##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





FORM 10-K


|                                     |  |                                                                                             
|------------------------------------ |  | --------------------------------------------------------------------------------------------
|þ                                    |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|                                    
|For the Year Ended December 31, 2004
|                                    
|Commission file number 333-99939    
|OR                                  
|                                    
|o                                    |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934




ZIFF DAVIS HOLDINGS INC.


(Exact name of Registrant as Specified in Its Charter)


|                                                                   |  |                                     
|------------------------------------------------------------------ |  | ------------------------------------
|Delaware                                                           |  | 36-4335050                          
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

28 East 28th Street


New York, New York 10016


(Address of Principal Executive Offices and Zip Code)





(212) 503-3500


(Registrants Telephone Number, Including Area Code)


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


Shares registered pursuant to Section 12(g) of the
Act:





þ o


þ


o þ






DOCUMENTS INCORPORATED BY REFERENCE












---










ZIFF DAVIS HOLDINGS INC.


Index to Form 10-K for the Year Ended December 31,
2004


|                                                   |  |                                                                                                                       |    |      |    |  |  | 
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- |  |  | 
|                                                   |  |                                                                                                                       |    | Page |   
|                                                   |  |                                                                                                                       |    |      |   
|PART I                                            
|Item 1.                                            |  | Business                                                                                                              |    |      | 2  | 
|Item 2.                                            |  | Properties                                                                                                            |    |      | 17 | 
|Item 3.                                            |  | Legal Proceedings                                                                                                     |    |      | 18 | 
|Item 4.                                            |  | Submission of Matters to a Vote of Security
    Holders                                                               |    |      | 18 | 
|PART II                                           
|Item 5.                                            |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchasers of Equity
    Securities |    |      | 18 | 
|Item 6.                                            |  | Selected Financial Data                                                                                               |    |      | 18 | 
|Item 7.                                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                             |    |      | 20 | 
|Item 7A.                                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                        |    |      | 33 | 
|Item 8.                                            |  | Financial Statements and Supplementary
    Data                                                                       |    |      | 34 | 
|Item 9.                                            |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                              |    |      | 78 | 
|Item 9A.                                           |  | Controls and Procedures                                                                                               |    |      | 78 | 
|Item 9B.                                           |  | Other Information                                                                                                     |    |      | 78 | 
|PART III                                          
|Item 10.                                           |  | Directors and Executive Officers of the
    Registrant                                                                |    |      | 79 | 
|Item 11.                                           |  | Executive Compensation                                                                                                |    |      | 83 | 
|Item 12.                                           |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                    |    |      | 87 | 
|Item 13.                                           |  | Certain Relationships and Related
    Transactions                                                                    |    |      | 89 | 
|Item 14.                                           |  | Principal Accountant Fees and Services                                                                                |    |      | 92 | 
|PART IV                                           
|Item 15.                                           |  | Exhibits and Financial Statement
    Schedules                                                                        |    |      | 93 | 
|                                                   |  |                                                                                                                       |    |      |    |  |  | 
|SIGNATURES                                         |  |                                                                                                                       | 97 |     
|EX-10.18: EXECUTIVE AGREEMENT                     
|EX-10.35: AMENDED AND RESTATED EXECUTIVE AGREEMENT
|EX-10.36: AMENDED AND RESTATED EXECUTIVE AGREEMENT
|EX-10.37: AMENDED AND RESTATED EXECUTIVE AGREEMENT
|EX-10.38: AMENDED AND RESTATED EXECUTIVE AGREEMENT
|EX-10.39: EXECUTIVE AGREEMENT                     
|EX-10.40: EXECUTIVE AGREEMENT                     
|EX-10.41: AMENDMENT TO EXECUTIVE AGREEMENT        
|EX-10.42: LETTER                                  
|EX-31.1: CERTIFICATION                            
|EX-31.2: CERTIFICATION                            
|EX-32.1: CERTIFICATION                            
|EX-32.2: CERTIFICATION                            



1



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##### Table of Contents






PART I


Important Note:







|        |         
|------- | --------
|ITEM 1. | BUSINESS



Background and Organization


tm








2



---



##### Table of Contents



PC Magazine,
Sync ExtremeTech


eWEEK,
CIO Insight Baseline.


(Electronic Gaming Monthly, Computer Gaming World Official U.S. PlayStation Magazine) GMR XBox Nation




General




PC Magazine, Sync, ExtremeTech,
eWEEK, Baseline, CIO Insight, Electronic Gaming Monthly,
Computer Gaming World Official U.S. Playstation
Magazine. PC Magazine eWEEK Sync, ExtremeTech


PC
Magazine eWEEK


3



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Consumer Tech Group


PC Magazine Sync ExtremeTech




|               |  |       |      |  |           |  |    |                  |  |                   |  |           |  |  |         | 
|-------------- |  | ----- | ---- |  | --------- |  | -- | ---------------- |  | ----------------- |  | --------- |  |  | ------- | 
|               |  | First |      |  | Frequency |  |    |                  |  |                   |  |          
|Magazine Title |  | Issue |      |  | Per Year  |  |    | Primary Audience |  | Circulation       |  | Rate Base | 
|               |  |       |      |  |           |  |    |                  |  |                   |  |           | 
|PC Magazine    |  |       | 1981 |  |           |  | 22 |                  |  | Consumer/Business |  | Paid      |  |  | 700,000 | 
|Sync           |  |       | 2004 |  |           |  | 7  |                  |  | Consumer          |  | Paid      |  |  | 250,000 | 
|ExtremeTech    |  |       | 2004 |  |           |  | 6  |                  |  | Consumer/Business |  | Paid      |  |  | *       | 






|  |                                              
|- | ---------------------------------------------
|* | No rate base is claimed for this publication.

PC Magazine PC Magazine PC Magazine PC
Magazine PC Magazine


Sync Sync Sync Sync Sync


ExtremeTech ExtremeTech




4



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##### Table of Contents









|                    |  |            |            |  |                 |  |           | 
|------------------- |  | ---------- | ---------- |  | --------------- |  | --------- | 
|Website Address     |  | Page Views |            |  | Unique Visitors | 
|                    |  |            |            |  |                 | 
|www.pcmag.com       |  |            | 23,413,700 |  |                 |  | 3,049,000 | 
|www.extremetech.com |  |            | 7,939,700  |  |                 |  | 1,247,600 | 
|                    |  |            |            |  |                 | 
|Total               |  |            | 31,353,400 |  |                 |  | 4,296,600 | 






|  |                                                                 
|- | ----------------------------------------------------------------
|* | Unadjusted for duplication of unique visitors between all sites.

PC
Magazine


ExtremeTech


Enterprise Group


eWEEK,
CIO Insight Baseline


5



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##### Table of Contents





|               |  |       |      |  |           |    |                  |          |             |            |           |  |         | 
|-------------- |  | ----- | ---- |  | --------- | -- | ---------------- | -------- | ----------- | ---------- | --------- |  | ------- | 
|               |  | First |      |  | Frequency |    |                  |          |             |            |          
|Magazine Title |  | Issue |      |  | Per Year  |    | Primary Audience |          | Circulation |            | Rate Base | 
|               |  |       |      |  |           |    |                  |          |             |            |           | 
|eWEEK          |  |       | 1983 |  |           | 51 |                  | Business |             | Controlled |           |  | 400,100 | 
|CIO Insight    |  |       | 2001 |  |           | 14 |                  | Business |             | Controlled |           |  | 50,000  | 
|Baseline       |  |       | 2001 |  |           | 14 |                  | Business |             | Controlled |           |  | 125,000 | 

eWEEK eWEEK eWEEK eWEEK eWEEK


CIO Insight CIO Insight CIO Insight


Baseline Baseline Baseline




6



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|                          |  |            |           |  |                 |  |           |   
|------------------------- |  | ---------- | --------- |  | --------------- |  | --------- | --
|Website Address           |  | Page Views |           |  | Unique Visitors | 
|                          |  |            |           |  |                 | 
|www.eweek.com             |  |            | 5,870,300 |  |                 |  | 1,671,900 |   
|www.cioinsight.com        |  |            | 179,900   |  |                 |  | 67,000    |   
|www.baselinemag.com       |  |            | 261,500   |  |                 |  | 92,000    |   
|Other targeted B2B Sites* |  |            | 2,699,600 |  |                 |  | 810,700   |   
|                          |  |            |           |  |                 | 
|Total                     |  |            | 9,011,300 |  |                 |  | 2,641,600 | **






|  |                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------
|* | Includes miscellaneous sites such as eSeminars, Microsoft Watch,
    Ziff Davis Channel Insider, Dev Source and other targeted sites.



eWEEK CIO Insight Baseline






Game Group


Electronic Gaming Monthly Computer Gaming World Official U.S. Playstation Magazine


7



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##### Table of Contents





|                                   |  |       |      |  |           |    |                  |          |             |      |           |  |         |  
|---------------------------------- |  | ----- | ---- |  | --------- | -- | ---------------- | -------- | ----------- | ---- | --------- |  | ------- | -
|                                   |  | First |      |  | Frequency |    |                  |          |             |      |          
|Magazine Title                     |  | Issue |      |  | Per Year  |    | Primary Audience |          | Circulation |      | Rate Base | 
|                                   |  |       |      |  |           |    |                  |          |             |      |           | 
|Computer Gaming World              |  |       | 1981 |  |           | 11 |                  | Consumer |             | Paid |           |  | 200,000 | *
|Electronic Gaming Monthly          |  |       | 1988 |  |           | 12 |                  | Consumer |             | Paid |           |  | 500,000 |  
|Official U.S. Playstation Magazine |  |       | 1997 |  |           | 12 |                  | Consumer |             | Paid |           |  | 300,000 | *






|  |                                                                        
|- | -----------------------------------------------------------------------
|* | Target circulation; no rate base is claimed for these
    publications.

Computer Gaming World


Electronic Gaming Monthly


Official U.S. PlayStation Magazine




|                |  |            |            |  |                 |  |         | 
|--------------- |  | ---------- | ---------- |  | --------------- |  | ------- | 
|Website Address |  | Page Views |            |  | Unique Visitors | 
|                |  |            |            |  |                 | 
|www.1up.com     |  |            | 15,506,000 |  |                 |  | 816,000 | 



Revenue




Advertising.


Subscriptions.


8



---



##### Table of Contents



Newsstand.


Other Revenue Sources.


Operating Costs








Circulation






9



---



##### Table of Contents



Customers






Competition








| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | editorial quality;                                                        
|
| |  | quantity and quality of circulation;                                      
|
| |  | the strength of complementary products serving the same niche;            
|
| |  | the effectiveness of sales, research efforts and customer
    service; and
|
| |  | advertising rates.                                                        



Certain License Agreements and Service Contracts


Agreements with CNET Networks and ZDNet.


10



---



##### Table of Contents







Computer Shopper Computer Shopper. Computer
Shopper Computer Shopper.


Other Agreements. Official U.S. PlayStation
Magazine Official U.S. PlayStation Magazine


Xbox Nation


GMR GMR




Trademarks and Intellectual Property Rights




11



---



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Employees




Forward-Looking Statements








Certain Risk Factors




We require a significant amount of cash to service our
indebtedness, which could make it difficult for us to satisfy
our obligations with respect to our long-term debt and preferred
stock and which reduces the cash available to finance our
growth.




12



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| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | require us to dedicate a substantial portion of our cash flow
    from operations to payments on our indebtedness, thereby
    reducing the availability of our cash flow to fund our
    operations;        
|
| |  | limit our flexibility in planning for, or reacting to, changes
    in our business and the publishing industry generally;                                                                                    
|
| |  | place us at a competitive disadvantage compared to our
    competitors that have less debt;                                                                                                                  
|
| |  | limit, along with the financial and other restrictive covenants
    in our indebtedness, among other things, our ability to borrow
    additional funds, make acquisitions or invest in new
    products; and
|
| |  | if we fail to comply with those covenants, trigger an event of
    default under the agreements governing our indebtedness that, if
    not cured or waived, could have a material adverse effect on us.     



If Ziff Davis Holdings does not receive loans, advances or
dividends from its subsidiaries, Ziff Davis Holdings may be
unable to redeem or pay accrued dividends on its preferred
stock.




Our controlling stockholder may have interests that
conflict with the interests of other investors.




13



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We may not be able to finance a change of control
offer.




Stockholders proportional equity interest in Ziff
Davis Holdings could be reduced in the future.




Non-compliance with our debt facilities could accelerate
our obligations.




14



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We depend on advertising as a principal source of revenue,
which decreases during economic cycle downturns and fluctuates
due to seasonal buying.




If the U.S. economy worsens, we may have to implement
further cost saving efforts to achieve the benefits we expect,
which could result in further restructuring charges and
materially impact our business.


GMR Xbox Nation


We may not be able to protect our intellectual
property.




Our business might suffer if we fail to retain our senior
management or to recruit and retain key personnel.




15



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New product launches or acquired products may reduce our
earnings or generate losses.








| |                                                                     
| | --------------------------------------------------------------------
| | We face significant competition for advertising and
    circulation.

PC Magazine PC World,




| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Our principal vendors are consolidating and this may
    adversely affect our business and operations.





| |   |                                                                       
| | - | ----------------------------------------------------------------------
| |  | decreased competition, which may lead to increased prices;            
|
| |  | interruptions and delays in services provided by such
    vendors; and
|
| |  | greater dependence on certain vendors.                                

16



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| |                                                                             
| | ----------------------------------------------------------------------------
| | We may be adversely affected by fluctuations in paper and
    postage costs.







| |                                                                              
| | -----------------------------------------------------------------------------
| | We may be adversely affected by a continued weakening of
    newsstand sales.








|        |           
|------- | ----------
|ITEM 2. | PROPERTIES



| |           
| | ----------
| | Properties



|                                  |  |            |      |  |             |  |         | 
|--------------------------------- |  | ---------- | ---- |  | ----------- |  | ------- | 
|                                  |  | Lease      |      |  | Approximate | 
|                                  |  | Expiration |      |  | Square Feet | 
|                                  |  |            |      |  |             | 
|New York, New York (Headquarters) |  |            | 2019 |  |             |  | 144,000 | 
|San Francisco, California         |  |            | 2010 |  |             |  | 35,000  | 
|Woburn, Massachusetts             |  |            | 2006 |  |             |  | 11,000  | 





17



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|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

The Net
Economy


PC Magazine PC Magazine









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






PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASERS OF EQUITY
    SECURITIES












|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA



18



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ZIFF DAVIS HOLDINGS INC.


SELECTED FINANCIAL DATA


|                                          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |          |         |   |   |         |          |  
|----------------------------------------- | ------------------------------------------------------------------------------ | ----------------------- | -------- | ----------- | ------------ | - | ----------- | --------- | - | - | -------- | ------- | - | ------- | -------- | ------- | - | - | ------- | -------- | -
|                                          |                                                                                |                         |          | Nine Months |              |   | Fiscal Year |          
|                                          |                                                                                | Year Ended December 31, |          |             | Ended        |   |             | Ended     |  
|                                          |                                                                                |                         |          |             | December 31, |   |             | March 31, |  
|                                          |                                                                                | 2004                    |          |             | 2003         |   |             | 2002      |   |   | 2001(2)  |         |   | 2001(2) |         
|(in thousands of dollars)                 |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |         
|Statement of Operations Data(1):          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |          |         |   |   |         |         
|Revenue, net                              |                                                                                | $                       | 204,477  |             |              | $ | 194,107     |           |   | $ | 209,037  |         |   | $       | 215,859  |         |   | $ | 430,925 |         
|                                          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |         
|Operating expenses:                       |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |          |         |   |   |         |         
|                                          | Cost of production                                                             |                         |          | 59,743      |              |   |             | 60,622    |   |   |          | 75,835  |   |         |          | 81,726  |   |   |         | 139,284  |  
|                                          | Selling, general and administrative expenses                                   |                         |          | 110,939     |              |   |             | 98,973    |   |   |          | 125,171 |   |         |          | 164,351 |   |   |         | 244,990  |  
|                                          | Depreciation and amortization of property, equipment and
    intangible assets |                         |          | 21,428      |              |   |             | 25,901    |   |   |          | 37,770  |   |         |          | 62,636  |   |   |         | 66,098   |  
|                                          | Restructuring charges, net(3)                                                  |                         |          | 5,491       |              |   |             | (6,238    | ) |   |          | 48,950  |   |         |          | 37,412  |   |   |         |         |  
|                                          | Write-down of intangible assets(4)                                             |                         |          |            |              |   |             |          |   |   |          | 79,241  |   |         |          | 240,077 |   |   |         |         |  
|                                          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |         
|                                          | Total operating expenses                                                       |                         |          | 197,601     |              |   |             | 179,258   |   |   |          | 366,967 |   |         |          | 586,202 |   |   |         | 450,372  |  
|                                          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |         
|Income (loss) from operations             |                                                                                | $                       | 6,876    |             |              | $ | 14,849      |           |   | $ | (157,930 | )       |   | $       | (370,343 | )       |   | $ | (19,447 | )       
|                                          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |         
|Net (loss) income                         |                                                                                | $                       | (85,186  | )           |              | $ | (1,909      | )         |   | $ | (196,840 | )       |   | $       | (415,424 | )       |   | $ | (76,028 | )       
|                                          |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |         
|Cash Flows and Other Data(1):             |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |          |         |   |   |         |         
|Cash Flows:                               |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |          |         |   |   |         |         
|                                          | Operating                                                                      |                         | $        | 9,801       |              |   | $           | 8,535     |   |   | $        | (48,002 | ) |         | $        | (65,138 | ) |   | $       | 35,272   |  
|                                          | Investing                                                                      |                         |          | (8,982      | )            |   |             | 2,411     |   |   |          | (1,013  | ) |         |          | (8,704  | ) |   |         | (802,546 | )
|                                          | Financing                                                                      |                         |          | (15,535     | )            |   |             | (4,928    | ) |   |          | 70,349  |   |         |          | 68,287  |   |   |         | 790,785  |  
|Capital expenditures                      |                                                                                |                         | 5,849    |             |              |   | 2,518       |           |   |   | 2,567    |         |   |         | 23,336   |         |   |   | 33,655  |         
|Balance Sheet Data(1) (At End of Period): |                                                                                |                         |          |             |              |   |             |           |   |   |          |         |   |         |          |         |   |   |         |         
|Cash and cash equivalents                 |                                                                                | $                       | 32,592   |             |              | $ | 47,308      |           |   | $ | 41,290   |         |   | $       | 19,956   |         |   | $ | 25,511  |         
|Total assets                              |                                                                                |                         | 352,302  |             |              |   | 376,908     |           |   |   | 394,412  |         |   |         | 515,295  |         |   |   | 853,302 |         
|Total debt                                |                                                                                |                         | 308,857  |             |              |   | 309,031     |           |   |   | 301,266  |         |   |         | 429,201  |         |   |   | 459,167 |         
|Redeemable preferred stock                |                                                                                |                         | 814,549  |             |              |   | 739,602     |           |   |   | 673,577  |         |   |         | 515,987  |         |   |   | 375,585 |         
|Total stockholders deficit               |                                                                                | $                       | (948,537 | )           |              | $ | (863,351    | )         |   | $ | (796,763 | )       |   | $       | (555,314 | )       |   | $ | (96,645 | )       






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | The financial information presented is for Ziff Davis Holdings.
    See Note 19 to our Consolidated Financial Statements for
    condensed consolidating financial information for Ziff Davis
    Media and our subsidiary guarantors.                                                                                                                                                                                                                                                                
|
| | (2) | As of January 1, 2002, Ziff Davis Holdings adopted the
    Emerging Issues Task Force Nos. 01-9 and 00-25, which required
    the netting of product placement and distribution costs against
    reported revenue. Amounts prior to January 1, 2002, have
    been reclassified to reflect the current year adoption of this
    accounting pronouncement.                                                                                                                                           
|
| | (3) | The restructuring charges incurred in 2001, 2002 and 2004 were
    primarily related to the closure of magazines. They include the
    write-off of intangible assets, severance costs and costs to
    exit certain activities, such as facilities closure costs. The
    credit incurred in 2003 represents a reversal of a portion of
    the prior years accruals primarily relating to adjustments
    to our estimated future real estate lease costs after excess
    vacant space was sublet.
|
| | (4) | Reflects asset impairment charges primarily related to the
    closure of magazines.                                                                                                                                                                                                                                                                                                                                                                                                                  

19



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS



Overview






PC Magazine Sync ExtremeTech


eWEEK,
CIO Insight Baseline. tm


(Electronic Gaming Monthly, Computer Gaming World Official U.S. PlayStation Magazine) GMR XBox Nation




20



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##### Table of Contents





Technology Sector and Economic Trends








21



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##### Table of Contents



Results of Operations  Year Ended
December 31, 2004 Compared to Year Ended December 31,
2003




|                              |                                                         |              |         |         |              |   |         |         |  
|----------------------------- | ------------------------------------------------------- | ------------ | ------- | ------- | ------------ | - | ------- | ------- | -
|                              |                                                         | Year Ended   |         |         | Year Ended   |  
|                              |                                                         | December 31, |         |         | December 31, |  
|                              |                                                         | 2004         |         |         | 2003         |  
|                              |                                                         |              |         |         |              |  
|Revenue, net                  |                                                         | $            | 204,477 |         |              | $ | 194,107 |        
|                              |                                                         |              |         |         |              |  
|Operating expenses:           |                                                         |              |         |         |              |   |         |        
|                              | Cost of production                                      |              |         | 59,743  |              |   |         | 60,622  |  
|                              | Selling general and administrative expenses             |              |         | 110,939 |              |   |         | 98,973  |  
|                              | Depreciation and amortization of property and equipment |              |         | 6,202   |              |   |         | 10,793  |  
|                              | Amortization of intangible assets                       |              |         | 15,226  |              |   |         | 15,108  |  
|                              | Restructuring charges, net                              |              |         | 5,491   |              |   |         | (6,238  | )
|                              | Write-down of intangible assets                         |              |         |        |              |   |         |        |  
|                              |                                                         |              |         |         |              |  
|                              | Total operating expenses                                |              |         | 197,601 |              |   |         | 179,258 |  
|                              |                                                         |              |         |         |              |  
|Income (loss) from operations |                                                         |              | 6,876   |         |              |   | 14,849  |        
|Gain on sale of assets, net   |                                                         |              |        |         |              |   | 2,609   |        
|Interest expense, net         |                                                         |              | (91,824 | )       |              |   | (19,142 | )      
|                              |                                                         |              |         |         |              |  
|                              | Loss before income taxes                                |              |         | (84,948 | )            |   |         | (1,684  | )
|Income tax provision          |                                                         |              | 238     |         |              |   | 225     |        
|                              |                                                         |              |         |         |              |  
|Net loss                      |                                                         | $            | (85,186 | )       |              | $ | (1,909  | )      
|                              |                                                         |              |         |         |              |  

Revenue, Net




Sync ExtremeTech PC
Magazine PC Magazine Sync ExtremeTech PC
Magazine


CIO Insight eWEEK, Baseline CIO Insight Baseline CIO Insight




22



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GMR


Cost of Production










Selling, General and Administrative Expenses




Sync ExtremeTech PC Magazine




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Depreciation and amortization




Restructuring charges, net


GMR Xbox
Nation




Gain on sale of assets, net




Interest expense, net






24



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Income taxes




Net loss




Results of Operations  Year Ended
December 31, 2003 Compared to Year Ended December 31,
2002


|                              |                                                         |              |         |         |              |   |          |          |  
|----------------------------- | ------------------------------------------------------- | ------------ | ------- | ------- | ------------ | - | -------- | -------- | -
|                              |                                                         | Year Ended   |         |         | Year Ended   |  
|                              |                                                         | December 31, |         |         | December 31, |  
|                              |                                                         | 2003         |         |         | 2002         |  
|                              |                                                         |              |         |         |              |  
|Revenue, net                  |                                                         | $            | 194,107 |         |              | $ | 209,037  |         
|                              |                                                         |              |         |         |              |  
|Operating expenses:           |                                                         |              |         |         |              |   |          |         
|                              | Cost of production                                      |              |         | 60,622  |              |   |          | 75,835   |  
|                              | Selling general and administrative expenses             |              |         | 98,973  |              |   |          | 125,171  |  
|                              | Depreciation and amortization of property and equipment |              |         | 10,793  |              |   |          | 18,851   |  
|                              | Amortization of intangible assets                       |              |         | 15,108  |              |   |          | 18,919   |  
|                              | Restructuring charges, net                              |              |         | (6,238  | )            |   |          | 48,950   |  
|                              | Write-down of intangible assets                         |              |         |        |              |   |          | 79,241   |  
|                              |                                                         |              |         |         |              |  
|                              | Total operating expenses                                |              |         | 179,258 |              |   |          | 366,967  |  
|                              |                                                         |              |         |         |              |  
|Income (loss) from operations |                                                         |              | 14,849  |         |              |   | (157,930 | )       
|Gain on sale of assets, net   |                                                         |              | 2,609   |         |              |   | 634      |         
|Interest expense, net         |                                                         |              | (19,142 | )       |              |   | (39,286  | )       
|                              |                                                         |              |         |         |              |  
|                              | Loss before income taxes                                |              |         | (1,684  | )            |   |          | (196,582 | )
|Income tax provision          |                                                         |              | 225     |         |              |   | 258      |         
|                              |                                                         |              |         |         |              |  
|Net loss                      |                                                         | $            | (1,909  | )       |              | $ | (196,840 | )       
|                              |                                                         |              |         |         |              |  

Revenue, net


Yahoo! Internet Life, Ziff Davis SMART BUSINESS, The
Net Economy


Yahoo! Internet Life, Ziff Davis SMART BUSINESS PC Magazine


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The
Net Economy Baseline CIO Insight eWEEK, Baseline CIO
Insight


GMR


Cost of Production






eWEEK




26



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Selling, General and Administrative Expenses




Sync


eWEEK, Baseline CIO Insight




Depreciation and amortization




Restructuring charges, net




27



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Yahoo! Internet
Life, Ziff Davis SMART BUSINESS the Net Economy


Gain on sale of assets, net




Interest expense, net






Income taxes




Net loss




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Liquidity and Capital Resources










Financial Restructuring








Liquidity Position




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Sources and Uses of Cash  Years Ended
December 31, 2004 and 2003




Operating Activities.


Investing Activities.


Financing Activities.


Contractual Obligations and Commitments






|                                           |  |                              |           |           |          |   |        |             |  |          |            |  |       |            |         |  |  |   |         | 
|------------------------------------------ |  | ---------------------------- | --------- | --------- | -------- | - | ------ | ----------- |  | -------- | ---------- |  | ----- | ---------- | ------- |  |  | - | ------- | 
|                                           |  | Balance at December 31, 2004 |          
|                                           |  |                              |          
|                                           |  |                              |           | Less Than |          |   | One to |             |  | Three to |            |  | After |           
|                                           |  | Total                        |           |           | One Year |   |        | Three Years |  |          | Five Years |  |       | Five Years |        
|(in thousands of dollars)                  |  |                              |           |           |          |   |        |             |  |          |            |  |       |            |        
|Long-term debt                             |  | $                            | 308,857   |           |          | $ | 23,991 |             |  | $        | 150,150    |  |       | $          | 134,716 |  |  | $ |        | 
|Preferred stock at redemption value        |  |                              | 814,549   |           |          |   |       |             |  |          |           |  |       |            |        |  |  |   | 814,549 | 
|Non-cancelable operating lease obligations |  |                              | 156,330   |           |          |   | 9,556  |             |  |          | 27,095     |  |       |            | 19,819  |  |  |   | 99,860  | 
|                                           |  |                              |           |           |          |   |        |             |  |          |            |  |       |            |        
|                                           |  | $                            | 1,279,736 |           |          | $ | 33,547 |             |  | $        | 177,245    |  |       | $          | 154,535 |  |  | $ | 914,409 | 
|                                           |  |                              |           |           |          |   |        |             |  |          |            |  |       |            |        



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Off-Balance-Sheet Arrangements








Cyclicality




Seasonality




Critical Accounting Policies and Estimates




31



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Effect of Recently Issued Accounting Standards


Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.


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Exchange of Nonmonetary Assets


Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity







|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk






Inflation and Fluctuations in Paper Prices and Postage
Costs






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|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|                                                                                                                         |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                                         |  | Page |   
|                                                                                                                         |  |      |   
|Report of Independent Registered Public
    Accounting Firm                                                              |  |      | 35 | 
|Consolidated Balance Sheets as of
    December 31, 2004 and December 31, 2003                                            |  |      | 36 | 
|Consolidated Statements of Operations for
    the years ended December 31, 2004, 2003 and 2002                           |  |      | 37 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2004, 2003 and 2002                           |  |      | 38 | 
|Consolidated Statements of Changes in
    Stockholders Deficit for the years ended December 31,
    2004, 2003 and 2002 |  |      | 39 | 
|Notes to Consolidated Financial
    Statements                                                                           |  |      | 40 | 

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Report of Independent Registered Public Accounting Firm












|                                   | 
|---------------------------------- | 
|/s/
    PricewaterhouseCoopers LLP | 
|                                   | 
|PricewaterhouseCoopers LLP         | 
|                                  
|New York, New York                 | 
|March 21, 2005                     | 

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ZIFF DAVIS HOLDINGS INC.





CONSOLIDATED BALANCE SHEETS


(dollars in thousands, except per share data)


|                                                |                                                                                                                                                                           |                                             |         |          |           |   |         |          |          |  
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | -------- | --------- | - | ------- | -------- | -------- | -
|                                                |                                                                                                                                                                           | December 31,                                |        
|                                                |                                                                                                                                                                           |                                             |        
|                                                |                                                                                                                                                                           | 2004                                        |         |          | 2003      |  
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|ASSETS                                         
|Current assets:                                 |                                                                                                                                                                           |                                             |         |          |           |   |         |         
|                                                | Cash and cash equivalents                                                                                                                                                 |                                             | $       | 32,592   |           |   | $       | 47,308   |         
|                                                | Accounts receivable, net                                                                                                                                                  |                                             |         | 34,776   |           |   |         | 32,836   |         
|                                                | Inventories                                                                                                                                                               |                                             |         | 575      |           |   |         | 321      |         
|                                                | Prepaid expenses and other current assets                                                                                                                                 |                                             |         | 6,661    |           |   |         | 7,010    |         
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                                |                                                                                                                                                                           | Total current assets                        |         |          | 74,604    |   |         |          | 87,475   |  
|Property and equipment, net                     |                                                                                                                                                                           |                                             | 15,004  |          |           |   | 15,206  |         
|Intangible assets, net                          |                                                                                                                                                                           |                                             | 207,141 |          |           |   | 220,544 |         
|Goodwill, net                                   |                                                                                                                                                                           |                                             | 39,903  |          |           |   | 38,139  |         
|Other assets, net                               |                                                                                                                                                                           |                                             | 15,650  |          |           |   | 15,544  |         
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                                |                                                                                                                                                                           | Total assets                                |         | $        | 352,302   |   |         | $        | 376,908  |  
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                               
|Current liabilities:                            |                                                                                                                                                                           |                                             |         |          |           |   |         |         
|                                                | Accounts payable                                                                                                                                                          |                                             | $       | 20,280   |           |   | $       | 13,938   |         
|                                                | Accrued expenses and other current liabilities                                                                                                                            |                                             |         | 25,804   |           |   |         | 31,706   |         
|                                                | Current portion of long-term debt                                                                                                                                         |                                             |         | 23,991   |           |   |         | 15,766   |         
|                                                | Unexpired subscriptions and deferred revenue, net                                                                                                                         |                                             |         | 20,327   |           |   |         | 25,170   |         
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                                |                                                                                                                                                                           | Total current liabilities                   |         |          | 90,402    |   |         |          | 86,580   |  
|Long-term debt                                  |                                                                                                                                                                           |                                             | 284,866 |          |           |   | 293,265 |         
|Accrued interest  compounding notes            |                                                                                                                                                                           |                                             | 76,190  |          |           |   | 89,532  |         
|Accrued expenses  long-term                    |                                                                                                                                                                           |                                             | 14,978  |          |           |   | 14,027  |         
|Mandatorily redeemable preferred stock          |                                                                                                                                                                           |                                             | 814,549 |          |           |   |        |         
|Other non-current liabilities                   |                                                                                                                                                                           |                                             | 19,854  |          |           |   | 17,253  |         
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                                |                                                                                                                                                                           | Total liabilities                           |         |          | 1,300,839 |   |         |          | 500,657  |  
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|Commitments and contingencies (Notes 17 and 18) |                                                                                                                                                                           |                                             |         |          |           |   |         |         
|Mandatorily redeemable preferred stock          |                                                                                                                                                                           |                                             |        |          |           |   | 739,602 |         
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|Stockholders deficit:                          |                                                                                                                                                                           |                                             |         |          |           |   |         |         
|                                                | Common stock  $0.001 par value,
    100,000,000 shares authorized, 2,311,049 and 2,312,928
    issued and outstanding as of December 31, 2004 and 2003,
    respectively |                                             |         | 17,329   |           |   |         | 17,343   |         
|                                                | Stock subscription loans                                                                                                                                                  |                                             |         |         |           |   |         | (14      | )       
|                                                | Additional paid-in capital                                                                                                                                                |                                             |         | 8,468    |           |   |         | 8,468    |         
|                                                | Accumulated deficit                                                                                                                                                       |                                             |         | (974,334 | )         |   |         | (889,148 | )       
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                                |                                                                                                                                                                           | Total stockholders deficit                 |         |          | (948,537  | ) |         |          | (863,351 | )
|                                                |                                                                                                                                                                           |                                             |         |          |           |  
|                                                |                                                                                                                                                                           | Total liabilities and stockholders deficit |         | $        | 352,302   |   |         | $        | 376,908  |  
|                                                |                                                                                                                                                                           |                                             |         |          |           |  



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ZIFF DAVIS HOLDINGS INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


(dollars in thousands)


|                              |                                                         |              |         |         |              |   |         |              |   |   |          |          |  
|----------------------------- | ------------------------------------------------------- | ------------ | ------- | ------- | ------------ | - | ------- | ------------ | - | - | -------- | -------- | -
|                              |                                                         | Year Ended   |         |         | Year Ended   |   |         | Year Ended   |  
|                              |                                                         | December 31, |         |         | December 31, |   |         | December 31, |  
|                              |                                                         | 2004         |         |         | 2003         |   |         | 2002         |  
|                              |                                                         |              |         |         |              |   |         |              |  
|Revenue, net                  |                                                         | $            | 204,477 |         |              | $ | 194,107 |              |   | $ | 209,037  |         
|                              |                                                         |              |         |         |              |   |         |              |  
|Operating expenses:           |                                                         |              |         |         |              |   |         |              |   |   |          |         
|                              | Cost of production                                      |              |         | 59,743  |              |   |         | 60,622       |   |   |          | 75,835   |  
|                              | Selling general and administrative expenses             |              |         | 110,939 |              |   |         | 98,973       |   |   |          | 125,171  |  
|                              | Depreciation and amortization of property and equipment |              |         | 6,202   |              |   |         | 10,793       |   |   |          | 18,851   |  
|                              | Amortization of intangible assets                       |              |         | 15,226  |              |   |         | 15,108       |   |   |          | 18,919   |  
|                              | Restructuring charges (reductions), net                 |              |         | 5,491   |              |   |         | (6,238       | ) |   |          | 48,950   |  
|                              | Write-down of intangible assets                         |              |         |        |              |   |         |             |   |   |          | 79,241   |  
|                              |                                                         |              |         |         |              |   |         |              |  
|                              | Total operating expenses                                |              |         | 197,601 |              |   |         | 179,258      |   |   |          | 366,967  |  
|                              |                                                         |              |         |         |              |   |         |              |  
|Income (loss) from operations |                                                         |              | 6,876   |         |              |   | 14,849  |              |   |   | (157,930 | )       
|Gain on sale of assets, net   |                                                         |              |        |         |              |   | 2,609   |              |   |   | 634      |         
|Interest expense, net         |                                                         |              | (91,824 | )       |              |   | (19,142 | )            |   |   | (39,286  | )       
|                              |                                                         |              |         |         |              |   |         |              |  
|                              | Loss before income taxes                                |              |         | (84,948 | )            |   |         | (1,684       | ) |   |          | (196,582 | )
|Income tax provision          |                                                         |              | 238     |         |              |   | 225     |              |   |   | 258      |         
|                              |                                                         |              |         |         |              |   |         |              |  
|Net loss                      |                                                         | $            | (85,186 | )       |              | $ | (1,909  | )            |   | $ | (196,840 | )       
|                              |                                                         |              |         |         |              |   |         |              |  



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ZIFF DAVIS HOLDINGS INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


(dollars in thousands)


|                                                                                           |                                                                   |              |         |         |              |   |        |              |   |   |          |          |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------- | ------------ | ------- | ------- | ------------ | - | ------ | ------------ | - | - | -------- | -------- | -
|                                                                                           |                                                                   | Year Ended   |         |         | Year Ended   |   |        | Year Ended   |  
|                                                                                           |                                                                   | December 31, |         |         | December 31, |   |        | December 31, |  
|                                                                                           |                                                                   | 2004         |         |         | 2003         |   |        | 2002         |  
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Cash flows from operating activities:                                                      |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|Net loss                                                                                   |                                                                   | $            | (85,186 | )       |              | $ | (1,909 | )            |   | $ | (196,840 | )       
|Adjustments to reconcile net loss to net cash provided
    (used) by operating activities: |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|                                                                                           | Depreciation and amortization                                     |              |         | 21,428  |              |   |        | 25,901       |   |   |          | 37,770   |  
|                                                                                           | Provision for doubtful accounts                                   |              |         | (769    | )            |   |        | 557          |   |   |          | 1,331    |  
|                                                                                           | Non-cash rent (income) expense                                    |              |         | (389    | )            |   |        | (1,617       | ) |   |          | 2,452    |  
|                                                                                           | Non-cash interest expense on compounding notes, net               |              |         | 1,531   |              |   |        | 1,316        |   |   |          | 459      |  
|                                                                                           | Amortization of debt issuance costs                               |              |         | 2,236   |              |   |        | 2,158        |   |   |          | 2,473    |  
|                                                                                           | Non-cash compensation                                             |              |         | 1,109   |              |   |        |             |   |   |          |         |  
|                                                                                           | Gain on sale of assets                                            |              |         |        |              |   |        | (2,609       | ) |   |          | (634     | )
|                                                                                           | Non-cash restructuring charges                                    |              |         |        |              |   |        | (6,238       | ) |   |          | 5,974    |  
|                                                                                           | Accrued dividends on mandatorily redeemable preferred stock       |              |         | 74,947  |              |   |        |             |   |   |          |         |  
|                                                                                           | Write-down of intangible assets                                   |              |         |        |              |   |        |             |   |   |          | 79,241   |  
|Changes in operating assets and liabilities:                                               |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|                                                                                           | Accounts receivable                                               |              |         | (1,171  | )            |   |        | (2,797       | ) |   |          | 12,354   |  
|                                                                                           | Inventories                                                       |              |         | (254    | )            |   |        | 13           |   |   |          | 26       |  
|                                                                                           | Accounts payable and accrued expenses                             |              |         | 322     |              |   |        | (3,328       | ) |   |          | 6,371    |  
|                                                                                           | Unexpired subscriptions and deferred revenue, net                 |              |         | (4,843  | )            |   |        | (4,697       | ) |   |          | (1,327   | )
|                                                                                           | Prepaid expenses and other, net                                   |              |         | 840     |              |   |        | 1,785        |   |   |          | 2,348    |  
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Net cash provided (used) by operating activities                                           |                                                                   |              | 9,801   |         |              |   | 8,535  |              |   |   | (48,002  | )       
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Cash flows from investing activities:                                                      |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|                                                                                           | Capital expenditures                                              |              |         | (5,849  | )            |   |        | (2,518       | ) |   |          | (2,567   | )
|                                                                                           | Net proceeds from sale of assets                                  |              |         | 13      |              |   |        | 4,929        |   |   |          | 1,554    |  
|                                                                                           | Acquisitions and investments, net of cash acquired                |              |         | (3,146  | )            |   |        |             |   |   |          |         |  
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Net cash provided (used) by investing activities                                           |                                                                   |              | (8,982  | )       |              |   | 2,411  |              |   |   | (1,013   | )       
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Cash flows from financing activities:                                                      |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|                                                                                           | Proceeds from issuance of preferred and common stock              |              |         |        |              |   |        |             |   |   |          | 77,631   |  
|                                                                                           | Net borrowings under senior credit facilities                     |              |         |        |              |   |        |             |   |   |          | 21,000   |  
|                                                                                           | Repayment of borrowings under senior credit facilities            |              |         | (15,047 | )            |   |        | (4,928       | ) |   |          | (6,085   | )
|                                                                                           | Debt issuance costs                                               |              |         | (488    | )            |   |        |             |   |   |          | (1,039   | )
|                                                                                           | Payments to 12% Note holders in connection with
    restructuring |              |         |        |              |   |        |             |   |   |          | (21,158  | )
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Net cash provided (used) by financing activities                                           |                                                                   |              | (15,535 | )       |              |   | (4,928 | )            |   |   | 70,349   |         
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Net increase (decrease) in cash and cash equivalents                                       |                                                                   |              | (14,716 | )       |              |   | 6,018  |              |   |   | 21,334   |         
|Cash and cash equivalents at beginning of period                                           |                                                                   |              | 47,308  |         |              |   | 41,290 |              |   |   | 19,956   |         
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Cash and cash equivalents at end of period                                                 |                                                                   | $            | 32,592  |         |              | $ | 47,308 |              |   | $ | 41,290   |         
|                                                                                           |                                                                   |              |         |         |              |   |        |              |  
|Cash paid during the period for:                                                           |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|                                                                                           | Interest                                                          |              | $       | 11,743  |              |   | $      | 14,444       |   |   | $        | 33,701   |  
|                                                                                           | Income taxes                                                      |              |         | 15      |              |   |        | 33           |   |   |          | 90       |  
|Supplemental non-cash financing activities in connection with
    financial restructuring: |                                                                   |              |         |         |              |   |        |              |   |   |          |         
|                                                                                           | Issuance of preferred stock                                       |              |         |        |              |   |        |             |   |   |          | (35,895  | )
|                                                                                           | Issuance of compounding notes                                     |              |         |        |              |   |        |             |   |   |          | (90,334  | )
|                                                                                           | Accrued interest  compounding notes                              |              |         |        |              |   |        |             |   |   |          | (104,986 | )
|                                                                                           | Conversion of 12% Notes                                           |              |         |        |              |   |        |             |   |   |          | 233,163  |  
|                                                                                           | Write-off of debt issuance costs                                  |              |         |        |              |   |        |             |   |   |          | (1,948   | )



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ZIFF DAVIS HOLDINGS INC.





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
DEFICIT


(dollars in thousands)


|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |       |  |   |          |          |   |   |          |          |  
|---------------------------- | ------------------------------------------------------- | ------------ | ---------- | ----------- | ------------ | - | ------ | ---------- | - | ----------- | ----------- | --- | ----- | ------------- | ----- | ----- | ------------- | - | -------- | ------------- | - | - | ------ | ----- |  | - | -------- | -------- | - | - | -------- | -------- | -
|                             |                                                         |              |            |             |              |   |        |            |   | Accumulated |             |     |       |               |      
|                             |                                                         | Common Stock |            |             | Stock        |   |        | Additional |   |             |             |     | Other |               |       | Total |               |   |         
|                             |                                                         |              |            |             | Subscription |   |        | Paid-In    |   |             | Accumulated |     |       | Comprehensive |       |       | Stockholders |   |          | Comprehensive |  
|                             |                                                         | Shares       |            |             | Amount       |   |        | Loans      |   |             | Capital     |     |       | Deficit       |       |       | Loss          |   |          | Deficit       |   |   | Loss   |      
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|Balance at December 31, 2001 |                                                         |              | 74,985,785 |             |              | $ | 18,743 |            |   | $           | (1,164      | )   |       | $             | 3,468 |       |               | $ | (574,561 | )             |   | $ | (1,800 | )     |  | $ | (555,314 | )        |   | $ | (417,224 | )       
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|                             | Reverse stock split                                     |              |            | (72,486,259 | )            |   |        |           |   |             |             |    |       |               |       |      |               |   |          |              |   |   |        |      |  |   |          |         |   |   |          |          |  
|                             | Cancellation of shareholder loans                       |              |            | (164,778    | )            |   |        | (842       | ) |             |             | 592 |       |               |       | 250   |               |   |          |              |   |   |        |      |  |   |          |         |   |   |          |          |  
|                             | Change in fair value of interest rate swap              |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          |              |   |   |        | 454   |  |   |          | 454      |   |   | $        | 454      |  
|                             | Return of preferred stock in settlement with former CEO |              |            |            |              |   |        |           |   |             |             |    |       |               |       | 4,750 |               |   |          |              |   |   |        |      |  |   |          | 4,750    |   |   |          |          |  
|                             | Dividends payable on preferred stock                    |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          | (49,813       | ) |   |        |      |  |   |          | (49,813  | ) |   |          |          |  
|                             | Net loss                                                |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          | (196,840      | ) |   |        |      |  |   |          | (196,840 | ) |   |          | (196,840 | )
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|Balance at December 31, 2002 |                                                         |              | 2,334,748  |             |              | $ | 17,901 |            |   | $           | (572        | )   |       | $             | 8,468 |       |               | $ | (821,214 | )             |   | $ | (1,346 | )     |  | $ | (796,763 | )        |   | $ | (196,386 | )       
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|                             | Cancellation of shareholder loans                       |              |            | (21,820     | )            |   |        | (558       | ) |             |             | 558 |       |               |       |      |               |   |          |              |   |   |        |      |  |   |          |         |   |   |          |          |  
|                             | Change in fair value of interest rate swap              |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          |               |   |   |        | 1,346 |  |   |          | 1,346    |   |   | $        | 1,346    |  
|                             | Dividends payable on preferred stock                    |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          | (66,025       | ) |   |        |      |  |   |          | (66,025  | ) |   |          |          |  
|                             | Net loss                                                |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          | (1,909        | ) |   |        |      |  |   |          | (1,909   | ) |   |          | (1,909   | )
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|Balance at December 31, 2003 |                                                         |              | 2,312,928  |             |              | $ | 17,343 |            |   | $           | (14         | )   |       | $             | 8,468 |       |               | $ | (889,148 | )             |   | $ |       |       |  | $ | (863,351 | )        |   | $ | (563     | )       
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|                             | Cancellation of shareholder loans                       |              |            | (1,879      | )            |   |        | (14        | ) |             |             | 14  |       |               |       |      |               |   |          |              |   |   |        |      |  |   |          |         |   |   |          |          |  
|                             | Net loss                                                |              |            |            |              |   |        |           |   |             |             |    |       |               |       |      |               |   |          | (85,186       | ) |   |        |      |  |   |          | (85,186  | ) |   |          | (85,186  | )
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      
|Balance at December 31, 2004 |                                                         |              | 2,311,049  |             |              | $ | 17,329 |            |   | $           |            |     |       | $             | 8,468 |       |               | $ | (974,334 | )             |   | $ |       |       |  | $ | (948,537 | )        |   | $ | (85,186  | )       
|                             |                                                         |              |            |             |              |   |        |            |   |             |             |     |       |               |       |       |               |   |          |               |   |   |        |      



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ZIFF DAVIS HOLDINGS INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(dollars in thousands, except per share data)


NOTE 1  ORGANIZATION AND BASIS OF
PRESENTATION




| |                                      
| | -------------------------------------
| | Formation of Ziff Davis Holdings Inc.













| |           
| | ----------
| | Operations



40



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 1  ORGANIZATION AND BASIS OF
PRESENTATION (continued)


PC Magazine, Sync ExtremeTech


eWEEK,
CIO Insight Baseline.


(Electronic Gaming Monthly, Computer Gaming World Official U.S. PlayStation Magazine) GMR Xbox Nation




NOTE 2  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES




| |                            
| | ---------------------------
| | Principles of consolidation





| |                          
| | -------------------------
| | Cash and cash equivalents





| |                             
| | ----------------------------
| | Concentration of credit risk





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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 2  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)




| |            
| | -----------
| | Inventories

eWEEK.




| |                       
| | ----------------------
| | Property and equipment





| |                     
| | --------------------
| | Capitalized software

Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use,




| |                  
| | -----------------
| | Intangible assets





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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 2  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)




| |                                
| | -------------------------------
| | Impairment of long-lived assets





| |                    
| | -------------------
| | Debt issuance costs





| |             
| | ------------
| | Revenue, net





| |                             
| | ----------------------------
| | Operating costs and expenses





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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 2  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)




| |                         
| | ------------------------
| | Stock-based compensation

Accounting for Stock-based
Compensation, Accounting for Stock Issued to Employers




| |                   
| | ------------------
| | Comprehensive loss





| |             
| | ------------
| | Income taxes





| |                    
| | -------------------
| | Interest rate swaps





| |                                    
| | -----------------------------------
| | Fair value of financial investments





| |                 
| | ----------------
| | Use of estimates



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 2  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)














| |                                 
| | --------------------------------
| | Recent accounting pronouncements



Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.


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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 2  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)




Exchange of Nonmonetary Assets


Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity




| |                  
| | -----------------
| | Reclassifications



NOTE 3  ACQUISITIONS AND DISPOSITIONS




| |                                
| | -------------------------------
| | Sale of International Trademark





| |                        
| | -----------------------
| | eTESTING LABS Inc. Sale

eTESTING LABS


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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 3  ACQUISITIONS AND
DISPOSITIONS (continued)






| |                   
| | ------------------
| | Acquisition of ZDP





| |                                 
| | --------------------------------
| | Sale of International Operations





| |                   
| | ------------------
| | Other Acquisitions







NOTE 4  ACCOUNTS RECEIVABLE, NET




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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 4  ACCOUNTS RECEIVABLE,
NET (continued)




|            |  |      |        |  |      |   |        | 
|----------- |  | ---- | ------ |  | ---- | - | ------ | 
|            |  | 2004 |        |  | 2003 |  
|            |  |      |        |  |      |  
|Trade       |  | $    | 22,497 |  |      | $ | 21,688 | 
|Circulation |  |      | 39,956 |  |      |   | 27,631 | 
|Other       |  |      | 6,109  |  |      |   | 4,607  | 
|            |  |      |        |  |      |  
|Total       |  | $    | 68,562 |  |      | $ | 53,926 | 



|                  |  |                   |        |  |           |            |        |            |  |   |             |   |  |   |        | 
|----------------- |  | ----------------- | ------ |  | --------- | ---------- | ------ | ---------- |  | - | ----------- | - |  | - | ------ | 
|                  |  |                   |        |  |           | Write-offs |        |            | 
|                  |  | Balance at        |        |  | Net       |            |        | net of     |  |   | Balance at  |  
|                  |  | beginning of year |        |  | additions |            |        | recoveries |  |   | end of year |  
|                  |  |                   |        |  |           |            |        |            |  |   |             |  
|December 31, 2004 |  | $                 | 21,090 |  |           | $          | 15,922 |            |  | $ | (3,226      | ) |  | $ | 33,786 | 
|December 31, 2003 |  |                   | 24,926 |  |           |            | 160    |            |  |   | (3,996      | ) |  |   | 21,090 | 

NOTE 5  PREPAID EXPENSES AND OTHER
CURRENT ASSETS




|                               |  |              |       |  |      |   |       | 
|------------------------------ |  | ------------ | ----- |  | ---- | - | ----- | 
|                               |  | December 31, |      
|                               |  |              |      
|                               |  | 2004         |       |  | 2003 |  
|                               |  |              |       |  |      |  
|Deferred expenses and deposits |  | $            | 6,178 |  |      | $ | 6,358 | 
|Production expenses            |  |              | 54    |  |      |   | 223   | 
|Other                          |  |              | 429   |  |      |   | 429   | 
|                               |  |              |       |  |      |  
|                               |  | $            | 6,661 |  |      | $ | 7,010 | 
|                               |  |              |       |  |      |  



NOTE 6  PROPERTY AND EQUIPMENT, NET




|                                          |  |              |         |   |      |   |         |  
|----------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                          |  | December 31, |        
|                                          |  |              |        
|                                          |  | 2004         |         |   | 2003 |  
|                                          |  |              |         |   |      |  
|Computers and equipment                   |  | $            | 26,778  |   |      | $ | 24,798  |  
|Capitalized computer software             |  |              | 21,068  |   |      |   | 17,803  |  
|Leasehold improvements                    |  |              | 19,491  |   |      |   | 18,992  |  
|Furniture and fixtures                    |  |              | 6,512   |   |      |   | 6,295   |  
|                                          |  |              |         |   |      |  
|                                          |  |              | 73,849  |   |      |   | 67,888  |  
|Accumulated depreciation and amortization |  |              | (58,845 | ) |      |   | (52,682 | )
|                                          |  |              |         |   |      |  
|                                          |  | $            | 15,004  |   |      | $ | 15,206  |  
|                                          |  |              |         |   |      |  

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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 6  PROPERTY AND EQUIPMENT,
NET (continued)




NOTE 7  INTANGIBLE ASSETS, NET






Ziff Davis SMART
BUSINESS Yahoo! Internet Life






|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |   |         |         |   |   |         |         | 
|------------------------------ | ----------------------------------- | ----------------------- | ------- | ----------- | ----------------------- | - | ------- | ------- | - | - | ----------- | ------- |  | ------------ | ------- | ------- | --- | - | ------- | ------- | - | - | ------- | ------- | 
|                               |                                     | As of December 31, 2004 |         |             | As of December 31, 2003 |  
|                               |                                     |                         |         |             |                         |  
|                               |                                     |                         |         | Accumulated |                         |   |         |         |   |   | Accumulated |         |  |             
|                               |                                     | Gross                   |         |             | Amortization            |   |         | Net     |   |   | Gross       |         |  | Amortization |         |         | Net |  
|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |  
|Amortized intangible assets:   |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |   |         |         |   |   |         |        
|                               | Advertising lists                   |                         | $       | 184,178     |                         |   | $       | (60,146 | ) |   | $           | 124,032 |  |              | $       | 183,729 |     |   | $       | (46,318 | ) |   | $       | 137,411 | 
|                               | Trademark/trade names               |                         |         | 14,300      |                         |   |         | (4,104  | ) |   |             | 10,196  |  |              |         | 14,300  |     |   |         | (2,707  | ) |   |         | 11,593  | 
|                               | Subscriber lists and other          |                         |         | 12,973      |                         |   |         | (11,600 | ) |   |             | 1,373   |  |              |         | 11,600  |     |   |         | (11,600 | ) |   |         |        | 
|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |  
|                               | Total amortized intangible assets   |                         |         | 211,451     |                         |   |         | (75,850 | ) |   |             | 135,601 |  |              |         | 209,629 |     |   |         | (60,625 | ) |   |         | 149,004 | 
|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |  
|Unamortized intangible assets: |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |   |         |         |   |   |         |        
|                               | Trademark/trade names               |                         |         | 78,443      |                         |   |         | (6,903  | ) |   |             | 71,540  |  |              |         | 78,443  |     |   |         | (6,903  | ) |   |         | 71,540  | 
|                               | Goodwill                            |                         |         | 47,170      |                         |   |         | (7,267  | ) |   |             | 39,903  |  |              |         | 45,406  |     |   |         | (7,267  | ) |   |         | 38,139  | 
|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |  
|                               | Total unamortized intangible assets |                         |         | 125,613     |                         |   |         | (14,170 | ) |   |             | 111,443 |  |              |         | 123,849 |     |   |         | (14,170 | ) |   |         | 109,679 | 
|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |  
|Total intangible assets        |                                     | $                       | 337,064 |             |                         | $ | (90,020 | )       |   | $ | 247,044     |         |  | $            | 333,478 |         |     | $ | (74,795 | )       |   | $ | 258,683 |        
|                               |                                     |                         |         |             |                         |   |         |         |   |   |             |         |  |              |         |         |     |  

49



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 7  INTANGIBLE ASSETS,
NET (continued)




GMR






|     |  |   |        | 
|---- |  | - | ------ | 
|2005 |  | $ | 15,544 | 
|2006 |  |   | 15,544 | 
|2007 |  |   | 15,544 | 
|2008 |  |   | 15,338 | 
|2009 |  |   | 15,226 | 

NOTE 8  ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES




|                                         |                                                |              |        |        |      |   |        |        | 
|---------------------------------------- | ---------------------------------------------- | ------------ | ------ | ------ | ---- | - | ------ | ------ | 
|                                         |                                                | December 31, |       
|                                         |                                                |              |       
|                                         |                                                | 2004         |        |        | 2003 |  
|                                         |                                                |              |        |        |      |  
|Accrued operating and production costs   |                                                | $            | 11,606 |        |      | $ | 10,116 |       
|Accrued restructuring costs  short-term |                                                |              | 7,977  |        |      |   | 9,365  |       
|Accrued interest                         |                                                |              | 1,329  |        |      |   | 1,040  |       
|Payroll and related employee benefits    |                                                |              | 3,037  |        |      |   | 8,731  |       
|Other taxes payable                      |                                                |              | 845    |        |      |   | 942    |       
|Other                                    |                                                |              | 1,010  |        |      |   | 1,512  |       
|                                         |                                                |              |        |        |      |  
|                                         | Accrued expenses and other current liabilities |              | $      | 25,804 |      |   | $      | 31,706 | 
|                                         |                                                |              |        |        |      |  

NOTE 9  COST REDUCTION AND RESTRUCTURING
PROGRAM, ASSET IMPAIRMENTAND RELATED CHARGES


GMR Xbox Nation


|                                    |  |              |       | 
|----------------------------------- |  | ------------ | ----- | 
|                                    |  | Year Ended   |      
|                                    |  | December 31, |      
|                                    |  | 2004         |      
|                                    |  |              |      
|Employee severance costs(b)         |  | $            | 3,320 | 
|Costs to exit certain activities(c) |  |              | 2,171 | 
|                                    |  |              |      
|                                    |  | $            | 5,491 | 
|                                    |  |              |      

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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 9  COST REDUCTION AND RESTRUCTURING
PROGRAM, ASSET IMPAIRMENTAND
RELATED                     CHARGES (continued)


The Net Economy Ziff Davis SMART BUSINESS Yahoo!
Internet Life.


|                                     |  |              |         | 
|------------------------------------ |  | ------------ | ------- | 
|                                     |  | Year Ended   |        
|                                     |  | December 31, |        
|                                     |  | 2002         |        
|                                     |  |              |        
|Intangible asset impairment costs(a) |  | $            | 79,241  | 
|Fixed asset impairment costs(a)      |  |              | 5,974   | 
|Employee severance costs(b)          |  |              | 8,137   | 
|Costs to exit certain activities(c)  |  |              | 34,839  | 
|                                     |  |              |        
|                                     |  | $            | 128,191 | 
|                                     |  |              |        






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Intangible asset impairment and fixed asset impairment costs are
    non-cash write-offs of fixed assets and intangible assets,
    primarily subscriber lists, tradenames, goodwill, capitalized
    software and leasehold improvements associated with discontinued
    publications and other businesses. These impairments are
    included in Writedown of intangible assets in the Consolidated
    Statements of Operations.
|   
|(b) |  | Employee severance costs relate to severance benefits and other
    related costs that are calculated pursuant to the Companys
    employee severance plan or individual employee contracts, as
    applicable.                                                                                                                                                                                                                    
|   
|(c) |  | Costs to exit certain activities relate to the termination of
    contracts, closure or consolidation of offices and other related
    costs associated with the closure of publications and other
    businesses.                                                                                                                                                                                                                  



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 9  COST REDUCTION AND RESTRUCTURING
PROGRAM, ASSET IMPAIRMENTAND
RELATED                     CHARGES (continued)




|                                       |  |              |        |                                               |             |         |         |          |  |         |         |   |              |      |         |   |  |   |        | 
|-------------------------------------- |  | ------------ | ------ | --------------------------------------------- | ----------- | ------- | ------- | -------- |  | ------- | ------- | - | ------------ | ---- | ------- | - |  | - | ------ | 
|                                       |  |              |        | Activity for the Year Ended December 31, 2002 |            
|                                       |  |              |        |                                               |            
|                                       |  |              |        |                                               |             | Applied |         |          | 
|                                       |  | Balance      |        |                                               |             |         | Against |          |  | Balance |        
|                                       |  | December 31, |        |                                               | Expenses/   |         |         |          |  | Related |         |   | December 31, |     
|                                       |  | 2001         |        |                                               | Adjustments |         |         | Payments |  |         | Assets  |   |              | 2002 |        
|                                       |  |              |        |                                               |             |         |         |          |  |         |         |   |              |      |        
|Employee severance costs               |  | $            | 5,826  |                                               |             | $       | 8,137   |          |  | $       | (10,047 | ) |              | $    |        |   |  | $ | 3,916  | 
|Write-down of intangible assets        |  |              |       |                                               |             |         | 79,241  |          |  |         |        |   |              |      | (79,241 | ) |  |   |       | 
|Facility consolidation and other costs |  |              | 11,794 |                                               |             |         | 40,813  |          |  |         | (12,336 | ) |              |      | (5,974  | ) |  |   | 34,297 | 
|                                       |  |              |        |                                               |             |         |         |          |  |         |         |   |              |      |        
|Total                                  |  | $            | 17,620 |                                               |             | $       | 128,191 |          |  | $       | (22,383 | ) |              | $    | (85,215 | ) |  | $ | 38,213 | 
|                                       |  |              |        |                                               |             |         |         |          |  |         |         |   |              |      |        

|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |       |  |  |   |        | 
|-------------------------------------- |  | ------------ | ------ | --------------------------------------------- | ----------- | - | --------- | -------- |  | ------- | --------- | - | ------------ | ---- | ----- |  |  | - | ------ | 
|                                       |  |              |        | Activity for the Year Ended December 31, 2003 |            
|                                       |  |              |        |                                               |            
|                                       |  | Balance      |        |                                               |             |   | Accretion |          |  | Balance |          
|                                       |  | December 31, |        |                                               | Expenses/   |   |           |          |  | of      |           |   | December 31, |     
|                                       |  | 2002         |        |                                               | Adjustments |   |           | Payments |  |         | Liability |   |              | 2003 |      
|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |      
|Employee severance costs               |  | $            | 3,916  |                                               |             | $ | (485      | )        |  | $       | (1,457    | ) |              | $    |      |  |  | $ | 1,974  | 
|Facility consolidation and other costs |  |              | 34,297 |                                               |             |   | (3,815    | )        |  |         | (10,941   | ) |              |      | 1,877 |  |  |   | 21,418 | 
|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |      
|Total                                  |  | $            | 38,213 |                                               |             | $ | (4,300    | )        |  | $       | (12,398   | ) |              | $    | 1,877 |  |  | $ | 23,392 | 
|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |      

|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |       |  |  |   |        | 
|-------------------------------------- |  | ------------ | ------ | --------------------------------------------- | ----------- | - | --------- | -------- |  | ------- | --------- | - | ------------ | ---- | ----- |  |  | - | ------ | 
|                                       |  |              |        | Activity for the Year Ended December 31, 2004 |            
|                                       |  |              |        |                                               |            
|                                       |  | Balance      |        |                                               |             |   | Accretion |          |  | Balance |          
|                                       |  | December 31, |        |                                               | Expenses/   |   |           |          |  | of      |           |   | December 31, |     
|                                       |  | 2003         |        |                                               | Adjustments |   |           | Payments |  |         | Liability |   |              | 2004 |      
|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |      
|Employee severance costs               |  | $            | 1,974  |                                               |             | $ | 3,320     |          |  | $       | (1,374    | ) |              | $    |      |  |  | $ | 3,920  | 
|Facility consolidation and other costs |  |              | 21,418 |                                               |             |   | 2,171     |          |  |         | (7,960    | ) |              |      | 3,406 |  |  |   | 19,035 | 
|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |      
|Total                                  |  | $            | 23,392 |                                               |             | $ | 5,491     |          |  | $       | (9,334    | ) |              | $    | 3,406 |  |  | $ | 22,955 | 
|                                       |  |              |        |                                               |             |   |           |          |  |         |           |   |              |      |      



|        |               
|------- | --------------
|NOTE 10 |  INCOME TAXES

Accounting for Income
Taxes.




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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                         
|--------- | ------------------------
|NOTE 10  | INCOME TAXES (continued)



|                           |          |                 |   |     |              |  |   |              |     |  |   |     |     | 
|-------------------------- | -------- | --------------- | - | --- | ------------ |  | - | ------------ | --- |  | - | --- | --- | 
|                           |          | Year Ended      |   |     | Year Ended   |  |   | Year Ended   |    
|                           |          | December 31,    |   |     | December 31, |  |   | December 31, |    
|                           |          | 2004            |   |     | 2003         |  |   | 2002         |    
|                           |          |                 |   |     |              |  |   |              |    
|U.S. federal income taxes: |          |                 |   |     |              |  |   |              |     |  |   |    
|                           | Current  |                 | $ |    |              |  | $ |             |     |  | $ |    |    
|                           | Deferred |                 |   |    |              |  |   |             |     |  |   |    |    
|State and local taxes:     |          |                 |   |     |              |  |   |              |     |  |   |    
|                           | Current  |                 |   | 30  |              |  |   | 30           |     |  |   | 61  |    
|                           | Deferred |                 |   |    |              |  |   |             |     |  |   |    |    
|Foreign income taxes:      |          |                 |  |     |              |  |  |              |     |  |   |    
|                           | Current  |                 |   | 208 |              |  |   | 195          |     |  |   | 197 |    
|                           |          |                 |   |     |              |  |   |              |    
|                           |          | Total provision |   | $   | 238          |  |   | $            | 225 |  |   | $   | 258 | 
|                           |          |                 |   |     |              |  |   |              |    



|                           |                                                    |              |      |       |              |  |       |              |   |  |      |       |  
|-------------------------- | -------------------------------------------------- | ------------ | ---- | ----- | ------------ |  | ----- | ------------ | - |  | ---- | ----- | -
|                           |                                                    | Year Ended   |      |       | Year Ended   |  |       | Year Ended   |  
|                           |                                                    | December 31, |      |       | December 31, |  |       | December 31, |  
|                           |                                                    | 2004         |      |       | 2003         |  |       | 2002         |  
|                           |                                                    |              |      |       |              |  |       |              |  
|Federal statutory tax rate |                                                    |              | 35.0 | %     |              |  | 35.0  | %            |   |  | 35.0 | %    
|                           | State and local taxes (net of federal tax benefit) |              |      |      |              |  |       | (1.1         | ) |  |      | (0.1  | )
|                           | Permanent differences                              |              |      | (31.5 | )            |  |       | (8.9         | ) |  |      | (0.2  | )
|                           | Valuation allowance                                |              |      | (3.6  | )            |  |       | (26.8        | ) |  |      | (34.8 | )
|                           | Foreign operations                                 |              |      | (0.3  | )            |  |       | (11.6        | ) |  |      | (0.1  | )
|                           | Other                                              |              |      |      |              |  |       |             |   |  |      | 0.1   |  
|                           |                                                    |              |      |       |              |  |       |              |  
|Effective tax rate         |                                                    |              | (0.4 | )%    |              |  | (13.4 | )%           |   |  | (0.1 | )%   
|                           |                                                    |              |      |       |              |  |       |              |  



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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                         
|--------- | ------------------------
|NOTE 10  | INCOME TAXES (continued)



|                                                   |                                            |                                      |          |         |         |   |          |         |         | 
|-------------------------------------------------- | ------------------------------------------ | ------------------------------------ | -------- | ------- | ------- | - | -------- | ------- | ------- | 
|                                                   |                                            | December 31,                         |         
|                                                   |                                            |                                      |         
|                                                   |                                            | 2004                                 |          |         | 2003    |  
|                                                   |                                            |                                      |          |         |         |  
|Current deferred tax assets and (liabilities):     |                                            |                                      |          |         |         |   |          |        
|                                                   | Allowance for doubtful accounts            |                                      | $        | 1,124   |         |   | $        | 909     |        
|                                                   | Prepaid expenses                           |                                      |          | (108    | )       |   |          | (191    | )      
|                                                   | Other                                      |                                      |          |        |         |   |          |        |        
|                                                   |                                            |                                      |          |         |         |  
|                                                   |                                            | Current deferred net tax assets, net |          |         | 1,016   |   |          |         | 718     | 
|                                                   |                                            |                                      |          |         |         |  
|Non-current deferred tax assets and (liabilities): |                                            |                                      |          |         |         |   |          |        
|                                                   | Basis difference in intangible assets      |                                      |          | 97,195  |         |   |          | 110,993 |        
|                                                   | Basis difference in property and equipment |                                      |          | (3,849  | )       |   |          | 1,477   |        
|                                                   | Start-up costs capitalized                 |                                      |          | 1,357   |         |   |          | 3,149   |        
|                                                   | Deferred rent                              |                                      |          | 3,073   |         |   |          | 2,560   |        
|                                                   | Other                                      |                                      |          | 584     |         |   |          | 124     |        
|                                                   | Net operating loss and other carryforwards |                                      |          | 169,790 |         |   |          | 153,894 |        
|                                                   |                                            |                                      |          |         |         |  
|                                                   |                                            | Non-current deferred tax assets, net |          |         | 268,150 |   |          |         | 272,197 | 
|                                                   |                                            |                                      |          |         |         |  
|Gross deferred tax assets                          |                                            |                                      | 269,166  |         |         |   | 272,915  |        
|Valuation allowance                                |                                            |                                      | (269,166 | )       |         |   | (272,915 | )      
|                                                   |                                            |                                      |          |         |         |  
|Net deferred tax assets                            |                                            | $                                    |         |         |         | $ |         |        
|                                                   |                                            |                                      |          |         |         |  







NOTE 11  DEBT




| |        
| | -------
| | General



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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 11  DEBT (continued)




| |                       
| | ----------------------
| | Senior Credit Facility











| |                  
| | -----------------
| | Compounding Notes





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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 11  DEBT (continued)






| |          
| | ---------
| | 12% Notes





| |           
| | ----------
| | Maturities





|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 23,991  | 
|2006       |  |   | 83,124  | 
|2007       |  |   | 67,026  | 
|2008       |  |   |        | 
|2009       |  |   | 122,436 | 
|Thereafter |  |   | 12,280  | 
|           |  |   |        
|           |  | $ | 308,857 | 
|           |  |   |        



|          |                        
|--------- | -----------------------
|NOTE 12  | FINANCIAL RESTRUCTURING







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company received an equity contribution of $80,000 from
    Willis Stein in exchange for the issuance of a new series D
    redeemable preferred stock (the Series D Preferred
    Stock) with an aggregate liquidation preference of
    approximately $80,000 as well as approximately 38.6 million
    warrants, each representing the right to purchase one share of
    the common stock of Ziff Davis Holdings at an exercise price of
    $0.001 per share. The contribution was comprised of $10,100
    of cash received during the quarter ended June 30, 2002,
    approximately $62,531 of cash received in August 2002, and
    approximately $7,369 in liquidation preference of Series D
    Preferred Stock issued by Ziff Davis Holdings in lieu of a cash
    payment which otherwise would have been owed to Willis Stein by
    Ziff Davis Media with respect to the 12% Notes held by
    Willis Stein.

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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                    
|--------- | -----------------------------------
|NOTE 12  | FINANCIAL RESTRUCTURING (continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Accredited investors representing approximately 95.1% in
    aggregate principal amount of the Companys 12% Notes
    who tendered their notes received an aggregate of approximately
    $21,158 in cash and $90,334 in aggregate principal amount of
    Compounding Notes. These holders also received an aggregate of
    approximately $28,526 in liquidation preference of a new series
    of preferred stock (Series E Preferred Stock)
    and warrants for the purchase of approximately 5.2 million
    shares of common stock of Ziff Davis Holdings in exchange for
    their 12% Notes.                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The Compounding Notes accrue interest in semi-annual periods,
    commencing on February 15 and August 15 of each year, with the
    first period starting on February 15, 2003. For the first
    four years, interest accrues at rates ranging from 12% to 14%
    and may be paid, at the Companys option and subject to
    certain restrictions under the Senior Credit Facility, either in
    cash or by compounding such interest on the Compounding Notes.
    For all payments of interest accruing after August 12,
    2006, interest shall be payable in cash at a rate of
    12% per annum.                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The Series E Preferred Stock accrues dividends at a rate of
    10% per annum and is subject to mandatory redemption on the
    earlier of March 31, 2010 or the date of a change in
    control. Dividends will only be paid in cash if declared for
    payment by the Companys Board of Directors. In addition,
    so long as any Series D Preferred Stock remains
    outstanding, and without the prior written consent of Willis
    Stein, together with the holder or holders of a majority of the
    outstanding shares of Series D Preferred Stock, Ziff Davis
    Holdings will not be permitted directly or indirectly to pay or
    declare any cash dividend or make any distribution to the
    holders of Series E Preferred Stock (see Note 13), and
    the Senior Credit Facility and the indenture governing the
    Compounding Notes each restricts the payment of dividends to
    holders of capital stock of Ziff Davis Holdings.
|
| |  | Interest due to holders of the $12,280 principal amount of the
    12% Notes not tendered previously due on July 15,
    2002, was funded on August 14, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The Company amended and restated its Senior Credit Facility
    providing for, among other terms: (1) waiver of all
    existing defaults; (2) deferral of principal payments for
    eight quarters; (3) removal of the obligation to pay the
    default interest rate on the outstanding principal; and
    (4) mandatory use of a portion of excess cash flows, as
    defined, to repay amounts owed under the Senior Credit Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  





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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                  
|--------- | -----------------
|NOTE 13  | CAPITAL STRUCTURE





| |                           
| | --------------------------
| | Redeemable Preferred Stock

Series A Redeemable Preferred Stock divided by divided by


Series B Redeemable Preferred Stock divided by divided by


Series C Convertible Preferred Stock divided by


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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                              
|--------- | -----------------------------
|NOTE 13  | CAPITAL STRUCTURE (continued)

divided by


Series D Redeemable Preferred Stock divided by divided by


Series E Redeemable Preferred Stock divided by divided by


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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                              
|--------- | -----------------------------
|NOTE 13  | CAPITAL STRUCTURE (continued)



|                             |                                                   |                        |         |        |   |   |         |        |   |   |       |      |   |   |         |        |       |   |        |        |  |   |        |       |  |   |         |        |  
|---------------------------- | ------------------------------------------------- | ---------------------- | ------- | ------ | - | - | ------- | ------ | - | - | ----- | ---- | - | - | ------- | ------ | ----- | - | ------ | ------ |  | - | ------ | ----- |  | - | ------- | ------ | -
|                             |                                                   | Preferred Stock Series |         |        |   |   |        
|                             |                                                   |                        |         |        |   |   |        
|                             |                                                   | A                      |         |        | B |   |         | C      |   |   | D     |      |   | E |         |        | Loans |   |        | Total  | 
|                             |                                                   |                        |         |        |   |   |         |        |   |   |       |      |   |   |         |        |       |   |        |        | 
|Balance at December 31, 2001 |                                                   | $                      | 414,568 |        |   | $ | 100,151 |        |   | $ | 4,973 |      |   | $ |        |        |       | $ |       |        |  | $ | (3,705 | )     |  | $ | 515,987 |       
|                             | Issued                                            |                        |         |       |   |   |         | 13,395 |   |   |       | 705  |   |   |         |       |       |   |        |       |  |   |        |      |  |   |         | 14,100 |  
|                             | Issued in connection with financial restructuring |                        |         |       |   |   |         |       |   |   |       |     |   |   |         | 69,901 |       |   |        | 28,526 |  |   |        |      |  |   |         | 98,427 |  
|                             | Converted                                         |                        |         |       |   |   |         | (9,799 | ) |   |       | (505 | ) |   |         | 10,304 |       |   |        |       |  |   |        |      |  |   |         |       |  
|                             | Dividends payable                                 |                        |         | 29,183 |   |   |         | 12,570 |   |   |       |     |   |   |         | 6,948  |       |   |        | 1,112  |  |   |        |      |  |   |         | 49,813 |  
|                             | Return of former CEO shares                       |                        |         | (8,455 | ) |   |         |       |   |   |       |     |   |   |         |       |       |   |        |       |  |   |        | 3,705 |  |   |         | (4,750 | )
|                             |                                                   |                        |         |        |   |   |         |        |   |   |       |      |   |   |         |        |       |   |        |        | 
|Balance at December 31, 2002 |                                                   | $                      | 435,296 |        |   | $ | 116,317 |        |   | $ | 5,173 |      |   | $ | 87,153  |        |       | $ | 29,638 |        |  | $ |       |       |  | $ | 673,577 |       
|                             | Dividends payable                                 |                        |         | 28,992 |   |   |         | 13,143 |   |   |       |     |   |   |         | 20,813 |       |   |        | 3,077  |  |   |        |      |  |   |         | 66,025 |  
|                             |                                                   |                        |         |        |   |   |         |        |   |   |       |      |   |   |         |        |       |   |        |        | 
|Balance at December 31, 2003 |                                                   | $                      | 464,288 |        |   | $ | 129,460 |        |   | $ | 5,173 |      |   | $ | 107,966 |        |       | $ | 32,715 |        |  |   |       |       |  | $ | 739,602 |       
|                             | Dividends payable                                 |                        |         | 31,009 |   |   |         | 14,670 |   |   |       |     |   |   |         | 25,862 |       |   |        | 3,406  |  |   |        |      |  |   |         | 74,947 |  
|                             |                                                   |                        |         |        |   |   |         |        |   |   |       |      |   |   |         |        |       |   |        |        | 
|Balance at December 31, 2004 |                                                   | $                      | 495,297 |        |   | $ | 144,130 |        |   | $ | 5,173 |      |   | $ | 133,828 |        |       | $ | 36,121 |        |  | $ |       |       |  | $ | 814,549 |       
|                             |                                                   |                        |         |        |   |   |         |        |   |   |       |      |   |   |         |        |       |   |        |        | 



| |             
| | ------------
| | Common Stock





| |                                          
| | -----------------------------------------
| | Restrictions on Transfer of Capital Stock





| |                      
| | ---------------------
| | Common Stock Warrants



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                              
|--------- | -----------------------------
|NOTE 13  | CAPITAL STRUCTURE (continued)





| |                       
| | ----------------------
| | Liquidation Preference





|          |                   
|--------- | ------------------
|NOTE 14  | CONTRACTS WITH ZDI

Computer Shopper Computer Shopper Computer Shopper Computer Shopper.




|          |                   
|--------- | ------------------
|NOTE 15  | EARNINGS PER SHARE





|          |                       
|--------- | ----------------------
|NOTE 16  | EMPLOYEE BENEFIT PLANS



| |            
| | -----------
| | 401(k) Plan





| |                   
| | ------------------
| | Stock Option Plans

2001 Stock Option Plan




61



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                   
|--------- | ----------------------------------
|NOTE 16  | EMPLOYEE BENEFIT PLANS (continued)





|                             |                             |                  |           |                  |                 |   |      |      | 
|---------------------------- | --------------------------- | ---------------- | --------- | ---------------- | --------------- | - | ---- | ---- | 
|                             |                             |                  |           | Weighted Average |                
|                             |                             | Number of Shares |           |                  | Price Per Share |  
|                             |                             |                  |           |                  |                 |  
|Balance at December 31, 2001 |                             |                  | 1,382,066 |                  |                 |   | 0.25 |     
|                             | Reverse stock split         |                  |           | (1,335,997       | )               |   |      | 0.25 | 
|                             | Options granted             |                  |           |                 |                 |   |      |     | 
|                             | Options exercised           |                  |           |                 |                 |   |      |     | 
|                             | Options cancelled/forfeited |                  |           | (19,114          | )               |   |      | 7.50 | 
|                             |                             |                  |           |                  |                 |  
|Balance at December 31, 2002 |                             |                  | 26,955    |                  |                 |   | 7.50 |     
|                             | Options granted             |                  |           |                 |                 |   |      |     | 
|                             | Options exercised           |                  |           |                 |                 |   |      |     | 
|                             | Options cancelled/forfeited |                  |           | (5,459           | )               |   |      | 7.50 | 
|                             |                             |                  |           |                  |                 |  
|Balance at December 31, 2003 |                             |                  | 21,496    |                  |                 | $ | 7.50 |     
|                             | Options granted             |                  |           |                 |                 |   |      |     | 
|                             | Options exercised           |                  |           |                 |                 |   |      |     | 
|                             | Options cancelled/forfeited |                  |           | (3,418           | )               |   |      | 7.50 | 
|                             |                             |                  |           |                  |                 |  
|Balance at December 31, 2004 |                             |                  | 18,078    |                  |                 | $ | 7.50 |     
|                             |                             |                  |           |                  |                 |  







2002 Stock Option Plan




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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                   
|--------- | ----------------------------------
|NOTE 16  | EMPLOYEE BENEFIT PLANS (continued)











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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                   
|--------- | ----------------------------------
|NOTE 16  | EMPLOYEE BENEFIT PLANS (continued)





|                                |  |               |        |         |               |   |             |               |         |  |          |   |  |         |             |  |          |  |         |         |  |   |           |  |  |  |           |   |  |   |           | 
|------------------------------- |  | ------------- | ------ | ------- | ------------- | - | ----------- | ------------- | ------- |  | -------- | - |  | ------- | ----------- |  | -------- |  | ------- | ------- |  | - | --------- |  |  |  | --------- | - |  | - | --------- | 
|                                |  | Series D Pfd. |        |         | Series B Pfd. |   |             | Series A Pfd. |         |  | Common   |  
|                                |  |               |        |         |               |   |             |               |         |  |          |  
|                                |  |               |        | Wtd Avg |               |   |             |               | Wtd Avg |  |          |   |  | Wtd Avg |             |  |          |  | Wtd Avg |        
|                                |  | # of          |        |         | Exercise      |   |             | # of          |         |  | Exercise |   |  | # of    |             |  | Exercise |  |         | # of    |  |   | Exercise  | 
|                                |  | Options       |        |         | Price         |   |             | Options       |         |  | Price    |   |  | Options |             |  | Price    |  |         | Options |  |   | Price     | 
|                                |  |               |        |         |               |   |             |               |         |  |          |   |  |         |             |  |          |  |         |         |  |   |           | 
|Options Outstanding at 12/31/03 |  |               |       |         |               |   |            |               |         |  |         |   |  |         |            |  |          |  |        |         |  |   |          |  |  |  |          |   |  |   |          | 
|Granted                         |  |               | 12,301 |         |               | $ | 1,096       |               |         |  | 14,769   |   |  | $       | 1,010       |  |          |  | 48,894  |         |  | $ | 0.01      |  |  |  | 8,000,000 |   |  | $ | 0.001     | 
|Forfeited                       |  |               | (485   | )       |               | $ | 1,106       |               |         |  | (597     | ) |  | $       | 1,068       |  |          |  | (1,999  | )       |  | $ | 0.01      |  |  |  | (395,000  | ) |  | $ | 0.001     | 
|Expired                         |  |               |       |         |               |   |            |               |         |  |         |   |  |         |            |  |          |  |        |         |  |   |          |  |  |  |          |   |  |   |          | 
|Options Outstanding at 12/31/04 |  |               | 11,816 |         |               | $ | 1,098       |               |         |  | 14,172   |   |  | $       | 1,007       |  |          |  | 46,895  |         |  | $ | 0.01      |  |  |  | 7,605,000 |   |  | $ | 0.001     | 
|Range of Exercise Prices        |  |               |        |         |               | $ | 1,000-1,610 |               |         |  |          |   |  | $       | 1,000-1,160 |  |          |  |         |         |  | $ | 0.01      |  |  |  |           |   |  | $ | 0.001     | 
|Weighted Average Remaining Life |  |               |        |         |               |   | 8.6 years   |               |         |  |          |   |  |         | 8.6 years   |  |          |  |         |         |  |   | 8.5 years |  |  |  |           |   |  |   | 8.5 years | 



|          |                            
|--------- | ---------------------------
|NOTE 17  | OPERATING LEASE COMMITMENTS



|           |  |              |         |  |          |   |        |             |  |   |         | 
|---------- |  | ------------ | ------- |  | -------- | - | ------ | ----------- |  | - | ------- | 
|           |  | Gross Rental |         |  | Sublease |   |        | Net Rental  | 
|           |  | Commitments  |         |  | Income   |   |        | Commitments | 
|           |  |              |         |  |          |   |        |             | 
|2005       |  | $            | 18,500  |  |          | $ | 8,944  |             |  | $ | 9,556   | 
|2006       |  |              | 17,633  |  |          |   | 8,367  |             |  |   | 9,266   | 
|2007       |  |              | 16,957  |  |          |   | 7,998  |             |  |   | 8,959   | 
|2008       |  |              | 16,929  |  |          |   | 8,059  |             |  |   | 8,870   | 
|2009       |  |              | 16,244  |  |          |   | 8,462  |             |  |   | 7,782   | 
|Thereafter |  |              | 138,014 |  |          |   | 26,117 |             |  |   | 111,897 | 
|           |  |              |         |  |          |   |        |             | 
|           |  | $            | 224,277 |  |          | $ | 67,947 |             |  | $ | 156,330 | 
|           |  |              |         |  |          |   |        |             | 





|          |              
|--------- | -------------
|NOTE 18  | CONTINGENCIES



| |                  
| | -----------------
| | Legal Proceedings

The Net
Economy


64



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 18  CONTINGENCIES (continued)




PC Magazine PC Magazine






| |                               
| | ------------------------------
| | Off-Balance-Sheet Arrangements





|          |                                          
|--------- | -----------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION



| |                                
| | -------------------------------
| | Guarantor Financial Information



65



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)



|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |          |           |  
|-------------------------------------------------- | ------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ---------- | - | ------- | ---------- | -------- | - | ------------ | -------- | ------- | ----- | -------- | ---------- | -------- | - | ------- | -------- | --------- | -
|                                                   |                                                   | At December 31, 2004                                 |         
|                                                   |                                                   |                                                      |         
|                                                   |                                                   | Ziff Davis                                           |          |          | Ziff Davis |   |         |           
|                                                   |                                                   | Holdings Inc.                                        |          |          | Media Inc. |   |         | Guarantors |          |   | Eliminations |          |         | Total |         
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|ASSETS                                             |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|Current assets:                                    |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|                                                   | Cash and cash equivalents                         |                                                      | $        |         |            |   | $       |           |          |   | $            | 32,592   |         |       | $        |           |          |   | $       | 32,592   |          
|                                                   | Accounts receivable, net                          |                                                      |          |         |            |   |         |           |          |   |              | 34,776   |         |       |          |           |          |   |         | 34,776   |          
|                                                   | Inventories                                       |                                                      |          |         |            |   |         |           |          |   |              | 575      |         |       |          |           |          |   |         | 575      |          
|                                                   | Prepaid expenses and other current assets         |                                                      |          |         |            |   |         |           |          |   |              | 6,661    |         |       |          |           |          |   |         | 6,661    |          
|                                                   | Due (to) from affiliates                          |                                                      |          | 1        |            |   |         | (190,067   | )        |   |              | 190,066  |         |       |          |           |          |   |         |         |          
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                   |                                                   | Total current assets                                 |          |          | 1          |   |         |            | (190,067 | ) |              |          | 264,670 |       |          |            |         |   |         |          | 74,604    |  
|Property and equipment, net                        |                                                   |                                                      |         |          |            |   |        |            |          |   | 15,004       |          |         |       |         |            |          |   | 15,004  |         
|Investments in subsidiaries, equity method         |                                                   |                                                      | (133,989 | )        |            |   | (34,166 | )          |          |   |             |          |         |       | 168,155  |            |          |   |        |         
|Intangible assets, net                             |                                                   |                                                      |         |          |            |   |        |            |          |   | 207,141      |          |         |       |         |            |          |   | 207,141 |         
|Goodwill net                                       |                                                   |                                                      |         |          |            |   |        |            |          |   | 39,903       |          |         |       |         |            |          |   | 39,903  |         
|Note receivable  affiliate                        |                                                   |                                                      |         |          |            |   | 464,800 |            |          |   |             |          |         |       | (464,800 | )          |          |   |        |         
|Other assets, net                                  |                                                   |                                                      |         |          |            |   | 10,964  |            |          |   | 4,686        |          |         |       |         |            |          |   | 15,650  |         
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                   |                                                   | Total assets                                         |          | $        | (133,988   | ) |         | $          | 251,531  |   |              | $        | 531,404 |       |          | $          | (296,645 | ) |         | $        | 352,302   |  
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                  
|LIABILITIES AND STOCKHOLDERS
    (DEFICIT) EQUITY |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|Current liabilities:                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|                                                   | Accounts payable                                  |                                                      | $        |         |            |   | $       |           |          |   | $            | 20,280   |         |       | $        |           |          |   | $       | 20,280   |          
|                                                   | Accrued expenses and other current liabilities    |                                                      |          |         |            |   |         | 1,329      |          |   |              | 24,475   |         |       |          |           |          |   |         | 25,804   |          
|                                                   | Current portion of long-term debt                 |                                                      |          |         |            |   |         | 23,991     |          |   |              |         |         |       |          |           |          |   |         | 23,991   |          
|                                                   | Unexpired subscriptions and deferred revenue, net |                                                      |          |         |            |   |         |           |          |   |              | 20,327   |         |       |          |           |          |   |         | 20,327   |          
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                   |                                                   | Total current liabilities                            |          |          |           |   |         |            | 25,320   |   |              |          | 65,082  |       |          |            |         |   |         |          | 90,402    |  
|Long-term debt                                     |                                                   |                                                      |         |          |            |   | 284,866 |            |          |   |             |          |         |       |         |            |          |   | 284,866 |         
|Accrued interest  compounding notes               |                                                   |                                                      |         |          |            |   | 76,190  |            |          |   |             |          |         |       |         |            |          |   | 76,190  |         
|Note payable  affiliate                           |                                                   |                                                      |         |          |            |   |        |            |          |   | 464,800      |          |         |       | (464,800 | )          |          |   |        |         
|Accrued expenses  long-term                       |                                                   |                                                      |         |          |            |   |        |            |          |   | 14,978       |          |         |       |         |            |          |   | 14,978  |         
|Mandatorily redeemable preferred stock             |                                                   |                                                      | 814,549  |          |            |   |        |            |          |   |             |          |         |       |         |            |          |   | 814,549 |         
|Other non-current liabilities                      |                                                   |                                                      |         |          |            |   |        |            |          |   | 19,854       |          |         |       |         |            |          |   | 19,854  |         
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                   |                                                   | Total liabilities                                    |          |          | 814,549    |   |         |            | 386,376  |   |              |          | 564,714 |       |          |            | (464,800 | ) |         |          | 1,300,839 |  
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|Stockholders (deficit) equity:                    |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|                                                   | Preferred stock                                   |                                                      |          |         |            |   |         |           |          |   |              | 1,234    |         |       |          | (1,234     | )        |   |         |         |          
|                                                   | Common stock                                      |                                                      |          | 17,329   |            |   |         |           |          |   |              | 28       |         |       |          | (28        | )        |   |         | 17,329   |          
|                                                   | Stock subscription loans                          |                                                      |          |         |            |   |         |           |          |   |              |         |         |       |          |           |          |   |         |         |          
|                                                   | Additional paid-in capital                        |                                                      |          | 8,468    |            |   |         | 566,631    |          |   |              | 720,420  |         |       |          | (1,287,051 | )        |   |         | 8,468    |          
|                                                   | Accumulated (deficit) equity                      |                                                      |          | (974,334 | )          |   |         | (701,476   | )        |   |              | (754,992 | )       |       |          | 1,456,468  |          |   |         | (974,334 | )        
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                   |                                                   | Total stockholders (deficit) equity                 |          |          | (948,537   | ) |         |            | (134,845 | ) |              |          | (33,310 | )     |          |            | 168,155  |   |         |          | (948,537  | )
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                                   |                                                   | Total liabilities and stockholders (deficit) equity |          | $        | (133,988   | ) |         | $          | 251,531  |   |              | $        | 531,404 |       |          | $          | (296,645 | ) |         | $        | 352,302   |  
|                                                   |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         

66



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |          |          |  
|---------------------------------------------- | ------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ---------- | - | ------- | ---------- | -------- | - | ------------ | -------- | ------- | ----- | -------- | ---------- | -------- | - | ------- | -------- | -------- | -
|                                               |                                                   | At December 31, 2003                                 |         
|                                               |                                                   |                                                      |         
|                                               |                                                   | Ziff Davis                                           |          |          | Ziff Davis |   |         |           
|                                               |                                                   | Holdings Inc.                                        |          |          | Media Inc. |   |         | Guarantors |          |   | Eliminations |          |         | Total |         
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|ASSETS                                         |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|Current assets:                                |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|                                               | Cash and cash equivalents                         |                                                      | $        |         |            |   | $       |           |          |   | $            | 47,308   |         |       | $        |           |          |   | $       | 47,308   |         
|                                               | Accounts receivable, net                          |                                                      |          |         |            |   |         |           |          |   |              | 32,836   |         |       |          |           |          |   |         | 32,836   |         
|                                               | Inventories                                       |                                                      |          |         |            |   |         |           |          |   |              | 321      |         |       |          |           |          |   |         | 321      |         
|                                               | Prepaid expenses and other current assets         |                                                      |          |         |            |   |         |           |          |   |              | 7,010    |         |       |          |           |          |   |         | 7,010    |         
|                                               | Due from (to) affiliates                          |                                                      |          | 1        |            |   |         | (151,939   | )        |   |              | 151,938  |         |       |          |           |          |   |         |         |         
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                               |                                                   | Total current assets                                 |          |          | 1          |   |         |            | (151,939 | ) |              |          | 239,413 |       |          |            |         |   |         |          | 87,475   |  
|Property and equipment, net                    |                                                   |                                                      |         |          |            |   |        |            |          |   | 15,206       |          |         |       |         |            |          |   | 15,206  |         
|Investments in subsidiaries, equity method     |                                                   |                                                      | (123,750 | )        |            |   | (71,876 | )          |          |   |             |          |         |       | 195,626  |            |          |   |        |         
|Intangible assets, net                         |                                                   |                                                      |         |          |            |   |        |            |          |   | 220,544      |          |         |       |         |            |          |   | 220,544 |         
|Goodwill net                                   |                                                   |                                                      |         |          |            |   |        |            |          |   | 38,139       |          |         |       |         |            |          |   | 38,139  |         
|Note receivable  affiliate                    |                                                   |                                                      |         |          |            |   | 486,100 |            |          |   |             |          |         |       | (486,100 | )          |          |   |        |         
|Other assets, net                              |                                                   |                                                      |         |          |            |   | 12,712  |            |          |   | 2,832        |          |         |       |         |            |          |   | 15,544  |         
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                               |                                                   | Total assets                                         |          | $        | (123,749   | ) |         | $          | 274,997  |   |              | $        | 516,134 |       |          | $          | (290,474 | ) |         | $        | 376,908  |  
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                              
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|Current liabilities:                           |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|                                               | Accounts payable                                  |                                                      | $        |         |            |   | $       |           |          |   | $            | 13,938   |         |       | $        |           |          |   | $       | 13,938   |         
|                                               | Accrued expenses and other current liabilities    |                                                      |          |         |            |   |         | 1,040      |          |   |              | 30,666   |         |       |          |           |          |   |         | 31,706   |         
|                                               | Current portion of long-term debt                 |                                                      |          |         |            |   |         | 15766      |          |   |              |         |         |       |          |           |          |   |         | 15766    |         
|                                               | Unexpired subscriptions and deferred revenue, net |                                                      |          |         |            |   |         |           |          |   |              | 25,170   |         |       |          |           |          |   |         | 25,170   |         
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                               |                                                   | Total current liabilities                            |          |          |           |   |         |            | 16,806   |   |              |          | 69,774  |       |          |            |         |   |         |          | 86,580   |  
|Long-term debt                                 |                                                   |                                                      |         |          |            |   | 293,265 |            |          |   |             |          |         |       |         |            |          |   | 293,265 |         
|Accrued interest  compounding notes           |                                                   |                                                      |         |          |            |   | 89,532  |            |          |   |             |          |         |       |         |            |          |   | 89,532  |         
|Note payable  affiliate                       |                                                   |                                                      |         |          |            |   |        |            |          |   | 486,100      |          |         |       | (486,100 | )          |          |   |        |         
|Accrued expenses  long-term                   |                                                   |                                                      |         |          |            |   |        |            |          |   | 14,027       |          |         |       |         |            |          |   | 14,027  |         
|Other non-current liabilities                  |                                                   |                                                      |         |          |            |   |        |            |          |   | 17,253       |          |         |       |         |            |          |   | 17,253  |         
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                               |                                                   | Total liabilities                                    |          |          |           |   |         |            | 399,603  |   |              |          | 587,154 |       |          |            | (486,100 | ) |         |          | 500,657  |  
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|Redeemable preferred stock                     |                                                   |                                                      | 739,602  |          |            |   |        |            |          |   |             |          |         |       |         |            |          |   | 739,602 |         
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|Stockholders (deficit) equity:                |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |          |            |          |   |         |         
|                                               | Preferred stock                                   |                                                      |          |         |            |   |         |           |          |   |              | 1,234    |         |       |          | (1,234     | )        |   |         |         |         
|                                               | Common stock                                      |                                                      |          | 17,343   |            |   |         |           |          |   |              | 28       |         |       |          | (28        | )        |   |         | 17,343   |         
|                                               | Stock subscription loans                          |                                                      |          | (14      | )          |   |         |           |          |   |              |         |         |       |          |           |          |   |         | (14      | )       
|                                               | Additional paid-in capital                        |                                                      |          | 8,468    |            |   |         | 566,631    |          |   |              | 632,378  |         |       |          | (1,199,009 | )        |   |         | 8,468    |         
|                                               | Accumulated (deficit) equity                      |                                                      |          | (889,148 | )          |   |         | (691,237   | )        |   |              | (704,660 | )       |       |          | 1,395,897  |          |   |         | (889,148 | )       
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                               |                                                   | Total stockholders deficit                          |          |          | (863,351   | ) |         |            | (124,606 | ) |              |          | (71,020 | )     |          |            | 195,626  |   |         |          | (863,351 | )
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         
|                                               |                                                   | Total liabilities and stockholders (deficit) equity |          | $        | (123,749   | ) |         | $          | 274,997  |   |              | $        | 516,134 |       |          | $          | (290,474 | ) |         | $        | 376,908  |  
|                                               |                                                   |                                                      |          |          |            |   |         |            |          |   |              |          |         |       |         

67



---



##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |        |        |  |   |         |         |  
|----------------------------------------- | ------------------------------------------------------- | ---------------------------- | ------- | ---------- | ----- | - | ------- | ---------- | - | - | ------------ | ------- | - | ----- | ------ | ------ |  | - | ------- | ------- | -
|                                          |                                                         | Year Ended December 31, 2004 |        
|                                          |                                                         |                              |        
|                                          |                                                         |                              |         | Ziff Davis |       |   |        
|                                          |                                                         | Ziff Davis                   |         |            | Media |   |         |           
|                                          |                                                         | Holdings Inc.                |         |            | Inc.  |   |         | Guarantors |   |   | Eliminations |         |   | Total |       
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       
|Revenue, net                              |                                                         | $                            |        |            |       | $ |        |            |   | $ | 204,477      |         |   | $     |       |        |  | $ | 204,477 |        
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       
|Operating expenses:                       |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |        |        |  |   |         |        
|                                          | Cost of production                                      |                              |         |           |       |   |         |           |   |   |              | 59,743  |   |       |        |       |  |   |         | 59,743  |  
|                                          | Selling, general and administrative expenses            |                              |         |           |       |   |         |           |   |   |              | 110,939 |   |       |        |       |  |   |         | 110,939 |  
|                                          | Depreciation and amortization of property and equipment |                              |         |           |       |   |         |           |   |   |              | 6,202   |   |       |        |       |  |   |         | 6,202   |  
|                                          | Amortization of intangible assets                       |                              |         |           |       |   |         |           |   |   |              | 15,226  |   |       |        |       |  |   |         | 15,226  |  
|                                          | Restructuring charges, net                              |                              |         |           |       |   |         |           |   |   |              | 5,491   |   |       |        |       |  |   |         | 5,491   |  
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       
|                                          | Total operating expenses                                |                              |         |           |       |   |         |           |   |   |              | 197,601 |   |       |        |       |  |   |         | 197,601 |  
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       
|Income from operations                    |                                                         |                              |        |            |       |   |        |            |   |   | 6,876        |         |   |       |        |        |  |   | 6,876   |        
|Equity in (loss) income from subsidiaries |                                                         |                              | (10,239 | )          |       |   | (50,332 | )          |   |   |             |         |   |       | 60,571 |        |  |   |        |        
|Intercompany interest income (expense)    |                                                         |                              |        |            |       |   | 57,430  |            |   |   | (57,430      | )       |   |       |       |        |  |   |        |        
|Interest income (expense), net            |                                                         |                              | (74,947 | )          |       |   | (17,337 | )          |   |   | 460          |         |   |       |       |        |  |   | (91,824 | )      
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       
|                                          | (Loss) income before income taxes                       |                              |         | (85,186    | )     |   |         | (10,239    | ) |   |              | (50,094 | ) |       |        | 60,571 |  |   |         | (84,948 | )
|Income tax provision (benefit)            |                                                         |                              |        |            |       |   |        |            |   |   | 238          |         |   |       |       |        |  |   | 238     |        
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       
|                                          | Net (loss) income                                       |                              | $       | (85,186    | )     |   | $       | (10,239    | ) |   | $            | (50,332 | ) |       | $      | 60,571 |  |   | $       | (85,186 | )
|                                          |                                                         |                              |         |            |       |   |         |            |   |   |              |         |   |       |       

68



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |        |        |  |   |         |         |  
|----------------------------------------- | ------------------------------------------------------- | ---------------------------- | ------ | ------ | ---------- | - | ------- | ---------- | - | - | ------------ | ------- | - | ----- | ------ | ------ |  | - | ------- | ------- | -
|                                          |                                                         | Year Ended December 31, 2003 |       
|                                          |                                                         |                              |       
|                                          |                                                         | Ziff Davis                   |        |        | Ziff Davis |   |         |           
|                                          |                                                         | Holdings Inc.                |        |        | Media Inc. |   |         | Guarantors |   |   | Eliminations |         |   | Total |       
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       
|Revenue, net                              |                                                         | $                            |       |        |            | $ |        |            |   | $ | 194,107      |         |   | $     |       |        |  | $ | 194,107 |        
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       
|Operating expenses:                       |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |        |        |  |   |         |        
|                                          | Cost of production                                      |                              |        |       |            |   |         |           |   |   |              | 60,622  |   |       |        |       |  |   |         | 60,622  |  
|                                          | Selling, general and administrative expenses            |                              |        |       |            |   |         |           |   |   |              | 98,973  |   |       |        |       |  |   |         | 98,973  |  
|                                          | Depreciation and amortization of property and equipment |                              |        |       |            |   |         |           |   |   |              | 10,793  |   |       |        |       |  |   |         | 10,793  |  
|                                          | Amortization of intangible assets                       |                              |        |       |            |   |         |           |   |   |              | 15,108  |   |       |        |       |  |   |         | 15,108  |  
|                                          | Restructuring charges, net                              |                              |        |       |            |   |         |           |   |   |              | (6,238  | ) |       |        |       |  |   |         | (6,238  | )
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       
|                                          | Total operating expenses                                |                              |        |       |            |   |         |           |   |   |              | 179,258 |   |       |        |       |  |   |         | 179,258 |  
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       
|Income from operations                    |                                                         |                              |       |        |            |   |        |            |   |   | 14,849       |         |   |       |       |        |  |   | 14,849  |        
|Equity in (loss) income from subsidiaries |                                                         |                              | (1,909 | )      |            |   | (44,729 | )          |   |   |             |         |   |       | 46,638 |        |  |   |        |        
|Gain on sale of assets, net               |                                                         |                              |       |        |            |   | 2,544   |            |   |   | 65           |         |   |       |       |        |  |   | 2,609   |        
|Intercompany interest income (expense)    |                                                         |                              |       |        |            |   | 59,757  |            |   |   | (59,757      | )       |   |       |       |        |  |   |        |        
|Interest (expense) income, net            |                                                         |                              |       |        |            |   | (19,481 | )          |   |   | 339          |         |   |       |       |        |  |   | (19,142 | )      
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       
|                                          | (Loss) income before income taxes                       |                              |        | (1,909 | )          |   |         | (1,909     | ) |   |              | (44,504 | ) |       |        | 46,638 |  |   |         | (1,684  | )
|Income tax provision                      |                                                         |                              |       |        |            |   |        |            |   |   | 225          |         |   |       |       |        |  |   | 225     |        
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       
|                                          | Net (loss) income                                       |                              | $      | (1,909 | )          |   | $       | (1,909     | ) |   | $            | (44,729 | ) |       | $      | 46,638 |  |   | $       | (1,909  | )
|                                          |                                                         |                              |        |        |            |   |         |            |   |   |              |         |   |       |       

69



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |         |         |  |   |          |          |  
|----------------------------------------- | ------------------------------------------------------- | ---------------------------- | -------- | -------- | ---------- | - | -------- | ---------- | - | - | ------------ | -------- | - | ----- | ------- | ------- |  | - | -------- | -------- | -
|                                          |                                                         | Year Ended December 31, 2002 |         
|                                          |                                                         |                              |         
|                                          |                                                         | Ziff Davis                   |          |          | Ziff Davis |   |          |           
|                                          |                                                         | Holdings Inc.                |          |          | Media Inc. |   |          | Guarantors |   |   | Eliminations |          |   | Total |        
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        
|Revenue, net                              |                                                         | $                            |         |          |            | $ |         |            |   | $ | 209,037      |          |   | $     |        |         |  | $ | 209,037  |         
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        
|Operating expenses:                       |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |         |         |  |   |          |         
|                                          | Cost of production                                      |                              |          |         |            |   |          |           |   |   |              | 75,835   |   |       |         |        |  |   |          | 75,835   |  
|                                          | Selling, general and administrative expenses            |                              |          |         |            |   |          |           |   |   |              | 125,171  |   |       |         |        |  |   |          | 125,171  |  
|                                          | Depreciation and amortization of property and equipment |                              |          |         |            |   |          |           |   |   |              | 18,851   |   |       |         |        |  |   |          | 18,851   |  
|                                          | Amortization of intangible assets                       |                              |          |         |            |   |          |           |   |   |              | 18,919   |   |       |         |        |  |   |          | 18,919   |  
|                                          | Restructuring charges, net                              |                              |          |         |            |   |          |           |   |   |              | 48,950   |   |       |         |        |  |   |          | 48,950   |  
|                                          | Write-down of intangible assets                         |                              |          |         |            |   |          |           |   |   |              | 79,241   |   |       |         |        |  |   |          | 79,241   |  
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        
|                                          | Total operating expenses                                |                              |          |         |            |   |          |           |   |   |              | 366,967  |   |       |         |        |  |   |          | 366,967  |  
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        
|Loss from operations                      |                                                         |                              |         |          |            |   |         |            |   |   | (157,930     | )        |   |       |        |         |  |   | (157,930 | )       
|Equity in (loss) income from subsidiaries |                                                         |                              | (196,844 | )        |            |   | (218,963 | )          |   |   |             |          |   |       | 415,807 |         |  |   |         |         
|Gain on sale of assets, net               |                                                         |                              |         |          |            |   |         |            |   |   | 634          |          |   |       |        |         |  |   | 634      |         
|Intercompany interest income (expense)    |                                                         |                              |         |          |            |   | 61,473   |            |   |   | (61,473      | )        |   |       |        |         |  |   |         |         
|Interest income (expense), net            |                                                         |                              | 4        |          |            |   | (39,331  | )          |   |   | 41           |          |   |       |        |         |  |   | (39,286  | )       
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        
|                                          | (Loss) income before income taxes                       |                              |          | (196,840 | )          |   |          | (196,821   | ) |   |              | (218,728 | ) |       |         | 415,807 |  |   |          | (196,582 | )
|Income tax provision                      |                                                         |                              |         |          |            |   | 23       |            |   |   | 235          |          |   |       |        |         |  |   | 258      |         
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        
|                                          | Net (loss) income                                       |                              | $        | (196,840 | )          |   | $        | (196,844   | ) |   | $            | (218,963 | ) |       | $       | 415,807 |  |   | $        | (196,840 | )
|                                          |                                                         |                              |          |          |            |   |          |            |   |   |              |          |   |       |        

70



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------- | ---------------------------- | ------- | ------ | ---------- | - | ------- | ---------- | - | - | ------------ | ------- | - | ----- | ------- | ------- | - | - | ------- | ------- | -
|                                                                                           |                                                             | Year Ended December 31, 2004 |        
|                                                                                           |                                                             |                              |        
|                                                                                           |                                                             | Ziff Davis                   |         |        | Ziff Davis |   |         |           
|                                                                                           |                                                             | Holdings Inc.                |         |        | Media Inc. |   |         | Guarantors |   |   | Eliminations |         |   | Total |        
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Cash flows from operating activities:                                                      |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |         |         |   |   |         |        
|Net (loss) income                                                                          |                                                             | $                            | (85,186 | )      |            | $ | (10,239 | )          |   | $ | (50,332      | )       |   | $     | 60,571  |         |   | $ | (85,186 | )      
|Adjustments to reconcile net loss to net cash provided
    (used) by operating activities: |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |         |         |   |   |         |        
|                                                                                           | Depreciation and amortization                               |                              |         |       |            |   |         |           |   |   |              | 21,428  |   |       |         |        |   |   |         | 21,428  |  
|                                                                                           | Provision for doubtful accounts                             |                              |         |       |            |   |         |           |   |   |              | (769    | ) |       |         |        |   |   |         | (769    | )
|                                                                                           | Non-cash rent expense                                       |                              |         |       |            |   |         |           |   |   |              | (389    | ) |       |         |        |   |   |         | (389    | )
|                                                                                           | Amortization of accrued interest on compounding notes, net  |                              |         |       |            |   |         | 1,531      |   |   |              |        |   |       |         |        |   |   |         | 1,531   |  
|                                                                                           | Amortization of debt issuance costs                         |                              |         |       |            |   |         | 2,236      |   |   |              |        |   |       |         |        |   |   |         | 2,236   |  
|                                                                                           | Non-cash restructuring charges                              |                              |         |       |            |   |         |           |   |   |              |        |   |       |         |        |   |   |         |        |  
|                                                                                           | Non-cash compensation                                       |                              |         |       |            |   |         |           |   |   |              | 1,109   |   |       |         |        |   |   |         | 1,109   |  
|                                                                                           | Accrued dividends on mandatorily redeemable preferred stock |                              |         | 74,947 |            |   |         |           |   |   |              |        |   |       |         |        |   |   |         | 74,947  |  
|                                                                                           | Equity in loss of subsidiaries                              |                              |         | 10,239 |            |   |         | 50,332     |   |   |              |        |   |       |         | (60,571 | ) |   |         |        |  
|Changes in operating assets and liabilities:                                               |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |         |         |   |   |         |        
|                                                                                           | Accounts receivable                                         |                              |         |       |            |   |         |           |   |   |              | (1,171  | ) |       |         |        |   |   |         | (1,171  | )
|                                                                                           | Inventories                                                 |                              |         |       |            |   |         |           |   |   |              | (254    | ) |       |         |        |   |   |         | (254    | )
|                                                                                           | Accounts payable and accrued expenses                       |                              |         |       |            |   |         | 289        |   |   |              | 33      |   |       |         |        |   |   |         | 322     |  
|                                                                                           | Unexpired subscriptions and deferred revenue, net           |                              |         |       |            |   |         |           |   |   |              | (4,843  | ) |       |         |        |   |   |         | (4,843  | )
|                                                                                           | Due (to) from affiliate                                     |                              |         |       |            |   |         | 36,373     |   |   |              | (36,373 | ) |       |         |        |   |   |         |        |  
|                                                                                           | Prepaid expenses and other, net                             |                              |         |       |            |   |         |           |   |   |              | 840     |   |       |         |        |   |   |         | 840     |  
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Net cash provided (used) by operating activities                                           |                                                             |                              |        |        |            |   | 80,522  |            |   |   | (70,721      | )       |   |       |        |         |   |   | 9,801   |        
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Cash flows from investing activities:                                                      |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |         |         |   |   |         |        
|                                                                                           | Capital expenditures                                        |                              |         |       |            |   |         |           |   |   |              | (5,849  | ) |       |         |        |   |   |         | (5,849  | )
|                                                                                           | Net proceeds from sale of assets                            |                              |         |       |            |   |         |           |   |   |              | 13      |   |       |         |        |   |   |         | 13      |  
|                                                                                           | Investments in subsidiaries                                 |                              |         |       |            |   |         | (86,287    | ) |   |              |        |   |       |         | 86,287  |   |   |         |        |  
|                                                                                           | Acquisitions and investments, net of cash acquired          |                              |         |       |            |   |         |           |   |   |              | (3,146  | ) |       |         |        |   |   |         | (3,146  | )
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Net cash (used) provided by investing activities                                           |                                                             |                              |        |        |            |   | (86,287 | )          |   |   | (8,982       | )       |   |       | 86,287  |         |   |   | (8,982  | )      
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Cash flows from financing activities:                                                      |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |         |         |   |   |         |        
|                                                                                           | Proceeds from capital contributions                         |                              |         |       |            |   |         |           |   |   |              | 86,287  |   |       |         | (86,287 | ) |   |         |        |  
|                                                                                           | Repayment of borrowings under senior credit facilities      |                              |         |       |            |   |         | (15,047    | ) |   |              |        |   |       |         |        |   |   |         | (15,047 | )
|                                                                                           | Proceeds from collection of intercompany notes receivable   |                              |         |       |            |   |         | 21,300     |   |   |              |        |   |       |         | (21,300 | ) |   |         |        |  
|                                                                                           | Repayment of intercompany notes payable                     |                              |         |       |            |   |         |           |   |   |              | (21,300 | ) |       |         | 21,300  |   |   |         |        |  
|                                                                                           | Debt issuance costs                                         |                              |         |       |            |   |         | (488       | ) |   |              |        |   |       |         |        |   |   |         | (488    | )
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Net cash provided (used) by financing activities                                           |                                                             |                              |        |        |            |   | 5,765   |            |   |   | 64,987       |         |   |       | (86,287 | )       |   |   | (15,535 | )      
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Net (decrease) increase in cash and cash equivalents                                       |                                                             |                              |        |        |            |   |        |            |   |   | (14,716      | )       |   |       |        |         |   |   | (14,716 | )      
|Cash and cash equivalents at beginning of period                                           |                                                             |                              |        |        |            |   |        |            |   |   | 47,308       |         |   |       |        |         |   |   | 47,308  |        
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        
|Cash and cash equivalents at end of period                                                 |                                                             | $                            |        |        |            | $ |        |            |   | $ | 32,592       |         |   | $     |        |         |   | $ | 32,592  |        
|                                                                                           |                                                             |                              |         |        |            |   |         |            |   |   |              |         |   |       |        

71



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |         |         |   |   |        |        |  
|------------------------------------------------------------------------------------------ | --------------------------------------------------------- | ---------------------------- | ------ | ----- | ---------- | - | ------- | ---------- | - | - | ------------ | ------- | - | ----- | ------- | ------- | - | - | ------ | ------ | -
|                                                                                           |                                                           | Year Ended December 31, 2003 |       
|                                                                                           |                                                           |                              |       
|                                                                                           |                                                           | Ziff Davis                   |        |       | Ziff Davis |   |         |           
|                                                                                           |                                                           | Holdings Inc.                |        |       | Media Inc. |   |         | Guarantors |   |   | Eliminations |         |   | Total |        
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Cash flows from operating activities:                                                      |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |         |         |   |   |        |       
|Net (loss) income                                                                          |                                                           | $                            | (1,909 | )     |            | $ | (1,909  | )          |   | $ | (44,729      | )       |   | $     | 46,638  |         |   | $ | (1,909 | )     
|Adjustments to reconcile net loss to net cash provided
    (used) by operating activities: |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |         |         |   |   |        |       
|                                                                                           | Depreciation and amortization                             |                              |        |      |            |   |         |           |   |   |              | 25,901  |   |       |         |        |   |   |        | 25,901 |  
|                                                                                           | Provision for doubtful accounts                           |                              |        |      |            |   |         |           |   |   |              | 557     |   |       |         |        |   |   |        | 557    |  
|                                                                                           | Non-cash rent income                                      |                              |        |      |            |   |         |           |   |   |              | (1,617  | ) |       |         |        |   |   |        | (1,617 | )
|                                                                                           | Non-cash interest expense on compounding notes, net       |                              |        |      |            |   |         | 1,316      |   |   |              |        |   |       |         |        |   |   |        | 1,316  |  
|                                                                                           | Amortization of debt issuance costs                       |                              |        |      |            |   |         | 2,158      |   |   |              |        |   |       |         |        |   |   |        | 2,158  |  
|                                                                                           | Gain on sale of assets                                    |                              |        |      |            |   |         |           |   |   |              | (2,609  | ) |       |         |        |   |   |        | (2,609 | )
|                                                                                           | Non-cash restructuring charges                            |                              |        |      |            |   |         |           |   |   |              | (6,238  | ) |       |         |        |   |   |        | (6,238 | )
|                                                                                           | Equity in loss (income) of subsidiaries                   |                              |        | 1,909 |            |   |         | 44,729     |   |   |              |        |   |       |         | (46,638 | ) |   |        |       |  
|Changes in operating assets and liabilities:                                               |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |         |         |   |   |        |       
|                                                                                           | Accounts receivable                                       |                              |        |      |            |   |         |           |   |   |              | (2,797  | ) |       |         |        |   |   |        | (2,797 | )
|                                                                                           | Inventories                                               |                              |        |      |            |   |         |           |   |   |              | 13      |   |       |         |        |   |   |        | 13     |  
|                                                                                           | Accounts payable and accrued expenses                     |                              |        |      |            |   |         | (312       | ) |   |              | (3,016  | ) |       |         |        |   |   |        | (3,328 | )
|                                                                                           | Unexpired subscriptions and deferred revenue, net         |                              |        |      |            |   |         |           |   |   |              | (4,697  | ) |       |         |        |   |   |        | (4,697 | )
|                                                                                           | Due (to) from affiliate                                   |                              |        | (1    | )          |   |         | (859       | ) |   |              | 860     |   |       |         |        |   |   |        |       |  
|                                                                                           | Prepaid expenses and other, net                           |                              |        |      |            |   |         | 1,346      |   |   |              | 439     |   |       |         |        |   |   |        | 1,785  |  
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Net cash (used) provided by operating activities                                           |                                                           |                              | (1     | )     |            |   | 46,469  |            |   |   | (37,933      | )       |   |       |        |         |   |   | 8,535  |       
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Cash flows from investing activities:                                                      |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |         |         |   |   |        |       
|                                                                                           | Capital expenditures                                      |                              |        |      |            |   |         |           |   |   |              | (2,518  | ) |       |         |        |   |   |        | (2,518 | )
|                                                                                           | Net proceeds from sale of assets                          |                              |        |      |            |   |         |           |   |   |              | 4,929   |   |       |         |        |   |   |        | 4,929  |  
|                                                                                           | Investments in subsidiaries                               |                              |        |      |            |   |         | (86,733    | ) |   |              |        |   |       |         | 86,733  |   |   |        |       |  
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Net cash (used) provided by investing activities                                           |                                                           |                              |       |       |            |   | (86,733 | )          |   |   | 2,411        |         |   |       | 86,733  |         |   |   | 2,411  |       
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Cash flows from financing activities:                                                      |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |         |         |   |   |        |       
|                                                                                           | Proceeds from capital contributions                       |                              |        |      |            |   |         |           |   |   |              | 86,733  |   |       |         | (86,733 | ) |   |        |       |  
|                                                                                           | Repayment of borrowings under senior credit facilities    |                              |        |      |            |   |         | (4,928     | ) |   |              |        |   |       |         |        |   |   |        | (4,928 | )
|                                                                                           | Proceeds from collection of intercompany notes receivable |                              |        |      |            |   |         | 16,925     |   |   |              |        |   |       |         | (16,925 | ) |   |        |       |  
|                                                                                           | Repayment of intercompany notes payable                   |                              |        |      |            |   |         |           |   |   |              | (16,925 | ) |       |         | 16,925  |   |   |        |       |  
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Net cash provided (used) by financing activities                                           |                                                           |                              |       |       |            |   | 11,997  |            |   |   | 69,808       |         |   |       | (86,733 | )       |   |   | (4,928 | )     
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Net (decrease) increase in cash and cash equivalents                                       |                                                           |                              | (1     | )     |            |   | (28,267 | )          |   |   | 34,286       |         |   |       |        |         |   |   | 6,018  |       
|Cash and cash equivalents at beginning of period                                           |                                                           |                              | 1      |       |            |   | 28,267  |            |   |   | 13,022       |         |   |       |        |         |   |   | 41,290 |       
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        
|Cash and cash equivalents at end of period                                                 |                                                           | $                            |       |       |            | $ |        |            |   | $ | 47,308       |         |   | $     |        |         |   | $ | 47,308 |       
|                                                                                           |                                                           |                              |        |       |            |   |         |            |   |   |              |         |   |       |        

72



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 19  | GUARANTOR AND OTHER FINANCIAL INFORMATION (continued)

|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |          |          |          |   |          |         |      |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------- | --------------------------------------- | -------- | -------- | ---------- | - | -------- | ---------- | ------- | - | ------------ | ------- | ---- | ----- | -------- | -------- | -------- | - | -------- | ------- | ---- | -
|                                                                                           |                                                                   | Year Ended December 31, 2002            |         
|                                                                                           |                                                                   |                                         |         
|                                                                                           |                                                                   | Ziff Davis                              |          |          | Ziff Davis |   |          |           
|                                                                                           |                                                                   | Holdings Inc.                           |          |          | Media Inc. |   |          | Guarantors |         |   | Eliminations |         |      | Total |         
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Cash flows from operating activities:                                                      |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |          |          |          |   |          |        
|Net (loss) income                                                                          |                                                                   | $                                       | (196,840 | )        |            | $ | (196,844 | )          |         | $ | (218,963     | )       |      | $     | 415,807  |          |          | $ | (196,840 | )      
|Adjustments to reconcile net loss to net cash provided
    (used) by operating activities: |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |          |          |          |   |          |        
|                                                                                           | Depreciation and amortization                                     |                                         |          |         |            |   |          |           |         |   |              | 37,770  |      |       |          |         |          |   |          | 37,770  |     
|                                                                                           | Provision for doubtful accounts                                   |                                         |          |         |            |   |          |           |         |   |              | 1,331   |      |       |          |         |          |   |          | 1,331   |     
|                                                                                           | Non-cash rent expense                                             |                                         |          |         |            |   |          |           |         |   |              | 2,452   |      |       |          |         |          |   |          | 2,452   |     
|                                                                                           | Non-cash interest expense on compounding notes, net               |                                         |          |         |            |   |          | 459        |         |   |              |        |      |       |          |         |          |   |          | 459     |     
|                                                                                           | Amortization of debt issuance costs                               |                                         |          |         |            |   |          | 2,473      |         |   |              |        |      |       |          |         |          |   |          | 2,473   |     
|                                                                                           |                                                                   | Gain on sale of asset                   |          |          |           |   |          |            |        |   |              |         | (634 | )     |          |          |         |   |          |         | (634 | )
|                                                                                           | Non-cash restructuring charges                                    |                                         |          |         |            |   |          |           |         |   |              | 5,974   |      |       |          |         |          |   |          | 5,974   |     
|                                                                                           | Write-down of intangible assets                                   |                                         |          |         |            |   |          |           |         |   |              | 79,241  |      |       |          |         |          |   |          | 79,241  |     
|                                                                                           |                                                                   | Equity in loss (income) of subsidiaries |          |          | 196,844    |   |          |            | 218,963 |   |              |         |     |       |          |          | (415,807 | ) |          |         |     |  
|Changes in operating assets and liabilities:                                               |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |          |          |          |   |          |        
|                                                                                           | Accounts receivable                                               |                                         |          |         |            |   |          |           |         |   |              | 12,354  |      |       |          |         |          |   |          | 12,354  |     
|                                                                                           |                                                                   | Inventories                             |          |          |           |   |          |            |        |   |              |         | 26   |       |          |          |         |   |          |         | 26   |  
|                                                                                           | Accounts payable and accrued expenses                             |                                         |          |         |            |   |          | (14,601    | )       |   |              | 20,972  |      |       |          |         |          |   |          | 6,371   |     
|                                                                                           | Unexpired subscriptions and deferred revenue, net                 |                                         |          |         |            |   |          |           |         |   |              | (1,327  | )    |       |          |         |          |   |          | (1,327  | )   
|                                                                                           | Due from (to) affiliate                                           |                                         |          | 34,896   |            |   |          | (17,235    | )       |   |              | (17,661 | )    |       |          |         |          |   |          |        |     
|                                                                                           | Prepaid expenses and other, net                                   |                                         |          |         |            |   |          | 454        |         |   |              | 1,894   |      |       |          |         |          |   |          | 2,348   |     
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Net cash provided (used) by operating activities                                           |                                                                   |                                         | 34,900   |          |            |   | (6,331   | )          |         |   | (76,571      | )       |      |       |         |          |          |   | (48,002  | )      
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Cash flows from investing activities:                                                      |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |          |          |          |   |          |        
|                                                                                           | Capital expenditures                                              |                                         |          |         |            |   |          |           |         |   |              | (2,567  | )    |       |          |         |          |   |          | (2,567  | )   
|                                                                                           | Net proceeds from sale of assets                                  |                                         |          |         |            |   |          |           |         |   |              | 1,554   |      |       |          |         |          |   |          | 1,554   |     
|                                                                                           | Investments in subsidiaries                                       |                                         |          | (112,931 | )          |   |          | (101,929   | )       |   |              |        |      |       |          | 214,860  |          |   |          |        |     
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Net cash (used) provided by investing activities                                           |                                                                   |                                         | (112,931 | )        |            |   | (101,929 | )          |         |   | (1,013       | )       |      |       | 214,860  |          |          |   | (1,013   | )      
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Cash flows from financing activities:                                                      |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |          |          |          |   |          |        
|                                                                                           | Proceeds from issuance of preferred stock                         |                                         |          | 77,631   |            |   |          |           |         |   |              |        |      |       |          |         |          |   |          | 77,631  |     
|                                                                                           | Proceeds from capital contributions                               |                                         |          |         |            |   |          | 112,931    |         |   |              | 101,929 |      |       |          | (214,860 | )        |   |          |        |     
|                                                                                           | Net borrowings under senior credit facilities                     |                                         |          |         |            |   |          | 21,000     |         |   |              |        |      |       |          |         |          |   |          | 21,000  |     
|                                                                                           | Repayment of borrowings under senior credit facilities            |                                         |          |         |            |   |          | (6,085     | )       |   |              |        |      |       |          |         |          |   |          | (6,085  | )   
|                                                                                           | Proceeds from collection of intercompany notes receivable         |                                         |          |         |            |   |          | 14,425     |         |   |              |        |      |       |          | (14,425  | )        |   |          |        |     
|                                                                                           | Repayment of intercompany notes payable                           |                                         |          |          |            |   |          |           |         |   |              | (14,425 | )    |       |          | 14,425   |          |   |          |        |     
|                                                                                           | Debt issuance costs                                               |                                         |          |         |            |   |          | (1,039     | )       |   |              |        |      |       |          |         |          |   |          | (1,039  | )   
|                                                                                           | Payments to 12% Note holders in connection with
    restructuring |                                         |          |         |            |   |          | (21,158    | )       |   |              |        |      |       |          |         |          |   |          | (21,158 | )   
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Net cash provided (used) by financing activities                                           |                                                                   |                                         | 77,631   |          |            |   | 120,074  |            |         |   | 87,504       |         |      |       | (214,860 | )        |          |   | 70,349   |        
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Net (decrease) increase in cash and cash equivalents                                       |                                                                   |                                         | (400     | )        |            |   | 11,814   |            |         |   | 9,920        |         |      |       |         |          |          |   | 21,334   |        
|Cash and cash equivalents at beginning of period                                           |                                                                   |                                         | 401      |          |            |   | 16,453   |            |         |   | 3,102        |         |      |       |         |          |          |   | 19,956   |        
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         
|Cash and cash equivalents at end of period                                                 |                                                                   | $                                       | 1        |          |            | $ | 28,267   |            |         | $ | 13,022       |         |      | $     |         |          |          | $ | 41,290   |        
|                                                                                           |                                                                   |                                         |          |          |            |   |          |            |         |   |              |         |      |       |         

73



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)


NOTE 20  RELATED PARTY TRANSACTIONS






NOTE 21  SEGMENT INFORMATION


Disclosures about Segments of an
Enterprise and Related Information.




PC Magazine Sync ExtremeTech


eWEEK,
CIO Insight Baseline.


(Electronic Gaming Monthly, Computer Gaming World and
Official U.S. PlayStation Magazine) GMR Xbox Nation


74



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 21  SEGMENT INFORMATION (continued)






|              |                     |                         |   |        |         |  |   |        |         |  |   |         |         | 
|------------- | ------------------- | ----------------------- | - | ------ | ------- |  | - | ------ | ------- |  | - | ------- | ------- | 
|              |                     | Year Ended December 31, |  
|              |                     |                         |  
|              |                     | 2004                    |   |        | 2003    |  |   | 2002   |        
|              |                     |                         |   |        |         |  |   |        |        
|Revenue, net: |                     |                         |   |        |         |  |   |        |         |  |   |        
|              | Consumer Tech Group |                         | $ | 80,988 |         |  | $ | 76,928 |         |  | $ | 89,816  |        
|              | Enterprise Group    |                         |   | 72,925 |         |  |   | 60,234 |         |  |   | 60,631  |        
|              | Game Group          |                         |   | 50,564 |         |  |   | 56,945 |         |  |   | 58,590  |        
|              |                     |                         |   |        |         |  |   |        |        
|              |                     | Total                   |   | $      | 204,477 |  |   | $      | 194,107 |  |   | $       | 209,037 | 
|              |                     |                         |   |        |         |  |   |        |        
|EBITDA:       |                     |                         |   |        |         |  |   |        |         |  |   |        
|              | Consumer Tech Group |                         | $ | 20,945 |         |  | $ | 22,946 |         |  | $ | 10,499  |        
|              | Enterprise Group    |                         |   | 12,474 |         |  |   | 3,392  |         |  |   | (10,352 | )      
|              | Game Group          |                         |   | 1,485  |         |  |   | 8,174  |         |  |   | 7,884   |        
|              |                     |                         |   |        |         |  |   |        |        
|              |                     | Total                   |   | $      | 34,904  |  |   | $      | 34,512  |  |   | $       | 8,031   | 
|              |                     |                         |   |        |         |  |   |        |        

|                                                                               |                          |                                 |   |         |         |   |   |        |         |   |   |          |         |  
|------------------------------------------------------------------------------ | ------------------------ | ------------------------------- | - | ------- | ------- | - | - | ------ | ------- | - | - | -------- | ------- | -
|                                                                               |                          | Year Ended December 31,         |  
|                                                                               |                          |                                 |  
|                                                                               |                          | 2004                            |   |         | 2003    |   |   | 2002   |        
|                                                                               |                          |                                 |   |         |         |   |   |        |        
|Reconciliation of segment EBITDA to consolidated loss
    before income taxes: |                          |                                 |   |         |         |   |   |        |         |   |   |         
|                                                                               | Total segment EBITDA     |                                 | $ | 34,904  |         |   | $ | 34,512 |         |   | $ | 8,031    |        
|                                                                               |                          | Depreciation and amortization   |   |         | (21,428 | ) |   |        | (25,901 | ) |   |          | (37,770 | )
|                                                                               |                          | Restructuring charges           |   |         | (5,491  | ) |   |        | 6,238   |   |   |          | (48,950 | )
|                                                                               |                          | Write-down of intangible assets |   |         |        |   |   |        |        |   |   |          | (79,241 | )
|                                                                               |                          | Gain on sale of assets, net     |   |         |        |   |   |        | 2,609   |   |   |          | 634     |  
|                                                                               |                          | Interest expense, net           |   |         | (91,824 | ) |   |        | (19,142 | ) |   |          | (39,286 | )
|                                                                               |                          | Non-cash compensation           |   |         | (1,109  | ) |   |        |        |   |   |          |        |  
|                                                                               |                          |                                 |   |         |         |   |   |        |        
|                                                                               | Loss before income taxes |                                 | $ | (84,948 | )       |   | $ | (1,684 | )       |   | $ | (196,582 | )      
|                                                                               |                          |                                 |   |         |         |   |   |        |        



75



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##### Table of Contents



ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)




NOTE 21  SEGMENT INFORMATION (continued)




|                   |  |                         |         |  |      |   |         |      |  |   |         | 
|------------------ |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                   |  | Year Ended December 31, |        
|                   |  |                         |        
|                   |  | 2004                    |         |  | 2003 |   |         | 2002 | 
|                   |  |                         |         |  |      |   |         |      | 
|Advertising        |  | $                       | 130,301 |  |      | $ | 132,865 |      |  | $ | 146,007 | 
|Circulation        |  |                         | 37,980  |  |      |   | 40,042  |      |  |   | 45,224  | 
|Other              |  |                         | 36,196  |  |      |   | 21,200  |      |  |   | 17,806  | 
|                   |  |                         |         |  |      |   |         |      | 
|Total Revenue, net |  | $                       | 204,477 |  |      | $ | 194,107 |      |  | $ | 209,037 | 
|                   |  |                         |         |  |      |   |         |      | 



NOTE 22  QUARTERLY FINANCIAL DATA
(UNAUDITED)




|                        |  |                               |         |   |          |   |         |               |  |   |              |   |  |   |         |  
|----------------------- |  | ----------------------------- | ------- | - | -------- | - | ------- | ------------- |  | - | ------------ | - |  | - | ------- | -
|                        |  | 2004 Quarterly Periods Ending |        
|                        |  |                               |        
|                        |  | March 31,                     |         |   | June 30, |   |         | September 30, |  |   | December 31, |  
|                        |  |                               |         |   |          |   |         |               |  |   |              |  
|Revenue, net            |  | $                             | 41,968  |   |          | $ | 51,328  |               |  | $ | 46,166       |   |  | $ | 65,015  |  
|Operating (loss) income |  |                               | (2,590  | ) |          |   | 2,350   |               |  |   | 1,421        |   |  |   | 5,695   |  
|Net (loss) income       |  |                               | (24,706 | ) |          |   | (20,394 | )             |  |   | (22,200      | ) |  |   | (17,886 | )

|                        |  |                               |         |   |          |   |        |               |  |   |              |   |  |   |        | 
|----------------------- |  | ----------------------------- | ------- | - | -------- | - | ------ | ------------- |  | - | ------------ | - |  | - | ------ | 
|                        |  | 2003 Quarterly Periods Ending |        
|                        |  |                               |        
|                        |  | March 31,                     |         |   | June 30, |   |        | September 30, |  |   | December 31, |  
|                        |  |                               |         |   |          |   |        |               |  |   |              |  
|Revenue, net            |  | $                             | 42,091  |   |          | $ | 47,116 |               |  | $ | 45,209       |   |  | $ | 59,691 | 
|Operating (loss) income |  |                               | (5,530  | ) |          |   | 2,610  |               |  |   | 1,197        |   |  |   | 16,572 | 
|Net (loss) income       |  |                               | (10,726 | ) |          |   | (2,342 | )             |  |   | (1,205       | ) |  |   | 12,364 | 

|               |  |                               |         |   |          |   |         |               |  |   |              |   |  |   |         |  
|-------------- |  | ----------------------------- | ------- | - | -------- | - | ------- | ------------- |  | - | ------------ | - |  | - | ------- | -
|               |  | 2002 Quarterly Periods Ending |        
|               |  |                               |        
|               |  | March 31,                     |         |   | June 30, |   |         | September 30, |  |   | December 31, |  
|               |  |                               |         |   |          |   |         |               |  |   |              |  
|Revenue, net   |  | $                             | 54,149  |   |          | $ | 56,794  |               |  | $ | 41,795       |   |  | $ | 56,299  |  
|Operating loss |  |                               | (16,235 | ) |          |   | (32,399 | )             |  |   | (21,290      | ) |  |   | (88,006 | )
|Net loss       |  |                               | (29,283 | ) |          |   | (45,719 | )             |  |   | (29,067      | ) |  |   | (92,771 | )

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ZIFF DAVIS HOLDINGS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(dollars in thousands, except per share data)


NOTE 23  FAIR VALUE OF FINANCIAL
INSTRUMENTS






|                         |  |                   |         |  |                   |   |          |        |  |   |            |  |  |   |         | 
|------------------------ |  | ----------------- | ------- |  | ----------------- | - | -------- | ------ |  | - | ---------- |  |  | - | ------- | 
|                         |  | December 31, 2004 |         |  | December 31, 2003 |  
|                         |  |                   |         |  |                   |  
|                         |  | Carrying          |         |  |                   |   | Carrying |        |  |  
|                         |  | Amount            |         |  | Fair Value        |   |          | Amount |  |   | Fair Value | 
|                         |  |                   |         |  |                   |   |          |        |  |   |            | 
|Cash and equivalents     |  | $                 | 32,592  |  |                   | $ | 32,592   |        |  | $ | 47,308     |  |  | $ | 47,308  | 
|Accounts receivable, net |  |                   | 34,776  |  |                   |   | 34,776   |        |  |   | 32,836     |  |  |   | 32,836  | 
|Accounts payable         |  |                   | 20,280  |  |                   |   | 20,280   |        |  |   | 13,938     |  |  |   | 13,938  | 
|Senior credit facility   |  |                   | 174,141 |  |                   |   | 174,141  |        |  |   | 189,188    |  |  |   | 189,188 | 
|Compounding notes        |  |                   | 122,437 |  |                   |   | 122,437  |        |  |   | 107,563    |  |  |   | 102,185 | 
|12% notes                |  |                   | 12,280  |  |                   |   | 13,140   |        |  |   | 12,280     |  |  |   | 11,789  | 
|Preferred stock          |  |                   | 814,549 |  |                   |   | 80,059   |        |  |   | 739,602    |  |  |   | 91,962  | 



| |                          
| | -------------------------
| | Standby Letters of Credit



77



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








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.


Changes in internal controls.







|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION







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PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers






| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ziff Davis Holdings Chief Executive Officer;                                                                                                
|
| |  | one person designated by DLJ Merchant Banking Partners II,
    L.P.; currently nobody has been designated, and                               
|
| |  | four persons designated by Willis Stein, who currently are Avy
    H. Stein, John R. Willis, Daniel H. Blumenthal and Bradley J.
    Shisler.





|                     |  |     |    |  |          |                                                                                                         
|-------------------- |  | --- | -- |  | -------- | --------------------------------------------------------------------------------------------------------
|Name                 |  | Age |    |  | Position
|                     |  |     |    |  |         
|Robert F. Callahan   |  |     | 53 |  |          | Chairman of the Board of Directors and Chief Executive Officer                                          
|Bart W. Catalane     |  |     | 48 |  |          | President, Chief Operating Officer and Director                                                         
|Derek Irwin          |  |     | 40 |  |          | Chief Financial Officer                                                                                 
|Jason Young          |  |     | 35 |  |          | President, Consumer Tech Group                                                                          
|Sloan Seymour        |  |     | 42 |  |          | President, Enterprise Group                                                                             
|Scott McCarthy       |  |     | 39 |  |          | President, Game Group                                                                                   
|Thomas McGrade       |  |     | 47 |  |          | Senior Executive Vice President                                                                         
|Gregory Barton       |  |     | 43 |  |          | Executive Vice President of Licensing and Legal Affairs, General
    Counsel and Secretary              
|Michael J. Miller    |  |     | 46 |  |          | Executive Vice President and Editorial Director, Ziff Davis
    Publishing, Editor In-Chief, PC Magazine
|Timothy J. Castelli  |  |     | 37 |  |          | Senior Vice President, Publisher, Consumer Tech Group                                                   
|Jasmine Alexander    |  |     | 42 |  |          | Senior Vice President, Technology and Sales Operations                                                  
|Sara B. DeCarlo      |  |     | 41 |  |          | Vice President of Consumer Marketing and Database Management                                            
|Paul OReilly        |  |     | 50 |  |          | Vice President, Ziff Davis Event Marketing Group                                                        
|Beth Repeta          |  |     | 38 |  |          | Vice President of Human Resources                                                                       
|John R. Willis       |  |     | 54 |  |          | Director                                                                                                
|Avy H. Stein         |  |     | 49 |  |          | Director                                                                                                
|Daniel H. Blumenthal |  |     | 41 |  |          | Director                                                                                                
|Bradley J. Shisler   |  |     | 34 |  |          | Director                                                                                                
|David M. Wittels     |  |     | 40 |  |          | Director                                                                                                

Robert F. Callahan


79



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Bart W. Catalane


Derek Irwin


Jason Young Windows Pro, Windows Sources,


Sloan Seymour Baseline Baseline, PC Magazine eWEEK.


Scott McCarthy


Thomas McGrade


Gregory Barton


80



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Michael J. Miller PC
Magazine, PC Magazine. InfoWorld, Popular
Computing Building
Design & Construction.


Timothy J. Castelli PC
Magazine PC
Magazine


Jasmine Alexander Wilkes Barre Times Leader,


Sara DeCarlo Baseline CIO Insight eWEEK Technology Investor Magazine Technology Learning, Network Magazine, Software
Development Web Techniques Parenting Magazine Martha Stewart Living


Paul OReilly


Beth Repeta


81



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John R. Willis


Avy H. Stein


Daniel H. Blumenthal


Bradley J. Shisler


David M. Wittels




82



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|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

Summary Compensation Table




|                            |                                    |                                                 |      |              |            |   |              |           |           |            |              |           |         |         |         |         |         |     |           |   |   | 
|--------------------------- | ---------------------------------- | ----------------------------------------------- | ---- | ------------ | ---------- | - | ------------ | --------- | --------- | ---------- | ------------ | --------- | ------- | ------- | ------- | ------- | ------- | --- | --------- | - | - | 
|                            |                                    |                                                 |      |              |            |   |              |           |           | Long-Term  |             
|                            |                                    |                                                 |      | Compensation |           
|                            |                                    | Annual Compensation                             |      |              |            |  
|                            |                                    |                                                 |      |              | Securities |  
|                            |                                    | Fiscal                                          |      |              |            |   | Other Annual |           |           | Underlying |             
|Name and Principal Position |                                    | Year                                            |      |              | Salary     |   |              | Bonus     |           |            | Compensation |           |         | Options |        
|                            |                                    |                                                 |      |              |            |   |              |           |           |            |              |           |         |         |        
|                            |                                    | (in dollars)                                    |      |              |           
|Robert F. Callahan          |                                    |                                                 | 2004 |              |            | $ | 1,000,000    |           |           | $          |             |           |         | $       | 100,000 | (1)     |         |     | 1,216,566 |  
|                            | Chairman and Chief Executive       |                                                 |      | 2003         |            |   |              | 1,000,000 |           |            |              | 1,000,000 |         |         |         | 100,000 | (1)     |     |           |  |  
|                            |                                    | Officer of Ziff Davis Holdings,                 |      |              | 2002       |   |              |           | 1,000,000 |            |              |           | 500,000 |         |         |         | 125,000 | (1) |           |   |  | 
|                            |                                    | Ziff Davis Media and Ziff Davis Publishing Inc. |      |              |            |   |              |           |           |            |              |           |         |         |         |         |         |     |           |   |   | 
|Bart W. Catalane            |                                    |                                                 | 2004 |              |            |   | 525,667      |           |           |            |             |           |         |         |        |         |         |     | 811,832   |  
|                            | President and Chief Operating      |                                                 |      | 2003         |            |   |              | 500,000   |           |            |              | 500,000   |         |         |         |        |         |     |           |  |  
|                            |                                    | Officer of Ziff Davis Holdings,                 |      |              | 2002       |   |              |           | 500,000   |            |              |           | 250,000 |         |         |         |        |     |           |   |  | 
|                            |                                    | Ziff Davis Media and Ziff Davis Publishing Inc. |      |              |            |   |              |           |           |            |              |           |         |         |         |         |         |     |           |   |   | 
|Jason Young                 |                                    |                                                 | 2004 |              |            |   | 262,500      |           |           |            | 438,321      |           |         |         |        |         |         |     | 603,937   |  
|                            | President, Consumer Tech Group     |                                                 |      | 2003         |            |   |              | 250,000   |           |            |              | 378,156   |         |         |         |        |         |     |           |  |  
|                            |                                    |                                                 |      |              | 2002       |   |              |           | 250,000   |            |              |           | 169,170 |         |         |         |        |     |           |   |  | 
|Michael J. Miller           |                                    |                                                 | 2004 |              |            |   | 370,000      |           |           |            |             |           |         |         |        |         |         |     | 301,903   |  
|                            | Executive Vice President and       |                                                 |      | 2003         |            |   |              | 370,000   |           |            |              | 150,000   |         |         |         |        |         |     |           |  |  
|                            |                                    | Editorial Director, Ziff Davis                  |      |              | 2002       |   |              |           | 370,000   |            |              |           | 100,000 |         |         |         |        |     |           |   |  | 
|                            |                                    | Publishing, Editor-In-Chief, PC Magazine        |      |              |            |   |              |           |           |            |              |           |         |         |         |         |         |     |           |   |   | 
|Thomas McGrade              |                                    |                                                 | 2004 |              |            |   | 350,000      |           |           |            |             |           |         |         |        |         |         |     | 301,903   |  
|                            | Senior Executive Vice President of |                                                 |      | 2003         |            |   |              | 350,000   |           |            |              | 275,000   |         |         |         |        |         |     |           |  |  
|                            |                                    | Ziff Davis Media and Ziff Davis Publishing Inc. |      |              | 2002       |   |              |           | 350,000   |            |              |           | 175,000 |         |         |         |        |     |           |   |  | 






|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Allowance, without need for accounting, for reimbursement of
    expenses in addition to expenses eligible for reimbursement
    under our existing policies.

Stock Option/ SAR Grants in Last Fiscal Year.




|                  |              |                 |  |                 |  |          |       |            |   |               |  |  |  |           |  |  |   |         | 
|----------------- | ------------ | --------------- |  | --------------- |  | -------- | ----- | ---------- | - | ------------- |  |  |  | --------- |  |  | - | ------- | 
|                  |              | Number of       |  | % of Total      |  | Weighted |       | Weighted   |   |              
|                  |              | Securities      |  | Options Granted |  | Average  |       | Average    |   |              
|                  |              | Underlying      |  | to Employees in |  | Exercise |       | Expiration |   | Grant Date   
|Executive         |              | Options Granted |  | Fiscal Year     |  | Price    |       | Date       |   | Present Value
|                  |              |                 |  |                 |  |          |       |            |   |              
|Robert F Callahan |              |                 |  |                 |  |          |       |            |   |               |  |  |  |           |  |  |   |        
|                  | Series D     |                 |  | 2,612           |  |          | 21.2% |            | $ | 1,000.00      |  |  |  | 6/30/2013 |  |  | $ | 327,767 | 
|                  | Series B     |                 |  | 3,209           |  |          | 21.7% |            |   | 1,000.00      |  |  |  | 6/30/2013 |  |  |   |        | 
|                  | Series A     |                 |  | 10,745          |  |          | 21.4% |            |   | 0.01          |  |  |  | 6/30/2013 |  |  |   |        | 
|                  | Common Stock |                 |  | 1,200,000       |  |          | 15.0% |            |   | 0.001         |  |  |  | 6/30/2013 |  |  |   |        | 

83



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|                  |              |                 |  |         |                 |  |          |  |  |            |  |  |               |            |  |  |  |         | 
|----------------- | ------------ | --------------- |  | ------- | --------------- |  | -------- |  |  | ---------- |  |  | ------------- | ---------- |  |  |  | ------- | 
|                  |              | Number of       |  |         | % of Total      |  | Weighted |  |  | Weighted   |  |  |              
|                  |              | Securities      |  |         | Options Granted |  | Average  |  |  | Average    |  |  |              
|                  |              | Underlying      |  |         | to Employees in |  | Exercise |  |  | Expiration |  |  | Grant Date    |           
|Executive         |              | Options Granted |  |         | Fiscal Year     |  | Price    |  |  | Date       |  |  | Present Value |           
|                  |              |                 |  |         |                 |  |          |  |  |            |  |  |               |           
|Bart W. Catalane  |              |                 |  |         |                 |  |          |  |  |            |  |  |               |            |  |  |  |        
|                  | Series D     |                 |  | 1,865   |                 |  | 15.2%    |  |  | 1,000.00   |  |  |               | 6/30/2013  |  |  |  | 234,030 | 
|                  | Series B     |                 |  | 2,292   |                 |  | 15.5%    |  |  | 1,000.00   |  |  |               | 6/30/2013  |  |  |  |        | 
|                  | Series A     |                 |  | 7,675   |                 |  | 15.7%    |  |  | 0.01       |  |  |               | 6/30/2013  |  |  |  |        | 
|                  | Common Stock |                 |  | 800,000 |                 |  | 10.0%    |  |  | 0.001      |  |  |               | 6/30/2013  |  |  |  |        | 
|Jason Young       |              |                 |  |         |                 |  |          |  |  |            |  |  |               |            |  |  |  |        
|                  | Series D     |                 |  | 700     |                 |  | 5.7%     |  |  | 1,348.39   |  |  |               | 2/12/2014  |  |  |  | 87,840  | 
|                  | Series B     |                 |  | 769     |                 |  | 5.2%     |  |  | 1,000.00   |  |  |               | 1/12/2014  |  |  |  |        | 
|                  | Series A     |                 |  | 2,468   |                 |  | 5.0%     |  |  | 0.01       |  |  |               | 12/31/2013 |  |  |  |        | 
|                  | Common Stock |                 |  | 600,000 |                 |  | 7.5%     |  |  | 0.001      |  |  |               | 12/31/2013 |  |  |  |        | 
|Michael J. Miller |              |                 |  |         |                 |  |          |  |  |            |  |  |               |            |  |  |  |        
|                  | Series D     |                 |  | 300     |                 |  | 2.4%     |  |  | 1,000.00   |  |  |               | 3/3/2013   |  |  |  | 37,646  | 
|                  | Series B     |                 |  | 369     |                 |  | 2.5%     |  |  | 1,000.00   |  |  |               | 3/3/2013   |  |  |  |        | 
|                  | Series A     |                 |  | 1,234   |                 |  | 2.5%     |  |  | 0.01       |  |  |               | 3/3/2013   |  |  |  |        | 
|                  | Common Stock |                 |  | 300,000 |                 |  | 3.8%     |  |  | 0.001      |  |  |               | 3/3/2013   |  |  |  |        | 
|Thomas McGrade    |              |                 |  |         |                 |  |          |  |  |            |  |  |               |            |  |  |  |        
|                  | Series D     |                 |  | 300     |                 |  | 2.4%     |  |  | 1,000.00   |  |  |               | 3/3/2013   |  |  |  | 37,646  | 
|                  | Series B     |                 |  | 369     |                 |  | 2.5%     |  |  | 1,000.00   |  |  |               | 3/3/2013   |  |  |  |        | 
|                  | Series A     |                 |  | 1,234   |                 |  | 2.5%     |  |  | 0.01       |  |  |               | 3/3/2013   |  |  |  |        | 
|                  | Common Stock |                 |  | 300,000 |                 |  | 3.8%     |  |  | 0.001      |  |  |               | 3/3/2013   |  |  |  |        | 

Stock Option/ SAR Exercised in Last Fiscal Year.




Executive Agreements


Mr. Callahan.




Mr. Catalane.


84



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Mr. Young.


Mr. Miller. PC Magazine


Mr. McGrade.


Equity Incentive Plans




85



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2002 Stock Option Plan






Board Practices










86



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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS



87



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|                                                             |  |                         |           |            |             |  |       |           |            |  |             |  |  |           |       |            |             |  |            |  |  |  |       |  
|------------------------------------------------------------ |  | ----------------------- | --------- | ---------- | ----------- |  | ----- | --------- | ---------- |  | ----------- |  |  | --------- | ----- | ---------- | ----------- |  | ---------- |  |  |  | ----- | -
|                                                             |  | Beneficial Ownership(1) |          
|                                                             |  |                         |          
|                                                             |  |                         |           | Percent of |             |  |       |           | Percent of |  |             | 
|                                                             |  | Shares of               |           |            | Outstanding |  |       | Shares of |            |  | Outstanding |  |  |           |       | Percent of |            
|                                                             |  | Series A                |           |            | Series A    |  |       | Series E  |            |  | Series E    |  |  | Shares of |       |            | Outstanding | 
|                                                             |  | Preferred               |           |            | Preferred   |  |       | Preferred |            |  | Preferred   |  |  | Common    |       |            | Common      | 
|Beneficial Owner                                             |  | Stock                   |           |            | Stock       |  |       | Stock     |            |  | Stock       |  |  | Stock     |       |            | Stock       | 
|                                                             |  |                         |           |            |             |  |       |           |            |  |             |  |  |           |       |            |             | 
|Willis Stein Entities(2)                                     |  |                         | 281,627.5 |            |             |  | 85.57 | %         |            |  | 8,088.6     |  |  |           | 28.35 | %          |             |  | 50,650,938 |  |  |  | 99.35 | %
|DLJ Entities(3)                                              |  |                         | 47,500.0  |            |             |  | 14.43 |           |            |  |            |  |  |           |      |            |             |  | 333,333    |  |  |  | 14.42 |  
|MacKay Shields LLP(4)                                        |  |                         |          |            |             |  |      |           |            |  | 10,360.8    |  |  |           | 36.32 |            |             |  | 1,921,502  |  |  |  | 45.40 |  
|Robert F. Callahan                                           |  |                         |          |            |             |  |      |           |            |  |            |  |  |           |      |            |             |  |           |  |  |  |      |  
|Bart W. Catalane                                             |  |                         |          |            |             |  |      |           |            |  |            |  |  |           |      |            |             |  |           |  |  |  |      |  
|Jason Young                                                  |  |                         |          |            |             |  |      |           |            |  |            |  |  |           |      |            |             |  |           |  |  |  |      |  
|Thomas McGrade                                               |  |                         | 142.5     |            |             |  | *     |           |            |  |            |  |  |           |      |            |             |  | 1,000      |  |  |  | *     |  
|Michael J. Miller                                            |  |                         |          |            |             |  |      |           |            |  |            |  |  |           |      |            |             |  |           |  |  |  |      |  
|John R. Willis(2)                                            |  |                         | 281,627.5 |            |             |  | 85.57 |           |            |  | 8,088.6     |  |  |           | 28.35 |            |             |  | 50,650,938 |  |  |  | 99.35 |  
|Avy H. Stein(2)                                              |  |                         | 281,627.5 |            |             |  | 85.57 |           |            |  | 8,088.6     |  |  |           | 28.35 |            |             |  | 50,650,938 |  |  |  | 99.35 |  
|Daniel H. Blumenthal(2)                                      |  |                         | 281,627.5 |            |             |  | 85.57 |           |            |  | 8,088.6     |  |  |           | 28.35 |            |             |  | 50,650,938 |  |  |  | 99.35 |  
|Bradley J. Shisler                                           |  |                         |          |            |             |  |      |           |            |  |            |  |  |           |      |            |             |  |           |  |  |  |      |  
|David M. Wittels                                             |  |                         |          |            |             |  |      |           |            |  |            |  |  |           |      |            |             |  |           |  |  |  |      |  
|All directors and executive officers as a group (22 persons) |  |                         | 281,627.5 |            |             |  | 85.57 | %         |            |  | 8,088.6     |  |  |           | 28.35 | %          |             |  | 50,650,938 |  |  |  | 99.35 | %






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Less than 1% of outstanding series of stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(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 213,750 shares of Series A Preferred Stock
    (64.9%), 8,088.6 shares of Series E Preferred Stock
    (28.4%) and 50.2 million shares of common stock (including
    approximately 8.6 million shares issuable upon conversion
    of Series C Preferred Stock and approximately
    40.1 million shares issuable upon the exercise of warrants
    to purchase common stock) 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. (collectively,
    the Willis Stein Entities). Also includes
    67,877.5 shares of Series A Preferred Stock and
    477,716 shares of common stock held by the stockholders
    executing the Investor Rights Agreement (other than the DLJ
    Entities). Such stockholders have agreed pursuant to the terms
    of the Investor Rights Agreement to vote their shares as
    directed by the Willis Stein Entities in certain matters as
    described more fully in Item 13 hereof and in the Investor
    Rights Agreement. As a result of the foregoing, the Willis Stein
    Entities may be deemed to have beneficial ownership with respect
    to the shares held by the stockholders executing the Investor
    Rights Agreement (other than the DLJ Entities). The Willis Stein
    Entities disclaim beneficial ownership of such shares held by
    such stockholders. Messrs. John R. Willis, Avy H. Stein and
    Daniel H. Blumenthal are Managing Directors of each of the
    ultimate general partners of the Willis Stein Entities, and, as
    a result, may be deemed to have beneficial ownership with
    respect to the shares held by and deemed to be beneficially
    owned by the Willis Stein Entities. Each disclaims beneficial
    ownership of such shares held by and deemed to be beneficially
    owned by such funds. The address for Willis Stein and
    Messrs. Willis, Stein and Blumenthal is One North Wacker
    Drive, Suite 4800, Chicago, Illinois 60606.

88



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, CV. and
    DLJMB Funding II, Inc., which are private equity investment
    funds affiliated with DLJ Merchant Banking, Inc. The address for
    DLJ Merchant Banking, Inc. is Eleven Madison Avenue, New York,
    New York 10010.                                          
|   
|(4) | Based on the most recent information available to the Company,
    includes 10,361 shares of Series E Preferred Stock of
    Ziff Davis Holdings and 1,921,502 shares issuable upon the
    exercise of warrants to purchase shares of common stock of Ziff
    Davis Holdings held by MacKay Shields LLP as investment manager
    on behalf of its managed funds for which it has discretionary
    authority. The address for MacKay Shields LLP is 9 West 57th
    Street, 33rd Floor, New York, New York 10019.

Equity Compensation Plans




|                                                            |                        |                         |           |        |                      |                      |   |                           |          |  |           |   |  | 
|----------------------------------------------------------- | ---------------------- | ----------------------- | --------- | ------ | -------------------- | -------------------- | - | ------------------------- | -------- |  | --------- | - |  | 
|                                                            |                        |                         |           |        |                      | (c)                  |  
|                                                            |                        |                         |           |        |                      | Number of Securities |  
|                                                            |                        | (a)                     |           |        | (b)                  |                      |   | Remaining Available for   |         
|                                                            |                        | Number of Securities to |           |        | Weighted-Average     |                      |   | Future Issuance under     |         
|                                                            |                        | be Issued upon Exercise |           |        | Exercise Price of    |                      |   | Equity Compensation Plans |         
|                                                            |                        | of Outstanding Options, |           |        | Outstanding Options, |                      |   | (Excluding Securities     |         
|                                                            |                        | Warrants and Rights     |           |        | Warrants and Rights  |                      |   | Reflected in Column (a))  |         
|                                                            |                        |                         |           |        |                      |                      |   |                           |         
|Plan category:                                              |                        |                         |           |        |                      |                      |   |                           |          |  |           |  
|Equity compensation plans approved by security holders      |                        |                         |          |        |                      |                      |  |                           |          |  |          |  
|Equity compensation plans not approved by security holders: |                        |                         |           |        |                      |                      |   |                           |          |  |           |  
|                                                            | 2001 Stock Option Plan |                         |           | 18,078 |                      |                      | $ | 7.50                      |          |  |           |   | 
|                                                            | 2002 Stock Option Plan |                         |           |        |                      |                      |   |                           |          |  |           |   | 
|                                                            |                        | Series D                |           |        | 11,816               |                      |   |                           | 1,098.05 |  |           |   |  | 
|                                                            |                        | Series B                |           |        | 14,172               |                      |   |                           | 1,007.05 |  |           |   |  | 
|                                                            |                        | Series A                |           |        | 46,895               |                      |   |                           | 0.01     |  |           |   |  | 
|                                                            |                        | Common Stock            |           |        | 7,605,000            |                      |   |                           | 0.001    |  |           |   |  | 
|                                                            |                        |                         |           |        |                      |                      |   |                           |         
|Total                                                       |                        |                         | 7,695,961 |        |                      |                      |  |                           |          |  | 2,030,830 | *
|                                                            |                        |                         |           |        |                      |                      |   |                           |         






|  |                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Comprised of 2,301 shares of Series D Preferred Stock,
    3,172 shares of Series B Preferred Stock,
    11,186 shares of Series A Preferred Stock and
    2,014,171 shares of common stock.






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Investor Rights Agreement




89



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| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ziff Davis Holdings Chief Executive Officer;                                                                                                
|
| |  | one person designated by DLJ Merchant Banking Partners II,
    L.P.; currently nobody has been designated; and                               
|
| |  | four persons designated by Willis Stein, who currently are Avy
    H. Stein, John R. Willis, Daniel H. Blumenthal and Bradley J.
    Shisler.









Subscription Services




Willis Stein




90



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##### Table of Contents





Distribution and Payment Arrangements








Indemnification of Directors and Officers




91



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|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES



Audit and Other Fees for the Past Two Fiscal Years




|                      |  |      |         |  |      |   |         | 
|--------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                      |  | 2004 |         |  | 2003 |  
|                      |  |      |         |  |      |  
|Audit fees(l)         |  | $    | 310,000 |  |      | $ | 225,000 | 
|Audit-related fees(2) |  |      | 23,650  |  |      |   | 21,500  | 
|Tax fees(3)           |  |      | 182,985 |  |      |   | 195,906 | 
|All other fees(4)     |  |      | 1,400   |  |      |   | 10,000  | 
|                      |  |      |         |  |      |  
|Total                 |  | $    | 518,035 |  |      | $ | 452,406 | 
|                      |  |      |         |  |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees consist of the audit of our annual financial
    statements, the review of quarterly financial statements, as
    well as work generally only the independent auditor can
    reasonably be expected to provide, such as statutory audits and
    financial audits of subsidiaries, services associated with SEC
    registration statements filed in connection with securities
    offerings (i.e., comfort letters and consents), and financial
    accounting and reporting consultations.                                        
|   
|(2) | Audit-related fees consist principally of audits of employee
    benefit plans, assurance and related services that are
    reasonably related to the performance of the audit or review of
    financial statements, attestations by PwC that are not required
    by statute or regulation and consulting on financial accounting
    and reporting standards.                                                                                                                                                                                 
|   
|(3) | Tax fees consist principally of assistance with tax compliance,
    tax advice and tax planning. Tax compliance includes preparation
    of original and amended tax returns for Ziff Davis Holdings and
    its consolidated subsidiaries; refund claims; and payment
    planning. Tax advice and tax planning includes assistance with
    tax audits and appeals, tax work stemming from
    Audit-Related items, tax work relating to employee
    benefit plans and requests for rulings or technical advice from
    taxing authorities.
|   
|(4) | All other fees consisted principally of amounts paid for
    consulting services related to a legal matter that was settled
    during 2003.                                                                                                                                                                                                                                                                                                                                                                                                     

92



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PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



|        |   |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | - | --- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |     |            
|No.     |   |     | Description
|        |   |     |            
|        | 2 | .1  |             | Purchase Agreement dated December 6, 1999 among WS-ZP
    Acquisition, Inc., ZD Inc. and ZD Holdings (Europe) Ltd.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 2.1.*                                                                                                                                                        
|        | 3 | .1  |             | Certificate of Incorporation for Ziff Davis Media Inc.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 3.1.*                                                                                                                                                                                                                    
|        | 3 | .2  |             | Fifth Amended and Restated Certificate of Incorporation for Ziff
    Davis Holdings Inc.*                                                                                                                                                                                                                                                                                                                                               
|        | 3 | .3  |             | Certificate of Incorporation for Ziff Davis Publishing Holdings
    Inc. Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 3.2.*                                                                                                                                                                                                      
|        | 3 | .4  |             | Certificate of Incorporation for Ziff Davis Internet Inc.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 3.3.*                                                                                                                                                                                                                 
|        | 3 | .5  |             | Certificate of Incorporation for Ziff Davis Development Inc.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 3.4.*                                                                                                                                                                                                              
|        | 3 | .6  |             | Certificate of Incorporation for Ziff Davis Publishing Inc.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 3.5.*                                                                                                                                                                                                               
|        | 3 | .7  |             | By-laws for Ziff Davis Media Inc. Previously filed in connection
    with Ziff Davis Medias Registration Statement on
    Form S-4 (No. 333-48014) dated October 16, 2000 as
    Exhibit 3.7.*                                                                                                                                                                                                                                         
|        | 3 | .8  |             | By-laws for Ziff Davis Holdings Inc.*                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3 | .9  |             | By-laws for Ziff Davis Publishing Holdings Inc. Previously filed
    in connection with Ziff Davis Medias Registration
    Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 3.8.*                                                                                                                                                                                                                           
|        | 3 | .10 |             | By-laws for Ziff Davis Internet Inc. Previously filed in
    connection with Ziff Davis Medias Registration Statement
    on Form S-4 (No. 333-48014) dated October 16, 2000 as
    Exhibit 3.9.*                                                                                                                                                                                                                                      
|        | 3 | .11 |             | By-laws for Ziff Davis Development Inc. Previously filed in
    connection with Ziff Davis Medias Registration Statement
    on Form S-4 (No. 333-48014) dated October 16, 2000 as
    Exhibit 3.10.*                                                                                                                                                                                                                                  
|        | 3 | .12 |             | By-laws for Ziff Davis Publishing Inc. Previously filed in
    connection with Ziff Davis Medias Registration Statement
    on Form S-4 (No. 333-48014) dated October 16, 2000 as
    Exhibit 3.11.*                                                                                                                                                                                                                                   
|        | 3 | .13 |             | Certificate of Incorporation of Ziff Davis Intermediate Holdings
    Inc.*                                                                                                                                                                                                                                                                                                                                                              
|        | 3 | .14 |             | By-laws of Ziff Davis Intermediate Holdings Inc.*                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4 | .1  |             | Indenture, dated August 12, 2002, by and between Ziff Davis
    Media Inc., the guarantors thereunder and Deutsche Bank Trust
    Company Americas.*                                                                                                                                                                                                                                                                                    
|        | 4 | .2  |             | Registration Rights Agreement, dated August 12, 2002, by
    and among Ziff Davis Holdings Inc. and Ziff Davis Media Inc.*                                                                                                                                                                                                                                                                                                              
|        | 4 | .3  |             | Indenture, dated July 21, 2000 by and between Ziff Davis
    Media Inc., the guarantors thereunder and Bankers Trust Company.
    Previously filed on April 30, 2002 in connection with Ziff
    Davis Medias Registration Statement on Form S-4 dated
    January 24, 2001. Previously filed in connection with Ziff
    Davis Medias Registration Statement on Form S-4, (No.
    333-48014) dated October 16, 2000 as Exhibit 4.1.*
|        | 4 | .4  |             | First Supplemental Indenture, dated as of August 12, 2002
    by and between Ziff Davis Media, the guarantors thereunder and
    Deutsche Bank Trust Company Americas, supplementing that certain
    indenture, dated July 21, 2000, by and between Ziff Davis
    Media Inc., the guarantors thereunder and Bankers Trust Company.*                                                                                                   

93



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|        |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | -- | --- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|No.     |    |     | Description
|        |    |     |            
|        | 4  | .5  |             | Investor Rights Agreement, dated April 5, 2000, by and
    among Ziff Davis Holdings Inc., Willis Stein &
    Partners II, L.P., Willis Stein & Partners Dutch
    II, L.P., Willis Stein & Partners III, L.P. (and
    other partnerships sharing a common general partner therewith),
    the investors listed on the Schedule of Co-Investors, certain
    executive employees of Ziff Davis Holdings Inc., and certain
    other stockholders listed on the Schedule of New Stockholders.
    Previously filed on March 20, 2002 in connection with Ziff
    Davis Medias Form 10-K as Exhibit 9.1.*
|        | 4  | .6  |             | Amendment No. 1 to Investor Rights Agreement, dated
    August 12, 2002, by and among Ziff Davis Holdings Inc.,
    Willis Stein & Partners II, L.P., Willis
    Stein & Partners Dutch II, L.P., Willis
    Stein & Partners III, L.P. (and other partnerships
    sharing a common general partner therewith), the investors
    listed on the Schedule of Co-Investors, certain executive
    employees of Ziff Davis Holdings Inc., and certain other
    stockholders listed on the Schedule of New Stockholders.*                                                                                  
|        | 4  | .7  |             | Supplemental Indenture, dated as of September 18, 2002, by
    and among Ziff Davis Media Inc., Ziff Davis Holdings Inc., and
    Deutsche Bank Trust Company Americas, supplementing the
    indenture, dated as of August 12, 2002, by and between Ziff
    Davis Media Inc., the guarantors thereunder and Deutsche Bank
    Trust Company Americas.*                                                                                                                                                                                                                                                 
|        | 4  | .8  |             | Second Supplemental Indenture, dated as of September 18,
    2002, by and among Ziff Davis Media Inc., Ziff Davis Holdings
    Inc. and Deutsche Bank Trust Company Americas, supplementing the
    indenture, dated as of July 21, 2000, by and between Ziff
    Davis Media Inc., the guarantors thereunder and Deutsche Bank
    Trust Company Americas (f/k/a Bankers Trust Company).*                                                                                                                                                                                                               
|        | 4  | .9  |             | Form of Global Series E-l Preferred Stock Certificate.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .1  |             | Series D Preferred Stock Purchase Agreement, dated
    August 12, 2002, by and between Ziff Davis Holdings Inc.,
    and the purchasers thereunder.*                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .2  |             | Stock Purchase Agreement, dated as of April 30, 2002, by
    and among Ziff Davis Holdings Inc. and the purchasers
    thereunder.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .3  |             | Stock Purchase Agreement, dated as of May 31, 2002, by and
    among Ziff Davis Holdings Inc. and the purchasers thereunder.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 10 | .4  |             | Stock Purchase Agreement, dated as of June 28, 2002, by and
    among Ziff Davis Holdings Inc. and the purchasers thereunder.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .5  |             | Stock Purchase Agreement, dated as of August 8, 2002, by
    and among Ziff Davis Holdings Inc. and the purchasers
    thereunder.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .6  |             | Warrant Agreement, dated August 12, 2002, by and among Ziff
    Davis Holdings Inc. and Willis Stein &
    Partners II, L.P.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 10 | .7  |             | Warrant Agreement, dated August 12, 2002, by and among Ziff
    Davis Holdings Inc. and Deutsche Bank Trust Company Americas.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .8  |             | Distribution and Payment Agreement, dated August 12, 2002,
    by and between Ziff Davis Holdings Inc. and Willis
    Stein & Partners II, L.P.*                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10 | .9  |             | Amended and Restated Credit Agreement, dated as of
    August 12, 2002, by and between Ziff Davis Media Inc., CIBC
    World Markets Corp., Bankers Trust Company, Fleet National Bank,
    Canadian Imperial Bank of Commerce and other credit parties.*                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .10 |             | 2002 Ziff Davis Holdings Inc. Amended and Restated Employee
    Stock Option Plan.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .11 |             | License Agreement, dated April 5, 2000 with ZD Inc.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 10.2.*                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .12 |             | License Agreement, dated April 5, 2000 with ZD Inc. (ZD
    logo). Previously filed in connection with Ziff Davis
    Medias Registration Statement on Form S-4 (No.
    333-48014) dated October 16, 2000 as Exhibit 10.3.*                                                                                                                                                                                                                                                                                                                                                                            
|        | 10 | .13 |             | License Agreement, dated April 5, 2000 with ZD Inc.
    (Interactive). Previously filed in connection with Ziff Davis
    Medias Registration Statement on Form S-4 (No.
    333-48014) dated October 16, 2000 as Exhibit 10.4.*                                                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .14 |             | Executive Agreement by and between Ziff Davis Holdings Inc. and
    Mr. Thomas McGrade, dated as of April 5, 2000.
    Previously filed in connection with Ziff Davis Medias
    Registration Statement on Form S-4 (No. 333-48014) dated
    October 16, 2000 as Exhibit 10.7.*                                                                                                                                                                                                                                                                                                                       

94



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|        |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | --- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|No.     |    |     | Description
|        |    |     |            
|        | 10 | .15 |             | Amendment to License Agreement, dated January 19, 2001 with
    ZDNet, Inc. Previously filed in connection with Ziff Davis
    Medias Amendment No. 1 to Registration Statement on
    Form S-4 (No. 333-48014) dated January 24, 2001 as
    Exhibit 10.10.*                                                                                                                                                                   
|        | 10 | .16 |             | Amended and Restated Executive Agreement by and between Ziff
    Davis Holdings Inc., Ziff Davis Publishing Inc. and
    Mr. Robert F. Callahan, dated as of October 1, 2001.
    Previously filed on August 14, 2002 in connection with Ziff
    Davis Medias Form 10-Q as Exhibit l0.l.*                                                                                                                                     
|        | 10 | .17 |             | Amended and Restated Executive Agreement by and between Ziff
    Davis Holdings Inc., Ziff Davis Publishing Inc. and
    Mr. Bart Catalane, dated as of November 26, 2001.
    Previously filed on August 14, 2002 in connection with Ziff
    Davis Medias Form 10-Q as Exhibit 10.2.*                                                                                                                                        
|        | 10 | .18 |             | Executive Agreement by and between Ziff Davis Media Inc. and
    Mr. Paul OReilly, dated as of September 17,
    2003.**                                                                                                                                                                                                                                                                                                       
|        | 10 | .19 |             | Stock Purchase Agreement by and among Ziff Davis Holdings Inc.
    and the stock purchasers thereunder, dated May 20, 2001.
    Previously filed in connection with Ziff Davis Medias Form
    10-Q as Exhibit 10.2 for the quarter ended
    September 30, 2001.*                                                                                                                                                              
|        | 10 | .20 |             | Stock Purchase Agreement by and among Ziff Davis Holdings Inc.
    and the stock purchasers thereunder, dated July 13, 2001.
    Previously filed in connection with Ziff Davis Medias Form
    10-Q as Exhibit 10.3 for the quarter ended
    September 30, 2001.*                                                                                                                                                             
|        | 10 | .21 |             | Stock Purchase Agreement by and among Ziff Davis Holdings Inc.
    and the stock purchasers thereunder, dated August 30, 2001.
    Previously filed in connection with Ziff Davis Medias Form
    10-Q as Exhibit 10.4 for the quarter ended
    September 30, 2001.*                                                                                                                                                           
|        | 10 | .22 |             | Sale and Purchase Agreement relating to certain Print-Based
    Publishing Assets in the UK, Germany and France, dated
    June 20, 2000 with VNU N.V., View Group B.V., VNU Business
    Publications Limited, VNU Holding Deutschland GMBH, VNU Business
    Publications France S.A. Previously filed in connection with
    Ziff Davis Medias Registration Statement on Form S-4
    dated October 16, 2000 as Exhibit 2.2.*
|        | 10 | .23 |             | Stock Purchase Agreement, dated as of July 3, 2002, by and
    among Ziff Davis Media Inc., Ziff Davis Development Inc. and
    Lionbridge Technologies, Inc.*                                                                                                                                                                                                                                                                   
|        | 10 | .24 |             | Amendment No. 1 to Amended and Restated Credit Agreement,
    dated as of September 17, 2002, by and between Ziff Davis
    Media Inc., CIBC World Markets, Inc., Bankers Trust Company,
    Fleet National Bank, Canadian Imperial Bank of Commerce and
    other credit parties.*                                                                                                                                              
|        | 10 | .25 |             | Amendment No. 1 to Stock Purchase Agreement, dated as of
    August 12, 2002 by and among Ziff Davis Holdings, Inc.,
    Willis Stein & Partners Dutch III-B, L.P. and
    Willis Stein & Partners III-C, L.P. (relating to
    Stock Purchase Agreement, dated as of April 30, 2002).*                                                                                                                                          
|        | 10 | .26 |             | Amendment No. 1 to Stock Purchase Agreement, dated as of
    August 12, 2002 by and among Ziff Davis Holdings, Inc.,
    Willis Stein & Partners Dutch III-B, L.P. and
    Willis Stein & Partners III-C, L.P. (relating to
    Stock Purchase Agreement, dated as of May 31, 2002).*                                                                                                                                            
|        | 10 | .27 |             | Amendment No. 1 to Stock Purchase Agreement, dated as of
    August 12, 2002 by and among Ziff Davis Holdings, Inc.,
    Willis Stein & Partners Dutch III-B, L.P. and
    Willis Stein & Partners III-C, L.P. (relating to
    Stock Purchase Agreement, dated as of June 28, 2002).*                                                                                                                                           
|        | 10 | .28 |             | Amendment No. 1 to Stock Purchase Agreement, dated as of
    August 12, 2002 by and among Ziff Davis Holdings, Inc.,
    Willis Stein & Partners Dutch III-B, L.P. and
    Willis Stein & Partners III-C, L.P. (relating to
    Stock Purchase Agreement, dated as of August 8, 2002).*                                                                                                                                          
|        | 10 | .29 |             | Executive Agreement by and between Ziff Davis Holdings Inc.,
    Ziff Davis Publishing Inc. and Mr. Gregory Barton, dated as
    of October 23, 2002.*                                                                                                                                                                                                                                                                          
|        | 10 | .30 |             | Offer Letter by and between Ziff Davis Media Inc. and
    Mr. Derek Irwin, dated as of November 15, 2002.*                                                                                                                                                                                                                                                                                                                      
|        | 10 | .31 |             | Executive Agreement by and between Ziff Davis Media Inc. and
    Ms. Jasmine Alexander, dated as of March 1,
    2003.*                                                                                                                                                                                                                                                                                                         
|        | 10 | .32 |             | Executive Agreement by and between Ziff Davis Media Inc. and
    Mr. Jason Young, dated as of June 1, 2003.*                                                                                                                                                                                                                                                                                                                    
|        | 10 | .33 |             | Executive Agreement by and between Ziff Davis Media Inc. and
    Mr. Timothy Castelli, dated as of August 1,
    2003.*                                                                                                                                                                                                                                                                                                         

95



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|        |    |     |             |                                                                                                                                                                                             
|------- | -- | --- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|No.     |    |     | Description
|        |    |     |            
|        | 10 | .34 |             | Executive Agreement by and between Ziff Davis Media Inc. and
    Mr. Sloan Seymour, dated as of August 1, 2003.*                                                                           
|        | 10 | .35 |             | Amendment dated December 30, 2004 to Amended and Restated
    Executive Agreement by and between Ziff Davis Holdings Inc.,
    Ziff Davis Publishing Inc. and Mr. Robert F.
    Callahan.**
|        | 10 | .36 |             | Amendment dated December 30, 2004 to Amended and Restated
    Executive Agreement by and between Ziff Davis Holdings Inc.,
    Ziff Davis Publishing Inc. and Mr. Bart Catalane.**         
|        | 10 | .37 |             | Amendment dated February 28, 2005 to Amended and Restated
    Executive Agreement by and between Ziff Davis Holdings Inc.,
    Ziff Davis Publishing Inc. and Mr. Robert F.
    Callahan.**
|        | 10 | .38 |             | Amendment dated February 28, 2005 to Amended and Restated
    Executive Agreement by and between Ziff Davis Holdings Inc.,
    Ziff Davis Publishing Inc. and Mr. Bart Catalane.**         
|        | 10 | .39 |             | Executive Agreement by and between Ziff Davis Media Inc. and Mr.
    Michael Miller, dated as of October 1, 2004.**                                                                        
|        | 10 | .40 |             | Executive Agreement by and between Ziff Davis Media Inc. and Mr.
    Scott McCarthy, dated as of October 15, 2004.**                                                                       
|        | 10 | .41 |             | Amendment dated December 31, 2004 to Executive Agreement by
    and between Ziff Davis Media Inc. and Mr. Scott McCarthy.**                                                                
|        | 10 | .42 |             | Letter dated September 23, 2004 from the Registrant to
    David Wittels.**                                                                                                                 
|        | 14 | .1  |             | Code of Ethics.*                                                                                                                                                                            
|        | 21 | .1  |             | Subsidiaries of Registrants.*                                                                                                                                                               
|        | 31 | .1  |             | Certification of our Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.**                                                                               
|        | 31 | .2  |             | Certification of our Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.**                                                                               
|        | 32 | .1  |             | Certification of our Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002. **                                                                              
|        | 32 | .2  |             | Certification of our Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                               






|  |                  
|- | -----------------
|* | Previously filed.



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



|  |                                                                 
|- | ----------------------------------------------------------------
| | Denotes management contract or compensatory plan or arrangement.

96



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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 25th day of March
2005.




| |                         
| | ------------------------
| | ZIFF DAVIS HOLDINGS INC.



| |     |                
| | --- | ---------------
| | By: | /s/ Derek Irwin

| |                  
| | -----------------
| |                  
| | Name: Derek Irwin

| |        |                        
| | ------ | -----------------------
| | Title: | Chief Financial 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.


|                                                     |  |                                                                          |  | 
|---------------------------------------------------- |  | ------------------------------------------------------------------------ |  | 
|Signatures                                           |  | Title                                                                   
|                                                     |  |                                                                         
|                                                    
|/s/ Robert F. CallahanRobert
    F. Callahan         |  | Chairman and Chief Executive Officer
    (Principal Executive Officer)  
|                                                    
|/s/ Derek IrwinDerek
    Irwin                       |  | Chief Financial Officer
    (Principal Financial and Accounting Officer)
|                                                    
|/s/ Bart W. CatalaneBart
    W. Catalane             |  | President, Chief Operating Officer
    and Director                     
|                                                    
|/s/ John R. WillisJohn
    R. Willis                 |  | Director                                                                
|                                                    
|/s/ Avy H. SteinAvy
    H. Stein                     |  | Director                                                                
|                                                    
|/s/ Daniel H.
    BlumenthalDaniel
    H. Blumenthal |  | Director                                                                
|                                                    
|/s/ Bradley J. ShislerBradley
    J. Shisler         |  | Director                                                                
|                                                    
|/s/ David M. WittelsDavid
    M. Wittels             |  | Director                                                                

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.




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