10-K 1 y85517e10vk.txt KEY3MEIDA GROUP, INC. ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2002 COMMISSION FILE NUMBER: 001-16061 KEY3MEDIA GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 95-4799962 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 5700 WILSHIRE BLVD., SUITE 325 LOS ANGELES, CA 90036 (Address of principal executive offices) (Zip Code) (323) 954-6000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Title of each class: Common stock, par value $0.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes[ ] No[X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:[X] As of April 2, 2003 there were 68,531,919 shares of the registrant's common stock outstanding. Based upon the March 31, 2003 closing price of $0.0036 per share, the aggregate market value of the Registrant's outstanding common stock held by non-affiliates is approximately $113,773. (If all the Registrant's convertible preferred stock had been converted on such date, the aggregate market value would be approximately $180,778.) ================================================================================ KEY3MEDIA GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002

FORWARD LOOKING STATEMENTS Certain matters discussed in this Annual Report on Form 10-K are "forward-looking statements," including statements about Key3Media Group, Inc.'s ("KeyMedia") future results, plans and goals and other events which have not yet occurred. These statements are intended to qualify for the safe harbors from liability provided by the Private Securities Litigation Reform Act of 1995. You can find many (but not all) of these statements by looking for words like "will", "may", "believes", "expects", "anticipates", "plans" and "estimates" and for similar expressions. Because forward-looking statements involve risks and uncertainties, there are many factors that could cause Key3Media's actual results to differ materially from those expressed or implied in this release. These include, but are not limited to, economic conditions generally and in the information technology industry in particular; the timing of Key3Media's events and their popularity with exhibitors, sponsors and attendees; technological changes and developments; intellectual property rights; competition; capital expenditures; and factors impacting Key3Media's international operations. On February 3, 2003, Key3Media voluntarily filed for protection and reorganization under the federal bankruptcy code as a result of declining operating profits caused in part by the persistent difficulties experienced by participants in the IT industry and the related reductions in IT marketing budgets, a general downturn in the economy and the continuing adverse consequences of the September 11, 2001 terrorist attacks on the travel industry which have been further negatively impacted by the commencement of hostilities in Iraq during March 2003. Each of these developments have and will continue to adversely affect participation and attendance at Key3Media's events, although we are not able to quantify or reliably estimate the future impact that these matters may have on our businesses, results of operations or financial condition. We discuss some of these and other factors that could cause actual results to differ from those expressed or implied by forward looking statements in "Item 1 -- Business -- Certain Factors That May Affect Our Businesses". We do not plan to update any forward-looking statements. 1 PART I KEY RISK FACTOR WE HAVE FILED FOR PROTECTION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AND BELIEVE OUR SHARES HAVE NO VALUE As a result of the continuing difficulties being experienced by our operations, our high debt load and the other factors described in "Item 1 -- Business", we filed for protection and reorganization under chapter 11 of the U.S. Bankruptcy Code on February 3, 2003. We are seeking approval of a plan of reorganization which, if completed, will discharge any and all interests or claims that holders of our common stock and preferred stock have with respect to our company and its assets. As a result, we believe our shares no longer have any value and do not believe any investor should pay anything for such shares. Under the expected plan of reorganization, holders of our 11.25% Senior Subordinated Notes due 2011 (the "Notes") other than Thomas Weisel Capital Partners and certain of its affiliates (collectively, "TWCP") will share ratably with other unsecured creditors in distributions of $2.5 million in cash, 40% of the net proceeds of an insurance claim up to a maximum of $4 million, warrants to purchase up to 5% of the reorganized company's equity with a strike price at the reorganization value, and potential additional minor assets that remain subject to final negotiation. TWCP has agreed to forego its pro rata share of the foregoing distributions. Although it is not possible to predict with certainty what the ultimate distributions will be to those holders of our Notes, it is virtually certain that whatever they receive will, in present value terms, represent only a very small percentage of the aggregate principal amount of, and accrued interest on, our Notes. Accordingly, we believe our Notes have very little value and any potential purchaser of our Notes should proceed with extreme caution. If our company is liquidated instead of reorganized, we believe that the holders of our shares and the holders of our Notes would likely receive nothing. For a more detailed description of the risks involved with our company, see "Item 1 -- Business -- Risk Factors". ITEM 1. BUSINESS IMPORTANT CAUTIONARY NOTE CONCERNING THE DESCRIPTION OF OUR BUSINESS As described above in "Key Risk Factor" and below in "Risk Factors", we have filed for protection under chapter 11 of the U.S. Bankruptcy Code. We do not know whether we will successfully reorganize our company. In the event we do, we expect the nature and scope of our operations will be significantly different and much more limited than they have been historically. The description of our business set forth in the following paragraphs describes our businesses as they were conducted through December 31, 2002, the period through which we have included financial statements. If we are able to reorganize successfully, we expect to produce a total of 19 tradeshow and conference events in 2003, down from 26 in 2002, focusing on a single national event for each of our major brands and continue to operate in the United States out of our principal west coast locations in Los Angeles and Foster City after the closure of our office in Needham, Massachusetts in December 2002. Key3Media Group, Inc. was incorporated in 2000 to hold Ziff-Davis Inc.'s portfolio of tradeshow businesses. We were spun off from Ziff-Davis in August 2000. Our principal executive offices are located at 5700 Wilshire Blvd., Suite 325, Los Angeles, CA 90036, our telephone number is (323) 954-6000 and our Internet website is http://www.key3media.com. We are a reporting company that files reports with the Securities and Exchange Commission (the "SEC"). Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available free of charge on our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Additionally, the public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549 or at the SEC's Internet website http://www.sec.gov. Information about the SEC can be obtained by calling 1-800-SEC-0330. When we use the terms "Key3Media", "Registrant", "we" and "our", we mean, prior to the spin-off, the portfolio of tradeshow and other event businesses formerly held by Ziff-Davis Inc. and, after the spin-off, Key3Media Group, Inc., a Delaware corporation, and its subsidiaries. 1 We produce, manage and promote a portfolio of tradeshows, conferences and other events for the information technology, or IT, industry. Our events provide community, content and commerce for vendors, resellers, large volume end-users and others involved in the IT industry, including consultants and other advisors. In 2002, we provided face-to-face marketplaces for business-to-business marketing, sales and education in the IT industry for more than 530,000 participants at 26 owned and operated events, including co-located events. In 2002, our COMDEX and NetWorld+Interop events were the top two business-to-business IT industry tradeshow brands in the United States when measured by revenue from exhibit space rentals based on statistical data obtained from Tradeshow Week, a leading industry publication. We also produce customized events for specific IT vendors and specific segments of the IT industry. At our events, we rent space to exhibitors and receive commissions from third parties who provide services to our exhibitors. We also charge fees for conferences and sell advertising and sponsorships. In 2002, our revenue was $151.5 million and our net loss was $795.9 million. We have events which focus on the full spectrum of the IT industry and others that target particular segments of the industry. We believe that we can enhance our revenue by creating multiple revenue streams from a portfolio of events with different targeted audiences and limited attendee overlap. Our customized events allow us to build close relationships with individual IT vendors and better understand their products and marketing needs. These relationships also help us identify and keep current with emerging trends in the IT industry. Our COMDEX tradeshows cover the full spectrum of the IT industry. Our COMDEX Fall 2002 tradeshow was the largest business-to-business tradeshow in the United States for any industry when measured by revenue from exhibit space rentals and attendance (including exhibitor personnel). In 2002, we offered 12 COMDEX events in 10 countries and our owned and operated COMDEX events generated about 22% of our revenue. Our NetWorld+Interop tradeshows focus on the networking, Internet and telecommunications sectors of the IT industry, although our shows outside the United States also address broader aspects of the IT industry. In 2002, we held four NetWorld+Interop tradeshows in three countries and we owned and operated all of them. These four NetWorld+Interop tradeshows generated approximately 34% of our revenue in 2002. We currently employ approximately 350 people, including sales, marketing, operational and corporate service personnel. Of these, approximately 280 are in the United States and the balance are in France, Sweden, Japan and Canada. We also employ temporary personnel from time to time. None of our United States employees are covered by a collective bargaining agreement. We believe that we have good relations with our employees. INDUSTRY OVERVIEW Tradeshows, conferences and other business-to-business events provide face-to-face interaction between buyers and sellers and offer educational and networking opportunities for attendees. Tradeshow Week has estimated that there are over 13,000 trade and consumer events held annually worldwide. The spectrum of these events is fairly broad, with individual shows distinguishing themselves by their style, the nature and level of sophistication of their content, organizational efficiency and, most importantly, by their attendance record. With the recent difficulties experienced in the IT industry, exhibitors have become much more selective in choosing events and more sensitive to the returns they can generate from their marketing investments. Exhibitors consider not only exhibit space rental costs, but also other event-related costs such as exhibit design and production, transportation, travel, lodging and entertainment costs and event-related promotions. We believe that our revenues, net paid square footage of exhibit space and conference participants have been adversely affected by the persistent difficulties experienced by participants in the IT industry and the related reductions in IT marketing budgets, a general downturn in the economy and the continuing adverse consequences of the September 11, 2001 terrorist attacks on the travel industry which have been further negatively impacted by the commencement of hostilities in Iraq during March 2003. See "Certain Factors That May Affect Our Businesses" and "Item 7--Management's Discussion and Analysis of Financial Condition and Results of Operations". As an alternative to exhibiting at events, some IT vendors host private events such as regional conferences, product demonstrations, user-group meetings, road shows and educational demonstrations. While these allow vendors to engage customers in a more controlled environment, they typically involve much smaller audiences than attend larger industry events. We believe that our larger industry leading events present better opportunities for our 2 exhibitors to launch new products and services, establish and enhance their brands with customers and the media and maintain the face-to-face connection with their buyers. We also believe that the "see and be seen" aspect of our events is very important to exhibitors who are seeking to maximize the returns from their sales and marketing efforts. OUR EVENTS In 2002, we produced 26 owned and operated events, including co-located events. In 2002, these events were attended by a total of more than 530,000 participants. In addition to the events we own and operate, we license our brands to foreign tradeshow operators for use in connection with 7 events held outside of the United States. We refer to these as our international contract events. Most of our international contract events are operated under the COMDEX or NetWorld+Interop brands. Generally, our events have three features in common, although the emphasis may vary: - an exposition floor on which exhibitors and attendees interact face-to-face; - conferences designed to inform and educate IT professionals; and - keynote speakers and product launches. We produce events under a number of different brand names, including COMDEX, NetWorld+Interop, Seybold Seminars, JavaOne, and BCR/NGN. Our two most important brands in terms of revenues are COMDEX and NetWorld+Interop. We classify our events as "horizontal" events if they cover the full spectrum of the IT industry and "vertical" events if they focus only on particular segments of the IT industry. Our COMDEX tradeshows are horizontal events and all our other events are vertical. NetWorld+Interop and Seybold Seminars are our largest vertical events. Our JavaOne conference is our largest customized event. VoiceCon, Opticon, Next Generation Networks and Next Generation Ventures are vertical events that focus on the networking and Internet Protocol communication industries. In addition to our branded events, we conduct a series of customized vertical events through our Studios division. The following table summarizes the scope and reach of our principal branded and customized events:

COMDEX Our COMDEX tradeshows cover the full spectrum of the IT industry. Our COMDEX Fall 2001 tradeshow was the largest tradeshow in the United States when measured by revenue from exhibitor space rentals and attendance (including exhibitor personnel). In 2002, we offered 12 COMDEX tradeshows in 10 countries. Our COMDEX tradeshows cover a broad range of new technologies at every stage, from their development and introduction to commercial maturity. Many of the most significant business technology, digital and computer products launched over the past 20 years occurred at COMDEX tradeshows, including the launch of the IBM PC, Lotus 1-2-3, Windows 3.1, Windows CE and DVD. Microsoft featured its X-Box at our COMDEX Fall show in 2001. IT and Internet technologies form an integral part of our COMDEX tradeshows. While maintaining our coverage of the full spectrum of the IT industry, we are currently highlighting nine key technology areas: - Information Security -- Security will be a top spending priority for companies throughout 2003. COMDEX will focus on information security, biometrics, anti-virus, firewalls, security services and security management software. - Digital Imaging and Document Management -- Whether outputting to paper or the Web, enterprise publishing has gone digital, as has document management and distribution. COMDEX will focus on the technologies and solutions that drive efficiency, productivity and creativity for businesses. - Digital Lifestyles -- The convergence of personal and professional life is driving significant technology and services innovation. COMDEX will focus on how the PC continues to emerge as the digital hub of the home, becoming the center of creativity. With education and special programs attendees will explore whether the PC is the most versatile device for the transition from productivity to creativity. - Software Platforms and Solutions -- Operating systems, utility applications, analytics, collaborative software, supply chain management, CRM, ERP, database, e-commerce, e-business -- there is no better comparative platform than COMDEX, which also features, Key3Media's Customer 360 event. - Web Services -- The burgeoning set of technologies that allow software to offer identical functions on multiple devices will be highlighted, including XML, SOAP, WSDL and UDDI. - Infrastructure -- This zone will focus on network infrastructure equipment, integration, storage solutions including SANs, VPNs, managed services, hosting, content delivery and more. - Networking and communications -- Products that provide the broadband infrastructure for the delivery of data, voice and video, while focusing on such issues as network security and virtual private networking. - eMobility and Wireless -- Businesses are going mobile at an ever increasing pace. Data access, devices, applications, security and connectivity solutions must be explored in great detail to ensure 4 business viability. WAP, HomeRF, WiFi, wireless Ethernet, broadband, fixed wireless and more will be featured in this zone. - OEM and International Components manufacturers -- Technology vendors and channel members have been building relationships at COMDEX for 23 years. As technologies converge and emerge, COMDEX will continue to be fertile ground for new partnerships that will drive new solutions. Our COMDEX Fall tradeshow is a five-day tradeshow we hold in Las Vegas in November of each year. Although we offer other COMDEX shows, COMDEX Fall is the single tradeshow that brings the entire IT industry together. COMDEX Fall has international appeal. It includes a large number of country- and region- sponsored pavilions designed to introduce attendees to the products and technologies from their local regions. In 2002, it was attended by over 10,000 international attendees. In total, COMDEX Fall 2002 was attended by more than 1,000 exhibitors occupying 325,000 square feet of exhibitor space and over 120,000 attendees. In 2002, exhibitors for COMDEX Fall included: Microsoft Corporation, Hewlett-Packard Co., Nokia Corp, Samsung Electronics Co., Palm Inc., Computer Associates International, Inc., and Xerox Corporation. Despite a recovery in 2000, our COMDEX Fall tradeshow experienced a decline in revenues, exhibit space rentals and attendees in 2002, and 2001. We believe that the declines in 2001 were due primarily to adverse conditions in the IT industry and the events of September 11th and their effect on travel. Moreover, we believe the declines in 2002 resulted from the prolonged downturn in the IT industry and the related reductions in marketing budgets compounded by the absence of the new product introductions that generally act to draw audiences to events and the continuing adverse consequences of September 11 on travel budgets. NETWORLD+INTEROP Our NetWorld+Interop tradeshows are our largest branded vertical events. They focus on the rapidly growing and converging fields of computer networking, the Internet and telecommunications, although our shows outside the United States also address broader aspects of the IT industry. Our largest NetWorld+Interop tradeshow is held each year in Las Vegas and, in 2002, was the second largest business-to-business IT tradeshow in the United States when measured by revenue from exhibit space rentals. In 2002, our owned and operated NetWorld+Interop events generated approximately 34% of our revenues. In 2002, our NetWorld+Interop tradeshow in Las Vegas had approximately 470 exhibiting companies occupying over 275,000 net square feet of exhibit rental space and approximately 2,500 attendees. NetWorld+Interop has always focused on new and emerging networking technologies. We are continuing this tradition by offering at our NetWorld+Interop 2002 events conferences highlighting the construction of new public networks with integrated voice/data/video delivery systems and the emergence of new embedded networks with software that can be used to update the network's circuits and chips remotely without physical upgrade. The NetWorld+Interop tradeshow in Las Vegas features InteropNet, a live, multi-platform, vendor-sponsored network that interconnects exhibitors and attendees to one another and to the Internet. Exhibitors at our 2002 NetWorld+Interop tradeshows included: AT&T Corp., Cisco Systems Inc., Intel Corporation, Computer Associates International, Inc., Microsoft Corporation and Nortel Networks Corporation. Our NetWorld+Interop tradeshow experienced a decline in revenues, exhibit space rentals and attendees in 2002, and 2001. We believe that the declines in 2001 were due primarily to adverse conditions in the IT industry and the events of September 11th and their effect on travel. Moreover, we believe the declines in 2002 resulted from the prolonged downturn in the IT industry and the related reductions in marketing budgets compounded by the absence of the new product introductions that generally act to draw audiences to events and the continuing adverse consequences of September 11 on travel budgets. 5 SEYBOLD SEMINARS Our Seybold Seminars are vertical events that target the latest technologies and products, design tools and applications for web and desktop print publishing. We hold our largest Seybold Seminars event each fall in San Francisco. In 2002, our Seybold Seminars in San Francisco had approximately 150 exhibiting companies occupying over 55,000 net square feet of exhibit space and approximately 18,000 attendees. We also hold a Seybold Seminars event on the east coast in the first half of each year. In 2002, we moved this event to New York from Boston. Major exhibitors at the Seybold Seminars events include Apple Computer, Inc., Adobe Systems Incorporated, Hewlett-Packard Co. and Macromedia, Inc. This east coast event will not be produced in 2003. JAVAONE We believe our JavaOne event is the largest software developer conference in the world and the premier source of technical education on the latest developments for the Java technology platform. Attendees at JavaOne are typically either independent or enterprise software developers. JavaOne is unlike our other events in that exhibitors are invited by Sun Microsystems, Inc. to participate in the conference. As a result, most of our revenue from JavaOne is from conference fees, with over 10,000 attendees at our 2002 event. Our secondary revenue is derived from sales of sponsorships and exhibitor space fees with 230 exhibitors for 2002. Exhibitors at JavaOne 2002 included: Apple Computer, Inc., Fujitsu Software Corporation, Hewlett-Packard Company-Network Services, International Business Machines Corporation and Motorola. We own and produce the JavaOne event under an exclusive license agreement from Sun Microsystems, the inventor and developer of Java technology, which expires in July 2004. See "-- Trademarks and Licenses". STUDIOS Our Studios division, Key3Studios, produces a wide range of events in the United States and international markets. These events include technical, sales, marketing and educational conferences, road shows, seminars, corporate meetings, exhibitions, trade shows and executive forums. By working as a "strategic marketing partner", Key3Studios helps its clients penetrate new markets, create and develop community building activities, build brand recognition and educate and build awareness among their most important customers and buying prospects. In 2002, Studios clients included Intel Corporation, Sun Microsystems, Microsoft Corporation, Texas Instruments and WebCT. VON CONFERENCES AND SIP SUMMITS In September 2001, we acquired two event brands from pulver.com: Voice on the Net (VON) Conferences and Session Initiation Protocol (SIP) Summits. pulver.com is considered one of the industry leaders in the networking and initiation protocol communications sectors. There are six VON Conferences around the world each year, which focus on the convergence of the telecom and Internet industries. There are currently two SIP Summits each year. SIP is a signaling protocol used for Internet conferencing, telephony, presence, events notification and instant messaging. In January 2003, we sold this business back to its prior owner. NGN AND BCR In September 2001, we acquired the Opticon, VoiceCon, Next Generation Networks (NGN) and Next Generation Ventures conferences and tradeshows and Business Communications Review (BCR) magazine from BCR Enterprises, Inc. and McQuillan Ventures. The events focus on computer, optical, voice and other types of networking technology. Business Communications Review magazine is a leading magazine for enterprise network managers and other communications professionals that provides analysis of networking technology, trends, management issues, pricing, and regulation. 6 INTERNATIONAL EXPOSITIONS Internationally, we have two primary methods of operation. We own and operate some of our largest international events and operate the others as international contract events. We own and operate the NetWorld+Interop events in France and Japan and two COMDEX events in Canada. In addition, we owned, but did not operate, a COMDEX event in Mexico in 2001 although we have terminated our contracts for this event and another COMDEX event in Argentina in 2002. We also own and operate the Technology in Government Week event in Ottawa, Canada. We run our owned and operated international shows essentially in the same manner as our U.S. shows, although we modify our offerings and procedures to fit the local environment. The arrangements for our international contract events differ by event, but have some common characteristics. Typically, we have no equity interest in these events, but instead receive a guaranteed minimum fee and a portion of the profits above agreed benchmark amounts. We license the brands to the foreign operator and provide it with branding, sales and marketing services, but we usually do not have a direct management role. The contracts typically give each party the right to terminate after one year's notice, and upon termination the license is revoked and both parties are subject to a prohibition on competing within the market for two years. On June 15, 2001, our wholly owned subsidiary, Key3Media Events, completed its acquisition of all of SOFTBANK America Inc.'s interest in SB Forums. SB Forums owns and operates tradeshows and conferences in Japan, including the NetWorld+Interop Tokyo tradeshow, one of the largest IT tradeshows in Japan, which takes place in the summer of each year, and several custom events scheduled throughout the year. For more information about these events, refer to the section entitled "Related Party Transactions -- Acquisition of SB Forums" in our definitive proxy statement. In late November 2001, we announced the acquisition of ExpoNova Events & Exhibitions, Scandinavia's premier IT tradeshow organizer. Founded in 1996, ExpoNova has grown rapidly to become a leading organizer throughout Scandinavia for the IT, telecom and marketing sectors. ExpoNova currently produces events including COMDEX Nordic, PubTech/Ondemand, Information Management, Business Software, Nordic Telecom Week, and other technology-oriented exhibitions and conferences. The transaction closed in January 2002. We have also agreed to purchase IW Nordic Expo Ab, an affiliated Sweden-based company that will continue to produce Internet World Sweden and Internet World Norway. There are 13 ExpoNova events currently produced in Scandinavia each year. In November 2001, we announced we were working with the U.S. Department of Commerce to develop several programs to assist U.S.-based IT companies interested in doing business overseas. Since 1995, the U.S. Commercial Service has brought thousands of international buyers representing more than 100 countries to our tradeshows all over the world. The U.S. Commercial Service matches our event exhibitors with international buyers in a number of ways. Before the show, exhibitors fill out detailed questionnaires about their business and potential partners they are seeking. This information is then entered into an online matchmaking system called COMDEX Connect, which organizes the data and pairs companies as business objectives match. MANAGEMENT OF EVENTS We manage all of our owned and operated events on a decentralized basis. We assign a general manager for each event who is responsible for all aspects of the event including the profitability of the event. Each event has dedicated employee teams consisting of both direct reports and shared centralized resources in each of the following areas: - sales; - marketing communications and media; and - operations. The employee teams report directly to the general manager for the event as well as to the heads of their respective departments. 7 SALES Our events provide a face-to-face forum for business-to-business sales, business marketing, and professional education for the IT industry. We maintain three groups of sales professionals to maximize event revenue in each of these areas. Exhibit Space Rentals. We maintain a staff of dedicated sales professionals who report directly to our event general managers. These professionals attend their respective events to ensure client satisfaction and to accept reservations for exhibit space at the following year's event by participating exhibitors. Historically, between 60% and 70% of the ensuing year's exhibit space is contracted at the current year's event, although in 2001 and 2002 the percentages were lower due to the difficulties being experienced in the IT industry and the events of September 11th. Throughout the year, our exhibition sales staff is responsible for encouraging exhibitor upgrades, reducing exhibitor churn and ensuring timely payment of remaining installments. Our exhibition sales staff also prospects for new clients and sells remaining exhibit space using telemarketing or, for larger customers, in-person sales calls. Advertising and Sponsorships. Our event marketing staff is responsible for selling advertising and sponsorships to participating exhibitors at our events, including banner advertising, brochure and program advertising, website advertising, and keynote, luncheon and other event sponsorships. This group is centralized and individual sales professionals are assigned to one or more events. Conferences. We also have a sales team that is responsible for selling the special conferences we provide at our events directly to the attendees. A team of conference sales professionals is dedicated to each event for the four months preceding that event. MARKETING COMMUNICATIONS AND MEDIA Our marketing department oversees all aspects of creating and delivering brand and product messaging including creative production, direct response marketing, public relations and market research. This group works with all forms of media presentation. Direct Response Marketing Group. Our direct response marketing group's goal is to maximize event attendance while ensuring attendee quality. Using proprietary and other direct marketing lists, this group develops mailing and telemarketing lists for our conference salespersons. Conference Content Staff. Our content staff is responsible for developing the themes and topics comprising conference programs at all of our events, including the recruitment of all speakers and other panel participants. Creative Production. Our creative production staff works with our event general managers and content staff to create the layout of and produce all event-related publications. OPERATIONS Our operations staff is responsible for all event logistics, including the activities described below. Our operations group also participates in exhibitor contract administration with respect to our responsibilities in each of these areas. Venue Management. Our venue management group contracts with hotels or convention centers for exhibition space and meeting rooms. This group is responsible for identifying appropriate venues, negotiating per-square-foot rates and for ongoing contract maintenance. We have venues under contract for COMDEX Fall and NetWorld+Interop Las Vegas for each of the next three years. Vendor Management. We maintain agreements with several professional vendors, including florists, booth architects and designers, travel agencies and moving companies who assist our exhibitors in creating and transporting their exhibits. We collect a commission each time an exhibitor uses one of our preferred vendors. Our 8 vendor management group is primarily responsible for facilitating introductions between our vendors and exhibitors and collecting fees from chosen vendors. Housing. We collect commissions for rooms rented by event participants in surrounding area hotels and also, to a far lesser extent, purchase local hotel rooms in advance at discounts and resell them. Our housing group is responsible for negotiating all housing rental and commission rates and guaranteeing room availability for the length of the event. Registration. Our registration group tracks the number and other characteristics of exhibitors, attendees and paid conference attendees, including tutorial participants. Logistics. Our logistics staff runs the floor at all events, including setting up, maintaining and closing down the event. They are present at every event to handle floor space allocation issues and interface directly with vendors, exhibitors and venue staff to ensure the smooth running of any event. KEY VENDORS We enter into contracts with our third party suppliers. Under these contracts, we usually agree to promote the services offered by the suppliers to our exhibitors in exchange for the suppliers' agreement to give us a certain percentage of their revenue from our exhibitors. The size of the commissions we receive varies between 10% and 25%. In 2002, we used Freeman Decorating Co. ("Freeman"), GES Exposition Services ("GES"), and Champion Exposition Services, Inc. ("Champion") as our principal "decorators". In the tradeshow industry, decorators offer to provide various services to us and to exhibitors to assist them create, set up, maintain and remove their exhibits. We recommend and promote our decorator's services to our exhibitors at most of our United States and Canadian events. The services that our decorators provide to us and to exhibitors include shipping, installation and dismantling of booth structures and contents, furniture and fixture rental, trash removal and similar services. TRADEMARKS AND LICENSES Because we have developed strong brand awareness for our principal events, we believe our trademarks and service marks are critical to our success. We rely on trademark law, as well as licensing agreements, to protect our intellectual property rights. We have registered our material trademarks in the United States and in certain other key countries. For example, "COMDEX" is registered in the United States and over 25 other countries. Effective trademark protection may not be available in every country in which we operate. As a result of an assignment made by Novell, Inc. in December 2001, we now own the trademarks "NetWorld+Interop", "NetWorld" and "Interop". Prior to this assignment, Novell owned the trademark "NetWorld", we owned the trademark "Interop" and we shared with Novell the intellectual property rights to the "NetWorld+Interop" trademark. As part of our consideration for this assignment, we paid Novell with free booth and discounted overflow space, marketing opportunities, and other benefits at a discount. Our agreement with Novell expires on December 31, 2004, but we will retain ownership of the "NetWorld+Interop" and "NetWorld" trademarks after any termination. Sun Microsystems owns the trademarks "Java" and "JavaOne" and has licensed them to us until July 2004. We own and operate the JavaOne conferences and are entitled to all revenue from the conferences. Sun Microsystems occupies substantial space at the conferences, helps secure sponsors, and is responsible for the special conference content. We jointly own the attendee database. Our current arrangement terminates after the conference in June 2004. COMPETITION The IT events industry is highly competitive and is characterized by low barriers to entry. Although we believe we are the largest producer of events for the IT industry in the United States when measured by revenue 9 from exhibit space rentals, we face competition from tradeshow management companies that operate in other and more diverse industries, including the following companies: - Deutsche Messe AG (DMAG) is one of the world's largest trade fair and exhibit organizers. It owns and operates the CeBIT tradeshow held annually in Hanover, Germany, which is the largest IT tradeshow in the world. In June 2003, DMAG will produce a CeBIT event in New York; - Jupiter Media, an information provider, has announced their intention to produce Computer Digital Expo as a competitive event to COMDEX which is scheduled to run concurrent with COMDEX in Las Vegas in 2003. - CMP Media Inc., a subsidiary of United News & Media plc, publishes Information Week, Internet Week and Computer Reseller News. Its exhibition businesses include e-business expo and PC Expo; - Advanstar Communications, Inc., publishes newspapers and magazines that serve a variety of markets including the internet/e-business segment. It manages 79 tradeshows and conferences in North America, Latin America, Europe and Asia; - IDG is a multi-national, multimedia publishing company focused on the technology market. It produces more than 168 conferences and events in 35 countries; - Reed Exhibit Companies, a subsidiary of Reed Elsevier plc, organizes over 470 tradeshows and consumer events in 29 countries; - Penton Media, Inc., is a publishing company that produces more than 130 tradeshows and conferences throughout the world. It covers various industries including IT and owns Internet World; - DMG World Media, a wholly owned subsidiary of the Daily Mail and General Trust plc, a FTSE 100 company, operates over 260 public and trade exhibitions worldwide; - VS&A Communications Partners is a private equity investor which owns several trade show companies in a variety of industries; - VNU Expositions, Inc., a wholly owned subsidiary of VNU, operates more than 50 trade shows around the world in a variety of industry segments; and - Other top show operators include PriMedia publishing and Hall-Erickson Inc. We also compete for advertising dollars with other forms of media, including print publishing and the Internet. We must make our events more attractive to exhibitors and attendees than the other alternatives available to them or we will lose advertising dollars to our competitors. RISK FACTORS WE HAVE FILED FOR PROTECTION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AND BELIEVE OUR SHARES HAVE NO VALUE As a result of the continuing difficulties being experienced by our operations, our high debt load and the other factors described in this "Item 1 -- Business", we filed for protection and reorganization under chapter 11 of the U.S. Bankruptcy Code on February 3, 2003. We are seeking approval of a plan of reorganization which, if completed, will discharge any and all interests or claims that holders of our common stock and preferred stock have with respect to our company and its assets. As a result, we believe our shares no longer have any value and do not believe any investor should pay anything for such shares. Under the expected plan of reorganization, holders of our Notes due 2011, other than TWCP, will share ratably with other unsecured creditors in distributions of $2.5 million in cash, 40% of the net proceeds of an insurance claim up to a maximum of $4 million, warrants to purchase up to 10 5% of the reorganized company's equity with a strike price at the reorganization value, and potential additional minor assets that remain subject to final negotiation. TWCP has agreed to forego its pro rata share of the foregoing distributions. Although it is not possible to predict with certainty what the ultimate distributions will be to those holders of our Notes, it is virtually certain that whatever they receive will, in present value terms, represent only a very small percentage of the aggregate principal amount of, and accrued interest on, our Notes. Accordingly, we believe our Notes have very little value and any potential purchaser of our Notes should proceed with extreme caution. If we are liquidated instead of reorganized, we believe that the holders of our shares and the holders of our Notes would likely receive nothing. WE SERVE THE IT INDUSTRY, WHICH HAS RECENTLY EXPERIENCED DIFFICULTIES AND CAN CHANGE RAPIDLY All of our events currently serve vendors and customers in the IT industry. Many participants in the IT industry have experienced declining revenues, reduced or negative cash flows and declining share prices. Some industry participants have announced lay-offs and other cost-cutting measures, and we believe many others are implementing similar initiatives. If these or future developments cause our exhibitors and attendees to reduce significantly their tradeshow budgets and travel and entertainment expenses, our revenues and results of operations will be affected adversely. The marketing decisions of some of our larger exhibitors could also influence the decisions of other exhibitors. Because most of our exhibitors are required to pay for their exhibit space on a non-refundable basis six months before the event, exhibit space rentals may not immediately reflect the full impact of a downturn. In addition to its recent difficulties, the IT industry is a rapidly evolving industry in which trends and preferences can shift quickly as new technologies and products are introduced. If we fail in the future to identify and focus our events on the most important emerging trends and preferences in the IT industry, it could adversely affect our results of operations. THE TERRORIST ATTACKS ON THE UNITED STATES AND THE OUTBREAK OF HOSTILITIES IN IRAQ HAVE NEGATIVELY AFFECTED OUR TRADE SHOWS AND CONFERENCES AND ARE LIKELY TO CONTINUE TO DO SO IN THE FUTURE On September 11, 2001, the United States was attacked by terrorists using hijacked commercial airplanes. The United States and other countries have responded with concerted action against the suspected terrorists. There have been several cases of deliberate anthrax infection in the United States which are also suspected to be terrorist attacks. In addition armed forces of the United States along with certain other countries commenced hostile activities with military and paramilitary forces of Iraq in March 2003. These events and the ongoing uncertainty they have created have to a certain degree adversely affected the economy in general and the tradeshow and conference industry in particular. There has been a decline in air travel and tradeshow and conference attendance due to, among other things, the public's general reluctance to travel and fears concerning additional acts of terrorism, as well as reduced operations by airlines due to, among other things, decreased demands for air travel, new security directives and increased costs. While we cannot predict how these events or any similar events that may occur in the future will affect our business, results of operation or financial condition, it is likely that our trade shows and conferences will be negatively affected at least in the near future. Continued negative market conditions due to acts of terrorism, any future occurrences of similar actions and potential responsive actions by the United States and other countries that perpetuate or aggravate the current climate of fear and uncertainty could cause more disruption of our tradeshows and conferences. THERE WAS A GENERAL DOWNTURN IN THE U.S. ECONOMY IN 2001 THAT CONTINUED INTO 2002 There was a general downturn in the U.S. economy in 2001 that continued into 2002, not only due in part to the difficulties in the IT industry and the events of September 11th but also due to other economic factors and conditions. If these trends continue or become worse, they could adversely affect the ability and willingness of exhibitors, attendees and advertisers to participate in our events and the extent of that participation. This could materially and adversely affect our business, results of operations and financial condition. ALL OF OUR MAJOR DOMESTIC TRADESHOWS AND EVENTS HAD LOWER RESULTS IN 2002 THAN IN 2001 Due in part to the adverse conditions and developments referred to above, all of our major domestic tradeshows and events had lower revenues and contributions to earnings in 2002 than in 2001. Exhibition space rentals, conference participation, advertising and sponsorship, commissions from third party service providers to our 11 exhibitors, attendance and resign rates were all generally down at these events in 2002. We expect these trends to continue for an indeterminate time in the future. These trends adversely affected our results of operations for 2002 and if they continue in the future our business, results of operations and financial condition could be adversely affected. OUR REVENUES AND RESULTS DEPEND SIGNIFICANTLY ON A FEW IMPORTANT IT TRADESHOWS THAT HAVE EXPERIENCED ADVERSE RESULTS IN RECENT YEARS Historically, we have derived a significant portion of our revenues from a few of our trade shows, and we expect that our reliance on these shows will continue in the future. In 2002, we derived about 22% of our revenue from tradeshows that we owned and operated under the COMDEX brand name and approximately 18% from our COMDEX Fall tradeshow in particular. We also derived approximately 34% of our revenue from our NetWorld+Interop tradeshows including 23% from our largest two domestic tradeshows under this brand. Although we are seeking to diversify our portfolio of tradeshows, our revenues and results of operations depend substantially on the success of our COMDEX Fall and top two domestic NetWorld+Interop tradeshows. We had five major events that occurred during 2002: JavaOne, COMDEX Spring, NetWorld+Interop Las Vegas, Seybold Seminars New York and COMDEX Fall. Compared to the prior year, paid attendance was down at JavaOne and each of these events experienced significant declines in exhibit space rentals, conference participation and attendees. If these trends continue in the future at our events, it will adversely affect our results of operation. OUR SUBSTANTIAL INDEBTEDNESS HAS ADVERSELY AFFECTED OUR FINANCIAL CONDITION We have a significant amount of indebtedness. As of December 31, 2002, we borrowed $81.8 million on a senior secured basis under our senior bank revolving credit facility and had $306.3 million of outstanding indebtedness including accrued and unpaid interest which was due on December 16, 2002 represented by our 11.25% senior subordinated notes. This level of indebtedness could have important consequences for our shareholders, including the following: - failure to pay the interest that was due on December 16, 2002 by January 15, 2003 resulted in an event of default under the terms of our senior subordinated note indenture agreement. A default under the indenture agreement creates a cross default under the terms of our Amended and Restated Credit Agreement. We did not make the required payment of interest by January 15, 2003 which contributed to our determination to voluntary file for bankruptcy protection on February 3, 2003; - it limits our ability to borrow money or sell stock for our working capital, capital expenditures, debt service requirements or other purposes; - it limits our flexibility in planning for, or reacting to, changes in our business; - we will be more highly leveraged than some of our competitors, which places us at a competitive disadvantage; - it makes us more vulnerable to a downturn in our business or the economy; - a substantial portion of our cash flow from operations is dedicated to payments in respect of our indebtedness and would not be available for other purposes; and - a material adverse effect on our business and financial condition due to our inability to service our indebtedness or obtain additional financing, as needed. RESTRICTIVE COVENANTS IN OUR DEBTOR-IN-POSSESSION (DIP) CREDIT AND GUARANTY AGREEMENT MAY RESTRICT OUR ABILITY TO OPERATE AND REACT TO COMPETITIVE AND OTHER CHANGES IN OUR INDUSTRY Our DIP credit and guaranty agreement limits our ability, among other things, to: 12 - incur additional indebtedness or contingent obligations; - pay dividends or make distributions to our stockholders; - make investments; - issue equity; - sell assets; and - acquire the assets of, or merge or consolidate with, other companies. In addition, the DIP credit and guaranty agreement maintains a requirement that the bankruptcy court confirm the Plan of Reorganization on or before June 30, 2003. If this requirement in not met, then there is an Event of Default under this agreement. RESTRICTIVE COVENANTS IN OUR SENIOR BANK REVOLVING CREDIT FACILITY AND THE INDENTURE MAY RESTRICT OUR ABILITY TO PURSUE OUR BUSINESS STRATEGIES Our senior bank revolving credit facility and the indenture under which our senior subordinated notes were issued limit our ability, among other things, to: - incur additional indebtedness or contingent obligations; - pay dividends or make distributions to our stockholders; - repurchase or redeem our stock; - make investments; - grant liens; - make capital expenditures; - enter into transactions with our stockholders and affiliates; - sell assets; and - acquire the assets of, or merge or consolidate with, other companies. In the event we are unable to comply with the financial covenants in our senior bank revolving credit facility and are unsuccessful in obtaining waivers with respect to our noncompliance, our lenders would have the option to require us to immediately repay all of our borrowings under the facility. We do not currently have sufficient funds to make such a repayment. In addition, any acceleration of the borrowings under our senior bank revolving credit facility would be an event of default in respect of our senior subordinated notes and could result in the acceleration of the maturity of those notes (although the subordination provisions of the notes would require the prior payment of the bank borrowings). We do not currently have sufficient funds to repay our senior subordinated notes in full. OUR HISTORICAL INFORMATION MAY NOT BE INDICATIVE OF OUR FUTURE RESULTS We were a division of Ziff-Davis Inc. until August 18, 2000 and we have operated as an independent public company only since that date. The historical financial information included in this Annual Report does not reflect 13 what our results of operations, financial position and cash flows would have been if we had been a separate stand-alone entity during the periods presented and may not be indicative of our future results. THE IT EVENTS INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY LOSE EXHIBITORS, ATTENDEES AND ADVERTISING AND SPONSORSHIP REVENUE TO OUR COMPETITORS, WHICH WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS The IT events industry is highly competitive and is characterized by low barriers to entry. We compete with various established tradeshows, including those produced by the Deutsche Messe AG, (CeBIT); CMP Media, Inc., a subsidiary of United News and Media plc, produces PCExpo; Advanstar Communications, Inc. (Telexpo Brazil); IDG World Expo, a division of International Data Group (Comnet) Reed Exhibition Companies; and Penton Media, Inc. (Internet World). Some of our competitors are larger and have greater financial resources than we do. We also face competition from a growing number of new small and mid-sized regional events and events focusing on particular segments of the IT industry. At most tradeshows, participation by key exhibitors is important because it helps attract other exhibitors and attendees. If we were to lose any of our key exhibitors to our competitors, it could make our events less attractive to other exhibitors and attendees. We also compete for advertising dollars with other forms of media, including print publishing and the Internet. We must make our events more attractive to exhibitors and attendees than the other alternatives available to them or our business will suffer. IF WE CANNOT RETAIN KEY PERSONNEL, IT MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS Our success depends to a significant extent on the continued service of key management personnel. The loss or interruption of the services of our senior management personnel or the inability to attract and retain other qualified management, sales, marketing and technical employees could also have an adverse effect on our financial condition or results of operations. We do not have any key man insurance. Since our restructuring process began, we have lost some senior operating personnel. THE SEASONALITY OF OUR REVENUE MAY ADVERSELY AFFECT THE MARKET PRICES FOR OUR SHARES Although we receive the majority of fees we generate from our events in advance, we record them as revenue only when the events occur. Because of the timing of our largest tradeshows, our revenue is seasonal. Our revenue is usually higher during the second and fourth quarters of each calendar year, primarily because our largest NetWorld+Interop event occurs in the second quarter and our largest COMDEX event occurs in the fourth quarter. This seasonality causes our operating results to vary considerably from quarter to quarter and these fluctuations could adversely affect the market price of our common stock. WE ARE SUBJECT TO RISKS RELATED TO INTERNATIONAL OPERATIONS We operate a multinational business and, accordingly, we are subject to risks inherent in international operations, including: - the difficulty of enforcing agreements and collecting receivables through some foreign legal systems; - fluctuations in the exchange rates between the U.S. dollar and the currencies of the foreign countries in which we operate; - tax rates in some foreign countries may exceed those of the United States and foreign earnings may be subject to withholding requirements or the imposition of tariffs, exchange controls or other restrictions; and - general economic and political conditions in the countries in which we operate may have an adverse effect on our operations in those countries or on our ability to generate exhibitors from those countries at our domestic tradeshows and conferences. We do not hedge our foreign currency exchange rate risk. As we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks. 14 ITEM 2. PROPERTIES Our headquarters are in Los Angeles, California. We also have office space in Northern California, Illinois, Japan, France, Canada and Sweden as well as a sales branch in Massachusetts. We lease all of our material offices. We believe that our existing space is adequate to meet our needs for the immediate future and future growth can be accommodated by leasing additional or alternate space. ITEM 3. LEGAL PROCEEDINGS The following discussion pertains to legal proceedings that existed as of February 3, 2003, the date we filed our petition for relief under chapter 11 of the U.S. Bankruptcy Code. By operation of Section 362 of the U.S. Bankruptcy Code, generally all actions and proceedings against us were automatically stayed on February 3, 2003, subject to further proceedings in the bankruptcy court. On August 31, 2001, Key3Media Events provided notice of termination of its then existing leased office space in Needham, Massachusetts to the landlord of the existing space. The annual rental payments (net of operating expenses) for the prior space were approximately $1.4 million. We entered into a lease for new office space in Needham and relocated to its new offices on October 1, 2001. We estimate that our total annual occupancy costs under the new lease will be approximately $1.7 million greater than those under the prior lease. The landlord of the prior office space has taken the position that Key3Media Events is in breach of the lease agreement and that it did not have the right to terminate the lease. On or about November 6, 2001, Interface Group - Massachusetts, LLC, the landlord under the prior lease, sued Key3Media Events in the Superior Court, County of Norfolk, Commonwealth of Massachusetts for breach of contract, breach of the implied covenant of good faith and fair dealing and violations of Mass. Gen L. c. 93A (unfair and deceptive acts and practices). The landlord has requested payment of rent for the remainder of the term of the lease in an amount in excess of $6.5 million, treble damages, attorneys' fees, costs and expenses, pre-judgment interest and costs of suit. In December 2001, Key3Media Events filed an answer and counterclaim to the Interface complaint and a motion to dismiss the Mass. Gen L. c. 93A claim. The counterclaim included causes of action for (i) breach of contract, (ii) breach of implied covenant of good faith and fair dealing, (iii) tortious interference with business relationship, (iv) trespass, (v) breach of the covenant of quiet enjoyment and constructive eviction, (vi) violation of Mass. Gen L. c. 93A, (vii) a request for declaratory relief, (viii) civil conspiracy and (ix) fraud. In February 2002, Interface filed an opposition to motion to dismiss and an amended complaint alleging breach of contract, breach of implied covenant of good faith and fair dealing and violations of Mass. Gen L. c. 93A. Also in February 2002, Key3Media Events filed an answer and counterclaim to the amended complaint and a motion to dismiss the Mass. Gen L. c. 93A claim and Interface filed a motion to dismiss counts (iii), (v), (vi), (viii) and (ix) of the counterclaim. In March 2002, Interface filed a second amended complaint adding a claim for trustee process and to add Fleet Bank of Massachusetts and Citizens Bank of Massachusetts as trustee defendants. Interface also filed a motion for Ex Parte Approval of Trustee Process Attachment. The court denied the ex parte motion, however the court subsequently held a hearing at which it found that Interface had established a reasonable likelihood of prevailing on its claims and it awarded a trustee attachment in the amount of $711,111 representing rent for the period of October 2001 through May 2002. On September 26, 2002 Interface was awarded an attachment on certain of Key3Media Events' assets in the amount of $711,111 located in Massachusetts and on or before October 15, 2002, Interface attached these assets. Interface has withdrawn its Massachusetts attachment with respect to all but $67,000 in cash and has obtained an attachment on $711,000 in a parallel action in the Superior Court, County of Los Angeles, State of California. The California Action was filed on August 21, 2002, for the sole purpose of seeking pre-judgment attachments in California based on the Massachusetts claims. Interface obtained a Right to Attach Order in California on or about October 24, 2002, and subsequently levied upon that Order. In December 2002, a Third Party Claim was filed in the California Action by Morgan Stanley & Co. asserting a superior interest in the assets Interface was seeking to attach. Before the Third Party Claim was adjudicated, a Notice of Stay was filed in California as a result of the bankruptcy petition. The two parallel cases are stayed, as of February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code.. On November 15, 2002, Interface Group Massachusetts, LLC filed a complaint in United States District Court, District of Massachusetts, against our chairman, Fredric D. Rosen alleging tortious interference with respect to the lease that is the subject of the dispute in the litigation between Key3Media Events and Interface in Massachusetts. On November 25, 2002, Mr. Rosen, as chairman, requested we indemnify him and the claim was 15 submitted to our directors and officers' liability insurer. On January, 22, 2003, Rosen filed a motion to dismiss. On April 10, 2003, the motion to dismiss was granted on personal jurisdiction grounds. Key3Media Events is the plaintiff and counter-defendant in a case filed October 18, 2000, in the Eighth Judicial District Court, Clark County, Nevada. The suit arises out of a dispute between Key3Media Events, Inc. on the one hand, and the Venetian Casino Resort, LLC, and Interface Group-Nevada, Inc., on the other hand, concerning COMDEX/Fall. Key3Media Events initiated the action, seeking damages and injunctive relief against defendants for their alleged actual and threatened breaches of lease, meeting space, and credit extension agreements in connection with the COMDEX/Fall 2000 show. The Venetian and Interface Group-Nevada, Inc. counter sued for compensatory damages "in excess of $10,000" based on an asserted breach of an alleged oral agreement to host keynote speeches at The Venetian, asserted breach of an alleged agreement not to sublease certain facilities, intentional misrepresentation, and breach of the implied covenant of good faith and fair dealing. The counterclaims include a prayer for punitive damages. On October 19, 2001, the counter-defendants specified their alleged damages in their supplemental response to plaintiff's third request for production of documents. The response alleged damages of over $3.0 million arising from breaches related to COMDEX/Fall 2000 and over $2.0 million arising from breaches related to COMDEX/Fall 2001. On July 22, 2002, Key3Media Events sought and was granted leave to amend its complaint. On July 23, 2002, Key3Media Events filed its first amended complaint. The amended complaint included causes of action for declaratory relief, injunctive relief, breach of contract, tortious interference, civil conspiracy, intentional misrepresentation/fraud, predatory price fixing and restraint of trade. The amended complaint seeks injunctive and declaratory relief, compensatory damages, punitive damages, treble damages, interest and attorneys' fees. On July 29, 2002, the Venetian and Interface Group-Nevada, Inc. filed a motion to dismiss the intentional misrepresentation/fraud, predatory price fixing and restraint of trade causes of action. On September 19, 2002, the Venetian and Interface Group-Nevada, Inc., filed their answer to the first amended complaint and counterclaim for breach of contract, unjust enrichment, breach of implied covenant of good faith and fair dealing, negligent and intentional misrepresentation, accounting, abuse of process, intentional interference with contract and declaratory relief and seeking compensatory damages in excess of $10,000 and punitive damages in excess of $10,000 and declaratory relief. A jury trial was scheduled for January 21, 2003 but subsequently postponed. The case was stayed on February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. Interface has subsequently moved to have the case transferred to federal court. On or about December 27, 2001, Key3Media Events filed a complaint against Krause International, Inc., E.J. Krause & Associates (Argentina), Inc., and E.J. Krause & Associates, Inc. (collectively, "Krause"), with respect to Krause's management of COMDEX Argentina 2001. The complaint includes causes of action for breach of contract, misrepresentation and fraud, fraudulent misrepresentation, negligent misrepresentation, and tortious interference with business relations and seeks actual damages, punitive damages, interest, attorneys' fees and costs. On or about February 8, 2002, Krause answered the complaint, and filed a counter-claim alleging breach of contract, unjust enrichment, and an additional claim for breach of contract. The counter-claim seeks damages in the amount of $451,983 plus interest, and reasonable attorneys' fees and costs. The parties have subsequently filed various responsive documents including a reply to the counterclaim by Key3Media Events and a motion to dismiss by Krause. On or about March 27, 2002, counsel for Krause requested permission to amend its counter-claim to add E.J. Krause y Asociados Argentina S.R.L., an Argentine corporation owned in part by Reed Elsevier Overseas BV, as a third party, to add additional counter-claims and to request compensatory damages of not less than $10.5 million and punitive damages of $10.0 million. On or about April 12, 2002, Krause and E.J. Krause Asociados Argentina S.R.L. filed their answer and first amended counterclaim alleging breach of contract, unjust enrichment, fraudulent inducement to contract, breach of implied covenant of good faith and fair dealing, intentional misrepresentation, constructive fraud, negligent misrepresentation, breach of fiduciary duty, torts arising from breach of contract and tortious interference with prospective advantage. The amended counterclaim seeks compensatory damages of not less than $10.5 million and punitive damages of $10.0 million. On or about August 30, 2002, E.J. Krause & Associates, Inc. filed a similar answer and counterclaim. The case was stayed on February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. On or about February 4, 2002, Key3Media Events filed a complaint against Krause International, Inc., E.J. Krause and Associates, Inc. and E.J. Krause de Mexico SA de CV (collectively, "Krause"), with respect to Krause's management of COMDEX Mexico for the years 2001 and 2002. The complaint alleges breach of oral contract, breach of written contract, declaratory relief, breach of covenant of good faith and fair dealing, breach of fiduciary duty, fraud, negligent misrepresentation, and violation of California Business and Professions Code Section 17200 16 and seeks actual damages, punitive and exemplary damages in an amount of at least $10.0 million, attorneys' fees and costs, disgorgement and interest. On or about March 12, 2002, Krause filed a motion to dismiss the complaint on the grounds of improper venue or, alternately, to change venue to the United States District Court for the District of Maryland. A hearing was held on this issue on April 29, 2002 and on May 9, 2002, the court granted the portion of the motion for transfer of venue. Key3Media Events' subsequent motion for reconsideration was denied. On or about July 26, 2002 Krause filed an answer and counterclaim for breach of contract, unjust enrichment, fraudulent inducement to contract, breach of implied covenant of good faith and fair dealing, intentional misrepresentation, constructive fraud, negligent misrepresentation, torts arising from breach of contract and tortious interference with prospective advantage. The amended counterclaim seeks compensatory damages of not less than $10.6 million and punitive damages of $10.0 million. The case was stayed on February 3, 2003 pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. On July 1, 2002, Commerce and Industry Insurance Company ("CIC") sued us for declaratory relief in the Supreme Court of the State of New York. The complaint arises out of our event cancellation policy with CIC covering its 2001 COMDEX/Fall event. On July 31, 2002, we sued CIC in the Superior Court of the State of California, County of Los Angeles, for breach of contract, tortious breach of implied covenant of good faith and fair dealing and declaratory relief arising out of our event cancellation policy with CIC covering its 2001 Networld + Interop/Atlanta and 2001 COMDEX/Fall events. Our complaint seeks compensatory damages of $9.1 million and $52.4 million with respect to the 2001 Networld + Interop/Atlanta and 2001 COMDEX/Fall events, respectively, punitive damages, interest and reasonable attorneys' fees. The dispute arises out of CIC's response to our insurance claim for losses incurred in connection with these two events as a result of the tragedies of September 11, 2001. We and CIC have moved to dismiss or stay the other party's suit in New York and California, respectively. On November 5, 2002, the California court rejected CIC's motion to dismiss or stay the California action. The New York court has not yet rendered a decision on our pending motion to dismiss or stay the New York action. On March 10, 2003, CIC filed a motion for summary adjudication of the second, fourth and fifth causes of action in the California case, all of which relate to the 2001 COMDEX/Fall event; on April 10, 2003 we filed our response. A hearing on the motion is scheduled for April 24, 2003. The parties have engaged in various settlement discussions but have not reached an agreement. In connection with its spin-off from Ziff-Davis, we and our subsidiaries have received an indemnification from Ziff-Davis against all liabilities not related to our businesses, including the class actions and derivative litigation filed against Ziff-Davis discussed in our Registration Statement on Form S-1 (No. 333-36828). We and our subsidiaries are subject to various other claims and legal proceedings arising in the normal course of business. Our management believes that the ultimate liability, if any, in the aggregate will not be material to our financial position, results of operations or cash flows. ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2002. EXECUTIVE OFFICERS OF KEY3MEDIA GROUP, INC. Set forth below are the name, age, present title, principal occupation, and certain biographical information for the past five years for our executive officers, all of whom have been appointed by and serve at the pleasure of our board of directors. FREDRIC D. ROSEN, 59 Fredric D. Rosen was hired by Ziff-Davis in March 2000 to become our Chairman and Chief Executive Officer. In the 18 months preceding his employment by Ziff-Davis, he was a consultant and private investor. Mr. Rosen was previously President & Chief Executive Officer of Ticketmaster Group, Inc., a position he held for more than 16 years, from 1982 to 1998. Mr. Rosen is also a member of the board of directors of Playboy.com, Inc., a private company. 17 JASON E. CHUDNOFSKY, 59 Jason E. Chudnofsky is the Vice Chairman and Chief Operating Officer of Key3Media Group, Inc. and serves as the Vice Chairman, President and the Chief Executive Officer of Key3Media Events. Mr. Chudnofsky has worked at Key3Media Events since 1998. He has been a director of Ziff-Davis since 1998. From 1988 to 1997, Mr. Chudnofsky was President of the Trade Show Division of The Interface Group which was renamed SOFTBANK COMDEX when that division was acquired by SOFTBANK in 1995. In addition, Mr. Chudnofsky served as President and Chief Executive Officer of the Sands Expo and Convention Center Division from 1990 to 1995. Mr. Chudnofsky has over 15 years of experience in the events, tradeshow and conference industry. Mr. Chudnofsky is a member of the board of directors of Tech Corporation, Folio Exhibits, Inc., and Quantum Clicks, Inc. PETER B. KNEPPER, 54 Peter B. Knepper was hired by Ziff-Davis in March 2000 to be our Executive Vice President and Chief Financial Officer. In the year preceding his employment by Ziff-Davis, he was a private investor and consultant providing strategic planning and financial management services. Mr. Knepper was previously Senior Vice President and Chief Financial Officer of Ticketmaster Group, Inc., a position he held for more than ten years, from 1988 to 1998. NED S. GOLDSTEIN, 47 Ned S. Goldstein was hired by Ziff-Davis in March 2000 to be our Executive Vice President and General Counsel. In 1998, Mr. Goldstein co-founded The Etechnology Companies, L.L.C. ("Etech"), a consulting, investment and lobbying firm specializing in new economy companies and issues. Before co-founding Etech, Mr. Goldstein was previously Senior Vice President and General Counsel of Ticketmaster Group, Inc., a position he held for more than 11 years, from 1987 to 1998. Mr. Goldstein is a member of the board of directors of M.Cam, Inc. a private company specializing in intellectual property valuation. ROBERT PRIEST-HECK, 36 Robert Priest-Heck is the Chief Operating Officer of our subsidiary, Key3Media Events, Inc., formerly ZD Events. Mr. Priest-Heck has worked at Key3Media Events, Inc. since 1998 and has served in a variety of positions, including Executive Vice President of Operations and Director of International Operations. Prior to joining Key3Media Events, Mr. Priest-Heck held a variety of positions at Ziff-Davis and its subsidiaries and held management positions with Hyatt Hotels. EUGENE L. COBUZZI, 46 Eugene L. Cobuzzi was named as our Executive Vice-President of Operations and Strategic Planning in January of 2002. Mr. Cobuzzi had been a Senior Vice-President of Key3Media Events, Inc., focused on company operations, major vendor relationships, and mergers and acquisitions since January of 2001. Before joining our company, Mr. Cobuzzi developed new business opportunities in the digital music distribution space for Real Networks. Prior to that, Mr. Cobuzzi spent 15 years at Ticketmaster Corporation in a variety of executive positions including Chief Operating Officer and director. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information relating to the principal market in which our common stock is traded and the high and low sales prices per share for each full quarterly period for the two most recent fiscal years is set forth below. As of April 2, 2003, there were approximately 352 holders of record of our common stock. Our common stock commenced trading on the New York Stock Exchange ("NYSE") under the symbol "KME" on August 21, 2000. Prior to that date, there was no public market for our common stock. On July 29, 2002, 18 the NYSE suspended the trading of our common stock and the NYSE commenced procedures to delist the shares from the exchange. The NYSE said it was taking this action due to the abnormally low recent selling prices of the shares. We discussed these matters with the NYSE and decided not to challenge the NYSE's actions. On July 31, 2002, our common stock began trading on Over-The-Counter Bulletin Board under the symbol KMED, which was subsequently changes to KMEDQ.OB. The following table sets forth, for the periods indicated, the high and low closing prices per share for our common stock as reported by the Consolidated Tape Association:

During 2001 and 2002 no dividends were declared. Our board of directors does not intend to pay any dividends in the foreseeable future. Instead, we will retain any future earnings to finance the operation and expansion of our business. In addition, our ability to pay dividends in the future is restricted by the terms of our credit facility and senior subordinated notes. The following table sets forth the number of securities to be issued upon exercise of outstanding options warrants and rights:

ITEM 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with, and are qualified by reference to, our audited consolidated and audited combined financial statements and the notes thereto contained elsewhere in this Annual Report. The selected financial data presented is for the five-year period ended December 31, 2002. The consolidated statement of operations data for the years ended December 31, 2002, 2001 and 2000 and the consolidated balance sheet data as of such dates are derived from our consolidated audited financial statements for such years, which have been audited by Ernst & Young LLP, independent auditors and are included herein. The combined statement of operations data for the year ended December 31, 1999 are derived from our audited combined financial statements for such year, which has been audited by PricewaterhouseCoopers LLP, our previous independent accountants, and are included herein. The combined statement of operations data for the year ended December 31, 1998 and the combined balance sheet data as of December 31, 1999 and 1998 are derived from our audited combined financial statements for those years, which have been audited by PricewaterhouseCoopers LLP, but which are not included herein. 19 Our historical financial information may not be indicative of our future performance as an independent company.

------------------- (1) Interest expense related to debts payable to Ziff-Davis and SOFTBANK for fiscal year 1998 through August 2000. For the period September 2000 to June 26, 2001, interest expense related to our credit facility and debentures. After June 26, 2001, interest expense related to our senior bank credit facility and our unsecured senior subordinated notes. (2) Represents gain on sale of Expo Comm. (3) EBITDA represents income before taxes plus depreciation and amortization, interest expense net of interest income and excluding any gain on the sale of joint venture interest. EBITDA should not be considered as an alternative to, or more meaningful than, operating income as determined in accordance with GAAP, cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity. Our management believes EBITDA provides meaningful additional information on our operating results and on our ability to service our long-term debt and other obligations and to fund our operations. Because EBITDA is not calculated in the same manner by all companies, the representation herein may not be comparable to other similarly titled measured of other companies. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS WE HAVE FILED FOR PROTECTION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AND BELIEVE OUR SHARES HAVE NO VALUE As a result of the continuing difficulties being experienced by our operations, our high debt load and the other factors described in this "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations", we filed for protection and reorganization under chapter 11 of the U.S. Bankruptcy Code on February 3, 2003. We are seeking approval of a plan of reorganization which, if completed, will discharge any and 21 all interests or claims that holders of our common stock and preferred stock have with respect to our company and its assets. As a result, we believe our shares no longer have any value and do not believe any investor should pay anything for such shares. Under the expected plan of reorganization, holders of our Notes other than TWCP will share ratably with other unsecured creditors in distributions of $2.5 million in cash, 40% of the net proceeds of an insurance claim up to a maximum of $4 million, warrants to purchase up to 5% of the reorganized company's equity with a strike price at the reorganization value, and potential additional minor assets that remain subject to final negotiation. TWCP has agreed to forego its pro rata share of the foregoing distributions. Although it is not possible to predict with certainty what the ultimate distributions will be to those holders of our Notes, it is virtually certain that whatever they receive will, in present value terms, represent only a very small percentage of the aggregate principal amount of, and accrued interest on, our Notes. Accordingly, we believe our Notes have very little value and any potential purchaser of our Notes should proceed with extreme caution. If our company is liquidated instead of reorganized, we believe that the holders of our shares and the holders of our Notes would likely receive nothing. For a more detailed description of the risks involved with our company, see "Item 1 -- Business -- Risk Factors". The discussion below should be read in conjunction with our historical audited consolidated and audited combined financial statements, the notes thereto and the comparative summary of selected historical financial data contained elsewhere herein. Certain reclassifications have been made to prior period data to conform to current year presentations. Our historical results may not be indicative of future results and we may engage in new or different business activities and practices in the future. In addition to historical information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including those set forth under "Item 1 -- Business -- Certain Factors that May Affect our Business" and elsewhere herein. We utilize the term EBITDA in the following discussion. EBITDA represents income before interest expense, net of interest income, taxes, depreciation and amortization. EBITDA should not be considered as an alternative to, or more meaningful than, operating income as determined in accordance with GAAP, cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity. Our management believes EBITDA provides meaningful additional information on its operating results and on its ability to service its long-term debt and other obligations and to fund its operations. Because EBITDA is not calculated in the same manner by all companies, the representation herein may not be comparable to other similarly titled measures of other companies. DEVELOPMENTS IN 2002 STRATEGIC REVIEW, EXPENSE REDUCTION PROGRAMS AND RESTRUCTURING On July 28, 2002, we announced the undertaking of a strategic review of our operations in response to the sustained economic downturns being experienced in the information technology, networking and trade show industries and the effects of September 11, 2001 on our operations. The review initially focused on our operations in light of the recent trend toward reduced market demand with a view to modifying our operating structure as necessary to compete in the current operating environment. We engaged financial and legal advisors to assist us in evaluating our available options. On September 18, 2002, we announced that we were reducing and consolidating our event schedule for 2003 and closing our regional office in Needham, Massachusetts, completing the initial phase of this strategic review. As a result of the strategic review and other developments described above, our board of directors decided we could not continue to operate our businesses in the near term under our existing capital structure and that it would be in the best long-term interests of the holders of our shares and debt obligations to explore a possible restructuring (with or without additional capital), sale, business combination and/or other reorganization transaction which, if consummated could result in a change of control of our company. On or about November 22, 2002, we commenced a structured process through our financial advisor Houlihan Lokey Howard & Zukin to explore these alternatives. 22 BANKRUPTCY FILING On February 3, 2003, we filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the District of Delaware (the "Court"). We decided to seek judicial reorganization based upon a comprehensive recapitalization plan designed to provide a strong financial foundation for the company. The plan is backed by investment funds managed by TWCP, which, with certain of its affiliates, owns approximately 68% of our bank debt and approximately 38% of our Notes as of February 3, 2003. On February 4, 2003, the Court gave interim approval for $12.5 million of a $30.0 million debtor-in-possession Credit and Guaranty Agreement ("DIP Credit Facility") to be provided by TWCP for payment of permitted pre-petition claims, working capital needs, and other general corporate purposes. On March 26, 2003, the Court gave final approval of the DIP Credit Facility for the full $30.0 Million. A further description of the bankruptcy filing is included in footnotes to the consolidated financial statements appearing elsewhere in this Form 10-K. NYSE DELISTING On July 29, 2002, NYSE suspended the trading of our common stock and the NYSE commenced procedures to delist our shares from the exchange. The NYSE said it was taking this action due to the abnormally low recent selling prices of the shares. On July 31, 2002, our common stock began trading on Over-The-Counter Bulletin Board under the symbol KMEDQ.OB. FINANCING TRANSACTIONS On June 26, 2002, we further amended our Amended and Restated Credit Facility to modify the existing financial covenants until April 1, 2003, after we determined that we might be in non-compliance with our financial covenants for the quarter ending June 30, 2002. On December 16, 2002, we failed to pay the semi-annual interest payment due on our 11.25% senior subordinated notes ("the Notes"). This non-payment of interest continued past the 30-day grace period and became an event of default in respect of the Notes. Further, this event of default under the Notes constituted a cross-default under our Amended and Restated Credit Facility. On January 23, 2003 and January 28, 2003, we further amended our Amended and Restated Credit Facility. These amendments, among other things, provided consents to the subordination of liens in connection with us obtaining debtor-in-possession financing in a contemplated filing under Chapter 11 of the U.S. Bankruptcy Code and waivers for certain defaults that existed at each amendment date. On July 2, 2002, we converted 50,000 shares of our 5.5% Series B Convertible Preferred Stock to 254,500 shares of our common stock. On November 7, 2002 and November 25, 2002, we repurchased a total of 1,400,000 shares of our 5.5% Series B Convertible Preferred Stock for $5 dollars. Also on November 27, 2002, we converted 80,000 shares of our 5.5% Series B Convertible Preferred Stock to 80,000 shares of our 5.5% Series A Convertible Preferred Stock. A further description of the terms and conditions of these debt and equity transactions is included in the "Liquidity and Capital Resources" section of this Item 7 and in the footnotes to the consolidated financial statements appearing elsewhere in this Form 10-K. ACQUISITIONS AND DISPOSITIONS On January 7, 2002, we completed the acquisition of ExpoNova Events & Exhibitions ("ExpoNova") previously announced on November 30, 2001. In connection with this acquisition, ExpoNova retained and subsequently exercised a right to require us to purchase another tradeshow and conference business subject to certain conditions on April 9, 2002. On January 24, 2003, we completed the sale of the assets of our Key3Media VON Events (VON) subsidiary to Pulver.com VON Events, Inc., an affiliate of the prior owners of the VON events. In connection with this sale, we were required to account for the operations of these assets as discontinued operations and make certain reclassification to prior year financial statements to conform to this new presentation. A further description of the terms and conditions of this acquisition and disposition is included in footnotes to the consolidated financial statements appearing elsewhere in this Form 10-K. 23 OTHER Bruce M. Ramer resigned as a director of our company on July 15, 2002, James A. Wiatt resigned as a director on July 25, 2002, James E. Moore resigned as a director on August 8, 2002, John A. Pritzker resigned as a director on August 23, 2002, G. Andrea Botta resigned as a director on August 28, 2002, Pamela C. Alexander resigned as a director on October 3, 2002, and Eric Hippeau resigned as a director on December 19, 2002, in each case citing demands on their time except for Mr. Botta and Mr. Hippeau who did not provide reasons. Additionally, Michael B. Solomon resigned as a director on January 6, 2003, without providing a reason. REVENUE To date, our revenue has been derived principally from: - exhibitor services revenue, which consists of the fees we receive from IT vendors to rent exhibit space at our events and the commissions and discounts we receive from third parties who provide services to our exhibitors; - fees paid by attendees to participate in conferences that we offer at our events; and - advertising and sponsorship fees. Historically, exhibitor services revenue has ranged from 68% to 74% of our total revenue. Exhibit space rental revenue accounts for a substantial majority of exhibitor services revenue and fluctuates as a result of changes in the amount of net square feet of exhibit space rentals and our rental rates. The balance of exhibitor services revenue depends upon the demand for and pricing of the third-party services that we promote to our exhibitors. At most of our annual events, we generally rent a majority of the exhibit space for the next year's event. Exhibitors are contractually required to pay for exhibit space rentals in advance in two or three installments. The last installment is usually due six months from the contract date or, if the contract is signed after this date, the date of the contract. We recognize exhibitor services revenue when the related event occurs. As a result, a significant portion of our cash and cash equivalents and accounts receivable represent deferred revenues for events to occur at a later date. Historically we maintained insurance on our three largest events in amounts sufficient to cover a substantial portion of lost exhibit space rental revenue for certain event cancellations covered by the policy in question. The events of September 11th have significantly affected the market for this type of insurance. We are currently negotiating the terms of policies for our COMDEX Fall and certain other events in 2003. While we believe we will be able to reach agreement on these policies, it seems clear from our negotiations that the cost of this insurance will be greater than in past years and that the policies will contain an exclusion for event cancellations due to terrorist actions. Conference fees have ranged from 15% to 20% of our total revenue and consist of the fees we charge attendees to participate in the conferences we offer at our events and, to a very minor extent, the fees paid by attendees to attend our events. While attendees must obtain tickets for our events, these tickets are usually distributed on a complimentary basis and only permit attendees to visit the exhibit floor and other generally available portions of the events. Advertising and sponsorship fees paid by our exhibitors generate approximately 6% to 12% of our total revenue. This revenue comes primarily from the following sources: - advertising in Preview, a newspaper distributed before some of our larger events to pre-registrants and certain prior year attendees; - advertising in Program Exhibits Guide, a guide to the exhibitors distributed before and during our events; - advertising in Show Daily, a daily newspaper we distribute during some of our larger events; - advertising on billboards and banners at and around our event venues; and 24 - sponsorships of key areas and promotional materials throughout our event venues. We currently sell advertising and sponsorships almost exclusively to our exhibitors on an event-by-event basis. We believe that with the strength of our brands and audiences, we have opportunities to expand these sales beyond our exhibitor base and the IT industry. We also believe we have significant opportunities to generate additional revenue by selling advertising and sponsorships across multiple events and brands and by introducing promotional activities at our events. We market our events under a limited number of brands. The table below presents revenue for our principal brands over the last three years, excluding international contract events discussed below under "Description of Business--International Expositions."

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

-------------------------- (1) Unlike our tradeshows, JavaOne is a conference from which we derive most of our revenue from the fees attendees pay to attend the conference. Although we do derive secondary revenue from exhibit space rental fees, it is not material and, accordingly, exhibitor information has been omitted from this table. OPERATING COSTS COST OF PRODUCTION We record as cost of production all costs we pay to third parties that are directly associated with an event. The largest components of these costs are event-specific advertising and attendee marketing, venue rental, costs of 25 temporary personnel, conference content and other costs related to event production, including hospitality and lodging. In the case of COMDEX Fall, we currently have the Las Vegas Convention Center under contract through 2007, subject to the acceptance of the lease(s) in our bankruptcy filing. In the case of our events, contractual rights with venues vary. Although we do not have a contractual right to use the venues beyond the contract period, we believe that venue owners will generally give us the first chance to rent the space in the ensuing years. While we have experienced recent increases in the venue rental rates, we have been generally able to pass these increased costs on to our exhibitors. Costs incurred prior to the occurrence of an event are recorded as prepaid event costs and expensed as events occur; thereby matching event costs with event revenues. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A consists of payroll and benefit costs for our employees, office rental expenses, legal, accounting and all other expenses not directly associated with an event (other than depreciation and amortization). For part of 2000 and prior, SG&A has included charges from Ziff-Davis for administrative services, including legal, tax and financial accounting, management information, telecommunications, and human resources services. In general, Ziff-Davis charged us for these services based upon our utilization; however, where measuring utilization was impractical, Ziff-Davis apportioned these charges among the businesses in its ZD division based upon relative headcount or revenue. In addition, Ziff-Davis managed most of our treasury activities. Since the spin-off, we no longer rely on Ziff-Davis for these services and provide them ourselves. In addition, we have new expenses as an independent public company that we did not have in the past. We may also incur new or different expenses as our business changes over time. DEPRECIATION AND AMORTIZATION As of December 31, 2002, we had $73.9 million, net, of intangibles. These intangibles consist primarily of goodwill and trade names from our acquisition of COMDEX in 1995, ZD Expos in 1994 and ExpoNova in 2002. In June 2001, the Financial Accounting Standards Board issued Financial Accounting Standards No. 142, "Goodwill and Other Intangibles Assets" (SFAS No. 142). We adopted SFAS No. 142 in the first quarter of 2002 and recorded a non-cash charge of $344.6 million, net to reduce the carrying value of goodwill and other intangibles related to the COMDEX reporting unit to their fair estimated value. See "Recent Accounting Pronouncements" for additional information. Our depreciation relates to the depreciation of property and equipment, principally computers and similar equipment. As of December 31, 2002, we had $9.5 million of property and equipment, net. INTEREST EXPENSE In prior periods, interest expense related to amounts owed to affiliates of SOFTBANK and Ziff-Davis. From August 18, 2000 to June 26, 2001, this expense related to our bank credit facility and debentures. Subsequent to June 26, 2001, this expense related to our senior subordinated notes and senior bank revolving credit facility. NON-GAAP FINANCIAL MEASURE We believe that, although not prescribed under generally accepted accounting principles ("GAAP"), EBITDA and Adjusted EBITDA provide stockholders and potential investors with valuable measures in evaluating our operating performance. The most directly comparable GAAP measure, operating income (loss), includes depreciation and amortization, restructuring costs, non-recurring compensation charge, staff reduction severance charges, reduction of goodwill and other intangibles and stock based compensation. EBITDA and Adjusted EBITDA exclude these items because they do not directly influence the ongoing operations of the business. It is important to note, however, that not all companies calculate adjusted EBITDA in the same manner, and adjusted EBITDA as presented may not be comparable to similarly titled measures by other companies. A reconciliation of our operating income (loss) to our adjusted EBITDA for 2002, 2001 and 2000 is as follows (in thousands): 26

RESULTS OF OPERATIONS The following table sets forth our combined and consolidated statement of operations data expressed as a percentage of revenue for the periods presented:

27 2002 COMPARED WITH 2001 In 2002, our revenues, net paid square footage of exhibit space, and conference participants continue to decline due primarily to on-going difficulties in the economy in general and in the IT industry in particular and the related reductions in IT marketing and travel budgets, along with the continuing effects of September 11, 2001. In addition, we have made certain reclassifications to the consolidated financial statements for 2001 to conform to the presentation in the consolidated financial statements for 2002. Our total revenue decreased $97.7 million, or 39.2%, to $151.5 million in 2002 from $249.2 million in 2001. This decrease was primarily attributable to lower overall revenue at most of our major events, mainly our COMDEX Fall, N+I Las Vegas, N+I Atlanta and JavaOne events. The decrease in revenue for these four events in 2002 from 2001 was approximately $79.0 million Exhibitor services revenue decreased by $67.9 million, or 37.6%, to $112.4 million in 2002 from $180.3 million in 2001. This decrease was primarily due to a 39.8% decrease in net paid square footage and a 5.3% decrease in average rental rate per square foot and a $15.6 million decrease in other exhibit revenue activity. The net paid square footage decreased from 2,262,124 in 2001 to 1,362,864 in 2002 and the average rental rate per square foot paid by exhibitors decreased 5.3% to $50.86 in 2002 from $53.68 in 2001. These decreases were primarily due to the continuing difficulties in the IT industry. The $15.6 million decrease in other exhibit revenue resulted principally from lower exhibitor participation at the COMDEX Fall, N+I Las Vegas, N+I Atlanta and Seybold Seminars San Francisco events. Conference fees decreased $11.5 million, or 29.4%, to $27.6 million in 2002 from $39.0 million in 2001. This decrease was principally attributable to the lower conference attendance at most of our major events, mainly at our JavaOne and N+I Las Vegas events, and a decrease of 7.5% in the average revenue per conference attendee in 2002 of $1,368 compared with $1,478 in 2001. The number of participants at our conferences decreased 23.7% to 20,146 in 2002 from 26,394 in 2001. Advertising and sponsorship revenues decreased $20.1 million, or 67.2%, to $9.8 million in 2002 from $29.9 million in 2000. This decrease was primarily attributable to lower advertising and sponsorship revenue for our COMDEX Fall, N+I Las Vegas, N+I Atlanta and JavaOne events. In 2002, we recorded $1.7 million of income related to proceeds from insurance claims. The majority of this amount, $1.6 million, was earned in connection with a claim submitted for our Next Generation Network event held in November 2001, which was adversely impacted by the events of September 11, 2001. We had no such income in 2001. Cost of production decreased $29.1 million, or 33.8%, to $56.9 million in 2002 from $86.0 million in 2001. As a percentage of revenue, cost of production represented 37.6% of revenue in 2002 compared to 34.5% in 2001. The aggregate dollar decrease in cost of production was attributable to the reduced size and scope of all of our major events. The percentage increase reflects our lower revenues and the fixed cost component of our cost of production. SG&A expenses decreased $20.9 million, or 19.8%, to $84.8 million in 2002 from $105.7 million in 2001. As a percentage of revenue, SG&A expenses represented 56.0% of revenue in 2002 compared to 42.4% in 2001. The decrease in SG&A expenses on a dollar basis was primarily due to the effects of a staff reduction program that commenced in September 2001 and continued through 2002, and other cost reduction programs implemented during 2002 to reduce our temporary personnel and travel and entertainment costs, partially off-set by higher rent expense, insurance costs and professional and legal service fees. The percentage increase primarily reflects our lower revenues. In 2002, we recorded $7.4 million of restructuring costs related to the closure of our Needham, Massachusetts regional office and abandonment of the related lease obligation, professional service fees incurred in connection with our strategic review and loss on write-down of property and equipment principally due to the closure of our regional office. In 2001, we had no such costs. 28 Staff reduction severance charge increased $1.1 million to $2.8 million in 2002 from $1.7 million in 2001. The increase was attributable to the incremental reduction of personnel that principally worked at our Needham, Massachusetts regional office. In 2002, in connection with our strategic review that commenced during the third quarter, we conducted a review of our goodwill and intangible assets and recorded a total non-cash charge of $396.1 million to reduce the value of goodwill and other intangibles related to our portfolio of reporting units to their estimated fair value. This charge is recorded in our consolidated statement of operations for the year as follows: $363.0 million in the line item "Reduction of goodwill and other intangibles" and $33.1 million in the line item "Net income (loss) on discontinued operations" related to the sale of the assets of VON subsequent to December 31, 2002. The strategic review and resulting charge recognizes the sustained economic downturns experienced in the economy in general and specifically in the information technology and networking industries we service as shown by the significant decline in our results of operations. We used a combination of discounted cash flow methodology and relative market measures to determine fair value. In 2001, we had no such charge. Noncash stock-based compensation increased $1.6 million to $1.8 million in 2002 from $0.2 million in 2001. The increase was attributable to the reversal of previously recorded expense in 2001, resulting from the application of variable accounting stock-based compensation valuation principles. During August 2000, we granted stock options to certain of our employees who were previously employed by Ziff-Davis that we must account for under variable accounting valuation principles. Using this accounting treatment, we must record the fair value of these options at the close of each accounting period and recognize the increase or decrease in fair value from period to period as an increase or decrease in stock-based compensation. Other income (expense), net decreased $6.9 million or 106.3%, to expense of $0.4 million in 2002 from income of $6.5 million in 2001. The decrease was attributable to $6.7 million of other income from ending the GES litigation in 2001. As a result of the foregoing, EBITDA decreased by $427.6 million, or 689.9%, to an EBITDA loss of $365.6 million in 2002 from an EBITDA gain of $62.0 million in 2001. After adjustments to exclude the effects of restructuring costs, staff reduction severance charges, reduction in goodwill and other intangibles and non-cash stock-based compensation, adjusted EBITDA would have been $9.3 million in 2002, a decrease of $54.6 million, or 85.4%, from adjusted EBITDA in 2001 of $63.9 million. Depreciation and amortization decreased $22.3 million, or 55.8%, to $17.7 million in 2002 from $40.0 million in 2001. The decrease is principally due to our adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," (SFAS No. 142) effective January 1, 2002 and the elimination of depreciation expense for fixed assets that were fully depreciated in the first half of 2002. SFAS No. 142 requires, among other things, that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. We recognized approximately $12.8 million of amortization expense in 2001 related to goodwill and intangible assets with indefinite useful lives. Net interest expense decreased $2.8 million to $39.4 million in 2002 from $42.2 million in 2001. The decrease is principally due to a lower average interest rate (including amortization of deferred financing costs) on our primary debt obligations in 2002 than in 2001. The benefit for income tax decreased $0.3 million to $4.9 million for 2002 from $5.1 million in 2001. As a percentage of income (loss) before income taxes, this balance represents 25.4% in 2001 compared to 1.1% in 2002. Our income tax benefit as a percentage of loss before income taxes decreased principally to the increase in non-deductible amounts in 2002 including reductions in goodwill and other intangibles. Net income (loss) on discontinued operations decreased $34.7 million, to net loss of $33.5 million in 2002 from net income of $1.2 million in 2001. The decrease was primarily attributable to a $33.1 million reduction in goodwill related to the VON assets in 2002. 29 In 2001, in connection with the repayment of our bank indebtedness and repurchase of our zero coupon debentures on June 26, 2001, we recognized an extraordinary loss on retirement of debt of $9.1 million, net of tax benefit of $3.4 million. This amount represents the write-off of unamortized original issue discount assigned to the warrants issued with the zero coupon debentures retired and unamortized debt issuance costs. We also recognized an extraordinary gain of $1.6 million, net of tax provision of $0.6 million, in connection with the exchange of $10.0 million face amount of senior subordinated notes for $7.5 million of Series B preferred stock in December 2001. This extraordinary gain represents the difference in exchange value of the securities off-set by the unamortized debt issuance costs attributable to the exchanged and cancelled senior subordinated notes. In 2002, we had no such charges. In connection with the adoption of SFAS No. 142, on January 1, 2002 we recognized a cumulative effect of a change in accounting principle of $344.6 million, net of tax benefit of $80.4 million. This amount represents the difference between the fair value and carrying value of goodwill and other intangibles related to the COMDEX reporting unit as of January 1, 2002. In 2001, we had no such charge. As a result of the foregoing, we incurred a net loss of $795.9 million in 2002 compared to net loss of $21.4 million in 2001. 2001 COMPARED WITH 2000 We believe that the decreases in our revenues, net paid square footage of exhibit space, and conference participants in 2001 were attributed to continuing difficulties in the economy in general and in the IT industry in particular, the related reductions in IT marketing and travel budgets and the terrorist attacks that occurred on September 11, 2001. We held three of our most significant events during the year on and after the September 11th tragedy. We held our N+I Atlanta event on September 11, 2001 to September 13, 2001, our Seybold Seminars San Francisco event on September 25, 2001 to September 27, 2001, and our COMDEX Fall event on November 12, 2001 to November 16, 2001. Our total revenue decreased $37.7 million, or 13.2%, to $249.2 million in 2001 from $286.9 million in 2000. This decrease was primarily attributable to lower overall revenue at most of our major events including COMDEX Fall, N+I Atlanta and Seybold Seminars San Francisco, partially off-set by the addition of operating results from acquired businesses in 2001. SB Forums was acquired on June 1, 2001 and the NGN and BCR assets were acquired in two separate transactions on September 10, 2001. After adjusting revenue for the year ended December 31, 2001 to exclude the effects of these acquired businesses, our revenue for the year would have been $226.4 million, a decrease of $60.5 million, or 21.1%, from $286.9 million in 2000. Exhibitor services revenue decreased by $16.9 million, or 8.6%, to $180.3 million in 2001 from $197.2 million in 2000. This decrease was primarily due to a 20.5% decrease in net paid square footage partially off-set by a 3.6% increase in average rental rate per square foot and a $9.1 million increase in other exhibit revenue activity. The net paid square footage decreased from 2,847,214 in 2000 to 2,262,124 in 2001. This decrease was primarily due to the continuing difficulties in the IT industry and the events of September 11th partially off-set by the inclusion of SB Forums' N+I Tokyo event and NGN's Next Generation event. Excluding the effect of the N+I Tokyo and Next Generation events, net paid square footage decreased 28.1% in 2001 to 2,047,624. The average rental rate per square foot paid by exhibitors increased 3.6% to $53.68 in 2001 from $51.79 in 2000. The increase is primarily attributable to the higher rate charged per net paid square foot at our major events in 2001 than in 2000. For instance, our rate increases for the COMDEX Fall, N+I Las Vegas and N+I Atlanta events, our three largest square footage events, were 3% or higher in 2001 over 2000. The $9.1 million increase in other exhibit revenue resulted principally from (i) $5.8 million of revenue from SB Forums' event and conference business; (ii) $0.6 million and $0.4 million from BCR's training business and NGN's publication business, respectively; and (iii) an increase of $1.9 million for JavaOne relating to higher fees charged in 2001. Conference fees decreased $17.1 million, or 30.5%, to $39.0 million in 2001 from $56.2 million in 2000. This decrease was principally attributable to the lower conference attendance at most of our major events, mainly at our COMDEX Fall, N+I Las Vegas, N+I Atlanta, JavaOne and Seybold Seminars San Francisco events, partially off-set by the inclusion of SB Forums' N+I Tokyo event and NGN's Next Generation event. Excluding the effect of the N+I Tokyo and Next Generation, adjusted conference fees decreased $18.0 million, or 32.0% in 2001. The 30 number of participants at our conferences decreased 39.0% to 26,394 in 2001 from 43,292 in 2000. This decrease in participants was partially off-set by a 13.9% increase in the average revenue per conference attendee in 2001 of $1,478 compared with $1,297 in 2000. Excluding the effects of the N+I Tokyo and Next Generation events, the number of conference participants decreased to 24,283, or 43.9% in 2001 and the average revenue per conference attendee increased to $1,573, or 21.2%, in 2001. Advertising and sponsorship revenues decreased $3.6 million, or 10.9%, to $29.9 million in 2001 from $33.5 million in 2000. This decrease was primarily attributable to lower advertising and sponsorship revenue for our COMDEX Fall and N+I Atlanta events partially off-set by a full year of corporate sponsorship revenue earned in 2001 and inclusion of our N+I Tokyo event. Excluding the effects of N+I Tokyo, adjusted advertising and sponsorship revenues decreased $4.6 million, or 13.6% in 2001. Cost of production increased $7.5 million, or 9.6%, to $86.0 million in 2001 from $78.5 million in 2000. As a percentage of revenue, cost of production represented 34.5% of revenue in 2001 compared to 27.4% in 2000. The aggregate dollar and percentage increases in cost of production were attributable to the inclusion of operating results from businesses acquired in 2001 whose cost of production as a percentage of revenue was higher than our historical experience. The percentage increase also reflects our lower revenues and the fixed cost component of our cost of production. Excluding operating results from these acquired businesses, cost of production decreased $5.7 million, or 7.2% in 2001 compared to 2000. Cost of production represents 32.2% of revenue in 2001 after adjusting for the effects of the acquired businesses. SG&A expenses decreased $0.5 million, or 0.5%, to $105.7 million in 2001 from $106.2 million in 2000. As a percentage of revenue, SG&A expenses represented 42.4% of revenue in 2001 compared to 37.0% in 2000. The decrease in SG&A expenses on a dollar basis was primarily due to the effects of a staff reduction program that commenced in September 2001 and other cost reduction programs implemented during the year off-set by incremental SG&A expenses resulting from the recently acquired businesses. Excluding the results of businesses acquired in 2001, SG&A expenses decreased by $3.5 million, or 3.3%, in 2001 from 2000. SG&A expenses represent 45.4% of revenue in 2001 after adjusting for the effects of the acquired businesses. In 2001, we recorded a $1.7 million staff reduction severance charge related to severance and benefits due to employees terminated during the period from August to December 2001. In 2000, we had a non-recurring compensation charge of $3.0 million related to payments due two of our executives who elected to exercise the termination provisions included in their employment agreements. Noncash stock-based compensation decreased $7.8 million to $0.2 million in 2001 from $8.0 million in 2000. The decrease was attributable to the reversal of previously recorded expense, resulting from the application of variable accounting stock-based compensation valuation principles. During August 2000, we granted stock options to certain of our employees who were previously employed by Ziff-Davis that we must account for under variable accounting valuation principles. Using this accounting treatment, we must record the fair value of these options at the close of each accounting period and recognize the increase or decrease in fair value from period to period as an increase or decrease in stock-based compensation. Other income (expense), net decreased $0.4 million or 1.0%, to expense of $35.7 million in 2001 from expense of $36.1 million in 2000. The decrease was attributable to $6.7 million of other income from ending the GES litigation almost all of which was off-set by an increase in net interest expense. Net interest expense increased due to the higher average debt balance and a higher interest rate on our primary debt obligation in 2001 over 2000. As a result of the foregoing, EBITDA decreased by $19.4 million, or 32.0%, to $62.0 million in 2001 from $91.2 million in 2000. After adjustments to exclude the effects of businesses acquired in 2001, non-cash stock-based compensation, non-recurring compensation and staff reduction severance charges and other income from ending the GES litigation, adjusted EBITDA would have been $50.7 million in 2001, a decrease of $51.4 million, or 50.3%, from adjusted EBITDA in 2000 of $102.2 million. Depreciation and amortization increased $3.3 million, or 9.0%, to $40.0 million in 2001 from $36.7 million in 2000. The increase is principally due to depreciation expense from increased purchases of property and equipment 31 in 2001 over 2000. Our depreciation and amortization expense in future years will be impacted by the implementation of recent accounting standards. See "Recent Accounting Pronouncements." The provision for income tax decreased $15.0 million to a benefit for income tax of $5.1 million for 2001 from a provision of $9.9 million in 2000. As a percentage of income (loss) before income taxes, this balance represents 25.4% in 2001 compared to 53.5% in 2000. Our income tax expense (benefit) as a percentage of income (loss) before income taxes decreased primarily because of the effect of foreign operations and changes in 2001 compared to 2000 for expenses not deductible for tax purposes relating primarily to executive compensation and debenture interest. In connection with the repayment of our bank indebtedness and repurchase of our zero coupon debentures on June 26, 2001, we recognized an extraordinary loss on retirement of debt of $9.1 million, net of tax benefit of $3.4 million. This amount represents the write-off of unamortized original issue discount assigned to the warrants issued with the zero coupon debentures retired and unamortized debt issuance costs. We also recognized an extraordinary gain of $1.6 million, net of tax provision of $0.6 million, in connection with the exchange of $10.0 million face amount of senior subordinated notes for $7.5 million of Series B preferred stock in December 2001. This extraordinary gain represents the difference in exchange value of the securities off-set by the unamortized debt issuance costs attributable to the exchanged and cancelled senior subordinated notes. As a result of the foregoing, we incurred a net loss of $21.4 million in 2001 compared to net income of $8.6 million in 2000. LIQUIDITY AND CAPITAL RESOURCES On December 31, 2002, our balance of cash and cash equivalents was $7.8 million and we had a working capital deficit of $406.8 million compared to cash and cash equivalents of $41.4 million and a working capital deficit of $16.9 million at December 31, 2001. This decrease in cash and cash equivalents was primarily attributable to net cash used in operating activities and the use of cash to purchase property and equipment and acquire businesses in 2002 off-set by the return of part of the cash purchase price for businesses acquired in 2001. The increase in the working capital deficit was principally due to the reclassification of our long-term debt obligations to currently payable resulting from the interest payment default that occurred subsequent to December 31, 2002. During 2002, we met our liquidity needs principally through cash reserves, and the return of part of the cash purchase price for businesses acquired in 2001. Net cash used in operating activities was $54.0 million in 2001, compared to net cash provided by operating activities of $0.5 million and $97.7 million in 2001 and 2000, respectively. These decreases were primarily attributable to continued lower levels of profitability and a net reduction in working capital. Net cash provided by investing activities was $19.4 million in 2002, compared to net cash used in investing activities of $118.5 million and $7.4 million in 2001 and 2000, respectively. Net cash provided by investing activities in 2002 was comprised of $22.0 million of cash purchase price returned for businesses acquired in 2001 partially off-set by $0.7 million used to purchase property and equipment and $1.9 million used to acquire businesses. Net cash used in investing activities in 2001 was comprised of $14.8 million used to purchase property and equipment and $103.7 million used to acquire businesses, compared to net cash used in investing activities in 2000 of $7.4 million used to purchase property and equipment. Net cash provided by financing activities was $1.6 million, $49.8 million, and $14.1 million in 2002, 2001 and 2000, respectively. The activity for 2002 related to $1.7 million of addition borrowings under our Amended and Restated Credit Facility off-set by $0.1 million of offering costs related to the issuance of preferred stock in 2001. The activity for 2001 related principally to the refinancing and retirement of indebtedness in June 2001, net borrowings under our revolving credit facility for use in acquiring businesses and issuance of convertible preferred stock. Prior to April 13, 2000, we, as a wholly owned subsidiary of Ziff-Davis, relied on Ziff-Davis' cash management and treasury functions and remitted most of the cash we did not use in our business to Ziff-Davis. Since April 13, 2000, we have assumed responsibility for our cash management and treasury activities as if we were an independent company. 32 In connection with our spin-off from Ziff-Davis on August 18, 2000, we raised approximately $75.0 million through the issuance of zero coupon senior debentures with detachable warrants and sold 11,641,950 shares of our common stock for $6.00 per share. Additionally, our subsidiary Key3Media Events borrowed $330.0 million from a syndicate of banks. The proceeds of these transactions were used to repay and refinance Key3Media Events' existing indebtedness of $382.0 million and to fund a cash dividend to Ziff-Davis of $43.0 million, and the balance was retained for working capital and general corporate purposes. In 2000, we made early repayments of $30.0 million on our bank borrowings. On December 16, 2002, we failed to pay the semi-annual interest payment due on our Notes. This non-payment of interest continued past the 30-day grace period and became an event of default in respect of the Notes. Further, this event of default under the Notes constituted a cross-default under our Amended and Restated Credit Facility. On January 23, 2003 and January 28, 2003, we further amended our Amended and Restated Credit Facility. As a result of the continuing difficulties being experienced by our operations, our high debt load and the other factors described above in "Item 1 -- Business", we filed for protection and reorganization under the U.S. Bankruptcy Code on February 3, 2003. Following our Petition Date of February 3, 2003, we utilized our cash reserves, cash flow from operations and debtor-in-possession financing as our primary sources of working capital. In conjunction with our filing under Chapter 11, we entered into a $30 million debtor-in-possession Credit and Guaranty Agreement ("DIP Credit Facility") with Thomas Weisel Capital Partners ("TWCP"). On February 4, 2003, the Court gave interim approval for up to $12.5 million of funding under the DIP Credit Facility and on March 26, 2003, the Court gave final approval for the entire $30.0 million DIP Credit Facility. The DIP Credit Facility has been afforded superpriority claim status in the Chapter 11 case and is collateralized by liens on certain of our assets (subject to valid and unavoidable prepetition liens and certain other permitted liens) and provides that proceeds be used for payment of permitted pre-petition claims, working capital needs, and other general corporate purposes. Borrowings under the DIP Credit Facility bear interest at 7.0% per annum and interest is payable the last business day of the month. The DIP Credit Facility stipulates that a participation fee be paid on all borrowings at an amount not to exceed 1% of the total principal amount of borrowings. Under the DIP Credit Facility, we are required, among other things, to maintain specified levels of selling, general and administrative expenses (as defined), provide cash reporting and ensure that accounts payables are paid with forty-five (45) days, unless such amounts are disputed in good faith. The DIP Credit Facility also contains other customary covenants, including certain reporting requirements and covenants that restrict our ability to incur or create liens, indebtedness and guarantees, make dividend payments, sell or dispose of assets, and enter into affiliate transactions, mergers and consolidations. Failure to satisfy these covenants would (in some cases, after the expiration of a grace period) result in an event of default that could cause, absent the receipt of appropriate waivers, the funds necessary to maintain our operations to become unavailable. The DIP Credit Facility contains other customary events of default, including a provision that the Court must enter the Plan of Reorganization on or before June 30, 2003. The maturity date of the DIP Credit Facility is June 30, 2003, with a twelve (12) month extension at the discretion of the lender after our request for extension is submitted. Our cash needs are satisfied through working capital generated by our business and funds available under our DIP Credit Facility. The level of cash generated by our business is dependent, in significant part, on our level of sales and the credit extended by our vendors. Since our filing for reorganization under Chapter 11, most of our vendors have resumed normal trade terms. In addition, while we have experienced since the filing lower than expected sales, we have plans for the remainder of the year to restore our businesses and maintain a cost structure that maximizes our cash resources. If, however, we experience a significant disruption of terms with our vendors, sales fail to improve, and/or the DIP Credit Facility for any reason becomes unavailable and/or actual results differ materially from our expectations, our compliance with financial covenants and our cash resources could be adversely affected. With regards to our other capital transaction, we converted 50,000 shares of our 5.5% Series B Convertible Preferred Stock to 254,500 shares of our common stock on July 2, 2002. On November 7, 2002 and November 25, 2002, we repurchased a total of 1,400,000 shares of our 5.5% Series B Convertible Preferred Stock for $5 dollars. Also on November 27, 2002, we converted 80,000 shares of our 5.5% Series B Convertible Preferred Stock to 80,000 shares of our 5.5% Series A Convertible Preferred Stock. 33 Following is a summary of our contractual obligations as of December 31, 2002 (in millions), excluding any borrowing under the DIP Credit Facility:

In connection with the January 7, 2002 purchase of ExpoNova Events & Exhibitions, a portion of the purchase price was placed in an escrow account, subject to the determination of the final purchase price. To the extent the final purchase price is calculated to be more or less than the initial estimate, then, subject to the bankruptcy, we would be required to make an additional payment to the sellers or entitled to a return of purchase price. As of December 31, 2002, we had $0.3 million currently held in escrow. As of April 11, 2003, we borrowed $14 million under the DIP Credit Facility and have a remaining $16 million of borrowings available. SEASONALITY Our revenue is highly seasonal, but our cash flows are more stable. This is because our customers pay us for an event during the 12 months preceding the event, but we do not recognize the payments we receive as revenue until the event occurs. Historically, our largest events occur in the second quarter (NetWorld+Interop, Las Vegas) and the fourth quarter (COMDEX Fall). As a result, the majority of our revenue is recorded in these quarters. We may also experience seasonal fluctuations as events held in one quarter in one year may be held in a different quarter in other years. MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES Management believes that the accounting policies discussed below are important to an understanding of our financial statements because they require management to exercise judgment and estimate the effects of uncertain matters in the preparation and reporting of financial results. Accordingly, management cautions that these policies and the judgments and estimates they involve are subject to revision and adjustment in the future. While they involve less judgment, management believes that the other accounting policies discussed in footnote 3 to the consolidated financial statements included elsewhere in this Form 10-K are also important to an understanding of our financial statements. We determine our allowance for doubtful accounts using a number of factors including historical collection experience, the financial prospects of specific customers and market sectors, and general economic conditions. Generally, we establish an allowance for doubtful accounts based on our collection experience when measured by the amount of time an account receivable is past its payment due date. In certain circumstances where we believe an account is unable to meet its financial obligations to us, we record a specific allowance for doubtful accounts to reduce the account receivable to the amount we believe will be collected. In some instances, we have been able to collect on past due amounts when accounts execute a contract for a subsequent trade show, seminar, conference or exposition. We evaluate our long-lived assets for impairment based on accounting pronouncements that require management to assess fair value of these assets by estimating the future cash flows that will be generated by the assets and then selecting an appropriate discount rate to determine the present value of these future cash flows. An evaluation for impairment must be conducted when circumstances indicate that an impairment may exist; but not less frequently than on an annual basis. The determination of impairment is subjective and based on facts and circumstances specific to our company and the relevant long-lived asset. Factors indicating an impairment condition exists may include permanent declines in cash flows, continued decreases in utilization of a long-lived asset or a change in business strategy. At December 31, 2002, we have a net intangible asset balance of $73.9 million and a 34 net property and equipment balance of $9.5 million. For additional information regarding long-lived assets, see the "Recent Accounting Pronouncements" section of this Item 7 and footnote 3, "Summary of Significant Accounting Policies" included in the consolidated financial statements appearing elsewhere in this Form 10-K. For 2002, we recorded a full valuation allowance for our net deferred tax assets and net operating loss carryforwards. The valuation allowance was calculated in accordance with the provisions of SFAS 109, which places primary importance our operating results in the most recent three-year period when assessing the need for a valuation allowance. Although we believe that our results for the last three years were heavily affected by temporary but persistent difficulties experienced by the industry we serve, impairments and planned restructuring activities, which were undertaken to right-size our cost structure, the cumulative losses represented sufficient negative evidence to require a valuation allowance under the provisions of SFAS 109. We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal. Until such time, except for minor foreign tax provisions, the Company will have no reported tax provision, net of valuation allowance adjustments. Restructuring costs and staff reduction severance charges include estimated costs for severance benefits, lease termination expenses and other costs. If the future payments of these costs were to differ from our estimates, we may need to increase or decrease our related reserves. Specifically, for leased premises that we no longer occupy, management makes certain assumptions as to when or if these premises will be subleased and at what price. Assumptions include the number of years of any sublease, square footage, market trends, property locations, and the price per square foot. These assumptions involve significant judgments and estimations. We have based our assumptions on current market information. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets," (SFAS No. 142) effective for fiscal years beginning after December 15, 2001. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." We adopted SFAS 142 effective January 1, 2002. Based on the evaluation performed to adopt SFAS No. 142, we recorded a non-cash charge of $344.6 million, net of tax benefit of $80.4 million, to reduce the carrying value of goodwill and other intangibles related to the COMDEX reporting unit to their estimated fair value. This charge is nonoperational in nature and is reported as a cumulative effect of an accounting change in the consolidated statement of operations appearing elsewhere in this Form 10-K. We utilized a combination of discounted cash flow methodology and relative market measures to determine fair value. As a result of a strategic review of our operations undertaken during the third quarter ending September 30, 2002 and an updated review of our operations in the fourth quarter ending December 31, 2002, we conducted an evaluation of our goodwill and intangible assets. Based on the results of this evaluation, we recorded an additional non-cash charge of $396.1 million to reduce the value of goodwill and other intangibles related to our portfolio of reporting units to their estimated fair value. This charge is recorded in the consolidated statement of operations appearing elsewhere in this Form 10-K as follows: $363.0 million in the line item "Reduction of goodwill and other intangibles" and $33.1 million in the line item "Net income (loss) on discontinued operations" related to the sale of the assets of VON subsequent to December 31, 2002. We utilized a combination of discounted cash flow methodology and relative market measures to determine fair value in these evaluations. In October 2001, FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," however it retains the fundamental provisions of SFAS No. 121 related to the recognition and measurement of the impairment of long-lived assets to be "held and used." In addition, SFAS No. 144 provides, among other things, more guidance on estimating cash flows when performing a recoverability 35 test and establishes more restrictive criteria to classify an asset as "held for sale." Our adoption of the provisions of SFAS No. 144 on January 1, 2002 did not effect our financial position or results of operations. In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections." For most companies, SFAS No. 145 will require, among other things, gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. We will adopt the provisions of SFAS No. 145 related to the rescission of SFAS No. 4 on January 1, 2003. At such time, we will reclassify the extraordinary loss and gain on extinguishments of debt to continuing operations for prior periods. With regards to other provisions of SFAS No. 145, we have adopted them and such adoption did not effect our financial position or results of operations. In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS No. 146 and EITF No. 94-3 relates to the requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred while EITF No. 94-3 requires that the liability be recognized at the date of an entity's commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 15, 2002, with early application encouraged. We adopted SFAS No. 146 in the second quarter 2002. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to various market risks, which include the potential loss arising from adverse changes in market rates and prices such as foreign currency exchange and interest rates. We do not enter into derivatives or other financial instruments for grading or speculative purposes. We do not hedge our foreign currency rate risk. We entered into an interest rate cap agreement, however, in August 2000 to manage and reduce the impact of changes in interest rates on not less than $165 million of the borrowings under our senior credit facility. This interest rate cap agreement expired in 2001 and we did not enter into a new agreement. Currencies. We maintain operations, cash and other assets in Europe, Japan and Canada. The results of operations and financial position of our foreign operations are principally measured in their respective currency and translated into U.S. dollars. As a result, exposure to foreign currency gains and losses exists. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Part IV, Item 14 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS CONTINUING IN OFFICE -- TERM EXPIRING IN 2005 Edward A. Bennett, 56 Director since 2000 Mr. Bennett is President of Need Studios, and Chairman of Softnet Systems, a publicly traded company on Nasdaq. He is also the co-founder of 212/Investcorp Technology Ventures, and Vaultus, a wireless solutions company. Prior to this, Mr. Bennett was President and CEO of Prodigy Services, President and CEO of MTV Networks' VH-1 Music Television network, and spent 14 years in various executive positions at Viacom. 36 DIRECTORS CONTINUING IN OFFICE -- TERM EXPIRING IN 2004 Jason E. Chudnofsky, 59 Director since 2000 Jason E. Chudnofsky is the Vice Chairman and Chief Operating Officer of Key3Media Group, Inc. and serves as the Vice Chairman, President and Chief Executive Officer of Key3Media Events. Mr. Chudnofsky has worked at Key3Media Events since 1998. He has been a director of Ziff-Davis since 1998. From 1988 to 1997, Mr. Chudnofsky was President of the Trade Show Division of The Interface Group which was renamed SOFTBANK COMDEX when that division was acquired by SOFTBANK in 1995. In addition, Mr. Chudnofsky served as President and Chief Executive Officer of the Sands Expo and Convention Center Division from 1990 to 1995. Mr. Chudnofsky has over 15 years of experience in the events, tradeshow and conference industry. Mr. Chudnofsky is a member of the board of directors of Tech Corporation and Folio Exhibits, Inc. DIRECTORS CONTINUING IN OFFICE -- TERM EXPIRING IN 2003 Ronald D. Fisher, 55 Director since 2000 Ronald D. Fisher has been the Vice Chairman of SOFTBANK Holdings Inc. since 1995. From 1990 to 1995, Mr. Fisher was the Chief Executive Officer of Phoenix Technologies Ltd., a leading developer and marketer of systems software products for personal computers. From 1984 through 1989, Mr. Fisher was the President of Interactive Systems Corporation. His prior experience also includes senior management positions at Visicorp, TRW and ICL (USA). In addition to being a director of SOFTBANK Corp., Mr. Fisher serves on the board of directors of E*Trade, GSI Commerce, InsWeb Corporation, Optimark Holdings Inc., and VieFinancial Group. Fredric D. Rosen, 59 Director since 2000 Fredric D. Rosen was hired by Ziff-Davis in March 2000 to become our Chairman and Chief Executive Officer. In the 18 months preceding his employment by Ziff-Davis, he was a consultant and private investor. Mr. Rosen was previously President & Chief Executive Officer of Ticketmaster Group, Inc., a position he held for more than 16 years, from 1982 to 1998. Mr. Rosen is also a member of the board of directors of Playboy.com, Inc., a subsidiary of a public company. There are no family relationships among any directors or executive officers of Key3Media. BOARD OF DIRECTORS' COMMITTEES Edward A. Bennett and Ronald D. Fisher are the members of our Audit Committee. Mr. Fisher joined our Audit Committee on August __, 2003. Mr. Bennett is an independent member of our Audit Committee as independence is defined in Section 303.01(B)(2)(a) and (3) of the NYSE's listing standards. Mr. Fisher is employed by SOFTBANK Inc., which, until December 20, 2002, owned almost a majority of our stock. The primary purpose of our Audit Committee, chaired by Mr. Bennett, is to assist the Board of Directors in its oversight of our internal controls and financial statements and the audit process. The Audit Committee is also responsible for recommending for approval by the Board of Directors a firm of independent auditors whose duty it is to audit our consolidated financial statements for the fiscal year in which they are appointed. The report of the Audit Committee is included below. Ronald D. Fisher and Edward A. Bennett are the members of our Nominating and Compensation Committee. Our Nominating and Compensation Committee is responsible for reviewing and approving compensation levels for all of our senior executives. The Nominating and Compensation Committee is also responsible for administering our 2000 Stock Option and Incentive Plan. Fredric D. Rosen, Jason E. Chudnofsky and Ronald D. Fisher, are the members of our Executive Committee. The Executive Committee has, and may exercise, all the powers and authority of the Board in the management of the business and affairs of Key3Media except to the extent prohibited by the Delaware General 37 Corporation Law at the relevant time, and may authorize the seal of Key3Media to be affixed to all papers which may require it. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership of, and transactions in, our securities with the Securities and Exchange Commission. Such directors, executive officers and 10% shareholders are also required to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of the copies of such reports we received, and on written representations from certain reporting persons, we believe that all Section 16(a) filing requirements applicable to our directors, executive officers and 10% shareholders were complied with during fiscal year 2002 except as follows: None ITEM 11. EXECUTIVE COMPENSATION The following table contains certain compensation information for Fredric D. Rosen, who has served as our chief executive officer since March 2000, and the four other most highly compensated executive officers who were serving as our executive officers at the end of our last completed fiscal year. All of the information in this and the next two tables reflects compensation paid in accordance with our compensation and benefit plans.

(1) These options, which were granted under the Key3Media 2000 Stock Option and Incentive Plan, will vest over four years from the date of grant. 38 (2) Represents $51,929 for health, life and disability insurance premiums and $72,632 for medical reimbursement paid by the company. (2a) Represents $39,434 for health, life and disability insurance premiums and $52,245 for medical reimbursement paid by the company. (2b) Represents $27,388 for health, life and disability insurance premiums and $6,068 for medical reimbursement paid by the company. (3) Represents $29,919 for health, life and disability insurance premiums, matching contributions of $3,333 to the executive's 401(k) plan and $6,923 for medical reimbursement paid by the company. (3a) Represents $30,787 for health, life and disability insurance premiums, matching contributions of $3,425 to the executive's 401(k) plan and $4,533 for medical reimbursement paid by the company. (3b) Represents $2,053,129 paid to the executive as part of Key3Media's non-recurring compensation charge of $3.9 million related to compensation granted by former owner Ziff-Davis to two executives of Key3Media, $29,396 for health, life and disability insurance premiums, matching contributions of $5,250 to the executive's 401(k) plan and $141 for medical reimbursements paid by the company. (4) Represents $19,704 for health, life and disability insurance premiums, matching contributions of $4,000 to the executive's 401(k) plan and $2,014 for medical reimbursement paid by the company. (4a) Represents $22,594 for health, life and disability insurance premiums, matching contributions of $4,442 to the executive's 401(k) plan and $8,143 for medical reimbursement paid by the company. (4b) Represents health, life and disability insurance premiums paid for by the company. (5) Represents $18,795 for health, life and disability insurance premiums, matching contributions of $4,000 to the executive's 401(k) plan and $12,374 for medical reimbursement paid by the company. (5a) Represents $22,276 for health, life and disability insurance premiums, matching contributions of $5,242 to the executive's 401(k) plan and $8,833 for medical reimbursement paid by the company. (5b) Represents $10,457 for health, life and disability insurance premiums, matching contributions of $5,250 to the executive's 401(k) plan and $5,133 for medical reimbursement paid by the company. (6) Represents $12,677 for health, life and disability insurance premiums and matching contributions of $1,833 to the executive's 401(k) plan. (6a) Represents $14,032 for health, life and disability insurance premiums and matching contributions of $2,878 to the executive's 401(k) plan. (6b) Represents $10,801 for health, life and disability insurance premiums and matching contributions of $5,250 to the executive's 401(k) plan. 39 OPTION GRANTS IN 2002 We granted stock options to purchase 100,000 shares of our common stock at $6.50 per share to Eugene Cobuzzi on January 14, 2002. AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES The following table summarizes aggregate option exercises by each of the persons named in the Summary Compensation Table during 2002 and the value of the options held by them as of December 31, 2002:

(1) Options originally granted by Ziff-Davis and ZDNet to purchase Ziff-Davis common stock and ZDNet common stock, converted to options to purchase CNET common stock. After the spin-off of Key3Media, ZDNet merged with CNET and the number of shares and exercise price were adjusted accordingly. (2) Options to purchase SOFTBANK common stock. 40 EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS The following summaries address all of the material provisions of our employment contracts with Messrs. Rosen, Chudnofsky, Knepper, Goldstein and Priest-Heck but are qualified in their entirety by the complete text of those agreements which we filed as exhibits to our registration statement on Form S-1 (No. 333-36828). Additionally, we anticipate that all of the employment agreements below will be terminated pursuant to a plan reorganization. As part of our reorganization, we are currently negotiating a Key Employee Retention Program (the "KERP") which will replace the terms of the employment contracts summarized below. Under the terms of the expected KERP, certain key employees would receive between $3.4 million and $4.7 million depending on the achievement of certain performance targets. On March 27, 2003, Mr. Rosen offered to forego the cash payments that would have be due him pursuant to the proposed KERP, thereby reducing the cost of the KERP by between approximately $0.9 and 1.4 million. The terms of the KERP have not been finalized and the KERP will not be effective until approved by the Bankruptcy Court. Fredric D. Rosen. We have entered into an employment agreement with Fredric D. Rosen pursuant to which Mr. Rosen is entitled to: - a base salary of at least $1,500,000 per year; - a performance bonus equal to an escalating percentage of incremental growth in "EBITDA"; - a discretionary bonus in an amount to be determined by our Board of Directors or its Nominating and Compensation Committee; - options to purchase 9,573,333 of the shares of our Common Stock in accordance with our Key3Media 2000 Stock Option and Incentive Plan; and - a term life insurance policy in the amount of $5 million. The amount of the performance bonus for each year will be based on a percentage of the incremental growth in EBITDA for that year over the prior year (or earlier prior year if there has been an interim decrease in EBITDA). The percentage by which Mr. Rosen's performance bonus will be calculated will vary depending on the rate of the growth in EBITDA but will not exceed 5%. For this purpose "EBITDA" means our consolidated reported earnings for that year, as adjusted to: - add back interest, taxes, depreciation and amortization, all as determined by our independent auditors; - exclude unusual non-recurring items; - exclude charges related to his performance bonus, similar bonuses paid to other executive officers and any other earnings-related bonuses exceeding $150,000 per year; - exclude any charges to earnings attributable to payments to affiliates that are in excess of the fair market value of goods sold or services rendered; and - exclude the effect of non-cash stock based compensation, calculated in a manner consistent with our financial reporting. EBITDA for 2000 shall be adjusted by the Compensation Committee to reflect a normalized situation, taking into account special costs and expenses which may be incurred in that year. If there is a change in control, as defined in his contract, of our company, Mr. Rosen's options will vest immediately and become immediately exercisable or he may elect a cash payment in place of the options. The amount of the cash payment for the options will be determined based on the manner of the change of control. In 41 addition, Mr. Rosen will, upon a change of control, receive an amount which, on an after-tax basis (including federal income and excise taxes, and state and local income taxes) is equal to the excise tax, if any, imposed by the Internal Revenue Code. Our contract with Mr. Rosen expires on February 28, 2005. We may terminate his employment for cause or disability (each as defined in his contract), without cause, or upon his death. Mr. Rosen may terminate his employment for good reason (as defined in his contract) upon 30 days' written notice. Any termination of his employment is subject to the following conditions: - Regardless of the reason for such termination, we will pay him his base salary through the date of the termination. - If his employment is terminated as a result of his disability or death, we will pay to him or his estate one year's worth of base compensation plus the prorated portion of any annual incentive bonus he would have received for the year of such termination. - If we terminate his employment for cause or he voluntarily terminates his own employment, but without good reason, we will have no additional obligations to him. - If we terminate his employment other than for disability or cause or he terminates his employment for good reason, then we will pay him both twice his then current salary and twice his most recent performance bonus, spread over the succeeding two years, and all of his options to purchase our stock will fully vest. Mr. Rosen's employment contract prohibits him, without our written consent, from competing with us or our subsidiaries for a period of two years commencing upon the termination of his employment. Jason E. Chudnofsky. We have entered into an employment agreement with Jason E. Chudnofsky pursuant to which he is entitled to: - a base salary of at least $950,000 per year; - a performance bonus equal to 40% of the annual performance bonus received by Mr. Rosen, or, if Mr. Rosen has been replaced by a successor, then a performance bonus equal to an escalating percentage of incremental growth in EBITDA (defined in the same way as for Mr. Rosen), but will not exceed 2%; - a discretionary bonus comprised of cash and/or stock equal to 40% of the discretionary bonus received by Mr. Rosen, or Mr. Rosen's successor; - options to purchase 750,000 shares of our Common Stock in accordance with the Key3Media 2000 Stock Option and Incentive Plan; and - a life insurance policy in the amount of $2 million. In addition to the options to purchase 750,000 shares that Mr. Chudnofsky is entitled to pursuant to his employment agreement with us, he still retains options to purchase 3,000,000 shares of our Common Stock, which he was awarded under his initial contract with us. If there is a change in control, as defined in his contract, of our company, Mr. Chudnofsky's options will vest immediately and become immediately exercisable or he may elect to receive a cash payment in place of the options. The amount of the cash payment for the options will be determined based on the manner of the change of control. In addition, Mr. Chudnofsky will, upon a change of control, receive an amount which, on an after-tax basis (including federal income and excise taxes, and state and local income taxes) is equal to the excise tax, if any, imposed by the Internal Revenue Code. 42 Our contract with Mr. Chudnofsky expires on December 31, 2004. We may terminate his employment for cause or disability (each as defined in his contract), without cause, or upon his death. Mr. Chudnofsky may terminate his employment at any time for good reason. Any termination of his employment is subject to the following conditions: - Regardless of the reason for such termination, we will pay him his base salary through the date of the termination. - If his employment is terminated as a result of his disability or death, we will pay to him or his estate one year's worth of base compensation plus the prorated portion of any annual incentive bonus he would have received for the year of such termination. - If we terminate his employment for cause, or Mr. Chudnofsky voluntarily terminates his own employment without good reason, we will have no additional obligations to him. - If we terminate his employment at the end of the term of his contract other than for disability or cause or Mr. Chudnofsky terminates his employment at any time for good reason, then we will (i) pay Mr. Chudnofsky his base salary at the level in effect as of the date of termination, (ii) pay Mr. Chudnofsky twice his most recent performance bonus, spread over the succeeding two years, and (iii) fully vest all options of Common Stock granted to him under our Key3Media 2000 Stock Option and Incentive Plan. Mr. Chudnofsky's employment contract prohibits him, without our written consent, from competing with us or our subsidiaries for a period of two years commencing upon the termination of his employment. Peter B. Knepper. We have entered into an employment agreement, dated as of March 1, 2000, with Peter B. Knepper pursuant to which Mr. Knepper is entitled to: - a base annual salary of at least $525,000 in the first three contract years and $550,000 during the final two contract years; - a performance bonus in an amount to be determined by our Board of Directors or its Nominating and Compensation Committee; provided, however, that in no event shall the bonus be less than $125,000 for the first contract year and $150,000 for the final four contract years; - options to purchase 1,000,000 shares of our Common Stock in accordance with the Key3Media 2000 Stock Option and Incentive Plan; and - a term life insurance policy in the amount of $2 million. If there is a change in control, as defined in his contract, of our company, Mr. Knepper's options will vest immediately and become immediately exercisable or he may elect to receive a cash payment in place of the options. The amount of the cash payment for the options will be determined based on the manner of the change in control. In addition, Mr. Knepper will, upon a change in control, receive an amount which, on an after-tax basis (including federal income and excise taxes, and state and local income taxes) equal to the excise tax, if any, imposed by the Internal Revenue Code. Our contract with Mr. Knepper expires on February 28, 2005. We may terminate his employment for cause or without cause (as defined in his contract) or if he has a disability (as defined in his contract). Mr. Knepper may terminate his employment at any time for good reason (as defined in his contract). Any termination of his employment is subject to the following conditions: - Regardless of the reason for such termination, we will pay him his base salary through the date of the termination. 43 - If his employment is terminated as a result of his disability or death, we will pay to him or his estate one year's worth of base compensation plus the prorated portion of any annual performance bonus he would have received for the year of such termination. - If we terminate his employment for cause or Mr. Knepper voluntarily terminates his own employment, but without good reason, we will have no additional obligations to him. - If we terminate his employment, other than for disability or cause, or Mr. Knepper terminates his employment for good reason, then we will pay him both twice his then current salary and twice his most recent performance bonus, spread over the succeeding two years, and all of his options to purchase our Common Stock will fully vest. Mr. Knepper's employment contract prohibits him, without our written consent, from competing with us or our subsidiaries for a period of two years commencing upon the termination of his employment. Ned S. Goldstein. We have entered into an employment agreement, dated as of March 1, 2000, with Ned S. Goldstein pursuant to which Mr. Goldstein is entitled to: - a base salary of at least $525,000 per year in the first three contract years and $550,000 during the final two contract years; - a performance bonus in an amount to be determined by our Board of Directors or its Nominating and Compensation Committee; provided, however, that in no event shall the bonus be less than $125,000 for the first contract year and $150,000 for the final four contract years; - options to purchase 1,000,000 shares of our Common Stock in accordance with the Key3Media 2000 Stock Option and Incentive Plan; and - a term life insurance policy in the amount of $2 million. If there is a change in control, as defined in his contract, of our company, Mr. Goldstein's options will vest immediately and become immediately exercisable or he may elect to receive a cash payment in place of the options. The amount of the cash payment for the options will be determined based on the manner of the change in control. In addition, Mr. Goldstein will, upon a change in control, receive an amount which, on an after-tax basis (including federal income and excise taxes, and state and local income taxes) is equal to the excise tax, if any, imposed by the Internal Revenue Code. Our contract with Mr. Goldstein expires on February 28, 2005. We may terminate his employment for cause or disability (each as defined in his contract), without cause, or upon his death. Mr. Goldstein may terminate his employment at any time for good reason (as defined in his contract). Any termination of his employment is subject to the following conditions: - Regardless of the reason for such termination, we will pay him his base salary through the date of the termination. - If his employment is terminated as a result of his disability or death, we will pay to him or his estate one year's worth of base compensation plus the prorated portion of any annual performance bonus he would have received for the year of such termination. - If we terminate his employment for cause or he voluntarily terminates his own employment, but without good reason, we will have no additional obligations to him. - If we terminate his employment other than for disability or cause, or he terminates his employment for good reason, then we will pay him both twice his then current base salary and twice his most recent 44 performance bonus, spread over the succeeding two years, and all of his options to purchase our Common Stock will fully vest. Mr. Goldstein's employment contract prohibits him, without our written consent, from competing with us or our subsidiaries for a period of two years commencing upon the termination of his employment. Robert Priest-Heck. We have entered into an employment agreement, dated as of July 2000, with Robert Priest-Heck pursuant to which Mr. Priest-Heck is entitled to: - a base salary of $500,000 per year; - a performance bonus in an amount to be determined by our Board of Directors or its Nominating and Compensation Committee; provided, however, that in no event shall the bonus for a full year be less than $125,000; - options to purchase 500,000 shares of our Common Stock in accordance with the Key3Media 2000 Stock Option and Incentive Plan. Our contract with Mr. Priest-Heck expires on June 30, 2004. We may terminate his employment for cause, for disability (each as defined in his contract), without cause, or in the event of death. Mr. Priest-Heck may terminate his employment at any time for good reason (as defined in his contract). Any termination of his employment is subject to the following conditions: - Regardless of the reason for such termination, we will pay him all compensation through the date of the termination, including (unless the termination is for cause) a pro rata portion of the performance bonus. - If Mr. Priest-Heck's employment terminates for any reason other than for or by virtue of cause, death, disability, or his voluntary termination, we will pay the base salary and performance bonus for the remainder of the contract. Mr. Priest-Heck's employment contract prohibits him, without our written consent, from competing with us or our subsidiaries for a period of two years commencing upon the termination of his employment. COMPENSATION OF DIRECTORS Directors who are also our employees or consultants receive no additional compensation for their services as directors. Directors who are not our employees receive fees of $1,000 for each meeting of the Board of Directors and $1,000 for each meeting of any committee of the Board of Directors that they attend. 45 STOCK PRICE PERFORMANCE GRAPH The following graph compares the performance of an investment in Common Stock from August 21, 2000 through December 31, 2002 with an investment in the S&P 500 Index or in the NASDAQ Non-Financial Index from July 31, 2000 through December 31, 2002. The graph assumes $100 was invested on August 21, 2000 in the Common Stock and July 31, 2000 in the S&P 500 Index and in the NASDAQ Non-Financial Index and the reinvestment of dividends on the date of payment without payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance. COMPARISON OF 28 MONTH CUMULATIVE TOTAL RETURN * AMONG KEYMEDIA GROUP, INC., THE S & P 500 INDEX AND THE NASDAQ NON-FINANCIAL INDEX [PERFORMANCE GRAPH]

* $100 Invested on 8/8/00 In stock or on 7/31/00 in Index-including reinvestment of dividents. Fiscal year ending December 31, Copyright @ 2002 Standard & Poors, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm 46 REPORT OF THE AUDIT COMMITTEE The Audit Committee's purpose is to assist the Board of Directors in its oversight of Key3Media's internal controls, financial statements and the audit process. The Board of Directors, in its business judgment, has determined that all members of the Committee are "independent", as required by applicable listing standards of the NYSE. The Committee operates pursuant to a Charter that was last amended and restated by the Board on March 27, 2002. Management is responsible for the preparation, presentation and integrity of Key3Media's financial statements, accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors, Ernst & Young LLP, are responsible for performing an independent audit of the consolidated financial statements in accordance with generally accepted auditing standards. In performing its oversight role, the Audit Committee has considered and discussed the audited financial statements with management and the independent auditors. The Committee has also discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as currently in effect. The Committee has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as currently in effect. The Committee has also considered whether the provision of information technology consulting services relating to financial information systems design and implementation and other non-audit services by the independent auditors is compatible with maintaining the auditors' independence and has discussed with the auditors the auditors' independence. Based on the reports and discussions described in this Report, and subject to the limitations on the role and responsibilities of the Committee referred to below and in the Charter, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2002. The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields of accounting or auditing, including in respect of auditor independence. Members of the Committee rely without independent verification on the information provided to them and on the representations made by management and the independent auditors. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of Key3Media's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles or that Ernst & Young LLP is in fact "independent". AUDIT COMMITTEE: Edward A. Bennett Ronald D. Fisher 47 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT BENEFICIAL OWNERSHIP OF MANAGEMENT The following table contains information about our common stock beneficially owned by Fredric D. Rosen, our current Chairman and Chief Executive Officer, and our four other most highly compensated executive officers, by each of our directors and by all of our directors and executive officers as a group.

* Less than one percent. (1) For purposes of this table, "beneficial ownership" is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant to which a person or group of persons is deemed to have "beneficial ownership" of common stock that such person or group has the right to acquire within 60 days after April 2, 2003. For purposes of computing the percentage of outstanding Common Stock held by each person or group, any shares that such person or group has the right to acquire within 60 days after April 2, 2003 are deemed outstanding but are not deemed outstanding for purposes of computing the percentage of any other person or group. (2) Holding includes right to acquire beneficial ownership of 7,778,247 shares of Common Stock within 60 days through the exercise of stock options granted under the Key3Media 2000 Stock Option and Incentive Plan. Mr. Rosen also owns unexercisable options to acquire 1,795,086 shares of our Common Stock. (3) Holding includes right to acquire beneficial ownership of 2,890,621 shares of Common Stock within 60 days through the exercise of stock options granted under the Key3Media 2000 Stock Option and Incentive Plan. Mr. Chudnofsky also owns unexercisable options to acquire 859,379 shares of our Common Stock. (4) Holding includes right to acquire beneficial ownership of 812,496 shares of Common Stock within 60 days through the exercise of stock options granted under the Key3Media 2000 Stock Option and Incentive Plan. Mr. Knepper and Mr. Goldstein each also own unexercisable options to acquire 187,509 shares of our Common Stock. (5) Holding includes right to acquire beneficial ownership of 343,750 shares of Common Stock within 60 days. Mr. Priest-Heck also owns unexercisable options to acquire 156,250 shares of our Common Stock. (6) Mr. Bennett has the right to acquire 26,664 shares of Common Stock and has options that are unexercisable on 13,336 shares of Common Stock. (7) Mr. Fisher has the right to acquire 26,664 shares of Common Stock and has options that are unexercisable on 13,336 shares of Common Stock. (8) Mr. Solomon is the managing member of Gladwyne Catalyst GenPar LLC, a Delaware limited liability company ("Gladwyne GenPar"), which is a managing member of Invemed Catalyst GenPar LLC, a Delaware limited liability company ("Catalyst GenPar"), the general partner of Invemed Catalyst Fund, L.P. ("Invemed"). As a managing member of Gladwyne GenPar, Mr. Solomon may be deemed to share voting and dispositive power over Invemed's shares. The table includes (i) 0 shares of Common Stock, (ii) 26,666 shares of Common Stock that would be held by Invemed upon exercise of options to purchase such shares, (iii) 49,780,000 shares of Common Stock that would be held by Invemed upon conversion of its 1,000,000 shares of Series A Preferred Stock (representing 100% of the Series A class) and 3,982,400 shares of Common Stock that would be held by Invemed upon conversion of its 80,000 shares of Series B Preferred Stock (representing approximately 13.8% of the Series B class). Mr. Solomon disclaims beneficial ownership of these securities in excess of his pecuniary interest therein. Mr. Solomon resigned as a director on January 6, 2003. 48 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Based on filings made under Section 13(d) and Section 13(g) of the Securities Exchange Act of 1934, the only persons known by us to be beneficial owners of more than 5% of our Common Stock as of April 2, 2003 are set forth in the following table:

(1) For purposes of this table, "beneficial ownership" is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant to which a person or group of persons is deemed to have "beneficial ownership" of Common Stock that such person or group has the right to acquire within 60 days after April 2, 2003. For purposes of computing the percentage of outstanding Common Stock held by each person or group, any shares that such person or group has the right to acquire within 60 days after April 2, 2003 are deemed outstanding but are not deemed outstanding for purposes of computing the percentage of any other person or group. (2) Princes Gate Investors, III L.P. owns warrants to acquire 4,753,052 shares of our Common Stock. The general partner of Princes Gate Investors, III L.P. is PG Investors III, Inc., a wholly owned subsidiary of Morgan Stanley Dean Witter & Co. Certain other investors have given PG Investors III, Inc. sole investment management authority over their warrants to acquire 1,227,673 shares of our Common Stock. In addition, Morgan Stanley Dean Witter & Co., through other wholly owned subsidiaries, has shared voting and dispositive power over an additional 296,275 shares of our Common Stock. Therefore, through its affiliates, Morgan Stanley Dean Witter & Co. has shared power to vote or dispose of 6,277,000 shares of our Common Stock obtainable upon exercise of the warrants. Princess Gate Investors, III L.P.'s address is that of Morgan Stanley Dean Witter & Co. at 1585 Broadway, New York, NY 10036. (3) Invemed directly owns 0 shares of Common Stock and has the right to acquire 26,666 shares of Common Stock upon exercise of options to purchase such shares. This number also includes 49,780,000 shares of Common Stock that would be held by Invemed upon conversion of its 1,000,000 shares of Series A Preferred Stock (representing 100% of the Series A class) and 3,982,400 shares of Common Stock that would be held by Invemed upon conversion of its 80,000 shares of Series B Preferred Stock (representing approximately 13.8% of the Series B class). Invemed's address is 375 Park Avenue, Suite 2205, New York, New York 10152. The general partner of Invemed is Catalyst GenPar. The managing members of Catalyst GenPar are Gladwyne GenPar, and Invemed Securities, Inc., a New York corporation ("Invemed Securities"). The business address of Gladwyne GenPar is 600 The Times Building, Ardmore, PA 19003. The business address of Invemed Securities is 375 Park Avenue, Suite 2205, New York, New York 10152. The members of Gladwyne GenPar are Michael B. Solomon, Philip P. Young, Suzanne M. Present, Robert B. Friedman, William M. Sams and Kathryn Casoria. The controlling shareholder of Invemed Securities is Kenneth G. Langone. Catalyst GenPar, as the general partner of Invemed, has the sole power to vote and dispose of the 9,696,383 shares of Common Stock beneficially owned by Invemed. Each of Gladwyne GenPar and Invemed Securities, as managing members of Catalyst GenPar, may be deemed to have shared voting and dispositive power over Invemed's shares. Each of Gladwyne GenPar, Invemed Securities, the members of Gladwyne GenPar and Mr. Langone disclaim beneficial ownership of such shares in excess of their respective interests therein. CHANGE IN CONTROL Under the terms of our expected plan of reorganization, TWCP will become the majority owner of our company upon confirmation of the plan. Additionally, it is expected that all existing equity interests will be expunged upon confirmation of the plan of reorganization. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATED PARTY TRANSACTIONS REGISTRATION RIGHTS AGREEMENTS We have granted to SOFTBANK and its affiliates customary registration rights with respect to the shares they received in the distribution in connection with the spin-off of our company from Ziff-Davis in 2000. On December 20, 2002, SOFTBANK sold its shares to Triax Holdings Ltd. SOFTBANK had the power to assign its registration rights but we are not aware if they have done so. We also have granted registration rights to Invemed Catalyst Fund L.P. ("Invemed"), as purchaser of our Series A Preferred Stock. Additionally, we granted registration rights to all of the purchasers of our Series B Preferred Stock. 49 WARRANTS The purchasers of zero coupon debentures we issued in 2000 and redeemed in 2001 received warrants to purchase 6.8 million shares of our Common Stock at $6.00 per share subject to customary anti-dilution rights. The warrants can be exercised at any time, in whole or in part. Cashless exercise is permitted and the warrants will expire in 2007. Since the zero coupon debentures were redeemed within 22 months after they were issued, the number of shares issuable upon exercise of the warrants was decreased by 523,000, leaving a total of 6.3 million warrants outstanding. See "Financing". CONVERTIBLE PREFERRED STOCK On November 27, 2001, we sold to Invemed 1,000,000 shares of our Series A Preferred Stock for $25.00 per share. As a condition to this sale to Invemed, on the same date we also sold 1,080,000 shares of our Series B Preferred Stock for $25.00 per share. On December 11, 2001 we sold an additional 300,000 shares of the Series B Preferred Stock in exchange for $10.0 million aggregate principal amount of our 11.25% senior subordinated notes due 2011. For purposes of this exchange, the senior subordinated notes were valued at $7.5 million and the Series B Preferred Stock was issued at $25.00 per share. On December 19, 2001 we sold an additional 600,000 shares of our Series B Preferred Stock for $25.00 per share. In each case, the Series A and Series B Preferred Stock was issued in a private placement exempt from the registration requirements of the Securities Act of 1933 (the "Securities Act"). In aggregate, we raised $67.0 million in cash and exchanged $10 million aggregate principal amount (valued at $7.5 million for purposes of the exchange) of our senior subordinated notes for shares of our convertible preferred stock from the sales and exchange. For a more detailed description of the terms of the Series A and Series B Preferred Stock, see "Financing". The terms of the Series A and Series B Preferred Stock are identical except that the conversion rights of the Series A Preferred stock were subject to shareholder approval. On February 7, 2002, at a special meeting of shareholders, our shareholders approved Invemed's right to convert its Series A Preferred Stock. NTH DEGREE CONTRACT In February 2001, we entered into a contract with Nth Degree, Inc. to provide various exhibitor services to our Comdex Susecu and NetWorld+Interop Sao Paulo events held in Sao Paulo, Brazil. Under this contract, we receive 10% of the revenue generated by Nth Degree from its sale of services to exhibitors. Nth Degree generated approximately $140,000 from exhibitor service sales at Comdex Susecu and NetWorld+Interop Sao Paulo. Darren Roy, the son-in-law of our director and executive officer Mr. Chudnofsky, was employed by Nth Degree when we entered into the contract in 2001. PART IV ITEM 14. CONTROLS AND PROCEDURES Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) Documents filed as part of this Report: 1. Consolidated and Combined Financial Statements 50 The consolidated and combined financial statements required to be filed in this Annual Report on Form 10-K are listed on page F-1 hereof. The required statements appear on pages F-4 hereof. 2. Financial Statement Schedule The financial statement schedule required in this Annual Report on Form 10-K is listed on page F-1 hereof. The required schedule appears on pages F-28 hereof. 3. Exhibits 2.1 Asset Purchase Agreement, dated as of September 10, 2001, by and among Key3Media Art Events, Inc., BCR Enterprises, Inc., McQuillan Ventures, John M. McQuillan and Jerry A. Goldstone (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K, filed September 24, 2001). 2.2 Asset Purchase Agreement, dated as of September 10, 2001, by and among Key3Media Art Events, Inc., BCR Enterprises, Inc. and Jerry A. Goldstone (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K, filed September 24, 2001). 2.3 Asset Purchase Agreement, dated as of September 10, 2001, by and among Key3Media VON Events, Inc., pulver.com, Inc., pulver.com Europe, Ltd., pulver.com Asia Pacific, Ltd., pulver.com Conferences, Inc. and Jeffrey Pulver (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K, filed September 24, 2001). 3.1 Amended and Restated Certificate of Incorporation of Key3Media Group, Inc.* 3.2 Amended and Restated By-Laws of Key3Media Group, Inc.* 4.1 Form of Senior Debt Indenture, between Key3Media Group, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant's registration statement on Form S-3/A (No. 333-58808-01), filed on May 18, 2001). 4.2 Form of Subordinated Debt Indenture between Key3Media Group, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's registration statement on Form S-3/A (No. 333-58808-01), filed on May 18, 2001). 4.3 Form of senior debt securities of Key3Media Group, Inc. (included in Exhibit 4.1). 4.4 Form of subordinated debt securities of Key3Media Group, Inc. (included in Exhibit 4.2). 4.5 Subordinated Debt Indenture between Key3Media Group, Inc., as issuer, Key3Media Events, Inc., as subsidiary guarantor, and The Bank of New York, as trustee, dated as of June 26, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed June 26, 2001). 4.6 Form of Note (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed June 26, 2001). 4.7 Amended and Restated Credit Agreement dated as of June 26, 2001 among Key3Media Group, Inc., Morgan Stanley Senior Funding, Inc., Morgan Stanley & Co. Incorporated, The Bank of New York, UBS Warburg LLC and certain lenders and guarantors named in the Agreement (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for period ended June 30, 2001). 4.7.1 Amendment No. 2 to the Amended and Restated Credit Agreement, dated November 9, 2001, by and between Key3Media Group, Inc., the banks, financial institutions, institutional lenders and Morgan Stanley Senior Funding, Inc. (incorporated by reference to Exhibit 99.1 to the Registrant's Quarterly Report on Form 10-Q for period ended September 30, 2001). 51 4.7.2 Amendment No. 3 to the Amended and Restated Credit Agreement, dated June 26, 2002, by and between Key3Media Group, Inc., the banks, financial institutions, institutional lenders and Morgan Stanley Senior Funding, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed June 28, 2002). 4.7.3 Amendment No. 4 to the Amended and Restated Credit Agreement, dated January 24, 2003, by and between Key3Media Group, Inc., the banks, financial institutions, institutional lenders and Morgan Stanley Senior Funding, Inc. 4.7.4 Amendment No. 5 to the Amended and Restated Credit Agreement, dated January 28, 2003, by and between Key3Media Group, Inc., the banks, financial institutions, institutional lenders and Morgan Stanley Senior Funding, Inc. 4.8 Certificate of Designations of Series A 5.5% Convertible Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.9 Certificate of Correction filed to correct error in the Certificate of Designations of Series A 5.5% Convertible Redeemable Preferred Stock (incorporated by reference to Exhibit 4.2 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.10 Certificate of Designations of Series B 5.5% Convertible Redeemable Preferred Stock (incorporated by reference to Exhibit 4.3 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.11 Certificate of Correction filed to correct error in the Certificate of Designations of Series B 5.5% Convertible Redeemable Preferred Stock (incorporated by reference to Exhibit 4.4 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.12 Registration Rights Agreement, dated November 27, 2001, between Key3Media Group, Inc. and Invemed Catalyst Fund, L.P. (incorporated by reference to Exhibit 4.5 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.13 Registration Rights Agreement, dated November 27, 2001, between Key3Media Group, Inc. and William M. Sams (incorporated by reference to Exhibit 4.6 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.14 Registration Rights Agreement, dated November 27, 2001, between Key3Media Group, Inc. and ValueAct Capital Partners, L.P., ValueAct Capital Partners II, L.P., and ValueAct Capital International, Ltd. (incorporated by reference to Exhibit 4.7 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.15 Registration Rights Agreement, dated December 20, 2001, between Key3Media Group, Inc. and the signatories listed therein (incorporated by reference to Exhibit 4.18 to the Registrant's registration statement on Form S-3 (No. 333-75866), filed on December 21, 2001). 4.16 Final Order of United States Bankruptcy Court for the District of Delaware, dated March 26, 2003, authorizing Key3Media Group Inc.'s Debtor-in Possession ("DIP") Financing. 4.17 Post-Petition Credit and Guaranty Agreement, dated March 26, 2003, by and between Key3Media Group, Inc. and its affiliates, the DIP Lender Parties named therein and the Wilmington Trust Company. 10.1 Distribution Agreement, dated August, 2000, among Ziff-Davis Inc., Key3Media Group, Inc. and Key3Media Events Inc.* 52 10.2 NETWORLD License and Production Agreement, dated as of December 14, 1998, by and between Novell, Inc. and ZD Events Inc. (which was renamed Key3Media Events Inc.).* 10.3 Letter of Intent for JavaOne 1999-2001, dated July 15, 1998, between Sun Microsystems, Inc.* 10.3.1 Amendment dated December 2000 to Letter of Intent for JavaOne between Sun Microsystems, Inc. and Key3Media Events Inc. (incorporated by reference to Exhibit 10.3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). 10.5 Key3Media 2000 Stock Option and Incentive Plan.*+ 10.6 Employment Agreement, as amended, dated as of March 1, 2000, between Ziff-Davis Inc. (now Key3Media Group, Inc.) and Fredric D. Rosen.*+ 10.6.1 Amendment to Employment Agreement, dated October 5, 2001, by and between Key3Media Group, Inc. and Fredric D. Rosen (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for period ended September 30, 2001).+ 10.7 Employment Agreement, dated as of March 3, 2000, between ZD Events Inc. (now Key3Media Events, Inc.) Ziff-Davis Inc. and Jason E. Chudnofsky.*+ 10.7.1 Employment Agreement, dated as of December 18, 2000, between Key3Media Group, Inc. and Jason E. Chudnofsky (incorporated by reference to Exhibit 10.3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000).+ 10.7.2 Amendment to Employment Agreement, dated October 5, 2001, by and between Key3Media Group Inc. and Jason E. Chudnofsky (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for period ended September 30, 2001).+ 10.8 Employment Agreement, as amended, dated as of March 1, 2000, between ZD Events Inc. (now Key3Media Events, Inc.) and Peter B. Knepper.*+ 10.9 Employment Agreement, as amended, dated as of March 1, 2000, between ZD Events Inc. (now Key3Media Events, Inc.) and Ned S. Goldstein.*+ 10.10 Employment Agreement, dated as of July 1, 2000, between Key3Media Events, Inc. and Robert Priest-Heck.*+ 10.11 Employment Agreement dated January 7, 2002, between Key3Media Group, Inc. and Eugene L. Cobuzzi. (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for year ended December 31, 2001).+ 10.12 Letter of Intent to acquire SOFTBANK Forums Japan, Inc. between Key3Media Group, Inc. and SOFTBANK America Inc. dated April 27, 2001 (incorporated by reference to Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for period ended March 31, 2001). 10.13 Purchase Agreement between Key3Media Events, Inc., SOFTBANK America Inc. and SOFTBANK Forums Japan, Inc., dated June 1, 2001 (incorporated by reference to Exhibit 10 to the Registrant's Current Report on Form 8-K, filed June 26, 2001). 10.14 Stock Purchase Agreement, dated November 13, 2001, by and between Key3Media Group, Inc. and Invemed Catalyst Fund, L.P. incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for period ended September 30, 2001). 53 10.15 Registration Rights Agreement, dated November, 2001, by and between Key3Media Group, Inc. and Invemed Catalyst Fund L.P. (included as Exhibit B to Exhibit 10.13). 12.1 Statement re computation of ratios of earnings to fixed charges. (incorporated by reference to Exhibit 12.1 to the Registrant's registration statement on Form S-3 (No. 333-58808), filed on April 12, 2001). 12.2 Statement re computation of ratios of earnings to fixed charges (incorporated by reference to Exhibit 12.1 to the Registrant's registration statement on Form S-3/A (No. 333-58808-01), filed on May 18, 2001). 16.1 Letter from PricewaterhouseCoopers LLP, dated December 6, 2000.** 21.1 List of Subsidiaries of Key3Media Group, Inc. 23.1 Consent of Ernst & Young LLP. -------------------- * Incorporated by reference to the corresponding exhibit to the Registrant's registration statement on Form S-1 (No. 333-36828). ** Incorporated by reference to the corresponding exhibit to the Registrant's current report of Form 8-K filed on December 6, 2000 (No. 333-36828). + This exhibit is a management contract or a compensatory plan or arrangement. (b) Reports on Form 8-K: On June 28, 2002, we filed a Current Report on Form 8-K (Items 5 and 7) announcing an amendment to Key3Media's senior credit facility. On July 12, 2002, we filed a Current Report on Form 8-K (Items 5 and 7) concerning our continued listing on the New York Stock Exchange. On July 17, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of Bruce M. Ramer as a director of Key3Media. On July 30, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of James A. Wiatt as a director of Key3Media. On August 12, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of James E. Moore as a director of Key3Media. On August 14, 2002, we filed a Current Report on Form 8-K (Item 9) concerning the signing of the certifications required by Section 906 of the Sarbanes-Oxley Act. On August 28, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of John A. Pritzker as a director of Key3Media and announcing an adjustment to the purchase price and escrow arrangement for our Voice on Net Conferences and Sessions Initiation Protocol Summits acquisition. On August 30, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of G. Andrea Botta as a director of Key3Media. On October 7, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of Pamela C. Alexander as a director of Key3Media. 54 On December 17, 2002, we filed a Current Report on Form 8-K (Item 5 and 7) concerning our failure to make an interest payment on our senior subordinated notes. On December 23, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of Eric Hippeau as a director of Key3Media. On January 3, 2002, we filed a Current Report on Form 8-K (Item 1) announcing that Triax Holdings Ltd. purchase of a controlling stake in our company from SOFTBANK America, Inc. and SOFTBANK Holdings, Inc. On January 8, 2002, we filed a Current Report on Form 8-K (Item 5) announcing the resignation of Michael B Solomon as a director of Key3Media. 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. KEY3MEDIA GROUP, INC. By: /s/ NED S. GOLDSTEIN ------------------------------ Name: Ned S. Goldstein Title: Executive Vice President, General Counsel and Secretary Date: April 15, 2003 By: /s/ PETER B. KNEPPER ------------------------------ Name: Peter B. Knepper Title: Executive Vice President and Chief Financial Officer Date: April 15, 2003 56 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ned S. Goldstein, and each of them severally, his or her true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he or she might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on behalf of the registrant and in the capacities and on the dates indicated.

57 CERTIFICATION I, Fredric D. Rosen, certify that: 1. I have reviewed this annual report on Form 10-K of Key3Media Group, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Fredric D. Rosen ---------------------------- Name: Fredric D. Rosen Title: Chief Executive Officer and Chairman of the Board Date: April 15, 2003 58 CERTIFICATION I, Peter B. Knepper, certify that: 1. I have reviewed this annual report on Form 10-K of Key3Media Group, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Peter B. Knepper ----------------------------- Name: Peter B. Knepper Title: Executive Vice President and Chief Financial Officer Date: April 15, 2003 59 (This page intentionally left blank) 60 KEY3MEDIA GROUP, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE ITEMS 15(a)(1) AND 15(a)(2) PAGE REFERENCE -------------- FORM 10-K CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors-Ernst & Young LLP.................... F-2 Consolidated Balance Sheets-December 31, 2001 and 2002.............. F-3 Consolidated Statements of Operations-Three-year period ended December 31, 2002............................................. F-4 Consolidated Statements of Changes in Shareholders' Equity (Deficit) and Comprehensive Income (Loss) Three-year period ended December 31, 2002................................................... F-6 Consolidated Statements of Cash Flows-Three-year period ended December 31, 2002................................................... F-7 Notes to Consolidated Financial Statements............................ F-9 Financial Statement Schedule-Valuation and Qualifying Accounts........ S-1 F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors Key3Media Group, Inc. We have audited the accompanying consolidated balance sheets of Key3Media Group, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Key3Media Group, Inc. and subsidiaries at December 31, 2002 and 2001 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth herein. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As more fully discussed in Note 2, the Company has incurred recurring operating losses and has filed for bankruptcy. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2. The 2002 financial statements do not include adjustments that might result from the outcome of this uncertainty. As discussed in Note 6 to the consolidated financial statements, on January 1, 2002 the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". /s/ ERNST & YOUNG LLP Los Angeles, California April 10, 2003 F-2 KEY3MEDIA GROUP, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)

See accompanying notes. F-3 KEY3MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes. F-4 KEY3MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes. F-5 KEY3MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (IN THOUSANDS)

See accompanying notes F-6 KEY3MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

See accompanying notes. F-7 KEY3MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED) (IN THOUSANDS)

See accompanying notes. F-8 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. ORGANIZATION AND NATURE OF OPERATIONS Key3Media Group, Inc. (the "Company") is a leading producer of business-to-business events, principally trade shows, conferences, and customized marketing and education programs with operations in the United States, Canada, Europe and Japan. In March 2000, Ziff-Davis Inc. ("ZDI") announced its decision to recapitalize and spin-off its trade show and conference business to the holders of ZDI common stock as part of a comprehensive restructuring. On August 18, 2000, ZDI completed the spin-off of the Company, which had been formed in 2000 to hold ZDI's trade show and conference business. In addition to the 53,358 shares of the Company's common stock that were issued to holders of ZDI common stock in the spin-off, the Company raised approximately $75,000 through the issuance of zero coupon senior debentures with detachable warrants and raised approximately $70,000 through the sale of 11,642 shares of its common stock for $6.00 per share. Concurrently, the Company's wholly owned subsidiary Key3Media Events, Inc. ("Key3Media Events") borrowed $330,000 from a syndicate of banks. The proceeds of these transactions were used to repay Key3Media Events' $382,000 of existing indebtedness and to fund a $43,000 cash dividend to ZDI, and the balance was retained for working capital and general corporate purposes. Prior to June 1, 2000, ZDI provided to the Company certain centralized administrative services including but not limited to, legal, tax and financial accounting, management information, telecommunications and human resources. Since June 1, 2000, the Company has provided these services for itself. Charges for the services provided by ZDI were generally based upon utilization; however, where measuring utilization was impractical, ZDI used percentages based upon headcount or revenue in determining charges for these services. Management of the Company believes the allocated cost of the centralized administrative services approximated the cost it would have incurred if it had obtained the same administrative services from unaffiliated third parties. A portion of the cost of administrative services charged to the Company by ZDI included amounts for certain cash management and treasury activities. These activities included the investment of surplus cash and the issuance, repayment and repurchase of short-term and long-term debt. The Company generally remitted its cash receipts (other than receipts of foreign operations or operations that were not wholly owned) to ZDI, and ZDI generally funded the Company's cash disbursements (other than disbursements of foreign operations or operations that were not wholly owned), on a periodic basis. The cash funding described was accounted for within Division Capital and upon the April 13, 2000 signing of a loan agreement with two banks the Company assumed responsibility for its cash management and treasury activities. The Company recorded $0, $0 and $2,490 for centralized administrative charges from ZDI for the years ended December 31, 2002, 2001, and 2000 respectively. The financial statements are not necessarily indicative of results that would have occurred if the activities of the Company had been a separate stand-alone entity prior to August 18, 2000. 2. PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AND BASIS OF PRESENTATION On February 3, 2003 ("Petition Date") Key3Media Group, Inc. and five of its U.S. subsidiaries (collectively "the Debtors") filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws ("Bankruptcy Code" or "Chapter 11") in the United States Bankruptcy Court for the District of Delaware ("Court"). The reorganization is being jointly administered under the caption "In re Key3Media Inc., et al. case No. 03-10323." Included in the Consolidated Financial Statements are subsidiaries operating outside of the United States, which have not commenced Chapter 11 cases or other similar proceedings elsewhere, and are not Debtors. Key3Media Group, Inc. and all of its consolidated subsidiaries are collectively referred to herein as "Key3Media," or "the Company." The Company decided to seek judicial reorganization based upon a comprehensive recapitalization plan designed to provide a strong financial foundation for the Company. The plan is backed by F-9 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) investment funds managed by Thomas Weisel Capital Partners ("TWCP"), which owns as of February 3, 2003, approximately 68% of Key3Media's bank debt and approximately 38% of its 11.25% Senior Subordinated notes due 2011. On February 4, 2003, the Court gave interim approval for $12,500 of a $30,000 debtor-in-possession Credit and Guaranty Agreement ("DIP Credit Facility") to be provided by TWCP for payment of permitted pre-petition claims, working capital needs, and other general corporate purposes. On March 26, 2003, the Court gave final approval of the DIP Credit Facility, which requires the Company, amongst other things, to maintain certain financial covenants and restricts liens, indebtedness, capital expenditures, dividend payments and sales of assets. In addition, the DIP Credit Facility maintains a requirement that the Court enter the Plan of Reorganization on or before June 30, 2003. If this requirement in not met, then there is an Event of Default under the DIP Credit Facility. As a debtor-in-possession, Key3Media is authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the approval of the Court, after notice and an opportunity for hearing. Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed and other contractual obligations against Key3Media may not be enforced. In addition, under the Bankruptcy Code, Key3Media may assume or reject executory contracts, including lease obligations. Parties affected by these rejections may file claims with the Court in accordance with the reorganization process. Absent an order from the Court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be voted upon by creditors and approved by the Court. The accompanying consolidated financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In particular, these consolidated financial statements do not purport to show (a) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (b) as to liabilities, the amounts that may be allowed for claims or contingencies, or the status and priority thereof; (c) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Company; and (d) as to operations, the effect of any changes that may be made in its business. The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and the liquidation of liabilities and commitments in the normal course of business. The Company's recurring losses and bankruptcy filing raise substantial doubt about the Company's ability to continue as a going concern. The ability of Key3Media to continue as a going concern is predicated upon numerous issues, including the Company's ability to achieve the following: - Implement its long-term strategy to revitalize its business and return Key3Media to profitability; - Take appropriate action to offset the negative effects that the Chapter 11 filing has had on the business, including the loss in customers and the impairment of vendor relations; - Operate within the framework of the DIP Credit Facility, including its limitations on capital expenditures, its financial covenants, the ability to generate cash flows from operations or seek other sources of financing and the availability of projected vendor credit terms; - Attract, motivate and/or retain key executives and other employees; - Confirmation by the Court of the Company's plan of reorganization. These challenges are in addition to those operational and competitive challenges faced by Key3Media in connection with its general business activities. F-10 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Key3Media Group, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents Cash and cash equivalents include cash on deposit and highly liquid investments with original maturities at time of purchase of three months or less. Concentrations of Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, are principally cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with various high credit financial institutions. At times, cash and cash equivalents may be in excess of federally insured limits or, with respect to international operations, there may be no insurance. The Company has not experienced losses in these accounts. The Company generally bills its customers in advance of the commencement of an event and does not require collateral from its customers. As a result of the timing of the billing and collection of a substantial portion of accounts receivable, the Company has limited its credit risk in the event a customer does not pay. Significant revenue and earnings are generated from our NetWorld+Interop tradeshows and JavaOne conference brands. The Company owns the service mark "Interop" and Novell has assigned the combined mark "Networld + Interop" to the Company in an agreement dated December 17, 2001. The Company also licenses the name "JavaOne" from Sun Microsystems which expires in July 2004. If these licenses terminate and are not renewed, the Company would not be able to produce events using these service marks and that could adversely affect revenues and results of operations. Fair Value of Financial Instruments The Company's financial instruments recorded on the consolidated balance sheets include cash and cash equivalents, accounts receivable and accounts payable. The carrying amount of these financial instruments approximates fair value because of their short-term maturity. The fair value of the Company's indebtedness is discussed in Note 4. Property and Equipment Property and equipment have been recorded at cost. Major replacements and improvements are capitalized while general repairs and maintenance costs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: computers and equipment two to seven years, furniture and fixtures five to ten years and leasehold improvements the shorter of their estimated useful lives or lease periods. Intangible Assets Intangible assets consist principally of trade names, advertiser and exhibitor lists, and goodwill. Trade names are recorded at their estimated fair value using the "relief from royalty" approach. The "relief-from-royalty" approach is based upon the savings that an intangible asset owner will realize from owning the intangible asset instead of paying a rent or royalty for the use of that asset. Advertiser and exhibitor lists have been recorded at their F-11 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) estimated fair value as determined by an "income" approach. Amortization of intangible assets is computed on a straight-line basis over their estimated useful lives. The Company assesses the recoverability of its intangible assets whenever events or changes in circumstances indicate that expected future cash flows (undiscounted and without interest charges) may not be sufficient to support its carrying value. If undiscounted cash flows are not sufficient to support the recorded value, an impairment loss is recognized to reduce the carrying value of the intangibles to its estimated recoverable amount. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Revenue Recognition Trade show, conference, customized marketing and education program revenue, less agency commissions, cash discounts, and non-cash discounts are recognized when the events are conducted. Payments received in advance of trade shows, conferences and customized marketing and education programs are initially reported on the balance sheet as deferred revenue. The Company enters into barter transactions with certain vendors where booth space at trade shows or conferences is exchanged for advertising or the Company and the vendor exchange advertising. These transactions are not included in the consolidated statements of operations. If these transactions had been included, the Company would have recorded additional revenue and expense of approximately $8,649, $7,186, $2,903 for the years ended December 31, 2000, 2001, and 2002, respectively. Computation of Net (Loss) Income Per Share and Pro Forma Net Income Per Share Basic net income (loss) per common share is computed by dividing the net income (loss) attributable to common shareholders by the weighted average of the number of common shares outstanding, including the assumed issuance of shares to ZDI shareholders in connection with the spin-off, as if such issuance occurred at the beginning of 2000. Diluted earnings per common share is calculated by dividing the net income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding, including the assumed issuance of shares to ZDI shareholders in connection with the spin-off, as if such issuance occurred at the beginning of 2000 plus the dilutive effect of stock options, warrants and preferred stock calculated using the treasury stock method. Pro forma basic net income per share is computed by dividing the net income (loss) attributable to common shareholders by the weighted average of the number of common shares outstanding, including the assumed issuance of shares to Initial Public Offering shareholders in connection with the spin-off, as if such issuances occurred at the beginning of 2000. Pro forma diluted earnings per share is calculated by dividing the net income (loss) attributable to common shareholders on the weighted average number of shares of common stock outstanding, including the assumed issuance of shares to Initial Public Offering shareholders in connection with the spin-off, as if such issuances occurred at the beginning of 2000 plus the dilutive effect of stock options and warrants, calculated using the treasury stock method. F-12 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) A summary of the shares used to compute historical earnings per share is as follows:

A summary of the shares used to compute unaudited pro forma earnings per share is as follows:

Operating Costs and Expenses Cost of production includes the direct costs of organizing, producing and managing trade shows, seminars, conferences and expositions. These costs are capitalized as prepaid and expensed in the month in which the event is conducted. Foreign Currency Translation The assets and liabilities of foreign operations are translated at the current exchange rate and elements of shareholders' equity are translated at historical exchange rates at year-end. Revenue and expense accounts are translated at the average exchange rate during the periods presented. Gains or losses from foreign currency transactions are included in earnings as incurred. Translation adjustments are included as a separate component of shareholders' equity (deficit). F-13 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Advertising The Company generally expenses the cost of advertising as incurred. Income Taxes The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Net deferred tax assets are recorded when it is more likely than not that such tax benefits will be realized. The activities of the Company were included in the consolidated federal income tax return filed by ZDI (from May 4, 1998 through August 18, 2000). However, the tax provision shown on the consolidated statement of operations for fiscal year 2000 was prepared as though the activities of the Company were filed in income tax returns on a stand-alone basis. The tax benefit arising from the change in the deferred tax accounts and the Company's interim loss through August 18, 2000 was reflected in the accompanying consolidated statement of operations, however as the operating tax asset was utilized by Ziff Davis, the amount of the asset was reflected as a distribution to Ziff Davis. The effect of recording the income tax provision on a stand-alone basis as of August 18, 2000 resulted in an aggregate reduction in Division Equity of $32,027. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amount reported in the financial statements. Actual results may differ from these estimates. Related Party Transactions During 2001, the Company recorded event related cost of approximately $140 charged by a vendor who employed a relative by marriage of an officer and director of the Company. Stock-Based Compensation Statement of Financial Accounting Standards No. 123 (SFAS 123),"Accounting for Stock-Based Compensation" encourages, but does not require, companies to adopt a fair value based method for determining the expense related to stock-based compensation. The Company records stock-based compensation using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and Financial Accounting Standards Board (FASB) Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation-an interpretation of APB Opinion No. 25 (FIN 44)." New Accounting Pronouncements In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill and Other Intangible Assets," which establishes financial accounting and reporting for acquired goodwill and other intangible assets and supercedes APB Opinion No. 17, "Intangible Assets." The Company adopted SFAS No. 142 beginning with the first quarter of 2002. See Note 6 for further discussion on the Company's adoption of SFAS No. 142. In October 2001, FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," however it retains the fundamental provisions of SFAS No. 121 related to F-14 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) the recognition and measurement of the impairment of long-lived assets to be "held and used." In addition, SFAS No. 144 provides, among other things, more guidance on estimating cash flows when performing a recoverability test and establishes more restrictive criteria to classify an asset as "held for sale." The Company's adoption of the provisions of SFAS No. 144 on January 1, 2002 did not effect its financial position or results of operations. In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections." For most companies, SFAS No. 145 will require, among other things, gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. The Company will adopt the provisions of SFAS No. 145 related to the rescission of SFAS No. 4 on January 1, 2003. At such time, the Company will reclassify the extraordinary loss and gain on extinguishments of debt to continuing operations for prior periods. With regards to other provisions of SFAS No. 145, the Company has adopted them and such adoption did not effect its financial position or results of operations. In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS No. 146 and EITF No. 94-3 relates to the requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred while EITF No. 94-3 requires that the liability be recognized at the date of an entity's commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 15, 2002, with early application encouraged. The Company adopted SFAS No. 146 in the second quarter of 2002. Reclassification Certain reclassifications were made to the prior year consolidated financial statements to conform to current year presentation. 4. LONG-TERM OBLIGATIONS Long-term Obligations consist of the following:

On December 16, 2002, the Company failed to pay the semi-annual interest payment due on its 11.25% senior subordinated notes (the "Notes"). This non-payment of interest continued past the 30 day grace period and became an event of default in respect of the Notes. Further, this event of default under the Notes constituted a cross-default under the Company's Amended and Restated Credit Facility. In addition, as of December 31, 2002, the Company is not in compliance with the financial and certain other covenants contained in its Amended and Restated Credit Facility. F-15 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The net proceeds from the offering of the Notes on June 26, 2001, which approximated $292,000 after deducting the underwriting discount and other sale expenses, and cash on hand, were used by the Company to repay its existing term loan bank borrowings and to repurchase and retire zero coupon debentures issued in August 2000 in connection with the spin-off from ZDI. The Notes bear interest at a rate of 11.25% per annum, payable semi-annually on June 15 and December 15 of each year and may be redeemed beginning on June 15, 2006. The Notes are guaranteed by the Company's wholly owned subsidiaries, Key3Media Events, Key3Media Von Events Inc. and Key3Media BCR Events, Inc., as to principal, premium, if any, and interest. In addition, the Notes are subordinated to all of the Company's senior indebtedness (as defined) and will be structurally subordinated to all liabilities of the subsidiaries that do not guarantee the Notes. The Notes contain various financial covenants including, amongst other things, (i) limitations on dividends and other restricted payments, (ii) limitations on the incurrence of indebtedness, and (iii) limitations on the sale or exchange of assets. Concurrent with the issuance of the Notes and repayment of existing term loan bank borrowings, the Company amended and restated its bank credit facility previously entered into on August 3, 2000 by eliminating the term loan facility and increasing the revolving credit facility with its syndicate of banks committing to lend up to $150,000 for general corporate purposes, which could include acquisitions. The Company may borrow, repay and re-borrow under the increased revolving loan facility until June 26, 2004, at which time it must repay any outstanding amounts. Loans under the Amended and Restated Credit Facility are guaranteed by the Company's wholly owned subsidiaries (other than foreign and unrestricted subsidiaries, as defined) and are secured by substantially all of their assets. Subject to certain conditions, our revolving credit facility does not prohibit us from borrowing on a term loan basis an aggregate principal amount of up to $200,000. These borrowings can be senior and can share in the collateral securing the revolving credit facility. In addition, we may be required to prepay any term loans under this part of the credit facility from the net cash proceeds of assets sales outside the ordinary course of our business, the net cash proceeds of additional debt and a portion of our excess cash flow (as defined in our amended and restated credit agreement). No lender has committed to lend us money under this provision. At the Company's election, loans under the Amended and Restated Credit Facility will bear interest at a margin over either (1) a base rate equal to the higher of the federal funds rate plus 1/2% and Citibank, N.A.'s base rate or (2) the Eurodollar rate (as defined). The margin that the Company must pay will vary between 1.00% and 3.25% depending on which rate the Company chooses as its base rate and the ratio of its total debt to EBITDA (earnings before interest, taxes, depreciation and amortization) as defined in the Amended and Restated Credit Facility. The Amended and Restated Credit Facility contains various financial covenants including, amongst other things, (i) limitations on dividends, (ii) limitations on the incurrence of indebtedness, (iii) limitations on the sale or exchange of assets and (iv) maintenance of minimum leverage and interest coverage ratios. On November 27, 2001, the Company raised $52,000 through the private placement of 1,000 shares of 5.5% Series A Convertible Preferred Stock and 1,080 shares of 5.5% Series B Convertible Preferred Stock, in each case for $25.00 per share. Concurrent with the issuance of this convertible preferred stock, the Company repaid $30,000 of the borrowings under the Amended and Restated Credit Facility and further amended that facility to replace its existing covenants to maintain a minimum interest coverage ratio and maximum senior debt and total debt to pro forma EBITDA ratios with new covenants that require the maintenance of a ratio of pro forma EBITDA to fixed charges (which will include interest, domestic taxes and annual capital expenditures of up to $5,000) of at least 1.1:1 and limit the total senior debt to $120,000; total debt to $410,000 and annual capital expenditures to $15,000. The revised covenants will remain in effect until there have been two consecutive quarters in which the Company's pro forma EBITDA for the last twelve months is more than $85,000, after which time the existing covenants will come back into effect. F-16 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) On June 26, 2002, the Company further amended its Amended and Restated Credit Facility. This amendment modifies the existing financial covenants until April 1, 2003, including replacing the fixed charge coverage ratio with minimum quarterly EBITDA requirements through March 31, 2003, and limits total senior debt to $100,000 and total debt to $390,000. In addition, the margin percentage that the Company must pay on its loans under the Amended and Restated Credit Facility changed to a range of 1.00% to 4.00% from the prior range of 1.00% to 3.25%, depending on which rate the Company chooses as its base ratio and the ratio of its total debt to EBITDA, as defined. On January 23, 2003 and January 28, 2003, the Company further amended its Amended and Restated Credit Facility. These amendments, amongst other things, provided consents to the sale of the VON assets and subordination of liens in connection with the Company obtaining debtor-in-possession financing, and waivers for certain other technical defaults that existed at each amendment date. On December 12, 2001, the Company issued 300 shares of 5.5% Series B Convertible Preferred Stock in a private placement in exchange for $10,000 face amount of its Notes. For the purpose of this exchange, the Notes were valued at $7,500 and the convertible preferred shares were issued for $25.00 per share. In connection with this exchange, the Company recorded an extraordinary gain on conversion of debt to preferred stock of $1,606 (net of taxes of $594) representing the difference between the face value of the Notes and the value of the convertible preferred stock less the write-off of unamortized debt issuance costs allocated to the Notes converted to preferred stock. In connection with the repayment of all of its term loans and repurchase of all of the outstanding debentures on June 26, 2001, the Company recognized an extraordinary loss on retirement of debt of $9,146 (net of a tax benefit of $3,383) representing the write-off of unamortized debt issuance costs and unamortized debt discount recorded in August 2000, the original issuance date of the debentures. The Company incurred interest expense to related parties for the years ended December 31, 2000, 2001 and 2002 of $15,522, $0 and $0, respectively. The unaudited estimated fair value of the Notes included in current maturities of long-term obligations as of December 31, 2002 was in the approximate range of $4,000 to $8,000 while the fair value of the borrowings under the Amended and Restated Credit Facility as of December 31, 2002 cannot be reasonably estimated. The fair value of the Notes was determined based on recent market information. Maturities of long-term debt for the next five years and thereafter are:

F-17 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 5. BUSINESS COMBINATIONS AND DISPOSITIONS Business Combinations On January 7, 2002, the Company completed its acquisition of ExpoNova Events & Exhibitions ("ExpoNova") previously announced on November 30, 2001. The Company paid an estimated initial purchase price of $3,360 in cash and issued 178 shares of its common stock with a fair value approximating $840 for a total purchase price of $4,200. Additionally, in connection with this acquisition, ExpoNova retained and subsequently exercised a right to require the Company to purchase another tradeshow and conference business subject to certain conditions. The exercise of this put resulted in no additional payments as consideration by the Company when it completed this purchase transaction on April 9, 2002. The initial purchase price was determined by applying a multiple to the average EBITDA (as defined in the purchase agreement) for the years 2000, 2001, and 2002. For the purpose of the closing, an estimate of 2001 and 2002 EBITDA was used to calculate the estimated initial purchase price with ten percent of the total cash and securities given as consideration placed into escrow. Upon the final determination of the purchase price, the escrow amount and additional amounts, if any, due to each party will be distributed as required by the purchase agreement. On September 10, 2001, the Company, in three separate transactions, acquired: (i) the Next Generation Networks and Next Generation Ventures tradeshows and conferences (the "NGN Assets"), (ii) the Opticon and VoiceCon tradeshows and conferences and the Business Communications Review magazine (the "BCR Assets"); and (iii) the Voice on the Net Conferences and Session Initiation Protocol Summits (collectively, the "Pulver Assets"). Each of the BCR Assets and the NGN Assets relate to events that target the networking industry while the Pulver Assets relate to events that target the networking and Internet Protocol communications industries. The Company acquired these assets to strengthen its presence in the networking trade show and event business. In connection with each of these acquisitions, the initial purchase price was determined by applying a multiple to the average EBITDA (as defined in the purchase agreements) for the years 2000 and 2001 attributable to each group of assets acquired. For purposes of each acquisition closing, an estimate of 2001 EBITDA was used to calculate the estimated initial purchase price with a portion of this estimated initial purchase price placed into an escrow account pending final determination of the initial purchase price based upon audited financial results for 2001. Upon the final determination of the initial purchase price, the escrow amounts and additional amounts, if any, due each party will be distributed as required by the purchase agreements. The following data shows the estimated initial purchase price for each acquisition described above and the respective changes for each purchase price from the date of acquisition to December 31, 2002:

F-18 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table shows the portion of the estimated initial purchase price currently held in escrow for each acquisition described above as of December 31, 2002:

The estimated initial purchase price was preliminarily allocated based on the estimated fair values of the assets acquired at their date of purchase subject to final determination of the initial purchase price. This preliminary allocation resulted in total acquired identifiable intangible assets related primarily to exhibitor lists of $8,612, which are being amortized on a straight-line basis over 3 years. The resulting total goodwill of $89,919 has not been amortized but has been subjected to impairment testing in accordance with SFAS No. 142. See note 7. The Pulver asset purchase agreement includes provisions for purchase price adjustments in each of 2002, 2003 and 2004. In each instance, EBITDA for the year will be compared to the average EBITDA attributable to the Pulver Assets for 2000 and 2001 (the "Base EBITDA"). If the EBITDA for any such year exceeds the Base EBITDA, then the purchase price will increase by an amount equal to 50% of such excess multiplied by 8.75; conversely, if the EBITDA for any such year is less than the Base EBITDA, then the purchase price will decrease by an amount equal to 50% of the shortfall multiplied by 8.75. Notwithstanding the foregoing, the maximum increase or decrease in purchase price for any year is $6,000 provided however, if the price increases as a result of the EBITDA for 2002, then the maximum increase or decrease will be $5,000 for each subsequent year. During the third quarter ended September 30, 2002, the Company and the sellers of the Pulver assets agreed to eliminate the provisions related to purchase price adjustments for 2002, 2003 and 2004 and set a final purchase price of $41,502; accordingly, the balance of funds held in escrow were distributed. In each of the NGN and BCR purchase agreements there is an incentive provision to increase the purchase price of the assets acquired. To the extent that (i) revenues for the year 2003 are greater than the average revenue for 2000 and 2001, and provided that (ii) the percentage that EBITDA bears to revenue for 2003 is not less than the comparable percentage of average revenue for 2000 and 2001, then additional purchase consideration will be due each seller. For the portion of revenue increase up to $3,000, the additional consideration will be the amount of the increase; for that portion of the revenue increase from $3,001 to $6,000 the additional consideration will be 1.25 times the amount of the increase; and for that portion of the increase from the above $6,000 the additional increase will be 1.5 times the amount of the increase. As of December 31, 2002, the purchase prices for BCR and NGN were determined resulting in a final determination of purchase price for BCR; however in connection with the final determination of purchase price for NGN, the Company and the sellers of NGN agreed to a preliminary final purchase price based upon applying a multiple to the average EBITDA for years 2000 and 2001 which did not include any proceeds from a pending insurance claim for event interruption and cancellation submitted by NGN's sellers for one of its events which they believed was impacted by the events that occurred on September 11, 2001. The determination of this preliminary F-19 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) final purchase price required NGN's sellers to deposit $4,373, into the escrow as a potential return of purchase price pending resolution of the insurance claim previously noted. During the fourth quarter ended December 31, 2002, the Company and the sellers of the NGN assets agreed to eliminate the provisions related to purchase price adjustments for 2002 and 2003 and set a final purchase price of $40,029; accordingly, the balance of funds held in escrow were distributed. In connection with the insurance claim noted above, the insurance company accepted a proof of loss on September 6, 2002, in the amount of $1,562. This amount, plus an addition amount of $121 related to an event that the Company held during September 11, 2001 in Atlanta, Georgia, is classified in the accompanying consolidated statement of operations as "Proceeds from insurance claim." These acquisitions have been recorded using the purchase method of accounting. Accordingly, the accompanying consolidated statements of operations do not include any revenues and expenses related to these acquisitions prior to the respective closing dates. On June 1, 2001, the Company's wholly owned subsidiary, Key3Media Events, acquired and received from Softbank America Inc. ("SB America") all the outstanding equity shares of Softbank Forums Inc. ("SB Forums") for a purchase price equal to (i) ten times the EBITDA of SB Forums for 2001 minus (ii) $450. The Company paid the purchase price in shares of its common stock, which were valued at $10 per share for this purpose. The Company initially issued 2,955 shares of its common stock to SB America, which was based on an estimate that SB Forums' EBITDA for 2001 will be $3,000. Based on SB Forums' EBITDA for 2001, the Company was not required to issue any additional shares in connection with this acquisition. Because SB America owned in excess of fifty (50) percent of the voting common shares of the Company at the June 1, 2001 closing of this transaction and continued to be a majority shareholder through the record date for voting on the transaction, the Company recorded the acquisition as of this closing date. Accordingly, the results of SB Forums are included in the Company's consolidated statement of operations beginning June 1, 2001. Furthermore, as this transaction is between companies under common control, this business combination has been recorded using the historical cost basis of the assets and liabilities acquired; consequently, the fair value of common shares initially issued of approximately $29,800 was reduced by $29,403 to equal the historical cost of the net assets acquired of $397. This reduction in value was accomplished by adjusting additional paid-in-capital. Disposition of Business On January 24, 2003, the Company completed the sale of the assets of its Key3Media VON Events, Inc. (VON) subsidiary to Pulver.com VON Events, Inc., an affiliate of the prior owners of the VON events. The Company has accounted for these operations as discontinued operations in the accompanying consolidated financial statements. For the years ended December 31, 2001 and 2002, VON's revenues were $3,151 and $4,637, respectively. The Company's net income (loss) from operations from VON was income of $1,229 and a loss of $33,450 for the years ended December 31, 2001 and 2002, respectively. The operating loss for 2002 included a write down of the value of the goodwill associated with the VON events in the amount of $33,130. F-20 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The components of the assets held for sale and the liabilities related to the assets held for sale in the consolidated balance sheet are as follows:

6. CHARGES AND NON-RECURRING ITEMS Reduction of Goodwill and Other Intangibles In July 2001, FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets," which establishes financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." The Company adopted SFAS No. 142 beginning with the first quarter of 2002. SFAS No. 142 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but, instead, tested at least annually for impairment while intangible assets that have finite useful lives continue to be amortized over their respective useful lives. Accordingly, the Company ceased amortization of all goodwill, which is its only intangible asset with an indefinite useful life, on January 1, 2002, and will continue to amortize its intangible assets with finite useful lives, consisting primarily of trade names and advertiser and exhibitor lists, over their respective useful lives. SFAS No. 142 requires that goodwill and other intangibles be tested for impairment using a two-step process. The first step is to determine the fair value of the reporting unit, which may be calculated using a discounted cash flow methodology, and compare this value to its carrying value. If the fair value exceeds the carrying value, no further work is required and no impairment loss would be recognized. The second step is an allocation of the fair value of the reporting unit to all of the reporting unit's assets and liabilities under a hypothetical purchase price allocation. Based on the evaluation performed to adopt SFAS No. 142, the Company recorded a non-cash charge of $344,615, net of tax benefit of $80,385, to reduce the carrying value of goodwill and other intangibles related to the COMDEX reporting unit to their estimated fair value. This charge is nonoperational in nature and is reported as a cumulative effect of an accounting change in the accompanying consolidated statement of operations. The Company utilized a combination of discounted cash flow methodology and relative market measures to determine fair value. As a result of the strategic review of its operations undertaken during the third quarter ending September 30, 2002, which lead to the announced reduction and consolidation of its event schedule for 2003 and closing of its regional office in Needham, Massachusetts, and an updated review of its operations in the fourth quarter ending December 31, 2002, the Company conducted an evaluation of its goodwill and intangible assets. Based on the results of this evaluation, the Company recorded an additional non-cash charge of $396,130 to reduce the value of goodwill and other intangibles related to its portfolio of reporting units to their estimated fair value. F-21 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) This charge is recorded in the accompanying consolidated statement of operations as follows: $363,000 in the line item "Reduction of goodwill and other intangibles" and $33,130 in the line item "Net income (loss) on discontinued operations" related to the sale of the assets of VON subsequent to December 31, 2002. The strategic review and resulting charge recognizes the sustained economic downturns experienced in the information technology and networking industries serviced by the Company as shown by the significant decline in the results of operations of the Company. A combination of discounted cash flow methodology and relative market measures was used by the Company to determine fair value in connection with these evaluations. The following table reflects the Company's comparative net income (loss) before the cumulative effect of accounting change and goodwill amortization under SFAS No. 142:

F-22 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following table displays the intangible assets that continue to be subject to amortization and aggregate amortization expense and intangible assets not subject to amortization:

The following table displays the activity of the goodwill balance from December 31, 2001 to December 31, 2002:

Staff Reduction Severance Charges In the second half of 2001, the Company initiated several cost reduction and expense containment programs that reduced its temporary employment costs, travel and entertainment expenses and most significantly, its total employment costs through staff reductions. The Company continued these cost reductions efforts in 2002 through reviewing its organizational structure and consolidating certain operations. On July 26, 2002, the Company announced that it was undertaking a strategic review of its operations in response to the sustained economic downturns being experienced in the information technology, networking and trade show industries. On September 18, 2002, the Company announced the completion of the initial phase of its strategic business review which includes a consolidation of the 2003 event schedule and the closing of its regional office in Needham, Massachusetts. As a result of these actions and previously untaken cost reduction efforts in the first half of 2002, the Company recorded a charge of $2,779 for the year ended December 31, 2002. These charges are classified in the consolidated statement of operations as "Staff Reduction Severance Charges" and related to termination and benefit costs incurred as a result of staff reductions. F-23 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following table displays a rollforward of the accrual balance related to the Staff Reduction Severance Charges:

Restructuring costs In addition to staff reduction severance charges, the Company incurred additional costs in fiscal year 2002 in connection with the strategic review undertaken in the second half of 2002. These costs are as follows:

The Company recognized a charge of $4,607 in connection with the abandonment of its Needham, Massachusetts facility and related lease obligation. The charge was determined by calculating the present value of remaining lease payments less an estimate of sublease rental income on this facility. In addition, the Company recognized a loss of $1,371 on the write-down of property and equipment principally due to the abandonment of the Needham, Massachusetts facility. The charge of $1,373 related to professional fees incurred in connection with the strategic review and restructuring options available to the Company. Non-recurring compensation charge In December 2000, two executives of the Company elected to exercise their rights under the termination provisions included in their respective employment agreements. This action resulted in a one time non-recurring compensation charge of $2,977 for the required termination payments. Subsequently, the Company and one of these executives entered into a new four-year employment agreement in December, 2000. 7. BALANCE SHEET COMPONENTS Accounts receivable consist of the following:

F-24 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Property and equipment consist of the following:

During fiscal year 2002, the Company wrote-off $21,906 of fixed assets that were fully depreciated. Also in fiscal year 2002, the Company wrote-off $9,863 of fixed assets with a net book value of $871 and wrote-down certain fixed assets by $500, principally due to the closure of the Needham, Massachusetts facility. The resulting loss of $1,371 is recorded in the "Restructuring costs" line in the accompanying consolidated statement of operations. Depreciation and amortization expense for the years ended December 31, 2000, 2001 and 2002 was $5,226, $8,311 and $8,396, respectively. Intangible assets consist of the following:

F-25 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Amortization expense for the years ended December 31, 2000, 2001 and 2002 was $31,462, $32,477 and $11,690, respectively. For fiscal years 2001 and 2002, $804 and $2,412, respectively, was reclassed to net income (loss) on discontinued operations. During 2001, the Company wrote-off $8,290 of fully amortized other intangible assets. The majority of the balance related to an intangible asset totaling $6,700 obtained in the SB Forums acquisition at a historical basis. As previously noted, the Company adopted SFAS 142 on July 1, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives arising from acquisitions completed after June 30, 2001. Consequently, the Company did not amortize the goodwill that arose from the acquisition of the Pulver, BCR and NGN assets. Additionally, SFAS 142 contains non-amortization provisions for goodwill and intangible assets with indefinite useful lives that arose prior to June 30, 2001 effective as of January 1, 2002. The Company recognized approximately $12,800 of amortization expense in 2001 for goodwill that was not amortized after January 1, 2002. Accrued expenses consist of the following:

8. INCOME TAXES Income (loss) before income taxes is attributable to the following jurisdictions:

Components of the provision (benefit) for income taxes related to continuing operations are as follows:

F-26 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) A reconciliation of the U.S. federal statutory tax rate to the Company's effective tax rate on income (loss) before income taxes and extraordinary items is as follows:

Following is a summary of the components of the deferred tax accounts:

For tax purposes, the Company had available, at December 31, 2002, net operating loss carry-forwards for regular federal income tax purposes of approximately $235,000, which begin to expire in 2018. The Company's net operating loss carry-forwards and other tax attributes are subject to limitations in the event of a change in ownership as defined by the Internal Revenue Code or in the event these assets are used to offset a gain on the cancellation of indebtedness as a result of the Company's emergence from chapter 11. Accordingly, full utilization of these net operating loss carry-forwards is not assured. 9. STOCK COMPENSATION PLANS The disclosures described below set forth the various compensation plans implemented by the Company and by Softbank and ZDI only to the extent such plans affect the employees of the Company. Key3Media Group, Inc. 2000 Stock Option and Incentive Plan The Board of Directors of the Company adopted the Key3Media Group, Inc. 2000 Stock Option and Incentive Plan (the "Plan") on August 21, 2000. Under the terms of the Plan, all employees, officers, directors and consultants of the Company are eligible to participate. The Nominating and Compensation Committee of the Board of Directors establish the option price and the vesting schedule of each stock grant. The initial number of shares authorized for option grants under the Plan was 23,933. In the event the Company issues additional shares of common stock, as defined, the total number of additional shares of common stock authorized for option grants shall equal 33 1/3% of the additional shares of common stock issued at the time. The Company has authorized 24,888 shares of common stock to be granted at December 31, 2002. On August 21, 2000, the Company made certain options grants to employees who previously held options to purchase stock of ZDI, ZDNet, and Softbank Corp. As a consequence, these options are subject to the accounting F-27 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) treatment described in FIN 44 which requires recording the fair value of these options at the close of each accounting period and recognizing the change in fair value from period to period as an increase or decrease in stock based compensation. Softbank Executive Stock Option Plans The Softbank Executive Stock Option Plans provide for the granting of nonqualified stock options (the "Softbank Options") to purchase the common stock of Softbank Corp., a publicly traded company in Japan, to officers, directors and key employees of ZDI, including certain employees of the Company prior to the spin-off. Under the Plans, options have been granted at exercise prices equal to the closing market price in Japan's public equities market (market price denominated in Japanese yen) on the date of grant. Substantially all options granted become exercisable in various installments over the first six anniversaries of the date of grant and expire ten years after the date of grant. Certain employees of the Company who continue to hold options to purchase stock of Softbank Corp. were granted accelerated vesting rights that resulted in additional deferred stock compensation of $1,137 and non-cash stock based compensation expense of $1,382 for the year ended December 31, 2000. Option Grants Information relating to the Key3Media Group, Inc. 2000 Stock Option and Incentive Plan is as follows:

F-28 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

SFAS No. 123, "Accounting for Stock-Based Compensation," ("SSFAS 123"), requires the Company to disclose pro forma information regarding options grants made to its employees. SFAS 123 specifies certain valuation techniques that produce estimated compensation charges that are included in the pro forma results below. These amounts have not been reflected in the Company's Consolidated Statement of Income, because APB 25. "Accounting for Stock Issued to Employee," specifies that no compensation charge arises when the price of the employees' stock options equal the market value of the underlying stock at the grant date, as in the case of certain options granted to the Company's employees. SFAS 123 pro forma numbers are as follows for December 31 (in thousands, except per share amount and percentages):

Key3Media Options

The weighted average fair value of options granted during the years ended December 31, 2000, 2001 and 2002 was $2.20, $5.01 and $4.31, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimates, in management's opinion the existing models do not necessarily provide a reliable single measure of the fair value of the Company's options. F-29 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 10. EMPLOYEE BENEFIT PLAN Defined Contribution Plans The Company sponsors the Key3Media Events 401(k) Plan (the "Plan") to provide retirement benefits for its employees. As allowed under Section 401(k) of the Internal Revenue Code, the Plan provided tax-deferred salary deductions for eligible employees. Employees may contribute from 1% to 20% of their annual compensation, limited to a maximum annual amount as set periodically by the Internal Revenue Service. The Company matches employee contributions at 50% for the first 4% contributed by employees. All matching contributions vest over four years. In addition, the Plan provides for discretionary contributions as determined by the Company's Management based on the Company's performance during the past year. Such contributions vest over five years and will be allocated to eligible participants in proportion to their current investment allocation. Prior to August 18, 2000, ZDI and its subsidiaries maintained various defined contribution retirement plans. Substantially all of the Company's employees were eligible to participate in one of these plans under which the Company made annual contributions. In addition, employees were permitted to make contributions to the plan in which they participated, subject to certain limitations. The Company matched employee contributions up to certain specified percentages. Employees were generally eligible to participate in a plan upon joining the Company and received matching contributions immediately upon commencement of employment. Additionally, employees became eligible to receive a discretionary contribution after one year of employment. In connection with the spin-off on August 18, 2000, the investment balances of employees under the various ZDI defined contribution retirement plans were transferred to the Key3Media Events 401(k) Plan if their employment continued with the Company. The Company made contributions to the above noted plans of $346, $622 and $444 for the years ended December 31, 2000, 2001 and 2002, respectively. 11. COMMITMENTS AND CONTINGENCIES The following discussion pertains to legal proceedings that existed as of February 3, 2003, the date the Company filed its petition for relief under chapter 11 of the U.S. Bankruptcy Code. By operation of Section 362 of the U.S. Bankruptcy Code, generally all actions and proceedings against the Company were automatically stayed on February 3, 2003, subject to further proceedings in the bankruptcy court. On August 31, 2001, Key3Media Events provided notice of termination of its then existing leased office space in Needham, Massachusetts to the landlord of the existing space. The annual rental payments (net of operating expenses) for the prior space were approximately $1,400. The Company entered into a lease for new office space in Needham and relocated to its new offices on October 1, 2001. The Company estimates that its total annual occupancy costs under the new lease will be approximately $1,700 greater than those under the prior lease. The landlord of the prior office space has taken the position that Key3Media Events is in breach of the lease agreement and that it did not have the right to terminate the lease. On or about November 6, 2001, Interface Group - Massachusetts, LLC, the landlord under the prior lease, sued Key3Media Events in the Superior Court, County of Norfolk, Commonwealth of Massachusetts for breach of contract, breach of the implied covenant of good faith and fair dealing and violations of Mass. Gen L. c. 93A (unfair and deceptive acts and practices). The landlord has requested payment of rent for the remainder of the term of the lease in an amount in excess of $6,500, treble damages, attorneys' fees, costs and expenses, pre-judgment interest and costs of suit. In December 2001, Key3Media Events filed an answer and counterclaim to the Interface complaint and a motion to dismiss the Mass. Gen L. c. 93A claim. The counterclaim included causes of action for (i) breach of contract, (ii) breach of implied covenant of good faith and fair dealing, (iii) tortious interference with business relationship, (iv) trespass, (v) breach of the covenant of quiet enjoyment and constructive eviction, (vi) violation of Mass. Gen L. c. 93A, (vii) a request for declaratory relief, (viii) civil conspiracy and (ix) fraud. In February 2002, Interface filed an opposition to motion F-30 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) to dismiss and an amended complaint alleging breach of contract, breach of implied covenant of good faith and fair dealing and violations of Mass. Gen L. c. 93A. Also in February 2002, Key3Media Events filed an answer and counterclaim to the amended complaint and a motion to dismiss the Mass. Gen L. c. 93A claim and Interface filed a motion to dismiss counts (iii), (v), (vi), (viii) and (ix) of the counterclaim. In March 2002, Interface filed a second amended complaint adding a claim for trustee process and to add Fleet Bank of Massachusetts and Citizens Bank of Massachusetts as trustee defendants. Interface also filed a motion for Ex Parte Approval of Trustee Process Attachment. The court denied the ex parte motion, however the court subsequently held a hearing at which it found that Interface had established a reasonable likelihood of prevailing on its claims and it awarded a trustee attachment in the amount of $711 representing rent for the period of October 2001 through May 2002. On September 26, 2002 Interface was awarded an attachment on certain of Key3Media Events' assets in the amount of $711 located in Massachusetts and on or before October 15, 2002, Interface attached these assets. Interface has withdrawn its Massachusetts attachment with respect to all but $67 in cash and has obtained an attachment on $711 in a parallel action in the Superior Court, County of Los Angeles, State of California. The California Action was filed on August 21, 2002, for the sole purpose of seeking pre-judgment attachments in California based on the Massachusetts claims. Interface obtained a Right to Attach Order in California on or about October 24, 2002, and subsequently levied upon that Order. In December 2002, a Third Party Claim was filed in the California Action by Morgan Stanley & Co. asserting a superior interest in the assets Interface was seeking to attach. Before the Third Party Claim was adjudicated, a Notice of Stay was filed in California as a result of the bankruptcy petition. The two parallel cases are stayed, as of February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. On November 15, 2002, Interface Group Massachusetts, LLC filed a complaint in United States District Court, District of Massachusetts, against the Company's chairman, Fredric D. Rosen, alleging tortious interference with respect to the lease that is the subject of the dispute in the litigation between Key3Media Events and Interface in Massachusetts. On November 25, 2002, Rosen, as chairman, requested indemnity from the Company and the claim was submitted to the Company's directors and officers' liability insurer. On January, 22, 2003, Rosen filed a motion to dismiss. On April 10, 2003, the motion to dismiss was granted on personal jurisdiction grounds. Key3Media Events is the plaintiff and counter-defendant in a case filed October 18, 2000, in the Eighth Judicial District Court, Clark County, Nevada. The suit arises out of a dispute between Key3Media Events, Inc. on the one hand, and the Venetian Casino Resort, LLC, and Interface Group-Nevada, Inc., on the other hand, concerning COMDEX/Fall. Key3Media Events initiated the action, seeking damages and injunctive relief against defendants for their alleged actual and threatened breaches of lease, meeting space, and credit extension agreements in connection with the COMDEX/Fall 2000 show. The Venetian and Interface Group-Nevada counter sued for compensatory damages "in excess of $10,000" based on an asserted breach of an alleged oral agreement to host keynote speeches at The Venetian, asserted breach of an alleged agreement not to sublease certain facilities, intentional misrepresentation, and breach of the implied covenant of good faith and fair dealing. The counterclaims include a prayer for punitive damages. On October 19, 2001, the counter-defendants specified their alleged damages in their supplemental response to plaintiff's third request for production of documents. The response alleged damages of over $3,000 arising from breaches related to COMDEX/Fall 2000 and over $2,000 arising from breaches related to COMDEX/Fall 2001. On July 22, 2002, Key3Media Events sought and was granted leave to amend its complaint. On July 23, 2002, Key3Media Events filed its first amended complaint. The amended complaint included causes of action for declaratory relief, injunctive relief, breach of contract, tortious interference, civil conspiracy, intentional misrepresentation/fraud, predatory price fixing and restraint of trade. The amended complaint seeks injunctive and declaratory relief, compensatory damages, punitive damages, treble damages, interest and attorneys' fees. On July 29, 2002, the Venetian and Interface Group-Nevada, Inc. filed a motion to dismiss the intentional misrepresentation/fraud, predatory price fixing and restraint of trade causes of action. On September 19, 2002, the Venetian and Interface Group-Nevada, Inc., filed their answer to the first amended complaint and counterclaim for breach of contract, unjust enrichment, breach of implied covenant of good faith and fair dealing, negligent and intentional misrepresentation, accounting, abuse of process, intentional interference with contract and declaratory relief and seeking compensatory damages in excess of $10 and punitive damages in excess of $10 and declaratory relief. A jury trial was scheduled for January 21, 2003 but subsequently postponed. The case F-31 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) was stayed on February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. Interface has subsequently moved to have the case transferred to federal court. On or about December 27, 2001, Key3Media Events filed a complaint against Krause International, Inc., E.J. Krause & Associates (Argentina), Inc., and E.J. Krause & Associates, Inc. (collectively, "Krause"), with respect to Krause's management of COMDEX Argentina 2001. The complaint includes causes of action for breach of contract, misrepresentation and fraud, fraudulent misrepresentation, negligent misrepresentation, and tortious interference with business relations and seeks actual damages, punitive damages, interest, attorneys' fees and costs. On or about February 8, 2002, Krause answered the complaint, and filed a counter-claim alleging breach of contract, unjust enrichment, and an additional claim for breach of contract. The counter-claim seeks damages in the amount of $452 plus interest, and reasonable attorneys' fees and costs. The parties have subsequently filed various responsive documents including a reply to the counterclaim by Key3Media Events and a motion to dismiss by Krause. On or about March 27, 2002, counsel for Krause requested permission to amend its counter-claim to add E.J. Krause y Asociados Argentina S.R.L., an Argentine corporation owned in part by Reed Elsevier Overseas BV, as a third party, to add additional counter-claims and to request compensatory damages of not less than $10,451 and punitive damages of $10,000. On or about April 12, 2002, Krause and E.J. Krause Asociados Argentina S.R.L. filed their answer and first amended counterclaim alleging breach of contract, unjust enrichment, fraudulent inducement to contract, breach of implied covenant of good faith and fair dealing, intentional misrepresentation, constructive fraud, negligent misrepresentation, breach of fiduciary duty, torts arising from breach of contract and tortious interference with prospective advantage. The amended counterclaim seeks compensatory damages of not less than $10,451 and punitive damages of $10,000. On or about August 30, 2002, E.J. Krause & Associates, Inc. filed a similar answer and counterclaim. The case was stayed on February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. On or about February 4, 2002, Key3Media Events filed a complaint against Krause International, Inc., E.J. Krause and Associates, Inc. and E.J. Krause de Mexico SA de CV (collectively, "Krause"), with respect to Krause's management of COMDEX Mexico for the years 2001 and 2002. The complaint alleges breach of oral contract, breach of written contract, declaratory relief, breach of covenant of good faith and fair dealing, breach of fiduciary duty, fraud, negligent misrepresentation, and violation of California Business and Professions Code Section 17200 and seeks actual damages, punitive and exemplary damages in an amount of at least $10,000, attorneys' fees and costs, disgorgement and interest. On or about March 12, 2002, Krause filed a motion to dismiss the complaint on the grounds of improper venue or, alternately, to change venue to the United States District Court for the District of Maryland. A hearing was held on this issue on April 29, 2002 and on May 9, 2002, the court granted the portion of the motion for transfer of venue. Key3Media Events' subsequent motion for reconsideration was denied. On or about July 26, 2002 Krause filed an answer and counterclaim for breach of contract, unjust enrichment, fraudulent inducement to contract, breach of implied covenant of good faith and fair dealing, intentional misrepresentation, constructive fraud, negligent misrepresentation, torts arising from breach of contract and tortious interference with prospective advantage. The amended counterclaim seeks compensatory damages of not less than $10,670 and punitive damages of $10,000. The case was stayed on February 3, 2003, pursuant to the automatic stay provisions of Section 362 of the U.S. Bankruptcy Code. On July 1, 2002, Commerce and Industry Insurance Company ("CIC") sued the Company for declaratory relief in the Supreme Court of the State of New York. The complaint arises out of the Company's event cancellation policy with CIC covering its 2001 COMDEX/Fall event. On July 31, 2002, the Company sued CIC in the Superior Court of the State of California, County of Los Angeles, for breach of contract, tortious breach of implied covenant of good faith and fair dealing and declaratory relief arising out of the Company's event cancellation policy with CIC covering its 2001 Networld + Interop/Atlanta and 2001 COMDEX/Fall events. The complaint seeks compensatory damages of $9,147 and $52,423 with respect to the 2001 Networld + Interop/Atlanta and 2001 COMDEX/Fall events, respectively, punitive damages, interest and reasonable attorneys' fees. The dispute arises out of CIC's response to the Company's insurance claim for losses incurred in connection with these two events as a result of the tragedies of September 11, 2001. Each of the Company and CIC have moved to dismiss or stay the other party's suit in New York and California, respectively. On November 5, 2002, the California court rejected CIC's motion to F-32 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) dismiss or stay the California action. The New York court has not yet rendered a decision on the Company's pending motion to dismiss or stay the New York action. On March 10, 2003, CIC filed a motion for summary adjudication of the second, fourth and fifth causes of action in the California case, all of which relate to the 2001 COMDEX/Fall event; on April 10, 2003 Key3Media filed its response. A hearing on the motion is scheduled for April 24, 2003. The parties have engaged in various settlement discussions but have not reached an agreement. In connection with its spin-off from ZDI, the Company and its subsidiaries have received an indemnification from ZDI against all liabilities not related to its businesses, including the class actions and derivative litigation filed against ZDI discussed in the Company's Registration Statement on Form S-1 (No.333-36828). The Company and its subsidiaries are subject to various other claims and legal proceedings arising in the normal course of business. Management believes that the ultimate liability, if any, in the aggregate will not be material to the Company's financial position, results of operations or cash flows. 12. OPERATING LEASE COMMITMENTS Operating Leases and Sublease Arrangements The Company leases certain office facilities and certain furniture and equipment under operating leases expiring through 2010. Some of these facility leases contain renewal options and provisions adjusting the lease payments based upon changes in the consumer price index. Following is a schedule of future minimum lease payments under operating lease arrangements that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2002:

Rent expense amounted to approximately $5,026, $6,668 and $9,500 for the years ended December 31, 2000, 2001, and 2002, respectively. Included in cost of production is the rental fee for venues that hold our exhibits. The agreements related to these rental arrangements generally permit cancellations and require a termination fee based on the cancellation date. The rental fee amount for the years ended December 31, 2000, 2001, and 2002, approximated $6,500, $11,200 and $7,300, respectively. 13. SHAREHOLDERS' EQUITY The total amount of authorized capital stock of the Company is 600,000 shares, consisting of 200,000 shares of common stock, par value $0.01 per share, 200,000 shares of non-voting common stock, par value $0.01 per share, and 200,000 shares of preferred stock, par value $0.01 per share. The Company has the following shares outstanding as of December 31, 2002: F-33 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

On November 27, 2001, the Company raised $52,000 through the private placement of 1,000 shares of 5.5% Series A Convertible Preferred Stock and 1,080 shares of 5.5% Series B Convertible Preferred Stock, in each case for $25.00 per share. Both of these series of preferred stock convert into shares of Key3Media common stock at a conversion price of $5.55 per share, subject to adjustment. The terms for each of the series are identical. The liquidation preference is $25.00 per share plus accrued but unpaid dividends, which accrues at the rate of 5.39% per annum prior to November 27, 2002 and at a rate of 5.5% after November 27, 2002, payable quarterly commencing on February 27, 2002 when, as and if declared by the Board of Directors. However, if all or any portion of any quarterly dividends is not paid, then the liquidation preference will increase by the amount of such unpaid dividend per share. In addition to the quarterly dividend, the holders of Preferred Stock will share equally in any dividends declared or paid to holders of the Common Stock and are entitled to vote on all matters on which the Common Stock is entitled to vote on an as converted basis. Both series of Preferred Stock have automatic and mandatory conversion features. On November 27, 2001, each share of Preferred Stock will automatically convert into the number of shares of Common Stock equal to the adjusted liquidation preference divided by the lesser of the then current conversion price or the current market price of the Common Stock, in each case determined as of such date. The mandatory conversion feature is triggered at any time after the volume-weighted average closing price of the Common Stock trades at or above 150% of the then current conversion price for 60 consecutive days. The Company must mandatorily convert each share of the Preferred Stock into the number of shares of Common Stock equal to the adjusted liquidation preference divided by the conversion price, in each case determined as of the conversion date. Moreover, the Company may not redeem the Preferred Stock at its own option prior to November 27, 2004 unless the mandatory conversion feature is triggered earlier. On December 12, 2001, the Company issued 300 shares of 5.5% Series B Convertible Preferred Stock in a private placement in exchange for $10,000 face amount of our 11.25% Senior Subordinated Notes (the "Notes") due 2011. For the purpose of this exchange, the Notes were valued at $7,500 and the convertible preferred shares were issued for $25.00 per share. In connection with this exchange, the Company recorded an extraordinary gain on retirement of debt of $6,606 (net of taxes of $594) representing the difference between the face value of the Notes and the value of the convertible preferred stock less the write-off of unamortized debt issuance costs allocated to the Notes converted to preferred stock. On July 2, 2002, the Company converted 50 shares of its 5.5% Series B Convertible Preferred Stock to 255 shares of its common stock. On November 7, 2002 and November 25, 2002, the Company repurchased a total of 1,400 shares of its 5.5% Series B Convertible Preferred Stock for $5 dollars. Also on November 27, 2002, the Company converted 80 shares of its 5.5% Series B Convertible Preferred Stock to 80 shares of its 5.5% Series A Convertible Preferred Stock. As of December 31, 2002, the Company still had warrants outstanding to purchase 6,277 shares of its' common stock at $6.00 per share. These warrants were issued in connection with the issuance of zero coupon debentures in August 2000. Cashless exercise is permitted and the warrants expire on August 18, 2007. F-34 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Shares reserved for future issuance as of December 31, 2002:

14. SEGMENT INFORMATION The Company operates in one business segment, the production and management of trade shows, conferences, and customized marketing and education programs. The Company holds events either directly or through international contract events. Financial information by geographic areas is as follows:

F-35 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) As discussed in Note 5, the sale of the assets of VON required the Company to account for these operations as discontinued operations for all periods presented in the accompanying consolidated statements of operations. The reclassification of the VON operations is reflected in the "As Reclassified" tables below. The following is a summary of selected quarterly financial data for the years ended December 31, 2002 and 2001 on an "As Reclassified" and "As Previously Reported" presentation:

F-36 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

16. SUBSEQUENT EVENTS (UNAUDITED) On January 24, 2003, the Company completed the sale of the assets of its Key3Media VON Events subsidiary to pulver.com. The Company purchased the VON events from pulver.com in September of 2001. F-37 KEY3MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) On February 3, 2003, the Company filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws. See Note 2 for additional information. 17. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTOR AND SUBSIDIARY NON-GUARANTOR In connection with the issuance of the Company's $290,000 unsecured senior subordinated notes (Notes), the Company's U.S.-based subsidiaries, Key3Media Events. Key3Media Von Events, and Key3Media BCR Events, Inc., guaranteed the payment of principal, premium and interest on the Notes. Presented below is condensed consolidating financial information for the parent company (Key3Media Group, Inc.) only, the subsidiary guarantors only and the subsidiary non-guarantors as a group as of December 31, 2001 and 2002 and for the three years ended December 31, 2002. F-38 KEY3MEDIA GROUP, INC. CONSOLIDATING BALANCE SHEET (IN THOUSANDS) DECEMBER 31, 2002

F-39 KEY3MEDIA GROUP, INC. CONSOLIDATING BALANCE SHEET (IN THOUSANDS) DECEMBER 31, 2001

F-40 KEY3MEDIA GROUP, INC. CONSOLIDATING STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2002

F-41 KEY3MEDIA GROUP, INC. CONSOLIDATING STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2001

F-42 KEY3MEDIA GROUP, INC. CONSOLIDATING STATEMENT OF OPERATIONS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2000

F-43 KEY3MEDIA GROUP, INC. CONSOLIDATING STATEMENT OF CASH FLOWS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2002

F-44 KEY3MEDIA GROUP, INC. CONSOLIDATING STATEMENT OF CASH FLOWS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2001

F-45 KEY3MEDIA GROUP, INC. CONSOLIDATING STATEMENT OF CASH FLOWS (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2000

F-46 SCHEDULE VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)

S-1

KEY3MEDIA GROUP INC 10-K