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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
                       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, 1998
 
                                         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 USA, INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
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<S>                                              <C>
                    DELAWARE                                        65-0470894
        (STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

               6340 N.W. 5TH WAY                                      33309
            FORT LAUDERDALE, FLORIDA                                (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (954) 351-2120
 
       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 or any amendment to this
Form 10-K.  [ ]
 
     The aggregate market value of shares of Common Stock held by non-affiliates
of the Registrant as of March 12, 1999, was approximately $841,826,659 based on
the $57.8125 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
February 28, 1999 was 22,289,880.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the registrant's definitive Proxy Statement relating to its
1999 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission not later than 120 days after the end of the fiscal year
covered by this report, are incorporated by reference into Part III of this
report.
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<PAGE>   2
 
                                 INDEX TO ITEMS
 
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                                                                          PAGE
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<S>         <C>                                                           <C>
PART I
  Item 1.   Business....................................................    2
  Item 2.   Properties..................................................   16
  Item 3.   Legal Proceedings...........................................   16
  Item 4.   Submission of Matters to a Vote of Security Holders.........   16
PART II
  Item 5.   Market for the Registrant's Common Equity and Related
            Stockholder Matters.........................................   17
  Item 6.   Selected Financial Data.....................................   19
  Item 7.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations...................................   20
  Item 7A.  Quantitative and Qualitative Disclosure About Market Risk...   39
  Item 8.   Financial Statements and Supplementary Data.................   40
  Item 9.   Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure....................................   61
PART III
  Item 10.  Directors and Executive Officers of the Registrant..........   61
  Item 11.  Executive Compensation......................................   61
  Item 12.  Security Ownership of Certain Beneficial Owners and
            Management..................................................   61
  Item 13.  Certain Relationships and Related Transactions..............   61
PART IV
  Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
            8-K.........................................................   61
</TABLE>
 
                                        1
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                                     PART I
 
ITEM 1.  BUSINESS.
 
     THIS ANNUAL REPORT ON FORM 10-K 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 FACTORS, INCLUDING THOSE FACTORS SET FORTH UNDER THE CAPTION
"RISK FACTORS THAT MAY AFFECT FUTURE RESULTS" IN "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" OF
THIS ANNUAL REPORT ON FORM 10-K AND ELSEWHERE IN THIS REPORT.
 
     SportsLine USA is a leading Internet-based sports media company that
provides branded, interactive information and programming as well as merchandise
to sports enthusiasts worldwide. The Company produces and distributes original,
interactive sports content, including editorials and analyses, radio shows,
contests, games, fantasy league products and fan clubs. The Company also
distributes a broad range of up-to-date news, scores, player and team statistics
and standings, photos, audio clips and video clips obtained from CBS and other
leading sports news organizations, as well as the Company's superstar athletes.
 
     The Company has established a number of important strategic relationships
to increase awareness of the SportsLine brand, build traffic on its Web sites
and develop proprietary programming. In March 1997, the Company established a
strategic alliance with CBS Corporation ("CBS") pursuant to which the Company's
flagship Web site was renamed "cbs.sportsline.com" and receives extensive
network television advertising and on-air promotion, primarily during CBS
television sports broadcasts such as the NFL, the NCAA Men's Basketball
Tournament, NCAA Football, PGA Tour events, U.S. Open tennis and the Daytona
500. The CBS agreement was amended in February 1999 to extend its term through
2006. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Recent Developments." 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 will receive on CBS
television broadcasts, will enable it to establish SportsLine as a broadly
recognized Worldwide consumer brand. The Company also has distribution
agreements and relationships with America Online, Excite, Netscape,
InfoSpace.com, Microsoft and Sports Byline USA. See " -- Strategic
Relationships."
 
     The Company's SportsLine WorldWide Web site features sports content from
Soccernet
(soccernet.com), a Web site co-produced by the Company and The Daily Mail,
CricInfo (cricinfo.org), a London-based organization sanctioned by the
International Cricket Council, and golfweb.com. SportsLine WorldWide also offers
country-specific sports content through strategic relationships with major
publishing organizations in Brazil (O Estado de Sao Paulo), France (Le Monde),
Germany (Verlagsgruppe Fleet), Italy (Tirreno Internet), the Netherlands (World
Online), Spain (El Pais), Russia (Russian Story), Latin America (El Sitro) and
Sweden (Aftonbladet). In addition, the Company has established strategic
relationships with various sports superstars and organizations.
 
SPORTS INFORMATION, PROGRAMMING AND DISTRIBUTION
 
     The Company offers a broad range of sports-related information and
programming, which it delivers through its network of Web sites and other
distribution channels.
 
INFORMATION AND PROGRAMMING
 
News and Editorials              The Company's news organization provides
                                 up-to-date general sports news and information
                                 for all major professional and college sports
                                 24 hours a day, seven days a week, including
                                 previews, game summaries, audio and video clips
                                 and color photographs, obtained from strategic
                                 partners and a variety of leading sports news
                                 organizations such as The Associated Press,
                                 CBS, Reuters and SportsTicker. The Company also
                                 publishes exclusive editorials and analyses
                                 from its in-house staff of writers and editors
                                 and freelance sports journalists.
                                        2
<PAGE>   4
 
Scores, Statistics and Odds      The Company delivers continuously updated,
                                 real-time scores, schedules, standings, player
                                 and team statistics and odds for all major
                                 professional and college sports from data
                                 providers including The Associated Press,
                                 Computer Sports World, Data Broadcasting
                                 Corporation, Elias Sports Bureau and
                                 SportsTicker and directly from the NBA, NFL and
                                 WNBA.
 
Fantasy Leagues and Contests     Fantasy league enthusiasts can participate in
                                 SportsLine leagues or form their own leagues
                                 with customized rules, scoring and reporting.
                                 The Company administers player transactions
                                 (for example, drafts, trades, starting lineup
                                 selection and disabled list and minor league
                                 moves) and provides summaries of scoring,
                                 standings and roster transactions. Proprietary
                                 contests feature cash prizes, limited edition
                                 sports memorabilia and other awards based on
                                 the results of weekly, season-long or special
                                 event related games of skill. Regular
                                 sweepstakes and "giveaways" feature cash
                                 prizes, sports memorabilia, event tickets and
                                 other merchandise.
 
Live Game Simulations            The Company broadcasts web-based real-time
                                 animated recreations of major sporting events
                                 including NBA, NFL, Major League Baseball,
                                 World Cup Soccer and NCAA Tournament basketball
                                 games.
 
Local and Personalized Content   The Company packages its information and
                                 programming to enable users to follow local or
                                 regional team and event coverage, including
                                 weekly stories from college sports publications
                                 and team coverage from staff writers located in
                                 all strategic cities across the nation. Members
                                 can personalize the information and programming
                                 they receive through the Company's "Personal
                                 SportsPage" and "Personal SportsMail," which
                                 are delivered over the Web or by e-mail.
 
Community Content                The Company hosts monitored interactive chat
                                 sessions with sports superstars and
                                 personalities, and experts on subjects such as
                                 sports memorabilia and fantasy leagues. The
                                 Company also hosts monitored forums devoted to
                                 sports-related topics.
 
Audio                            The Company's radio studio produces over 60
                                 hours of original, live programming each week,
                                 including interviews with superstars and
                                 notable sports personalities and regular
                                 commentary from leading sports analysts. As of
                                 December 31, 1998, one of the Company's sports
                                 and talk radio shows was broadcast on
                                 traditional radio stations in approximately 50
                                 markets in association with the SportsFan Radio
                                 Network. The Company also "cybercasts"
                                 syndicated radio shows from Sports Byline USA,
                                 Sports Overnight America and various experts on
                                 sports-related topics, and produces and
                                 distributes audio clips of interviews, press
                                 conferences and other audio in connection with
                                 major sports events.
 
Video                            The Company produces original video programming
                                 in connection with major sports events and
                                 video interviews. The Company's coverage of
                                 major events such as the XVIII Olympic Winter
                                 Games and the Super Bowl XXXIII features live
                                 video interviews and daily video clips covering
                                 the events and sports celebrities. The Company
                                 also distributes video highlights from NBA,
                                 NHL, CBS Sports and other sporting events.
                                        3
<PAGE>   5
 
  Web Sites
 
     cbs.sportsline.com, the Company's flagship Web site, features
comprehensive, in-depth coverage of all major professional and college sports on
a domestic and international basis, including the following:
 
Baseball
     Major League Baseball
     Minor League Baseball
     College
Hockey
     National Hockey League
     International Hockey League
     American Hockey League
     College
Auto Racing
Boxing
Cricket
Cycling
Golf
Health and Fitness
Horse Racing
Football
     National Football League
     Canadian Football League
     College
Basketball
     National Basketball Association
     Women's National Basketball Association
     American Basketball League
     College
Olympic Sports
Rugby
Skiing
Soccer
Tennis
Volleyball
Women's Sports
 
     cbs.sportsline.com has won numerous awards, including the Internet Services
Association's "Outstanding Innovation" award for Baseball LIVE! (1996); a "Gold
Medal" for Outstanding Olympic Coverage from The Wall Street Journal (1996); a
"Members' Choice" designation from AOL (1996-1998); NetGuide's "Platinum Award"
as one of the best sites on the Web (1996); NetGuide's "Platinum Award" for
overall site excellence (1997); "Editor's Choice" from UK Plus (1997); PC
Magazine's top 25 sites on the Web (1997); the Webby Award for sports (1998); a
"Revolution" award for Soccernet in the U.K. (1999); and NetGuide's "Best Sports
Site" (1999).
 
     cbs.sportsline.com's comprehensive approach is exemplified by its coverage
of Major League Baseball. In addition to up-to-date news, scores, standings,
rosters, transaction reports and exclusive editorial commentary,
cbs.sportsline.com features Baseball LIVE!, an online "stadium" that utilizes
Shockwave technology to enable users to view a graphical depiction of real-time
play-by-play action of Major League Baseball games in progress. Additional
baseball coverage includes player and team statistics that are sortable by
position, team and standing; chat rooms and baseball newsgroup links and
contests. Fantasy league enthusiasts also can purchase SportsLine's fantasy
league products, which include Fantasy Baseball and Commissioner. Fantasy
Baseball enables participants to manage their own fantasy- or rotisserie-style
baseball league in season-long and playoff competitions. Participants form
leagues of up to 20 teams and utilize cbs.sportsline.com to administer all
player transactions (for example, drafts, trades, starting lineup selection,
disabled list and minor league moves) and obtain real time scoring, standings
and roster transactions. cbs.sportsline.com also offers Fantasy Baseball
participants the ability to communicate in specially reserved chat rooms.
Commissioner provides fantasy and rotisserie league participants a fully
configurable interface to manage their own leagues, including customizing rules,
scoring and reporting to their own preferences.
 
     golfweb.com, acquired by the Company in January 1998, provides golf-related
content, interactive entertainment, membership services, golf course discounts
and merchandise domestically. The Company also provides golf-related content,
interactive entertainment, membership services and merchandise internationally
through Web sites targeted to golf enthusiasts in Europe and Asia. golfweb.com
features tournament coverage from over 24 golf tours worldwide, including the
PGA, LPGA and Senior PGA, and is the official Web site of the PGA European Tour.
golfweb.com has a worldwide golf course directory with information on over
21,000 golf courses, as well as the Web's largest online discount golf pro shop.
 
                                        4
<PAGE>   6
 
     igogolf.com, acquired by the Company in June 1998, is a Web site that
offers fine golf equipment and accessories, including golf clubs, golf balls,
bags, footwear, apparel, accessories, training aids, art, software, books, and
videos.
 
     SportsLine WorldWide, launched as a separate Web site in February 1998, is
dedicated to providing comprehensive coverage of international sports.
SportsLine WorldWide features sports content from Soccernet (soccernet.com), a
Web site co-produced by the Company and The Daily Mail, CricInfo (cricinfo.org),
a London-based organization sanctioned by the International Cricket Council, and
golfweb.com. SportsLine WorldWide also offers country-specific sports content
through strategic relationships with major publishing organizations in Brazil (O
Estado de Sao Paulo), France (Le Monde), Germany (Verlagsgruppe Fleet), Italy
(Tirreno Internet), the Netherlands (World Online), Spain (El Pais), Russia
(Russian Story), Latin America (El Sitro) and Sweden (Aftonbladet). Content
provided by these publishers is displayed in foreign languages on the SportsLine
WorldWide Web site, and the publishers distribute the Company's content in the
English language on their own Web sites.
 
     vegasinsider.com, launched as a separate Web site in March 1997, provides
sports gaming information and features electronic odds on all major sports
events from the Las Vegas casinos, including the Stardust, the Flamingo Hilton,
the MGM Grand and Bally's, plus lines from nationally recognized oddsmakers.
Handicapping information includes commentary, matchup analysis and picks from
some of the nation's leading sports handicappers. The site's news reporting is
focused on a gaming perspective and provides detailed statistical and matchup
analysis tools, including "against-the-spread" and "straight-up" records, team
and player statistics and injury and weather reports. Live scoreboards provide
breaking news and scores, updates, recaps and boxscores. Most of the content on
vegasinsider.com is available only to paying members. In February 1999, the
Company launched World Sports Plus (worldsportsplus.com), a free sports gaming
site focused on global sports such as rugby, English and Italian soccer and
Formula One.
 
     Web Sites for Sports Superstars and Personalities.  The Company has created
and maintains Web sites for sports superstars and personalities, including Joe
Namath, Michael Jordan (jordan.sportsline.com), Tiger Woods (tigerwoods.com),
Shaquille O'Neal (shaq.com), Cal Ripken, Jr. (2131.com), Pete Sampras
(sampras.com), Mike Schmidt and John Daly (gripitandripit.com). The Company has
packaged these Web sites in a unique and entertaining site that includes all of
SportsLine's athlete spokespersons. The superstar athlete site includes daily
features and insights from athletes, the opportunity to belong to fan clubs, as
well as radio interviews and chat sessions from active and retired athletes from
around the world of sports.
 
     Other Web Sites.  The Company has created Web sites for sports
organizations and major sports events, including the San Francisco Forty-Niners
NFL franchise (sf49ers.com), the PGA of America (pga98.com), the PGA European
Tour (europeantour.com), Soccernet (soccernet.com), CricInfo (cricinfo.org),
Soccer Age (soccerage.com), Golf Holidays (golfholidays.com), 1998 World Cup
Soccer (worldcup.soccernet.com), the 1998 Major League Baseball All-Star Game
(mlballstargame.com) and the 1998 Major League Baseball official post-season
site (worldseries.com).
 
     The Company is responsible for the technical development, production and
maintenance of the Web sites it creates for athletes and sports organizations,
as well as customer service, technical support and billing associated with the
sale of premium features or merchandise. The Company's third party Web site
agreements are for terms ranging from one to ten years and generally provide the
Company the exclusive right to create a Web site for a sports superstar,
personality, organization or affinity group, as well as to receive certain
content for the Web site to use the athlete or organization's name, logos and
other materials to promote the Company's business and products. In consideration
for the rights granted under its third party Web site agreements, the Company
has issued warrants to purchase Common Stock and, in certain instances, agreed
to make cash payments. The Company generally is entitled to receive a percentage
of the sponsorship, advertising and other revenue generated from third party Web
sites it develops.
 
  Other Distribution Channels
 
     The inclusion of cbs.sportsline.com in AOL's services and the integration
of cbs.sportsline.com into Excite Sports, Netscape Sports and InfoSpace Sports
make the Company's sports content and programming
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readily accessible to the millions of Web users that access the Internet via
these platforms. The Company also distributes its sports content and programming
through relationships with other commercial online services (CompuServe and
Prodigy), third party Web sites (Delta Airlines) and high speed modems and
television-based products (@Home, Road Runner and WebTV). The Company believes
that its original sports radio shows have broad appeal and has recently entered
into an agreement to syndicate certain of its radio programming, both on the
Internet and nationally to over-the-air sports talk radio stations. As of
December 31, 1998, one of the Company's sports and talk radio shows was
broadcast on traditional radio stations in approximately 50 markets in
association with the SportsFan Radio Network. The Company also intends to
develop distribution and revenue opportunities in other media, including news
wire services, publications and e-mail.
 
STRATEGIC RELATIONSHIPS
 
     The Company has established strategic relationships to provide marketing
and cross promotional opportunities, to increase consumer awareness of the
SportsLine brand, to build traffic on its Web sites and to obtain exclusive
sports content for its Web sites.
 
     CBS.  In March 1997, the Company entered into a strategic alliance with CBS
pursuant to which CBS acquired a minority ownership interest in the Company and
the Company's flagship Web site was renamed "cbs.sportsline.com". The agreement
provides for cbs.sportsline.com to receive, among other things, extensive
network television advertising and on-air promotion during the term of the
agreement, primarily during CBS television sports broadcasts such as the NFL,
the NCAA Men's Basketball Tournament, NCAA Football, PGA Tour events, U.S. Open
tennis and the Daytona 500. In addition, the Company has the right to use
certain CBS logos and television-related sports content on cbs.sportsline.com
and in connection with the operation and promotion of that Web site. CBS and the
Company will seek to maximize revenue through a joint advertising sales effort
and by creating merchandising opportunities. The agreement also provides the
Company access to certain CBS television-related sports content and the
potential to create distribution and revenue opportunities with more than 200
CBS affiliates throughout the United States. In addition, under the terms of the
agreement, the Company and CBS will share advertising revenue on pages of
cbs.sportsline.com that relate to certain CBS broadcast sports events or that
contain CBS content. The CBS agreement was amended in February 1999 to extend
its term through 2006. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Developments."
 
     AOL.  In July 1997, the Company entered into a strategic programming and
distribution agreement with America Online, Inc. pursuant to which
cbs.sportsline.com became the first "anchor tenant" on AOL's Sports Channel. In
October 1998, the Company and AOL entered into a new three-year agreement and
significantly expanded their online relationship to provide Company-produced
sports news and statistics, special features, major event coverage and
merchandise on several key AOL brands around the world. The Company became the
premier provider of special features and major event coverage to the Sports
Channel on the AOL service, as well as an anchor tenant in the Sports Web Center
on aol.com, AOL's Web site. cbs.sportsline.com will be the premier national
sports partner with a presence on all Digital City local services, currently
serving over 50 cities, and an anchor tenant in the Sports Channel on
CompuServe. In addition, SportsLine WorldWide became the premier global provider
of country-specific sports content to all of AOL's international services, and
the Company will become the premier provider of licensed sports equipment and
apparel as well as golf products within the Sports Channel on the AOL service.
 
       Excite.  In October 1998, the Company entered into a three-year strategic
relationship with Excite, Inc. making the Company the exclusive provider of
sports content on the Excite Sports Channel.
 
       Netscape.  In January 1999, the Company entered into a one-year strategic
relationship with Netscape Communications Corporation making the Company the
premier sports content provider for the Netcenter Sports Channel as well as the
exclusive provider for news, information and merchandise for NFL, NBA, NHL, MLB,
golf, soccer, tennis, auto racing and NCAA basketball and football. In addition,
cbs.sportsline.com is featured as a default content "channel" in the Channel
Finder of Netscape's Netcaster
 
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<PAGE>   8
 
Software which utilizes "push" delivery to give users the ability to subscribe
to dynamic Web content and to browse these channels and Web sites offline from
their desktop.
 
     InfoSpace.  In February 1999, the Company entered into a strategic
agreement with InfoSpace.com whereby InfoSpace will become a distributor of the
Company's sports content, merchandise and premium services through a sports
channel named InfoSpace Sports by SportsLine, which will be available to
InfoSpace's broad affiliate network at over 1,500 websites.
 
     Microsoft.  The Company's strategic marketing and content distribution
agreement with Microsoft provides for Microsoft to promote the Company's service
in conjunction with the commercial release of the latest version of Internet
Explorer ("IE4") as a "Platinum Channel Partner." The Company is one of 25
content providers permanently bundled into the "Active Desktop," an integrated
component of every copy of IE4 distributed by Microsoft within the United States
over the term of the agreement.
 
     Sports Superstars and Organizations.  The Company has established strategic
relationships with sports superstars and personalities, including Michael
Jordan, Tiger Woods, Joe Namath, Shaquille O'Neal, Joe Montana, Cal Ripken, Jr.,
Pete Sampras, Mike Schmidt and John Daly, and an advisory agreement with Mark
McCormack (Chairman of International Management Group). Each of these
individuals has agreed to serve as a spokesperson for the Company, to permit the
Company to use his or her name, likeness and photographs on promotional
materials and to be available to the Company to provide input on business and
marketing strategies. The Company also maintains cross promotional relationships
with sports organizations for which it has created Web sites, including the PGA
of America, the PGA European Tour, the San Francisco Forty Niners, the Florida
Marlins and Sports Careers, a career consulting and placement service.
 
     IMG.  In June 1995, the Company entered into a consulting agreement with
International Merchandising Corporation ("IMG") which provided for IMG to
provide certain services to the Company on an exclusive basis, including acting
as the Company's representative and marketing agent in negotiations for the
acquisition of rights to programs and events, access to IMG clients as content
providers as well as implementing marketing plans for obtaining subscribers and
sponsors. In June 1996, the Company and IMG entered into an amended agreement
under which IMG also agreed to act as the Company's agent in negotiations with
television broadcasters, athletes and strategic corporate partners. In April
1997, the Company and IMG agreed to expand, on a global basis, the services IMG
provides to the Company.
 
     Other Media Relationships.  In addition to promotion on CBS television
sports broadcasts, SportsLine receives radio promotion through its strategic
media relationship with Sports Byline USA, the nation's largest syndicated
sports radio network, including on-air commercials and live endorsements by Ron
Barr, Sports Byline USA's Emmy Award winning host. The Company has developed
similar cross promotional relationships with leading sports talk radio stations
in several major metropolitan markets throughout the United States, and, as of
December 31, 1998, one of the Company's sports and talk radio shows was
broadcast on traditional radio stations in approximately 50 markets in
association with the SportsFan Radio Network. The Company also receives
promotional space within the print version of each of the publications it
distributes through its Web sites.
 
     Internet and Online Relationships.  Through a variety of strategic
relationships, the Company receives broad exposure by distributing its
proprietary sports content and programming through commercial online services
(AOL, CompuServe and Prodigy), Websites, Excite, Netscape and InfoSpace and high
speed modems and television-based products (@Home, Road Runner and WebTV).
 
ADVERTISING AND SALES
 
     The Company believes that the demographics of its audience are similar to
the traditional sports advertisers' target market. Based on Company sponsored
market research, users of the Company's Web sites are predominantly male, 88%
are between the ages of 18 to 54, 63% have college degrees and 41% have an
annual income greater than $75,000.
 
     The Company currently derives, and expects to continue to derive, a
substantial portion of its revenue from advertising on its Web sites. The
Company sells "banner" advertisements that allow interested readers
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link directly to the advertisers' own Web sites or to promotional sites created
by the Company. The Company also offers sponsorship opportunities that enable
advertisers to associate their corporate messages with the Company's coverage of
athletes and marquee events (such as the World Series, the Super Bowl, the
Olympics, World Cup Soccer, the NBA Playoffs and the Stanley Cup Playoffs),
special features of the Company's Web sites (including ScoreCenters or Baseball
LIVE!) and special promotions, contests and events. The Company targets
traditional sports advertisers, such as consumer product and service companies,
sporting goods manufacturers and automobile companies, as advertisers on its Web
sites.
 
     Advertising revenue has been derived principally from short-term
advertising contracts on a per impression basis or for a fixed fee based on a
minimum number of impressions. The Company's advertising rates generally range
from $15.00 to $50.00 per thousand impressions. To enable advertisers to verify
the number of impressions received by their advertisements and monitor their
advertisements' effectiveness, the Company provides its advertisers with third
party audit reports showing data on impressions received by their
advertisements.
 
     The Company's in-house sales staff develops and implements its advertising
strategies, including identifying strategic accounts and developing
presentations and promotional materials. The Company has sales personnel located
in Fort Lauderdale, New York, Chicago, San Francisco, Los Angeles and Detroit.
In addition, the Company utilizes DoubleClick Inc. as its exclusive advertising
sales representative outside the United States. The Company also capitalizes on
its cross-marketing relationships with sports superstars, personalities,
organizations and affinity groups by seeking sponsorships and advertisements
from their sponsors. Pursuant to the CBS agreement, the Company and CBS's
television network advertising sales personnel coordinate advertising sales
efforts for cbs.sportsline.com.
 
     No advertiser accounted for more than 9% of the Company's revenue during
1998.
 
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MEMBERSHIPS AND PREMIUM OFFERINGS
 
     Although the majority of information and programming on the Company's Web
sites is free, the Company offers membership programs and other premium services
on cbs.sportsline.com and vegasinsider.com. The Company also believes that it
will be able to charge fees for access to "pay-per-view" content such as
exclusive interviews, chat sessions or special coverage of major sports events.
 
     The following table sets forth certain information, as of December 31,
1998, concerning the Company's membership and premium service offerings:
 
<TABLE>
<CAPTION>
MEMBERSHIPS                                   DESCRIPTION                            PRICE RANGE
-----------                      --------------------------------------    -------------------------------
<S>                              <C>                                       <C>
SPORTSLINE REWARDS               SportsLine Rewards. Membership program            Free
                                 in which members are rewarded for
                                 visiting the site and purchasing
                                 merchandise or fantasy products.

                                 SportsLine Rewards Plus. Same as                  $39.95
                                 SportsLine Rewards except that members
                                 receive bonus rewards and savings on
                                 the purchase of merchandise and fantasy
                                 products.

TEAM SPORTSLINE                  Personal SportsPage. Member-configured
                                 Web pages to follow selected teams and
                                 sports.

                                 Personal SportsMail. Information on
                                 members' favorite teams and sports
                                 delivered daily to their personal
                                 e-mail addresses.                                $ 4.95 monthsly
                                                                                  $39.95 annually   
                                 Electronic Odds. Fifteen minute
                                 delayed odds from premier Las Vegas
                                 casinos.

                                 National and Regional News. Breaking
                                 news, photos and audio clips from the
                                 Associated Press and exclusive stories
                                 from the Company's in-house editorial
                                 staff.

                                 Contests. Sports specific contests
                                 with travel, memorabilia and cash
                                 prizes.

                                 Special Editorial Content. Sports
                                 birthdays. Playboy's Classic Sports
                                 Interviews and access to a sports                $29.95 - $39.95
                                 almanac.                                         annually

                                 Sports Radio. Access to archived radio
                                 broadcasts.

                                 Chat Rooms. Private chat rooms
                                 available only to members.

                                 Discounts. Members receive discounts
                                 on merchandise, travel, entertainment
                                 and fantasy league products and
                                 services.

GOLFWEB                          Players Club. Personalized golf
                                 instruction; performance tracking;
                                 discounts on greens fees, golf travel
                                 and merchandise; weekly newsletter;
                                 online golf handicap.
</TABLE>


 
                                        9
<PAGE>   11
 
<TABLE>
<CAPTION>
MEMBERSHIPS                                   DESCRIPTION                            PRICE RANGE
-----------                      --------------------------------------    -------------------------------
<S>                              <C>                                       <C>
VEGAS INSIDER                    Electronic Odds. Fifteen minute
                                 delayed odds from premier Las Vegas
                                 casinos.

                                 Detailed Match-up Analysis. Game logs,
                                 "against-the-spread" and "straight-up"
                                 records, team and player statistics,            $ 29.95 monthly
                                 injury and weather reports and                  $199.95 annually 
                                 detailed write-ups from Computer
                                 Sports World.

                                 Handicapping Experts. Picks, match-up
                                 analysis and editorial commentary.

                                 Live Scoreboards. Breaking scores,
                                 odds, updates, recaps, box scores and
                                 breaking news.
</TABLE>

<TABLE>
<CAPTION>
PREMIUM SERVICES                              DESCRIPTION                            PRICE RANGE
----------------                 --------------------------------------    -------------------------------
 
<S>                              <C>                                       <C>
 
FANTASY LEAGUES AND FANTASY      Commissioner. Functional, easy to use
TOOLS                            fantasy and rotisserie league
                                 management software and statistics
                                 services.
 
                                 Challenge Game. Multi-player leagues
                                 featuring overall, conference, league          $19.95 - $99.95
                                 and weekly prizes.
 
                                 Fantasy Software/tools. Team and
                                 league management, including sortable
                                 stats, Fantasy Scoring Center, Stats
                                 Projector and Trends Analysis
 
ODDS AND PICKS                   Electronic Odds. Instant odds from            $149.95 monthly 
                                 premier  Las Vegas casinos.                   $999.00 annually
 
                                 Pick Packs. Expert picks for college          $ 9.95 to $49.95
                                 and professional games from well-known        per pick pack
                                 handicappers.
 
JOB LISTINGS                     Sports Careers. Exclusive job listings        $ 19.95 monthly
                                 in multiple sports categories. Also           $ 99.95 semiannually
                                 includes articles, audio, tips, success       $149.95 annually
                                 stories and company contacts
 
</TABLE>
 
     The Company offers potential members a 30-day free trial period. As is
typical in the online services industry, a portion of the users who access the
Company's service on a trial basis do not become members, and each month a
portion of the Company's members terminate their memberships. The Company
believes that its conversion and retention rates are consistent with industry
averages for online and similar services.
 
MERCHANDISE
 
     During the fourth quarter of 1997, the Company launched The Sports Store
(www.thesportsstore.com), a comprehensive online retail site featuring more than
7,000 items, including event-driven merchandise (such as Super Bowl Champion
Lockerroom Caps), licensed team gear and apparel, unique sports superstar
memorabilia, Upper Deck merchandise and exclusive merchandise like the limited
edition Mark McGwire 70th Home Run Record Commemorative Coin.
 
 


 
                                       10
<PAGE>   12
 
     The Sports Store offers such features as: (i) an intuitive search tool,
resulting in the presentation of the product image, description, price and a
quick check-out feature to assist in making purchases; (ii) dynamically
generated related product offerings which suggest similar products for sale as
that requested; (iii) private password-protected shopper profiles which expedite
ordering for return shoppers; (iv) automatic e-mail confirmation of orders; and
(v) instant member discounts of 10% for shoppers who subscribe to CBS SportsLine
or GolfWeb memberships.
 
     In June 1998, the Company acquired igogolf.com, a leading Internet golf
retailer, which offers a full selection of name brand golf equipment and
accessories from manufacturers including Callaway, Cobra, Titleist, TaylorMade,
Ping, Wilson, Orlimar and many others. The Company has established the ability
with many of these manufacturers to offer direct and/or drop shipping
capabilities which allow for fast and efficient shipment to the end-consumer, as
well as to limit the Company's inventory exposure. In addition, igogolf.com
distributes golf equipment and accessories for third-party websites.
 
MARKETING
 
     The Company's agreement with CBS provides for cbs.sportsline.com to
receive, extensive network television advertising and on-air promotion during
the term of the agreement, primarily during CBS television sports broadcasts
such as the NFL, the NCAA Men's Basketball Tournament, NCAA Football, PGA Tour
events, U.S. Open tennis and the Daytona 500. The Company also receives on-air
promotion on Sports Byline USA's nationally syndicated radio broadcasts and on
sports talk and other radio stations in several major metropolitan markets.
 
     Another effective source of advertising for the Company has been Web
advertising. The Company has advertised on a number of leading Web sites,
including AltaVista, Excite, InfoSeek, Microsoft Network, Netscape, USA Today
and Yahoo! The Company also actively pursues links from other popular Web sites,
and is listed in the directories of most major search engine sites, including
AltaVista, Excite, InfoSeek, Lycos and Yahoo!
 
     The Company employs a variety of methods to promote the SportsLine brand
and attract traffic and new members to its Web sites. In addition to on-air
promotion on CBS television sports broadcasts and Sports Byline USA, the Company
advertises on other Web sites, in targeted publications and on sports talk radio
stations, distributes promotional materials at selected sports events and
engages in an ongoing public relations campaign. The Company also conducts
direct e-mail and mail campaigns targeting online or sports-oriented consumers.
Whenever possible, the Company utilizes cross promotional arrangements to secure
advertising and other promotional considerations.
 
     The Company's agreements with sports organizations typically provide for
the Company to receive exposure in any print, television and marketing vehicles
utilized by the organizations to promote themselves or their products or
services and for the distribution of the Company's promotional materials at
events or industry shows in which they participate.
 
MEMBER SERVICE AND SUPPORT
 
     The Company believes that member service and support are important to its
ability to attract and retain members. The Company's member support staff
provides toll free telephone support, responds to customer requests concerning
technical aspects of the Company's Web sites or certain third party software and
conducts inbound and outbound telemarketing on an 18 hour a day, seven day a
week basis. The Company does not charge for service and support.
 
COMPETITION
 
     The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated with no substantial barriers to entry,
and the Company expects that competition will continue to intensify. The Company
competes, directly and indirectly, for advertisers, viewers, members, content
providers, merchandise sales and rights to sports events with the following
categories of companies: (i) Web sites targeted to sports enthusiasts generally
(such as ESPN.com, CNN and Sports Illustrated's CNN/SI and Fox Sports) or to
enthusiasts of particular sports (such as Web
 
                                       11
<PAGE>   13
 
sites maintained by Major League Baseball, the NFL, the NBA and the NHL); (ii)
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; (iii) general purpose consumer
online services such as AOL and Microsoft Network, each of which provides access
to sports-related content and services; (iv) vendors of sports information,
merchandise, products and services distributed through other means, including
retail stores, mail, facsimile and private bulletin board services; and (v) Web
search and retrieval services, such as AltaVista, Excite, InfoSeek, Lycos and
Yahoo!, and other high-traffic Web sites, such as those operated by CGNET and
Netscape. The Company anticipates that the number of its direct and indirect
competitors will increase in the future. Management believes that the Company's
most significant competitors are ESPN.com and CNN/SI, Web sites which offer a
variety of sports content.
 
     The Company believes that the principal competitive factors in attracting
and retaining users and members are the depth, breadth and timeliness of
content, the ability to offer compelling and entertaining content and brand
recognition. Other important factors in attracting and retaining users include
ease of use, service quality and cost. The Company believes that the principal
competitive factor in attracting and retaining content providers and
merchandisers is the Company's ability to offer sufficient incremental revenue
from licensing fees, bounties and online sales of product or services. The
Company believes that the principal competitive factors in attracting
advertisers include the number of users and members of the Company's Web sites,
the demographics of the Company's user and membership bases, price and the
creative implementation of advertisement placements. There can be no assurance
that the Company will be able to compete favorably with respect to these
factors.
 
     Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, significantly greater name recognition and substantially larger user
or membership bases than the Company and, therefore, have a significantly
greater ability to attract advertisers and users. In addition, many of these
competitors may be able to respond more quickly than the Company to new or
emerging technologies and changes in Internet user requirements and to devote
greater resources than the Company to the development, promotion and sale of
their services. There can be no assurance that the Company's current or
potential competitors will not develop products and services comparable or
superior to those developed by the Company or adapt more quickly than the
Company to new technologies, evolving industry trends or changing Internet user
preferences. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which would materially and adversely
affect the Company's business, results of operations and financial condition. In
addition, as the Company expands internationally, it may face new competition.
There can be no assurance that the Company will be able to compete successfully
against current and future competitors, or that competitive pressures faced by
the Company would not have a material adverse effect on its business, results of
operations and financial condition.
 
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
 
     The Company is subject, both directly and indirectly, to various laws and
governmental regulations relating to its business. There are currently few laws
or regulations directly applicable to access to or commerce on commercial online
services or the Internet. However, due to the increasing popularity and use of
commercial online services and the Internet, it is possible that a number of
laws and regulations may be adopted with respect to commercial online services
and the Internet. Such laws and regulations may cover issues such as user
privacy, pricing and characteristics and quality of products and services. On
June 26, 1997, the United States Supreme Court held unconstitutional certain
provisions of the Communications Decency Act of 1996, which, among other things,
imposed criminal penalties for transmission of or allowing access to certain
obscene communications over the Internet and other computer services, intended
to protect minors. The adoption of similar laws or regulations in the future may
decrease the growth of commercial online services and the Internet, which could
in turn decrease the demand for the Company's services and products and increase
the Company's costs of doing business or otherwise have an adverse effect on the
Company's business, operating results and financial condition. Moreover, the
applicability to commercial online services and the Internet of existing laws
governing issues such as property ownership, libel and personal privacy is
 
                                       12
<PAGE>   14
 
uncertain and could expose the Company to substantial liability, for which the
Company might not be indemnified by content providers.
 
     The Company's contests and sweepstakes may be subject to state and federal
laws governing lotteries and gambling. The Company seeks to design its contest
and sweepstakes rules to fall within exemptions from such laws and restricts
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. There can be no assurance that the Company's contests and sweepstakes
will be exempt from such laws or that the applicability of such laws to the
Company would not have a material adverse effect on the Company's business,
results of operations and financial condition.
 
INTELLECTUAL PROPERTY
 
     The Company's performance and ability to compete are dependent to a
significant degree on its internally developed content and technology. The
Company relies on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements with its employees and
with third parties and contractual provisions to establish and protect its
proprietary rights. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate, that the Company
will be able to secure trademark registrations for all of its marks in the
United States and/or foreign countries, or that third parties will not infringe
upon or misappropriate the Company's copyrights, trademarks, service marks and
similar proprietary rights. In addition, effective copyright and trademark
protection may be unenforceable or limited in certain foreign countries, and the
global nature of the Internet makes it impossible to control the ultimate
destination of the Company's services. In the future, litigation may be
necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.
 
     On March 25, 1997, Weatherline, Inc. ("Weatherline"), a company that
provides pre-recorded weather and sports information by telephone, filed a
complaint against the Company in the United States District Court for the
Eastern District of Missouri. Weatherline owned a United States trademark
registration for the mark "Sportsline" for use in promoting the goods and
services of others by making sports information available to customers of
participating businesses through the telephone, and claimed to have used the
mark for this purpose since 1968. The complaint alleged that the Company's use
of the mark "SportsLine USA" and other marks utilizing the term "SportsLine"
infringed upon and otherwise violated Weatherline's rights under its registered
trademark and damaged Weatherline's reputation. In October 1998, the Company and
Weatherline settled this action. In connection with the settlement, Weatherline
will assign to the Company its United States trademark registration for the mark
"Sportsline." The Company recorded a non-recurring charge of approximately $1.1
million associated with such settlement in the third quarter of 1998. The
Company believes that it will collect insurance proceeds to offset a portion of
the settlement expenses, including certain legal fees; however, there can be no
assurance that the Company will be able to collect such proceeds.
 
     There can be no assurance that third parties will not bring copyright or
trademark infringement claims against the Company in addition to the claim
brought by Weatherline referred to above, or claim that the Company's use of
certain technologies violates a patent. If it is determined that the Company has
infringed upon a third party's proprietary rights, there can be no assurance
that any necessary licenses or rights could be obtained on terms satisfactory to
the Company, if at all. The inability to obtain any required license on
satisfactory terms could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company may also be
subject to litigation to defend against claims of infringement of the rights of
others or to determine the scope and validity of the intellectual property
rights of others. If competitors of the Company prepare and file applications in
the United States that claim trademarks used or registered by the Company, the
Company may oppose those applications and have to participate in proceedings
before the USPTO to determine priority of rights to the trademark, which could
result in substantial costs to the Company, even if the eventual outcome is
favorable to the Company. An adverse outcome could require the Company to
license disputed rights from third parties or to cease using such trademarks.
Any such litigation would be costly and divert management's attention, either of
which could have a material adverse effect on the Company's business, results of
operations and financial condition. Adverse
                                       13
<PAGE>   15
 
determinations in such litigation could result in the loss of certain of the
Company's proprietary rights, subject the Company to significant liabilities,
require the Company to seek licenses from third parties, or prevent the Company
from selling its services, any one of which could have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, inasmuch as the Company licenses a substantial portion of its content
from third parties, its exposure to copyright infringement actions may increase;
because the Company must rely upon such third parties for information as to the
origin and ownership of such licensed content. The Company generally obtains
representations as to the origins and ownership of such licensed content and
generally obtains indemnification to cover any breach of any such
representations; however, there can be no assurance that such representations
will be accurate or that such indemnification will provide adequate compensation
for any breach of such representations.
 
     In 1996, the Company was issued a United States trademark registration for
its former SportsLine USA logo. The Company has applied to register in the
United States its current SportsLine USA logo and a number of other marks,
several of which include the term "SportsLine USA." The Company has filed
applications to register "SportsLine" marks in Australia and the United Kingdom.
There can be no assurance that the Company will be able to secure adequate
protection for these trademarks in the United States or in foreign countries.
Many foreign countries have a "first-to-file" trademark registration system; and
thus the Company may be prevented from registering its marks in certain
countries if third parties have previously filed applications to register or
have registered the same or similar marks. It is possible that competitors of
the Company or others will adopt product or service names similar to the
Company's, thereby impeding the Company's ability to build brand identity and
possibly leading to customer confusion. The inability of the Company to protect
its "SportsLine" mark and other marks adequately could have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     The Company grants users of cbs.sportsline.com a license to use the
Company's service under an agreement that prohibits the unauthorized
reproduction or distribution of the Company's licensed and proprietary content.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's service or to obtain and
use information that the Company or its content providers regard as proprietary.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks, service marks and similar
proprietary rights.
 
EMPLOYEES
 
     The Company had 303 full-time employees as of December 31, 1998, of which
85 were in editorial and operations, 83 were in technical and product
development, 79 were in sales and marketing, 25 were in finance and
administration and 31 other employees. The Company's future success depends in
large part upon its ability to attract and retain highly qualified employees.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to retain its senior management or other key employees
or that it will be able to attract and retain additional qualified personnel in
the future. The Company's employees are not represented by any collective
bargaining organization, and the Company considers its relations with its
employees to be good.
 
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
 
     The Company makes its Web sites available through multiple servers, running
on Sun Solaris, Microsoft Windows and Microsoft NT operating systems. The
Company uses the Netscape family of Commercial Applications Software for its Web
servers, publishing systems, merchandise systems and secure credit card capture
and billing. The Company has worked closely with Netscape in the implementation
of the Company's Web sites. Capabilities in place include bulletin boards, mail,
chat (including regular text based chat as well as Virtual Reality worlds with
integrated chat), news groups, merchandising, streaming audio and video, and
interactive Java and Shockwave applications.
 
     The Company maintains all of its computer systems at its Fort Lauderdale,
Florida corporate headquarters and maintains mirror sites for its Web sites at
host facilities in Santa Clara, California and Herndon,
 
                                       14
<PAGE>   16
 
Virginia. The Company's operations are dependent upon its ability to protect its
systems against damage from fire, hurricanes, power loss, telecommunications
failure, break-ins, computer viruses and other events beyond the Company's
control. The Company maintains access to the Internet through three third-party
providers, each of which maintains a DS3 connection running at 45 megabits per
second connected to three routers in the Company's facility. Redundant fiber
optic cables from the Company's building connect with each local Internet
provider's fiber network. The Company's Internet connections are fully
redundant, so that if a failure in the network or equipment of one service
provider occurs, traffic is automatically routed through to the other provider.
All of the Company's computer equipment is powered by an uninterruptible power
supply ("UPS"), which is backed up by a diesel generator designed to provide
power to the UPS within seconds of a power outage. In addition, all of the
Company's production systems are copied to backup tapes each night and stored at
a third party, off-site storage facility. All of the Company's computer
equipment is insured at replacement cost and the Company has developed a
comprehensive, out-of-state disaster recovery plan to respond to system
failures. The Company has an arrangement with Comdisco Disaster Recovery
Services ("CDRS") which provides that in the event the Company's facility cannot
provide service for any reason, the Company's backup tapes would be shipped to
Comdisco's New Jersey facility where they will be loaded to replicate and
restore the Company's service. Moreover, the Company has leased space in CDRS's
Business Recovery Center in Atlanta, Georgia. In the event of a system failure,
the Company's engineering and content production staff would have access to
hardware and software in Atlanta similar to that used at the Company's facility.
The equipment in Atlanta is connected to the production systems in New Jersey
via Comdisco's private high speed network. Notwithstanding the precautions taken
by the Company, any disruption in the Company's Internet access, failure of the
Company's third party providers to handle higher volumes of users or damage or
failure that causes system disruptions or other significant interruptions in the
Company's operations could have a material adverse effect on the Company's
business, results of operations and financial condition.
 
EXECUTIVE OFFICERS
 
     The executive officers of the Company are as follows:
 
<TABLE>
<CAPTION>
NAME                                   AGE                           POSITION
----                                   ---                           --------
<S>                                    <C>   <C>
Michael Levy.........................  52    Chairman of the Board, President and Chief Executive
                                             Officer
Kenneth W. Sanders...................  42    Senior Vice President and Chief Financial Officer
Mark J. Mariani......................  42    Executive Vice President, Sales
Andrew S. Sturner....................  34    Senior Vice President, Business Development
Thomas Jessiman......................  38    Senior Vice President, Operations
</TABLE>
 
     MICHAEL LEVY has served as the President, Chief Executive Officer and
Chairman of the Board of the Company since its inception in February 1994. From
1979 through March 1993, Mr. Levy served as President, Chief Executive Officer
and as a director of Lexicon Corporation, a high technology company specializing
in data communications and signal processing technology. From January 1988 to
June 1993, Mr. Levy also served as Chairman of the Board and Chief Executive
Officer of Sports-Tech International, Inc., a company engaged in the
development, acquisition, integration and sale of computer software, equipment
and computer-aided video systems used by professional, collegiate and high
school sports programs. Between June 1993 and February 1994, Mr. Levy was a
private investor.
 
     KENNETH W. SANDERS has served as the Vice President and Chief Financial
Officer of the Company since September 1997 and was appointed Senior Vice
President in October 1998. From January 1996 to August 1997, Mr. Sanders served
as Senior Vice President, Chief Financial Officer of Paging Network, Inc., the
world's largest paging company. From May 1993 to December 1995, Mr. Sanders
served as Executive Vice President, Chief Financial Officer and a director of
CellStar Corporation, an integrated wholesaler and retailer of cellular phones
and related products. Between July 1979 and April 1993, Mr. Sanders was with
KPMG Peat Marwick, most recently as an Audit Partner from July 1990 to April
1993.
 
                                       15
<PAGE>   17
 
     MARK J. MARIANI has served as the Company's Executive Vice President, Sales
since April 1996. From August 1991 to March 1996, Mr. Mariani served as
Executive Vice President of Sports Sales for Turner Broadcasting Sales, Inc.
From June 1990 to August 1991, Mr. Mariani served as Senior Vice President and
National Sales Manager for CNN in New York, and from May 1986 to June 1990, Mr.
Mariani served as Vice President for CNN Sales Midwest. Prior to joining Turner
Broadcasting, Mr. Mariani served as an Account Executive for WBBM, an owned and
operated CBS television station in Chicago, Illinois.
 
     ANDREW S. STURNER has served as the Company's Vice President, Business
Development since June 1995 and was appointed Senior Vice President, Business
Development in October 1998. From May 1994 to June 1995, Mr. Sturner served as
Vice President of Business Development for MovieFone, Inc., an interactive
telephone service company. From March 1993 to May 1994, Mr. Sturner served as
President of Interactive Services, an interactive audiotext development company
which he co-founded in 1992. From August 1990 to March 1993, Mr. Sturner was a
bankruptcy associate at the law firm of Stroock & Stroock & Lavan.
 
     THOMAS JESSIMAN has served as the Company's Senior Vice President,
Operations since February 1998. From March 1997 to February 1998, Mr. Jessiman
served as the Company's Vice President, International. From November 1995 to
March 1997, Mr. Jessiman served as the Director of Business Development for U.S.
WEST Media Group's Interactive Services Division and from September 1994 to
November 1995, Mr. Jessiman served as Director of Business Development in the
U.S. WEST Multimedia Group. From January 1992 to September 1994, Mr. Jessiman
served as Manager in IBM's Multimedia Group.
 
ITEM 2.  PROPERTIES.
 
     The Company's corporate headquarters are located in Fort Lauderdale,
Florida. The Company currently leases approximately 45,000 square feet in three
adjacent buildings under three leases, which expire in April 2000, June 2000 and
September 2001, respectively, with an option to extend the latter lease for a
five-year term. The Company also leases sales offices in Chicago, New York, San
Francisco and Los Angeles and a news operation office in Tacoma, Washington. In
order to meet the Company's estimated future space needs, the Company has
entered into an agreement to lease a commercial building in Fort Lauderdale,
Florida consisting of approximately 81,000 square feet. The lease is for a term
of ten years for total rent commitments of up to $13 million, commencing upon
occupancy, with options to extend the lease for two additional five-year terms.
The Company anticipates moving its corporate headquarters into this new building
in late 1999. igogolf.com leases office/warehouse space in Austin, Texas.
 
ITEM 3.  LEGAL PROCEEDINGS.
 
     In October 1998, the Company settled a lawsuit alleging various trademark
infringement claims. See "Item 1. Business -- Intellectual Property."
 
     From time to time, the Company may be involved in other litigation relating
to claims arising out of its operations in the normal course of business. The
Company is not currently a party to any other legal proceedings, the adverse
outcome of which, individually or in the aggregate, would have a material
adverse effect on the Company's financial position or results of operations.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     No matter was submitted to a vote of security holders during the fiscal
quarter ended December 31, 1998.
 
                                       16
<PAGE>   18
 
                                    PART II
 
ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
 
MARKET PRICES FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
     The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "SPLN" since November 13, 1997. The following table sets forth
for the periods indicated the range of high and low closing prices per share of
Common Stock, as reported by the Nasdaq National Market:
 
<TABLE>
<CAPTION>
                                                                HIGH        LOW
                                                              --------    --------
<S>                                                           <C>         <C>
1997
  Fourth Quarter (commencing November 13, 1997).............  $  10.75    $   7.75
1998
  First Quarter.............................................     32.38       11.75
  Second Quarter............................................     38.38       22.75
  Third Quarter.............................................     37.50       13.00
  Fourth Quarter............................................     19.13        7.69
</TABLE>
 
     The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings, if any, to fund the development and
growth of its business.
 
     As of March 12, 1999, the Company had approximately 184 shareholders of
record. The Company believes that the number of beneficial owners of the Common
Stock is in excess of 300.
 
SALES OF UNREGISTERED SECURITIES DURING THE YEAR ENDED DECEMBER 31, 1998
 
     During the year ended December 31, 1998, the Company issued and sold the
following securities without registration under the Securities Act:
 
          (1) In January 1998, the Company issued to CBS 735,802 shares of
     Common Stock and warrants to purchase 380,000 shares of Common Stock. The
     consideration for such shares and warrants consisted of licenses to CBS
     logos and content and CBS's agreement to provide the Company specified
     minimum amounts of advertising and promotion. In addition, upon exercise of
     warrants that were granted to CBS in March 1997 and December 1998, the
     Company issued to CBS 380,000 shares for aggregate cash consideration of
     $3,800,000 and 380,000 shares for aggregate cash consideration of
     $5,700,000, respectively.
 
          (2) In January 1998, in partial consideration of the Company's
     acquisition of all of the outstanding capital stock of GolfWeb, the Company
     issued to the stockholders of GolfWeb 844,490 shares of Common Stock.
 
          (3) In April 1998, the Company issued 14,116 shares of Common Stock to
     Comdisco, Inc. pursuant to a cashless exercise of a warrant pursuant to its
     terms.
 
          (4) In June 1998, in consideration of the Company's acquisition of all
     of the outstanding capital stock of IGO, the Company issued to the
     stockholders of IGO 46,924 shares of Common Stock.
 
          (5) In August 1998, in consideration of the right of the Company to
     host the official PGA Championship Web site, the Company issued 7,882
     shares of Common Stock and warrants to purchase 45,320 shares of Common
     Stock to PGA Interactive LLC.
 
          (6) In August 1998, in consideration of the Company's acquisition of
     an Internet domain name and service mark, the Company issued 10,050 shares
     of Common Stock to Greg McLemore.
 
          (7) In October 1998, the Company issued to AOL 550,000 shares of
     Common Stock and granted to AOL warrants to purchase 900,000 shares of
     Common Stock. The consideration for such shares and warrants consisted of
     the rights and benefits granted to the Company under the AOL agreement.
                                       17
<PAGE>   19
 
          (8) During the year ended December 31, 1998, the Company issued
     warrants to purchase a total of 20,000 shares of Common Stock to Lisa L.
     Enterprises, Inc. (August 3, 1998, 17,000) and Management Plus Enterprises
     (August 3, 1998, 3,000) principally in exchange for advisory and consulting
     services.
 
          (9) During the year ended December 31, 1998, upon exercise of
     warrants, the Company issued a total of 222,073 shares of Common Stock for
     aggregate cash consideration of $1,447,179, including (i) 40,000 shares of
     Common Stock to ETW Corp. for cash consideration of $300,000; (ii) 10,000
     shares of Common Stock to Arnold Palmer Enterprises, Inc. for cash
     consideration of $50,000; (iii) 9,250 shares of Common Stock to Wayne
     Gretzky for cash consideration of $46,250; (iv) 49,323 shares of Common
     Stock to International Management Group for cash consideration of $333,429;
     (v) 5,000 shares of Common Stock to Gabrielle Reece for cash consideration
     of $25,000; (vi) 5,000 shares of Common Stock to Lee Kolligian for cash
     consideration of $25,000; (vii) 10,000 shares of Common Stock to William
     Morris Agency for cash consideration of $100,000; (viii) 20,000 shares of
     Common Stock to James Walsh for cash consideration of $100,000; (ix) 8,500
     shares of Common Stock to Pistol Pete, Inc. for cash consideration of
     $42,500; (x) 10,000 shares of Common Stock to Emerson Fittipaldi for cash
     consideration of $75,000; (xi) 40,000 shares of Common Stock to Michael P.
     Schulhof for cash consideration of $200,000; and (xii) 15,000 shares of
     Common Stock to John Daly for cash consideration of $150,000.
 
          (10) During the year ended December 31, 1998, the Company issued
     options to purchase a total of 1,980,157 shares of Common Stock to
     employees pursuant to the Company's stock option plans.
 
     No underwriter was involved in any of the above sales of securities. All of
the above securities were issued in reliance upon the exemption set forth in
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") on
the basis that they were issued under circumstances not involving a public
offering.
 
                                       18
<PAGE>   20
 
ITEM 6.  SELECTED FINANCIAL DATA.
 
     The following data should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included herein. The
selected consolidated balance sheet data set forth below as of December 31, 1997
and 1998, and the selected consolidated statement of operations data for the
three years ended December 31, 1998 have been derived from the Company's audited
consolidated financial statements.
 
<TABLE>
<CAPTION>
                                                                                           FEBRUARY 23,
                                                                                               1994
                                                                                           (INCEPTION)
                                                 YEAR ENDED DECEMBER 31,(1)                  THROUGH
                                    ----------------------------------------------------   DECEMBER 31,
                                        1998          1997         1996         1995           1994
                                    ------------   ----------   ----------   -----------   ------------
                                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                 <C>            <C>          <C>          <C>           <C>
STATEMENT OF OPERATIONS DATA:
Revenue...........................   $   30,551    $   12,014   $    3,058   $       100   $        --
Cost of revenue...................       17,231        10,431        4,233           818            --
                                     ----------    ----------   ----------   -----------   -----------
Gross margin (deficit)............       13,320         1,583       (1,175)         (718)           --
Operating expenses:
  Product development.............        1,313         2,541        1,445           721            58
  Sales and marketing.............       20,482        14,019        7,115         1,456            59
  General and administrative......       13,159         8,305        5,644         3,081           309
  Depreciation and amortization...       17,104        11,689          993           206            16
  Non-recurring charge for
     settlement of litigation.....        1,100            --           --            --            --
                                     ----------    ----------   ----------   -----------   -----------
     Total operating expenses.....       53,158        36,554       15,197         5,464           442
                                     ----------    ----------   ----------   -----------   -----------
Loss from operations..............      (39,838)      (34,971)     (16,372)       (6,182)         (442)
Interest expense..................         (118)         (146)        (161)          (51)           --
Interest and other income, net....        4,447           940          430           125            38
                                     ----------    ----------   ----------   -----------   -----------
Net loss..........................   $  (35,509)   $  (34,177)  $  (16,103)  $    (6,108)  $      (404)
                                     ==========    ==========   ==========   ===========   ===========
Net loss per share -- basic and
  diluted.........................   $    (1.94)   $    (3.08)  $    (2.31)  $     (1.59)  $     (0.19)
                                     ==========    ==========   ==========   ===========   ===========
Weighted average common and common
  equivalent shares
  outstanding -- basic and
  diluted.........................   18,305,927    11,107,534    6,971,369     3,835,977     2,071,869
                                     ==========    ==========   ==========   ===========   ===========
</TABLE>
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                     -----------------------------------------------------------------
                                         1998          1997          1996         1995         1994
                                     ------------   -----------   ----------   ----------   ----------
                                                              (IN THOUSANDS)
<S>                                  <C>            <C>           <C>          <C>          <C>
BALANCE SHEET DATA:
Cash and marketable securities.....  $    85,242    $    33,988   $   15,250   $    1,175   $    1,666
Working capital (deficit)..........       64,509         31,284       12,519       (1,349)       1,656
Total assets.......................      137,655         45,726       19,984        3,901        1,962
Long-term obligations, net of
  current maturities...............          207            458          685          770           --
Total shareholders' equity.........      118,963         36,985       15,426          405        1,910
</TABLE>
 
---------------
(1) On January 29, 1998, the Company acquired all of the outstanding capital
    stock of GolfWeb in exchange for approximately 844,490 shares of Common
    Stock and the assumption of stock options and warrants to purchase up to
    approximately 53,300 shares of Common Stock. The selected consolidated
    financial data gives effect to the acquisition, which was accounted for
    under the "pooling-of-interests" accounting method.
 
                                       19
<PAGE>   21
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
 
     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 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 FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED IN "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA"
OF THIS ANNUAL REPORT ON FORM 10-K.
 
OVERVIEW
 
     SportsLine USA is a leading Internet-based sports media company that
provides branded, interactive information and programming as well as merchandise
to sports enthusiasts worldwide.
 
     Prior to March 1996, substantially all of the Company's revenue was derived
from membership subscriptions and fees for premium services. 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 content and products. The Company first
recognized advertising revenue in March 1996. Advertising revenue, e-commerce
revenue and fees from memberships and premium services constituted approximately
58%, 12% and 16%, respectively, of the Company's total revenue in 1998 and 53%,
9% and 22%, respectively, of the Company's total revenue in 1997 and 66%, 5% and
29%, respectively, of the Company's total revenue in 1996. The Company also
derives revenue from content licensing, primarily barter. In the fall of 1997,
the Company launched a redesigned merchandise area, The Sports Store
(thesportstore.com), in which it offers consumers a wide assortment of branded
sports merchandise, licensed apparel, league, event and team merchandise and
unique sports superstar collectibles and memorabilia. In November 1997, the
Company entered into an agreement to syndicate certain of its radio programming.
As of December 31, 1998, one of the Company's sports and talk radio shows was
broadcast on traditional radio stations in approximately 50 markets in
association with the SportsFan Radio Network. The Company also expects to
syndicate its content in other media and to develop web sites for third parties.
Through December 31, 1998, the Company's syndication and site development
revenue has not been significant.
 
     Advertising revenue is recognized in the period in which the advertisement
is displayed, 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. Revenue relating to monthly
memberships is recognized in the month the service is provided. 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 is recognized
over the period of the license agreement as the Company delivers its content.
Merchandise revenue is recognized once the product has been shipped and payment
is reasonably assured.
 
     On January 29, 1998, the Company acquired all of the outstanding capital
stock of GolfWeb in exchange for approximately 844,490 shares of Common Stock
and the assumption of stock options and warrants to purchase up to approximately
53,300 additional shares of Common Stock. The acquisition was accounted for
under the "pooling-of-interests" accounting method. Accordingly, the Company's
consolidated financial statements include the accounts of GolfWeb. See Notes 2
and 5 of Notes to Consolidated Financial Statements.
 
     On June 29, 1998, the Company acquired International Golf Outlet, Inc.
("IGO"), a privately-held Internet retailer of fine golf equipment and
accessories, for $2 million, consisting of $350,000 in cash and $1.65 million of
Common Stock (46,924 shares). The Company also agreed to issue to the IGO
shareholders additional Common Stock, valued at $1.5 million at the time of the
acquisition (42,658 shares), if IGO meets certain annual revenue and earnings
targets over the three-year period following the acquisition.
 
                                       20
<PAGE>   22
 
RECENT DEVELOPMENTS
 
     In February 1999, the Company amended its agreement with CBS to extend the
term of the agreement for five years, through 2006. Commencing with calendar
year 1999, CBS will provide advertising and promotion in accordance with a fixed
promotion schedule. The Company accelerated the issuance to CBS of 1,052,937
shares of Common Stock and warrants to purchase 760,000 shares of Common Stock,
which originally were to be issued in 2000 and 2001. The Company also issued to
CBS new warrants to purchase 1,200,000 shares of Common Stock, which vest on
various dates through January 2001, and agreed to issue to CBS on specified
issue dates for each of the sixth through tenth contract years Common Stock
having a fair market value of $20 million on each such issue date. In addition,
a revenue sharing provision which required the Company to pay CBS a percentage
of certain advertising revenues was replaced with a new revenue sharing formula
based on specified percentages of the Company's "Net Revenue" (as defined in the
agreement).
 
RESULTS OF OPERATIONS
 
  Revenue
 
     Total revenue for the year ended December 31, 1998 was $30,551,000 compared
to $12,014,000 for the year ended December 31, 1997 and $3,058,000 for the year
ended December 31, 1996. The increase in revenue in each period was primarily
due to increased advertising sales, as well as increased revenue from the sale
of merchandise, memberships and premium service fees, and content licensing.
Advertising revenue for the years ended December 31, 1998, 1997 and 1996
accounted for approximately 58%, 53% and 66%, respectively, of total revenue.
Advertising revenue increased primarily as a result of a higher number of
impressions sold and additional sponsors advertising on the Company's Web sites.
During 1998, the number of impressions available on the Company's Web sites
increased as more content was produced. Membership and premium services revenue
increased $2,331,000 in 1998 compared to 1997. Basic membership revenue
increased as a result of additional member signups and retention. Basic
membership fees remained the same during 1998, 1997 and 1996. Premium service
revenue increased due to increased participation in the Company's fantasy sports
contests as well as increased number of premium products, including the
Company's vegasinsider.com Web site, which was launched in March 1997. The
Company had approximately 58,100 paying members as of December 31, 1998.
E-commerce revenue increased to $3,601,000 for the year ended December 31, 1998
compared to $1,049,000 and $151,000 for the years ended December 31, 1997 and
1996, respectively. During the fourth quarter of 1997, the Company launched The
Sports Store (thesportstore.com), which offers a variety of branded sports
merchandise, books, videos and unique collectible memorabilia. Both advertising
and E-commerce revenue increased during 1998 in part due to special events in
1998, such as the Winter Olympics and World Cup Soccer. In addition, during June
1998, the Company acquired IGO, an Internet retailer of fine golf equipment and
accessories (igogolf.com). See "Item 1. Business -- Merchandise." Content
licensing and other revenue increased $2,284,000 during 1998 compared to 1997
primarily due to an agreement entered into in July 1997 and extended in October
1998 between the Company and AOL. As of December 31, 1998, the Company had
deferred revenue of $2,067,000 relating to cash or 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 19%, 19% and 16% of total revenue for the years
ended December 31, 1998, 1997 and 1996, respectively. Barter revenue increased
in 1998 and 1997 primarily due to revenue related to the AOL agreement. In
future periods, management intends to maximize cash advertising and content
licensing revenue, although the Company will continue to enter into barter
relationships when deemed appropriate.
 
  Cost of Revenue
 
     Cost of revenue consists primarily of content fees to third parties and
payroll and related expenses for the Company's editorial and operations staff
who are responsible for creating content on the Company's Web sites and radio
programs. Telecommunications, Internet access and computer related expenses for
the support and
 
                                       21
<PAGE>   23
 
delivery of the Company's services are also included in cost of revenue. Cost of
revenue also includes the cost of merchandise sold as well as prizes awarded to
contestants in the Company's various contests. Also included in cost of revenue
are royalty and other payments paid to certain content providers, technology and
marketing partners and celebrity athletes based on membership levels or
percentage of revenue generated subject, in certain instances, to specified
minimum amounts.
 
     Cost of revenue for the year ended December 31, 1998 was $17,231,000
compared to $10,431,000 and $4,233,000 for the years ended December 31, 1997 and
1996, respectively. The increase in cost of revenue for each period was
primarily the result of increased revenue sharing, content fees and
athlete/personality fees incurred, as well as increases in editorial and
operations staff necessary for the production of sports-related information and
programming on the Company's Web sites. In addition, telecommunications cost has
increased for each period as the Company increased its capacity to provide
support and delivery of its services to the increased traffic on its Web sites.
The Company anticipates that cost of revenue will continue to grow as it
increases staffing to expand its services, increases its merchandising efforts
and incurs higher content and royalty fees, and as the Company requires more
bandwidth from its ISPs. As a percentage of revenue, cost of revenue decreased
to 56% for the year ended December 31, 1998 from 87% and 138%, for the years
ended December 31, 1997 and 1996, respectively.
 
  Operating Expenses
 
     Product Development.  Product development expense consists primarily of
consulting and employee compensation and related expenses required to support
the development of existing and new service offerings and proprietary content.
These costs are expensed as incurred.
 
     Product development expense was $1,313,000 for the year ended December 31,
1998 compared to $2,541,000 and $1,444,000 for the years ended December 31, 1997
and 1996, respectively. The decrease in product development expense in 1998 from
1997 is primarily the result of the reduction of product development personnel
and consultants at GolfWeb. During 1998, GolfWeb product development and
personnel were consolidated with the Company's existing staff, redundancies were
eliminated. The increase in product development expense in 1997 from 1996 was
primarily attributable to increases in technical personnel and associated costs
relating to developing the features and functionality of the Company's Web
sites. The Company believes that significant investments in product development
are required to remain competitive. Consequently, the Company intends to
continue to invest significant resources in product development. As a percentage
of revenue, product development expense decreased to 4% for the year ended
December 31, 1998 from 21% and 47%, for the years ended December 31, 1997 and
1996, respectively.
 
     Sales and Marketing.  Sales and marketing expense consists of salaries and
related expenses, advertising, marketing, promotional, business development and
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 the cost of obtaining qualified prospects
from direct marketing programs and from third parties. The Company expenses
member acquisition costs as incurred.
 
     Sales and marketing expense was $20,482,000 for the year ended December 31,
1998 compared to $14,019,000 and $7,115,000 for the years ended December 31,
1997 and 1996, respectively. The increase in sales and marketing expense in each
period was primarily the result of the growth in the number of personnel and
related costs and increased advertising on other Web sites. Barter transactions
accounted for approximately 27%, 16% and 7% of sales and marketing expense for
the years ended December 31, 1998, 1997 and 1996, respectively. The increase in
the proportionate amount of barter expense was due to the use of barter for
content licensing during 1998 and 1997. As a percentage of revenue, sales and
marketing expense decreased to 67% for the year ended December 31, 1998 from
117% and 233% for the years ended December 31, 1997 and 1996, respectively.
 
     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
professional service fees. General and administrative expense for the year ended
December 31, 1998 was $13,159,000 compared to $8,305,000 and $5,644,000 for the
years ended Decem-
                                       22
<PAGE>   24
 
ber 31, 1997 and 1996, respectively. The increase in general and administrative
expense in each period was primarily attributable to salary and related expenses
for additional personnel and an increase in professional fees. The Company
increased general and administrative expense in each year to develop and
maintain the administrative infrastructure necessary to support the growth of
its business. As a percentage of revenue, general and administrative expense
decreased to 43% for the year ended December 31, 1998 from 69% and 185%, for the
years ended December 31, 1997 and 1996, respectively.
 
     Depreciation and Amortization.  Depreciation and amortization expense
consists of the depreciation of property and equipment, amortization of costs
associated with consulting agreements and, beginning in March 1997, the
amortization of deferred advertising and content costs relating to the CBS
agreement. Depreciation and amortization expense for the year ended December 31,
1998 was $17,104,000 compared to $11,689,000 and $993,000 for the years ended
December 31, 1997 and 1996, respectively. The increase in depreciation and
amortization expense from 1996 to 1997 and from 1997 to 1998 was primarily due
to the amortization of amounts related to the Company's agreements with CBS and
AOL and to a lesser extent additional property and equipment. The Company
expects depreciation and amortization expense to continue increasing as amounts
related to the CBS agreement are amortized as well as the AOL agreement.
 
     Under the Company's agreement with CBS, the Company will issue shares of
Common Stock and warrants to purchase Common Stock in consideration of CBS's
advertising and promotional efforts and its license to the Company of the right
to use certain CBS logos and television-related sports content. The value of the
advertising and content will be recorded annually in the balance sheet as
deferred advertising and content costs and amortized to depreciation and
amortization expense over each related contract year. See Note 5 of Notes to
Consolidated Financial Statements. Total expense under the CBS agreement was
$12,002,000 for the year ended December 31, 1998 and $7,835,000 for the year
ended December 31, 1997, and will be $14,096,000 in 1999, $17,286,000 in 2000
and $17,286,000 in 2001 and $22,286,000 annually from 2002 to 2006.
 
     Under the Company's new agreement with AOL which was effective upon
expiration of the prior agreement in October 1998, the Company has issued shares
of Common Stock and warrants to purchase Common Stock and made a cash payment in
consideration of AOL's advertising and promotional efforts. The value of the
advertising has been recorded in the balance sheet as deferred advertising costs
and amortized to depreciation and amortization expense over each related
contract year. See Note 5 of Notes to Consolidated Financial Statements. Total
expense under the new AOL agreement was $1,992,000 for the year ended December
31, 1998 and will be $7,966,000 in 1999, $7,966,000 in 2000 and $5,974,000 in
2001.
 
     Interest Expense.  Interest expense consists primarily of interest paid on
the Company's existing equipment line of credit, on capital lease obligations
and on short-term loans that have been repaid. Interest expense was $118,000 for
the year ended December 31, 1998 compared to $146,000 and $161,000 for the years
ended December 31, 1997 and 1996, respectively. The decrease in interest expense
from 1997 to 1998 was due to the payment in full of two equipment lines in
February 1998 and one of the Company's capital leases for computer equipment in
June 1998. The decrease in interest expense from 1996 to 1997 was primarily due
to the repayment of a $973,000 term loan during 1996.
 
     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 for the year ended December 31, 1998
was $4,447,000 compared to $940,000 and $430,000 for the years ended December
31, 1997 and 1996, respectively. The increase from year to year was primarily
attributable to the investment of the proceeds from the IPO and the Company's
April 1998 secondary public offering in cash and cash equivalents and, in 1997
and 1998, marketable securities. The Company anticipates that interest income
may decrease in future periods as the Company utilizes its cash and cash
equivalents and marketable securities for working capital and other purposes.
 
     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, 1998, the Company had approximately $88,000,000 of net
operating loss carryforwards for Federal income tax purposes, expiring beginning
in 2009, available to offset future taxable income. Given the Company's limited
operating history,
                                       23
<PAGE>   25
 
losses incurred to date and the difficulty in accurately forecasting the
Company's future results, management does not believe that the realization of
the related deferred income tax assets meets the criteria required by generally
accepted accounting principles and, accordingly, a full 100% valuation allowance
has been recorded to reduce the deferred income tax assets to zero. See Note 7
of Notes to Consolidated Financial Statements.
 
     As a result of the Company's relatively short operating history and the
emerging nature of the markets in which it competes, the Company is limited in
its ability to accurately forecast its revenue. The Company's current and future
expense levels are based largely on its estimates of future revenue and are to a
large extent fixed. Accordingly, the Company may be unable to adjust spending in
a timely manner to compensate for any unexpected revenue shortfall, and a
shortfall in revenue in relation to the Company's expectations could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company currently intends to significantly
increase its operating expenses to develop and enhance its technology, to
create, introduce and enhance its service offerings, to acquire and develop
content, to fund increased sales and marketing expenses and to enter into new
strategic agreements. To the extent that such expenses precede or are not
subsequently followed by increased revenue, the Company's business, results of
operations and financial condition could be materially adversely affected.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     In November 1997, the Company sold 3,500,000 shares of Common Stock in an
initial public offering (the "IPO"). Of the 3,500,000 shares sold in the IPO,
2,693,549 shares were sold to the public at a price of $8.00 per share and
672,043 shares and 134,408 shares were sold to Intel Corporation and Mitsubishi
Corporation, respectively, at a price of $7.44 per share. In December 1997, the
underwriters exercised their over-allotment option to purchase an additional
525,000 shares of Common Stock. The total net proceeds to the Company from the
IPO were approximately $30,000,000.
 
     In May and October 1997, GolfWeb issued Series C convertible preferred
stock which raised net proceeds of approximately $7,900,000. Upon the
acquisition of GolfWeb, the Series C convertible preferred stock converted into
373,494 shares of the Company's common stock.
 
     In April 1998, the Company sold 2,288,430 shares of Common Stock in a
secondary public offering at a price to public of $37.625 per share. The total
net proceeds to the Company from this offering were approximately $80,841,000.
 
     As of December 31, 1998, the Company's primary source of liquidity
consisted of $31,684,000 in cash and cash equivalents. Prior to the IPO and the
secondary public offering, the Company financed its operations primarily through
private placements of common stock and convertible preferred stock. In January
1998, CBS exercised warrants to purchase 380,000 shares of Common Stock,
resulting in the net proceeds of $3,800,000. In December 1998, CBS exercised
warrants to purchase 380,000 shares of Common Stock resulting in net proceeds of
$5,700,000. As of December 31, 1998, the Company has $27,391,000 in current
marketable securities and $26,167,000 in noncurrent marketable securities which
will be held to maturity.
 
     As of December 31, 1997, the Company owed $281,000 under its equipment line
of credit which was paid in full in February 1998. At December 31, 1997 the
Company owed $231,000 for a capital lease obligation which was paid off in
December 1998.
 
     The Company has obtained revolving credit facilities that provide for the
lease financing of computers and other equipment purchases. Outstanding amounts
under the facilities bear interest at variable rates of approximately 9%. As of
December 31, 1998, the Company owed $472,000 under these facilities.
 
     As of December 31, 1998, deferred advertising and content costs totaled
$5,413,000, which represented costs related to the CBS and AOL agreements to be
amortized to depreciation and amortization expense during the year ended
December 31, 1999. Accrued liabilities totaled $5,334,000 as of December 31,
1998, an increase of $2,076,000 from December 31, 1997, primarily due to
increases in accruals for cost of merchandise sold, revenue sharing and
professional fees.
 
                                       24
<PAGE>   26
 
     Net cash used in operating activities was $25,295,000, $22,048,000 and
$13,984,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
The principal uses of cash for all periods were to fund the Company's net losses
from operations, partially offset by increases in deferred revenue, accounts
payable and depreciation and amortization and other noncash charges.
 
     Net cash used in investing activities was $69,185,000, $3,937,000 and
$1,556,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
The principal uses in 1998 were for purchases of current and noncurrent
marketable securities and for purchases of property and equipment. In 1997 and
1996 the principle use was for the purchase of property and equipment.
 
     Net cash provided by financing activities was $93,682,000, $43,217,000, and
$29,615,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Financing activities consisted principally of the issuance of equity securities,
including shares of Common Stock sold in the IPO and the secondary public
offering as well as private placements in 1996.
 
     The Company has entered into various licensing, royalty and consulting
agreements with content providers, vendors, athletes 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 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, 1998, the minimum guaranteed payments
required to be made by the Company under such agreements were $8,249,000. The
Company's minimum guaranteed payments are subject to reduction in the case of
certain agreements based upon the appreciation of warrants issued, the value of
stock received on exercise of such warrants and the amount of profit sharing
earned under the related agreements.
 
     Although the Company has no material commitments for capital expenditures,
it anticipates purchasing approximately $5.2 million of property and equipment
during 1999, primarily computer equipment and furniture and fixtures. The
Company intends to continue to pursue acquisitions of or investments in
businesses, services and technologies that are complementary to those of the
Company.
 
     The Company believes that its current cash and marketable securities will
be sufficient to fund its working capital and capital expenditure requirements
for the foreseeable future. However, the Company expects to continue to incur
significant operating losses for at least the next 24 to 36 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 shareholders. 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.
 
YEAR 2000 COMPLIANCE
 
     The Company utilizes a significant number of computer software programs and
operating systems across its entire organization, including applications used in
operating the Company's various Web sites, member services, e-commerce, and
various administrative and billing functions. To the extent that the Company's
software applications contain source codes that are unable to appropriately
interpret the upcoming calendar year 2000, some level of modification, or even
possible replacement of such applications may be necessary.
 
     The Company has retained a consulting firm to help assess the Company's
Year 2000 compliance. The assessment is currently being conducted in three
phases, the first two of which have been completed. During Phase One the Company
analyzed facilities, applications, network, distributed computing,
infrastructure, and data in order to determine the size, scope, and complexity
of the Company's exposure to Year 2000. During Phase Two specific strategies
required to bring exposure areas into compliance were formulated. Additionally,
during Phase Two, the Company began interviewing hardware, software, market
feed, and firmware vendors for Year 2000 compliance plans. The results of the
first and second phases were used to develop a compliance/renovation approach,
budget, and project plan which includes an analysis of compliance
 
                                       25
<PAGE>   27
 
strategies, cost parameters and timelines. During Phase Three, the Company will
complete the renovations of software and applications, implement hardware
patches, develop project contingencies and complete final testing. The Company
expects to be substantially Year 2000 compliant before the end of April 1999
with respect to its mission critical computing infrastructure, associated
applications, and strategic vendors/suppliers.
 
     The costs incurred by the Company during 1998 to address the Year 2000
compliance were approximately $143,750. The Company estimates it will incur a
maximum of $500,000 in direct costs during 1999 to support its compliance
initiatives. Although the Company expects to be Year 2000 compliant on or before
December 31, 1999, there can be no assurances that the Company will not
experience serious unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in its internal
systems or by failures of its vendors/partners to address their year 2000 issues
in a timely and effective manner.
 
     Should miscalculations or other operational errors occur as a result of the
Year 2000 issue, the Company or the parties on which it depends may be unable to
produce reliable information or to process routine transactions. Furthermore, in
the worst case, the Company or the parties on which it depends may, for an
extended period of time, be incapable of conducting critical business activities
which include, but are not limited to, the production and delivery of the
Company's Internet sites, invoicing customers and paying vendors, which could
have material adverse effect on the Company's business, prospects, financial
condition and operating results.
 
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. 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 affect on
the Company's business, results of operations and financial condition.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In February 1997, SFAS No. 128, Earnings Per Share, was issued. SFAS No.
128 simplifies the methodology of computing earnings per share, and requires the
presentation of basic and diluted earnings per share. The Company's basic and
diluted earnings per share are the same, as the Company's common stock
equivalents are antidilutive. SFAS No. 128 has been adopted by the Company for
the year ended December 31, 1997 and is retroactively reflected in the financial
statements.
 
     In June 1997, SFAS No. 130, Reporting Comprehensive Income, was issued
which was adopted by the Company as of January 1, 1998. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income by
their nature in financial statements and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of statements of financial position.
Comprehensive income is defined as the change in equity during the financial
reporting period of a business enterprise resulting from non-owner sources.
Comprehensive loss equals the net loss for all periods presented.
 
     In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 establishes standards for
the way public business enterprises report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. SFAS No. 131 is
                                       26
<PAGE>   28
 
effective for financial statements for periods beginning after December 31,
1997. Currently, the Company analyzes its revenue streams by type as disclosed
in Note 2 of the consolidated financial statements and analyzes and controls
expenses by area or department as presented on the statements of operations and
does not believe it has any separately reportable business segments.
 
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in the statement of operations unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the statement
of operations, and requires that a company formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. A company may
also implement the provision of SFAS No. 133 as of the beginning of any fiscal
quarter after issuance. SFAS No. 133 cannot be applied retroactively, and must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997. The Company has not yet adopted SFAS No. 133
and presently does not have any derivative instruments.
 
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
 
     THE COMPANY'S BUSINESS, RESULTS OF OPERATION AND FINANCIAL CONDITION COULD
BE ADVERSELY AFFECTED BY A NUMBER OF FACTORS, INCLUDING THE FOLLOWING:
 
                RISK FACTORS RELATED TO THE COMPANY'S OPERATIONS
 
LIMITED OPERATING HISTORY; ANTICIPATION OF CONTINUING LOSSES; ACCUMULATED
DEFICIT
 
     The Company was incorporated in February 1994 and commercially introduced
its first Web site in August 1995. The Company first recognized revenue from
operations in the quarter ended September 30, 1995. Accordingly, the Company has
a limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company's prospects must be considered in light of
the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in the new
and rapidly evolving Internet-based advertising, information services and
commerce markets. To address these risks, the Company must, among other things,
provide compelling and original content to Internet users, maintain existing
relationships and effectively develop new relationships with advertisers, their
advertising agencies and other third parties, develop and upgrade its
technology, respond to competitive developments and attract, retain and motivate
qualified personnel. There can be no assurance that the Company will succeed in
addressing such risks, and the failure to do so could have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     Since its inception, the Company has incurred substantial costs to develop
and enhance its technology, to create, introduce and enhance its service
offerings, to acquire and develop content, to build traffic on its Web sites, to
acquire members, to establish marketing relationships and to build an
administrative organization. The Company intends to continue these efforts and,
in addition, to increase its spending for content development and acquisition
and for marketing. The Company has entered into various licensing, royalty and
consulting agreements with content providers, vendors, athletes 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 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, 1998, the minimum
guaranteed payments required to be made by the Company under such agreements
were $8,249,000. The Company's minimum guaranteed payments are subject to
reduction in the case of certain agreements based upon the appreciation of
 
                                       27
<PAGE>   29
 
warrants issued, the value of stock received on exercise of such warrants and
the amount of profit sharing earned under the related agreements. Also, the
Company recorded non-cash expense of $12,000,000 for the year ended December 31,
1998 related to the CBS agreement and will record an additional $160,098,000 of
non-cash expense related to the CBS agreement over the remaining eight-year term
of that agreement. Additionally, non-cash expense under the Company's agreement
with AOL will total $21,906,000 over the remaining term of such agreement. As a
consequence of the foregoing, the Company has incurred operating losses in each
of its fiscal quarters and years since inception and expects to continue to
incur significant operating losses for at least the next 24 to 36 months. As of
December 31, 1998, the Company had an accumulated deficit of $92,301,032.
 
     The Company has achieved only limited revenue to date and its ability to
generate significant revenue is subject to substantial uncertainty. There can be
no assurance that the Company will ever generate sufficient revenue to meet its
expenses or achieve or maintain profitability and the failure to do so would
have a material adverse effect on the Company's business, results of operations
and financial condition. Further, in view of the rapidly evolving nature of the
Company's business and its limited operating history, the Company believes that
period-to-period comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
 
UNPREDICTABILITY OF FUTURE REVENUE; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS; SEASONALITY
 
     As a result of the Company's relatively short operating history and the
emerging nature of the markets in which it competes, the Company is limited in
its ability to accurately forecast its revenue. The Company derives revenue from
a mix of advertising, merchandise sales, membership and premium service fees,
content licensing, Web site development and syndication fees. Because changes in
revenue from memberships and premium services are expected to occur over a
period of time while advertising revenue will be recognized when the
advertisements appear, fluctuations in quarterly revenue and operating results
are likely to be particularly affected by the level of advertising revenue
within each quarter. The Company's current and future expense levels are based
largely on its expectations concerning future revenue and are to a large extent
fixed. Accordingly, the Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall, and a shortfall in
revenue in relation to the Company's expectations could have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, the Company currently intends to significantly increase its
operating expenses to develop and enhance its technology, to create, introduce
and enhance its service offerings, to acquire and develop content, to fund
increased sales and marketing expenses and to enter into new strategic
agreements. To the extent that such expenses precede or are not subsequently
followed by increased revenue, the Company's business, results of operations and
financial condition could be materially adversely affected.
 
     The Company's quarterly operating results have fluctuated in the past and
are expected to continue to fluctuate in the future as a result of a variety of
factors, many of which are outside the Company's control. These factors include:
the level of usage of the Internet; the level of traffic on the Company's Web
sites; demand for Internet advertising; seasonal trends in both Internet usage
and advertising placements; the addition or loss of advertisers; the advertising
budgeting cycles of individual advertisers; the number of users that purchase
memberships, merchandise or premium services; the amount and timing of capital
expenditures and other costs relating to the expansion of the Company's
operations; the introduction of new sites and services by the Company or its
competitors; price competition or pricing changes in the industry; general
economic conditions; and economic conditions specific to the Internet,
electronic commerce and online media.
 
     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. 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.
                                       28
<PAGE>   30
 
The foregoing factors could have a material adverse effect on the Company's
business, results of operations and financial condition. Due to all of the
foregoing factors, it is possible that the Company's operating results will fall
below the expectations of securities analysts or investors in some future
quarter. In such event, the trading price of the Common Stock would likely be
materially adversely affected.
 
DEPENDENCE ON CBS RELATIONSHIP
 
     In March 1997, the Company entered into a five-year agreement with CBS,
pursuant to which the Company's flagship Web site was renamed
"cbs.sportsline.com." The CBS agreement was amended in February 1999 to extend
its term through 2006. Over the term of the agreement, the Company has the right
to use certain CBS logos and television-related sports content in exchange for,
among other things, extensive network television advertising and on-air
promotions. Such network television advertising and on-air promotions, as well
as the association of the Company's brand with CBS, are important elements of
the Company's strategy to increase awareness of the SportsLine brand and build
traffic on its Web sites. The CBS agreement provides that the Company shall (i)
maintain and operate the Company's flagship Web site, cbs.sportsline.com, in
accordance with guidelines and restrictions developed from time to time by the
Company and CBS (which would prohibit, among other things, the Company from
providing on cbs.sportsline.com gambling information or content that is sexually
explicit, contains profanity, is slanderous or libelous or that denigrates a
particular group based on gender, race, creed, religion, sexual preference or
disability) and (ii) cease using any content on cbs.sportsline.com which CBS
determines conflicts, interferes with or is detrimental to CBS's reputation or
business 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. Under
the agreement, CBS has the right to receive specified percentages of the
Company's "Net Revenues" (as defined in the agreement). CBS has the right to
terminate the agreement upon the acquisition by a CBS competitor of 40% or more
of the voting power of the Company's outstanding equity securities or in certain
other circumstances, including if the Company breaches a material term or
condition of the agreement or becomes insolvent or subject to bankruptcy or
similar proceedings. There can be no assurance that CBS will perform its
obligations under the agreement, or that the agreement will significantly
increase consumer awareness of the Company's brand or build traffic on its Web
sites. Any failure of CBS to perform its material obligations under the
agreement, or the termination of the agreement prior to the end of the term in
accordance with its terms, would have a material adverse effect on the Company's
business, results of operations and financial condition.
 
DEPENDENCE ON STRATEGIC RELATIONSHIPS
 
     In addition to its relationship with CBS, the Company has entered into
other strategic relationships with sports superstars, personalities,
organizations and affinity groups, commercial online services (such as AOL),
third party Web sites and developers of browsers and other Internet-based
products to increase awareness of its brand among consumers, to create revenue
opportunities and to obtain content for its Web sites. There can be no assurance
that any party to a strategic agreement with the Company will perform its
obligations as agreed or that any such agreement would be specifically
enforceable by the Company. Many of the Company's strategic agreements are
short-term in nature. In addition, certain of the Company's agreements with its
strategic partners may be terminated by either party on short notice. The
failure to maintain or renew its existing strategic relationships, to establish
additional strategic relationships or to fully capitalize on any such
relationship could have a material adverse effect on the Company's business,
results of operations and financial condition.
 
INTENSE COMPETITION
 
     The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated with no substantial barriers to entry,
and the Company expects that competition will continue to intensify. The Company
competes, directly and indirectly, for advertisers, viewers, members, content
providers, merchandise sales and rights to sports events with the following
categories of companies: (i) online services or Web sites targeted to sports
enthusiasts generally (such as ESPN.com, CNN and Sports Illustrated's CNN/SI and
Fox Sports) or to enthusiasts of particular
 
                                       29
<PAGE>   31
 
sports (such as Web sites maintained by Major League Baseball, the NFL, the NBA
and the NHL); (ii) 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; (iii)
general purpose consumer online services such as AOL and Microsoft Network, each
of which provides access to sports-related content and services; (iv) vendors of
sports information, merchandise, products and services distributed through other
means, including retail stores, mail, facsimile and private bulletin board
services; and (v) Web search and retrieval services, such as AltaVista, Excite,
InfoSeek, Lycos and Yahoo!, and other high-traffic Web sites, such as those
operated by CYNET and Netscape. The Company anticipates that the number of its
direct and indirect competitors will increase in the future. Management believes
that the Company's most significant competitors are ESPN.com, CNN/SI and Fox
Sports, Web sites that offer a variety of sports content.
 
     Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, significantly greater name recognition and substantially larger user
or membership bases than the Company and, therefore, have a significantly
greater ability to attract advertisers and users. In addition, many of these
competitors may be able to respond more quickly than the Company to new or
emerging technologies and changes in Internet user requirements and to devote
greater resources than the Company to the development, promotion and sale of
their services. There can be no assurance that the Company's current or
potential competitors will not develop products and services comparable or
superior to those developed by the Company or adapt more quickly than the
Company to new technologies, evolving industry trends or changing Internet user
preferences. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which would materially and adversely
affect the Company's business, results of operations and financial condition. In
addition, as the Company expands internationally it may face new competition.
There can be no assurance that the Company will be able to compete successfully
against current and future competitors, or that competitive pressures faced by
the Company would not have a material adverse effect on its business, results of
operations and financial condition.
 
DEPENDENCE ON CONTENT PROVIDERS; SIGNIFICANT PAYMENTS REQUIRED TO BE MADE TO
CONTENT PROVIDERS; RISK OF THIRD PARTY CLAIMS
 
     The Company relies on independent content providers for sports news,
scores, statistics and other sports information. The Company's future success
depends, in significant part, on its ability to maintain and renew its existing
relationships with such content providers and to build new relationships with
other content providers. The Company's agreements with content providers
generally are short-term and may be terminated by the content provider if the
Company fails to fulfill its obligations under the applicable agreement. Some of
the Company's content providers compete with one another and, to some extent,
with the Company for advertising and members. Termination of one or more
significant content provider agreements would decrease the availability of
sports news and information which the Company can offer its customers and could
have a material adverse effect on the Company's business, results of operations
and financial condition.
 
     The Company's agreements with most of its content providers are
nonexclusive, and many of the Company's competitors offer, or could offer,
content that is similar or the same as that obtained by the Company 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 the Company's current suppliers, provide information to users at a
lower cost than the Company or at minimal or no cost, the Company's business,
results of operations and financial condition could be materially adversely
affected.
 
     Fees payable to content providers constitute a significant portion of the
Company's cost of revenue. There can be no assurance that the Company's content
providers will enter into or renew agreements with the Company on the same or
similar terms as those currently in effect. If the Company is required to
increase the fees payable to its content providers, such increased payments
could have a material adverse effect on the Company's business, results of
operations and financial condition. Moreover, the Company may in the future be
subject to third party claims, for defamation, negligence, copyright or
trademark infringement or other
 
                                       30
<PAGE>   32
 
theories based on the nature and content of information supplied by its content
providers, and any such claims may have a material adverse effect on the
Company's business, results of operations and financial condition. See
"-- Intellectual Property; Risk of Third Party Claims for Infringement" and
"-- Liability for Information Retrieved from the Internet."
 
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS AND INVESTMENTS
 
     The Company pursues opportunities to acquire or invest in businesses,
products and technologies that would complement or expand its existing business.
A decision by the Company to pursue a significant business expansion,
acquisition or new business opportunity may require a substantial investment of
capital, which could have a material adverse effect on the Company's financial
condition and its ability to implement its existing business strategy, and may
involve the issuance of equity interest in the Company or its subsidiaries,
which would be dilutive to holders of Common Stock. Such an investment could
also result in operating losses for the Company. There can be no assurance that
any significant business expansion, acquisition or new business strategy would
ever be profitable, and a failure by the Company to recover its investment
required could have a material adverse effect in the Company's business,
prospects, financial condition and operating results. Acquisitions and
investments also involve a number of other risks that could adversely affect the
Company's operating results, including the diversion of management's attention,
the assimilation of the operations and personnel of acquired companies, the
amortization of acquired intangible assets and the potential loss of key
employees of acquired companies. In addition, any such acquisition or investment
that is not favorably received by consumers or other persons (such as
advertisers) with whom the Company does business could damage the Company's
reputation or the SportsLine brand. There can be no assurance that any
businesses acquired by the Company will be successfully integrated or that the
Company will be able to consummate future acquisitions on satisfactory terms.
 
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
 
     The Company intends to continue to expand internationally and expects that
its international operations will be subject to most of the risks inherent in
its business generally. There can be no assurance that revenue from
international operations will increase in the future or that operating losses
will not be incurred from such operations. In addition, there are certain risks
inherent in doing business in international markets, such as changes in
regulatory requirements, tariffs and other trade barriers, fluctuations in
currency exchange rates, potentially adverse tax consequences and difficulties
in managing or overseeing foreign operations, and there are likely to be
different consumer preferences and requirements in such markets. There can be no
assurance that one or more of such factors would not have a material adverse
effect on the Company's current or future international operations and,
consequently, on the Company's business, results of operations and financial
condition.
 
INTELLECTUAL PROPERTY; RISK OF THIRD PARTY CLAIMS FOR INFRINGEMENT
 
     The Company's performance and ability to compete are dependent to a
significant degree on its internally developed content and technology. The
Company relies on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements with its employees and
with third parties and contractual provisions to establish and protect its
proprietary rights. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate, that the Company
will be able to secure trademark registrations for all of its marks in the
United States and/or foreign countries, or that third parties will not infringe
upon or misappropriate the Company's copyrights, trademarks, service marks and
similar proprietary rights. In addition, effective copyright and trademark
protection may be unenforceable or limited in certain foreign countries, and the
global nature of the Internet makes it impossible to control the ultimate
destination of the Company's services. In the future, litigation may be
necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.
 
     There can be no assurance that third parties will not bring copyright or
trademark infringement claims against the Company, or claim that the Company's
use of certain technologies violates a patent. If it is determined that the
Company has infringed upon a third party's proprietary rights, there can be no
assurance
                                       31
<PAGE>   33
 
that any necessary licenses or rights could be obtained on terms satisfactory to
the Company, if at all. The inability to obtain any required license on
satisfactory terms could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company may also be
subject to litigation to defend against claims of infringement of the rights of
others or to determine the scope and validity of the intellectual property
rights of others. If competitors of the Company prepare and file applications in
the United States that claim trademarks used or registered by the Company, the
Company may oppose those applications and have to participate in proceedings
before the United States Patent and Trademark Office ("USPTO") to determine
priority of rights to the trademark, which could result in substantial costs to
the Company, even if the eventual outcome is favorable to the Company. An
adverse outcome could require the Company to license disputed rights from third
parties or to cease using such trademark. Any such litigation would be costly
and divert management's attention, either of which could have a material adverse
effect on the Company's business, results of operations and financial condition.
Adverse determinations in such litigation could result in the loss of certain of
the Company's proprietary rights, subject the Company to significant
liabilities, require the Company to seek licenses from third parties, and
prevent the Company from selling its services, any one of which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, inasmuch as the Company licenses a substantial
portion of its content from third parties, its exposure to copyright
infringement actions may increase because the Company must rely upon such third
parties for information as to the origin and ownership of such licensed content.
The Company generally obtains representations as to the origins and ownership of
such licensed content and generally obtains indemnification to cover any breach
of any such representations; however, there can be no assurance that such
representations will be accurate or that such indemnification will provide
adequate compensation for any breach of such representations.
 
     In 1996, the Company was issued a United States trademark registration for
its former SportsLine USA logo. The Company has applied to register in the
United States its current SportsLine USA logo and a number of other marks,
several of which include the term "SportsLine USA." The Company has filed
applications to register "SportsLine" marks in Australia and the United Kingdom.
There can be no assurance that the Company will be able to secure adequate
protection for these trademarks in the United States or in foreign countries.
Many foreign countries have a "first-to-file" trademark registration system and
thus the Company may be prevented from registering its marks in certain
countries if third parties have previously filed applications to register or
have registered the same or similar marks. It is possible that competitors of
the Company or others will adopt product or service names similar to the
Company's, thereby impeding the Company's ability to build brand identity and
possibly leading to customer confusion. The inability of the Company to protect
its "SportsLine USA" and other marks adequately would have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     As part of its confidentiality procedures, the Company generally enters
into agreements with its employees and consultants and limits access to and
distribution of its software, documentation and other proprietary information.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that agreements entered into for that
purpose will be enforceable. Notwithstanding the precautions taken by the
Company, it might be possible for a third party to copy or otherwise obtain and
use the Company's software or other proprietary information without
authorization or to develop similar software independently. Policing
unauthorized use of the Company's technology is difficult, particularly because
the global nature of the Internet makes it difficult to control the ultimate
destination or security of software or other data transmitted. The laws of other
countries may afford the Company little or no effective protection of its
intellectual property. The Company also relies on a variety of technology that
it licenses from third parties, including its Internet server software, which is
used in the Company's Web sites to perform key functions. There can be no
assurance that these third party technology licenses will continue to be
available to the Company on commercially reasonable terms. The loss of or
inability of the Company to maintain or obtain upgrades to any of these
technology licenses could materially adversely affect the Company's business,
results of operations and financial condition.
 
                                       32
<PAGE>   34
 
MANAGEMENT OF GROWTH
 
     The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion of its operations will continue to be
required in order to address potential market opportunities. The Company
expanded from five employees at January 1, 1995 to 303 employees at December 31,
1998, and the Company expects to add additional personnel in the near future.
Such growth has placed, and any future growth may continue to place, substantial
strain on the Company's management, operational and financial resources and
systems. To manage its growth, the Company must implement, improve and
effectively utilize its operational, management, marketing and financial systems
and train and manage its employees. In addition, it may become necessary for the
Company to increase the capacity of its software, hardware and
telecommunications systems on short notice. There can be no assurance that the
Company will be able to effectively manage the expansion of its operations or
that the Company's systems or procedures or controls will be adequate to support
the Company's operations. Any failure of management to effectively manage the
Company's growth would have a material adverse effect on the Company's business,
results of operations and financial condition.
 
RISK OF SYSTEM FAILURE, DELAYS AND INADEQUACY
 
     The performance of the Company's Web sites is critical to its 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 the Company's Web sites to users and advertisers. A
sudden and significant increase in the number of users of the Company's Web
sites also could strain the capacity of the software, hardware or
telecommunications systems deployed by the Company, which could lead to slower
response time or system failures. In addition, if the number of Web pages or
users of the Company's Web sites increases substantially, there can be no
assurance that the Company's hardware and software infrastructure will be able
to adequately handle the increased demand. The Company's operations also are
dependent upon receipt of timely feeds and computer downloads from its content
providers, and any failure or delay in the transmission or receipt of such feeds
and downloads, whether on account of system failure of the Company, its content
providers, the public network or otherwise, could disrupt the Company's
operations. Any failure or delay that causes interruptions in the Company's
operations could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company relies on private
third party providers to provide it with access to the Internet. Any disruption
in the Company's Internet access or any failure of the Company's third party
provider to handle higher volumes of users could have a material adverse effect
on the Company's business, results of operations and financial condition. The
Company is also dependent upon Web browsers and Internet service providers
("ISPs") and online service providers ("OSPs") to provide Internet users access
to the Company's Web sites, and members and users may experience difficulties
accessing or using the Company's Web sites due to system failures or delays
unrelated to the Company's systems.
 
     The Company's operations are dependent on its ability to maintain its
computer and telecommunications equipment in effective working order and to
protect its systems against damage from fire, hurricanes, power loss,
telecommunications failure, break-ins, computer viruses and other events beyond
the Company's control. Although the Company has developed an out-of-state
disaster recovery plan to respond to system failures and also maintains property
insurance for its equipment, there can be no assurance that the Company's
disaster recovery plan is capable of being implemented successfully, if at all,
or that such insurance will be adequate to compensate the Company for all losses
that may occur or to provide for costs associated with business interruption.
Any damage or failure that causes system disruptions or other significant
interruptions in the Company's operations could have a material adverse effect
on the Company's business, results of operations and financial condition.
 
                                       33
<PAGE>   35
 
DEPENDENCE ON KEY PERSONNEL
 
     The Company's future success depends, in significant part, upon the
continued service of its senior management and other key personnel. The Company
maintains $2 million of key man life insurance covering Michael Levy, the
Company's President and Chief Executive Officer, and in June 1998 entered into
an employment agreement with Mr. Levy that continues in effect through December
31, 2003. However, the loss of the services of Mr. Levy or one or more of the
Company's other executive officers or key employees could have a material
adverse effect on the Company, and there can be no assurance that the Company
will be able to retain its key personnel.
 
     The Company's future success also depends on its continuing ability to
attract and retain highly qualified technical, editorial and managerial
personnel. Competition for such personnel is intense, and the Company has, at
times, experienced difficulties in attracting the desired number of such
individuals. There can be no assurance that the Company will be able to attract
or retain a sufficient number of highly qualified employees in the future. If
the Company is unable to hire and retain personnel in key positions, the
Company's business, results of operations and financial condition could be
materially adversely affected.
 
                     RISKS RELATED TO THE INTERNET INDUSTRY
 
EMERGING MARKET FOR THE COMPANY'S SERVICES
 
     The Company operates in a market that is at a very early stage of
development, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced or developed competing products and
services. As is typical in the case of a new and rapidly evolving industry,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty and risk. Because the market for the
Company's Web sites is new and evolving, it is difficult to predict, with any
assurance, the size of this market and its growth rate, if any. In addition, it
is not known whether individuals will utilize the Internet to any significant
degree as a means of purchasing goods and services. The adoption of the Internet
for commerce, particularly by those individuals and companies that historically
have relied upon traditional means of commerce, will require a broad acceptance
of new methods of conducting business and exchanging information. There can be
no assurance that the market for the Company's Web sites will develop or that
demand for the Company's service will emerge or be sustainable. If the market
fails to develop, develops more slowly than expected or becomes saturated with
competitors, or if the Company's Web sites do not achieve or sustain market
acceptance, the Company's business, results of operations and financial
condition would be materially adversely affected.
 
DEPENDENCE ON ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM; RELIANCE ON
SHORT-TERM ADVERTISING CONTRACTS; COMPETITION FOR ADVERTISERS
 
     The Company derives a substantial portion of its revenue from the sale of
advertisements on its Web sites. The Company's ability to generate advertising
revenue will depend on, among other factors, the development of the Internet as
an advertising medium, the amount of traffic on and the membership bases of the
Company's Web sites and the Company's ability to achieve and demonstrate user
and member demographic characteristics that are attractive to advertisers. Most
potential advertisers and their advertising agencies have only limited
experience with the Internet as an advertising medium and have not devoted a
significant portion of their advertising expenditures to Internet-based
advertising. There can be no assurance that advertisers or advertising agencies
will be persuaded to allocate or continue to allocate portions of their budgets
to Internet-based advertising or, if so persuaded, that they will find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. No standards have yet been widely
accepted for the measurement of the effectiveness of Internet-based advertising,
and there can be no assurance that such standards will develop sufficiently to
support Internet-based advertising as a significant advertising medium. In
addition, the widespread adoption of technologies that permit Internet users to
selectively block out unwanted graphics, including advertisements, attached to
Web pages could adversely affect the growth of the Internet as an advertising
medium. Acceptance of the Internet among advertisers and
 
                                       34
<PAGE>   36
 
advertising agencies will also depend, to a large extent, on the level of use of
the Internet by consumers, which is highly uncertain, and upon growth in the
commercial use of the Internet. If widespread commercial use of the Internet
does not develop, or if the Internet does not develop as an effective and
measurable medium for advertising, the Company's business, results of operations
and financial condition would be materially adversely affected.
 
     The Company's advertising revenue to date has been derived under short-term
contracts. Consequently, the Company's advertising customers can move their
advertising to competing Web sites or to other media quickly and without
penalty, thereby increasing the Company's exposure to competitive pressures.
There can be no assurance that the Company's current advertisers will continue
to purchase advertisements, or that the Company will be able to secure new
advertising contracts from existing or future customers at attractive rates or
at all. Any failure of the Company to achieve sufficient advertising revenue
would have a material adverse effect on the Company's business, results of
operations and financial condition.
 
     There is intense competition for the sale of advertising on high-traffic
Web sites, which has resulted in a wide range of rates quoted by different
vendors for a variety of advertising services, making it difficult to project
levels of Internet advertising that will be realized generally or by any
specific company. Competition for advertisers among present and future Web
sites, as well as competition with other traditional media for advertising
placements, could result in significant price competition. Most of the Company's
advertisements to date have been sold on the basis of the number of
"impressions," or times that an advertisement appears in page views downloaded
by users, rather than on the number of "click-throughs," or user requests for
additional information made by clicking on the advertisement. There can be no
assurance that the Company's future advertising customers will continue to pay
on a per-impression basis rather than on a "click-through" basis. In addition,
there can be no assurance that the Company's advertising customers will accept
the internal and third-party measurements of impressions received by
advertisements on the Company's Web sites, or that such measurements will not
contain errors. The foregoing factors and uncertainties could have a material
adverse effect on the Company's business, results of operations and financial
condition.
 
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET
 
     The Company's success is highly dependent upon continued growth in the use
of the Internet generally and, in particular, as a medium for advertising,
information services and commerce. Use of the Internet by consumers is at a very
early stage of development, and market acceptance of the Internet as a medium
for advertising, information services and commerce is subject to a high level of
uncertainty. The rapid growth of global commerce and the exchange of information
on the Internet and online services is new and evolving, making it difficult to
predict whether the Internet will prove to be a viable commercial marketplace.
The Company believes that its future success will require the development and
widespread acceptance of the Internet and online services as a medium for
advertising and commerce. In particular, the Company's future financial success
will be dependent on the sale of advertising on its Web sites and its ability to
attract and retain paying members and to sell merchandise and premium services.
There can be no assurance that the Internet will be a successful commerce and
information channel. The Internet may not prove to be a viable commercial
marketplace due to inadequate development of the necessary infrastructure, such
as reliable network backbones, or complementary services, such as high speed
modems and security procedures for financial transactions. Consumer concern over
Internet security has been, and could continue to be, a barrier to commercial
activities requiring consumers to send their credit card information over the
Internet. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by sustained growth.
 
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE
 
     The Internet industry is characterized by rapid technological developments,
evolving industry standards, changes in user and customer requirements, frequent
new service and product introductions and enhancements. The introduction of
services or products embodying new technologies or the emergence of new industry
standards and practices could render the Company's existing Web sites and
proprietary technology obsolete
                                       35
<PAGE>   37
 
and unmarketable or require significant unanticipated investments in product
development. The Company's performance will depend, in part, on its ability to
license leading technologies, enhance its existing services, develop new
proprietary technologies that address the increasingly sophisticated and varied
needs of Web users and advertisers and respond to technological advances and
emerging industry standards and practices on a timely and cost-effective basis.
The development of Web sites and other proprietary technologies entails
significant technical and business risks. There can be no assurance that the
Company will be successful in using new technologies effectively or adapting its
Web sites and proprietary technologies to customer requirements or emerging
industry standards. If the Company is unable, for technical, legal, financial or
other reasons, to adapt in a timely manner in response to technological
developments, evolving industry standards, changing market conditions or
customer requirements, or if the Company's Web sites do not achieve market
acceptance, the Company's business, results of operations and financial
condition would be materially adversely affected.
 
INTERNET COMMERCE SECURITY RISKS
 
     A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. The
Company relies on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect secure
transmission of confidential information. There can be no assurance 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 used by the Company to protect customer transaction data. If any such
compromise of the Company's security were to occur it could have a material
adverse effect on the Company's business, results of operations and financial
condition. A party who is able to circumvent the Company's security measures
could misappropriate proprietary information or cause interruptions in the
Company's operations. The Company 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 activities of the Company
or third party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could expose the
Company to a risk of loss or litigation and possible liability. There can be no
assurance that the Company's security measures will prevent security breaches or
that failure to prevent such security breaches would not have a material adverse
effect on the Company's business, results of operations and financial condition.
 
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
 
     The Company is subject to various laws and governmental regulations
applicable to businesses generally. The Company believes it is currently in
compliance with such laws and that such laws do not have a material impact on
its operations. In addition, although there are currently few laws or
regulations directly applicable to access to or commerce on the Internet, due to
the increasing popularity and use of the Internet, it is possible that more
stringent consumer protection laws and regulations may be adopted with respect
to the Internet, covering issues such as user privacy and expression, pricing,
intellectual property, information security, anti-competitive practices, the
convergence of traditional channels with Internet commerce, characteristics and
quality of products and services and the taxation of subscription fees or gross
receipts of ISPs. On June 26, 1997, the United States Supreme Court held
unconstitutional provisions of the Communications Decency Act of 1996, which,
among other things, imposed criminal penalties on anyone who distributes
obscene, lascivious or indecent communications over the Internet. The enactment
or enforcement of other federal or state laws or regulations in the future may
increase the Company's cost of doing business or decrease the growth of the
Internet and could in turn decrease the demand for the Company's products and
services, increase the Company's costs, or otherwise have an adverse effect on
the Company's business, results of operations and financial condition. Moreover,
the applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, libel and personal privacy is
uncertain, may take years to resolve and could expose the Company to substantial
liability for which the Company might not be indemnified by the content
providers or other third parties. Any such new legislation or regulation or the
application of existing
                                       36
<PAGE>   38
 
laws and regulations to the Internet could have a material adverse effect on the
Company's business, results of operations and financial condition.
 
     The Company's contests and sweepstakes may be subject to state and federal
laws governing lotteries and gambling. The Company seeks to design its contest
and sweepstakes rules to fall within exemptions from such laws and restricts
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. There can be no assurance that the Company's contests and sweepstakes
will be exempt from such laws or that the applicability of such laws to the
Company would not have a material adverse effect on the Company's business,
results of operations and financial condition.
 
     Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject the Company to additional state sales and income
taxes. As the Company's service is available over the Internet in multiple
states and foreign countries, such jurisdictions may claim that the Company is
required to qualify to do business as a foreign corporation in each such state
and foreign country. The failure by the Company to qualify as a foreign
corporation in a jurisdiction where it is required to do so could subject the
Company to taxes and penalties for the failure to qualify. It is possible that
the governments of other states and foreign countries also might attempt to
regulate the Company's transmissions of content on its Web sites or prosecute
the Company for violations of their laws. There can be no assurance that
violations of local laws will not be alleged or charged by state or foreign
governments, that the Company might not unintentionally violate such law or that
such laws will not be modified, or new laws enacted, in the future.
 
     In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association has filed a
petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Internet has burdened the existing telecommunications
infrastructure and many areas with high Internet use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs. If
either of these petitions are granted, or the relief sought therein is otherwise
granted, the costs of communicating on the Internet could increase
substantially, potentially slowing the growth in use of the Internet. Any such
new legislation or regulation or application or interpretation of existing laws
could have a material adverse effect on the Company's business, results of
operations and financial condition.
 
LIABILITY FOR INFORMATION RETRIEVED FROM THE INTERNET
 
     Due to the fact that materials may be downloaded from Web sites operated by
the Company and may be subsequently distributed to others, there is a potential
that claims will be made against the Company for defamation, negligence,
copyright or trademark infringement or other theories based on the nature and
content of such materials. Such claims have been brought, sometimes
successfully, against online services in the past. In addition, the Company
could be subject to liability with respect to content that may be accessible
through the Company's Web sites or third party Web sites linked from the
Company's Web sites. For example, claims could be made against the Company if
material deemed inappropriate for viewing by children could be accessed through
the Company's Web sites. Although the Company carries general liability
insurance, the Company's 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 the Company 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 the Company's
business, results of operations and financial condition.
 
                                       37
<PAGE>   39
 
                  RISKS RELATED TO THE COMPANY'S COMMON STOCK
 
POSSIBLE VOLATILITY OF STOCK PRICE
 
     The trading price of the Common Stock has fluctuated significantly and
could be subject to future fluctuations in response to quarterly variations in
the Company's results of operations, announcements of technological innovations
or new services or products by the Company or its competitors, changes in
financial estimates by securities analysts, the operating and stock price
performance of other companies and other events or factors. In addition, the
stock market has experienced volatility that has particularly affected the
market prices of equity securities of companies within certain industry groups
such as technology companies and Internet-related companies in particular, and
that often has been unrelated to the operating performance of such companies.
These broad market fluctuations may materially adversely affect the trading
price of the Common Stock. See "Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters" of this Annual Report on Form 10-K.
 
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CHARTER AND BYLAWS
 
     The Company is organized under the laws of the State of Delaware. Certain
provisions of Delaware law may have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, certain provisions
of the Company's Amended and Restated Certificate of Incorporation (the
"Certificate") and Amended and Restated Bylaws (the "Bylaws") may be deemed to
have anti-takeover effects and may delay, defer or prevent a takeover attempt
that a shareholder might consider in its best interest. The Certificate
authorizes the Board to determine the rights, preferences, privileges and
restrictions of unissued series of preferred stock and to fix the number of
shares of any series of preferred stock and the designation of any such series,
without any vote or action by the Company's shareholders. Thus, the Board can
authorize and issue shares of preferred stock with voting or conversion rights
that could adversely affect the voting or other rights of holders of the
Company's Common Stock. In addition, the issuance of preferred stock may have
the effect of delaying, deferring or preventing a change of control of the
Company, since the terms of the preferred stock that might be issued could
potentially prohibit the Company's consummation of any merger, reorganization,
sale of substantially all of its assets, liquidation or other extraordinary
corporate transaction without the approval of the holders of the outstanding
shares of the Common Stock. Other provisions of the Certificate and Bylaws (i)
divide the Company's Board of Directors into three classes, each of which will
serve for different three-year periods, (ii) provide that the shareholders may
not take action by written consent, but only at duly called annual or special
meetings of shareholders, (iii) provide that special meetings of the
shareholders may be called only by the Chairman of the Board of Directors or a
majority of the entire Board of Directors and (iv) establish certain advance
notice procedures for nomination of candidates for election as directors and for
shareholder proposals to be considered at annual shareholders' meetings.
 
SHARES ELIGIBLE FOR FUTURE SALE
 
     A substantial number of shares of Common Stock currently outstanding, or
issuable upon exercise of outstanding stock options and warrants, are or will
become eligible for future sale in the public market at prescribed times
pursuant to applicable regulations or registration rights held by certain
security holders. Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales will occur, could have a material
adverse effect on the market price of the Company's Common Stock. In connection
with entering into strategic relationships, particularly with athletes, the
Company has issued and may continue to issue warrants to purchase significant
amounts of Common Stock. The issuance of significant amounts of warrants in the
future, particularly warrants with exercise prices below the fair market value
of the Common Stock at the time of issuance, could have a material adverse
effect on the Company's results of operations or financial condition, or on the
market price for the Company's Common Stock.
 
                                       38
<PAGE>   40
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
     The Company's exposure to market rate risk for changes in interest rates
relates primarily to the Company's investment portfolio. The Company has not
used derivative financial instruments in its investment portfolio. The Company
invests its excess cash in debt instruments of the U.S. Government and its
agencies, and in high-quality corporate issuers and, by policy, limits the
amount of credit exposure to any one issuer. The Company protects and preserves
its invested funds by limiting default, market and reinvestment risk.
 
     Investments in both fixed rate and floating rate interest earning
instruments carries a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, the Company's future investment income
may fall short of expectations due to changes in interest rates or the Company
may suffer losses in principal if forced to sell securities which have declined
in market value due to changes in interest rates.
 
                                       39
<PAGE>   41
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Certified Public Accountants..........   41
Consolidated Balance Sheets as of December 31, 1998 and
  1997......................................................   42
Consolidated Statements of Operations for the years ended
  December 31, 1998, 1997 and 1996..........................   43
Consolidated Statements of Changes in Shareholders' Equity
  for the years ended December 31, 1998, 1997 and 1996......   44
Consolidated Statements of Cash Flows for the years ended
  December 31, 1998, 1997 and 1996..........................   45
Notes to Consolidated Financial Statements..................   46
</TABLE>
 
                                       40
<PAGE>   42
 
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To SportsLine USA, Inc.:
 
     We have audited the accompanying consolidated balance sheets of SportsLine
USA, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998 and
1997, 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, 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SportsLine USA, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
 
Arthur Andersen LLP
 
Fort Lauderdale, Florida,
  January 25, 1999 (except with respect to the matter
  discussed in the eighth paragraph of Note 5, as to which
  the date is February 10, 1999).
 
                                       41
<PAGE>   43
 
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                              ----------------------------
                                                                  1998            1997
                                                              ------------    ------------
<S>                                                           <C>             <C>
                                          ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $ 31,683,869    $ 32,482,039
  Marketable securities.....................................    27,390,989       1,505,909
  Deferred advertising and content costs....................     5,412,639         517,084
  Accounts receivable.......................................     5,051,306       2,214,150
  Prepaid expenses and other current assets.................     5,180,860       2,847,561
                                                              ------------    ------------
     Total current assets...................................    74,719,663      39,566,743
 
PROPERTY AND EQUIPMENT, net.................................     5,366,818       4,169,688
NONCURRENT MARKETABLE SECURITIES............................    26,167,086              --
RESTRICTED CASH EQUIVALENTS.................................    13,037,907         138,601
NONCURRENT DEFERRED ADVERTISING.............................    13,416,667              --
OTHER ASSETS................................................     4,946,414       1,850,605
                                                              ------------    ------------
                                                              $137,654,555    $ 45,725,637
                                                              ============    ============
                           LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable..........................................  $  2,544,988    $  2,001,900
  Accrued liabilities.......................................     5,334,011       3,257,708
  Current portion of capital lease obligations..............       264,815         501,193
  Current portion of long-term borrowings...................            --         682,159
  Deferred revenue..........................................     2,066,982       1,839,962
                                                              ------------    ------------
     Total current liabilities..............................    10,210,796       8,282,922
 
CAPITAL LEASE OBLIGATIONS, net of current portion...........       207,465         457,700
ACCRUED AOL OBLIGATION......................................     8,273,775              --
                                                              ------------    ------------
     Total liabilities......................................    18,692,036       8,740,622
                                                              ------------    ------------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
 
SHAREHOLDERS' EQUITY:
  Preferred stock, $0.01 par value, 1,000,000 shares
     authorized, none issued and outstanding as of December
     31, 1998 and 1997, respectively........................            --              --
  Common stock, $0.01 par value, 50,000,000 shares
     authorized, 20,300,785 and 15,019,220 issued and
     outstanding as of December 31, 1998 and 1997,
     respectively...........................................       203,008         150,192
  Additional paid-in capital................................   211,060,543      93,627,062
  Accumulated deficit.......................................   (92,301,032)    (56,792,239)
                                                              ------------    ------------
     Total shareholders' equity.............................   118,962,519      36,985,015
                                                              ------------    ------------
                                                              $137,654,555    $ 45,725,637
                                                              ============    ============
</TABLE>
 
        The accompanying notes to consolidated financial statements are
             an integral part of these consolidated balance sheets.
                                       42
<PAGE>   44
 
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                   --------------------------------------------
                                                       1998            1997            1996
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
REVENUE..........................................  $ 30,550,746    $ 12,013,702    $  3,058,416
COST OF REVENUE..................................    17,231,152      10,430,592       4,232,862
                                                   ------------    ------------    ------------
GROSS MARGIN (DEFICIT)...........................    13,319,594       1,583,110      (1,174,446)
                                                   ------------    ------------    ------------
OPERATING EXPENSES:
  Product development............................     1,313,116       2,540,734       1,444,476
  Sales and marketing............................    20,481,438      14,018,860       7,115,206
  General and administrative.....................    13,159,129       8,305,517       5,644,036
  Depreciation and amortization..................    17,103,992      11,688,795         993,380
  Non-recurring charge for settlement of
     litigation..................................     1,100,000              --              --
                                                   ------------    ------------    ------------
     Total operating expenses....................    53,157,675      36,553,906      15,197,098
                                                   ------------    ------------    ------------
LOSS FROM OPERATIONS.............................   (39,838,081)    (34,970,796)    (16,371,544)
INTEREST EXPENSE.................................      (117,615)       (146,283)       (161,270)
INTEREST AND OTHER INCOME, net...................     4,446,903         939,731         430,160
                                                   ------------    ------------    ------------
NET LOSS.........................................  $(35,508,793)   $(34,177,348)   $(16,102,654)
                                                   ============    ============    ============
NET LOSS PER SHARE -- BASIC AND DILUTED..........  $      (1.94)   $      (3.08)   $      (2.31)
                                                   ============    ============    ============
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
  SHARES OUTSTANDING -- BASIC AND DILUTED........    18,305,927      11,107,534       6,971,369
                                                   ============    ============    ============
</TABLE>
 
        The accompanying notes to consolidated financial statements are
               an integral part of these consolidated statements.
                                       43
<PAGE>   45
 
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                        SERIES A, B AND C
                                      CONVERTIBLE PREFERRED
                                              STOCK                COMMON STOCK         ADDITIONAL
                                     -----------------------   ---------------------     PAID-IN      ACCUMULATED
                                       SHARES       AMOUNT       SHARES      AMOUNT      CAPITAL        DEFICIT         TOTAL
                                     -----------   ---------   ----------   --------   ------------   ------------   ------------
<S>                                  <C>           <C>         <C>          <C>        <C>            <C>            <C>
Balance, December 31, 1995.........    3,000,000   $  30,000    2,762,213   $ 27,622   $  6,859,608   $ (6,512,237)  $    404,993
Net proceeds from issuance of
  Series B convertible preferred
  stock............................    6,162,776      61,628           --         --     11,031,369             --     11,092,997
Net proceeds from issuance of
  Series C convertible preferred
  stock............................    5,333,333      53,333           --         --     15,873,367             --     15,926,700
Net proceeds from issuance of
  common stock.....................           --          --      249,920      2,499      3,519,101             --      3,521,600
Proceeds from exercise of common
  stock options....................           --          --        2,155         22          2,750             --          2,772
Non-cash issuance of common stock
  warrants pursuant to consulting
  agreements.......................           --          --           --         --        579,963             --        579,963
Net loss...........................           --          --           --         --             --    (16,102,654)   (16,102,654)
                                     -----------   ---------   ----------   --------   ------------   ------------   ------------
Balance, December 31, 1996.........   14,496,109     144,961    3,014,288     30,143     37,866,158    (22,614,891)    15,426,371
Net proceeds from issuance of
  common stock.....................           --          --    4,398,494     43,985     35,521,195             --     35,565,180
Proceeds from exercise of common
  stock options....................           --          --       42,521        425         33,771             --         34,196
Proceeds from exercise of common
  stock warrants...................           --          --      960,000      9,600      7,910,400             --      7,920,000
Conversion of preferred stock into
  common stock.....................  (14,496,109)   (144,961)   5,798,434     57,984         86,977             --             --
Non-cash issuance of common stock
  and common stock warrants
  pursuant to CBS agreement........           --          --      752,273      7,523      8,293,598             --      8,301,121
Non-cash issuance of common stock
  and common stock warrants
  pursuant to consulting and
  advertising agreements...........           --          --       53,210        532      3,914,963             --      3,915,495
Net loss...........................           --          --           --         --             --    (34,177,348)   (34,177,348)
                                     -----------   ---------   ----------   --------   ------------   ------------   ------------
Balance, December 31, 1997.........           --          --   15,019,220    150,192     93,627,062    (56,792,239)    36,985,015
Net proceeds from issuance of
  common stock.....................           --          --    2,288,430     22,884     80,817,801             --     80,840,685
Proceeds from exercise of common
  stock options....................           --          --      317,203      3,172        881,246             --        884,418
Proceeds from exercise of common
  stock warrants...................           --          --      236,189      2,362      1,444,957             --      1,447,319
Proceeds from issuance of common
  stock pursuant to employee stock
  purchase plan....................           --          --      329,085      3,291      2,279,046             --      2,282,337
Non-cash issuance of common stock
  pursuant to purchase of
  International Golf Outlet........           --          --       46,924        469      1,668,272             --      1,668,741
Non-cash issuance of common stock
  and common stock warrants
  pursuant to AOL agreement........           --          --      550,000      5,500      7,617,422             --      7,622,922
Proceeds from exercise of CBS
  warrants.........................           --          --      760,000      7,600      9,492,400             --      9,500,000
Non-cash issuance of common stock
  and common stock warrants
  pursuant to CBS agreement........           --          --      735,802      7,358     11,890,096             --     11,897,454
Non-cash issuance of common stock
  and common stock warrants
  pursuant to consulting agreements
  and purchase of service mark.....           --          --       17,932        180      1,342,241             --      1,342,421
Net loss...........................           --          --           --         --             --    (35,508,793)   (35,508,793)
                                     -----------   ---------   ----------   --------   ------------   ------------   ------------
Balance, December 31, 1998.........           --   $      --   20,300,785   $203,008   $211,060,543   $(92,301,032)  $118,962,519
                                     ===========   =========   ==========   ========   ============   ============   ============
</TABLE>
 
        The accompanying notes to consolidated financial statements are
               an integral part of these consolidated statements.
                                       44
<PAGE>   46
 
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                        --------------------------------------------
                                                            1998            1997            1996
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss............................................  $(35,508,793)   $(34,177,348)   $(16,102,654)
  Adjustments to reconcile net loss to net cash used
    in operating activities:
    Depreciation and amortization.....................    17,103,992      11,688,795         993,380
    Provision for doubtful accounts...................       166,465          72,513          27,045
    Loss on disposal of assets........................        82,676              --              --
    Changes in operating assets and liabilities:
       Accounts receivable............................    (3,056,883)     (1,614,320)       (661,452)
       Prepaid expenses and other assets..............    (6,928,591)     (1,832,323)       (105,535)
       Accounts payable...............................       543,088       1,172,775         137,216
       Accrued liabilities............................     2,076,303       1,632,297       1,160,834
       Deferred revenue...............................       227,020       1,009,484         567,166
                                                        ------------    ------------    ------------
    Net cash used in operating activities.............   (25,294,723)    (22,048,127)    (13,984,000)
                                                        ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of marketable securities, net.............   (52,052,166)     (1,505,909)             --
  Purchases of property and equipment, net............    (3,780,991)     (2,430,849)     (1,995,550)
  Acquisition of International Golf Outlet............      (352,661)             --              --
  Purchase of service mark............................      (100,000)             --              --
  Net (increase) decrease in restricted cash
    equivalents.......................................   (12,899,306)             --         439,466
                                                        ------------    ------------    ------------
    Net cash used in investing activities.............   (69,185,124)     (3,936,758)     (1,556,084)
                                                        ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of common stock and
    exercise of common stock warrants and options.....    94,954,759      43,519,376       3,524,372
  Net proceeds from issuance of convertible preferred
    stock.............................................            --              --      27,019,697
  Repayment of term loan..............................            --              --        (973,000)
  Proceeds from long-term borrowings..................            --         353,326         424,154
  Repayment of long-term borrowings...................      (682,159)       (384,486)       (112,262)
  Repayment of capital lease obligations..............      (590,923)       (270,837)       (267,977)
                                                        ------------    ------------    ------------
    Net cash provided by financing activities.........    93,681,677      43,217,379      29,614,984
                                                        ------------    ------------    ------------
    Net increase (decrease) in cash and cash
       equivalents....................................      (798,170)     17,232,494      14,074,900
CASH AND CASH EQUIVALENTS, beginning of year..........    32,482,039      15,249,545       1,174,645
                                                        ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, end of year................  $ 31,683,869    $ 32,482,039    $ 15,249,545
                                                        ============    ============    ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
  FINANCING ACTIVITIES:
  Non-cash issuance of common stock and common stock
    warrants pursuant to CBS agreement................  $ 11,897,454    $  8,301,121    $         --
                                                        ============    ============    ============
  Non-cash issuance of common stock and common stock
    warrants pursuant to AOL agreement................  $  7,622,922    $         --    $         --
                                                        ============    ============    ============
  Non-cash issuance of common stock and common stock
    warrants pursuant to consulting agreements and
    purchase of service mark..........................  $  1,342,421    $  3,915,495    $    579,963
                                                        ============    ============    ============
  Non-cash issuance of common stock pursuant to
    purchase of International Golf Outlet.............  $  1,650,000    $         --    $         --
                                                        ============    ============    ============
  Equipment acquired under capital leases.............  $    104,310    $    670,178    $    126,125
                                                        ============    ============    ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest..............................  $    108,736    $    175,507    $    145,988
                                                        ============    ============    ============
</TABLE>
 
        The accompanying notes to consolidated financial statements are
               an integral part of these consolidated statements.
                                       45
<PAGE>   47
 
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) NATURE OF OPERATIONS:
 
     SportsLine USA, Inc. ("SportsLine") was incorporated on February 23, 1994
and began recognizing revenue from its operations in September 1995. The Company
is a leading Internet-based sports media company that provides branded,
interactive information and programming as well as merchandise to sports
enthusiasts worldwide. The Company's flagship site on the World Wide Web (the
"Web"), cbs.sportsline.com, delivers real-time, in-depth and compelling sports
content and programming that capitalizes on the Web's unique graphical and
interactive capabilities. The Company's other Web sites include those devoted to
sports superstars, specific sports such as golf, cricket and soccer,
international sports coverage and electronic odds and analysis on major sports
events.
 
     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 and the Company's superstar
athletes; offers instant odds and picks; produces and distributes entertaining,
interactive and original programming such as editorials and analyses from its
in-house staff and freelance journalists; produces and offers contests, games,
and fantasy league products and fan clubs; and sells sports-related merchandise
and memorabilia. The Company also owns and operates a state-of-the-art radio
studio from which it produces the only all-sports radio programming that is
broadcast via the Internet and syndicated to traditional radio stations.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Basis of Presentation
 
     The accompanying audited consolidated financial statements include the
accounts of SportsLine USA, Inc. and its subsidiaries (the "Company"). The
consolidated financial statements include the financial position and results of
operations of GolfWeb, which the Company acquired in January 1998 (the "GolfWeb
Merger"). GolfWeb is an Internet company that provides golf-related content,
interactive entertainment, membership services and merchandise through its
golfweb.com site, and its international Web sites targeted to golf enthusiasts
in Europe and Asia. The Company accounted for this transaction using the
pooling-of-interests method of accounting, therefore, the accompanying 1997
consolidated financial statements have been restated to include the accounts of
GolfWeb as if the companies had operated as one entity since inception. The
consolidated financial statements also include the financial position and
results of operations of International Golf Outlet, Inc., acquired in June 1998
(the "IGO Merger"). The Company accounted for this transaction using the
purchase method of accounting. The purchase resulted in goodwill of $1,960,000
which is included in other assets in the Company's consolidated balance sheet.
Such goodwill is being amortized over an estimated life of ten years. During
1998, $117,000 was amortized to expense. Pro forma information is not required
as the IGO Merger was not significant to the Company.
 
  Cash and Cash Equivalents
 
     The Company considers all highly liquid temporary cash investments with
original maturities of three months or less to be cash equivalents.
 
  Marketable Securities
 
     Marketable securities includes highly liquid investments with original
maturities in excess of three months but less than one year. Noncurrent
marketable securities are those investments with original
 
                                       46
<PAGE>   48
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

maturities in excess of one year. Such marketable securities are classified as
held to maturity and, accordingly, are carried at cost which approximates market
value as of December 31, 1998 and 1997 as detailed below:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                         -----------------------------
                                                             1998            1997
                                                         ------------    -------------
<S>                                                      <C>             <C>
U.S. Government Agencies...............................  $ 36,369,716    $  12,870,735
Commercial Paper.......................................    26,564,529       16,902,387
Corporate Bonds........................................     9,948,452        1,504,933
Money Market Funds.....................................     9,802,878               --
                                                         ------------    -------------
Total Marketable Securities............................    82,685,575       31,278,055
Less: Amounts classified as Cash and Cash
  Equivalents..........................................   (29,127,500)     (29,772,146)
Less: Current Marketable Securities....................   (27,390,989)      (1,505,909)
                                                         ------------    -------------
Noncurrent Marketable Securities.......................  $ 26,167,086    $          --
                                                         ============    =============
</TABLE>
 
  Restricted Cash Equivalents
 
     Restricted cash equivalents includes amounts required by an agreement with
AOL as discussed in Note 5 as well as two landlords and a supplier as discussed
in Note 8.
 
  Deferred Advertising and Content Costs
 
     Deferred advertising and content costs relates to unamortized costs under
the CBS Agreement and AOL Agreement discussed in Note 5. Such costs are
capitalized as equity investments are issued under such agreements and are
charged to operations as the Company receives advertising and other benefits
under the agreements.
 
  Licensing and Consulting Agreements
 
     The cost of license and consulting agreements, which is primarily a result
of issuances of warrants to purchase common stock (see Note 6), 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 $5,562,000,
$4,090,000 and $782,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. Accumulated amortization on such amounts was approximately
$2,089,000, $1,516,000 and $200,000 at December 31, 1998, 1997 and 1996,
respectively. The current portion of such amounts is reflected in prepaid
expenses and other current assets and the long-term portion in other assets in
the accompanying consolidated balance sheets. Amortization expense under these
agreements amounted to approximately $1,643,000, $1,316,000 and $160,000 for the
years ended December 31, 1998, 1997 and 1996, respectively, and is included in
depreciation and amortization expense in the accompanying consolidated
statements of operations.
 
  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 are removed from the account and any gain or loss is recognized.
 
                                       47
<PAGE>   49
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

  Accrued Liabilities
 
     Accrued liabilities at December 31, 1998 and 1997 are as follows:
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                              ------------------------
                                                                 1998          1997
                                                              ----------    ----------
<S>                                                           <C>           <C>
Revenue sharing.............................................  $1,111,451    $  877,179
Professional fees...........................................     684,707       415,250
Cost of merchandise sold....................................     661,095        97,319
Advertising costs...........................................     620,498       458,884
Other.......................................................   2,256,260     1,409,076
                                                              ----------    ----------
                                                              $5,334,011    $3,257,708
                                                              ==========    ==========
</TABLE>
 
  Revenue Recognition
 
     Revenue recognition policies for advertising, e-commerce, membership and
premium services and content licensing are set forth below.
 
     Advertising Revenue
 
     Advertising revenue is derived from the sale of advertising on the
Company's Web sites. Advertising revenue is recognized in the period the
advertisement is displayed, 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.
 
     E-Commerce Revenue
 
     E-commerce revenue is derived from the sales of limited edition
memorabilia, licensed apparel, golf equipment and other sports-related products.
E-commerce revenue is recognized once the product has been shipped and payment
is assured.
 
     Membership and Premium Services Revenue
 
     The Company offers monthly and yearly memberships to certain of the
proprietary content contained in its Web sites. Potential members are offered a
30-day free trial membership. If such trial membership is not cancelled within
the first 30 days, the member is charged and revenue is recognized. For
additional fees, members are also eligible to participate in sports contests to
win cash prizes and merchandise and join celebrity fan clubs.
 
     Revenue relating to monthly memberships is recognized in the month the
service is provided, except for trial memberships as noted above. Revenue
relating to yearly memberships and 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 reflected as deferred
revenue in the accompanying consolidated balance sheets.
 
                                       48
<PAGE>   50
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

     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.
 
     Barter Transactions
 
     The Company recognizes advertising and content licensing revenue as a
result of barter transactions primarily with certain other Internet-related
companies. 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 is
recognized in the period the advertising is displayed.
 
     Revenue by Type
 
     Revenue by type for the years ended December 31, 1998, 1997 and 1996 is as
follows:
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                               ----------------------------------------
                                                  1998           1997           1996
                                               -----------    -----------    ----------
<S>                                            <C>            <C>            <C>
Advertising..................................  $17,698,311    $ 6,329,199    $2,013,519
E-commerce...................................    3,601,117      1,049,008       151,497
Membership and premium services..............    5,031,749      2,700,346       882,750
Content licensing and other..................    4,219,569      1,935,149        10,650
                                               -----------    -----------    ----------
                                               $30,550,746    $12,013,702    $3,058,416
                                               ===========    ===========    ==========
</TABLE>
 
     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 19%, 19% and 16% of total revenue for the years
ended December 31, 1998, 1997 and 1996, respectively.
 
  Cost of Revenue
 
     Cost of revenue consists primarily of content and royalty fees, payroll and
related expenses for the editorial and operations staff, telecommunications and
computer-related expenses for the support and delivery of the Company's
services. Royalty payments are paid to certain content providers and technology
and marketing partners based on membership levels subject, in certain instances,
to specified minimum amounts.
 
  Sales and Marketing
 
     Sales and marketing 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, 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.
 
                                       49
<PAGE>   51
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

  Per Share Amounts
 
     In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings Per Share, was issued. SFAS No. 128 simplifies the methodology of
computing earnings per share and requires the presentation of basic and diluted
earnings per share. The Company's basic and diluted earnings per share are the
same, since the Company's common stock equivalents are antidilutive. The
Company's previously outstanding convertible preferred stock was converted upon
completion of the Company's initial public offering ("IPO") in November 1997.
Accordingly, such shares have been reflected as common stock for all periods
prior to the IPO. SFAS No. 128 was adopted as of December 31, 1997.
 
     Net 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 all convertible preferred stock (using the if-converted method)
and shares issuable upon exercise of stock options and warrants (using the
treasury stock method). There were approximately 5,187,000 and 3,475,000 options
and warrants outstanding at December 31, 1998 and 1997, respectively, that could
potentially dilute earnings per share in the future. Such options and warrants
were not included in the computation of diluted loss per share because to do so
would have been antidilutive for all periods presented.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles 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.
 
  Fair Value of Financial Instruments
 
     The Company's financial instruments, primarily consisting of cash and cash
equivalents, marketable securities, accounts receivable, restricted cash
equivalents, accounts payable and borrowings, approximate fair value due to
their short-term nature and/or market rates of interest.
 
  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 were not material to the Company's financial position
or results of operations. The Company performs ongoing credit evaluations and
generally requires no collateral. The Company maintains an allowance for
doubtful accounts and such losses have not been
 
                                       50
<PAGE>   52
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

significant and have been within management's expectations. The allowance for
doubtful accounts amounted to $230,000 and $87,000 at December 31, 1998 and
1997, respectively, and activity is as follows:
 
<TABLE>
<CAPTION>
                                                 1998       1997        1997
                                               --------   --------    --------
<S>                                            <C>        <C>         <C>
January 1 balance............................  $ 86,557   $ 27,045    $     --
Provision for doubtful accounts..............   166,465     72,513      27,045
Write off of bad debts.......................   (23,473)   (13,001)         --
                                               --------   --------    --------
December 31 balance..........................  $229,549   $ 86,557    $ 27,045
                                               ========   ========    ========
</TABLE>
 
  Impairment of Long-Lived Assets
 
     In March 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, was issued. SFAS No. 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the carrying
amount of the assets. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
1996. The effect of adoption was not material.
 
  Stock-Based Compensation
 
     In October 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was
issued. SFAS No. 123 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 Opinion No. 25, Accounting for Stock Issued to Employees. The
Company has elected to continue to use the intrinsic value based method.
Accordingly, pro forma disclosures required to be presented by SFAS No. 123 for
companies continuing to utilize the intrinsic value based method are presented
in Note 6.
 
  Reverse Stock Split
 
     On October 10, 1997, the Board of Directors authorized a 1-for-2.5 reverse
stock split of the Company's common stock to become effective upon completion of
the IPO of its common stock. Such reverse stock split has been retroactively
reflected in all share and per share disclosures in the accompanying financial
statements and notes.
 
  Recent Accounting Pronouncements
 
     In June 1997, SFAS No. 130, Reporting Comprehensive Income, was issued
which was adopted by the Company as of January 1, 1998. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income by
their nature in financial statements and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the statements of financial position.
Comprehensive income is defined as the change in equity during the financial
reporting period of a business enterprise resulting from non-owner sources.
Comprehensive loss equals the net loss for all periods presented.
 
     In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 establishes standards for
the way public business enterprises report information
 
                                       51
<PAGE>   53
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

about operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in interim
financial reports issued to stockholders. SFAS No. 131 is effective for
financial statements for periods beginning after December 31, 1997. Currently,
the Company analyzes its revenue streams by type as disclosed in Note 2 and
analyzes and controls expenses by area or department as presented on the
consolidated statements of operations and does not believe it has any separately
reportable business segments as defined in SFAS No. 131.
 
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in the statement of operations unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the statement
of operations, and requires that a company formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. A company may
also implement the provision of SFAS No. 133 as of the beginning of any fiscal
quarter after issuance. SFAS No. 133 cannot be applied retroactively, and must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997. The Company has not yet adopted SFAS No. 133
and presently does not have any derivative instruments.
 
(3) PROPERTY AND EQUIPMENT, NET:
 
     Property and equipment, net consists of the following:
 
<TABLE>
<CAPTION>
                                                ESTIMATED             DECEMBER 31,
                                               USEFUL LIVES    --------------------------
                                                 (YEARS)          1998           1997
                                               ------------    -----------    -----------
<S>                                            <C>             <C>            <C>
Computer equipment...........................      2-3         $ 8,616,301    $ 6,183,819
Furniture, fixtures and leasehold
  improvements...............................      3-7           1,765,145        830,381
                                                               -----------    -----------
                                                                10,381,446      7,014,200
Less-accumulated depreciation and
  amortization...............................                   (5,014,628)    (2,844,512)
                                                               -----------    -----------
                                                               $ 5,366,818    $ 4,169,688
                                                               ===========    ===========
</TABLE>
 
     Included in property and equipment is equipment acquired under capital
leases amounting to approximately $1,245,000 and $1,636,000 as of December 31,
1998 and 1997 less accumulated amortization amounting to $800,000 and $713,000,
respectively. Depreciation and amortization expense on property and equipment
amounted to approximately $2,606,000, $1,815,000 and $850,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
 
(4) CAPITAL LEASE AND BORROWINGS:
 
     In July 1997, the Company entered into a $2,500,000 equipment line of
credit with a leasing company. The equipment line carries interest at the prime
rate plus  1/4%. Borrowings are payable monthly over 36 months. As of December
31, 1998, $472,280 was outstanding.
 
     In October 1995, the Company entered into a $1,500,000 equipment line of
credit with a bank (the "Equipment Line"). The Equipment Line carries interest
at the prime rate plus 1.5% (10% at December 31, 1997) and is payable monthly,
interest only through June 1996, and thereafter in 33 equal monthly principal
 
                                       52
<PAGE>   54
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(4) CAPITAL LEASE AND BORROWINGS: -- (CONTINUED)

plus interest payments. In addition, the Company is required to comply with
certain restrictive covenants which include, among other things, maintenance of
certain financial ratios and a cash balance equal to the amount of the
outstanding balance of the line of credit. The Company is in compliance with
such requirements. The Equipment Line is collateralized by substantially all of
the Company's assets. This loan matured and was paid off in 1998.
 
(5) SHAREHOLDERS' EQUITY:
 
     In March 1996, the Company's certificate of incorporation was amended to
increase the authorized preferred stock to 9,162,776 shares, and to designate
6,162,776 shares as Series B convertible preferred stock. In September 1996, the
Company's certificate of incorporation was amended to increase the authorized
common stock to 50,000,000 shares and to increase the authorized preferred stock
to 14,496,109 shares and to designate 5,333,333 shares as Series C convertible
preferred stock.
 
     In March 1996, the Company entered into a stock subscription agreement with
two venture capital firms and other investors that raised net proceeds of
$11,092,997 and resulted in the issuance of 6,162,776 shares of Series B
convertible preferred stock.
 
     In October 1996, the Company entered into a stock subscription agreement
with two venture capital firms and other investors that raised net proceeds of
$15,926,700 and resulted in the issuance of 5,333,333 shares of Series C
convertible preferred stock.
 
     Upon completion of the Company's IPO on November 13, 1997, the convertible
preferred stock converted into common stock at the ratio of 0.4 shares of common
stock for each share of preferred stock. All then existing classes of preferred
stock ceased to be authorized, and were replaced by the preferred stock
discussed below.
 
     On April 14, 1997, the Board of Directors authorized the filing of an
Amended and Restated Certificate of Incorporation which became effective upon
the completion of the IPO. Pursuant to the terms of the Amended and Restated
Certificate of Incorporation, the Board of Directors authorized the issuance of
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 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 September 1996, the Company entered into an agreement with an investor
to issue warrants to acquire up to 960,000 shares of common stock at an exercise
price of $8.25 per share, contingent upon the investor meeting certain
conditions. These conditions included providing assistance with new technologies
and business expansion opportunities. The Company did not value such warrants at
December 31, 1996 as it was unable to estimate if and when the contingencies
would be met. On January 30, 1997, the Company's Board of Directors concluded
that the warrants were exercisable and placed a value on them of $227,000 using
the Black-Scholes option pricing model with a volatility factor of 40%,
risk-free interest rate of 5.1% and an estimated life of two months. In March
1997, the investor exercised the warrants resulting in net proceeds to the
Company of $7,920,000 and the issuance of 960,000 shares of common stock.
 
     In March 1997, the Company and CBS Corporation ("CBS") entered into a
five-year agreement (the "CBS Agreement"). 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 will receive
3,100,000 shares of common stock over the term of the agreement (752,273,
735,802, 558,988, 567,579 and
                                       53
<PAGE>   55
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) SHAREHOLDERS' EQUITY: -- (CONTINUED)

485,358 shares in 1997, 1998, 1999, 2000 and 2001, respectively). CBS will also
have the right to receive 60% of the Company's advertising revenue on
cbs.sportsline.com pages related to certain "signature events" (such as the NCAA
Men's Basketball Tournament, the 1998 Winter Olympics, U.S. Open tennis, PGA
Tour events and the Daytona 500) and 50% of the Company's advertising revenue on
other cbs.sportsline.com pages containing CBS television-related sports content.
The CBS Agreement also provides that the Company shall issue to CBS on the first
business day of each contract year 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 are exercisable at any time during the contract year in which they are
granted. The value of the advertising and content will be recorded annually in
the consolidated balance sheets as deferred advertising and content costs. These
costs are being amortized to depreciation and amortization expense over each
related contract year. Amounts amortized to expense in 1998 and 1997 totaled
$12,002,000 and $7,835,000, respectively, consisting of amortization relating to
advertising of $11,000,000 and $7,000,000,respectively, content of $518,000 and
$431,000, respectively and expense related to warrants of $484,000 and $404,000,
respectively, and are included in depreciation and amortization in the
accompanying consolidated statements of operations for the year ended December
31, 1998 and 1997.
 
     In February 1999, the Company amended and extended its agreement with CBS.
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), 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 issue additional
shares of common stock valued at $100,000,000 between 2002 and 2006.
Additionally, the revenue sharing provisions relating to the 60% share for
signature events and the 50% share for CBS content pages were eliminated and
replaced by a new revenue sharing formula which is calculated on a broader
revenue base and at a lower rate. Total annual amounts to be amortized to
expense in accordance with the CBS Agreement and amendment are as follows:
 
<TABLE>
<S>                                              <C>
1999...........................................  $ 14,096,000
2000...........................................    17,286,000
2001...........................................    17,286,000
2002...........................................    22,286,000
2003...........................................    22,286,000
2004...........................................    22,286,000
2005...........................................    22,286,000
2006...........................................    22,286,000
                                                 ------------
                                                 $160,098,000
                                                 ============
</TABLE>
 
     In November 1997, the Company completed an underwritten initial public
offering (the "IPO") of 3,500,000 shares of common stock. Of the 3,500,000
shares sold in the IPO, 2,693,549 shares were sold at a price to the public of
$8.00 per share and 672,043 shares and 134,408 shares were sold to Intel
Corporation and Mitsubishi Corporation, respectively, at a price of $7.44 per
share. In December 1997, the underwriters exercised their over-allotment option
to purchase an additional 525,000 shares of common stock. The total net proceeds
to the Company from the IPO were approximately $30,000,000.
 
     On January 29, 1998, the Company acquired all of the outstanding capital
stock of GolfWeb in exchange for approximately 844,490 shares of common stock
and the assumption of stock options and warrants to purchase up to approximately
53,300 additional shares of common stock. The acquisition was accounted for
 
                                       54
<PAGE>   56
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) SHAREHOLDERS' EQUITY: -- (CONTINUED)

under the "pooling-of-interests" accounting method. Accordingly, the Company's
consolidated financial statements include the accounts of GolfWeb.
 
     In May and October 1997, Golfweb issued Series C convertible preferred
stock which raised net proceeds of approximately $7,900,000. Upon the
acquisition of GolfWeb, the Series C convertible preferred stock converted into
373,494 shares of the Company's common stock.
 
     In April 1998, the Company completed a public offering (the "Secondary
Offering") of 4,000,000 shares of common stock at $37.625 per share. Of the
4,000,000 shares offered, 2,288,430 shares were offered by the Company and
1,711,570 shares by selling shareholders. The Company realized approximately
$81,000,000 in net proceeds as a result of the Secondary Offering.
 
     On June 29, 1998, the Company acquired International Golf Outlet, Inc.
("IGO"), an Internet retailer of fine golf equipment and accessories, for
$2,000,000, consisting of $350,000 in cash and $1,650,000 of common stock
(46,924 shares). The Company also agreed to issue to the IGO shareholders
additional common stock, valued at $1,500,000 (42,658 shares) at the time of the
acquisition, if IGO meets certain annual revenue and earnings targets over the
three-year period following the acquisition.
 
     Effective as of October 1, 1998, upon expiration of a pre-existing
agreement, the Company and America Online, Inc. ("AOL") entered into an
agreement (the "AOL Agreement"), which has an initial term of three years,
subject to extension for up to two additional three-year terms at the option of
AOL under certain circumstances. Under the AOL Agreement, the Company became the
premier provider of special features and major event coverage to the Sports
Channel on the AOL service, as well as an anchor tenant in the Sports Web Center
on aol.com, AOL's Web site. cbs.sportsline.com will also be the premier national
sports partner with a presence on all Digital City local services, currently
serving 50 cities, and an anchor tenant in the Sports Channel on CompuServe. In
addition, SportsLine WorldWide will become the premier global provider of
country-specific sports content to all of AOL's international services, and the
Company will become the premier provider of licensed sports equipment and
apparel as well as golf products within the Sports Channel on the AOL service.
The Company will (i) pay AOL cash in the amount of $8,000,000, (ii) issue AOL
550,000 shares of Common Stock and (iii) grant AOL warrants to purchase an
additional 900,000 shares of Common Stock at exercise prices ranging from $20 to
$40 per share, 450,000 of which are subject to vesting based on the Company's
achievement of specified revenue thresholds. Furthermore, the Company has agreed
to make a payment to AOL, provided that AOL holds and does not sell any of such
shares for a period of two years, if AOL is not able to realize at least
$15,000,000 from the sale of the 550,000 shares of common stock issued to it at
the end of such two-year period (the "AOL Obligation"). The Company accrued a
liability of approximately $8,300,000 for the payment that may be required based
on the value of the Company's stock at inception of the AOL Agreement and placed
in escrow cash and cash equivalents of approximately $12,500,000 to be
restricted as security for the AOL Obligation. In addition, AOL will be eligible
to share in direct revenues attributable to AOL promotion of Company offerings
on AOL brands once certain thresholds specified in the agreement have been met.
Over the three-year agreement, the Company will receive a number of guaranteed
impressions on AOL's commercial online services and Web sites. Total expense
under the AOL Agreement was $1,992,000 in 1998 and will be $7,966,000 in 1999,
$7,966,000 in 2000 and $5,974,000 in 2001. On a pro forma basis, as of December
31, 1998, had AOL sold the shares of the Company's common stock issued under the
AOL Agreement pursuant to the provisions of the stock value liability, the
Company would have recorded a non-recurring gain of approximately $1,800,000.
The ultimate amount of any such accrued AOL obligation will be determined upon
the future sale of such shares by AOL.
 
     In January 1998, CBS exercised its 1997 warrants resulting in net proceeds
of $3,800,000 to the Company. In December 1998, CBS exercised its 1998 warrants
resulting in net proceeds of $5,700,000 to the
 
                                       55
<PAGE>   57
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) SHAREHOLDERS' EQUITY: -- (CONTINUED)

Company. The Company has reserved sufficient shares of its common stock to cover
issuance of common stock under the CBS Agreement, exercises of common stock
warrants and the stock option, incentive compensation and employee stock
purchase plans discussed in Note 6.
 
(6) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:
 
     Common stock warrants issued in 1998, 1997 and 1996 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 and the assumptions utilized involving the grants in 1998, 1997 and
1996:
 
<TABLE>
<CAPTION>
                                         1998                   1997                   1996
                                 --------------------   --------------------   --------------------
                                             WEIGHTED               WEIGHTED               WEIGHTED
                                             AVERAGE                AVERAGE                AVERAGE
                                             EXERCISE               EXERCISE               EXERCISE
                                  SHARES      PRICE      SHARES      PRICE      SHARES      PRICE
                                 ---------   --------   ---------   --------   ---------   --------
<S>                              <C>         <C>        <C>         <C>        <C>         <C>
Warrants outstanding, beginning
  of year......................  2,018,000    $ 7.16    1,050,000    $5.23       812,000    $5.13
Granted........................  1,355,000     27.08    1,933,000     8.71       251,000     5.45
Exercised......................   (996,000)    10.99     (960,000)    8.25            --       --
Canceled.......................    (12,000)     8.84       (5,000)    5.00       (13,000)    5.00
                                 ---------              ---------              ---------
Warrants outstanding, end of
  year.........................  2,365,000     17.51    2,018,000     7.16     1,050,000     5.23
                                 =========              =========              =========
</TABLE>
 
     The range of exercise prices of warrants outstanding at December 31, 1998
was $5.00 -- $40.00. The weighted average fair value of warrants granted during
1998, 1997 and 1996 was $2.43, $2.83 and $2.25, respectively. There were
1,459,000 warrants exercisable at December 31, 1998 at a weighted average
exercise price of $16.18 per share.
 
     Assumptions utilized to value warrants are as follows:
 
<TABLE>
<CAPTION>
                                                                    RISK-FREE
                                         VOLATILITY    DIVIDEND     INTEREST      ESTIMATED
                                           FACTOR       YIELD         RATES         LIVES
                                         ----------    --------    -----------    ---------
<S>                                      <C>           <C>         <C>            <C>
1998 grants............................  40%-65%          0%       4.5% - 5.9%       1-5
1997 grants............................    40%            0%       5.7% - 6.7%       1-9
1996 grants............................    40%            0%       5.3% - 6.6%       4-7
</TABLE>
 
     In 1995, the Company adopted the SportsLine USA, Inc. 1995 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, nonemployee 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 10
years.
 
     On April 14, 1997, the Company adopted the 1997 Incentive Compensation Plan
(the "Incentive Plan"). Pursuant to the Incentive Plan, the total number of
shares of common stock that may be subject to the granting of awards shall be
equal to: (i) 2,000,000 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
 
                                       56
<PAGE>   58
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(6) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS: -- (CONTINUED)

awards or any tax withholding requirements. The Incentive Plan became effective
upon completion of the IPO. 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 at not less than
the fair market value of the underlying common stock that may be settled in
cash, stock or other property.
 
     A summary of the activity relating to the Company's stock option plans as
of December 31, 1998, 1997 and 1996, and changes during the years then ended is
presented below:
 
<TABLE>
<CAPTION>
                                           1998                   1997                  1996
                                   --------------------   --------------------   ------------------
                                               WEIGHTED               WEIGHTED             WEIGHTED
                                               AVERAGE                AVERAGE              AVERAGE
                                               EXERCISE               EXERCISE             EXERCISE
                                    SHARES      PRICE      SHARES      PRICE     SHARES     PRICE
                                   ---------   --------   ---------   --------   -------   --------
<S>                                <C>         <C>        <C>         <C>        <C>       <C>
Outstanding at beginning of
  year...........................  1,457,000    $ 5.13      683,664    $1.42     349,489    $0.67
Granted..........................  1,980,157     12.72      904,388     7.50     365,738     2.10
Exercised........................   (314,525)     2.77      (42,521)    0.80      (2,156)    0.83
Forfeited........................   (300,928)    15.10      (88,531)    2.60     (29,407)    0.81
                                   ---------              ---------              -------
Outstanding at end of year.......  2,821,704      9.60    1,457,000     5.13     683,664     1.42
                                   =========              =========              =======
Options exercisable at end of
  year...........................    462,175      5.05      331,778     1.56     118,215     0.66
                                   =========              =========              =======
</TABLE>
 
     The weighted average fair value of options granted during 1998, 1997 and
1996 was $4.89, $3.18 and $1.10, respectively. In September 1998, the Company
repriced 230,000 options held by certain officers and directors to reduce their
exercise price to the then current market value and, in October 1998, repriced
625,382 options held by certain other employees to the then current market
value.
 
     The following table summarizes information about stock options outstanding
at December 31, 1998:
 
<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                  -------------------------------------------------   -------------------------------
                                      WEIGHTED
                                       AVERAGE
                  OUTSTANDING AT      REMAINING         WEIGHTED      EXERCISABLE AT      WEIGHTED
    RANGE OF       DECEMBER 31,      CONTRACTUAL        AVERAGE        DECEMBER 31,       AVERAGE
EXERCISE PRICES        1998        LIFE (IN YEARS)   EXERCISE PRICE        1998        EXERCISE PRICE
----------------  --------------   ---------------   --------------   --------------   --------------
<S>               <C>              <C>               <C>              <C>              <C>
 $0.63 to $5.00       439,544           7.20             $ 2.67          247,693           $ 2.18
  5.01 to  8.00     1,369,316           8.80               8.00          203,968             8.00
  8.01 to 12.00        10,157           7.30               9.46            2,702             9.80
 12.01 to 15.00       572,200           9.60              14.06               --               --
 15.01 to 18.00       425,737           9.50              15.83            7,812            17.26
 18.01 to 28.63         4,750           9.20              19.89               --               --
                    ---------                                            -------
  0.63 to 28.63     2,821,704           8.80               9.60          462,175             5.05
                    =========                                            =======
</TABLE>
 
     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 1998, 1997 and 1996,
respectively: risk-free interest rates of 4.6% to 5.6%, 5.7% to 6.7% and 6.0% to
6.6%, dividend yield of 0% for all years, expected volatility factor of 65%, 40%
and 40% and expected life of 4.39 years for all years.
 
                                       57
<PAGE>   59
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(6) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS: -- (CONTINUED)

     The Company's pro forma information follows for the years ended December
31:
 
<TABLE>
<CAPTION>
                                               1998            1997            1996
                                           ------------    ------------    ------------
<S>                                        <C>             <C>             <C>
Net loss -- As reported..................  $(35,508,793)   $(34,177,348)   $(16,102,654)
Pro forma net loss.......................   (37,090,186)    (34,663,838)    (16,264,844)
Net loss per share -- basic and
  diluted --
  As reported............................        $(1.94)         $(3.08)         $(2.31)
Pro forma net loss per share -- basic and
  diluted................................        $(2.03)         $(3.12)         $(2.33)
</TABLE>
 
     On April 14, 1997, the Company adopted the Employee Stock Purchase Plan
(the "Purchase Plan") under which 500,000 shares of common stock are reserved.
The Purchase Plan became effective upon completion of the IPO. 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
$25,000. During the year ended December 31, 1998, 329,085 shares of common stock
were issued under the Purchase Plan.
 
     In January 1996, the Company adopted the SportsLine USA, Inc. 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.
 
(7) INCOME TAXES:
 
     No provision for Federal and state income taxes has been recorded as the
Company has incurred net operating losses through December 31, 1998. At December
31, 1998, the Company had approximately $88,000,000 of net operating loss
carryforwards for Federal income tax reporting purposes available to offset
future taxable income; such carryforwards expire beginning in 2009. Under the
Tax Reform Act of 1986, the amounts of and benefits from net operating losses
carried forward may be impaired or limited in certain circumstances. Events
which may cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50% over a three year period.
 
     Deferred tax assets at December 31, 1998 and 1997 consist primarily of the
tax effect of net operating loss carryforwards which amounted to approximately
$33,000,000 and $21,000,000, respectively. Other deferred tax assets and
liabilities are not significant. The Company has provided a full 100% valuation
allowance on the deferred tax assets at December 31, 1998 and 1997 to reduce
such deferred income tax assets to zero as it is management's belief that
realization of such amounts do not meet the criteria required by generally
accepted accounting principles. Management will review the valuation allowance
requirement periodically and make adjustments as warranted.
 
(8) COMMITMENTS AND CONTINGENCIES:
 
     The Company leases its facilities and computer and communications equipment
under noncancellable leases that expire on various dates through 2009. The
office leases require the Company to pay operating costs, including property
taxes and maintenance costs and include rent adjustment clauses. The Company has
committed to a ten year lease for its new corporate headquarters beginning in
2000. Management anticipates
 
                                       58
<PAGE>   60
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(8) COMMITMENTS AND CONTINGENCIES: -- (CONTINUED)

that it will be able to sublease its existing facilities at rates equivalent to
its existing lease rates so as not to incur a material expense.
 
     Under the terms of one office lease, the Company has provided a letter of
credit to the landlord. The letter of credit is secured by a restricted
certificate of deposit of approximately $92,000 as of December 31, 1998. Under
the terms of an additional office lease the Company has provided a letter of
credit to the landlord. The letter of credit is secured by a restricted
certificate of deposit of approximately $297,000 as of December 31, 1998.
Additionally, the Company has provided a letter of credit to one of its
suppliers. The letter of credit is secured by a restricted certificate of
deposit of approximately $100,000 as of December 31, 1998.
 
     Rent expense amounted to approximately $735,000, $570,000 and $198,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
 
     Future minimum lease payments for all leases are as follows as of December
31, 1998:
 
<TABLE>
<CAPTION>
                                                      CAPITAL      OPERATING
                                                      --------    -----------
<S>                                                   <C>         <C>
1999................................................  $294,349    $   923,000
2000................................................   208,959      1,623,000
2001................................................     6,152      1,377,000
2002................................................        --      1,284,000
2003................................................        --      1,323,000
Thereafter..........................................        --      8,690,000
                                                      --------    -----------
Total minimum lease payments........................   509,460    $15,220,000
                                                                  ===========
Less: amount representing interest..................   (37,180)
                                                      --------
Lease obligations reflected as current ($264,815)
  and noncurrent ($207,465).........................  $472,280
                                                      ========
</TABLE>
 
     The Company has entered into various licensing, royalty and consulting
agreements with various content providers, vendors and sports celebrities. The
remaining terms of these agreements range from one to ten years. These
agreements provide for the payment of royalties, bounties and certain guaranteed
amounts on a per member and/or a minimum dollar amount basis. Additionally, some
agreements provide for a specified percentage of advertising and merchandising
revenue to be paid to the celebrity athlete from whose Web site the revenue is
derived.
 
     Minimum guaranteed payments required under such agreements are as follows
as of December 31, 1998:
 
<TABLE>
<S>                                                <C>
1999...........................................    $3,946,000
2000...........................................     2,360,000
2001...........................................     1,460,000
2002...........................................       483,000
                                                   ----------
                                                   $8,249,000
                                                   ==========
</TABLE>
 
     From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. In 1998,
the Company and Weatherline, Inc. ("Weatherline") settled a lawsuit in which
Weatherline alleged that the Company had infringed on its trademark. In
connection with the settlement, Weatherline assigned to the Company its United
States trademark registration
 
                                       59
<PAGE>   61
                     SPORTSLINE USA, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(8) COMMITMENTS AND CONTINGENCIES: -- (CONTINUED)

for the mark "Sportsline". The Company has recorded a non-recurring charge of
approximately $1,100,000 associated with such settlement in 1998. The Company
believes that it will collect insurance proceeds to offset a portion of the
settlement expenses, including certain legal fees; however, there can be no
assurance that the Company will be able to collect such proceeds. Accordingly,
no benefit from any proceeds will be recorded until receipt is assured. The
Company is not currently a party to any other legal proceedings, the adverse
outcome of which, individually or in the aggregate, would have a material
adverse effect on the Company's consolidated financial position or results of
operations.
 
(9) EVENT SUBSEQUENT TO DATES OF AUDITORS' REPORT (UNAUDITED):
 
     On March 15, 1999, the Company announced its intention to raise
$150,000,000 through a Rule 144A offering of convertible subordinated notes (the
"Notes"). The Notes will be convertible, at the option of the holder, into
shares of the Company's common stock and will be non-callable for three years.
 
                                       60
<PAGE>   62
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     Not Applicable.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
 
     The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
 
ITEM 11.  EXECUTIVE COMPENSATION.
 
     The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
 
                                    PART IV
 
ITEM 14.  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.
 
     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:
 
<TABLE>
<CAPTION>
EXHIBIT   DESCRIPTION
-------   -----------
<C>       <S>
     3.1  Amended and Restated Certificate of Incorporation (3.1)(1)
     3.2  Form of Amended and Restated Bylaws(3.2)(1)
    10.1  1995 Stock Option Plan(10.1)(2)*
    10.2  Form of Indemnification Agreement between the Company and
          each of its directors and executive officers(10.2)(2)
</TABLE>
 
                                       61
<PAGE>   63
 
<TABLE>
<CAPTION>
EXHIBIT   DESCRIPTION
-------   -----------
<C>       <S>
    10.3  1997 Incentive Compensation Plan(10.3)(2)*
    10.4  Employee Stock Purchase Plan(10.4)(2)*
    10.5  Amended and Restated Investors' Rights Agreement dated as of
          September 25, 1996, among the Company, the holders of the
          Company's Series A, Series B and Series C Preferred Stock,
          The Estate of Burk Zanft and Michael Levy(10.5)(2)
    10.6  Agreement dated March 5, 1997 between the Company and CBS
          Inc.(10.6)(2)
    10.7  Licensing Agreement dated September 27, 1996 between the
          Company and US WEST Interactive Services, Inc.(10.7)(2)
    10.8  Marketing Agreement dated March 12, 1996 between the Company
          and Reuters NewMedia, Inc.(10.8)(2)
    10.9  Guaranty dated December 1995 executed by Kleiner Perkins
          Caufield & Byers(10.9)(2)
    10.10 Consulting Agreement dated September 1, 1994, between the
          Company and Horrow Sports Ventures(10.10)(2)*
    10.11 Agreement dated June 1996 between the Company and Michael P.
          Schulhof(10.11)(2)*
    10.12 Agreement dated August 1994 between the Company and Planned
          Licensing, Inc.(10.12)(2)
    10.13 Employment Agreement dated as of September 1, 1997, between
          the Company and Kenneth W. Sanders(10.13)(2)*
    10.14+ Advisory Agreement dated June 20, 1997 among the Company,
          Michael Jordan and Falk Associates Management
          Enterprises(10.14)(2)
    10.15+ Advisory Agreement dated July 1, 1997 between the Company
          and ETW Corp.(10.15)(2)
    10.16+ Interactive Services Agreement dated July 1, 1997 between
          the Company and America Online, Inc.(10.16)(2)
    10.17+ Amendment to Advisory Agreement and Warrants dated November
          7, 1997 between the Company, Michael Jordan and FAME,
          Inc.(10.17)(2)
    10.18 Stock Option between the Company and Gerry Hogan(10.19)(3)*
    10.19 Agreement and Plan of Merger dated as of January 15, 1998,
          among the Company, GolfWeb.Com, Inc. and GolfWeb (excluding
          Exhibits thereto), and Amendment No. 1 to the Merger
          Agreement dated of January 29, 1998, among the Company,
          GolfWeb.Com, Inc. and GolfWeb(2.1; 2.2)(4)
    10.20 Employment Agreement dated as of June 15, 1998, between the
          Company and Michael Levy(10.1)(5)*
    10.21 Form of Letter Agreement entered into between the Company
          and each of Kenneth W. Sanders and Mark J. Mariani(10.2)(5)*
    10.22+ Premier Sports Information and Commerce Agreement, effective
          as of October 1, 1998, by and between the Company and
          America Online, Inc.(10.1)(6)
    10.23 Amendment to Agreement, effective as of January 1, 1999,
          between the Company and CBS Broadcasting, Inc.(99.1)(7)
    21.1  Subsidiaries of the Company(8)
    23.1  Consent of Arthur Andersen LLP(8)
    27.1  Financial Data Schedule -- For SEC use only(8)
</TABLE>
 
---------------
(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-1
    (Registration No. 333-25259).
 
                                       62
<PAGE>   64
 
(3) 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. 333-46029).
 
(4) Incorporated by reference to the exhibit shown in the preceding parentheses
    and filed with the Company's Report on Form 8-K (Event of January 29, 1998).
 
(5) 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
    ended June 30, 1998.
 
(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
    ended 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) Filed herewith.
 
+   Confidential treatment granted to certain portions of this Exhibit.
 
*   Management Contract or Compensatory Plan
 
(b) Reports on Form 8-K
 
     No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
 
                                       63
<PAGE>   65
 
                                   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 USA, INC.
 
                                          By:       /s/ MICHAEL LEVY
 
                                            ------------------------------------
                                            Michael Levy
                                            President and Chief Executive
                                              Officer
 
March 15, 1999
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant in
the capacities and on the dates indicated:
 
<TABLE>
<CAPTION>
SIGNATURE                                                          TITLE                     DATE
---------                                                          -----                     ----
<C>                                                  <S>                                <C>
                 /s/ MICHAEL LEVY                    President, Chief Executive         March 15, 1999
---------------------------------------------------    Officer and Director (principal
                   Michael Levy                        executive officer)
 
              /s/ KENNETH W. SANDERS                 Chief Financial Officer            March 15, 1999
---------------------------------------------------    (principal financial and
                Kenneth W. Sanders                     accounting officer)
 
                 /s/ THOMAS CULLEN                   Director                           March 15, 1999
---------------------------------------------------
                   Thomas Cullen
 
                  /s/ GERRY HOGAN                    Director                           March 15, 1999
---------------------------------------------------
                    Gerry Hogan
 
               /s/ RICHARD B. HORROW                 Director                           March 15, 1999
---------------------------------------------------
                 Richard B. Horrow
 
                 /s/ JOSEPH LACOB                    Director                           March 15, 1999
---------------------------------------------------
                   Joseph Lacob
 
                 /s/ SEAN MCMANUS                    Director                           March 15, 1999
---------------------------------------------------
                   Sean McManus
 
                 /s/ ANDREW NIBLEY                   Director                           March 15, 1999
---------------------------------------------------
                   Andrew Nibley
 
              /s/ MICHAEL P. SCHULHOF                Director                           March 15, 1999
---------------------------------------------------
                Michael P. Schulhof
 
                /s/ JAMES C. WALSH                   Director                           March 15, 1999
---------------------------------------------------
                  James C. Walsh
</TABLE>
 
                                       64
<PAGE>   66
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT                            DESCRIPTION
-------                            -----------
<C>        <S>
 21.1      Subsidiaries of the Company
 23.1      Consent of Arthur Andersen LLP
 27.1      Financial Data Schedule - For SEC use only
</TABLE>