<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2001.

                                       OR

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

                        Commission File Number 333-48014

                              ZIFF DAVIS MEDIA INC.
             (Exact Name of Registrant as Specified in Its Charter)

           DELAWARE                                      36-4336460
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                              28 East 28th Street,
                            New York, New York 10016
              (Address of principal executive offices and zip code)

        Registrants telephone number, including area code: (212) 503-3500

          Shares registered pursuant to Section 12(b) of the Act: None

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

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

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

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.

     As of July 13, 2001, 1,000 shares of common stock, par value, $0.01 per
share.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

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                              ZIFF DAVIS MEDIA INC.

           Index to Form 10-K for the Fiscal Year ended March 31, 2001
                                                                            Page
                                                                            ----
PART I

Item  1.    Business........................................................   3
Item  2.    Properties......................................................  11
Item  3.    Legal Proceedings...............................................  11
Item  4.    Submission of Matters to a Vote of Security Holders.............  12


PART II

Item  5.    Market for Registrant's Common Equity and Related
              Stockholder Matters........................................     12
Item  6.    Selected Financial Data.........................................  12
Item  7.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................     12
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk......  12
Item  8.    Financial Statements and Supplementary Data.....................  12
Item  9.    Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure...................................     12

PART III

Item  10    Directors and Executive Officers of the Registrant..............  13
Item  11    Executive Compensation..........................................  15
Item  12    Security Ownership of Certain Beneficial Owners and Management..  17
Item  13    Certain Relationships and Related Transactions..................  18


PART IV

Item  14    Exhibits, Financial Statement Schedules, and Reports
              on Form 8-K................................................     19

SIGNATURES  ................................................................  20

APPENDIX    ................................................................ F-1


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Forward-Looking Statements

     Certain statements in this Annual Report on Form 10-K contain
"forward-looking statements." Forward-looking statements are any statements
other than statements of historical fact. Examples of forward-looking statements
include projections of earnings, revenue or other financial items, statements of
the plans and objectives of management for future operations, and statements
concerning proposed new products and services, and any statements of assumptions
underlying any of the foregoing. In some cases, you can identify forward-looking
statements by the use of words such as "may", "will", "expects", "should",
"believes", "plans", "anticipates", "estimates", "predicts", "potential" or
"continue", and any other words of similar meaning.

     Statements regarding the company's future financial performance or results
of operations, including expected revenue growth, future paper, postage,
printing or other expenses, future operating margins, anticipated capital
spending, our ability to obtain funding and other future or expected performance
are subject to the following risks: the acquisition of businesses or the launch
of new lines of business, which could increase operating expenses and decrease
operating margins; the inability to identify, develop and achieve success for
new products, services and technologies; the inability to attract new customers
for the company's publications and services; increased competition, which could
lead to decreases in users or negative pressure on the company's pricing and the
need for increased marketing; the inability to maintain, establish or renew
relationships with suppliers and advertisers; a decrease in the growth of
advertising spending in magazines or in general or on our businesses in
particular; failure of advertisers to meet their commitments under their
contracts to purchase advertising. For risks about our business, see our
Registration Statement on Form S-4 dated January 24, 2001, including under the
captions "Risk Factors" and "Management's Discussion and Analysis of Results of
Operations."

     Any or all of our forward-looking statements in this report and in any
other public statements we make may turn out to be wrong. They can be affected
by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in the discussion in this report will be
important in determining future results. Consequently, no forward-looking
statement can be guaranteed. Actual future results may vary materially. We
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our reports to the SEC. Also note that we provide the following cautionary
discussion of risks, uncertainties and possibly inaccurate assumptions relevant
to our businesses. These are factors that we think could cause our actual
results to differ materially from expected and historical results. Other factors
besides those listed here could also adversely affect us. This discussion is
provided as permitted by the Private Securities Litigation Reform Act of 1995.


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                                     PART I

ITEM 1.  BUSINESS

Background

     Ziff Davis Media Inc. (the "Company", "we") is a multimedia content company
whose principal business is publishing. We publish and license magazines,
provide editorial content about technology and the Internet, both in print and
online, and also provide custom testing services and software and produce
conferences, seminars and webcasts. The Company was incorporated in the state of
Delaware on November 24, 1999 and was formed to acquire certain publishing
assets of the Publishing division ("Ziff-Davis Publishing", "ZDP" or
"Predecessor") of Ziff-Davis Inc. ("ZDI"), an unrelated company. Our major
operating subsidiaries are Ziff Davis Publishing Inc., Ziff Davis Development
Inc. ("LaunchCo") and Ziff Davis Internet Inc. ("InternetCo"). The Company's
year-end is March 31, while ZDP's year-end was December 31.

     We had no operations prior to April 5, 2000, when we completed the
acquisition of ZDP for $780.0 million plus expenses (the "Acquisition"). The
Acquisition was accounted for under the purchase method of accounting. We funded
the Acquisition by: (i) issuing 1,000 shares of common stock to our parent
company, Ziff Davis Holdings Inc., for $335.0 million, (ii) entering into a
$405.0 million senior credit facility of which $355.0 million was borrowed at
closing and (iii) issuing $175.0 million of senior subordinated notes (the
"Bridge Loan") (See Note 5 of Notes to Consolidated Financial Statements). Fees
and expenses, including debt issuance costs associated with the Acquisition,
totaling approximately $30.0 million, were paid with the equity and debt
proceeds.

     Our operations are classified into two reportable operating segments,
Established Businesses and Developing Businesses.

     The Established Businesses segment is engaged in publishing and licensing
magazines with editorial content about technology and the Internet. The business
segment licenses its content and brands to more than 50 licensees in over 30
foreign markets. In addition, this segment also publishes MacWorld through a 50%
owned joint venture with International Data Group.

     The Developing Businesses segment is comprised of our InternetCo and
LaunchCo subsidiaries. This segment is focused on developing (1)
Internet-related ventures leveraged off our editorial expertise and
relationships with our audience and advertisers in our Established Businesses
and (2) new businesses including publications, testing services, conferences and
research.

Established Businesses

     We are one of the largest technology magazine publishers in the United
States as measured by revenue. In 2000, we had an estimated 25% share of the
technology magazine industry based on advertising revenue. Our 11 established
U.S. titles, excluding our MacWorld joint venture, have a combined circulation
of approximately 5.9 million and estimated domestic readership of approximately
21 million individuals. Our magazines are well known, leading publications that
offer readers comprehensive market and product coverage as well as access to
lab-based testing and award-winning editorial content. Our titles include PC
Magazine and eWeek (formerly PC Week), which were the number two and number four
ranked technology magazines, respectively, in the United States in 2000 as
measured by advertising revenue. PC Magazine was the 17th largest domestic
magazine in 2000 as measured by advertising revenue, placing it among the
leading domestic business and entertainment magazines such as Business Week's
North America edition, Forbes, Fortune and People. In addition, Yahoo! Internet
Life and Interactive Week, were named two of the top 20 magazine launches of the
1990s by Folio magazine and are the leading publications in their respective
market places. We are also the leading publisher of electronic games magazines,
with the largest market share, an estimated 40.1%, based on advertising revenue
in 2000.

     Our readers are well-educated, influential buyers of technology and other
products and decision-makers in their professional fields and households, which
makes them attractive to a wide range of technology advertisers. For example,
the more than 2.8 million estimated business influencers (professionals who
recommend, specify and/or approve product purchases) who read PC Magazine each
spent an estimated average of $390,000 on technology products in 2000, according
to IntelliQuest. Similarly, in December 2000, according to BPA International,
the average technology budget for readers of eWeek was $26.5 million.
Furthermore, according to Mediamark Research Inc.'s Fall 2000 data release, the
average household incomes of the PC Magazine and Yahoo! Internet Life readers
are approximately $77,000 and $71,000, respectively, which are significantly
higher than the average U.S. household income. The size and composition of our
readership offers advertisers concentrated exposure to their target audiences.
As a result, our top 10 advertisers, including Microsoft, International Business
Machines, Hewlett Packard and Dell Computer, have consistently advertised in our


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publications. Importantly, as technology has become more pervasive, our
publications are becoming more appealing to a broader range of advertisers.

     Our current portfolio of established titles can be divided into the
following three categories: (1) Business publications; (2) Consumer
publications; and (3) Games publications. The following table sets forth
information regarding these titles:

Established Businesses Segment

                                                                   Year 2001
                                         First      Primary         Target
Magazine Title (1)                       Issue     Audience       Circulation
--------------------------------------------------------------------------------
Business Publications
PC Magazine ............................  1981      Business      1,225,000
Ziff Davis SMART BUSINESS ..............  1988      Business        800,000
eWeek ..................................  1983      Business        400,000
Interactive Week .......................  1994      Business        300,000
Smart Partner ..........................  1998      Business         85,000

Consumer Publications
Yahoo! Internet Life ...................  1995      Consumer      1,100,000
Family Internet Life (formerly FamilyPC)  1994      Consumer        700,000

Games Publications
Electronic Gaming Monthly ..............  1988      Consumer        500,000
Official U.S. PlayStation Magazine .....  1997      Consumer        375,000
Computer Gaming World ..................  1981      Consumer        340,000
Expert Gamer ...........................  1988      Consumer        200,000

(1)  Does not include MacWorld (published through a joint venture with
     International Data Group)

Business Publications

     Our titles in this category provide authoritative, independent guidance to
business influencers and professionals that is considered by its readers a
primary resource for technology purchasing decisions and business solutions.

     PC Magazine. PC Magazine is one of the nation's largest technology
magazines, with a circulation rate base of more than 1.2 million and an
estimated readership of more than 6.6 million. The magazine's brand recognition
is estimated to be more than 50% among all U.S. adults and more than 80% among
individuals involved in the purchase of computer-related products and services.
PC Magazine differentiates itself through unique and extensive product reviews
based on benchmark testing performed in the PC Magazine Labs, supplemented by
its "First Looks" section covering recently released technology products and by
its widely respected opinion/analysis columns. As the Internet becomes more
pervasive, we are broadening PC Magazine's focus to increase its emphasis on
Internet infrastructure products and services.

     Ziff Davis Smart Business. The magazine is for business leaders needing to
know the "why and how" of deploying technology and services to grow business
focusing on the bottom line. The publication's editorial focus emphasizes not
only how a product will perform from a technical standpoint, but also how real
users will rate the product and how it will impact their business. The magazine
offers a blend of product-oriented coverage that combines performance-oriented
testing with usability testing from the Ziff Davis Smart Business Usability Lab.
Articles include reviews of hardware, software, Internet products and CD-ROMs,
as well as highlights of technologies and top picks.

     eWeek. With a rate base of 400,000, eWeek is one of the largest
controlled-circulation technology publications. Controlled-circulation
publications are distributed directly to qualified professionals without charge.
Through print, the Internet, webcasts, interactive and face-to-face seminars and
conferences, eWeek helps leading e-business IT decision makers evaluate and
deploy Internet technology solutions in their enterprises. In order to qualify
for subscriptions, eWeek readers must have a minimum budget authority of
$25,000, must purchase Internet/intranet products and services and work at a
site that has the Internet installed, as audited by BPA International. The
criteria we use to qualify readers for this magazine are some of the highest
qualification standards in the industry. We believe this makes eWeek attractive
to advertisers selling products and services to IT professionals and businesses
building dot-com enterprises, such as consulting, telecommunications and
Internet infrastructure companies.


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     eWeek is aggressively expanding its franchise to other branded products and
services that are advertiser- or sponsor-supported, such as special report
series, online content and online events, such as the eWeek Live! platform. The
regularly scheduled online seminars focus on eWeek content areas, including
eWeek eValuations, Fast@Tracks special reports and eWeek Labs.

     Interactive Week. A controlled-circulation publication launched in 1994,
Interactive Week has become one of the largest newsweeklies focused on the
Internet as measured by circulation, with a rate base of 300,000 as of January
2001. We only distribute the magazine to readers who are business and technology
leaders responsible for facilitating and implementing e-commerce and
communications solutions for their organization's Internet strategies.
Interactive Week provides complete coverage of the Internet, from building the
infrastructure to the applications to the devices used to access the
information.

     Smart Partner. Smart Partner is the leading "how to" magazine for IT
consultants, integrators, outsourcing and solution providers. Smart Partner's
readers determine what and how customers select, design and deploy technology to
bolster operating results and solve business problems. Smart Partner identifies
the most lucrative opportunities and technologies in the consulting,
integration, outsourcing and software-development markets and shows IT
consultants how to build profitable alliances with customers, hardware
providers, software providers and service providers. Effective with the July 23,
2001 issue, Smart Partner will be published 18 times a year with a
controlled-circulation of 120,100.

Consumer Publications

     Our titles in this category include Yahoo! Internet Life and Family
Internet Life. These publications address the changes and new opportunities that
technology and the Internet present in people's personal lives. The increasing
interest in and use of the Internet has contributed to the rapid growth of these
titles.

     Yahoo! Internet Life. Launched in 1995, Yahoo! Internet Life has been one
of the fastest growing technology magazines and among the fastest growing
magazines in the publishing industry with a rate base that grew from 100,000 to
1,100,000 (as of the September 2000 issue) in less than five years. We believe
the magazine has firmly established itself as the "Voice of the Net," helping
readers incorporate the benefits of the Internet revolution into their everyday
lives by explaining how and where to access and utilize the most valuable
content available on the Internet. Yahoo! Internet Life measures the societal
impact of the Internet with issues such as "How America Uses the Net,"
"America's Most Wired Cities and Towns," and "America's Most Wired Colleges."
Issues like "Online Music" and "Online Film" help capture and explain cultural
and lifestyle changes resulting from the Internet.

     Family Internet Life (formerly FamilyPC). Written for parents with children
between the ages of 3 and 18 years old, Family Internet Life inspires, educates
and empowers families to get the most out of life in the 21st century. The
magazine's mission is to be the definitive source of information for parents
seeking advice on their home computing and Internet experience. Family Internet
Life is unique in that it is written by parents, for parents, in a non-technical
format, and goes beyond reviewing technology and into technology-related issues.
Family Internet Life covers lifestyle-oriented topics, such as education,
entertainment, family finance, food, health and beauty, and travel, all within
the scope of technology and the family. Through comparative reviews of computer
products based on real world, in-home testing, as well as features, tutorials
and advice columns, all aspects of family computing are covered.

Games Publications

     Our titles in this category - Electronic Gaming Monthly, Official U.S.
Playstation Magazine, Computer Gaming World and Expert Gamer - are positioned to
capitalize on the growing interest in electronic games. According to the Informa
Media Group, in 2001, the U.S. electronic games market is expected to see sales
of approximately $15.7 billion, with revenues expected to rise to $23.7 billion
by 2006. Because our readers of these magazines are principally 18 to 34
year-old males, these publications offer advertisers access to a highly focused,
difficult-to-reach readership with attractive demographics and spending
patterns. At December 31, 2000, we were the leader in the United States in this
growing segment, based on advertising revenue (40.1% share), based on total
circulation (37.5% share) and based on newsstand circulation (43.4% share). In
2000, 38.5% of our game magazine circulation occurred at the newsstand compared
with 30.1% for our audited competitors. On average, our electronic games
publications sell nearly 530,000 copies at the newsstand each month.


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Other Operations

     MacWorld Joint Venture. MacWorld is published through a 50:50 joint venture
with International Data Group and has a rate base of 425,000. MacWorld provides
Macintosh buyers with comparative, laboratory-based product evaluations, reviews
and information about Macintosh products, supported by its own product testing
facility that we believe is the most advanced in the Macintosh industry.

Developing Businesses Segment

     We are developing new publications and businesses through LaunchCo and
developing Internet-related ventures leveraged off our expertise in technology
and the Internet through InternetCo.

LaunchCo

o    New Publications - Expedia Travels, The Net Economy and CIO Insight. In
     2000, we launched two new publications - Expedia Travels, a paid consumer
     magazine with a rate base of 300,000 targeted at travel enthusiasts, and
     The Net Economy, a 75,000 controlled-circulation business-to-business
     publication targeted at network operators and service providers of all
     types. In May 2001, we launched CIO Insight, a 50,000
     controlled-circulation publication targeting senior-level IT executives
     with strategic and business information.

                                                    Primary
     Magazine Title               First Issue       Audience     Rate Base
     -----------------------------------------------------------------------
     Expedia Travels...........   October 2000      Consumer      300,000
     The Net Economy...........   October 2000      Business       75,000
     CIO Insight...............   May 2001          Business       50,000

o    eTESTING LABS - eTESTING LABS develops the benchmark tests for our
     publications and is also an independent for-hire testing service
     independent of our editorial testing groups. eTESTING LABS develops
     benchmarking and testing software, which we believe has become the de facto
     industry standard. Benchmarking is a competitive analysis tool that allows
     the user to compare competing products. eTESTING LABS' results provide the
     basis for some of the editorial content of PC Magazine, eWeek and Smart
     Partner and are instrumental in helping readers with their technology
     purchasing decisions. We believe that our labs give us a competitive
     advantage with respect to our editorial content and in acquiring and
     retaining readers.

InternetCo

o    On January 19, 2001, we amended a content license agreement with ZDNet (and
     its new parent, CNET Networks) which provides that beginning on March 1,
     2001, ZDNet's content license becomes non-exclusive and on March 1, 2002,
     all of ZDNet's license rights to content from our magazines terminate.
     During the time that the license is non-exclusive, we have the right to use
     and display the editorial content of our publications through any media,
     including the Internet. In a sequence from April 1, 2001 through November
     1, 2001, ZDNet's right and obligation to maintain websites for our
     publications will terminate and we will obtain the right to host these
     websites. Accordingly, InternetCo plans to launch a series of URLs related
     to our publications throughout 2001.

o    On June 1, 2001, InternetCo launched ExtremeTech.com, a web site that
     targets "hardcore technologists" - the IT professionals and computer
     enthusiasts who are truly passionate about technology. The site focuses on
     the technologies that power products, providing this early adopter audience
     with technical detail that goes well beyond traditional tech coverage.

o    On July 2, 2001, InternetCo launched PC Magazine Online (www.pcmag.com)
     targeting IT professionals with comprehensive product reviews, performance
     tests and evaluations.


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Assets Held For Sale

     In connection with the Acquisition, we determined that ZDP's wholly-owned
international operations (excluding international licensing operations and
international joint ventures) did not meet our long-term strategic objectives.
As a result, the operations were sold on August 4, 2000. The results of these
operations are excluded from our consolidated statement of operations for the
period from April 5, 2000 to the sale date, August 4, 2000. (See Note 5 of the
Notes to Consolidated Financial Statements).

Circulation

     Our publications include paid-circulation magazines, which generate revenue
from advertising, newsstand sales and subscriptions, and controlled-circulation
publications, which are distributed to business leaders and qualified IT
professionals and generate revenue principally from the sale of advertising. Our
controlled-circulation publications offer business-oriented technology content
that appeals to a professional audience in need of specific technology
information. Our paid-circulation publications offer business and/or
consumer-oriented content that appeals to a broader audience interested in
business technology, general Internet/technology, travel and/or electronic games
information. In 2000, we published nine domestic paid-circulation publications
and four domestic controlled-circulation publications.

     In the year ended March 31, 2001, Circulation Management magazine awarded
four of our publications Circulation Excellence Awards, recognizing outstanding
achievement, innovation and strategic performance in circulation marketing and
management.

Paper and Printing

     Paper is our principal raw material, and in fiscal year ending March 31,
2001, it accounted for 34.0% of our total production costs. We purchased our
paper from five main suppliers for our publications, of which four accounted for
more than 10% each of our paper supply in fiscal 2001 as measured by tonnage.

     We outsource the printing process for all of our publications. To
facilitate efficient and timely printing of our publications, we have
established strategic relationships with certain printing companies, including
R.R. Donnelley, Brown, and Quebecor. In fiscal 2001, approximately half of our
total printing expenses for our publications were for printing services supplied
by R.R. Donnelley. Since the Acquisition, we have been seeking to achieve
operating improvements by enhancing vendor relationships. In that regard, we
have consolidated from four to three printers and outsourced the majority of our
pre-press and paper buying operations to these printers.

Competition

     The magazine publishing industry is highly competitive. We compete for
advertising and circulation revenue principally with publishers of other
technology magazines with similar editorial content as ours. The technology
magazine industry has traditionally been dominated by a small number of large
publishers. In 2000, the three largest technology publishing companies, Ziff
Davis Media Inc., International Data Group ("IDG") and CMP Media ("CMP")
accounted for 72.6% of total technology magazine advertising revenue and 62.3%
of total technology advertising pages. IDG publications include CIO,
Computerworld, InfoWorld, The Industry Standard, Network World, PC World and
the "Dummies" book series, and CMP publications include Network Computing,
Information Week, Computer Reseller News, Electronic Engineering Times and
VARBusiness.


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     We believe that we compete successfully with other technology publications
based on our market leading position within the technology magazine sector, the
nature and quality of our magazines' editorial content and the attractive
demographics of our readers. In addition to other technology magazines, our
magazines also compete for advertising revenue with general-interest and
business magazines and other forms of media, including broadcast and cable
television, radio, newspaper, direct marketing and electronic media. In
competing with general-interest and business magazines and other forms of media,
we rely on our ability to reach a targeted segment of the population in a
cost-effective manner.

License Agreements and Service Contracts

     Agreements with CNET Networks and ZDNet. On January 19, 2001, we amended a
content license agreement with ZDNet (and its new parent, CNET Networks) to
provide that beginning on March 1, 2001, ZDNet's content license becomes
non-exclusive and on March 1, 2002, all of ZDNet's license rights to content
from our magazines terminate. During the time that the license is non-exclusive,
we will have the right to use and display the editorial content of our
publications through any media, including the Internet. In a sequence from April
1, 2001 through November 1, 2001, ZDNet's right and obligation to maintain
websites for our publications will terminate and we will obtain the right to
host these websites. As consideration for amending the license agreement, ZDNet
is obligated to pay us a royalty termination fee of $4.5 million, $2.2 million
of which was paid on March 1, 2001 and $2.3 million of which is payable on March
1, 2002, and ZDNet is not obligated to pay any royalties with respect to
licensed content after February 28, 2001.

     Under the previous five-year license agreement with ZDNet, we were
providing the editorial content of our publications existing as of April 4, 2000
to ZDNet and ZDNet maintained websites for those publications. This agreement
did not cover any new publications acquired or developed by us after the date of
the Acquisition (such as Expedia Travels and The Net Economy), to which we
retain all rights in every medium, and it specifically allows us, in certain
circumstances, to transact e-commerce independently of ZDNet for all
publications.

     We have a license from ZDNet to use the trademark "ZD" in print in
perpetuity. ZDNet continues to use the trademark "ZD" online and may use certain
derivations of the trademark "ZD" in print. We also have a license from ZDNet to
use the trademark "Interactive Investor" in print in perpetuity. Currently, our
magazine Interactive Week includes the column "Interactive Investor." ZDNet
continues to use the "Interactive Investor" trademark online and derivations
thereof in print.

     In connection with the closing of the Acquisition, we entered into a
services agreement with ZDI. Under this agreement, Ziff Davis Publishing Inc.
(our publishing subsidiary) provides distribution, circulation and production
services to ZDI for its Computer Shopper magazine, and ZDI paid Ziff Davis
Publishing Inc. its costs in relation to the performance of these services plus
an additional $5.0 million annually in fees. On January 19, 2001, we agreed with
ZDI to terminate this services agreement and we entered into a new agreement
effective March 1, 2001. The new agreement contains substantially similar terms,
except that ZDI will not be required to pay us any annual fee and will only be
required to reimburse us for our out-of-pocket expenses incurred in connection
with producing and distributing Computer Shopper. ZDI agreed to pay us a $2.0
million non-refundable termination fee on March 1, 2001 in connection with the
termination of the original Computer Shopper services agreement. The new
agreement expires on February 28, 2003, however ZDI may terminate the agreement
at any time with 90 days prior written notice.

     Agreements with Others. We have been granted a license to use certain
trademarks owned by Yahoo! Corporation in connection with the publishing of
Yahoo! Internet Life magazine both in print and online. The term of our right to
use these marks expires on January 15, 2016. We have been granted an exclusive
license to use certain trademarks owned by Sony Computer Entertainment Corp. in
connection with the publishing of the magazine Official U.S. Playstation
Magazine in the United States and Canada. The initial term of our right to use
these marks extends until December 31, 2001. We are currently in discussion with
Sony to renew this license. We have also been granted an exclusive license to
use certain trademarks owned by Expedia, Inc. in connection with the publishing
of the magazine Expedia Travels in the United States and its territories and
possessions. The initial term of our right to use these marks expires on January
28, 2010.

Trademarks

     We have developed strong brand awareness for our principal publications and
services. Accordingly, we consider our trademarks, copyrights, trade services
and similar intellectual property critical to our success and rely on trademark,
copyright and trade secrets laws, as well as licensing and confidentiality
agreements, to protect our intellectual property rights. We generally register
our material trademarks in the U.S. and in certain other key countries in which
these trademarks are used. Effective trademark, copyright and trade secret
protection may not be available in every country where our publications and
services are available.


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     We may be subject to claims of alleged infringement by third parties or
licensees of trademarks and other intellectual property right of third parties
from time to time in the ordinary course of business. We do not believe there
are any such legal proceedings or claims that are likely to have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or results of operations.

Employees

     As of March 31, 2001, we had a total of approximately 1,080 employees, all
based in the U.S. or Canada. None of our employees are represented by a labor
union. We believe our relations with our employees are good.

ITEM 2.  PROPERTIES

     Our headquarters are located at 28 East 28th Street, New York, NY. As of
March 31, 2001, we leased approximately 400,000 square feet at that location,
maintained other offices in Massachusetts, Illinois and California, and had over
15 editorial, production and sales offices and computer labs in other states in
the United States. We do not own real property that is material to our business
and lease all of our offices from third parties. We believe that our facilities
are in good operating condition and are suitable and adequate for our current
operation.

ITEM 3.  LEGAL PROCEEDINGS

     Ziff Davis Media is subject to various claims and legal proceedings arising
in the normal course of business. However, we are not presently involved in any
legal proceedings that we expect individually or in the aggregate to have a
material adverse effect on our financial condition, results of operations or
liquidity.

     We are a defendant, along with 11 other magazine publishing companies, in
In Re Magazine Antitrust Litigation, pending in Federal District Court for the
Southern District of New York. The case alleges a conspiracy among the magazine
publishers to inflate subscription prices by agreeing not to offer subscriptions
at more than a 50% discount off list price. The plaintiff's motion for partial
summary judgment on the issue of liability is pending and the parties are in
settlement discussions. Management expects, based upon consultation with
counsel, that the outcome of this lawsuit will not have a material adverse
effect on the financial position of the Company.

     On February 27, 2001, International Data Group ("IDG") initiated a lawsuit
alleging trademark infringement arising out of the launch of our new magazine,
CIO Insight. The case, International Data Group v. Ziff Davis Media, is pending
in the Federal District Court in Delaware. IDG's motion for a preliminary
injunction was denied on May 24, 2001. We do not believe that the outcome of
this lawsuit will have a material adverse effect on our financial position.

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

     Not applicable.



                                       9

<PAGE>

                                     PART II

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

     The Company is a wholly-owned subsidiary of Ziff Davis Holdings, Inc. There
is no public trading market for the Company's common stock.

     The Company did not pay cash dividends on its common stock and currently
intends to retain any future earnings to finance operations, debt service and
business expansion. Therefore, the payment of any cash dividends on the common
stock is unlikely in the foreseeable future. Any future determination to pay
cash dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's earnings, capital requirements and financial
condition and such other factors deemed relevant by the Board of Directors.

ITEM 6.  SELECTED FINANCIAL DATA

     For information required under Item 6, see the Appendix to this Form 10-K.

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

     For information required under Item 7, see the Appendix to this Form 10-K.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The information required by this item appears in Management's Discussion
and Analysis of Financial Condition and Results of Operations under the headings
"Commodity Price Risk" and "Interest Rate Risk".

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     For information required under Item 8, see the Appendix to this Form 10-K.

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

     Not applicable.


                                       10

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table contains information as of March 31, 2001 with respect
to our and Ziff Davis Holdings Inc.'s (our Parent) directors and our executive
officers:

<TABLE>
<CAPTION>

            Name            Age                           Position
            ----            ---                           --------
<S>                         <C>   <C>

James D. Dunning, Jr......  53    Chairman, Chief Executive Officer and President of our
                                  Parent, Ziff Davis Media Inc. and Ziff Davis Publishing Inc.
Thomas McGrade............  42    Senior Executive Vice President, Chief Operating Officer and Director
                                  Ziff Davis Media Inc. and Ziff Davis Publishing Inc.
Alan J. Perlman...........  47    President of Ziff Davis Business Media Group and Director Ziff Davis Media
                                  Inc. and Ziff Davis Publishing Inc.
Peter Longo...............  39    Executive Vice President and Publishing Director, Ziff Davis
                                  Business Media Group
Scott Crystal.............  43    Executive Vice President and Publishing Director, Ziff Davis
                                  Consumer Media Group

Wenda Harris Millard......  47    Chief Internet Officer and Director Ziff Davis Media Inc. and President
                                  and Chief Internet Officer, Ziff Davis Internet
Sloan Seymour.............  38    Vice President and Publishing Director, Ziff Davis Publishing
Dale Strang...............  40    Vice President, Ziff Davis Games Group
Carolyn Schurr Levin......  36    Vice President, General Counsel, Ziff Davis Media Inc. and
                                  Ziff Davis Publishing Inc.
David F. Mullen...........  32    Vice President, Controller, Ziff Davis Media Inc. and Ziff
                                  Davis Publishing Inc.
John R. Willis............  51    Director of our Parent and Ziff Davis Media Inc.
Avy H. Stein..............  46    Director of our Parent and Ziff Davis Media Inc.
Daniel H. Blumenthal......  37    Director of our Parent and Ziff Davis Media Inc.

Milton J. "Chip" Block....  54    Director of Ziff Davis Media Inc.
David M. Wittels..........  35    Director of our Parent and Ziff Davis Media Inc.
</TABLE>


     James D. Dunning, Jr. has been the President, Chief Executive Officer and
Chairman of our Parent, Ziff Davis Media Inc. and Ziff Davis Publishing Inc.
since the Acquisition. From 1999 to current, Mr. Dunning held the positions of
Chairman and Director of USApubs, Inc. Mr. Dunning served as Chairman and Chief
Executive Officer of The Petersen Companies, Inc. from 1996 to 1999. From 1992
to 1997, Mr. Dunning served as Chairman and Chief Executive Officer of
TransWestern Publishing Company L.P. Mr. Dunning has also served as Chairman of
SRDS Media Information, L.P. ("SRDS") and as Chairman, Chief Executive Officer
and President of Multi-Local Media Information Group. From 1985 to 1986, Mr.
Dunning served as Executive Vice President of Ziff Communications.

     Thomas McGrade has been Senior Executive Vice President and Chief Operating
Officer and Director of Ziff Davis Media Inc. and Ziff Davis Publishing Inc.
since the Acquisition. From 1997 to April 2000, Mr. McGrade held the position of
Executive Vice President and General Manager of Ziff Davis Inc. His previous
positions have included Vice President and Assistant to the Chairman of Ziff
Davis Inc. from 1995 to 1996, and business manager of Ziff Davis Publishing from
1993 to 1994. He spent seven years at Doubleday/Dell Publishing from 1980 to
1987, where he held several business and finance positions.

     Alan J. Perlman has been President of Ziff Davis Business Media Group and
Director of Ziff Davis Media Inc. and Ziff Davis Publishing Inc. since the
Acquisition. From 1995 to April 2000, Mr. Perlman was Senior VP/Publisher of
Interactive Week. Mr. Perlman co-launched Interactive Week in 1994. For 15 years
prior to joining Ziff Davis Inc., Mr. Perlman was a top publishing executive at
CMP Publications, where he was founding publisher of Network Computing magazine.
Prior to that time, Mr. Perlman was Vice President and Editorial Director at
CMP, where he was responsible for all editorial content, which included the
launch of Computer Reseller News, CommunicationsWeek, VARBusiness and
CommunicationsWeek International.

     Peter Longo has been Executive Vice President and Publishing Director, Ziff
Davis Business Media Group since the Acquisition. From 1999 to April 2000, Mr.
Longo was Senior Vice President and Publisher of PC Magazine. From 1998 to 1999,
Mr. Longo was Vice President and Publisher of PC Week. His previous positions
included National Associate Publisher for PC Magazine from 1996 to 1997 and
National Associate Publisher for Computer Shopper from 1994 to 1996. Previously,
Mr. Longo held various positions at Sport Magazine from 1985 to 1987 and CMP
from 1987 to 1991.


                                       11

<PAGE>

     Scott Crystal has been Executive Vice President and Publishing Director,
Ziff Davis Consumer Media since the Acquisition. Mr. Crystal oversees Yahoo!
Internet Life, Family PC and Expedia Travels. From 1992 until joining Ziff Davis
Inc. in March 2000, Mr. Crystal held various positions at the National
Geographic Society, including Vice President and Publishing Director of National
Geographic Society, from 1998 to March 2000 and Vice President and Advertising
Director from 1994 to 1998.

     Wenda Harris Millard has been Chief Internet Officer and Director of Ziff
Davis Media and President of Ziff Davis Internet since December 2000. From 1996
until joining us, Ms. Millard was Executive Vice President and one of the
founding members of DoubleClick. From 1994 and prior to launching DoubleClick,
Ms. Millard served as President and Group Publisher of SRDS, the country's
leading provider of media and marketing information. From 1992 to 1994, Ms.
Millard was Senior Vice President and Publisher of Family Circle and previously,
Ms. Millard had been Executive Vice President/Group Publisher of Adweek,
Brandweek and Mediaweek magazines from 1987 to 1992.

     Sloan Seymour has been Publishing Director of eWeek (formerly PCWeek) and
Smart Partner since January 2001 and Vice President of Ziff Davis Publishing
since the Acquisition. Since 1999, Mr. Seymour was Vice President of Ziff Davis
Inc. and Publisher of PCWeek. Mr. Seymour was Publisher of PC/Computing and
Smart Reseller from 1997 to 1998 and previously, he held various positions at
Ziff Davis Inc. from 1986 to 1996.

     Dale Strang has been Vice President, Ziff Davis Games Group, Ziff Davis
Publishing Inc. since the Acquisition. Mr. Strang held similar positions at Ziff
Davis Inc. since March 1999. Since joining Ziff Davis Inc. in June 1996, Mr.
Strang served in several positions, including Group Publisher of Electronic
Gaming Monthly, Expert Gamer and Official U.S. PlayStation Magazine and
Publisher of Computer Gaming World. From 1991 to 1996, Mr. Strang held the
position of President-Publisher of the Active Media Inc. division of
International Data Group.

     Carolyn Schurr Levin has been Vice President and General Counsel, Ziff
Davis Media Inc. and Ziff Davis Publishing Inc. since June 2000. From 1991 until
joining us, Ms. Levin served in various legal positions at The Times Mirror
Company. She held the positions of Vice President and General Counsel for
Newsday, a Times Mirror Company, from 1995 to June 2000, and Associate General
Counsel of The Times Mirror Company from 1996 to June 2000. Prior to her tenure
at The Times Mirror Company, Ms. Levin was a litigation attorney with Corbin
Silverman & Sanseverino and Cravath, Swaine & Moore.

     David F. Mullen has been Vice President of Ziff Davis Media Inc. since
January 2001 and Controller of Ziff Davis Media Inc. since the Acquisition. Mr.
Mullen was Assistant Controller of Ziff Davis Inc. from January 1999 to April
2000 and Director of Financial Reporting of Ziff Davis Inc. from June 1998 to
January 1999. From November 1997 to June 1998, Mr. Mullen served as Manager of
External Reporting of Ziff Davis Inc. From 1990 to 1997, Mr. Mullen served in
various positions at Deloitte & Touche, LLP.

     John R. Willis has been a Director of our Parent and a Director of Ziff
Davis Media Inc. since April 2001. Mr. Willis is a Managing Director of Willis
Stein. Prior to the formation of Willis Stein in 1994, Mr. Willis served as
President and a Director of Continental Illinois Venture Capital Corporation, a
venture capital investment firm, ("CIVC") from 1989 to 1994. In 1988, he founded
the Continental Mezzanine Investment Group and was its manager through 1990.
From 1974 until 1988, Mr. Willis held various management positions at
Continental Bank. He currently serves as a Director of several companies,
including Advantage Business Services, Aurum Technologies, Inc., PersonalPath
Systems, Inc., National Veterinary Associates, Inc. and Troll Communications
L.L.C.

     Avy H. Stein has been a Director of our Parent since the Acquisition and a
Director of Ziff Davis Media Inc. since November 1999. Mr. Stein is a Managing
Director of Willis Stein. Prior to the formation of Willis Stein in 1994, Mr.
Stein served as a Managing Director of CIVC from 1989 to 1994. From 1984 to
1985, Mr. Stein was President of Cook Energy Corporation and Vice President of
Corporate Planning and Legal Affairs at Cook International, Inc. From 1980
through 1983, Mr. Stein was an attorney with Kirkland & Ellis. Mr. Stein has
also served as a special consultant for mergers and acquisitions to the chief
executive officer of NL Industries, Inc. and as the Chief Executive Officer of
Regent Corporation. He currently serves as a Director of several companies,
including CTN Media Group Inc., Racing Champions Corporation, USApubs, Inc.,
Tremont Corporation and Orius Corp.

     Daniel H. Blumenthal has been a Director of our Parent since the
Acquisition and a Director of Ziff Davis Media Inc. since November 1999. Mr.
Blumenthal has been a Managing Director of Willis Stein since its inception in
1994. Prior to the formation of Willis Stein in 1994, Mr. Blumenthal served as
Vice President of CIVC from 1993 to 1994. From 1988 to 1993 he was a corporate
tax attorney with Latham & Watkins. Mr. Blumenthal currently serves as a
Director of several companies,


                                       12

<PAGE>

including USApubs, Inc., Troll Communications L.L.C., Aavid Thermal
Technologies, Inc., PersonalPath Systems, Inc., and Interval Acquisition Corp.

     Milton J. "Chip" Block has been a Director of Ziff Davis Media since the
Acquisition. Mr. Block is Vice Chairman of USApubs, Inc., a magazine
subscription marketing company. From 1998 to 1999, Mr. Block was President of
the Consumer Marketing Group and General Manager of The Petersen Companies, Inc.
Mr. Block also served on the Board of Directors of The Petersen Companies, Inc.
and was a Director of the Magazine Publishers of America from 1998 until
February 2000. From 1993 to 1999, Mr. Block was Chairman and President of
Applied Interactive Media LLC, which he sold to USApubs, Inc. in 1999. Mr. Block
currently serves as a Director of USApubs, Inc. and Worldwide Media Inc., a
Hudson News company.

     David M. Wittels has been a Director of our Parent and Ziff Davis Media
Inc. since May 2000. Mr. Wittels has been a Principal of DLJ Merchant Banking,
Inc. since January 1997. For the past five years, Mr. Wittels has held various
positions within DLJ Merchant Banking, Inc. Mr. Wittels currently serves on the
boards of AKI Holding Corp., AKI Inc., Mueller Holdings (N.A.), Inc. and Wilson
Greatbatch Technologies, Inc.

     Each director is elected to serve until the next annual meeting of
stockholders or until a successor is duly elected and qualified. The current
directors were elected pursuant to the terms of an investor rights agreement.
See "Certain Relationships and Related Party Transactions-Investor Rights
Agreement." There is no family relationship between any of our executive
officers or directors.

     We will reimburse members of the board of directors for any out-of-pocket
expenses incurred by them in connection with services provided in such capacity.
In addition, we anticipate that outside directors will receive compensation for
serving as director. Although the amount of compensation for outside directors
has not yet been determined, it is expected to be reasonable and customary.

ITEM 11.  EXECUTIVE COMPENSATION

     None of the executive officers named below were granted any options during
the Company's fiscal year ended March 31, 2001 and did not hold any options at
March 31, 2001.

Summary Compensation Table

     The following table sets forth certain information concerning the
compensation earned by (a) James D. Dunning Jr., the Company's Chief Executive
Officer, during the fiscal year ended March 31, 2001 and (b) the four other most
highly compensated individuals who served as executive officers of the Company
during the fiscal year ended March 31, 2001.

<TABLE>
<CAPTION>

                                                               Annual Compensation
                                                             -----------------------
                                                    Fiscal                                 All Other
Name and Principal Position                          Year     Salary ($)   Bonus ($)    Compensation(1)
-------------------------------------------------------------------------------------------------------
<S>                                                 <C>      <C>           <C>          <C>

James D. Dunning Jr. - Chairman, Chief Executive     2001    2,000,000         --            --
Officer and President of our Parent, Ziff Davis
Media and Ziff Davis Publishing

Alan J. Perlman - President of Business              2001      450,000      286,800         3,000
Publications, Ziff Davis Media and Ziff Davis
Publishing

Scott Crystal - Executive Vice President and         2001      397,450      178,300           --
Publishing Director, Ziff Davis Consumer
Publications

Peter Longo - Executive Vice President and           2001      315,000      167,300           --
Publishing Director, Ziff Davis Business Media
Group

Thomas McGrade - Senior Executive Vice President     2001      350,000         --             --
and Chief Operating Officer, Ziff Davis Media Inc.
and Ziff Davis Publishing Inc.
</TABLE>

(1)  Vehicle Allowance

Executive Agreements

     Mr. Dunning. In connection with the Acquisition, our Parent and Ziff Davis
Publishing Inc. entered into an executive agreement with Mr. Dunning. The
agreement provides, among other things, that Mr. Dunning will serve as
President, Chief Executive Officer and Chairman of the Board of Ziff Davis
Publishing, Ziff Davis Media Inc. and our Parent during a term ending on April
5, 2005. Under his agreement, Mr. Dunning is entitled to a base salary of $2.0
million per year, subject to


                                       13

<PAGE>

annual cost-of-living increases. In addition to his base salary, Mr. Dunning is
eligible to receive an annual bonus of $500,000 for each of the fiscal years
ended March 31, 2001 and March 31, 2002 based upon our Parent's financial
performance as measured by EBITDA. Under his executive agreement, Mr. Dunning
contributed $5.0 million in cash to our Parent in exchange for stock of our
Parent.

     Mr. McGrade. In connection with the Acquisition, our Parent and Ziff Davis
Publishing entered into an executive agreement with Mr. McGrade. The agreement
provides, among other things, that he will serve as Senior Executive Vice
President and Chief Operating Officer of Ziff Davis Publishing during a term
ending on April 5, 2005. His base salary will be $350,000 per year, subject to
annual cost of living adjustments, and he will be eligible to receive an annual
bonus of $250,000, payable in the discretion of our Parent's board of directors.

     Mr. Perlman. In connection with the Acquisition, our Parent and Ziff Davis
Publishing entered into an executive agreement with Mr. Perlman. The agreement
provides, among other things, that he will serve as President of Business Media
of Publishing during a term ending on April 5, 2005. His base salary will be
$450,000 per year, subject to annual cost of living adjustments, and he will be
eligible to receive an annual bonus of no less than $250,000, payable in the
discretion of our Parent's board of directors.

     Ms. Millard. On December 11, 2000, our Parent and Ziff Davis Publishing
entered into an executive agreement with Ms. Millard. This agreement provided,
among other things, that she will serve as Chief Internet Officer of Ziff Davis
Media and President and Chief Internet Officer of Ziff Davis Internet during a
term expiring on December 11, 2005. Her base salary will be $300,000 in the
first year, $325,000 in the second year and $350,000 thereafter. She will
receive a one-time $25,000 bonus on March 31, 2001 and will be eligible to
receive an annual target bonus of $250,000 based upon meeting certain financial
performance metrics, payable in the discretion of our Parent's board of
directors and the Chief Executive Officer of Publishing.

Equity Incentive Plans

     Following the Acquisition, we implemented an equity incentive program. The
program provides for the issuance of, or the grant of options to purchase
restricted common stock to certain of our employees, directors and officers of
the company. Under the program, our Parent has reserved 2,630,000 shares of its
fully diluted common equity (approximately 10% of its fully diluted common
equity) and we have reserved up to 10% of the fully diluted common equity of
LaunchCo and up to 20% of the fully diluted common equity of InternetCo for our
employees, directors and officers. In connection with the issuance of, or the
grant of options to acquire these equity interests, the participants in the
program will grant to participants customary "drag-along" rights in the event of
a sale of the entity in which they hold equity interests. We also have the
option to repurchase the participant's option shares if his/her employment
terminates for any reason, including upon his/her death, disability or
resignation.


                                       14

<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The Company is authorized to issue a total of 1,000 shares of common stock,
par value $0.01 per share. There are 1,000 shares of common stock issued and
outstanding.

     All of the Company's outstanding capital stock is owned by our Parent. The
table below lists information about the beneficial ownership of our Parent's
capital stock, as of June 30, 2001, by each person whom we know to own
beneficially more than 5% of any class of our Parent's stock, by each of our
Parent's directors, the executive officers named in the Summary Compensation
table and by all of our Parent's directors and our executive officers as a
group. Our Parent has two classes of capital stock authorized for issuance,
Series A preferred stock and common stock. The Series A preferred stock is
divided into two Series, Series A-1 and Series A-2, which are identical in all
respects except for the initial date that dividends begin to accrue. There are
445,000 shares of our Parent's Series A preferred stock (of which 350,000 are
designated Series A-1 and 95,000 are designated Series A-2) authorized for
issuance, 357,583 of which are issued and outstanding and 100,000,000 shares of
our Parent's common stock authorized for issuance, of which 76,049,302 are
issued and outstanding. In the event of an initial public offering of our
Parent's common stock, Willis Stein and the other holders of our Parent's Series
A preferred stock may elect to convert their shares of Series A preferred stock
to shares of our Parent's common stock. Unless otherwise noted, the address of
each director and executive officer is c/o Ziff Davis Media Inc., 28 East 28th
Street, New York, New York 10016.

<TABLE>
<CAPTION>
                                                                      Beneficial Ownership(1)
                                                       ----------------------------------------------------
                                                                     Percent of
                                                       Shares of    Outstanding                  Percent of
                                                       Series A       Series A   Shares of      Outstanding
                                                       Preferred     Preferred    Common          Common
                                                        Stock         Stock       Stock           Stock
-----------------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>         <C>              <C>

Willis Stein Entities (2) ........................     233,750.0       65.37%   45,000,000         59.17%
DLJ Entities (3) .................................      47,500.0       13.28    10,000,000         13.15
James D. Dunning, Jr .............................       8,455.0        2.36     4,146,000          5.45
Alan J. Perlman ..................................         285.0        0.08       552,917          0.73
Scott Crystal.....................................          --           --        117,511          0.16
Peter Longo.......................................          --           --        148,664          0.20
Thomas McGrade ...................................         142.5        0.04       522,917          0.69
Wenda Harris Millard..............................         475.0        0.13       346,458          0.46
John R. Willis (2)................................          --           --           --            --
Avy H. Stein (2)..................................          --           --           --            --
Daniel H. Blumenthal (2)..........................          --           --           --            --
Milton J. "Chip" Block............................          --           --           --            --
David M. Wittels (3)..............................          --           --           --            --
All directors and executive officers as a group
   (11 persons) ..................................       9,357.5        2.62%    5,834,467          7.70%
</TABLE>

(1)  "Beneficial ownership" generally means voting or investment power with
     respect to a security or the right to acquire such power within 60 days.
     Unless otherwise indicated, we believe that each holder has sole voting and
     investment power with regard to the equity interests listed as beneficially
     owned.

(2)  Includes shares held by Willis Stein & Partners II, L.P., Willis Stein &
     Partners III, L.P., Willis Stein & Partners Dutch, L.P., Willis Stein &
     Partners Dutch III - A, L.P., Willis Stein & Partners Dutch III-B, L.P. and
     Willis Stein & Partners III - C, L.P. Mr. Willis, Mr. Stein and Mr.
     Blumenthal are Managing Directors of Willis Stein. Each disclaims
     beneficial ownership of the shares held by the investment funds associated
     with Willis Stein. The address for Willis Stein and Messrs. Willis, Stein
     and Blumenthal is 227 West Monroe Street, Suite 4300, Chicago, Illinois
     60606.

(3)  Includes shares held by DLJ Diversified Partners, L.P., DLJ Diversified
     Partners-A, L.P., DLJ EAB Partners, L.P., DLJ ESC II L.P., DLJ First Esc
     L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Offshore Partners II,
     C.V. and DLJMB Funding II, Inc., which are private equity investment funds
     affiliated with DLJ Merchant Banking, Inc. Mr. Wittels is a Principal of
     DLJ Merchant Banking, Inc. Mr. Wittels disclaims beneficial ownership of
     the shares held by the investment funds associated with DLJ Merchant
     Banking, Inc. The address for DLJ Merchant Banking, Inc. and Mr. Wittels is
     277 Park Avenue, New York, New York 10172.


                                       15

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Investor Rights Agreement

     Our Parent, Willis Stein, its equity co-investors and the members of
management who hold equity securities of our Parent are parties to an investor
rights agreement. The investor rights agreement provides that our Parent's board
of directors will be established at seven directors or such other number
designated by Willis Stein. The agreement provides that the board will consist
of:

     o    our Parent's chief executive officer, who will initially be Mr.
          Dunning;

     o    one person designated by DLJ Merchant Banking Partners II, L.P.;

     o    four persons designated by Willis Stein, who initially included Avy H.
          Stein, Daniel H. Blumenthal, and Milton J. "Chip" Block and
          subsequently John R. Willis; and

     o    one additional person to be identified by Willis Stein.

     The stockholders executing the investor rights agreement other than DLJ
have agreed to vote their shares as directed by Willis Stein in matters relating
to any amendment of our Parent's certificate of incorporation, any merger or
other business combination with, any sale by our Parent of substantially all of
the assets of our Parent or any liquidation of our Parent. Willis Stein may also
control the circumstances under which a public offering of our Parent's equity
securities may take place. References in this section to DLJ refer to DLJ
Merchant Banking Partners II, L.P. and its affiliates that are holders of our
Parent's stock.

     The investor rights agreement generally restricts the transfer of shares of
our Parent's stock. The parties to the investor rights agreement have granted
our Parent a right of first refusal with respect to its stock, which, if not
exercised by our Parent, may be exercised by Willis Stein and its equity
co-investors. Each holder of shares generally has the right to participate in
any transfer of shares by Willis Stein, with certain exceptions. In addition,
our Parent has agreed not to issue new equity securities (or securities with
equity features) without giving Willis Stein and its equity co-investors an
opportunity to purchase their pro rata share of the new securities on
substantially the same terms, with certain exceptions. Each of our Parent's
stockholders has agreed to consent to a sale of our Parent or the assets of our
Parent if Willis Stein votes to approve the sale.

     The investors rights agreement also provides that Willis Stein may request
at any time that all or any portion of its common stock be registered with the
SEC. If Willis Stein no longer owns at least 50% of the common stock specified
in the investor rights agreement, DLJ may also make one such request. In the
event that Willis Stein or DLJ makes a request for registration, the other
parties to investor rights agreement that hold common stock will be entitled to
participate in the registration. Our Parent has also granted the parties to the
investor rights agreement piggyback registration rights with respect to
registrations by it and our Parent has agreed to pay all expenses relating to
any registrations.

Make-Well Agreement

     In connection with the closing of the transactions, we, our Parent, Willis
Stein and its equity co-investors entered into a make-well agreement. Under this
agreement, if our ratio of debt to EBITDA is greater than 4.5 to 1.0 on March
31, 2001, then either we must repay debt owed by us under our senior credit
facilities or Willis Stein and its equity co-investors must contribute to us up
to a maximum of $50.0 million in additional equity so that we may repay
indebtedness under our senior credit facilities such that our ratio of debt to
EBITDA is equal to or less than 4.5 to 1.0 on March 31, 2001, after giving pro
forma effect to any repayment. The Company's debt to EBITDA ratio at March 31,
2001 was 4.45 to 1.0 therefore, no make-well payment was required.

Executive Promissory Notes

     Under his or her executive agreement, each of Messrs. Dunning, McGrade,
Perlman and Ms. Millard purchased shares of our Parent's stock with one or more
promissory notes.

     Mr. Dunning paid for his shares with $5.0 million in cash and two
promissory notes in the aggregate principal amount of $4,491,500. The first
promissory note is in the principal amount of $3,900,000 and the second
promissory note is in the principal amount of $591,500. Both notes accrue simple
interest at a rate equal to the lesser of 7.0% per annum or the highest


                                       16

<PAGE>

rate permitted by law, and both mature on April 5, 2007. Mr. Dunning must prepay
all amounts due under the notes if his employment terminates for any reason or
if we are (or our Parent is) sold, and if Mr. Dunning receives any cash in
respect of his shares, he must use that cash to repay a portion of the amounts
due under the notes. Mr. Dunning's personal liability under the notes is limited
to no more than 60% of the aggregate principal amount of $4,491,500 minus the
amount of any principal payments made under his notes plus 100% of any accrued
and unpaid interest. Mr. Dunning has pledged all of his shares of our Parent's
stock to secure his obligations under his notes. As of March 31, 2001, all of
the aggregate principal amount of Mr. Dunning's notes (and interest accrued
thereon) was outstanding.

     Mr. McGrade paid for his shares with two promissory notes in the aggregate
principal amount of $273,229. The first promissory note in the principal amount
of $150,000 was repaid in full as of May 31, 2000. The second promissory note in
the principal amount of $123,229 matures on April 5, 2007. The first note
accrued and the second note accrues simple interest at a rate equal to the
lesser of 7.0% per annum or the highest rate permitted by law. Mr. McGrade's
personal liability under the second promissory note is limited to no more than
60% of the aggregate principal amount of $123,229 minus the amount of any
principal payments made under that note plus 100% of any accrued and unpaid
interest. The prepayment terms under Mr. McGrade's note are similar to those
under Mr. Dunning's notes. Mr. McGrade has pledged all of his shares of our
Parent's stock to secure his obligations under his note. As of March 31, 2001,
all of the aggregate principal amount of Mr. McGrade's second promissory note
(and interest accrued thereon) was outstanding.

     Mr. Perlman paid for his shares with $300,000 in cash and a promissory note
in the principal amount of $123,229, which matures on April 5, 2007, which
accrues simple interest at a rate equal to the lesser of 7.0% per annum or the
highest rate permitted by law. Mr. Perlman's personal liability under his
promissory note is limited to no more than 60% of the principal amount of
$123,229 minus the amount of any principal payments made under his note plus
100% of any accrued and unpaid interest. The prepayment terms under Mr.
Perlman's note are similar to those under Mr. Dunning's notes. Mr. Perlman has
pledged all of his shares of our Parent's stock to secure his obligations under
his note. As of March 31, 2001, all of the principal amount of Mr. Perlman's
note (and interest accrued thereon) was outstanding.

     Ms. Millard paid for her shares with $500,000 in cash and a promissory note
in the principal amount of $61,615, which matures on April 5, 2007, which
accrues simple interest at a rate equal to the lesser of 7.0% per annum or the
highest rate permitted by law. Ms. Millard's personal liability under her
promissory note is limited to no more than 60% of the principal amount minus the
amount of any principal payments made under her note plus 100% of any accrued
and unpaid interest. The prepayment terms under Ms. Millard's note are similar
to those under Mr. Dunning's notes. Ms. Millard has pledged all of her shares of
our Parent's stock to secure her obligations under her note. As of March 31,
2001, all of the principal amount of Ms. Millard's note (and interest accrued
thereon) was outstanding.

Subscription Services

     Investment funds affiliated with Willis Stein are shareholders of USApubs
Inc., a marketer of magazine subscriptions and other services. We sell
subscriptions to our publications both directly and through independent
subscription marketing companies, including USApubs Inc. For the fiscal year
ended March 31, 2001, we paid approximately $6.6 million in fees to USApubs and
have accounts payable, net of approximately $0.3 million at March 31, 2001. In
management's opinion, our transactions with USApubs are generally representative
of arm's-length transactions.


                                       17

<PAGE>


                                     PART IV

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

A.       Exhibit Index

1.1      Purchase Agreement by and among Ziff Davis Media Inc., Deutsche Bank
           Securities Inc. and CIBC World Markets Corp. dated July 18, 2000.*

2.1      Purchase Agreement dated December 6, 1999 among WS-ZP Acquisition,
           Inc., ZD Inc. and ZD Holdings (Europe) Ltd.*
2.2      Sale and Purchase Agreement relating to Certain Print-Based Publishing
           Assets in the UK, Germany and France, dated June 30, 2000 with VNU
           N.V., View Group B.V., VNU Business Publications Limited, VNU Holding
           Deutschland GMBH, VNU Business Publications France SA.*
3.1      Article of Incorporation for Ziff Davis Media Inc.*
3.2      By-laws for Ziff Davis Media Inc.*
4.1      Indenture between Ziff Davis Media Inc., Ziff Davis Publishing Holdings
           Inc., Ziff Davis Internet Inc., Ziff Davis Development Inc., Ziff
           Davis Publishing Inc., eTESTING LABS, Inc. and Bankers Trust Company
           dated July 1, 2000.*
4.2      Registration Rights Agreement by and among Ziff Davis Media Inc., Ziff
           Davis Publishing Holdings Inc., Ziff Davis Internet
           Inc., Ziff Davis Development Inc., Ziff Davis Publishing Inc.,
           eTESTING LABS, Inc., Deutsche Bank Securities Inc. and CIBC
           World Markets Corp. dated July 21, 2000.*
10.1     Credit Agreement between Ziff Davis Media Inc., CIBC World Markets
           Corp., Bankers Trust Company, Fleet National Bank, Canadian Imperial
           Bank of Commerce and other credit parties dated April 5, 2000,
           as amended.*
10.2     License Agreement, dated April 5, 2000 with ZD Inc.*
10.3     License Agreement, dated April 5, 2000 with ZD Inc. (ZD logo).*
10.4     License Agreement, dated April 5, 2000 with ZD Inc. (Interactive).*
10.5     Limited Liability Company Agreement, dated July 31, 1997, with
           Ziff-Davis Inc., Macworld Communications, Inc. and
           International Data Group, Inc., as amended.*
10.6     Executive Agreements by and between Ziff Davis Holdings Inc. and
           Mr. Dunning, dated as of April 5, 2000.*+
10.7     Executive Agreements by and between Ziff Davis Holdings Inc. and
           Mr. Thomas McGrade, dated as of April 5, 2000.*+
10.8     Executive Agreement by and between Ziff Davis Holdings Inc. and
           Mr. Alan Perlman, dated April 5, 2000.*+
10.9     Executive Agreements by and between Ziff Davis Holdings Inc. and
           Ms. Millard, dated December 6, 2000.**+
10.10    Amendment to License Agreement, dated January 19, 2001 with
           ZDNet, Inc.*
12.1     Statements re computation of ratio of earnings to fixed charges.**
21.1     Subsidiaries of the registrant.*

*   previously filed in connection with the Company's Registration Statement
    on Form S-4 dated January 24, 2001.
**  filed herewith.
+   denotes compensation plan or arrangement.

B.       No reports on Form 8-K have been filed during the year.


                                       18

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
it behalf by the undersigned, thereunto duly authorized on the 16th day of July
2001.

                                        ZIFF DAVIS MEDIA INC.

                                        By:     /s/ JAMES D. DUNNING JR.
                                           -------------------------------------
                                        NAME:   JAMES D. DUNNING JR.
                                        TITLE:  CHIEF EXECUTIVE OFFICER

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on July 16, 2001.

               Signatures                                    Title
               ----------                                    -----

         /s/ James D. Dunning Jr.                Chairman, Chief Executive
-----------------------------------------        Officer, President and Director
     James D. Dunning Jr.                        (Principal Executive Officer)

         /s/ Thomas McGrade
-----------------------------------------
     Thomas McGrade                              Director

         /s/ Alan J. Perlman
-----------------------------------------
     Alan J. Perlman                             Director

      /s/ Wenda Harris Millard
-----------------------------------------
     Wenda Harris Millard                        Director

         /s/ John R. Willis
-----------------------------------------
     John R. Willis                              Director

         /s/ Avy H. Stein
-----------------------------------------
     Avy H. Stein                                Director

         /s/ Daniel H. Blumenthal
-----------------------------------------
     Daniel H. Blumenthal                        Director

         /s/ Milton J. "Chip" Block
-----------------------------------------
     Milton J. "Chip" Block                      Director

         /s/ David Wittels
-----------------------------------------
     David Wittels                               Director

         /s/ David F. Mullen
-----------------------------------------
     David F. Mullen                             Vice President (Principal
                                                 Accounting Officer)


     Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.

     None.


                                       19

<PAGE>


                              ZIFF DAVIS MEDIA INC.

                                    APPENDIX

                                                                         Page

Selected Historical Financial Information ............................   F-2

Management's Discussion and Analysis of Financial Condition
  and Results of Operations ..........................................   F-3

Reports of Independent Accountants....................................   F-13

Consolidated Balance Sheets as of March 31, 2001 and
  December 31, 1999 (Predecessor) ....................................   F-15

Consolidated Statements of Operations for the fiscal year ended
  March 31, 2001, period from January 1, 2000 to April 4, 2000
  (Predecessor) and years ended December 31, 1999 (Predecessor)
  and 1998 (Predecessor)..............................................   F-16

Consolidated Statements of Cash Flows for the fiscal year ended
  March 31, 2001, period from January 1, 2000 to April 4, 2000
  (Predecessor) and years ended December 31, 1999 (Predecessor)
  and 1998 (Predecessor)..............................................   F-17

Consolidated Statement of Changes in Stockholder's Equity for the
  fiscal year ended March 31, 2001, period from January 1, 2000 to
  April 4, 2000 (Predecessor) and years ended December 31, 1999
  (Predecessor) and 1998 (Predecessor)................................   F-18

Notes to Consolidated Financial Statements............................   F-19

                                       F-1

<PAGE>

                    SELECTED HISTORICAL FINANCIAL INFORMATION

     The following table presents our selected historical financial information.
The selected financial information as of December 31, 1998 and 1999, for the
three years in the period ended December 31, 1999 and for the period January 1
to April 4, 2000 were derived from the audited carve-out financial statements
and the related notes of our Predecessor. The balance sheet information at
December 31, 1997 and financial information for 1996 is unaudited. The selected
historical financial data as of March 31, 2001 and for the fiscal year ended
March 31, 2001 was derived from our Consolidated Financial Statements and the
related notes. Selected historical financial information may not be comparable
due to differing accounting basis resulting from changes in ownership. Prior to
February 29, 1996, we were a division of Ziff-Davis Holdings Corp. On February
29, 1996, Ziff-Davis Inc., our former parent company, was acquired by SOFTBANK
Corp., establishing a different accounting basis. Another accounting basis was
established on April 5, 2000 when our predecessor, the publishing division of
Ziff-Davis Inc., was purchased by an investor group led by Willis Stein &
Partners. Accordingly, we have separated the periods of different ownership in
the table below. The Selected Historical Financial Information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and the notes to those
statements, included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>

                                     Period  |    Period                                                    Period   |
                                    January 1| from March 1                                                January 1 |     Fiscal
                                       to    |      to                                                        to     |   Year Ended
                                 February 29,| December 31,         Years Ended December 31,               April 4,  |    March 31,
                                ------------ |------------- -----------------------------------------  ------------- |   -----------
                                     1996    |     1996          1997           1998           1999          2000    |       2001
                                ------------ |------------- ------------- -------------  ------------  ------------- |   -----------
                                (Predecessor)|(Predecessor) (Predecessor) (Predecessor)  (Predecessor) (Predecessor) |   (Company)
<S>                             <C>          |<C>           <C>           <C>            <C>           <C>           |   <C>
                                             |                                                                       |
Statement of Operations                      |                                                                       |
Data:                                        |                                                                       |
                                             |                                                                       |
Revenue, net ................   $    84,412  |$   467,252    $   575,206   $   540,977    $   535,709    $   128,941 | $   440,485
Cost of production ..........        25,419  |    135,022        165,794       167,284        158,040         38,733 |     139,284
Selling, general and                         |                                                                       |
  administrative expenses ...        40,689  |    256,320        294,166       284,098        278,602         76,029 |     254,542
Depreciation and ............        11,052  |     66,659         81,556        82,263         82,477         12,066 |      66,098
amortization                                 |                                                                       |
Year 2000 remediation .......          --    |       --             --            --            3,027           --   |        --
expense                                      |                                                                       |
Write-down of intangible                     |                                                                       |
  assets (1) ................          --    |       --             --            --          778,760           --   |        --
Restructuring charge (2) ....          --    |       --             --          39,995           --             --   |        --
                                -----------  |-----------    -----------   -----------    -----------    ----------- | -----------
Income (loss) from ..........         7,252  |      9,251         33,690       (32,663)      (765,197)         2,133 |     (19,439)
operations                                   |                                                                       |
Net income (loss) ...........         4,562  |    (13,412)         3,429       (23,651)      (583,034)           304 |     (73,435)
                                             |                                                                       |
Other Financial Data:                        |                                                                       |
                                             |                                                                       |
Capital expenditures ........   $       414  |$    10,993    $     8,016   $    17,559    $    10,840    $     1,792 | $    33,655
Cash and cash equivalents ...         5,271  |      2,532          4,265         6,309          2,487          4,632 |      24,889
Total assets ................     1,312,813  |  1,840,984      1,791,756     1,727,883        931,248        915,306 |     852,927
Total debt ..................          --    |       --             --            --             --             --   |     459,167
Division equity (3) .........     1,148,858  |  1,617,759      1,546,198     1,466,616        826,725        816,545 |        --
Total stockholder's equity ..          --    |       --             --            --             --             --   |     278,565
</TABLE>

(1)  Reflects an adjustment by the seller to write-down the intangible assets to
     reflect Ziff Davis Media's $780.0 million acquisition price.

(2)  The restructuring charge incurred in 1998 related to the closure of three
     magazines and includes the write-off of intangible assets, severance costs
     and facilities closure costs.

(3)  Division equity is presented because prior to the closing of the
     transactions we were a division of Ziff-Davis Inc. and were not a separate
     legal entity.


                                       F-2

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

     The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with our financial
statements including the notes to those statements.

Overview

     We are a multimedia content company whose principal business is publishing.
We publish and license magazines, provide editorial content about technology and
the Internet, both in print and online, and to a lesser extent provide custom
testing services and software and produce conferences, seminars and webcasts. On
April 5, 2000, we acquired certain publishing assets ("Ziff Davis Publishing",
"ZDP" or the "Predecessor") from Ziff-Davis Inc. ("ZDI"), an unrelated company
for $780.0 million plus expenses (the "Acquisition"). The Acquisition was
accounted for under the purchase method of accounting.

     We had no operations prior to April 5, 2000 (date of Acquisition). Our
financial statements as of March 31, 2001, and for the fiscal year then ended
are prepared on a consolidated basis and include the accounts of the Company and
its subsidiaries. The combined financial statements of the Predecessor for the
period prior to April 5, 2000 are prepared on a carve-out basis, as ZDP was not
a separate legal entity owned by ZDI.

     Since April 5, 2000, we have formed two subsidiaries which are focused on
developing and launching new products and businesses. These subsidiaries, Ziff
Davis Development Inc. ("LaunchCo") and Ziff Davis Internet Inc. ("InternetCo"),
are collectively referred to, and defined under our debt agreements, as
"Unrestricted Subsidiaries". We are developing new publications and businesses
through LaunchCo and developing Internet-related ventures leveraged off our
editorial expertise and relationships with our audience and advertisers through
InternetCo. Where appropriate in our discussion below, we have separately
identified amounts associated with the Unrestricted Subsidiaries when comparing
amounts to prior year periods, as they relate to the new business established in
the current fiscal year and are required to be reported separately under our
credit agreements.

     In connection with the Acquisition, we determined that ZDP's wholly-owned
international operations (excluding international licensing operations and
international joint ventures) did not meet our long-term strategic objectives.
As a result, the operations were sold on August 4, 2000. The results of these
operations are excluded from our consolidated statement of operations for the
period from April 5, 2000 to the sale date, August 4, 2000. (See Note 5 of the
Notes to Consolidated Financial Statements). Financial statements for periods
prior to April 5, 2000 include the operating results of ZDP's wholly-owned
international operations.

Revenue

     Our principal sources of revenue are advertising (74.0% of fiscal year 2001
total revenue), circulation (18.0%) and other (8.0%). Circulation comprises both
paid subscriptions (11.0%) and newsstand sales (7.0%) while other includes
royalties, mailing list rentals, testing services, custom publishing and
seminars. No single advertiser has comprised more than 6.0% of our advertising
revenue or 4.5% of total revenue in fiscal year 2001. We record revenue net of
agency commissions, estimated subscription cancellations and newsstand returns.

     Advertising. Advertising rates and rate structures vary among our
publications and are based on, among other things, the circulation of the
particular publication, the readership demographics, the scheduled frequency and
the size and placement of the advertisement in the publication. Our advertising
revenue is influenced by a number of external factors, including the volume of
new technology product introductions, the amount and allocation of marketing
expenditures by our advertising clients and the extent to which our customers
elect to advertise using print media.

     Newsstand. We sold approximately 8.9 million single copy magazines for the
fiscal year ended March 31, 2001. Generally we receive approximately 57.0% of
the cover price of an individual magazine sold through a newsstand with the
balance of the cover price going to the magazine's distributor, wholesaler and
retailer.

     Subscriptions. Generally, we sell subscriptions to our publications either
directly by our circulation force or by an independent subscription direct
marketing companies or agents. We receive approximately 18.0% of the total price
of subscriptions sold through agents. In addition to agents, we have
historically sold subscriptions using a variety of techniques including direct
reply subscription cards, direct mail and the Internet.


                                       F-3

<PAGE>

     Other Revenue Sources. We also derive revenue from royalty arrangements,
testing services and mailing list rentals. Our most significant licensing
royalty agreement was with ZDNet, the Internet business of the seller. In
exchange for use of our editorial content on ZDNet's websites, ZDNet paid
royalties to us based on its annual revenue, net of bad debt expense and
discounts and subject to minimum and maximum annual payments. On January 19,
2001, we amended this agreement to provide that starting March 1, 2001, ZDNet's
license will no longer be exclusive and on March 1, 2002, all of ZDNet's license
rights to content from our magazines will terminate. As consideration for
amending the license agreement, ZDNet is obligated to pay us a royalty
termination fee of $4.5 million, $2.2 million of which was paid on March 1, 2001
and $2.3 million of which is payable on March 1, 2002, and ZDNet was not
obligated to pay any royalties with respect to licensed content after February
28, 2001. Under a service agreement with ZDI we produced and distributed ZDI's
Computer Shopper magazine in return for a $5.0 million annual fee, which we
recognize as revenue. ZDI reimbursed us for all costs incurred in producing and
distributing Computer Shopper. On January 19, 2001, we agreed with ZDI to
terminate the service agreement and enter into a new agreement effective March
1, 2001. The new agreement contains substantially similar terms, except that ZDI
will not be required to pay us any annual fee and will only be required to
reimburse us for our out-of-pocket expenses incurred in connection with
producing and distributing Computer Shopper. ZDI paid us a $2.0 million
non-refundable termination fee in connection with the termination of the
original service agreement on March 1, 2001. The new agreement expires on
February 28, 2003, however, ZDI may terminate the agreement at any time with 90
days prior written notice.

     We will recognize the revenue associated with these termination payments
over the term of the respective agreement.

Operating costs

     The principal components of our production costs are raw materials,
printing and distribution, which represented 39.0%, 34.0% and 27.0%,
respectively of our total 2001 publishing production expenses. Our principal raw
material is paper. Paper supply and prices are subject to volatility and may be
significantly affected by many factors, including market and economic
conditions.

     Our other principal operating costs are selling, general and administrative
expenses, including editorial costs. Included in these costs are salaries, sales
commissions and benefits along with marketing and promotion expenses related to
advertising and circulation. Prior to the transactions, we received an
allocation of centralized costs from the seller based on estimated utilization.
We have since built an infrastructure to service our needs as a stand-alone
entity.

Factors affecting future periods

     Our revenue and profitability are influenced by a number of external
factors, including the volume of new technology product introductions, the
amount and allocation of marketing expenditures by our clients, the extent to
which sellers elect to advertise using print and online media, changes in paper
prices, and competition among computer technology marketers, including print
publishers, and providers of other technology information services. Accordingly,
we may experience fluctuations in revenue from period to period. Many of our
large customers concentrate their advertising expenditures around major new
product or service launches. Marketing expenditures by technology companies can
also be affected by factors generally affecting the technology industry,
including pricing pressures and temporary surpluses of inventory. Revenue and
profitability are also influenced by product mix and the timing and frequency of
our new product launches and launches in new markets, as well as by
acquisitions. New publications generally require several years to achieve
profitability and upon achieving initial profitability, often have lower margin
than more established publications. Accordingly, our revenue from year to year
may be affected by the number and timing of new product launches. If we conclude
that a new publication or service will not achieve certain milestones with
regard to revenue, profitability and cash flow within a reasonable period of
time, management may discontinue such publication or service or merge it into
another existing publication, trade show or service.

     Current economic trends in the United States have had a negative impact on
our business. These trends include consolidation among our advertisers,
increases in postage costs and a general decline in advertising spending. In
anticipation of this decline, we have begun a restructuring program during which
we expect to consolidate operations and eliminate headcount to reduce costs. We
expect to finalize these initiatives during the second quarter of our fiscal
year and anticipate incurring employee termination and related costs, which have
not yet been quantified.

     Further, as a result of a significant decline in our fiscal 2002 first
quarter operating results, we do not expect to meet certain financial ratios
required under our credit facility. Accordingly, in July 2001 we amended our
credit facility. See Liquidity and Capital Resources.


                                       F-4

<PAGE>

Results of operations

Comparison of the fiscal year ended March 31, 2001 and the year ended December
31, 1999 (Predecessor)

     The table below sets forth our consolidated summary of operations (in
millions of dollars and as a percentage of net revenue) for the fiscal year
ended March 31, 2001 and the year ended December 31, 1999 (Predecessor),
respectively. For comparative purposes, pro forma adjustments have been made to
the 1999 figures to exclude the operating results of eTESTING LABS and ZDP's
wholly-owned international operations which, as described above, have been sold.

<TABLE>
<CAPTION>
                                           For the
                                           fiscal                                        For the    For the
                                            year                                         fiscal   year ended
                                           ended             For the year ended       year ended  December 31,
                                            March            December 31, 1999          March 31,    1999
                                          31, 2001             (Predecessor)              2001    (Predecessor)
                                          --------  --------------------------------- ----------- -------------
                                                                                         Actual    Pro Forma
                                                                                       ---------- -------------
                                                             International
                                                              Operations
                                                              & eTESTING                   As a percent of
                                          Actual     Actual     LABS        Pro Forma        Revenue, net
                                         -------   --------  -------------  ---------  ------------------------
<S>                                     <C>        <C>        <C>           <C>           <C>          <C>
Statement of Operations Data:

Revenue, net .......................    $  440.5   $  535.7     $  81.5     $  454.2       100.0%      100.0%
Cost of production .................       139.3      158.0        27.9        130.1        31.6        28.6
Selling, general and administrative        254.5      281.6        61.4        220.3        57.8        48.5
expenses
Depreciation and amortization ......        66.1       82.5         3.1         79.4        15.0        17.5
Write-down of intangible assets ....        --        778.8         2.8        775.9         n/a         n/a
                                        --------   --------     -------     --------
Loss from operations ...............       (19.4)    (765.2)      (13.7)      (751.5)
Equity in income from joint ventures         1.3        1.9        --            1.9         0.3         0.4
Interest expense, net ..............        54.7       --          --           --          12.4         n/a
Income tax (benefit) provision .....         0.6     (180.3)       --         (180.3)        0.1       (39.7)
                                        --------   --------     -------     --------
Net loss ...........................    $  (73.4)  $ (583.0)    $ (13.7)    $ (569.3)
                                        ========   ========     =======     ========

Other Data:

EBITDA, as defined herein ..........    $   48.0   $  103.6     $  (7.8)    $  111.4
EBITDA, as defined - Restricted ....        97.5        n/a         n/a          n/a
Subsidiaries
EBITDA, as defined - Unrestricted ..       (49.5)       n/a         n/a          n/a
Subsidiaries
</TABLE>

International operations & eTESTING LABS

   As discussed above, we determined to sell our international operations at the
time of the Acquisition and completed the sale in August 2000. Accordingly, the
net assets related to these operations were recorded as assets held for sale at
the estimated net proceeds from the sale and liquidation of the business, as
adjusted for estimated cash flows from these operations and an allocation of
interest expense for the estimated holding period. Additionally, eTESTING LABS
became an Unrestricted Subsidiary business unit in the fourth quarter of fiscal
2000. As a result, for the year ended December 31, 1999 pro forma adjustments
have been made to revenue, cost of production and selling, general and
administrative expense to exclude these results. The financial statements for
the fiscal year ended March 31, 2001 do not reflect any results of operations of
the international operations. The discussion below excludes the impact of the
above-described international operations for the year ended December 31, 1999.

Revenue, net

   Revenue was $440.5 million for the fiscal year ended March 31, 2001, compared
to $454.2 million in the year ended December 31, 1999, a decrease of $13.7
million, or 3.0%. Revenue from the Unrestricted Subsidiaries was $10.5 million
for the fiscal year ended March 31, 2001, which primarily related to service
fees earned by eTESTING LABS and advertising revenue from new publications, The
Net Economy and Expedia Travels. Excluding the Unrestricted Subsidiaries,
advertising revenue decreased by $17.2 million, or 5.1%, to $322.5 million. This
decrease in advertising revenue was due to a 17.2% decline in advertising pages,
partially offset by 13.3% increase in average revenue per page. Other revenue,
which is primarily derived from royalties, mail list rentals and other services,
increased $9.3 million, or 45.6%, to $29.6 million. This increase is due
primarily to (1) $5.0 million of fees related to certain services we provide to
Computer Shopper, an unaffiliated magazine and (2) a $4.1 million increase in
royalty revenue, primarily due to a $1.5 million increase in license fees from
ZDNet. Circulation revenue decreased $15.9 million to $78.2 million, or 16.9%,
primarily related to fewer single-copy sales as compared to the year ended
December 31, 1999. Excluding the Unrestricted Subsidiaries, advertising,
circulation and other revenue accounted for 74.0%, 18.0% and 8.0% of our
consolidated net revenue during the fiscal year ended March 31, 2001, as
compared to 72.9%, 22.5% and 4.6% in the year ended December 31, 1999.


                                       F-5

<PAGE>

Cost of production

   Cost of production was $139.3 million for the fiscal year ended March 31,
2001 compared to $130.1 million for the year ended December 31, 1999, an
increase of $9.2 million, or 7.1%. Cost of production related to the
Unrestricted Subsidiaries was $7.6 million which primarily related to the new
publications, The Net Economy and Expedia Travels. Excluding the Unrestricted
Subsidiaries, cost of production increased $1.6 million, or 1.2%. This increase
was due to (1) an increase of approximately 5.7% in the total number of copies
printed to meet increased circulation levels in our aggregate magazine portfolio
and (2) an increase of approximately 5.5% in our average price per pound of
paper driven by (1) the mix of paper used in our publications and (2) an
increase in paper prices. These increases were partially offset by a decline in
total pages produced in our magazine portfolio. Cost of production, excluding
Unrestricted Subsidiaries, increased as a percentage of net revenue to 30.6%
from 28.6% in the previous period, due to the increased circulation levels
partially offset by higher advertising revenue per page being achieved.
Recently, a 2.6% increase in postage rates for calendar year 2001 was approved
by the Governors of the U.S. Postal Service. Although we may not be able to
recover the postage price increase in whole or in part in our pricing, we do not
believe that this increase will have a material adverse effect on our cash flows
or results of operations. In addition, a 1.6% increase effective July 2001 has
been requested by the U.S. Postal Service.

Selling, general and administrative expenses

   Selling, general and administrative expenses for the fiscal year ended March
31, 2001 were $254.5 million compared to $220.3 million for the year ended
December 31, 1999, an increase of $34.2 million, or 15.5%. Selling, general and
administrative expenses related to the Unrestricted Subsidiaries were $52.4
million and consisted mainly of operating, pre-publication and business
development expenses for our new publications and Internet ventures. Excluding
Unrestricted Subsidiaries, selling, general and administrative expenses
decreased $18.2 million, or 8.3%. This decrease was partially related to cost
reductions realized in administrative areas such as corporate sales, information
technology, finance and human resources, as well as reduced bad debt expense. In
addition, the prior year period includes approximately $3.0 million of costs
related to remediation of the Year 2000 problem. These selling, general and
administrative expense reductions were partially offset by increased editorial,
brand development, sales and marketing spending in support of our magazine
portfolio, brand repositioning and growth initiatives. Excluding Unrestricted
Subsidiaries, selling, general and administrative expenses as a percentage of
revenue decreased from 48.5% to 47.0% for the year ended December 31, 1999 and
fiscal year ended March 31, 2001, respectively. Selling, general and
administrative expenses related to the Unrestricted Subsidiaries are anticipated
to increase as development of these new businesses continues. As a result,
selling, general and administrative expenses, both in total and as a percentage
of revenue, are expected to increase in relation to the comparable prior year
period.

Interest expense, net

     Interest expense was $54.7 million for the fiscal year ended March 31, 2001
compared to no interest expense in the year ended December 31, 1999. This
increase is the result of indebtedness incurred in connection with the
Acquisition, and the issuance of our 12% senior subordinated notes due 2010, in
fiscal year 2001. Our weighted average debt outstanding was approximately $554.6
million and our weighted average interest rate was 10.9% for the fiscal year
ended March 31, 2001. Prior to the transactions, external financing transactions
were executed and funded by ZDI, as a result, interest expense of the
Predecessor is not applicable.

Equity in income from joint ventures

     Our equity in income from joint ventures decreased $0.6 million from $1.9
in the year ended December 31, 1999 to $1.3 million in the fiscal year ended
March 31, 2001, primarily due to a decrease in income from Mac Publishing LLC.

Income taxes

     The income tax provision of $0.6 million for the fiscal year ended March
31, 2001 and the income tax benefit of $180.3 million in the year ended December
31, 1999 represent effective rates of negative 0.9% and positive 23.6%,
respectively. The effective rate for the fiscal year ended March 31, 2001
results from certain minimum state and local taxes despite the consolidated
entity being in a pre-tax loss position. As a result of the Acquisition and the
different tax profiles of our Company and the Predecessor, the effective tax
rate of the Predecessor is not applicable or representative of our ongoing
business and income tax position.


                                       F-6

<PAGE>

Net loss

     Net loss of $73.4 million for the fiscal year ended March 31, 2001 improved
$509.6 million compared to net loss of $583.0 million for the year ended
December 31, 1999. The decline is primarily due to the write-down of intangible
assets totaling $778.8 million in the year ended December 31, 1999, to reflect
the fair value of the business based on the $780.0 purchase price for ZDP's
publishing assets. Excluding the results of ZDP's wholly-owned international
operations and eTESTING LABS, net loss for the year ended December 31, 1999 was
$569.3 million.

EBITDA

     EBITDA is defined as income before provision for income taxes, interest
expense, depreciation and amortization expense and other non-cash charges.
EBITDA, as defined is not a measure of performance under GAAP, and EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
from operating activities and other income or cash flow statement data prepared
in accordance with GAAP or as a measure of profitability or liquidity. EBITDA is
presented because it is commonly used by certain investors and analysts to
analyze a company's ability to service debt. EBITDA (subject to certain
adjustments) is also a component of our debt compliance calculations. However,
our method of computation may not be comparable to similarly titled measures of
other companies.

     EBITDA for the fiscal year ended March 31, 2001, was $48.0 million. EBITDA
related to the Unrestricted Subsidiaries was a loss of $49.5 million. Excluding
Unrestricted Subsidiaries, EBITDA was $97.5 million compared to $111.4 million
for the year ended December 31, 1999, a $13.9 million or 12.5% decrease.

Comparison of the period January 1, 2000 to April 4, 2000 (Predecessor) and the
three months ended March 31, 1999 (Predecessor)

Revenue, net

     Revenue increased by $2.1 million, or 1.7%, from $126.8 million in the
three months ended March 31, 1999 to $128.9 million in the comparable period in
2000. This increase reflects significant growth in our newer publications,
including Yahoo! Internet Life and Interactive Week, partially offset by lower
advertising in certain of our business publications. Margin pressures on smaller
computer equipment manufacturers, and the resulting consolidation in that
industry have contributed to a reduced demand for advertising in certain of our
business publications. Revenue from international operations, which generated
15.2% of revenue, decreased $0.5 million, or 2.7%. Other revenue increased $2.1
million, or 45.5%, due to an increase in royalties from ZDNet and the launch of
eTESTING LABS external testing services.

Cost of production

     Production costs decreased by $0.8 million, or 1.9%, from $39.5 million in
the three months ended March 31, 1999 to $38.7 million in the comparable period
in 2000. This represents a decrease in cost of production as a percent of
revenue from 31.1 % in 1999 to 30.0% in 2000. These decreases were primarily due
to a net decline in advertising pages and an increase in advertising revenue per
page.

Selling, general and administrative expenses

     Selling, general and administrative expenses increased by $11.7 million, or
18.3%, from $63.9 million in the three months ended March 31, 1999 to $75.6
million in the comparable period in 2000. This represents an increase in
selling, general and administrative expenses as a percent of revenue from 50.4%
in 1999 to 58.7% in 2000. This increase was primarily related to increased
spending in support of our newer publications, including Yahoo! Internet Life
and Interactive Week. The areas of such spending and the increase over all
domestic titles include editorial ($2.1 million), circulation ($1.9 million) and
sales and marketing ($5.7 million). In addition, expenses at the newly launched
eTESTING LABS increased $1.3 million, as the business pursues third party
opportunities. Some savings were realized in administrative areas as a result of
the cost reductions prior to the transactions.

Stock-based compensation expense

     Stock-based compensation of $0.4 million in the period January 1 to April
4, 2000 is a non-cash charge that is recorded over the vesting period of certain
ZDNet stock option grants to our employees. This represents a slight decrease
from the 1999 period due to forfeitures of options.


                                       F-7

<PAGE>

Depreciation and amortization

     Total depreciation and amortization decreased $8.0 million, or 40.1%, from
$20.1 million in the three months ended March 31, 1999 to $12.1 million in the
comparable period in 2000. This decline resulted from the $778.8 million
write-down of intangible assets that was recorded in December 1999 to reflect
the fair value of the business based on the $780.0 million purchase price. This
write-down resulted in lower goodwill amortization in subsequent periods.

Equity in income and loss from joint ventures

     Our equity share in income and losses from joint ventures increased $0.4
million from a loss of $0.1 million in the three months ended March 31, 1999 to
$0.3 million in the three months ended March 31, 2000 primarily due to stronger
performance from the Mac Publishing LLC joint venture.

Income taxes

     The income tax expenses of $0.7 million in the three months ended March 31,
1999 and $2.1 million in the comparable period in 2000 represent effective rates
of 24.6% and 59.2%, respectively. This 2000 effective rate is significantly
higher than the federal statutory rate of 35.0% due to non-recognition of losses
in foreign jurisdictions and the impact of state and local taxes. The 1999
effective tax rate, which is based on the full year effective rate, is lower
than the federal statutory rate of 35.0% primarily due to the amortization of
non-deductible goodwill.

Comparison of the year ended December 31, 1999 (Predecessor) and the year ended
December 31, 1998 (Predecessor)

Revenue, net

     Revenue decreased by $5.3 million, or 1.0%, from $541.0 million in 1998 to
$535.7 million in 1999. This decline was primarily due to the absence of revenue
from three publications discontinued in October 1998. Excluding discontinued
publications, revenue increased $18.8 million, or 3.6% from 1998. This growth
was due to advertising and circulation increases in our newer publications,
including Yahoo! Internet Life and Interactive Week, partially offset by lower
advertising revenues in certain of our business publications. Margin pressures
on smaller computer equipment manufacturers, industry and product delays, lower
demand in Asia and reduced advertising budgets to fund expenses associated with
the Year 2000 transition contributed to a reduced demand for advertising pages
in our established magazines. However, this decline was partially offset by
higher advertising revenue per page in 1999. Revenue from international
operations, which generated 14.8% of revenue, was relatively unchanged. Other
revenue increased $4.3 million, or 21.4%, from 1998 due to an increase in
royalties from ZDNet and the launch of eTESTING LABS' external testing services.

Cost of production

     Production costs decreased by $9.3 million, or 5.5%, from $167.3 million in
1998 to $158.0 in 1999. This represents a decrease in production costs as a
percent of revenue from 30.9% in 1998 to 29.5% in 1999. The decrease was
primarily due to the absence of costs related to three publications that were
discontinued in the fourth quarter of 1998. In addition, a net decline in
advertising pages and higher advertising revenue per page contributed to the
decline.

Selling, general and administrative expenses

     Selling, general and administrative expenses decreased by $2.5 million, or
1.0%, from $284.1 million in 1998 to $281.6 million in 1999. This represents a
decrease in selling, general and administrative expenses as a percent of revenue
from 52.5% in 1998 to 52.6% in 1999. The decrease reflects efficiencies gained
through the 1998 restructuring in which three magazines were discontinued.

Stock-based compensation expense

     Stock-based compensation is a non-cash charge that is recorded over the
vesting period of certain ZDNet stock option grants to our employees. These
options were granted on December 21, 1998, as such 1999 is the first period in
which the related expense is incurred.


                                       F-8

<PAGE>

Year 2000 remediation costs

     Year 2000 remediation costs represent the costs we incurred to ensure our
various computer systems were Year 2000 compliant. No such charges were incurred
in 1998.

Depreciation and amortization

     Total depreciation and amortization increased $0.2 million from $82.3
million in 1998 to $82.5 million in 1999.

Restructuring

     Margin pressure on smaller computer equipment manufacturers, industry and
product delays, lower demand in Asia and reduced advertising budgets to fund
expenses associated with Year 2000 transition contributed to a reduced demand
for advertising in our magazines, principally, PC Magazine, Ziff Davis SMART
BUSINESS (formerly PC/Computing) and eWeek (formerly PC Week).

     As a result of this reduced demand, in October 1998 we announced a
restructuring program with the intent of significantly reducing our costs base.
We incurred a pre-tax charge of $40.0 million in connection with this
restructuring program. The charge was reported as a component of income from
operations for the fourth quarter of 1998. The charge included asset impairment
costs ($34.2 million), employee termination costs ($3.9 million) and costs to
exit activities ($1.9 million) principally resulting from the discontinuation of
three publications, Windows Pro, Internet Business and Equip, and the reduction
of our work force by 184 employees. The following sets forth additional detail
concerning the principal components of the charge:

o    Asset impairment costs were a non-cash write-off of intangible assets,
     primarily subscriber lists, advertising lists and tradenames associated
     with the discontinued publications.

o    Employee termination costs related to severed personnel at the closed
     publications as well as a rationalization and resulting workforce reduction
     of the remainder of our operations. Employee termination costs included
     payments for severance and earned vacation as well as the costs of
     outplacement services and the provision of continued benefits to personnel.

o    Costs to exit activities reflect the costs associated with the final
     closure of discontinued publications including the costs to reduce office
     space under lease as a result of the reduced level of employees.

Write-down of intangible assets

     The $778.8 million write-down of intangible assets was recorded to reflect
the fair value of the business based on the $780.0 million purchase price.

Equity in income from joint ventures

     Our equity share in income from joint ventures decreased $0.3 million, or
13.0%, from $2.2 million in 1998 to $1.9 million in 1999 primarily due to the
acquisition of the remaining 50% interest of FamilyPC in May 1998. This resulted
in FamilyPC being consolidated from that time, therefore its earnings are no
longer reflected as earnings from joint ventures.

Income taxes

     The 1999 income tax benefit of $180.3 million represents an effective tax
rate of 23.6%, slightly higher than the 22.5% effective rate experienced in
1998. These effective rates are lower than the federal statutory rate of 35.0%
primarily due to the amortization of non-deductible goodwill.

Liquidity and Capital Resources

     Total cash at March 31, 2001 was $24.9 million of which $5.3 million is
earmarked for Unrestricted Subsidiaries.

     Under our senior credit facility, we have Restricted and Unrestricted
Subsidiaries. As described above, the Unrestricted Subsidiaries are LaunchCo and
InternetCo and, at the time of the Acquisition, $50.0 million of our equity
proceeds (contributed by Willis Stein and co-investors) were earmarked for
funding of these subsidiaries. In March 2001, an equity


                                       F-9

<PAGE>

contribution of $17 million was also earmarked for funding of the Unrestricted
Subsidiaries. The Restricted Subsidiaries represent our remaining subsidiaries
and are generally comprised of businesses that were acquired from ZDI. The
senior credit facility and indenture governing the $250.0 million 12% notes due
2010 place restrictions on funding from the Restricted Subsidiaries to the
Unrestricted Subsidiaries.

     Details of changes in cash and cash equivalents during the fiscal year
ended March 31, 2001, are discussed below. Prior to April 5, 2000, the
Predecessor participated in ZDI's centralized cash management system. As such,
external financing transactions including debt service and capital spending for
major capital projects were executed and funded by ZDI. Predecessor cash
balances primarily represent cash held by international operations.

     Operating Activities. We currently rely primarily upon cash flow from
operating activities, borrowings under our revolving credit facility and equity
contributions to finance our operations and expansion. Cash provided by
operating activities was $37.6 million the fiscal year ended March 31, 2001,
compared to $91.4 million for the year ended December 31, 1999, a decrease of
$53.8 million or 58.9%. The decrease in cash provided by operating activities
was due primarily to lower EBITDA and $47.4 million of cash interest paid,
partially offset by increased cash flow associated with certain working capital
improvements achieved during the fiscal year ended March 31, 2001. These working
capital improvements mainly related to reductions in advertising accounts
receivable primarily due to enhanced credit and collection activities since the
Acquisition and reductions in inventory due to our decision to outsource a
significant portion of our paper buying operations to our printers resulting in
a decreased investment in paper inventory. Cash flow from accounts receivable
and inventory increased $18.3 million and $8.1 million, respectively, when
compared to the year ended December 31, 1999.

     Investing Activities. Cash used by investing activities of $802.5 million
in the fiscal year ended March 31, 2001 reflects cash used primarily for our
purchase of ZDP at a total cost of $802.0 million, including fees and expenses,
and $33.7 million of capital expenditures ($10.6 million associated with the
Restricted Subsidiaries). These cash investments were partially offset by net
proceeds from the sale of our international operations of $28.3 million, $1.7
million from the sale of our ZDNet Media (China) LDC (previously named Ziff
Davis Richina Media LDC) and $3.6 million of distributions received from our
MacWorld joint venture. We earmarked and used $3.3 million of our international
proceeds to partially fund the Restricted Subsidiary capital expenditures during
the fiscal year ended March 31, 2001. We anticipate making additional capital
investments in connection with the continued development of the businesses of
the Unrestricted Subsidiaries, however, the amount and timing of such
investments has not yet been determined and will vary depending upon the
implementation of the related business plans.

     Financing Activities. Cash provided by financing activities was $787.8
million for the fiscal year ended March 31, 2001. In conjunction with the
Acquisition, we (1) entered into a $405.0 million senior credit facility of
which $355.0 million was funded at the closing of the Acquisition, (2) issued
$175.0 million senior subordinated notes and (3) received equity contributions
from our parent company, Ziff Davis Holdings, Inc., of $335.0 million ($333.0
million of which was received during the fiscal year ended March 31, 2001) that
was funded by Willis Stein and its co-investors. In July 2000, we completed an
offering of $250.0 million 12% senior subordinated notes due 2010 ("the Notes"),
the proceeds of which were primarily used to repay indebtedness. In connection
with the foregoing financing activities, we paid approximately $30.0 million in
costs and expenses related to our various debt agreements. In March 2001, the
Company received an additional $17.0 million equity contribution from our parent
company, Ziff Davis Holdings Inc., which was earmarked to fund the Unrestricted
Subsidiaries.

     Proceeds from the Notes were used to (1) repay the $175.0 million senior
subordinated notes in full, (2) prepay approximately $59.7 million of the senior
credit facilities, (3) pay $6.8 million of accrued interest related to senior
and subordinated debt and (4) pay approximately $8.5 million of transaction
related fees. Following the Notes offering, the senior credit facility consisted
of a $295.3 million term loan and a $50.0 million revolving credit facility, of
which up to $10.0 million may be utilized for letters of credit. The term loan
matures in two tranches, one due December 31, 2006 and the other due March 31,
2007, respectively, with quarterly payments beginning March 31, 2001. At March
31, 2001, $7.4 million of our bank debt was due within the next 12 months.
Borrowings under the revolving credit facility are due December 31, 2006.

     In addition to the $59.7 million prepayment discussed above, we prepaid
$84.0 million of principal outstanding under senior credit facilities during the
fiscal year and made a $2.1 million scheduled principal payment, reducing our
total debt balance to $459.2 million and our senior debt balance to $209.2
million. Based on our weighted average interest rate for fiscal 2001, these
principal prepayments will result in a reduction of approximately $8.5 million
in annual interest expense.

     At March 31, 2001, we were required to have a ratio of debt to EBITDA of
4.5 to 1.0. If the ratio was in excess of 4.5 to 1.0, either we would need to
repay indebtedness under our senior credit facilities or Willis Stein and its
co-investors would


                                       F-10

<PAGE>

need to contribute to us a maximum of $50.0 million in additional equity so that
we could repay indebtedness under our senior credit facilities in order to
reduce our ratio of debt to EBITDA. As of March 31, 2001, we were in compliance
with our debt covenants and no additional equity payment was required.

     Our senior credit facility requires that we enter into hedge agreements so
that at least 50% of our funded debt be effectively set at a fixed rate of
interest. On September 27, 2000, we entered into an interest rate swap agreement
in the notional amount of $25.0 million and a maturity date of October 11, 2003.
Under this swap agreement, we receive a floating rate of interest based on
three-month LIBOR, which resets quarterly, and pay a fixed rate of interest each
quarter for the term of the agreement. This swap agreement, coupled with the
Notes, results in $275.0 million or 59.9% of our funded debt being effectively
set at a fixed rate of interest as of March 31, 2001.

     In August 2000, our European subsidiaries and we completed the sale of our
wholly-owned International operations (excluding international licensing and
international joint ventures) to VNU N.V. and affiliates for a purchase price of
approximately $42.0 million.

     The purchase price for these assets consists of:

(1)  $31.0 million in cash subject to post closing adjustments; plus

(2)  $3.2 million related to purchase of inventory, prepaid expenses and fixed
     assets, excluding leasehold improvements offset by approximately $3.5
     million of net subscription liabilities assumed; and

(3)  an additional $15.0 million to be paid over a period of five years in five
     annual payments of $3.0 million which we have recorded at a net present
     value of $11.3 million.

     We retained most of the related accounts receivable and liabilities. At
closing, we received net proceeds of $30.9 million and have incurred $2.7
million in net costs and expenses associated with the sale and liquidation of
these operations. Under our senior credit agreement, these net proceeds must be
used for certain permitted capital expenditures and acquisitions within 360 days
from the sale date or they must be used to prepay principal due under our senior
credit facility. During our fiscal year, we utilized $3.3 million of the
international proceeds for capital spending. In addition, we utilized $24.9
million of the international proceeds as part of our debt prepayments in the
fiscal year ended March 31, 2001.

     Under the terms of our credit agreement, the Unrestricted Subsidiaries and
the Restricted Subsidiaries are largely to be funded through distinct sources.
In connection with the Acquisition, we earmarked $50.0 million of our equity
proceeds, contributed by Willis Stein and co-investors, for funding the working
capital and financing needs of LaunchCo and InternetCo. The March 2001 equity
contribution of $17 million was also earmarked for funding of the Unrestricted
Subsidiaries. At March 31, 2001, $5.3 million of the earmarked contributions
remained for use by the Unrestricted Subsidiaries. In May 2001, an additional
$20 million of equity was contributed to fund the Unrestricted Subsidiaries. As
we continue to develop and launch products or businesses within LaunchCo and
InternetCo, we may seek additional funding, the amount and timing of such
funding needs will vary depending upon approval and implementation of the
related business plans. Under the terms of our amended debt agreements, the
Restricted Subsidiaries are generally not able to invest in the Unrestricted
Subsidiaries except that (1) equity specifically contributed to us and earmarked
for use by the Unrestricted Subsidiaries and (2) proceeds from specified assets
sales may both be used to fund the Unrestricted Subsidiaries. We are currently
seeking to raise additional funding for the Unrestricted Subsidiaries to meet
anticipated requirements in the second fiscal quarter. However, there can be no
assurance that we will be successful in raising the needed funds. Should funding
not be available, we would reduce or discontinue these operations as
appropriate.

     Our Restricted Subsidiaries have historically been funded by cash provided
by operations and the availability of funds under our revolving credit facility.
However, due to a substantial decrease in the number of advertising pages
published in our publications in the first fiscal quarter of 2002, we expect
that we will not be in compliance with certain debt covenants contained in our
senior credit facility at the end of the first fiscal quarter of 2002.
Accordingly, we have amended our senior credit facility. This amendment, among
other things, amends the compliance covenants such that we would expect to be in
compliance with such covenants at June 30, 2001 and adjusts required ratios for
the period through September 30, 2002 to levels more in line with our
performance expectations. In addition, the availability of the existing $50
million revolving credit facility was permanently reduced to $30 million, of
which only $10 million would be available during the amendment period.

     In consideration for amending the senior credit facility on July 13, 2001,
Willis Stein and its co-investors contributed $50 million of additional equity
to Ziff Davis Holdings Inc., our parent Company. The $50 million was
subsequently contributed to the Company of which $35 million is being used to
repay senior indebtedness and $15 million is restricted to


                                       F-11

<PAGE>

pay interest due on the Notes on July 16, 2001. Under the amendment, net
proceeds of up to $50.0 million from the sale of certain assets will not have to
be used to repay indebtedness and may be used to fund the Unrestricted
Subsidiaries. The Company has not entered any agreements with respect to such
asset sales. In addition, interest rates under the credit facility will be
adjusted and we have paid a fee to our lenders totaling approximately $0.5
million.

     There can be no assurance that the number of advertising pages published in
our publications and related operating performance will improve and that we will
be in compliance with our loan covenants in the future. We continuously evaluate
potential acquisitions of businesses, which complement our existing operations.
Depending on various factors including, among others, the cash consideration
required in such potential acquisitions, we may determine to finance any such
transactions with existing sources of liquidity and may determine to consider
such acquisitions as a component of either the Restricted or Unrestricted
Subsidiaries.

Cyclicality

     Revenue from advertising accounts for approximately 74% of our total
revenue. Cyclicality in advertising expenditures generally, or with respect to
magazine-based advertising specifically, could therefore have a material effect
on our business, financial condition or operating results. Further, economic
trends could also significantly impact the growth of our revenue and operating
results with respect to prior periods.

Seasonality

     Historically, our business has been seasonal because we have earned a
significant portion of our annual revenue in our third fiscal quarter. This is
largely due to the general increase in publishing revenue in the third quarter
as a result of increased consumer buying activity during the holiday season.
Factors affecting the seasonality of our business are holiday spending, customer
budgetary spending patterns, new product introductions and general economic
trends. Quarterly results may also be affected by the timing and magnitude of
acquisitions and related costs, variations in the number of magazines sold in
any quarter, customer spending patterns, termination of existing agreements,
costs incurred in connection with internal growth, changes in our mix of
customers, contracts of our business, fluctuation in the costs of raw materials
and other general economic conditions. Accordingly, our operating results in any
particular quarter may not be indicative of the results that can be expected for
any quarter or for the entire year. We cannot assure you that our third quarter
revenue for fiscal 2002 or any future year will be higher than revenue for our
other quarters. We have not had significant overhead and other costs generally
associated with large seasonal fluctuations.

Inflation and Fluctuations in Paper Prices and Postage Costs

     We continually assess the impact of inflation and changes in paper and
postage prices as these costs represent a significant portion of our cost of
production. Paper prices began to rise in 1994, rose significantly in 1995 and
1996 and then decreased in 1997. During 1998 and 1999, paper prices were
relatively flat with a price increase occurring in 2000. In 2001 paper prices
have declined

     During fiscal 2001, we outsourced the majority of our paper buying to
printers. As a result we hold significantly lower levels of inventory and are
purchasing paper at market prices at the time of use.

     Postage rates increased 5.0% in January 1999, 9.9% in January 2001 and 2.6%
in April 2001 and the U.S. Postal Service has proposed a 1.6% increase in July
2001. Management considers announced increases in our pricing policies but there
can be no assurance we will recover these incurred costs.

     We continually review our purchasing and manufacturing processes for
opportunities to reduce costs and mitigate the impact of paper price and postage
rate increases. In that regard, we have consolidated from four to three printers
and outsourced the majority of our pre-press and paper buying operations to our
primary printers.
                                       F-12

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
Ziff Davis Media Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and changes in stockholder's
equity present fairly, in all material respects, the financial position of Ziff
Davis Media Inc and its subsidiaries (the "Company") at March 31, 2001 and for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America. 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 audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, 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
audit provides a reasonable basis for our opinion.

/S/  PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
New York, NY
May 14, 2001 except as to Note 24
which is as of July 16, 2001

                                      F-13

<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
Ziff Davis Media Inc.


In our opinion, the accompanying carve-out balance sheet and the related
carve-out statements of operations, cash flows and changes in division equity
present fairly, in all material respects, the financial position of Ziff Davis
Publishing (the "Company"), as defined in Notes 1 and 2 of the accompanying
financial statements, at December 31, 1999 and the results of its operations and
its cash flows for the period from January 1, 2000 to April 4, 2000 and the two
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America. 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
auditing standards generally accepted in the United States of America, 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 our opinion.

/S/  PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
New York, NY
May 14, 2001

                                       F-14

<PAGE>
                              ZIFF DAVIS MEDIA INC.


                           CONSOLIDATED BALANCE SHEETS
                  (dollars in thousands, except per share data)
<TABLE>
<CAPTION>


                                                                              March 31,     December 31,
                                                                                2001           1999
                                                                            -------------  -------------
                                    ASSETS                                                 (Predecessor)
<S>                                                                           <C>          <C>
Current assets:
   Cash and cash equivalents ..............................................   $  24,889    $     2,487
   Accounts receivable, net ...............................................      52,946         97,902
   Inventories ............................................................       1,102         10,881
   Deferred taxes .........................................................          --          4,911
   Prepaid expenses and other current assets ..............................      14,508         16,465
   Due from affiliate .....................................................         354             --
                                                                              ---------    -----------
     Total current assets .................................................      93,799        132,646
Property and equipment, net ...............................................      80,634         65,529
Deferred taxes ............................................................          --         41,814
Equity investments ........................................................      12,135          7,140
Intangible assets, net ....................................................     639,213        684,119
Other assets, net .........................................................      27,146             --
                                                                              ---------    -----------
     Total assets .........................................................   $ 852,927    $   931,248
                                                                              =========    ===========

                     LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
   Accounts payable .......................................................   $  11,994    $     5,839
   Accrued expenses and other current liabilities .........................      54,070         45,048
   Current portion of long term debt ......................................       7,460             --
   Unexpired subscriptions, net ...........................................      47,179         50,670
   Due to management ......................................................          --          2,966
                                                                              ---------    -----------
     Total current liabilities ............................................     120,703        104,523
Long-term debt ............................................................     451,707             --
Other non-current liabilities .............................................       1,952             --
                                                                              ---------    -----------
     Total liabilities ....................................................     574,362        104,523
                                                                              ---------    -----------

Commitments and contingencies (Notes 17 and 18)
Stockholder's equity:
   Common stock, March 31, 2001 - $0.01 par value, 1,000 shares
     authorized, issued and outstanding; December 31, 1999 - not applicable          --             --
   Additional paid-in capital .............................................     352,000             --
   Division capital .......................................................          --      1,447,245
   Accumulated deficit ....................................................     (73,435)      (616,668)
   Deferred compensation ..................................................          --         (2,359)
   Accumulated other comprehensive loss ...................................          --         (1,493)
                                                                              ---------    -----------
     Total stockholder's equity ...........................................     278,565        826,725
                                                                              ---------    -----------
     Total liabilities and stockholder's equity ...........................   $ 852,927    $   931,248
                                                                              =========    ===========
</TABLE>

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

                                       F-15

<PAGE>

                              ZIFF DAVIS MEDIA INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                       Period from
                                                    Fiscal year         January 1,         Year ended         Year ended
                                                  ended March 31,      2000 to April      December 31,       December 31,
                                                       2001               4, 2000             1999               1998
                                                  -----------------   ----------------  -----------------  ---------------
                                                                       (Predecessor)     (Predecessor)      (Predecessor)
<S>                                                  <C>                 <C>               <C>                <C>
Revenue, net:                                        $ 440,485           $128,941          $ 535,709          $ 540,977
Cost of operations:
   Cost of production ..........................       139,284             38,733            158,040            167,284
   Selling, general and administrative expenses        254,542             75,563            277,736            284,098
   Depreciation and amortization of property
     and equipment .............................        16,599              3,413             13,461             15,068
   Amortization of intangible assets ...........        49,499              8,653             69,016             67,195
   Year 2000 remediation expense ...............            --                 --              3,027                 --
   Non-cash stock-based compensation expense ...            --                446                866                 --
   Write-down of intangible assets .............            --                 --            778,760                 --
   Restructuring charges .......................            --                 --                 --             39,995
                                                     ---------           --------          ---------          ---------
Income (loss) from operations ..................       (19,439)             2,133           (765,197)           (32,663)
Equity in income from joint ventures ...........         1,339                266              1,874              2,154
Interest expense, net ..........................        54,677                 --                 --                 --
                                                     ---------           --------          ---------          ---------
   Net income (loss) before income taxes .......       (72,777)             2,399           (763,323)           (30,509)
Income tax (benefit) provision .................           658              2,095           (180,289)            (6,858)
                                                     ---------           --------          ---------          ---------
   Net income (loss) ...........................     $ (73,435)          $    304          $(583,034)         $ (23,651)
                                                     =========           ========          =========          =========
</TABLE>

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

                                      F-16

<PAGE>
                              ZIFF DAVIS MEDIA INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  (dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                            Fiscal year           Period from         Year ended       Year ended
                                                              ended             January 1, 2000       December 31,     December 31,
                                                          March 31, 2001        to April 4, 2000          1999             1998
                                                          --------------        ----------------     -------------    -------------
                                                                                  (Predecessor)      (Predecessor)    (Predecessor)
<S>                                                         <C>                    <C>                <C>               <C>
Cash flows from operating activities:
Net (loss) income ....................................      $ (73,435)             $    304           $(583,034)        $(23,651)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
   Depreciation and amortization .....................         66,098                12,066              82,477           82,263
   Equity in income from joint ventures ..............         (1,339)                 (266)             (1,874)          (2,154)
   Deferred tax provision (benefit) ..................             --                 2,095            (185,978)         (11,309)
   Provision for doubtful accounts ...................          2,668                 1,665               8,977           10,495
   Non-cash rent expense (credit) ....................          1,995                   404               1,774           (1,794)
   Stock-based compensation expense ..................             --                   446                 866               --
   Amortization of debt issuance costs ...............          2,135                    --                  --               --
   Restructuring charge ..............................             --                    --                  --           39,995
   Write-down of intangible assets ...................             --                    --             778,760               --
   Changes in operating assets and liabilities:
     Accounts receivable .............................         15,421                 4,981              (2,909)          (9,719)
     Inventories .....................................          9,284                  (406)              1,155            1,582
     Accounts payable and accrued expenses ...........         31,265                (7,438)             (4,047)          (9,471)
     Unexpired subscriptions, net ....................         (4,901)                2,526                (655)          (5,017)
     Due from affiliate ..............................           (354)                   --                  --               --
     Prepaid expenses and other, net .................        (11,219)               (1,136)             (4,083)           9,564
                                                            ---------              --------           ---------         --------
Net cash provided by operating activities ............         37,618                15,241              91,429           80,784
                                                            ---------              --------           ---------         --------
Cash flows from investing activities:
   Capital expenditures ..............................        (33,655)               (1,792)            (10,840)         (17,559)
   Distributions from joint venture ..................          3,600                    --               4,000               --
   Net proceeds from sale of joint venture ...........          1,700                    --                  --               --
   Net proceeds from sale of international operations          28,267                    --                  --               --
   Acquisitions and investments, net of cash acquired            (505)                 (816)             (9,498)            (600)
   Acquisition of ZDP, net of cash acquired ..........       (801,953)                   --                  --               --
                                                            ---------              --------           ---------         --------
Net cash used by investing activities ................       (802,546)               (2,608)            (16,338)         (18,159)
                                                            ---------              --------           ---------         --------
Cash flows from financing activities:
   Proceeds from issuance of equity securities .......        350,000                    --                  --               --
   Proceeds from long-term borrowings ................        605,000                    --                  --               --
   Repayment of borrowings under senior credit
   facilities ........................................       (145,833)                   --                  --               --
   Proceeds from issuance of senior subordinated notes        175,000                    --                  --               --
   Repayment of senior subordinated notes ............       (175,000)                   --                  --               --
   Debt issuance costs ...............................        (21,350)                   --                  --               --
   Capital returned to ZDI, net ......................             --               (10,488)            (78,913)         (60,581)
                                                            ---------              --------           ---------         --------
Net cash provided (used) by financing activities .....        787,817               (10,488)            (78,913)         (60,581)
                                                            ---------              --------           ---------         --------
Net increase (decrease) in cash and cash equivalents .         22,889                 2,145              (3,822)           2,044
Cash and cash equivalents at beginning of period .....          2,000                 2,487               6,309            4,265
                                                            ---------              --------           ---------         --------
Cash and cash equivalents at end of period ...........      $  24,889              $  4,632           $   2,487         $  6,309
------------------                                          =========              ========           =========         ========

Cash paid during the year for:
   Interest ..........................................      $  47,442              $     --           $      --         $     --
   Income taxes ......................................          1,301                    --                  --               --
                                                            ---------              --------           ---------         --------
                                                            $  48,295              $     --           $      --         $     --
                                                            =========              ========           =========         ========
</TABLE>

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

                                      F-17

<PAGE>




                              ZIFF DAVIS MEDIA INC.

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                                           Accumulated
                                                                                              Other
                                              Division      Accumulated      Deferred     Comprehensive      Total     Comprehensive
Predecessor                                    Capital        Deficit      Compensation       Income        Division   Income (Loss)
                                               -------        -------      ------------       ------        --------   -------------
                                                                                                             Equity

<S>                 <C> <C>                     <C>            <C>          <C>           <C>            <C>           <C>
Balance at December 31, 1997 ................   $ 1,556,171    $  (9,983)   $    --        $    10        $ 1,546,198
Net loss ....................................            --      (23,651)        --             --            (23,651)    $ (23,651)
Issuance of stock options ...................         3,417           --     (3,417)            --                 --            --
Other comprehensive income:
   Foreign currency translation adjustment               --           --         --            295                295           295
                                                                                                                          ---------
Comprehensive loss ..........................                                                                             $ (23,356)
                                                                                                                          =========
Basis difference in assets acquired from ....       (18,224)          --         --             --            (18,224)
related party
Contribution of office space constructed ....        22,579           --         --             --             22,579
by ZDI
Return of capital ...........................       (60,581)          --         --             --            (60,581)
                                                -----------    ---------    -------        -------        -----------
Balance at December 31, 1998 ................   $ 1,503,362    $ (33,634)   $(3,417)       $   305        $ 1,466,616
Net loss ....................................            --     (583,034)        --             --           (583,034)    $(583,034)
Stock-based compensation ....................            --           --        866             --                866            --
Forfeiture of compensatory stock options ....          (192)          --        192             --                 --            --
Other comprehensive income:
   Foreign currency translation adjustment               --           --         --         (1,798)            (1,798)       (1,798)
                                                                                                                          ---------
Comprehensive loss ..........................                                                                             $(584,832)
                                                                                                                          =========
Contribution of office space constructed ....        22,988           --         --             --             22,988
by ZDI
Return of capital ...........................       (78,913)          --         --             --            (78,913)
                                                -----------    ---------    -------        -------        -----------
Balance at December 31, 1999 ................   $ 1,447,245    $(616,668)   $(2,359)       $(1,493)       $   826,725
Net income ..................................            --        1,442         --             --              1,442     $   1,442
Stock-based compensation ....................            --           --        446             --                446            --
Other comprehensive income:
   Foreign currency translation adjustment               --           --         --           (442)              (442)         (442)
                                                                                                                          ---------
Comprehensive income ........................                                                                             $   1,000
                                                                                                                          =========
Return of capital ...........................       (13,543)          --         --             --            (13,543)
                                                -----------    ---------    -------        -------        -----------
Balance at April 4, 2000 ....................   $ 1,433,702    $(615,226)   $(1,913)       $(1,935)       $   814,628
                                                ===========    =========    =======        =======        ===========

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

                                                                          Additional                          Total
Ziff Davis Media Inc.                                                       Paid-in      Accumulated       Stockholder's
                                                         Common Stock       Capital        Deficit            Equity
                                                     -------------------    -------        -------            ------
                                                     Shares      Amount
                                                     ------      ------

Balance at April 1, 2000 .........                        6    $      --   $  2,000       $     --          $   2,000
Issuance of common stock to Parent                      994           --    350,000             --            350,000
Net loss .........................                       --           --         --        (73,435)           (73,435)
                                                      -----    ---------   --------       --------          ---------
Balance at March 31, 2001 ........                    1,000    $      --   $352,000       $(73,435)         $ 278,565
                                                      =====    =========   ========       ========          =========

</TABLE>

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

                                       F-18

<PAGE>

                              ZIFF DAVIS MEDIA INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except per share data)


1.   The Company and Basis of Presentation

Formation of Ziff Davis Media Inc.

     Ziff Davis Media Inc. (the "Company") is a multimedia content company whose
principal business is publishing. The Company publishes and licenses magazines,
provides editorial content about technology and the Internet, both in print and
online, and also provides custom research testing services and software and
produces conferences, seminars and webcasts. The Company was incorporated in the
state of Delaware on November 24, 1999 and was formed to acquire certain
publishing assets ("Ziff-Davis Publishing", "ZDP", or "Predecessor") from
Ziff-Davis Inc. ("ZDI"), an unrelated company. The Company's major operating
subsidiaries are Ziff Davis Publishing Inc., Ziff Davis Development Inc.
("LaunchCo") and Ziff Davis Internet Inc. ("InternetCo"). The Company's year-end
is March 31 while ZDP's year-end was December 31.

     The Company had no operations prior to April 5, 2000 when it completed the
acquisition of ZDP for $780,000 plus expenses (the "Acquisition"). The
Acquisition was accounted for under the purchase method of accounting. The
Company funded the Acquisition by: (i) issuing 1,000 shares of common stock to
its parent company, Ziff Davis Holdings Inc., for $335,000, (ii) issuing
$175,000 of senior subordinated notes (the "Bridge Loan") (See Note 15). Fees
and expenses, including debt issuance costs associated with the Acquisition,
totaling approximately $30,000, were paid with the equity and debt proceeds.

Operations

     The Company's operations are classified into two reportable operating
segments, Established Businesses and Developing Businesses.

     The Established Businesses segment is engaged in publishing and licensing
magazines and providing editorial content about technology and the Internet.
This segment licenses its content and brands to more than 50 licensees in over
30 foreign markets. In addition, this segment also publishes MacWorld through a
50% owned joint venture with International Data Group.

     The Developing Businesses segment is comprised of the InternetCo and
LaunchCo subsidiaries. This segment is focused on developing (1)
Internet-related ventures leveraged off our editorial expertise and
relationships with our audience and advertisers and (2) new businesses including
publications, testing services, conferences and research.

     For additional information on the Company's reportable operating segments,
see Note 21.

2.   Summary of Significant Accounting Policies

Principles of combination and consolidation

     The financial statements of the Company as of March 31, 2001 and for the
year then ended are prepared on a consolidated basis and include the accounts of
the Company and its subsidiaries. The combined financial statements of the
Predecessor as of December 31, 1999 and for the period from January 1 to April
4, 2000 and the years ended December 31, 1999 and 1998 are prepared on a
carve-out basis, as ZDP was not a separate legal entity of ZDI. All significant
intercompany accounts and transactions have been eliminated in combination.
Investments in companies in which ownership interests are greater than 20
percent and in which the Company has the ability to exercise significant
influence, but not control, over the operating and financial policies of such
companies are accounted for under the equity method.

     The carve-out financial statements of ZDP and related notes reflect the
carve-out historical results of operations, financial position and cash flows of
ZDP. These financial statements are not necessarily indicative of results that
would have occurred if ZDP had been a separate stand-alone entity during the
periods presented or future results of ZDP.

Cash and cash equivalents

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

                                       F-19

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)

Concentration of credit risk

     The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of federally
insured limits, or, with respect to international accounts, there may be no
insurance. The Company has not experienced losses in such accounts.

     The Company's advertisers primarily include customers who represent a
variety of technology companies in the United States and other countries. The
Company extends credit to its customers and historically has not experienced
significant losses relating to receivables from individual customers or groups
of customers.

Inventories

     Inventories, which consist of paper, are stated at the lower of cost or
market. Cost is determined on a first-in, first-out basis.

Property and equipment

     Property and equipment have been recorded at cost or their estimated fair
value at the date of acquisition. Depreciation is computed using the
straight-line method over the estimated useful lives of the acquired assets,
ranging from 2 to 20 years. Leasehold improvements are amortized using the
straight-line method over the service life of the improvement or the life of the
related lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.

Capitalized software

     The costs of materials and consultants incurred in developing or obtaining
internal-use computer software are capitalized. Costs incurred in connection
with business process re-engineering are expensed as incurred. The Company
capitalized approximately $21,000 and $1,400 of internal use software costs
during fiscal year 2001 and the year ended December 31, 1999, respectively.
Approximately, $21,000 and $2,100 of unamortized software costs remained at
March 31, 2001 and December 31, 1999, respectively.

Intangible assets

     Intangible assets consist principally of advertising lists, subscriber
lists, trademarks and trade names and goodwill. Amortization of these assets is
computed on a straight-line basis over estimated useful lives. Identifiable
intangible assets are amortized over a period of 2 to 20 years and goodwill,
which represents the excess of the purchase price over the estimated fair value
of net assets acquired, is amortized over a period of 20 years. (See Note 10).

Impairment of long-lived assets

     Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Impairment losses for assets to be held and used are recognized in operating
results in the event that the undiscounted expected future cash flows to be
generated by the related asset are less than the carrying value of the asset. If
undiscounted expected future cash flows are not sufficient to support the
recorded value of the assets, an impairment loss is recognized to reduce the
carrying value of the intangible assets to estimated recoverable value.
Impairment losses for assets held for sale are recognized in operating results
when the fair value of the related assets are less than the carrying value of
the asset. Fair value is determined using quoted market prices in active market
(if available). If quoted market prices are not available, management estimates
the fair market value using the best information available including prices for
similar assets and the results of established valuation techniques.

Debt issuance costs

     The cost to issue debt is recorded in other assets and amortized to
interest expense over the term of the related debt using the effective-interest
rate method. At March 31, 2001, other assets included $19,215 in net debt
issuance costs. There were no debt issuance costs at December 31, 1999.

                                       F-20

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


Revenue, net

     Advertising revenue for the Company's publications, less agency
commissions, is recognized as income in the month that the related publications
are sent to subscribers or become available for sale at newsstands. Circulation
revenue consists of both subscription and single copy newsstand sales.
Subscription revenue, less estimated cancellations, is deferred and recognized
as income in the month that the related publications are sent to subscribers.
Newsstand sales, less estimated returns, are recognized in the month that the
related publications become available for sale at newsstands. The Company also
derives revenue from royalty agreements. These other revenues are recognized
over the term of the agreement or when services are provided.

Operating costs and expenses

     Cost of production includes the direct cost of producing magazines,
primarily paper, manufacturing, distribution and fulfillment.

     Selling, general and administrative costs include editorial, product
development, advertising and subscriber acquisition costs and other general and
administrative costs. Editorial and product development costs, including
pre-publication expenses, are expensed as incurred. Product development costs
include the cost of artwork, graphics, prepress, plates and photography for new
products and are expensed as incurred.

     The Company accounts for advertising expense in accordance with SOP 93-7,
"Accounting for Advertising Costs", which generally requires that advertising
costs be expensed either as incurred or the first time the advertising takes
place, except for the cost of certain direct-response advertising programs.
Direct-response advertising consists primarily of publication subscription
renewal mailings, magazine advertisements which include order coupons for the
Company's publications and other subscription promotions. The capitalized cost
of the advertising is amortized over the 12-month period following the
advertising campaign. At March 31, 2001, $1,805 of advertising expenditures were
reported as other current assets. Approximately $2,900 of deferred advertising
costs were expensed in the fiscal year ended March 31, 2001. There was no
deferred advertising cost at December 31, 1999 and none was expensed for the
year then ended.

Stock-based compensation

     The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, to account for stock options.
Effective January 1, 1996, the Company adopted the disclosure-only provisions of
Statement of Financial Accounting Standard ("SFAS") No. 123, Accounting for
Stock-Based Compensation.

Equity in income from joint ventures

     Equity in income from joint ventures includes the Company's equity share of
income from its investments in joint ventures.

Comprehensive income

     The Company implemented SFAS No. 130, Reporting Comprehensive Income,
effective January 1, 1998. This standard requires the Company to report the
total changes in division equity that do not result directly from transactions
with stockholders or do not affect retained earnings. The only such change is
the change in cumulative translation adjustment as detailed in the Statements of
Changes in Division Equity.

Income taxes

     Income taxes are based upon income for financial reporting purposes.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

                                       F-21

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


Fair value of financial investments

     The Company's financial instruments recorded on the balance sheet include
cash and cash equivalents, accounts receivable, accounts payable and debt.
Because of their short maturity, the carrying amount of cash and cash
equivalents, accounts receivable and accounts payable approximate fair value.
Fair value of long-term bank debt is based on rates available to the Company for
debt with similar terms and maturities. Fair value of public debt is based on
quoted market prices, where available, or quoted market prices of comparable
instruments. Fair values of private placement debt securities are estimated
using discounted cash flows that reflect interest rates currently being offered
with similar terms to borrowers of similar credit quality.

     The Company uses an interest swap agreement to manage risk on its floating
rate debt. Fair value of the instruments is based on estimated current
settlement cost.

Interest rate swaps

     The Company uses interest rate swap agreements to minimize the risk of
floating-rate interest payments. Each interest rate swap agreement is designated
with all or a portion of the principal balance and term of a specific debt
obligation. These agreements involve the exchange of amounts based on a fixed
interest rate for amounts based on variable interest rates over the life of the
agreement, without an exchange of the notional amount upon which the payments
are based. On September 27, 2000, we entered into an interest rate swap
agreement with a notional amount of $25,000 and a maturity date of October 11,
2003. Under this swap agreement, we receive a floating rate of interest based on
three-month LIBOR, which resets quarterly, and pay a fixed rate of interest each
quarter for the term of the agreement. The fair value of the swap agreement is
not recognized in the financial statements. Gains and losses on terminations of
interest rate swap agreements are deferred on the balance sheet and amortized as
an adjustment to interest expense related to the debt over the remaining term of
the original contract life of the terminated swap agreement.

Use of estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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 expense during the reporting period. Actual
results could subsequently differ from those estimates. The significant
estimates that affect the financial statements include, but are not limited to,
doubtful accounts, newsstand returns, deferred advertising costs and
recoverability of long-term assets such as intangible assets.

Recent accounting pronouncements

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which requires
entities to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133, as amended by SFAS Nos. 137 and 138, is effective for all fiscal
years beginning after June 15, 2000. The Company is currently reviewing the
impact SFAS No. 133 (as amended) will have on the Company's financial position
or results of operations.

     On June 29, 2001, the Financial Accounting Standards Board issued SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS 142 includes requirements to
test goodwill and indefinite lived intangible assets for impairment rather than
amortize them. SFAS 142 will be effective for fiscal years beginning after
December 15, 2001. The Company intends to adopt the provisions of SFAS No. 142
during its fiscal year 2002. The impact of this pronouncement on the Company's
financial results is currently being evaluated.

Reclassifications

     Certain amounts have been reclassified, where appropriate, to conform to
the current financial statement presentation.

                                       F-22

<PAGE>

                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


3.   Predecessor Policies in Carve-Out

     As described in Note 2, financial statements for periods prior to April 5,
2000 (Predecessor) have been prepared on a carve-out basis. The following are
policies related to such carve-out.

Treasury activities

     ZDI manages most treasury activities on a centralized basis. These
activities include the investment of surplus cash, the issuance, repayment and
repurchase of short-term and long-term debt, and the issuance and repurchase of
common stock and preferred stock. ZDP generally remits its cash receipts (other
than receipts of foreign operations or operations that are not wholly-owned) to
ZDI, and ZDI generally funds ZDP's cash disbursements (other than disbursements
of foreign operations or operations that are not wholly-owned), on a daily
basis.

     In the financial statements of ZDP, (1) no external debt and equity
transactions (and the proceeds thereof) were attributed to ZDP, (2) whenever ZDP
held cash (other than cash of ZDP's foreign operations or cash of ZDP's
operations that are not wholly-owned), that cash was transferred to ZDI and
accounted for as a return of capital (i.e., as a reduction in ZDP's division
equity) and (3) whenever ZDP had a cash need (other than cash needs of ZDP's
foreign operations or cash needs of ZDP's operations that are not wholly-owned
owned), that cash need was funded by ZDI and accounted for as a capital
contribution (i.e., as an increase in ZDP's division equity). No interest
expense or income to or from ZDI has been reflected in the financial statements
of ZDP.

General and administrative service expense

     ZDI allocates the cost of certain corporate general and administrative
services, including certain legal, accounting (tax and financial), information
systems, telecommunications, purchasing, marketing, intellectual property,
public relations and travel expenses (collectively, "Central Services") to ZDP
based on utilization. Where determination based on utilization alone is
impracticable, ZDI uses other methods and criteria that management believes to
provide a reasonable estimate of the cost attributable to ZDP.

Royalty charges

     ZDP charges ZDNet, (ZDI's Internet division), an annual fee for the use of
various brands and editorial content. The current annual fee, which is reflected
in ZDP's financial statements as royalty revenue, is equal to 5% of the first
$100,000 of ZDNet's revenue for the year, 4% of the next $50,000 of ZDNet's
revenue for that year and 3% of any incremental revenue over $150,000 for that
year. In October 1999, ZDI's Board of Directors approved a prospective change in
methodology of determining future royalty charges whereby the charge began to be
based on revenue, net of bad debt expense.

4.   Restructuring in 1998

     Margin pressure on computer equipment manufacturers, industry and product
delays, lower product demand in and from Asia and a focus on the Year 2000
transition contributed to a reduced demand for advertising in ZDP's magazines.

     As a result of this reduced demand, in October 1998 ZDP announced a
restructuring program with the intent of significantly reducing its cost base.
ZDP incurred a pre-tax charge of $39,995 for this restructuring program. The
charge included asset impairment costs ($34,215), employee termination costs
($3,943) and costs to exit activities ($1,837) principally resulting from the
closing of three publications (Windows Pro, Internet Business and Equip) and the
reduction of ZDP's work force by 184 employees. The following sets forth
additional detail concerning the principal components of the charge:

     o    Asset impairment costs were a non-cash write-off of intangible assets,
          primarily subscriber lists, advertising lists and tradenames
          associated with the discontinued publications.

     o    Employee termination costs related to severed personnel at the closed
          publications as well as a rationalization and resulting workforce
          reduction of the remainder of ZDP's operations. Employee termination
          costs included payments for severance as well as the costs of
          outplacement services and the provision of continued benefits to
          personnel.

                                       F-23

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


     o    Costs to exit activities reflect the costs associated with the final
          closure of the discontinued publications, including the costs to
          reduce office space under lease as a result of the reduced level of
          employees.

     Included in accrued expenses were $3,943 and $0 at December 31, 1998 and
1999, respectively, relating to this restructuring.

5.   Acquisitions and Dispositions

Acquisition of ZDP

     The Acquisition of ZDP was accounted for using the purchase method of
accounting. The assets and liabilities of ZDP acquired by the Company on April
5, 2000, have been recorded at their estimated fair value as of the Acquisition
date with the excess of purchase price over net assets acquired being allocated
to intangible assets, including Goodwill.

     The following table summarizes the allocation of the aggregate
consideration paid to the fair value of the assets acquired and liabilities
assumed by the Company in connection with the Acquisition:

<TABLE>
<S>                                                                  <C>             <C>
     Accounts receivable, net.......................................    $    71,035
     Inventories....................................................         10,386
     Prepaid expenses and other current assets......................          6,302
                                                                        -----------
         Total current assets.......................................                     $   87,723
     Equity investments.............................................                         27,470
     Property and equipment.........................................                         60,056
     Assets held for sale...........................................                         36,750
     Subscriber lists...............................................                         11,700
     Advertiser lists...............................................                        350,700
     Tradenames.....................................................                        214,100
     Goodwill.......................................................                        100,333
                                                                                        -----------
                                                                                            888,832

     Accounts payable and accrued expenses..........................        (34,799)
     Unearned income, net...........................................        (52,080)
                                                                        ------------
         Total liabilities..........................................                        (86,879)
                                                                                        -----------
         Net consideration paid.....................................                    $   801,953
                                                                                        ===========
</TABLE>
     Intangible assets are being amortized over periods ranging from 2 to 20
years. Management has put plans in place to establish a stand-alone
infrastructure and restructure the operations of ZDP. These plans include the
consolidation and rationalization of certain operations and incremental
non-recurring costs associated with the Acquisition. The primary objectives of
these plans are to (i) develop and establish the infrastructure of the Company,
as ZDP was not a separate legal entity and did not have stand-alone operations,
(ii) reduce overhead expenses and (iii) dispose of businesses which do not meet
long-term strategic objectives. These plans have been substantially finalized
however, additional costs may result as the Company refines and implements these
plans. Such costs will be recorded as an adjustment to goodwill. The Company's
estimate of the total cash expenditures associated with these plans is
approximately $8,000, which primarily consists of severance and termination
benefit costs, contract termination costs and facilities rationalization
expenses, with approximately $6,000 having been spent through March 31, 2001.
The Company expects to substantially complete these plans and related cash
expenditures during fiscal 2002. The final costs associated with these plans and
the final allocation of purchase price, are not expected to differ materially
from current estimates.

     Summary pro forma financial information for the fiscal year ended March 31,
2001 would not differ materially from actual results, as the Acquisition was
completed near the beginning of the Company's fiscal year and therefore, is not
presented. The following summary pro forma financial information has been
prepared as if the Acquisition, debt agreements and decision to sell
international operations (described below) had been consummated on April 1,
1999. The pro forma adjustments reflect the removal of stock based compensation
and amortization of intangible assets related to the capital structure of ZDI,
the exclusion of the results of the international operations, the recognition of
interest expense related to the debt agreement, inclusion of amortization
expense of the new intangible assets created in the Acquisition and the income
tax

                                       F-24

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)

effect of the pro forma adjustments. Summary pro forma financial information is
not necessarily indicative of actual results had the Acquisition occurred on
January 1, 1999 or results that may be expected for future periods.

<TABLE>
<CAPTION>

                                                                       Year ended
                                                                   December 31, 1999
                                                                 ---------------------
                                                                      (unaudited)
<S>                                                                   <C>
     Revenue, net............................................         $    456,578
     Income from operations..................................               39,135
     Equity in loss from joint ventures......................                1,874
     Interest expense........................................               54,677
     Income (loss) before taxes..............................              (13,668)
     Provision/(benefit) for income taxes....................                  159
     Net income (loss).......................................         $    (13,827)
</TABLE>
Sale of International Operations

     In connection with the Acquisition, the Company determined that all of its
wholly-owned international operations (excluding international licensing
operations and international joint ventures) did not meet its long-term
strategic objectives and initiated a plan to sell these operations. The net
assets related to these operations were recorded as assets held for sale at the
estimated net proceeds from the sale, as adjusted for estimated cash flows from
these operations and an allocation of interest expense for the estimated holding
period of $1,256. Accordingly, the results of these operations are excluded from
our consolidated statement of operations for the period from April 5, 2000 to
the sale date August 4, 2000. During such period, the operations had revenue of
$29,615 and a loss from operations of $1,484.

     In August 2000, the Company and its European subsidiaries completed the
sale of its wholly-owned International operations (excluding international
licensing and international joint ventures) for a purchase price of
approximately $42,000.

     The purchase price for these assets consists of:

     1.   $31,000 in cash subject to post closing adjustments, plus

     2.   approximately $3,200 related to purchase of inventory, prepaid
          expenses and fixed assets, excluding leasehold improvements offset by
          approximately $3,500 of net subscription liabilities assumed; and

     3.   an additional $15,000 to be paid over a period of five years in five
          annual payments of $3,000 which we have recorded at a net present
          value of $11,300

     The net assets related to these operations have been recorded in the
balance sheet as other assets and as of March 31, 2001 are reflected at the
remaining estimated net proceeds from the sale, as adjusted for estimated cash
flows from these operations and liquidation expenses. Activity in the net assets
held for sale from the Acquisition (April 5, 2000) to March 31, 2001 is:

     Asset held for sale at Acquisition date...........     $        36,750
     Non-cash adjustments to assets held for sale......              (2,357)
     Initial proceeds from sale of operations..........             (30,948)
     Cash outlays......................................               2,681
                                                            ---------------
     Asset held for sale, net at March 31, 2001........     $         6,126
                                                            ===============

     The amount the Company will ultimately realize upon completion of the sale
and liquidation may differ from the amounts assumed in arriving at the estimated
net realizable value of the assets. Such a difference would be recorded as an
adjustment to goodwill. The Company expects the liquidation of its wholly-owned
International operations to be completed during fiscal 2002.

                                       F-25

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
6.   Accounts Receivable, Net

     Accounts receivable, net consist of the following:

                                                                               March 31,          December 31,
                                                                                 2001                 1999
                                                                            ----------------    ----------------
                                                                                                  (Predecessor)
<S>                                                                           <C>                <C>
     Accounts receivable.................................................     $   113,375        $    187,102
     Allowance for doubtful accounts, returns and cancellations..........         (60,429)            (89,200)
                                                                              -----------        ------------
                                                                              $    52,946        $     97,902
                                                                              ===========        ============

7.   Prepaid Expenses and Other Current Assets

     Prepaid expenses and other current assets consist of the following:

                                                                               March 31,          December 31,
                                                                                 2001                 1999
                                                                            ----------------    ----------------
                                                                                                  (Predecessor)

     Deposits............................................................     $     9,707        $      12,014
     Production expenses.................................................           3,922                   --
     Other...............................................................             879                4,451
                                                                              -----------        -------------
                                                                              $    14,508        $      16,465
                                                                              ===========        =============

8.   Property and Equipment, Net

     Property and equipment, net consist of the following:

                                                                               March 31,          December 31,
                                                                                 2001                 1999
                                                                            ----------------    ----------------
                                                                                                  (Predecessor)

     Computers and equipment.............................................   $      27,455        $      45,338
     Capitalized computer software.......................................          22,379                1,392
     Leasehold improvements..............................................          36,263               55,287
     Furniture and fixtures..............................................          11,136               16,708
                                                                            -------------        -------------
                                                                                   97,233              118,725
     Accumulated depreciation and amortization...........................         (16,599)             (53,196)
                                                                            -------------        -------------
                                                                            $      80,634        $      65,529
                                                                            =============        =============

9.   Investments

     Ziff Davis Media has investments in the following joint ventures:

                                                                                     Carrying value at
                                                                            ---------------------------------
                                                              Ownership       March 31,           December 31,
                                                             Percentage         2001                 1999
                                                             ----------     --------------    ---------------
                                                                                                (Predecessor)

     Equity investments

     MAC Publishing LLC.................................   50%              $    12,135         $     6,449
     ZDNet Richina Media (China), LDC*..................   65%                       --                 378
     ZD APN Partners*...................................   51%                       --                 313

     -------
     * These greater than 50% owned joint ventures are not consolidated, as the
       Company did not exercise control over the entities.

</TABLE>

                                       F-26

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


     The entities listed above are engaged primarily in the publication or
distribution of print media and providing interactive information and
programming to technology-oriented Internet users.

     In March 2001, the Company sold its 65 percent interest in ZDNet Media
(China) LDC to ZDNet, a unit of CNET Networks, Inc., for net proceeds of $1,700.
The Company recognized no gain or loss as a result of this sale. In connection
with the transaction, the Company entered into a three-year licensing agreement
with ZDNet Media (China) through its partners in China, for the continued
publication of PC Magazine, Smart Partner, eWEEK and PC/Computing.

     ZD APN Partners was partially owned by the predecessor whose ownership
interest not acquired by Ziff Davis Media.

     The Company's equity income was $1,339, $266, $1,874 and $2,154 in the
fiscal year ended March 31, 2001, the period from January 1, 2000 to April 4,
2000 (Predecessor) and the years ended December 31, 1999 (Predecessor) and 1998
(Predecessor), respectively.

10.  Intangible Assets, Net

     Intangible assets, net consist of the following:
<TABLE>
<CAPTION>
                                                               Range of         March 31,         December 31,
                                                             Useful Lives         2001               1999
                                                             ------------    -------------       -------------
                                                                (years)                          (Predecessor)
<S>                                                                 <C>      <C>                 <C>
     Advertising lists...................................           3-20     $     350,700       $     557,318
     Trademark/trade names...............................             20           214,100             209,221
     Subscribers lists...................................            2-4            11,700              30,110
     Other identified intangible assets..................           4-20            14,900              10,804
     Goodwill............................................             20            97,312                  --
                                                                             -------------       -------------
                                                                                   688,712             807,453
     Accumulated amortization............................                          (49,499)           (123,334)
                                                                             -------------       -------------
                                                                             $     639,213       $     684,119
                                                                             =============       =============
</TABLE>

     Intangible assets primarily relate to the acquisitions of ZDP. The
acquisitions were accounted for under the purchase method of accounting. As
such, the purchase price of these acquisitions was allocated to tangible and
identifiable intangible assets with the remaining amount being allocated to
goodwill.

     Advertising lists and subscriber lists were recorded at estimated fair
value as determined by an income approach. Trademarks/trade names were recorded
at estimated fair value using a relief from royalty approach.

     All intangible assets are being amortized using the straight-line method
over estimated useful lives, up to 20 years. In determining the estimated useful
lives, the Company considered its competitive position in the markets in
which it operates, the historical attrition rates of advertisers, subscribers,
legal and contractual obligations and other factors.

     Recoverability of goodwill and intangible assets is assessed at a minimum
on an annual basis. Impairments would be recognized in operating results if a
permanent diminution in value were to occur based upon an undiscounted cash flow
analysis.

     On December 6, 1999 ZDP wrote-down the value of the intangible assets to
reflect the agreement between ZDI and Willis Stein to sell ZDP for $780,000.

                                       F-27

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


11.  Accrued Expenses

     Accrued expenses consist of the following:
<TABLE>
<CAPTION>

                                                                               March 31,         December 31,
                                                                                 2001                1999
                                                                            ----------------    ----------------
                                                                                                 (Predecessor)
<S>                                                                         <C>                 <C>
     Accrued operating and production costs.............................    $      35,001       $      19,049
     Accrued interest...................................................            9,909                  --
     Payroll and related employee benefits..............................            8,623              24,622
     Other taxes payable................................................              126               1,270
     Other..............................................................              411                 107
                                                                            -------------       -------------
                                                                            $      54,070       $      45,048
                                                                            =============       =============
</TABLE>

12.  Income Taxes

     The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are computed based on the differences between the financial
statement and income tax bases of assets and liabilities using the enacted
marginal tax rate. SFAS No. 109 requires that the net deferred tax asset be
reduced by a valuation allowance if, based on the weight of available evidence,
it is more likely than not that some portion of all or the net deferred tax
asset will not be realized. Due to the Company's absence of a positive earnings
history, a valuation of allowance equal to the net deferred tax asset has been
applied.

     ZDP is included in the consolidated federal income tax return filed by ZDI
for Period January 1, 2000 to April 4, 2000 and years ended December 31, 1999
and 1998. However, the tax expense reflected on the Carve-out Statements of
Operations and the tax assets and liabilities reflected on the Carve-out Balance
Sheets have been prepared as though ZDP filed stand-alone income tax returns.
Current taxes payable for the Period January 1, 2000 to April 4, 2000 and years
ended December 31, 1999 and 1998 were recorded as increases to Division Capital.

     Income (loss) before income taxes is attributable to the following
jurisdictions:

<TABLE>
<CAPTION>

                                                             |      Period from
                                                             |      January 1,
                                             Fiscal year     |         2000                                    Year ended
                                                ended        |      to April 4,          Year ended           December 31,
                                            March 31, 2001   |         2000           December 31, 1999           1998
                                          -----------------  |   ----------------    ------------------    -----------------
                                                             |     (Predecessor)        (Predecessor)        (Predecessor)
<S>                                        <C>               |    <C>                 <C>                   <C>
U.S................................        $    (72,777)     |    $      4,273        $     (764,916)       $     (31,096)
Foreign............................                  --      |          (1,874)                1,593                  587
                                           ------------      |    ------------        --------------        -------------
   Total...........................        $    (72,777)     |    $      2,399        $     (763,323)       $     (30,509)
                                           ============      |    ============        ==============        =============
</TABLE>

     Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
                                                             |      Period from
                                                             |      January 1,
                                             Fiscal year     |         2000                                    Year ended
                                                ended        |      to April 4,          Year ended           December 31,
                                            March 31, 2001   |         2000           December 31, 1999           1998
                                          -----------------  |   ----------------    ------------------    -----------------
                                                             |     (Predecessor)        (Predecessor)        (Predecessor)
<S>                                        <C>               |    <C>                 <C>                   <C>
                                                             |
U.S. federal income taxes                                    |
   Current............................     $          --     |    $       1,500        $       4,199        $       3,253
   Deferred...........................                --     |               --             (150,224)              (9,135)
State and local taxes:                                       |
   Current............................               377     |              216                  999                  775
   Deferred...........................                --     |               --              (35,754)              (2,174)
Foreign income taxes:                                        |
  Current.............................               281     |              379                  491                  423
                                           -------------     |    -------------        -------------        -------------
  Total provision (benefit) for income                       |
     taxes............................     $         658     |    $       2,095        $    (180,289)       $      (6,858)
                                           =============     |    =============        =============        =============
</TABLE>

                                       F-28

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


     A reconciliation of the U.S. federal statutory tax rate to the Company's
effective tax rate on income (loss) before income taxes is as follows:

<TABLE>
<CAPTION>
                                                                |    Period from
                                              Fiscal year       |     January 1,
                                                 ended          |        2000
                                             March 31, 2001     |     to April 4,           Year ended            Year ended
                                                                |        2000            December 31, 1999     December 31, 1998
                                            -----------------   |   ----------------     ------------------    ------------------
                                                                |    (Predecessor)         (Predecessor)         (Predecessor)
<S>                                               <C>           |        <C>                    <C>                   <C>
Federal statutory tax rate ..............         35.0%         |        35.0%                  35.0%                 35.0%
State and local taxes (net of federal tax         (0.3)         |         5.8                    5.0                   5.0
benefit)                                                        |
Permanent differences ...................         (1.0)         |          --                     --                    --
Valuation allowance .....................        (34.3)         |          --                     --                    --
Non recognition of combined loss of MAC .           --          |          --                     --                  (3.7)
assets                                                          |
Amortization of non-deductible goodwill .           --          |          --                  (16.3)                (11.0)
Foreign operations ......................         (0.3)         |        15.8                   0.1                   0.2
Other ...................................           --          |        30.7                   (0.2)                 (3.2)
                                                  ----          |        ----                   ----                  ----
Effective tax rate ......................         (0.9)%        |        87.3%                  23.6%                 22.3%
                                                  ====          |        ====                   ====                  ====
</TABLE>

     Following is a summary of the components of the deferred tax accounts at
March 31, 2001 and December 31, 1999 (Predecessor):
<TABLE>
<CAPTION>

                                                                              March 31,          December 31,
                                                                                2001                 1999
                                                                          ----------------     ----------------
                                                                                                 (Predecessor)
<S>                                                                        <C>                  <C>
     Current deferred tax assets and (liabilities):
       Allowance for doubtful accounts...............................      $       2,312        $       1,457
       Employee compensation bonus and vacation......................                719                1,932
       Prepaid expenses..............................................             (1,184)                  --
       Other.........................................................                 --                1,522
                                                                           -------------        -------------
          Current deferred net tax assets............................              1,847                4,911
                                                                           -------------        -------------
     Non-current deferred tax assets:
       Basis difference in intangible assets.........................                 --               40,759
       Basis difference in property and equipment....................                955                   --
       Capitalized start-up costs....................................                779                   --
       Net operating loss and other carryforwards....................             21,382               41,722
       Other.........................................................                 --                1,055
                                                                           -------------        -------------
          Non-current deferred tax assets............................             23,116               83,536
                                                                           -------------        -------------

     Gross deferred tax assets.......................................             24,963               88,447
     Valuation allowance.............................................            (24,963)             (41,722)
                                                                           -------------        -------------
     Net deferred tax assets.........................................      $          --        $      46,725
                                                                           =============        =============
</TABLE>

     The Company's total deferred tax assets were $26,147 and $89,050 at March
31, 2001 and December 31, 1999 (Predecessor), respectively. Total deferred tax
liability was $1,184 and $603 at March 31, 2001 and December 31, 1999
(Predecessor), respectively.

     The March 31, 2001 and December 31, 1999 (Predecessor) net deferred tax
asset is reduced by a valuation allowance of $24,963 and $41,722, respectively.

     The Company's provision for foreign taxes relates to withholding taxes paid
on royalty income remitted by foreign intangible asset licenses.

13.  Debt

     In connection with the Acquisition, the Company entered into a senior
credit agreement with a syndicate of lenders, comprised of (i) a $355,000 term
loan facility and (ii) a $50,000 revolving credit facility (collectively, the
"Senior Credit Facility"). The Company also entered into the $175,000 Bridge
Loan which bore interest at 12.5% per annum.

                                       F-29

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


     On July 18, 2000, the Company issued $250,000 of 12% Senior Subordinated
Notes (the "Notes"). Interest is paid semi-annually and the Notes mature on July
15, 2010. The Notes are unsecured and subordinated to all existing and future
senior indebtedness. All existing and future domestic subsidiaries will
guarantee the notes. The proceeds of this offering were used to repay the Bridge
Loan and $59,710 of the Senior Credit Facility. In addition, proceeds were used
to pay approximately $8,500 of expenses associated with the offering and
approximately $6,790 of accrued interest related to the principal repayments.

     During the fiscal year ended March 31, 2001, the Company prepaid $84,000 of
outstanding principal under its Senior Credit Facility in addition to the
$59,710 prepayment discussed above. On March 30, 2001, the Company made a
scheduled principal payment of $2,124 of the Senior Credit Facility.

     As of March 31, 2001, total indebtedness was $459,167 and consisted of
$209,167 of outstanding principal under the Senior Credit Facility and $250,000
in Notes.

     Amounts outstanding under the Senior Credit Facility bear interest, at the
Company's option, at a rate per annum equal to either the base rate or the
eurodollar rate (as defined), in each case plus an additional margin. The
additional margin adjusts according to a performance pricing grid based on the
Company's ratio of total debt to EBITDA (as defined). As of March 31, 2001,
borrowings under the Senior Credit Facility bore interest at rates ranging from
7.66% to 10.51%.

     The Senior Credit Facility is secured by a first priority security interest
in substantially all of the Company's existing and future tangible and
intangible assets. The Senior Credit Facility requires the Company to meet
certain financial tests, including maximum total leverage ratio and maximum
senior leverage ratio, minimum interest coverage ratio, minimum fixed charge
coverage ratio and maximum capital expenditure tests. The Senior Credit Facility
contains certain restrictive covenants, including restrictions on (i)
indebtedness, liens and guarantees; (ii) mergers, consolidations and certain
types of acquisitions and asset sales; and (iii) dividends and stock
repurchases. In addition, the Senior Credit Facility requires the Company to
enter into financial instruments, such as interest rate swaps, so that at least
50% of total debt is effectively at a fixed interest rate. On September 27,
2000, the Company entered into an interest rate swap agreement for a notional
amount of $25,000. Under this agreement, the Company pays a fixed rate of
interest for a three year period in exchange for receiving a floating rate of
interest based on three-month LIBOR. At March 31, 2001, the Company was in
compliance with its debt covenants.

     Borrowings under the revolving credit facility are due September 30, 2006
and may be borrowed, repaid and reborrowed prior to maturity. Borrowings under
the term loan facility are payable in varying quarterly installments beginning
March 31, 2001 through March 2007. The maturity of all the loans can be
accelerated upon the event of default.

     The scheduled annual maturities of the Senior Credit Facility and Notes at
March 31, 2001 are as follows:

                    2002...............................     $          7,460
                    2003...............................                8,946
                    2004...............................               10,433
                    2005...............................               13,405
                    2006...............................               13,405
                    Thereafter.........................              405,518
                                                            ----------------
                                                            $        459,167
                                                            ================

     In July 2001, the Company amended its Senior Credit Facility. (See Note
24).

14.  Contracts with ZDI

     In connection with the Acquisition, the Company entered into certain
agreements with ZDI pertaining to ZDNet, ZDI's Internet division, and Computer
Shopper, a ZDI magazine.

     Prior to the Acquisition, ZDP charged ZDNet an annual fee for the use of
the editorial content of its publications. The annual fee, which was recorded as
revenue, was equal to 5% of the first $100,000 of ZDNet's revenue for the year,
4% of the next $50,000 of ZDNet's revenue for that year and 3% of any
incremental revenue over $150,000 for that year. In October

                                       F-30

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


1999, ZDI's Board of Directors approved a prospective change in methodology of
determining future royalty charges whereby the charge began to be based on
revenue, net of bad debt expense.

     As a result of the Acquisition, this royalty agreement was contractually
formalized into a three-year exclusive license agreement with ZDNet with an
additional two years on a non-exclusive basis. After the third year, the
contract begins a two-year transition period in which fees are reduced and
ZDNet's exclusive right to the Company's content is eliminated. The ZDNet
Agreement applies only to those publications existing at the date of the
Acquisition. This agreement does not cover any new publications acquired or
developed by the Company (such as Expedia Travels or The Net Economy), to which
the Company retains all the rights in every medium and it specifically allows
the Company, in certain circumstances, to transact e-commerce independently of
ZDNet.

     On January 19, 2001, the Company amended the content license agreement to
provide that beginning on March 1, 2001, ZDNet's content license becomes
non-exclusive and on March 1, 2002, all of ZDNet's license rights to content
from our magazines terminate. During the time at which the license is
non-exclusive, the Company will have the right to use and display the editorial
content of its publications through any means and media including the Internet.
In a sequence from April 1, 2001 through November 1, 2001, ZDNet's right and
obligation to maintain websites for the Company's publications will terminate
and the Company will obtain the right to host these websites. As consideration
for amending the license agreement, ZDNet is obligated to pay the Company a
royalty termination fee of $4,500, $2,200 of which was paid on March 1, 2001 and
$2,300 of which is payable on March 1, 2002, and ZDNet shall not be obligated to
pay any royalties with respect to licensed content after February 28, 2001. The
Company will recognize the termination fee pro rata over the contract term.

Computer Shopper Services Agreement

     Under this agreement, the Company provides distribution, circulation and
production services to ZDI for its Computer Shopper magazine, and ZDI paid the
Company its costs in relation to the performance of these services, plus an
additional $5,000 annually in fees. ZDI may terminate this agreement at any time
with 90 days prior notice.

     On January 19, 2001, the Company agreed with ZDI to terminate the services
agreement and enter into a new agreement effective March 1, 2001. The new
agreement contains substantially similar terms, except that ZDI shall not be
required to pay the Company any annual fee and shall only be required to
reimburse the Company for out-of-pocket expenses incurred in connection with
producing and distributing Computer Shopper. On March 1, 2001, ZDI paid the
Company a $2,000 non-refundable termination fee in connection with the
termination of the original services agreement. The new agreement expires on
February 28, 2003, however, ZDI may terminate at any time with 90 days prior
written notice. The Company will recognize the termination fee pro rata over the
contract term.

15.  Earnings Per Share

     Earnings per share have been omitted on the basis that there are no public
shareholders.

16.  Employee Benefit Plans

401(k) Plan

     The Company has established a tax-qualified 401(k) employee savings and
profit sharing plan, for all of our employees who meet the 401(k) plan's
eligibility requirement. The 401(k) plan is intended to qualify under Section
401 of the Internal Revenue Code so that contributions by employees and income
earned on the 401(k) plan contributions are not taxable to the employees until
withdrawn from the 401(k) plan. Employees may make contributions to the plan,
which may be matched by the Company; both employee and Company contributions are
subject to certain limitations. The Company made contributions of $1,003, $225,
$3,990 and $3,674 for the fiscal year ended March 31, 2001, period from January
1, 2000 to April 4, 2000 (Predecessor) and years ended December 31, 1999
(Predecessor) and 1998 (Predecessor), respectively.

Stock Option Plan

     In fiscal 2001, the Company's Board of Directors adopted the 2001 Ziff
Davis Holdings Inc. Employee Stock Option Plan (the "Stock Option Plan") which
provides for the issuance of non-qualified stock options to purchase shares of
Ziff Davis Holdings Inc., the Company's parent, to eligible employees,
directors, officers, consultants and advisors (each a

                                       F-31

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


"participant"). Under the terms of this Stock Option Plan, options to purchase
2,630,000 shares of the Ziff Davis Holdings Inc.'s common stock shall be
reserved for issuance under this Stock Option Plan. The option price per share
of common stock shall be fixed at fair value by the appointed committee and set
forth in the option agreement entered into with any participant. Generally,
options granted have a term of ten years from the date of grant, and vest in
increments of 20% per year over a five year period on the yearly anniversary
date of the grant.

     A summary of the status of the Company's Stock Option Plan as of March 31,
2001, and changes during the fiscal year is presented below:

<TABLE>
<CAPTION>
                                             -------------------     ------------------------
                                                   Number                Average Exercise
                                                 of Shares           Weighted Price Per Share
                                             -------------------     ------------------------
<S>                                              <C>                          <C>
     Outstanding:
       Beginning of fiscal year..........               --                    $      --
       Granted...........................        2,423,543                         0.25
       Exercised.........................               --                           --
       Forfeited ........................          221,679                           --
                                                 ---------                    ---------

     Outstanding - end of fiscal year....        2,201,864                    $    0.25
                                                 =========                    =========

     Exercisable - end of fiscal year....               --
                                                 =========
</TABLE>

     Options granted in fiscal 2001 have an exercise price of $0.25.

     As permitted by SFAS No. 123, the Company has chosen to account for
employee stock options under Accounting Principles Board Opinion ("APB") No. 25
and related interpretations. Under APB No. 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

     If the Company had accounted for employee stock options under the fair
value based method, net loss would have increased by approximately $111. As the
Company has no public equity, fair value of the options was calculated under the
minimum value method utilizing a risk free interest rate of 4.62% and an
expected option life of 5 years.

17.  Operating Lease Commitments

     Ziff Davis Media is obligated under various operating leases which expire
at various dates through 2019. Future minimum rental commitments under
noncancelable operating leases are as follows:

                  2002...........................    $    12,184
                  2003...........................         12,307
                  2004...........................         12,301
                  2005...........................         12,779
                  2006...........................         11,776
                  Thereafter.....................        148,365
                                                   -------------
                    Total........................  $     209,712
                                                   =============

     Included in the above totals is approximately $51,204 of which Ziff Davis
Media has noncancelable subleases in place. Total sublease income approximates
Ziff Davis Media's required payments under the related leases. Rent expense
amounted to approximately $19,530, $4,485, $12,016 and $9,210 for the fiscal
year ended March 31, 2001, period from January 1, 2000 to April 4, 2000
(Predecessor) and years ended December 31, 1999 (Predecessor) and 1998
(Predecessor), respectively. Rent income amounted to approximately $2,958, $95,
$442, and $0 for the fiscal year ended March 31, 2001, period from January 1,
2000 to April 4, 2000 (Predecessor) and years ended December 31, 1999
(Predecessor) and 1998 (Predecessor), respectively.

                                       F-32

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


18.  Contingencies

     The Company is a defendant, along with 11 other magazine publishing
companies, in In Re Magazine Antitrust Litigation, pending in Federal District
Court for the Southern District of New York. The case alleges a conspiracy among
the magazine publishers to inflate subscription prices by agreeing not to offer
subscriptions at more than a 50% discount off list price. The plaintiff's motion
for partial summary judgment on the issue of liability is pending and the
parties are in settlement discussions. Management expects, based upon
consultation with counsel, that the outcome of this lawsuit will not have a
material adverse effect on the financial position of the Company.

     On February 27, 2001, International Data Group ("IDG") initiated a lawsuit
alleging trademark infringement arising out of the launch of our new magazine,
CIO Insight. The case, International Data Group v. Ziff Davis Media, is pending
in the Federal District Court in Delaware. IDG's motion for a preliminary
injunction was denied on May 24, 2001. The Company does not believe that the
outcome of this lawsuit will have a material adverse effect on its financial
position.

     The Company is subject to various claims and legal proceedings arising in
the normal course of business. However, the Company is not presently involved in
any legal proceedings that it expects individually or in the aggregate to have a
material adverse effect on its financial condition, results of operations or
liquidity.

19.  Supplemental Financial Information

Guarantor financial information

     The Company is a holding company and its only assets are the ownership of
the capital stock of its subsidiaries and cash balances. All of the Company's
consolidated subsidiaries have guaranteed the Company's debt on a full
unconditional, joint and several basis. The Company's equity investees
(primarily Mac Publishing LLC) are not guarantors of the Company's debt and are
recorded in the March 31, 2001 balance sheet at $12,135. There are no
restrictions which limit the ability of the Company's subsidiaries to transfer
funds to the Company in the form of cash dividends, loans or advances.

     The table below presents combining financial data detailing the Company,
the guarantor subsidiaries, the non-guarantor investees and related elimination
entries.

                                       F-33

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>


                                                                       At March 31, 2001
                                               --------------------------------------------------------------
                                                 Ziff Davis                 Non-
                                                 Media Inc.   Guarantors  Guarantors  Eliminations    Total
                                                 ----------   ----------  ----------  ------------    -----
<S>                                              <C>          <C>          <C>         <C>          <C>
ASSETS

Current assets:

Cash and cash equivalents ....................   $   1,889    $  23,000    $     --    $      --    $  24,889
Accounts receivable, net .....................          --       52,946          --           --       52,946
Inventories ..................................          --        1,102          --           --        1,102
Prepaid expenses and other current assets ....          --       14,508          --           --       14,508
Due (to) from affiliates .......................   (40,224)      51,899     (11,321)          --          354
                                                 ---------    ---------    --------    ---------    ---------
   Total current assets ......................     (38,335)     143,455     (11,321)          --       93,799
Property and equipment, net ..................          --       80,634          --           --       80,634
Equity investments ...........................          --           --      12,135           --       12,135
Investments in subsidiaries ..................     236,761           --          --     (236,761)          --
Intangible assets, net .......................          --      639,213          --           --      639,213
Notes receivable-affiliate ...................     530,000           --          --     (530,000)          --
Other assets, net ............................      19,215        7,931          --           --       27,146
                                                 ---------    ---------    --------    ---------    ---------
   Total assets ..............................   $ 747,641    $ 871,233    $    814    $(766,761)   $ 852,927
                                                 =========    =========    ========    =========    =========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:

Accounts payable .............................   $      --    $  11,994    $     --    $      --    $  11,994
Accrued expenses and other current liabilities       9,909       44,161          --           --       54,070
Current portion of long-term debt ............       7,460           --          --           --        7,460
Unexpired subscriptions, net .................          --       47,179          --           --       47,179
                                                 ---------    ---------    --------    ---------    ---------
   Total current liabilities .................      17,369      103,334          --           --      120,703
Long-term debt ...............................     451,707           --          --           --      451,707
Notes payable-affiliate ......................          --      530,000          --     (530,000)          --
Other non-current liabilities ................          --        1,952          --           --        1,952
                                                 ---------    ---------    --------    ---------    ---------
   Total liabilities .........................     469,076      635,286          --     (530,000)     574,362
                                                 ---------    ---------    --------    ---------    ---------
Stockholder's equity:
Preferred stock ..............................          --          296          --         (296)          --
Common stock .................................          --           27          --          (27)          --
Additional paid-in capital ...................     352,000      315,323          --     (315,323)     352,000
Retained earnings (deficit) ..................     (73,435)     (79,699)        814       78,885      (73,435)
                                                 ---------    ---------    --------    ---------    ---------
   Total stockholder's equity ................     278,565      235,947         814     (236,761)     278,565
                                                 ---------    ---------    --------    ---------    ---------
Total liabilities and stockholder's equity ...   $ 747,641    $ 871,233    $    814    $(766,761)   $ 852,927
                                                 =========    =========    ========    =========    =========
</TABLE>

                                       F-34

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)
<TABLE>
<CAPTION>



                                                            For the fiscal year ended March 31, 2001
                                               ----------------------------------------------------------------
                                                 Ziff Davis                 Non-
                                                 Media Inc.   Guarantors  Guarantors  Eliminations     Total
                                                 ----------   ----------  ----------  ------------     -----
<S>                                                 <C>          <C>         <C>          <C>         <C>
Revenue, net ...................................   $     --    $ 440,485    $   --       $    --    $ 440,485
Cost of operations:
    Cost of production .........................         --      139,284        --            --      139,284
    Selling, general and administrative expenses         --      254,542        --            --      254,542
    Depreciation and amortization of property
      and equipment ............................         --       16,599        --            --       16,599
    Amortization of intangible assets ..........         --       49,499        --            --       49,499
                                                   --------    ---------    ------       -------    ---------
   Loss from operations ........................         --      (19,439)       --            --      (19,439)
Equity in income from joint ventures ...........         --           --     1,339            --        1,339
Equity in loss from subsidiaries ...............    (78,885)          --        --        78,885           --
Intercompany interest (income) expense .........    (63,600)      63,600        --            --           --
Interest expense, net ..........................     56,561       (1,884)       --            --       54,677
                                                   --------    ---------    ------       -------    ---------
   Income (loss) before income taxes ...........    (71,846)     (81,155)    1,339        78,885      (72,777)
Income tax provision (benefit) .................      1,589       (1,456)      525            --          658
                                                   --------    ---------    ------       -------    ---------
   Net income (loss) ...........................   $(73,435)   $ (79,699)   $  814       $78,885    $ (73,435)
                                                   ========    =========    ======       =======    =========
</TABLE>

                                      F-35

<PAGE>

                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>


                                                                   For the fiscal year ended March 31, 2001
                                                      --------------------------------------------------------------
                                                        Ziff Davis                 Non-
                                                        Media Inc.   Guarantors  Guarantors  Eliminations   Total
                                                        ----------   ----------  ----------  ------------   -----

   Cash flows from operating activities:
<S>                                                     <C>         <C>          <C>        <C>          <C>
   Net income (loss).................................   $(73,435)   $ (79,699)   $   814    $  78,885    $ (73,435)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
  Depreciation and amortization ....................          --       66,098         --           --       66,098
  Equity in income from joint ventures .............          --           --     (1,339)          --       (1,339)
  Equity in loss from subsidiaries .................      78,888           --         --      (78,885)          --
  Provision for doubtful accounts ..................          --        2,668         --           --        2,668
  Non cash rent expense ............................          --        1,995         --           --        1,995
  Amortization of debt issuance cost ...............       2,135           --         --           --        2,135
Changes in operating assets and liabilities:

  Accounts receivable ..............................          --       15,421         --           --       15,421
  Inventories ......................................          --        9,284         --           --        9,284
  Accounts payable & accrued expenses ..............       9,909       21,356         --           --       31,265
  Unexpired subscriptions, net .....................          --       (4,901)        --           --       (4,901)
  Due to (from) affiliates .........................      40,224      (41,103)       525           --         (354)
  Prepaid expenses and other, net ..................          --      (11,219)        --           --      (11,219)
                                                       ---------    ---------    -------    ---------    ---------
Net cash provided (used) by operating activities ...      57,718      (20,100)        --           --       37,618
                                                       ---------    ---------    -------    ---------    ---------

Cash flows from investing activities:

  Capital expenditures .............................          --      (33,655)        --           --      (33,655)
  Distributions from joint venture .................          --        3,600         --           --        3,600
  Net proceeds from sale of joint venture ..........          --        1,700         --           --        1,700
  Net proceeds from sale of international operations          --       28,267         --           --       28,267
  Investment in subsidiaries .......................    (315,646)          --         --      315,646           --
  Acquisitions and investments, net of cash acquired          --         (505)        --           --         (505)
  Acquisition of ZDP, net of cash acquired .........          --     (801,953)        --           --     (801,953)
                                                       ---------    ---------    -------    ---------    ---------
Net cash provided by (used)investing activities ....    (315,646)    (802,546)        --      315,646     (802,546)
                                                       ---------    ---------    -------    ---------    ---------

Cash flows from financing activities:

  Proceeds from issuance of equity securities ......     350,000      315,646         --     (315,646)     350,000
  Proceeds from long-term borrowings ...............     605,000           --         --           --      605,000
  Repayment of borrowings under the credit
    facilities .....................................    (145,833)          --         --           --     (145,833)
  Proceeds from senior subordinate notes ...........     175,000           --         --           --      175,000
  Repayment of senior subordinate notes ............    (175,000)          --         --           --     (175,000)
  Issuance of intercompany notes receivable, net ...    (530,000)          --         --      530,000           --
  Proceeds from intercompany notes payable, net ....          --      530,000         --     (530,000)          --
  Debt issuance cost ...............................     (21,350)          --         --           --      (21,350)
                                                       ---------    ---------    -------    ---------    ---------
Net cash provided (used) by financing activities ...     257,817      845,646         --     (315,646)     787,817
                                                       ---------    ---------    -------    ---------    ---------

Net (decrease) increase in cash and cash equivalents        (111)      23,000         --           --       22,889
Cash and cash equivalents, beginning of year .......       2,000           --         --           --        2,000
                                                       ---------    ---------    -------    ---------    ---------

Cash and cash equivalents, end of year .............   $   1,889    $  23,000    $    --    $      --    $  24,889
                                                       =========    =========    =======    =========    =========
</TABLE>


Restricted and Unrestricted Subsidiary Financial Data

     The Company is the borrower and its consolidated subsidiaries are all
guarantors under the Company's debt agreements on a full unconditional joint and
several basis. The Company's equity investees (primarily Mac Publishing LLC) are
not guarantors of the Company's debt. In determining compliance with certain
covenants specified in these agreements, the Company is required to exclude the
results of operations of LaunchCo and InternetCo ("Unrestricted Subsidiaries")
and separately report the combining financial statements of the restricted and
Unrestricted Subsidiaries, as defined in these agreements. The results of
operations of the Unrestricted Subsidiaries are also excluded for certain
purposes under the

                                       F-36

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


indenture governing the Notes. Reflected below are combining balance sheets and
statements of operations for the Company detailing the restricted and
Unrestricted Subsidiaries.

<TABLE>
<CAPTION>
                                                                                      At March 31, 2001
                                                              -------------------------------------------------------------------
                                                                Ziff Davis Media
                                                              Inc. and Restricted    Unrestricted
                                                                  Subsidiaries       Subsidiaries   Eliminations           Total
                                                                  ------------       ------------   ------------           -----

<S>                                                                 <C>                 <C>         <C>                 <C>
ASSETS
Current assets:
     Cash and cash equivalents ............................         $  24,888           $      1    $     --            $  24,889
     Accounts receivable, net .............................            50,454              2,492          --               52,946
     Inventories ..........................................             1,102                 --          --                1,102
     Prepaid expenses and other current assets ............            17,951                 --      (3,443)              14,508
     Due (to) from affiliates .............................               454               (100)         --                  354
                                                                    ---------           --------    --------            ---------
         Total current assets .............................            94,849              2,393      (3,443)              93,799
Property and equipment, net ...............................            54,929             25,705          --               80,634
Equity investments ........................................            12,135                 --          --               12,135
Investments in subsidiaries ...............................            14,159                 --     (14,159)                  --
Intangible assets, net ....................................           639,183                 30          --              639,213
Other assets, net .........................................            27,146                 --          --               27,146
                                                                    ---------           --------    --------            ---------
         Total assets .....................................         $ 892,583           $ 28,128    $(17,602)           $ 852,927
                                                                    =========           ========    ========            =========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:

     Accounts payable .....................................         $  11,994           $     --    $     --            $  11,994
     Accrued expenses and other current liabilities .......            44,448             13,065      (3,443)              54,070
     Current portion of long term debt ....................             7,460                 --          --                7,460
     Unexpired subscriptions, net .........................            46,275                904          --               47,179
                                                                    ---------           --------    --------            ---------
         Total current liabilities ........................           110,177             13,969      (3,443)             120,703

Long-term debt ............................................           451,707                 --          --              451,707
Other non-current liabilities .............................             1,952                 --          --                1,952
                                                                    ---------           --------    --------            ---------
         Total liabilities ................................           563,836             13,969      (3,443)             574,362
                                                                    ---------           --------    --------            ---------

Stockholder's equity:
     Preferred stock ......................................                --              1,234      (1,234)                  --
     Common stock .........................................                --                 28         (28)                  --
     Additional paid-in capital ...........................           352,000             63,079     (63,079)             352,000
     Accumulated deficit ..................................           (73,435)           (50,182)     50,182              (73,435)
                                                                    ---------           --------    --------            ---------
         Total stockholder's equity .......................           328,747             14,159     (14,159)             278,565
                                                                    ---------           --------    --------            ---------
         Total liabilities and stockholder's equity .......         $ 892,583           $ 28,128    $(17,602)           $ 852,927
                                                                    =========           ========    ========            =========
<CAPTION>

                                                                Ziff Davis Media
                                                              Inc. and Restricted    Unrestricted
                                                                  Subsidiaries       Subsidiaries   Eliminations           Total
                                                                  ------------       ------------   ------------           -----
<S>                                                                 <C>                 <C>         <C>                 <C>
Revenue, net ..............................................         $ 429,995           $ 10,490    $     --            $ 440,485
Cost of operations: .......................................                --
    Cost of production ....................................           131,712              7,572          --              139,284
    Selling, general and administrative expenses ..........           202,108             52,434          --              254,542
    Depreciation and amortization of property and equipment            15,113              1,486          --               16,599
    Amortization of intangible assets .....................            49,499                 --          --               49,499
                                                                    ---------           --------    --------            ---------
    Income (loss) from operations .........................            31,563            (51,002)         --              (19,439)
Equity income from joint ventures .........................             1,339                 --          --                1,339
Equity in loss from subsidiaries ..........................           (50,182)                --      50,182                   --
Interest expense (income), net ............................            54,680                 (3)     50,182               54,677
                                                                    ---------           --------    --------            ---------
     Loss before income taxes .............................           (21,778)           (50,999)         --              (72,777)
Income tax provision (benefit) ............................             1,475               (817)         --                  658
                                                                    ---------           --------    --------            ---------
     Net loss .............................................         $ (23,253)          $(50,182)   $ 50,182            $ (73,435)
                                                                    =========           ========    ========            =========
</TABLE>

                                       F-37

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


20.  Related Parties

     Investment funds affiliated with Willis Stein are also shareholders of
USApubs Inc., a marketer of magazine subscriptions and other services. For the
fiscal year ended March 31, 2001, the Company paid approximately $6,600 in fees
to USApubs Inc. and has accounts payable, net of approximately $300 at March 31,
2001. The Company sells subscriptions to its publications both directly and
through independent subscription marketing companies including USApubs Inc.

21.  Segment Information

     Segment information is presented in accordance with SFAS 131, Disclosures
about Segments of an Enterprise and Related Information. This standard is based
on a management approach, which designates the internal organization that is
used by management for making operating decisions and assessing performance as
the sources of the Company's reportable segments. Asset information is not used
for decision making.

     The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which segregates its
business by media platforms and product lines. The Company's reportable segments
are:

o    Established Businesses Segment - established publications targeted to
     customers in the consumer and business market

o    Developing Businesses Segment - internet operations, publications and
     business services for emerging product categories targeted to the consumer
     and business markets.

     The Company evaluates the performance of its segments and allocates
resources to them based on earnings before interest, taxes, depreciation and
amortization (EBITDA). Any inter-segment revenues included in segment data are
not material.

     The following presents information about the reported segments for the
periods ending:

<TABLE>
<CAPTION>

                                                              |     Period from
                                         Fiscal year ended    |   April 4, 2000      December 31, 1999       December 31, 1998
                                         -------------------  |  ------------------   --------------------    --------------------
                                                              |    (Predecessor)          (Predecessor)           (Predecessor)
<S>                                      <C>                  |  <C>                   <C>                     <C>
REVENUE:                                                      |
   Established Businesses...........     $        429,995     |  $      128,008        $       533,364         $       540,977
   Developing Businesses............               10,490     |             933                  2,345                      --
                                         ----------------     |  --------------        ---------------         ---------------
     Total..........................     $        440,485     |  $      128,941        $       535,709         $       540,977
                                         ================     |  ==============        ===============         ===============

                                                              |     Period from
                                         Fiscal year ended    |   January 1, 2000         Year ended              Year ended
                                           March 31, 2001     |  to April 4, 2000      December 31, 1999       December 31, 1998
                                         -------------------  |  ------------------   --------------------    --------------------
                                                              |    (Predecessor)          (Predecessor)           (Predecessor)
                                                              |
EBITDA:                                                       |
   Established Businesses...........     $         97,515     |  $       15,342        $       107,599         $        96,438
   Developing Businesses............              (49,517)    |             (27)                (4,018)                 (6,483)
                                         ----------------     |  --------------        ---------------         ---------------
     Total..........................     $         47,998     |  $       15,315        $       103,581         $        89,955
                                         ================     |  ==============        ===============         ===============

                                         Fiscal year ended    |     Year ended
                                           March 31, 2001     |  December 31, 1999
                                         -------------------  | --------------------
                                                              |     (Predecessor)
TOTAL ASSETS:                                                 |
  Established Businesses............     $        828,244     |  $     929,696
  Developing Businesses.............               24,683     |          1,552
                                         ----------------     |  -------------
     Total..........................     $        852,927     |  $     931,248
                                         ================     |  =============
</TABLE>

                                       F-38

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                              |    Period from
                                         Fiscal year ended    |  January 1, 2000          Year ended              Year ended
                                           March 31, 2001     | to April 4, 2000       December 31, 1999       December 31, 1998
                                         -------------------  | ------------------    --------------------    --------------------
                                                              |   (Predecessor)          (Predecessor)           (Predecessor)
<S>                                      <C>                  | <C>                   <C>                     <C>
Reconciliation of Segment EBITDA to                           |
consolidated (loss) income before                             |
income taxes                                                  |
Total segment EBITDA................     $         47,998     | $       15,315        $       103,581         $        89,955
Stock-based compensation expense....                   --     |            446                    866                      --
Non-cash rent expense (credit) and                            |
Year 2000 cost......................                   --     |            404                  4,801                  (1,794)
Depreciation and amortization.......               66,098     |         12,066                 82,477                  82,263
Write-down of intangible assets.....                   --     |             --                778,760                      --
Restructuring charge................                   --     |             --                     --                  39,995
Interest expense, net...............               54,677     |             --                     --                      --
                                         ----------------     | --------------        ---------------         ---------------
Net income (loss) before income taxes    $        (72,777)    | $        2,399        $      (763,323)        $       (30,509)
                                         ================     | ==============        ===============         ===============
</TABLE>

     Equity in income of investees included in the Established Businesses
segment EBITDA for the fiscal year ended March 31, 2001, period from January 1,
2000 to April 4, 2000 (Predecessor) and years ended December 31, 1999
(Predecessor) and 1998 (Predecessor) was $1,339, $266, $1,874 and $2,154,
respectively.

     The following is sales information by geographic area for the fiscal year
ended March 31, 2001, period from January 1, 2000 to April 4, 2000 (Predecessor)
and years ended December 31, 1999 (Predecessor) and 1998 (Predecessor). The only
geographic area currently reported to and reviewed by the chief operating
decision maker is the U.S.
<TABLE>
<CAPTION>
                                                              |    Period from
                                         Fiscal year ended    |  January 1, 2000         Year ended              Year ended
                                           March 31, 2001     | to April 4, 2000      December 31, 1999       December 31, 1998
                                         -------------------  | ------------------   --------------------    --------------------
                                                              |   (Predecessor)          (Predecessor)           (Predecessor)
<S>                                      <C>                  | <C>                   <C>                     <C>
Revenue                                                       |
United States.......................     $        440,485     | $       109,321       $       456,371         $       461,085
Foreign.............................                   --     |          19,620                79,338                  79,892
                                         ----------------     | ---------------       ---------------         ---------------
   Total revenue....................     $        440,485     | $       128,941       $       535,709         $       540,977
                                         ================     | ===============       ===============         ===============
</TABLE>

     Foreign revenue is based on the country in which the sales originate.
Revenue from no single foreign country was material to the consolidated revenues
of the Company. The Company sold its international operations in August 2000.
(See Note 5).

     The following is long-lived asset information by geographic area as of
March 31, 2001 and December 31, 1999 (Predecessor):

                                    Fiscal year ended  |      Year ended
                                     March 31, 2001    |   December 31, 1999
                                   ------------------- | --------------------
                                                       |     (Predecessor)
                                                       |
Long-lived assets                                      |
                                                       |
  U.S. ........................     $        731,982   |   $     753,453
  Foreign .....................                   --   |           3,335
                                    ----------------   |   -------------
     Total.....................     $        731,982   |   $     756,788
                                    ================   |   =============

     No one customer accounted for more than 4.5% of total revenue for the
fiscal year ended March 31, 2001, period from January 1, 2000 to April 4, 2000
(Predecessor) and years ended December 31, 1999 (Predecessor) and 1998
(Predecessor).

                                       F-39

<PAGE>
                              ZIFF DAVIS MEDIA INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                  (dollars in thousands, except per share data)


22.  Quarterly Financial Data (Unaudited)

     The following is summarized quarterly financial data for fiscal year ended
March 31, 2001 for the Company and quarterly financial data for 1999
(Predecessor) and the period from January 1 to March 31, 2000 (Predecessor).

<TABLE>
<CAPTION>

                                           Fiscal
                                          June 30,      Fiscal September    Fiscal December        Fiscal
                                            2001            30, 2001           31, 2001        March 31, 2001
                                      ----------------- ------------------ ------------------ -----------------
<S>                                   <C>               <C>                <C>                <C>
     Revenue, net................     $       126,804   $       100,586    $       125,745    $        87,350
     Gross margin................              91,356            71,453             83,928             54,464
     Operating income (loss).....              16,728            (3,792)               832            (33,207)
     Net income (loss)...........     $         2,781   $       (16,388)   $       (15,228)   $       (44,600)

                                          June 30,        September 30,    December 31, 1999     March 31,
                                            1999              1999                                  2000
                                      ----------------- ------------------ ------------------ -----------------
                                       (Predecessor)      (Predecessor)      (Predecessor)     (Predecessor)
     Revenue, net................     $       132,744   $       121,732    $       154,184    $       128,941
     Gross margin................              93,576            85,441            111,081             90,208
     Operating income (loss).....               5,607            (7,462)          (766,208)             2,133
     Net income (loss)...........     $         4,733   $        (5,193)   $      (584,677)   $           304

</TABLE>

23.  Fair Value of Financial Instruments

     The Company's accounting policies with respect to financial instruments are
discussed in Note 2.

     The carrying amounts and fair values of the Company's significant on
balance sheet financial instruments are as follows:

<TABLE>
<CAPTION>

                                                           At March 31, 2001                     At December 31, 1999
                                                   -----------------------------------    --------------------------------
                                                    Carrying             Fair               Carrying            Fair
                                                     Amount              Value               Amount             Value
                                                   ------------      ------------------------------------    -------------
<S>                                                <C>                <C>                 <C>                 <C>
     Cash and equivalents.....................     $    24,889        $    24,889         $     2,487         $     2,487
     Accounts receivable, net.................          52,946             52,946              97,902              97,902
     Accounts payable.........................          11,994             11,994               5,839               5,839
     Senior Credit Facility...................         209,167            209,167                 --                  --
     Senior Subordinated Notes................         250,000            203,750                 --                  --
</TABLE>

Interest rate swaps

     The Company utilizes an interest rate swap to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt. Under the
Company's interest rate swap agreement, the Company agreed with the counter
parties to exchange, at quarterly intervals, the difference between the
Company's fixed pay rate and the counter parties' variable pay rate on
three-month LIBOR.

     The fair value of the interest rate swap was estimated by obtaining a quote
from a broker, which represented the amount that the Company would pay if the
agreement were terminated at the balance sheet date. While it is not the
Company's intention to terminate the interest rate swap, the fair value
indicated that the termination of the interest rate swap agreement would have
resulted in a loss of $1,187.

24.  Subsequent Events

Amendment of Senior Credit Facility

     Due to a substantial decrease in the number of advertising pages published
in the Company's publications in the first fiscal quarter of 2002, the Company
did not expect to be in compliance at the end of its first fiscal quarter of
2002 with certain debt covenants contained in our Senior Credit Facility.
Accordingly, the Company amended its Senior Credit

                                       F-40

<PAGE>

Facility. This amendment among other things, amends the compliance covenants
such that the Company expects to be in compliance with such covenants at June
30, 2001 and adjusts required ratios for the period through September 30, 2002
to levels more in line with our performance expectations. In addition, the
availability of the existing $50,000 revolving credit facility is permanently
reduced to $30,000, of which only $10,000 is available from June 30, 2001 to
September 2002.

     In consideration for amending the Senior Credit Facility on July 13, 2001,
Willis Stein and its co-investors contributed $50,000 of equity to Ziff Davis
Holdings Inc., the Company's parent. The $50,000 was subsequently contributed to
the Company, of which $35,000 was used to repay senior indebtedness and $15,000
was restricted to pay interest on the Company's Notes. Under the amendment, net
proceeds of up to $50,000 from the sale of certain assets will not have to be
used to repay indebtedness and may be used to fund the Unrestricted
Subsidiaries. The Company has not entered into any agreements with respect to
such asset sales. In addition, interest rates under the credit facility have
been adjusted and we have paid a fee to our lenders totaling approximately $500.

     There can be no assurance that the number of advertising pages published in
our publications and related operating performance will improve and that the
Company will be in compliance with our loan covenants in the future.

Capital Contribution

     In May 2001, the Company received $20,000 of capital contribution from
Willis Stein and its co-investors.

Restructuring

     Current economic trends in the United States have had a negative impact on
the Company's business. These trends include consolidation among advertisers,
increases in postage costs and a general decline in advertising spending. In
anticipation of this decline, the Company began a restructuring program in the
first quarter of fiscal 2002 under which the Company expects to consolidate
operations and eliminate headcount to reduce costs. The Company expects to
finalize these initiatives during the second quarter of its fiscal year and
anticipates incurring employee termination and related costs which have not yet
been quantified.

                                       F-41