KEY3MEDIA GROUP INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

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

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

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

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

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

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

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

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE:

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

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

FORWARD LOOKING STATEMENTS

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

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PART I

ITEM 1. BUSINESS

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

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

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

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

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

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

INDUSTRY OVERVIEW

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

1

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

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

OUR COMPETITIVE STRENGTHS

We believe that our business has several competitive strengths:

WE BELIEVE WE ARE THE INDUSTRY LEADER IN IT EVENTS

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

ATTRACTIVE COST STRUCTURE

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

COMPREHENSIVE PORTFOLIO OF IT BRANDS

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

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EXTENSIVE DATABASE OF EXHIBITORS AND ATTENDEES

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

OUR STRATEGY

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

FOCUS ON KEY REVENUE DRIVERS

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

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

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

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

REDUCE EXPENSES

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

MAINTAIN AND EXTEND OUR INDUSTRY LEADING POSITION

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

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

- expanding our exhibitor and attendee base;

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

- increasing attendee participation in its conferences.

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LEVERAGE OUR CUSTOMIZED EVENTS

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

PURSUE ACQUISITIONS SELECTIVELY

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

EXPAND INTERNATIONALLY

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

OUR EVENTS

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

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

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

- conferences designed to inform and educate IT professionals; and

- keynote speakers and product launches.

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

4

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

COMDEX

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NETWORLD+INTEROP

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

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

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

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

SEYBOLD SEMINARS

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

JAVAONE

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

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

STUDIOS

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

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

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VON CONFERENCES AND SIP SUMMITS

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

NGN AND BCR

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

INTERNATIONAL EXPOSITIONS

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

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

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

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

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

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

MANAGEMENT OF EVENTS

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

- sales;

- marketing communications and media; and

- operations.

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

SALES

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

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

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

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

MARKETING COMMUNICATIONS AND MEDIA

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

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

9

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

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

OPERATIONS

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

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

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

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

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

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

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

KEY VENDORS

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

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

10

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

TRADEMARKS AND LICENSES

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

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

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

COMPETITION

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

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

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

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

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

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

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

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

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

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

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

CERTAIN FACTORS THAT MAY AFFECT OUR BUSINESSES

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

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

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

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

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

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

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

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

12

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

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

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

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION

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

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

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

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

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

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

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

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

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

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

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

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

- incur additional indebtedness or contingent obligations;

- pay dividends or make distributions to our stockholders;

- repurchase or redeem our stock;

- make investments;

- grant liens;

- make capital expenditures;

- enter into transactions with our stockholders and affiliates;

- sell assets; and

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

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

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

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

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

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

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

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

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

14

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

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

OUR HISTORICAL INFORMATION MAY NOT BE INDICATIVE OF OUR FUTURE RESULTS

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

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

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

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

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

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

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

- a change of control, including a merger;

- the acquisition or disposition of assets by our company;

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

- our incurrence of debt; and

- the payment of dividends on our common stock.

15

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

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

WE ARE SUBJECT TO RISKS RELATED TO INTERNATIONAL OPERATIONS

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

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

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

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

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

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

ITEM 2. PROPERTIES

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

ITEM 3. LEGAL PROCEEDINGS

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

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

16

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

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

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

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

17

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

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

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

ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS

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

EXECUTIVE OFFICERS OF KEY3MEDIA GROUP, INC.

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

FREDRIC D. ROSEN, 58

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

JASON E. CHUDNOFSKY, 58

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

PETER B. KNEPPER, 53

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

18

NED S. GOLDSTEIN, 46

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

ROBERT PRIEST-HECK, 35

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

EUGENE L. COBUZZI, 45

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

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

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

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

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

(1) From August 21 to September 30, 2000

19

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

CONVERTIBLE PREFERRED STOCK TRANSACTIONS

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

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

AUTOMATIC CONVERSION

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

20

MANDATORY CONVERSION

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

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

ITEM 6. SELECTED FINANCIAL DATA

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

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

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

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

(2) Represents gain on sale of Expo Comm.

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

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

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

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

23

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

DEVELOPMENTS IN 2001

INDUSTRY DEVELOPMENTS

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

EXPENSE REDUCTION PROGRAMS

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

ACQUISITIONS

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

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

FINANCING TRANSACTIONS

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

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

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

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

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

REVENUE

To date, our revenue has been derived principally from:

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

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

- advertising and sponsorship fees.

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

25

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

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

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

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

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

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

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

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

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

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

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

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

OPERATING COSTS

COST OF PRODUCTION

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

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

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

DEPRECIATION AND AMORTIZATION

As of December 31, 2001, we had $928.3 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 the NGN, BCR and Pulver Assets in 2001.
In June 2001, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 141, "Business Combinations," (SFAS No. 141) and
"Goodwill and Other Intangible Assets," (SFAS No. 142). Under these new rules,
our amortization expense and amortization periods will be impacted in future
years and we expect to record a significant impairment charge with respect to
goodwill and intangible assets relating to COMDEX in the first quarter of 2002.
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, 2001, we had
$18.8 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.

27

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:

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 $34.6 million, or 12.1%, to $252.3 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, BCR and Pulver assets were acquired in three 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 $14.8 million, or 7.5%, to $182.4
million in 2001 from $197.2 million in 2000. This decrease was primarily due to
a 19.6% decrease in net paid square footage

28

partially off-set by a 2.1% increase in average rental rate per square foot and
a $11.6 million increase in other exhibit revenue activity. The net paid square
footage decreased from 2,847,214 in 2000 to 2,289,124 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, NGN's Next Generation event and Pulver's VON Fall event. Excluding the
effect of the N+I Tokyo, Next Generation and VON Fall 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 2.1% to $52.88 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 $11.6
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 $16.2 million, or 28.9%, to $39.9 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, NGN's
Next Generation event and Pulver's VON Fall event. Excluding the effect of the
N+I Tokyo, Next Generation and VON Fall events, adjusted conference fees
decreased $17.9 million, or 31.9% in 2001. The number of participants at our
conferences decreased 37.9% to 26,904 in 2001 from 43,292 in 2000. This decrease
in participants was partially off-set by a 14.4% increase in the average revenue
per conference attendee in 2001 of $1,485 compared with $1,297 in 2000.
Excluding the effects of the N+I Tokyo, Next Generation and VON Fall events, the
number of conference participants decreased to 24,283, or 43.9% in 2001 and the
average revenue per conference attendee increased to $1,576, or 21.5%, in 2001.

Advertising and sponsorship revenues decreased $3.5 million, or 10.5%, to
$30.0 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
$4.4 million, or 13.2% in 2001.

Cost of production increased $8.4 million, or 10.7%, to $86.9 million in
2001 from $78.5 million in 2000. As a percentage of revenue, cost of production
represented 34.4% 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 $0.2 million, or 0.2%, to $106.0 million in 2001
from $106.2 million in 2000. As a percentage of revenue, SG&A expenses
represented 42.0% 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
29

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 $27.2 million, or 29.8%,
to $64.0 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 $4.1 million, or 11.2%, to $40.8
million in 2001 from $36.7 million in 2000. The increase is principally due to
depreciation expense from increased purchases of property and equipment 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 27.0%
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.

2000 COMPARED WITH 1999

Our total revenue increased $35.5 million, or 14.1%, to $286.9 million in
2000 from $251.4 million in 1999. Exhibitor services revenues increased by $17.5
million, or 9.7%, to $197.2 million in 2000 from $179.7 million in 1999. This
increase was due to a 2.9% increase in net square feet of exhibit space rented
at our events to 2,847,214 for 2000 from 2,767,773 in 1999 and an increase in
the average rental rate per square foot paid by exhibitors to $51.79 for 2000
from $49.57 in 1999, along with an $7.4 million increase in other exhibitor
revenue activity. The largest increase for an individual event occurred at
COMDEX Fall where the net square feet rented increased by approximately 65,000
square feet to 1.011 million net square feet and the rental rate per square foot
increased by more than 3% in 2000 compared to 1999. The $7.4 million increase in
other exhibitor revenue resulted principally from (i) a $4.3 million increase in
management fee income related to our various contract events in 2000 compared to
1999; (ii) increases of $2.7 million for JavaOne relating to

30

higher fees charged to participate in JavaOne in 2000; and (iii) the balance was
due to increases in commissions and discounts received from third parties to
exhibitors.

Conference fees increased $11.3 million, or 25.2%, to $56.2 million in 2000
from $44.9 million in 1999. This increase was attributable to a 7.7% increase in
the number of conference participants at our events to 43,292 from 40,213 and a
16.3% increase in the average revenue per conference attendee in 2000 to $1,297
compared with $1,115 in 1999. The increase in conference attendees in 2000 was
due to more specific customization and a greater number of programs offered at
our JavaOne, N+I Las Vegas, N+I Atlanta, and COMDEX Spring events.

Advertising and sponsorship revenues increased $6.7 million, or 25.0%, to
$33.5 million in 2000 from $26.8 million in 1999. This increase was attributable
to the creation and sale of additional advertising and sponsorship opportunities
at our N+I Las Vegas, N+I Atlanta and COMDEX Spring events.

Cost of production increased $4.4 million, or 5.9%, to $78.5 million in
2000 from $74.1 million in 1999. As a percentage of our revenues, these costs
represented 27.4% in 2000 compared to 29.5% in 1999. The decrease in our cost of
production as a percentage of revenue reflected the high fixed cost nature of
our business.

SG&A expenses increased $18.1 million, or 20.5%, to $106.2 million in 2000
from $88.1 million in 1999. As a percentage of our revenue, SG&A represented
37.0% in 2000 compared to 35.0% in 1999. SG&A increased on an absolute basis and
as a percentage of revenue primarily due to higher levels of employment as well
as increased use of temporary and contract labor at our business locations in
Massachusetts and California and the addition of certain senior managers in
March 2000.

In 2000, we had a non-recurring compensation charge of $3.0 million related
to payments due to two of our executives who elected to exercise the termination
provisions included in their employment agreements. There was no such charge in
1999.

Non-cash stock-based compensation increased $7.5 million to $8.0 million in
2000. During August 2000, we granted stock options to certain of our employees
who were previously employed by Ziff-Davis that we must account for using
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.

As a result of the foregoing, EBITDA increased by $0.9 million to $91.2
million in 2000 from $90.3 million in 1999. After adjusting to exclude the
non-recurring compensation charge and the non-cash stock-based compensation
changes in both years, adjusted EBITDA increased by $11.4 million, or 12.6%, to
$102.2 million in 2000 from $90.8 million in 1999.

Depreciation and amortization decreased by $1.4 million, or 3.7%, to $36.7
million in 2000 from $38.1 million in 1999. This decrease was primarily due to
certain intangible assets becoming fully amortized in 2000.

Interest expense, net, increased by $13.3 million, or 58.3%, to $36.1
million in 2000 from $22.8 million in 1999. This increase was due primarily to
higher interest rates on our current borrowings than under our prior borrowing
arrangements as well as the recognition of non-cash interest expense related to
the amortization of deferred financing costs and debt discount and accretion of
interest on the zero coupon senior debentures and warrants that we issued in
August 2000. In 1999, we had no such items to amortize or accrete.

Income tax expense decreased $7.2 million to $9.9 million in 2000 from
$17.1 million in 1999. As a percentage of income before income taxes, this
balance represented 53.5% in 2000 compared to 39.7% in 1999. Our income tax
expense as a percentage of income before income taxes increased primarily
because the impact of an increase in foreign taxes as a percentage of income
before income taxes and an increase in other non-deductible amounts including
executive compensation and a portion of the debenture interest expense.

As a result of the foregoing and the one-time gain on sale of joint venture
interest of $13.7 million in 1999, our net income decreased $17.4 million to
$8.6 million in 2000 from $26.0 million in 1999.

31

LIQUIDITY AND CAPITAL RESOURCES

On December 31, 2001, our balance of cash and cash equivalents was $41.4
million and we had a working capital deficit of $16.9 million compared to cash
and cash equivalents of $109.9 million and working capital of $27.1 million at
December 31, 2000. These decreases were primarily attributable to the use of
cash to refinance our indebtedness in June 2001, and to purchase property and
equipment, as well as a decrease in net cash provided by operating activities
off-set by the issuance and receipt of net proceeds from the sale of convertible
preferred stock.

During 2001, we met our liquidity needs principally through cash reserves,
and cash generated from operating and financing activities. Net cash provided by
operating activities was $0.5 million in 2001, compared to $97.7 million and
$87.8 million in 2000 and 1999, respectively. This decrease is primarily
attributable to lower levels of profitability and a net reduction in working
capital.

Net cash used in investing activities was $118.5 million of which $14.8
million was used to purchase property and equipment and $103.7 million was used
to acquire businesses in 2001, compared to $7.4 million used to purchase
property and equipment in 2000 and $5.2 million to purchase property and
equipment and intangibles in 1999.

Net cash provided by financing activities was $49.8 million in 2001
compared to $14.1 million in 2000 and cash used in financing activities of $86.5
million in 1999. 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.

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.

We anticipate our capital expenditures for 2002 to total approximately $5.0
million, principally related to ongoing infrastructure initiatives, and
replacement and upgrades of property and equipment.

On April 15, 2001, we filed a shelf registration with the Securities and
Exchange Commission to periodically sell up to $375.0 million in debt
securities, common and preferred stock, warrants, and depository shares.

On June 26, 2001, we issued $300.0 million of our 11.25% senior
subordinated notes due 2011 under our shelf registration statement. We may
redeem any of our senior subordinated notes beginning on June 15, 2006. The
initial redemption price is 105.625% of their principal amount plus accrued
interest. In addition, before June 15, 2004, we may redeem up to 35% of the
original aggregate principal amount of the senior subordinated notes at a
redemption price of 111.250% of their principal amount plus accrued interest.
The senior subordinated notes are junior to all of our senior indebtedness,
unsecured and rank equally with any other unsecured senior subordinated
indebtedness we incur. All of our domestic restricted subsidiaries, including
Key3Media Events, Key3Media Von Events, Inc. and Key3Media BCR Events, Inc.,
have guaranteed the senior subordinated notes on a senior subordinated basis.
Each guarantee will be unsecured and will be junior to all senior indebtedness
of the subsidiary guarantors.

Additionally on June 26, 2001 we used the net proceeds of the senior
subordinated notes of $292.0 million and cash on hand to repay our then existing
term loan borrowings under our senior bank credit facility of $300.0 million and
to repurchase and retire our outstanding zero coupon debentures for $83.6
million. We also amended and restated our senior bank credit facility with a
syndicate of banks to eliminate the term loans and

32

to commit the banks, subject to certain conditions, to lend up to $150.0 million
to us on a revolving basis for general corporate purpose, which could include
acquisitions. We may borrow, repay and re-borrow under this senior bank
revolving credit facility until the third anniversary of the closing date at
which time we must repay any outstanding amounts. We will pay commitment fees to
the banks to the extent that we do not borrow the full $150.0 million committed
amount. This senior bank revolving credit facility was further amended on
November 27, 2001 as described below.

At our election, loans under our 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 in our amended and restated credit facility agreement). The
margin we pay will vary between 1.0% and 3.25% depending on which rate we choose
and the ratio of our total debt to EBITDA.

On November 27, 2001, we raised $52.0 million through the private placement
of 1,000,000 shares of Series A preferred stock and 1,080,000 shares of Series B
preferred stock, in each case for $25.00 per share. Both series of preferred
stock convert into shares of Key3Media common stock at an initial conversion
price of $5.55 per share, subject to adjustment. The terms for each of the
series are identical. The liquidation preference is initially $25.00 per share
but will increase at the end of each quarter by the amount of any accrued and
unpaid dividends for the quarters that are not paid. Dividends accrue on the
liquidation preference (as it may increase over time) at the rate of 5.39% per
annum prior to November 27, 2002 and at a rate of 5.5% after November 27, 2002,
and are 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 December 12, 2001, we issued 300,000 shares of Series B preferred stock
in a private placement in exchange for $10.0 million face amount of our senior
subordinated notes. For the purpose of this exchange, the senior subordinated
notes were valued at $7.5 million and the convertible preferred shares were
issued for $25.00 per share. In connection with this exchange, we recorded an
extraordinary gain on exchange of debt to preferred stock of $1.6 million (net
of taxes of $0.6 million) representing the difference between the face value of
the senior subordinated notes and the value of the convertible preferred stock
less the write-off of unamortized debt issuance costs allocated to the senior
subordinated notes exchanged for preferred stock.

On December 20, 2001, we raised $15.0 million through the private placement
of 600,000 shares of Series B preferred stock for $25.00 per share. This
transaction brings the total gross proceeds from recent convertible preferred
stock issuances to $67.0 million.

Concurrent with the receipt on November 27, 2001 of the net proceeds from
the issuance of the convertible preferred stock noted above, we repaid $30.0
million of our $110.0 million of outstanding borrowings under our senior bank
revolving credit facility and further amended that facility to replace our
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 us to maintain a ratio of pro forma EDITDA to fixed charges (which will
include interest, domestic taxes and annual capital expenditures of up to $5
million) of at least 1.1 to 1 and to limit our total senior debt to $120.0
million, our total debt to $410.0 million and our annual capital expenditures to
$15.0 million. The revised covenants will remain in effect until we have two
consecutive quarters in which our pro forma EDITDA for the previous twelve
months is equal to or greater than $85.0 million, after which time the prior
covenants will come back into effect.

We were in compliance with the financial and other covenants included in
our borrowing agreements as of December 31, 2001. In order to remain in
compliance with our senior bank revolving credit facility, among

33

other things, we must generate sufficient EBITDA from our events so that we
maintain at the end of each quarterly period the required ratio of pro forma
EBITDA to fixed charges of at least 1.1 to 1 for the preceding four consecutive
quarters. Because we cannot determine the results of our events until they
occur, we cannot predict at this point whether we will remain in compliance
throughout 2002. However, the Company believes that it will remain in compliance
with this financial covenant during 2002 if, as of the end of each quarter
during the year, it has generated at least $48.0 million to $50.0 million of pro
forma EBITDA during the past four consecutive quarters. So far in 2002, we have
produced two major events, Seybold Seminars in New York and COMDEX Chicago, and
are currently producing JavaOne which is scheduled to end on March 29, 2002. The
continuing difficulties in the IT industry, the relocation of our Seybold
Seminars event from Boston to New York and the ongoing effects of September
11(th) have resulted in and are expected to generate a small operating loss at
Seybold Seminars, materially lower operating income at JavaOne and slightly
lower operating income at COMDEX Chicago, in each case compared to the prior
year. These declines in operating income and their resulting negative effect on
EBITDA will be partially offset by events we acquired in 2001 and in January
2002, and the cost reduction efforts implemented by the Company during the
second half of 2001. Based on currently available information, we believe that
we will continue to be in compliance with the financial covenants contained in
our senior bank revolving credit facility at the end of the first quarter of
2002. Our compliance at the end of the other quarters in 2002 will depend upon
the results of our events during the year that have not yet been held, which
includes almost all of our major events.

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 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 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.

Following is a summary of our contractual obligations as of December 31,
2001 (in millions):

At December 31, 2001, we have $40.0 million available under our senior bank
credit facility before considering the $1.8 million letter of credit
outstanding.

In connection with the September 10, 2001 purchase of certain assets, a
portion of the purchase price in each transaction 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 we would be required to make an additional payment to the sellers
or entitled to a return of purchase price. As of December 31, 2001, the
following table lists the amounts currently held in escrow (in thousands):

34

Based upon current and anticipated levels of operations, management
believes that our cash on hand and cash flow from operations combined with
borrowings available under our senior bank credit facility will be sufficient to
enable us to meet our cash operating requirements, including venue rental
payments, scheduled interest payments and capital expenditures for the next 12
months. We will, however, be subject to general economic conditions and the
financial, business and other factors, including factors beyond our control.

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 2 to the consolidated financial statements included elsewhere in this
annual report 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, 2001, we have a net intangible
asset balance of $928.3 million and a net property and equipment balance of
$18.8 million. For additional information regarding long-lived assets, see the
"Recent Accounting Pronouncements" section of this Item 7 and footnote 2,
"Summary of Significant Accounting Policies" included in the consolidated
financial statements appearing elsewhere in this Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combination," (SFAS No. 141)
and "Goodwill and Other Intangible Assets," (SFAS No. 142) effective for fiscal
years beginning after December 15, 2001. SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 141 also specifies criteria for determining intangible assets
acquired in a purchase method business combination that must be recognized and
reported apart from goodwill, noting that any purchase price

35

allocable to an assembled workforce may not be accounted for separately. 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 were required to adopt the provisions of SFAS No. 141 in July 2001, and
SFAS No. 142 effective January 1, 2002. Goodwill and intangible assets acquired
in business combinations completed before July 1, 2001 will continue to be
amortized until December 31, 2001. We recorded approximately $105.0 million of
goodwill in connection with the acquisitions that closed after July 1, 2001.
This goodwill amount was not amortized during 2001.

We will apply SFAS 142 beginning in the first quarter of 2002. Application
of the nonamortization provisions of SFAS 142 is expected to result in an
increase in net income of approximately $12.6 million in 2002. We will test
goodwill for impairment using the two-step process prescribed in SFAS 142. The
first step is a screen for potential impairment, while the second step measures
the amount of the impairment, if any. We expect to perform the first of the
required impairment tests of goodwill and indefinite lived intangible assets as
of January 1, 2002 in the first quarter of 2002. Based on steps we have taken to
prepare for the adoption of SFAS 142, it is likely that a portion of the
goodwill and intangible assets related to the COMDEX brand will be impaired
using the impairment test required by SFAS 142. An impairment that is required
to be recognized when adopting SFAS 142 will be reflected as the cumulative
effect of a change in accounting principle in the first quarter of 2002. We
currently believe the amount of the potential impairment loss will be in the
range of $400.0 to $450.0 million. We plan to complete the measurement of the
impairment loss in the first quarter of 2002.

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations" for a
disposal of a segment of a business. SFAS 144 is effective for fiscal years
beginning after December 15, 2001, with earlier application encouraged. We
expect to adopt SFAS 144 as of January 1, 2002 and we do not believe the
adoption of SFAS 144 will have a material impact on our financial position and
results of operations.

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, Canada, Australia and Latin America. 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.

36

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 II

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See Item 13 below.

ITEM 11. EXECUTIVE COMPENSATION

See Item 13 below.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See Item 13 below.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information related to our executive officers is included herein. Pursuant
to Instruction G (3) to Form 10-K, we incorporate by reference, to our
definitive proxy statement for the annual meeting of stockholders to be held May
15, 2002, the remainder of the information to be provided in response to Items
10, 11, 12 and 13 of Form 10-K (other than information pursuant to Rule 402 (i),
(k) and (l) of Regulation S-K). We will file our proxy statement with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days of
December 31, 2001.

PART III

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

(a) Documents filed as part of this Report:

1. Consolidated and Combined Financial Statements

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 2.3 to the Registrant's
Current Report on Form 8-K, filed September 24, 2001).

37

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).
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).

38

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).
10.1 Distribution Agreement, dated August, 2000, among Ziff-Davis
Inc., Key3Media Group, Inc. and Key3Media Events Inc.*
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.+
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).
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).

39

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.
23.2 Consent of PricewaterhouseCoopers LLP.
99.1 Opinion of Ernst & Young LLP with respect to the Selected
Financial Data, which is included in Part II, Item 6 hereof.

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

* 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 September 24, 2001, we filed a Current Report on Form 8-K (Item 2)
dated September 10, 2001, related to the acquisition of the NGN, BCR and
Pulver assets. On November 13, 2001, we filed an amended Current Report on
Form 8-K/A (Item 7) amending our Current Report on Form 8-K dated September
10, 2001. This amended Current Report on Form 8K/A contained the financial
statements of pulver.com -- VON Conferences, BCR Enterprises, Inc. and Next
Generation Networks as of December 31, 2000 and June 30, 2001 (unaudited)
and for the year ended December 31, 2000 and the six months ended June 30,
2000 (unaudited) and 2001 (unaudited) including the report thereon by each
entity's respective independent auditors.

On November 28, 2001, we filed a Current Report on Form 8-K (Items 5
and 7) dated November 27, 2001, related to the completion of Key3Media's
sale of $52 million of convertible preferred stock.

On December 12, 2001, we filed a Current Report on Form 8-K (Items 5
and 7) dated December 11, 2001, announcing the reduction of Key3Media's
debt by $10 million.

On December 21, 2001, we filed a Current Report on Form 8-K (Items 5
and 7) dated December 20, 2001, announcing that Key3Media raised an
additional $15 million through the sale of convertible preferred stock.

40

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/ PETER B. KNEPPER
------------------------------------
Name: Peter B. Knepper
Title: Executive Vice President and
Chief Financial Officer

Date: March 28, 2002

By: /s/ NED S. GOLDSTEIN
------------------------------------
Name: Ned S. Goldstein
Title: Executive Vice President,
General Counsel and
Secretary

Date: March 28, 2002

41

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.

42

KEY3MEDIA GROUP, INC.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
ITEMS 14(a)(1) AND 14(a)(2)

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, 2000 and 2001, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the two years ended December 31, 2001. Our audits also included the financial
statement schedule listed in the Index at Item 14(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, 2000 and 2001 and the consolidated
results of their operations and their cash flows for the two years ended
December 31, 2001, 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.

As discussed in Note 2 to the financial statements, the Company has not yet
adopted Statement of Financial Accounting Standards No. 142. However, the
transition provisions of that Statement preclude the amortization of goodwill
acquired in a business combination for which the acquisition date is after
June 30, 2001.

/s/ ERNST & YOUNG LLP

Los Angeles, California
February 12, 2002

F-2

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Ziff-Davis Inc:

In our opinion, the accompanying combined statements of operations, of cash
flows and changes in stockholders' equity for the year ended December 31, 1999
(appearing on pages F-5 through F-7) of Key3Media Group Inc.'s (previously known
as ZD Events) (the "Business") Annual Report on Form 10-K present fairly, in all
material respects, the results of operations and cash flows of the business for
the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Business' Management; our responsibility is to
express an opinion on these financial statements based upon our audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluation of the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.

As discussed, in Note 1, certain costs and expenses presented in the
combined financial statements represent allocations and estimates of the costs
of services provided to the Business by management of Ziff-Davis Inc. As a
result, the combined financial statements presented may not be indicative of the
financial position, results of operations or cash flows that would have been
achieved had the Business operated as a nonaffiliated entity.

/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts April 12, 2000
except for the tenth paragraph of Note 3, and Note 16,
for which the dates are April 13, 2000
and June 7, 2001, respectively

F-3

KEY3MEDIA GROUP, INC.

CONSOLIDATED BALANCE SHEETS

See accompanying notes.

F-4

KEY3MEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

F-5

KEY3MEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

See accompanying notes.
F-6

KEY3MEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

F-7

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. BASIS OF PRESENTATION, 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, Japan, Mexico and Australia.

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 $12,543, $2,490, and $0 for centralized administrative
charges from ZDI for the years ended December 31, 1999, 2000, and 2001,
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.

During 2001, the Company refinanced its long-term obligations as described
in Note 3 and issued convertible preferred stock as described in Note 12.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Key3Media
Group, Inc. and its wholly owned subsidiaries. The Company does not have any
business arrangements with special purpose entities. All significant
intercompany accounts and transactions have been eliminated.

F-8

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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 licenses the "NetWorld" service mark from Novell. On December 17,
2001, Novell in an amendment to its existing agreement with the Company assigned
all rights in and to the "Networld" service mark and any of its abbreviated
forms to the Company for a fee payable of $500 due in 2002. The Company also
licenses the name "JavaOne" from Sun Microsystems which expires in July 2004. If
this license terminates and is not renewed, the Company would not be able to
produce conference events using this service mark 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 recorded amount of the Company's
indebtedness also approximates fair value based upon the current rates available
to the Company for debt with similar maturities except for its Senior
Subordinated Notes (the "Notes"). The Notes are traded occasionally in public
markets and had a fair value of approximately $240,000 compared to a carrying
amount of $290,000 at December 31, 2001.

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,
software 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
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.

F-9

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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 $6,849, $8,649 and $7,186 for the years ended December 31, 1999,
2000 and 2001, 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 1999.

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 1999 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-10

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.

F-11

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

EQUITY IN EARNINGS FROM JOINT VENTURES

Equity in earnings from joint ventures includes the Company's equity share
of income or loss from its investments in joint ventures. This amount is
included in deferred financing costs and other assets. In September 1999, the
Company sold its 50% interest in Expo Comm which resulted in a gain of $13,746.

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.

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 statements of operations
and the tax assets and liabilities shown on the consolidated balance sheet for
fiscal year 2000 have been 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 has been recorded in the accompanying statement of operations,
however as the operating tax asset will be utilized by Ziff Davis, the amount of
the asset has been recorded 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 TRANSACTION

During 2001, the Company recorded event related cost of approximately $125
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,

F-12

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

"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 June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combination," (SFAS No. 141)
and "Goodwill and Other Intangible Assets," (SFAS No. 142). SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 141 also specifies criteria
for determining intangible assets acquired in a purchase method business
combination that must be recognized and reported apart from goodwill, noting
that any purchase price allocable to an assembled workforce may not be accounted
for separately. 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.

If impairment indicators such as significant decreases in operating results
and cash flows over prior periods arise prior to the annual test at the
enterprise level, then the Company will prepare a fair value calculation of
enterprise goodwill based on discounted cash flows at the enterprise level. If
the fair value exceeds the carrying value, then no further work is required and
no impairment loss would be recognized. If the carrying value exceeds the fair
value, then the enterprise goodwill may be potentially impaired and the Company
will evaluate the goodwill at the reporting level based on discounted cash
flows. The discount rate will be based on the Company's incremental borrowing
rates, the risk associated with the cash flows or nature of the business
associated with the asset being measured and other factors.

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. The Company is required to adopt the provisions of
SFAS No. 141 in July 2001, and SFAS No. 142 effective January 1, 2002. Goodwill
and intangible assets acquired in business combinations completed before July 1,
2001 will continue to be amortized prior to the adoption of SFAS No. 142. The
Company recorded approximately $105,000 of goodwill in connection with the
acquisitions that closed after July 1, 2001. This goodwill amount was not
amortized during 2001.

The Company will apply SFAS 142 beginning in the first quarter of 2002.
Application of the nonamortization provisions of SFAS 142 is expected to result
in an increase in net income of approximately $12,600 in 2002. The Company will
test goodwill for impairment using the two-step process prescribed in SFAS 142.
The first step is a screen for potential impairment, while the second step
measures the amount of the impairment, if any. The Company expects to perform
the first of the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002 in the first quarter of 2002. Based on
steps the Company has taken to prepare for the adoption of SFAS 142, it is
likely that a portion of the goodwill and intangible assets related to the
COMDEX brand will be impaired using the impairment test required by SFAS 142. An
impairment that is required to be recognized when adopting SFAS 142 will be
reflected as the cumulative effect of a change in accounting principle in the
first quarter of 2002. The Company currently believes the amount of the
potential impairment loss will be in the range of $400,000 to $450,000. The
Company plans to complete the measurement of the impairment loss in the first
quarter of 2002.

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be

F-13

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations" for a disposal of a segment of a business.
SFAS 144 is effective for fiscal years beginning after December 15, 2001, with
earlier application encouraged. The Company expects to adopt SFAS 144 as of
January 1, 2002 and it does not believe the adoption of SFAS 144 will have a
material impact on the Company's financial position and results of operations.

RECLASSIFICATION

Certain reclassifications were made to the prior year consolidated
financial statements to conform to current year presentation.

3. LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

On June 26, 2001, the Company issued $300,000 of unsecured senior
subordinated notes (the "Notes") that mature on June 15, 2011. The Notes bear
interest at a rate of 11.25% per annum, payable semi-annually on June 15 and
December 15 of each year. The net proceeds from the offering of the Notes were
approximately $292,000, after deducting the underwriting discount and other sale
expenses. These net proceeds 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 may be redeemed beginning on June 15, 2006 at an initial
redemption price of 105.625% of the principal amount, plus accrued and unpaid
interest. The redemption price declines ratably each year after 2006 to 100% of
their principal amount, plus accrued and unpaid interest to the redemption date,
beginning on June 15, 2009. In addition, the Company may redeem a portion of the
Notes in one or more redemptions prior to June 15, 2004 using certain equity
proceeds as long as the aggregate principal amount of the Notes outstanding
after each redemption is at least $195,000. 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. If the Company
acquires new subsidiaries, in most cases they will be required to 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

F-14

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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 Series A 5.5% Convertible Redeemable Preferred
Stock and 1,080 shares of Series B 5.5% Convertible Redeemable 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 on its
revolving credit facility and further amended its senior bank credit facility
replacing its existing financial 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 it to maintain a ratio of pro forma EDITDA to
fixed charges (which will include interest, domestic taxes and annual capital
expenditures of up to $5,000) of at least 1.1 to 1 and limit 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 EDITDA for the previous
twelve months is equal to or greater than $85,000, after which time the
preexisting covenants will be reinstated. The Company is in compliance with the
new covenants as of December 31, 2001.

At December 31, 2001, the Company had $38,231 of available borrowings under
its Amended and Restated Credit Facility, after considering a $1,769 letter of
credit issued in connection with a facility lease agreement.

On August 18, 2000, the Company issued zero coupon senior debentures with
an initial principal amount of $75,000. The purchasers paid $72,938 for the
debentures and the warrants described below. The principal amount of the
debentures accreted at a rate of 12% per year, compounded quarterly. As noted
above, the Company repurchased all of these outstanding debentures on June 26,
2001. As part of the redemption of the debentures, 523 warrants to purchase
common shares of the Company's stock were cancelled. As of December 31, 2001,
warrants to purchase 6,277 shares of the Company's common stock at $6.00 per
share remain outstanding. Cashless exercise is permitted and the warrants expire
on August 18, 2007.

F-15

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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. This current extraordinary
loss amount of $9,146 varies from the extraordinary loss amount of $9,309 (net
of tax benefit of $3,220) reported in the Company's quarterly report for the
period ended June 30, 2001 due to the change in effective tax rates for the
respective periods.

In May 1998, Key3Media Events entered into a Loan Agreement with ZDI for
$382,002 (the "Loan"). The Loan stated that interest payments were due on a
quarterly basis beginning June 1998 at a rate of 6% per annum. The Loan was
payable on March 31, 2008 and contained no financial covenants. On April 13,
2000, Key3Media Events entered into a Revolving Credit Agreement ("the
Agreement") with two banks and borrowed $150,000 which represented the maximum
amount available under the Agreement. The proceeds of this borrowing were used
to repay a portion of the Loan. Under the terms of the Agreement, Key3Media
Events was required to maintain certain financial and operating covenants, which
included maximum leverage and minimum interest coverage ratios and limits on
capitalized leases and capital expenditures. The borrowing bore interest at a
base rate or eurodollar rate, at the option of Key3Media Events. The base rate
was equal to the higher of the lender's commercial lending rate or 1/2 of 1% per
annum above the federal funds rate. The eurodollar rate was equal to the London
Interbank Offered Rate divided by a percentage equal to 100% minus the
eurodollar rate reserve percentage, as defined in the Agreement. The Loan and
the Agreement were repaid on August 18, 2000 with borrowings from the term loan
bank borrowings noted above.

The Company incurred interest expense to related parties for the years
ended December 31, 1999, 2000 and 2001 of $23,300, $15,522 and $0, respectively.

Maturities of long-term debt for the next five years and thereafter are:

4. BUSINESS COMBINATIONS

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

F-16

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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. In
December 2001, the escrow provisions to the Pulver Asset acquisition were
amended to return to the Company $2,750 of the original escrow amount deposited
and increase the total escrow amount at December 31, 2001 to $20,250. The
following table shows the estimated initial purchase price and the portion of
the estimated initial purchase price currently held in escrow for each
acquisition:

This estimated initial purchase price has been 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 has resulted in total acquired identifiable intangible
assets related primarily to exhibitor lists of $10,631, which are being
amortized on a straight-line basis over 3 years. The resulting total preliminary
goodwill of $104,931 has not been amortized but will be subjected to an annual
impairment test in accordance with SFAS No. 142.

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 EBITDA to 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.

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 EBITDA attributable to the Pulver Assets for 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.

F-17

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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 America 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 the preliminary results of SB
Forums' EBITDA for 2001, the Company does not expect 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 statement of
operations beginning on 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.

Following are the Company's unaudited pro forma results for the years ended
December 31, 2000 and 2001, respectively, assuming the acquisitions described
above occurred on January 1, 2000:

These pro forma results of operations have been prepared for comparative
purposes only and are not necessarily indicative of the results of operations
which actually would have resulted had the acquisitions occurred on January 1,
2000.

5. BALANCE SHEET COMPONENTS

Accounts receivable consist of the following:

F-18

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Property and equipment consist of the following:

Depreciation and amortization expense of property and equipment for the
years ended December 31, 1999, 2000 and 2001 was $4,591, $5,226 and $8,311,
respectively.

Intangible assets consist of the following:

Amortization expense related to intangible assets for the years ended
December 31, 1999, 2000 and 2001 was $33,541, $31,462 and $ 32,477,
respectively.

F-19

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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.
These goodwill amounts will be subjected to testing for impairment at least
annually in accordance with provisions of SFAS 142. The Company recognized
approximately $12,800 of amortization expense in 2001 for goodwill that will not
be amortized effective January 1, 2002.

Accrued expenses consist of the following:

6. STAFF REDUCTION SEVERANCE CHARGE AND NON-RECURRING COMPENSATION CHARGE

During the last five months of 2001, the Company eliminated various
positions across all of its functional business segments. The amount due
employees for severance and termination benefits was $1,709, of which $1,100 was
unpaid as of December 31, 2001.

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. INCOME TAXES

Income (loss) before income taxes and extraordinary items is attributable
to the following jurisdictions:

F-20

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

The income tax provision (benefit) for 2001 includes $3,383 attributable to
the extraordinary loss on retirement of debt and $594 attributable to the
extraordinary gain on the exchange of debt for convertible preferred stock.

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:

During 2001, the Company reclassified $11,850 of income taxes payable at
December 31, 2000 to deferred income tax as this amount was not expected to be
currently payable.

F-21

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

For tax purposes, the Company had available, at December 31, 2001, net
operating loss carry forwards for regular federal income tax purposes of $20,424
which will expire in 2021.

8. 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 24,744 shares of
common stock to be granted at December 31, 2001.

On August 21, 2000, the Company made certain option 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 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.

On January 19, 1998, the exercise price of all of the shares outstanding
under option agreements was reset to (Yen) 4,000, the closing market price on
Japan's Tokyo Stock Exchange First Section at that date. In conjunction with the
repricing, those options previously exercisable on December 31,1997 could only
be exercised after July 19, 1998. The repricing of the stock options did not
result in compensation expense to the Company.

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 for the year ended December 31,
2000 and non-cash stock based compensation expense of $1,382 and $97 for the
year ended December 31, 2000 and 2001, respectively.

F-22

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

In 2000, the Company's deferred compensation activity related to the
following plans:

1998 INCENTIVE COMPENSATION PLAN AND THE 1998 NON-EMPLOYEE DIRECTOR'S STOCK
OPTION PLAN

ZDI has two classes of common stock; ZD Inc.-ZD Common Stock ("ZD Stock")
and ZD Inc.-ZDNet Stock ("ZDNet Stock").

The 1998 Incentive Compensation Plan (the "Incentive Plan") provides for
the grant of options, stock appreciation rights, stock awards and other
interests in ZDI common stock to key employees of ZDI and its affiliates and
consultants. On December 21, 1998, the ZDI Board of Directors approved an
amendment to the Incentive Plan to permit grants of options and other
stock-based awards with respect to any services of common stock of ZDI and to
increase the number of shares available for issuance to all ZDI employees from
8,500 shares to 17,828 shares.

The 1998 Non-Employee Directors Stock Option Plan (the "Non-Employee
Directors Plan") provides for the grant of stock options to non-employee
directors. ZDI had reserved 8,500 shares of common stock for issuance under the
Non-Employee Directors Plan.

On September 23, 1998, the ZDI Board of Directors approved the reduction of
the exercise price of all options outstanding under the Incentive Plan from
$16.00 to $6.00, the closing market price of ZDI common stock on that date. In
addition, the vesting period of the options was extended by three months. The
repricing did not result in compensation expense to the Company.

On December 21, 1998, ZDI's Board of Directors approved the grant of
options to acquire an aggregate of approximately 224 shares of ZDNet Stock to
certain employees of the Company at a price of $4.29 per share. As a result of
the grant the Company recorded deferred compensation expense of $408 for the
difference between the exercise price and the deemed fair value of the
underlying shares. The Company is recognizing non-cash compensation for
accounting purposes of $102 ratably over the vesting periods of the options.
These options are currently scheduled to vest and become exercisable on the
fifth anniversary of the date of grant.

On January 29, 1999, ZDI granted options to a number of ZD Events employees
in connection with the cancellation of corresponding options to purchase stock
of SOFTBANK Corp. In connection with these grants, an affiliate of SOFTBANK
Corp. has agreed with ZDI that, if and when any of these options are exercised,
(1) that affiliate will cause the shares to ZDI common stock issuable upon such
exercise to be supplied to ZDI and (2) ZDI will deliver to that affiliate of its
designee the exercise price paid upon such exercise. Thus, the exercise of these
options will not increase the number of shares of ZDI common stock outstanding
or ZDI's stockholders equity. The Company recognized compensation expense for
accounting purposes through the vesting period that ended in fiscal year 2000.

F-23

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

OPTION GRANTS

Information relating to the Key3Media Group, Inc. 2000 Stock Option and
Incentive Plan is as follows:

Information relating to the Softbank options for ZD Events employees during
1999 and part of 2000 is as follows:

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

(1) The exercise price of the stock options is set in Japanese yen. The exercise
prices as shown about have been converted to U.S. dollars based upon the
exchange rate of the date of grant for the respective options. The 1998
activity reflects the repricing of all options outstanding as of January 19,
1998 to (Yen) 4,000.

F-24

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Information relating to the Ziff-Davis Inc.-ZD stock options for ZD Events
employees during 1999 and 2000 is as follows:

Information relating to the Ziff-Davis Inc.-ZDNet stock options for ZD
Events employees during 1999 and 2000 is as follows:

Information relating to the Key3Media Group, Inc. stock options as of
December 31, 2001 is as follows:

SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS 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

F-25

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

below. These amounts have not been reflected in the Company's Consolidated
Statement of Operations, 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 following assumptions are for 1999 only as there were no options
outstanding as of December 31, 2000 related to these plans:

The weighted average fair value of options granted during the year ended
December 31 is as follows:

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-26

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

EMPLOYEE STOCK PURCHASE PLAN

Prior to August 18, 2000, certain employees of the Company were eligible to
participate in the ZDI Employee Stock Purchase Plan (the "Stock Purchase Plan").
Under this plan, eligible employees could purchase ZDI's common stock with
after-tax payroll deductions of 1% to 10% of their base pay. The price at which
shares of common stock could be purchased was the lesser of 85% of the fair
market value of a share of common stock on (1) the first business day of a
purchase period of (2) the last business day of a purchase period. ZDI had
reserved 2,500 shares of common stock for issuance under the Stock Purchase Plan
as of December 21, 1998. Prior to this date, the number of shares available for
sale under this plan was 1,500. As of August 19, 2000, the employees permitted
to participate withdrew from the Stock Purchase Plan in connection with the
Company's spin-off from ZDI.

9. EMPLOYEE BENEFIT PLANS

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 $2,450, $346 and
$622 for the years ended December 31, 1999, 2000 and 2001, respectively.

10. COMMITMENTS AND CONTINGENCIES

In March 2000, the Company's wholly owned subsidiary Key3Media Events, Inc.
("Key3Media Events") sued GES Exposition Services, Inc. ("GES") for breach of
contract in the United States District Court for the District of Massachusetts.
The Company previously used GES as the decorator for all of its major events.
The Company believed that GES was withholding commissions that it was required
to pay to Key3Media Events under its decorator contract. GES raised a number of
counterclaims in which it alleged that Key3Media Events owed it money and/or
damages. The litigation was settled in July 2001. As a result of this
settlement, advance payments previously received from GES that were recorded as
deferred revenue (included in other long-term liabilities) and a net receivable
amount from GES were eliminated from The

F-27

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Company's balance sheet. In addition, the settlement resulted in an increase in
other income (expense), net for the second quarter of 2001 of approximately
$6,700. A stipulation of dismissal with prejudice evidencing the companies'
agreement to end the litigation was filed with the court on October 19, 2001.

On August 31, 2001, Key3Media Events provided notice of termination of its
then existing leased office space in Needham, Massachusetts to the landlord of
the existing space. The annual rental payments (net of operating expenses) for
the prior space were approximately $1,400. 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 to dismiss and an
amended complaint alleging breach of contract, breach of implied covenant of
good faith and fair dealing and violations of Mass. Gen L. c. 93A. Also in
February 2002, Key3Media Events filed an answer and counterclaim to the amended
complaint and a motion to dismiss the Mass. Gen L. c. 93A claim and Interface
filed a motion to dismiss counts (iii), (v), (vi), (viii) and (ix) of the
counterclaim. The case is in discovery.

Key3Media Events is the plaintiff and counter-defendant in a case filed
October 18, 2000, in the Eighth Judicial District Court, Clark County, Nevada.
The suit arises out of a dispute between Key3Media Events, 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. The case is in discovery.

On or about December 27, 2001, Key3Media Events filed a complaint against
Krause International, Inc., E.J. Krause & Associates (Argentina), Inc., and E.J.
Krause & Associates, Inc. (collectively, "Krause"), with respect to Krause's
management of COMDEX Argentina 2001. The complaint includes causes of action for
breach of contract, misrepresentation and fraud, fraudulent misrepresentation,
negligent misrepresentation, and tortious interference with business relations
and seeks actual damages, punitive damages, interest, attorneys' fees and costs.
On or about February 8, 2002, Krause answered the complaint, and filed a
counter-claim alleging breach of contract, unjust enrichment, and an additional
claim for breach of contract. The counter-claim seeks damages in the amount of
$452 plus interest, and reasonable attorneys' fees and costs.
F-28

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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 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.

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.

11. 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
leases and under sublease arrangements that have initial or remaining
noncancelable lease terms in excess of one year at December 31, 2001:

Rent expense amounted to approximately $4,469, $5,026 and $6,668 for the
years ended December 31, 1999, 2000, and 2001, respectively.

F-29

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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, 1999, 2000 and 2001
approximated $6,000, $6,500 and $11,200, respectively.

12. 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, 2001:

On November 27, 2001, the Company raised $52,000 through the private
placement of 1,000 shares of Series A 5.5% Convertible Redeemable Preferred
Stock and 1,080 shares of Series B 5.5% Convertible Redeemable 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 dividends 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, 2011, 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 trading 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 Series B 5.5%
Convertible Redeemable Preferred Stock in a private placement in exchange for
$10,000 face amount of our 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 exchanged for preferred
stock.

On December 20, 2001, the Company raised $15,000 through the private
placement of 600 shares of Series B 5.5% Convertible Redeemable Preferred Stock
for $25.00 per share.

F-30

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

A director of the Company is affiliated with the purchaser of 1,000 shares
of Series A 5.5% Convertible Redeemable Preferred Stock.

Shares reserved for future issuance as of December 31, 2001:

13. 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-31

KEY3MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of selected quarterly financial data for the
years ended December 31, 2001 and 2000:

15. SUBSEQUENT EVENT (UNAUDITED)

On January 7, 2002, the Company completed its acquisition of ExpoNova
Events & Exhibitions (ExpoNova) previously announced on November 20, 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 the right to require the Company to purchase another tradeshow
and conference business subject to certain conditions. On January 16, 2002,
ExpoNova exercised this right; consequently, the Company has agreed to purchase
the business and expects to complete this purchase transaction in April 2002.
Ten percent of the total cash and securities given as consideration for these
acquisitions has been or will be placed into escrow. Upon the final
determination of the purchase price, the escrow amount and additional amounts,
if any, due each party will be distributed as required by the purchase
agreements.

16. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTOR AND SUBSIDIARY NON-GUARANTOR

In connection with the issuance of the Company's $300,000 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,
2000 and 2001 and for the three years ended December 31, 2001.

F-32

KEY3MEDIA GROUP, INC.

CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2001

F-33

KEY3MEDIA GROUP, INC.

CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2000

F-34

KEY3MEDIA GROUP, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001

F-35

KEY3MEDIA GROUP, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000

F-36

KEY3MEDIA GROUP, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999

F-37

KEY3MEDIA GROUP, INC.

CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2001

F-38

KEY3MEDIA GROUP, INC.

CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2000

F-39

KEY3MEDIA GROUP, INC.

CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1999

F-40

SCHEDULE

VALUATION AND QUALIFYING ACCOUNTS

S-1