<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

               [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year Ended December 31, 1997
                  -------------------------------------------

                                      OR
             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from ___ to ___

                        Commission File Number 0-23600

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

              DELAWARE                                 13-3757816
              --------                                 ----------
      (State or other jurisdic-                     (I.R.S. Employer
       tion of incorporation or                    Identification No.)
            organization)

                 335 MADISON AVENUE, NEW YORK, NEW YORK 10017
              ---------------------------------------------------
              (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code 212-450-8000
                                                           ------------

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

<TABLE>
<CAPTION>
               Title of class                           Name of each exchange on which registered
               --------------                           -----------------------------------------
<S>                                                         <C>                                                   
Class A Common Stock, par value $.01 per share                 The Nasdaq Stock Market
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:  None

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sales price of the Class A Common Stock on
March 25, 1998, as reported on NASDAQ was approximately $22,211,844. Shares of
Common Stock held by each officer and director and by each person who owns 5
percent or more of the outstanding Common Stock have been excluded in that
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.

As of March 25, 1998, the Registrant had outstanding 5,262,135 shares of Class
A Common Stock, par value $.01 per share and 7,155,053 shares of Class B
Common Stock, par value $.01 per share.

                      Documents Incorporated by Reference

Part III: Portions of Registrant's Proxy Statement to be filed within 120 days
of the end of the fiscal year covered by this report.

                                 Page 1 of 25
                     Index to Exhibits on Page E-1 and E-2


<PAGE>



                       MOVIEFONE, INC. AND SUBSIDIARIES

                               TABLE OF CONTENTS
                                   FORM 10-K


                                                                           PAGE
                                                                           ----
                                    PART I                                 
                                                                           
                                                                           
Item 1.  BUSINESS                                                            3
                                                                           
Item 2.  PROPERTIES                                                         11
                                                                           
Item 3.  LEGAL PROCEEDINGS                                                  12
                                                                           
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                13
                                                                           
                                                                           
                                    PART II                                
                                                                           
                                                                           
Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                 
         STOCKHOLDER MATTERS                                                14
                                                                           
Item 6.  SELECTED FINANCIAL DATA                                            15
                                                                           
Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION       
         AND RESULTS OF OPERATIONS                                          16
                                                                           
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                        22
                                                                           
Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING       
         AND FINANCIAL DISCLOSURE                                           22
                                                                           
                                                                           
                                   PART III                                
                                                                           
                                                                           
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                 23
                                                                           
Item 11. EXECUTIVE COMPENSATION                                             23
                                                                           
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     23
                                                                           
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                     23
                                                                           
                                                                           
                                    PART IV                                
                                                                           
                                                                           
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K   24
         SIGNATURES                                                        
         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                       
         EXHIBIT INDEX







<PAGE>

                                    PART I


ITEM 1.    BUSINESS

General

         MovieFone, Inc. (the "Company"), incorporated in Delaware in March
1994, is the leading provider of interactive advertising, information, and
ticketing services to the motion picture industry and moviegoers through its
interactive telephone movie guide ("MovieFone") and its online service
("MovieLink"). MovieFone(R), commonly known by its trademark telephone numbers
such as 777-FILM(R), and MovieLink(R) provide moviegoers with movie listings
for approximately 13,000 movie screens (representing more than 95 percent of
the total movie screens in the Company's markets and approximately 40 percent
of the total screens in the United States) and the ability to purchase tickets
in advance by credit card for many of these screens. The Company currently
operates in 31 markets: New York, Los Angeles, San Francisco, Boston, Chicago,
Dallas/Ft. Worth, Miami, Denver, Philadelphia, San Diego, Houston, Cleveland,
Washington, D.C., Atlanta, Palm Springs, Santa Barbara, Minneapolis/St. Paul,
Sacramento, Seattle, Tampa/St. Petersburg, Orlando, Phoenix, Detroit, Las
Vegas, Kansas City, Cincinnati, Salt Lake City, San Antonio, Nashville,
Baltimore and Toronto, Canada. The Company also provides "Private Label"
MovieFone systems for individual theater chains. During the year ended
December 31, 1997, the Company received approximately 69.5 million MovieFone
calls, 15 million MovieLink sessions, and sold approximately 3.2 million
tickets via teleticketing.

         At the beginning of each call, MovieFone callers hear a 20-second
advertisement usually for an upcoming movie (the "Feature Billboard"), after
which they access movie listings by selecting a movie and theater using the
buttons on their touch-tone telephone. MovieFone provides these listings free
of charge and, for a $1.00 to $1.50 per-ticket fee, offers callers the
opportunity to purchase tickets in advance, thereby avoiding ticket-buyers
lines and the disappointment of being turned away from a sold-out show. The
Feature Billboard advertisement, which the Company sells primarily to motion
picture studios on a per-call basis, provides these advertisers with a
highly-targeted medium for marketing their movies, with the added benefit that
it is linked to a direct ticket-selling mechanism.

         The Company's primary sources of revenue include (i) advertising
sales on MovieFone and MovieLink to motion picture studios and other
advertisers ($9.5 million, $7.7 million, and $5.1 million in 1997, 1996, and
1995 respectively), (ii) sponsorships and other promotional services to local
media and credit card companies ($5.2 million, $4.4 million, and $3.7 million
in 1997, 1996, and 1995, respectively), (iii) service fees for movie tickets
sold to the public via MovieFone's and MovieLink's teleticketing service ($4.1
million, $2.7 million, and $2.1 million in 1997, 1996 and 1995, respectively),
and (iv) other revenue which primarily includes software license fees,
hardware sales, and installation and service fees from Mars theater management
system sales.

                                       3

<PAGE>



Business

   MovieFone

         MovieFone is the interactive telephone movie guide commonly known by
its trademark telephone numbers such as 777-FILM. MovieFone provides
moviegoers with movie listings for approximately 13,000 movie screens
(representing more than 95 percent of the total movie screens in the Company's
markets and approximately 40 percent of the total screens in the United
States) and the ability to purchase tickets in advance by credit card for many
of these screens (see "Teleticketing" below).

         Each MovieFone caller hears a single 20-second Feature Billboard
advertisement at the beginning of each call. The Company sells this time on a
per-call basis to motion picture studios that use it to advertise their movies
and to consumer products companies that use it to advertise their merchandise
and services. In addition to the Feature Billboard advertisement, the Company
also sells another advertising position on MovieFone called "Previews". Motion
picture studios purchase Previews on a per-preview basis to advertise their
movies. Previews provide MovieFone callers with movie descriptions including
star names, plot, running time, and rating.

         All of the major motion picture studios and most "mini-majors" have
advertised on MovieFone including, among others, Buena Vista Distribution (the
distribution arm of Touchstone Pictures, Walt Disney Pictures, and Hollywood
Pictures), Columbia Pictures, MGM, Miramax, Paramount Pictures, TriStar
Pictures, 20th Century Fox, Fox Searchlight, Universal Pictures, Warner
Brothers, October Films, Trimark, Gramercy, Polygram, and New Line. Non-studio
customers have included, Samsung, NBC, A&E, MTV, and TCBY. Historically the
Company has sold the bulk of its available advertising time to motion picture
studios. During 1997, MovieFone's average rate card price for advertisers was
$0.15 per call for Feature Billboard advertisements and $20,000 per Preview,
though advertisers may receive a discount for bulk purchases of advertising
time.

         The Feature Billboard is sold on a per-call basis and may be
"rotated" among multiple advertisers. For example, the Company may sell 50
percent of its calls in a specified week to each of two advertisers. In this
case, MovieFone's call distribution system ensures that every other caller
hears the advertisement for the second movie in the rotation. While
advertising time on MovieFone is generally sold nationally for all MovieFone
markets, the Company can also sell advertisers time for each MovieFone market
separately. MovieFone also enables advertisers to customize and rotate
different messages in one or multiple markets.

         The Company's primary market for selling advertising time has been
motion picture studios. In 1997, 94 films were advertised on MovieFone.
According to Entertainment Data Inc., the major motion picture studios
released approximately 191 movies in 1997 and the total number of movies
released in 1997 by all distributors was approximately 275.


                                       4

<PAGE>



         In addition to the services the Company offers under MovieFone's
centralized numbers such as 777-FILM(R), which provide movie listings and
teleticketing services for multiple theater chains in a given market
("MovieFone Systems"), the Company provides some theater chains with systems
that provide these services for a single theater chain in a given market
("Private Label MovieFone Systems"). As with MovieFone Systems, the Company is
able to run Feature Billboard and Previews advertisements and sell tickets on
these Private Label MovieFone Systems.

MovieLink

         MovieLink, the online version of MovieFone, was launched on the World
Wide Web in July 1995 and currently logs as many as 800,000 individual user
sessions each week. The service offers up-to-the-minute movie showtimes for
13,000 screens, online ticket sales (see "Teleticketing"), downloadable movie
trailers and other multimedia, movie synopses and production notes, a parents'
ratings guide, and a store featuring merchandise from popular movies. Users
may access MovieLink through any commercial online service or directly on the
Internet. To help increase MovieLink usage, the Company has entered into
marketing alliances with such online services as America Online, WebTV, and
Microsoft, which provide direct connections to MovieLink from their respective
services. In addition, the Company has established links with hundreds of
major Web sites for promotion and traffic-building. The Company has begun
selling advertising on MovieLink to a number of motion picture studios, as
well as various other advertisers, including M&M Mars, Microsoft, Chase
Manhattan Bank, and AT&T.

         The Company has also entered into agreements with many motion picture
studios to provide them with a custom, or "Private Label" version of MovieLink
just for their films. These custom pages provide theater and showtime
information only for the specific movie being promoted on the studio's web
site. MovieLink earns a service fee for providing these custom links, which is
reported in Other Revenue in the statement of operations. MovieLink
earns a service fee for providing this company with customized, co-branded
access to certain pages of MovieLink, which is reported in Other Revenue in
the statement of operations.

         During 1997, the Company launched a new service called MovieMail.
MovieMail is a direct e-mail service that provides moviegoers with free,
customized movie information. Moviegoers who subscribe to MovieMail receive
e-mails telling them about movies that match their individual film
preferences, including local showtimes for their closest neighborhood
theaters. Revenue for MovieMail comes from advertisers who pay to promote
their movies or other products.




                                       5

<PAGE>



   Teleticketing

         The Company currently sells tickets for most major theater chains in
15 of MovieFone's markets. The Company currently charges ticket buyers a
service fee of $1.00 to $1.50 per ticket purchased through MovieFone or
MovieLink. 

         The Company sells tickets through its automated teleticketing system
without the use of live operators, mailing of tickets, or other labor
intensive elements of conventional box-office or telephone ticket sales. After
hearing showtimes for a movie and theater of their choice, MovieFone callers
are asked if they wish to purchase tickets. They are then asked to enter their
credit card number and the number of tickets they require, and are instructed
to pick up their tickets at the theater. Tickets may be retrieved at the
theater either through an ATM-style ticket dispensing machine located in the
theater lobby or at a "will call" window at the theatre box-office.








                                       6

<PAGE>



   Mars Theater Management System

         The Mars theater management system includes proprietary software and
off-the-shelf hardware which provides theaters with a complete point-of-sale
and theater management system to perform such functions as theater scheduling,
ticketing (including on-line teleticketing through MovieFone and MovieLink),
concession operations, and home office reporting. The Company offers
procurement, installation, training, and help desk support and service for the
Mars theater management system. As of December 31, 1997, 85 Mars theater
management systems were installed in theaters in several markets across the
United States. The primary sources of revenue from Mars theater management
systems include software license fees, hardware sales, and installation and
service fees, which are reported as other revenue in the statements of
operations.

   Sponsorships

         The Company has numerous sponsorship agreements with radio stations,
television stations, cellular telephone companies, and local newspapers,
including The New York Times and the Los Angeles Times. These entities provide
the Company with advertising space or airtime in return for promotional
"sponsorship" mentions on the local MovieFone System and presence on the
Company's in-theater promotional materials. Many of the entities also provide
revenue in the form of quarterly promotional fees or other consideration.

         In addition, the Company has sold a "preferred card" sponsorship to
American Express. In return for an annual fee, the Company includes the logo
of the American Express charge card on its in-theater promotional materials,
in its newspaper and other print advertising, and mentions the American
Express card as part of the message teleticketing customers hear on MovieFone
(e.g. "We welcome the American Express Card, and also accept . . ."). The
Company also has agreements with cellular telephone companies, including AT&T
Wireless. These agreements allow the cellular telephone companies to permit
their subscribers to access MovieFone using a special abbreviated dialing
pattern (such as "*-FILM") in return for which the Company receives payments,
promotional support, and/or free cellular airtime.

New Business Opportunities

   Other Ticketing Services

         The Company believes that some of the elements of its teleticketing
system may be applicable to the sale of tickets for non-movie events, such as
live theater, concerts, and sporting events, and that there may be an
opportunity to expand its teleticketing capabilities to include the sale of
tickets to these events. The Company does not currently provide any of these
services, nor has it generated any revenue from these services and no
assurances can be given that, if it determines to provide these services, the
Company will be successful in doing so.



                                      7

<PAGE>



   Direct Marketing and Research

         The Company conducts surveys of MovieFone callers from time to time
in which callers provide certain demographic information in response to
computer automated questions. 

         During 1997, the Company hired an employee to further develop direct
marketing and research products as described above. No assurances can be given
that the Company will be successful in this venture. In addition, there are
many competitors in these businesses which have been in existence
significantly longer and have significantly greater financial and other
resources than the Company.


Key Relationships and Agreements

   Motion Picture Studios

         All of the major motion picture studios have purchased advertising
time from the Company. Also, most major motion picture studios have entered
into license agreements with the Company which permit them to use the
Company's trademark telephone numbers and World Wide Web address in their own
print and broadcast advertising to encourage moviegoers to call MovieFone or
use MovieLink to purchase tickets.

   Theater Chain Agreements

         The Company has agreements with many major theater chains for the
sale of tickets to their theaters. The Company's agreements with theater
chains generally require that the theater chains assist the Company in
advertising its services on an on-going basis by displaying and distributing
printed promotional materials and running on-screen advertisements in their
theaters.

   Motion Picture Association of America ("MPAA")

         The Company has a multi-year agreement with the MPAA, pursuant to
which the Company provides MPAA ratings information in its markets through a
special "Ratings Guide" branch of MovieFone's interactive telephone service.
The MPAA pays an annual fee for this service and supports usage of MovieFone
by promoting the numbers as a means of obtaining ratings information. In
addition, the Company has been appointed as an Associate Member of the MPAA.


                                       8

<PAGE>



System and Operations

         MovieFone allows consumers to access information and execute
transactions using the buttons and corresponding numbers and letters on a
touch-tone telephone. MovieFone allows callers to access movie listings by:
(i) entering the first three letters of the movie title on their touch-tone
keypad; (ii) browsing through a list of current movie titles and previews
organized by genre; and (iii) picking a particular theater and choosing from 
the movies currently playing there. Callers are asked to enter
their 5-digit zip code, which permits MovieFone to provide showtimes for the
theaters nearest them. If callers wish to see a movie in another area, they
can choose to find a theater geographically. Where teleticketing is available,
callers can enter their credit card number and the number of tickets they wish
to purchase.

         MovieLink is the online version of MovieFone accessed via the
internet's world wide web. MovieLink users can access movie listings by: (i)
movie title, (ii) movie genre, (iii) star name, (iv) theatre name, and (v)
time. Aside from the service charge for tickets the Company does not charge 
moviegoers to use MovieFone or MovieLink.

         In order to ensure that MovieFone is a local call from most areas
within each market, the Company operates individual computer
centers in each area code in the markets in which the Company
operates. These computer centers use computer equipment containing "voice
processing cards" and other components, all of which are readily available
from multiple manufacturers. The Company collects showtimes and other data
needed to update the information stored at its computer centers in two ways.
Listing information from some theaters is collected electronically, in which
case the respective MovieFone System is updated directly via a computer
interface to each theater. Listing information from other theaters is sent by
theater chains via facsimile to the Company's data center in New York City.
There, the listing information is entered manually via the Company's
proprietary data entry system. Once the information is entered and checked for
accuracy, it is sent by computer modem via regular telephone lines to the
corresponding local computer center, where it updates the information
available to MovieFone callers. This information is then sent to the computer
centers in the manner described above. The MovieFone system is readily
expandable by adding new phone lines and computer equipment. The Company
currently employs over 3,000 incoming telephone lines nationwide.


Competition

         Generally, the Company's advertising sales business competes with
other advertising vehicles, such as newspapers and television, while its
teleticketing business primarily competes with the sale of tickets at theater
box-offices.

                                       9

<PAGE>




        The business of selling advertising time to motion picture studios is
highly competitive and motion picture studios spend a much larger portion of
their advertising dollars on more traditional forms of advertising such as
television and newspapers. 

         For the teleticketing business potential competitors include theater 
chains, which may choose themselves or through third parties to develop the 
technology to provide teleticketing without the assistance of the Company, 
and other ticket selling companies. Other potential competitors include motion 
picture studios and providers of remote ticket sales services for events other 
than motion pictures. There can be no assurance that, should any of these 
potential competitors determine to engage in teleticketing or assist the 
Company's competitors in the provision of such services, the Company could 
compete effectively with such competitors or potential competitors. If 
potential competitors were to attempt to compete with the Company, these 
competitors might encourage theater chains to enter into teleticketing 
relationships with such competitors in addition to or in lieu of entering 
into, or maintaining, relationships with the Company. Such competition could
reduce the Company's revenues.

         The Company's Mars theater management system has several direct 
competitors and some theater chains choose to create their own systems 
internally.

Trademarks

         The Company has numerous registered trademarks including"MovieFone",
"777-FILM", "MovieLink", and others.

                                      10

<PAGE>



These registrations expire in 2000 through 2005 and are renewable by the
Company. The Company has initiated registration applications for a number of
other trademarks. The Company has not sought patent protection and holds no
patents.


Regulation

         The Company is not currently subject to direct regulation other than
regulation applicable generally to businesses. However, changes in the
regulatory environment relating to the industry in which the Company currently
operates, or regulatory schemes applicable to new business areas in which the
Company may enter could have an effect on the Company's business. Increasing
concern over consumer privacy has led to the introduction from time to time of
proposed legislation which could impact the direct marketing industries. The
Company does not know when or whether any such proposed legislation may pass
or whether any such legislation would relate to the types of services the
Company intends to develop. The Company cannot predict the effect, if any,
that any future regulation may have on its business.


Employees

         As of December 31, 1997, the Company employed 112 persons (94
full-time and 18 part-time), 7 of whom constituted executive management, 25 of
whom were employed in sales and marketing, 7 of whom were employed in
accounting and administration and 73 of whom were employed in system
development, operations, and maintenance. None of the Company's employees is
represented by union or bargaining agents. The Company believes that its
relations with its employees are satisfactory.



ITEM 2.  PROPERTIES

         The Company leases its premises in two locations. Its New York office
is located at 335 Madison Avenue, New York, NY 10017. Its Los Angeles office
is located at 1875 Century Park East, Los Angeles, CA 90067. The Company also
has approximately 55 leases at various sites for space located in the markets
in which it operates, aggregating to approximately 5,000 square feet.



                                      11

<PAGE>



ITEM 3.  LEGAL PROCEEDINGS

In-Touch Technologies

         In March 1994, In-Touch Technologies, Ltd. ("In-Touch") commenced an
action in the United States District Court for the Southern District of New
York against the Company and others contending that the Company and others had
violated the securities laws and engaged in common law fraud and
misrepresentation in connection with a loan transaction between The Falconwood
Corporation ("Falconwood"), a related party, and In-Touch in an action
entitled In-Touch Technologies, Ltd. et al. v. The Falconwood Corporation, et
al. Pursuant to a Stipulation of Dismissal dated January 5, 1998, all claims
against all of the defendants, including the Company, were discontinued with
prejudice.

Pacer/CATS

         On November 1, 1994 the Company filed a Demand for Arbitration
("Demand") with the American Arbitration Association ("AAA") against
Pacer/CATS Corporation ("Pacer/CATS") in an action entitled PromoFone, Inc. et
al. v. Pacer/CATS Corporation. The Demand alleged that Pacer/CATS has failed
to perform its obligations under the February 14, 1992 agreement between
Promofone, Inc. and Pacer/CATS and promoted the services of Ticketmaster
Corporation ("Ticketmaster"). The Demand sought an injunction and damages in
an unspecified amount. Evidentiary hearings in the arbitration began September
30, 1996 and concluded on April 11, 1997. Final briefs were filed during May
and June and closing arguments in the arbitration were heard on June 10, 1997.
On July 23, 1997, a unanimous panel of three arbitrators awarded the Company
$22,751,250 in monetary damages against Pacer/CATS, its successors and
assigns, and all persons or entities acting in concert with them. On July 24,
1997, the Company filed a petition in the Supreme Court of the State of New
York to confirm the arbitration award. On November 20, 1997, the Court
confirmed the arbitration award and the decision was entered on November 25,
1997. On December 22, 1997, Pacer/CATS filed a notice of appeal of the
decision to confirm the arbitration award. The appeal has not been perfected
to date. On February 23, 1998, the arbitration award was entered as a valid,
enforceable judgment. The Company has not received any proceeds from the
award.

Ticketmaster

         On March 17, 1995, the Company filed an action against Ticketmaster
in the U.S. District Court for the Southern District of New York, alleging
that Ticketmaster violated the federal antitrust laws and the common laws of
New York. In particular, the Company alleged that Ticketmaster violated the
Sherman Act by entering into unlawful exclusive-dealing contracts, by making
unlawful acquisitions, and by engaging in other exclusionary conduct including
the acquisition of PCC Management, Inc. ("PCC"). The Company also alleges that
Ticketmaster tortiously interfered with the Company's contract with PCC,
tortiously interfered with the Company's prospective business relationships,
otherwise interfered with business relationships of

                                      12

<PAGE>



the Company, misappropriated the Company's trade secrets, breached the
contractual obligations it assumed as an affiliate of PCC, and engaged in
unfair competition. On May 9, 1995, Ticketmaster filed a motion to dismiss.
The Company filed opposition to this motion on June 27, 1995. Oral argument on
Ticketmaster's motion was held in late September 1995. The court took the
motion under submission. To date, no decision has been rendered. On March 4,
1997, the Company filed an amended complaint against Ticketmaster, adding a
federal claim of racketeering and additional antitrust and tort claims. On
April 17, 1997, Ticketmaster filed a motion to dismiss all federal claims in
the amended complaint. On August 15, 1997, the Company submitted its
opposition to the motion to dismiss. Ticketmaster submitted a reply to the
opposition on November 19, 1997. On January 6, 1998, the Company submitted a
sur-reply to Ticketmaster's reply. Ticketmaster submitted a response to the
Company's sur-reply on January 28, 1998.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the registrant's security
holders during the last quarter of its fiscal year ended December 31, 1997.

                                      13

<PAGE>



                                    PART II



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


         The Company's Class A common stock, par value $.01 per share (the
"Class A Common Stock"), is traded on The Nasdaq Stock Market under the symbol
MOFN. As of December 31, 1997, the registrant had 49 Class A Common Stock
shareholders of record, which represented approximately 1,100 beneficial
shareholders. The following table sets forth the range of high and low prices
for shares of the Class A Common Stock for the fiscal quarters indicated, as
furnished by The Nasdaq Stock Market.

                                                     HIGH             LOW
Fiscal Year Ended December 31, 1997
         First Quarter                               5-1/4           4
         Second Quarter                              8-7/8           4-1/8
         Third Quarter                               8-1/2           4-5/8
         Fourth Quarter                              7-5/8           5-1/4

Fiscal Year Ended December 31, 1996
         First Quarter                               5-1/2           3-5/8
         Second Quarter                              7-3/4           4-1/4
         Third Quarter                               5-1/2           3-1/4
         Fourth Quarter                              5-1/8           3-7/8


         There is no established public trading market for the Company's Class
B common stock. The registrant had 7 Class B common stock shareholders of
record at December 31, 1997.

         The Company has not paid any cash dividends on any of its common
stock since its inception. While the Board of Directors has general authority
over dividend policy, and there are no material restrictions on the Company's
ability to pay dividends, it does not anticipate paying cash dividends in the
foreseeable future.

                                      14

<PAGE>


ITEM 6.          SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                    ----------------------------------------------------------
                                      1997        1996        1995         1994        1993
                                      -----       -----       -----        -----       ----
                                                     (in thousands, except per share data)
<S>                                 <C>         <C>         <C>          <C>         <C>      
STATEMENT OF OPERATIONS DATA:
Total Revenue (a)                   $  20,598   $  15,355   $  11,245    $  8,140    $   4,571
                                    =========   =========   =========    ========    =========
Net Loss                            $  (1,774)  $  (1,957)  $  (1,723)   $ (1,943)   $  (2,219)
                                    =========   =========   =========    ========    =========
Net Loss per common share
   Basic and diluted                $   (0.14)  $   (0.15)  $   (0.13)   $  (0.17)   $   (0.22)
                                    =========   =========   =========    ========    =========
</TABLE>

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                    -----------------------------------------------------------
                                      1997        1996        1995         1994        1993
                                      -----       -----       -----        -----       ----
                                                              (in thousands)
<S>                                 <C>         <C>         <C>          <C>         <C>      
BALANCE SHEET DATA:
Total Assets                        $  21,593   $  23,956   $  24,020    $ 25,152    $   3,241
                                    =========   =========   =========    ========    =========
Long-term debt                      $      --   $      --   $      --    $     --    $   3,897
                                    =========   =========   =========    ========    =========
</TABLE>

(a)  Amounts for years prior to 1995 have been reclassified to eliminate from
     revenue the price of tickets sold.



                                      15
<PAGE>



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


General

         The Company's revenues are derived primarily from the sale of
advertising time to advertisers, the sale of sponsorships to local media, and
the sale of movie tickets to the public.

         Advertising Sales. This business includes those activities relating
to the provision of movie listings via MovieFone and MovieLink, and the sale
of advertising time on a per-call and per-preview basis (principally to motion
picture studios) on MovieFone and a per-user basis on MovieLink.

         Sponsorship Sales. The Company currently receives, in exchange for
certain services, local media time and space from its sponsors and others with
which it has marketing relationships, typically in the form of 20 to 30-second
advertisements on radio stations and one-eighth to full-page advertisements in
newspapers circulated in the markets where the Company offers its services.
These exchanges of media services are reported at estimated fair market value
of the services received and revenues and expenses are recorded as these
services are provided or received.

         Teleticketing. The Company's revenues from the sale of movie tickets
is comprised of a service fee earned (currently $1.00 to $1.50 depending upon
the market) per movie ticket sold.

         Other Revenue. The Company's other revenue consists primarily of
sales of the Mars theater management system, which includes software license
fees, hardware sales, and installation and service fees.

                                      16

<PAGE>



Results of Operations

The following table sets forth, for the periods indicated, operating results
expressed as a percentage of total revenue:

                                                   Percent of Total Revenue
                                                   Years Ended December 31,
                                                ------------------------------
                                                 1997         1996       1995
                                                ------       ------     ------
Revenue
  Advertising revenue                             46.1%       50.1%       45.0%
  Sponsorship revenue                             25.5        29.0        33.0
  Ticket service fees, net                        19.9        17.8        18.7
  Other revenue                                    8.5         3.1         3.3
                                                 -----       -----       -----
    Total revenue                                100.0       100.0       100.0

Cost of services
  Advertising commissions                          3.8         4.7         5.5
  Ticket sales servicing and
     transaction fees                              4.5         4.8         6.7
  Telecommunications                               5.9         7.2         8.4
  Other expenses                                   2.7         1.8         1.8
                                                 -----       -----       -----
    Total cost of services                        16.9        18.5        22.4
                                                 -----       -----       -----

Gross profit                                      83.1        81.5        77.6
    Total other costs and expenses                91.7        94.2        92.9
                                                 -----       -----       -----
Net loss                                          (8.6)      (12.7)      (15.3)
                                                 -----       -----       -----


Fiscal Year 1997 Compared to Fiscal Year 1996

         Total revenue increased 34% from $15.36 million to $20.60 million
from 1996 to 1997. Advertising revenue increased 24% from $7.69 million in
1996 to $9.51 million in 1997. The increase in advertising revenue was the
result of an increased number of calls on which advertising was sold and an
increase in the average advertising rate per call sold, as well an increase in
Previews sales. The percentage of calls on which the Company sold advertising
time decreased from 87% in 1996 to 77% in 1997. Sponsorship revenue increased
18% from $4.44 million in

                                      17

<PAGE>



1996 to $5.25 million in 1997 primarily due to increased barter services
provided. Ticket service fees increased 50% from $2.74 million in 1996 to
$4.10 million in 1997. The increase in ticket service fees was due to an
increase in the number of tickets sold and a full year's increase in the
ticket service fee from $1.25 to $1.50 in Manhattan which began in June 1996.
Other revenue increased 265% from $.48 million in 1996 to $1.75 million in
1997. The increase in other revenue is primarily due to an increase in sales
of the Company's Mars business.

         Cost of services increased 23% from $2.84 million to $3.48 million
from 1996 to 1997. These costs increased primarily due to increased ticket
sales servicing and transaction fees resulting from increased ticket sales,
and increased other expenses, particularly computer equipment costs, associated
with the growth of the Company's Mars business.

         Gross profit increased 37% from $12.52 million in 1996 to $17.12
million in 1997.

         Other costs and expenses (which include selling, general and
administrative expenses) increased 30% from $14.48 million to $18.89 million
from 1996 to 1997. These expenses increased primarily as a result of the
Company's increased personnel expenses primarily associated with hiring of
additional staff in the Company's core advertising and ticket sales business,
the development of the Company's emerging business units, the increase in
advertising and promotion expenses, and increased legal expenses. Legal
expenses, relating primarily to the Company's arbitration and litigation
proceedings with Pacer/CATS (see Item 3. in Part I and Note 7 to the Company's
consolidated financial statements), increased 22% from $2.44 million in 1996
to $2.97 million in 1997.

         The net loss decreased 10% from $1.96 million ($.15 per share) in
1996 to $1.77 million ($.14 per share) in 1997.

         The number of calls received by the Company's MovieFone service
increased 22% from 56.9 million in 1996 to 69.5 million in 1997.

         The number of tickets sold through MovieFone and MovieLink increased
38% from 2.36 million in 1996 to 3.21 million in 1997.

         The Company believes that the growth in its call volume and the
number of tickets sold from 1996 to 1997 were the result of increased
awareness in established markets, the addition of new markets and theaters,
and increased moviegoing in the United States. Also, the Company believes its
ticket sales are to some extent driven by the release of "hit" movies, since
moviegoers attending these movies are more likely to buy tickets in advance
using the Company's service in order to avoid being sold-out from these
movies. There were more of these "hit" movies in 1997 than 1996 which
contributed to the increase in the Company's ticket sales.

         The Company added three new markets during 1997 (San Antonio,
Nashville and Baltimore) bringing its total number of markets to 31.

                                      18

<PAGE>




Fiscal Year 1996 Compared to Fiscal Year 1995

         Total revenue increased 37% from $11.24 million to $15.36 million
from 1995 to 1996. Advertising revenue increased 52% from $5.07 million in
1995 to $7.69 million in 1996. The increase in advertising revenue was the
result of an increased number of calls on which advertising was sold and an
increase in the average advertising rate per call sold, as well as the
addition of Previews sales. The percentage of calls on which the Company sold
advertising time increased from 85% in 1995 to 87% in 1996. Sponsorship
revenue increased 20% from $3.71 million in 1995 to $4.44 million in 1996 due
to increased barter services provided. Ticket service fees increased 30% from
$2.10 million in 1995 to $2.74 million in 1996. The increase in ticket service
fees was due to an increase in the number of tickets sold and a full year's
increase in the ticket service fee from $1.00 to $1.25 in most of the
Company's markets, as well as an increase in the ticket service fee from $1.25
to $1.50 in Manhattan starting in June 1996. Other revenue increased 30% from
$.37 million in 1995 to $.48 million in 1996. Other revenue is comprised of
revenue from the Company's emerging business units, primarily Mars and certain
MovieLink revenue.

         Cost of services increased 13% from $2.52 million to $2.84 million
from 1995 to 1996. These costs increased primarily due to increased
advertising commissions resulting from increased advertising sales, increased
telecommunications expense resulting from processing more calls, the adding of
new area codes in existing markets, and opening new markets, as well as
increased expenses associated with the growth of MovieFone's emerging business
units, particularly computer equipment costs associated with sales of Mars.

         Gross profit increased 43% from $8.73 million in 1995 to $12.52
million in 1996.

         Other costs and expenses (which include selling, general and
administrative expenses) increased 39% from $10.45 million to $14.48 million
from 1995 to 1996. These expenses increased primarily as a result of the
Company's increased personnel expenses associated with hiring of additional
staff in the Company's core advertising and ticket sales business, the
development of the Company's emerging business units, the increase in
advertising and promotion expenses, and increased legal expenses. Legal
expenses, relating primarily to the Company's ongoing arbitration and
litigation proceedings with Pacer/CATS (see Item 3. in Part I and Note 7 to
the Company's consolidated financial statements), increased 144% from $1.00
million in 1995 to $2.44 million in 1996.

         The net loss increased 14% from $1.72 million ($.13 per share) in
1995 to $1.96 million ($.15 per share) in 1996.

         The number of calls received by the Company's MovieFone service
increased 26% from 45.0 million in 1995 to 56.9 million in 1996.


                                      19

<PAGE>



         The number of tickets sold through MovieFone and MovieLink increased
7% from 2.20 million in 1995 to 2.36 million in 1996.

         The Company believes that the growth in its call volume and the
number of tickets sold from 1995 to 1996 were the result of increased
awareness in established markets, the addition of new markets and theaters,
and increased moviegoing in the United States. Also, the Company believes its
ticket sales are to some extent driven by the release of "hit" movies, since
moviegoers attending these movies are more likely to buy tickets in advance
using the Company's service in order to avoid being sold-out from these
movies. There were more of these "hit" movies in 1996 than 1995 which
contributed to the increase in the Company's ticket sales.

         The Company added two new markets during 1996 (Cincinnati and Salt
Lake City) bringing its total number of markets to 28.


Liquidity and Capital Resources

         The Company's primary capital requirements are to maintain its
operations, to fund the investment required to establish MovieFone in
additional markets and teleticketing at additional theaters, and to develop
new businesses.

         During 1997, net cash flows provided by operating activities was $.17
million. During 1996 and 1995, net cash flows used in operating activities was
$.08 million and $1.73 million, respectively. Cash flows provided by operating
activities for the year ended December 31, 1997 was primarily due to a minimal
increase in trade accounts receivable and a significant increase in accounts
payable. The decrease in the use of cash from the year ended December 31, 1995
to the year ended December 31, 1996 was mainly due to the increase in accrued
expenses and other current liabilities, and an increase in depreciation and
amortization and amortization of premium (discount) on investment securities.

         During 1997, 1996 and 1995, net cash flows provided by investing
activities was $1.94 million, $2.78 million and $2.04 million, respectively.
For each of the three years in the period ended December 31, 1997, net cash
flows provided by investing activities was primarily due to the
sales/maturities of investment securities.

         During 1997, net cash flows used in financing activities was $2.18
million primarily due to the purchase of 400,000 shares of treasury stock at a
cost of $2.22 million. During 1996, net cash flows provided by financing
activities was $.02 million. The Company did not engage in any financing
activities during 1995.

         The Company's cash balance decreased 2% from $3.56 million to $3.48
million from December 31, 1996 to December 31, 1997.


                                      20

<PAGE>



         The Company does not have any significant outstanding commitments for
capital expenditures but intends to incur such expenditures for expansion of
its core businesses and development of its infrastructure and new businesses.

         As is the case with most other companies using computers in their
operations, the Company is in the process of addressing matters relating to
what is commonly referred as Year 2000 compliance. The Company is currently
undertaking a review of its systems and applications and those of its vendors
to ensure that such systems and applications properly recognize the Year 2000.
The Company will utilize internal and external resources to ensure that all of
its systems and applications are Year 2000 compliant and expects to complete
and test such compliance within the next 12 months. There can be no guarantee
that the systems and applications of the Company will be Year 2000 compliant
and that any non-compliance would not have a material adverse effect on the
Company.


Seasonality and Quarterly Comparisons

         Historically, the Company's revenues have been seasonal, with the
highest sales occurring during the months of June, July, and August, and the
months of November, December, and January. These periods correspond to the
busy moviegoing seasons. During these two periods, typically referred to as
the summer and holiday seasons, respectively, moviegoing increases and motion
picture studios typically release their big-budget and most highly-anticipated
movies.

         The advertising sales business is dependent on MovieFone call volume
and MovieLink session volume. While calls and sessions tend to rise and fall
with movie theater attendance, the Company believes that they are less
volatile than movie theater attendance.

         Teleticketing volume is generally more volatile than movie theater
attendance. When motion picture studios have released big-budget,
highly-anticipated movies, teleticketing volume has increased significantly
compared to other periods during the year. The Company believes this higher
volume is the result of moviegoers' increased concerns about particular
performances being sold-out. In addition, motion picture distributors often
release high-profile movies for exhibition on a limited number of screens
during the busy seasons. The Company believes that the limited release of
high-profile movies further heightens moviegoers' concern that a particular
movie will be sold-out and increases teleticketing volume.

         The Company typically neither increases its staff during its busy
periods nor decreases its staff during the other times of the year. However,
the Company has scheduled periodic additions of telephone lines and related
computer equipment to its MovieFone Systems just prior to these two busy
seasons.




                                      21

<PAGE>



         In addition to fluctuations in movie theater attendance, the Company
expects that its quarterly results will fluctuate due to its expansion
efforts. As the Company expands its existing markets, enters into new markets
and initiates new business activities, its expenses may increase more than its
revenues, resulting in quarterly fluctuations in operating results.


Impact of Inflation

         The Company does not believe that inflation has had a material impact
on its operations to date. However, substantial inflation-driven increases in
the costs of labor and telephone service in particular could adversely affect
the Company's profitability.


Impact of New Accounting Standards

         During the year ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"). SFAS No. 128 requires the dual presentation of basic and
diluted earnings per share ("EPS"). All prior periods have been restated to
comply with the provisions of SFAS No. 128.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements and supplementary financial information
required by this Item and included in this Report are listed in the Index to
Consolidated Financial Statements appearing on page F-1 and are incorporated
herein by reference.



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

         None.

                                      22

<PAGE>





                                   PART III



ITEMS 10, 11, 12 and 13  DIRECTORS AND EXECUTIVE OFFICERS OF THE
                         REGISTRANT; EXECUTIVE COMPENSATION; SECURITY
                         OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                         MANAGEMENT; CERTAIN RELATIONSHIPS AND
                         RELATED TRANSACTIONS


         The information required by items 10, 11, 12, and 13 are incorporated
by reference from the 1998 Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days of the end of the fiscal year covered by
this report.





                                      23

<PAGE>





                                    PART IV



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

         (a)      1.  Consolidated Financial Statements:

                           See Index to Consolidated Financial Statements on
                           page F-1 hereof.

                  2.  Financial Statement Schedules:

                           None.

                  3.  Exhibits:

                           See Exhibit Index on pages E-1 and E-2 hereof.

         (b)      Reports on Form 8-K:

                           None.

                                      24

<PAGE>


                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          MOVIEFONE, INC.
                                          (Registrant)

Date: March 25, 1998                  By  /s/  Adam H. Slutsky
                                          --------------------
                                          Adam H. Slutsky, Chief Financial
                                          Officer and Chief Operating Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


  Signature                                   Title


/s/ Dr. Henry G. Jarecki                 Chairman of the Board of Directors
---------------------------------
  Dr. Henry G. Jarecki


/s/ Andrew R. Jarecki                    Chief Executive Officer (principal
---------------------------------        executive officer); Director
  Andrew R. Jarecki                      


/s/ Adam H. Slutsky                      Chief Operating Officer and Chief
---------------------------------        Financial Officer (principal financial
  Adam H. Slutsky                        and accounting officer); Director     
                                         

/s/ J. Russell Leatherman                President; Director
---------------------------------
  J. Russell Leatherman


/s/ Mark N. Kaplan                       Director
---------------------------------
  Mark N. Kaplan


/s/ George H. McLaughlin                 Director
---------------------------------
  George H. McLaughlin


/s/ Strauss Zelnick                      Director
---------------------------------
  Strauss Zelnick



March 25, 1998



                                      25
<PAGE>





                       MOVIEFONE, INC. AND SUBSIDIARIES
                                   INDEX TO
                       CONSOLIDATED FINANCIAL STATEMENTS


                                                                          PAGE
                                                                          ----
INDEPENDENT AUDITORS' REPORT                                               F-2

CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheets as of December 31, 1997 and 1996      F-3

         Consolidated Statements of Operations for the Years Ended
            December 31, 1997, 1996 and 1995                               F-4

         Consolidated Statements of Changes in Stockholders' 
            Equity for the Years Ended December 31, 1997, 1996 and 1995    F-5

         Consolidated Statements of Cash Flows for the Years Ended
            December 31, 1997, 1996 and 1995                               F-6

         Notes to Consolidated Financial Statements                        F-7








                                      F-1

<PAGE>


INDEPENDENT AUDITORS' REPORT

The Board of Directors of
  MovieFone, Inc.:

We have audited the accompanying consolidated balance sheets of MovieFone,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of MovieFone, Inc. and subsidiaries
at December 31, 1997 and 1996, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1997
in conformity with generally accepted accounting principles.


/s/DELOITTE & TOUCHE LLP

Parsippany, New Jersey
March 20, 1998

                                      F-2

<PAGE>

                       MOVIEFONE, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                               ----------------------------
                                                                                   1997            1996
                                                                                   ----            ----
<S>                                                                            <C>             <C>         
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                                   $  3,482,363    $  3,560,007
   Short-term investments, at amortized cost                                              -       3,003,839
   Trade accounts receivable                                                      3,586,604       3,213,869
   Prepaid expenses and other current assets                                        380,024         305,674
   Inventory                                                                        370,549         103,923
                                                                               ------------    ------------
     Total current assets                                                         7,819,540      10,187,312

PROPERTY AND EQUIPMENT, net                                                       1,501,853       1,773,528

LONG-TERM INVESTMENTS, at fair value in 1997 and                                 12,151,101      11,685,777
    at amortized cost in 1996

DUE FROM OFFICER                                                                      8,844          16,663

OTHER ASSETS                                                                        111,773         292,709
                                                                               ------------    ------------

   TOTAL ASSETS                                                                $ 21,593,111    $ 23,955,989
                                                                               ============    ============


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Due to related parties                                                      $     13,908    $     79,860
   Accounts payable                                                               3,453,071       2,026,610
   Accrued expenses and other current liabilities                                 2,288,529       2,157,527
                                                                               ------------    ------------
     Total current liabilities                                                    5,755,508       4,263,997


COMMITMENTS AND CONTINGENCIES  (Note 7)

STOCKHOLDERS' EQUITY:
  Preferred Stock, par value $.01 per share;
    5,000,000 shares authorized, no shares issued
  Common Stock, par value $.01 per share; 30,000,000 
   shares authorized; 5,662,135 and 5,650,947 shares 
   in 1997 and 1996, respectively, of Class A
   Common Stock issued and outstanding;                                              56,621          56,509
    7,155,053 shares of Class B Common Stock issued
    and outstanding in 1997 and 1996                                                 71,551          71,551

   Additional paid-in capital                                                    34,316,355      34,279,267
   Unrealized holding gain on investments                                           101,920               -
   Accumulated deficit                                                          (16,488,844)    (14,715,335)
                                                                               ------------    ------------
                                                                                 18,057,603      19,691,992
   Less Treasury Stock, 400,000 shares, at cost                                  (2,220,000)              -
                                                                               ------------    ------------
     Total stockholders' equity                                                  15,837,603      19,691,992
                                                                               ------------    ------------

     TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY                               $ 21,593,111    $ 23,955,989
                                                                               ============    ============
</TABLE>


See notes to consolidated financial statements.

                                     F-3
<PAGE>
                       MOVIEFONE, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                 -------------------------------------------
                                                     1997           1996            1995
                                                 -----------    ------------    ------------
<S>                                             <C>             <C>             <C>         
REVENUE
  Advertising revenue                           $  9,505,205    $  7,693,891    $  5,067,384
  Sponsorship revenue                              5,247,879       4,441,411       3,711,015
  Ticket service fees, net                         4,095,832       2,738,817       2,099,286
  Other revenue                                    1,749,002         481,203         366,995
                                                ------------    ------------    ------------
    Total revenue                                 20,597,918      15,355,322      11,244,680
                                                ------------    ------------    ------------

COST OF SERVICES
  Advertising commissions                            781,289         712,065         617,309
  Ticket sales servicing and transaction fees        935,716         734,613         752,715
  Telecommunications                               1,208,110       1,110,300         946,329
  Other expenses                                     553,667         279,003         202,437
                                                ------------    ------------    ------------
    Total cost of services                         3,478,782       2,835,981       2,518,790
                                                ------------    ------------    ------------

    Gross Profit                                  17,119,136      12,519,341       8,725,890

OTHER COSTS AND EXPENSES
  Selling, general and administrative              9,438,187       6,716,389       5,286,866
  Advertising and promotions                       6,563,561       5,393,665       4,593,248
  Legal expenses                                   2,973,500       2,443,661       1,003,010
  Depreciation and amortization                      940,754       1,010,420         749,987
  Interest income                                 (1,023,357)     (1,087,507)     (1,184,623)
                                                ------------    ------------    ------------
    Total other costs and expenses                18,892,645      14,476,628      10,448,488
                                                ------------    ------------    ------------

NET LOSS                                        $ (1,773,509)   $ (1,957,287)   $ (1,722,598)
                                                ============    ============    ============

NET LOSS PER COMMON SHARE -
  BASIC AND DILUTED                             $      (0.14)   $      (0.15)   $      (0.13)
                                                ============    ============    ============

WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING -
  BASIC AND DILUTED                               12,704,887      12,801,820      12,800,000
                                                ============    ============    ============
</TABLE>


See notes to consolidated financial statements.



                                     F-4
<PAGE>

                       MOVIEFONE, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                      Class A        Class B     Additional     Unrealized                   
                                                      Common         Common       Paid-in      Holding Gain    Accumulated   
                                                      Stock          Stock        Capital     On Investments     Deficit     
                                                  ------------   ------------   ------------  --------------  ------------   
<S>                                               <C>            <C>              <C>          <C>            <C>            
BALANCE, JANUARY 1, 1995 ......................   $     56,449   $     71,551   $ 34,255,327   $         --   $(11,035,450)  
   Net loss ...................................             --             --             --             --     (1,722,598)  
                                                  ------------   ------------   ------------   ------------   ------------   
BALANCE, DECEMBER 31, 1995 ....................         56,449         71,551     34,255,327             --    (12,758,048)  
   Issuance of 6,000 shares of Class A Common
     Stock upon exercise of stock options .....             60             --         23,940             --             --   
   Net loss ...................................             --             --             --             --     (1,957,287)  
                                                  ------------   ------------   ------------   ------------   ------------   
BALANCE, DECEMBER 31, 1996 ....................         56,509         71,551     34,279,267             --    (14,715,335)  
   Issuance of 11,188 shares of Class A Common
     Stock upon exercise of stock options .....            112             --         37,088             --             --   
   Unrealized holding gain on investments .....             --             --             --        101,920             --   
   Purchase of 400,000 shares of Treasury Stock             --             --             --             --             --   
   Net loss ...................................             --             --             --             --     (1,773,509)  
                                                  ------------   ------------   ------------   ------------   ------------   
BALANCE, DECEMBER 31, 1997 ....................   $     56,621   $     71,551   $ 34,316,355   $    101,920   $(16,488,844)  
                                                  ============   ============   ============   ============   ============   
</TABLE>


                    [RESTUBBED TABLE CONTINUED FROM ABOVE]


                                                                    Total       
                                                  Treasury       Stockholders'  
                                                    Stock           Equity      
                                                 ------------    ------------   
                                                                                
BALANCE, JANUARY 1, 1995 ......................  $         --    $ 23,347,877   
   Net loss ...................................            --      (1,722,598)  
                                                 ------------    ------------   
BALANCE, DECEMBER 31, 1995 ....................            --      21,625,279   
   Issuance of 6,000 shares of Class A Common                                   
     Stock upon exercise of stock options .....            --          24,000   
   Net loss ...................................            --      (1,957,287)  
                                                 ------------    ------------   
BALANCE, DECEMBER 31, 1996 ....................            --      19,691,992   
   Issuance of 11,188 shares of Class A Common                                  
     Stock upon exercise of stock options .....            --          37,200   
   Unrealized holding gain on investments .....            --         101,920   
   Purchase of 400,000 shares of Treasury Stock    (2,220,000)     (2,220,000)  
   Net loss ...................................            --      (1,773,509)  
                                                 ------------    ------------   
BALANCE, DECEMBER 31, 1997 ....................  $ (2,220,000)   $ 15,837,603   
                                                 ============    ============   
                                                                                
                                                  
See notes to consolidated financial statements.


                                     F-5
<PAGE>


                       MOVIEFONE, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                 YEARS ENDED DECEMBER 31,
                                                                                     ----------------------------------------------
                                                                                          1997             1996            1995
                                                                                          -----            ----            ----
<S>                                                                                  <C>              <C>              <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                          $ (1,773,509)    $ (1,957,287)    $ (1,722,598)
   Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities:
      Depreciation and amortization                                                       940,754        1,010,420          749,987
      Amortization of premium (discount) on investment securities                          61,242          124,640         (134,155)
      Gain on sale of investment securities                                               (28,577)              --               --
      Barter services received                                                          4,938,969        4,148,929        3,353,522
      Barter services provided                                                         (4,938,969)      (4,148,929)      (3,353,522)
      Changes in assets and liabilities:
         Increase in trade accounts receivable                                           (372,735)      (1,217,378)        (805,726)
         (Increase) decrease in prepaid expenses and other current assets                 (74,350)          17,579         (115,200)
         (Increase) decrease in inventory                                                (266,626)          63,794         (167,717)
         Decrease (increase) in due from related parties                                       --           93,524          (93,524)
         Decrease (increase) in due from officer                                            7,819           (1,051)          11,951
         Decrease (increase) in other assets                                              180,936          (82,539)         (41,039)
         (Decrease) increase in due to related parties                                    (65,952)          79,860         (240,718)
         Increase in accounts payable                                                   1,426,461          637,604          736,233
         Increase in accrued expenses and other current liabilities                       131,002        1,151,816           94,787
                                                                                     ------------     ------------     ------------

            Net cash provided by (used in) operating activities                           166,465          (79,018)      (1,727,719)
                                                                                     ------------     ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of investment securities                                               (4,414,638)      (2,768,644)     (10,777,032)
      Sales/Maturities of investment securities                                         7,022,408        6,000,000       13,759,615
      Purchases of property and equipment                                                (669,079)        (455,668)        (946,699)
                                                                                     ------------     ------------     ------------

            Net cash provided by investing activities                                   1,938,691        2,775,688        2,035,884
                                                                                     ------------     ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from exercise of stock options                                              37,200           24,000               --
      Purchase of treasury stock                                                       (2,220,000)              --               --
                                                                                     ------------     ------------     ------------

             Net cash (used in) provided by financing activities                       (2,182,800)          24,000               --
                                                                                     ------------     ------------     ------------

             Net (decrease) increase in cash and cash equivalents                         (77,644)       2,720,670          308,165

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                            3,560,007          839,337          531,172
                                                                                     ------------     ------------     ------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                               $  3,482,363     $  3,560,007     $    839,337
                                                                                     ============     ============     ============
</TABLE>


See notes to consolidated financial statements.


                                     F-6
<PAGE>

                       MOVIEFONE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 Years Ended December 31, 1997, 1996 and 1995


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Business--MovieFone, Inc. and its wholly-owned subsidiaries (the
"Company") provide interactive advertising, information, and ticketing
services to the motion picture industry and moviegoers through its interactive
telephone movie guide ("MovieFone") and its online service ("MovieLink"). The
Company's primary sources of revenue include (1) advertising sales on
MovieFone and MovieLink to motion picture studios and other advertisers, (2)
service fees for movie tickets sold to the public via MovieFone's and
MovieLink's teleticketing service, (3) sponsorships and other promotional
services to local media and credit card companies, and (4) other revenue which
primarily includes software license, service and installation fees, and
hardware sales from Mars theater management systems sales.

         Basis of Presentation--The consolidated financial statements include
the accounts of MovieFone, Inc. and of its wholly-owned subsidiaries which
include PromoFone ("PF"), Teleticketing Services, Inc. ("TSI") and The
Teleticketing Company, L.P. ("TTCLP") (ownership of TTCLP is as follows: TSI -
1 percent general partner, MovieFone, Inc. - 99 percent limited partner). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

         Earnings Per Share--During the fiscal year ended December 31, 1997,
the Company adopted SFAS No. 128, "Earnings per Share." SFAS No. 128 requires
the dual presentation of basic and diluted earnings per share ("EPS"). Basic
EPS excludes dilution and is computed by dividing net loss by the weighted
average number of common shares outstanding. Diluted EPS reflects the
potential dilution that could occur if stock options were exercised and
resulted in the issuance of common stock that then shared in the earnings of
the Company. For December 31, 1997, 1996 and 1995, the weighted average number
of common shares outstanding was calculated excluding stock options of
873,869, 707,444 and 667,694, respectively, as they are antidilutive.

         Revenue Recognition and Barter Services--Ticket service fee revenue
is recognized upon the sale of tickets to a buyer. Ticket service fee revenue
is net of ticket purchases of approximately $23,500,000, $16,004,000, and
$14,906,000 in 1997, 1996 and 1995, respectively, as well as allowances for
disputed charges and refunds of approximately $235,000, $404,000, and $213,000
in 1997, 1996 and 1995, respectively.

         Advertising revenue for MovieFone is based on a per call charge and
is recognized as calls are received. MovieLink advertising revenue is based on
a per user charge and is recognized as users log onto the website. Previews
advertising revenue is based on a per preview charge and is recognized upon
initial setup of the Preview on MovieFone.

                                      F-7

<PAGE>




         Sponsorship revenue includes barter services revenue as well as
promotional fees. All promotional fees are deferred and amortized over the
sponsorship period. There was approximately $31,000 of deferred sponsorship
revenue as of December 31, 1997 and $13,000 as of December 31, 1996. The
Company's barter revenue is generated via the exchange of MovieFone
advertising time and MovieLink advertising space for various sponsor media
services. These barter transactions and other services are reported at the
estimated fair market value of the sponsor media services received, and
revenues and expenses are recorded as these barter services are provided or
received. Amounts reported as both sponsorship revenue and advertising and
promotions expense were approximately $4,939,000, $4,149,000, and $3,353,500
in 1997, 1996 and 1995, respectively. These cross-promotion barter
transactions resulted in no receivables or liabilities as of December 31, 1997
and 1996.

         Other revenue primarily includes software license, service and
installation fees, and hardware sales from Mars theater management systems.
Software license and installation fees, as well as, hardware sales are
recognized upon installation of the system in the movie theater. Service fees
are deferred and amortized to revenue over the service period.

         Cash and Cash Equivalents--Cash and cash equivalents include cash on
hand and in banks, and all highly liquid debt instruments with a maturity of
three months or less when purchased.

         Investments--The Company's short-term investments at December 31,
1996 consist of United States Treasury notes with maturities within one year
of the balance sheet date. The Company's long-term investments at December 31,
1997 and 1996 consist of United States Treasury notes with maturities greater
than one year from the balance sheet date. All investments are recorded on a
trade date basis. During 1997, the Company's investments were reclassified
from held-to-maturity to available-for-sale in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities". Investments are carried at fair market value with
unrealized holding gains and losses reported in a separate component of
stockholders' equity. Investments were previously accounted for at amortized
cost. The Company's decision to sell investments originally intended to be
held to maturity was due to the need for funds to purchase treasury stock.

         Inventory--Inventory consists of computer hardware equipment which is
valued at the lower of first-in, first-out (FIFO) cost or current market
value.

         Property and Equipment--Property and equipment are stated at cost.
Depreciation of property and equipment is provided on a straight-line basis
over the estimated useful lives of the assets, principally five years.
Leasehold improvements are capitalized and amortized over the shorter of the
useful life of the asset or the lease term. Maintenance and repairs of
property and equipment are charged to operations when incurred and major
improvements are capitalized. Upon retirement, sale or other disposition of
property and equipment, the cost and accumulated depreciation or amortization
are eliminated from the accounts and any gain or loss is credited or charged
to operations.

                                      F-8

<PAGE>




         Research and Development Costs--Costs incurred for the development of
proprietary software are expensed as incurred and for the years ended December
31, 1997, 1996 and 1995 were approximately $303,000, $369,000, and $279,000,
respectively.

         Income Taxes--Deferred taxes are provided for the temporary
differences between the book and tax basis of the Company's assets and
liabilities.

         Use of estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

         Fair value of financial instruments--Fair value estimates are based
on pertinent information available to management as of December 31, 1997 and
1996. The estimated fair value, which approximates cost, of cash and cash
equivalents, accounts receivable, due from officer, due to affiliates,
accounts payable and accrued expenses are reflected in the consolidated
balance sheet. The fair value of investments is based on quoted market prices
as presented in Note 2.


2. INVESTMENTS

         The amortized cost, gross unrealized gains and losses and fair value
of the investment securities available-for-sale as of December 31, 1997 are as
follows:

<TABLE>
<CAPTION>
                                                   Gross       Gross
                                                 Unrealized  Unrealized
                                     Amortized    Holding      Holding       Fair
                                        Cost       Gains       Losses        Value
                                    -----------  ----------  -----------  -----------
<S>                                 <C>           <C>          <C>        <C>        
Debt securities issued by the
U.S. Treasury with maturities:
   After 1 year through 5 years.... $12,049,181   $124,719     $22,799    $12,151,101
                                    -----------  ----------  -----------  -----------
</TABLE>

         Proceeds from the sale of investment securities available-for-sale
during 1997 were $4,119,939 and related net realized gains included in income
were $28,577. The cost of the investment securities sold was based on the
specific identification method.







                                      F-9

<PAGE>



         At December 31, 1996, investment securities classified as
held-to-maturity are as follows:

                                               Amortized          Fair
                                                  Cost            Value
                                              ------------     ------------
Debt securities issued by the
U.S. Treasury with maturities:
   Within 1 year...........................    $ 3,003,839      $ 3,012,180
   After 1 year through 5 years............     11,685,777       11,741,280
                                              ------------     ------------
                                               $14,689,616      $14,753,460
                                              ------------     ------------

         The gross unrealized holding gains at December 31, 1996 are $63,844.


3. PROPERTY AND EQUIPMENT

                                                           December 31,
                                                   ---------------------------
                                                      1997             1996
                                                   ----------       ----------
Computer equipment .........................       $3,363,427       $2,735,101
Theater equipment ..........................        1,323,205        1,302,750
Capitalized software costs .................          795,858          795,858
Telephone equipment ........................          187,762          187,762
Furniture, fixtures and leasehold
 improvements ..............................          401,429          381,131
                                                   ----------       ----------
                                                    6,071,681        5,402,602
Less accumulated depreciation and
 amortization ..............................        4,569,828        3,629,074
                                                   ----------       ----------
                                                   $1,501,853       $1,773,528
                                                   ----------       ----------

         Capitalized software costs are recorded in accordance with the
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs
of Computer Software to Be Sold, Leased, or Otherwise Marketed" and relate
solely to the costs incurred for the Company's theater management system,
which provides theaters with a complete management system for all movie
theater scheduling, ticketing and concession operations. Capitalized software
costs are being depreciated on a straight-line basis over a three year period
which began January 1, 1996. Depreciation expense for capitalized software
costs for each of the two years ended December 31, 1997 and 1996 was $265,286.



                                     F-10

<PAGE>



4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

                                                            December 31,
                                                    --------------------------
                                                       1997            1996
                                                    ----------      ----------
Accrued payroll, bonuses and related
 taxes .......................................      $1,019,364      $  716,695
Accrued pension and vacation benefits ........         490,918         369,000
Accrued professional fees ....................         367,609         763,688
Other ........................................         410,638         308,144
                                                    ----------      ----------
                                                    $2,288,529      $2,157,527
                                                    ----------      ----------


5. RELATED PARTY TRANSACTIONS

         The Company enters into various transactions in connection with its
operations with companies whose officers, directors and partners are also
officers and/or shareholders of MovieFone, Inc. (collectively, "Related
Party").

         In 1994, the Company commenced leasing office space and entered into
a facilities service agreement with a Related Party to provide certain
administrative services to the Company. For the years ended December 31, 1997,
1996 and 1995, this Related Party charged the Company approximately $0,
$145,000 and $151,000, respectively, under such lease agreement, and $191,000,
$119,000 and $382,000, respectively, under such facilities service agreement.
Effective October 31, 1996, the lease agreement was terminated due to the
Company's move to new office space.

         During 1997 and 1996, various Company employees provided certain
administrative and professional services to a Related Party. The Company
charged the Related Party approximately $32,000 and $59,000 for these services
for the years ended December 31, 1997 and 1996, respectively.





                                     F-11

<PAGE>



6. INCOME TAXES

         There was no income tax expense or benefit for 1997, 1996 and 1995
due to the operating losses incurred.

         The major sources of temporary differences and their tax effect are
as follows:

                                                         December 31,
                                                    1997             1996
                                                 -----------      -----------
Deferred tax asset
Net operating loss carry forward ...........     $ 5,142,000      $ 4,569,000
Accrued expenses and other .................         246,000               --
Valuation allowance ........................      (5,388,000)      (4,569,000)
                                                 -----------      -----------
Net deferred tax asset after valuation
  allowance ................................     $        --      $        --
                                                 -----------      -----------

         The Company has available federal net operating loss carry forwards
to offset future taxable income of approximately $13,000,000 which expire in
2003 through 2012. These operating loss carry forwards do not include losses
of TTCLP through May 13, 1994 (effective date of the Reorganization) which are
included in the tax returns of the individual partners.


7. COMMITMENTS AND CONTINGENCIES

         At December 31, 1997, the Company was committed under operating
leases for office space, expiring at various dates through 2000, requiring
minimum annual rental payments as follows:

         1998..............................................   $ 407,112
         1999..............................................     276,162
         2000..............................................       4,436
                                                              ---------
                                                              $ 687,710
                                                              ---------

         Rental expense under such leases totaled $322,600, $274,800, and
$162,300 for the years ended December 31, 1997, 1996 and 1995, respectively.




                                     F-12

<PAGE>



         In March 1994, In-Touch Technologies, Ltd. ("In-Touch") commenced an
action in the United States District Court for the Southern District of New
York against the Company and others contending that the Company and others had
violated the securities laws and engaged in common law fraud and
misrepresentation in connection with a loan transaction between The Falconwood
Corporation ("Falconwood"), a related party, and In-Touch in an action
entitled In-Touch Technologies, Ltd. et al. v. The Falconwood Corporation, et
al. Pursuant to a Stipulation of Dismissal dated January 5, 1998, all claims
against all of the defendants, including the Company, were discontinued with
prejudice.

         On November 1, 1994 the Company filed a Demand for Arbitration
("Demand") with the American Arbitration Association ("AAA") against
Pacer/CATS Corporation ("Pacer/CATS") in an action entitled PromoFone, Inc. et
al. v. Pacer/CATS Corporation. The Demand alleged that Pacer/CATS has failed
to perform its obligations under the February 14, 1992 between Promofone, Inc.
and Pacer/CATS and promoted the services of Ticketmaster Corp.
("Ticketmaster"). The Demand sought an injunction and damages in an
unspecified amount. Evidentiary hearings in the arbitration began September
30, 1996 and concluded on April 11, 1997. Final briefs were filed during May
and June and closing arguments in the arbitration were heard on June 10, 1997.
On July 23, 1997, a unanimous panel of three arbitrators awarded the Company
$22,751,250 in monetary damages against Pacer/CATS, its successors and
assigns, and all persons or entities acting in concert with them. On July 24,
1997, the Company filed a petition in the Supreme Court of the State of New
York to confirm the arbitration award. On November 20, 1997, the Court
confirmed the arbitration award and the decision was entered on November 25,
1997. On December 22, 1997, Pacer/CATS filed a notice of appeal of the
decision to confirm the arbitration award. The appeal has not been perfected
to date. On February 23, 1998, the arbitration award was entered as a valid,
enforceable judgment. The Company has not received any proceeds from the
award.

         On March 17, 1995, the Company filed an action against Ticketmaster
in the U.S. District Court for the Southern District of New York, alleging
that Ticketmaster violated the federal antitrust laws and the common laws of
New York. In particular, the Company alleged that Ticketmaster violated the
Sherman Act by entering into unlawful exclusive-dealing contracts, by making
unlawful acquisitions, and by engaging in other exclusionary conduct including
the acquisition of PCC Management, Inc. ("PCC"). The Company also alleges that
Ticketmaster tortiously interfered with the Company's contract with PCC,
tortiously interfered with the Company's prospective business relationships,
otherwise interfered with business relationships of the Company,
misappropriated the Company's trade secrets, breached the contractual
obligations it assumed as an affiliate of PCC, and engaged in unfair
competition. On May 9, 1995, Ticketmaster filed a motion to dismiss. The
Company filed opposition to this motion on June 27, 1995. Oral argument on
Ticketmaster's motion was held in late September 1995. The court took the
motion under submission. To date, no decision has been rendered. On March 4,
1997, the Company filed an amended complaint against Ticketmaster, adding a
federal claim of racketeering and additional antitrust and tort claims. On
April 17, 1997, Ticketmaster filed a motion to dismiss all federal claims in
the amended complaint. On August 15, 1997, the Company submitted its

                                     F-13

<PAGE>



opposition to the motion to dismiss. Ticketmaster submitted a reply to the
opposition on November 19, 1997. On January 6, 1998, the Company submitted a
sur-reply to Ticketmaster's reply. Ticketmaster submitted a response to the
Company's sur-reply on January 28, 1998.


8. EMPLOYEE BENEFITS AND EMPLOYMENT AGREEMENTS

         The Company participates in a related party sponsored noncontributory
defined benefit pension plan, which covers substantially all salaried
employees. Normal benefits, payable beginning at age 65, are based on
employee's length of service and earnings. Benefits are payable in an annuity
form for a period of at least 10 years and thereafter for the life of the
participant. For the years ended December 31, 1997, 1996 and 1995 pension
expense was approximately $83,000, $121,000, and $110,000, respectively.

         The Company has entered into employment agreements with certain of
its executive officers. These agreements automatically renew for an additional
two-year term unless notice of non-renewal is given. These agreements provide
for a minimum base salary. These agreements include a covenant against
competition with the Company extending for a period of two years after
termination.


9. CAPITAL STOCK

         The shares of the Class A and Class B common stock are identical
except as to voting rights. On all matters submitted to a vote of
stockholders, holders of Class A common stock are entitled to one vote per
share and holders of Class B common stock are entitled to five votes per
share. Both classes vote together as a single class on all matters, except
that the holders of Class A common stock are entitled to vote as a separate
class on certain amendments to the Company's Certificate of Incorporation.


10. STOCK OPTION PLAN

         In 1994, the Board of Directors adopted a stock option plan which
provides for the granting of stock options to key employees and other persons
rendering services to the Company. The plan provides for the granting of
incentive and/or non-statutory stock options. The exercise price of the
options is determined by the Compensation Committee of the Board of Directors,
and may not be less than, in the case of incentive stock options, the fair
market value of the Company's common stock at the date of grant (or 110% in
the case of an employee owning more than 10% of the outstanding stock of the
Company). Any options granted will be exercisable in full at any time or from
time to time as determined by the Compensation Committee and provided in the
option agreement. Any options would expire from five to fifteen years from the
date granted.


                                     F-14

<PAGE>






         The activity in the plan is presented below:

                                         --------------------------------------
                                                                       Weighted
                                                                       Average
                                                                       Exercise
                                         Shares Under    Price Range    Price
                                            Option        Per Share   Per Share
                                         --------------------------------------
Outstanding December 31, 1994 ........      432,908      $6.00-11.50     $7.50
Granted ..............................      295,500       3.63- 4.38      4.18
Exercised ............................           --               --        --
Expired or canceled ..................      (60,714)      3.19- 4.38      3.47
                                         --------------------------------------
Outstanding December 31, 1995 ........      667,694      $3.19-11.50     $3.94
Granted ..............................      173,000       3.63- 4.50      4.05
Exercised ............................       (6,000)            4.00      4.00
Expired or canceled ..................     (127,250)      3.19- 4.19      3.86
                                         --------------------------------------
Outstanding December 31, 1996 ........      707,444      $3.19-11.50     $3.98
Granted ..............................      243,000       4.25- 7.50      4.72
Exercised ............................      (11,188)      3.19- 4.19      3.32
Expired or canceled ..................      (65,387)      3.19- 4.25      3.77
                                         --------------------------------------
Outstanding December 31, 1997 ........      873,869      $3.19-11.50     $4.21
                                         --------------------------------------
Exercisable December 31, 1995 ........       38,869      $3.19-11.50     $3.77
Exercisable December 31, 1996 ........      118,036      $3.19-11.50     $3.92
Exercisable December 31, 1997 ........      196,644      $3.19-11.50     $3.96
                                         --------------------------------------









                                     F-15

<PAGE>


         For options outstanding and exercisable at December 31, 1997, the
exercise price ranges and weighted average prices and remaining lives were as
follows:

                           Options Outstanding           Options Exercisable
                  ------------------------------------  ----------------------
                      Number     Weighted-   Weighted-    Number     Weighted-
   Range of         Outstanding  Average     Average    Exercisable  Average
   Exercise             at      Remaining    Exercise       at       Exercise
    Prices           12/31/97      Life       Price      12/31/97     Price
----------------    ----------- ----------   ---------  -----------  ---------
$3.19-$4.50 .......  780,869       8.2         $ 3.81     184,494     $ 3.46
$5.50-$7.50 .......   66,000      10.0           5.97          --         --
$11.50 ............   27,000       7.0          11.50      12,150      11.50
                     -------     ------        ------     -------     ------
                     873,869       8.3         $ 4.21     196,644     $ 3.96
                     -------     ------        ------     -------     ------
                                                                       
         On May 31, 1995, options to acquire an aggregate of 405,908 shares of
Class A common stock at exercise prices ranging from $6.00 to $7.67 per share
were repriced at an exercise price of $3.19 per share, which was the NASDAQ
closing price as of that date. All other terms of the option agreements
remained unchanged.

         The Company has reserved 1,400,000 shares of Class A Common Stock for
issuance under this plan.

         The estimated fair value on the date of grant of options granted
during 1997, 1996 and 1995 ranged from $2.48 to $5.03, $1.69 to $2.10, and
$1.69 to $2.04, respectively. The Company accounts for the stock option plan
in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB No. 25"), under which no compensation cost has
been recognized for stock option awards. Had compensation cost for the stock
option plan been determined consistent with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
the Company's pro forma net loss and loss per share for 1997 and 1996 would
have been $1.97 million and $.16 per share, and $2.13 million and $.17 per
share, respectively. Because the SFAS No. 123 method of accounting has not
been applied to options granted prior to January 1, 1995, there is no
resulting pro forma compensation cost for 1995 and the pro forma costs for
1997 and 1996 may not be representative of that to be expected in future
years.

         The fair value of each stock option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following range of
weighted average assumptions used for grants in 1997, 1996 and 1995: risk-free
interest rate of 5.71% to 5.75%, 6.12% to 6.14%, and 6.04% to 6.10%,
respectively, no dividend yield for all years, expected life of 5 and 7 years,
5 years, and 5 years, respectively, and expected volatility of 62.72%, 43.11%
and 43.11%, respectively.

                                     F-16


<PAGE>




                                  EXHIBIT INDEX

The following exhibits are filed as part of this Annual Report or, where
indicated, were heretofore filed and are hereby incorporated by reference.


2        Form of Reorganization Agreement (incorporated by refernce to Exhibit
         2 of the registrant's Registration Statement on Form S-1, dated May
         13, 1994 (File No. 33-76062)).

3.1      Registrant's Certificate of Incorporation (incorporated by reference
         to Exhibit 3.1 of the registrant's Registration Statement on Form
         S-1, dated May 13, 1994 (File No. 33-76062)).

3.2      Registrant's By-Laws, (incorporated by reference to Exhibit 3.2 of
         the registrant's Registration Statement on Form S-1, dated May 13,
         1994 (File No. 33-76062)).

4.1      Specimen of Class A Common Stock Certificate (incorporated by
         reference to Exhibit 4.1 of the registrant's Registration Statement
         on Form S-1, dated May 13, 1994 (File No. 33-76062)).

4.2      Form of Registration Rights Agreement (incorporated by reference to
         Exhibit 4.2 of the registrant's Registration Statement on Form S-1,
         dated May 13, 1994 (File No. 33-76062)).

10.1     Stock Option Plan (incorporated by reference to Exhibit 10.1 of the
         registrant's Registration Statement on Form S-1, dated May 13, 1994
         (File No. 33-76062)). *

10.2     Form Indemnification Agreement entered into with each director and
         executive officer of the Company (incorporated by reference to
         Exhibit 10.2 of the registrant's Registration Statement on Form S-1,
         dated May 13, 1994 (File No. 33-76062)).

10.11    Amendment, dated as of February 25, 1994, to the PromoFone Loan
         Agreements and The Teleticketing Company, L.P. Loan Agreement,
         between Falconwood, the Timber Trusts, PromoFone, The
         Teleticketing Company, L.P., Douglas F. Hoitenga, J. Russell
         Leatherman and Robert Gukeisen (incorporated by reference to
         Exhibit 10.11 of the registrant's Registration Statement on Form S-1,
         dated May 13, 1994 (File No. 33-76062)).

10.12    Letter Agreement, dated as of February 14, 1992, between The
         Teleticketing Company, L.P. and Pacer/CATS Corporation (incorporated
         by reference to Exhibit 10.12 of the registrant's Registration
         Statement on Form S-1, dated May 13, 1994 (File No.
         33-76062)).


                                      E-1

<PAGE>



10.13    Sublease, dated as of March 1, 1994, by and among The Falconwood
         Corporation and Brody, White & Company, Inc., as sublessors, and The
         Teleticketing Company, L.P. and Promofone, Inc., as sublessees
         (incorporated by reference to Exhibit 10.13 of the registrant's
         Registration Statement on Form S-1, dated May 13, 1994 (File No.
         33-76062)).

10.14    Facilities Service Agreement, dated as of March 1, 1994, by and among
         The Falconwood Corporation and The Teleticketing Company, L.P. and
         PromoFone, Inc (incorporated by reference to Exhibit 10.14 of the
         registrant's Registration Statement on Form S-1, dated May 13, 1994
         (File No. 33-76062)).

10.15    Employment Agreement between MovieFone, Inc. and Andrew R. Jarecki
         (incorporated by reference to Exhibit 10.15 of the registrant's
         Registration Statement on Form S-1, dated May 13, 1994 (File No.
         33-76062)).*

10.16    Employment Agreement between MovieFone, Inc. and Adam H. Slutsky
         (incorporated by reference to Exhibit 10.16 of the registrant's
         Registration Statement on Form S-1, dated May 13, 1994 (File No.
         33-76062)).*

10.17    Employment Agreement between MovieFone, Inc. and J. Russell
         Leatherman (incorporated by reference to Exhibit 10.17 of the
         registrant's Registration Statement on Form S-1, dated May 13, 1994
         (FIle No. 33-76062)).*

21       Subsidiaries of the Company (incorporated by reference to Exhibit 21
         of the registrant's Registration Statement on Form S-1, dated May 13,
         1994 (File No. 33-76062)).

23       Consent of Deloitte & Touche LLP (included in the Independent
         Auditors' Report)

27       Financial Data Schedule

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*    As required by Item 14, each of Exhibits 10.1 and Exhibits 10.15 through
     10.17 is hereby identified as a management contract or compensatory plan
     or arrangement.


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