<PAGE>
                                  FORM 10-Q 

                                UNITED STATES 
                      SECURITIES AND EXCHANGE COMMISSION 

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
        EXCHANGE ACT OF 1934 

For the quarter ended March 31, 1998 

[ ]     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: 333-43287 

                           SFX ENTERTAINMENT, INC. 
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 

           DELAWARE                                    13-3977880 
(State or other jurisdiction of                     (I.R.S. Employer 
incorporation or organization)                     Identification No.) 


                        650 MADISON AVENUE, 16TH FLOOR 
                           NEW YORK, NEW YORK 10155 
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 

                                (212)-838-3100 
                       (REGISTRANT'S TELEPHONE NUMBER) 

Indicate by check mark whether the registrant (1) has filed all reports 
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during 
the preceding 12 months (or for such shorter period that the registrant was 
required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days. 

Yes [ ]    No [X] 

Indicate the number of shares outstanding of each of the issuer's classes of 
common stock, as of the latest practicable date: As of MAY 4, 1998, the 
number of shares outstanding of the Registrant's Class A Common Stock, $.01 
par value, and Class B Common Stock, $.01 par value, was 18,512,170 and 
1,697,037, respectively. 

<PAGE>
                   SFX ENTERTAINMENT, INC. AND SUBSIDIARIES 
                    INDEX TO QUARTERLY REPORT ON FORM 10-Q 

<TABLE>
<CAPTION>
                                                                                 PAGE 
                                                                               -------- 
<S>           <C>                                                                 <C>
PART I        FINANCIAL INFORMATION 
Item 1        Financial Statements 
              Consolidated Balance Sheets at March 31, 1998 (Unaudited) and 
               December 31,1997..................................................  2 
              Consolidated Statements of Operations for the Three Months 
              Ended  March 31, 1998 and 1997 (Unaudited).........................  3 
              Consolidated Statements of Cash Flows for the Three Months 
              Ended  March 31, 1998 and 1997 (Unaudited).........................  4 
              Notes to Consolidated Financial Statements (Unaudited).............  5 
Item 2        Management's Discussion and Analysis of Financial Condition and 
               Results of Operations............................................. 13 
PART II       OTHER INFORMATION 
Item 2        Changes in Securities and Use of Proceeds.......................... 27 
Item 6        Exhibits and Reports on Form 8-K................................... 28 
              SIGNATURES......................................................... 29 
</TABLE>


















                                       1
<PAGE>
                   SFX ENTERTAINMENT, INC. AND SUBSIDIARIES 
                         CONSOLIDATED BALANCE SHEETS 
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS) 

<TABLE>
<CAPTION>
                                                                  MARCH 31,    DECEMBER 31, 
                                                                     1998          1997 
                                                                 ----------- -------------- 
                                                                 (UNAUDITED) 
<S>                                                              <C>         <C>          
ASSETS 
Current assets: 
 Cash and cash equivalents .....................................   $ 93,992      $  5,979 
 Accounts receivable ...........................................     36,251         3,831 
 Prepaid expenses and other current assets .....................     19,132         1,410 
                                                                 ----------- -------------- 
Total current assets ...........................................    149,375        11,220 
Property and equipment, net ....................................    196,732        59,685 
Deferred acquisition costs .....................................         --         6,213 
Goodwill and other intangible assets, net ......................    470,721        60,306 
Investment in equity investees .................................     18,506           937 
Note receivable from employees .................................      4,060           900 
Other assets ...................................................     19,032         7,681 
                                                                 ----------- -------------- 
TOTAL ASSETS ...................................................   $858,426      $146,942 
                                                                 =========== ============== 
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) 
Current liabilities: 
 Accounts payable and accrued expenses .........................   $ 50,501      $  2,715 
 Deferred revenue ..............................................     54,943         3,603 
 Income taxes payable ..........................................     15,160         1,707 
 Due to SFX Broadcasting .......................................    125,378        11,539 
 Current portion of long-term debt .............................     12,127           755 
 Current portion of capital lease obligations ..................        326           168 
 Current portion of deferred purchase consideration  ...........      1,730         1,950 
                                                                 ----------- -------------- 
Total current liabilities ......................................    260,165        22,437 

Long-term debt, less current portion ...........................    518,574        14,929 
Capital lease obligations, less current portion ................     11,976           326 
Deferred purchase consideration, less current portion  .........      4,128         4,289 
Deferred income taxes ..........................................     50,559         2,817 
                                                                 ----------- -------------- 
Total liabilities ..............................................    845,402        44,798 

Minority interest ..............................................      1,570            -- 
Temporary equity-Stock subject to redemption ...................     16,500            -- 
Shareholder's equity (deficit): 
Net capital transferred from SFX Broadcasting ..................    (21,410)       98,184 
Preferred Stock, $.01 par value, 25,000,000 shares authorized, 
 10 shares issued and outstanding at March 31, 1998 and no 
 shares issued and outstanding at December 31, 1997  ...........         --            -- 
Class A common stock, $.01 par value, 100,000,000 shares 
 authorized, 13,579,024 shares issued and outstanding  .........        136           136 
Class B common stock, $.01 par value, 10,000,000 shares 
 authorized, 1,047,037 shares issued and outstanding  ..........         10            10 
Paid-in capital ................................................     39,975            -- 
Accumulated (deficit) earnings .................................    (23,757)        3,814 
                                                                 ----------- -------------- 
Total shareholder's equity (deficit)............................     (5,046)      102,144 
                                                                 ----------- -------------- 
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) ...........   $858,426      $146,942 
                                                                 =========== ============== 
</TABLE>

                            See accompanying notes.

                                       2
<PAGE>
                   SFX ENTERTAINMENT, INC. AND SUBSIDIARIES 
                    CONSOLIDATED STATEMENTS OF OPERATIONS 
                      (IN THOUSANDS, EXCEPT SHARE DATA) 
                                 (UNAUDITED) 

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED 
                                                                 MARCH 31, 
                                                           ---------------------- 
                                                               1998       1997 
                                                           ----------- --------- 
<S>                                                        <C>         <C>
Revenue ..................................................   $ 60,994    $ 7,789 
Operating expenses: 
 Cost of revenue .........................................     58,175      7,738 
 Depreciation and amortization............................      4,428        660 
 Corporate expenses, net of Triathlon fees of $133 in 
 1998  and $641 in 1997 ..................................      1,314        858 
                                                           ----------- ----------
                                                               63,917      9,256 
                                                           ----------- ----------
Loss from operations .....................................     (2,923)    (1,467) 
Investment income ........................................       (897)       (26) 
Interest expense .........................................      6,748        103 
Other expenses, principally relating to the Spin-Off  ....     18,385         -- 
Minority interest ........................................         82         -- 
Pretax income of equity investees ........................       (445)        -- 
                                                           ----------- ----------
Loss before provision for income taxes ...................    (26,796)    (1,544) 
Provision for income taxes ...............................        500         -- 
                                                           ----------- ----------
Net loss .................................................    (27,296)    (1,544) 
Accretion on stock subject to redemption..................       (275)        -- 
                                                           ----------- ----------
Net loss applicable to Common Shares......................   $(27,571)   $(1,544) 
                                                           =========== ==========
</TABLE>























                            See accompanying notes.

                                       3
<PAGE>
                   SFX ENTERTAINMENT, INC. AND SUBSIDIARIES 
                    CONSOLIDATED STATEMENTS OF CASH FLOWS 
                            (DOLLARS IN THOUSANDS) 
                                 (UNAUDITED) 

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED MARCH 
                                                                                31, 
                                                                      ------------------------ 
                                                                          1998        1997 
                                                                      ----------- ----------- 
<S>                                                                   <C>         <C>
Operating activities: 
Net loss ............................................................  $ (27,296)   $  (1,544) 
Adjustment to reconcile net loss to net cash provided by operating 
 activities: 
 Depreciation and amortization ......................................      4,428         660 
 Pretax income of equity investees, net of distributions received  ..       (351)         -- 
 Other expenses, principally relating to Spin-Off....................     18,385          -- 
 Minority interest...................................................         82          -- 
 Changes in operating assets and liabilities, net of amounts 
  acquired: 
  Accounts receivable................................................      3,390        (260) 
  Prepaid expenses and other current assets..........................     (1,207)       (603) 
  Other assets.......................................................     (1,150)      1,384 
  Accounts payable and accrued expenses..............................      4,586         (81) 
  Deferred revenue...................................................      8,273         751 
                                                                      ----------- ----------- 
Net cash provided by operating activities............................      9,140         307 
Investing activities: 
 Acquisition of businesses, net of cash acquired.....................   (367,997)    (22,590) 
 Purchase of property and equipment..................................    (11,785)        (22) 
                                                                      ----------- ----------- 
Net cash used in investing activities................................   (379,782)    (22,612) 
                                                                      ----------- ----------- 
Financing activities: 
 Capital transferred from SFX Broadcasting...........................         --      24,956 
 Repayment of debt...................................................     (1,158)        (29) 
 Proceeds from issuance of senior subordinated notes and borrowings 
  under credit agreement.............................................    500,000          -- 
 Spin-Off related payments ..........................................    (17,107)         -- 
 Due to SFX Broadcasting ............................................     (6,161)         -- 
 Other, principally debt issuance costs .............................    (16,920)         -- 
                                                                      ----------- ----------- 
Net cash provided by financing activities............................    458,654      24,927 
Net increase in cash and cash equivalents............................     88,012       2,622 
Cash and cash equivalents at beginning of period.....................      5,980           0 
                                                                      ----------- ----------- 
Cash and cash equivalents at end of period...........................  $  93,992    $  2,622 
                                                                      =========== =========== 
Supplemental disclosure of cash flow information: 
Cash paid for interest...............................................  $     274    $     -- 
                                                                      =========== =========== 
Cash paid for income taxes...........................................  $      --    $     -- 
                                                                      =========== =========== 
</TABLE>

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

Supplemental disclosure of non-cash investing and financing activities: 

   o  Issuance of equity securities, including deferred equity security 
      issuance and assumption of debt in connection with certain acquisitions 
      (see Note 1). 

   o  Agreements to pay future cash consideration in connection with certain 
      acquisitions (see Note 1). 

   o  The balance sheet includes certain assets and liabilities which have 
      been contributed by SFX Broadcasting to the Company in connection with 
      the Spin-Off. 

                            See accompanying notes.

                                       4
<PAGE>
                   SFX ENTERTAINMENT, INC. AND SUBSIDIARIES 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                                 (UNAUDITED) 

1. ORGANIZATION AND BASIS OF PRESENTATION 

   SFX Entertainment, Inc. ("SFX" or the "Company") was formed as a 
wholly-owned subsidiary of SFX Broadcasting, Inc. ("SFX Broadcasting") in 
December 1997 and as the parent company of SFX Concerts, Inc ("Concerts"). 
Concerts was formed in January of 1997 to acquire and hold SFX Broadcasting's 
live entertainment operations. During 1997 and 1998, the Company made several 
acquisitions as described below. The Company had no substantive operations 
until its acquisition of Delsener/Slater Enterprises, Ltd. and Affiliated 
Companies ("Delsener/Slater") in January 1997. 

   Information with respect to the three months ended March 31, 1998 and 1997 
is unaudited. The accompanying unaudited consolidated financial statements 
have been prepared in accordance with generally accepted accounting 
principles for interim financial information and Rule 10-01 of Regulation 
S-X. Accordingly, they do not include all the information and footnotes 
required by generally accepted accounting principles for complete financial 
statements. In the opinion of management, the unaudited interim financial 
statements contain all adjustments, consisting of normal recurring accruals, 
necessary for a fair presentation of the financial position, results of 
operations and cash flows of the Company, for the periods presented. 

   In June 1997, the Financial Accounting Standards Board issued Statement 
No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related 
Information," which establishes new standards for the way that public 
business enterprises report information about operating segments in annual 
financial statements and requires that these enterprises report selected 
information about operating segments in interim financial reports. It also 
establishes standards for related disclosures about products and services, 
geographic areas and major customers. SFAS 131 is effective for financial 
statements for fiscal years beginning after December 31, 1997, and therefore 
the Company will adopt the new requirements in 1998. Management has not yet 
completed its review of SFAS 131 but does not expect that its adoption will 
have a material effect on the Company's statement of position or revenues, 
only on the composition of its reportable segments. 

   The Company's operations and revenues are largely seasonal in nature, with 
generally higher revenue generated in the second and third quarters of the 
year. The Company's outdoor venues are primarily utilized in the summer 
months and do not generate substantial revenue in the late fall, winter and 
early spring. Similarly, the musical concerts that the Company promotes 
largely occur in the second and third quarters. To the extent that the 
Company's entertainment marketing and consulting relate to musical concerts, 
they also predominantly generate revenues in the second and third quarters. 

   In August 1997, SFX Broadcasting agreed to the merger (the "Broadcasting 
Merger Agreement") among SBI Holdings, Inc. (the "Buyer"), SBI Radio 
Acquisition Corporation, a wholly-owned subsidiary of the Buyer, and SFX 
Broadcasting (the "Broadcasting Merger") and to the spin-off of the Company 
to the shareholders of SFX Broadcasting (the "Spin-Off"). The Spin-Off was 
completed on April 27, 1998 and the Broadcasting Merger is expected to be 
completed in the second quarter of 1998. 

   Pursuant to the terms of the Spin-Off, SFX Broadcasting contributed to the 
Company all of the assets relating to its live entertainment businesses and 
the Company assumed all of SFX Broadcasting's liabilities pertaining to the 
live entertainment businesses, as well as certain other liabilities including 
the obligation to make change of control payments to certain employees of SFX 
Broadcasting of approximately $5,000,000 as well as the obligation to 
indemnify one-half of certain of these employees' excise tax. At the time of 
the Broadcasting Merger, SFX Broadcasting will contribute its positive 
Working Capital (as defined in the Broadcasting Merger Agreement) to the 
Company. If Working Capital is negative, the Company must pay the amount of 
the shortfall to SFX Broadcasting. Alternatively, SFX Broadcasting must pay 
to the Company any net positive Working Capital. As of March 31, 1998, SFX 


                                       5
<PAGE>
Broadcasting had advanced approximately $5,378,000 to the Company for use in 
connection with certain acquisitions and capital expenditures. This 
obligation and other costs subsequently incurred in connection with the 
Spin-Off were reimbursed in April 1998. 

   SFX Broadcasting and the Company have entered into a tax sharing 
agreement, pursuant to which the Company is responsible for certain taxes, 
including income taxes imposed with respect to income generated by the 
Company for the periods prior to the Spin-Off and taxes resulting from gain 
recognized in the Spin-Off. The Company will be allowed to offset any gain or 
income by the net operating losses of SFX Broadcasting (including net 
operating losses generated in the current year prior to the Spin-Off) which 
are available to offset such gain or income. The Company believes that the 
amount of taxes that it will be required to pay in connection with the 
Spin-Off will be determined by reference to the average of the high and low 
sales price of the Class A Common Stock on April 27, 1998 (the date of the 
distribution of Common Stock pursuant to the Spin-Off). Increases or 
decreases in the value of the Common Stock subsequent to such date will not 
affect the tax liability. The average of the high and low sales price of the 
Class A Common Stock on the Nasdaq National Market on April 27, 1998 was 
$30.50 per share and management estimates that the Company will be required 
to pay approximately $120.0 million pursuant to such indemnification 
obligation. Most of the tax liability relates to certain deferred 
intercompany transactions creating taxable income for the Company. Management 
believes that these deferred intercompany transactions will give rise to 
additional tax basis which will be available to offset future taxable income 
of the Company. Management's estimates of the amount of the indemnity payment 
and additional taxable basis are based on certain assumptions which 
management believes are reasonable. However, upon completion of the relevant 
tax forms, including any potential audits, such assumptions could be modified 
in a manner which would result in a significant variance in the actual 
amounts of the tax indemnity and of the additional basis. The Company intends 
to use a substantial portion of the net proceeds from an equity offering to 
make such payment and expects that such payment will be due on or about June 
15, 1998. Such payment will not result in any corresponding increase in the 
Company's assets or cash flows. 

2. RECENT ACQUISITIONS 

Delsener/Slater 

   In January 1997, SFX Broadcasting acquired Delsener/Slater, a leading 
concert promotion company, for an aggregate consideration of approximately 
$27,600,000, including $2,900,000 for working capital and the present value 
of deferred payments of $3,000,000 to be paid without interest over five 
years and $1,000,000 to be paid without interest over ten years. 
Delsener/Slater has long-term leases or is the exclusive promoter for seven 
of the major concert venues in the New York City metropolitan area, including 
the Jones Beach Amphitheater, a 14,000-seat complex located in Wantagh, New 
York, and the PNC Bank Arts Center (formerly known as the Garden State Arts 
Center), a 17,500-seat complex located in Holmdel, New Jersey. 

Meadows 

   In March 1997, the Company acquired the stock of certain companies which 
own and operate the Meadows Music Theater (the "Meadows"), a 25,000-seat 
indoor/outdoor complex located in Hartford, Connecticut for $900,000 in cash, 
250,838 shares of SFX Broadcasting Class A Common Stock with a value of 
approximately $7,500,000 and the assumption of approximately $15,400,000 in 
debt. 

   In connection with the acquisition of the Meadows, SFX Broadcasting 
obtained an option to repurchase 250,838 shares of its Class A common stock 
(the "Meadows Shares") for an aggregate purchase price of $8.3 million (the 
"Meadows Repurchase"). Pursuant to the terms of the SFX Merger Agreement, if 
the Meadows Shares are outstanding at the effective time of the SFX Merger, 
Working Capital would be decreased by approximately $10.5 million. However, 
SFX Broadcasting was restricted from exercising the Meadows Repurchase by 
certain loan covenants and other restrictions. 

   In January 1998, Robert F.X. Sillerman, the Executive Chairman of the 
Company, committed to finance the $8.3 million exercise price of the Meadows 
Repurchase in order to avoid the $10.5 million 



                                       6
<PAGE>
reduction to Working Capital. In consideration for such commitment, the board 
of directors of SFX Broadcasting agreed that Mr. Sillerman would receive 
approximately the number of shares of Class A Common Stock to be issued in 
the Spin-Off with respect to the Meadows Shares. At the time SFX Broadcasting 
accepted Mr. Sillerman's commitment, the board of directors of SFX 
Broadcasting valued the Class A Common Stock to be issued in the Spin-Off at 
$4.20 per share, the value attributed to such shares in the fairness opinion 
obtained by SFX Broadcasting in connection with the Broadcasting Merger. In 
April 1998, SFX Broadcasting assigned the option for the Meadows Shares to an 
unaffiliated third party and, in connection therewith, paid such party a fee 
of $75,000. Mr. Sillerman subsequently advanced such party the $8.3 million 
exercise price for the Meadows Repurchase which will become due on the 
earlier of the date on which the Meadows Shares are disposed of by the third 
party or January 16, 1999. If the SFX Merger is consummated, the Meadows 
Shares will be tendered in the SFX Merger without any gain or loss to the 
third party. In the event that the SFX Merger is not consummated on or before 
December 31, 1998, SFX Broadcasting has the option, for a limited time, to 
repurchase the Meadows Shares for an aggregate consideration of approximately 
$10.0 million. The third party has agreed to transfer to Mr. Sillerman the 
Class A Common Stock to be issued in the Spin-Off with respect to the Meadows 
Shares. The transaction has been approved by SFX Broadcasting's board of 
directors, including the independent directors. A non-cash charge to earnings 
of approximately $7.5 million will be recorded in the second quarter of 1998 
based on the fair value of the shares received by Mr. Sillerman as of the 
date of the Meadows Repurchase. 

Sunshine Promotions 

   In June 1997, the Company acquired the stock of Sunshine Promotions, Inc. 
and certain other related Companies ("Sunshine Promotions"), one of the 
largest concert promoters in the Midwest, for $53,900,000 in cash, of which 
$2,000,000 is payable over five years, 62,792 shares of SFX Broadcasting 
Class A Common Stock issued with a value of approximately $2,000,000, shares 
of SFX Broadcasting stock issuable over a two year period with a value of 
approximately $2,000,000 and the assumption of approximately $1,600,000 of 
debt. The shares of stock to be issued in the future are classified as 
deferred purchase consideration on the balance sheet. Sunshine Promotions 
owns the Deer Creek Music Theater, a 21,000-seat complex located in 
Indianapolis, Indiana, and the Polaris Amphitheater, a 20,000-seat complex 
located in Columbus, Ohio, and has a long-term lease to operate the Murat 
Centre (the "Murat"), a 2,700-seat theater and 2,200-seat ballroom located in 
Indianapolis, Indiana. Pursuant to the Broadcasting Merger Agreement, the 
Company is responsible for the payments owing under the Sunshine note, which 
by its terms accelerates upon the change in control of SFX Broadcasting 
resulting from the consummation of the Broadcasting Merger. 

   The Delsener/Slater, Meadows, and Sunshine Promotions acquisitions are 
collectively referred to herein as the "1997 Acquisitions." The cash portion 
of the 1997 Acquisitions were financed through capital contributions from SFX 
Broadcasting and were accounted for under the purchase method of accounting. 
The purchase price of Sunshine Promotions has been preliminarily allocated to 
the assets acquired and liabilities assumed and is subject to change. 

Westbury 

   On January 8, 1998, the Company acquired a long-term lease for Westbury 
Music Fair, located in Westbury, New York, for an aggregate consideration of 
approximately $3.0 million and an agreement to issue 75,019 shares of Class A 
Common Stock. During the period between the closing and January 8, 2000, the 
Company has the right to repurchase all of such shares for an aggregate 
consideration of $2.0 million and the seller has the right to require the 
Company to purchase all of such shares for an aggregate consideration of 
$750,000. The purchase price was financed from the Company's cash on hand. 

BGP 

   On February 24, 1998, the Company acquired all of the outstanding capital 
stock of BG Presents ("BGP"), one of the oldest promoters of, and 
owner-operators of venues for, live entertainment in the 



                                       7
<PAGE>
United States, and a leading promoter in the San Francisco Bay area (the "BGP 
Acquisition"), for total consideration of approximately $80,300,000 
(including the repayment of $12,000,000 in BGP debt and the issuance upon the 
Spin-Off of 562,640 shares of common stock of the Company valued by the 
parties at $7,500,000). The sellers of BGP provided net working capital (as 
defined in the acquisition agreement) at the closing in an amount equal to or 
greater than long-term debt. 

PACE 

   On February 25, 1998, the Company acquired all of the outstanding capital 
stock of PACE Entertainment Corporation ("PACE"), one of the largest 
diversified producers and promoters of live entertainment in the United 
States, having what the Company believes to be the largest distribution 
network in the United States in each of its music, theater and specialized 
motor sports businesses (the "PACE Acquisition"), for total consideration of 
approximately $150,100,000 (including issuance upon the Spin-Off of 1,500,000 
shares of the Company's common stock valued by the parties at $20,000,000 and 
assumption of approximately $20,600,000 of debt). In related transactions, 
the Company acquired, for total consideration of $90,600,000 comprised of 
$41,400,000 in cash, the repayment of approximately $43,100,000 of debt and 
the assumption of approximately $6,100,000 of debt related to a capital 
lease, the 66 2/3% ownership interests of Blockbuster Entertainment 
Corporation and Sony Music Entertainment, Inc. in Amphitheater Entertainment 
Partnership, a partner of PACE in the Pavilion Partners venue partnership. As 
a result, the Company owns 100% of Pavilion Partners. 

   The PACE acquisition agreement further provides that each seller of PACE 
shall have an option, exercisable during a period beginning on the fifth 
anniversary of the closing of the PACE acquisition and ending 90 days 
thereafter, to require the Company to purchase up to one-third of the PACE 
consideration stock received by such PACE seller for a cash purchase price of 
$33.00 per share. With certain limited exceptions, these option rights are 
not assignable by the PACE sellers. 

   Under the terms of an employment agreement entered into by the Company 
with an officer of PACE, the officer will have the right, two years from the 
date of the acquisition, to purchase PACE's motor sports division at fair 
value. If the motor sports division has been sold by the Company, the officer 
would be entitled to purchase PACE's theatrical division for the fair value. 

   In addition, on March 25, 1998 PACE paid $4,000,000 to acquire a 67% 
interest in certain assets and liabilities of USA Motor Sports. The remaining 
33% interest is owned by the Contemporary Group. 

Contemporary 

   On February 27, 1998, the Company acquired the Contemporary Group 
("Contemporary"), a fully-integrated live entertainment and special event 
promoter and producer, venue owner and operator and consumer marketer, for 
total consideration of approximately $101,400,000 comprised of $72,800,000 in 
cash, a payment for working capital of approximately $9,900,000 and the 
issuance of preferred stock of the Company valued by the parties at 
$18,700,000 which, upon the Spin-Off, was converted into 1,402,850 shares of 
common stock of the Company (the "Contemporary Acquisition"). The 
Contemporary Acquisition involved the merger of Contemporary International 
Productions Corporation with and into the Company, the acquisition by a 
wholly owned subsidiary of the Company of substantially all of the assets, 
excluding certain cash and receivables, of the remaining members of 
Contemporary and the acquisition by Contemporary of the 50% interest in the 
Riverport Amphitheater Joint Venture not owned by Contemporary. If any of the 
Contemporary sellers owns any shares of the Company's Class A Common Stock 
received in the Contemporary Acquisition on the second anniversary of the 
closing date and the average trading price of such stock over the 20-day 
period ending on such anniversary date is less than $13.33 per share, then 
the Company will make a one-time cash payment to each individual holding any 
such shares that is equal to the product of (i) the quotient of the 
difference between (A) the actual average trading price per share over such 
20-day period and (B) $13.33 divided by two, multiplied by (ii) the number of 
shares of Class A Common Stock of the Company received by such individual in 
the Contemporary Acquisition and owned as of such anniversary date. 


                                       8
<PAGE>
Network 

   On February 27, 1998, the Company acquired the Network Magazine Group 
("Network Magazine"), a publisher of trade magazines for the radio 
broadcasting industry, and SJS Entertainment Corporation ("SJS"), an 
independent creator, producer and distributor of music-related radio 
programming, services and research which it exchanges with radio broadcasters 
for commercial air-time sold, in turn, to national network advertisers (the 
"Network Acquisition"), for total consideration of approximately $66,800,000 
comprised of $52,000,000 in cash, a payment for working capital of 
approximately $1,800,000, reimbursed sellers costs of $500,000, the purchase 
of an office building and property for $2,500,000 and the issuance upon the 
Spin-Off of approximately 750,000 shares of common stock of the Company 
valued by the parties at $10,000,000. The $2,500,000 purchase of the office 
building and property is comprised of cash of approximately $700,000 and the 
assumption of debt of approximately $1,800,000. The Company is also obligated 
to pay the sellers an additional payment in common stock or, at the Company's 
option, cash based on future operating results, as defined, generated on a 
combined basis by Network Magazine and SJS in 1998, up to a maximum of 
$14,000,000. In the Network Acquisition, the Company, through a wholly owned 
subsidiary, acquired all of the outstanding capital stock of each of The 
Album Network, Inc. and SJS Entertainment Corporation and purchased 
substantially all of the assets and properties and assumed substantially all 
of the liabilities and obligations of The Network 40, Inc. 

Concert/Southern 

   On March 4, 1998, the Company acquired Concert/Southern Promotions 
("Concert/Southern"), a promoter of live music events in the Atlanta, Georgia 
metropolitan area (the "Concert/Southern Acquisition"), for total cash 
consideration of approximately $16,900,000, which includes a $300,000 payment 
for working capital. 

   The PACE Acquisition, the Contemporary Acquisition, the Network 
Acquisition, the BGP Acquisition and the Concert/Southern Acquisition are 
collectively referred to herein as the "1998 Acquisitions." The cash portion 
of the 1998 Acquisitions were financed with the proceeds of the Notes 
offering and Credit Agreement (see Note 3) and were accounted for under the 
purchase method of accounting. The purchase prices of the 1998 Acquisitions 
have been preliminarily allocated to the assets acquired and liabilities 
assumed and are subject to change. 

   The accompanying consolidated financial statements as of March 31, 1998 
include the accounts of the Company, its subsidiaries and certain assets and 
liabilities which were contributed by SFX Broadcasting to the Company in the 
Spin-Off. Operating results for the 1997 Acquisitions and the 1998 
Acquisitions are included herein from their respective acquisition dates. 
Operating results associated with the assets and liabilities to be 
contributed by SFX Broadcasting are included herein. SFX Broadcasting 
provides various administrative services to the Company. It is SFX 
Broadcasting's policy to allocate these expenses on the basis of direct 
usage. In the opinion of management, this method of allocation is reasonable 
and allocated expenses approximate what the Company would have incurred on a 
stand-alone basis. Intercompany transactions and balances have been 
eliminated in consolidation. 

   The following pro forma summary represents the consolidated results for 
the three months ended March 31, 1998 and 1997 as if the 1997 Acquisitions 
and the 1998 Acquisitions had occurred at the beginning of such period after 
giving effect to certain adjustments, including amortization of intangible 
assets and interest expense on the acquisition debt. These pro forma results 
have been included for comparative purposes only and do not purport to be 
indicative of what would have occurred had the acquisitions been made as of 
that date or of results which may occur in the future (in thousands). 

<TABLE>
<CAPTION>
                   PRO FORMA 
              THREE MONTHS ENDED 
                   MARCH 31, 
            ----------------------- 
                1998        1997 
            ----------- ---------- 
<S>         <C>         <C>
Revenues ..   $173,828    $127,446 
Net loss ..   $(26,633)   $(17,129) 
</TABLE>



                                       9
<PAGE>
3. FINANCING 

   On February 11, 1998, SFX completed an offering of $350.0 million of 
9 1/8% Senior Subordinated Notes (the "Notes" or "Note Offering") due 2008. 
Interest is payable on the Notes on February 1 and August 1 of each year. 

   On February 26, 1998 the Company executed a Credit and Guarantee Agreement 
(the "Credit Agreement") which established a $300.0 million senior secured 
credit facility comprised of (i) a $150.0 million eight-year term loan (the 
"Term Loan") and (ii) a $150.0 million seven-year reducing revolving credit 
facility. Loans outstanding under the Credit Facility bear interest, at the 
Company's option, at 1.875 to 2.375 percentage points over LIBOR or the 
greater of the Federal Funds rate plus 0.50% or BNY's prime rate. The 
interest rate spreads on the Term Loan and the Revolver will be adjusted 
based on the Company's Total Leverage Ratio (as defined in the Credit 
Agreement). The Company will pay a per annum commitment fee on unused 
availability under the Revolver of 0.50% to the extent that the Company's 
Leverage Ratio is greater than or equal to 4.0 to 1.0, and 0.375% if such 
ratio is less than 4.0 to 1.0 and a per annum letter of credit fee equal to 
the Applicable LIBOR Margin (as defined in the Credit Agreement) for the 
Revolver then in effect. The Revolver and Term Loan contain provisions 
providing that, at its option and subject to certain conditions, the Company 
may increase the amount of either the Revolver or Term Loan by $50.0 million. 
Borrowings under the Credit Agreement are secured by substantially all of the 
assets of the Company, including a pledge of the outstanding stock of 
substantially all of its subsidiaries and guaranteed by all of the Company's 
subsidiaries. On February 27, 1998, the Company borrowed $150.0 million under 
the Term Loan. As of May 4, 1998 there were no borrowings under the Revolver. 
The Company intends to draw down approximately $125 million of the Revolver 
to fund the Pending Acquisitions (see Note 6). 

4. CAPITAL STOCK 

   In order to facilitate the Spin-Off, the Company recently revised its 
capital structure to increase its authorized capital stock and to effect a 
stock split. The authorized capital stock of the Company consists of 
110,000,000 shares of Common Stock (comprised of 100,000,000 shares of Class 
A Common Stock and 10,000,000 shares of Class B Common Stock), and 25,000,000 
shares of preferred stock, par value $.01 per share. 

   In the Spin-Off, (a) 13,579,024 shares of Class A Common Stock were 
distributed to holders on the Spin-Off record date of SFX Broadcasting's 
Class A common stock, Series D preferred stock and interests in SFX 
Broadcasting's director deferred stock ownership plan, (b) 1,047,037 shares 
of Class B Common Stock were distributed to holders on the Spin-Off record 
date of SFX Broadcasting Class B common stock and (c) 609,856 shares were 
placed in escrow to be issued upon the exercise of certain warrants of SFX 
Broadcasting. The financial statements have been retroactively adjusted to 
reflect this transaction. 

   Holders of Class A Common Stock and Class B Common Stock vote as a single 
class on all matters submitted to a vote of the stockholders, with each share 
of Class A Common Stock entitled to one vote and each share of Class B Common 
Stock entitled to ten votes, except (a) for the election of directors, (b) 
with respect to any "going private" transaction between the Company and Mr. 
Sillerman or any of his affiliates and (c) as otherwise provided by law. 

   The Board of Directors has the authority to issue preferred stock and will 
assign the designations and rights at the time of issuance. 

   During January 1998, the Board of Directors and SFX Broadcasting, as sole 
stockholder, approved and adopted a stock option and restricted stock plan 
providing for the issuance of restricted shares of the Company's Class A 
Common Stock and options to purchase shares of the Company's Class A Common 
Stock totaling up to 2,000,000 shares. In addition, the Board, upon 
recommendation of the Compensation Committee, has approved the issuance of 
stock options exercisable for 1,002,500 shares of the Company's Class A Common 
Stock. Of these options, 750,000 will vest over five years and will have an
exercise price of $30.50 and 252,000 will vest over three years and will have 
an exercise price of $5.50 per share. The Company will record non-cash 
compensation charges over the three-year period of approximately $2 million 
annually. 


                                       10
<PAGE>
   During January 1998, in connection with the expectation of certain 
executive officers entering into employment agreements with the Company, the 
Board of Directors, upon recommendation of the Compensation Committee, 
approved the sale of an aggregate of 650,000 shares of the Company's Class B 
Common Stock and 190,000 shares of the Company's Class A Common Stock to 
certain officers for a purchase price of $2.00 per share. Such shares were 
issued in April 1998. A non-cash charge to earnings will be recorded by the 
Company in the second quarter of approximately $24 million associated with 
the sale. 

   The Board of Directors has also approved the issuance of shares of the 
Company's Class A Common Stock to holders of stock options or stock 
appreciation rights ("SARs") of SFX Broadcasting as of the Spin-Off record 
date, whether or not vested. The issuance was approved to allow such holders 
of these options or SARs to participate in the Spin-Off in a similar manner 
to holders of SFX Broadcasting's Class A Common Stock. Additionally, many of 
the option holders will become officers, directors and employees of the 
Company. 

5. COMMITMENTS AND CONTINGENCIES 

   While the Company is involved in several law suits and claims arising in 
the ordinary course of business, the Company is not now a party to any legal 
proceeding that the Company believes would have a material adverse effect on 
its business, financial position or results of operations. 

6. SUBSEQUENT EVENTS 

   In April and May of 1998, the Company entered into agreements and/or 
letters of intent to acquire the following live entertainment and talent 
representation businesses: 

FAME 

   The Company has entered into an agreement to acquire Falk Associates 
Management Enterprises, Inc. and Financial Advisory Management Enterprises, 
Inc. (collectively, "FAME"), a leading full-service marketing and management 
company which specializes in the representation of team sports athletes, 
primarily in professional basketball. The aggregate purchase price for FAME 
will be approximately $82.0 million in cash (including approximately $7.9 
million which the Company anticipates paying in order to reimburse the FAME 
sellers for certain taxes which they will be subject to) and 1.0 million 
shares of Class A Common Stock. The agreement provides for payments by the 
Company to the FAME sellers of additional amounts up to $15.0 million in 
equal annual installments over 5 years contingent on the achievement of 
certain operating performance targets. The agreement also provides for 
additional payments by the Company if FAME's operating performance exceed the 
targets by certain amounts. 

Don Law 

   The Company has entered into an agreement to acquire certain assets of 
Blackstone Entertainment, LLC ("Don Law"), a leading concert and theater 
promoter in New England, for an aggregate consideration of approximately 
$90.0 million (subject to adjustment under certain circumstances), including 
the repayment of approximately $10.0 million in debt. The Company may, at its 
option, pay up to $16.0 million of the purchase price in shares of Class A 
Common Stock. Don Law currently owns and/or operates three venues in New 
England with an aggregate seating capacity of 27,400. Don Law also acts as 
the sole ticket operator for all of its own venues as well as several third 
party venues. 

Avalon 

   The Company entered into letters of intent to acquire all of the 
outstanding equity interests of Irvine Meadows Amphitheater, New Avalon, 
Inc., TBA Media, Inc. and West Coast Amphitheater (collectively, "Avalon") 
for a cash purchase price of $27.0 million (subject to adjustment under 
certain circumstances). Avalon is a leading concert promoter and producer 
that operates predominantly in the Los Angeles area. In addition, the Company 
will be obligated to reimburse the Avalon sellers' third party out of pocket 
costs and expenses incurred in the development of the Camarillo Creek 
Amphitheater (expected to be 


                                       11
<PAGE>
approximately $400,000). The Company may also be obligated to pay an 
additional $1.0 million to the Avalon sellers if the Camarillo Creek 
Amphitheater has been completed pursuant to certain budget projections and 
the production of entertainment events at the site has commenced. 

Oakdale 

   The Company has entered into an agreement to acquire Oakdale Concerts, LLC 
and Oakdale Development Limited Partnership (collectively, "Oakdale"), a 
promoter and producer of concerts in Connecticut and the owner of the 4,800 
seat Oakdale Music Theater, for a purchase price of $11.9 million in cash. At 
the closing the Company will also make a non-recourse loan to Oakdale in the 
amount of $11.4 million. In addition, the Company may be obligated to make an 
additional payment based on the combined operating performance (as defined in 
the acquisition agreement) of the Oakdale Music Theater and Meadows for 1999. 

EMI 

   The Company has entered into an agreement to acquire an approximately 80% 
interest in Event Merchandising, Inc. ("EMI"), a leading event merchandising 
contractor in the United States for approximately $8.5 million. In addition, 
the Company is required to make a loan to the EMI sellers in an amount equal 
to certain taxes incurred by the EMI sellers in connection with the 
transaction. The Company expects that the amount of the loan will be 
approximately $750,000. EMI has concession contracts with 26 amphitheaters, 
including 13 venues owned and/or operated by the Company. 

   The acquisitions of FAME, Don Law, Avalon, Oakdale and EMI are 
collectively referred to herein as the "Pending Acquisitions." The Company 
intends to use a portion of the proceeds from an equity offering and 
additional borrowings under the Credit Agreement (collectively, the 
"Financing") to consummate the Pending Acquisitions. The Company expects to 
complete all of the Pending Acquisitions in the second quarter of 1998. 
However, the timing and completion of the Pending Acquisitions are subject to 
a number of conditions, certain of which are beyond the Company's control and 
there can be no assurance that any of the Pending Acquisitions will be 
consummated during such period, on the terms described herein, or at all. The 
Company is also currently pursuing certain additional acquisitions; however, 
it has not entered into any definitive agreements with respect to such 
acquisitions and there can be no assurance that it will do so. 


















                                       12
<PAGE>
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

 The following discussion of the financial condition and results of 
operations of the Company should be read in conjunction with the consolidated 
financial statements and related notes thereto. The following discussion 
contains certain forward-looking statements that involve risks and 
uncertainties. The Company's actual results could differ materially from 
those discussed herein. Factors that could cause or contribute to the 
differences include, but are not limited to, risks and uncertainties relating 
to the Company's absence of a combined operating history, its potential 
inability to integrate the 1998 Acquisitions, the Pending Acquisitions and 
other risks related to the recent acquisitions, control of the motor sports 
and theatrical businesses, future acquisitions, inability to obtain future 
financing, inability to successfully implement operating strategies 
(including the achievement of cost savings), the Company's expansion 
strategy, its need for additional funds, its control of venues, working 
capital adjustments, control by management, dependence on key personnel, 
potential conflicts of interest, indemnification agreements, seasonality, 
competition, regulatory matters, environmental matters, economic conditions 
and consumer tastes and availability of artists and events. The Company 
undertakes no obligation to publicly release the results of any revisions to 
these forward-looking statements that may be made to reflect any future 
events or circumstances. 

   The performance of entertainment companies, such as the Company, is 
measured, in part, by their ability to generate EBITDA. "EBITDA" is defined 
as earnings before interest, taxes, other income, net equity income (loss) 
from investments and depreciation and amortization. Although EBITDA is not a 
measure of performance calculated in accordance with GAAP, the Company 
believes that EBITDA is accepted by the industry as a generally recognized 
measure of performance and is used by analysts who report publicly on the 
performance of entertainment companies. Nevertheless, this measure should not 
be considered in isolation or as a substitute for operating income, net 
income, net cash provided by operating activities or any other measure for 
determining the Company's operating performance or liquidity that is 
calculated in accordance with GAAP. 

   The Company's core business is the promotion and production of live 
entertainment events, most significantly for concert and other music 
performances in venues owned and/or operated by the Company and in 
third-party venues. In connection with all of its live entertainment events, 
the Company seeks to maximize related revenue streams, including the sale of 
corporate sponsorships, the sale of concessions and the merchandising of a 
broad range of products. On a pro forma basis, the Company's music businesses 
comprised approximately 67%, theater comprised approximately 13%, specialized 
motor sports comprised approximately 6% and other operations comprised 
approximately 14% of the Company's total net revenues for the twelve months 
ended March 31, 1998. 

   Promotion of events involves booking talent, renting or providing the 
event venue, marketing the event to attract ticket buyers and providing for 
local services required in the production of the event such as security and 
stage hands. Promoters generally receive revenues from the sale of tickets 
and sponsorships. When an event is promoted at a venue owned or managed by 
the promoter, the promoter also generally receives a percentage of revenues 
from concessions, merchandising, parking and premium box seats. The Company 
earns promotion revenues principally by promoting (a) music concerts, (b) 
Touring Broadway Shows and (c) specialized motor sports events. 

   Production of events involves developing the event content, hiring 
artistic talent and managing the actual production of the event (with the 
assistance of the local promoter). Producers generally receive revenues from 
guarantees and from profit sharing agreements with promoters, a percentage of 
the promoters' ticket sales, merchandising, sponsorships, licensing and the 
exploitation of other rights (including intellectual property rights) related 
to the production. The Company earns revenues by producing (a) Touring 
Broadway Shows, (b) specialized motor events and (c) other proprietary and 
non-proprietary entertainment events. 

1997 ACQUISITIONS 

   The Company entered the live entertainment business with SFX 
Broadcasting's acquisition of Delsener/Slater, a New York-based concert 
promotion company, in January 1997 for aggregate 


                                       13
<PAGE>
consideration of $27.6 million. Delsener/Slater has long-term leases or is 
the exclusive promoter for many of the major concert venues in the New York 
City metropolitan area, including the Jones Beach Amphitheater, a 14,000-seat 
complex located in Wantagh, New York, and the PNC Bank Arts Center (formerly 
known as the Garden State Arts Center), a 17,500-seat complex located in 
Holmdel, New Jersey. In March 1997, Delsener/Slater acquired, for aggregate 
consideration of $23.8 million, companies which hold a 37-year lease to 
operate the Meadows Music Theater ("Meadows"), a 25,000-seat indoor/outdoor 
complex located in Hartford, Connecticut. In June 1997, SFX Broadcasting 
acquired Sunshine Promotions, a concert promoter in the Midwest, and certain 
other related companies for an aggregate consideration of $57.5 million. As a 
result of the acquisition of Sunshine Promotions, the Company owns the Deer 
Creek Music Theater, a 21,000-seat complex located in Indianapolis, Indiana, 
the Polaris Amphitheater, a 20,000-seat complex located in Columbus, Ohio, 
and has a long-term lease to operate the Murat Centre, a 2,700-seat theater 
and 2,200-seat ballroom located in Indianapolis, Indiana. 

   The acquisitions of Delsener/Slater, Sunshine and Meadows are collectively 
referred to herein as the "1997 Acquisitions." The cash portion of the 1997 
Acquisitions was financed through capital contributions from SFX 
Broadcasting. 

RECENT ACQUISITIONS 

   In January 1998, the Company acquired Westbury Music Theater. In February 
1998, the Company acquired PACE, Pavilion Partners, Contemporary, BGP and 
Network and in March 1998, the Company acquired Concert/Southern and USA 
Motorsports. The acquisitions of Westbury Music Theater, PACE, Pavilion 
Partners, Contemporary, BGP, Network, Concert/Southern and USA Motorsports 
are collectively referred to herein as the "Recent Acquisitions." 

 ACQUISITION OF PACE 

   On February 25, 1998, the Company acquired all of the outstanding capital 
stock of PACE (the "PACE Acquisition"). In connection with the PACE 
Acquisition, the Company acquired 100% of Pavilion Partners, a partnership 
that owns interests in 10 venues ("Pavilion"), one-third through the 
acquisition of PACE and two-thirds through separate agreements between PACE 
and Blockbuster and between PACE and Sony (the acquisition of such two-thirds 
interest, the "Pavilion Acquisition"). The total consideration for the PACE 
Acquisition was approximately $109.5 million in cash, the repayment of 
approximately $20.6 million of debt and the issuance of 1.5 million shares of 
Class A Common Stock. The total consideration for the Pavilion Acquisition 
was approximately $90.6 million, comprised of $41.4 million in cash and the 
repayment of $43.1 million of debt and the assumption of approximately $6.1 
million of debt related to a capital lease. The purchase price was financed 
from the proceeds of the Note Offering. 

   In addition, on March 25, 1998, PACE acquired a 67% interest in certain 
assets and liabilities of USA Motorsports for an aggregate cash consideration 
of approximately $4.0 million. The remaining 33% interest is held by the 
Contemporary Group. 

   In connection with its acquisition of partnership interests in Lakewood 
Amphitheater in Atlanta, Georgia and Starplex Amphitheater in Dallas, Texas, 
PACE entered into a co-promotion agreement with its partner that contains a 
provision that purports, under certain circumstances, to require PACE to 
co-promote (and share one-half of the profits and losses) with such 
partnership certain concerts which are presented by PACE or any of its 
affiliates in another venue located in either Atlanta, Georgia or Dallas, 
Texas. However, the Company acquired an interest in Chastain Park 
Amphitheater, also in Atlanta, in the Concert Southern acquisition described 
below. The Company is currently negotiating with the third party to waive 
this restrictive provision; however, it is possible that the Company will be 
unable to obtain the waiver. In management's view, this provision will not 
materially affect the business or prospects of the Company. 

 ACQUISITION OF CONTEMPORARY 

   On February 27, 1998, the Company acquired Contemporary Group (the 
"Contemporary Acquisition"). The Contemporary Acquisition involved the merger 
of Contemporary International Productions 


                                       14
<PAGE>
Corporation with and into the Company, the acquisition by a wholly-owned 
subsidiary of the Company of substantially all of the assets, excluding 
certain cash and receivables, of the remaining members of Contemporary and 
the acquisition of the 50% interest in the Riverport Amphitheatre Joint 
Venture not owned by Contemporary. The total consideration of the 
Contemporary Acquisition was approximately $72.8 million in cash, a payment 
for working capital of $9.9 million, and the issuance of 1,402,850 shares of 
Class A Common Stock. The purchase price was financed by the borrowings under 
the Credit Facility and with the proceeds of the Note Offering. 

 ACQUISITION OF BGP 

   On February 24, 1998, the Company, through the Company's wholly-owned 
subsidiary, BGP Acquisition, LLC acquired all of the outstanding capital 
stock of BGP, for a total consideration of $60.8 million in cash, $12.0 
million in repayment of debt, which amount was at least equal to BGP's 
working capital (as defined in the acquisition agreement), and 562,640 shares 
of Class A Common Stock (the "BGP Acquisition"). The purchase price was 
financed from the proceeds of the Note Offering. 

 ACQUISITION OF NETWORK 

   On February 27, 1998, the Company acquired Network (the "Network 
Acquisition"). In the Network Acquisition, the Company acquired all of the 
outstanding capital stock of each of The Album Network, Inc. and SJS and 
purchased substantially all of the assets and properties and assumed 
substantially all of the liabilities and obligations of The Network 40, Inc. 
The total purchase price was approximately $52.0 million cash, a payment for 
working capital of $1.8 million, reimbursed seller's costs of $500,000, the 
purchase of an office building and related property for approximately $2.5 
million and the issuance of approximately 750,000 shares of Class A Common 
Stock. The purchase price is subject to increase based on Network's actual 
1998 EBITDA (as defined in the acquisition agreement) by $4.0 million if such 
EBITDA equals or exceeds $9.0 million to $14 million if EBITDA is greater 
than $11 million, and is payable in stock, or in certain circumstances in 
cash, by no later than March 20, 1999. The $2.5 million purchase of the 
office building and related property used in connection with Network's 
business was comprised of cash of $700,000 and the assumption of debt of $1.8 
million. The purchase price was financed by the borrowings under the Credit 
Facility. In connection with the Network Acquisition, the selling 
stockholders were reimbursed working capital (as defined in the acquisition 
agreement) in excess of $500,000. 

 ACQUISITION OF CONCERT/SOUTHERN 

   On March 4, 1998, the Company acquired Concert/Southern Promotions, a 
promoter of live music entertainment in the Atlanta metropolitan area, for a 
total consideration of $16.9 million (including the payments of the $1.6 
million representing the present value of a deferred purchase obligation and 
$300,000 for the working capital adjustment.) The purchase price was financed 
by the borrowings under the Credit Facility. 

 ACQUISITION OF WESTBURY 

   On January 8, 1998, the Company acquired a long-term lease for Westbury 
Music Fair, located in Westbury, New York, for an aggregate consideration of 
approximately $3.0 million and an agreement to issue 75,019 shares of Class A 
Common Stock. During the period between the closing and January 8, 2000, the 
Company has the right to repurchase all of such shares for an aggregate 
consideration of $2.0 million and the seller has the right to require the 
Company to purchase all of such shares for an aggregate consideration of 
$750,000. The purchase price was financed from the Company's cash on hand. 

   The foregoing descriptions do not purport to be complete descriptions of 
the terms of the acquisition agreements and are qualified by reference to the 
acquisition agreements, copies of which are attached hereto as exhibits and 
incorporated herein by reference. Pursuant to the acquisition agreements and 
the agreements related thereto, the Company, (a) under certain circumstances, 
may be required to repurchase shares of its Class A Common Stock or make 
additional payments in connection therewith, 


                                       15
<PAGE>
(b) has granted certain rights of first refusal certain of which are 
exercisable at 95% of the proposed purchase price and (c) in connection with 
the PACE Acquisition, has granted Brian Becker, the Executive Vice President, 
a Member of the Office of the Chairman, and a director of the Company, the 
option to acquire, after the second anniversary of the consummation of the 
PACE Acquisition, the Company's then existing motor sports line of business 
(or, if that business has previously been sold, the Company's then existing 
theatrical line of business) at its then fair market value. 

   The Recent Acquisitions were accounted for using the purchase method of 
accounting, and the intangible assets created in the purchase transactions 
will generally be amortized against future earnings over a 15-year period. 
The amount of amortization will be substantial and will continue to affect 
the Company's operating results in the future. These expenses, however, do 
not result in an outflow of cash by the Company and do not impact EBITDA. 

PENDING ACQUISITIONS 

   In April and May of 1998, the Company entered into agreements or letters 
of intent to acquire all of the capital stock of FAME, certain assets of Don 
Law, all of the outstanding equity interests of Avalon, certain assets of 
Oakdale and 80% of the outstanding capital stock of EMI for an aggregate 
consideration consisting of approximately $216.1 million in cash, including 
the repayment of approximately $10.0 million in debt, and the issuance of 
1,531,782 million shares of Class A Common Stock. The acquisitions of FAME, 
Don Law, Avalon, Oakdale and EMI are referred to collectively herein as the 
"Pending Acquisitions." 

 ACQUISITION OF FAME 

   On April 29, 1998 the Company entered into an agreement to acquire all of 
the outstanding capital stock of FAME (the "FAME Acquisition"). The aggregate 
purchase price for FAME is approximately $82.9 million in cash (including 
approximately $7.9 million which the Company anticipates paying in connection 
with certain taxes which FAME and the FAME sellers will be subject to) and 
1.0 million shares of Class A Common Stock. The agreement also provides for 
payments by the Company to the FAME sellers of additional amounts up to $15.0 
million in equal annual installments over 5 years contingent on the 
achievement of certain EBITDA targets. The agreement also provides for 
additional payments by the Company if FAME's EBITDA performance exceeds the 
targets by certain amounts. The additional payments are to be within 120 days 
after the end of the year to which they relate. 

 ACQUISITION OF DON LAW 

   On April 29, 1998 the Company entered into an agreement to acquire certain 
assets of Blackstone Entertainment, LLC (the "Don Law Acquisition"). The 
aggregate purchase price for the Don Law Acquisition is approximately $90.0 
million, including the repayment of $10.0 million in debt. The Company may, 
at its option, pay up to $16.0 million of the purchase price in 531,782 
shares of Class A Common Stock. The purchase price will be increased or 
decreased, as applicable, to the extent that Don Law's Net Working Capital 
(as defined in the acquisition agreement) is positive or negative at the 
closing. The Company has made a $100,000 non-refundable deposit in connection 
with the Don Law Acquisition. 

 ACQUISITION OF AVALON 

   On March 6 and 9, 1998, the Company entered into two binding letters of 
intent to acquire all the outstanding equity interests in Avalon for a total 
cash purchase price of $27.4 million, including approximately $400,000 that 
the Company is obligated to pay to reimburse the Avalon sellers' third party 
out of pocket costs and expenses incurred with the development of the 
Camarillo Creek Amphitheater (the "Avalon Acquisition"). The Company may also 
be obligated to pay an additional $1.0 million to the Avalon sellers if the 
Camarillo Creek Amphitheater has been completed pursuant to certain budget 
projections and the production of entertainment events at the site have 
commenced. 

 ACQUISITION OF OAKDALE 

   On April 22, 1998, the Company entered into an agreement to acquire 
certain assets of Oakdale for a purchase price of $11.9 million in cash (the 
"Oakdale Acquisition"). At the closing the Company will also 

                                       16
<PAGE>
make a non-recourse loan to the Oakdale sellers in the amount of $11.3 
million, a portion of which will be used to repay outstanding indebtedness. 
In addition, if the combined EBITDA (as defined in the acquisition agreement) 
for the Oakdale Music Theater and Meadows exceeds $5.5 million in 1999, the 
Company will be obligated to pay the amount of such excess multiplied by a 
factor of between 5.0 to 5.8. 

 ACQUISITION OF EMI 

   On May 1, 1998, the Company entered into an agreement to acquire an 80% 
equity interest in EMI for $8.5 million in cash (the "EMI Acquisition"). In 
addition, the Company is required to make a loan to the EMI sellers in an 
amount equal to twenty percent of certain taxes incurred by the EMI sellers 
in connection with the transaction. The Company expects that the amount of 
the loan will be approximately $750,000. 

   The Pending Acquisitions will be accounted for using the purchase method 
of accounting and intangible assets created in the purchase transaction will 
generally be amortized against future earnings over a fifteen-year period. 
The amount of such amortization will be substantial and will continue to 
affect the Company's operating results in the future. These expenses, 
however, do not result in an outflow of cash by the Company and do not impact 
EBITDA. 

   The Company expects to complete all of the Pending Acquisitions as soon as 
practicable after the consummation of the Offering. The Company anticipates 
that it will consummate all of the Pending Acquisitions in the second quarter 
of 1998. However, the timing and completion of the Pending Acquisitions are 
subject to a number of conditions, certain of which are beyond the Company's 
control, and there can be no assurance that any of the Pending Acquisitions 
will be consummated during such periods, on the terms described herein, or at 
all. 

THE SPIN-OFF AND THE SFX MERGER 

   SFX Broadcasting was formed in 1992 principally to acquire and operate 
radio broadcasting stations. In August 1997, SFX Broadcasting agreed to merge 
with a subsidiary of SFX Buyer, and to Spin-Off the Company to certain 
stockholders of SFX Broadcasting on a pro rata basis. The Spin-Off was 
consummated on April 27, 1998. The Spin-Off separated the entertainment 
business from SFX Broadcasting's radio broadcasting business and will enable 
SFX Buyer to acquire only SFX Broadcasting's radio broadcasting business in 
the SFX Merger. SFX Broadcasting has indicated that it expects the SFX Merger 
to be completed in the second quarter of 1998. 

   Prior to the Spin-Off, pursuant to the Distribution Agreement, SFX 
Broadcasting contributed to the Company all of its assets relating to the 
entertainment business. In addition, the Company, SFX Broadcasting and SFX 
Buyer also entered into the Tax Sharing Agreement and the Employee Benefits 
Agreement. Each of the agreements provides for certain indemnification 
obligations by the Company and SFX Broadcasting. Pursuant to the Distribution 
Agreement, at the time of the SFX Merger, if Working Capital is negative, the 
Company must pay the amount of the shortfall to SFX Broadcasting, and if 
positive SFX Broadcasting must pay such Working Capital to the Company. 
Copies of the Distribution Agreement (containing a description of the Working 
Capital calculation), Tax Sharing Agreement and Employee Benefits Agreement 
have been filed as exhibits to the Company's Registration Statement on Form 
S-1 (File No. 333-50079). 

   In the Spin-Off, shares of Common Stock were distributed pro rata to 
holders on the Spin-Off record date of SFX Broadcasting's Class A common 
stock, Class B common stock, Series D preferred stock and interests in SFX 
Broadcasting's director deferred stock ownership plan, and the remaining 
shares were placed in escrow to be issued upon the exercise of certain 
warrants of SFX Broadcasting. 

RECENT DEVELOPMENTS 

   The Company has indicated to The Marquee Group Inc. ("Marquee"), a 
publicly-traded company, its potential interest in acquiring Marquee. Marquee 
provides integrated event management, television production, marketing and 
consulting services in the sports, news and entertainment industries. In 

                                       17
<PAGE>
addition, Marquee books tours and appearances for a variety of entertainers. 
Mr. Sillerman, the Executive Chairman of the Company, has an aggregate equity 
interest of approximately 9.1% in Marquee and is the chairman of its board of 
directors, and Mr. Tytel, a Director and Executive Vice President of the 
Company, is one of its directors. The Company has been informed that Marquee 
has formed a committee of independent directors to consider the proposal, as 
well as other strategic alternatives. However, the Company has not entered 
into any agreement, arrangement or understanding with Marquee, and there can 
be no assurance that the Company will enter into a definitive agreement with 
Marquee. 

RESULTS OF OPERATIONS 

 GENERAL 

   The Company's operations consist primarily of (a) concert promotion and 
venue operation, (b) the promotion and production of theatrical events, 
particularly Touring Broadway Shows, and (c) the promotion and production of 
motor sports events. The Company and the Acquired Businesses also engage in 
various other activities ancillary to their live entertainment businesses. 

   On a pro forma basis, after giving effect to the Transactions (defined 
collectively as the 1997 Acquisitions, the 1998 Acquisitions, the Note 
Offering, initial borrowings under the Credit Agreement, the Spin-Off and the 
Broadcasting Merger), the Pending Acquisitions and the Financing (defined as 
additional borrowings under the Credit Agreement and the proposed equity 
Offering), the Company's revenues for the year ended December 31, 1997 and 
the three months ended March 31, 1998, would have been $779.0 million and 
$187.3 million, respectively. 

   On a pro forma basis, after giving effect to the Transactions, the Pending 
Acquisitions and the Financing, operating expenses for the year ended 
December 31, 1997 and the three months ended March 31, 1998, would have been 
$688.4 million and $172.4 million, respectively. Pro forma operating expenses 
do not reflect the Company's expectation that it will be able to achieve 
substantial economies of scale upon completion of the Recent Acquisitions and 
reductions in operating expenses as a result of the elimination of 
duplicative staffing and general and administrative expenses. 

   On a pro forma basis, after giving effect to the Transactions, the Pending 
Acquisitions and the Financing, the Company's net loss for the year ended 
December 31, 1997 and the three months ended March 31, 1998, would have been 
$22.8 million and $32.2 million, respectively. Net loss per share, after 
accretion of the Fifth Year Put Option issued in connection with the PACE 
Acquisition, would have been $.92 and $1.17 for the year ended December 31, 
1997 and three months ended March 31, 1998, respectively. The pro forma 
operating results include the impact of significant non-cash amortization 
expense arising from the Recent Acquisitions and interest expense relating to 
the Financing. 

   As of March 31, 1998, on a pro forma basis after giving effect to the 
Financing, Spin-Off and SFX Merger, the Company had net current assets of 
$167.0 million (included in net current assets is cash and cash equivalents 
of $105.7 million), net property and equipment (principally concert venues) 
of $243.8 million, net intangible assets of $695.2 million and long-term debt 
of $628.0 million. The long-term debt is comprised of $350.0 million of 
Notes, borrowings of $235.0 million under the Credit Facility and other debt 
obligations of $43.0 million. 

 CONCERT PROMOTION/VENUE OPERATION 

   The Company's concert promotion and venue operation business consist 
primarily of the promotion of concerts and operation of venues primarily for 
use in the presentation of musical events. The Company's primary source of 
revenues from its concert promotion activities is from ticket sales at events 
promoted by the Company. As a venue operator, the Company's primary sources 
of revenue are sponsorships, concessions, parking and other ancillary 
services, derived principally from events promoted by the Company. 

   Revenue from ticket sales is affected primarily by the number of events 
the Company promotes, the average ticket price and the number of tickets 
sold. The average ticket price depends on the popularity 

                                       18
<PAGE>
of the artist whom the Company is promoting, the size and type of venue and 
the general economic conditions and consumer tastes in the market where the 
event is being held. Revenue and margins are also affected significantly by 
the type of contract entered into with the artist or the artist's 
representative. Generally, the promoter or venue operator will agree to pay 
the artist the greater of a minimum guarantee or a profit sharing payment 
based on ticket revenue, less certain show expenses. The promoter or venue 
operator assumes the financial risk of ticket sales and is responsible for 
local production and advertising of the event. However, in certain instances, 
the promoter agrees to accept a fixed fee from the artist for its services, 
and the artist assumes all financial risk. When the promoter or venue 
operator assumes the financial risk, all revenue and expenses associated with 
the event are recorded. When the artist assumes the risk, only the fee is 
recorded. As a result, operating margins would be significantly greater for 
fee-based events as opposed to events for which the Company assumes the risk 
of ticket sales, although profits per event would tend to be lower. Operating 
margins can vary from period to period. 

   The Company's most significant operating expenses are talent fees, 
production costs, venue operating expenses (including rent), advertising 
costs and insurance expense. The booking of talent in the concert promotion 
business generally involves contracts for limited engagements, often 
involving a small number of performances. Talent fees depend primarily on the 
popularity of the artist, the ticket price that the artist can command at a 
particular venue and the expected level of ticket sales. Production costs and 
venue operating expenses have substantial fixed cost components and lesser 
variable costs primarily related to expected attendance. 

 THEATRICAL 

   The Company's theatrical operations are directed mainly towards the 
promotion and production of Touring Broadway Shows, which generate revenues 
primarily from ticket sales and sponsorships. The Company may also 
participate in ancillary revenues, such as concessions and merchandise sales, 
depending on its agreement with a particular local promoter/venue operator. 
Revenue from ticket sales is primarily affected by the popularity of the 
production and the general economic conditions and consumer tastes in the 
particular market and venue where the production is presented. In order to 
reduce its dependency on the success of any single touring production, the 
Company sells advance annual subscriptions that provide the purchaser with 
tickets for all of the shows that the Company intends to tour in the 
particular market during the touring season. For the year ended December 31, 
1997, on a pro forma basis approximately 34% of ticket sales for Touring 
Broadway Shows presented by the Company were sold through advance annual 
subscriptions. Subscription related revenues received prior to the event date 
are initially recorded on the balance sheet as deferred revenue; after the 
event occurs, they are recorded on the statement of operations as gross 
revenue. Expenses are capitalized on the balance sheet as prepaid expenses 
until the event occurs. Subscriptions for Touring Broadway Shows typically 
cover approximately two-thirds of the Company's break-even cost point for 
those shows. 

   Principal operating expenses related to touring shows include talent, 
rent, advertising and royalties. Talent costs are generally fixed once a 
production is cast. Rent and advertising expense may be either fixed or 
variable based on the arrangement with the particular local promoter/venue 
operator. Royalties are generally paid as a percentage of gross ticket sales. 

   The Company also makes minority equity investments in original Broadway 
productions, principally as a means to obtain rights for touring shows, and 
in certain Touring Broadway Shows. These investments are accounted for using 
either the equity method or the cost method of accounting, based on the 
relative size of the investment. The Company monitors the recoverability of 
these investments on a regular basis, and the Company may be required to take 
write-offs if the original production closes or if the Company determines 
that the production will not recoup the investment. The timing of any 
write-off could adversely affect operating results in a particular quarter. 

 MOTOR SPORTS 

   The Company's motor sports activities consist principally of the promotion 
and production of specialized motor sports, which generate revenues primarily 
from ticket sales and sponsorships, as well 

                                       19
<PAGE>
as merchandising and video rights associated with producing motor sports 
events. Ticket prices for these events are generally lower than for 
theatrical or music concert events, generally ranging from $5 to $30 in 1996. 
Revenue from these sources is primarily affected by the type of event and the 
general economic conditions and consumer tastes in the particular markets and 
venues where the events are presented. Event-related revenues received prior 
to the event date are initially recorded on the balance sheet as deferred 
revenue; after the event occurs, they are recorded on the statement of 
operations as gross revenue. Expenses are capitalized on the balance sheet as 
prepaid expenses until the event occurs. 

   Operating expenses associated with motor sports activities include talent, 
rent, track preparation costs, security and advertising. These operating 
expenses are generally fixed costs that vary based on the type of event and 
venue where the event is held. 

   Under certain circumstances, the Company may be required to sell either 
its motor sports or theatrical lines of business. 

 REPRESENTATION OF PROFESSIONAL ATHLETES 

   FAME's talent representation activities consist principally of the 
representation of team sports athletes, primarily in the National Basketball 
Association, in player contract and endorsement negotiations. FAME also 
provides certain investment advisory services to its clients through an 
affiliate. FAME typically receives a percentage of monies earned by a player, 
generally approximately 4% of a player's sports contract and typically from 
20% to 25% of endorsement deals. Revenue from these sources is recognized as 
the player receives his salary or endorsement payments based on the terms of 
the negotiated agreement. Revenue from these sources is dependent upon a 
number of variables, many of which are outside the Company's control, 
including a player's skill, health, public appeal and the appeal of the sport 
in which the player participates. Principal operating expenses include 
salaries, wages and travel and entertainment expenses. 

 OTHER BUSINESSES 

   The Company's other principal businesses include (a) the production and 
distribution of radio industry trade magazines, (b) the production of radio 
programming content and show-prep material and (c) the provision of radio air 
play and music retail research services. The primary sources of revenues from 
these activities include (a) the sale of advertising space in its 
publications and the sale of advertising time on radio stations that carry 
its syndicated shows, (b) subscription fees for its trade publications and 
(c) subscription fees for access to its database of radio play list and 
audience data. Revenues generally vary based on the overall advertising 
environment and competition. 

   The Company also provides marketing and consulting services pursuant to 
contracts with individual clients for specific projects. Revenues from and 
costs related to these services vary based on the type of service being 
provided and the incremental associated costs. 

 SEASONALITY 

   The Company's operations and revenues have been largely seasonal in 
nature, with generally higher revenue generated in the second and third 
quarters of the year. For example, on a pro forma basis for the 1997 
Acquisitions, the Company generated approximately 68% of its revenues in the 
second and third quarters for the twelve months ended December 31, 1997. The 
Company's outdoor venues are primarily utilized in the summer months and do 
not generate substantial revenue in the late fall, winter and early spring. 
Similarly, the musical concerts that the Company promotes largely occur in 
the second and third quarters. To the extent that the Company's entertainment 
marketing and consulting relate to musical concerts, they also predominantly 
generate revenues in the second and third quarters. Therefore, the 
seasonality of the Company's business causes (and, upon consummation of the 
Pending Acquisitions, will probably continue to cause) a significant 
variation in the Company's quarterly operating results. These variations in 
demand could have a material adverse effect on the timing of the Company's 
cash flows and, therefore, on its ability to service its obligations with 
respect to its indebtedness. 

                                       20
<PAGE>
However, the Company believes that this variation may be somewhat offset with 
the acquisition of typically non-summer seasonal businesses in the Recent 
Acquisitions, such as motor sports (which is winter-seasonal) and Touring 
Broadway Shows (which typically tour between September and May). 

 THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 
31, 1997 

   The Company's revenue increased by $53.2 million to $61.0 million for the 
three months ended March 1998, compared to $7.8 million for three months 
ended March 31, 1997, as a result of the acquisitions of Sunshine and Meadows 
in 1997 and the Recent Acquisitions. On a pro forma basis after giving effect 
to the Transactions, the pending Acquisitions and the Financing, revenue for 
the three months ended March 31, 1998 would have been $187.3 million. 

   Operating expenses increased by $50.5 million to $58.2 million for the 
three month period ended March 31, 1998, compared to $7.7 million for three 
months ended March 31, 1997, primarily as a result of the acquisition of 
Sunshine and Meadows in 1997 and the Recent Acquisitions. On a pro forma 
basis, after giving effect to the Transactions, the Pending Acquisitions and 
the Financing, operating expenses would have been $172.4 million for the 
three month period ended March 31, 1998. 

   Depreciation and amortization expense increased to $4.4 million for the 
three month period ended March 31, 1998 compared to $660,000 for the three 
month period ended March 31, 1997, due to the inclusion of depreciation and 
amortization expense related to the acquisitions of Sunshine and Meadows in 
1997 and the Recent Acquisitions. The Company recorded the fixed assets the 
these acquisitions at fair value and recorded intangible asset equal to the 
excess of purchase price over the fair value of the net tangible assets, 
which are being amortized over a 15 year period. 

   Corporate expenses were $1.3 million for the three month period ended 
March 31, 1998, net of $133,000 fees received from Triathlon, compared to 
$858,000 million for the three months ended March 31, 1997, net of Triathlon 
fees of $651,000. The fees receivable from Triathlon are based on consulting 
services provided by or on behalf of Sillerman Communications Management 
Corporation, a private investment company in which Messrs. Sillerman and 
Tytel have economic interests, that makes investments in and provides 
financial consulting services to companies engaged in the music business 
("SCMC"). The fees will fluctuate (above the minimum annual fee of $500,000) 
based on the level of acquisition financing activities of Triathlon. SCMC 
previously assigned its rights to receive fees payable from Triathlon to SFX 
Broadcasting, and SFX Broadcasting will assign its rights to receive the fees 
to the Company, pursuant to the Distribution Agreement. Triathlon has 
announced that it is exploring ways of maximizing stockholder value, 
including possible sale to a third party. If Triathlon is acquired by a third 
party, it is possible that the consulting fees would not continue for the 
remainder of the agreement's term. 

   Non-recurring and unusual charges relating to the Spin-Off included $16.6 
million of consent fees and $1.8 million of legal, accounting and other 
costs. 

   The operating loss was $2.9 million for the three month period ended March 
31, 1998, compared to a loss of $1.5 million for the three months March 31, 
1997, due to the results discussed above. 

   Interest expense, net of investment income, was $5.9 million in the three 
months ended March 31, 1998, compared to $77,000 for the three months ended 
March 31, 1997, primarily as a result of assumption of additional debt 
related to the Recent Acquisitions and the debt assumed in connection with 
Meadows and Sunshine acquisitions. 

   Equity income in unconsolidated subsidiaries were $445,000 for the three 
months March 31, 1998 as a result of Recent Acquisitions. 

   Income tax expense was $500,000 for the three month period ended March 31, 
1998. 

   The Company's net loss increased to $27.3 million for the three month 
period ended March 31, 1998, as compared to a net loss of $1.5 million for 
the three months ended March 31, 1997, due to the factors discussed above. 

   EBITDA increased to $1.5 million for the three month period ended March 
31, 1998, compared to negative $807,000 for the three months ended March 31, 
1997, primarily as a result of the 1997 and Recent Acquisitions. 

                                       21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES 

   The Company's principal need for funds has been for acquisitions, interest 
expense, working capital needs, to make certain payments in connection with 
the Spin-Off and, to a lesser extent, capital expenditures. The Company 
anticipates that its principal sources of funds will be the proceeds from an 
anticipated equity offering (the "Offering") remaining proceeds from the Note 
Offering, borrowings under the Credit Facility and cash flows from 
operations. 

   Net cash provided by operations was $9.1 million for the three months 
ended March 31, 1998 as compared to $307,000 for the three months ended March 
31, 1997. The increase was primarily attributable to changes in working 
capital. 

   Net cash used in investing activities for the three months ended March 31, 
1998 was $379.8 million as compared to $22.6 million for the three months 
ended March 31, 1997. The increase was primarily the result of the 1998 
Acquisitions. During the three months ended March 31, 1997, the Company 
completed the acquisition of Delsener/Slater. 

   Net cash provided by financing activities for the three months ended March 
31, 1998 was $458.7 million as compared to $24.9 million for the three months 
ended March 31, 1997. During 1998, the Company completed the issuance of its 
Senior Subordinated Notes for $350.0 million and borrowed $150.0 under the 
Credit Agreement, offset by Spin-Off related payments of $17.1 million and 
the payment of debt issuance costs of $16.9 million. 

 PENDING ACQUISITIONS 

   The aggregate consideration in the Pending Acquisitions is expected to 
consist of approximately $216.1 million (including the repayment of 
approximately $10 million in debt, and 1,531,782 shares of Class A Common 
Stock). In addition, the Company expects to incur approximately $6.0 million 
in fees and expenses related to the Pending Acquisitions. In addition, the 
agreements relating to the Pending Acquisitions provide for future contingent 
payments under certain circumstances. The Company has also placed a deposit 
in connection with the Pending Acquisitions of $100,000, which will be 
applied against the applicable purchase price at closing. In addition, the 
agreements relating to the Pending Acquisitions provide for certain future 
contingent payments. 

   The 1,531,782 shares to be issued in connection with acquisitions of FAME 
and Don Law were not registered under the Securities Act or state securities 
laws, as may have been required. The Company has filed a registration 
statement in order to make a rescission offer with respect to such 
transactions which could result in the unwinding of all or a portion of the 
FAME and/or Don Law acquisitions. The Company does not expect the sellers to 
accept such recission offer. 

   The timing and completion of the Pending Acquisitions is subject to a 
number of closing conditions certain of which are beyond the control of the 
Company. No assurance can be given that the Company will be able to complete 
any of the Pending Acquisitions on the terms described or at all, or that the 
Company will have sufficient funds available to make any of the contingent 
payments described above should they come due. 

 FUTURE CONTINGENT PAYMENTS 

   Certain of the agreements relating to the Recent Acquisitions provide for 
purchase price adjustments and other future contingent payments under certain 
circumstances. The PACE acquisition agreement provides that each PACE seller 
will have an option, exercisable for 90 days after the fifth anniversary of 
the closing of the PACE acquisition, to require the Company to repurchase up 
to 500,000 shares of the Class A Common Stock received by that seller for 
$33.00 in cash per share (an aggregate of up to $1.5 million). Pursuant to 
the terms of the Becker Employment Agreement (as defined herein), during the 
period between December 12, 1999 and December 27, 1999, Mr. Becker, an 
Executive Vice President, Director and a Member of the Office of the Chairman 
of the Company, will have the option to, among other things, require the 
Company to purchase any stock or portion thereof (including vested and 
unvested options) granted to him by the Company and/or pay him an amount 
equal to the present value 

                                       22
<PAGE>
of the compensation payable during the remaining term of his employment 
agreement. Moreover, pursuant to the Contemporary acquisition agreement, if 
the average trading price of the 1,402,850 shares of Class A Common Stock 
issued in the Contemporary acquisition is less than $13.33 during the twenty 
days prior to the second anniversary of the Contemporary acquisition, the 
Company will be required to pay one-half of such difference for each share 
held by the sellers of Contemporary on such date. Pursuant to the Network 
acquisition agreement, the Company has agreed to increase the purchase price 
for Network based on Network's actual 1998 EBITDA (as defined in the 
acquisition agreement) as follows: (a) by $4.0 million if the 1998 EBITDA 
equals or exceeds $9.0 million; (b) by an additional $4 for each $1 of 
additional 1998 EBITDA between $9.0 million and $10.0 million; and (c) by an 
additional $6 for each $1 of additional 1998 EBITDA between $10.0 million and 
$11.0 million. This contingent consideration of up to $14.0 million is 
payable in shares of Class A Common Stock or, in certain circumstances, in 
cash by no later than March 20, 1999. No assurance can be given that the 
Company will have sufficient cash or other available sources of capital to 
make any or all of the future or contingent payments described above. 

   In addition, certain of the agreements relating to the Pending 
Acquisitions provide for future contingent payments under certain 
circumstances. Pursuant to the agreement relating to the acquisition of FAME, 
the Company is obligated to pay to the FAME sellers additional amounts up to 
$15.0 million in equal annual installments over five years contingent on the 
achievement by FAME of certain EBITDA targets. The FAME agreement also 
provides for additional payments by the Company to the FAME sellers if FAME's 
EBITDA performance exceed the targets by certain amounts. Futhermore, if the 
Company disposes of all or substantially all of the assets or voting 
interests of FAME during the five years following the closing of the FAME 
acquisition, certain payments may become due to the FAME sellers out of the 
proceeds of such sale. See "Agreements Related to the Pending Acquisitions." 
In addition, pursuant to the agreement relating to the acquisition certain 
assets of Oakdale, if the combined EBITDA (as defined in the Oakdale 
acquisition agreement) of the Oakdale Music Theater and Meadows exceeds $5.5 
million in 1999, the Company will be obligated to pay the Oakdale sellers 
between 5.0 to 5.8 times the amount of such excess. 

 FUTURE ACQUISITIONS 

   The Company is in the process of negotiating certain additional 
acquisitions in the live entertainment business and related businesses, 
however, it has not yet entered into any definitive agreements with respect 
to such acquisitions and there can be no assurance that it will do so or have 
the necessary resources to consummate any of such acquisitions. 

 SPIN-OFF 

   Pursuant to the Tax Sharing Agreement, the Company is responsible for 
certain taxes of SFX Broadcasting, including taxes imposed with respect to 
income generated by the Company for the periods prior to the Spin-Off and 
taxes resulting from gain recognized in the Spin-Off. The Company will be 
allowed to offset any gain or income by the net operating losses of SFX 
Broadcasting (including net operating losses generated in the current year 
prior to the Spin-Off) which are available to offset such gain or income. The 
Company believes that the amount of taxes that it will be required to pay in 
connection with the Spin-Off will be determined by reference to the average 
of the high and low sales price of the Class A Common Stock on April 27, 1998 
(the date of the distribution of Common Stock pursuant to the Spin-Off). 
Increases or decreases in the value of the Common Stock subsequent to such 
date will not affect the tax liability. The average of the high and low sales 
price of the Class A Common Stock on April 27, 1998 was $30.50 per share, and 
Management estimates that the Company will be required to pay approximately 
$120 million pursuant to such indemnification obligation. Most of the tax 
liability relates to certain deferred intercompany transactions creating 
taxable income for the Company. Management believes that these deferred 
intercompany transactions will give rise to additional tax basis which will 
be available to offset future taxable income of the Company. Management's 
estimates of the amount of the indemnity payment and additional taxable basis 
are based on certain assumptions which management believes are reasonable. 
However, upon completion of the relevant tax forms, including 


                                       23
<PAGE>
any potential audits, such assumptions could be modified in a manner which 
would result in a significant variance in the actual amount of the tax 
indemnity. The Company intends to use a substantial portion of the net 
proceeds from the Offering to make such payment and expects that such payment 
will be due on or about June 15, 1998. Such payment will not result in any 
corresponding increase in the Company's assets or cash flows and, therefore, 
the purchasers of Class A Common Stock in the Offering will experience 
substantial dilution. For a more complete description of the tax 
indemnification obligations, see the Tax Sharing Agreement filed as an 
exhibit hereto. 

   The Company also incurred approximately $18.0 million in fees and expenses 
in connection with the Spin-Off which the Company will fund from its cash on 
hand. In addition, pursuant to the SFX Merger Agreement, the Company has 
agreed to assume SFX Broadcasting's obligations under the employment 
agreements of certain employees and senior management, including the 
obligation to make change of control payments to Messrs. Sillerman, Ferrel 
and Benson aggregating approximately $3.3 million, $1.5 million and $0.2 
million, respectively. The assumed obligations will also include the duty to 
indemnify Messrs. Sillerman and Ferrel for one-half of any excise taxes that 
may be assessed against them in connection with the change of control 
payments. It is also anticipated that Mr. Sillerman's employment agreement 
with the Company will provide for certain indemnities relating to the SFX 
Merger. In addition, pursuant to the Distribution Agreement, the Company will 
be required to indemnify SFX Broadcasting and each of its directors, officers 
and employees for any losses relating to the Company's assets and 
liabilities. 

   In addition, pursuant to the Distribution Agreement, the Company will 
assume certain obligations of SFX Broadcasting, including two real estate 
leases on its executive offices. Such leases provide for annual rent of 
approximately $1.4 million. 

 WORKING CAPITAL 

   As required by the Distribution Agreement, SFX Broadcasting contributed to 
the Company all of its concert and other live entertainment assets. At that 
time, the Company assumed all of SFX Broadcasting's liabilities relating to 
the live entertainment businesses, along with certain other liabilities. At 
the time of the SFX Merger, if Working Capital is negative, then the Company 
must pay the amount of the shortfall to SFX Broadcasting. If positive, SFX 
Broadcasting must pay such Working Capital to the Company. As of March 31, 
1998, the Company estimates that Working Capital to be paid by SFX 
Broadcasting to the Company would have been approximately $3.3 million. The 
Company does not expect that the amount of Working Capital will be materially 
different at the time of the SFX Merger, but the actual amount of Working 
Capital as of the SFX Merger will be a function of, among other things, the 
operating results of SFX Broadcasting through the date of the SFX Merger, the 
actual date of the closing of the SFX Merger and the actual cost of 
consummating the SFX Merger and related transactions. In February 1998, the 
Company reimbursed SFX Broadcasting approximately $25.3 million for consent 
fees, capital expenditures and other acquisition related fees previously 
funded by SFX Broadcasting. 

 INTEREST ON NOTES AND BORROWINGS UNDER THE CREDIT FACILITY 

   On February 11, 1998, the Company completed the private placement of 
$350.0 million of 9 1/8% Senior Subordinated Notes. Interest is payable on 
the Notes on February 1 and August 1 of each year. In addition, the Company 
borrowed $150.0 million under the Credit Facility at an interest rate of 
approximately 8.07%. 

   The degree to which the Company is leveraged will have material 
consequences to the Company. The Company's ability to obtain additional 
financing in the future for acquisitions, working capital, capital 
expenditures, general corporate or other purposes are subject to the 
covenants contained in the instruments governing its indebtedness. A 
substantial portion of the Company's cash flow from operations will be 
required to be used to pay principal and interest on its debt and will not be 
available for other purposes. The Indenture and the credit agreement with 
respect to the Credit Facility (the "Credit Agreement") contain restrictive 
financial and operating covenants, and the failure by the Company to comply 
with those covenants would result in an event of default under the applicable 
instruments, which 

                                       24
<PAGE>
in turn would permit acceleration of the debt under the instruments (and in 
some cases acceleration of debt under other instruments that contain 
cross-default or cross-acceleration provisions). The Company will be more 
vulnerable to economic downturns and could also be limited in its ability to 
withstand competitive pressures and in its flexibility in reacting to changes 
in its industry and general economic conditions. These consequences are not 
exhaustive; the Company's indebtedness could also have other adverse 
consequences. 

   The Company's ability to make scheduled payments of principal of, to pay 
interest on or to refinance its debt depends on its future financial 
performance, which, to a certain extent, is subject to general economic, 
financial, competitive, legislative, regulatory and other factors beyond its 
control, as well as the success of the businesses to be acquired and the 
integration of these businesses into the Company's operations. There can be 
no assurance that the Company will be able to make planned borrowings 
(including under the Credit Facility), that the Company's business will 
generate sufficient cash flow from operations, or that future borrowings will 
be available in an amount to enable the Company to service its debt and to 
make necessary capital or other expenditures. The Company may be required to 
refinance a portion of the principal amount of its indebtedness prior to 
their respective maturities. There can be no assurance that the Company will 
be able to raise additional capital through the sale of securities, the 
disposition of assets or otherwise for any refinancing. 

 CAPITAL EXPENDITURES 

   Capital expenditures totaled $11.8 million for the three months ended 
March 31, 1998. The Company expects that capital expenditures for the full 
fiscal year 1998 will be substantially higher than historical levels, due to 
the planned capital expenditures of approximately $29.0 million for 1998 at 
existing venues (including $17.0 million for the expansion and renovation of 
the Jones Beach Amphitheater and $12.0 million for the expansion and 
renovation of the PNC Bank Arts Center) and capital expenditures requirements 
of the Acquired Businesses, including $12.0 million for the construction of a 
new amphitheater serving the Seattle, Washington market. The Company expects 
to fund its remaining capital expenditures for 1998 (estimated by the Company 
to be approximately $32 million (including $25.0 million of major projects 
and $7.0 of other capital expenditures)) from its cash on hand. 

 FUTURE CHARGES TO EARNINGS 

   The Company anticipates entering into or amending employment agreements 
with certain of its executive officers before the Spin-Off. In connection 
with these agreements, the Company sold to the executive officers an 
aggregate of 650,000 shares of Class B Common Stock and 190,000 shares of 
Class A Common Stock at a purchase price of $2.00 per share. The Company will 
record a non-cash compensation charge in the second quarter of approximately 
$24 million in connection with this sale. In addition, the Company will 
recognize a charge to earnings of approximately $7.5 million in the second 
quarter associated with the Meadows Repurchase resulting from 247,177 shares 
of Class A Common Stock issued to Mr. Sillerman in connection with the 
Meadows Repurchase. The amount of such charge would be equal to the fair 
value of Class A Common Stock to be received by Mr. Sillerman at the time of 
the Meadows Repurchase. 

   Further, the Board, on the recommendation of its Compensation Committee, 
also has approved the issuance of certain "below market" stock options 
exercisable for an aggregate of 252,500 shares of Class A Common Stock. These 
options will vest over three years and will have an exercise price of $5.50 
per share. The Company will record non-cash compensation charges of 
approximately $2 million annually over the three-year exercise period. 

   The consummation of the Recent Acquisitions and other future acquisitions 
will also result in substantial charges to earnings relating to interest 
expense and the recognition and amortization of goodwill and other intangible 
assets. As of March 31, 1998, the Company's goodwill was approximately $470.7 
million. This balance will substantially increase due to the Pending 
Acquisitions. Goodwill and other intangible assets are being amortized using 
the straight line method over 15 years. 


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<PAGE>
 YEAR 2000 COMPLIANCE 

   The Company has addressed the risks associated with Year 2000 compliance 
with respect to its accounting and financial reporting systems and is in the 
process of installing new accounting and reporting systems. These systems are 
expected to provide better reporting, to allow for more detailed analysis, to 
handle both the 1997, Recent and the Pending Acquisitions and to be Year 2000 
compliant. The Company anticipates that the cost of implementing these 
systems will be approximately $3.0 million. The Company is in the process of 
examining Year 2000 compliance issues with respect to its vendors and does 
not anticipate that it will be subject to a material impact in this area. 

 RECENT ACCOUNTING PRONOUNCEMENTS 

   In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 131, "Disclosures About Segments of An 
Enterprise and Related Information" ("FAS 131"), which is effective for years 
beginning after December 15, 1997. FAS 131 establishes standards for the way 
that public business enterprises report information about operating segments 
in annual financial statements and requires that those enterprises report 
selected information about operating segments in interim financial reports. 
It also establishes standards for related disclosures about products and 
services, geographic areas and major customers. FAS 131 is effective for 
financial statements for fiscal years beginning after December 15, 1997, and 
therefore the Company will adopt the new requirements in 1998. Management has 
not yet completed its review of FAS 131 but does not expect that its adoption 
will have a material effect on the Company's statement of position or 
revenues, only on the composition of its reportable segments. 

 SOURCES OF LIQUIDITY 

   As of March 31, 1998, the Company's cash and cash equivalents totaled 
$94.0 million and its working capital deficiency totaled $110.8 million. In 
February of 1998, the Company received proceeds of $350.0 million from the 
Note Offering and borrowed $150.0 million under the Credit Facility in order 
to consummate the Recent Acquisitions (approximately $446.1 million) and pay 
certain fees and expenses related to the Recent Acquisitions (approximately 
$6.0 million). On a pro forma basis, after giving effect to the Transactions, 
the Pending Acquisitions and the Financing as if they had occurred on March 
31, 1998, the Company's working capital would have been approximately $27.8 
million at March 31, 1998. 

   The Company has incurred and will continue to incurr substantial amounts 
of indebtedness. As of March 31, 1998, the Company's consolidated 
indebtedness would have been approximately $628.0 million on a pro forma 
basis giving effect to the Transactions, the Pending Acquisitions and the 
Financing (assuming that the Spin-Off and the SFX Merger occur on the terms 
currently contemplated). The Company may incur indebtedness from time to time 
to finance acquisitions, for capital expenditures or for other purposes. 

   The Credit Facility consists of a $150.0 million seven year reducing 
revolving facility (the "Revolver") and a $150.0 million eight year term loan 
(the "Term Loan"). Upon consummation of the Financing, the Company will have 
$65.1 million in remaining borrowing availability under the Credit Agreement 
(subject to the ability of the Company to increase borrowing availability by 
up to an additional $50.0 million). Loans outstanding under the Credit 
Facility will bear interest, at the Company's option, at 1.875 to 2.375 
percentage points over LIBOR or the greater of the Federal Funds rate plus 
0.50% or BNY's prime rate. The interest rate spreads on the Term Loan and the 
Revolver will be adjusted based on the Company's Total Leverage Ratio (as 
defined in the Credit Agreement). The Company will pay a per annum commitment 
fee on unused availability under the Revolver of 0.50% to the extent that the 
Company's Leverage Ratio is greater than or equal to 4.0 to 1.0, and 0.375% 
if such ratio is less than 4.0 to 1.0 and a per annum letter of credit fee 
equal to the Applicable LIBOR Margin (as defined in the Credit Agreement) for 
the Revolver then in effect. The Revolver and Term Loan contain provisions 
providing that, at its option and subject to certain conditions, the Company 
may increase the amount of either the Revolver or Term Loan by $50.0 million. 
The Revolver and Term Loan contain usual and customary 

                                       26
<PAGE>
covenants, including limitations on (a) line of business, (b) additional 
indebtedness, (c) liens, (d) acquisitions, (e) asset sales, (f) dividends, 
repurchases of stock and other cash distributions, (g) total leverage, (h) 
senior leverage and (i) ratios of Operating Cash Flow (as defined in the 
Credit Agreement) to pro forma interest expense, debt service and fixed 
charges. The Company's obligations under the Revolver and Term Loan are 
secured by substantially all of its assets, including property, stock of 
subsidiaries and accounts receivable and guaranteed by the Company's 
subsidiaries. 

   The net proceeds of the Offering, together with anticipated borrowings 
under the Credit Facility, are expected to be approximately $347.0 million, 
which the Company intends to use to pay the anticipated tax indemnification 
obligation to SFX Broadcasting (approximately $120.0 million), to pay the 
cash portion of the purchase price of the Pending Acquisitions (approximately 
$216.1 million), to pay certain fees and expenses related to the Financing 
(approximately $17.9 million), to pay certain fees and expenses related to 
the Pending Acquisitions (approximately $6.0 million) and to make certain 
change of control payments to executive officers ($5.0 million). The 
foregoing represents the Company's best estimate of the allocation of the net 
proceeds of the Offering based on the current status of its business and as 
noted elsewhere herein could be subject to significant change. On a pro forma 
basis for the twelve months ended March 31, 1998, amounts available for 
borrowing under the Credit Facility plus the net proceeds from the Offering, 
would be sufficient for the uses of funds described herein. However, there 
can be no assurance that the Company will have sufficient cash flows at the 
time of borrowing to permit it to make borrowings under the Credit Facility 
in the amounts required. 

   Future events, including the actual amount of the tax indemnity payment, 
the ability of the Company to identify appropriate acquisition candidates, 
the availability of other financing and funds generated from operations and 
the status of the Company's business from time to time, may make changes in 
the allocation of the net proceeds of the Offering necessary or desirable. 

   Furthermore, certain agreements of the Company, including the Distribution 
Agreement, the Tax Sharing Agreement, certain employment agreements and the 
agreements relating to the Recent Acquisitions and the Pending Acquisitions 
provide for tax and other indemnities, purchase price adjustments and future 
contingent payments in certain circumstances. There can be no assurance that 
the Company will have sufficient sources of funds to make such payments 
should they come due. In addition, consistent with its operating strategy, 
the Company intends to pursue additional expansion opportunities and expects 
to continue to identify and negotiate with respect to substantial 
acquisitions in the live entertainment business. However, it may be unable to 
identify and acquire additional suitable businesses or obtain the financing 
necessary to acquire the businesses. Future acquisitions by the Company could 
result in (a) potentially dilutive issuance of equity securities, (b) the 
incurrence of substantial additional indebtedness and/or (c) the amortization 
of expenses related to goodwill and other intangible assets, any or all of 
which could materially adversely affect the Company's business, financial 
condition and results of operations. 

PART II OTHER INFORMATION 

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 

   (c) On February 11, 1998, the Company sold $350.0 million in aggregate 
principal amount of its 9 1/8% Senior Subordinated Notes due 2008. Lehman 
Brothers, Goldman Sachs, & Co., BNY Capital Markets, Inc. and ING Barings 
(the "Initial Purchasers") were the purchasers of the Notes and resold the 
Notes (i) to certain "qualified institutional buyers," as defined in Rule 
144A of the Securities Act, and (ii) outside the United States to certain 
persons in reliance upon Regulation S promulgated under the Securities Act. 
The aggregate cash offering price of the Notes was $350.0 million and the 
aggregate discounts and commissions related to the sale were $10.5 million. 
The Company relied upon an exemption from registration under Section 4(2) of 
the Securities Act as a transaction not involving a public offering. The 
Company has agreed to register the Notes (or a new series of securities 
identical in all respects to the Notes) under the Securities Act within a 
certain time period. 

                                       27
<PAGE>
   On February 25, 1998, the Company consummated its acquisition of PACE. In 
connection with such acquisition, the Company issued to the sellers of PACE 
1.5 million shares of Class A Common Stock upon consummation of the Spin-Off. 

   On February 27, 1998, the Company consummated its acquisition of 
Contemporary. In connection with such acquisition, the Company issued to the 
sellers of Contemporary shares of the Company's series A redeemable 
convertible preferred stock which automatically converted into 1,402,850 
shares of Class A Common Stock upon consummation of the Spin-Off. 

   On February 24, 1998, the Company consummated its acquisition of BGP. In 
connection with such acquisition, the Company issued to the sellers of BGP 
options to purchase an aggregate of 562,640 shares of Class A Common Stock 
upon consummation of the Spin-Off. 

   On February 27, 1998, the Company consummated its acquisition of Network. 
In connection with such acquisition, the Company issued to the sellers of 
Network 750,188 shares of Class A Common Stock upon consummation of the 
Spin-Off. 

   On May 1, 1998, upon the consummation of the Spin-Off, the Company issued 
526,566 shares of Class A Common Stock to the holders of certain options and 
SAR's issued by SFX Broadcasting. 

   In May 1998, the Company sold 190,000 shares of Class A Common Stock and 
650,000 shares of Class B Common Stock to certain executive officers for a 
purchase price $2.00 per share. 

   The sales of securities to the sellers of PACE, Contemporary, BGP and 
Network and the issuance of shares to the holders of options and SARs were 
private transactions not involving a public offering and were exempt from the 
registration provisions of the Securities Act pursuant to Section 4(2) 
thereof. Each of these sales was made without the use of an underwriter. 

   In addition, the Company has agreed to issue 1,531,782 shares of Class A 
Common Stock in connection with the acquisition of FAME and Don Law. 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 

   (a) Exhibits 

<TABLE>
<CAPTION>
   EXHIBIT 
   NUMBER                                DESCRIPTION OF EXHIBIT 
   -------                               ----------------------
   <S>       <C>
    **2.1    Distribution Agreement among the Company, SFX Broadcasting and SFX Buyer 
    **2.2    Tax Sharing Agreement among the Company, SFX Broadcasting and SFX Buyer 
    **2.3    Employee Benefits Agreement among the Company, SFX Broadcasting and SFX Buyer 
    **3.1    Amended and Restated Certificate of Incorporation of the Company 
      3.2    Certificate of Amendment to the Certificate of Incorporation of SFX Entertainment, Inc., as 
             filed with the Secretary of State of the State of Delaware on February 25, 1998 
             (incorporated by reference to Exhibit 3.1 to Form 8-K of SFX Entertainment, Inc. (Commission 
             File No. 333-43287) filed with the Securities and Exchange Commission on March 11, 1998). 
      3.3    Certificate of Designation relating to the Series A Preferred Stock of SFX Entertainment, 
             Inc., as filed with the Secretary of State of the State of Delaware on February 27, 1998 
             (incorporated by reference to Exhibit 3.1 to Form 8-K of SFX Entertainment, Inc. (Commission 
             File No. 333-43287) filed with the Securities and Exchange Commission on March 11, 1998). 
      4.1    Indenture, dated February 11, 1998, by and among SFX Entertainment, Inc., certain of its 
             subsidiaries and The Chase Manhattan Bank (incorporated by reference to Exhibit 10.2 to the 
             Form 8-K of SFX Broadcasting, Inc. (Commission File No. 0-22486) filed with the Securities 
             and Exchange Commission on February 18, 1998). 




                                       28
<PAGE>
   EXHIBIT 
   NUMBER                                       DESCRIPTION OF EXHIBIT 
   -------                                      ----------------------
     10.1    Registration Rights Agreement, dated as of February 11, 1998, relating to the 9 1/8% Senior 
             Subordinated Notes due 2008 of SFX Entertainment, Inc., the subsidiaries of SFX 
             Entertainment named therein, Lehman Brother Inc., Goldman Sachs & Co., BNY Capital Markets, 
             Inc. and ING Barings (incorporated by reference to Exhibit 10.3 to the Form 8-K of SFX 
             Broadcasting, Inc. (Commission File No. 0-22486) filed with the Securities and Exchange 
             Commission on February 18, 1998). 
     10.2    Credit and Guarantee Agreement, dated as of February 26, 1998, by and among SFX 
             Entertainment, the Subsidiary Guarantors party thereto, the Lenders party thereto, Goldman 
             Sachs Credit Partners, L.P., as co-documentation agent, Lehman Commercial Paper Inc., as 
             co-documentation agent, and The Bank of New York, as administrative agent (incorporated by 
             reference to Exhibit 10.2 to the Form 8-K of SFX Entertainment, Inc. (Commission File No. 
             333-43287) filed with the Securities and Exchange Commission on March 11, 1998). 
     10.3    Purchase Agreement, dated February 5, 1998, relating to the 9 1/8% Senior Subordinated Notes 
             due 2008 of SFX Entertainment, Inc., the subsidiaries of SFX Entertainment named therein, 
             Lehman Brother Inc., Goldman Sachs & Co., BNY Capital Markets, Inc. and ING Barings 
             (incorporated by reference to Exhibit 10.4 to the Form 8-K of SFX Entertainment, Inc. 
             (Commission File No. 333-43287) filed with the Securities and Exchange Commission on March 
             11, 1998). 
   **10.4    Stock Purchase Agreement, dated as of April 29, 1998, among SFX Sports Group, Inc., SFX 
             Entertainment, Inc. and David Falk, Curtis Polk and G. Michael Higgins 
   **10.5    Asset Purchase Agreement, dated April 29, 1998, by and among Blackstone Entertainment LLC, 
             its members, DLC Acquisition Corp., and SFX Entertainment, Inc. 
   **10.6    Purchase and Sale Agreement, dated April 22, 1998, by and among Oakdale Concerts, LLC, 
             Oakdale Development Limited Partnership and Oakdale Theater Concerts, Inc. 
   **10.7    Stock Purchase and Redemption Agreement, dated May 1, 1998, among Event Merchandising, Inc., 
             its stockholders and EMI Acquisition Sub, Inc. 
   **10.8    Letter of Intent, dated March 6, 1998, among SFX Entertainment, Inc., TBA Entertainment 
             Corporation, Brian F. Murphy, Randy Brogna and Matt Curto 
   **10.9    Letter of intent, dated March 9, 1998, among SFX Entertainment Inc., TBA Entertainment 
             Corporation, Robert E. Geddes, Thomas Miserendino and Brian E. Murphy 
     27.1*   Financial Data Schedule. 
</TABLE>

------------ 
*      Filed herewith. 

**     Incorporated by reference to Amendment No. 1 to the Registration 
       Statement on Form S-1 (File No. 333-50079) filed with the Commission on 
       May 5, 1998. 

   (b)  Reports on Form 8-K 

   On March 11, 1998, the Company filed a Form 8-K under Item 2 (Acquisition 
or Disposition of Assets) thereof disclosing the acquisition by the Company 
of (i) BG Presents. Inc., (ii) PACE Entertainment Corporation, (iii) The 
Contemporary Group, (iv) The Album Network, Inc., SJS Entertainment 
Corporation and The Network 40, Inc. and (v) Concert/Southern Promotions; and 
under Item 5 (Other Events) thereof, disclosing the execution of a Credit and 
Guarantee Agreement. 

                                       29
<PAGE>
                                  SIGNATURES 

   Pursuant to the requirement 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. 

                                          SFX ENTERTAINMENT, INC. 

Date: May 4, 1998                         By: /s/ Howard Tytel 
                                              ------------------------------- 
                                              Howard J. Tytel 
                                              Executive Vice President, 
                                              General Counsel, 
                                              Secretary and Director 

Date: May 4, 1998                         By: /s/ Thomas P. Benson 
                                              ------------------------------- 
                                              Thomas P. Benson 
                                              Chief Financial Officer, 
                                              Vice President and Director 






































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