<PAGE>   1
 
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1998
    
                                                      REGISTRATION NO. 333-52877
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
   
                                AMENDMENT NO. 3
    
                                       TO
                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                               broadcast.com inc.
 
             (Exact Name of Registrant as Specified in its Charter)
 
<TABLE>
<S>                                <C>                             <C>
             DELAWARE                           7375                         75-2600532
   (State or other jurisdiction     (Primary Standard Industrial          (I.R.S. Employer
of incorporation or organization)    Classification Code Number)       Identification Number)
</TABLE>
 
                               2914 TAYLOR STREET
                              DALLAS, TEXAS 75226
                                 (214) 748-6660
              (Address, including zip code, and telephone number,
                                   including
            area code, of registrant's principal executive offices)
 
                                 TODD R. WAGNER
                            CHIEF EXECUTIVE OFFICER
                               BROADCAST.COM INC.
                               2914 TAYLOR STREET
                              DALLAS, TEXAS 75226
                                 (214) 748-6660
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                             ---------------------
 
                                   Copies to:
 
<TABLE>
<S>                                            <C>
           SEAN P. GRIFFITHS, ESQ.                            NEIL WOLFF, ESQ.
         GIBSON, DUNN & CRUTCHER LLP                  WILSON SONSINI GOODRICH & ROSATI
               200 PARK AVENUE                            PROFESSIONAL CORPORATION
           NEW YORK, NEW YORK 10166                           650 PAGE MILL RD
                (212) 351-4000                            PALO ALTO, CA 94304-1050
                                                               (650) 493-9300
</TABLE>
 
                             ---------------------
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box:  [ ]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering.  [ ]  ____________
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]  ____________
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]  ____________
 
     If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
                             ---------------------
 
   
                        CALCULATION OF REGISTRATION FEE
    
 
   
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
                                                              PROPOSED               PROPOSED            AMOUNT OF
        TITLE OF EACH CLASS             AMOUNT TO BE      MAXIMUM OFFERING      MAXIMUM AGGREGATE       REGISTRATION
      OF SECURITIES REGISTERED           REGISTERED        PRICE PER UNIT       OFFERING PRICE(1)          FEE(2)
----------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                <C>                   <C>                    <C>
Common Stock, $.01 par value........     2,875,000             $16.00              $46,000,000               $0
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
</TABLE>
    
 
   
(1) Estimated solely for the purpose of calculating the registration fee in
    accordance with Rule 457(a) under the Securities Act of 1933.
    
   
(2) A registration fee of $11,026 has already been paid in connection with the
    filing of the Registration Statement.
    
                             ---------------------
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
 
PROSPECTUS (Subject to Completion)
 
   
Issued July 16, 1998
    
 
                                2,500,000 Shares
 
                              [broadcast.com LOGO]
                           (formerly AudioNet, Inc.)
 
                                  COMMON STOCK
                            ------------------------
 
   
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF
 THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
 WILL BE BETWEEN $14 AND $16 PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF
 THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
 THE SHARES OF COMMON STOCK OFFERED HEREBY HAVE BEEN APPROVED FOR QUOTATION ON
THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "BCST" SUBJECT TO OFFICIAL NOTICE OF
                                   ISSUANCE.
    
 
                            ------------------------
 
        THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
                          COMMENCING ON PAGE 5 HEREOF.
                            ------------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
                            ------------------------
 
                              PRICE $      A SHARE
                            ------------------------
 
<TABLE>
<CAPTION>
                                                              UNDERWRITING
                                        PRICE TO             DISCOUNTS AND              PROCEEDS TO
                                         PUBLIC              COMMISSIONS(1)              COMPANY(2)
                                        --------             --------------             -----------
<S>                                <C>                  <C>                       <C>
Per Share........................           $                      $                         $
Total(3).........................           $                      $                         $
</TABLE>
 
------------
 
    (1) The Company and the Selling Stockholder have agreed to indemnify the
        Underwriters against certain liabilities, including liabilities under
        the Securities Act of 1933, as amended. See "Underwriters."
    (2) Before deducting expenses payable by the Company estimated at
        $1,000,000.
    (3) The Company and the Selling Stockholder have granted the Underwriters an
        option, exercisable within 30 days of the date hereof, to purchase up to
        an aggregate of 375,000 additional Shares at the price to public less
        underwriting discounts and commissions for the purpose of covering
        over-allotments, if any. If the Underwriters exercise such option in
        full, the total price to public, underwriting discounts and commissions,
        proceeds to Company and proceeds to Selling Stockholder will be
        $        , $        , $        and $        , respectively. See
        "Underwriters."
                            ------------------------
 
    The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters. It is expected that delivery of the Shares will be made on or
about                   , 1998, at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.
                            ------------------------
 
MORGAN STANLEY DEAN WITTER
                     DONALDSON, LUFKIN & JENRETTE
                                 SECURITIES CORPORATION
 
                                                               HAMBRECHT & QUIST
               , 1998
<PAGE>   3
 
[Artwork]
[Description of Artwork: Panel #1 includes down the left margin a broadcast.com
Channel Guide. The remainder of the page includes screen shots of 15 Web pages
highlighting broadcast.com content.]
[Panel #1 copy:]
 
     WELCOME TO broadcast.com, THE LEADING AGGREGATOR AND BROADCASTER OF
STREAMING MEDIA PROGRAMMING ON THE WEB. The Company delivers hundreds of live
and on-demand audio and video programs to hundreds of thousands of users.
 
(1) LARGE AGGREGATION OF STREAMING MEDIA CONTENT
 
     The broadcast.com Web sites offer a large and comprehensive selection of
audio and video programming.
 
LIVE RADIO
WBAL page
Police Scanner page
WSIX page
     - 345+ radio stations and networks
 
LIVE TV
WFAA page
Court TV page
NetShow Player (Video)
     - 17 television stations and cable networks
 
SPORTS
PGA page
Florida Seminoles page
NHL page
SuperBowl page
RealPlayer (RealVideo)
     - Game broadcasts of 350+ college and professional sports teams
 
MUSIC & CD JUKEBOX
Willie Nelson page
Blockbuster Rockfest page
RealPlayer (RealAudio)
     - 2,100+ full-length music CDs
NEWS
CNN page
BBC page
     - News and information broadcasts
 
broadcast.com FIRSTS:
     - First live commercial radio station
     - First live sporting event
     - First live corporate quarterly earnings call
     - First live stockholders meeting
 
[Description of Artwork: Panel #2 includes down the right margin the logos of 15
of the Company's business services customers. The remainder of the page includes
screen shots of nine Web pages highlighting business services broadcasts.]
[Panel #2 copy:]
 
(2) LEADING PROVIDER OF INTERNET BUSINESS SERVICES BROADCASTS
 
     Broadcast.com provides cost-effective Internet and intranet broadcasting
services to businesses and other organizations, including turnkey production of
live and archived press conferences, earnings conference calls,
<PAGE>   4
 
investor conferences, trade shows, stockholder meetings, product introductions,
training sessions, distance learning telecourses and media events.
 
SCREEN SHOTS:
 
HARVARD CONFERENCE ON INTERNET & SOCIETY
RealPlayer (RealVideo)
 
A  113TH AT&T ANNUAL SHAREHOLDERS MEETING
B  SYBASE ADAPTIVE SERVER LAUNCH WEBCAST
C  COMERICA BANK ECONOMIC FORUM
D  MICROSOFT DIRECT ACCESS SEMINARS
E  AMERICA ONLINE EARNINGS CALL
F  BREAKFAST WITH DELL TECHNOLOGY BRIEFS
G  BELL & HOWELL'S 1998 ANNUAL SHAREHOLDERS
   MEETING
LOGOS
SELECTED BUSINESS SERVICES CUSTOMERS
AOL
AT&T
Bell & Howell
Comerica
Dell
ElOnline
Charles Schwab
Genzyme
Microsoft
Motorola
PR Newswire
Sybase
Texaco
Texas Instruments
Yahoo!
 
[Artwork in Panel #3: Panel #3 includes screen shots of Web pages highlighting
the Company's differentiated, interactive, multimedia advertising as well as a
map of the United States with dots representing the Company's radio station and
network and television station and cable network broadcast partners.]
[Panel #3 copy]
 
(3) DIFFERENTIATED, INTERACTIVE, MULTIMEDIA ADVERTISING
 
     Unlike Web sites that offer only text-based banner ads, broadcast.com
offers multimedia packages incorporating custom audio and video applications
such as gateway ads with guaranteed click-thrus, channel and event sponsorships
and multimedia and traditional banner ads.
 
TITLE: AUDIO AND VIDEO GATEWAY ADS WITH GUARANTEED CLICK-THRUS
Image: KXL News/Talk radio station, IBM gateway ad
 
TITLE: CHANNEL AND EVENT SPONSORSHIPS
Image: Kentucky Wildcats Men's Bball page with CBS SportsLine logo
 
TITLE: MULTIMEDIA AND TRADITIONAL BANNER ADS
Images:
     Nextcard Visa 125X125 button
     Quick & Reilly 468X60 banner
     Dell 120X60 button
 
TRADITIONAL MEDIA ADVERTISING
 
     Using commercial spots the Company receives from its radio and television
station providers, the Company provides advertisers with the opportunity to
bundle Web and traditional media advertising.
 
OVER 360 RADIO AND TV AFFILIATES
 
[Panel #4 Artwork:  Panel #4 includes a graphic representing how the Company
receives, manages and broadcasts content. Panel #4 also includes a graphic
illustrating its branded distribution and certain strategic relationships.]
 
[Panel #4 Copy:]
<PAGE>   5
 
(4) LEADING INTERNET BROADCAST NETWORK INFRASTRUCTURE
 
CONTENT IN
Private frame relay and T-1 Aggregation Network
[icons]:
Satellite feed
Video feed
Audio feed
Analog
Digital
 
CONTENT RECEIVED, MONITORED AND ENCODED FOR DELIVERY
broadcast.com
     -  22 satellite receiving dishes
     -  24 X 7 Broadcast Center
     -  580 multimedia streaming servers support 500 simultaneous live events
 
       MULTICAST
            Building the first large-scale commercial multicast network which
            provides the Company access to over 400,000 dial-up multicast ports
 
        UNICAST
            Multiple 45 Mbps and 155Mbps connections
          UUNet
          Sprint
          MCI
          GTEI
 
CONTENT OUT
     -  Daily average of 400,000+ unique users
     -  broadcast.com principal Web site ranked in top 20 among all
        News/Information/Entertainment sites (source: Media Metrix)
 
(5) BRANDED DISTRIBUTION
 
     Broadcast.com drives traffic to its sites and enhances brand awareness
through strategic relationships with key Internet companies. The Company has
established increased visibility among Internet users through its relationships
with Yahoo!, RealNetworks, and Microsoft, among others.
<PAGE>   6
 
     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THIS OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
                                        2
<PAGE>   7
 
                               PROSPECTUS SUMMARY
 
    The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
 
                                  THE COMPANY
 
    Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. The Company broadcasts on the Internet 24 hours a day
seven days a week, and its programming includes more than 345 radio stations and
networks, 17 television stations and cable networks and game broadcasts and
other programming for over 350 college and professional sports teams. The
Company licenses such programming from content providers, in most cases under
exclusive, multi-year agreements. The Company's Business Services Group provides
cost-effective Internet and intranet broadcasting services to businesses and
other organizations. These business services include the turnkey production of
press conferences, earnings conference calls, investor conferences, trade shows,
stockholder meetings, product introductions, training sessions, distance
learning telecourses and media events. In addition to its business services, the
Company derives revenues from the sale of advertising on its Web sites,
including gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads, as well as the sale of
radio and television ad spots the Company receives from stations in exchange for
broadcasting their programming over the Internet. In March 1998, the Company's
Web sites served a daily average of over 400,000 unique users and its principal
Web site was ranked in the top 20 among all News/Information/Entertainment sites
according to Media Metrix.
 
                                  THE OFFERING
 
Common Stock offered................     2,500,000 shares
 
Common Stock to be outstanding after
the offering........................     16,883,451 shares(1)
 
   
Use of proceeds.....................     For general corporate purposes,
                                         including capital expenditures and
                                         working capital, and strategic
                                         acquisitions. See "Use of Proceeds."
    
 
Nasdaq National Market symbol.......     BCST
 
                             SUMMARY FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                    PERIOD FROM
                                                     INCEPTION         YEAR ENDED        THREE MONTHS ENDED
                                                  (MAY 19, 1995)      DECEMBER 31,            MARCH 31,
                                                  TO DECEMBER 31,   -----------------   ---------------------
                                                       1995          1996      1997      1997        1998
                                                  ---------------   -------   -------   -------   -----------
<S>                                               <C>               <C>       <C>       <C>       <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................................      $   --        $ 1,756   $ 6,856   $ 1,087     $ 3,176
Total operating expenses........................         268          4,821    13,543     2,211       6,173
Net operating loss..............................        (268)        (3,065)   (6,687)   (1,124)     (2,997)
Net loss........................................        (268)        (2,989)   (6,474)   (1,063)     (2,722)
Basic and diluted net loss per share(2).........      $ (.04)       $  (.31)  $  (.55)  $  (.09)    $  (.19)
Shares used in the net loss per share
  calculations(2)...............................       6,020          9,564    11,680    11,428      14,076
</TABLE>
 
   
<TABLE>
<CAPTION>
                                                                   MARCH 31, 1998
                                                              -------------------------
                                                                               AS
                                                              ACTUAL      ADJUSTED(3)
                                                              -------    --------------
<S>                                                           <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................  $22,400       $56,275
Total assets................................................   30,134        64,009
Total stockholders' equity..................................   28,306        62,181
</TABLE>
    
 
------------
 
   
(1) Based on the number of shares outstanding as of March 31, 1998. Excludes (i)
    2,027,856 shares of Common Stock issuable upon the exercise of options then
    outstanding, with a weighted average exercise price of $5.71 per share, (ii)
    1,092,361 shares available for future issuance under the Company's stock
    plans as of March 31, 1998, (iii) an additional 1,000,000 shares of Common
    Stock reserved for issuance under the Company's 1998 Stock Option Plan,
    pursuant to an amendment approved in June 1998, and (iv) 250,000 shares of
    Common Stock reserved for issuance under the Company's Employee Stock
    Purchase Plan approved in June 1998. Also excludes 234,056 shares of Common
    Stock subject to outstanding warrants. See "Capitalization,"
    "Management--Director Compensation," "--Employee Benefit Plans" and Note 6
    of Notes to Financial Statements.
    
(2) See Note 8 of Notes to Financial Statements for an explanation of the
    determination of the number of shares used in per share calculations.
   
(3) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
    by the Company hereby at an assumed initial public offering price of $15.00
    per share and after deducting estimated underwriting discounts and
    commissions and estimated offering expenses payable by the Company. See "Use
    of Proceeds" and "Capitalization."
    
 
                                        3
<PAGE>   8
 
     NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
                            ------------------------
 
     UNTIL                     , 1998 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary....................    3
Risk Factors..........................    5
The Company...........................   18
Use of Proceeds.......................   20
Dividend Policy.......................   20
Capitalization........................   21
Dilution..............................   22
Selected Financial Data...............   23
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   24
</TABLE>
 
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Business..............................   32
Management............................   48
Certain Transactions..................   56
Principal and Selling Stockholders....   58
Description of Capital Stock..........   59
Shares Eligible for Future Sale.......   62
Underwriters..........................   64
Legal Matters.........................   66
Experts...............................   66
Available Information.................   66
Index to Financial Statements.........  F-1
</TABLE>
 
                            ------------------------
 
     The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports containing unaudited financial data for the first three
quarters of each year.
                            ------------------------
 
     broadcast.com, AudioNet and the broadcast.com logo are trademarks or
registered trademarks of the Company. This Prospectus also includes trademarks
of companies other than the Company.
                            ------------------------
 
     Unless the context otherwise requires, the terms "broadcast.com" and the
"Company" refer to broadcast.com inc., a Delaware corporation. Except as
otherwise noted herein, information in this Prospectus assumes (i) no exercise
of the Underwriters' over-allotment option and (ii) the sixty-for-one split of
the Company's Common Stock effected in the form of a stock dividend in April
1997.
 
                                        4
<PAGE>   9
 
                                  RISK FACTORS
 
     In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully before purchasing the
shares of Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth below.
 
     Limited Operating History; History of Losses and Anticipation of Future
Losses. The Company commenced broadcasting live audio programming on the Web in
September 1995 and live video programming in March 1997. The Company first
recognized business services revenues and Web advertising revenues in January
1996 and traditional media advertising revenues in January 1997 and has recorded
a net loss for each year since its inception. As of March 31, 1998, the Company
had an accumulated deficit of $12.5 million. Accordingly, the Company has a
limited operating history on which to base an evaluation of its business and
prospects. The Company and its prospects must be considered in light of the
risks, difficulties and uncertainties frequently encountered by companies in an
early stage of development, particularly companies in new and rapidly evolving
markets such as the market for Internet content, business services and
advertising. To achieve and sustain profitability, the Company believes it must,
among other things, (i) provide compelling and unique content to Internet users,
(ii) successfully market and sell its business services, (iii) effectively
develop new and maintain existing relationships with advertisers, content
providers, business customers and advertising agencies, (iv) continue to develop
and upgrade its technology and network infrastructure, (v) respond to
competitive developments, (vi) successfully introduce enhancements to its
existing products and services to address new technologies and standards, (vii)
effectively sell its inventory of radio and television ad spots and (viii)
attract, retain and motivate qualified personnel. The Company's operating
results are also dependent on factors outside the control of the Company, such
as the availability of compelling content and the development of broadband
networks that support multimedia streaming. There can be no assurance that the
Company will be successful in addressing these risks, and failure to do so could
have a material adverse effect on the Company's business, results of operations
and financial condition. Additionally, the limited operating history of the
Company makes the prediction of future operating results difficult or
impossible, and there can be no assurance that the Company's revenues will
increase or even continue at their current level, or that the Company will
achieve or maintain profitability or generate sufficient cash from operations in
future periods. The Company expects to continue to incur significant losses on a
quarterly and annual basis for the foreseeable future. For these and other
reasons, there can be no assurance that the Company will ever achieve
profitability or, if profitability is achieved, that it can be sustained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
     Unpredictability of Future Revenues; Potential Fluctuations in Quarterly
Operating Results. Because of the Company's limited operating history and the
emerging nature of the markets in which it competes, the Company is unable to
forecast accurately its revenues. The market for the Company's business services
and the long-term acceptance of Web-based advertising are uncertain. The Company
currently intends to increase substantially its operating expenses in order to,
among other things, (i) expand its distribution network capacity, (ii) fund
increased sales and marketing activities, (iii) acquire additional content, (iv)
develop and upgrade technology and (v) purchase equipment for its operations.
The Company's expense levels are based, in part, on its expectations with regard
to future revenues, and to a large extent such expenses are fixed, particularly
in the short term. To the extent the Company is unsuccessful in increasing its
revenues, the Company may be unable to appropriately adjust spending in a timely
manner to compensate for any unexpected revenue shortfall or will have to reduce
its operating expenses, causing it to forego potential revenue generating
activities, either of which could cause a material adverse effect in the
Company's business, results of operations and financial condition.
 
     The Company's quarterly operating results may fluctuate significantly in
the future as a result of a variety of factors, many of which are outside the
Company's control. Factors that may affect the Company's quarterly operating
results include (i) the cost of acquiring and the availability of content, (ii)
the demand for the Company's business services, (iii) demand for Internet
advertising, (iv) seasonal trends in Internet and advertising placements, (v)
the advertising cycles for, or the addition or loss of, individual advertisers,
(vi) the
                                        5
<PAGE>   10
 
level of traffic on the Company's Web sites, (vii) the amount and timing of
capital expenditures and other costs relating to the expansion of the Company's
operations, (viii) price competition or pricing changes in Internet broadcasting
services, such as the Company's business services, and in Internet advertising,
(ix) the seasonality of the content of the Company's broadcasts, such as
sporting and other events, (x) the level of and seasonal trends in the use of
the Internet, (xi) technical difficulties or system downtime, (xii) the cost to
acquire sufficient bandwidth or to integrate efficient broadcast technologies,
such as multicasting, to meet the Company's needs, (xiii) the mix of unicasting
and multicasting from the Company's Web sites (see "--Scalability of Number of
Users"), (xiv) the introduction of new products or services by the Company or
its competitors and (xv) general economic conditions and economic conditions
specific to the Internet, such as electronic commerce and online media. Any one
of these factors could cause the Company's revenues and operating results to
vary significantly in the future. In addition, as a strategic response to
changes in the competitive environment, the Company may from time to time make
certain pricing, service or marketing decisions or acquisitions that could cause
significant declines in the Company's quarterly operating results.
 
     The Company expects that its revenues will be higher leading up to and
during major United States sport seasons for sports that the Company broadcasts,
such as the NHL and college football, and lower at other times of the year. The
Company believes that advertising sales in traditional media, such as
television, generally are lower in the first and third calendar quarters of each
year, and that advertising expenditures fluctuate significantly with economic
cycles. Depending on the extent to which the Internet is accepted as an
advertising medium, seasonality and cyclicality in the level of Internet
advertising expenditures could become more pronounced than it is currently. As a
result, the Company believes that its revenues from Web and traditional media
advertising sales have been affected by these cyclical factors and the Company
expects its Web and traditional media advertising sales generally to follow the
quarterly trends of traditional media advertising. The foregoing factors could
have a material adverse effect on the Company's business, results of operations
and financial condition.
 
     Due to all of the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Furthermore, it is possible that the Company's operating results in one or more
quarters will fail to meet the expectations of securities analysts or investors.
In such event, the price of the Common Stock could be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
 
     Dependence on Content Providers; License Fees Payable to Content
Providers. The Company's future success depends in large part upon its ability
to aggregate and deliver compelling content over the Internet. The Company
typically does not create its own content. Rather, the Company relies on third
party content providers, such as radio and television stations and cable
networks, businesses and other organizations, universities and record labels for
compelling and entertaining content. The Company's ability to maintain its
existing relationships with such content providers and to build new
relationships with additional content providers is critical to the success of
its business. Although many of the Company's agreements with third party content
providers are for initial terms of more than two years, the content providers
may choose not to renew such agreements or may terminate such agreements prior
to the expiration of their terms if the Company fails to fulfill its contractual
obligations. The Company's inability to secure licenses from content providers
or performance rights societies or the termination of a significant number of
content provider agreements would decrease the availability of content that the
Company can offer users. This may result in decreased traffic on the Company's
Web sites and, as a result, decreased advertising revenue, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
 
     The Company's agreements with certain of its content providers are
nonexclusive, and many of the Company's competitors offer, or could offer,
content that is similar to or the same as that obtained by the Company from such
nonexclusive content providers. Such direct competition could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "--Competition."
 
     License fees payable to content providers and performance rights societies
and other licensing agencies may increase as the Company continues to aggregate
content and as competition for such content increases.
 
                                        6
<PAGE>   11
 
There can be no assurance that the Company's content providers, performance
rights societies and other licensing agencies will enter into prospective
agreements with the Company on the same or similar terms as those currently in
effect or on terms acceptable to the Company if no agreement is in effect. If
the Company is required to pay increased licensing fees, such increased payments
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "--Government Regulation and Legal
Uncertainty."
 
     Uncertain Acceptance of the Company's Business Services. The Company's
ability to establish and maintain a leadership position in Internet and intranet
broadcasting for businesses and in the distribution of other live and on-demand
events will depend on, among other things, (i) the Company's success in
providing quality programming at low and high bit rates over the Internet, (ii)
the Company's marketing and sales efforts, (iii) market acceptance of the
Company's current and future service offerings, (iv) the reliability of the
Company's networks and services and (v) the extent to which end users are able
to receive the Company's broadcasts at adequate bit rates to provide for high
quality services, none of which can be assured. The Company operates in a market
that is at a very early stage of development, is rapidly evolving and is
characterized by an increasing number of market entrants who have introduced or
developed competing broadcasting and distribution services. As is typical in the
case of a new and rapidly evolving industry, demand and market acceptance for
recently introduced services are subject to a high level of uncertainty and
risk. Sales of the Company's business services may require an extended sales
effort in certain cases. In addition, potential customers must accept the
Company's audio and video broadcast services as a viable alternative to
face-to-face meetings, traditional media, traditional business communications
tools, such as audio teleconferences and video conferencing, and conventional
classroom-based learning. Because the market for the Company's business services
is new and evolving, it is difficult to predict the size of this market and its
growth rate, if any. In addition, it is not known whether businesses and other
organizations will utilize the Internet to any significant degree as a means of
broadcasting business and other events. There can be no assurance that the
market for the Company's business services will continue to develop or be
sustainable. If the market fails to develop, develops more slowly than expected
or becomes saturated with competitors, or if the Company's Web sites do not
achieve or sustain market acceptance, the Company's business, results of
operations and financial condition could be materially adversely affected.
 
     Uncertain Acceptance of Streaming Media Technology. The Company's success
depends on the market acceptance of streaming media technology provided by
companies such as RealNetworks, Inc. ("RealNetworks") and Microsoft Corporation
("Microsoft"). Prior to the advent of streaming technology, Internet users could
not initiate the playback of audio or video clips until such content was
downloaded in its entirety, resulting in significant waiting times. As a result,
live broadcasts of audio and video content over the Internet or intranets were
not possible. Early streaming media technology suffered from poor audio quality,
and video streaming at 28.8 kbps (thousands of bits per second) currently is of
lower quality than traditional media broadcasts. In addition, congestion over
the Internet and packet loss may interrupt audio and video streams, resulting in
unsatisfying user experiences. In order to receive streamed media adequately,
users generally must have multimedia PCs with certain microprocessor
requirements and at least 28.8 kbps Internet access and streaming media
software. Users typically electronically download such software and install it
on their PCs. Such installation may require technical expertise that some users
do not possess. In addition, older versions of certain Web browsers may need to
be reconfigured in order to receive streaming media from the Company's Web
sites. Furthermore, in order for users to receive streaming media over corporate
intranets, information systems managers may need to reconfigure such intranets.
Because of bandwidth constraints on corporate intranets, some information
systems managers may block reception of streamed media. Widespread adoption of
streaming media technology depends on overcoming these obstacles, improving
audio and video quality and educating customers and users in the use of
streaming media technology. If streaming media technology fails to achieve broad
commercial acceptance or such acceptance is delayed, the Company's business,
results of operations and financial condition could be materially adversely
affected. See "--Competition."
 
     Uncertain Acceptance of the Internet as an Advertising Medium. The market
for Internet advertising has only recently begun to develop, is rapidly evolving
and is characterized by an increasing number of market entrants. As is typical
in the case of a new and rapidly evolving industry, demand and market acceptance
for
 
                                        7
<PAGE>   12
 
recently introduced products and services are subject to a high level of
uncertainty. The Company's ability to generate advertising revenue will depend
on, among other factors, (i) the development of the Internet as an advertising
medium, (ii) pricing of advertising on other Web sites, (iii) the amount of
traffic on the Company's Web sites, (iv) the Company's ability to achieve and
demonstrate user and member demographic characteristics that are attractive to
advertisers, (v) the development and expansion of the Company's advertising
sales force and (vi) the establishment and maintenance of desirable advertising
sales agency relationships. Most potential advertisers and their advertising
agencies have only limited experience with the Internet as an advertising medium
and have not devoted a significant portion of their advertising expenditures to
Web-based advertising. There can be no assurance that advertisers or advertising
agencies will be persuaded to allocate or continue to allocate portions of their
budgets to Web-based advertising or, if so persuaded, that they will find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. No standards have yet been widely
accepted for the measurement of the effectiveness of Web-based advertising, and
there can be no assurance that such standards will develop sufficiently to
enable Web-based advertising to become a significant advertising medium.
Acceptance of the Internet among advertisers and advertising agencies will also
depend, to a large extent, on the level of use of the Internet by consumers and
upon growth in the commercial use of the Internet. If widespread commercial use
of the Internet does not develop, or if the Internet does not develop as an
effective and measurable medium for advertising, the Company's business, results
of operations and financial condition could be materially adversely affected.
See "Business--Sales and Marketing."
 
     Management of Growth. The Company has rapidly and significantly expanded
its operations and anticipates that significant expansion of its operations will
continue to be required in order to address potential market opportunities. The
Company expanded from fewer than 10 employees on September 30, 1995, to 191
employees on June 15, 1998, and the Company expects to increase its personnel
significantly in the near future. The Company's recent growth has placed, and is
expected to continue to place, a significant strain on its managerial,
operational and financial resources and systems. To manage its growth, the
Company must implement, improve and effectively utilize its operational,
management, marketing and financial systems and train and manage its employees.
Many of the Company's senior management have only recently joined the Company.
These individuals have not previously worked together and are in the process of
integrating as a management team. There can be no assurance that the Company
will be able to manage effectively the expansion of its operations or that the
Company's current personnel, systems, procedures and controls will be adequate
to support the Company's operations. Any failure of management to manage
effectively the Company's growth could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"--Dependence on Key Personnel; Need for Additional Personnel."
 
     Risk of System Failure, Delays and Inadequacy; Single Site. The
performance, reliability and availability of the Company's Web sites and network
infrastructure are critical to its reputation and ability to attract and retain
users, advertisers and content providers. A large portion of the Company's
network infrastructure is located at a single, leased facility in Dallas, Texas.
The Company's systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, Internet breakdowns,
break-ins, tornadoes and similar events. The Company does not presently have
redundant facilities or systems or a formal disaster recovery plan and does not
carry sufficient business interruption insurance to compensate it for losses
that may occur. Services based on sophisticated software and computer systems
often encounter development delays and the underlying software may contain
undetected errors that could cause system failures when introduced. Any system
error or failure that causes interruption in availability of content or an
increase in response time could result in a loss of potential or existing
business services customers, users, advertisers or content providers and, if
sustained or repeated, could reduce the attractiveness of the Company's Web
sites to such entities or individuals. In addition, because the Company's Web
advertising revenues are directly related to the number of advertisements
delivered by the Company to users, system interruptions that result in the
unavailability of the Company's Web sites or slower response times for users
would reduce the number of advertisements delivered and reduce revenues.
 
     A sudden and significant increase in traffic on the Company's Web sites
could strain the capacity of the software, hardware and telecommunications
systems deployed or utilized by the Company, which could lead
 
                                        8
<PAGE>   13
 
to slower response times or system failures. The Company's operations also are
dependent upon receipt of timely feeds from its content providers, and any
failure or delay in the transmission or receipt of such feeds, whether due to
system failure of the Company, its content providers, satellites or otherwise,
could disrupt the Company's operations. The Company is also dependent upon Web
browsers, Internet Service Providers ("ISPs") and online service providers
("OSPs") to provide Internet users access to the Company's Web sites. Users may
experience difficulties accessing or using the Company's Web sites due to system
failures or delays unrelated to the Company's systems. These difficulties may
negatively affect audio and video quality or result in intermittent interruption
in programming. In addition, the Company relies on third party ISPs to provide
hosting services with respect to some of the Company's content providers. Any
sustained failure or delay could reduce the attractiveness of the Company's Web
sites to business services customers, users, advertisers and content providers.
The occurrence of any of the foregoing events could have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     Security Risks. Despite the implementation of security measures, the
Company's networks may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. A party who is able to circumvent security
measures could misappropriate proprietary information or cause interruptions in
the Company's Internet operations. ISPs and OSPs have in the past experienced,
and may in the future experience, interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. The Company may be required to expend significant capital
or other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Although the Company intends to
continue to implement industry-standard security measures, there can be no
assurance that measures implemented by the Company will not be circumvented in
the future. Eliminating computer viruses and alleviating other security problems
may require interruptions, delays or cessation of service to users accessing the
Company's Web sites, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
 
     Dependence on Short-Term Advertising Contracts. A substantial portion of
the Company's Web advertising revenues are derived from short-term contracts.
Consequently, many of the Company's advertising customers can cease advertising
on the Company's Web sites quickly and without penalty, thereby increasing the
Company's exposure to competitive pressures. There can be no assurance that the
Company's current advertisers will continue to purchase advertisements or that
the Company will be able to secure new advertising contracts from existing or
future customers at attractive rates or at all. Any failure of the Company to
achieve sufficient advertising revenue could have a material adverse effect on
the Company's business, results of operations and financial condition.
 
     Competition. The market for Internet broadcasting and services is highly
competitive and the Company expects that competition will continue to intensify.
The Company competes with (i) other Web sites, Internet portals and Internet
broadcasters to acquire and provide content to attract users, (ii)
videoconferencing companies, audio conferencing companies and Internet business
services broadcasters, (iii) online services, other Web site operators and
advertising networks, as well as traditional media such as television, radio and
print, for a share of advertisers' total advertising budgets and (iv) local
radio and television stations and national radio and television networks for
sales of advertising spots. There can be no assurance that the Company will be
able to compete successfully or that the competitive pressures faced by the
Company, including those described below, will not have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     Competition among Web sites that provide compelling content, including
streaming media content, is intense and is expected to increase significantly in
the future. The Company competes against a variety of businesses that provide
content through one or more mediums, such as print, radio, television, cable
television and the Internet. Traditional media companies have not established a
significant streaming media presence on the Internet and may expend resources to
establish a more significant presence in the future. These companies have
significantly greater brand recognition and financial, technical, marketing and
other resources than the Company. The Company competes generally with other
content providers for the time and attention of users and for advertising
revenues. To compete successfully, the Company must license and then provide
sufficiently compelling and popular content to generate users, support
advertising intended to reach such users and attract
                                        9
<PAGE>   14
 
business and other organizations seeking Internet broadcasting and distribution
services. The Company competes with other Internet broadcasters and Web sites to
acquire Internet broadcasting rights to compelling content. The Company believes
that the principal competitive factors in attracting Internet users include the
quality of service and the relevance, timeliness, depth and breadth of content
and services offered. In the market for Internet distribution of radio and
television broadcasts, the Company competes with ISPs, radio and television
stations and networks that originate their own Internet broadcasts. RealNetworks
and MCI Communications Corporation ("MCI") announced a strategic alliance in
August 1997 involving the introduction of a service currently called Real
Broadcast Network that delivers audio and video broadcasts over the Internet. In
the area of sports content, the Company competes with CBS SportsLine and ESPNET
SportsZone. The Company also competes for the time and attention of Internet
users with thousands of Web sites operated by businesses and other
organizations, individuals, governmental agencies and educational institutions.
For example, certain Web sites may provide a collection of links to other Web
sites with streaming media content. The Company expects competition to intensify
and the number of competitors to increase significantly in the future. In
addition, as the Company expands the scope of its content and services, it will
compete directly with a greater number of Web sites and other media companies.
Because the operations and strategic plans of existing and future competitors
are undergoing rapid change, it is extremely difficult for the Company to
anticipate which companies are likely to offer competitive services in the
future.
 
     The Company competes with videoconferencing and teleconferencing companies,
along with companies that provide Internet broadcasting services to businesses
and other organizations. Principal competitive factors include price,
transmission quality, transmission speed, reliability of service, ease of
access, ease of use, customer support, brand recognition and operating
experience. The Company's current and potential competitors may have
significantly greater financial, technical and marketing resources, longer
operating histories and greater brand recognition. Traditional videoconferencing
and teleconferencing may allow for a more interactive user experience. As prices
for videoconferencing systems decrease and transmission quality increases, the
installed base of videoconferencing systems may increase. Companies that provide
media streaming software may also enter the market for Internet broadcast
services. If media streaming technology and backbone bandwidth becomes more
readily available to companies at low prices, the Company's customers may decide
to broadcast their own programming. In particular, local exchange carriers, ISPs
and other data communication service providers may compete in the future with a
portion of or all of the Company's business services as technological
advancements facilitate the ability of these providers to offer effectively
these services. There can be no assurance that the Company will be able to
compete successfully against current or future competitors for Internet
broadcast services.
 
     The Company also competes with online services, other Web site operators
and advertising networks, as well as traditional media such as television, radio
and print for a share of advertisers' total advertising budgets. The Company
believes that the principal competitive factors for attracting advertisers
include the number of users accessing the Company's Web sites, the demographics
of the Company's users, the Company's ability to deliver focused advertising and
interactivity through its Web sites and the overall cost-effectiveness and value
of advertising offered by the Company. There is intense competition for the sale
of advertising on high-traffic Web sites, which has resulted in a wide range of
rates quoted by different vendors for a variety of advertising services, making
it difficult to project levels of Internet advertising that will be realized
generally or by any specific company. Any competition for advertisers among
present and future Web sites, as well as competition with other traditional
media for advertising placements, could result in significant price competition.
The Company believes that the number of companies selling Web-based advertising
and the available inventory of advertising space have recently increased
substantially. Accordingly, the Company may face increased pricing pressure for
the sale of advertisements. Reduction in the Company's Web advertising revenues
would have a material adverse effect on the Company's business, results of
operations and financial condition.
 
     The Company competes for traditional media advertising sales with national
radio and television networks, as well as local radio and television stations.
Local radio and television content providers and national radio and television
networks may have larger and more established sales organizations than the
Company. These companies may have greater name recognition and more established
relationships with advertisers and advertising agencies than the Company. Such
competitors may be able to undertake more
 
                                       10
<PAGE>   15
 
extensive marketing campaigns, obtain a more attractive inventory of ad spots,
adopt more aggressive pricing policies and devote substantially more resources
to selling advertising inventory. The Company's traditional media advertising
sales efforts depend on the Company's ability to obtain an inventory of ad spots
across the top radio and television markets. If the Company is unable to obtain
such inventory, it could have a material adverse effect on the Company's
business, results of operations and financial condition.
 
     Risks Associated with Traditional Media Advertising Sales. The Company is
dependent, in part, on its ability to sell its inventory of radio and television
ad spots obtained from stations in exchange for the Company's Internet broadcast
of their programming. Selling radio and television advertising is highly
competitive. The Company depends on Premiere Radio Networks, Inc. ("Premiere
Radio Networks") to sell a majority of its radio ad spots. The Company's
traditional media advertising sales efforts are focused on selling ads to
traditional national advertisers in order to avoid competing with advertising
sales efforts of its local radio and television station content providers. Sales
of ad spots to national advertisers are typically sold at a lower cost per
thousand ("CPM") than local advertising. The Company competes for traditional
media advertising sales with national radio and television networks. National
radio and television networks typically have larger and more established sales
organizations as compared to those of the Company. There can be no assurance
that Premiere Radio Networks will continue to sell effectively the Company's
inventory of ad spots or that competitive pressures with respect to traditional
media advertising sales will not have a material adverse effect on the Company's
business, results of operations and financial condition. See "--Competition."
 
     Scalability of Number of Users. The Company's success depends on its
ability to broadcast audio and video programming to a large number of
simultaneous users. Until recently, the Company only deployed unicasting (one
user per Company originated stream) technology to broadcast audio and video
programming to users over the Internet. The Company has deployed another
broadcast technology, multicasting (multiple users per Company originated
stream), on a trial basis since September 1997 and has begun to deploy this
technology on a broader commercial basis only recently. The Company anticipates
that unicasting will continue to be used to distribute its archived and
on-demand programming and that multicasting or a similar broadcasting technology
will be used for live and other events where a large audience for the content is
expected. To increase the Company's unicast capacity, the Company will be
required to successfully expand its network infrastructure through the
acquisition and deployment of additional network equipment and bandwidth. There
can be no assurance that the Company will be successful in such expansion. The
Company believes that to be a successful Internet broadcaster it also must
successfully deploy multicasting or a similar broadcasting technology that can
deliver streaming media content to many users simultaneously through one-
to-many Internet connections. To this end, the Company has deployed
multicasting, but has not yet tested its full capacity during an actual
broadcast. The Company will be required to test, deploy and successfully scale
its multicast network infrastructure to serve mass audiences. There can be no
assurance that the Company will be successful in doing so, that multicasting
will be able to support a substantial audience or that an alternative technology
will not emerge that offers superior broadcasting technology as compared to
multicasting. In the event that multicasting technology is not successfully
deployed in a timely manner or such an alternative technology emerges, the
Company would likely be required to expend significant resources to deploy a
technology other than multicasting, which could have a material adverse effect
on the Company's results of operations during the period in which the Company
attempts such deployment. If the Company fails to scale its broadcasts to large
audiences of simultaneous users, such failure could have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     Dependence on Providers of Streaming Media Products. The Company relies on
providers of streaming media products, such as RealNetworks and Microsoft, to
provide a broad base of users with streaming media software. The Company
currently licenses software products that enable the broadcast of streaming
media from such companies and others. The Company may need to acquire additional
licenses from such streaming media companies to meet its future needs. Users are
currently able to download electronically copies of the RealNetwork's RealPlayer
and Microsoft's NetShow Player software free of charge. If providers of
streaming media products substantially increase license fees charged to the
Company for the use of their products, refuse to license such products to the
Company or begin charging users for copies of their player software, such
 
                                       11
<PAGE>   16
 
actions could have a material adverse effect on the Company's business, results
of operations and financial condition.
 
     Dependence on Continued Growth in Use of the Internet and Streaming Media
Content on the Internet. Rapid growth in use of and interest in the Internet is
a recent phenomenon and there can be no assurance that acceptance and use of the
Internet will continue to develop or that a sufficient base of users will emerge
to support the Company's business. Future revenues of the Company will depend
largely on the widespread acceptance and use of the Internet as a source of
multimedia information and entertainment and as a vehicle for commerce in goods
and services. The Internet may not be accepted as a viable commercial medium for
broadcasting multimedia content, if at all, for a number of reasons, including
(i) potentially inadequate development of the necessary infrastructure, (ii)
inadequate development of enabling technologies, (iii) lack of acceptance of the
Internet as a medium for distributing streaming media content and (iv)
inadequate commercial support for Web-based advertising. To the extent that the
Internet continues to experience an increase in users, an increase in frequency
of use or an increase in the bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will be able to support the demands
placed upon it, specifically the demands of delivering high-quality video
content. Furthermore, user experiences on the Internet are affected by access
speed. There is no assurance that broadband access technologies, such as xDSL
and cable modems, will become widely adopted. In addition, the Internet could
lose its viability as a commercial medium due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity, or due to increased government regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
also could result in unacceptable response times and could adversely affect use
of the Internet generally and of the Company's Web sites in particular. If use
of the Internet does not continue to grow or grows more slowly than expected, or
if the Internet infrastructure does not effectively support the growth that may
occur, the Company's business, results of operations and financial condition
could be materially adversely affected.
 
     Risk of Technological Change. The market for Internet broadcast services is
characterized by rapid technological developments, frequent new product
introductions and evolving industry standards. The emerging character of these
products and services and their rapid evolution will require the Company to
effectively use leading technologies, continue to develop its technological
expertise, enhance its current services and continue to improve the performance,
features and reliability of its network infrastructure. Changes in network
infrastructure, transmission and content delivery methods and underlying
software platforms and the emergence of new broadband technologies, such as xDSL
and cable modems, could dramatically change the structure and competitive
dynamic of the market for streaming media solutions. In particular,
technological developments or strategic partnerships that accelerate the
adoption of broadband access technologies or advancements in streaming and
compression technologies may require the Company to expend resources to address
these developments. There can be no assurance that the Company will be
successful in responding quickly, cost effectively and sufficiently to these or
other such developments. In addition, the widespread adoption of new Internet
technologies or standards could require substantial expenditures by the Company
to modify or adapt its Web sites and services. A failure by the Company to
rapidly respond to technological developments could have a material adverse
effect on the Company's business, results of operations and financial condition.
 
     Dependence on Key Personnel; Need for Additional Personnel. The Company's
performance and development is substantially dependent on the continued services
of certain members of senior management, including Todd R. Wagner, Chief
Executive Officer, and Mark Cuban, President, as well as on the Company's
ability to retain and motivate its other officers and key employees. The Company
does not have "key person" life insurance policies on any of its officers or
other employees. The Company's future success also depends on its continuing
ability to attract and retain highly qualified technical personnel and
management. Competition for such personnel is intense and there can be no
assurance that the Company will be able to retain its key management and
technical employees or that it will be able to attract or retain additional
qualified technical personnel and management in the future. The inability to
attract and retain the necessary technical personnel and management could have a
material adverse effect upon the Company's business, result of operations and
financial condition. See "Management--Employment Agreements."
 
                                       12
<PAGE>   17
 
     Risks Associated with broadcast.com Name Change. In May 1998, the Company
changed its name from AudioNet, Inc. to broadcast.com inc. to better represent
the diversity of its programming, service offerings and solutions. The Company
believes that developing and strengthening the broadcast.com brand is critical
to achieving widespread acceptance of its broadcast services and increasing
traffic to its Web sites and that the importance of brand recognition will
increase as competition in the market for Internet broadcasting increases. The
Company has expended substantial resources in establishing brand recognition of
the name and Web address www.audionet.com. Although users accessing
www.audionet.com will automatically be taken to www.broadcast.com, the name
change may cause confusion among users and customers. If the Company fails to
promote and maintain its brand, if the Company's existing or future strategic
relationships fail to promote the Company's brand or if the Company incurs
excessive expenses in an attempt to promote and maintain its brand, then the
Company's business, results of operations and financial condition could be
materially adversely affected. There can be no assurance that the Company will
be able to enforce rights related to the broadcast.com name, that it will be
free to use the name in all jurisdictions, that there will be no challenges to
the use of that name or that it will not be required to expend significant
resources in defending the use of that name.
 
     Government Regulation and Legal Uncertainty. Although there are currently
few laws and regulations directly applicable to the Internet, it is likely that
new laws and regulations will be adopted in the United States and elsewhere
covering issues such as music licensing, broadcast license fees, copyrights,
privacy, pricing, sales taxes and characteristics and quality of Internet
services. The adoption of restrictive laws or regulations could slow Internet
growth or expose the Company to significant liabilities associated with content
available on its Web sites. The application of existing laws and regulations
governing Internet issues such as property ownership, libel and personal privacy
is also subject to substantial uncertainty. There can be no assurance that
current or new government laws and regulations, or the application of existing
laws and regulations (including laws and regulations governing issues such as
property ownership, content, taxation, defamation and personal injury), will not
expose the Company to significant liabilities, significantly slow Internet
growth or otherwise cause a material adverse effect on the Company's business,
results of operations or financial condition.
 
     In November 1995, the Digital Performance Right in Sound Recordings Act of
1995 (the "1995 Act") was enacted. The 1995 Act provides that the owners of
sound recordings have certain exclusive performance rights in such recordings,
and, if applicable to the Company, could require the Company to pay additional
licensing fees for its broadcasts. The Company believes, however, that its
broadcasts are exempt from such fees under the 1995 Act. No assurance, however,
can be given that the Company's belief is correct, particularly because the 1995
Act has not yet been sufficiently interpreted. An interpretation of the 1995 Act
on this or other provisions of the Act that is adverse to the Company, could
have a material adverse effect on the Company's business, results of operations
and financial condition.
 
   
     The Company currently does not collect sales or other taxes with respect to
the sale of services or products in states and countries where the Company
believes it is not required to do so. The Company does collect sales and other
taxes in the states it has offices and believes it is required by law to do so.
One or more states or countries have sought to impose sales or other tax
obligations on companies that engage in online commerce within their
jurisdictions. A successful assertion by one or more states or countries that
the Company should collect sales or other taxes on products and services, or
remit payment of sales or other taxes for prior periods, could have a material
adverse effect on the Company's business, results of operations and financial
condition.
    
 
     The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted. Although the
Company does not currently distribute the types of materials that the CDA may
have deemed illegal, the nature of such similar legislation and the manner in
which it may be interpreted and enforced cannot be fully determined, and
legislation similar to the CDA could subject the Company to potential liability,
which in turn could have an adverse effect on the Company's business, financial
condition and results of operations. Such laws could also damage
 
                                       13
<PAGE>   18
 
the growth of the Internet generally and decrease the demand for the Company's
products and services, which could adversely affect the Company's business,
results of operations and financial condition. See "Business--Governmental
Regulation."
 
     Liability for Internet Content. As a distributor of Internet content, the
Company faces potential liability for negligence, copyright, patent, trademark,
defamation, indecency and other claims based on the nature and content of the
materials that it broadcasts. Such claims have been brought, and sometimes
successfully pressed, against Internet content distributors. In addition, the
Company could be exposed to liability with respect to the content or
unauthorized duplication or broadcast of content. Although the Company maintains
general liability insurance, the Company's insurance may not cover potential
claims of this type or may not be adequate to indemnify the Company for all
liability that may be imposed. In addition, although the Company generally
requires its content providers to indemnify the Company for such liability, such
indemnification may be inadequate. Any imposition of liability that is not
covered by insurance, is in excess of insurance coverage or is not covered by an
indemnification by a content provider could have a material adverse effect on
the Company's business, results of operations and financial condition. See
"--Government Regulation and Legal Uncertainty."
 
     Intellectual Property. The Company regards its copyrights, trademarks,
trade secrets and similar intellectual property as critical to its success, and
the Company relies on a combination of copyright and trademark laws, trade
secret protection, confidentiality and non-disclosure agreements and contractual
provisions with its employees and with third parties to establish and protect
its proprietary rights. There can be no assurance that these steps will be
adequate, that the Company will be able to secure trademark registrations for
all of its marks in the United States or other countries or that third parties
will not infringe upon or misappropriate the Company's copyrights, trademarks,
service marks and similar proprietary rights. In addition, effective copyright
and trademark protection may be unenforceable or limited in certain countries,
and the global nature of the Internet makes it impossible to control the
ultimate destination of the Company's broadcasts. In the future, litigation may
be necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.
 
   
     The Company may also be subject to litigation to defend against claims of
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. If third parties hold trademark,
copyright or patent rights that conflict with the business of the Company, then
the Company may be forced to litigate infringement claims that could result in
substantial costs to the Company. In addition, if the Company was unsuccessful
in defending such a claim, it could have a material adverse effect on the
Company's business, results of operations and financial condition. On or about
July 8, 1998, a lawsuit was filed against the Company and one of its officers
and directors. Although no assurance can be given as to the outcome of this
lawsuit, the Company believes that the allegations in this action are without
merit. The Company intends to vigorously defend against this action and seek its
early dismissal. See "Business -- Legal Proceedings." If third parties prepare
and file applications in the United States that claim trademarks used or
registered by the Company, the Company may oppose those applications and be
required to participate in proceedings before the United States Patent and
Trademark Office to determine priority of rights to the trademark, which could
result in substantial costs to the Company. An adverse outcome in litigation or
privity proceedings could require the Company to license disputed rights from
third parties or to cease using such rights. Any litigation regarding the
Company's proprietary rights could be costly and divert management's attention,
result in the loss of certain of the Company's proprietary rights, require the
Company to seek licenses from third parties and prevent the Company from selling
its services, any one of which could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
inasmuch as the Company licenses a substantial portion of its content from third
parties, its exposure to copyright infringement actions may increase because the
Company must rely upon such third parties for information as to the origin and
ownership of such licensed content. The Company generally obtains
representations as to the origins and ownership of such licensed content and
generally obtains indemnification to cover any breach of any such
representations; however, there can be no assurance that such representations
will be accurate or given, or that such indemnification will adequately protect
the Company. See "--Liability for Internet Content" and "--Government Regulation
and Legal Uncertainty."
    
 
                                       14
<PAGE>   19
 
     In December 1997, the Company filed an application for a United States
trademark registration for "broadcast.com." There can be no assurance that the
Company will be able to secure such a registered trademark. In October 1996, the
Company was issued a United States trademark for "AudioNet." The Company intends
to pursue the registration of its trademarks based upon anticipated use
internationally. There can be no assurance that the Company will be able to
secure adequate protection for these trademarks in foreign countries. Many
countries have a "first-to-file" trademark registration system and thus the
Company may be prevented from registering its marks in certain countries if
third parties have previously filed applications to register or have registered
the same or similar marks. It is possible that competitors of the Company or
others will adopt service names similar to the Company's, thereby impeding the
Company's ability to build brand identity and possibly leading to customer
confusion. In addition, there could be potential trademark or trademark
infringement claims brought by owners of other registered trademarks or
trademarks that incorporate variations of the term broadcast.com. The inability
of the Company to protect its "broadcast.com," "AudioNet" and other marks
adequately could have a material adverse effect on the Company's business,
results of operations and financial condition. See "--Risks Associated with
broadcast.com Name Change."
 
     As part of its confidentiality procedures, the Company generally enters
into agreements with its employees and consultants and limits access to and
distribution of its software, documentation and other proprietary information.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its proprietary information or that agreements entered into
for that purpose would be enforceable. Notwithstanding the precautions taken by
the Company, it might be possible for a third party to copy or otherwise obtain
and use the Company's proprietary information without authorization. The laws of
some countries may afford the Company little or no effective protection of its
intellectual property.
 
     Acquisition Risk. The Company may pursue the acquisition of new or
complementary businesses, services or technologies, although it has no present
understandings, commitments or agreements with respect to any material
acquisitions or investments. Any such future acquisitions would be accompanied
by the risks commonly encountered in acquisitions of companies, including, among
other things, the difficulty of integrating the operations and personnel of the
acquired companies, the potential disruption of the Company's ongoing business,
the inability of management to incorporate successfully acquired technology and
rights into the Company's services and content offerings, additional expense
associated with amortization of acquired intangible assets, the maintenance of
uniform standards, controls, procedures and policies, and the potential
impairment of relationships with employees, customers and strategic partners.
 
     Control by Certain Stockholders. Upon completion of this offering, the
Company's directors and executive officers will beneficially own approximately
43.8% of the outstanding Common Stock (approximately 42.3% of the outstanding
Common Stock assuming full exercise of the Underwriters' overallotment option).
As a result, these stockholders, if they act as a group, will have a significant
influence on all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. Such control
may have the effect of delaying or preventing a change in control of the
Company. See "Principal and Selling Stockholders."
 
     Certain Anti-Takeover Provisions. The Company's Board of Directors has the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders
of the Company. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company, may discourage bids for the Company's Common Stock at a premium over
the market price of the Common Stock and may adversely affect the market price
of, and the other rights of the holders of, the Common Stock. The Company has no
present plans to issue shares of Preferred Stock. In addition, certain
provisions of the Company's Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") and Amended and Restated Bylaws, as amended (the
"Bylaws") will have the effect of delaying, deferring or preventing a change of
control of the Company. These provisions provide, among other things, that the
Board of Directors will be divided into three classes to serve staggered
three-year terms following the first annual meeting after a public
                                       15
<PAGE>   20
 
offering, that stockholders may not take actions by written consent and that the
ability of stockholders to call special meetings will be restricted. In
addition, the Company is subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law (the "DGCL"), which will prohibit the
Company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. The Company's indemnification
agreements with directors and officers, the Company's Restated Certificate of
Incorporation and Bylaws provide that the Company will indemnify officers and
directors against losses that they may incur in investigations and legal
proceedings resulting from their services to the Company, which may be broad
enough to include services in connection with takeover defense measures. Such
provisions may have the effect of preventing changes in the management of the
Company. See "Description of Capital Stock."
 
   
     No Specific Use of Proceeds. The Company has not designated any specific
use for the net proceeds from the sale by the Company of the shares of Common
Stock offered hereby. Rather, the Company intends to use the net proceeds
primarily for general corporate purposes, including working capital and capital
expenditures, and strategic acquisitions. The Company has no present plans or
commitments and is not currently engaged in any negotiations with respect to
strategic acquisitions. Accordingly, management will have significant
flexibility in applying the net proceeds of this offering. The failure of
management to apply such funds effectively could have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Use of Proceeds."
    
 
     Year 2000 Compliance. There are issues associated with the programming code
in existing computer systems as the year 2000 approaches. The "year 2000
problem" is pervasive and complex, as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is in the process of working with its software vendors to
assure that the Company is prepared for the year 2000. The Company has not
verified that companies doing business with it are year 2000 compliant. The
Company does not anticipate that it will incur significant operating expenses or
be required to invest heavily in computer systems improvements to be year 2000
compliant. However, significant uncertainty exists concerning the potential
costs and effects associated with any year 2000 compliance. Any year 2000
compliance problem of either the Company or its users, customers or advertisers
could have a material adverse effect on the Company's business, results of
operations and financial condition.
 
     No Prior Public Market. Prior to this offering, there has been no public
market for the Common Stock. The initial public offering price will be
determined by negotiation between the Company and the representatives of the
Underwriters based upon several factors. The initial public offering price may
not be indicative of future market prices. See "Underwriters" for a discussion
of the factors to be considered in determining the initial public offering
price.
 
     Possible Volatility of Stock Price. The trading price of the Common Stock
is likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as actual or anticipated variations in quarterly
operating results, announcements of technological innovations, new sales formats
or new services by the Company or its competitors, changes in financial
estimates by securities analysts, conditions or trends in Internet markets,
changes in the market valuations of other Internet companies, announcements by
the Company or its competitors of significant acquisitions, strategic
partnerships, joint ventures, capital commitments, additions or departures of
key personnel, sales of Common Stock and other events or factors, many of which
are beyond the Company's control. In addition, the stock market in general, and
the market for Internet-related and technology companies in particular, has
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of such companies. The trading
prices of many technology companies' stocks are at or near historical highs and
reflect price earnings ratios substantially above historical levels. There can
be no assurance that these trading prices and price earnings ratios will be
sustained. These broad market and industry factors may materially adversely
affect the market price of the Common Stock, regardless of the Company's
operating performance. In the past, following periods of volatility in the
market price of a company's securities, securities class-action litigation
                                       16
<PAGE>   21
 
has often been instituted against such company. Such litigation, if instituted,
could result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
 
   
     Shares Eligible for Future Sale; Registration Rights. Sales of a
substantial number of shares of Common Stock in the public market following this
offering could adversely affect the market price for the Company's Common Stock.
The number of shares of Common Stock available for sale in the public market is
limited by restrictions under the Securities Act of 1933, as amended (the
"Securities Act"), and lock-up agreements under which the holders of such shares
have agreed not to sell or otherwise dispose of any of their shares for a period
of 180 days after the date of this Prospectus without the prior written consent
of Morgan Stanley & Co. Incorporated. Morgan Stanley & Co. Incorporated, may,
however, in its sole discretion and at any time without prior notice, release
all or any portion of the Common Stock subject to these lock-up agreements.
Morgan Stanley & Co. Incorporated currently has no plans to release any portion
of the securities subject to lock-up agreements. When determining whether or not
to release shares from the lock-up agreements, Morgan Stanley & Co. Incorporated
will consider, among other factors, the stockholder's reasons for requesting the
release, the number of shares for which the release is being requested and
market conditions at the time. In addition to the 2,500,000 shares of Common
Stock offered hereby (assuming no exercise of the Underwriters' overallotment
option), there will be 14,401,031 shares of Common Stock outstanding upon
completion of this offering (assuming no exercise of warrants or options), all
of which are subject to lock-up agreements and are "restricted shares" under the
Securities Act. On the date of this Prospectus, no shares other than the
2,500,000 shares offered hereby will be eligible for sale. Upon expiration of
the lock-up agreements 180 days after the date of this Prospectus, an additional
13,977,905 shares will become eligible for sale in the public market, of which
all but 3,260,940 shares shall be subject to the volume limitations and other
conditions of Rule 144 adopted under the Securities Act ("Rule 144"). An
additional 407,166 shares will become eligible for sale in the public market in
March 1999, all of which shall be subject to the volume limitations and other
conditions of Rule 144. The remaining 15,960 shares will become eligible for
sale in July 1999, all of which shall be subject to the volume limitations and
other conditions of Rule 144. In addition, on March 31, 1998, there were
outstanding warrants to purchase 322,316 shares of the Company's Common Stock
and options exercisable for 337,493 shares of the Company's Common Stock. In
addition, the Company intends to register shortly after the date of this
Prospectus a total of 4,105,360 shares of Common Stock subject to options
outstanding or reserved for future issuance under the Company's 1996 Stock
Option Plan, 1998 Stock Option Plan and 1996 Non-Employee Directors Stock Option
Plan, and 250,000 shares of Common Stock reserved for issuance under the
Company's Employee Stock Purchase Plan. Upon expiration of the lock-up
agreements referred to above, holders of 4,533,631 shares of Common Stock and
holders of warrants to purchase 218,096 shares of Common Stock will have certain
rights to require the Company to register those shares of Common Stock and those
shares issuable upon the exercise of warrants under the Securities Act. If such
holders, by exercising their registration rights, cause a large number of shares
to be registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Company's Common Stock. See
"Description of Capital Stock--Registration Rights," "Shares Eligible for Future
Sale" and "Underwriters."
    
 
   
     Dilution. Purchasers of the Common Stock in this offering will experience
immediate and substantial dilution of $11.33 per share (based on an assumed
public offering price of $15.00 per share). Additional dilution will occur upon
exercise of outstanding stock options. See "Dilution."
    
 
                                       17
<PAGE>   22
 
                                  THE COMPANY
 
     Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. The Company broadcasts on the Internet 24 hours a day
seven days a week, and its programming includes more than 345 radio stations and
networks, 17 television stations and cable networks and game broadcasts and
other programming for over 350 college and professional sports teams. The
Company licenses such programming from content providers, in most cases under
exclusive, multi-year agreements. The Company's Business Services Group provides
cost-effective Internet and intranet broadcasting services to businesses and
other organizations. These business services include the turnkey production of
press conferences, earnings conference calls, investor conferences, trade shows,
stockholder meetings, product introductions, training sessions, distance
learning telecourses and media events. In addition to its business services, the
Company derives revenues from the sale of advertising on its Web sites,
including gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads, as well as the sale of
radio and television ad spots the Company receives from stations in exchange for
broadcasting their programming over the Internet. In March 1998, the Company's
Web sites served a daily average of over 400,000 unique users and its principal
Web site was ranked in the top 20 among all News/ Information/Entertainment
sites according to Media Metrix.
 
     Broadcasting audio and video content over the Internet offers certain
opportunities that are not generally available from traditional media. Currently
available analog technology and government regulations limit the ability of
radio and television stations to broadcast beyond certain geographic areas.
Radios and televisions are not widely used in office buildings and other
workplaces, where Internet access has become commonplace. Traditional business
communication tools such as audio conferencing and videoconferencing can be
costly, non-targeted and inconvenient. In addition, traditional broadcasters are
limited in their ability to measure or identify in real time the listeners or
viewers of a program. By using the Internet, targeted streaming media content
can be broadcast to a geographically dispersed audience of customers, suppliers,
employees and stockholders at relatively low costs. Internet users can interact
with the broadcast content by responding to online surveys, voting in polls and
obtaining additional information. In addition, Internet broadcasters can provide
highly specific information about a program's audience to content providers,
advertisers and users of Internet business services. The convergence of the
Internet's capabilities and attributes has accelerated its acceptance as a
business tool, leading to rapidly growing economic opportunities in Web-based
advertising and business service offerings, including audio conferencing,
electronic commerce and video transmission, among others.
 
     The Company believes it has accomplished numerous Internet achievements
since its initial live broadcast in September 1995, including the Internet
broadcasts of the first live commercial radio station, first live sporting
event, first live corporate quarterly earnings call and first live stockholders'
meeting. The Company's early entrance into the Internet broadcasting market has
enabled the Company to establish strong brand recognition for its broadcasts and
services and to form relationships with a diverse range of content providers.
The Company currently offers content from a variety of sources, including radio
and television, college and professional sports teams and leagues, production
and film studios and record labels. The Company has broadcast over 11,000 live
events such as the last three NFL Super Bowls and NCAA Basketball Tournaments,
the Stanley Cup Playoffs, the entire 1997-98 season for 24 of the 26 NHL teams,
game broadcasts for the entire season of over 300 college teams, the premiere
event for the movie "Titanic," Blockbuster Rockfest '97 and backstage interviews
from the 1998 Academy Awards Webcast. The Company has also amassed over 50,000
hours of on-demand broadcast programming, including over 2,100 full-length music
CDs, sports programming, talk radio and business and media events.
Broadcast.com's business services customers include the American Bar
Association, AT&T Corporation ("AT&T"), Charles Schwab Corporation ("Charles
Schwab"), Comerica Incorporated ("Comerica"), Gartner Group, Inc.
("GartnerGroup"), Harvard University, Intel Corporation ("Intel"), Microsoft,
Motorola, Inc. ("Motorola"), PR Newswire,
 
                                       18
<PAGE>   23
 
Texas Instruments Incorporated ("Texas Instruments") and more than 290 other
organizations. Business services broadcasts have originated from 36 states and
nine countries.
 
     The Company's objective is to enhance its leadership position in Internet
broadcasting by continuing to provide services that enable the delivery of a
broad range of streaming media content over the Internet and intranets. The
Company's strategy to achieve this objective includes enhancing and expanding
exclusive content offerings, further penetrating the business services market,
expanding network capacity, enhancing brand awareness and capturing and
developing emerging revenue opportunities.
 
     The Company's name was changed from AudioNet, Inc. to broadcast.com inc. in
May 1998. The Company's headquarters is located at 2914 Taylor Street, Dallas,
Texas 75226. Its telephone number is 214.748.6660, fax number is 214.748.6657
and its principal Web site is located at http://www.broadcast.com. Other Company
Web sites include: www.homematters.com, www.jukebox.com, www.pluggedin.com,
www.policescanner.com, www.soapopera.com and www.sportsworld.com. Information
contained on the Company's Web sites is not part of this Prospectus.
 
                                       19
<PAGE>   24
 
                                USE OF PROCEEDS
 
   
     The net proceeds to be received by the Company from the sale of the
2,500,000 shares of Common Stock offered by the Company hereby are estimated to
be approximately $33.9 million (approximately $36.5 million, if the
Underwriters' over-allotment option is exercised in full), at an assumed initial
public offering price of $15.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company. The net proceeds are expected to be used for general corporate
purposes, including capital expenditures and working capital, and strategic
acquisitions. The Company has no present plans or commitments and is not
currently engaged in any negotiations with respect to strategic acquisitions.
Prior to such use, the Company intends to invest the net proceeds from this
offering in short-term, interest-bearing, investment-grade securities. See "Risk
Factors--Use of Proceeds."
    
 
                                DIVIDEND POLICY
 
     The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
 
                                       20
<PAGE>   25
 
                                 CAPITALIZATION
 
   
     The following table sets forth the capitalization of the Company as of
March 31, 1998, and as adjusted to give effect to the issuance and sale of the
shares of Common Stock offered by the Company (at an assumed initial public
offering price of $15.00 per share after deducting estimated underwriting
discounts, commissions and estimated offering expenses payable by the Company)
and the application of the net proceeds therefrom. This table should be read in
conjunction with the Company's Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
    
 
   
<TABLE>
<CAPTION>
                                                                  MARCH 31, 1998
                                                              ----------------------
                                                              ACTUAL     AS ADJUSTED
                                                              -------    -----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>        <C>
Stockholders' equity:
  Preferred Stock, $.01 par value; 5,000,000 shares
     authorized;
     no shares issued and outstanding.......................  $    --      $    --
  Common stock, $.01 par value; 60,000,000 shares
     authorized; 14,383,451 shares issued and outstanding,
     actual and 16,883,451 shares issued and outstanding, as
     adjusted(1)............................................       90          115
  Additional paid-in capital................................   40,669       74,519
  Accumulated deficit.......................................  (12,453)     (12,453)
                                                              -------      -------
       Total stockholders' equity...........................   28,306       62,181
                                                              -------      -------
          Total capitalization..............................  $28,306      $62,181
                                                              =======      =======
</TABLE>
    
 
---------------
 
   
(1) Excludes (i) 2,027,856 shares of Common Stock issuable upon exercise of
    options outstanding on March 31, 1998, with a weighted average exercise
    price of $5.71 per share, (ii) 1,092,361 shares available for future
    issuance under the Company's stock plans as of March 31, 1998, (iii) an
    additional 1,000,000 shares of Common Stock reserved for issuance under the
    Company's 1998 Stock Option Plan, pursuant to an amendment approved in June
    1998, and (iv) 250,000 shares of Common Stock reserved for issuance under
    the Company's Employee Stock Purchase Plan approved in June 1998. Also
    excludes 234,056 shares of Common Stock subject to outstanding warrants. See
    "Management--Director Compensation," "--Employee Benefit Plans" and Note 6
    of Notes to Financial Statements.
    
 
                                       21
<PAGE>   26
 
                                    DILUTION
 
   
     The net tangible book value of the Company as of March 31, 1998 was
$28,114,512 or $1.95 per share. Net tangible book value per share is equal to
the Company's total tangible assets, less its total liabilities, divided by the
number of shares of Common Stock outstanding as of March 31, 1998. After giving
effect to the issuance and sale of the 2,500,000 shares of Common Stock offered
by the Company hereby and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, the as
adjusted net tangible book value of the Company as of March 31, 1998 would have
been $61,989,512 or $3.67 per share. This represents an immediate increase in
net tangible book value of $1.72 per share to existing stockholders and an
immediate dilution of approximately $11.33 per share to new public investors
purchasing shares in this offering. The following table illustrates the per
share dilution to new investors:
    
 
   
<TABLE>
<S>                                                            <C>      <C>
Assumed initial public offering price per share.............            $15.00
  Net tangible book value per share as of March 31, 1998....   $ 1.95
  Increase per share attributable to new public investors...    13.05
                                                               ------
As adjusted net tangible book value per share after the
  offering..................................................              3.67
                                                                        ------
Dilution per share to new public investors..................            $11.33
                                                                        ======
</TABLE>
    
 
     The following table summarizes on a pro forma basis, as of March 31, 1998,
the difference between the existing stockholders and the purchasers of shares of
Common Stock in this offering (before deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company) with respect
to the number of shares of Common Stock purchased from the Company, the total
cash consideration paid and the average price paid per share.
 
   
<TABLE>
<CAPTION>
                                           SHARES PURCHASED      TOTAL CONSIDERATION
                                         --------------------   ---------------------   AVERAGE PRICE
                                           NUMBER     PERCENT     AMOUNT      PERCENT     PER SHARE
                                         ----------   -------   -----------   -------   -------------
<S>                                      <C>          <C>       <C>           <C>       <C>
Existing stockholders..................  14,383,451     85.2%   $40,039,419     51.6%      $ 2.78
New public investors...................   2,500,000     14.8     37,500,000     48.4        15.00
                                         ----------    -----    -----------    -----
          Total........................  16,883,451    100.0%   $77,539,419    100.0%
                                         ==========    =====    ===========    =====
</TABLE>
    
 
     The foregoing discussion and tables assume no exercise of any stock options
outstanding as of March 31, 1998 and no exercise of warrants to purchase 322,316
shares of Common Stock. As of March 31, 1998, there were options outstanding to
purchase a total of 2,027,856 shares of Common Stock with a weighted average
exercise price of $5.71 per share. To the extent that any of these options or
warrants are exercised, there will be further dilution to new public investors.
See "Capitalization," "Management--Director Compensation," "--Employee Benefit
Plans" and Note 6 of Notes to Financial Statements.
 
                                       22
<PAGE>   27
 
                            SELECTED FINANCIAL DATA
 
     The following table sets forth selected financial information for the
periods presented. The statement of operations data of the Company presented for
the period from inception (May 19, 1995) to December 31, 1995, years ended
December 31, 1996 and 1997 and the balance sheet data for the years then ended
are derived from the financial statements of the Company audited by
PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere
in this Prospectus. The selected financial data of the Company presented for the
three months ended March 31, 1997 and 1998 were derived from the Company's
unaudited financial statements also appearing herein and which, in the opinion
of Company management, include all adjustments, consisting of normal recurring
accruals and other adjustments, necessary for the fair presentation of the
financial position and results of operations for these periods. The results of
operations for the three months ended March 31, 1998 may not be indicative of
results that may be expected for the full year ending December 31, 1998. The
financial information set forth below should be read in conjunction with, and is
qualified in its entirety by, the Financial Statements of the Company and
related notes thereto that appear elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
<TABLE>
<CAPTION>
                                       PERIOD FROM         YEAR ENDED          THREE MONTHS ENDED
                                        INCEPTION         DECEMBER 31,             MARCH 31,
                                    (MAY 19, 1995) TO   -----------------   ------------------------
                                    DECEMBER 31, 1995    1996      1997      1997          1998
                                    -----------------   -------   -------   -------   --------------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                 <C>                 <C>       <C>       <C>       <C>
STATEMENTS OF OPERATIONS DATA:
Revenues..........................       $   --         $ 1,756   $ 6,856   $ 1,087      $ 3,176
Operating expenses:
  Production costs................           --           1,301     2,950       469        1,225
  Operating and development.......           --           1,506     4,659       650        2,247
  Sales and marketing.............           21             718     3,389       519        1,671
  General and administrative......          217             752     1,416       397          588
  Depreciation and amortization...           30             544     1,129       176          442
                                         ------         -------   -------   -------      -------
          Total operating
            expenses..............          268           4,821    13,543     2,211        6,173
                                         ------         -------   -------   -------      -------
          Net operating loss......         (268)         (3,065)   (6,687)   (1,124)      (2,997)
Interest and other income.........           --              76       213        61          275
                                         ------         -------   -------   -------      -------
          Net loss................       $ (268)        $(2,989)  $(6,474)  $(1,063)     $(2,722)
                                         ======         =======   =======   =======      =======
Basic and diluted net loss per
  share(1)........................       $ (.04)        $  (.31)  $  (.55)  $  (.09)     $  (.19)
                                         ======         =======   =======   =======      =======
Shares used in the net loss per
  share calculations(1)...........        6,020           9,564    11,680    11,428       14,076
</TABLE>
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                        --------------------------    MARCH 31,
                                                        1995      1996      1997        1998
                                                        -----    ------    -------    ---------
                                                                    (IN THOUSANDS)
<S>                                                     <C>      <C>       <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................  $ 142    $4,580    $21,337     $22,400
Working capital (deficit).............................    (75)    4,524     23,318      24,455
Total assets..........................................    676     8,154     28,233      30,134
Total debt............................................     --        --         --          --
Total other liabilities...............................    320       546      1,040       1,828
Total stockholders' equity (deficit)..................   (214)    7,608     27,193      28,306
</TABLE>
 
---------------
 
(1) See Note 8 of Notes to Financial Statements for an explanation of the
    determination of the number of shares used in per share calculations.
 
                                       23
<PAGE>   28
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. The
following discussion contains forward-looking statements. The Company's actual
results may differ significantly from those projected in the forward-looking
statements. Factors that might cause future results to differ materially from
those projected in the forward-looking statements include, but are not limited
to, those discussed in "Risk Factors" and elsewhere in this Prospectus.
 
OVERVIEW
 
     Broadcast.com (formerly AudioNet) is the leading aggregator and broadcaster
of streaming media programming on the Web with the network infrastructure and
expertise to deliver or "stream" hundreds of live and on-demand audio and video
programs over the Internet to hundreds of thousands of users. The Company's Web
sites offer a large and comprehensive selection of live and on-demand audio and
video programming, including sports, talk and music radio, television, business
events, full-length CDs, news, commentary and full-length audio-books. During
the period from the Company's inception on May 19, 1995 through December 31,
1995 (the "Inception Period"), the Company had no revenues and its operating
activities related primarily to the investment in necessary network
infrastructure and initial planning and development of the Company's Web sites
and operations. During 1996, the Company generated revenues primarily from
business services and Web advertising and the Company's operating activities
related to the continued development of the network infrastructure required for
large-scale streaming media broadcasts, continued enhancement of its Web sites
and the opening of a sales office in New York. During 1997, the Company
significantly increased revenues from business services and Web advertising and
began generating revenues from traditional media advertising. Also during 1997,
the Company continued to expand its network infrastructure, moved to a 28,000
square foot facility, continued the enhancement of its Web sites and added
qualified sales, marketing, operations and general and administrative personnel.
During 1998, the Company added television advertising sales to its traditional
media advertising revenues, expanded its customer and user base, hired sales
directors and vice presidents, opened sales offices in Los Angeles and San
Francisco and continued to expand its network infrastructure. Throughout the
Company's existence, it has expended significant resources in the aggregation of
content by obtaining Internet broadcasting rights to audio and video
programming.
 
     The Company derives substantially all of its revenues through the sale of
business services, Web advertising and traditional media advertising. Business
services revenues are derived from the Company's Internet and intranet
broadcasts of its customers' business, educational or other programming.
Business services revenues are recognized in the month in which the service is
provided. Web advertising revenues are derived from the sale of gateway ads with
guaranteed click-thrus, channel and event sponsorships and multimedia and
traditional banner ads. Web advertising revenues are recognized over the period
in which the advertisement is displayed on one of the Company's Web pages,
except for sponsorship sales which are recognized ratably over the term of the
sponsorship. Traditional media advertising revenues are derived from the sale of
ad spots received from radio and television stations in exchange for the Company
broadcasting their programming over the Internet and the sale of prepaid
advertising. Traditional media advertising revenues are recognized in the month
in which the spots are sold. Other revenues consist of electronic commerce sales
as well as certain programming and promotional services performed by the Company
and are recognized in the month in which the product is sold or the service is
provided.
 
     The Company has incurred significant losses since its inception, and as of
March 31, 1998 had an accumulated deficit of approximately $12.5 million. The
Company believes that its success will depend largely on its ability to extend
its leadership position as a source for streaming media programming and business
services on the Web. Accordingly, the Company intends to invest heavily in sales
and marketing, content acquisition and continued development of its network
infrastructure. The Company expects to continue to incur substantial operating
losses for the foreseeable future.
 
     In view of the rapidly evolving nature of the Company's business and its
limited operating history, the Company believes that period-to-period
comparisons of its revenues and operating results, including its gross
 
                                       24
<PAGE>   29
 
profit margin and operating expenses as a percentage of total net revenues, are
not necessarily meaningful and should not be relied upon as indications of
future performance. Although the Company has experienced sequential quarterly
growth in revenues, it does not believe that its historical growth rates are
necessarily sustainable or indicative of future growth.
 
RESULTS OF OPERATIONS
 
     The following table sets forth certain financial data for the periods
indicated as a percentage of total revenues. Data for the Inception Period is
not presented as the Company had no revenues in the Inception Period.
 
<TABLE>
<CAPTION>
                                                  YEAR ENDED         THREE MONTHS ENDED
                                                 DECEMBER 31,             MARCH 31,
                                               -----------------     -------------------
                                                1996       1997       1997        1998
                                               ------     ------     -------     -------
                                                                         (UNAUDITED)
<S>                                            <C>        <C>        <C>         <C>
Revenues:
  Business services..........................    30.5%      41.1%      41.1%       35.5%
  Web advertising............................    62.1       43.1       48.9        41.6
  Traditional media advertising..............      --       13.8        8.3        16.3
  Other......................................     7.4        2.0        1.7         6.6
                                               ------     ------     ------      ------
          Total revenues.....................   100.0      100.0      100.0       100.0
Operating expenses:
  Production costs...........................    74.1       43.0       43.2        38.6
  Operations and development.................    85.8       68.0       59.8        70.8
  Sales and marketing........................    40.9       49.4       47.8        52.6
  General and administrative.................    42.7       20.6       36.5        18.5
  Depreciation and amortization..............    31.0       16.5       16.2        13.9
                                               ------     ------     ------      ------
          Total operating expenses...........   274.5      197.5      203.5       194.4
                                               ------     ------     ------      ------
          Net operating loss.................  (174.5)     (97.5)    (103.5)      (94.4)
Interest and other income....................     4.3        3.1        5.7         8.7
                                               ------     ------     ------      ------
          Net loss...........................  (170.2)%    (94.4)%    (97.8)%     (85.7)%
                                               ======     ======     ======      ======
</TABLE>
 
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
 
     REVENUES
 
     Total revenues increased $2.1 million, or 192.2%, from $1.1 million to $3.2
million for the three months ended March 31, 1997 and 1998, respectively.
 
   
     Business Services. Business services revenues increased $680,000, or
152.2%, from $447,000 to $1.1 million for the three months ended March 31, 1997
and 1998, respectively. Business services revenues represented 41.1% of total
revenues for the three months ended March 31, 1997 and 35.5% of total revenues
for the three months ended March 31, 1998. The increase in business services
revenues was due primarily to an increase in the number of business services
events broadcast by the Company from 120 events in the three months ended March
31, 1997 to 347 events in the three months ended March 31, 1998.
    
 
   
     Web Advertising. Web advertising revenues increased $792,000, or 149.0%,
from $531,000 to $1.3 million for the three months ended March 31, 1997 and
1998, respectively. Web advertising revenues represented 48.9% of total revenues
for the three months ended March 31, 1997 and 41.6% of total revenues for the
three months ended March 31, 1998. Bartered Web advertising revenues increased
$24,000, or 9.2%, from $256,000 to $280,000 for the three months ended March 31,
1997 and 1998, respectively, and represented 23.6% and 8.8% of total revenues,
respectively. The Company anticipates that bartered Web advertising revenues, as
a percentage of total revenues, will continue to decline. In prior periods, the
Company used bartered Web advertising to assist in establishing its brand and to
drive traffic to its Web sites. As a result of the Company's
    
 
                                       25
<PAGE>   30
 
   
decreased focus on the use of bartered Web advertising for these purposes, and
the Company's increased cash flows from other revenue activities, the Company
expects bartered Web advertising revenues to comprise corresponding smaller
percentages of its revenues in future periods. The increase in Web advertising
revenues was due primarily to an increase in ads sold to existing and new
advertisers on the Company's Web sites, including increased sales of gateway
ads, which sell at a higher rate than traditional banner ads.
    
 
     Traditional Media Advertising. Traditional media advertising revenues
increased $426,000, from $91,000 to $517,000 for the three months ended March
31, 1997 and 1998, respectively. Traditional media advertising revenues
represented 8.3% of total revenues for the three months ended March 31, 1997 and
16.3% of total revenues for the three months ended March 31, 1998. The increase
was due primarily to increased sales of ad spots acquired through the licensing
of additional radio stations.
 
     Other. Other revenues increased $192,000, from $18,000 to $210,000 for the
three months ended March 31, 1997 and 1998, respectively, representing 1.7% and
6.6% of total revenues, respectively. The Company began selling promotional
services and electronic commerce sales increased in the first quarter of 1998.
 
     OPERATING EXPENSES
 
     Production Costs. Production costs consist primarily of expenses from the
sale of prepaid advertising credits, bartered Web advertising expenses, event
production costs, direct personnel expenses associated with event production and
performance license fees. Production costs increased $756,000, or 161.0%, from
$469,000 to $1.2 million for the three months ended March 31, 1997 and 1998,
respectively. Of the increase, $650,000 was due to the increase in sales of
prepaid advertising credits and performance license fees. The increase was also
due to added personnel and production costs required to support the broadcast of
additional live events. Excluding both the revenues and expenses associated with
bartered Web advertising transactions, production costs increased from 25.7% to
32.6% of revenues for the three month periods presented, respectively.
 
     Operating and Development. Operating and development expenses consist
primarily of data communications expenses, personnel expenses associated with
broadcasting, software and content license fees, operating supplies and
overhead. Operating and development expenses increased $1.6 million, from
$650,000 to $2.2 million, for the three months ended March 31, 1997 and 1998,
respectively. Approximately $1.2 million of the increase was due to increased
expenditures for data communications as user traffic increased, software license
fees as the network infrastructure expanded and operations personnel to handle
additional broadcasts as the Company obtained additional Internet broadcasting
rights to programming. In future periods, operating and development expenses
will reflect an additional $161,000 per month for additional access to bandwidth
pursuant to a three year agreement entered into in April 1998. Such amounts will
be reflected when access to such bandwidth becomes operational, which is
anticipated to occur in July 1998.
 
     Sales and Marketing. Sales and marketing expenses consist primarily of
personnel expenses associated with the sale of the Company's business services,
Web advertising and traditional media advertising, marketing of the Company's
Web sites, graphic design costs and overhead. Sales and marketing expenses
increased $1.2 million, from $519,000 to $1.7 million for the three months ended
March 31, 1997 and 1998, respectively. Approximately $1.0 million of the
increase was due to growth in the Company's sales force and marketing staff and
increased advertising expenses.
 
     General and Administrative. General and administrative expenses consist
primarily of administrative personnel expenses, professional fees, expenditures
for applicable facilities costs and overhead. General and administrative
expenses increased $191,000, or 48.2%, from $397,000 to $588,000 for the three
months ended March 31, 1997 and 1998, respectively. The increase was due
primarily to increased personnel expenses and professional fees necessary to
support the Company's growth.
 
     Depreciation and Amortization. Depreciation and amortization expenses
consist of depreciation of property and equipment and amortization of intangible
assets. Depreciation and amortization expenses increased $266,000, or 150.7%,
from $176,000 to $442,000 for the three months ended March 31, 1997 and
 
                                       26
<PAGE>   31
 
1998, respectively. The increase was primarily due to the addition of property
and equipment as the Company expanded its network infrastructure, incurred
leasehold improvement costs and purchased equipment necessary to support the
growth in personnel.
 
     INTEREST AND OTHER INCOME
 
     Interest and other income consist primarily of interest earnings on the
Company's cash and cash equivalents. Interest and other income increased from
$61,000 to $275,000 for the three months ended March 31, 1997 and 1998,
respectively. The increase was due to interest earned from the investment of
higher cash and cash equivalent balances derived from sales of the Company's
Common Stock in December 1997.
 
INCEPTION PERIOD AND YEARS ENDED DECEMBER 31, 1996 AND 1997
 
     REVENUES
 
     Total revenues increased $5.1 million, or 290.4%, from $1.8 million to $6.9
million in 1996 and 1997, respectively. The Company had no revenues during the
Inception Period.
 
   
     Business Services. Business services revenues increased $2.3 million, from
$535,000 to $2.8 million in 1996 and 1997, respectively. Business services
revenues represented 30.5% of total revenues in 1996 and 41.1% of total revenues
in 1997. The increase in business services revenues was due primarily to an
increase in the number of business services events broadcast by the Company from
238 events in 1996 to 740 events in 1997.
    
 
     Web Advertising. Web advertising revenues increased $1.9 million from $1.1
million to $3.0 million in 1996 and 1997, respectively. Web advertising revenues
represented 62.1% of total revenues in 1996 and 43.1% of total revenues in 1997.
Bartered Web advertising revenues increased $379,000, or 59.4%, from $638,000 to
$1.0 million in 1996 and 1997, respectively, and represented 36.3% and 14.8% of
total revenues, respectively. The increase in Web advertising revenues was due
primarily to an increase in ads sold to existing and new advertisers on the
Company's Web sites, including gateway ads, which the Company began selling in
the first quarter of 1997.
 
     Traditional Media Advertising. Traditional media advertising was $942,000,
or 13.8% of total revenues in 1997, as the Company began selling its ad spots
acquired through the licensing of radio stations in the first quarter of 1997.
 
     Other. Other revenues increased $8,000, or 6.1%, from $130,000 to $138,000
in 1996 and 1997, respectively, representing 7.4% and 2.0% of total revenues,
respectively.
 
     OPERATING EXPENSES
 
     Production Costs. Production costs increased $1.6 million, or 126.7%, from
$1.3 million to $2.9 million in 1996 and 1997, respectively. The Company did not
incur production costs during the Inception Period. The increase was primarily
due to the increase in sales of prepaid advertising credits, barter expenses and
production and personnel costs required for the broadcasting of additional
business services events. Excluding both the revenues and expenses associated
with bartered Web advertising transactions, production costs decreased from
59.3% to 33.1% of revenues for the periods presented, respectively.
 
     Operating and Development. Operating and development expenses increased
$3.2 million, from $1.5 million to $4.7 million in 1996 and 1997, respectively.
The Company did not incur operating and development expenses during the
Inception Period. Approximately $2.6 million of the increase was due to
expenditures for data communications as user traffic increased, operations
personnel to handle the additional broadcasts of the Company's additional
content, and content license fees for the acquisition of additional content.
 
     Sales and Marketing. Sales and marketing expenses increased from $21,000 in
the Inception Period to $718,000 in 1996 to $3.4 million in 1997, an increase of
$696,000 and $2.7 million, respectively. The increases were due primarily to
growth in the Company's sales force and marketing staff.
 
     General and Administrative. General and administrative expenses increased
from $217,000 in the Inception Period to $752,000 in 1996 to $1.4 million in
1997, an increase of $535,000 and $664,000, or 247.1%
 
                                       27
<PAGE>   32
 
and 88.4%, respectively. The increases were due primarily to increased personnel
expenses, professional fees and building expenses necessary to support the
Company's growth.
 
     Depreciation and Amortization. Depreciation and amortization expenses
increased from $30,000 in the Inception Period to $544,000 in 1996 to $1.1
million in 1997, an increase of $514,000 and $585,000, respectively. The
increases were primarily due to the addition of property and equipment as the
Company expanded its network infrastructure, incurred leasehold improvement
costs and purchased equipment necessary to support the growth in personnel.
 
     INTEREST AND OTHER INCOME
 
     Interest and other income consist primarily of interest earnings on the
Company's cash and cash equivalents. Interest and other income increased from
$76,000 in 1996 to $213,000 in 1997. The Company had no interest and other
income in the Inception Period.
 
SELECTED QUARTERLY OPERATING RESULTS
 
     The following table sets forth certain unaudited quarterly statements of
operations data for the nine quarters ended March 31, 1998. This information has
been derived from the Company's unaudited financial statements, which, in
management's opinion, have been prepared on the same basis as the audited
Financial Statements, and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information for
the quarters presented. This information should be read in conjunction with the
audited Financial Statements of the Company and the Notes thereto included
elsewhere in this Prospectus. The operating results for any quarter are not
necessarily indicative of the operating results for any future period.
 
<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                 ------------------------------------------------------------------------------------------------
                                 MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,
                                   1996       1996       1996       1996       1997       1997       1997       1997       1998
                                 --------   --------   --------   --------   --------   --------   --------   --------   --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                              <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenues:
  Business services............. $    13    $    78    $   217    $   226    $   447    $   794    $   804    $   776    $ 1,127
  Web advertising...............      23         34        167        867        531        538        693      1,193      1,322
  Traditional media
    advertising.................      --         --         --         --         91        117        360        374        517
  Other.........................      15         28         71         17         18         18         50         53        210
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Total revenues..........      51        140        455      1,110      1,087      1,467      1,907      2,396      3,176
Operating expenses:
  Production costs..............      45         58        207        992        469        593        995        893      1,225
  Operations and development....     128        233        371        774        650      1,128      1,285      1,597      2,247
  Sales and marketing...........      47        106        213        351        519        780        908      1,183      1,671
  General and administrative....      46         84        273        347        398        256        338        425        589
  Depreciation and
    amortization................     119        128        142        156        176        223        315        414        442
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Total operating
          expenses..............     385        609      1,206      2,620      2,212      2,980      3,841      4,512      6,174
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Net operating loss......    (334)      (469)      (751)    (1,510)    (1,125)    (1,513)    (1,934)    (2,116)    (2,998)
Interest and other income.......       1          2         17         56         62         61         39         52        276
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Net loss................ $  (333)   $  (467)   $  (734)   $(1,454)   $(1,063)   $(1,452)   $(1,895)   $(2,064)   $(2,722)
                                 =======    =======    =======    =======    =======    =======    =======    =======    =======
Basic and diluted net loss per
  share......................... $  (.04)   $  (.05)   $  (.07)   $  (.13)   $  (.09)   $  (.12)   $  (.16)   $  (.17)   $  (.19)
                                 =======    =======    =======    =======    =======    =======    =======    =======    =======
Shares used in the net loss per
  share calculations............   7,956      9,382     10,018     10,846     11,428     11,675     11,681     11,930     14,076
</TABLE>
 
                                       28
<PAGE>   33
 
<TABLE>
<CAPTION>
                                                                AS A PERCENTAGE OF TOTAL REVENUES
                                 ------------------------------------------------------------------------------------------------
                                 MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,
                                   1996       1996       1996       1996       1997       1997       1997       1997       1998
                                 --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                              <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenues:
  Business services.............    25.8%      55.9%      47.8%      20.4%      41.1%      54.1%      42.2%      32.4%      35.5%
  Web advertising...............    44.1       24.4       36.7       78.1       48.9       36.7       36.3       49.8       41.6
  Traditional media
    advertising.................      --         --         --         --        8.3        8.0       18.9       15.6       16.3
  Other.........................    30.1       19.7       15.5        1.5        1.7        1.2        2.6        2.2        6.6
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Total revenues..........   100.0      100.0      100.0      100.0      100.0      100.0      100.0      100.0      100.0
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
Operating expenses:
  Production costs..............    88.1       41.3       45.4       89.3       43.2       40.4       52.1       37.3       38.6
  Operations and development....   248.3      166.9       81.7       69.7       59.8       76.9       67.4       66.6       70.8
  Sales and marketing...........    91.4       75.9       46.9       31.6       47.8       53.2       47.6       49.4       52.6
  General and administrative....    89.3       60.4       60.1       31.4       36.5       17.5       17.8       17.7       18.5
  Depreciation and
    amortization................   230.6       91.1       31.1       14.1       16.2       15.2       16.5       17.3       13.9
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Total operating
          expenses..............   747.7      435.6      265.2      236.1      203.5      203.2      201.4      188.3      194.4
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Net operating loss......  (647.7)    (335.6)    (165.2)    (136.1)    (103.5)    (103.2)    (101.4)     (88.3)     (94.4)
Interest and other income.......     1.7        1.5        3.7        5.1        5.7        4.2        2.0        2.1        8.7
                                 -------    -------    -------    -------    -------    -------    -------    -------    -------
        Net loss................  (646.0)%   (334.1)%   (161.5)%   (131.0)%    (97.8)%    (99.0)%    (99.4)%    (86.2)%    (85.7)%
                                 =======    =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>
 
FACTORS AFFECTING OPERATING RESULTS
 
     The Company's operating results have varied on a quarterly basis during its
short operating history and may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside the Company's control.
Factors that may affect the Company's quarterly operating results include, but
are not limited to, (i) the cost of acquiring and the availability of content,
(ii) the demand for the Company's business services, (iii) demand for Internet
advertising, (iv) seasonal trends in Internet and advertising placements, (v)
the advertising cycles for, or the addition or loss of, individual advertisers,
(vi) the level of traffic on the Company's Web sites, (vii) the amount and
timing of capital expenditures and other costs relating to the expansion of the
Company's operations, (viii) price competition or pricing changes in Internet
broadcasting services, such as the Company's Internet advertising and business
services, (ix) the seasonality of the content of the Company's broadcasts, such
as sporting and other events, (x) the level of, and seasonal trends in, the use
of the Internet, (xi) technical difficulties or system downtime, (xii) the cost
to acquire sufficient bandwidth to integrate efficient broadcast technologies,
such as multicasting, to meet the Company's needs, (xiii) the mix of unicasting
and multicasting from the Company's Web sites, (xiv) the introduction of new
products or services by the Company or its competitors and (xv) general economic
conditions and economic conditions specific to the Internet such as electronic
commerce and online media. Any one of these factors could cause the Company's
revenues and operating results to vary significantly in the future. In addition,
as a strategic response to changes in the competitive environment, the Company
may from time to time make certain pricing, service or marketing decisions or
acquisitions that could cause significant declines in the Company's quarterly
operating results.
 
     The Company's limited operating history and the emerging nature of its
markets make prediction of future revenues difficult. The Company's expense
levels are based, in part, on its expectations with regard to future revenues,
and to a large extent such expenses are fixed, particularly in the short term.
There can be no assurance that the Company will be able to predict its future
revenues accurately and the Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in relation to the Company's expectations could cause
significant declines in the Company's quarterly operating results.
 
     Due to all the foregoing factors, the Company's quarterly revenues and
operating results are difficult to forecast. The Company believes that its
quarterly revenues, expenses and operating results could vary significantly in
the future, and that period-to-period comparisons should not be relied upon as
indications of future performance. Due to the foregoing factors, it is likely
that in some future quarters the Company's
 
                                       29
<PAGE>   34
 
operating results will fall below the expectations of securities analysts and
investors, which could have a material adverse effect on the trading price of
the Common Stock.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Since its inception, the Company has financed its operations through
private sales of Common Stock and warrants. Net proceeds from these sales from
inception to March 31, 1998 have totaled approximately $40.8 million. At March
31, 1998, the principal source of liquidity for the Company was approximately
$22.4 million of cash and cash equivalents. In April 1998, the Company entered
into an operating lease facility which provides for up to $2.5 million for
equipment, of which the Company has utilized approximately $550,000 as of April
30, 1998. In addition, in December 1997 the Company entered into a line of
credit that provides for borrowings up to $2.5 million for working capital needs
and equipment purchases. As of March 31, 1998 the Company had not made any
borrowings against this line of credit.
 
     Net cash used in operating activities was $30,000, $4.3 million and $6.6
million in the Inception Period, 1996 and 1997, respectively. For the three
month period ended March 31, 1998, net cash used in operating activities was
$1.8 million. Net cash used in operating activities in all such periods was
primarily attributable to net losses, offset in part by increases in accounts
payable and accrued liabilities.
 
     Net cash used in investing activities was $414,000, $1.3 million and $2.7
million in the Inception Period, 1996 and 1997, respectively. For the three
month period ended March 31, 1998, net cash used in investing activities was
$983,000. Net cash used in investing activities in all such periods was
primarily related to purchases of property and equipment.
 
     Net cash provided by financing activities was $586,000, $10.0 million and
$26.1 million in the Inception Period, 1996 and 1997, respectively. For the
three month period ended March 31, 1998, net cash provided by financing
activities was $3.8 million. Net cash provided by financing activities resulted
primarily from the issuances of Common Stock.
 
     The Company believes that the net proceeds from this offering, together
with its current cash and cash equivalents, will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. The Company may need to raise additional funds through
public or private financings, or other arrangements. There can be no assurance
that such additional financings, if needed, will be available on terms
attractive to the Company, if at all. Failure of the Company to raise capital
when needed could have a material adverse effect on the Company's business,
results of operations and financial condition. If additional funds are raised
through the issuance of equity securities, the percentage ownership of the
Company's then-current stockholders would be reduced. Furthermore, such equity
securities might have rights, preferences or privileges senior to those of the
Company's Common Stock.
 
YEAR 2000 COMPLIANCE
 
     There are issues associated with the programming code in existing computer
systems as the year 2000 approaches. The "year 2000 problem" is pervasive and
complex, as virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is whether computer
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. The Company is in the process of
working with its software vendors to assure that the Company is prepared for the
year 2000. The Company has not verified that companies doing business with it
are year 2000 compliant. The Company does not anticipate that it will incur
significant operating expenses or be required to invest heavily in computer
systems improvements to be year 2000 compliant. However, significant uncertainty
exists concerning the potential costs and effects associated with year 2000
compliance. Any year 2000 compliance problem of either the Company or its users,
customers or advertisers could have a material adverse effect on the Company's
business, results of operations and financial condition.
 
                                       30
<PAGE>   35
 
NET OPERATING LOSS CARRYFORWARDS
 
     As of December 31, 1997, the Company had available net operating loss
carryforwards totaling $10.3 million, which expire beginning in 2011. See Note 5
of Notes to the Financial Statements included elsewhere herein. The Tax Reform
Act of 1986 imposes limitations on the use of net operating loss carryforwards
if certain stock ownership changes have occurred or could occur in the future.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("FAS
130"). FAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. Reclassification of financial
statements for earlier periods provided for comparative purposes is required
upon adoption. FAS 130 is effective for fiscal years beginning after December
15, 1997. The Company has adopted FAS 130 for the year ending December 31, 1998.
 
     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosure About Segments of an
Enterprise and Related Information ("FAS 131"). FAS 131 establishes standards
for the way that public business enterprises report information about operating
segments and requires those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. FAS 131
is effective for financial statements for periods beginning after December 15,
1997. The Company will adopt the reporting requirements of FAS 131 in its
financial statements for the year ending December 31, 1998.
 
     On March 4, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use ("SOP 98-1"). SOP 98-1 requires computer software costs related
to internal use software that are incurred in the preliminary project stage
should be expensed as incurred. Once the capitalization criteria of SOP 98-1
have been met, external direct costs of materials and services consumed in
developing or obtaining internal-use computer software; payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the internal-use computer software project (to the extent of the
time spent directly on the project); and interest costs incurred when developing
computer software for internal use should be capitalized. SOP 98-1 is effective
for financial statements for fiscal years beginning after December 15, 1998.
Accordingly, the Company will adopt SOP 98-1 in its financial statements for the
year ending December 31, 1999. The Company does not believe the adoption of SOP
98-1 will have a material effect on the Company's results of operations or
financial condition.
 
                                       31
<PAGE>   36
 
                                    BUSINESS
 
     Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. The Company broadcasts on the Internet 24 hours a day
seven days a week, and its programming includes more than 345 radio stations and
networks, 17 television stations and cable networks and game broadcasts and
other programming for over 350 college and professional sports teams. The
Company licenses such programming from content providers, in most cases under
exclusive, multi-year agreements. The Company's Business Services Group provides
cost-effective Internet and intranet broadcasting services to businesses and
other organizations. These business services include the turnkey production of
press conferences, earnings conference calls, investor conferences, trade shows,
stockholder meetings, product introductions, training sessions, distance
learning telecourses and media events. In addition to its business services, the
Company derives revenues from the sale of advertising on its Web sites,
including gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads, as well as the sale of
radio and television ad spots the Company receives from stations in exchange for
broadcasting their programming over the Internet. In March 1998, the Company's
Web sites served a daily average of over 400,000 unique users and its principal
Web site was ranked in the top 20 among all News/ Information/Entertainment
sites according to Media Metrix.
 
     The Company believes it has accomplished numerous Internet achievements
since its initial live broadcast in September 1995, including the Internet
broadcast of the first live commercial radio station, first live sporting event,
first live corporate quarterly earnings call and first live stockholders'
meeting. The Company's early entrance into the Internet broadcasting market has
enabled the Company to establish strong brand recognition for its broadcasts and
services and to form relationships with a diverse range of content providers.
The Company currently offers content from a variety of sources including radio
and television, college and professional sports teams and leagues, production
and film studios and record labels. The Company has broadcast over 11,000 live
events such as the last three NFL Super Bowls and NCAA Basketball Tournaments,
the Stanley Cup Playoffs, the entire 1997-98 season for 24 of the 26 NHL teams,
game broadcasts for the entire season of over 300 college teams, the premiere
event for the movie "Titanic," Blockbuster Rockfest '97 and backstage interviews
from the 1998 Academy Awards Webcast. The Company has also amassed over 50,000
hours of on-demand broadcast programming, including over 2,100 full-length music
CDs, sports programming, talk radio and business and media events.
Broadcast.com's business services customers include the American Bar
Association, AT&T, Charles Schwab, Comerica, GartnerGroup, Harvard University,
Intel, Microsoft, Motorola, PR Newswire, Texas Instruments and more than 290
other organizations. Business services broadcasts have originated from 36 states
and nine countries.
 
     In May 1998, the Company changed its name from AudioNet, Inc. to
broadcast.com inc. to better represent the diversity of its programming and
services and to continue developing the Company's brand as a complete Internet
content aggregator, broadcaster and distributor.
 
INDUSTRY BACKGROUND
 
     The Internet has grown rapidly in recent years, spurred by developments
such as easy-to-use Web browsers, the availability of multimedia PCs, the
adoption of more robust network architectures and the emergence of compelling
Web-based content and commerce applications. The broad acceptance of the
Internet Protocol ("IP") standard has also led to the emergence of intranets and
the development of a wide range of non-PC devices that allow users to access the
Internet and intranets. International Data Corporation ("IDC") estimates that
the number of Web users worldwide will increase from approximately 69 million at
the end of 1997 to approximately 320 million by the end of 2002.
 
     Much of the Internet's rapid evolution towards becoming a mass medium can
be attributed to the accelerated pace of technological innovation, which has
expanded the Web's capabilities and improved users'
 
                                       32
<PAGE>   37
 
experiences. Most notably, the Internet has evolved from a mass of static,
text-oriented Web pages and email services to a much richer environment, capable
of delivering graphical, interactive and multimedia content. Prior to the
development of streaming media technologies, users could not play back audio and
video clips until the content was downloaded in its entirety. As a result, live
Internet broadcasts were not possible. The development of streaming media
products from companies such as Microsoft and RealNetworks enables the
simultaneous transmission and playback (i.e., the Internet broadcast) of
continuous "streams" of audio and video content over the Internet and intranets.
These technologies have evolved to deliver audio and video over widely used 28.8
kbps narrow bandwidth modems, yet can scale in quality to take advantage of
higher speed access that is expected to be provided by xDSL, cable modems and
other emerging broadband technologies.
 
     Broadcasting audio and video content over the Internet offers certain
opportunities that are not generally available from traditional media. Currently
available analog technology and government regulations limit the ability of
radio and television stations to broadcast beyond certain geographic areas.
Radios and televisions are not widely used in office buildings and other
workplaces, where Internet access has become commonplace. Traditional business
communication tools such as audio conferencing and videoconferencing can be
costly, non-targeted, and inconvenient. In addition, traditional broadcasters
are limited in their ability to measure or identify in real time the listeners
or viewers of a program. By using the Internet, targeted streaming media content
can be broadcast to a geographically dispersed audience of customers, suppliers,
employees and stockholders at relatively low costs. Internet users can interact
with the broadcast content by responding to online surveys, voting in polls and
obtaining additional information. In addition, Internet broadcasters can provide
highly specific information about a program's audience to content providers,
advertisers and users of Internet business services. The convergence of the
Internet's capabilities and attributes has accelerated its acceptance as a
business tool, leading to rapidly growing economic opportunities in Web-based
advertising and business service offerings, including audio conferencing,
electronic commerce and video transmission, among others.
 
     The Company believes that several challenges must be overcome to realize
cost-effective Internet broadcasting: aggregating diverse and compelling
content, scaling Internet broadcasts from small to large audiences, deploying
new transmission and streaming technologies in a timely manner and providing
multimedia advertisements and services. In order to aggregate content, Internet
broadcasters must rapidly identify and secure licensing opportunities by
demonstrating to content providers broad based distribution and the ability to
deliver associated traffic. Successful Internet broadcasters serving a large
number of simultaneous users around the clock also need to design, develop and
integrate complex network elements, which include extensive bandwidth, streaming
licenses, equipment and technical expertise. The rapid evolution of streaming
media technologies requires Internet broadcasters to support multiple vendors,
an investment which few companies have made. The Company believes, therefore,
that a successful Internet broadcaster must develop a well-branded,
highly-trafficked Web site which offers compelling content, a network capable of
streaming audio and video programming to large audiences 24 hours a day seven
days a week and an organization which can deliver quality broadcasting services
to advertisers and businesses.
 
THE broadcast.com SOLUTION
 
     Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. In March 1998, the Company's Web sites served an
average daily audience of over 400,000 unique users. The Company's Business
Services Group provides cost-effective Internet and intranet broadcasting
services to businesses and other organizations. These business services include
the turnkey production of press conferences, earnings conference calls, investor
conferences, trade shows, stockholder meetings, product introductions, training
sessions, distance learning telecourses and media events. Broadcast.com's
network infrastructure supports multiple streaming technologies and permits
multimedia content to be broadcast efficiently and effectively to hundreds of
thousands of users. Broadcast.com
 
                                       33
<PAGE>   38
 
believes it has established a significant brand for its broadcasts and services
on the Internet due to its breadth of content, audience size and distribution
capabilities. In addition, the Company's Web sites provide an attractive
platform for advertisers seeking to target specific users with rich, compelling
advertising solutions. Key elements of the broadcast.com solution include:
 
     LARGE AGGREGATION OF STREAMING MEDIA CONTENT
 
     Broadcast.com's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming on the Internet, including sports,
talk and music radio, television, business events, full-length CDs, news,
commentary and audio-books. The Company currently has Internet broadcasting
rights for more than 345 radio stations and networks, 17 television stations and
cable networks and over 350 college and professional sports teams. The Company
has also amassed over 50,000 hours of on-demand broadcast programming, including
over 2,100 full-length music CDs, sports programming, talk radio and business
and media events. Broadcast content providers include the NFL, the NHL, Major
League Baseball, CNN, BBC World Service, SFX Broadcasting, Inc. ("SFX"),
Learfield Communications, Inc. ("Learfield Communications") and over 200 record
labels. The Company believes that its content aggregation has established
www.broadcast.com as a leading destination for Internet users seeking streaming
media content and also for multimedia content providers and advertisers seeking
to reach large online audiences. This leading position, combined with the
Company's broadcast networking capabilities and experience in establishing
content relationships, further enables broadcast.com to attract compelling
programming.
 
     LEADING PROVIDER OF INTERNET BUSINESS SERVICES BROADCASTS
 
     The Company leverages its network infrastructure and expertise by providing
Internet and intranet broadcasting and distribution services to businesses and
other organizations. The Company's business services enable customers to conduct
cost-effective Internet or intranet broadcasts of live and on-demand business
and educational programming, including press conferences, quarterly earnings
conference calls, investor conferences, trade shows, stockholder meetings,
product introductions, training sessions, distance learning opportunities and
media events, tailored to each such customer's needs. The Company believes that
these services differentiate its content and broaden its revenue base. The
Company's business services customers include the American Bar Association,
AT&T, Charles Schwab, Comerica, GartnerGroup, Harvard University, Intel,
Microsoft, Motorola, PR Newswire, Texas Instruments and more than 290 other
organizations. Business services broadcasts have originated from 36 states and
nine countries.
 
     LEADING INTERNET BROADCAST NETWORK INFRASTRUCTURE
 
     The Company's network infrastructure and expertise permits the Company to
stream hundreds of live and on-demand audio and video programs over the Internet
to hundreds of thousands of users. Broadcast.com's distribution network can
support over 500 simultaneous live events and includes approximately 580
multimedia servers that support multiple streaming technologies. These servers
are linked through direct 45 Mbps (millions of bits per second) and 155 Mbps
connections to major Internet backbone providers including GTE Internetworking
("GTEI"), MCI, Sprint Corporation ("Sprint") and UUNET Technologies, Inc.
("UUNET"), which, in turn, connect to over 80% of the downstream ISPs. The
Company believes that direct connections to the major backbone providers help to
enhance the end-user experience by avoiding the congestion of public peering
points which can cause transmission delays or packet loss. The Company believes
that its broadcast network infrastructure provides it with the flexibility to
implement new software, hardware and system developments without incurring
substantial redesign costs or down time. See "--Network."
 
     BRANDED DISTRIBUTION
 
     The Company believes it has established a leading brand for streaming media
content through its Web sites, which have been ranked by Media Metrix as among
the Internet's most frequently visited destinations. The Company drives traffic
to its sites and enhances brand awareness through strategic relationships with
key
 
                                       34
<PAGE>   39
 
Internet companies. The Company has established increased visibility among
Internet users through its relationships with Yahoo!, RealNetworks and
Microsoft, among others. See "--Strategic Relationships."
 
     DIFFERENTIATED, INTERACTIVE MULTIMEDIA ADVERTISING
 
     Broadcast.com offers exclusive and comprehensive audio and video
programming that can be targeted to specific audiences and demographics.
Additionally, unlike Web sites that offer only text-based banner ads, the
Company offers multimedia packages incorporating custom audio and video
applications such as gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads. Because the Company
receives commercial spots from its radio and television station content
providers, the Company also provides advertisers with the opportunity to bundle
Web and traditional media advertising. Finally, the Company offers advertisers
the ability to insert Internet-only commercials within existing broadcast.com
programming. See "--Sales and Marketing--Web Advertising."
 
STRATEGY
 
     The Company's objective is to enhance its leadership position in Internet
broadcasting by aggregating comprehensive audio and video programming,
preferably on an exclusive basis, and providing services enabling the delivery
of a broad range of streaming media content over the Internet. Key elements of
the Company's strategy include the following:
 
     ENHANCE AND EXPAND EXCLUSIVE CONTENT OFFERINGS
 
     Broadcast.com seeks to provide the most comprehensive audio and video
programming on the Internet. To this end, the Company's objective is to acquire
exclusive, long-term Internet broadcast rights to streaming media content
provided by radio and television stations, networks and ownership groups,
college and professional sports teams and leagues, production and film studios,
record labels and other content providers.
 
     FURTHER PENETRATE THE BUSINESS SERVICES MARKET
 
     The Company's broadcast services enable businesses and other organizations
to improve communication with, and the dissemination of information to,
customers, suppliers, employees and the investment community. The Company
believes that its network infrastructure, combined with the local and global
reach of the Internet, provides business services customers with lower
transmission costs than conventional broadcast and communications systems and
enables these customers to access both large and small target audiences. The
Company intends to continue to rapidly expand, enhance and optimize its turnkey
broadcasting solutions to continue to enhance the broadcast experience for its
business services customers. See "--Sales and Marketing--Business Services."
 
     EXPAND NETWORK INFRASTRUCTURE
 
     Broadcast.com intends to expand its network infrastructure through the
acquisition and deployment of additional network equipment, bandwidth and
broadcast scaling technologies. As part of its network expansion strategy, the
Company is deploying its multicast network which is designed to provide
streaming media content to hundreds of thousands of users simultaneously through
one-to-many Internet connections. The Company has entered into agreements with
over 30 ISPs and UUNET and is building the first large-scale commercial
multicast network, which provides the Company with access to over 400,000
dial-up multicast ports. The Company is developing software to more efficiently
handle the broadcast of hundreds of simultaneous live events and has developed
proprietary software to handle broadcast blackouts, remote monitoring and remote
server access. Although streaming video over the Internet does not currently
offer broadcast television equivalent quality to a broad base of users, the
Company believes that the quality of and demand for Internet video broadcasts
will continue to improve as broadband Internet access technologies such as xDSL
and cable modems become more commonly available. Further, the Company believes
that video is an important and essential element in the future of Internet
broadcasting. Accordingly, the broadcast.com
 
                                       35
<PAGE>   40
 
network has been video enabled and supports multiple leading video streaming
technologies including RealNetwork's RealVideo and Microsoft's NetShow. See
"--Network."
 
     ENHANCE BRAND AWARENESS
 
     In order to maximize its broadcast audience, broadcast.com (formerly
AudioNet) seeks to co-brand its programming with other popular content providers
in addition to providing access to its programming directly through its own Web
sites. These relationships typically allow the co-branding partner to present
broadcast.com's or its partners' programming through a link on the partner's Web
site. To date, the Company has focused on co-branding its sports, music and
entertainment content and intends to expand this effort to cover its news and
business programming, talk shows and audio-books. Current co-branding
arrangements include a recent Yahoo! co-promotion agreement which gives the
Company prominent co-branded access to Yahoo!'s audience. Other co-branding
relationships include RealNetworks, Microsoft, CNN, NHL and USA Today. In
addition, the Company's radio and television content providers typically grant
the Company a certain number of weekly commercial spots, which the Company can
use for self-promotion. Radio and television stations also extend brand
awareness for broadcast.com through on-air mentions during their broadcasts.
 
     CAPTURE AND DEVELOP EMERGING REVENUE OPPORTUNITIES
 
     Broadcast.com intends to capture strategic revenue growth opportunities as
user demand increases and technological developments become more widely adopted.
Such opportunities are expected to include pay-per-listen/view applications,
fee-based sharing of the Company's exclusive content on other Web sites and
electronic commerce opportunities.
 
PROGRAMMING
 
     The Company believes its Web sites offer a large and comprehensive
selection of live and on-demand audio and video programming on the Internet,
including live continuous broadcasts of over 345 radio stations and networks, 17
television stations and cable networks, game broadcasts of more than 350 college
and professional sports teams and over 50,000 hours of on-demand programming,
including over 2,100 full-length music CDs, sports programming, talk radio and
business and media events. The www.broadcast.com Web site is organized into
content channels. The following is a description of certain elements of
broadcast.com's programming, illustrating the breadth and depth of its content:
 
     SPORTS
 
     The Company believes that it provides the most comprehensive live and
on-demand broadcasting of sporting events on the Internet. The Company's early
entrance into Internet broadcasting has allowed it to establish relationships
with a broad range of sports teams and leagues. Broadcast.com has the Internet
broadcasting rights for certain sporting events, including football and
basketball in most cases, for 98 colleges and universities participating in NCAA
Division IA athletics, over 95% of which are on an exclusive basis. In addition,
the Company is the exclusive streaming media partner for 24 of the 26 NHL teams
and broadcasts on behalf of Major League Baseball most regular season and
playoff games. The Company has handled the Internet broadcast for the last three
Super Bowls, the 1998 Kentucky Derby and the Boston Marathon. In the case of
such special events, the Company often broadcasts complementary programming such
as stadium announcer press box feeds and full-length post-game press conferences
with players and coaches in lieu of, or in addition to, the game broadcast.
Broadcast.com typically archives audio game broadcasts until the next game is
played so users can access sporting events they may have missed. In addition, a
"Great Games" section contains archives of a wide variety of classic match-ups
for fans to access at any time. The Company is expanding its sports coverage to
include video programming as well, including recent arrangements with the NHL
and PGA TOUR.
 
                                       36
<PAGE>   41
 
     The following table illustrates the breadth of the sports content the
Company is currently broadcasting, or has broadcast.
 
                        broadcast.com SPORTS PROGRAMMING
 
NATIONAL HOCKEY LEAGUE
Anaheim Mighty Ducks
Boston Bruins
Buffalo Sabres
Calgary Flames
Carolina Hurricanes
Colorado Avalanche
Dallas Stars
Detroit Red Wings
Edmonton Oilers
Florida Panthers
Los Angeles Kings
Montreal Canadiens
New Jersey Devils
New York Islanders
New York Rangers
Ottawa Senators
Phoenix Coyotes
Pittsburgh Penguins
San Jose Sharks
St. Louis Blues
Tampa Bay Lightning
Toronto Maple Leafs
Vancouver Canucks
Washington Capitals
 
MAJOR LEAGUE BASEBALL
Anaheim Angels
Arizona Diamondbacks
Baltimore Orioles
Chicago White Sox
Cincinnati Reds
Cleveland Indians
Houston Astros
New York Mets
New York Yankees
Oakland Athletics
Philadelphia Phillies
San Diego Padres
San Francisco Giants
St. Louis Cardinals
Texas Rangers
 
GOLF
PGA TOUR
PGA of America
Senior Tour
USGA
Golf Majors
Nike Tour
 
MAJOR LEAGUE SOCCER
Chicago Fire
Colorado Rapids
Columbus Crew
D.C. United
NY/NJ Metrostars
Dallas Burn
Kansas City Wizards
Los Angeles Galaxy
Miami Fusion F.C.
New England Revolution
San Jose Clash
Tampa Bay Mutiny
 
AUTO RACING
Selected In-car radio and events:
ARCA
CART
NASCAR Winston Cup
NASCAR Busch Series
Toyota Atlantic
 
PRO FOOTBALL
1997 NFL Training Camp
Arena Football
Canadian Football League
  1997 Grey Cup (CFL)
NFL Europe - Audio and Video
NFL pre- and post-game
  coverage
Super Bowls XXX, XXXI
  and XXXII
 
HORSE RACING
Belmont Stakes
Kentucky Derby
Preakness Stakes
Breeder's Cup
Keeneland
Lone Star Park Racing
Meadowlands
Oaklawn
Santa Anita
 
PRO BASKETBALL
1996 NBA Draft
1997 Continental Basketball
  Association Finals and
  All-Star Game
American Basketball League
  Finals and All-Star Game
NBA Championship Press
  Conferences
 
OTHER SPORTS COVERAGE
Boston Marathon
Continental Indoor Soccer   League
HBO World Championship
  Boxing: Prince Hamed
  vs. Kevin Kelly
Minor League Baseball
Minor League Hockey
NBC 1996 Atlanta
  Olympics Interviews
Tour de France
United States Olympic
  Committee Press
  Conferences
 
                         NCAA COLLEGES AND UNIVERSITIES
 
Air Force Academy Falcons
Alabama Crimson Tide
Alaska-Fairbanks Nanooks
Arizona Wildcats
Arizona State Sun Devils
Arkansas Razorbacks
Baylor Bears
Boise State Broncos
Boston University Terriers
Brigham Young Cougars
Bucknell Bison
Cal-Berkeley Bears
Cal State Fullerton Titans
Central Florida Golden Knights
Central Michigan Chipawas
Clemson Tigers
Colorado Buffaloes
Connecticut Huskies
Cornell Big Red
Dayton Flyers
Denver Pioneers
Duke Blue Devils
East Carolina Pirates
Florida Gators
Florida State Seminoles
Fresno State Bulldogs
George Washington Colonials
Georgetown Hoyas
Georgia Bulldogs
Georgia Tech Yellow Jackets
Harvard Crimson
Hawaii Rainbows
Houston Cougars
Idaho Vandals
Illinois State Redbirds
Illinois-Chicago Flames
Indiana Hoosiers
Iowa Hawkeyes
Iowa State Cyclones
James Madison Dukes
Kansas Jayhawks
Kansas State Wildcats
Kentucky Wildcats
Lamar Cardinals
Long Beach State 49ers
Louisiana State Tigers
Louisiana Tech Bulldogs
Louisville Cardinals
Marquette Golden Eagles
Marshall Thundering Herd
Maryland Terrapins
Massachusetts Minutemen
Memphis Tigers
Miami (Florida) Hurricanes
Miami (Ohio) Redhawks
Michigan State Spartans
Mississippi Rebels
Mississippi State Bulldogs
Missouri Tigers
Naval Academy Midshipmen
UNC Tar Heels
UNC-Charlotte 49ers
Nebraska Cornhuskers
New Hampshire Wildcats
New Mexico Lobos
North Carolina St. Wolfpack
North Texas Eagles
Northern Arizona Lumberjacks
Notre Dame Fighting Irish
Ohio Bobcats
Oklahoma Sooners
Oklahoma State Cowboys
Oregon Ducks
Oregon State Beavers
Penn State Nittany Lions
Pepperdine Waves
Pittsburgh Panthers
Princeton Tigers
Purdue Boilermakers
Rhode Island Rams
Rice Owls
Rutgers Scarlet Knights
San Diego State Aztecs
San Francisco Dons
San Jose State Spartans
SE Louisiana Lions
Seton Hall Pirates
SMU Mustangs
South Carolina Gamecocks
South Florida Bulls
Southern Miss. Golden Eagles
St. John's Red Storm
St. Louis Billikens
Stanford Cardinal
SW Louisiana Cajuns
Syracuse Orangemen
TCU Horned Frogs
Tennessee Volunteers
Texas Longhorns
Texas-El Paso Miners
Texas A&M Aggies
Texas Tech Red Raiders
Toledo Rockets
Tulane Green Wave
Tulsa Hurricanes
UCLA Bruins
UNLV Rebels
USC Trojans
Utah Utes
Vanderbilt Commodores
Villanova Wildcats
Virginia Cavaliers
VA Commonwealth Rams
Virginia Tech Hokies
Wake Forest Demon Deacons
Washington Huskies
Washington State Cougars
West Virginia Mountaineers
Western Kentucky Hilltoppers
Western Michigan Broncos
William and Mary Tribe
Wisconsin Badgers
Wright State Raiders
Wyoming Cowboys
 
                                       37
<PAGE>   42
 
     RADIO
 
     Broadcast.com is the leading Internet broadcaster of radio programming, and
has rights to broadcast more than 345 stations based in over 110 cities, in most
cases under exclusive multi-year agreements. The Company's relationships with
radio stations and networks provide it with content from 18 of the nation's top
20 radio markets. The Company has benefited from its ability to license radio
content from ownership groups, such as a group of over 40 stations now part of
Clear Channel Communications and a group of 72 stations which will be part of
Capstar Broadcasting Corporation ("Capstar") following completion of its
acquisition of SFX. Broadcast.com's radio programming spans all formats, from
talk shows and news programs to country music and classic rock. The Company's
audience benefits from the ability to receive local radio programming in-office
and from outside the listener's geographic area, allowing users to select from
hundreds of stations and dozens of formats. Broadcast.com archives selected talk
radio programming so users can listen to their favorite shows and hosts when
unable to listen to the live broadcast. Thousands of hours are currently
available on demand for popular nationally syndicated hosts including Dr. Laura
Schlessinger and Jim Rome.
 
     TELEVISION
 
     Broadcast.com has begun expanding its content aggregation strategy into
television programming. The Company currently has video Internet broadcasting
rights for 17 stations and cable networks, including Court TV and programming
originated by affiliated local television stations such as WFAA-TV Dallas, one
of ABC's top-rated local news stations. The Company provides archives of
newscasts so users can access the latest information on breaking news 24 hours a
day seven days a week from their home or office. The Company believes that the
emergence of broadband Internet access technologies such as xDSL, cable modems
and other technologies have the potential to increase the demand for and quality
of Internet-delivered video content, leading to a convergence of the Internet
and television.
 
     BUSINESS
 
     The Company is a leading aggregator of audio and video media business
related content. In addition to the thousands of hours of events and special
programming offered live and on demand from the Company's business services
customers, the Company has also aggregated content from other sources to provide
a complete business content channel. The Company offers hourly stock market
updates, video interviews and features from CNBC/Dow Jones Business Video,
business shows such as "Wall Street Review" and other business programming from
its selection of radio and television content providers. Broadcast.com has
broadcast quarterly earnings conference calls from companies such as Intel,
Texaco, Inc. ("Texaco"), Texas Instruments and Yahoo!; product launches from
Asymetrix Corporation ("Asymetrix"), Microsoft and Sybase, Inc. ("Sybase"); and
keynote speeches from industry leaders such as Intel's Andy Grove, Hewlett
Packard's Lewis Platt, Microsoft's Bill Gates and Dell's Michael Dell.
Broadcast.com also provides supplemental data to accompany Internet broadcasts,
such as proprietary database registration services and real-time audience
measurement. See "--Business Services."
 
     ENTERTAINMENT
 
     The Company provides Internet broadcasting services to entertainment and
media companies, film studios, broadcast networks and other content providers.
Content providers utilize broadcast.com's distribution network, technology,
services, Web site promotions and sizable audience base to deliver and drive
traffic to high profile events. Examples include: all live and on-demand
Webcasts of 1998 Academy Awards coverage with ABC.com, including red-carpet
arrivals and backstage interviews in their entirety (which received
approximately 600,000 video views), "The ER Live" Webcast, a co-venture between
Warner Bros. Online and NBC Multimedia, Inc. for the 1997 season premiere for
their top-rated television program and numerous broadcasts of coverage from
movie premieres and parties, including "Titanic."
 
                                       38
<PAGE>   43
 
     MUSIC
 
     Through the broadcast.com Jukebox, the Company believes it offers the
largest selection of full-length CDs available for listening on demand over the
Internet, currently numbering over 2,100 titles. The Company has entered into
agreements with over 200 record labels to broadcast certain of their CDs in
their entirety. Interscope Records recently entered into an agreement to
establish broadcast.com as Interscope's preferred Internet broadcasting
solution. Broadcast.com hosts frequent "listening parties" which feature
scheduled CD broadcasts of many of Interscope's artists on www.broadcast.com,
including No Doubt and the Wallflowers. In addition, the Company plans to
broadcast an Interscope Internet-only radio station that will be available 24
hours a day and feature Interscope artists and special events. To expand its
Jukebox selections, the Company intends to continue to form relationships with
leading record companies. Broadcast.com and College Music Journal have recently
developed The Internet Broadcast Chart, a compilation of the most frequently
streamed songs from a representative sampling of Internet broadcasters. Current
customer feedback indicates that listeners use the broadcast.com Jukebox as a
way to sample new music and, in turn, purchase CDs that they enjoy. Accordingly,
the Company believes that its Jukebox will provide an attractive platform for
record labels and musicians to promote and sell their recordings over the
Internet through broadcast.com. For example, Willie Nelson has recently teamed
with broadcast.com in a co-promotion deal with Yahoo! and CDnow to promote and
sell his latest studio recording for an exclusive period on the Internet prior
to its general public release.
 
     OTHER PROGRAMMING
 
     The Company has aggregated thousands of hours of live and on-demand content
in several other channels, providing broadcast.com users with a comprehensive
selection of streaming media programming on the Company's Web sites. An
illustrative list follows:
 
<TABLE>
<CAPTION>
         CHANNEL              EXAMPLES
         -------              --------
 <S>                          <C>
 AudioBooks                   Over 360 full length audio-books including:
                              Charles Dickens' "The Lawyer and the Ghost"
                              Gore Vidal's "Kalki"
 Education                    Distance Learning from University of Texas System and
                              Rutgers University
                              John F. Kennedy School of Government at Harvard University
                              University of Wisconsin Distance Learning Telecourse
 News                         BBC World Service
                              CNN Audioselect
                              Over 47 leading news radio and television stations across
                              the country
 Public Affairs               C-SPAN
                              White House Millennium Series with Stephen Hawking
                              U.S. Department of State Daily Press Briefings
 Special Interest             policescanner.com
                              Best of Dr. Laura Schlessinger
                              Art Bell
 Spiritual                    Focus on the Family with James Dobson
                              Family Life Today
                              For Faith and Family
 Technology                   CMP Net Insider
                              The Computer Broadcast Network
                              The Silicon Alley Reporter
</TABLE>
 
                                       39
<PAGE>   44
 
BUSINESS SERVICES
 
     The Company's Business Services Group provides cost-effective Internet and
intranet broadcasting services to businesses and other organizations. These
business services include turnkey production of press conferences, earnings
conference calls, investor conferences, tradeshows, stockholder meetings,
product introductions, training sessions, distance learning telecourses and
media events. Since January 1997, the Company has broadcast over 1,000 business
services events for customers such as the American Bar Association, AT&T,
Charles Schwab, Comerica, GartnerGroup, Harvard University, Intel, Microsoft,
Motorola, PR Newswire, Texas Instruments and more than 290 other organizations.
Business services broadcasts have originated from 36 states and nine countries.
 
     The Company's broadcast services enable businesses and other organizations
to improve communication with, and the dissemination of information to,
customers, suppliers, employees and the investment community by:
 
     COST-EFFECTIVELY REACHING THE IN-OFFICE USER
 
     The proliferation of multimedia enabled networked personal computers and
other Internet-attached devices in the workplace has created the opportunity for
businesses to use the Internet and intranet to cost-effectively broadcast
streaming media communications to access both large and small targeted
audiences. The Company is able to broadcast events to users who can view and
listen to such broadcasts uninterrupted while continuing to perform other tasks
on their computer.
 
     DELIVERING TURNKEY BROADCASTING SOLUTIONS
 
     The Company delivers turnkey Internet broadcasting solutions by providing
analysis, telecommunications and, if necessary, on-site equipment and personnel
to its business services customers. Based on the expertise gained from
broadcasting more than 1,000 business services and over 10,000 other live
events, the Company determines the most effective way to capture the broadcast
feed, whether by satellite, coupler or on-site with a team of its engineers.
Once captured, the broadcast feed is then integrated with other sources such as
Powerpoint presentations and computer demo screens. Potential Internet
congestion is bypassed by using a private point-to-point connection to the
Company's broadcast center. The broadcast is then distributed by streaming media
to the Internet audience via the Company's distribution network, or, if desired,
restricted to a limited audience utilizing password-protected access or player
authentication. In addition, the Company can supply its customers with the total
number of devices receiving the broadcast, the length of time such devices are
receiving the broadcast and the broadcast quality. See "--Network."
 
     The Company has initiated pay-per-view broadcasts of major conferences for
GartnerGroup, as well as the introduction of their own branded Webcast channel,
"GartnerGroup Live!" The Company broadcasts on behalf of Microsoft "DevTalk
Live," a developer seminar, and Microsoft TV, a channel offering information
technology business solutions. The Company's innovative broadcast services
provide World Championship Wrestling's Web site additional revenue opportunities
through exclusive Internet-only pay-per-view broadcasts. Broadcast.com's turnkey
solutions are being used by the University of Wisconsin (Madison) to offer
graduate level distance learning telecourses. Broadcast.com also coordinated all
of the logistics associated with the first-ever Internet broadcast from China on
behalf of Intel.
 
     INNOVATIVELY ENHANCING THE BROADCAST EXPERIENCE
 
     In order to provide business services customers with immediate feedback and
to enhance the users' broadcast experience, users can interact with the
broadcast content by responding to online surveys, voting in polls and obtaining
additional information. For example, the Company has broadcast over the Internet
the last three Bell & Howell Company ("Bell & Howell") annual stockholders'
meetings. Stockholders can listen to meetings over the Internet and deliver
proxies online. In addition, the effectiveness of broadcasts can be maximized by
delivering text transcriptions, graphics, presentations and other supplemental
information during the broadcasts. Broadcast.com business services broadcasts
can also provide customers with real-time user information. Utilizing the
Company's proprietary database registration services as an enhancement to the
broadcast, corporate customers can identify the users accessing their broadcasts
in real time.
 
                                       40
<PAGE>   45
 
     The depth and breadth of broadcast.com's experience and expertise includes
numerous other business services events. An illustrative selection includes:
 
BUSINESS AND FINANCIAL SHOWS
Calico Technology Seminar Series
Catch a Rising Stock
Charles Schwab Special Event
CNBC/Dow Jones Business Video news updates
Money Go Round
Money Talk
Tiger Investments: After Hours Trading
 
DISTANCE LEARNING
American Academy of Ophthalmology Events
American Bar Association Tax May Meeting
American Society of CW Web Education Network
Microsoft SQL Server in Higher Education
State Bar of Texas: New Developments in Summary Judgement
U.S. Chamber of Commerce Quality Learnings Series
UT Southwestern AIDS Research Presentation
 
EARNINGS ANNOUNCEMENTS/INVESTOR RELATIONS
America Online
AT&T
MicroAge
Motorola
SoftQuad
Texaco
Yahoo!
 
KEYNOTE SPEECHES
AT&T WorldNet Service: Former President Tom Evslin
Compaq: Tradeshow events at ISPCON '98
Dell Computer: Michael Dell at Fall Internet World
Hewlett Packard: CEO Lewis Platt at Spring Internet World
IBM: John Brisbane at the WWW7 Conference
Intel: CEO Dr. Andrew Grove
Microsoft: Bill Gates, COMDEX
PRODUCT LAUNCHES
Ameritech: Clearpath Wireless Launch
Asymetrix: Cool Tools
Bell & Howell: Scanner Division
General Motors Chevy Malibu Announcement
Microsoft: Internet Explorer 4.0 Launch and NetShow 2.0 Launch
Silicon Graphics Workstation Launch
Sybase: Adaptive Server Launch
 
PUBLIC RELATIONS
Chicago Tribune Interactive: George Lazarus
Communications Week: Meet the Editor
Digital & Microsoft: Delivering Enterprise Solutions
General Motors: Global Update News Conference
MSNBC: Meet the Editors
NationsBank and BankAmerica merger announcement
Wall Street Journal Media Coffee
 
SEMINARS
Dell: Breakfast With Dell
GartnerGroup Forums
Harvard Seminar on Internet Society
IBM: Teleconference for Internet Developers
Price Waterhouse Forums and Seminars
SAS Institute: Data Mining Forum
Texas Instruments Forum '97
 
TRADE SHOWS/CONFERENCES
ComNet '98
Internet World
MacWorld Expo '97
National Association of Broadcasters: '97 and '98
National Investor Relations Institute: Annual Business Meeting
NetWorld + Interop '97
SuperComm '97
 
SALES AND MARKETING
 
     The Company sells business services, Web advertising and traditional media
advertising through its direct sales force and through reseller arrangements.
The Company currently maintains distinct sales departments for each of these
three revenue sources. In addition, the Company maintains a marketing and public
relations department to promote the broadcast.com brand and its services.
 
     BUSINESS SERVICES
 
     To date, the Company has focused its business services marketing efforts on
larger companies in varied industries. Based on the success of these direct
sales efforts, broadcast.com believes that it can successfully market its
services to medium-sized and smaller businesses as well. As a result,
broadcast.com is taking advantage of existing distribution channels through
reseller arrangements with vendors such as PR Newswire, one of the largest
global and media relations distribution networks, and Trade Show Central to
market these services to a broad range of potential customers. The Company seeks
to expand its business services customer base and broadcast offerings by
targeting industries and businesses that are early adopters of technological
advancement. The hospitality industry and the growing popularity of corporate
intranets and distance learning opportunities have provided new vertical markets
for broadcast.com's streaming media solutions. The Company is expanding its
sales team, adding directors and account executives in strategic regions across
the United States to continue delivering personalized service and target new and
emerging market opportunities.
 
                                       41
<PAGE>   46
 
     WEB ADVERTISING
 
     The Company's wide variety of content offers the ability to sell
advertising packages targeted to specific audiences and demographics.
Additionally, unlike Web sites that offer only text-based banner advertisements,
the Company offers multimedia packages incorporating custom audio and video
applications such as gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads.
 
          Gateway Ads with Guaranteed Click-Thrus. Broadcast.com provides
     advertisers the opportunity to incorporate gateway ads into their Internet
     advertising packages. Gateway ads are audio or video clips that are
     inserted at the lead of selected programming, lasting from 15 to 30
     seconds, that play prior to the audio or video content that has been
     selected by the user. A guaranteed click-thru is a pop-down browser window
     that automatically launches at the beginning of the gateway ad displaying
     an advertiser's Web site or other targeted information. Gateway ads are
     also available without guaranteed click-thrus. The Company currently sells
     these advertisements at a higher CPM than traditional banner ads because of
     their unique nature. Advertisers that have purchased gateway ads with
     guaranteed click-thrus include Bell Atlantic, CompareNet and 3Com.
 
          Channel and Event Sponsorships. The Company offers advertisers the
     ability to sponsor one or more of its programming channels or events,
     enabling advertisers to brand entire sections of the Company's Web sites. A
     channel or event sponsorship can involve the rotating and permanent
     placement of buttons, logos and Web site links, integrated gateway ads,
     multimedia banner ads and mention on the broadcast.com home page, channel
     home page and email newsletter (which has over 285,000 current subscribers
     in over 150 countries). These sponsorships may also include promotional
     advertisements utilizing broadcast.com's radio and television spot
     inventory. Event sponsorships have been purchased by CBS SportsLine, RCA
     and Microsoft. The Company typically sells these packages on a channel-by-
     channel or event-by-event basis. See "--Traditional Media Advertising."
 
          Multimedia and Traditional Banner Ads. The Company offers advertisers
     the ability to integrate audio and video into their text and graphics
     banner ads. The multimedia portion of the banner plays when the user clicks
     on the banner. In addition, visitors to the Company's Web sites are able to
     move to advertisers' Web sites while continuing to listen to or watch
     broadcast.com audio or video programming. Because audio and video can
     increase the impact of a banner ad, these packages are sold at a higher CPM
     than traditional banner ads. Purchasers of multimedia or traditional banner
     ads include Ford Motor Company, Citibank, N.A., Music Boulevard and Quick &
     Reilly.
 
     TRADITIONAL MEDIA ADVERTISING
 
     As compensation for broadcasting radio and television station feeds, the
Company contractually receives on-air inventory of radio or television ad spots
or direct cash payments. The Company sells the majority of these advertising
spots to traditional radio and television advertisers. Premiere Radio Networks
is currently selling most of the radio ad spot inventory on behalf of the
Company. As of June 15, 1998, the Company had over 3,500 radio spots per week
available for sale.
 
     MARKETING
 
     The Company's marketing efforts promote the broadcast.com brand and the
Company's audio and video programming and business services. The Company
utilizes traditional media vehicles for marketing and promotional purposes,
including radio, television and print advertisements, as well as marketing
arrangements with other leading Web sites, gateway ads on the Company's Web
sites and email newsletters.
 
          Radio and Television. The Company's radio and television content
     providers typically grant the Company a certain amount of commercial spot
     inventory. The commercial spots that the Company receives as part of its
     radio and television hosting activities can be used by the Company for
     promotion of the Company's programming and services. Radio and television
     stations also extend brand awareness for broadcast.com through required
     on-air mentions during their broadcasts.
 
                                       42
<PAGE>   47
 
          Print and Other Media. In exchange for Internet broadcasts of sporting
     events, colleges and universities provide advertising space for
     broadcast.com in various campus publications including game-day programs,
     newsletters and alumni magazines. Broadcast.com has also received
     advertising space in the official NCAA Basketball Tournament Final Four
     program and the College Hockey Guide. In addition, the Company has received
     billboard space at the NCAA Basketball Tournament Fanfest as well as at
     other sporting events. Stadium public address announcements during certain
     sporting events also extend the Company's brand awareness. The Company has
     also placed advertisements in targeted trade magazines including
     Broadcasting and Cable and Online Access.
 
          Online Marketing. The Company exchanges banner ads with other high
     traffic Web sites such as Infoseek, Tripod, Talk Cities, Go2Net, Los
     Angeles Times, CBS SportsLine, Music Boulevard, Games Domain and Lycos. The
     Company uses these opportunities to highlight its high profile live events
     and drive traffic to revenue generating channels. The banner ads are also
     used to promote business services customers' events in order to attract
     larger audiences. The Company extends brand awareness on the Web by
     requiring that its logo and distinctive "listen/view button" be placed
     prominently on the Web pages of broadcast partners. A number of search
     engines and live events guides feature broadcast.com such as CNET Events,
     Yahoo! Events, NetGuide Live, Microsoft's NetShow Gallery and Your Personal
     Net. Additionally, RealNetwork's Timecast Web site features broadcast.com
     programming, often as the "Event of the Day."
 
          Gateway Ads and Email Newsletters. The Company utilizes gateway ads to
     promote upcoming broadcast.com content offerings. The Company also
     distributes free semi-weekly email newsletters to over 285,000 registered
     subscribers in 150 countries which highlight events for the upcoming week.
     In addition, the Company utilizes the newsletter distribution list to alert
     broadcast.com users to major breaking news stories that are being broadcast
     on the Company's Web sites. The Company also distributes sports-focused and
     music-focused newsletters, and is developing additional specialty
     newsletters targeted to those interested in particular programming
     channels.
 
STRATEGIC RELATIONSHIPS
 
     Broadcast.com has entered into strategic relationships with content
providers, key Internet companies and technology and bandwidth providers.
 
     CONTENT PROVIDERS
 
     To expand its content offerings, broadcast.com has established
relationships with various strategic partners. The Company believes that
licensing content from third parties is preferable to creating content because
such licensed content has existing demand and is self-replenishing. Key
relationships include BBC World Service, CNN, Host Communications, Learfield
Communications, the NHL, Major League Baseball, a group of over 40 stations now
part of Clear Channel and a group of 72 stations which will be part of Capstar
following completion of its acquisition of SFX.
 
     KEY INTERNET COMPANIES
 
     Broadcast.com leverages its content aggregation and Internet broadcast
network through strategic relationships with key Internet companies to increase
traffic and brand awareness. Broadcast.com and Yahoo!, an equity investor in the
Company, recently agreed to establish a co-branded area on the Yahoo! Web site
at sports.yahoo.com to make available broadcast.com's programming and link to
listen/view pages on the www.broadcast.com Web site. Broadcast.com also has an
agreement with RealNetworks which provides for the placement of a link on the
drop-down menu item for RealNetworks' RealPlayer and RealPlayer Plus streaming
products to the Company's home page and five key channels on its sites. The
Company believes that RealNetworks' streaming products have been downloaded more
than 43 million times. In addition, Microsoft selected broadcast.com as one of
34 platinum channels on its latest Internet Explorer Web browser, which is used
by millions of people to navigate the Web. The Company believes these platinum
channels will be preset, in some form, on all versions of the new Windows '98
Operating System.
 
                                       43
<PAGE>   48
 
     TECHNOLOGY AND BANDWIDTH PROVIDERS
 
     In order to scale with future audience growth, broadcast.com has entered
into an agreement with UUNET under which the Company acquired access to 155Mbps
of bandwidth for unicasting and additional bandwidth for multicasting on UUNET's
network which can be configured to allow up to 500 simultaneous live events. In
addition, UUNET is part of the Company's multicasting buildout strategy. See
"--Network--Distribution."
 
     Broadcast.com and Motorola have signed a letter of intent to create a joint
venture for the deployment of audioSENSE, a front-end audio player which is
designed to make it easier for visitors to the www.broadcast.com Web site to
navigate the Radio and Jukebox channels. For example, audioSENSE enables users
to create personal radio dials, selecting stations by location and genre. Users
can also create personal presets, similar to those on a car radio, that make it
easier to find their favorite radio stations. Through the audioSENSE player,
radio stations will be able to deliver interactive advertising products over the
Internet which the Company believes will create a new revenue stream for
broadcasters on the broadcast.com network.
 
NETWORK
 
     In order to support hundreds of thousands of simultaneous streaming media
users on the Internet, the Company has developed and implemented an extensive
streaming media aggregation and distribution network, designed to ensure the
broadcast quality of the content received from broadcasters and distributed to
users.
 
     AGGREGATION
 
     The Company aggregates content from broadcasters through satellite feeds
and direct network connections from content providers to its broadcast center
where it is monitored for broadcast quality and encoded for delivery over the
Internet. The satellite receiving system is currently comprised of 22 satellite
dishes which can receive hundreds of simultaneous feeds from traditional
broadcasts and live events. The Company also receives radio and television
signals over a private network comprised of frame relay and T1 point-to-point
connections. This private network is designed to efficiently and securely feed
content directly from broadcasters to the Company's headquarters, thus avoiding
the congestion of public peering points on the Internet which can cause
transmission delays or packet loss. The Company believes that the use of a
private aggregation network enables the Company to control the broadcast quality
of the content it receives.
 
     DISTRIBUTION
 
     Currently, the Company employs both unicasting (one user per Company
originated stream) and multicasting (many users per Company originated stream)
technologies to distribute streaming media content to users over the Internet.
The Company's unicast network can provide content to tens of thousands of
simultaneous users through 580 multimedia servers which support multiple
streaming technologies. These servers are linked through direct 45Mbps and 155
Mbps connections to major Internet backbone providers including GTEI, MCI,
Sprint and UUNET, which, in turn, connect to over 80% of the downstream ISPs.
The Company believes that direct connections to these major backbone providers
enhances the user experience by avoiding the congestion of public peering points
which can cause transmission delays or packet loss.
 
     Although the Company anticipates that unicasting will remain essential for
archived and on-demand applications, it believes that multicasting, or similar
scaling technology, is essential to the future of large-scale Internet
broadcasting to a mass audience. The Company believes multicasting is especially
suited to audio and video broadcasting and will be increasingly used in the
delivery of streaming media content. Currently, the Company is deploying its
multicast network which is designed to provide streaming media content to
hundreds of thousands of users simultaneously through one-to-many Internet
connections. The Company has entered into agreements with over 30 ISPs and UUNET
and is building the first large-scale commercial multicast network which
provides the Company access to over 400,000 dial-up multicast ports.
 
                                       44
<PAGE>   49
 
COMPETITION
 
     The market for Internet broadcasting and services is highly competitive and
the Company expects that competition will continue to intensify. The Company
competes with (i) other Web sites, Internet portals and Internet broadcasters to
acquire and provide content to attract users, (ii) videoconferencing companies,
audio conferencing companies and Internet business services broadcasters, (iii)
online services, other Web site operators and advertising networks, as well as
traditional media such as television, radio and print, for a share of
advertisers' total advertising budgets and (iv) local radio and television
stations and national radio and television networks for sales of advertising
spots. There can be no assurance that the Company will be able to compete
successfully or that the competitive pressures faced by the Company, including
those described below, will not have a material adverse effect on the Company's
business, results of operations and financial condition.
 
     Competition among Web sites that provide compelling content, including
streaming media content, is intense and is expected to increase significantly in
the future. The Company competes against a variety of businesses that provide
content through one or more mediums, such as print, radio, television, cable
television and the Internet. Traditional media companies have not established a
significant streaming media presence on the Internet and may expend resources to
establish a more significant presence in the future. These companies have
significantly greater brand recognition and financial, technical, marketing and
other resources than the Company. The Company competes generally with other
content providers for the time and attention of users and for advertising
revenues. To compete successfully, the Company must license and then provide
sufficiently compelling and popular content to generate users, support
advertising intended to reach such users and attract business and other
organizations seeking Internet broadcasting and distribution services. The
Company believes that the principal competitive factors in attracting Internet
users include the quality of service and the relevance, timeliness, depth and
breadth of content and services offered. In the market for Internet distribution
of radio and television broadcasts, the Company competes with ISPs, radio and
television stations and networks that originate their own Internet broadcasts.
RealNetworks and MCI announced a strategic alliance in August 1997 involving the
introduction of a service currently called Real Broadcast Network that delivers
audio and video broadcasts over the Internet. In the area of sports content, the
Company competes with CBS SportsLine and ESPNET SportsZone. The Company also
competes for the time and attention of Internet users with thousands of Web
sites operated by businesses and other organizations, individuals, governmental
agencies and educational institutions. For example, certain Web sites may
provide a collection of links to other Web sites with streaming media content.
The Company expects competition to intensify and the number of competitors to
increase significantly in the future. In addition, as the Company expands the
scope of its content and services, it will compete directly with a greater
number of Web sites and other media companies. Because the operations and
strategic plans of existing and future competitors are undergoing rapid change,
it is extremely difficult for the Company to anticipate which companies are
likely to offer competitive services in the future.
 
     The Company competes with videoconferencing and teleconferencing companies,
along with companies that provide Internet broadcasting services to businesses
and other organizations. Principal competitive factors include price,
transmission quality, transmission speed, reliability of service, ease of
access, ease of use, customer support, brand recognition and operating
experience. The Company's current and potential competitors may have
significantly greater financial, technical and marketing resources, longer
operating histories and greater brand recognition. Traditional videoconferencing
and teleconferencing may allow for a more interactive user experience. As prices
for videoconferencing systems decrease and transmission quality increases, the
installed base of videoconferencing systems may increase. Companies that provide
media streaming software may also enter the market for Internet broadcast
services. If media streaming technology and backbone bandwidth becomes more
readily available to companies at low prices, the Company's customers may decide
to broadcast their own programming. In particular, local exchange carriers, ISPs
and other data communication service providers may compete in the future with a
portion of or all of the Company's business services as technological
advancements facilitate the ability of these providers to offer effectively
these services. There can be no assurance that the Company will be able to
compete successfully against current or future competitors for Internet
broadcast services.
 
                                       45
<PAGE>   50
 
     The Company also competes with online services, other Web site operators
and advertising networks, as well as traditional media such as television, radio
and print for a share of advertisers' total advertising budgets. The Company
believes that the principal competitive factors for attracting advertisers
include the number of users accessing the Company's Web sites, the demographics
of the Company's users, the Company's ability to deliver focused advertising and
interactivity through its Web sites and the overall cost-effectiveness and value
of advertising offered by the Company. There is intense competition for the sale
of advertising on high-traffic Web sites, which has resulted in a wide range of
rates quoted by different vendors for a variety of advertising services, making
it difficult to project levels of Internet advertising that will be realized
generally or by any specific company. Any competition for advertisers among
present and future Web sites, as well as competition with other traditional
media for advertising placements, could result in significant price competition.
The Company believes that the number of companies selling Web-based advertising
and the available inventory of advertising space have recently increased
substantially. Accordingly, the Company may face increased pricing pressure for
the sale of advertisements. Reduction in the Company's Web advertising revenues
would have a material adverse effect on the Company's business, results of
operations and financial condition.
 
     The Company competes for traditional media advertising sales with national
radio and television networks, as well as local radio and television stations.
Local radio and television content providers and national radio and television
networks may have larger and more established sales organizations than the
Company. These companies may have greater name recognition and more established
relationships with advertisers and advertising agencies than the Company. Such
competitors may be able to undertake more extensive marketing campaigns, obtain
a more attractive inventory of ad spots, adopt more aggressive pricing policies
and devote substantially more resources to selling advertising inventory. The
Company's traditional media advertising sales efforts depend on the Company's
ability to obtain an inventory of ad spots across the top radio and television
markets. If the Company is unable to obtain such inventory, it could have a
material adverse effect on the Company's business, results of operations and
financial condition.
 
GOVERNMENTAL REGULATION
 
     Although there are currently few laws and regulations directly applicable
to the Internet, it is likely that new laws and regulations will be adopted in
the United States and elsewhere covering issues such as music licensing,
broadcast license fees, copyrights, privacy, pricing, sales taxes and
characteristics and quality of Internet services. It is possible that
governments will enact legislation that may be applicable to the Company in
areas such as content, network security, encryption and the use of key escrow,
data and privacy protection, electronic authentication or "digital" signatures,
illegal and harmful content, access charges and retransmission activities.
Moreover, the applicability to the Internet of existing laws governing issues
such as property ownership, content, taxation, defamation and personal privacy
is uncertain. The majority of such laws were adopted before the widespread use
and commercialization of the Internet and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Any such
export or import restrictions, new legislation or regulation or governmental
enforcement of existing regulations may limit the growth of the Internet,
increase the Company's cost of doing business or increase the Company's legal
exposure, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
     By distributing content over the Internet, the Company faces potential
liability for claims based on the nature and content of the materials that it
distributes, including claims for defamation, negligence or copyright, patent or
trademark infringement, which claims have been brought, and sometimes
successfully litigated, against Internet companies. While the CDA generally
states that entities like the Company, which provide interactive computer
services, shall not be treated as the publisher or speaker with respect to third
party content they distribute, the scope of the CDA's definition and limitations
on liability have not been widely tested in court. Accordingly, the Company may
be subject to such claims. To protect itself from such claims, the Company
maintains media liability insurance as well as general liability insurance.
Additionally, in the Company's agreements with content providers, such content
providers generally represent that they have the rights to distribute and
transmit their programming on the Internet and, in most cases, indemnify the
Company for liability based on a breach of such representations and warranties.
The indemnification arrangements and the Company's media and general liability
insurance may not cover all potential claims of
 
                                       46
<PAGE>   51
 
this type or may not be adequate to indemnify the Company for any liability that
may be imposed. Any liability not covered by indemnification or insurance or in
excess of indemnification or insurance coverage could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Risk Factors--Governmental Regulation and Legal Uncertainty."
 
INTELLECTUAL PROPERTY
 
     The Company's success depends in part on its ability to protect its
intellectual property. To protect its proprietary rights, the Company relies
generally on copyright, trademark and trade secret laws, confidentiality
agreements with employees and third parties, and license agreements with
consultants, vendors and customers, although the Company has not signed such
agreements in every case. Despite such protections, a third party could, without
authorization, copy or otherwise obtain and use the Company's content. There can
be no assurance that the Company's agreements with employees, consultants and
others who participate in development activities will not be breached, that the
Company will have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known or independently developed by
competitors.
 
     The Company pursues the registration of certain of its trademarks and
service marks in the U.S. and in certain other countries, although it has not
secured registration of all its marks. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the U.S., and effective copyright, trademark and trade secret
protection may not be available in such jurisdictions. In general, there can be
no assurance that the Company's efforts to protect its intellectual property
rights through copyright, trademark and trade secret laws will be effective to
prevent misappropriation of its content, and the Company's failure or inability
to protect its proprietary rights could materially adversely affect the
Company's business, financial condition and results of operations. See "Risk
Factors--Intellectual Property."
 
LEGAL PROCEEDINGS
 
   
     On or about July 8, 1998, a lawsuit was filed against the Company and one
of its officers and directors in the United States District Court for the
Southern District of New York by Radio Channel Networks, Inc. In this action,
plaintiff alleges that the Company's use of the term "radio channel" infringes a
registered trade mark of the plaintiff. Plaintiff seeks to enjoin the Company
from using the words "radio channel" on the Company's Web sites and seeks
damages in an amount no less than $6,900,000 and that such damages be trebled.
Although no assurance can be given as to the outcome of this lawsuit, the
Company believes that the allegations in this action are without merit. The
Company intends to vigorously defend against this action and seek its early
dismissal.
    
 
     From time to time the Company has been, and expects to continue to be,
subject to legal proceedings and claims in the ordinary course of its business,
including claims of alleged infringement of third-party trademarks and other
intellectual property rights by the Company and its licensees. Such claims, even
if not meritorious, could result in the expenditure of significant financial and
managerial resources. The Company is not aware of any legal proceedings or
claims that it believes will have, individually or in the aggregate, a material
adverse effect on its business, financial condition or results of operations.
 
EMPLOYEES
 
     As of June 15, 1998, the Company had 191 full-time employees. None of the
Company's employees is subject to a collective bargaining agreement and the
Company believes that its relations with its employees are good.
 
FACILITIES
 
     The Company's executive offices are located in Dallas, Texas in a 28,000
square foot facility that the Company leases at a current monthly rent of
$3,920. The lease agreement terminates on February 1, 2002. The Company has an
option to extend the lease agreement for three additional five-year terms. The
Company also leases an office in New York, New York at a current monthly rent of
$3,083. This lease expires
                                       47
<PAGE>   52
 
January 31, 2001. The Company also leases an office in San Francisco, California
at a current monthly rent of $1,155. This lease expires September 30, 1998. The
Company also leases an office in Houston, Texas at a current monthly rent of
$450. This lease expires June 30, 1999. The Company anticipates that it will
require additional space within the next 12 months and that suitable additional
space will be available on commercially reasonable terms, although there can be
no assurance in this regard. The Company does not own any real estate.
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
 
   
     The following table sets forth certain information regarding the executive
officers, directors and key employees of the Company as of June 30, 1998.
    
 
   
<TABLE>
<CAPTION>
                 NAME                    AGE                POSITION WITH THE COMPANY
                 ----                    ---                -------------------------
<S>                                      <C>   <C>
Executive Officers and Directors
     Todd R. Wagner....................  37    Chief Executive Officer, Secretary and Vice Chairman
                                               of the Board
     Mark Cuban........................  39    President and Chairman of the Board
     Jack A. Riggs.....................  39    Chief Financial Officer, Treasurer and Director
     Kevin W. Parke....................  39    Vice President--Operations
     Joseph W. Autem(1)(2).............  40    Director
     Randall S. Battat.................  38    Director
     Steven D. Leeke(1)(2).............  36    Director
Key Employees
     Henry G. Heflich..................  47    Vice President--Technology
     Tina M. Williamson................  47    Vice President--Marketing
     Stan M. Woodward..................  36    Vice President--Business Services
</TABLE>
    
 
------------
 
(1) Member of Compensation Committee
 
(2) Member of Audit Committee
 
     TODD R. WAGNER co-founded the Company in May 1995 and has served as Chief
Executive Officer, Secretary and Vice Chairman of the Board since its inception.
From 1989 to 1994, Mr. Wagner worked at the law firm of Hopkins & Sutter, where
he was a partner from 1992 to 1994. Mr. Wagner became a certified public
accountant in April 1988. Mr. Wagner holds a B.S. in Accounting from Indiana
University and a J.D. from The University of Virginia School of Law.
 
     MARK CUBAN co-founded the Company in May 1995 and has served as President
and Chairman of the Board of the Company since its inception. From 1991 to the
present, Mr. Cuban has served as President of Radical Computing, Inc., a
Dallas-based venture capital and investment company specializing in technology
companies. In 1983, Mr. Cuban founded Microsolutions, Inc., a systems
integration company that was sold to CompuServe Corporation in 1990. Mr. Cuban
holds a B.S. in Business from Indiana University.
 
     JACK A. RIGGS has served as Chief Financial Officer and Treasurer of the
Company since August 1997 and as a Director since December 1997. From June 1996
to August 1997, Mr. Riggs served as Corporate Controller of Kitty Hawk, Inc., a
publicly traded international airfreight carrier. From 1994 to 1996 Mr. Riggs
served as Corporate Controller of DHN Enterprises, Inc., a privately held
wholesale distributor. Prior to that, Mr. Riggs served as Regional Controller of
INACOM Corp., a computer reseller. Prior to joining INACOM, Mr. Riggs was with
Coopers & Lybrand L.L.P. Mr. Riggs became a certified public accountant in 1990
and holds a B.S. in Accounting from Louisiana Tech University.
 
     KEVIN W. PARKE has served as Vice President--Operations of the Company
since May 1997 and as the Director--Operations since March 1996. From 1993 to
1996, Mr. Parke served as Vice President and General
 
                                       48
<PAGE>   53
 
Counsel of Merritt Marketing Group, a national integrated marketing company,
where he directed the production, finance, legal and accounting departments.
From 1991 to 1993, Mr. Parke was a partner at the law firm of Hopkins & Sutter.
Mr. Parke holds a B.A. in Economics from Vanderbilt University and a J.D. from
Southern Methodist University School of Law.
 
   
     JOSEPH W. AUTEM has served as a Director of the Company since September
1996. Mr. Autem has served as Senior Vice President and Chief Financial Officer
of CS Wireless, Inc., a privately held company that provides wireless video and
high speed internet access, since June 1998. Mr. Autem has also been a partner
of Vision Technology Partners, a private investment company, since March 1997.
From July 1996 to December 1996, Mr. Autem served as Chief Financial Officer of
the Company. From 1992 to 1996, Mr. Autem served as Vice President of Finance,
Secretary, Treasurer and Chief Financial Officer of OpenConnect Systems, Inc., a
software company. Mr. Autem became a certified public accountant in 1987 and
holds a B.S. in Accounting from Pittsburg State University.
    
 
   
     RANDALL S. BATTAT has served as a Director of the Company since February
1998. Mr. Battat has been the Senior Vice President and General Manager for the
Information Systems Group of Motorola since February 1997. From February 1994 to
February 1997, Mr. Battat served as Corporate Vice President and General Manager
of the Wireless Data Group of Motorola. Mr. Battat joined Apple Computer, Inc.
in 1981, and held a number of positions including, most recently, Vice President
of the Macintosh Desktop and Powerbook Division. Mr. Battat holds a B.S. in
Electrical Engineering from Stanford University.
    
 
     STEVEN D. LEEKE has served as a Director of the Company since October 1996.
Mr. Leeke is the Director and General Manager of Internet Content and Service
Businesses for the Messaging Information and Media Sector of Motorola, a
position he has held since September 1996. From March 1995 to September 1996,
Mr. Leeke was the Director of Strategy for Motorola New Enterprises. Prior to
joining Motorola, Mr. Leeke served in various capacities at Texas Instruments.
Mr. Leeke holds an A.B. in Physics and Math from Dartmouth College and an M.S.
and Ph.D. in Electrical Engineering from Stanford University.
 
     HENRY G. HEFLICH has served as Vice President--Technology for the Company
since March 1998. From January 1996 to March 1998, Mr. Heflich co-founded and
served as Chief System Architect for Genuity, Inc., a national ISP. From January
1981 to December 1995, Mr. Heflich served as President and Director of
Engineering for MicroNet Research. Mr. Heflich holds a B.S. in Electrical
Engineering from the Florida Institute of Technology, an M.S. in Electrical
Engineering from Southern Methodist University and an M.B.A. from the University
of Dallas.
 
     TINA M. WILLIAMSON has served as Vice President--Marketing for the Company
since April 1998 and as the Director--Marketing since May 1997. From October
1996 to February 1997, Ms. Williamson served as Vice President, Director of
Marketing for Deja News, Inc., an Internet search engine company, and from July
1995 to October 1996 was President and owner of TMW Group, an interactive media
and marketing consulting firm. Ms. Williamson was also Senior Vice President and
Associate Media Director at GSD&M Advertising. Ms. Williamson holds a B.S. in
Advertising from the University of Texas at Austin.
 
     STAN M. WOODWARD has served as Vice President--Business Services for the
Company since April 1998 and served as Director--Business Services for the
Company since November 1997. From December 1993 to November 1997, Mr. Woodward
served as Director of Sales for the South Central Region for Ascend
Communications, Inc. He has also held sales and sales management positions with
AMP Communication Systems, National Semiconductor Corporation and a number of
start-up companies specializing in fiber-optic data transport. He holds a B.S.
in Electrical Engineering from Oklahoma State University.
 
     Executive officers of the Company are appointed by the Board of Directors.
The Company's current directors will be eligible for re-election at the
Company's annual stockholder meeting in 1999 at which time the Board will be
divided into three classes. The initial term of the Class I directors will
expire at the Company's annual stockholders meeting in 2000, the initial term of
the Class II directors will expire at the Company's annual stockholder meeting
in 2001 and the initial term of the Class III directors will expire at the
Company's annual stockholder meeting in 2002. Thereafter, the term of each class
of directors will be three years. All directors hold office until the annual
stockholder meeting at which their respective class is subject to
 
                                       49
<PAGE>   54
 
re-election and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
 
BOARD COMMITTEES
 
     Compensation Committee. The Compensation Committee of the Board of
Directors reviews and makes recommendations to the Board regarding the Company's
compensation policies and all forms of compensation to be provided to executive
officers and directors of the Company, including, among other things, annual
salaries and bonuses, and stock option and other incentive compensation
arrangements. In addition, the Compensation Committee reviews bonus and stock
compensation arrangements for all other employees of the Company. As part of the
foregoing, the Compensation Committee administers the Company's Stock Option
Plans. The current members of the Compensation Committee are Messrs. Autem and
Leeke.
 
     Audit Committee. The Audit Committee of the Board of Directors reviews and
monitors the corporate financial reporting and the internal and external audits
of the Company, including, among other matters, the Company's control functions,
the results and scope of the annual audit and other services provided by the
Company's independent accountants, and the Company's compliance with legal
matters that have a significant impact on the Company's financial report. In
addition, the Audit Committee consults with the Company's management and
independent accountants prior to the presentation of financial statements to
stockholders and, as appropriate, initiates inquiries into aspects of the
Company's financial affairs. The Audit Committee also has the responsibility to
consider and recommend the appointment of, and to review fee arrangements with,
the Company's independent accountants. The current members of the Audit
Committee are Messrs. Autem and Leeke.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     For the year ended December 31, 1997, the Company's Stock Option Plan
Committee was comprised of Mr. Wagner, the Chief Executive Officer of the
Company, and Mark Cuban, the President of the Company. The Company's
Compensation Committee is currently comprised of Messrs. Autem and Leeke, both
of whom are Directors of the Company. No interlocking relationship exists
between any member of the Board of Directors or the Compensation Committee and
any member of the board of directors or compensation committee of any other
company, and no such interlocking relationship has existed in the past.
 
DIRECTOR COMPENSATION
 
     Non-Employee Directors Stock Option Plan. Directors who are not employees
of the Company are entitled to receive stock options pursuant to the Company's
1996 Non-Employee Directors Stock Option Plan (the "Directors' Plan"). All
options granted under the Directors' Plan expire 10 years from the date of the
option grant. The exercise price for options granted under the Directors' Plan
is the fair market value of a share of Common Stock on the date of grant. No
more than 150,000 shares of Common Stock may be issued upon exercise of options
granted under the Directors' Plan, subject to adjustment for stock splits, stock
dividends, reverse stock splits and other transactions affecting the number of
outstanding shares of Common Stock. Options may be granted under the Directors'
Plan until April 15, 2006.
 
     The Directors' Plan provides for the automatic grant of an option to
purchase 15,000 shares of Common Stock to each of the Company's non-employee
directors upon their initial election to the Board. Each non-employee director
re-elected to the Board of Directors at a subsequent annual stockholders'
meeting is granted an additional option to purchase 2,400 shares of Common Stock
immediately following such annual stockholders' meeting.
 
     Assuming that the non-employee director optionee has remained eligible
under the Directors' Plan for the entire period, 50% of the shares subject to
his or her initial option becomes exercisable upon the earlier of (i) the first
anniversary of the date of the option grant or (ii) immediately prior to the
first annual stockholders' meeting following the date of the option grant. The
remaining 50% of the shares subject to the option vest and become exercisable
upon the earlier of (i) the second anniversary of the date of the option grant
or (ii) immediately prior to the second annual stockholders' meeting following
the date of the option
                                       50
<PAGE>   55
 
grant. Assuming that such optionee has remained eligible under the Directors'
Plan for the entire period, each additional option will become exercisable upon
the earlier of (i) the first anniversary of the date of each such grant or (ii)
immediately prior to the first annual stockholders' meeting following the date
of each such grant.
 
     In the event of a sale of substantially all of the Company's assets, the
liquidation or dissolution of the Company, or certain changes in control of the
Company or its Board of Directors, options granted under the Directors' Plan
will become immediately exercisable prior to the occurrence of such event
without regard to vesting requirements and will then terminate if not exercised
prior to the occurrence thereof.
 
     As of March 31, 1998, options to purchase 7,500 shares of Common Stock were
outstanding under the Directors' Plan.
 
     Other Director Compensation. The Company has agreed to pay each
non-employee director $1,000 for each Board of Directors meeting attended, $500
for each meeting of a Committee of the Board of Directors attended and $200 for
each unanimous consent executed in lieu of a Board of Directors meeting. The
Company reimburses directors for all reasonable and documented expenses incurred
as a director. Directors who are also employees of the Company, including
Messrs. Wagner, Cuban and Riggs, are not compensated for their services as
directors.
 
EXECUTIVE COMPENSATION
 
     The following table sets forth, for the year ended December 31, 1997, all
compensation of the Chief Executive Officer and the other executive officers of
the Company who received compensation in excess of $100,000 in such year
(collectively, the "Named Executive Officers").
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                   ANNUAL
                                                                COMPENSATION
                                                                ------------
                NAME AND PRINCIPAL POSITION                        SALARY
                ---------------------------                     ------------
<S>                                                             <C>
Todd R. Wagner..............................................      $120,000
  Chief Executive Officer
Mark Cuban..................................................       120,000
  President and Chairman of the Board
</TABLE>
 
     The following table sets forth certain information concerning the grant of
stock options to each of the Named Executive Officers. None of such Named
Executive Officers exercised any options during the year ended December 31,
1997.
 
      AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR-END OPTION VALUES
 
   
<TABLE>
<CAPTION>
                                                                                VALUE OF UNEXERCISED
                                           NUMBER OF UNEXERCISED OPTIONS        IN-THE-MONEY OPTIONS
                                           HELD AT DECEMBER 31, 1997(1)        AT DECEMBER 31, 1997(2)
                                           -----------------------------    -----------------------------
                  NAME                     EXERCISABLE    UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
                  ----                     -----------    --------------    -----------    --------------
<S>                                        <C>            <C>               <C>            <C>
Todd R. Wagner...........................    47,160          188,640         $580,540        $2,322,158
Mark Cuban...............................    57,600          230,400          709,056         2,836,224
</TABLE>
    
 
---------------
 
(1) Options shown were granted under the Company's 1996 Stock Option Plan. These
    options become exercisable with respect to 20% of the shares covered by the
    option on the first anniversary of the date of grant and with respect to an
    additional 20% of these shares each year thereafter. Upon certain changes in
    control of the Company, all unvested options will automatically vest. See
    "--Stock Option Plans" for a description of the material terms of these
    options.
 
   
(2) Based on an assumed initial public offering price of $15.00 per share and
    net of the option exercise price.
    
 
                                       51
<PAGE>   56
 
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL CONSIDERATIONS
 
     The Company has entered into employment agreements with Messrs. Wagner and
Cuban for a term commencing on June 15, 1998, and ending on December 31, 2001,
subject to automatic successive one-year extensions in the absence of a notice
of termination by either the Company or the employee. Each agreement provides
for an annual base salary of $150,000 for 1998, plus a bonus equal to 1.5% of
the pre-tax income of the Company, as determined by the Company's outside
accountants in accordance with generally accepted accounting principles, in
excess of certain scheduled net income thresholds. Each of the agreements has
regularly scheduled increases in such salaries through the year 2001. Under the
terms of the agreements, upon consummation of this offering, (i) Messrs. Wagner
and Cuban shall each be paid a bonus of $50,000 and (ii) the current base
salaries of Messrs. Wagner and Cuban shall each increase to $225,000.
 
     The employment agreements provide that at any time within six months
following a Change of Control of the Company (as defined in the employment
agreements), Messrs. Wagner and Cuban can terminate their agreements. Following
such termination, the terminating employee is entitled to payment of Deferred
Compensation (as defined in the employment agreements) equal to the sum of (a)
the greater of (i) the remaining base salary payable to the employee through the
date on which the employment agreement would have expired by its terms or (ii)
150% of the employee's total compensation during the two years prior to such
termination, and (b) all additional benefits owing to the terminating employee
under the agreement for the period of time which is the longer of (x) the period
through the date on which the employment agreement would have expired by its
terms or (y) one year.
 
     Messrs. Wagner and Cuban have been granted options to purchase 235,800 and
288,000 shares of Common Stock, respectively, pursuant to the Company's stock
option plans, which plans provide for acceleration of vesting of such options so
that such options shall immediately become fully exercisable in the event of
certain changes of control.
 
EMPLOYEE BENEFIT PLANS
 
   
     The 1996 Stock Option Plan. In April 1996, the Board of Directors adopted,
and the stockholders of the Company approved, the Company's 1996 Stock Option
Plan (the "1996 Plan"), pursuant to which officers, employees and consultants
(excluding non-employee directors) are eligible to receive options to purchase
shares of Common Stock. At the time of adoption, no more than 1,440,000 shares
of Common Stock could be issued as a result of the exercise of options granted
under the 1996 Plan. Generally, with certain exceptions, no eligible person
could receive options to purchase more than 240,000 shares of Common Stock
during any calendar year. In August 1997, the Board of Directors elected not to
grant any further options under the 1996 Plan. At such time, there were options
to purchase 1,226,134 shares of Common Stock outstanding. As of March 31, 1998,
there were options to purchase 1,170,217 shares of Common Stock outstanding
under the 1996 Plan.
    
 
     The 1998 Stock Option Plan. In August 1997 and April 1998, the Board of
Directors adopted and amended, respectively, and in June 1998 the stockholders
approved, the Company's 1998 Stock Option Plan (the "1998 Plan"), pursuant to
which directors (other than non-employee directors), officers, employees,
consultants and advisors are eligible to receive options to purchase shares of
Common Stock. Subject to adjustment for stock splits, stock dividends, reverse
stock splits and other transactions affecting the number of outstanding shares
of Common Stock effected without the receipt of consideration by the Company, no
more than 2,800,000 shares of Common Stock may be issued as a result of the
exercise of options granted under the 1998 Plan, and no eligible person may be
granted options to purchase more than 250,000 shares of Common Stock during any
calendar year. Options may be granted under the 1998 Plan until August 19, 2007.
As of March 31, 1998, there were options to purchase 850,139 shares of Common
Stock outstanding under the 1998 Plan.
 
     Certain Provisions Applicable to the 1996 Stock Option Plan and the 1998
Stock Option Plan. The 1996 Plan and the 1998 Plan (the 1996 Plan and the 1998
Plan may herein be referred to collectively as the "Stock Option Plans") are
being administered by the Compensation Committee. Under the terms of the Stock
 
                                       52
<PAGE>   57
 
Option Plans, as long as the Company has any class of securities registered
pursuant to Section 12 of the Exchange Act, the Committee must be composed of at
least two members of the Board of Directors of the Company, each of whom is
required to be "disinterested" within the meaning of Rule 16b-3 under the
Exchange Act. In April 1998, the Board of Directors dissolved its Stock Option
Plan Committee and authorized the Compensation Committee (consisting of Messrs.
Leeke and Autem) to administer the Stock Option Plans. Messrs. Leeke and Autem
meet the requirements of Rule 16b-3. The Compensation Committee has the
authority to interpret the Stock Option Plans; to determine the terms and
conditions of options granted under the Stock Option Plans; to prescribe, amend
and rescind the rules and regulations of the Stock Options Plans; and to make
all other determinations necessary or advisable for the administration of the
Stock Option Plans.
 
     Options granted under the Stock Option Plans may be incentive stock
options, which are intended to qualify for favorable federal income tax
treatment under the provisions of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") ("ISOs"), or non-qualified stock options, which do
not so qualify ("NSOs"; ISOs and NSOs may be referred to herein collectively as
"Options"). The Compensation Committee selects the eligible persons to whom
Options will be granted and determines the dates, amounts, exercise prices (in
no event less than the fair market value of a share of Common Stock on the date
of grant), vesting periods and other relevant terms of the Options, including
whether the Options will be ISOs or NSOs. Options are generally not transferable
during the life of the optionee.
 
     Options vest and become exercisable as determined by the Compensation
Committee, although Options granted under the 1996 Plan may vest no earlier than
one year from the date of grant. Options may be exercised at any time after they
vest and before their expiration date as determined by the Compensation
Committee, provided, however, that no Option may be exercised more than 10 years
after its date of grant (five years after grant in the case of certain ISOs).
Options, whether or not vested, will generally terminate (i) immediately upon
termination of the optionee's employment with the Company for just cause; (ii)
12 months after death, permanent disability or normal retirement (unless the
Option expires earlier by its terms) under the 1996 Plan and six months
thereafter under the 1998 Plan; and (iii) 90 days after termination of
employment (180 days in the case of non-qualified Options granted thereunder)
for any other reason under the 1996 Plan and 30 days with respect to the 1998
Plan (unless the Option expires earlier by its terms), although the Compensation
Committee, in its discretion, may accelerate vesting and may extend the exercise
period of any Options. The aggregate fair market value (determined at the time
of the option grant) of the shares of Common Stock represented by ISOs that
become exercisable in any calendar year may not exceed $100,000. Options in
excess of this limit are treated as NSOs.
 
     If the Company consummates any reorganization, merger or consolidation,
each outstanding Option will, upon exercise, entitle the optionee to receive the
same consideration received by holders of shares of Common Stock in such
reorganization or merger or consolidation, with appropriate exercise price
adjustments. In the case of certain changes of control of the Company, any
Options so specified at any time by the Compensation Committee or the Board in
its discretion shall vest and become exercisable. Under the 1996 Plan, in the
case of certain changes in control involving the liquidation of the Company, the
disposition of substantially all of the Company's assets, and certain
reorganizations, mergers or consolidations of the Company, all outstanding
Options will automatically vest and become exercisable if, and to the extent
that such Options are not, in connection with the change of control, to be
cashed-out at full value, continued by the Company as the surviving corporation,
assumed by the successor corporation or parent thereof or replaced with
comparable options or other compensation programs. Under the 1998 Plan, in the
event of a "Change of Control" (as defined therein), all outstanding Options
will automatically vest and become exercisable.
 
     As of March 31, 1998, there were options to purchase 2,027,856 shares of
Common Stock outstanding in the aggregate under the Stock Option Plans.
 
     401(k) Plan. The Company sponsors a savings and investment plan (the
"401(k) Plan") intended to be qualified under Section 401 of the Code.
Participating employees may make pre-tax contributions, subject to limitations
under the Code, of a percentage of their total compensation. Employees become
eligible to
 
                                       53
<PAGE>   58
 
participate in the plan after being employed by the Company for six months. The
Company, in its sole discretion, may make matching contributions for the benefit
of all participants with at least one year of service who make pre-tax
contributions. The Board of Directors has not yet determined the matching
contribution, if any, that will be made for the 1998 plan year.
 
     Employee Stock Purchase Plan. In May 1998, the Board of Directors adopted,
and in June 1998 the stockholders approved, the Company's 1998 Employee Stock
Purchase Plan (the "Stock Purchase Plan"). Subject to meeting federal and state
securities law requirements and such stockholder approval, the Stock Purchase
Plan will become effective at the consummation of this offering, or as soon as
practicable thereafter.
 
     The purpose of the Stock Purchase Plan is to maintain competitive equity
compensation programs and to provide employees of the Company with an
opportunity and incentive to acquire a proprietary interest in the Company
through the purchase of Common Stock, thereby more closely aligning the
interests of the Company's employees and shareholders. The Company has reserved
a total of 250,000 shares of Common Stock for issuance and sale under the Stock
Purchase Plan. The Stock Purchase Plan will be administered by the Compensation
Committee, members of which are not eligible to participate in the Stock
Purchase Plan. The Board, however, may from time to time in its discretion
exercise any responsibilities or authority allocated to the Compensation
Committee under the Stock Purchase Plan.
 
     All employees of the Company who have been employees for at least six
months are eligible to participate in the Stock Purchase Plan, other than
employees whose customary employment is less than 20 hours per week or is not
for more than five months in a calendar year, or employees who are ineligible to
participate due to federal tax restrictions. There are certain restrictions on
the number of shares that a participant may purchase, including the requirement
that the fair market value of shares that may be purchased by any employee
during any calendar year may not exceed $25,000. The offering dates will be
August 15 and February 15 of each Stock Purchase Plan year, and each such
offering date will commence a new offering period, provided that the initial
offering period shall commence as soon as practicable following consummation of
this offering. The Company may alter the duration of any offering period if the
change is announced at least 15 days before the relevant offering date. Shares
purchased under the Stock Purchase Plan will be held in separate accounts for
each participant.
 
     Eligible employees may enroll in any offering period by delivering to the
Company a subscription agreement at least five days before the first day of such
offering period. In the subscription agreement, the employee will specify a
whole number percentage from 1% to 10% of his or her annual base compensation
(including any cash bonus) to be deducted from such employee's paycheck during
the offering period. The amounts so deducted and contributed are applied to the
purchase of shares of Common Stock at 85% of the lesser fair market value of
such shares on (i) the date of purchase or (ii) the offering date.
 
     Participants may increase or decrease their payroll deductions at any time
(subject to such limits as the Compensation Committee may impose) during an
offering period by filing with the Company a new subscription agreement
authorizing such a change in the payroll deduction rate. Participants may
withdraw from an offering period by giving written notice to the Company at
least five days before the end of such offering period. If a participant
withdraws from the Stock Purchase Plan, any contributions that have not been
used to purchase shares shall be refunded. A participant who has withdrawn may
not participate in the Stock Purchase Plan again until the next offering period.
 
     In the event of retirement or cessation of employment for any reason, any
contributions that have not yet been used to purchase shares will be refunded to
the participant, or to the participant's designated beneficiary in the case of
death, and a certificate will be issued for the full shares in the participating
account.
 
     The Compensation Committee may, at any time and for any reason, terminate
or amend the Stock Purchase Plan, subject to stockholder approval in certain
circumstances. Unless sooner terminated by the Committee, the Stock Purchase
Plan will continue in effect for a term of 10 years.
 
                                       54
<PAGE>   59
 
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
 
     The Company's Restated Certificate of Incorporation contains certain
provisions permitted under the DGCL relating to the liability of directors. The
Restated Certificate of Incorporation provides that, to the fullest extent
permitted under the DGCL, no director of the Company will be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director.
 
     The Bylaws provide that (i) the Company is required to indemnify the
directors, officers and employees of the Company against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement arising out of
any action taken by such officer or director in good faith and in a manner
reasonably believed by such officer or director to be in, or not opposed to, the
best interests of the Company, (ii) the Company is required to advance expenses
(including attorneys' fees) to its officers and directors in defending any
civil, criminal, investigative action, suit or proceeding or appeal therefrom
and (iii) the rights conferred in the Bylaws are not exclusive.
 
     The Company has entered into indemnification agreements with each of its
current directors and executive officers to give such directors and executive
officers additional contractual assurances regarding the scope of the
indemnification set forth in the Company's Restated Certificate of Incorporation
and the Company's Restated Bylaws and to provide additional procedural
protections. At present, there is no pending litigation or proceeding involving
a director, officer or employee of the Company regarding which indemnification
is sought, nor is the Company aware of any threatened litigation that may result
in claims for indemnification.
 
                                       55
<PAGE>   60
 
                              CERTAIN TRANSACTIONS
 
     The Company sold 2,640,000 shares, 920,040 shares, 990,000 shares and
59,700 shares of Common Stock to Mr. Cuban in May 1995, December 1995, March
1996 and August 1996, respectively.
 
     The Company sold 2,640,000 shares, 600 shares and 7,500 shares of Common
Stock to Mr. Wagner in May 1995, December 1995, and August 1996, respectively.
 
     The Company sold 120,000 and 1,560 shares of Common Stock to Martin Woodall
in May 1995 and August 1996, respectively.
 
     The Company entered into a Bill of Conveyance and Agreement to Assume
Liabilities effective July 1995 with Cameron Broadcasting Systems, Inc.
("Cameron Broadcasting") pursuant to which (i) Cameron Broadcasting transferred
certain intangible assets and rights to the Company, (ii) the Company assumed
certain liabilities (relating solely to the assets and rights acquired) and
(iii) the Company issued 600,000 shares of Common Stock to Cameron Broadcasting.
Cameron Broadcasting has appointed Mr. Wagner as proxy to vote these 600,000
shares pursuant to a Proxy dated as of July 1995. The Company sold 33,540
additional shares of Common Stock to Cameron Broadcasting in August 1996. The
Company repurchased 120,000 shares of Company Common Stock from Cameron
Broadcasting in June 1996.
 
     Cameron Broadcasting and Messrs. Cuban and Wagner entered into a Buy-Sell
Agreement effective July 1995 (as amended in August 1996, the "Buy-Sell
Agreement") pursuant to which each party was given the right to buy a pro rata
portion of shares that any other party offered for sale and, in certain
situations, the right or obligation to co-sell shares sold by another party. The
Buy-Sell Agreement terminates upon an initial public offering of any security of
the Company.
 
     The Company issued 735,720 shares, 9,840 shares, 5,220 shares, 21,120
shares and 1,592,356 shares of Common Stock to Motorola in September 1996,
January 1997, March 1997, April 1997 and December 1997, respectively pursuant to
stock purchase agreements and the exercise of preemptive rights contained
therein. The Company and Motorola entered into a Negotiation Rights Agreement in
September 1996 pursuant to which the Company agreed (i) to offer Motorola a
non-exclusive license to any technology which it licenses to other parties on a
non-exclusive basis on the same or better terms, (ii) to give Motorola 30 days
notice of the Company's intention to grant a license to any technology to other
parties on an exclusive basis and (iii) to give Motorola a right of first
negotiation to any license of certain wireless distribution technology. The
Company, Motorola, and Messrs. Cuban and Wagner entered into a Stockholders
Agreement (the "September Stockholders Agreement") in September 1996, as amended
in December 1996, pursuant to which Messrs. Cuban and Wagner agreed (i) to vote
their shares to ensure that two designees of Motorola are elected to the
Company's Board of Directors (See "Description of Capital Stock--Stockholder
Agreements") and (ii) to give Motorola certain tag-along rights with respect to
certain sales of shares by Messrs. Cuban and Wagner after the date of the
offering.
 
     Steven Leeke and Randall Battat, two of the Company's directors, were
designees of Motorola pursuant to the September Stockholders Agreement. The
September Stockholders Agreement will terminate upon the earlier to occur of (i)
the third anniversary of the Company's offering and (ii) the date on which
Motorola no longer holds at least 50% of the 735,720 shares purchased by
Motorola in September 1996.
 
     On December 16, 1997, the Company and Motorola entered into a Joint
Promotion and Advertising Sales Agreement pursuant to which the Company has
agreed to assist Motorola in monitoring and developing an end-user interface for
Internet delivery of audio content (the "audioSENSE Player"). In order for
Motorola to develop the audioSENSE Player, the Company has agreed to allow the
audioSENSE Player to reside on the Company's Web site as an interface for
accessing certain content on the Company's Web sites. Motorola is also a
customer of the Company, to whom the Company provides business services. These
relationships with Motorola have generated revenues for the Company of $10,000
and $84,000 for the twelve months ending December 31, 1997 and the three months
ending March 31, 1998, respectively. See "Business--Strategic Relationships--Key
Internet Companies."
 
                                       56
<PAGE>   61
 
     The Company issued 294,300 shares and 530,786 shares of Common Stock to
Intel in February 1997 and December 1997, respectively, and a stock purchase
warrant to Intel in February 1997, as amended in December 1997, (the "Intel
Warrant") pursuant to which Intel was granted the right to purchase an
additional 147,120 shares of Common Stock at an exercise price of $6.80 per
share pursuant to stock and warrant purchase agreements. Intel's right to
acquire 58,860 shares of Common Stock vested immediately upon the granting of
the warrant. Intel's right to acquire the remaining 88,260 shares of Common
Stock did not vest and expired on June 30, 1998. Intel is also a customer of the
Company, to whom the Company provides business services, which services
generated revenues for the Company of approximately $500,000 and $84,000 for the
twelve months ending December 31, 1997 and the three months ending March 31,
1998, respectively.
 
     The Company, Messrs. Cuban and Wagner, Motorola, Intel and certain other
shareholders of the Company are parties to a stockholders agreement (the
"December Stockholders Agreement") which was originally entered into in December
1996 and amended in February 1997 and December 1997 pursuant to which Messrs.
Cuban and Wagner granted Motorola, Intel and certain other shareholders a
tag-along right with respect to certain sales of shares by Messrs. Cuban and
Wagner after the date of this offering. See "Description of Capital
Stock--Stockholder Agreements." The December Stockholders Agreement will
terminate upon the third anniversary of the Company's Initial Public Offering.
 
     The Company, Motorola, Intel and certain other shareholders of the Company
are party to a Registration Rights Agreement, which was originally entered into
in September 1996 and amended in November 1996, December 1996, February 1997,
and December 1997 (the "Registration Rights Agreement"), pursuant to which
Motorola, Intel and certain other shareholders have rights (i) to request that
the Company effect a registration of the sale of shares held by them and (ii) to
request that the sale of shares held by them be included in registrations
conducted by the Company. See "Description of Capital Stock--Registration Rights
Agreement."
 
     The Company has entered into employment agreements with Messrs. Cuban and
Wagner. See "Management--Employment Agreements and Change in Control
Considerations."
 
     The Company has issued options to certain of its Directors and Officers.
The Company has entered into Indemnification Agreements with its directors and
executive officers. See "Management--Indemnification of Directors and Executive
Officers and Limitation of Liability."
 
     Mr. Cuban has agreed to act as guarantor of the following June 1997 Company
lease obligations with Green Tree Vender Services Corporation: (i) lease of
voicemail system with monthly payments of $1,128 for a term of three years; (ii)
lease of office furniture with monthly payments of $4,333 for a term of three
years; and (iii) lease of Nortel Meridian system with monthly payments of $3,938
for a term of three years.
 
                                       57
<PAGE>   62
 
                       PRINCIPAL AND SELLING STOCKHOLDERS
 
     The following table sets forth certain ownership information with respect
to the beneficial ownership of the Company's Common Stock as of March 31, 1998
(except as otherwise noted), and as adjusted to reflect the sale of shares of
Common Stock hereby, by (i) each person who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) each director of the
Company, (iii) each of the Named Executive Officers, and (iv) all directors and
executive officers of the Company as a group.
 
<TABLE>
<CAPTION>
                                                                                   PERCENTAGE OF
                                                                                   COMMON STOCK
                                                               NUMBER OF       BENEFICIALLY OWNED(1)
                                                                 SHARES       -----------------------
                                                              BENEFICIALLY     BEFORE        AFTER
                  NAME OF BENEFICIAL OWNER                       OWNED        OFFERING    OFFERING(2)
                  ------------------------                    ------------    --------    -----------
<S>                                                           <C>             <C>         <C>
Mark Cuban(3)...............................................   4,724,940        32.6%        27.8%
Todd R. Wagner(4)...........................................   2,742,420        18.9         16.2
Motorola, Inc.(5)...........................................   2,364,256        16.4         14.0
Intel Corporation(6)........................................     883,946         6.1          5.2
Joseph W. Autem.............................................      19,620           *            *
Steven Leeke(7).............................................       7,500           *            *
Kevin Parke(8)..............................................       6,000           *            *
All directors and executive officers as a group (9
  persons)(9)...............................................   7,500,480        51.4         43.8
</TABLE>
 
------------
 
 *  Less than one percent of the Company's Common Stock.
 
(1) Unless otherwise indicated, and subject to community property laws where
    applicable, each of the stockholders named in this table has sole voting and
    investment power with respect to the shares shown as beneficially owned by
    it. A person is deemed to be the beneficial owner of securities that can be
    acquired by such person within 60 days from March 31, 1998 upon the exercise
    of options and warrants. Each beneficial owner's percentage ownership is
    determined by assuming that options that are held by such person (but not
    those held by any other person) and that are exercisable within 60 days from
    March 31, 1998 have been exercised.
 
(2) Assumes that the Underwriter's overallotment option is not exercised.
 
(3) Includes an aggregate of 115,200 shares of Common Stock issuable pursuant to
    options that are currently exercisable or are exercisable within 60 days of
    March 31, 1998. Mr. Cuban is required to vote his shares to ensure
    representation of Motorola on the Board of Directors. See "Description of
    Capital Stock--Stockholder Agreements."
 
(4) Includes an aggregate of 94,320 shares of Common Stock issuable pursuant to
    options that are currently exercisable or are exercisable within 60 days of
    March 31, 1998. Mr. Wagner has granted the Underwriters an Option,
    exercisable within 30 days hereof, relating to the Offering, to purchase up
    to 187,500 shares of Common Stock at the price offered to the public less
    underwriting discounts and commissions for the purpose of covering
    overallotments, if any. If the Underwriters exercise such options in full,
    Mr. Wagner will beneficially own 2,554,920 shares or 14.9% of the Common
    Stock after the offering. Mr. Wagner holds voting rights with respect to an
    additional 600,000 shares of Common Stock, which shares are owned by Cameron
    Broadcasting and are subject to a proxy in favor of Mr. Wagner. See "Certain
    Transactions." Mr. Wagner is required to vote his shares to ensure
    representation of Motorola on the Board of Directors. See "Description of
    Capital Stock--Stockholder Agreements."
 
(5) The address of Motorola, Inc. is 1303 E. Algonquin Road, Schaumburg,
    Illinois 60196. Messrs. Wagner and Cuban are each required to vote their
    shares to ensure representation of Motorola on the Board of Directors. See
    "Description of Capital Stock--Stockholder Agreements." Messrs. Battat and
    Leeke disclaim beneficial ownership of any shares of Common Stock
    beneficially owned by Motorola.
 
(6) Includes an aggregate of 58,860 shares of Common Stock issuable pursuant to
    warrants that are currently exercisable or are exercisable within 60 days of
    March 31, 1998. The address of Intel Corporation is 2200 Mission College
    Boulevard, Santa Clara, California 95052.
 
(7) Includes an aggregate of 7,500 shares of Common Stock issuable pursuant to
    options that are currently exercisable or are exercisable within 60 days of
    March 31, 1998. Pursuant to an agreement between Mr. Leeke and Motorola
    dated March 27, 1998. Mr. Leeke can exercise his options at the sole
    direction of, and for the benefit of, Motorola.
 
(8) Includes an aggregate of 6,000 shares of Common Stock issuable pursuant to
    options that are currently exercisable or are exercisable within 60 days of
    March 31, 1998.
 
(9) Includes an aggregate of 223,020 shares of Common Stock issuable pursuant to
    options that are currently exercisable or are exercisable within 60 days of
    March 31, 1998.
 
                                       58
<PAGE>   63
 
                          DESCRIPTION OF CAPITAL STOCK
 
GENERAL
 
   
     The Company is authorized by its Restated Certificate of Incorporation to
issue 60,000,000 shares of Common Stock, par value $0.01 per share, of which
14,401,031 were outstanding and held of record by 36 stockholders on July 13,
1998; and 5,000,000 shares of Preferred Stock, par value $0.01 per share, of
which no shares are outstanding (collectively, the "Capital Stock").
    
 
     The Company may not subdivide or combine any shares of its Common Stock, or
pay any dividend or retire any share or make any other distribution on any share
of its Common Stock, or accord any other payment, benefit or preference to any
share of its Common Stock, except by extending such subdivision, combination,
distribution, payment, benefit or preference equally to all shares of Common
Stock.
 
     The Common Stock does not entitle holders to any preemptive rights upon the
issuance of other securities of the Company.
 
COMMON STOCK
 
     Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by stockholders and are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available therefore
and to share pro rata in any distribution to holders of Capital Stock. Holders
of Common Stock do not have the power to act by written consent. Actions
required or permitted to be taken by the stockholders of the Company may be
taken only at a duly called annual or special meeting of the stockholders. In
the event of a liquidation, dissolution, or winding-up of the Company, holders
of Common Stock will be entitled to share pro rata in the distribution to
holders of Capital Stock of all remaining assets of the Company after the
payment of all debts, liabilities, and obligations of the Company and the
preference distributions, if any, to holders of the Company's Preferred Stock.
 
     Options entitling the holders thereof to purchase a total of 2,027,856
shares of Common Stock were outstanding under the Company's 1996 and 1998 Stock
Option Plans and the Company's Directors' Plan as of March 31, 1998.
 
PREFERRED STOCK
 
     Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors has the authority to issue up to 5,000,000 shares of Preferred
Stock in one or more series with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
that may adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the Preferred Stock could be
utilized, under certain circumstances, to discourage, delay or prevent an
acquisition or change of control of the Company. The Company does not currently
intend to issue any shares of its Preferred Stock.
 
OPTIONS
 
     As of March 31, 1998, the Company had granted options, net of forfeitures
to purchase up to 2,027,856 shares of Common Stock, of which 337,493 shares were
then currently exercisable, at exercise prices that generally range from $1.07
to $10.43, pursuant to the provisions of the Company's Stock Option Plans and
Directors' Plan. See "Management--Non-Employee Directors Compensation" and
"--Stock Option Plans." Previous offerings under the Plans have been exempt from
registration, and shares issued in connection therewith are subject to resale
restrictions. The Company intends to file a Registration Statement on Form S-8
registering shares to be issued in connection with current and future option
grants. See "Shares Eligible for Future Sale."
 
                                       59
<PAGE>   64
 
WARRANTS
 
   
     As of the effective date of this Prospectus, the Company has outstanding
warrants entitling the holders thereof to purchase a total of 218,096 shares of
Common Stock of the Company with exercise prices of either $6.80 or $9.42 per
share.
    
 
DIVIDENDS
 
     The Company has never paid any cash dividends on its Capital Stock. For the
foreseeable future, the Company intends to retain all of its future earnings to
finance its operations and does not anticipate paying cash dividends.
 
CERTAIN PROVISIONS OF DELAWARE LAW
 
     The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of the Company's outstanding voting
stock) from engaging in a "business combination" (as defined in Section 203)
with the Company for three years following the date that person became an
interested stockholder unless: (i) before that person became an interested
stockholder, the Board approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon completion of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the Company outstanding at
the time the transaction commenced (excluding stock held by directors who are
also officers of the Company and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer) or (iii) on or
following the date on which that person became an interested stockholder, the
business combination is approved by the Company's Board and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
66 2/3% of the outstanding voting stock of the Company not owned by the
interested stockholder.
 
     Under Section 203, these restrictions do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the Company's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors (but not less than one) who were
directors before any person became an interested stockholder in the previous
three years or who were recommended for election or elected to succeed such
directors by a majority of such directors then in office.
 
     Under Section 162 of the DGCL, the Board of Directors of the Company can,
without stockholder approval, issue authorized but unissued shares of Capital
Stock, which may have the effect of delaying, deferring or preventing a change
of control of the Company. Except as contemplated hereby, the Company has no
plan or arrangement for the issuance of any shares of Capital Stock other than
in the ordinary course pursuant to the Plans.
 
CERTAIN CHARTER AND BYLAW PROVISIONS
 
     The Company's Restated Certificate of Incorporation provides that following
the consummation of an initial public offering of the Common Stock, no action
may be taken by written consent in lieu of a meeting of the stockholders.
 
     The Company's Restated Certificate of Incorporation provides that at the
first annual meeting following the consummation of an initial public offering of
shares of Common Stock, the Board of Directors will be divided into three
classes, and the directors will thereafter have staggered three-year terms.
Directors may be removed from office only for cause, and only upon the
affirmative vote of stockholders of the Company, voting as a single class, of
not less than 67% of the total outstanding shares entitled to vote in the
election of directors. The Restated Certificate of Incorporation further
provides that the provisions thereof pertaining to the Board of Directors may be
repealed or amended only in accordance with the DGCL and by the affirmative vote
of
 
                                       60
<PAGE>   65
 
the stockholders of the Company, voting as a single class, of not less than 67%
of the total outstanding shares entitled to vote in the election of directors.
 
     The Company's Bylaws provide that nominations for directors by stockholders
and stockholder proposals to be presented at annual meetings of stockholders
generally must be submitted to the Company not less than 120 calendar days in
advance of the anniversary date of the Company's proxy statement sent to
stockholders in connection with the previous year's annual meeting of
stockholders.
 
REGISTRATION RIGHTS AGREEMENT
 
     On February 24, 1997, the Company entered into that certain First Amended
and Restated Registration Rights Agreement (the "Registration Rights Agreement")
among Motorola, Premiere Radio Networks, Intel, Capitol and HMTF AudioNet
Investors (collectively, the "Holders"). Yahoo! was made a Holder under the
terms of the Registration Rights Agreement pursuant to the Addendum to First
Amended and Restated Registration Rights Agreement dated as of December 30,
1997. Under the terms of the Registration Rights Agreement, Holders owning a
majority of the shares subject to the agreement have the right to demand that
the Company register shares held by them. The rights of the Holders to demand
registration are subject to certain conditions and limitations regarding timing
of such demands (including a six month restriction following an initial public
offering), the number of demands, and other matters. In addition, if the Company
proposes to register any of its securities under the Securities Act (other than
in connection with an initial public offering), either for its own account or
for the account of other security holders, the Holders are entitled to notice of
such registration and are entitled to include their shares of Common Stock in
the registration ("Piggyback Registration"). The Piggyback Registration rights
of the Holders are subject to certain conditions and limitations, among them the
right of the underwriters of a registered offering to limit the number of shares
of Common Stock included in such registration. The Company has agreed to bear
all expenses incurred in connection with all registrations, except to the extent
that the Holders of the registration rights, and not the Company, initiate the
request that a registration be withdrawn prior to its effectiveness. Pursuant to
the Registration Rights Agreement, the Company has agreed, to the extent
permitted by law, to grant certain indemnification rights for claims arising
under the Securities Act in connection with material misstatements, omissions or
violations by the Company in a registration statement effecting a registration
under the Registration Rights Agreement. In addition, each Holder has agreed to
indemnify the Company, to the extent permitted by law, for claims which arise
out of any violation that occurs in reliance upon written information furnished
to the Company by such Holder expressly for use in connection with such
registration.
 
STOCKHOLDER AGREEMENTS
 
     On September 4, 1996 Motorola, Todd R. Wagner and Mark Cuban entered into a
stockholders agreement (as amended, the "September Stockholders Agreement")
pursuant to which Messrs. Wagner and Cuban have agreed to vote all shares of
Common Stock owned by them in a manner that ensures that (i) at all times two
Motorola designees serve as members of the Board of Directors of the Company,
subject to removal only under limited circumstances described in the September
Stockholders Agreement, and (ii) at all times that the Board of Directors is
segregated into classes, at least one such designee is a member of the class of
directors with the longest initial term.
 
     In the event that Mr. Cuban or Mr. Wagner proposes to sell, transfer or
otherwise dispose of shares of Common Stock representing 10% or more of the
Company's outstanding shares of Common Stock, certain shareholders, including
Intel and Motorola, have the right to co-sell a pro-rata number of shares of
Common Stock, subject to a limited number of exempt transfers.
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
 
                                       61
<PAGE>   66
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Prior to this offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices from time to time.
Furthermore, since no shares owned prior to this offering will be available for
sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after these restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
 
   
     Upon completion of this offering, the Company will have outstanding an
aggregate of 16,901,031 shares of Common Stock, assuming no exercise of any
warrants or options and no exercise of the Underwriters' over-allotment option.
Of these shares, all of the shares sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act,
unless such shares are purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act (the "Affiliates"). The remaining
14,401,031 shares of Common Stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act
("Restricted Shares"). Restricted Shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rule
144 or 701 promulgated under the Securities Act, which rules are summarized
below. All officers, directors, stockholders and option holders of the Company
have agreed not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly (or enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of),
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, for a period of 180 days after the date
of this Prospectus, without the prior written consent of Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. Incorporated may in its sole discretion
choose to release a certain number of these shares from such restrictions prior
to the expiration of such 180 day period. Morgan Stanley & Co. Incorporated
currently has no plans to release any portion of the securities subject to
lock-up agreements. When determining whether or not to release shares from the
lock-up agreements, Morgan Stanley & Co. Incorporated will consider, among other
factors, the stockholder's reasons for requesting the release, the number of
shares for which the release is being requested and market conditions at the
time. As a result of such contractual restrictions and the provisions of Rule
144 and 701, the Restricted Shares will be available for sale in the public
market as follows: (i) no shares will be eligible for immediate sale on the date
of this Prospectus; (ii) 13,977,905 shares will be eligible for sale upon
expiration of the contract restriction, 180 days after the date of this
Prospectus, subject in the case of all but 3,260,940 shares to the volume
limitations and other conditions of Rule 144 described below; (iii) 407,166
shares will become eligible for sale in March 1999, all of which will be subject
to the volume limitations and other conditions of Rule 144; and (iv) the
remaining 15,960 shares will become eligible for sale in July 1999, all of which
will be subject to the volume limitations and other conditions of Rule 144.
    
 
   
     In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the number of shares of Common Stock then outstanding
(which will equal approximately 169,010 shares immediately after this offering);
or (ii) the average weekly trading volume of the Common Stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of an notice
on Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an Affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of any
prior owner except an Affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144; therefore, unless otherwise restricted, shares
will quality as "144(k) shares" on the date of this Prospectus and may be sold
immediately upon the
    
 
                                       62
<PAGE>   67
 
completion of this offering. Subject to certain limitations on the aggregate
offering price of a transaction and other conditions, employees, directors,
officers, consultants or advisors may rely on Rule 701 with respect to the
resale of securities originally purchased from the Company prior to the date the
issuer becomes subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), pursuant to written compensatory
benefit plans or written contracts relating to the compensation of such persons.
In addition, the Securities and Exchange Commission has indicated that Rule 701
will apply to typical stock options granted by an issuer before it becomes
subject to the reporting requirements of the Exchange Act, along with the shares
acquired upon exercise of such options (including exercises after the date of
this Prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this Prospectus, may be sold by persons
other than Affiliates subject only to the manner of sale provisions of Rule 144,
and by Affiliates under Rule 144 without compliance with its holding period
requirements.
 
     Upon completion of this offering, the holders of approximately 4,751,727
shares of Common Stock currently outstanding or issuable upon exercise of
warrants, or their transferees, will be entitled to certain rights with respect
to the registration of such shares under the Securities Act. See "Description of
Capital Stock--Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for share purchases by affiliates)
immediately upon the effectiveness of such registration.
 
     The Company intends to file registration statements under the Securities
Act covering a total of 4,105,360 shares of Common Stock subject to options
outstanding or reserved for future issuance under the 1996 Plan, the 1998 Plan
and the Directors' Plan and 250,000 shares of Common Stock reserved for issuance
under the Stock Purchase Plan. See "Management--Employee Benefit Plans." Such
registration statements are expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under such registration statements will, subject to Rule 144 volume
limitations applicable to Affiliates, be available for sale in the open market,
beginning 180 days after the date of the Prospectus, unless such shares are
subject to vesting restrictions with the Company.
 
                                       63
<PAGE>   68
 
                                  UNDERWRITERS
 
     Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and Hambrecht & Quist LLC
are acting as Representatives (the "Representatives"), have severally agreed to
purchase, and the Company has agreed to sell to them, severally, the respective
number of shares of Common Stock set forth opposite their respective names
below:
 
<TABLE>
<CAPTION>
                                                               NUMBER
                                                                 OF
                            NAME                               SHARES
                            ----                              ---------
<S>                                                           <C>
Morgan Stanley & Co. Incorporated...........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Hambrecht & Quist LLC.......................................
 
                                                              ---------
          Total.............................................  2,500,000
                                                              =========
</TABLE>
 
     The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.
 
     The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the initial public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $     a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $     a share to other Underwriters or to certain dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Representatives.
 
     The Company and the Selling Stockholder have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to an aggregate of 375,000 additional shares of Common Stock at the initial
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, made in connection
with the offering of the shares of Common Stock offered hereby. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock set forth next to the names of all Underwriters in the preceding
table.
 
     The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
 
     Each of the Company and the directors, executive officers, other
stockholders and option holders of the Company has agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not during the period ending 180 days after the date of
this Prospectus (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer, lend or dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
 
                                       64
<PAGE>   69
 
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, except under
certain limited circumstances. The restrictions described in this paragraph do
not apply to (a) the sale of shares of Common Stock to the Underwriters, (b) the
issuance by the Company of shares of Common Stock upon exercise of an option or
a warrant or the conversion of a security outstanding on the date of this
Prospectus of which the Underwriters have been advised in writing or (c)
transactions by any person other than the Company relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the offering of the Shares.
 
   
     At the request of the Company, the Underwriters have reserved for sale, at
the initial offering price, up to twelve percent of the shares offered hereby
(not including shares subject to the Underwriters' over-allotment option) for
certain parties who have expressed an interest in purchasing such shares in this
offering. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent such persons purchase such reserved shares.
Any reserved shares which are not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.
    
 
     In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to any Underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
 
     The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
 
PRICING OF THE OFFERING
 
     Prior to this offering, there has been no public market for the shares of
Common Stock or any other securities of the Company. The initial public offering
price for the shares of Common Stock will be determined by negotiations between
the Company and the Representatives. Among the factors to be considered in
determining the initial public offering price will be the future prospects of
the Company and its industry in general, sales, earnings and certain other
financial and operating information of the Company in recent periods, and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company. The estimated initial public offering price
range set forth on the cover page of this Prospectus is subject to change as a
result of market conditions and other factors.
 
                                       65
<PAGE>   70
 
                                 LEGAL MATTERS
 
     The validity of the Common Stock offered hereby will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, New York, New York. Sean P. Griffiths, a
partner of Gibson, Dunn & Crutcher LLP, currently owns 20,220 shares of Common
Stock of the Company. Certain legal matters will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
 
                                    EXPERTS
 
     The financial statements of the Company for the period from inception (May
19, 1995) to December 31, 1995 and each of the two years in the period ended
December 31, 1997, included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
 
                             AVAILABLE INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is
hereby made to such Registration Statement and the exhibits and schedules
thereto. A copy of the Registration Statement may be inspected by anyone without
charge at the Commission's principal office in Washington, D.C., at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048, and Citicorp Center 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and through the SEC's Web site at http://www.sec.gov. Copies of
all or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W. Washington, D.C.
20549, upon payment of certain fees prescribed by the Commission.
 
                                       66
<PAGE>   71
 
                               broadcast.com inc.
 
                         INDEX TO FINANCIAL STATEMENTS
 
THE FINANCIAL STATEMENTS REFERRED TO BELOW ARE AS OF DECEMBER 31, 1996 AND 1997
 AND MARCH 31, 1998 (UNAUDITED) AND FOR THE INCEPTION PERIOD ENDED DECEMBER 31,
                                     1995,
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTHS ENDED MARCH 31, 1998
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................  F-2
Balance Sheets..............................................  F-3
Statements of Operations....................................  F-4
Statements of Stockholders' Equity (Deficit)................  F-5
Statements of Cash Flows....................................  F-6
Notes to Financial Statements...............................  F-7
</TABLE>
 
                                       F-1
<PAGE>   72
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
broadcast.com inc.
 
     In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of broadcast.com inc.
at December 31, 1996 and 1997 and the results of its operations and its cash
flows for the period from inception (May 19, 1995) to December 31, 1995 and the
years ended December 31, 1996 and 1997 in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
PRICEWATERHOUSECOOPERS LLP
 
Dallas, Texas
February 1, 1998, except
  as to Note 10, which is
  as of July 9, 1998
 
                                       F-2
<PAGE>   73
 
                               broadcast.com inc.
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                       -------------------------     MARCH 31,
                                                          1996          1997           1998
                       ASSETS                          ----------    -----------    -----------
                                                                                    (UNAUDITED)
<S>                                                    <C>           <C>            <C>
Current assets:
  Cash and cash equivalents..........................  $4,580,286    $21,337,116    $22,400,176
  Accounts receivable, net of allowance of $34,826,
     $76,240 and $141,679, respectively..............     406,802      1,976,765      2,448,561
  Prepaid expenses...................................      65,760      1,032,198      1,382,182
  Other..............................................      17,912         11,311         52,986
                                                       ----------    -----------    -----------
          Total current assets.......................   5,070,760     24,357,390     26,283,905
Property and equipment, net..........................   1,186,182      2,812,971      3,289,255
Prepaid expenses.....................................   1,715,000        935,720        369,834
Intangible assets, net...............................     182,414        126,733        191,480
                                                       ----------    -----------    -----------
          Total assets...............................  $8,154,356    $28,232,814    $30,134,474
                                                       ==========    ===========    ===========
 
        LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable...................................  $   91,545    $   362,214    $   674,333
  Accrued liabilities................................     454,926        677,662      1,154,149
                                                       ----------    -----------    -----------
          Total current liabilities..................     546,471      1,039,876      1,828,482
                                                       ----------    -----------    -----------
Commitments and contingencies (Note 4)
Stockholders' equity:
  Preferred stock, 5,000,000 shares authorized, $.01
     par value, no shares issued and outstanding.....          --             --             --
  Common stock, 60,000,000 shares authorized, $.01
     par value, 11,134,140, 13,976,285 and 14,383,451
     shares issued and outstanding, respectively.....      57,341         85,763         89,835
  Additional paid-in capital.........................  10,807,309     36,838,152     40,669,584
  Accumulated deficit................................  (3,256,765)    (9,730,977)   (12,453,427)
                                                       ----------    -----------    -----------
          Total stockholders' equity.................   7,607,885     27,192,938     28,305,992
                                                       ----------    -----------    -----------
          Total liabilities and stockholders'
            equity...................................  $8,154,356    $28,232,814    $30,134,474
                                                       ==========    ===========    ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-3
<PAGE>   74
 
                               broadcast.com inc.
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                     PERIOD
                                 FROM INCEPTION
                                 (MAY 19, 1995)          YEAR ENDED              THREE MONTHS ENDED
                                       TO               DECEMBER 31,                  MARCH 31,
                                  DECEMBER 31,    -------------------------   -------------------------
                                      1995           1996          1997          1997          1998
                                 --------------   -----------   -----------   -----------   -----------
                                                                                     (UNAUDITED)
<S>                              <C>              <C>           <C>           <C>           <C>
Revenues:
  Business services............    $      --      $   535,201   $ 2,820,449   $   446,711   $ 1,126,515
  Web advertising..............           --        1,090,629     2,955,259       531,306     1,322,911
  Traditional media
     advertising...............           --               --       942,090        90,751       516,707
  Other........................           --          130,270       138,235        18,189       209,811
                                   ---------      -----------   -----------   -----------   -----------
          Total revenues.......           --        1,756,100     6,856,033     1,086,957     3,175,944
                                   ---------      -----------   -----------   -----------   -----------
Operating expenses:
  Production costs.............           --        1,301,253     2,949,641       469,422     1,224,957
  Operating and development....           --        1,506,449     4,659,249       649,565     2,247,141
  Sales and marketing..........       21,413          717,547     3,389,069       519,182     1,670,727
  General and administrative...      216,609          751,785     1,416,276       396,832       588,179
  Depreciation and
     amortization..............       29,896          544,003     1,129,120       176,463       442,456
                                   ---------      -----------   -----------   -----------   -----------
          Total operating
            expenses...........      267,918        4,821,037    13,543,355     2,211,464     6,173,460
                                   ---------      -----------   -----------   -----------   -----------
          Net operating loss...     (267,918)      (3,064,937)   (6,687,322)   (1,124,507)   (2,997,516)
Interest and other income......           --           76,090       213,110        61,010       275,066
                                   ---------      -----------   -----------   -----------   -----------
          Net loss.............    $(267,918)     $(2,988,847)  $(6,474,212)  $(1,063,497)  $(2,722,450)
                                   =========      ===========   ===========   ===========   ===========
Basic and diluted net loss per
  share........................    $   (0.04)     $     (0.31)  $     (0.55)  $     (0.09)  $     (0.19)
                                   =========      ===========   ===========   ===========   ===========
Shares used in the net loss per
  share calculations...........    6,020,432        9,563,771    11,679,777    11,427,591    14,075,604
                                   =========      ===========   ===========   ===========   ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-4
<PAGE>   75
 
                               broadcast.com inc.
 
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 
 FOR THE INCEPTION PERIOD ENDED DECEMBER 31, 1995, THE YEARS ENDED DECEMBER 31,
                                 1996 AND 1997
             AND THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                   TOTAL
                                            COMMON STOCK        ADDITIONAL                     STOCKHOLDERS'
                                        --------------------      PAID-IN      ACCUMULATED        EQUITY
                                          SHARES     AMOUNT       CAPITAL        DEFICIT         (DEFICIT)
                                        ----------   -------    -----------    ------------    -------------
<S>                                     <C>          <C>        <C>            <C>             <C>
Issuance of Common Stock to founders
  in May 1995.........................   5,400,000   $    --    $     1,000    $         --     $     1,000
Issuance of Common Stock; purchase of
  transmission and digital programming
  rights from Cameron Broadcasting,
  Inc. ...............................     600,000     6,000         44,000              --          50,000
Issuance of Common Stock; payment for
  services............................      30,180       302          2,198              --           2,500
Net loss incurred during development
  stage...............................          --        --             --        (267,918)       (267,918)
                                        ----------   -------    -----------    ------------     -----------
BALANCES, DECEMBER 31, 1995...........   6,030,180     6,302         47,198        (267,918)       (214,418)
Issuance of Common Stock..............   5,103,960    51,039     10,760,111              --      10,811,150
Net loss..............................          --        --             --      (2,988,847)     (2,988,847)
                                        ----------   -------    -----------    ------------     -----------
BALANCES, DECEMBER 31, 1996...........  11,134,140    57,341     10,807,309      (3,256,765)      7,607,885
Issuance of Common Stock..............   2,842,145    28,422     25,310,843              --      25,339,265
Issuance of warrants..................          --        --        720,000              --         720,000
Net loss..............................          --        --             --      (6,474,212)     (6,474,212)
                                        ----------   -------    -----------    ------------     -----------
BALANCES, DECEMBER 31, 1997...........  13,976,285    85,763     36,838,152      (9,730,977)     27,192,938
Issuance of Common Stock..............     407,166     4,072      3,831,432              --       3,835,504
Net loss..............................          --        --             --      (2,722,450)     (2,722,450)
                                        ----------   -------    -----------    ------------     -----------
BALANCES, MARCH 31, 1998
  (UNAUDITED).........................  14,383,451   $89,835    $40,669,584    $(12,453,427)    $28,305,992
                                        ==========   =======    ===========    ============     ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-5
<PAGE>   76
 
                               broadcast.com inc.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                               PERIOD
                                                           FROM INCEPTION
                                                           (MAY 19, 1995)          YEAR ENDED              THREE MONTHS ENDED
                                                                 TO               DECEMBER 31,                  MARCH 31,
                                                            DECEMBER 31,    -------------------------   -------------------------
                                                                1995           1996          1997          1997          1998
                                                           --------------   -----------   -----------   -----------   -----------
                                                                                                               (UNAUDITED)
<S>                                                        <C>              <C>           <C>           <C>           <C>
Cash flows from operating activities:
  Net loss...............................................    $(267,918)     $(2,988,847)  $(6,474,212)  $(1,063,497)  $(2,722,450)
  Adjustments to reconcile net loss to net cash from
    operating activities:
    Depreciation.........................................       22,936          488,037     1,060,340       162,461       427,203
    Amortization.........................................        6,960           55,966        68,780        14,002        15,253
    Issuance of Common Stock for services................        2,500               --            --            --            --
    Provision for doubtful accounts......................           --           84,006        86,240         9,720        88,500
    Changes in operating assets and liabilities:
      Accounts receivable................................           --         (490,808)   (1,656,203)     (294,570)     (560,296)
      Prepaid expenses...................................      (87,168)      (1,693,592)     (200,257)       13,500       215,902
      Other assets.......................................      (11,663)          (6,559)        6,601          (372)      (41,675)
      Accounts payable and accrued liabilities...........      304,644          241,827       493,405       (39,936)      788,606
                                                           -----------       ----------    ----------    ----------    ----------
        Net cash used in operating activities............      (29,709)      (4,309,970)   (6,615,306)   (1,198,692)   (1,788,957)
                                                           -----------       ----------    ----------    ----------    ----------
Cash flows from investing activities:
  Purchases of intangible assets.........................           --               --            --            --       (80,000)
  Purchases of property and equipment....................     (414,227)      (1,282,928)   (2,687,129)     (688,824)     (903,487)
                                                           -----------       ----------    ----------    ----------    ----------
        Net cash used in investing activities............     (414,227)      (1,282,928)   (2,687,129)     (688,824)     (983,487)
                                                           -----------       ----------    ----------    ----------    ----------
Cash flows from financing activities:
  Proceeds from Common Stock issuances...................        1,000       10,045,790    25,339,265     3,542,940     3,835,504
  Proceeds from sale of warrants.........................           --               --       720,000       120,000            --
  Proceeds from stock subscription deposits..............      570,330               --            --            --            --
  Proceeds from (repayment of) stockholder loan..........       14,980          (14,980)           --            --            --
  Purchase of treasury stock.............................           --         (160,000)           --            --            --
  Proceeds from sale of treasury stock...................           --          160,000            --            --            --
                                                           -----------       ----------    ----------    ----------    ----------
        Net cash provided by financing activities........      586,310       10,030,810    26,059,265     3,662,940     3,835,504
                                                           -----------       ----------    ----------    ----------    ----------
Net increase in cash and cash equivalents................      142,374        4,437,912    16,756,830     1,755,424     1,063,060
Cash and cash equivalents at beginning of period.........           --          142,374     4,580,286     4,580,286    21,337,116
                                                           -----------       ----------    ----------    ----------    ----------
Cash and cash equivalents at end of period...............    $ 142,374      $ 4,580,286   $21,337,116   $ 6,335,710   $22,400,176
                                                             =========      ===========   ===========   ===========   ===========
</TABLE>
 
           (See disclosure of noncash transactions in Notes 2 and 7)
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-6
<PAGE>   77
 
                               broadcast.com inc.
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. NATURE OF BUSINESS
 
     Cameron Audio Networks, Inc. ("Cameron") was incorporated and filed its
Articles of Incorporation (the "Articles") with the Secretary of State of Texas
on May 19, 1995. The Articles authorized the issuance of one million shares of
no par Common Stock. In December 1995, Cameron filed the Articles of Amendment
to the Articles to increase the number of authorized no par shares of Common
Stock to ten million. On May 15, 1996, Cameron purchased the rights to the name
AudioNet and subsequently filed a Certificate of Incorporation to form AudioNet,
Inc. ("AudioNet"), a new entity, in the state of Delaware, on September 19,
1996. On November 1, 1996, Cameron and AudioNet filed a Certificate of Merger,
effectively a stock-for-stock merger, whereby Cameron merged with and into
AudioNet, with AudioNet continuing as the surviving entity. Each share of common
stock of Cameron was converted to one share of Common Stock of AudioNet, and
Cameron ceased to exist at the date of such merger. Effective as of the merger
date, the number of shares authorized increased from 10,000,000 shares of Common
Stock, no par value, to 5,000,000 shares of Preferred Stock, $0.01 par value,
and 45,000,000 shares of Common Stock, $0.01 par value. The financial statements
have been retroactively restated to reflect this reincorporation, except for the
original issuance of founders' shares (see Note 7). In April 1997, the Company
declared a sixty-for-one stock split to be effected in the form of a stock
dividend to stockholders of record on April 28, 1997. Concurrent with the stock
split, the number of authorized common shares was increased from 10,000,000 to
45,000,000. As stated in Note 2, the financial statements have been adjusted
retroactively for the sixty-for-one stock split. Effective May 1998, the Company
changed its name to broadcast.com inc. ("broadcast.com" or the "Company").
(Unaudited -- see Note 10). Additionally, in June 1998, the Company filed
Restated Certificate of Incorporation which increases the number of authorized
shares of Common Stock to 60,000,000. (Unaudited -- see Note 10).
 
     The Company aggregates content and is a broadcaster of streaming media
programming on the Web with the network infrastructure and expertise to deliver
or "stream" live and on-demand audio and video content on the Internet. The
Company offers a comprehensive selection of live and on-demand audio and video
programming on the Internet, including sports, talk and music radio, television,
business events, full-length music CDs, news, commentary and full-length
audio-books. The Company broadcasts on the Internet 24 hours a day seven days a
week, and its programming includes radio stations, television stations and cable
networks and game broadcasts and other programming for college and professional
sports teams. The Company licenses such programming from content providers, in
most cases under exclusive, multi-year agreements. The Company's Business
Services Group also provides Internet and intranet broadcasting services to
businesses and other organizations. These business services include turnkey
production of press conferences, earnings conference calls, stockholder
meetings, product introductions, training sessions, distance learning
telecourses and media events.
 
2. SIGNIFICANT ACCOUNTING POLICIES
 
     USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
 
     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.
 
     REVENUES
 
     The Company generates revenues through business services, Web advertising
and traditional media advertising.
 
                                       F-7
<PAGE>   78
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
     Business Services. In 1996 and 1997, the Company derived 31% and 41%,
respectively, of revenues from business services. Business services revenues are
derived by providing Internet or intranet broadcasting services to businesses
and other organizations. Business services revenues are recognized in the month
in which the service is performed, provided that no significant Company
obligations remain and collection of the resulting receivable is probable.
 
   
     Web Advertising. In 1996 and 1997, the Company derived 62% and 43%,
respectively, of its revenues from the sale of Web advertisements. Web
advertising revenues are derived from the sale of gateway ads with guaranteed
click-thrus ads, channel and event sponsorships and multimedia and traditional
banner ads. Bartered Web advertising revenues are derived from transactions in
which the Company trades advertising on its Web sites in exchange for
advertisements on the Web sites of other companies. Bartered Web advertising
revenues are recognized at the fair market value of consideration received or
provided, whichever is lower. If a barter agreement extends over the end of any
accounting period, an asset and a liability are each recorded related to the
fair value of the prepaid advertising expense and for advertisement obligations
remaining at such period end. Because historically all bartered Web advertising
agreements have been for periods not exceeding 30 days, all bartered Web
advertising revenues are offset by an equal amount of bartered Web advertising
expense in production costs. Bartered Web advertising revenues, which were
$638,000 in 1996 and $1,018,000 in 1997, represented 59% and 34% of Web
advertising revenues, or 36% and 15% of total revenues in 1996 and 1997,
respectively. The corresponding expenses recorded for bartered Web advertising
were $638,000 and $1,018,000 in 1996 and 1997, respectively. Web advertising
revenues are recognized in the period in which the advertisement is displayed on
one of the Company's Web pages, except for sponsorship sales which are
recognized ratably over the term of the sponsorship, provided that no
significant Company obligations remain and collection of the resulting
receivable is probable. The duration of the Company's advertising commitments
has generally ranged from one week to one year.
    
 
     Traditional Media Advertising. In 1997, the Company derived 14% of its
revenues from traditional media advertising. Traditional media advertising
revenues are derived from the sale of ad spots received from radio and
television stations in exchange for the Company broadcasting their programming
over the Internet and the sale of prepaid advertising. Traditional media
advertising revenues are recognized in the month in which the advertisement is
run.
 
     Other. Other revenues consist of electronic commerce sales as well as
certain programming and promotional services performed by the Company and are
recognized in the month the service is provided or the product is shipped.
 
     In 1996, two customers of the Company each accounted for 10% of revenues,
one of which is currently a stockholder. In 1997, no customer accounted for more
than 10% of revenues.
 
     PRODUCTION COSTS
 
     Production costs consist primarily of expenses from the sale of prepaid
advertising credits, bartered Web advertising expenses, event production costs,
direct personnel expenses associated with event production and performance
license fees.
 
     OPERATING AND DEVELOPMENT EXPENSES
 
     Operating and development expenses consist primarily of data communications
expenses, personnel expenses associated with broadcasting, content and software
license fees, operating supplies and overhead.
 
                                       F-8
<PAGE>   79
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
     SALES AND MARKETING EXPENSES
 
     Sales and marketing expenses consist primarily of personnel expenses
associated with the sale of the Company's business services and advertising,
marketing of the Company's Web sites, graphic design costs and overhead.
 
     GENERAL AND ADMINISTRATIVE EXPENSES
 
     General and administrative expenses consist primarily of administrative
personnel expenses, professional fees, expenditures for applicable facilities
costs and overhead.
 
     CASH EQUIVALENTS
 
     The Company considers investments with original maturities dates of 90 days
or less to be cash equivalents. The carrying values of these investments are
approximately equal to their fair market values at the end of the year.
 
     ADVERTISING EXPENSES
 
     Advertising expenses are either charged to operations when incurred or
purchased in advance and capitalized for future use or sale and expensed as the
advertising credits are used or sold. The cost of advertising used by the
Company is charged to operations while the cost of advertising sold to customers
is included in production costs.
 
     PREPAID EXPENSES
 
     In December 1997, the Company entered into an agreement with Yahoo! Inc.
("Yahoo!"), an existing stockholder, to integrate their services and conduct
certain joint marketing activities. Amounts paid under this agreement for
prepaid advertising credits are capitalized and expensed as the advertising
credits are utilized. Amounts paid under this agreement for the use,
reproduction and display of the broadcast.com brand, page views received from
Yahoo! for banner advertising, sponsorships and promotions for the Company are
capitalized and expensed ratably over the term of the agreement, which
terminates on January 31, 1999.
 
     In conjunction with a stock transaction with Premiere Radio Networks, Inc.
("Premiere"), the Company entered into an agreement in November 1996 to pay
Premiere $2,000,000 in exchange for an equal value of advertising credits. The
Company is required to utilize a minimum of $250,000 in each twelve-month period
over a maximum of four years. The asset has been and will continue to be
expensed in the period the advertising credits are utilized (see Advertising
expenses). In 1996 and 1997, the Company utilized approximately $285,000 and
$780,000, respectively, in advertising credits.
 
     Prepaid advertising credits that will be utilized within the next twelve
months are classified as current assets.
 
     PROPERTY AND EQUIPMENT
 
     Property and equipment is stated at cost and is depreciated over its
estimated useful life, ranging from one to five years. The Company provides for
depreciation of assets using the straight-line method for financial reporting
purposes and accelerated methods for income tax purposes. Prior to 1996,
capitalized software costs were being amortized over three years. However, in
1996, the Company changed the estimated life of all capitalized software costs
to one year. The effect of this change was to increase the net loss during 1996
by approximately $240,000, or $0.03 per share. Leasehold improvements are
amortized over the life of the lease using the straight-line method.
Expenditures for maintenance and repairs are charged to operations in the period
they are incurred.
 
                                       F-9
<PAGE>   80
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
     Long-lived assets held and used by the Company, or to be disposed of, are
reviewed for impairment whenever events or changes in circumstances indicate
that the net book value of the asset may not be recoverable. An impairment loss
is recognized if the sum of the expected future cash flows (undiscounted and
before interest) from the use of the asset is less than the net book value of
the asset. The amount of the impairment loss will generally be measured as the
difference between net book value of the assets and the estimated fair value of
the related assets. Based on its most recent analysis, the Company believes that
no impairment of long-lived assets existed at December 31, 1997.
 
     INTANGIBLE ASSETS
 
     Intangible assets consist of certain transmission and digital programming
distribution rights acquired under license agreements that are accounted for as
a purchase of rights by the Company. Assets and related liabilities associated
with license agreements are reported at cost when the license period begins and
the program material is available for distribution. Intangible assets are
reported at the lower of unamortized cost or estimated net realizable value, on
a program by program basis, based on management's expectation of the programs'
usefulness and are amortized on a straight-line basis over the term of the
license agreement.
 
     In May 1995, the Company acquired certain transmission and digital
programming distribution rights from Cameron Broadcasting Systems, Inc.
("Cameron Broadcasting") and entered into an agreement to purchase a license
from Universal Sports America, Inc. (formerly "University Sports America, Inc.")
("Universal Sports") (see Note 7). The transmission agreements acquired from
Cameron Broadcasting, an unrelated third party, are stated at an historical cost
of $50,000, less accumulated amortization of approximately $24,000 and $40,000
at December 31, 1996 and 1997, respectively, and are being amortized on a
straight-line basis over a three-year period.
 
     In January 1996, the Company entered into an agreement to purchase a
license from Universal Sports in exchange for 390,060 shares of Common Stock.
The license provides the Company with the right to broadcast several college and
university sports programs over the Internet. The license is stated at an
historical cost of $195,030, less accumulated amortization of approximately
$39,000 and $78,000 at December 31, 1996 and 1997, respectively, and is being
amortized on a straight-line basis over a five-year period.
 
     FINANCIAL INSTRUMENTS
 
     As of December 31, 1996 and 1997, the fair values of the Company's accounts
receivable and accounts payable and accrued liabilities approximate the related
carrying values.
 
     ACCRUED LIABILITIES
 
     At December 31, 1996, accrued liabilities included approximately $145,000
in software license fees, approximately $61,000 in expense reimbursements to
employees, approximately $56,000 in legal fees, approximately $51,000 for
computer hardware costs, and approximately $13,000 for leasehold improvements.
 
     At December 31, 1997, accrued liabilities included approximately $368,000
in software license fees, approximately $82,000 in deferred revenue, and
approximately $55,000 in advertising expenses.
 
     At March 31, 1998, accrued liabilities included approximately $497,000 in
content license fees, approximately $417,000 in software license fees, and
approximately $92,000 in deferred revenue.
 
     INCOME TAXES
 
     The Company presents income taxes pursuant to Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109"). FAS 109
uses an asset and liability approach to account for income taxes, wherein
deferred taxes are provided for book and tax basis differences for assets and
liabilities.
 
                                      F-10
<PAGE>   81
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
In the event differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities result in deferred tax assets, an
evaluation of the probability of being able to realize the future benefits
indicated by such assets is required. A valuation allowance is provided for a
portion or all of the deferred tax assets when there is sufficient uncertainty
regarding the Company's ability to recognize the benefits of the assets in
future years.
 
     ACCOUNTING FOR STOCK-BASED COMPENSATION
 
     Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("FAS 123"), encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has elected to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. Accordingly, compensation cost for stock
options issued to employees is measured as the excess, if any, of the fair
market value of the Company's Common Stock at the date of grant over the amount
the employee must pay to acquire the stock. Pro forma disclosure of net loss
based on the provisions of FAS 123 is discussed in Note 6.
 
     STOCK SPLIT
 
     A sixty-for-one split of the Company's Common Stock was effected in the
form of a stock dividend in April 1997. All references in the financial
statements to shares, share prices, per share amounts and stock plans have been
adjusted retroactively for the sixty-for-one stock split(see Note 1).
 
     UNAUDITED QUARTERLY FINANCIAL DATA
 
     The quarterly financial information presented herein should be read in
conjunction with the Company's annual financial statements for the year ended
December 31, 1997. The unaudited interim financial statements reflect all
adjustments (all of which are of a normal recurring nature) which are, in the
opinion of management, necessary for a fair presentation of the results of the
interim periods. The results for the interim periods are not necessarily
indicative of the results to be expected for the year.
 
     RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("FAS 130"), was issued. FAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. Reclassification of financial statements for earlier
periods provided for comparative purposes is required upon adoption. FAS 130 is
effective for fiscal years beginning after December 15, 1997. The Company
adopted FAS 130 for the year ending December 31, 1998. The Company had no
comprehensive income items to report for the three months ended March 31, 1998.
 
     In June 1997, Statement of Financial Accounting Standards No. 131,
Disclosure About Segments of an Enterprise and Related Information ("FAS 131"),
was issued. FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. FAS 131
is effective for financial statements for periods beginning after December 15,
1997. The Company will adopt the reporting requirements of FAS 131 in its
financial statements for the year ending December 31, 1998.
 
     On March 4, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use ("SOP 98-1"). SOP 98-1 requires computer software costs
 
                                      F-11
<PAGE>   82
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
related to internal use software that are incurred in the preliminary project
stage should be expensed as incurred. Once the capitalization criteria of SOP
98-1 have been met, external direct costs of materials and services consumed in
developing or obtaining internal-use computer software; payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the internal-use computer software project (to the extent of the
time spent directly on the project); and interest costs incurred when developing
computer software for internal use should be capitalized. SOP 98-1 is effective
for financial statements for fiscal years beginning after December 15, 1998.
Accordingly, the Company will adopt SOP 98-1 in its financial statements for the
year ending December 31, 1999. The Company does not believe the adoption of SOP
98-1 will have a material effect on the Company's results of operations or
financial condition.
 
3. PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following:
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                              ------------------------
                                                                 1996          1997
                                                              ----------    ----------
<S>                                                           <C>           <C>
Computer hardware...........................................  $1,031,198    $2,794,395
Computer software...........................................     492,894       575,582
Furniture and equipment.....................................      66,645       222,175
Leasehold improvements......................................     106,418       792,132
                                                              ----------    ----------
                                                               1,697,155     4,384,284
Accumulated depreciation....................................    (510,973)   (1,571,313)
                                                              ----------    ----------
                                                              $1,186,182    $2,812,971
                                                              ==========    ==========
</TABLE>
 
     Computer software represents software purchased from outside vendors for
internal use and is being amortized over one year.
 
4. COMMITMENTS AND CONTINGENCIES
 
     A summary of future minimum lease payments under operating leases for
buildings and equipment as of December 31, 1997 is as follows:
 
<TABLE>
<CAPTION>
         FISCAL YEAR ENDING DECEMBER 31,
         -------------------------------
<S>                                                 <C>
1998..............................................  $159,806
1999..............................................   159,806
2000..............................................    84,629
2001..............................................    47,040
2002..............................................     3,920
                                                    --------
Total.............................................  $455,201
                                                    ========
</TABLE>
 
     During 1995, the President and co-founder of the Company provided office
space to the Company for no cost. The fair market value of the office space
provided was immaterial for the period from Inception (May 19, 1995) to December
31, 1995. Rental expense of approximately $25,000 and $178,000 was incurred
during 1996 and 1997, respectively.
 
     Pursuant to an agreement with Capitol Radio Network, Inc. ("Capitol"), the
Company is obligated to purchase a minimum of $75,000 of advertising spots from
Capitol each year during the term of the agreement which began in February 1997
and which expires on December 31, 2000 (see Note 7).
 
     In December 1997, the Company entered into an agreement with Yahoo! to
integrate their services and conduct certain joint marketing activities. In
December 1997, the Company paid Yahoo! $1,000,000, representing a prepaid
advertising credit (see Note 2). The Company agreed to pay Yahoo! an additional
 
                                      F-12
<PAGE>   83
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
$1,500,000 in 1998, pursuant to which Yahoo! agreed to promote broadcast.com
programming on its Web site. As of March 31, 1998, the Company had paid Yahoo!
$750,000 of such amount. The agreement terminates on January 31, 1999.
 
     In December 1997, the Company entered into a line of credit, which provides
for borrowings of up to $2,500,000 for working capital needs and equipment
purchases. The Company's right to make borrowings under the line of credit can
be terminated by the lender upon the occurrence of a default by the Company,
including an uncured failure to pay principal or interest due under the
facility, certain breaches of the representations and warranties made by the
Company in connection with the establishment of the line of credit, and certain
insolvency events of the Company. The Company is obligated to pay monthly
interest on amounts outstanding under the line of credit, but no commitment fee
is payable by the Company in respect of unaccessed funding capacity. As of March
31, 1998, the Company had not made any borrowings against this line of credit.
 
     From time to time, the Company is subject to legal proceedings and claims
in the ordinary course of business, including claims of alleged infringement of
trademarks and other intellectual property rights. The Company is not currently
aware of any legal proceedings or claims that the Company believes will have,
individually or in the aggregate, a material adverse effect on the Company's
financial position or results of operations.
 
5. INCOME TAXES
 
     As of December 31, 1997, the Company has available net operating loss
carryforwards totaling approximately $10,269,000 which expire beginning in 2011.
Utilization of net operating loss carryforwards may be limited by ownership
changes which may have occurred or could occur in the future.
 
     Deferred taxes are provided for those items reported in different periods
for income tax and financial reporting purposes. The net deferred tax asset has
been fully reserved because of uncertainty regarding the Company's ability to
recognize the benefit of the asset in future years. The tax effects of temporary
differences that give rise to significant portions of the deferred tax assets
are presented below:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                            --------------------------
                                                               1996           1997
                                                            -----------    -----------
<S>                                                         <C>            <C>
Deferred tax assets:
  Net operating loss carryforwards........................  $ 1,088,606    $ 3,796,343
  Intangible amortization.................................       20,984         35,231
  Depreciation............................................       88,352        127,201
  Contribution carryover..................................          370            370
  Accrual to cash adjustment..............................        3,793             --
                                                            -----------    -----------
  Gross deferred tax assets...............................    1,202,105      3,959,145
Deferred tax liabilities:
  Accrual to cash adjustment..............................           --        367,680
                                                            -----------    -----------
Net deferred tax assets...................................    1,202,105      3,591,465
Valuation allowance.......................................   (1,202,105)    (3,591,465)
                                                            -----------    -----------
Deferred tax balance......................................  $        --    $        --
                                                            ===========    ===========
</TABLE>
 
                                      F-13
<PAGE>   84
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
     The provision for income taxes is different than the amount computed using
the applicable statutory federal income tax rate with the difference for each
year summarized below:
 
<TABLE>
<CAPTION>
                                                              1995    1996    1997
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Federal tax benefit at statutory rate.......................  (34)%   (34)%   (34)%
State taxes, net of federal benefit.........................   (4)     (4)     (3)
Adjustment due to increase in valuation allowance...........   38      38      37
                                                              ---     ---     ---
Provision for income taxes..................................   --%     --%     --%
                                                              ===     ===     ===
</TABLE>
 
6. STOCK-BASED COMPENSATION
 
     The Company's 1996 Stock Option Plan for employees and consultants was
approved by the Board of Directors and stockholders of the Company in April 1996
and authorizes the grant of up to 1,440,000 shares of the Company's Common Stock
in the form of incentive stock options ("ISOs") and nonqualified stock options
("NSOs"). The plan is administered by the Stock Option Committee of the Board of
Directors (the "Committee"). Options typically expire 10 years from the date of
grant, and under Committee policy become exercisable in installments of 20% per
year commencing one year from the date of grant, or over such other vesting
period determined by the Committee. Shares granted come from the Company's
authorized but unissued or reacquired Common Stock.
 
     The Company's 1998 Stock Option Plan for employees and consultants was
approved by the Board of Directors in August 1997 and approved by the
stockholders of the Company in June 1998 (unaudited -- see Note 10), and, as
amended, authorizes the grant of up to 2,800,000 shares of the Company's Common
Stock in the form of ISOs and NSOs. The plan is administered by the Compensation
Committee of the Board of Directors (the "Compensation Committee"). Options
typically expire 10 years from the date of grant, and become exercisable in
installments of 20% per year commencing one year from the date of grant, or over
such other vesting period determined by the Compensation Committee. Compensation
expense is recorded and amortized over the options' vesting period for options
granted to consultants. The amount of compensation expense is calculated based
on the fair value of the options determined using the Black-Scholes Option
Pricing Model. Shares granted come from the Company's authorized but unissued or
reacquired Common Stock.
 
     Under the 1996 and 1998 Stock Option Plans, the Company has issued options
to purchase a total, net of forfeitures, of 1,898,004 and 2,020,356 shares of
Common Stock and has 1,075,654 and 949,861 options available for issuance as of
December 31, 1997 and March 31, 1998, respectively. Effective August 19, 1997,
the Company discontinued the 1996 Stock Option Plan.
 
     The Company's 1996 Stock Option Plan for Non-Employee Directors, which was
approved by the Board of Directors and the stockholders in April 1996,
authorizes the grant of up to 150,000 shares of the Company's Common Stock in
the form of ISOs and NSOs. The plan is administered by the Committee. Options
typically expire 10 years from the date of grant, and under Committee policy
become exercisable in installments of 20% per year commencing one year from the
date of grant, or over such other vesting period determined by the Committee.
Shares granted come from the Company's authorized but unissued or reacquired
Common Stock. During 1996, the Company granted to a non-employee director an
option to purchase 15,000 shares of Common Stock at an exercise price of $1.07
per share. At December 31, 1997 and March 31, 1998, 15,000 and 7,500,
respectively, of these options were outstanding.
 
     There were no stock options granted prior to 1996. If compensation cost for
the Company's stock option plans had been determined based on the fair value at
the grant date for awards issued in 1996, 1997 and the
 
                                      F-14
<PAGE>   85
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
three months ended March 31, 1998 consistent with the provisions of FAS 123,
then the Company's net loss would have been increased to the pro forma amounts
indicated below:
 
<TABLE>
<CAPTION>
                                                                            THREE MONTHS
                                                                               ENDED
                                                   1996          1997      MARCH 31, 1998
                                                ----------    ----------   --------------
<S>                                             <C>           <C>          <C>
Net loss--as reported.........................  $2,988,847    $6,474,212     $2,722,450
Net loss--pro forma...........................   3,050,003     6,790,334      2,804,823
Basic and diluted net loss per share--as
  reported....................................       (0.31)        (0.55)         (0.19)
Basic and diluted net loss per share--pro
  forma.......................................       (0.32)        (0.58)         (0.20)
</TABLE>
 
     The weighted average fair value at date of grant for options granted during
1996, 1997 and the three months ended March 31, 1998 was $0.46, $1.10 and $1.50
per option, respectively. The fair value of each option grant was estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions used:
 
<TABLE>
<CAPTION>
                                                                            THREE MONTHS
                                                                                ENDED
                                                   1996         1997       MARCH 31, 1998
                                                 ---------    ---------    ---------------
<S>                                              <C>          <C>          <C>
Dividend yield.................................         --           --              --
Expected volatility............................         --           --              --
Risk-free rate of return.......................       6.2%         5.9%            5.8%
Expected life..................................  3.0 years    3.0 years       3.0 years
Expected forfeiture rate.......................         --        15.0%           15.0%
</TABLE>
 
     The following table summarizes activity under the Company's stock option
plans during the years ended December 31, 1996 and 1997 and the three months
ended March 31, 1998:
 
<TABLE>
<CAPTION>
                                                                                WEIGHTED
                                                                                AVERAGE
                                                                 EXERCISE       EXERCISE
                                                   OPTIONS         PRICE         PRICE
                                                  ---------    -------------    --------
<S>                                               <C>          <C>              <C>
Outstanding at December 31, 1995................         --    $          --     $  --
  Granted.......................................    719,249     1.07 - 13.47      3.10
                                                               -------------     -----
  Forfeited.....................................    (10,500)
                                                  ---------
Outstanding at December 31, 1996................    708,749     1.07 - 13.47      3.10
  Granted.......................................  1,280,795     6.80 - 10.73      6.82
  Forfeited.....................................    (76,540)    2.69 -  6.80      5.86
                                                  ---------    -------------     -----
Outstanding at December 31, 1997................  1,913,004     1.07 - 10.73      5.43
                                                               -------------     -----
  Granted.......................................    140,852     9.42 - 10.43      9.43
  Forfeited.....................................    (26,000)    1.07 -  6.80      5.15
Outstanding at March 31, 1998...................  2,027,856     1.07 - 10.43      5.71
                                                  =========    =============     =====
Options exercisable at December 31, 1997........    208,707     1.07 - 10.73      4.68
Options exercisable at March 31, 1998...........    337,493    $1.07 - 10.43     $5.55
</TABLE>
 
                                      F-15
<PAGE>   86
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
     The following table summarizes information about stock options outstanding
as of December 31, 1997 and March 31, 1998:
 
<TABLE>
<CAPTION>
                                                                    WEIGHTED AVERAGE
                                                        NUMBER         REMAINING         NUMBER
EXERCISE PRICES                                       OUTSTANDING   CONTRACTUAL LIFE   EXERCISABLE
---------------                                       -----------   ----------------   -----------
<S>             <C>                                   <C>           <C>                <C>
   December 31, 1997
   $ 1.07...........................................      15,000     8.4 years              7,500
     2.69...........................................     646,200     4.6 years            133,128
     3.33...........................................       6,000     8.8 years              6,000
     6.80...........................................   1,209,457     9.5 years             25,732
    10.73...........................................      36,347     6.0 years             36,347
March 31, 1998
     1.07...........................................       7,500     8.0 years              7,500
     2.69...........................................     646,200     4.4 years            133,128
     3.33...........................................       6,000     8.5 years              6,000
     6.80...........................................   1,190,966     9.3 years            133,468
     9.42...........................................     139,793     4.1 years             20,000
    10.43...........................................      37,397     5.8 years             37,397
</TABLE>
 
     In addition to the option activity described above, in September 1996, the
Company issued a warrant to purchase 15,960 shares of Common Stock at an
exercise price of $6.80 per share. In February and December 1997, the Company
issued 147,120 and 159,236 warrants, respectively, for the purchase of Common
Stock to two participants in private placement offerings at exercise prices of
$6.80 and $9.42, respectively (see Note 7).
 
7. STOCKHOLDERS' EQUITY
 
     In May 1995, founders of the Company were issued a total of 5,400,000
shares of Common Stock for $1,000.
 
     In May 1995, the Company issued 600,000 shares valued at $50,000 in
consideration for a purchase agreement in which the Company acquired certain
assets and intangible rights and assumed the obligations and duties under
certain transmission agreements.
 
     In August 1995, the Company issued 30,180 shares of Common Stock in order
to satisfy a $2,500 liability for legal fees.
 
     Between January and March 1996, the Company issued a total of 3,280,560
shares of Common Stock to new and existing stockholders of the Company for $0.50
per share or $1,640,280.
 
     In June 1996, the Company issued 499,080 shares of Common Stock to new and
existing stockholders for $536,012 or approximately $1.07 per share.
 
     In July 1996, the Company repurchased 120,000 shares of Common Stock from
Cameron for $1.33 per share or $160,000 and subsequently resold these shares to
new and existing stockholders for $1.33 per share.
 
     Between September 1996 and May 1997, the Company issued a total of
1,870,680 shares of Common Stock to new and existing stockholders, including
Motorola and Intel, for approximately $6.80 per share or $12,712,830. In
connection with Motorola's investment in September 1996, the two largest
stockholders agreed to vote their shares so as to elect a nominee of Motorola to
the Board of Directors. In February 1997, the Company issued a warrant to Intel
for $120,000 representing the right to acquire 147,120 shares of the Company's
Common Stock at a price of $6.80 per share, or $1,000,416. Under the terms of
the warrant, the right to acquire 58,860 shares is exercisable immediately and
expires on February 23, 2004. However, the right to acquire the remaining 88,260
shares of the Company's Common Stock at $6.80 per share will have expired prior
to the effectiveness of the Prospectus if the Company and Intel have not entered
into a subsequent agreement prior to June 30, 1998. The Company does not
anticipate that it will enter into such an agreement.
 
                                      F-16
<PAGE>   87
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
In addition, an underwriting fee related to certain of these transactions
totalling approximately $365,000 was recorded as a reduction in additional
paid-in capital.
 
     In December 1997, the Company issued 2,295,785 shares of Common Stock for
$21,626,294 or $9.42 per share to new and existing stockholders, including
Motorola, Intel and Yahoo! In connection with these transactions, the two
largest stockholders agreed to vote their shares so as to elect a second nominee
of Motorola to the Board of Directors and the Company issued a warrant to Yahoo!
for approximately $600,000 representing the right to purchase 159,236 shares of
the Company's Common Stock at a strike price of $9.42 per share or $1,500,000.
The warrant is exercisable immediately and expires on December 30, 2000.
 
     In March 1998, the Company issued 407,166 shares of Common Stock to new and
existing stockholders for $3,835,504 or $9.42 per share.
 
     The Company has granted to certain owners of Common Stock preemptive rights
that expire immediately prior to consummation of an initial public offering.
 
8. NET LOSS PER SHARE
 
     Basic net loss per share has been computed in accordance with FAS 128 using
the weighted average number of common shares outstanding. The provisions and
disclosure requirements for FAS 128 were required to be adopted for interim and
annual periods ending after December 15, 1997, with restatement of EPS for all
prior periods.
 
     Diluted net loss per share gives effect to all dilutive potential common
shares that were outstanding during the period. The Company had a net loss for
all periods presented herein; therefore, none of the options and warrants
outstanding during each of the periods presented, as discussed in Note 6, were
included in the computations of diluted earnings per share because they were
antidilutive. See Note 6 for a list of options and warrants outstanding at
December 31, 1997 that were excluded from the diluted EPS computation because
they were antidilutive. Options and warrants outstanding at March 31, 1998 which
were not included in the computation of diluted EPS because they were
antidilutive were as follows:
 
<TABLE>
<CAPTION>
EXERCISE
  PRICE                                  NUMBER OF        EXPIRATION
PER SHARE                             OPTIONS/WARRANTS       DATE
---------                             ----------------    ----------
<S>       <C>                         <C>                 <C>
 $ 1.07.............................         7,500          2006
   2.69.............................         646,200        2006
   3.33.............................           6,000        2006
   6.80.............................       1,354,046      2004-2007
   9.42.............................         299,029      2000-2008
  10.43.............................          37,397        2008
</TABLE>
 
9. RELATED PARTY TRANSACTIONS
 
     During 1995, certain computer equipment and office space, owned by a
corporation wholly-owned by the Company's President, were provided to the
Company at no cost. Also in 1995, certain travel and other expenses were
incurred by the President for the direct benefit of the Company. The cost of
these assets, rent and travel expenses were immaterial to the financial
statements as a whole and were not included in the 1995 financial statements.
Additionally, the Company's President has agreed to act as guarantor of certain
current equipment loan obligations of the Company.
 
     The Company and Motorola, a stockholder of the Company, entered into a
Negotiation Rights Agreement in September 1996 pursuant to which the Company
agreed to offer Motorola a non-exclusive license to certain of its technologies
as well as certain rights of notice and first negotiation with Motorola
regarding licenses that the Company proposes to grant to other parties. In
connection with this agreement, the
 
                                      F-17
<PAGE>   88
                               broadcast.com inc.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
Company, Motorola, and Messrs. Cuban and Wagner entered into a stockholders
agreement pursuant to which Motorola was granted representation rights on the
Company's Board of Directors and certain tag-along rights with respect to
certain sales of shares by Messrs. Cuban and Wagner after the date of the
Offering. Motorola is also a customer of the Company, to which the Company
provides business services. These relationships with Motorola have generated
revenues for the Company of $10,000 and $84,000 for the twelve months ending
December 31, 1997 and the three months ending March 31, 1998, respectively.
 
10. SUBSEQUENT EVENTS (UNAUDITED)
 
     In April 1998, the Company entered into an operating lease facility which
provides the Company with the ability to obtain additional equipment under
operating leases with total equipment costs of up to $2.5 million. As of May 31,
1998, the Company had entered into operating leases for equipment with purchase
prices aggregating $550,000 under this facility.
 
     In April 1998, the Company entered into a three year agreement to acquire
additional access to bandwidth for unicasting and multicasting. The agreement
provides for a cost to the Company of $161,000 per month. Once the bandwidth is
operational, such cost will be expressed as incurred during the term of the
agreement.
 
     In April 1998, the Company granted options to employees to purchase a total
of 329,195 shares of Common Stock with exercise prices equal to the fair market
value at the date of grant, or $9.42 per share.
 
     In May and June 1998, the Company granted options to employees to purchase
a total of 234,000 shares of Common Stock with exercise prices equal to the fair
market value at the date of grant, or $9.90 per share.
 
     In July 1998, the Company granted options to employees to purchase a total
of 17,000 options at the initial offering price.
 
     In May 1998, the Board of Directors adopted, and in June 1998 the
stockholders approved, the Company's 1998 Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Subject to meeting federal and state securities law
requirements and such stockholder approval, the Stock Purchase Plan will become
effective at the consummation of this offering, or as soon as practicable
thereafter. The Stock Purchase Plan will be administered by the Compensation
Committee of the Board of Directors, members of which are not eligible to
participate in the Stock Purchase Plan. The Company has reserved a total of
250,000 shares of Common Stock for issuance and sale under the Stock Purchase
Plan. Eligible employees may purchase Common Stock through voluntary payroll
deductions, not to exceed 10% of the employee's base salary. Payroll deductions
are made over a six month period. At the end of the deduction period, employees
have the option to purchase Common Stock at 85% of the lesser of fair market
value of such shares on the date of purchase or the offering date. The offering
dates will be August 15 and February 15 of each Stock Purchase Plan year.
Employee contributions not used to purchase Common Stock will be refunded to the
employee.
 
     Effective May 1998, the Company's name was changed from AudioNet, Inc. to
broadcast.com inc. Additionally, in June 1998, the Company filed Restated
Certificate of Incorporation increasing the number of authorized shares of
Common Stock to 60,000,000. Further, the stockholders of the Company approved
the Company's 1998 Stock Plan in June 1998, as amended, authorizing the issuance
of up to 2,800,000 shares of the Company's Common Stock.
 
                                      F-18
<PAGE>   89
 
                      (THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>   90
 
                              [broadcast.com LOGO]
<PAGE>   91
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     The Registrant estimates that expenses in connection with the offering
described in this registration statement will be as follows:
 
<TABLE>
<S>                                                           <C>
Securities and Exchange Commission registration fee.........  $   10,325
NASD filing fee.............................................       4,000
Printing expenses...........................................     200,000
Accounting fees and expenses................................     175,000
Legal fees and expenses.....................................     430,000
Nasdaq National Market listing fee..........................      90,000
Blue Sky fees and expenses..................................      10,000
Transfer agent's fees and expenses..........................      15,000
Miscellaneous...............................................      65,675
                                                              ----------
          Total.............................................  $1,000,000
                                                              ==========
</TABLE>
 
     All amounts except the Securities and Exchange Commission registration fee
and the NASD filing fee are estimated.
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Section 145(a) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no cause to believe his or her conduct was unlawful.
 
     Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted under similar standards,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
 
     Section 145 of DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsection (a) and (b) or in the defense of any
claim, issue or matter therein, such officer or director shall be indemnified
against expenses actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the corporation may purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
such officer or director and incurred by him or her in any such
 
                                      II-1
<PAGE>   92
 
capacity or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liabilities under Section 145.
 
     As permitted by Section 102(b)(7) of the DGCL, the Company's Restated
Certificate of Incorporation, as amended, provides that a director shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director. However, such provision does not eliminate or
limit the liability of a director for acts or omissions not in good faith or for
breaching his or her duty of loyalty, engaging in intentional misconduct or
knowingly violating a law, paying a dividend or approving a stock repurchase
which was illegal, or obtaining an improper personal benefit. A provision of
this type has no effect on the availability of equitable remedies, such as
injunction or rescission, for breach of fiduciary duty.
 
     The Company's Bylaws require the Company to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer or employee of the Company, or
that being such a director, officer or employee he is or was serving at the
request of the Company as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
 
     In addition, the Company's Bylaws require the Company to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the Company, or that being such a
director, officer or employee he is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
 
     Any indemnification (unless ordered by a court) made by the Company may be
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct as set forth
above. Such determination must be made (i) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders.
 
     To the extent that a director, officer, employee or agent of the Company
has been successful on the merits or otherwise in defense of any covered action,
suit or proceeding, or in defense of any covered claim, issue or matter therein,
he will be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
 
                                      II-2
<PAGE>   93
 
     Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
in the specific case upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Company as authorized in
the Bylaws. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board deems appropriate.
 
     The Company maintains policies of directors' and officers' liability
insurance.
 
     The Company and the Underwriters will enter into an agreement that the
Company anticipates will provide for indemnification by the Underwriters of the
Company, its directors and officers, and by the Company of the Underwriters, in
each case for certain liabilities, including liabilities arising under the Act
and affords certain rights of contribution with respect thereto.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     The Registrant has not issued or sold securities within the past three
years pursuant to offerings that were not registered under the Securities Act,
except as follows:
 
<TABLE>
<CAPTION>
                                                           NUMBER OF
               ACQUIROR                       DATE          SHARES         PRICE PER SHARE
               --------                       ----         ---------       ---------------
<S>                                      <C>               <C>         <C>
Mark Cuban.............................     May 1995       2,640,000    Founding Contribution
Todd R. Wagner.........................     May 1995       2,640,000    Founding Contribution
Martin Woodall.........................     May 1995         120,000    Founding Contribution
Cameron Broadcasting...................     May 1995         600,000      Contract Rights(1)
Steven R. Block........................     July 1995         20,100   Payment of Legal Fees(2)
Ray A. Balestri........................     July 1995         10,080   Payment of Legal Fees(3)
Mark Cuban.............................   December 1995      920,040            $0.50
Ray A. Balestri........................   December 1995       34,980            $0.50
Rex Farrior............................   December 1995      120,000            $0.50
John Lemak.............................   December 1995       60,000            $0.50
Rawleigh H. Ralls IV...................   December 1995       60,000            $0.50
Mark Landry............................   December 1995       34,980            $0.50
Sean P. Griffiths......................   December 1995       19,980            $0.50
Mark E. Jennings.......................   December 1995       60,000            $0.50
Mark A. Nouss..........................   December 1995       40,020            $0.50
Steven H. Stodghill....................   December 1995       30,000            $0.50
Todd R. Wagner.........................   December 1995          600            $0.50
Universal Sports.......................   January 1996       390,060      Contract Rights(4)
Stanley Woodward.......................    March 1996         60,000            $0.50
Andrew G. Matthes......................    March 1996         60,000            $0.50
Ray A. Balestri........................    March 1996          9,900            $0.50
Mark Cuban.............................    March 1996        990,000            $0.50
Richard Pollock........................    March 1996        100,020            $0.50
Stuart W. Cartner......................    March 1996        160,020            $0.50
Bruce W. Berg..........................    March 1996         79,980            $0.50
Goldstein Ventures.....................    March 1996         19,980            $0.50
Mark Landry............................    March 1996         10,020            $0.50
Matthew Dolan..........................    March 1996         19,980            $0.50
Big Bend Investments, L.P. ............    April 1996        465,540            $1.07
Cameron Broadcasting...................    April 1996         33,540            $1.07
Martin Woodall.........................    August 1996         1,560            $1.33
Steven R. Block........................    August 1996           240            $1.33
Ray A. Balestri........................    August 1996           720            $1.33
</TABLE>
 
                                      II-3
<PAGE>   94
 
   
<TABLE>
<CAPTION>
                                                           NUMBER OF
               ACQUIROR                       DATE          SHARES         PRICE PER SHARE
               --------                       ----         ---------       ---------------
<S>                                      <C>               <C>         <C>
Mark Cuban.............................    August 1996        59,700            $1.33
Rex Farrior............................    August 1996         1,560            $1.33
John Lemak.............................    August 1996           780            $1.33
Rawleigh H. Ralls IV...................    August 1996           780            $1.33
Mark Landry............................    August 1996           600            $1.33
Sean P. Griffiths......................    August 1996           240            $1.33
Mark E. Jennings.......................    August 1996           780            $1.33
Mark A. Nouss..........................    August 1996           540            $1.33
Steven H. Stodghill....................    August 1996           420            $1.33
Todd R. Wagner.........................    August 1996         7,500            $1.33
Universal Sports.......................    August 1996         5,100            $1.33
Stanley Woodward.......................    August 1996           780            $1.33
Andrew G. Matthes......................    August 1996           780            $1.33
Richard Pollock........................    August 1996         1,320            $1.33
Stuart W. Cartner......................    August 1996         2,100            $1.33
Bruce W. Berg..........................    August 1996         1,020            $1.33
Goldstein Ventures.....................    August 1996           240            $1.33
Big Bend Investments, L.P. ............    August 1996         6,120            $1.33
Joseph W. Autem........................    August 1996        19,620            $1.33
Daniel G. Routman......................    August 1996         7,500            $1.33
Motorola, Inc. ........................  September 1996      735,720            $6.80
Premiere Radio Networks, Inc. .........   November 1996      588,600            $6.80
HMTF Company Investors.................   December 1996      138,360            $6.80
Motorola, Inc. ........................   January 1997         9,840            $6.80
Capital Radio Network, Inc. ...........   February 1997       73,620            $6.80
Intel Corporation......................   February 1997      294,300            $6.80
Motorola, Inc..........................    March 1997          5,220            $6.80
Motorola, Inc..........................    April 1997         21,120            $6.80
HMTF Company Investors.................     May 1997           3,900            $6.80
Intel Corporation......................   December 1997      530,786            $9.42
Motorola, Inc..........................   December 1997    1,592,356            $9.42
HMTF Company Investors.................   December 1997       78,025            $9.42
Killian McCabe & Associates............   December 1977       15,000            $9.42
Yahoo! Inc. ...........................   December 1997       79,618            $9.42
HMTF Company Investors.................    March 1998        382,166            $9.42
Henry G. Heflich, Jr...................    March 1998         25,000            $9.42
Mark Powell(5).........................     May 1998           1,320            $6.80
Richard Greenhut(6)....................     June 1998            300            $6.80
BT Alex. Brown(7)......................     July 1998         15,960            $6.80
</TABLE>
    
 
---------------
 
(1) These 600,000 shares of Common Stock were issued to Cameron Broadcasting as
    consideration for the Company's purchase from Cameron Broadcasting of rights
    to certain agreements and intangible property owned by Cameron Broadcasting.
    The approximate value of such assets at the time of the issuance was
    $50,000, based on the sale price of shares of Common Stock issued shortly
    after the issuance to Cameron Broadcasting.
 
(2) The issuance of 20,100 shares of Common Stock to Mr. Block, along with the
    contemporaneous issuance of 10,080 shares of Common Stock to Mr. Balestri,
    was in satisfaction of legal fees in the amount of $2,500 owing from the
    Company to Block & Balestri, P.C.
 
(3) The issuance of 10,080 shares of Common Stock to Mr. Balestri, along with
    the contemporaneous issuance of 20,100 shares of Common Stock to Mr. Block,
    was in satisfaction of legal fees in the amount of $2,500 owing from the
    Company to Block & Balestri, P.C.
                                      II-4
<PAGE>   95
 
(4) These 390,060 shares of Common Stock were issued to Universal Sports as
    consideration for Universal Sports' contribution to the Company of a
    perpetual license enabling the Company to provide digital distribution of
    athletic events and related programming for certain colleges and
    professional sports organizations. The approximate value of the license at
    the time of the issuance was $195,030, based on the $0.50 sale price of
    shares of Common Stock issued shortly before and after this issuance to
    Universal Sports.
 
(5) The issuance of 1,320 shares of Common Stock to Mr. Powell was pursuant to
    Mr. Powell's exercise of certain vested options which were originally
    granted to Mr. Powell in January and February 1997 pursuant to the 1996
    Plan. The terms of the options provided an exercise price of $6.80 per
    share.
 
(6) The issuance of 300 shares of Common Stock to Mr. Greenhut was pursuant to
    Mr. Greenhut's exercise of certain vested options which were originally
    granted to Mr. Greenhut in February 1997 pursuant to the 1996 Plan. The
    terms of the options provided an exercise price of $6.80 per share.
 
   
(7) The issuance of 15,960 shares of Common Stock to BT Alex. Brown was pursuant
    to BT Alex. Brown's exercise of certain warrants which were originally
    granted to BT Alex. Brown in December 1996 for services rendered. The term
    of the warrants provided an exercise price of $6.80 per share.
    
 
   
     In February and December 1997 the Company issued warrants to purchase
147,120 and 159,236 shares of Common Stock, respectively, at exercise prices of
$6.80 and $9.42 per share, respectively, to investors. As of the effectiveness
of this Prospectus, stock options entitling the holders thereof to purchase
2,534,295 shares of the Company's Common Stock at exercise prices generally
ranging from $1.07 to the initial offering price per share are outstanding
pursuant to grants since May 1996 under the Company's stock option plans. Since
May 1996, the Company has issued no shares of Common Stock to employees,
consultants and directors upon exercise of stock options (except as described
above).
    
 
     The transactions set forth above, other than the purchases by Messrs.
Powell and Greenhut in June 1998 and the grants of options to employees,
consultants and directors of the Company were undertaken in reliance upon the
exemption from registration requirements of the Securities Act afforded by
Section 4(2) thereof and/or Regulation D promulgated thereunder, as sales not
involving a public offering. The June 1998 issuances to Messrs. Powell and
Greenhut and the grants of stock options to employees, consultants and directors
of the Company were undertaken in reliance upon the exemption from registration
requirements of the Securities Act afforded by rule 701 promulgated under the
Securities Act, as sales by an issuer to employees, directors, officers,
consultants or advisors pursuant to written compensatory benefit plans or
written contracts relating to the compensation of such persons. The recipients
of securities in each such transaction represented their intention to acquire
the securities for investment only and not with a view to, or for sale in
connection with, any distribution thereof, and appropriate legends were affixed
to share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with the Company, to
information about the Company.
 
                                      II-5
<PAGE>   96
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
     (a) Exhibits
 
   
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          1.1            -- Underwriting Agreement
          3.1*           -- Restated Certificate of Incorporation of the Company, as
                            amended (filed June 19, 1996)
          3.1.1*         -- Restated Certificate of Incorporation (filed June 23,
                            1998)
          3.2*           -- Amended and Restated Bylaws of the Company
          3.2.1*         -- Amendment to Amended and Restated Bylaws of the Company
          4.1*           -- Form of Common Stock Certificate
          5.1*           -- Opinion of Gibson, Dunn & Crutcher LLP
         10.1.1*         -- Employment Agreement, dated as of June 15, 1998, between
                            the Company and Todd R. Wagner.
         10.1.2*         -- Employment Agreement, dated as of June 15, 1998, between
                            the Company and Mark Cuban.
         10.2.1*         -- Stock Purchase Agreement, dated as of September 4, 1996,
                            between the Company and Motorola, Inc.
         10.2.2*         -- Stock Purchase Agreement, dated as of November 15, 1996,
                            between the Company and Premiere Radio Networks, Inc.
         10.3*           -- First Amended and Restated Registration Rights Agreement,
                            dated as of February 24, 1997 among the Company,
                            Motorola, Inc., Premiere Radio Networks, Inc., Capitol
                            Radio Network, Inc., Intel Corporation and HMTF AudioNet
                            Investors, as amended by the Addendum to First Amended
                            and Restated Registration Rights Agreement dated as of
                            December 30, 1997, among the Company, Yahoo! Inc.,
                            Motorola, Inc. and Intel Corporation.
         10.4*           -- Stockholders Agreement, dated as of September 4, 1996,
                            among the Company, Motorola, Inc., Todd R. Wagner and
                            Mark Cuban, as amended by Amendment No. 1 on December 30,
                            1996 and Amendment No. 2 on December 19, 1997.
         10.5*           -- December Stockholders Agreement, dated as of December 31,
                            1996, among the Company, Todd R. Wagner, Mark Cuban, HMTF
                            AudioNet Investors, Motorola, Inc., Premiere Radio
                            Networks, Inc., as amended by an Addendum to December
                            Stockholders Agreement dated February 24, 1997, between
                            Intel Corporation, the Company, Todd R. Wagner and Mark
                            Cuban, and as further amended by an Addendum to December
                            Stockholders Agreement dated December 30, 1997, between
                            Yahoo! Inc., the Company, Todd R. Wagner and Mark Cuban.
         10.6+           -- Network Radio Sales Representation Agreement dated as of
                            November 15, 1996, between the Company and Premiere Radio
                            Networks, Inc.
         10.7*           -- The Company's 1998 Employee Stock Purchase Plan.
         10.8*           -- The Company's 1996 Stock Option Plan.
         10.9*           -- The Company's 1998 Stock Option Plan, as amended.
         10.10*          -- Form of the Company's Stock Option Agreement under the
                            1998 Stock Option Plan.
         10.11*          -- The Company's 1996 Non-Employee Directors Stock Option
                            Plan.
         10.12+          -- RealNetworks License Agreement, dated as of January 1,
                            1998, between the Company and RealNetworks, Inc.
</TABLE>
    
 
                                      II-6
<PAGE>   97
 
   
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         10.13+          -- NetShow License Agreement, dated as of January 1, 1998,
                            between the Company and Microsoft Corporation.
         10.14*          -- Form of Directors and Officers Indemnification Agreement.
         10.15*          -- Lease Agreement, dated as of December 2, 1996, between
                            the Company and George W. Lollis and Daisy Lollis.
         10.16*          -- Master Lease of Personal Property No. 3769, dated April
                            15, 1998, between the Company and Charter Financial, Inc.
         10.17*          -- The Security and Loan Agreement (Accounts Receivable),
                            dated December 15, 1997, between the Company and Imperial
                            Bank.
         10.18*          -- Imperial Bank Note, dated December 15, 1997, between the
                            Company and Imperial Bank.
         21.1*           -- Subsidiary of the Company
         23.1            -- Consent of PricewaterhouseCoopers LLP
         23.2*           -- Consent of Gibson, Dunn & Crutcher LLP (contained in
                            Exhibit 5.1)
         24.1*           -- Power of Attorney
         27.1*           -- Financial Data Schedule
</TABLE>
    
 
------------
 
   
+ Information contained in such agreement has been omitted in connection with a
  confidential treatment request, marked with asterisks and filed separately
  with the Commission.
    
 
* Previously filed.
 
     b) Financial Statement Schedule
 
           Schedule II -- Valuation and Qualifying Accounts
 
                All other Schedules for which provision is made in the
           applicable accounting regulations of the Securities and Exchange
           Commission have been omitted because they are not required under the
           related instructions, are not applicable or the information has been
           provided in the Financial Statements or the Notes thereto.
 
ITEM 17. UNDERTAKINGS
 
     (a) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
 
     (b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
                                      II-7
<PAGE>   98
 
     (c) The undersigned registrant hereby undertakes that:
 
          (l) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of Prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     registration statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     Prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.
 
                                      II-8
<PAGE>   99
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
 
           PERIOD FROM INCEPTION (MAY 19, 1995) TO DECEMBER 31, 1995
                 AND THE YEARS ENDED DECEMBER 31, 1996 AND 1997
 
<TABLE>
<CAPTION>
                                                      ADDITIONS
                           BALANCE AT   --------------------------------------
                           BEGINNING        CHARGED TO          CHARGED TO                     BALANCE AT
       DESCRIPTION         OF PERIOD    COSTS AND EXPENSES   OTHER ACCOUNTS(A)   DEDUCTIONS   END OF PERIOD
       -----------         ----------   ------------------   -----------------   ----------   -------------
<S>                        <C>          <C>                  <C>                 <C>          <C>
1995:
  Provision for doubtful
     accounts -- accounts
     receivables.........  $       --       $       --           $     --         $     --     $       --
  Tax valuation
     reserve.............          --          101,429                 --               --        101,429
                           ----------       ----------           --------         --------     ----------
          Total..........  $       --       $  101,429           $     --         $     --     $  101,429
                           ==========       ==========           ========         ========     ==========
1996:
  Provision for doubtful
     accounts -- accounts
     receivables.........  $       --       $   84,006           $(49,180)        $     --     $   34,826
  Tax valuation
     reserve.............     101,429        1,100,676                 --               --      1,202,105
                           ----------       ----------           --------         --------     ----------
          Total..........  $  101,429       $1,184,682           $(49,180)        $     --     $1,236,931
                           ==========       ==========           ========         ========     ==========
1997:
  Provision for doubtful
     accounts -- accounts
     receivables.........  $   34,826       $   86,240           $(44,826)        $     --     $   76,240
  Tax valuation
     reserve.............   1,202,105        2,389,360                 --               --      3,591,465
                           ----------       ----------           --------         --------     ----------
          Total..........  $1,236,931       $2,475,600           $(44,826)        $     --     $3,667,705
                           ==========       ==========           ========         ========     ==========
</TABLE>
 
---------------
 
(a) Such amounts relate to the utilization of the valuation and qualifying
    accounts to specific items for which they were established in the accounts
    receivables and tax valuation reserve accounts.
 
                                      II-9
<PAGE>   100
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on July 14, 1998.
    
 
                                            broadcast.com inc.
 
                                            By:     /s/ TODD R. WAGNER
                                              ----------------------------------
                                              Name: Todd R. Wagner
                                              Title:   Chief Executive Officer
 
   
     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 has been signed by the following persons in the capacity indicated on July
14, 1998.
    
 
   
<TABLE>
<CAPTION>
                      SIGNATURE                                             TITLE
                      ---------                                             -----
<C>                                                     <S>
 
                 /s/ TODD R. WAGNER                     Chief Executive Officer (Principal Executive
-----------------------------------------------------     Officer)
                   Todd R. Wagner
 
                   /s/ MARK CUBAN                       Chairman of the Board and President
-----------------------------------------------------
                     Mark Cuban
 
                          *                             Director
-----------------------------------------------------
                   Steven D. Leeke
 
                          *                             Director
-----------------------------------------------------
                  Randall S. Battat
 
                          *                             Director
-----------------------------------------------------
                   Joseph W. Autem
 
                  /s/ JACK A. RIGGS                     Chief Financial Officer (Principal Financial
-----------------------------------------------------     and Accounting Officer) and Director
                    Jack A. Riggs
</TABLE>
    
 
<TABLE>
        <S>                                                     <C>
                       *By: /s/ TODD R. WAGNER
          ------------------------------------------------
                           Todd R. Wagner
                          Attorney-in-fact
</TABLE>
 
                                      II-10
<PAGE>   101
 
                               INDEX TO EXHIBITS
 
   
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          1.1            -- Underwriting Agreement
          3.1*           -- Restated Certificate of Incorporation of the Company, as
                            amended (filed June 19, 1996)
          3.1.1*         -- Restated Certificate of Incorporation (filed June 23,
                            1998)
          3.2*           -- Amended and Restated Bylaws of the Company
          3.2.1*         -- Amendment to Amended and Restated Bylaws of the Company
          4.1*           -- Form of Common Stock Certificate
          5.1*           -- Opinion of Gibson, Dunn & Crutcher LLP
         10.1.1*         -- Employment Agreement, dated as of June 15, 1998, between
                            the Company and Todd R. Wagner.
         10.1.2*         -- Employment Agreement, dated as of June 15, 1998, between
                            the Company and Mark Cuban.
         10.2.1*         -- Stock Purchase Agreement, dated as of September 4, 1996,
                            between the Company and Motorola, Inc.
         10.2.2*         -- Stock Purchase Agreement, dated as of November 15, 1996,
                            between the Company and Premiere Radio Networks, Inc.
         10.3*           -- First Amended and Restated Registration Rights Agreement,
                            dated as of February 24, 1997 among the Company,
                            Motorola, Inc., Premiere Radio Networks, Inc., Capitol
                            Radio Network, Inc., Intel Corporation and HMTF AudioNet
                            Investors, as amended by the Addendum to First Amended
                            and Restated Registration Rights Agreement dated as of
                            December 30, 1997, among the Company, Yahoo! Inc.,
                            Motorola, Inc. and Intel Corporation.
         10.4*           -- Stockholders Agreement, dated as of September 4, 1996,
                            among the Company, Motorola, Inc., Todd R. Wagner and
                            Mark Cuban, as amended by Amendment No. 1 on December 30,
                            1996 and Amendment No. 2 on December 19, 1997.
         10.5*           -- December Stockholders Agreement, dated as of December 31,
                            1996, among the Company, Todd R. Wagner, Mark Cuban, HMTF
                            AudioNet Investors, Motorola, Inc., Premiere Radio
                            Networks, Inc., as amended by an Addendum to December
                            Stockholders Agreement dated February 24, 1997, between
                            Intel Corporation, the Company, Todd R. Wagner and Mark
                            Cuban, and as further amended by an Addendum to December
                            Stockholders Agreement dated December 30, 1997, between
                            Yahoo! Inc., the Company, Todd R. Wagner and Mark Cuban.
         10.6+           -- Network Radio Sales Representation Agreement dated as of
                            November 15, 1996, between the Company and Premiere Radio
                            Networks, Inc.
         10.7*           -- The Company's 1998 Employee Stock Purchase Plan.
         10.8*           -- The Company's 1996 Stock Option Plan.
         10.9*           -- The Company's 1998 Stock Option Plan, as amended.
         10.10*          -- Form of the Company's Stock Option Agreement under the
                            1998 Stock Option Plan.
         10.11*          -- The Company's 1996 Non-Employee Directors Stock Option
                            Plan.
         10.12+          -- RealNetworks License Agreement, dated as of January 1,
                            1998, between the Company and RealNetworks, Inc.
</TABLE>
    
<PAGE>   102
 
   
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         10.13+          -- NetShow License Agreement, dated as of January 1, 1998,
                            between the Company and Microsoft Corporation.
         10.14*          -- Form of Directors and Officers Indemnification Agreement.
         10.15*          -- Lease Agreement, dated as of December 2, 1996, between
                            the Company and George W. Lollis and Daisy Lollis.
         10.16*          -- Master Lease of Personal Property No. 3769, dated April
                            15, 1998, between the Company and Charter Financial, Inc.
         10.17*          -- The Security and Loan Agreement (Accounts Receivable),
                            dated December 15, 1997, between the Company and Imperial
                            Bank.
         10.18*          -- Imperial Bank Note, dated December 15, 1997, between the
                            Company and Imperial Bank.
         21.1*           -- Subsidiary of the Company
         23.1            -- Consent of PricewaterhouseCoopers LLP
         23.2*           -- Consent of Gibson, Dunn & Crutcher LLP (contained in
                            Exhibit 5.1)
         24.1*           -- Power of Attorney
         27.1*           -- Financial Data Schedule
</TABLE>
    
 
------------
 
   
+ Information contained in such agreement has been omitted in connection with a
  confidential treatment request, marked with asterisks and filed separately
  with the Commission.
    
 
* Previously filed.