Sportsline Com (SPLN) 10-K/A 2002 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2002

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                            to                            

Commission file number: 0-23337

SPORTSLINE.COM, INC.

(Exact name of registrant as specified in its charter)

Delaware	65-0470894
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer identification No.)

2200 W. Cypress Creek Road
Fort Lauderdale, Florida	33309
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (954) 489-4000

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock (par value $.01 per share)

(Title of Class)

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/A or any amendment to this Form 10-K/A.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of shares of Common Stock held by non-affiliates of the Registrant as of June 28, 2002, the last trading day of the Registrant’s most recently completed second fiscal quarter, was approximately $33,762,686 based on the $1.03 closing price for the Common Stock on The Nasdaq National Market on such date. For purposes of this computation, all executive officers and directors of the registrant have been deemed to be affiliates. Such determination should not be deemed to be an admission that such directors and officers are, in fact, affiliates of the registrant.

The number of shares of Common Stock of the registrant outstanding as of March 24, 2003 was 38,060,986.

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K/A (“Amendment No. 1”) for SportsLine.com, Inc. (“SportsLine” or the “Company”) for the year ended December 31, 2002, is being filed to amend and restate the items described below contained in the Company’s Annual Report on Form 10-K originally filed with the Securities and Exchange Commission (“SEC”) on March 28, 2003.

This Amendment No. 1 makes the following changes for the purposes described:

• To amend Item 8. Financial Statements and Supplementary Data, to restate the Company’s Consolidated Financial Statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002 and 2001 primarily to correct an error in the way the Company had previously accounted for certain employee stock option grants and other grants of equity instruments and to make certain other adjustments, as more fully described in Note 2, “Restatement,” to the Company’s Consolidated Financial Statements;

• To amend Item 6. Selected Financial Data, to take into account the effects of the restatement;

• To amend Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations, to take into account the effects of the restatement; and

• To amend Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K, to furnish the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act.

In order to preserve the nature and character of the disclosures set forth in such Items as originally filed, this Amendment No. 1 continues to speak as of the date of the original filing of the Annual Report on Form 10-K on March 28, 2003 and the Company has not updated the disclosures in this report to speak as of a later date (except for Note 14, “Subsequent Events” to the Consolidated Financial Statements with respect to subsequent events through November 14, 2003). All information contained in this Amendment No. 1 is subject to updating and supplementing as provided in SportsLine’s reports and any amendments filed with the Securities and Exchange Commission for periods subsequent to the date of the original filing of the Annual Report on Form 10-K.

The Company did not amend its Annual Reports on Form 10-K or Quarterly Reports of Form 10-Q for periods affected by the restatement that ended prior to December 31, 2002, and the financial statements and related financial information contained in such reports should no longer be relied upon and should be viewed in the context of this report.

Index to Items

		Page
Item 6.	Selected Financial Data	4
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	5
Item 8.	Financial Statements and Supplementary Data	28
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	69

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Item 6. Selected Financial Data.

The following data should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K/A. The selected consolidated balance sheet data set forth in the total columns below as of December 31, 2002 and 2001, and the selected consolidated statement of operations data set forth in the total columns below for the three years ended December 31, 2002 have been derived from the Company’s audited consolidated financial statements included elsewhere herein.¹ The selected financial data as of and for the years ended December 31, 2002 and 2001 has been restated. For additional information regarding the restatement, please refer to Note 2 to the Consolidated Financial Statements included in Item 8.

	Year Ended December 31,
				(unaudited)			(unaudited)						(unaudited)			(unaudited)						(unaudited)			(unaudited)
	Total 2002			U.S. 2001			Sports.com 2001			Total 2001			U.S. 2000			Sports.com 2000			Total 2000			U.S. 1999			Sports.com 1999			Total 1999			Total 1998
	(As Restated see Note 2)
	(In thousands, except share and per share data)
Statement of Operations Data:
Revenue	$	62,635		$	59,276		$	4,484		$	63,760		$	87,458		$	8,429		$	95,887		$	58,284		$	1,994		$	60,278		$	30,551
Cost of revenue		24,120			23,981			8,902			32,883			28,070			12,931			41,001			31,536			2,542			34,078			17,231
Gross profit (loss)		38,515			35,295			(4,418	)		30,877			59,388			(4,502	)		54,886			26,748			(548	)		26,200			13,320
Operating expenses:
Product development		2,132			1,854			—			1,854			1,791			—			1,791			1,587			—			1,587			1,313
Sales and marketing:
Amortization of equity issued to Viacom for promotion		24,036			20,288			—			20,288			20,288			—			20,288			15,347			—			15,347			11,517
Other		24,674			35,751			6,199			41,950			37,224			13,719			50,943			34,463			1,989			36,452			20,481
General and administrative		23,428			29,552			6,222			35,774			26,726			10,365			37,091			17,306			2,757			20,063			13,159
Depreciation and amortization		11,106			26,155			1,664			27,819			19,257			2,341			21,598			9,462			997			10,459			5,587
Restructuring charge		2,499			985			—			985			—			—			—			—			—			—			—
Write-down of goodwill		2,650			21,600			—			21,600			—			—			—			—			—			—			—
Other non-recurring charge for settlement of litigation		—			—			—			—			—			—			—			—			—			—			1,100
Total operating expenses		90,525			136,185			14,085			150,270			105,286			26,425			131,711			78,165			5,743			83,908			53,157
Loss from operations		(52,010	)		(100,890	)		(18,503	)		(119,393	)		(45,898	)		(30,927	)		(76,825	)		(51,417	)		(6,291	)		(57,708	)		(39,837	)
Interest expense		(929	)		(1,064	)		(9	)		(1,073	)		(1,081	)		(3	)		(1,084	)		(4,392	)		—			(4,392	)		(118	)
Interest and other income, net		891			3,108			371			3,479			10,142			2,772			12,914			8,783			193			8,976			4,446
Loss on equity investments		—			(28	)		—			(28	)		(127,653	)		—			(127,653	)		—			—			—			—
Gain on termination of advertising agreements		—			2,051			—			2,051			78,766			—			78,766			—			—			—			—
Gain on sale of e-commerce subsidiaries		—			—			—			—			7,814			—			7,814			—			—			—			—
Gain on extinguishment of debt		—			2,404			—			2,404			—			—			—			36,027			—			36,027			—
Effect of deconsolidation of Sports.com		—			41,739			—			41,739			—			—			—			—			—			—			—
Loss before tax benefit		(52,048	)		(52,680	)		(18,141	)		(70,821	)		(77,910	)		(28,158	)		(106,068	)		(10,999	)		(6,098	)		(17,097	)		(35,509	)
Tax benefit		720			—			—			—			—			—			—			—			—			—			—
Net loss	$	(51,328	)	$	(52,680	)	$	(18,141	)	$	(70,821	)	$	(77,910	)	$	(28,158	)	$	(106,068	)	$	(10,999	)	$	(6,098	)	$	(17,097	)	$	(35,509	)
Loss per share—basic and diluted	$	(1.45	)							$	(2.65	)							$	(4.04	)							$	(0.74	)	$	(1.94	)
Weighted average common and common equivalent shares outstanding—basic and diluted		35,420,696									26,719,463									26,245,946									23,018,224			18,305,927

	December 31,
	2002		2001		2000		1999		1998
	(As Restated, see Note 2)
	(in thousands)
Balance Sheet Data:
Cash and marketable securities, including noncurrent securities	$	37,625	$	46,035	$	125,765	$	120,973	$	85,242
Working capital		18,405		43,280		127,119		97,229		64,509
Total assets		92,123		113,319		258,171		271,461		137,655
Long-term obligations, net of current maturities		23,561		20,546		19,608		19,608		207
Total shareholders’ equity		54,170		79,356		139,097		224,656		118,963

¹ Results of Sports.com are consolidated from August 1999 through July 2001 only. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview.”

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 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Consolidated Financial Statements as of and for the years ended December 31, 2002 and 2001 and the notes thereto included in this Amendment No. 1 have been restated. For additional information regarding the restatement, please refer to Note 2 to the Consolidated Financial Statements included in Item 8. All applicable financial information presented in this Item 7 has been restated to take into account the effects of the restatements described in Note 2 to the Consolidated Financial Statements.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements, which involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain risk factors, including those set forth under “Risk Factors that May Affect Future Results,” below and elsewhere in this Report. The following discussion also should be read in conjunction with the information set forth in “Item 6. Selected Financial Data” and the Company’s Consolidated Financial Statements and Notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K/A.

Overview

Commencing in 2002, the Company is categorizing its revenue streams into two types: advertising and marketing services revenue and subscription and premium products revenue. Prior to 2002, the Company also derived revenue from content licensing and international revenue. Advertising and marketing services revenue, subscription and premium products revenue, content licensing revenue and international revenue constituted approximately 77%, 23%, 0% and 0%, respectively, of the Company’s total revenue in 2002; 80%, 8%, 5% and 7%, respectively, of the Company’s total revenue in 2001; and 76%, 6%, 9% and 9%, respectively, of the Company’s total revenue in 2000.

Advertising and marketing services revenue is derived principally from short-term advertising contracts on a per impression basis or for a fixed fee based on a minimum number of impressions. Advertising revenue also includes sponsorship opportunities that enable advertisers to associate their corporate messages with the Company’s coverage of major sports and marquee events, games and contests for a fee. Advertising and marketing services revenue is also derived from the sale of advertising on Web sites that the Company operates such as NFL.com and pgatour.com. Advertising and marketing services revenue is recognized in the period in which the advertisement is displayed or services rendered, provided that no significant obligations remain and collection of the resulting receivable is probable. Company obligations typically include guarantees of a minimum number of “impressions,” or times that advertisements appear in page views downloaded by users. Advertising and marketing services revenue includes the Company’s revenue from its direct marketing services and from promotion of e-commerce Web sites such as MVP.com and the NFL.com shop.

Although most of the content on the Company’s Web sites is free, users of the Company’s Web sites can purchase memberships and premium services for a fee. Subscription and premium products revenue relating to annual memberships and seasonal sports contests is recognized ratably over the life of the membership agreement or contest period. Accordingly, amounts received for which services have not yet been provided are recorded as deferred revenue on the Company’s balance sheets.

Content licensing revenue was recognized over the period of the license agreement as the Company delivered its content. The Company did not have any content licensing revenue in 2002 and does not expect to have any such revenue in the future, unless the Company enters into new content licensing agreements. International revenue was related to the Company’s prior subsidiary Sports.com.

In March 1997, the Company entered into a strategic alliance with CBS pursuant to which the Company’s flagship Web site was renamed “cbs.sportsline.com.” The CBS agreement was amended in February 1999 (as amended to date, the “CBS Agreement”) to extend the term for an additional five years, effective as of January 1, 1999, through 2006. Commencing with calendar year 1999, CBS is obligated to provide advertising and promotion of the cbs.sportsline.com Web site pursuant to a fixed promotion schedule. In consideration of additional

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promotional and advertising opportunities, at the time of the execution of the amendment in 1999, the Company accelerated the issuance of the remaining shares that were formerly to be issued in 2000 and 2001 (567,579 and 485,358 shares, respectively), issued additional warrants to purchase 1,200,000 shares of common stock at per share exercise prices ranging from $23 in 1999 to $45 in 2001 and became obligated to issue additional shares of common stock valued at $100 million between 2002 and 2006. The 1999 amendment to the CBS Agreement provides that SportsLine’s obligation to issue additional shares of common stock valued at $100 million between 2002 and 2006 is to be satisfied by the issuance of shares having a fair market value of $20 million based on the average of closing prices of the common stock on the Nasdaq National Market for the five-day period ending on the day prior to each of the following five issue dates, as applicable: January 1, 2002; April 1, 2003; July 1, 2004; October 1, 2005; and January 1, 2007. In January 2002, the Company satisfied the first of the foregoing five issuances by issuing approximately 6.9 million shares of common stock to CBS valued at $20 million. In March 2003, the CBS Agreement was amended to modify the annual schedule of stock issuances to CBS. See “—Recent Developments.”

In July 2001, SportsLine entered into a multi-year agreement (the “NFL Agreement”) with CBS, AOL and the NFL. Pursuant to the terms of the NFL Agreement, SportsLine is responsible for the production and hosting of the NFL’s Internet sites, including NFL.com, superbowl.com, nfleurope.com and playfootball.com. SportsLine is entitled to recoup the costs of such production and hosting pursuant to an agreed-upon budget, from the first dollars of revenue generated from such sites, after the payment of certain sales commissions, including but not limited to, advertising and sponsorship sales, e-commerce revenues and direct marketing and, to a limited extent, from the exploitation of certain emerging media rights (collectively, the “Gross Revenues”). SportsLine is responsible for a portion of the rights fee payments required to be made to the NFL under the NFL Agreement, with SportsLine’s share of the required cash payments aggregating $24,050,000 over the five-year term of the NFL Agreement as follows: $4,238,000 has been paid as of December 31, 2002, $812,000 is owed for the second year; $6,000,000 for each of the third and fourth years; and $7,000,000 for the fifth year. In addition, SportsLine issued to the NFL 350,000 shares of SportsLine common stock upon effectiveness of the NFL Agreement; and is obligated to pay an additional $1,333,333 in cash or stock, at SportsLine’s option, in May 2003 and an additional $2,666,667 in cash or stock, at SportsLine’s option, in May 2004. After the payment of certain sales commissions and SportsLine’s recoupment of its production and hosting expenses, SportsLine is entitled to a graduated share of Gross Revenues in an amount aggregating approximately 50% of the first $140,000,000 of Gross Revenues generated during the term of the NFL Agreement. In addition, SportsLine may be entitled to receive 20% of certain additional Gross Revenues in excess of such amount. The NFL has the unilateral right to terminate the NFL Agreement after the second or third year of the contract.

In July 2001, SportsLine extended its existing agreement with AOL (the “AOL Extension”). Pursuant to the AOL Extension, SportsLine paid AOL $1,000,000 cash in July 2001 and issued to AOL approximately 1.95 million shares of common stock valued at $2,000,000 in July 2002, and the Company is obligated to pay an additional $1,000,000 in cash and/or stock, at SportsLine’s option, in July 2003.

In May 1999, SportsLine established Sports.com as a European-based, majority owned subsidiary. In 2000, the Company consolidated between 71% and 100% of the losses of Sports.com, which had historically been offset by the allocation of a portion of such losses to third party holders of Sports.com common stock. On July 17, 2001, Sports.com raised approximately $13,000,000 in equity funding from its existing investors. After giving effect to the funding, the Company’s fully diluted ownership stake in Sports.com, including all outstanding warrants and management options, was approximately 30%. As a result of the Company’s reduced ownership interest in Sports.com and a reduction in the Company’s representation on Sports.com’s board of directors to less than a majority, as of July 17, 2001 the Company no longer consolidated the results of Sports.com and accounted for its investment in Sports.com under the equity method of accounting. In accordance with United States generally accepted accounting principles, the Company recorded in 2001 the effect of the deconsolidation of the subsidiary in the amount of $41,739,000. The Company’s comprehensive loss in 2001 decreased by approximately $5,200,000 due to the deconsolidation of Sports.com. After July 17, 2001, the Company no longer recorded any losses generated by Sports.com, as its investment had been reduced to zero and the Company had no future obligation to provide funding to Sports.com. Sports.com’s assets and liabilities are included in the Company’s Consolidated Balance Sheet as of December 31, 2000. Sports.com’s revenue, expenses and minority interest are included in the Company’s Consolidated Statements of Operations for the year ended December 31, 2000 and its revenue, expenses and minority interest through July 17, 2001 are included in the Consolidated Statement of Operations of the

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Company for the year ended December 31, 2001. On May 31, 2002, Sports.com was placed into administration, a procedure in the U.K. pursuant to which a court-appointed administrator assumes day-to-day control of a company in order to determine whether a business should be reorganized, sold or liquidated. In July 2002, the Company terminated its inter-company agreement with Sports.com, pursuant to which, among other things, the Company licensed the sports.com domain to Sports.com. Separately, the Company sold the rights to the sports.com domain to an unrelated third party. The effect on the Company’s financial condition and results of operations was not material.

The Company acquired Daedalus World Wide Corporation (“DWWC”) in December 1999. The transaction was accounted for using the purchase method of accounting. The purchase resulted in goodwill of $31,880,000, which was being amortized over an estimated life of seven years. In the fourth quarter of 2000, a $12,000,000 liability (included in accounts payable at December 31, 2000) was recorded pursuant to the purchase agreement, which provided for additional consideration contingent upon the acquired company meeting certain performance thresholds. During the first quarter of 2001, 828,376 shares of common stock were issued in satisfaction of $6,000,000 of the liability and during the fourth quarter of 2001, 2,195,968 shares of common stock were issued in satisfaction of the remaining $6,000,000 liability. In addition, the Company recognized a goodwill write-down during the year ended December 31, 2001 of $17,000,000 related to the reduced estimate of the value of its investment in DWWC. The Company’s assessment of its goodwill investment was based on historical operations, future cash flows and the market values of similar entities. See Note 5 of Notes to Consolidated Financial Statements. The Company performed the annual impairment test required under Statement of Financial Accounting Standard (“SFAS”) No. 142 to test impairment as of October 1, 2002. As a result, the Company found no impairment of its goodwill. At December 31, 2002, the Company had goodwill of $16,194,000 recorded for DWWC.

In April 2000, the Company, through its wholly owned subsidiary VegasInsider.com, Inc., purchased the assets of the DBC Sports division (“DBC Sports”) of Data Broadcasting Corporation (“DBC”), including LVSC, in exchange for 277,152 shares of the Company’s common stock (the “Consideration Shares”). Pursuant to the terms of the purchase agreement, the Company guaranteed that the Consideration Shares would have a value equal to or greater than $12.5 million on March 31, 2001 (the “Guaranteed Proceeds”). On April 6, 2001, due to the decline in the trading price of the Company’s common stock, the Company fulfilled its obligation to DBC by purchasing the Consideration Shares for $12.5 million. The Consideration Shares were cancelled and retired in April 2001. The Company recorded a goodwill write-down of $4,600,000 in 2001 to reflect a reduction in the estimated value of its investment in DBC Sports. The assessment of goodwill was based on historical operating results, future cash flows and the market values of similar entities. The Company performed the annual impairment test required under SFAS No. 142 to test impairment as of October 1, 2002. As a result, the Company recorded a goodwill write-down of $2,650,000 to adjust the value of its investment in DBC Sports to its estimated fair value. At December 31, 2002, the Company had goodwill of $2,017,000 recorded for DBC Sports. See Note 5 of Notes to Consolidated Financial Statements.

Recent Developments

NCAASports.com Agreement

In February 2003, the NCAA, CBS and SportsLine announced an agreement whereby the Company sublicensed the rights from CBS for the official NCAA Championship Web site, in their entirety, through 2006. These rights include site production, hosting and management of the sale of advertising for the NCAASports.com Web site, and the exclusive rights to provide Internet broadcasts of certain NCAA championships, including the Division 1 Men’s Basketball Championship. The Company and CBS will share in revenues from the operations of the new site, with the Company’s start-up production costs being recouped in the initial year of operation.

Disposal of VegasInsider.com Website and LVSC

As part of the NCAASports.com agreement, the Company agreed that it would dispose of its gaming information operations, consisting of the VegasInsider.com Web site and LVSC. Beginning in its quarterly report on Form 10-Q for the quarter ending March 31, 2003, the Company will report the results from these operations as results from discontinued operations.

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CBS Amendment

On March 5, 2003, SportsLine and CBS entered into an amendment to the CBS agreement to provide for a change in the annual payment schedule pursuant to which CBS is entitled to receive SportsLine.com common stock in exchange for promotion of the CBS SportsLine.com Web site.

April 2003 Payment

On April 1, 2003, SportsLine is obligated to issue to CBS, the lesser of (1) a number of shares of common stock having a fair market value of $20,000,000 on April 1, 2003; or (2) a number of shares of common stock that will result in CBS and its affiliates’ aggregate beneficial ownership interest in SportsLine’s outstanding common stock not exceeding 39.9% (in which case the shares actually issued on April 1, 2003 will be valued at the current fair market value of such shares and the remainder of SportsLine’s $20,000,000 obligation will be deferred until July 2004).

July 2004 Payment

On July 1, 2004, SportsLine is obligated to issue to CBS the lesser of (1) a number of shares of common stock having a fair market value on July 1, 2004 equal to (x) $20,000,000 plus (y) the amount of the April 2003 payment which was deferred; or (2) a number of shares of common stock that will result in CBS and its affiliates’ aggregate beneficial ownership interest in SportsLine’s outstanding common stock not exceeding 49.9%. If the number of shares of common stock that would result in CBS and its affiliates’ aggregate beneficial ownership interest in SportsLine’s outstanding common stock not exceeding 49.9% has a fair market value on July 1, 2004 less than the amount of SportsLine’s total obligation on July 1, 2004 (i.e., $20,000,000 plus the deferred portion of the April 2003 payment), then SportsLine must satisfy up to $5,000,000 of such obligation in cash. SportsLine has the option to satisfy any additional remaining obligation on July 1, 2004 in cash and/or stock at its option. If SportsLine elects to satisfy any portion of that remaining obligation, if any, in stock and the issuance of such stock would cause the ownership interest of CBS and its affiliates to exceed 49.9% on July 1, 2004, then CBS may elect to defer that portion of the issuance until October 1, 2005.

October 2005 and January 2007 Payments

On October 1, 2005, SportsLine will remain obligated to issue to CBS common stock with a fair market value equal to (x) $20,000,000 plus (y) the portion of the payment due in July 2004, if any, that CBS may have elected to defer. SportsLine remains obligated to issue common stock with a fair market value of $20,000,000 to CBS on January 1, 2007.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, intangible assets, restructuring costs, contingencies and litigation. Management bases its estimates and judgments on historical experience, and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Management believes the following critical accounting policies, among others, affect the more significant judgments and estimates used in the preparation of its consolidated financial statements:

• The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

• The Company reviews its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. If the Company’s analysis indicates a possible impairment exists based on undiscounted future cash flows, it is required to then measure impairment based on the estimated fair value of the assets determined either by third party appraisal or projected discounted future cash flows.

• As described below under Recent Accounting Pronouncements, effective January 1, 2002, the Company is required at least annually to test for impairment of goodwill. Management believes its estimates and judgments have been reasonable in determining whether the Company’s goodwill has been impaired. If, however, there were a material change in the conditions or circumstances influencing fair value, the Company could be required to recognize an impairment charge.

• SFAS No. 123, Accounting for Stock-Based Compensation allows either adoption of a fair value based method of accounting for employee stock options and similar equity instruments or continuation of the measurement of compensation cost relating to such plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees.The Company has elected to use the intrinsic value based method.

• Advertising and marketing services revenue encompass advertising and sponsorship sales as well as the Company’s revenue from its direct marketing services and promotion of e-commerce Web sites such as MVP.com and the NFL.com shop. Revenue is primarily derived from the sale of advertising on the Company’s Web sites as well as the sale of advertising on Web sites operated by the Company. Advertising includes, among other forms, banner advertisements and sponsorships. Advertising and marketing services revenue is recognized in the period the advertisement is displayed or services rendered, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Company obligations typically include guarantees of a minimum number of “impressions”, or times that an advertisement is viewed by users of the Company’s Web sites.

Results of Operations

Revenue

Total revenue for the year ended December 31, 2002 was $62,635,000 compared to $63,760,000 for the year ended December 31, 2001 and $95,887,000 for the year ended December 31, 2000. Advertising and marketing services revenue decreased to $48,386,000 in 2002 compared to $52,813,000 in 2001 and $77,666,000 in 2000. Advertising and marketing services revenue for 2002, 2001 and 2000 accounted for approximately 77%, 83% and 81%, respectively, of total revenue. Advertising and marketing services decreased in 2002 from 2001 primarily due to management’s decision to limit barter revenue, which caused barter revenue to decrease in 2002 to 11% of advertising and marketing services revenue from 17% in 2001. Excluding barter and international revenue from both years, advertising and marketing services revenue increased, mainly due to increased revenue derived from the NFL as a result of the agreement being in effect for a full year in 2002. Advertising and marketing services revenue decreased in 2001 from 2000 due to lower advertising revenue relating to the termination of the Company’s agreements with MVP.com, Inc. (“MVP”) and Internet Sports Network, Inc. (“ISN”), which accounted for $27,655,000 of advertising revenue during 2000 in the aggregate, and the result of a general slowdown in the domestic advertising market. In addition, following the events of September 11, 2001, advertising revenue was lower than expected because of cancellations and postponement of certain sporting events such as the second week of college and pro football games and the Ryder Cup.

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Subscription and premium products revenue increased to $14,249,000 in 2002 compared to $4,252,000 in 2001 and $6,284,000 in 2000. Subscription and premium products revenue increased in 2002 from 2001 because of the successful conversion from primarily free fantasy sports products to fee-based fantasy products. More than 80,000 paid fantasy leagues representing about one million teams were formed in the Company’s fee-based baseball, football, basketball and hockey fantasy games in 2002, allowing the Company to generate approximately $10,900,000 of fantasy revenue in 2002 compared to $700,000 in 2001. The increase in fantasy revenue from 2002 to 2001 was offset by decreases in other products such as services related to statistical data and sales of the membership rewards program. From July 2000 to July 2001, the Company offered its fantasy products and services for free instead of for a subscription fee. As a result, subscription and premium products revenue decreased from 2000 to 2001 primarily due to the free offering of fantasy during the 2001 baseball season offset by fee-based football fantasy offerings during the 2001 season. Other factors contributing to the decrease in 2001 from 2000 were the discontinuation of some products such as Sports Careers subscriptions and services related to sales of statistical data.

There was no content licensing revenue in 2002 compared to $6,695,000 in 2001 and $11,937,000 in 2000. The decrease in content licensing revenue was due primarily to the replacement in July 2001 of the Company’s previous agreement with AOL, which had included a barter content licensing provision. Additionally, in 2000 the Company recognized content licensing revenue pursuant to its agreement with Excite, Inc. that expired in December 2000. Unless the Company enters into new content licensing agreements, management does not expect content licensing revenue to be significant in future periods.

There was no international revenue in 2002 compared to $4,484,000 and $8,429,000 in 2001 and 2000, respectively. The Company’s former subsidiary, Sports.com, was the sole source of international revenue.

As of December 31, 2002 and 2001, the Company had deferred revenue of $2,052,000 and $2,855,000, respectively relating to cash and receivables for which services had not yet been provided.

Barter transactions, in which the Company received advertising or other services or goods in exchange for content or advertising on its Web sites, accounted for approximately 8%, 20% and 17% of total revenue for 2002, 2001 and 2000, respectively. Barter transactions are recorded based upon, and to the extent of, similar recent cash transactions of the Company pursuant to Emerging Issues Task Force (“EITF”) Issue No. 99-17,Accounting for Advertising Barter Transactions. While the Company may enter into barter arrangements from time to time, the Company does not expect to recognize barter advertising revenue, along with the offsetting marketing expense, in future periods.

Equity transactions, in which the Company received equity in companies in exchange for advertising and promotion accounted for approximately 0%, 5% and 16% of total revenue for the years ended December 31, 2002, 2001 and 2000, respectively. The majority of the equity-related revenue in 2000 was derived from two agreements, both of which had been terminated as of December 31, 2000. An additional agreement for equity-related revenue terminated in June 2001. Therefore, the Company expects that, unless new agreements are entered into, equity-related revenue will be insignificant in future periods.

Cost of Revenue

Cost of revenue consists primarily of revenue share expenses, content fees to third parties and payroll and related expenses for the editorial and operations staff that are responsible for creating content on the Company’s Web sites. Telecommunications, Internet access and computer related expenses for the support and delivery of the Company’s services are also included in cost of revenue.

Cost of revenue was $24,120,000 in 2002 compared to $32,883,000 and $41,001,000 in 2001 and 2000, respectively. The decrease in cost of revenue in 2002 from 2001 is primarily due to the deconsolidation of Sports.com on July 17, 2001. Sports.com accounted for 27% of cost of revenue in 2001. Costs related to revenue sharing increased in 2002 from 2001, primarily due to increased expenses related to increased fantasy football revenue. Total revenue sharing expense was $10,306,000, $7,395,000 $13,608,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Revenue sharing expense represented 16% of total revenue in 2002, 12% of

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total revenue in 2001, and 14% of total revenue in the year 2000. These increased costs were offset by reductions in telecommunications expenses and payroll. The decrease in cost of revenue from 2000 to 2001 was primarily due to decreased revenue sharing expense to CBS because of lower advertising revenue, elimination of revenue sharing expense to Major League Baseball and lower costs associated with the Company’s cost restructuring program initiated in the second quarter of 2001. Also contributing to the decrease in 2001 was the deconsolidation of Sports.com in the third quarter of 2001. As a percentage of revenue, cost of revenue decreased to 39% in 2002 compared to 52% in 2001 and 43% in 2000.

Operating Expenses

Product Development. Product development expense consists primarily of employee compensation and related expenses required to support the continuing development of proprietary sports information and entertainment applications, services, technologies, interfaces and content. These costs include the Company’s effort to develop streaming media content and players, advanced java applications, ShockWave and Flash games and contests, wireless applications and technologies, broadband content and enhanced user interfaces across all products. These costs are expensed as incurred. In future periods, the Company intends to reclassify product development costs as general and administrative expense.

Product development expense was $2,132,000 in 2002 compared to $1,854,000 and $1,791,000 in 2001 and 2000, respectively. The increase in product development expense in 2002 is primarily the result of increased product development personnel and consultants related to the Company’s agreement to produce NFL.com partially offset by lower costs from the Company’s restructuring program. As a percentage of revenue, product development expense was 3%, 3% and 2% for 2002, 2001 and 2000, respectively.

Sales and Marketing—Amortization of Equity Issued to Viacom for Promotion.Amortization of equity issued to Viacom for promotion consists of the amortization expense for the Company’s agreements with two Viacom-related entities pursuant to which the Company issued equity instruments in exchange for advertising and promotion.

Pursuant to the Company’s promotion and licensing agreement with CBS, the Company issued shares of common stock and warrants to purchase shares of common stock and expensed $22,286,000 in 2002 compared to $17,288,000 in both 2001 and 2000. Additionally, the Company expensed $1,750,000 in 2002 and $3,000,000 in both 2001 and 2000 related to shares of common stock issued to Westwood One, Inc. in exchange for promotion and programming. These expenses were classified as depreciation and amortization expense in prior periods; 2001 and 2000 amounts have been reclassified in the accompanying consolidated financial statements to conform to current-year presentation as sales and marketing expense. As a percentage of revenue, amortization of equity issued to Viacom for promotion was 38% for the year ended December 31, 2002 compared to 32% in 2001 and 21% in 2000. The Company will not recognize amortization expense related to the Westwood One, Inc. agreement in future periods due to the expiration of the Company’s agreement with Westwood One on August 1, 2002. At that time, the Company entered into a new agreement with Westwood One that does not require the issuance of additional equity or any other financial consideration.

Sales and Marketing—Other. Sales and marketing—other expense consists of salaries and related expenses, advertising, marketing, promotional, business development, public relations expenses, research expenses and rights payment expenses related to the Company’s agreement with the NFL.

Sales and marketing expense—other was $24,674,000 in 2002 compared to $41,950,000 and $50,943,000 in 2001 and 2000, respectively. The decrease in sales and marketing—other expense from 2001 to 2002 was due to the deconsolidation of Sports.com along with decreased advertising and payroll as a result of the Company’s cost restructuring programs. Also, the Company’s decision to limit barter advertising contributed to the decrease in 2002. Barter transactions accounted for approximately 21% of sales and marketing—other expense for 2002, 30% for 2001 and 30% for 2000. The decrease in sales and marketing—other expense from 2000 to 2001 was primarily due to the decreased Web site and television advertising spending and the replacement of the Company’s agreement with AOL at a lower cost, offset by increases in radio and outdoor advertising expense. Additionally, payroll expenses decreased in 2001 because of the Company’s cost restructuring program. Also contributing to lower sales

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and marketing expense—other in 2001 was the deconsolidation of Sports.com in the third quarter of 2001. As a percentage of revenue, sales and marketing – other expense decreased to 39% in 2002 compared to 66% in 2001 and 53% in 2000. Included in sales and marketing—other expense are cash payments made to CBS and certain affiliates of CBS, of $367,000, $2,227,000 and $1,408,000 in 2002, 2001 and 2000, respectively, for television, radio and outdoor advertising during those periods.

General and Administrative. General and administrative expense consists of salary and related costs for executive, finance and accounting, technical and customer support, human resources and administrative functions, as well as rent and occupancy expenses and professional service fees.

General and administrative expense was $23,428,000 in 2002 compared to $35,774,000 and $37,091,000 in 2001 and 2000, respectively. The decrease in general and administrative expense from 2001 to 2002 was mainly due to the deconsolidation of Sports.com, which accounted for 20% of general and administrative expense in 2001, and decreases in payroll and consulting expenses due to the Company’s cost restructuring program. The decrease in general and administrative expense in 2001 from 2000 was primarily attributable to the deconsolidation of Sports.com in the third quarter of 2001, the Company’ cost restructuring program and to a lesser extent reduced bad debt expense related to lower advertising billings. As a percentage of revenue, general and administrative expense decreased to 37% in 2002 compared to 56% in 2001 and 39% in 2000.

Depreciation and Amortization. Depreciation and amortization expense consists of the depreciation of property and equipment, amortization of costs associated with consulting agreements and amortization of licensing rights and intangible assets. Depreciation and amortization expense was $11,106,000 in 2002 compared to $27,819,000 and $21,598,000 in 2001 and 2000, respectively. The decrease in depreciation and amortization expense in 2002 compared to 2001 was due primarily to the adoption of Statement of Financial Accounting Standard (“SFAS”) No. 142 “Goodwill and Other Intangible Assets,” effective January 1, 2002. Goodwill is no longer subject to amortization, but instead will be reviewed for impairment and, if deemed necessary, written down and charged to results of operations. Goodwill amortization was $7,841,000 and $6,762,000 for the years ended December 31, 2001 and 2000, respectively. Also depreciation and amortization expense related to fixed assets decreased due to decreased purchases in 2002 compared to 2001 combined with certain equipment becoming fully depreciated. The increase in depreciation and amortization in 2001 compared to 2000 was due to the amortization of the intangible assets acquired from MVP in January 2001 and the goodwill recorded in connection with the acquisition of DBC Sports in April 2000.

Under the Company’s agreement with the PGA TOUR, which became effective in April 1999, the Company paid an up-front licensing fee of $8,500,000. The licensing fee was recorded on the balance sheet as licensing rights and was amortized to depreciation and amortization expense over each related contract year, and has been fully amortized at December 31, 2002. Total amortization expense under the PGA TOUR agreement was $2,267,000 for each of the years ended December 31, 2002, 2001 and 2000. In January 2003 a cash payment of $2,000,000 was made to the PGA TOUR, which will be recognized as sales and marketing expense – other in 2003.

Write-down of Goodwill. For the years ended December 31, 2002 and 2001 the Company recorded charges totaling $2,650,000 and $21,600,000, respectively, to reflect the reduction in the estimated value of its investment in DWWC and DBC Sports. The write-down of goodwill related to DBC Sports was $2,650,000 in 2002 and $4,600,000 in 2001. The write-down of goodwill related to DWWC was $0 in 2002 and $17,000,000 in 2001. The assessment of goodwill in 2001 was based on historical operating results, estimated future cash flows, and the estimated market values of similar entities. As of October 1, 2002, the Company performed the annual impairment test required under SFAS No. 142 to test impairment.

Restructuring Charge.For the years ended December 31, 2002 and 2001 the Company recognized restructuring charges of $2,499,000 and $985,000, respectively, related to severance payments and the termination of leases. See Note 3 of Notes to Consolidated Financial Statements.

Interest Expense. Interest expense was $929,000 in 2002 compared to $1,073,000 and $1,084,000 in 2001 and 2000, respectively. The decrease in interest expense in 2002 was primarily due to the repurchase of an additional $2,930,000 principal amount of the Company’s Convertible Subordinated Notes due 2006 (“Convertible

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Subordinated Notes”) in the fourth quarter of 2001. The decrease in interest expense in 2001 was primarily due to the expiration of capital leases in the first quarter of 2001.

Interest and Other Income, Net. Interest and other income, net primarily represents interest earned on cash and cash equivalents and marketable securities. Interest and other income, net was $891,000 in 2002 compared to $3,479,000 and $12,914,000 in 2001 and 2000, respectively. The decrease in interest income in 2002 compared to 2001 and 2000 was primarily attributable to a lower invested cash balance and lower interest rates.

Loss on Equity Investments. Several of the Company’s equity investments in certain Internet companies, primarily its investment in MVP, were written off in 2000 in the amount of $127,653,000 while the remainder of such investments in the amount of $28,000 was written off in 2001. There was no loss on equity investments in 2002. During the third and fourth quarters of 2000, the Company deemed its investment in MVP to be permanently impaired and wrote off the entire value of that investment. The Company’s determination was based on the market downturn during the third and fourth quarters of 2000 which caused similar declines in the market values of publicly-traded Internet e-commerce companies, the difficulty experienced by MVP in raising additional capital and an assessment of MVP’s financial condition and prospects. MVP ceased operations in January 2001.

Gain on Termination of Advertising Agreements.Due to the termination of the Company’s relationships with MVP and Internet Sports Network during 2000, the Company was no longer obligated to perform under either of these agreements. In December 2000, the Company recorded a gain related to the recognition of deferred revenue from these agreements of $78,766,000, net of an expense accrual of $2,673,000 for tax expense and potential expenses related to the MVP liquidation, such as assumption of leases and legal expenses. In December 2001, the Company reversed the remaining accrual of $2,051,000 having deemed the MVP liquidation substantially complete. There was no gain on termination of agreements in 2002.

Gain on Sale of E-Commerce Subsidiaries. Effective January 1, 2000, the Company sold to MVP three of its subsidiaries, which engaged in e-commerce activity (International Golf Outlet, Inc., Golf Club Trader, Inc. and TennisDirect.com, Inc.). The sale resulted in a one-time gain of $7,814,000, net of taxes, in 2000.

Gain on Extinguishment of Debt.During the fourth quarter of 2001, the Company repurchased $2,930,000 of its Convertible Subordinated Notes for approximately $500,000 and, as a result, recognized a gain of $2,404,000, net of unamortized debt issuance costs. SFAS No. 145,Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections, eliminates the previous requirement under FASB Statement No. 4,Reporting Gains and Losses from Extinguishment of Debt,to report gains and losses from extinguishments of debt as extraordinary items in the income statement. The Company adopted SFAS No. 145 on July 1, 2002, and accordingly reclassified the extraordinary gain of $2,404,000 that occurred from its extinguishment of debt in 2001 to other non-operating income.

Effect of Deconsolidation of Sports.com. In accordance with United States generally accepted accounting principles, the Company recorded in 2001 the effect of the deconsolidation of Sports.com in the amount of $41,739,000. On July 17, 2001, Sports.com raised approximately $13,000,000 in equity funding from its existing investors. After giving effect to the funding, the Company’s fully diluted ownership stake in Sports.com, including all outstanding warrants and management options, was approximately 30%. As a result of the Company’s reduced ownership interest in Sports.com and a reduction in the Company’s representation on Sports.com’s board of directors to less than a majority, as of July 17, 2001 the Company no longer consolidated the results of Sports.com and accounted for its investment in Sports.com under the equity method of accounting.

Income Taxes. No provision for Federal and state income taxes has been recorded as the Company incurred net operating losses for each period presented. As of December 31, 2002, the Company had approximately $185,000,000 of net operating loss carryforwards for Federal income tax purposes, expiring beginning in 2009, available to offset future taxable income. Additionally, the Company had approximately $93,000,000 of capital loss carryforwards. SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets reported, if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full

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valuation allowance is necessary to reduce the deferred income tax assets to zero. See Note 11 of Notes to Consolidated Financial Statements.

In 2002, the Company recorded a tax benefit of $720,000 due to a refund of alternative minimum taxes paid in 2001.

Quarterly Results of Operations (unaudited)

The tables below set forth the quarterly operating results for 2002 and 2001. This information is unaudited, and in the opinion of the Company reflects all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of such information in accordance with United States generally accepted accounting principles. The results for any quarter are not necessarily indicative of results for any future period.

	2002
	Quarter Ended
	(As Restated, see Note 2) (in thousands, except for share and per share data)
	Mar. 31			Jun. 30			Sep. 30			Dec. 31
Revenue	$	16,191		$	11,029		$	15,526		$	19,889
Cost of revenue		4,956			5,230			6,669			7,266
Gross profit		11,235			5,799			8,857			12,623
Operating expenses:
Product development		621			551			500			460
Sales and marketing:
Amortization of equity issued to Viacom for promotion		6,321			6,322			5,821			5,572
Other		7,588			6,030			5,474			5,581
General and administrative		6,605			5,816			5,836			5,171
Depreciation and amortization		2,928			2,679			3,082			2,417
Write-down of goodwill		—			—			—			2,650
Restructuring charges		—			1,398			1,101			—
Total operating expenses		24,063			22,796			21,814			21,851
Loss from operations		(12,828	)		(16,997	)		(12,957	)		(9,228	)
Interest expense		(227	)		(227	)		(228	)		(246	)
Interest and other income, net		210			185			176			319
Loss before tax benefit		(12,845	)		(17,039	)		(13,009	)		(9,155	)
Tax benefit		—			—			720			—
Net loss	$	(12,845	)	$	(17,039	)	$	(12,289	)	$	(9,155	)
Net loss per share—basic	$	(0.38	)	$	(0.50	)	$	(0.34	)	$	(0.25	)
Weighted average common and common equivalent shares outstanding
Basic		34,192,103			34,149,729			36,028,554			37,024,527

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	2001
	Quarter Ended
	(As Restated, see Note 2) (in thousands, except for share and per share data)
	Mar. 31			Jun. 30			Sep. 30			Dec. 31
Revenue	$	22,298		$	13,132		$	13,601		$	14,729
Cost of revenue		11,335			8,206			7,281			6,062
Gross profit		10,963			4,926			6,320			8,667
Operating expenses:
Product development		521			462			468			403
Sales and marketing:
Amortization of equity issued to Viacom for promotion		5,072			5,072			5,072			5,072
Other		14,575			10,962			9,289			7,124
General and administrative		13,373			9,501			7,050			5,849
Depreciation and amortization		6,642			6,766			6,224			8,187
Write-down of goodwill		—			—			17,000			4,600
Restructuring charges		—			985			—			—
Total operating expenses		40,183			33,748			45,103			31,235
Loss from operations		(29,220	)		(28,822	)		(38,783	)		(22,568	)
Interest expense		(276	)		(268	)		(267	)		(262	)
Interest and other income, net		1,617			918			584			332
Gain on termination of agreements		—			—			—			2,051
Gain on extinguishment of debt		—			—			—			2,404
Effect of deconsolidation of Sports.com		—			—			41,739			—
Net income (loss)	$	(27,879	)	$	(28,172	)	$	3,273		$	(18,043	)
Net income (loss) per share—basic	$	(1.04	)	$	(1.04	)	$	0.12		$	(0.66	)
Net income (loss) per share—diluted	$	(1.04	)	$	(1.04	)	$	0.12		$	(0.66	)
Weighted average common and common equivalent Shares outstanding
Basic		26,821,619			27,103,878			28,367,690			27,476,011
Diluted		26,821,619			27,103,878			28,383,024			27,476,011

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Liquidity and Capital Resources

As of December 31, 2002, the Company’s primary source of liquidity consisted of $17,383,000 in cash and cash equivalents.As of December 31, 2002, the Company also had $3,866,000 in current marketable securities, which mature at various dates from January 2003 to March 2003, and $16,376,000 in non-current marketable securities, which have an average maturity of between twelve and eighteen months. The Company believes that its current cash and marketable securities will be sufficient to fund its working capital and capital expenditure requirements for at least the next 12 months. However, the Company expects to continue to incur significant operating losses for at least the next 12 months. To the extent the Company requires additional funds to support its operations or the expansion of its business, the Company may sell additional equity, issue debt or convertible securities or obtain credit facilities through financial institutions. The sale of additional equity or convertible securities will result in additional dilution to the Company’s stockholders. There can be no assurance that additional financing, if required, will be available to the Company in amounts or on terms acceptable to the Company.

As of December 31, 2002, deferred advertising and content costs related to the CBS Agreement totaled $9,143,000. These costs represent the value of the common stock warrants issued at the time of the renewal in exchange for the CBS Agreement extension. Accrued liabilities totaled $9,216,000 as of December 31, 2002, an increase of $1,017,000 from December 31, 2001, primarily due to increases in accruals for cost of revenue sharing and payroll charges. Long-term liabilities, excluding the outstanding balance of the Convertible Subordinated Notes, at December 31, 2002 were $6,883,000 compared to $3,868,000 in 2001, an increase of $3,015,000, mainly due to the increase in the accrual related to the NFL agreement.

Net cash used in operating activities was $7,127,000, $40,916,000 and $34,257,000 for 2002, 2001 and 2000, respectively. The principal uses of cash used in operating activities for all periods were to fund the Company’s net losses from operations, partially offset by amortization of equity issued to Viacom, increases in accrued liabilities, depreciation and amortization and other non-cash charges.

Net cash used in investing activities was $5,390,000 in 2002 and $5,995,000 in 2000, and net cash provided by investing activities was $21,934,000 in 2001. Investing activities in 2002 consisted primarily of net purchases of marketable securities and to a lesser extent purchases of property and equipment. Investing activities in 2001 consisted primarily of net proceeds from maturity of marketable securities offset by purchases of property and equipment and intangible assets and the Company’s investment in Sports.com. The principal uses in 2000 were for purchases of property and equipment offset by net proceeds from the maturity of marketable securities.

Net cash used in financing activities was $117,000 and $17,714,000 for 2002 and 2001, respectively. Net cash provided by financing activities was $66,474,000 for 2000. Financing activities in 2002 consisted primarily of the repurchase of restricted shares of common stock from a former employee. Financing activities in 2001 consisted principally of the repurchase of the Consideration Shares from DBC for $12,500,000 and the repurchase of 2,500,500 shares of the Company’s common stock for aggregate consideration of $5,074,000 on the open market. Financing activities in 2000 consisted principally of the issuance of a private placement of preferred stock by Sports.com and the exercise of warrants by CBS. In January 2000, Sports.com raised $52,500,000 through the issuance of Series B Preferred Stock. In February 2000, CBS exercised warrants to purchase 500,000 shares of Common Stock resulting in net proceeds of $11,500,000.

Convertible Subordinated Notes in an aggregate principal amount of approximately $16,678,000 were outstanding as of December 31, 2002. The Convertible Subordinated Notes mature in 2006.

The Company has entered into various licensing, royalty and consulting agreements with content providers, vendors and sports organizations, which agreements provide for consideration in various forms, including issuance of warrants to purchase Common Stock and payment of royalties, bounties and certain other guaranteed amounts on a per member and/or a minimum dollar amount basis over terms remaining of one to four years. Additionally, some of these agreements provide for a specified percentage of advertising and merchandising revenue to be paid to the organization from whose Web site the revenue is derived. As of December 31, 2002, the minimum guaranteed payments required to be made by the Company under such agreements, including the

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Company’s agreements with the NFL, the PGA TOUR and AOL, totaled $31,286,000, of which $5,000,000 is payable in stock at prevailing market prices in lieu of cash at the Company’s option.

The following contractual obligations and commercial commitments are payable during the periods stated:

	Years Ending December 31,
	(In thousands)
Type of obligation	Total		2003			2004			2005		2006		2007		Thereafter
Long-term debt	$	16,678	$	—		$	—		$	—	$	16,678	$	—	$	—
Operating leases		11,363		2,128			1,522			1,355		1,403		1,459		3,496
Other long-term obligations		31,286		12,896	(1)		9,355	(2)		7,105		1,930		—		—
Total obligations	$	59,327	$	15,024		$	10,877		$	8,460	$	20,011	$	1,459	$	3,496

(1) $2,333 of which is payable in stock at prevailing market prices in lieu of cash at the Company’s option.

(2) $2,666 of which is payable in stock at prevailing market prices in lieu of cash at the Company’s option.

The Company has entered into an agreement with a third-party vendor to purchase approximately $1,000,000 worth of computer hardware over a three-year period. This purchase is part of the Company’s plan to continue to invest in equipment related to the expected growth of the business. To date, the Company has purchased $720,000 of equipment under the agreement. In addition, the Company anticipates purchasing approximately $1,000,000 of additional property and equipment during 2003. These capital expenditures will primarily be computer equipment related to the growth of the business. Additionally, the Company intends to continue to pursue acquisitions of or investments in businesses, services and technologies that are complementary to those of the Company.

Related Party Transactions

The Company has had transactions in the normal course of business with certain officers and directors of the Company. The terms of these transactions were:

In April 2001, the Company loaned Peter Pezaris, the Company’s President, Operations and Product Development, $200,000 at an annual interest rate of 5.5% secured by 50,000 shares of the Company’s common stock owned by Mr. Pezaris. The loan was made in connection with Mr. Pezaris’ relocation from New York to the Company’s Fort Lauderdale headquarters. The loan and accrued interest were paid in full by Mr. Pezaris in December 2001.

The Company contracts for endorsement and other services of Joe Namath through Planned Licensing, Inc., which is a wholly-owned subsidiary of Namanco Productions, Inc. whose president and sole stockholder is a director of the Company. The Company has an agreement with Planned Licensing, Inc. through October 16, 2004. The Company incurred consulting and royalty expenses related to services provided by Planned Licensing, Inc. of $201,000, $207,000 and $267,000 in 2002, 2001 and 2000, respectively. Additionally, in 2000 the Company issued 30,000 common stock warrants to Planned Licensing, Inc. that vest over the life of the agreement. The Company is obligated to make future minimum payments to Planned Licensing, Inc. totaling $350,000 under this agreement through 2004.

The Company has a strategic alliance with CBS. As of March 28, 2003, CBS and its affiliates beneficially owned approximately 32% of SportsLine’s outstanding common stock and pursuant to the terms of the CBS Agreement, as amended in March 2003, SportsLine will issue additional shares of common stock to CBS on April 1, 2003 which will bring their ownership interest to approximately 39.9% of the Company’s outstanding stock. See “Business—Strategic Relationships—CBS,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Recent Developments.”

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Seasonality

The Company expects that its revenue will be higher leading up to and during major U.S. sports seasons and lower at other times of the year, particularly during the summer months. In addition, the effect of such seasonal fluctuations in revenue could be enhanced or offset by revenue associated with major sports events, such as the Olympics, the Ryder Cup and the World Cup, although such events do not occur every year. The Company believes that advertising sales in traditional media, such as television, generally are lower in the first and third calendar quarters of each year, and that advertising expenditures fluctuate significantly with economic cycles. Historically, the first and fourth quarters of each year have been the strongest for the Company due to the timing of major U.S. sporting events and major sports seasons. Furthermore, the Company has experienced growth in its revenue from fantasy football products affecting the third and fourth quarter. Depending on the extent to which the Internet is accepted as an advertising medium, seasonality and cyclicality in the level of Internet advertising expenditures could become more pronounced. The foregoing factors could have a material adverse effect on the Company’s business, results of operations and financial condition.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 142,Goodwill and Other Intangible Assets. SFAS No. 142 addresses financial accounting and reporting for intangible assets acquired individually or with a group of other assets (but not acquired in a business combination) at acquisition. SFAS No. 142 also addresses financial accounting and reporting for goodwill and other intangible assets subsequent to acquisition. With the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test, with the initial test required by June 30, 2002. SFAS No. 142 prescribes a two-phase process for impairment testing of goodwill. The first phase of the impairment test is designed to identify potential impairment; while the second phase (if necessary), measures the impairment. The impairment loss is the amount, if any, by which the implied fair value of goodwill is less than the book carrying value. SFAS No. 142 is effective for fiscal years beginning after September 30, 2001. The Company adopted SFAS No. 142 as of January 1, 2002, and its first phase impairment analysis, completed by the Company in May 2002, found no instances of impairment of its recorded goodwill; accordingly, the second testing phase, was not necessary. The Company has performed the annual impairment test required under SFAS No. 142 to test impairment as of October 1, 2002. As a result, the Company recorded a goodwill write-down of $2,650,000 to adjust the value of its investment in DBC Sports to its estimated fair value.

In October 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, which is applicable to financial statements issued for fiscal years beginning after December 15, 2001. The FASB’s new rules on asset impairment supercede SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and portions of Accounting Principles Board (“APB”) Opinion No. 30,Reporting the Results of Operations. SFAS No. 144 provides a single accounting model for long-lived assets to be disposed of and significantly changes the criteria that would have to be met to classify an asset as held-for-sale. Classification as held-for-sale is an important distinction since such assets are not depreciated and are stated at the lower of fair value or carrying amount. SFAS No. 144 also requires expected future operating losses from discontinued operations to be displayed in the period(s) in which the losses are incurred, rather than as of the measurement date as presently required. The adoption of SFAS No. 144 on January 1, 2002 did not have a material impact on the Company’s consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections,which is generally applicable to financial statements for fiscal years beginning after May 15, 2002; however, early adoption is encouraged. SFAS No. 145 eliminates the requirement under SFAS No. 4,Reporting Gains and Losses from Extinguishment of Debtto report gains and losses from extinguishments of debt as extraordinary items in the income statement. The Company adopted SFAS No. 145 on July 1, 2002, and has accordingly reclassified the extraordinary gains of $2,404,000 and $36,027,000, which occurred from its extinguishment of debt in the fourth quarter of 2001 and third and fourth quarters of 1999, respectively.

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In June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities,which is generally applicable to financial statements for fiscal years beginning after December 31, 2002; however early adoption is encouraged. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The Company adopted SFAS No. 146 on July 1, 2002, and it did not have a material impact on the Company’s consolidated financial statements.

In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involve the delivery or performance of multiple products, services, and/or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a stand-alone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. The provisions of this consensus are not expected to have a significant effect on the Company’s financial position or operating results.

In December 2002, the FASB issued SFAS No. 148“Accounting for Stock-Based Compensation—Transition and Disclosure.” This statement amends SFAS No. 123 “Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock—based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method used on reported results. The disclosure provisions of this standard are effective for fiscal years ending after December 15, 2002 and have been incorporated in the Company’s consolidated financial statements and notes thereto.

Risk Factors That May Affect Future Results

SportsLine’s business and the value of its stock are subject to a number of risks. Some of those risks are described below.

We operate in a difficult market environment.

The Internet-based advertising, information services and commerce markets in which we operate experience frequent and substantial changes. Additionally, we face intense competition and we must effectively manage our growth and respond quickly to rapid changes in customer demands and industry standards. To address these risks, among others, we must provide compelling and original content to our users, maintain our existing relationships and effectively develop new relationships with advertisers, advertising agencies and other third parties, develop and upgrade our technology and respond to competitive developments, and attract, retain and motivate qualified personnel. We may not succeed in addressing these challenges and risks.

We have an accumulated deficit and we anticipate further losses.

We have incurred significant losses since we began doing business and it is possible that we may never generate sufficient revenue to meet our expenses or achieve or maintain profitability. We incurred net losses of $35.5 million during 1998, $17.1 million during 1999, $106.1 million during 2000, $70.8 million during 2001 and $51.3 million during 2002. As of December 31, 2002, we had an accumulated deficit of $337.7 million. We expect to continue to incur operating losses for at least the next twelve months.

Since inception, we have incurred substantial costs to develop and enhance our technology, to create, introduce and enhance our service offerings, to acquire and develop content, to build traffic on our Web sites, to acquire members, to establish marketing relationships and to build an administrative organization and we intend to continue these efforts. We have entered into various licensing, royalty and consulting agreements with content providers, vendors, athletes and sports organizations, including, among others, the NFL, the PGA TOUR and AOL,

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which agreements provide for consideration in various forms, including issuance of shares of our common stock and/or warrants to purchase shares of our common stock and payment of royalties, bounties and certain other guaranteed amounts on a per member and/or a minimum dollar amount basis over terms ranging from one to ten years. Additionally, some of these agreements provide for a specified percentage of advertising and merchandising revenue to be paid to the athlete or organization from whose Web site the revenue is derived. As of December 31, 2002, the minimum guaranteed payments we were required to make under such agreements totaled $31,286,000, of which $5,000,000 is payable in stock at prevailing market prices in lieu of cash at the Company’s option. See “—Liquidity and Capital Resources.” Also, we recorded non-cash expense of approximately $22,000,000 and $17,000,000 in each of the years ended December 31, 2002 and 2001, related to our agreement with CBS and will record an additional $89,000,000 of non-cash expense over the remaining term of our agreement with CBS.

We may need additional capital and the future funding of these capital needs is uncertain.

As of December 31, 2002, our primary source of liquidity consisted of $17,383,000 in cash and cash equivalents, $3,866,000 in current marketable securities, which mature at various dates from January 2003 to March 2003, and $16,376,000 of long-term marketable securities with average maturity dates between twelve and eighteen months. We believe that our current cash and marketable securities will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. However, we expect to continue to incur significant operating losses for such period. To the extent we require additional funds to support our operations or the expansion of our business, we may need to sell additional equity, issue debt or convertible securities or obtain credit facilities through financial institutions. The sale of additional equity or convertible securities will result in additional dilution to our stockholders and the rights, preferences or privileges of the new security holders may be senior to those of the existing common stockholders. If we are unable to raise additional funds on favorable terms, we may be required to cut our expenditures, which may affect our ability to expand our business, support our operations and generate sustained revenues. There can be no assurance that additional financing, if required, will be available in amounts or on terms acceptable to us or at all.

Financial results for any particular period will not predict results for future periods.

There can be no assurance that the purchasing pattern of customers advertising on the SportsLine network of Web sites will not continue to fluctuate, that advertisers will not make smaller and shorter-term purchases, or that market prices for online advertising will not decrease due to competitive or other factors. In addition, there can be no assurance that consumers will continue to purchase memberships or the fantasy and other subscription and premium products we offer at the times or in the same volumes as they have in any particular sports season or fiscal period. Because of the rapidly changing market we serve, period-to-period comparisons of operating results are not likely to be meaningful. You should not rely on the results for any period as an indication of future performance.

Our quarterly results may fluctuate seasonally.

We expect that our revenue will be higher leading up to and during major U.S. sports seasons and lower at other times of the year, particularly during the summer months. In addition, the effect of such seasonal fluctuations in revenue could be enhanced or offset by revenue associated with major sports events, such as the Olympics and World Cup events, although such events do not occur every year. We believe that advertising sales in traditional media, such as television, generally are lower in the first and third calendar quarters of each year, and that advertising expenditures fluctuate significantly with economic cycles. The growth of our subscription fantasy business may heighten such seasonal fluctuations based on major U.S. sports seasons. Depending on the extent to which the Internet is accepted as an advertising medium, seasonality and cyclicality in the level of Internet advertising expenditures could become more pronounced in which case our revenues may be affected by such seasonal and cyclical patterns.

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We rely heavily on revenues derived from Internet advertising, which are subject to uncertain demand from our current and potential clients and are difficult to forecast accurately.

Currently, the majority of our revenues come from advertisements displayed on our online properties. Our ability to continue to achieve substantial advertising revenue depends upon:

• growth of our user base;

• our user base being attractive to advertisers;

• our ability to derive better demographic and other information from our users;

• acceptance by advertisers of the Web as an advertising medium; and

• our ability to transition and expand into other forms of advertising.

Most of our revenues are currently derived from agreements with advertisers or sponsorship arrangements. These agreements generally have terms no longer than three years and, in many cases, the terms are much shorter. In cases where the advertiser is providing services, the agreements often have payments contingent on usage levels. Accordingly, it is difficult to accurately forecast these revenues. However, our expense levels are based in part on expectations of future revenues and are fixed over the short term with respect to certain categories. We may be unable to adjust spending quickly enough to compensate for any unexpected revenue shortfall. Accordingly, the cancellation or deferral of advertising or sponsorship contracts could have a material adverse effect on our financial results. Although none of our advertising clients accounted for more than 9% of our consolidated revenue during 2002, if we lose several of our more significant advertising clients, or if these clients substantially reduce their advertising purchases from us, our advertising revenues could be adversely affected.

Our revenues also could be adversely affected if we are unable to adapt to other Internet advertising pricing models that are adopted as industry standard. It is difficult to predict which, if any, pricing models for Internet advertising will emerge as the industry standard. This makes it difficult to project our future advertising rates and revenues.

The rate structure of some of our sponsorship arrangements subjects us to financial risk.

A key element of our strategy is to generate advertising revenues through sponsored services and placements by third parties in our online media properties in addition to banner advertising. We typically receive sponsorship fees or a portion of transaction revenues in return for minimum levels of user impressions to be provided by us. These arrangements expose us to potentially significant financial risks in the event our usage levels decrease, including the following:

• the fees we are entitled to receive may be adjusted downwards;

• we may be required to “make good” on our obligations by providing alternative services;

• the sponsors may not renew the agreements or may renew at lower rates; and

• the arrangements may not generate anticipated levels of shared transaction revenues, or sponsors may default on the payment commitments in such agreements as has occurred in the past.

Accordingly, any leveling off or decrease of our user base or the failure to generate anticipated levels of shared transaction revenues could result in a significant decrease in our revenue levels.

We rely upon our strategic relationships in order to execute our business plan.

In March 1997, we entered into a five-year agreement with CBS, pursuant to which our flagship Web site was renamed “cbs.sportsline.com.” We amended our agreement with CBS in February 1999 to extend the term through 2006. Over the term of the agreement, we have the right to use certain CBS logos and television-related sports content and will receive extensive network television advertising and on-air promotions. This network television advertising and on-air promotions, as well as the association of our brand with CBS, are important elements of our strategy to increase awareness of the SportsLine brand and build traffic on our Web sites. Under the agreement, CBS has the right to receive specified percentages of our net revenues. The agreement requires us to maintain and operate our flagship Web site, cbs.sportsline.com, in accordance with certain guidelines and restrictions and to cease using any content on cbs.sportsline.com which CBS determines conflicts, interferes with or is detrimental to the reputation or business of CBS or which becomes subject to any third party restriction or claim which would prohibit, limit or restrict the use of such content on the Internet. CBS has the right to terminate the

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agreement upon the acquisition by a CBS competitor of 40% or more of the voting power of our equity securities or in certain other circumstances, including if we breach a material term or condition of the agreement or if we become insolvent or subject to bankruptcy or similar proceedings.

The Company believes that its relationship with CBS, in particular the branding of its flagship Web site as “cbs.sportsline.com” and the promotion the Company receives on CBS television broadcasts, has been important in establishing SportsLine as a broadly recognized consumer brand. We cannot assure you that CBS will perform its obligations under the agreement. If the agreement with CBS were to terminate and the Company was unable to establish a strategic relationship with another promotional partner of similar stature on similar or more favorable terms, it could have a material adverse effect on our business, results of operations and financial condition.

In addition to our relationship with CBS, we have entered into strategic relationships with other parties including the NFL, the NCAA, AOL and the PGA TOUR, and various sports superstars and personalities and other sports organizations. We rely on these relationships to increase awareness of our brand among consumers, to create revenue opportunities and to obtain content for our Web sites. We cannot assure you that a party to any of our strategic agreements will perform its obligations as agreed or that we will be able to specifically enforce any such agreement. Many of these strategic agreements are short-term in nature and either party on short notice may terminate certain of these agreements. Our failure to maintain or renew these existing strategic relationships, to establish additional strategic relationships or to fully capitalize on any such relationship could have a material adverse effect on our business, results of operations and financial condition.

CBS beneficially owns approximately 32% of our outstanding common stock and their interests could conflict with yours.

As of March 28, 2003, CBS and its affiliates beneficially owned approximately 32% of SportsLine’s outstanding common stock and pursuant to the terms of our agreement with CBS, as amended in March 2003, we will issue additional shares of common stock to CBS on April 1, 2003 which will bring their ownership interest to approximately 39.9% of our outstanding stock. Messrs. Sean McManus and Russell Pillar, members of our board of directors, are also employees of CBS and Viacom Inc., the parent company of CBS, respectively. As a result of CBS’s ownership stake and representation on our board of directors, CBS may be able to significantly influence matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Furthermore, pursuant to our agreement with CBS, upon a change of control we may be required to accelerate the issuance of shares of common stock that are otherwise scheduled to be issued over the term of our agreement. Such concentration of ownership and the provision for the acceleration of future stock issuances may have the effect of delaying or preventing a change in control of SportsLine. In addition, sales of significant amounts of shares held by CBS, or the prospect of these sales, could adversely affect the market price of our common stock.

We may not be able to compete successfully.

The market for Internet services and products is highly competitive and we expect that competition will continue to intensify. Competition could result in less user traffic to our Web sites, price reductions for our advertising, reduced margins or loss of market share, any of which would have a material adverse effect on our business, results of operations and financial condition.

We compete, directly and indirectly, for advertisers, viewers, members, content providers, merchandise sales and rights to sports events with the following categories of companies:

• Web sites targeted to sports enthusiasts generally (such as espn.com, si.com, sports.yahoo.com and foxsports.com) or to enthusiasts of particular sports (such as Web sites maintained by the NBA, MLB and the NHL),

• publishers and distributors of traditional off-line media (such as television, radio and print), including those targeted to sports enthusiasts, many of which have established or may establish Web sites,

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• general purpose consumer online services such as AOL and MSN, each of which provides access to sports-related content and services,

• vendors of sports information, merchandise, products and services distributed through other means, including retail stores, mail, facsimile and private bulletin board services, and

• Web search and retrieval services and portals, such as Google, Lycos, Netscape and Yahoo!, and other high-traffic Web sites.

Our ability to compete depends on many factors, many of which are outside of our control. These factors include the quality of content provided by us and by our competitors, the ease of use of services developed either by us or by our competitors, the timing and market acceptance of new and enhanced services developed either by us or by our competitors, and sales and marketing efforts by us and our competitors.

Based on our review of publicly available documents, we believe some of our existing competitors, as well as potential new competitors, have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition and substantially larger user or membership bases than we do. This may allow them to devote greater resources than we can to the development and promotion of their services. In addition, some of these competitors may be able to respond more quickly than us to new or emerging technologies and changes in Internet user requirements and to devote greater resources than us to the development, promotion and sale of their services. There can be no assurance that our current or potential competitors will not develop products and services comparable or superior to those developed by us or adapt more quickly than us to new technologies, evolving industry trends or changing Internet user preferences. In addition, as we expand internationally we are likely to face new competition. There can be no assurance that we will be able to compete successfully against current and future competitors, or that competitive pressures would not have a material adverse effect on our business, results of operations and financial condition.

More individuals are utilizing non-PC devices to access the Internet and we may not be successful in developing a version of our service that will gain widespread adoption by users of such devices.

In the coming years, the number of individuals who access the Internet through devices other than a personal computer (such as personal digital assistants, cellular telephones and television set-top devices) is expected to increase dramatically. Our services are designed for rich, graphical environments such as those available on personal and laptop computers. The lower resolution, functionality and memory associated with alternative devices may make the use of our services through such devices difficult and we may be unsuccessful in our efforts to modify our online properties to provide a compelling service for users of alternative devices. As we have limited experience to date in operating versions of our service developed or optimized for users of alternative devices, it is difficult to predict the problems we may encounter in doing so and we may need to devote significant resources to the creation, support and maintenance of such versions. If we are unable to attract and retain a substantial number of alternative device users to our online services, we may fail to capture a sufficient share of an increasingly important portion of the market for online services. Further, as the majority of our revenues are derived through the sale of banner and other advertising optimized for a personal computer screen, we may not be successful at developing a viable strategy for deriving substantial revenues from online properties that are directed at the users of alternative devices. Any failure to develop revenue-generating online properties that are adopted by a significant number of alternative device users could have a material adverse effect on our business, operating results and financial condition.

We are dependent on certain content providers and are required to make significant payments to such content providers

We rely on independent content providers, including professional sports organizations, for sports news, scores, statistics and other sports information. Our future success depends, in significant part, on our ability to maintain and renew our relationships with these content providers and to build new relationships with other content providers. Our agreements with content providers generally are short-term and may be terminated by the content provider if we fail to fulfill our obligations under the applicable agreement. Some of our content providers compete with one another and, to some extent, with us for advertising and members. Termination of one or more significant

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content provider agreements would decrease the availability of sports news and information which we can offer our customers and could have a material adverse effect on our business, results of operations and financial condition.

Most of our agreements with content providers are nonexclusive, and many of our competitors offer, or could offer, content that is similar or the same as that obtained by us from such content providers. In addition, the growing reach and use of the Internet have further intensified competition in this industry. Consumers have gained free access to certain information provided directly on the Internet by certain content providers. To the extent that content providers, including but not limited to our current suppliers, provide information to users at a lower cost than us or at minimal or no cost, our business, results of operations and financial condition could be materially adversely affected.

Fees payable to content providers constitute a significant portion of our cost of revenue. There can be no assurance that these content providers will enter into or renew agreements with us on the same or similar terms as those currently in effect. If we are required to increase the fees payable to our content providers, such increased payments could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to protect our proprietary rights and we may infringe the proprietary rights of others

Proprietary rights are important to our success and competitive position. In 1996, we were issued a United States trademark registration for our former SportsLine USA logo. We have applied to register in the United States a number of marks, several of which include the term “SportsLine.” We have filed applications to register “SportsLine” marks in Australia, the United Kingdom and other countries. We cannot assure you that we will be able to secure adequate protection for these trademarks in the United States or in foreign countries. Although we seek to protect our proprietary rights, our actions may be inadequate to protect any trademarks and other proprietary rights or to prevent others from claiming violations of their trademarks and other proprietary rights. In addition, effective copyright and trademark protection may be unenforceable or limited in certain countries, and the global nature of the Internet makes it impossible to control the ultimate destination of our work. We also license content from third parties and it is possible that we could become subject to infringement actions based upon the content licensed from those third parties. We generally obtain representations as to the origin and ownership of such licensed content; however, this may not adequately protect us. Any of these claims, with or without merit, could subject us to costly litigation and divert the attention of our technical and management personnel.

We hold rights to various Web domain names, including “cbs.sportsline.com,” “golfweb.com” and “vegasinsider.com,” among others. Governmental agencies typically regulate domain names. These regulations are subject to change. We may not be able to acquire or maintain appropriate domain names in all countries in which we do business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary rights.

Our business is at risk of system failures, delays and inadequacy

The performance of our Web sites is critical to our reputation and ability to attract and retain users, advertisers and members. Services based on sophisticated software and computer systems often encounter development delays and the underlying software may contain undetected errors or failures when introduced. Any system error or failure that causes interruption in availability or an increase in response time could result in a loss of potential or existing users, advertisers or members and, if sustained or repeated, could reduce the attractiveness of our Web sites to users and advertisers. A sudden and significant increase in the number of users of our Web sites also could strain the capacity of the software, hardware or telecommunications systems we deploy, which could lead to slower response time or system failures. In addition, if the number of Web pages or users of our Web sites increases substantially, our hardware and software infrastructure may not be able to adequately handle the increased demand. Our operations also are dependent upon receipt of timely feeds and computer downloads from content providers, and any failure or delay in the transmission or receipt of such feeds and downloads, whether on account of our system failure, our content providers, the public network or otherwise, could disrupt our operations. Any failure or delay that causes interruptions in our operations could have a material adverse effect on our business, results of operations and financial condition.

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Our success is dependent on our key personnel

Our future success depends, in part, upon the continued service of our senior management and other key personnel. Although we have entered into employment agreements with Michael Levy, our President and Chief Executive Officer, and each of our other executive officers, the loss of his services or the services of one or more of our other executive officers or key employees could have a material adverse effect on our business, results of operations and financial condition. Our future success also depends on our continuing ability to attract and retain highly qualified technical, editorial and managerial personnel. We have, at times, experienced difficulties in attracting the desired number of such individuals.

We may not be able to adapt as Internet technologies and customer demands continue to evolve

To be successful, we must adapt to rapidly changing Internet technologies by continually enhancing our Web sites and introducing new services to address our customers’ changing demands. We could incur substantial costs if we need to modify our services or infrastructure in order to adapt to changes affecting providers of Internet services. Our business, results of operations and financial condition could be materially adversely affected if we incur significant costs to adapt, or cannot adapt, to these changes.

Concerns regarding security of transactions and transmitting confidential information over the Internet

A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information. We cannot assure you that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not result in a compromise or breach of the algorithms we use to protect customer transaction data. If any such compromise of our security were to occur it could have a material adverse effect on our business, results of operations and financial condition. If someone is able to circumvent our security measures, such person could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Concerns over the security of Internet transactions and the privacy of users may also inhibit the growth of the Internet generally, and the Web in particular, especially as a means of conducting commercial transactions. To the extent that our activities or the activities of third party contractors involve the storage and transmission of proprietary information, such as credit card numbers, security breaches could expose us to a risk of loss or litigation and possible liability. We cannot assure you that our security measures will prevent security breaches or that failure to prevent such security breaches would not have a material adverse effect on our business, results of operations and financial condition.

Regulatory and legal uncertainties could harm our business

The application of existing laws and regulations to SportsLine and its advertising clients with respect to issues such as the protection of databases, user privacy, pricing, advertising, taxation, gambling, sweepstakes, promotions, content regulation, quality of products and services and intellectual property ownership and infringement can be unclear. In addition, SportsLine or its clients may also be subject to new laws and regulations directly applicable to our respective activities. Any existing or new legislation applicable to SportsLine could expose it to substantial liability, including significant expenses necessary to comply with such laws and regulations, and dampen the growth in use of the Web. Any new laws or regulations applicable to any of our advertising clients may reduce or eliminate their ability or desire to advertise their services on our online properties and could therefore have a material adverse effect on our business, results of operations and financial condition.

Several Federal laws could have an impact on SportsLine’s business. The Digital Millennium Copyright Act is intended to reduce the liability of online service providers for listing or linking to third-party Web sites that include materials that infringe copyrights or other rights of others. The Children’s Online Protection Act and the Children’s Online Privacy Protection Act are intended to restrict the distribution of certain materials deemed harmful to children and impose additional restrictions on the ability of online services to collect user information from minors. In addition, the Protection of Children From Sexual Predators Act of 1998 requires online service providers

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to report evidence of violations of Federal child pornography laws under certain circumstances. Such legislation may impose significant additional costs on our business or subject us to additional liabilities.

SportsLine posts its privacy policy and practices concerning the use and disclosure of user data. Any failure by the Company to comply with its posted privacy policy, requirements of the FTC regarding user privacy, or other privacy-related laws and regulations could result in proceedings by the FTC or others which could potentially have an adverse effect on SportsLine’s business, results of operations and financial condition. In this regard, there are a large number of legislative proposals before the United States Congress and various state legislative bodies regarding privacy issues related to SportsLine’s business. It is not possible to predict whether or when such legislation may be adopted, and certain proposals, if adopted, could materially and adversely affect the Company’s business through a decrease in user registrations and revenues. This could be caused by, among other possible provisions, the required use of disclaimers or other requirements before users can utilize SportsLine’s services.

Our contests and sweepstakes may be subject to state and Federal laws governing lotteries and gambling. We seek to design our contest and sweepstakes rules to fall within exemptions from such laws and restrict participation to individuals over 18 years of age who reside in jurisdictions within the United States and Canada in which the contests and sweepstakes are lawful. We cannot assure you that our contests and sweepstakes will be exempt from such laws or that the applicability of such laws to us would not have a material adverse effect on our business, results of operations and financial condition.

Through LVSC, we are currently engaged in the business of selling and providing certain information to casinos doing business in Nevada. As such, LVSC is required to be licensed as an “information service provider” as that term is defined by the Nevada Act and is subject to the regulatory jurisdiction of the Nevada Gaming Authorities. Our wholly owned subsidiary, VegasInsider, has filed an application to be found suitable as an intermediary holding company, and we have filed an application to be registered as a publicly traded company. In addition, certain of our officers and the officers of certain of our subsidiaries filed applications to be found suitable as officers of the respective companies. We have recently declared our intention to sell LVSC and VegasInsider and thereupon seek withdrawal of all applications. However, LVSC and VegasInsider intend to continue their respective business operations pending such sale. If, prior to the sale, the Nevada Gaming Authorities determine that LVSC, VegasInsider or SportsLine are unsuitable, LVSC may be required to cease the business of providing odds information to Nevada’s licensed sports books, within a time frame prescribed by the Nevada Gaming Commission. See “Business—Government Regulation and Legal Uncertainties – Nevada Regulation and Licensing.”

We may be liable for the content we make available on the Internet

We may be subject to legal claims relating to the content we make available on our Web sites, or the downloading and distribution of such content. For example, persons may bring claims against us if material that is inappropriate for viewing by young children can be accessed from our Web sites. Claims could also involve such matters as defamation, invasion of privacy and copyright infringement. Providers of Internet products and services have been sued in the past, sometimes successfully, based on the content of material. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liability that may be imposed. Any costs or imposition of liability that is not covered by insurance or in excess of insurance coverage could have a material adverse effect on our business, results of operations and financial condition. Implementing measures to reduce our exposure to this liability may require us to spend substantial resources and limit the attractiveness of our service to users.

Our consolidated financial statements as of and for the year ended December 31, 2000 included in this Form 10-K/A were audited by Arthur Andersen LLP, which has been found guilty of obstruction of justice and may be the subject of additional litigation.

Arthur Andersen LLP, the independent public accountants that audited our financial statements for the fiscal year ended December 31, 2000, was found guilty by a jury on June 15, 2002 of obstruction of justice in

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connection with the government’s investigation of Enron Corp. Arthur Andersen ceased practicing before the Securities and Exchange Commission (the “SEC”) effective August 31, 2002. It is possible that events arising out of the indictment may adversely affect the ability of Arthur Andersen to satisfy any claims arising from its provision of auditing and other services to us, including claims that may arise out of Arthur Andersen’s audits of our financial statements. The SEC has said that it will continue accepting financial statements audited or reviewed by Arthur Andersen provided that issuers comply with the applicable rules and orders issued by the SEC in March 2002 for such purpose.

In the future, should we seek to access the public capital markets, SEC’s current rules require the inclusion or incorporation by reference of three years of audited financial statements in any prospectus. These rules would require us to present audited financial statements for one or more fiscal years audited by Arthur Andersen until our audited financial statements for the fiscal year ending December 31, 2003 become available in the first quarter of the 2004. The SEC recently adopted rules exempting certain issuers filing Securities Act registration statements containing financial statements audited by Arthur Andersen from having to comply with rules that would also require such issuers to present manually signed reissued accountants’ reports and written consents issued by Arthur Andersen. Although we believe that we currently meet the requirements for such exemptions, if the SEC ceases accepting financial statements audited by Arthur Andersen pursuant to such exemptions, it is possible that our financial statements for the year ended December 31, 2000 audited by Arthur Andersen might not satisfy the SEC’s requirements. If this occurs, we would not be able to access the public capital markets unless Ernst & Young LLP, our current independent accounting firm, or another independent accounting firm, is able to audit the financial statements originally audited by Arthur Andersen. Any delay or inability to access the public capital markets caused by those circumstances could have a material adverse effect on our business, financial condition or results of operation.

27

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

	Page
Reports of Independent Certified Public Accountants	29
Consolidated Balance Sheets as of December 31, 2002 and 2001	31
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000	32
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2002, 2001 and 2000	33
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000	35
Notes to Consolidated Financial Statements	37

28

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors

SportsLine.com, Inc.

We have audited the accompanying consolidated balance sheets of SportsLine.com, Inc. as of December 31, 2002 and 2001, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of SportsLine.com, Inc. for the year ended December 31, 2000 were audited by other auditors who have ceased operations and whose report dated January 25, 2002 expressed an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SportsLine.com, Inc. at December 31, 2002 and 2001 and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

As discussed above, the financial statements of SportsLine.com, Inc. for the year ended December 31, 2000 were audited by other auditors who have ceased operations. As described in Note 3, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures in Note 3 with respect to 2000 included (a) agreeing the previously reported net loss to the previously issued financial statements and the adjustments to reported net loss representing amortization expense recognized in those periods related to goodwill to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of reported net loss to adjusted net loss, and the related adjusted loss-per-share amounts. In our opinion, the disclosures for 2000 in Note 3 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2000 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2000 financial statements taken as a whole.

/S/    ERNST & YOUNG LLP

Ft. Lauderdale, Florida

November 14, 2003

29

THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR ANDERSEN LLP PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM 10-K/A. SINCE THIS REPORT WAS ISSUED, THE COMPANY’S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2001 HAVE BEEN RE-AUDITED BY ERNST & YOUNG LLP.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To SportsLine.com, Inc.:

We have audited the accompanying consolidated balance sheets of SportsLine.com, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SportsLine.com, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Fort Lauderdale, Florida,

January 25, 2002.

30

SPORTSLINE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

	December 31,
	2002			2001
	(As Restated, see Note 2)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	17,383		$	30,017
Marketable securities		3,866			15,713
Accounts receivable, net		8,062			6,385
Due from CBS		1,782			483
Prepaid expenses and other current assets		1,704			4,099
Total current assets		32,797			56,697
DEFERRED ADVERTISING AND CONTENT		9,143			11,428
PROPERTY AND EQUIPMENT, net		7,567			12,069
NONCURRENT MARKETABLE SECURITIES		16,376			305
GOODWILL		18,211			20,861
OTHER ASSETS, net		8,029			11,959
	$	92,123		$	113,319
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,617		$	1,227
Accrued liabilities		9,216			8,199
Due to CBS		1,507			1,136
Deferred revenue		2,052			2,855
Total current liabilities		14,392			13,417
OTHER LONG TERM LIABILITIES		2,563			2,365
LONG TERM LIABILITIES—NFL		4,320			1,503
CONVERTIBLE SUBORDINATED NOTES		16,678			16,678
Total liabilities		37,953			33,963
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding as of December 31, 2002 and December 31, 2001		—			—
Common stock, $0.01 par value, 200,000,000 shares authorized, 38,256,024 and 29,218,936 issued and outstanding as of December 31, 2002 and December 31, 2001, respectively		383			292
Additional paid-in capital		399,497			377,411
Accumulated other comprehensive income		23			—
Deferred compensation costs		(8,032	)		(11,974	)
Accumulated deficit		(337,701	)		(286,373	)
Total shareholders’ equity		54,170			79,356
	$	92,123		$	113,319

The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.

31

SPORTSLINE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share data)

	Year Ended December 31,
	2002			2001			2000
	(As Restated, see Note 2)
REVENUE	$	62,635		$	63,760		$	95,887
COST OF REVENUE		24,120			32,883			41,001
GROSS PROFIT		38,515			30,877			54,886
OPERATING EXPENSES:
Product development		2,132			1,854			1,791
Sales and marketing:
Amortization of equity issued to Viacom for promotion		24,036			20,288			20,288
Other		24,674			41,950			50,943
General and administrative		23,428			35,774			37,091
Depreciation and amortization		11,106			27,819			21,598
Restructuring charge		2,499			985			—
Write-down of goodwill		2,650			21,600			—
Total operating expenses		90,525			150,270			131,711
LOSS FROM OPERATIONS		(52,010	)		(119,393	)		(76,825	)
INTEREST EXPENSE		(929	)		(1,073	)		(1,084	)
INTEREST AND OTHER INCOME, net		891			3,479			12,914
LOSS ON EQUITY INVESTMENTS		—			(28	)		(127,653	)
GAIN ON TERMINATION OF ADVERTISING AGREEMENTS		—			2,051			78,766
GAIN ON SALE OF E-COMMERCE SUBSIDIARIES		—			—			7,814
GAIN ON EXTINGUISHMENT OF DEBT		—			2,404			—
EFFECT OF DECONSOLIDATION OF SPORTS.COM		—			41,739			—
LOSS BEFORE TAX BENEFIT		(52,048	)		(70,821	)		(106,068	)
TAX BENEFIT		720			—			—
NET LOSS	$	(51,328	)	$	(70,821	)	$	(106,068	)
Loss per share—basic and diluted	$	(1.45	)	$	(2.65	)	$	(4.04	)
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING—BASIC AND DILUTED		35,420,696			26,719,463			26,245,946

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

32

SPORTSLINE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(amounts in thousands, except share data)

(As Restated, see Note 2)

	Common Stock					Additional Paid-In Capital			Deferred Compensation Costs			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Comprehensive Loss
	Shares		Amount
Balances at December 31, 1999	25,358,788		$	254		$	333,879		$	—		$	7		$	(109,484	)
Exercise of CBS warrants	500,000			5			11,495			—			—			—
Issuance of common stock and options pursuant to acquisition of Subsidiary	305,591			3			15,049			—			—			—
Equity activity of subsidiary	—			—			(5,007	)		—			—			—
Issuance of common stock pursuant to the employee stock purchase plan	73,883			1			715			—			—			—
Net proceeds from exercise of common stock warrants	57,000			—			365			—			—			—
Issuance of common stock warrants	—			—			1,567			—			—			—
Issuance of common stock from exercise of employee options	190,931			2			1,549			—			—			—
Comprehensive loss:
Net loss	—			—			—			—			—			(106,068	)	$	(106,068	)
Cumulative translation adjustment	—			—			—			—			(5,235	)		—			(5,235	)
Comprehensive loss																		$	(111,303	)
Balances at December 31, 2000	26,486,193			265			359,612			—			(5,228	)		(215,552	)
Repurchase of common stock	(2,500,500	)		(25	)		(5,049	)		—			—			—
Issuance of common stock and options pursuant to acquisition of Subsidiary	3,024,344			30			12,103			—			—			—
Issuance of common stock pursuant to the employee stock purchase plan	176,460			2			363			—			—			—
Issuance of common stock warrants pursuant to consulting agreement	—			—			386			—			—			—
Repurchase of common stock pursuant to acquisition of subsidiary	(277,152	)		(3	)		(12,497	)		—			—			—
Issuance of restricted shares of common stock to employees	1,909,458			19			5,481			(5,500	)		—			—
Issuance of common stock pursuant to National Football League agreement	350,000			3			630			—			—			—
Issuance of common stock warrants pursuant to AOL agreement	—			—			3,410			—			—			—
Issuance of common stock pursuant to consulting agreement	50,000			1			266			—			—			—
Issuance of common stock from exercise of employee options	133			—			1			—			—			—
Issuance of employee stock options net of forfeitures	—			—			12,705			(12,705	)		—			—
Amortization of deferred compensation costs	—			—			—			6,231			—			—
Comprehensive loss:
Net loss	—			—			—			—			—			(70,821	)	$	(70,821	)
Cumulative translation adjustment	—			—			—			—			5,228			—			5,228
Comprehensive loss																		$	(65,593	)
Balances at December 31, 2001	29,218,936		$	292		$	377,411		$	(11,974	)	$	—		$	(286,373	)

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

33

SPORTSLINE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(CONTINUED)

(amounts in thousands, except share data)

(As Restated, see Note 2)

(continued on next page)

	Common Stock					Additional Paid-In Capital			Deferred Compensation Costs			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Comprehensive Loss
	Shares		Amount
Balances at December 31, 2001	29,218,936		$	292		$	377,411		$	(11,974	)	$	—	$	(286,373	)
Issuance of common stock pursuant to CBS agreement	6,882,312			69			19,931			—			—		—
Repurchase of common stock	(24,700	)		—			(25	)		—			—		—
Issuance of common stock pursuant to the employee stock purchase plan	123,383			1			105			—			—		—
Repurchase of restricted shares of common stock from employees	(106,398	)		(1	)		(209	)		210			—		—
Issuance of common stock pursuant to AOL agreement	1,945,525			20			1,980			—			—		—
Issuance of common stock pursuant to John Elway agreement	200,000			2			244			—			—		—
Issuance of common stock warrants pursuant to consulting agreement	—			—			7			—			—		—
Issuance of employee options net of forfeitures	—			—			41			(41	)		—		—
Issuance of common stock from exercise of employee options	16,966			—			12			—			—		—
Amortization of deferred compensation costs	—			—			—			3,773			—		—
Comprehensive loss:
Net loss	—			—			—			—			—		(51,328	)	$	(51,328	)
Unrealized gains on marketable securities	—			—			—			—			23		—			23
Comprehensive loss																	$	(51,305	)
Balances at December 31, 2002	38,256,024		$	383		$	399,497		$	(8,032	)	$	23	$	(337,701	)

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

34

SPORTSLINE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

	Year Ended December 31,
	2002			2001			2000
	(As Restated, see Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(51,328	)	$	(70,821	)	$	(106,068	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		11,106			27,819			21,598
Amortization of equity issued to Viacom for promotion		24,036			20,288			20,288
Amortization of equity agreements		961			228			—
Non-cash stock compensation costs		3,722			6,231			—
Write-down of goodwill		2,650			21,600			—
Bad debt and other non-cash expense		466			635			1,986
Minority interest in consolidated subsidiaries		—			—			(2,951	)
Loss on equity investments		—			28			127,653
Gain on termination of agreements		—			(2,051	)		(78,766	)
Gain on sale of e-commerce subsidiaries		—			—			(7,814	)
Effect of deconsolidation of Sports.com		—			(41,739	)		—
Gain on extinguishment of debt		—			(2,404	)		—
Changes in operating assets and liabilities:
Accounts receivable		(3,426	)		(1,051	)		(3,022	)
Prepaid expenses and other current assets		192			1,448			2,808
Accounts payable		649			(168	)		1,156
Accrued liabilities		4,698			1,271			5,976
Deferred revenue		(853	)		(2,230	)		(17,101	)
Net cash used in operating activities		(7,127	)		(40,916	)		(34,257	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities		(16,844	)		—			—
Sales of available-for-sale securities		2,489			—			—
Purchases of held-to-maturity securities		(9,936	)		(305	)		—
Proceeds from maturity of held-to-maturity securities		20,081			43,339			10,953
Purchases of property and equipment		(1,389	)		(5,734	)		(18,808	)
Sale (purchase) of licensing rights and intangible assets		155			(6,158	)		—
Investment in Sports.com		—			(5,000	)		—
Cash effect of Sports.com deconsolidation		—			(3,743	)		—
Acquisition of businesses		—			(73	)		(11	)
Proceeds from sale of investments		—			—			1,871
Net decrease (increase) in restricted cash		54			(392	)		—
Net cash provided by (used in) investing activities		(5,390	)		21,934			(5,995	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock of subsidiary		—			—			52,500
Net proceeds from issuance of common stock and exercise of common stock warrants and options		118			366			14,132
Repurchase of common stock pursuant to acquisition of DBC Sports		—			(12,500	)		—
Repurchase of restricted shares of common stock		(210	)		—			—
Repurchase of common stock		(25	)		(5,074	)		—
Repurchase of convertible subordinated notes, net of costs		—			(500	)		—
Repayment of capital lease obligations		—			(6	)		(158	)
Net cash provided by (used in) financing activities		(117	)		(17,714	)		66,474
Effect of exchange rate changes on cash		—			—			(5,477	)
Net increase (decrease) in cash and cash equivalents		(12,634	)		(36,696	)		20,745
CASH AND CASH EQUIVALENTS, beginning of period		30,017			66,713			45,968
CASH AND CASH EQUIVALENTS, end of period	$	17,383		$	30,017		$	66,713

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

35

SPORTSLINE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(CONTINUED)

(amounts in thousands)

	Year Ended December 31,
	2002			2001		2000
	(As Restated, see Note 2)
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Sale of e-commerce subsidiaries	$	—		$	—	$	3,579
Investments in businesses	$	—		$	—	$	3,297
Equity activity of subsidiary	$	—		$	—	$	(5,007	)
Issuance of common stock pursuant to the CBS agreement	$	20,000		$	—	$	—
Issuance of common stock warrants pursuant to consulting agreement	$	—		$	386	$	—
Issuance of common stock pursuant to the AOL agreement	$	2,000		$	—	$	—
Issuance of common stock pursuant to the NFL agreement	$	—		$	633	$	—
Issuance of common stock pursuant to acquisition of subsidiaries	$	—		$	12,133	$	15,052
Issuance of common stock and common stock warrants pursuant to consulting agreements	$	253		$	3,677	$	1,567
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	834		$	988	$	990
Cash paid (refund received) for income taxes	$	(720	)	$	780	$	26

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

36

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002

(amounts in thousands except share and per share data)

(1) NATURE OF OPERATIONS:

SportsLine.com, Inc. (“SportsLine.com” or the “Company”) was incorporated on February 23, 1994 and began recognizing revenue from its operations in September 1995. SportsLine.com publishes one of the most comprehensive collections of multimedia sports news and information available on the Internet and offers consumers a broad assortment of merchandise and subscription and premium services, including fantasy leagues and contests. The Company’s flagship Internet sports service (http://cbs.sportsline.com) was renamed CBS SportsLine.com in March 1997 as part of an exclusive promotional and content agreement with CBS Broadcasting Inc. (“CBS”). The Company has strategic relationships with CBS, Westwood One, the National Football League (the “NFL”), the National Collegiate Athletic Association (the “NCAA”) and the PGA TOUR and serves as the primary sports content provider for America Online, Inc. (“AOL”). The Company distributes a broad range of up-to-date news, scores, player and team statistics and standings, photos and audio and video clips obtained from CBS and other leading sports news organizations; produces and offers fantasy league products, contests and other games; and produces and distributes entertaining, interactive and original programming such as editorials and analyses from its in-house staff and freelance journalists.

(2) RESTATEMENT:

Following the recommendation of management and the concurrence of the Audit Committee of the Board of Directors, the Company made a determination to restate its previously filed financial statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002 and 2001. The restatement is being made primarily to correct an error in the way the Company had previously accounted for employee stock option grants and certain other grants of equity instruments and to make other adjustments set forth below which were identified by the Company’s current auditors during the course of their re-audit of the Company’s 2001 financial statements. The restated transactions which the Company believes are the more significant are described in detail below and have been grouped under headings for convenience only:

Stock Compensation

• The Company historically has accounted for employee stock options using the intrinsic value method of accounting as outlined in Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly no compensation expense was recorded for stock option grants pursuant to APB Opinion No. 25 because the Company believed it had granted the stock options to its employees with an exercise price equal to the market price on the measurement date of each grant. The Company has since determined that it made an error in determining the measurement dates of employee stock option grants, which had an effect on the intrinsic value of such grants. The Company has recorded expense related to those grants of $3,077 and $6,067 in the restated financial statements for the years ended December 31, 2002 and 2001, respectively. These amounts include $1,484 and $317 of expense for the years ended December 31, 2002 and 2001, respectively, for the intrinsic value of employee stock options that were cancelled and replaced with restricted stock in 2001. See Note 10 for further discussion.

Revenue

• Revenue has been reduced by $770 in the 2001 restated financial statements as a result of certain advertising clients having received credits during 2002 relating to revenue recognized during 2001, certain revenue recognized during 2001 which should have been deferred until 2002, and an amount having been recorded during 2001 as bad debt expense which, due to the nature of the transaction, should have been recorded instead as a reduction in revenue. Revenue has been increased by $570 in the 2002 restated financial statements and general and administrative expense has been reduced by $200 in the 2001 restated financial statements as a result of the foregoing adjustments.

37

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share date)—(Continued)

(2) RESTATEMENT:—Continued

Expenses

• The Company’s Black-Scholes valuations of warrants issued to America Online, Inc. (“AOL”) and another third party service provider originally were prepared using incorrect assumptions regarding the life of the warrant and the value of the underlying stock at the date of grant. The net effect of these adjustments caused an additional $3,410 of amortization expense to be recorded in the 2001 restated financial statements relating to the AOL warrant and $174 and $77 of amortization expense to be recorded in the 2001 restated financial statements and the 2002 restated financial statements, respectively, relating to the additional warrant.

• During 2001, the Company over-accrued for certain tax, insurance, bad debt and cost of revenue expenses and under-accrued for certain tax and other miscellaneous expenses. The net effect of these adjustments was $546, resulting in a decrease in general and administrative expense of $501 and a decrease in cost of revenue of $45 in the 2001 restated financial statements. General and administrative expense and cost of revenue were increased by corresponding amounts in the 2002 restated financial statements.

Weighted Average Shares Outstanding

• The number of weighted average shares outstanding for the years ended December 31, 2002 and 2001 have been adjusted to exclude shares of restricted stock that had not yet vested and remain subject to forfeiture.

The following consolidated balance sheets, statements of operations, statements of changes in shareholders’ equity and statements of cash flows reconcile the previously reported and restated financial information:

CONSOLIDATED BALANCE SHEETS

	December 31, 2002
	As previously reported		Restatement adjustments		Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	17,383	$	—	$	17,383
Marketable securities		3,866		—		3,866
Accounts receivable, net		8,062		—		8,062
Due from CBS		1,782		—		1,782
Prepaid expenses and other current assets		1,704		—		1,704
Total current assets		32,797				32,797
DEFERRED ADVERTISING AND CONTENT		9,143		—		9,143
PROPERTY AND EQUIPMENT, net		7,567		—		7,567
NONCURRENT MARKETABLE SECURITIES		16,376		—		16,376
GOODWILL		18,211		—		18,211
OTHER ASSETS, NET		7,894		135		8,029
	$	91,988	$	135	$	92,123
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,617	$	—	$	1,617
Accrued liabilities		9,216		—		9,216
Due to CBS		1,507		—		1,507
Deferred revenue		2,052		—		2,052
Total current liabilities		14,392		—		14,392

38

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share date)—(Continued)

(2) RESTATEMENT:—Continued

	December 31, 2002
	As previously reported			Restatement adjustments			Restated
LONG-TERM LIABILITIES—NFL		4,320			—			4,320
OTHER LONG TERM LIABILITIES		2,563			—			2,563
CONVERTIBLE SUBORDINATED NOTES		16,678			—			16,678
Total liabilities		37,953			—			37,953
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding as of December 31, 2002		—			—			—
Common stock, $0.01 par value, 200,000,000 shares authorized, 38,256,024 issued and outstanding as of December 31, 2002		383			—			383
Additional paid-in capital		379,479			20,018			399,497
Accumulated other comprehensive income		23			—			23
Deferred compensation costs		(927	)		(7,105	)		(8,032	)
Accumulated deficit		(324,923	)		(12,778	)		(337,701	)
Total shareholders’ equity		54,035			135			54,170
	$	91,988		$	135		$	92,123

	December 31, 2001
	As previously reported		Restatement adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	30,322	$	(305	)	$	30,017
Marketable securities		15,713		—			15,713
Accounts receivable, net		6,445		(60	)		6,385
Due from CBS		483		—			483
Prepaid expenses and other current assets		3,937		162			4,099
Total current assets		56,900		(203	)		56,697
DEFERRED ADVERTISING AND CONTENT		11,428		—			11,428
PROPERTY AND EQUIPMENT, net		12,069		—			12,069
NONCURRENT MARKETABLE SECURITIES		—		305			305
GOODWILL		20,861		—			20,861
OTHER ASSETS		11,706		253			11,959
	$	112,964	$	355		$	113,319
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	968	$	259		$	1,227
Accrued liabilities		8,557		(358	)		8,199

39

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share date)—(Continued)

(2) RESTATEMENT:—Continued

	December 31, 2001
	As previously reported			Restatement adjustments			Restated
Due to CBS		1,136			—			1,136
Deferred revenue		2,640			215			2,855
Total current liabilities		13,301			116			13,417
LONG-TERM LIABILITIES—NFL		1,503			—			1,503
OTHER LONG-TERM LIABILITIES		2,315			50			2,365
CONVERTIBLE SUBORDINATED NOTES		16,678			—			16,678
Total liabilities		33,797			166			33,963
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding as of December 31, 2001		—			—			—
Common stock, $0.01 par value, 200,000,000 shares authorized, 29,218,936 issued and outstanding as of December 31, 2001		292			—			292
Additional paid-in capital		357,434			19,977			377,411
Deferred compensation costs		(1,861	)		(10,113	)		(11,974	)
Accumulated deficit		(276,698	)		(9,675	)		(286,373	)
Total shareholders’ equity		79,167			189			79,356
	$	112,964		$	355		$	113,319

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31, 2002
	As previously reported		Restatement adjustments		Restated
REVENUE	$	62,065	$	570	$	62,635
COST OF REVENUE		23,962		158		24,120
GROSS PROFIT		38,103		412		38,515
OPERATING EXPENSES:
Product development		2,132		—		2,132
Sales and marketing:
Amortization of equity issued to Viacom for promotion		24,036		—		24,036
Other		24,471		203		24,674
General and administrative		20,193		3,235		23,428
Depreciation and amortization		11,029		77		11,106
Restructuring charge		2,499		—		2,499
Write-down of goodwill		2,650		—		2,650

40

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share date)—(Continued)

(2) RESTATEMENT:—Continued

	Year Ended December 31, 2002
	As previously reported			Restatement adjustments			Restated
Total operating expenses		87,010			3,515			90,525
LOSS FROM OPERATIONS		(48,907	)		(3,103	)		(52,010	)
INTEREST EXPENSE		(929	)		—			(929	)
INTEREST AND OTHER INCOME, net		891			—			891
LOSS BEFORE TAX BENEFIT		(48,945	)		(3,103	)		(52,048	)
TAX BENEFIT		720			—			720
NET LOSS	$	(48,225	)	$	(3,103	)	$	(51,328	)
Loss per share—basic and diluted	$	(1.30	)				$	(1.45	)
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING—BASIC AND DILUTED		37,007,281			(1,586,585	)		35,420,696

	Year Ended December 31, 2001
	As previously reported				Restatement adjustments			Restated
REVENUE	$	64,530			$	(770	)	$	63,760
COST OF REVENUE		32,672				211			32,883
GROSS PROFIT		31,858				(981	)		30,877
OPERATING EXPENSES:
Product development		1,854				—			1,854
Sales and marketing:
Amortization of equity issued to Viacom for promotion		20,288				—			20,288
Other		41,255				695			41,950
General and administrative		31,359				4,415			35,774
Depreciation and amortization		24,235				3,584			27,819
Restructuring charge		985		��		—			985
Write-down of goodwill		21,600				—			21,600
Total operating expenses		141,576				8,694			150,270
LOSS FROM OPERATIONS		(109,718	)			(9,675	)		(119,393	)

41

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share date)—(Continued)

(2) RESTATEMENT:—Continued

	Year Ended December 31, 2001
	As previously reported			Restatement adjustments			Restated
INTEREST EXPENSE		(1,073	)		—			(1,073	)
INTEREST AND OTHER INCOME, net		3,479			—			3,479
LOSS ON EQUITY INVESTMENTS		(28	)		—			(28	)
GAIN ON TERMINATION OF ADVERTISING AGREEMENTS		2,051			—			2,051
GAIN ON EXTINGUISHMENT OF DEBT		2,404			—			2,404
EFFECT OF DECONSOLIDATION OF SPORTS.COM		41,739			—			41,739
NET LOSS	$	(61,146	)	$	(9,675	)	$	(70,821	)
Loss per share—basic and diluted	$	(2.23	)				$	(2.65	)
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING—BASIC AND DILUTED		27,446,626			(727,163	)		26,719,463

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

	Common Stock			Additional Paid-In Capital		Deferred Compensation Costs			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit
	Shares	Amount
Balances at December 31, 2001, as previously reported	29,218,936	$	292	$	357,434	$	(1,861	)	$	—	$	(276,698	)
Restatement adjustments	—		—		19,977		(10,113	)		—		(9,675	)
Restated Balances at December 31, 2001	29,218,936	$	292	$	377,411	$	(11,974	)	$	—	$	(286,373	)
Balances at December 31, 2002, as previously reported	38,256,024	$	383	$	379,479	$	(927	)	$	23	$	(324,923	)
Restatement adjustments	—		—		20,018		(7,105	)		—		(12,778	)
Restated Balances at December 31, 2002	38,256,024	$	383	$	399,497	$	(8,032	)	$	23	$	(337,701	)

42

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(2) RESTATEMENT:—Continued

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31, 2002
	As previously reported			Restatement adjustments			Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(48,225	)	$	(3,103	)	$	(51,328	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		11,029			77			11,106
Amortization of equity issued to Viacom for promotion		24,036			—			24,036
Amortization of equity agreements		1,633			(672	)		961
Non-cash compensation expense		—			3,722			3,722
Write-down of goodwill		2,650			—			2,650
Bad debt and other expense		227			239			466
Changes in operating assets and liabilities
Accounts receivable		(3,072	)		(354	)		(3,426	)
Prepaid expenses and other current assets		192			—			192
Accounts payable		649			—			649
Accrued liabilities		4,341			357			4,698
Deferred revenue		(587	)		(266	)		(853	)
Net cash used in operating activities		(7,127	)		—			(7,127	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities		(16,844	)		—			(16,844	)
Sales of available-for-sale securities		2,489			—			2,489
Purchases of held-to-maturity securities		(9,936	)		—			(9,936	)
Proceeds from maturity of held-to-maturity securities		19,776			305			20,081
Purchases of property and equipment		(1,389	)		—			(1,389	)
Sale of licensing rights and intangible assets		155			—			155
Net decrease in restricted cash		54			—			54
Net cash provided by (used in) investing activities		(5,695	)		305			(5,390	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and exercise of common stock warrants and options		118			—			118
Repurchase of restricted shares of common stock		(210	)		—			(210	)
Repurchase of common stock		(25	)		—			(25	)
Net cash used in financing activities		(117	)		—			(117	)
Net increase (decrease) in cash and cash equivalents		(12,939	)		(305	)		(12,634	)
CASH AND CASH EQUIVALENTS, beginning of period		30,322			(305	)		30,017
CASH AND CASH EQUIVALENTS, end of period	$	17,383		$	—		$	17,383
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock pursuant to the CBS agreement	$	20,000			—		$	20,000
Issuance of common stock pursuant to the AOL agreement	$	2,000			—		$	2,000
Issuance of common stock and common stock warrants pursuant to consulting agreements	$	253			—		$	253
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	834			—		$	834
Cash paid for (refund received from) income taxes	$	(720	)		—		$	(720	)

43

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(2) RESTATEMENT:—Continued

	December 31, 2001
	As previously reported			Restatement adjustments			Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(61,146	)	$	(9,675	)	$	(70,821	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		24,235			3,584			27,819
Amortization of equity issued to Viacom for promotion		20,288			—			20,288
Amortization of equity agreements		228			—			228
Non-cash compensation expense		—			6,231			6,231
Write-down of goodwill		21,600			—			21,600
Bad debt and other expense		1,038			(403	)		635
Loss on equity investments		28			—			28
Gain on termination of agreements		(2,051	)		—			(2,051	)
Effect of deconsolidation of Sports.com		(41,739	)		—			(41,739	)
Gain on extinguishment of debt		(2,404	)		—			(2,404	)
Changes in operating assets and liabilities
Accounts receivable		(1,405	)		354			(1,051	)
Prepaid expenses and other current assets		1,448			—			1,448
Accounts payable		(168	)		—			(168	)
Accrued liabilities		1,628			(357	)		1,271
Deferred revenue		(2,496	)		266			(2,230	)
Net cash used in operating activities		(40,916	)		—			(40,916	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of held-to-maturity securities		—			(305	)		(305	)
Proceeds from maturity of held-to-maturity securities		43,339			—			43,339
Purchases of property and equipment		(5,734	)		—			(5,734	)
Sale (purchase) of licensing rights and intangible assets		(6,158	)		—			(6,158	)
Investment in Sports.com		(5,000	)		—			(5,000	)
Cash effect of Sports.com deconsolidation		(3,743	)		—			(3,743	)
Acquisition of businesses		(73	)		—			(73	)
Net increase in restricted cash		(392	)		—			(392	)
Net cash provided by (used in) investing activities		22,239			(305	)		21,934
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and exercise of common stock warrants and options		366			—			366
Repurchase of common stock pursuant to acquisition of DBC Sports		(12,500	)		—			(12,500	)
Repurchase of common stock		(5,074	)		—			(5,074	)
Repurchase of convertible subordinated notes, net of costs		(500	)		—			(500	)
Repayment of capital lease obligations		(6	)		—			(6	)
Net cash used in financing activities		(17,714	)		—			(17,714	)
Net decrease in cash and cash equivalents		(36,391	)		(305	)		(36,696	)
CASH AND CASH EQUIVALENTS, beginning of period		66,713			—			66,713
CASH AND CASH EQUIVALENTS, end of period	$	30,322		$	(305	)	$	30,017
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:

44

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(2) RESTATEMENT:—Continued

	December 31, 2001
	As previously reported		Restatement adjustments	Restated
Issuance of common stock pursuant to the NFL agreement	$	633	—	$	633
Issuance of common stock warrants pursuant to consulting agreement	$	—	386	$	386
Issuance of common stock pursuant to acquisition of subsidiaries	$	12,133	—	$	12,133
Issuance of common stock and common stock warrants pursuant to consulting agreements	$	267	3,410	$	3,677
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	988	—	$	988
Cash paid for income taxes	$	780	—	$	780

45

SPORTLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of SportsLine.com and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Cash and Cash Equivalents

The Company considers all highly liquid cash investments with original maturities of three months or less to be cash equivalents.

Marketable Securities

The Company invests in certain marketable debt securities, which consist primarily of high-quality short-to long-term fixed income securities that are classified as available-for-sale and held-to-maturity securities. Such investments are included in “Marketable securities” and “Noncurrent marketable securities” on the accompanying consolidated balance sheets. The securities that are classified as available-for-sale are reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income.” The specific identification method is used to determine the cost of securities. The marketable securities that are classified as held-to-maturity are carried at amortized cost, which approximates market value at December 31, 2002 and 2001.

Deferred Advertising and Content Costs

Deferred advertising and content costs relate to unamortized costs of equity instruments issued under the CBS Agreement discussed in Note 9. Such costs are capitalized as the equity instruments are issued. These costs are then charged to operations as the Company receives promotion and other benefits under the agreement.

Long-Lived Assets

Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. The Company does not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value.

46

SPORTLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

Property and Equipment

Property and equipment is carried at historical cost and is being depreciated and amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease period.

Maintenance and repairs are charged to expense when incurred; betterments are capitalized. Upon the sale or retirement of assets, the cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is recognized.

Goodwill

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 142,Goodwill and Other Intangible Assets. SFAS No. 142 addresses financial accounting and reporting for intangible assets acquired individually or with a group of other assets (but not acquired in a business combination) at acquisition. SFAS No. 142 also addresses financial accounting and reporting for goodwill and other intangible assets subsequent to acquisition. With the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test, with the initial test required by June 30, 2002. SFAS No. 142 prescribes a two-phase process for impairment testing of goodwill. The first phase of the test is designed to identify potential impairment; while the second phase (if necessary), measures the impairment. The impairment loss is the amount, if any, by which the implied fair value of goodwill is less than the book carrying value. SFAS No. 142 was effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 142 as of January 1, 2002, and its first phase impairment analysis, completed by the Company in May 2002, found no instances of impairment of its recorded goodwill; accordingly, the second testing phase was not necessary. The Company has performed the annual impairment test required under SFAS No. 142 to test impairment as of October 1, 2002. See Note 5.

In accordance with Accounting Principles Board (“APB”) Opinion No. 20,Accounting Changes, the effect of this accounting change is reflected prospectively. Supplemental comparative disclosure, as if the change had been retroactively applied, is as follows:

	For the years ended December 31,
	2002			2001			2000
Net loss:
Reported net loss	$	(51,328	)	$	(70,821	)	$	(106,068	)
Goodwill amortization		—			7,841			6,762
Adjusted net loss	$	(51,328	)	$	(62,980	)	$	(99,306	)
Basic and diluted loss per share:
Reported loss per share	$	(1.45	)	$	(2.65	)	$	(4.04	)
Goodwill amortization		—			0.29			0.26
Adjusted basic and diluted loss per share	$	(1.45	)	$	(2.36	)	$	(3.78	)

Other Assets

Licensing and Consulting Agreements.The cost of licensing and consulting agreements, which is primarily a result of issuances of warrants to purchase common stock, is being amortized using the straight-line method over the term of the related agreements (from one to ten years) beginning in August 1995, when cbs.sportsline.com first became commercially available. Such costs totaled approximately $3,901 and $20,500 at December 31, 2002 and 2001, respectively. Accumulated amortization on such amounts was approximately $3,083 and $11,757 at December 31, 2002 and 2001, respectively. These amounts are reflected in other assets in the

47

SPORTLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

accompanying consolidated balance sheets. Amortization expense under these agreements was approximately $1,735, $8,709 and $5,689 for the years ended December 31, 2002, 2001 and 2000, respectively, and is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Intangible Assets.In January 2001, the Company acquired for a cost of $6,000 certain assets of MVP.com, Inc. (“MVP”), which had ceased business operations, including the domain names, trademarks and certain other assets associated with the Web sites mvp.com, planetoutdoors.com, igogolf.com, golfclubtrader.com and tennisdirect.com. The cost of these assets is being amortized using the straight-line method over five years. Accumulated amortization was $2,400 at December 31, 2002. Amortization expense was approximately $1,200 for each of the years ended December 31, 2002 and 2001 and is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Assuming there is no impairment of the asset, future amortization expense will be $1,200 in each of the next three years.

Accrued Liabilities

Accrued liabilities consists of the following:

	December 31,
	2002		2001
Revenue sharing	$	3,084	$	216
Payroll		2,603		2,207
Health insurance		503		479
Cash prizes		475		661
Advertising		330		1,159
Professional fees		282		998
Other		1,939		2,479
	$	9,216	$	8,199

Revenue Recognition

Revenue recognition policies for advertising and marketing services, subscription and premium products, content licensing, international revenue and barter transactions are set forth below.

Revenue by Type

Revenue by type for the years ended December 31, 2002, 2001 and 2000 was as follows:

	Year Ended December 31,
	2002		2001		2000
Advertising and marketing services	$	48,386	$	52,813	$	77,666
Subscription and premium products		14,249		4,252		6,284
Content licensing and other		—		6,695		11,937
	$	62,635	$	63,760	$	95,887

48

SPORTLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

Advertising and Marketing Services Revenue

Advertising and marketing services revenue encompass advertising and sponsorship sales as well as the Company’s revenue from its direct marketing services and promotion of e-commerce Web sites such as MVP.com and the NFL.com shop. Revenue is primarily derived from the sale of advertising on the Company’s Web sites as well as the sale of advertising on Web sites operated by the Company. Advertising includes, among other forms, banner advertisements and sponsorships. Advertising and marketing services revenue is recognized in the period the advertisement is displayed or services rendered, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Company obligations typically include guarantees of a minimum number of “impressions”, or times that an advertisement is viewed by users of the Company’s Web sites. Amounts received or billed for which impressions have not yet been delivered are reflected as deferred revenue in the accompanying consolidated balance sheets. The Company derives marketing services revenue from third party Web sites it promotes, hosts, or produces.

Subscription and Premium Products Revenue

Subscription and premium products revenue includes paid memberships, fee-based fantasy products and premium Vegas Insider services. The Company offers fee-based fantasy products for football, baseball, basketball and hockey. These fantasy products allow members to form their own team by assembling a group of athletes from a sport and following their performance on a weekly or daily basis. These fantasy teams can then compete in contests administered by the Company for cash or merchandise prizes or compete in leagues administered by the users on the Company’s Web site. The Company also offers a program, “SportsLine Rewards,” at no charge that offers bonus points to members for viewing pages and making purchases. These points can be redeemed for discounts on merchandise, special events and other premium items. For a fee, the Company offers “SportsLine Rewards Plus” where members are also eligible to participate in sports contests to win cash prizes and merchandise.

Revenue relating to monthly memberships is recognized in the month the service is provided. Revenue relating to yearly memberships and sports contests is recognized ratably over the life of the membership agreement or contest period. Revenue related to fantasy products is recognized over the applicable professional sports season, generally four to six months, over which the product is serviced. Accordingly, amounts received for which services have not yet been provided are reflected as deferred revenue in the accompanying consolidated balance sheets.

Content Licensing Revenue

Content licensing revenue is derived from the licensing of certain of the Company’s content to third parties. Content licensing revenue is recognized over the period of the license agreement as the Company delivers content. The Company did not have any content licensing revenue in 2002 and does not expect to have any such revenue in the future, unless the Company enters into new content licensing agreements.

Barter and Equity Transactions

The Company recognizes advertising and content licensing revenue as a result of barter transactions. Such revenue is recognized based on the fair value of the consideration received, which generally consists of advertising displayed on the other companies’ Web sites. Barter revenue and the corresponding expense are recognized in the period the advertising is displayed.

Barter transactions, in which the Company received advertising or other services or goods in exchange for content or advertising on its Web sites, accounted for approximately 8%, 20% and 17% of total revenue for the years ended December 31, 2002, 2001 and 2000, respectively. Barter transactions are recorded based upon, and to the extent of, similar recent cash transactions of the Company pursuant to Emerging Issues Task Force (“EITF”) Issue No. 99-17,Accounting for Advertising Barter Transactions. During 2002, the Company delivered approximately 25.4 million impressions under barter arrangements where fair market value was not determinable under EITF 99-17 and, accordingly, revenue was not recognized. During 2001, the Company delivered a minimal

49

SPORTLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

number of impressions under barter arrangements where fair market value was not determinable. While the Company may enter into barter arrangements from time to time, the Company does not expect to recognize barter advertising revenue, along with the offsetting marketing expense, in future periods.

Equity transactions, in which the Company received equity in companies in exchange for advertising and promotion accounted for approximately 0%, 5% and 16% of total revenue for the years ended December 31, 2002, 2001 and 2000, respectively. As discussed in Note 5, the majority of equity-related revenue was derived from two agreements, both of which were terminated prior to December 31, 2000. An additional agreement that provided for equity-related revenue was terminated in June 2001. The Company does not expect to have any equity related revenue in future periods, unless the Company enters into new agreements.

Cost of Revenue

Cost of revenue consists primarily of content and royalty fees, revenue sharing, and payroll and related expenses for the editorial and operations staff. Telecommunications, Internet access and computer related expenses for the support and delivery of the Company’s services are also included in cost of revenue.

Amortization of Equity Issued to Viacom

Amortization of equity issued to Viacom for promotion consists of the amortization expense for the Company’s agreements with two Viacom-related entities pursuant to which the Company issued equity instruments in exchange for advertising and promotion.

Sales and Marketing—Other

Sales and marketing—other expense consists of salaries and related expenses, advertising, marketing, promotional, business development, public relations expenses and member acquisition costs. Member acquisition costs consist primarily of the direct costs of member solicitation, including advertising on other Web sites and Internet search engines and the cost of obtaining qualified prospects from direct marketing programs and third parties. No indirect costs are included in member acquisition costs. In accordance with American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”), 93-7,Reporting on Advertising Costs,the Company may, in the future, capitalize such direct-response advertising costs if historical evidence is available to indicate that the advertising results in a future benefit. Until that time, all such costs are expensed as incurred. All other advertising and marketing costs are charged to expense at the time the advertising takes place. Cash advertising expense for 2002, 2001 and 2000 was $540, $7,035 and $16,217, respectively.

Per Share Amounts

Loss per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares issuable upon conversion of the Company’s Convertible Subordinated Notes due 2006 (“Convertible Subordinated Notes”) (using the if-converted method) and shares issuable upon exercise of stock options and warrants (using the treasury stock method).

There were 256,091 shares issuable upon conversion of the Convertible Subordinated Notes at December 31, 2002 and 2001, respectively, and 301,080 shares issuable upon conversion at December 31, 2000, and there were 4,763,000, 4,346,000 and 9,685,000 options and warrants outstanding in the aggregate at December 31, 2002, 2001 and 2000, respectively, that could potentially dilute earnings per share in the future. Such shares issuable upon conversion of the Convertible Subordinated Notes and upon exercise of the options and warrants were not included in the computation of diluted net loss per share as they were antidilutive for all periods presented.

50

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

Fair Value of Financial Instruments

The Company’s financial instruments, primarily consisting of cash and cash equivalents, marketable securities, accounts receivable and accounts payable, approximate fair value due to their short-term nature and/or market rates of interest. Additionally, the Company believes that the fair value of the Convertible Subordinated Notes at December 31, 2002 and 2001 was significantly below the principal amount of $16,678; however, it is not practicable to estimate their fair value as there is no market for the Convertible Subordinated Notes and the entire outstanding principal amount is held by one entity.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. The Company’s cash management and investment policies restrict investments to low risk, highly-liquid securities, and the Company performs periodic evaluations of the credit standing of the financial institutions with which it deals. Accounts receivable from customers outside the United States at December 31, 2002 were not significant. The Company performs ongoing credit evaluations and maintains an allowance for doubtful accounts for accounts which management believes may have become impaired and, to date, losses have not been significant. The allowance for doubtful accounts was $887 and $792 at December 31, 2002 and 2001, respectively, and activity for the years ended December 31, 2002, 2001 and 2000 was as follows:

	2002			2001			2000
January 1 balance	$	792		$	1,765		$	423
Provision for doubtful accounts		401			687			1,999
Write-offs		(306	)		(1,439	)		(657	)
Sports.com deconsolidation		—			(221	)		—
December 31 balance	$	887		$	792		$	1,765

Stock-Based Compensation

SFAS No. 123, Accounting for Stock-Based Compensation allows either adoption of a fair value based method of accounting for employee stock options and similar equity instruments or continuation of the measurement of compensation cost relating to such plans using the intrinsic value method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees.The Company has elected to use the intrinsic value method.

Pro forma information is required by SFAS No. 123 and has been determined as if the Company had accounted for its stock-based compensation plans under the fair value method. The fair value of each option grant was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2002, 2001 and 2000, respectively: risk-free interest rates of 2.9% to 4.7%, 1.3% to 5.5% and 5.2% to 6.7%; dividend yield of 0% for all years; expected volatility factor of 90% for 2002 and 100% for 2001 and 2000; and expected life of 4.39 years for all years. The weighted average fair value and the weighted average exercise price of options granted during 2002 where the exercise price was less than the market price of the stock on the date of grants was $1.59 and $1.85, respectively. The weighted average fair value and the weighted average exercise price of options granted during 2002 where the exercise price equaled the market price of the stock on the date of grants was $0.90 and $1.32, respectively. The weighted average fair value and the weighted average exercise price of options granted during 2001 where the exercise price was less than the market price of the stock on the date of grants were $3.65 and $2.73, respectively. The weighted average fair value and the weighted average exercise price of options granted during 2001 where the exercise price equaled the market price of the stock on the date of grants were $2.01 and $2.75, respectively. The weighted average fair value and the weighted average exercise price of options granted during 2001 where the exercise price was greater than the market price on the date of the grants were $0.69 and $1.05, respectively. The weighted average fair value of options granted during 2000 was $12.45.

51

SPORTLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

The Company’s pro forma information follows for the years ended December 31:

	2002			2001			2000
Net loss—as reported	$	(51,328	)	$	(70,821	)	$	(106,068	)
Stock-based compensation expense included in reported net loss		1,594			5,750			—
Total stock-based compensation determined under fair value based method for all awards		(10,914	)		(19,097	)		(23,868	)
Pro forma net loss	$	(60,648	)	$	(84,168	)	$	(129,936	)
Loss per share basic and diluted—as reported	$	(1.45	)	$	(2.65	)	$	(4.04	)
Loss per share basic and diluted—pro forma	$	(1.71	)	$	(3.15	)	$	(4.95	)

Restricted stock is measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company’s common stock. Such value is recognized as an expense ratably over the corresponding vesting period. Stock based compensation associated with the issuance of restricted stock was $2,179, $481 and $0 during 2002, 2001 and 2000, respectively.

Segment Reporting

Based on the criteria set forth in SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information, the Company operates in one principal business segment as of December 31, 2002. For the year ended December 31, 2000 and through July 17, 2001, the Company operated in two principal business segments that shared the same infrastructure: United States and international through the Company’s former subsidiary, Sports.com Limited. See Note 5.

Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive income (loss) and its components in a full set of financial statements. The objective of SFAS No. 130 is to report comprehensive income (loss), a measure of all changes in equity of an enterprise that result from transactions and other economic events in a period, other than transactions with owners. The Company has elected to disclose comprehensive income (loss) in the consolidated statements of changes in shareholders’ equity.

Restructuring Charge

In April 2001, the Company began implementing several cost-saving initiatives, which continued into 2002. Cost reductions were accomplished through a variety of steps, most significantly in the areas of discretionary marketing and a reduction of sixty-one employees throughout the Company’s domestic workforce. Severance and rent payments relating to this initial cost restructuring plan were approximately $143 and $800 for the years ended December 31, 2002 and 2001, respectively, with a remaining accrual balance at December 31, 2002 of $40.

In April 2002, the Company announced the resignation of its chief technology officer and the expansion of responsibilities of its president of product development. As part of this change in personnel, the Company further integrated its fantasy sports operations into its other operations and technology departments. In August 2002, the Company announced the resignation of its president of corporate and business development and integrated its business development and legal affairs departments into the sales and finance departments, respectively. As a result of these resignations and organizational changes, the Company eliminated approximately twenty-seven redundant

52

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:—(Continued)

positions. Severance payments relating to these actions during the year ended December 31, 2002 were $1,236, with a remaining accrual balance as of December 31, 2002 of $1,166.

Internal Use Software and Web Site Development Costs

SOP 98-1,Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, establishes criteria for determining which costs of developing or obtaining internal-use computer software should be charged to expense and which should be capitalized. To date, the Company has not capitalized any such costs.

EITF Issue 00-2,Accounting for Web Site Development Costs, provides guidance on what types of costs incurred to develop Web sites should be capitalized or expensed. To date, the Company has not capitalized any such costs.

Recent Accounting Pronouncements

In October 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, which is applicable to financial statements issued for fiscal years beginning after December 15, 2001. The FASB’s new rules on asset impairment supercede SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and portions of APB Opinion No. 30,Reporting the Results of Operations. SFAS No. 144 provides a single accounting model for long-lived assets to be disposed of and significantly changes the criteria that would have to be met to classify an asset as held-for-sale. Classification as held-for-sale is an important distinction since such assets are not depreciated and are stated at the lower of fair value or carrying amount. SFAS No. 144 also requires expected future operating losses from discontinued operations to be displayed in the period(s) in which the losses are incurred, rather than as of the measurement date as presently required. The adoption of SFAS No. 144 on January 1, 2002 did not have a material impact on the Company’s consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections,which is generally applicable to financial statements for fiscal years beginning after May 15, 2002; however, early adoption is encouraged. SFAS No. 145 eliminates the requirement under SFAS No. 4,Reporting Gains and Losses from Extinguishment of Debtto report gains and losses from extinguishments of debt as extraordinary items in the income statement. The Company adopted SFAS No. 145 on July 1, 2002, and accordingly reclassified the extraordinary gain of $2,404, which occurred from its extinguishment of debt in 2001.

In June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities,which is applicable to financial statements for fiscal years beginning after December 31, 2002; however early adoption is encouraged. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The Company adopted SFAS No. 146 on July 1, 2002, and it did not have a material impact on the Company’s consolidated financial statements.

In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involve the delivery or performance of multiple products, services, and/or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a stand-alone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003. The Company has adopted the provisions of EITF 00-21 as of July 1, 2003, and, as a result, when the Company enters into advertising agreements with multiple products and services and is unable to determine the objective fair value of one or more elements, the Company will generally recognize the advertising revenue on a straight-line basis over the term of the agreement.

53

SPORTLINE.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(3) SUMMARY OF ACCOUNTING POLICIES:—Continued

In December 2002, the FASB issued SFAS No. 148“Accounting for Stock-Based Compensation – Transition and Disclosure.” This statement amends SFAS No. 123 “Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock –based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method used on reported results. The disclosure provisions of this standard are effective for fiscal years ending after December 15, 2002 and have been incorporated in these financial statements and accompanying footnotes.

(4) CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES:

The following tables summarize, by major security type, the Company’s cash and cash equivalents and marketable securities as of December 31, 2002 and 2001:

	December 31, 2002									December 31, 2001
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	8,279		—		—		$	8,279	$	16,491	—		—		$	16,491
Agency securities		9,104		—		—			9,104		13,526	—		—			13,526
Cash and cash equivalents		17,383		—		—			17,383		30,017	—		—			30,017
Available-for-sale:
Corporate notes and bonds		2,599		23		—			2,622		—	—		—			—
Asset-backed and agency securities		11,746		31		(31	)		11,746		—	—		—			—
Held-to-maturity:
Corporate notes and bonds		1,067		—		(14	)		1,053		—	—		—			—
Asset-backed and agency securities		4,807		10		—			4,817		16,018	—		(24	)		15,994
Marketable securities		20,219		64		(45	)		20,238		16,018	—		(24	)		15,994
Total	$	37,602	$	64	$	(45	)	$	37,621	$	46,035	—	$	(24	)	$	46,011

The following table summarizes contractual maturities of the Company’s marketable securities as of December 31, 2002 and 2001:

	December 31, 2002				December 31, 2001
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	3,863	$	3,865	$	15,713	$	15,688
Asset-backed and agency securities with various maturities		16,356		16,373		305		306
	$	20,219	$	20,238	$	16,018	$	15,994

The Company realized an immaterial gain on the sale of an available-for-sale security in 2002. The Company classified all of its marketable securities as held-to-maturity as of December 31, 2001.

54

SPORTSLINE.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(5) ACQUISITIONS AND DISPOSITIONS:

The Company acquired International Golf Outlet, Inc. (“IGO”) in June 1998 and TennisDirect.com, Inc. in August 1999, and accounted for these transactions using the purchase method of accounting. The purchases resulted in goodwill of $3,180. Such goodwill was being amortized over an estimated life of ten years. In May 1999, the Company acquired Golf Club Trader, Inc. The purchase was accounted for using the pooling-of-interests method of accounting. As of January 2000, the aforementioned companies were sold to MVP.com, Inc. (“MVP”) in exchange for an equity interest in MVP resulting in a one-time gain of $7,814. In addition, the Company entered into a 10-year strategic e-commerce and marketing agreement with MVP pursuant to which MVP operated the Company’s domestic e-commerce business. These transactions with MVP resulted in the Company receiving an investment in MVP totaling $100,000. Such investment was initially recorded at estimated fair value.During the third and fourth quarters of 2000, the Company deemed its investment in MVP to be permanently impaired and wrote off the entire investment of $100,000, which is included in loss on equity investments. The Company’s estimate was based on the market downturn during the third and fourth quarters of 2000, which caused similar declines in publicly-traded Internet e-commerce companies’ market values, the difficulty experienced by MVP in raising additional capital and an assessment of MVP’s financial condition and prospects. In November 2000, the Company terminated its marketing agreement with MVP due to MVP’s breach of the agreement. As a result of the termination, in 2000 the Company reversed deferred revenue of $72,303, net of taxes, which is included in gain on termination of advertising agreements in the accompanying consolidated statements of operations. In 2001, the Company recognized an additional gain of $2,051 resulting from the reversal of an accrual related to the termination of the MVP.com agreement.

Additionally, as of December 29, 2000, Internet Sports Network ceased operations. As a result, the Company wrote off its investment of $15,247, included in loss on equity investments, during the fourth quarter of 2000, which the Company had received as part of the promotional and advertising agreement. Furthermore, several of the Company’s other equity investments were adversely affected by the market downturn and were written down by $12,406, included in loss on equity investments, in the third and fourth quarters of 2000. As of December 31, 2002 and 2001, the Company had an equity investment in one company totaling $500, the value of which is guaranteed by a cash escrow account.

Sports.com Limited (“Sports.com”) was formed in May 1999. As of December 31, 2000, SportsLine owned 71% of the common shares of Sports.com. In 2000, the Company consolidated between 71% and 100% of the losses of Sports.com, which has historically been offset by the allocation of a portion of such losses to third party holders of Sports.com common stock. On July 17, 2001, Sports.com raised approximately $13,000 in equity funding from its existing investors. After giving effect to the funding, the Company’s fully diluted ownership stake in Sports.com, including all outstanding warrants and management options, was approximately 30%. As a result of the Company’s reduced ownership interest in Sports.com and a reduction in the Company’s representation on Sports.com’s board of directors to less than a majority, as of July 17, 2001 the Company was no longer consolidating the results of Sports.com and accounted for its investment in Sports.com under the equity method of accounting. In accordance with United States generally accepted accounting principles, the Company recorded the effect of the deconsolidation of the subsidiary as a non-operating credit in the amount of $41,739 in 2001. After July 17, 2001, the Company no longer recorded any losses generated by Sports.com as its investment had been reduced to zero and the Company had no future obligation to provide funding to Sports.com. On May 31, 2002, Sports.com was placed into administration, a procedure in the U.K. pursuant to which a court-appointed administrator assumes day-to-day control of a company in order to determine whether a business should be reorganized, sold or liquidated, and in July 2002 the Company’s inter-company agreement with Sports.com was terminated.

The Company acquired Daedalus World Wide Corporation (“DWWC”) in December 1999. The transaction was accounted for using the purchase method of accounting. The purchase resulted in goodwill of $31,880, which was being amortized over an estimated life of seven years. In the fourth quarter of 2000, a $12,000 liability, included in accounts payable at December 31, 2000, was recorded pursuant to the purchase agreement, which provided for additional consideration in exchange for meeting certain performance thresholds. During the first quarter of 2001, 828,376 shares of common stock were issued in satisfaction of $6,000 of the liability, and

55

SPORTSLINE.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share and per share data)—(Continued)

(5) ACQUISITIONS AND DISPOSITIONS:—(Continued)

during the fourth quarter of 2001, 2,195,968 shares of common stock were issued in satisfaction of the remaining $6,000 liability. As a result of the identification of several indicators of impairment including a slowdown in the economy and differences in actual results in comparison to initial valuation forecasts, the Company recognized a goodwill write-down in the year ended December 31, 2001 of $17,000 to adjust its investment in DWWC to its estimated fair value. The Company’s assessment of its goodwill investment was based on historical operations, future cash flows and the market value of similar entities. The Company performed the annual impairment test required under SFAS No. 142 to test impairment as of October 1, 2002. As a result, the Company found no impairment of its goodwill. At December 31, 2002, the Company had goodwill of $16,194 recorded for DWWC.

In April 2000, the Company, through its wholly-owned subsidiary VegasInsider.com, Inc., purchased the DBC Sports division of Data Broadcasting Corporation (“DBC”) in exchange for 277,152 shares of the Company’s common stock (the “Consideration Shares”). Pursuant to the terms of the purchase agreement, the Company guaranteed that the Consideration Shares would have a value equal to or greater than $12,500 on March 31, 2001 (the “Guaranteed Proceeds”). On April 6, 2001, due to the decline in the trading price of the Company’s common stock, the Company fulfilled its obligation to DBC by purchasing the Consideration Shares for $12,500. The Consideration Shares were cancelled and retired in April 2001. DBC Sports originates and sells odds and other statistical data to certain Las Vegas casinos. As a result of the identification of several indicators of impairment including a slowdown in the economy and the elimination of one of its products, the Company recorded a goodwill write-down of $4,600 in 2001 to reflect a reduction in the estimated value of its investment in DBC Sports. The assessment of goodwill was based on historical operating results, future cash flows and the market values of similar entities. The Company performed the annual impairment test required under SFAS No. 142 to test impairment as of October 1, 2002. As a result, the Company recorded a goodwill write-down of $2,650 to adjust the value of its investment in DBC Sports to its estimated fair value. At December 31, 2002, the Company had goodwill of $2,017 recorded for DBC Sports.

The Company acquired another business during 1999 and accounted for the transaction using the purchase method of accounting. The purchase resulted in goodwill of $3,726, which was being amortized over an estimated life of seven years. The business was subsequently sold in April 2000 resulting in a gain of $264.

The following unaudited pro forma financial information presents the consolidated operations of the Company along with the acquired and disposed of companies as if the transactions had occurred at the beginning of the periods presented, after giving effect to certain adjustments including increased amortization of goodwill related to the acquisitions. The following table excludes the results of Sports.com in 2001 and 2000 and includes DBC Sports, acquired in April 2000, as if it had been acquired on January 1, 2000. For comparative purposes the financial information for 2002 has been presented although there were no dispositions or acquisitions in 2002. The unaudited pro forma information is provided for informational purposes only and should not be construed to be indicative of the Company’s consolidated results of operations had the transactions been consummated on the dates assumed and do not project the Company’s results of operations for any future period:

	2002			2001			2000
Revenue	$	62,635		$	59,276		$	87,927
Net loss	$	(51,328	)	$	(94,418	)	$	(78,091	)
Diluted loss per share	$	(1.45	)	$	(3.53	)	$	(2.96	)

56

SPORTSLINE.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(6) INVESTMENT IN CONSOLIDATED SUBSIDIARY AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED):

As discussed in Note 5, the Company began accounting for its investment in Sports.com under the equity method of accounting as of July 17, 2001. No losses have been recorded after July 17, 2001, as the Company’s investment in Sports.com has been reduced to zero and the Company has no future obligation to provide funding to Sports.com. Unaudited condensed financial information of Sports.com is as follows:

Balance Sheet	December 31, 2001
Assets:
Current assets	$	7,556
Other		5,717
Total assets	$	13,273
Liabilities and shareholders’ equity:
Current liabilities	$	5,138
Shareholders’ equity		8,135
Total liabilities and shareholders’ equity	$	13,273

Statement of Operations	Year Ended December 31,
	2001			2000
Revenue	$	7,253		$	8,429
Expenses		(37,178	)		(36,587	)
Net loss	$	(29,925	)	$	(28,158	)

57

SPORTSLINE.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(6) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED):—(Continued)

The unaudited pro forma results of operations for the years ended December 31, 2001 and 2000, assuming the deconsolidation of Sports.com occurred as of January 1, 2000, are as follows:

	Year Ended December 31
	2001			2000
REVENUE	$	59,276		$	87,458
COST OF REVENUE		23,981			28,070
GROSS PROFIT		35,295			59,388
OPERATING EXPENSES:
Product development		1,854			1,791
Sales and marketing
Amortization of equity issued to Viacom for promotion		20,288			20,288
Other		35,751			37,224
General and administrative		29,552			26,726
Depreciation and amortization		26,155			19,257
Restructuring charge		985			—
Write-down of goodwill		21,600			—
Total operating expenses		136,185			105,286
LOSS FROM OPERATIONS		(100,890	)		(45,898	)
INTEREST EXPENSE		(1,064	)		(1,081	)
INTEREST AND OTHER INCOME, net		3,109			7,190
LOSS ON EQUITY INVESTMENTS		(28	)		(127,653	)
GAIN ON TERMINATION OF AGREEMENTS		2,051			78,766
GAIN ON SALE OF E—COMMERCE SUBSIDIARIES		—			7,814
GAIN ON EXTINQUISHMENT OF DEBT		2,404			—
NET LOSS	$	(94,418	)	$	(80,862	)
LOSS PER SHARE—BASIC AND DILUTED	$	(3.53	)	$	(3.08	)

58

SPORTSLINE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(7) PROPERTY AND EQUIPMENT, NET:

Property and equipment, net consists of the following:

	Estimated Useful Lives (Years)	December 31,
		2002			2001
Computer equipment	2-3	$	29,454		$	27,929
Furniture, fixtures and leasehold improvements	3-10		6,062			6,376
			35,516			34,305
Less: accumulated depreciation and amortization			(27,949	)		(22,236	)
		$	7,567		$	12,069

Depreciation and amortization expense on property and equipment amounted to approximately $5,886, $8,848 and $7,609 for the years ended December 31, 2002, 2001 and 2000, respectively.

(8) DEBT:

In March 1999, the Company completed an offering of $150,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2006 (the “Convertible Subordinated Notes”). The Convertible Subordinated Notes are convertible, at the holder’s option, into the Company’s common stock at an initial conversion rate of 15.355 shares of common stock per thousand dollar principal amount (equivalent to a conversion price of approximately $65.125 per share), subject to adjustment in certain events. Interest on the Convertible Subordinated Notes is payable semiannually on April 1 and October 1 of each year. The Convertible Subordinated Notes are unsecured and are subordinated to all existing and future Senior Indebtedness (as defined in the indenture governing the Convertible Subordinated Notes (the “Indenture”)) of the Company. The Convertible Subordinated Notes are redeemable at the option of the Company, in whole or part, at the redemption prices set forth in the Indenture. At this time the Company does not intend to redeem the Convertible Subordinated Notes. As of December 31, 2002 and 2001, the Company had no material indebtedness outstanding that would have constituted Senior Indebtedness. The Indenture does not limit the amount of additional indebtedness, including Senior Indebtedness, which the Company can create, incur, assume, or guarantee, nor does the Indenture limit the amount of indebtedness which any subsidiary of the Company can create, incur, assume or guarantee. The Indenture includes provisions that give the holders of the Convertible Subordinated Notes the right to require the Company to repurchase all or part of the Convertible Subordinate Notes at 100% of the principal amount upon a change of control (as defined in the Indenture) or if the Company’s common stock is no longer listed for trading on a national securities exchange nor approved for trading on an established automated over-the-counter trading market. In such case, the Company would have the option to repurchase the Convertible Subordinated Notes in cash or shares of common stock, valued at 95% of the average of the closing prices of the common stock for the five consecutive trading days prior to the repurchase.

During the third and fourth quarters of 1999, the Company repurchased $130,300 of its Convertible Subordinated Notes for approximately $90,100 and, as a result, the Company recognized a gain of $36,027, net of unamortized debt issuance costs. During the fourth quarter of 2001, the Company repurchased $2,930 of its Convertible Subordinated Notes for approximately $500 and, as a result, the Company recognized a gain of $2,404, net of unamortized debt issuance costs. Convertible Subordinated Notes in an aggregate principal amount of approximately $16,678, which are convertible into 256,091 shares of common stock, were outstanding as of December 31, 2002 and 2001.

(9) SHAREHOLDERS’ EQUITY:

Pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issue up to an aggregate of 1,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(9) SHAREHOLDERS’ EQUITY:—(Continued)

each such series thereof, including the dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series. The Company has no present plans to issue any shares of preferred stock.

In March 1997, the Company entered into a five-year agreement with CBS Broadcasting Inc. (“CBS”). In consideration of the advertising and promotional efforts of CBS and its license to the Company of the right to use certain CBS logos and television-related sports content, CBS received 3,100,000 shares of common stock over the term of the agreement (752,273, 735,802, 558,988, 567,579 and 485,358 shares in 1997, 1998, 1999, 2000 and 2001, respectively). The CBS agreement also required the Company to issue CBS, on the first business day of each of the first five contract years, warrants to purchase 380,000 shares of common stock at per share exercise prices ranging from $10 in 1997 to $30 in 2001. Such warrants were exercisable at any time during the contract year in which they were granted. As of December 31, 2001, all unexercised warrants issued to CBS had expired. The value of the advertising and content was recorded annually in the consolidated balance sheets as deferred advertising and content costs and expensed to amortization of equity issued to Viacom over each related contract year. Amounts amortized to expense in 2002, 2001 and 2000 were $22,286, $17,288 and $17,288, respectively, consisting of amortization relating to advertising of $20,000 in 2002 and $14,000 in both 2001 and 2000; content of $0 for 2002 and $518 for both 2001 and 2000; and expense related to warrants of $2,286 for 2002 and $2,770 for both 2001 and 2000. Additionally, the Company expensed $1,750 in 2002 and $3,000 in both 2001 and 2000 related to common stock issued to Westwood One, Inc. in exchange for promotion and programming. These amounts are included in amortization of equity issued to Viacom in the accompanying consolidated statements of operations for the years ended December 31, 2002, 2001 and 2000.

In February 1999, the Company amended and extended its agreement with CBS. The original revenue sharing provisions of the CBS agreement were eliminated and replaced by a new revenue sharing formula, which is calculated on a broader revenue base and at a lower rate. In consideration of additional promotional and advertising opportunities the Company agreed to accelerate the issuance of the remaining shares that were formerly to be issued in 2000 and 2001 (567,579 and 485,358 shares, respectively), issued additional warrants to purchase 1,200,000 shares of common stock at per share exercise prices ranging from $23 in 1999 to $45 in 2001 and agreed to issue additional shares of common stock valued at $100,000 between 2002 and 2006. Shares having a fair market value of $20,000 will be issued each year based on the average of closing prices of the common stock on the Nasdaq National Market for the five-day period ending on the day prior to the applicable issue dates: January 1, 2002; April 1, 2003; July 1, 2004; October 1, 2005 and January 1, 2007. On January 1, 2002, the Company issued 6,882,312 shares of common stock, having a market value of $20,000, to CBS pursuant to this agreement. See Note 14 regarding the 2003 amendment of the CBS Agreement.

Total annual amounts to be recognized as sales and marketing expense, not including any revenue share payments, in accordance with the CBS agreement, as amended, are set forth below. The 2003 amendment did not have any effect on when such expense will be recognized.

2003	$	22,286
2004		22,286
2005		22,286
2006		22,286
	$	89,144

In March 2000, the Company issued 28,439 shares of common stock to the former owners of IGO in connection with the sale of IGO to MVP. See Note 5.

In April 2000, in connection with the acquisition of DBC Sports, the Company issued to DBC 277,152 shares of common stock. Due to the decline in the trading price of the Company’s common stock, the Company

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(9) SHAREHOLDERS’ EQUITY:—(Continued)

purchased such shares back from DBC for $12,500 in April 2001 in order to fulfill certain obligations set forth in the acquisition agreement. See Note 5.

In January 2000, CBS exercised its year 2000 warrants resulting in net proceeds of $11,500.

In July 2001, the Company issued to the National Football League 350,000 shares of the Company’s common stock valued at $633 pursuant to the Company’s agreement with the NFL.

In July 2002, the Company issued to AOL 1,945,525 shares of common stock with a value equal to $2,000 pursuant to the Company’s agreement with AOL.

In September 2002, the Company issued to JAE Endorsements, Inc. and its assignees 200,000 shares of common stock with a value of $246 pursuant to the Company’s agreement with JAE Endorsements, Inc.

The Company has reserved sufficient shares of its common stock to cover its issuance obligations under agreements with CBS, NFL and AOL, exercises of outstanding common stock warrants and the stock option, incentive compensation and employee stock purchase plans discussed in Note 10. The following is a summary of all common stock reserved for issuance as of December 31, 2002:

	Shares
Warrants	850,000
Employee stock option plans	2,373,050
Employee stock purchase plan	195,622
Convertible subordinated notes	256,091
Total common stock reserved for issuance	3,674,763

In addition, the Company has reserved common stock for issuance pursuant to the agreements with CBS, NFL and AOL. The amount of such shares is undetermined as such obligations are based on a dollar value dependent upon the trading price of the Company’s common stock at certain dates in the future and, in certain cases, are subject to the Company’s option to pay cash in lieu of issuing shares.

(10) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:

There were no warrants granted in 2002 and 2001. Common stock warrants issued in 2000 to non-employees for services rendered primarily under consulting agreements were valued on the date of grant using the Black-Scholes option pricing model. The following is a summary of warrants granted, exercised, canceled and outstanding:

	2002				2001				2000
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Warrants outstanding, beginning of year	1,157,000		$	25.01	2,344,000		$	29.24	3,451,000		$	29.20
Granted	—			—	—			—	230,000			7.26
Exercised	—			—	—			—	(557,000	)		21.30
Canceled	(307,000	)		15.35	(1,187,000	)		32.87	(780,000	)		30.13
Warrants outstanding, end of year	850,000		$	28.51	1,157,000		$	25.01	2,344,000		$	28.94

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(10) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:—(Continued)

The range of per share exercise prices of warrants outstanding at December 31, 2002 was $5.00—$49.00. The weighted average fair value of warrants granted during 2000 was $6.81 per share. There were 727,375 and 928,365 warrants exercisable at December 31, 2002 and 2001, respectively, at a weighted average exercise price of $29.51 and $26.35 per share, respectively. Warrants outstanding at December 31, 2002, are exercisable through various dates through 2009.

Assumptions utilized to value warrants granted in 2000 are as follows:

Volatility Factor	Dividend Yield	Risk-Free Interest Rates	Estimated Lives (Years)
100%	0%	5.8%—6.0%	4-5

In 1995, the Company adopted a stock option plan (the “1995 Plan”) under which the Company is authorized to issue a total of 1,200,000 incentive stock options and nonqualified stock options to purchase common stock to be granted to employees, non-employee members of the Board of Directors and certain consultants or independent advisors who provide services to the Company. Options become exercisable for 25% of the option shares upon the optionee’s completion of one year of service, as defined, with the balance vesting in successive equal monthly installments upon the optionee’s completion of each of the next 36 months of service. The maximum term of the options is ten years.

On April 14, 1997, the Company adopted the 1997 Incentive Compensation Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, as amended, the total number of shares of common stock that may be subject to the granting of awards shall be equal to: (i) 8,000,000 shares, plus (ii) the number of shares with respect to awards previously granted under the Incentive Plan that terminate without being exercised, expire, are forfeited or canceled, and the number of shares of common stock that are surrendered in payment of any awards or any tax withholding requirements. The Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock, deferred stock, other stock-related awards and performance or annual incentive awards (such incentive awards to be granted at not less than the fair market value of the underlying common stock) that may be settled in cash, stock or other property. At December 31, 2002, there were 2,373,050 shares available for issuance under both plans. The Company recorded expense of $1,594 and $5,750 for the years ended December 31, 2002 and 2001, respectively, related to the intrinsic value of employee stock options granted. The intrinsic value of employee stock options are recognized as an expense ratably over the corresponding vesting period.

A summary of the activity relating to the Company’s employee stock option plans for the years ended December 31, 2002, 2001 and 2000 is presented below:

	2002				2001				2000
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	3,189,111		$	11.01	6,561,569		$	18.74	4,260,796		$	20.39
Granted	1,180,850			1.85	1,094,950			2.63	3,168,500			16.74
Exercised	(16,966	)		0.73	(133	)		8.00	(190,931	)		7.98
Canceled	(439,158	)		13.58	(4,467,275	)		20.34	(676,796	)		22.78
Outstanding at end of year	3,913,837		$	8.00	3,189,111		$	11.01	6,561,569		$	18.74
Options exercisable at end of year	2,169,264		$	10.78	1,227,265		$	15.82	2,009,514		$	19.38

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(10) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:—(Continued)

The following table summarizes information about employee stock options outstanding at December 31, 2002:

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Outstanding at December 31, 2002	Weighted Average Remaining Contractual Life (In Years)	Weighted Average Exercise Price	Exercisable at December 31, 2002	Weighted Average Exercise Price
$0.62 to $2.00	1,008,691	8.30	$0.93	334,417	$0.85
2.01 to 5.00	1,375,565	6.90	3.58	629,919	3.92
5.01 to 8.00	527,695	5.90	7.81	405,011	7.87
8.01 to 15.00	388,534	6.40	12.02	283,543	12.01
15.01 to 30.00	342,897	5.70	18.93	282,381	18.90
30.01 to 60.00	270,455	5.20	37.60	233,993	37.17
	3,913,837	6.90	$8.00	2,169,264	$10.78

In August and September 2001, the Company issued an aggregate of 1,909,458 shares of restricted stock, at a weighted average fair value of $1.06 per share, to its executive officers and certain other key employees in exchange for the cancellation of certain outstanding stock options to purchase in the aggregate 3,818,919 shares of common stock. Deferred compensation has been recorded for the market value of the restricted shares as of the issuance date in the amount of $5,500, which includes $3,475 of intrinsic value from the related cancelled stock options. Such amount is being amortized to expense over the expected four-year vesting period of the restricted stock. Although vesting is over a four-year period, vesting may be accelerated upon the Company achieving certain financial goals. During the fourth quarter of 2002, the Company achieved certain financial goals and, as a result, the vesting of 10% of the outstanding shares of restricted stock was accelerated. As of December 31, 2002, 641,526 shares of restricted stock had vested.

On April 14, 1997, the Company adopted the Employee Stock Purchase Plan (the “Purchase Plan”) and on November 19, 1999 the Purchase Plan was amended to increase the number of shares of common stock reserved for issuance thereunder to 1,000,000. The Purchase Plan provides eligible employees, as defined therein, the right to purchase shares of common stock. The purchase price per share will be equal to 85% of the fair market value as of certain measurement dates. Such purchases are limited in any calendar year to the lower of 25% of the employee’s total annual compensation or $25. There were 123,383, 176,460 and 73,883 shares of common stock issued pursuant to the Purchase Plan in 2002, 2001 and 2000, respectively.

In January 1996, the Company adopted a retirement plan that qualifies under Section 401(k) of the Internal Revenue Code. Under this plan, participating employees, as defined, may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limits. There is currently no matching of employee contributions by the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(11) INCOME TAXES:

The Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes.” Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rate and laws that will be in effect when the differences are expected to reverse. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes as of December 31, 2002 and 2001 are as follows:

	2002			2001
Deferred tax assets:
Net operating losses	$	71,075		$	56,952
Capital losses		35,535			35,535
Expense items		9,235			13,020
Total gross deferred tax assets		115,845			105,507
Less valuation allowance		(115,769	)		(105,507	)
Net deferred tax assets		76			—
Deferred tax liabilities—expense items		(76	)		—
Net deferred tax assets	$	—		$	—

SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets reported, if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a $115,769 and $105,507 valuation allowance at December 31, 2002 and 2001, respectively, is necessary to reduce the deferred tax assets to the amount that will likely be realized. The change in the valuation allowance for 2002 and 2001 was an increase of $10,262 and $68,405, respectively. At December 31, 2002, the Company has available net operating loss carryforwards of $185,816, which begin to expire in the year 2009. Additionally, the Company has approximately $93,000 of capital loss carryforwards at December 31, 2002.

In 2002, the Company recorded a tax benefit of $720 due to a refund of alternative minimum taxes paid in 2001. The reconciliation of income tax computed at the U.S. Federal statutory rate to income tax expense is as follows:

	2002		2001
Tax at U.S. statutory rate	(34	%)	(34	%)
State taxes, net of Federal benefit	(4	%)	(3	%)
Non-deductible items	2	%	11	%
Change in valuation allowance	36	%	26	%
	0	%	0	%

(12) COMMITMENTS AND CONTINGENCIES:

The Company leases its facilities under noncancelable leases that expire on various dates through 2010. Certain of these leases require the Company to pay operating costs, including property taxes and maintenance costs and some include rent adjustment clauses. The Company entered into a ten-year lease for its corporate headquarters beginning in March 2000. Under the terms of certain of its office leases, the Company has provided letters of credit to the landlords. The letters of credit are secured by certain restricted certificates of deposit of approximately $535 as of December 31, 2002.

Rent expense amounted to approximately $2,046, $2,875 and $3,281 for the years ended December 31, 2002, 2001 and 2000, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(12) COMMITMENTS AND CONTINGENCIES—(Continued)

Future minimum lease payments for all operating leases are as follows as of December 31, 2002:

2003	$	2,128
2004		1,522
2005		1,355
2006		1,403
2007		1,459
Thereafter		3,496
Total minimum lease payments	$	11,363

The Company has entered into licensing, royalty and consulting agreements with various content providers, vendors and sports leagues and associations. The remaining terms of these agreements as of December 31, 2002 range from one to four years. These agreements provide for the payment of royalties, bounties and certain guaranteed amounts. Several of the payments ($2,333 in 2003, $2,666 in 2004) are payable in stock at prevailing market prices in lieu of cash at the Company’s option. The following agreements are included in the table of minimum guaranteed payments below:

NFL.com.In July 2001, the Company entered into an agreement with the NFL, CBS and AOL (the “NFL Agreement”). The Company is responsible for a portion of the rights fee payments required to be made to the NFL under the NFL Agreement. Under the terms of the multi-year agreement, $4,238 has been paid as of December 31, 2002, and the Company is obligated to make additional payments totaling $19,812 as follows: $812 for the balance of the payment due for the second year ending July 2003; $6,000 for each of the third and fourth years ending July 2004 and July 2005; and $7,000 for the fifth year ending July 2006. In addition, in July 2001 the Company issued to the NFL 350,000 shares of the Company’s common stock and is obligated to make additional payments in cash or stock, at the Company’s option, equal to $1,333 and $2,667 in 2003 and 2004, respectively. The Company is amortizing its total cost of the rights fee to sales and marketing expense on a straight-line basis over the five-year term of the NFL Agreement.

AOL. In July 2001, the Company extended its agreement with AOL (the “AOL Extension”). Under the terms of the multi-year promotional agreement, the Company paid AOL $1,000 in cash upon execution of the AOL Extension and on July 18, 2002 issued 1,945,525 shares of common stock to AOL with a value equal to $2,000. The Company is obligated to make an additional payment in cash and/or stock, at the Company’s option, equal to $1,000 in 2003. The Company is amortizing the costs of the AOL Extension to sales and marketing expense on a straight-line basis over the approximate five-year term of the agreement. See Note 14.

PGA Tour. Under the terms of the Company’s agreement with the PGA TOUR, the Company was required to make an additional license fee payment in cash of $2,000 to the PGA TOUR in January 2003. The Company will recognize the cost of such payment to sales and marketing expense during 2003.

Other Commitments. In July 2002, the Company entered into an agreement with a third party vendor to purchase approximately $1,000 worth of computer hardware over a three-year period. This purchase is part of the Company’s plan to continue to invest in equipment related to the expected growth of the business. To date, the Company has purchased $720 of equipment under the agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(12) COMMITMENTS AND CONTINGENCIES—(Continued)

Minimum future guaranteed payments required under such agreements are as follows as of December 31, 2002:

2003	$	12,896
2004		9,355
2005		7,105
2006		1,930
2007		—
	$	31,286

Contingencies

In November 2001, Sandbox.com, Inc. (“Sandbox”) filed a lawsuit in the Seventeenth Judicial Circuit in and for Broward County, Florida, alleging that the Company breached an agreement and plan of merger to acquire Sandbox (the “Merger Agreement”), misappropriated trade secrets, breached fiduciary duties, and was unjustly enriched as a consequence of alleged transfers of assets and proprietary information. The Company in its Answer and Affirmative Defenses and Claim of Right to Setoff asserts that it was within its contractual rights to terminate the Merger Agreement and otherwise denies the substantive claims set forth in Sandbox’s complaint, claims a $600 setoff for Sandbox’s breach of the Merger Agreement, and has filed a counterclaim against Sandbox and a third party complaint against another party for fraud in the inducement relating to the Merger Agreement and a related Consulting Agreement. The case is in the pre-trial discovery phase, and no trial date or pretrial order has yet been set by the court. On September 6, 2002, Sandbox commenced a Chapter 11 bankruptcy proceeding in the United States Bankruptcy Court, Eastern District of Virginia, which was subsequently converted into a Chapter 7 bankruptcy proceeding. The Company believes that it is unlikely that the bankruptcy trustee will continue to pursue the case; however the Company believes that the claim by Sandbox is without merit and intends to vigorously defend itself in this action in the event the case is pursued by the trustee. The Company also intends to continue to pursue its claims against the third party defendant.

The Company is subject to various other legal proceedings and claims arising in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights. The Company’s management does not expect that the outcome in any of these legal proceedings, individually or collectively, will have a material adverse effect on the Company’s consolidated financial position or results of operations. However, the Company may incur substantial expenses in defending against third party claims. In the event of a determination adverse to it, the Company may incur substantial monetary liability and be required to change its business practices. Either of these could have a material adverse effect on the Company’s financial position, results of operations or cash flows. See Note 14.

(13) RELATED PARTY TRANSACTIONS:

Pursuant to the Company’s promotion and licensing agreement with CBS, the Company issued equity instruments to CBS and expensed $22,286, $17,288 and $17,288 during 2002, 2001 and 2000, respectively, primarily related to advertising and promotion on CBS. See Note 9. Since January 2002, CBS has owned approximately 32% of the Company’s outstanding common stock. Revenue sharing expense was $3,877 and $3,536 for the years ended December 31, 2002 and 2001, respectively. Revenue from third party advertisers billed to CBS was $2,595 for the year ended December 31, 2002. In addition, the Company expensed $1,750, $3,000 and $3,000 during 2002, 2001 and 2000, respectively, related to shares issued to Westwood One, Inc., a company that may be deemed an affiliate of CBS, in exchange for advertising and promotion, and the Company incurred television, radio and outdoor advertising expenses related to services provided by CBS and/or certain of its affiliates of $367, $2,227 and $1,408 in 2002, 2001 and 2000, respectively.

The Company has had transactions in the normal course of business with certain officers and directors of the Company. The terms of these agreements were negotiated on what the Company believes is an “arms-length basis.” In April 2001, the Company loaned an officer of the Company $200 at an annual interest rate of 5.5%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(13) RELATED PARTY TRANSACTIONS:—(Continued)

secured by the officer’s stock in the Company. The loan and accrued interest were paid in full in December 2001. The Company contracts for endorsement and other services of Joe Namath through Planned Licensing, Inc., which is a wholly-owned subsidiary of Namanco Productions, Inc. whose president and sole stockholder is a director of the Company. The Company has an agreement with Planned Licensing, Inc. through October 16, 2004. The Company incurred consulting and royalty expenses related to services provided by Planned Licensing, Inc. of $201, $207 and $267 in 2002, 2001 and 2000, respectively. Additionally, in 2000 the Company issued 30,000 common stock warrants to Planned Licensing, Inc. that vest over the life of the agreement. The Company is obligated to make future minimum payments to Planned Licensing, Inc. totaling $350 under this agreement through 2004.

(14) SUBSEQUENT EVENTS:

SportsTicker Litigation.On January 28, 2003, SportsTicker Enterprises, L.P., a vendor of electronic sports data, filed a lawsuit against the Company in New York State Supreme Court, alleging that the Company improperly terminated its subscription agreement with SportsTicker. SportsTicker’s complaint seeks approximately $2,150 in damages. On March 24, 2003, the Company filed a motion to dismiss all claims, on the ground that SportsLine’s termination was expressly authorized by the contract as a result of interruptions in SportsTicker’s service. On April 15, 2003, SportsTicker filed an opposition to the Company’s motion to dismiss and filed a motion for summary judgment in SportsTicker’s favor. The motions have not yet been decided. The Company believes the claim by SportsTicker is without merit and intends to vigorously defend itself in this action.

NCAASports.com Agreement.On February 26, 2003, the Company announced an agreement to sublicense the rights from CBS for the official NCAA Championship Web site, in their entirety, through 2006. These rights include site production, hosting and management of the sale of advertising for the NCAASports.com Web site, and the exclusive rights to provide Internet broadcasts of certain NCAA championships including the Division 1 Men’s Basketball Championship.

Disposal of VegasInsider.com and LVSC. As part of the NCAASports.com agreement, the Company announced its intention to dispose of its gaming information operations, consisting of its VegasInsider.com and Las Vegas Sports Consultants subsidiaries. Beginning in its Quarterly Report on Form 10-Q for the quarter ending March 31, 2003, the Company has reported the results from these operations as discontinued operations. The carrying amount of the assets and liabilities as of December 31, 2002 that are included in the disposal group is approximately $2,205 and $137, respectively. On June 23, 2003 the Company completed the sale of its VegasInsider.com subsidiary to Sports Information Ltd., a United Kingdom company. On October 29, 2003, the Company entered into a definitive agreement for the sale of Las Vegas Sports Consultants, subject to a number of closing conditions, many of which are beyond the Company’s control. Although management expects to complete the disposition by the end of 2003, there is no assurance that this will occur.

CBS Amendment.On March 5, 2003, the CBS agreement was amended to modify the annual schedule of stock issuances to CBS.

April 2003 Payment. On April 1, 2003, SportsLine was obligated to issue to CBS, the lesser of (1) a number of shares of common stock having a fair market value of $20,000 on April 1, 2003; or (2) a number of shares of common stock that will result in CBS and its affiliates’ aggregate beneficial ownership interest in SportsLine’s outstanding common stock not exceeding 39.9% (in which case the shares actually issued on April 1, 2003 were to be valued at the current fair market value of such shares and the remainder of SportsLine’s $20,000 obligation would be deferred until July 2004). Pursuant to the amendment on April 1, 2003, the Company issued to CBS 5,454,428 shares of common stock valued at approximately $5.4 million, as a result of which the aggregate beneficial ownership interest of CBS and its affiliates in the Company’s outstanding common stock increased to 39.9%.

July 2004 Payment.On July 1, 2004, SportsLine is obligated to issue to CBS the lesser of (1) a number of shares of common stock having a fair market value on July 1, 2004 equal to (x) $20,000 plus (y) the amount of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share and per share data)

(14) SUBSEQUENT EVENTS:—(Continued)

April 2003 payment which was deferred; or (2) a number of shares of common stock that will result in CBS and its affiliates’ aggregate beneficial ownership interest in SportsLine’s outstanding common stock not exceeding 49.9%. If the number of shares of common stock that would result in CBS and its affiliates’ aggregate beneficial ownership interest in SportsLine’s outstanding common stock not exceeding 49.9% has a fair market value on July 1, 2004 less than the amount of SportsLine’s total obligation on July 1, 2004 (i.e., $20,000 plus the deferred portion of the April 2003 payment), then SportsLine must satisfy up to $5,000 of such obligation in cash. SportsLine has the option to satisfy any additional remaining obligation on July 1, 2004 in cash and/or stock at its option. If SportsLine elects to satisfy any portion of that remaining obligation, if any, in stock and the issuance of such stock would cause the ownership interest of CBS and its affiliates to exceed 49.9% on July 1, 2004, then CBS may elect to defer that portion of the issuance until October 1, 2005.

October 2005 and January 2007 Payments.On October 1, 2005, SportsLine will remain obligated to issue to CBS common stock with a fair market value equal to (x) $20,000 plus (y) the portion of the payment due in July 2004, if any, that CBS may have elected to defer. SportsLine remains obligated to issue common stock with a fair market value of $20,000 to CBS on January 1, 2007.

NFL Share Issuance.Pursuant to its agreement with the NFL, the Company issued to the NFL 1,049,869 shares of the Company’s common stock in May 2003. See Note 12.

AOL Agreement.In September 2003, the Company modified its relationship with AOL by terminating its existing agreement and entering into a new agreement. In connection with the termination of the existing agreement, AOL refunded to the Company approximately 1,700,000 shares of common stock in October 2003 which have been retired and cancelled. In addition, the Company was relieved from its obligation in 2003 to pay an additional $1,000 in cash and/or stock to AOL.

Shareholder Litigation.In October 2003, the Company and certain of its officers were named as defendants in several securities class action lawsuits filed in the United States District Court for the Southern District of Florida. These actions, which were filed on behalf of purchasers of the Company’s common stock during the period May 15, 2001 to September 25, 2003, generally allege that, during the class period, the defendants made misstatements to the investing public about the Company’s financial condition and prospects. The complaints seek unspecified damages. The Company believes the plaintiffs’ claims lack merit and intends to vigorously defend the lawsuits.

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Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) 1. Financial Statements:

Reference is made to the Index to Financial Statements set forth in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K/A.

2. Financial Statement Schedules:

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are not required under the related instructions, the required information is contained in the financial statements and notes thereto or are not applicable, and therefore have been omitted.

3. Exhibits:

The following exhibits are filed as part of this Annual Report on Form 10-K/A:

Exhibit	Description
3.1	Amended and Restated Certificate of Incorporation (3.1)(1)
3.2	Amendment of Article IV of the Amended and Restated Certificate of Incorporation (3.2)(2)
3.3	Amendment of Article I of the Amended and Restated Certificate of Incorporation (3.3)(3)
3.2	Form of Amended and Restated Bylaws (3.2) (4)
10.1*	Form of Indemnification Agreement between the Company and each of its directors and executive officers (10.2) (4)
10.2*	1995 Stock Option Plan (10.1) (4)
10.3*	1997 Incentive Compensation Plan, as amended (4.1)(5)
10.4*	Employee Stock Purchase Plan, as amended (10.4)(3)
10.5	Agreement dated March 5, 1997 between the Company and CBS Inc. (10.6) (4)
10.6+	Premier Sports Information and Commerce Agreement, effective as of October 1, 1998, by and between the Company and America Online, Inc. (10.1) (6)
10.7	Amendment to Agreement, effective as of January 1, 1999, between the Company and CBS Broadcasting, Inc. (99.1) (7)
10.8*	Amended and Restated Employment Agreement, dated as of January 28, 2000, between the Company and Michael Levy (10.14)(3)
10.9*	Amended and Restated Employment Agreement, dated as of January 28, 2000, between the Company and Kenneth W. Sanders (10.15)(3)
10.10*	Employment Agreement, dated as of January 28, 2000, between the Company and Mark J. Mariani (10.18)(3)
10.11	First Amendment to License and Consulting Agreement between the Company and Planned Licensing, Inc. dated as of October 16, 1999 (10.19)(3)
10.12*	Amendment to the Employment Agreement of Michael Levy, dated as of June 30, 2000 (10.1)(8)
10.13*	Second Amendment to Amended and Restated Employment Agreement of Michael Levy dated as of August 20, 2001 (10.1)(9)
10.14*	First Amendment to Amended and Restated Employment Agreement of Kenneth Sanders dated as of August 20, 2001 (10.2)(9)
10.15*	First Amendment to Employment Agreement of Mark Mariani dated as of August 20, 2001 (10.5)(9)
10.16*	Employment Agreement of Peter Pezaris dated as of August 20, 2001 (10.6)(9)
10.17++	NFL Interactive Media Rights Agreement among NFL Enterprises, L.P., and America Online, Inc., CBS Broadcasting Inc. and SportsLine.com, Inc. dated as of July 6, 2001 (10.7)(9)
10.18++	Third Amendment to Premier Sports Information and Commerce Agreement, effective as of July 6, 2001, by and between America Online, Inc. and SportsLine.com, Inc. (10.8)(9)
21.1	Subsidiaries of the Company (10)
23.1	Consent of Independent Certified Public Accountants, Ernst & Young LLP (filed herewith)
23.2	Notice Regarding Consent of Arthur Andersen LLP (filed herewith)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certificate of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32	Certificate of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

69

(1) Incorporated by reference to an exhibit shown in the preceding parentheses and filed with the Company’s Registration Statement on Form S-1 (Registration No. 333-62685).

(2) Incorporated by reference to an exhibit shown in the preceding parentheses and filed with the Company’s Registration Statement on Form S-3 (Registration No. 333-78921).

(3) Incorporated by reference to the exhibit shown in the preceding parentheses and filed with the Company’s Report on Form 10-K for the year ending December 31, 1999.

(4) Incorporated by reference to an exhibit shown in the preceding parentheses and filed with the Company’s Registration Statement on Form S-1 (Registration No. 333-25259).

(5) Incorporated by reference to an exhibit shown in the preceding parentheses and filed with the Company’s Registration Statement on Form S-8 (Registration No. 333-43746).

(6) Incorporated by reference to the exhibit shown in the preceding parentheses and filed with the Company’s Report on Form 10-Q for the quarterly period ending September 30, 1998.

(7) Incorporated by reference to the exhibit shown in the preceding parentheses and filed with the Company’s Report on Form 8-K (Event of February 10, 1999).

(8) Incorporated by reference to the exhibit shown in the preceding parentheses and filed with the Company’s Report on Form 10-Q for the quarterly period ending June 30, 2000.

(9) Incorporated by reference to the exhibit shown in the preceding parentheses and filed with the Company’s Report on Form 10-Q for the quarterly period ending September 30, 2001.

(10) Incorporated by reference to the exhibit of the same number filed with the Company’s Report on Form 10-K for the year ending December 31, 2002.

* Management Contract or Compensatory Plan

+ Confidential treatment granted to certain portions of this Exhibit

++ Certain portions of this exhibit have been omitted and separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment thereof.

(b) Reports on Form 8-K

The Company did not file any Reports on Form 8-K during the three months ended December 31, 2002.

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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.

	SPORTSLINE.COM, INC.
	By:	/s/    Michael Levy
November 19, 2003		Michael Levy President, Chief Executive Officer and Director (principal executive officer)

	By:	/s/    Kenneth W. Sanders
November 19, 2003		Kenneth W. Sanders Chief Financial Officer (principal financial and accounting officer)

EXHIBIT INDEX

Exhibit	Description
23.1	Consent of Independent Certified Public Accountants, Ernst & Young LLP
23.2	Notice Regarding Consent of Arthur Andersen LLP
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certificate of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32	Certificate of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)