**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549**

**FORM 10-Q**

 
| ý                                                                                                                                                                                    | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                | ** **                                                                                              |
| **For the  quarterly period ended March 31, 2006**                                                                                                                                   |
| ** **                                                                                                                                                                                | ** **                                                                                              |
| **OR**                                                                                                                                                                                    |
| ** **                                                                                                                                                                                | ** **                                                                                              |
| o                                                                                                                                                                                         | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                | ** **                                                                                              |
| **For the  transition period from                            to** |

 

**Commission file number:  000-25469**

**iVillage Inc.**

(Exact name of registrantas specified in its charter)

 
| **Delaware**                                           | **13-3845162**       |
|--------------------------------------------------------|----------------------|
| (State or other  jurisdiction of                       | (I.R.S. Employer     |
| incorporation or  organization)                        | Identification  No.) |
|                                                   |                 |
| **500 –  512 Seventh Avenue, New York, New York** | **10018**            |
| (Address of  principal executive offices)              | (Zip Code)           |

 

**(212) 600-6000**

(Registrant’stelephone number, including area code)

(Former name,former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   Yes   x   No   o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct.
| Large accelerated filer    o | Accelerated  filer   x | Non-accelerated  filer   o |
|---------------------------------------------|---------------------------------------|-------------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   o   No   x

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practicable date.
| Class                                      | ** ** | ** ** | **Outstanding at May 9, 2006** |
|--------------------------------------------|------------|------------|-------------------------------------|
| [Common Stock, $0.01  par value per share] |       |       | 72,739,902 shares                   |

 

 

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**iVillageInc.**

**Form 10-Q**

**For the Quarter ended March 31, 2006**

## **INDEX**

| **PART I.**                                                                                            | **FINANCIAL  INFORMATION**                                                                      | ** ** |
|-------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                  | ** **                                                                                      | ** ** |
| **Item  1.**                                                                                                | **Financial  Statements (Unaudited):**                                                          |       |
| ** **                                                                                                  | ** **                                                                                      |       |
| *Condensed  Consolidated Balance Sheets as of March 31, 2006 and December 31,  2005*              | 1                                                                                               |
| * *                                                                                                    |                                                                                            |
| *Condensed  Consolidated Statements of Operations for the three months ended  March 31, 2006 and 2005* | 2                                                                                               |
| * *                                                                                                    |                                                                                            |
| *Condensed  Consolidated Statements of Cash Flows for the three months ended  March 31, 2006 and 2005* | 3                                                                                               |
| * *                                                                                                    |                                                                                            |
| *Notes to Condensed Consolidated Financial Statements*                                                      | 4                                                                                               |
| * *                                                                                                    |                                                                                            |
| **Item 2.**                                                                                                 | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations** | 23         |
| ** **                                                                                                  | ** **                                                                                      |       |
| **Item 3.**                                                                                                 | **Quantitative  and Qualitative Disclosures About Market Risk**                                 | 38         |
| ** **                                                                                                  | ** **                                                                                      |       |
| **Item 4.**                                                                                                 | **Controls and  Procedures**                                                                    | 38         |
| ** **                                                                                                  | ** **                                                                                      |       |
| **PART II.**                                                                                           | **OTHER  INFORMATION**                                                                          |       |
| ** **                                                                                                  | ** **                                                                                      |       |
| **Item 1.**                                                                                                 | **Legal Proceedings**                                                                           | 39         |
| ** **                                                                                                  | ** **                                                                                      |       |
| **Item 1A.**                                                                                                | **Risk Factors**                                                                                | 41         |
| ** **                                                                                                  | ** **                                                                                      |       |
| **Item  6.**                                                                                                | **Exhibits**                                                                                    | 43         |
| ** **                                                                                                  | ** **                                                                                      |       |
| **Signatures**                                                                                              |                                                                                            | 44         |

 

**TRADEMARKS**

iVillage®, iVillage.com®, gURL.com®, Newborn Channel®, WebStakes.com®,iVillage Consulting®, iVillage Solutions®, GardenWeb® and Healthology® areregistered trademarks of iVillage Inc. The stylized iVillage logo, “theInternet for Women”, The iVillage Health Network, Astrology.com, BabySteps,Public Affairs Group, Inc., Business Women’s Network, Business Women’sNetwork Government, Diversity Best Practices, Best Practices In CorporateCommunications, Promotions.com, HealthCentersOnline, Inc. andiVillage.co.uk are trademarks of iVillage Inc. All other brand names,trademarks or service marks referred to in this report are the property oftheir owners.

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**PART I**

**FINANCIALINFORMATION**

**Item 1.Financial Statements.**

**iVILLAGE INC. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATEDBALANCE SHEETS**

**(in thousands, except share data)**

**(Unaudited)**
| ** **                                                                                                                                                                                                                                                                                | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                                                                | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| **Assets**                                                                                                                                                                                                                                                                                |       |               |       |                  |       |
| Current assets:                                                                                                                                                                                                                                                                           |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                                                                                                                |       | $                  | 56,992     |                  | $          | 55,881 |   |
| Accounts  receivable, less allowance for doubtful accounts of $724 and $1,010,  respectively                                                                                                                                                                                              |       | 16,545             |       | 20,321                |       |
| Accounts  receivable—related parties                                                                                                                                                                                                                                                 |       | 497                |       | 499                   |       |
| Prepaid rent                                                                                                                                                                                                                                                                              |       | 318                |       | 318                   |       |
| Other current  assets                                                                                                                                                                                                                                                                     |       | 6,646              |       | 5,374                 |       |
| Total current  assets                                                                                                                                                                                                                                                                     |       | 80,998             |       | 82,393                |       |
| Fixed assets, net                                                                                                                                                                                                                                                                         |       | 13,211             |       | 12,272                |       |
| Goodwill                                                                                                                                                                                                                                                                                  |       | 43,041             |       | 42,989                |       |
| Intangible assets, net                                                                                                                                                                                                                                                                    |       | 14,891             |       | 16,506                |       |
| Prepaid rent, net of  current portion                                                                                                                                                                                                                                                     |       | 3,014              |       | 3,051                 |       |
| Other assets                                                                                                                                                                                                                                                                              |       | 103                |       | 104                   |       |
| Total assets                                                                                                                                                                                                                                                                              |       | $                  | 155,258    |                  | $          | 157,315 |   |
| **Liabilities  And Stockholders’ Equity**                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Current liabilities:                                                                                                                                                                                                                                                                      |       |               |       |                  |       |
| Accounts payable  and accrued expenses                                                                                                                                                                                                                                                    |       | $                  | 11,103     |                  | $          | 11,506 |   |
| Accounts payable  and accrued expenses—related parties                                                                                                                                                                                                                               |       | 193                |       | 229                   |       |
| Deferred revenue                                                                                                                                                                                                                                                                          |       | 4,759              |       | 4,157                 |       |
| Deferred rent                                                                                                                                                                                                                                                                             |       | 144                |       | 144                   |       |
| Total current  liabilities                                                                                                                                                                                                                                                                |       | 16,199             |       | 16,036                |       |
| Deferred rent, net of  current portion                                                                                                                                                                                                                                                    |       | 1,160              |       | 1,196                 |       |
| Total  liabilities                                                                                                                                                                                                                                                                        |       | 17,359             |       | 17,232                |       |
| Commitments and  contingencies (Note 8)                                                                                                                                                                                                                                                   |       | —             |       | —                |       |
| Stockholders’ equity:                                                                                                                                                                                                                                                                |       |               |       |                  |       |
| Preferred stock—par  value $.01, 5,000,000 shares authorized, no shares issued and outstanding at  March 31, 2006 and December 31, 2005, respectively                                                                                                                      |       | —             |       | —                |       |
| Common stock—par value  $.01, 200,000,000 shares authorized 73,830,309 and 73,762,298 shares issued  at March 31, 2006 and December 31, 2005, respectively; 72,738,811  and 72,670,800 shares outstanding at March 31, 2006 and  December 31, 2005, respectively |       | 739                |       | 738                   |       |
| Additional paid-in  capital                                                                                                                                                                                                                                                               |       | 622,816            |       | 622,025               |       |
| Treasury stock at  cost—1,091,498 shares at March 31, 2006 and December 31, 2005,  respectively                                                                                                                                                                            |       | (966               | )          | (966                  | )          |
| Unearned compensation                                                                                                                                                                                                                                                                     |       | —             |       | (48                   | )          |
| Accumulated other  comprehensive income                                                                                                                                                                                                                                                   |       | (29                | )          | (47                   | )          |
| Accumulated deficit                                                                                                                                                                                                                                                                       |       | (484,661           | )          | (481,619              | )          |
| Total  stockholders’ equity                                                                                                                                                                                                                                                          |       | 137,899            |       | 140,083               |       |
| Total liabilities and  stockholders’ equity                                                                                                                                                                                                                                          |       | $                  | 155,258    |                  | $          | 157,315 |   |

 

The accompanying notes are anintegral part of these consolidated financial statements.

1

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**iVILLAGE INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(in thousands, except per share amounts)**

**(Unaudited)**

** **
| ** **                                                                                                  | ** ** | **Three months ended  March 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                  | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Revenues:                                                                                                   |       |                                             |       |   |   |
| Revenues                                                                                                    |       | $                                                | 20,134     |   | $ | 15,722 |   |
| Revenues—related  parties                                                                              |       | 1,416                                            |       | 1,552 |   |
| Total revenues                                                                                              |       | 21,550                                           |       | 17,274 |   |
| Operating expenses:                                                                                         |       |                                             |       |   |   |
| Editorial,  product development and technology                                                              |       | 8,596                                            |       | 8,239 |   |
| Sales and  marketing                                                                                        |       | 7,838                                            |       | 5,936 |   |
| General and  administrative                                                                                 |       | 6,284                                            |       | 2,989 |   |
| Depreciation and  amortization                                                                              |       | 2,371                                            |       | 1,804 |   |
| Total operating  expenses                                                                                   |       | 25,089                                           |       | 18,968 |   |
| Loss from operations                                                                                        |       | (3,539                                           | )          | (1,694 | ) |
| Interest income, net                                                                                        |       | 494                                              |       | 352 |   |
| Other income, net                                                                                           |       | 3                                                |       | — |   |
| Gain on sale of joint  venture interest                                                                     |       | —                                           |       | 76 |   |
| Net loss                                                                                                    |       | $                                                | (3,042     | ) | $ | (1,266 | ) |
|                                                                                                        |       |                                             |       |   |   |
| Per share data:                                                                                             |       |                                             |       |   |   |
|                                                                                                        |       |                                             |       |   |   |
| Basic and diluted net  loss per share                                                                       |       | $                                                | (0.04      | ) | $ | (0.02 | ) |
|                                                                                                        |       |                                             |       |   |   |
| Weighted average shares of common stock outstanding used in computing  basic and diluted net loss per share |       | 72,765                                           |       | 71,928 |   |

 

The accompanying notes are anintegral part of these consolidated financial statements.

2

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** **

**iVILLAGE INC. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS**

**(in thousands)**

**(Unaudited)**

** **
| ** **                                                                                                                                              | ** ** | **Three months ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                                              | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Cash flows from  operating activities:                                                                                                                  |       |                                             |       |   |   |
| Net loss                                                                                                                                                |       | $                                                | (3,042     | ) | $ | (1,266 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities:                                                                        |       |                                             |       |   |   |
| Depreciation and  amortization                                                                                                                          |       | 2,371                                            |       | 1,804 |   |
| Expense  recognized in connection with stock based compensation, the issuance and/or  modification of terms of stock options and restricted stock units |       | 830                                              |       | 3 |   |
| Deferred rent                                                                                                                                           |       | (36                                              | )          | (36 | ) |
| Bad debt expense                                                                                                                                        |       | 200                                              |       | 12 |   |
| Gain on sale of  joint venture interest and other assets                                                                                                |       | —                                           |       | (76 | ) |
| Changes in operating  assets and liabilities, net of effects of acquisitions:                                                                           |       |                                             |       |   |   |
| Accounts  receivable                                                                                                                                    |       | 3,600                                            |       | 1,715 |   |
| Prepaid rent                                                                                                                                            |       | 37                                               |       | 38 |   |
| Other assets                                                                                                                                            |       | (1,274                                           | )          | (242 | ) |
| Accounts payable  and accrued expenses                                                                                                                  |       | (356                                             | )          | 50 |   |
| Deferred revenue                                                                                                                                        |       | 606                                              |       | (475 | ) |
|                                                                                                                                                    |       |                                             |       |   |   |
| Net cash provided by  operating activities                                                                                                              |       | 2,936                                            |       | 1,527 |   |
|                                                                                                                                                    |       |                                             |       |   |   |
| Cash flows from  investing activities:                                                                                                                  |       |                                             |       |   |   |
| Purchase of  fixed assets                                                                                                                               |       | (1,985                                           | )          | (499 | ) |
| Cash paid less  cash acquired for acquisition of Healthology, Inc.                                                                                 |       | (10                                              | )          | (14,042 | ) |
| Cash paid for  acquisition of The Virtual Mirror, Inc.                                                                                             |       | —                                           |       | (5 | ) |
| Proceeds from  the sale of joint venture interest                                                                                                       |       | —                                           |       | 76 |   |
|                                                                                                                                                    |       |                                             |       |   |   |
| Net cash used in  investing activities                                                                                                                  |       | (1,995                                           | )          | (14,470 | ) |
|                                                                                                                                                    |       |                                             |       |   |   |
| Cash flows from  financing activities:                                                                                                                  |       |                                             |       |   |   |
| Proceeds from  exercise of stock options                                                                                                                |       | 152                                              |       | 178 |   |
|                                                                                                                                                    |       |                                             |       |   |   |
| Net cash provided by  financing activities                                                                                                              |       | 152                                              |       | 178 |   |
|                                                                                                                                                    |       |                                             |       |   |   |
| Effect of foreign  currency exchange rate changes on cash and cash equivalents                                                                          |       | 18                                               |       | — |   |
| Net decrease in cash  for the period                                                                                                                    |       | 1,111                                            |       | (12,765 | ) |
| Cash and cash  equivalents, beginning of period                                                                                                         |       | 55,881                                           |       | 83,046 |   |
|                                                                                                                                                    |       |                                             |       |   |   |
| Cash and cash  equivalents, end of period                                                                                                               |       | $                                                | 56,992     |   | $ | 70,281 |   |
|                                                                                                                                                    |       |                                             |       |   |   |

 

Supplemental disclosure of non-cash investing andfinancing activities:

At March 31, 2006,fixed assets of approximately $0.3 million were included in accounts payable.

The accompanying notes are anintegral part of these consolidated financial statements.

 

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**iVILLAGEINC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

**Note 1—Organizationand Basis of Presentation**

                iVillageis “the Internet for women” and consists of several online and offline media basedproperties, including the iVillage.com Web site, or iVillage.com, HealthologyInc., or Healthology, HealthCentersOnline Inc., or HealthCentersOnline,iVillage Limited, operator of the iVillage.co.uk Web site, iVillage Consulting,The Virtual Mirror, Inc., operator of the GardenWeb.com Web site, orGardenWeb.com, the gURL.com Web site, or gURL.com, Promotions.com, Inc.,Knowledgeweb, Inc., operator of the Astrology.com Web site, orAstrology.com, iVillage Parenting Network, Inc., or IVPN, and PublicAffairs Group, Inc., or PAG. Following is a synopsis of certain of ouroperational activities, subsidiaries and divisions:

 
| **Subsidiary or Division** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                          | ** ** | **Operational Activity** | ** ** | ** ** |
|----------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|------------|
| iVillage.com               |       | An online  destination providing practical solutions on a range of topics and everyday  support for women 18 years of age and over.                                                                                                                                                                                                                                                                                                                                 |
| Healthology                |       | Distributes  physician-generated videos and articles providing health and medical  information via the Healthology.com Web site, or Heathology.com, and a  syndication network, and provides Web site creation and development services  to healthcare related organizations.                                                                                                                                                                                       |
| HealthCentersOnline        |       | Acquired on  April 8, 2005, HealthCentersOnline provides healthcare information on  the Internet for patients and their families and helps patients understand  the complex nature of various conditions, diagnostic tests, treatment options  and preventive care. HealthCentersOnline creates health content through a  unique blend of original physician-edited articles, useful health tools and  high impact instructional animations and illustrations. |
| iVillage Limited           |       | On  April 29, 2005, iVillage, through its subsidiary iVillage Limited,  acquired from iVillage UK Limited, a subsidiary of Tesco Stores Limited,  certain assets relating to the iVillage.co.uk Web site, an online destination  providing practical solutions on a range of topics and everyday support for  women 18 years of age and over.                                                                                                                  |
| iVillage  Consulting       |       | Assists  companies in the creation and development of Web sites, digital commerce  platforms and other aspects of technological infrastructures, primarily for  Hearst Communications, Inc., and its affiliates, or Hearst, a related  party.                                                                                                                                                                                                                  |
| GardenWeb.com              |       | An online  destination offering an online community and reference tools focused on  horticulture.                                                                                                                                                                                                                                                                                                                                                                   |
| gURL.com                   |       | An online  destination catering to teenage girls that offers advice, games and  interactive content to girls 13 years of age and older.                                                                                                                                                                                                                                                                                                                             |
| Promotions.com, Inc.  |       | Comprised of two  divisions: Promotions.com and Webstakes.com, which offer online and offline  promotions and direct marketing programs that are integrated with customers’  marketing initiatives.                                                                                                                                                                                                                                                            |
| Astrology.com              |       | An online  destination for individuals seeking daily horoscopes, astrological content  and personalized forecasts online.                                                                                                                                                                                                                                                                                                                                           |
| IVPN                       |       | A holding  company for iVillage Integrated Properties, Inc., or IVIP, the operator  of the Newborn Channel and Lamaze Publishing Company, or Lamaze Publishing,  publisher of Lamaze Parents, which collectively provide informational and  instructional magazines, custom publications, television programming, videos  and online properties of interest to expectant and new parents.                                                                      |
| PAG                        |       | Comprised of three  divisions: Business Women’s Network, Diversity Best Practices and Best  Practices in Corporate Communications, each offering an extensive database of  pertinent information and events to subscribing companies and members, and  relevant publications.                                                                                                                                                                                  |

** **

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**               **Management believes that iVillage’scurrent funds will be sufficient to enable iVillage to meet its plannedexpenditures through at least the next twelve months. Factors that couldadversely affect iVillage’s operations include the loss of any of iVillage’smajor customers, a significant downturn in the advertising market or economy ingeneral, and iVillage’s ability to generate significantly increased annualrevenues.

iVillageis subject to the risks and uncertainties frequently encountered by companiesin the rapidly evolving markets for Internet and media products and services.These risks include the failure to develop and extend iVillage’s brands, thenon-acceptance or rejection of iVillage’s services by Web consumers, vendors,sponsors and/or advertisers and the inability of iVillage to maintain andincrease the levels of traffic on its online services. In the event iVillagedoes not successfully implement its business plan, certain assets may not berecoverable.

On March 3,2006, iVillage signed a definitive Merger Agreement with NBC Universal, Inc.,or NBC Universal. (See Note 10-Merger with NBC Universal, Inc.).

***Unaudited Interim Financial Information***

Theunaudited interim condensed consolidated financial statements of iVillage as ofMarch 31, 2006 and for the three months ended March 31, 2006 and2005, each included herein, have been prepared in accordance with theinstructions for Form 10-Q under the Securities Exchange Act of1934, as amended, or the Exchange Act, and Article 10 of Regulation S-X ofthe rules and regulations of the Securities and Exchange Commission, orSEC. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations relating to interim financial statements. These financialstatements should be read in conjunction with iVillage’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2005.

In the opinion ofmanagement, the accompanying unaudited interim condensed consolidated financialstatements reflect all adjustments,consisting only of normal recurring adjustments and appropriate intercompanyelimination adjustments, necessary to state fairly the financial position ofiVillage at March 31, 2006 and the results of its operations and its cashflows for the three months ended March 31, 2006 and 2005. The results forthe three months ended March 31, 2006 are not necessarily indicative ofthe expected results for the full fiscal year or any future period.

***Principlesof Consolidation***

Theconsolidated financial statements include the accounts of iVillage and itssubsidiaries. Intercompany balances and transactions have been eliminated inconsolidation.

Inaccordance with Statement of Financial Accounting Standards, or SFAS, No. 131,“Disclosures About Segments of an Enterprise and Related Information”, orSFAS 131, segment information is being reported consistent with our methodof internal reporting. In accordance with SFAS 131, operating segments aredefined as components of an enterprise for which separate financial informationis available that is evaluated regularly by the chief operating decision makerin deciding how to allocate resources and in assessing performance. iVillage isorganized primarily by subsidiaries and divisions. iVillage’s subsidiaries anddivisions have no operating managers that report to the chief operating decisionmaker. The chief operating decision maker reviews information at a consolidatedresults of operations level, although the chief operating decision maker doesreview revenue results of subsidiaries and divisions. As a result, iVillage’sdiscussion of revenue has been organized into separate subsidiaries anddivisions, however, operating expenses and results of operations are discussedon a combined basis.

***Revenues, Receivables and Customer Concentration***

Our five largestcustomers accounted for approximately 19% of total revenues for the threemonths ended March 31, 2006. No single customer accounted for more than 10% of our total revenuesfor the three months ended March 31, 2006. iVillage’s five largestcustomers accounted for approximately 23% of total revenues for the threemonths ended March 31,

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2005. No single customeraccounted for more than 10% of total revenues for the three months ended March 31,2005.  At March 31, 2006 and December 31,2005, no single customer accounted for more than 10% of total net accountsreceivable. The significance ofrevenues from any of our customers can vary on a quarter to quarter basis as aresult of the number and timing of such customers’ advertising and marketinginitiatives. We anticipate that our results of operations in any givenperiod will continue to depend to a significant extent on revenues from a smallnumber of customers.

Included in totalrevenues are barter transactions which totaled approximately $1.1 million, or5% of total revenues, for the three months ended March 31, 2006. For thecorresponding period in 2005, barter transactions totaled approximately $1.7million, or 10% of total revenues.

***Capitalized Production Costs***

iVillage capitalizes certain costs related to the creation andproduction of content associated with revenue contracts for Healthology. iVillageexpenses these costs on an accelerated method over the life of the expectedperiod of benefit. As of March 31, 2006, included in “Other current assets”on the Consolidated Balance Sheet was approximately $0.5 million in capitalizedproduction costs .

***FixedAssets and Intangibles***

Depreciation of equipment, furniture and fixtures and computer softwareis provided for by the straight-line method over their estimated useful livesranging from one to five years. Amortization of leasehold improvements isprovided for over the lesser of the term of the related lease or the estimateduseful life of the improvement. The cost of additions, and expenditures whichextend the useful lives of existing assets, are capitalized, and repairs andmaintenance costs are charged to operations as incurred. Amortization ofintangible assets are over the expected life of the related asset and rangefrom one to ten years. iVillage has adopted SFAS No. 144, “Accounting forthe Impairment or Disposal of Long-Lived Assets”, or SFAS 144, regardingthe recognition and measurement of the impairment of long-lived assets to beheld and used.

***WebSite Development Costs***

iVillage accounts for Web site development costs in accordance with theprovisions of Emerging Issues Task Force, or EITF, Issue No. 00-2, “Accountingfor Web Site Development Costs”, or EITF 00-2, which requires thatcertain costs to develop Web sites be capitalized or expensed, depending on thenature of the costs. Amortization of Web site development costs is provided forby the straight-line method over the estimated useful life of two years. Thedevelopment costs capitalized for the three months ended March 31, 2006and 2005 were approximately $48,000 and $0.3 million, respectively.Amortization expense of Web site development costs was approximately $0.2million and $0.1 million for the three months ended March 31, 2006and 2005, respectively.

***Goodwill***

SFAS No. 141, “Business Combinations”, or SFAS 141, requires allbusiness combinations to be accounted for using the purchase method ofaccounting and that certain intangible assets acquired in a businesscombination shall be recognized as assets apart from goodwill. Goodwill is notsubject to amortization and is tested for impairment annually, or morefrequently if events or changes in circumstances indicate that the asset may beimpaired in accordance with SFAS No. 142, “Goodwill and Other IntangibleAssets”, or SFAS 142. The impairment test consists of a comparison of thefair value of the reporting unit with its carrying amount. If the carryingamount of the reporting unit exceeds its fair value then an analysis will beperformed to compare the implied fair value of goodwill with carrying amount ofgoodwill. An impairment loss will be recognized in an amount equal to thedifference. Fair value is typically based upon future cash flows discounted ata rate commensurate with the risk involved or market based comparables. Afteran impairment loss is recognized, the adjusted carrying amount of goodwill isits new accounting basis. (See Note 3—Goodwill).

***ForeignCurrency Translation***

iVillage’sconsolidated financial statements are reported in U.S. dollars as that is thereporting currency. The Company’s foreign subsidiary,iVillage Limited, maintains its records in British Pounds, the currency of thecountry within which it operates. Under SFAS No. 52, “Foreign CurrencyTranslation”, the British Pound is the functional currency. Accordingly, thebalance sheet accounts of iVillage Limited are translated into U.S. dollars atthe rate of exchange in effect as

6

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of the balance sheetdate. Revenue and expenses are translated at the average exchange rateprevailing during the period. Translation adjustments are reported in accumulatedother comprehensive income within stockholders’ equity. The cumulative effectof the foreign currency translation loss was approximately $29,000 at March 31,2006.

***Comprehensive Income***

iVillage reflectsits comprehensive income such as unrealized gains and losses on the Company’sforeign currency translation adjustments as a separate component ofstockholders’ equity as required by SFAS No. 130, “Reporting Comprehensive Income*”*.iVillage has not recorded the tax effects related to the currency translationadjustments because such adjustments relate to indefinite investments ininternational subsidiaries. Comprehensive income consists of net income andforeign currency translation adjustments. Comprehensive loss was approximately$3.0 million for the three months ended March 31, 2006 and $1.3 millionfor the three months ended March 31, 2005.

***Useof Estimates***

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requires managementto make estimates and assumptions that affect the reported amount of assets andliabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and thereported amounts of revenues and expenses during the reporting period. Actualresults could differ from these estimates. Significant estimates andassumptions made by iVillage include those related to the useful lives of fixedassets and intangible assets, the recoverability of fixed assets, goodwill,intangible assets and deferred tax assets, the allocation of purchaseprice to the net assets acquired in acquisitions and deferred tax assets, theallowance for doubtful accounts, the expected period we will provide servicesfor Healthology revenue contracts, which is tied to webcast release dates andthe assessment of expected probable losses (if any) of claims and potentialclaims.

***IncomeTaxes***

iVillagerecognizes deferred taxes by the asset and liability method of accounting forincome taxes in accordance with the provisions of SFAS No. 109, “Accountingfor Income Taxes”, or SFAS 109. Deferred income taxes are recognized fordifferences between the financial statement and tax bases of assets andliabilities at enacted statutory tax rates in effect for the years in which thedifferences are expected to reverse. The effect on deferred taxes of a changein tax rates is recognized in income in the period that includes the enactmentdate. In assessing the realizability of deferred tax assets, iVillage considerswhether it is more likely than not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income or reversal of deferredtax liabilities during the periods in which those temporary differences becomedeductible. iVillage considers the scheduled reversal of deferred taxliabilities, projected future taxable income, and tax planning strategies inmaking this assessment.

The differencebetween iVillage’s U.S. federal statutory rate of 34%, as well as its state andlocal rate, net of federal benefit of 7%, when compared to its actual effectivetax rate of approximately 0%, is principally attributed to the valuationallowance provided for our deferred tax assets generated during the period andan estimated tax loss for 2006. iVillage has a full valuation allowance on itsnet deferred tax assets. If iVillage generates pre-tax income in futureperiods, we will assess the need for a reversal of the valuation allowance. Anysuch reversal may be material in the period in which the reversal is recorded.The decision to reverse the valuation allowance will, among other things,consider the profitability of iVillage in recent periods, as well asconsideration of iVillage’s future profitability and available tax planningstrategies.

***NetLoss Per Share***

Basic net loss pershare is computed using the weighted-average number of common sharesoutstanding during the period. Diluted net loss per share is computed using theweighted-average number of common shares and common stock equivalentsoutstanding during the period. Common stock equivalent shares are excluded fromthe computation if their effect are anti-dilutive.

Included in thecalculation of weighted average number of shares of common stock outstandingare 52,163 shares for March 31, 2006 and 56,995 shares for March 31,2005, which have not been issued. These shares are being held for formerWomen.com, Networks, Inc., or Women.com, and Promotions.com, Inc.stockholders who have not yet exchanged their respective shares for shares ofiVillage during the periods presented, but are entitled to do so.

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Stock options andwarrants in the amount of 8,198,844 shares for the three months ended March 31,2006 and 9,081,329 shares for the three months ended March 31, 2005, werenot included in the computation of diluted net income per share as they wereanti-dilutive as a result of the net losses during the periods persented.

***StockBased Compensation***

Effective January 1,2006, iVillage adopted the fair value recognition provisions ofSFAS 123(R), using the modified prospective transition method andtherefore has not restated results for prior periods. Upon the adoption of SFAS123(R), iVillage did not have a cumulative effect of accounting change. Underthis transition method, stock-based compensation expense for the first quarterof fiscal 2006 includes compensation expense for all stock-based compensationawards granted prior to, but not yet vested as of January 1, 2006, but dovest in the first quarter of 2006 based on the grant date fair value estimatedin accordance with the original provision of SFAS 123. Stock-basedcompensation expense for all stock-based compensation awards granted after January 1,2006 is based on the grant-date fair value estimated in accordance with theprovisions of SFAS 123(R). iVillage recognizes these compensation costs ona straight-line basis over the requisite service period of the award, which isgenerally the option vesting term of four years. iVillage uses theBlack-Scholes Option Pricing Model which requires extensive use of accountingjudgment and financial estimates, including estimates of the expected termemployees will retain their vested stock options before they are exercised, theestimated volatility of our stock price over the expected term and the numberof options that will be forfeited prior to the completion of their vestingrequirements. Application of alternative assumptions could producesignificantly different estimates of the fair value of stock-based compensationand consequently, the related amounts recognized in the Condensed ConsolidatedStatements of Operations. Prior to the adoption of SFAS 123(R), iVillagerecognized stock-based compensation expense in accordance with APB 25. In March 2005,the Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin No. 107, or SAB 107,regarding the SEC’s interpretation of SFAS 123(R) and the valuationof share-based payments for public companies. iVillage has applied theprovisions of SAB 107 in its adoption of SFAS 123(R). See Note 2to the Consolidated Financial Statements for a further discussion onstock-based compensation.

In January 2005,in conjunction with the acquisition of Healthology (See Note 6 — Business Acquisitions),all outstanding options to purchase Healthology common stock were convertedinto options to purchase shares of iVillage common stock at a predeterminedexchange ratio. The fair value of the converted options as determined by theBlack Scholes model was approximately $0.3 million. A deferred compensationcharge of approximately $0.1 million was calculated as a portion of theconverted options that were unvested on the acquisition date and contained acontinued service requirement. Compensation cost related to the convertedHealthology options, as well as a modification of stock option terms ingeneral, is measured at the fair value of iVillage’s common stock at themeasurement date and is amortized to expense over the vesting period.

**Note 2—Stock Based Compensation**

At March 31,2006, iVillage has the stock-based employee compensation plans described below.The total compensation expense related to these plans was approximately $0.8million for the three months ended March 31, 2006. Prior to January 1,2006, iVillage accounted for these plans under the recognition and measurementprovisions of APB 25. Accordingly, iVillage generally recognized compensationexpense only when it granted options with an exercise price less than the fairvalue on the date of grant, and for liability awards and modified awards. Anyresulting compensation expense was recognized ratably over the associatedservice period, which was generally the option vesting term.

iVillagerecognizes compensation costs only for those shares expected to vest on astraight-line basis over the requisite service period of the award, which isgenerally the option vesting term of four years. iVillage estimated theforfeiture rate as of January 1, 2006 based on its expectation of thepending merger with NBC Universal (See Note 10-Merger with NBC Universal, Inc.)closing in the second quarter of 2006. For all unvested outstanding optionswith an exercise price greater than the $8.50 merger offer price, a 95%forfeiture rate was applied and for all unvested outstanding options with anexercise price of less than $8.50, a 5% forfeiture rate was applied. Should thepending merger with NBC Universal not close, the expected forfeiture ratescould significantly change, resulting in a significant charge to the CondensedConsolidated Statement of Operations in a future period.

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Thefollowing is the effect of adopting SFAS 123(R) as of January 1, 2006(in thousands, except per share amounts): 

|                                                   | ** ** | **Three months ended  March 31,** | ** ** |
|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                        | ** ** | **2006**                                         | ** ** |
| Editorial,  product development and technology    |       | $                                                | 76         |   |
| Sales and  marketing                              |       | 53                                               |       |
| General and  administrative                       |       | 701                                              |       |
| Total stock-based compensation expense            |       | $                                                | 830        |   |
| Decrease in basic and  diluted earnings per share |       | $                                                | 0.01       |   |

 

The pro formatable below reflects the net loss and basic and diluted net loss per share forthe three months ended March 31, 2005, had iVillage applied the fair valuerecognition provisions of SFAS 123, as follows (in thousands, except pershare amounts): 

|                                                                                            | ** ** | **Three months ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                 | ** ** | **2005**                                         | ** ** |
| Net loss—as  reported                                                                 |       | $                                                | (1,266     | ) |
| Add: Stock-based  compensation expense included in reported net loss, net of tax           |       | 3                                                |       |
| Less: Stock-based  compensation expense determined under the fair value method, net of tax |       | (768                                             | )          |
| Net loss—pro  forma                                                                   |       | $                                                | (2,031     | ) |
| Basic and  diluted net loss per share—as reported                                     |       | $                                                | (0.02      | ) |
| Basic and diluted net  loss per share—pro forma                                       |       | $                                                | (0.03      | ) |

 

The fair value ofshare-based payment awards was estimated using the Black-Scholes option pricingmodel with the following assumptions and weighted average fair values asfollows:

 

|                                        | ** ** | **Stock Options (1)**                  | ** ** |
|----------------------------------------|------------|--------------------------------------------------|------------|
| ** **                             | ** ** | **Three months ended  March 31,** | ** ** |
| ** **                             | ** ** | **2005**                                         | ** ** |
| Weighted average  fair value of grants |       | $                                                | 3.36       |   |
| Risk-free  interest rate               |       | 3.24                                             | %          |
| Dividend yield                         |       | 0.00                                             | %          |
| Expected  volatility                   |       | 80.00                                            | %          |
| Expected life                          |       | 3 years                                          |       |
|                                        |            |                                                  |            |  |

 

(1)The fair value calculation wasbased on stock options granted during the period. There were no new stockoption awards in the three months ended March 31, 2006.

In determining theexpected life, iVillage examined its historical pattern of option exercises inan effort to determine if there were any discernable activity patterns based oncertain employee populations. From this analysis, iVillage identified threeemployee populations. iVillage used the Black-Scholes option pricing model tovalue the options for each of the employee populations. The table abovepresents the combined weighted average expected life in months of the threeidentified employee populations. The expected life computation is based onhistorical exercise patterns and post-vesting termination behavior within eachof the three populations identified. The interest rate for periods within thecontractual life of the award

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is based on the U.S.Treasury yield curve in effect at the time of grant. The Company determined theuse of historical volatility versus implied volatility represents a moreaccurate calculation of fair value.

***1995Amended and Restated Employee Stock Option Plan***

In 1995, iVillage’sboard of directors and stockholders adopted iVillage’s 1995 Amended andRestated Employee Stock Option Plan, as amended, or the ESOP. The ESOP providesfor the granting, at the discretion of the compensation committee of the boardof directors, or the Committee, of: (i) options that are intended toqualify as incentive stock options, within the meaning of Section 422 ofthe Internal Revenue Code of 1986, as amended, or the Code, to employees and (ii) optionsnot intended to so qualify to employees, officers, consultants and directors.The total number of shares of common stock for which options may be grantedunder the ESOP is 1,802,549.

The exercise priceof all stock options granted under the ESOP is determined by the Committee atthe time of grant. The maximum term of each option granted under the ESOP is10 years from the date of grant. Options shall become exercisable at suchtimes and in such installments as the Committee shall provide in the terms ofeach individual option. The ESOP also provides for all outstanding and unvestedoptions to become fully vested upon the occurrence of certain conditions,including a merger of iVillage with or into another corporation.

The exercise priceof all of the options under the ESOP ranges from $0.56-$35.94, and isdetermined based upon the fair market value of iVillage’s common stock on thedate of grant. Generally, the options vest 25% after one year, 6.25% quarterlythereafter, unless the employee has over one year of continuing service withiVillage, in which case, the options will vest 6.25% every quarter, and expire 5-10 yearsfrom the date of grant.

As of March 31,2006, there were no shares available for future grants under the ESOP.

***1997Amended and Restated Acquisition Stock Option Plan***

In May 1997,iVillage’s board of directors and stockholders adopted iVillage’s 1997 Amendedand Restated Acquisition Stock Option Plan, as amended, or the ASOP. The ASOPprovides for the granting, at the discretion of the Committee of: (i) optionsthat are intended to qualify as incentive stock options, within the meaning ofthe Code, to directors who are employees of iVillage or any of itssubsidiaries, or as part of one or more of such acquisitions and (ii) optionsnot intended to so qualify to employees, officers, consultants and directors ofiVillage, or as part of one or more of such acquisitions. The total number ofshares of common stock for which options may be granted under the ASOP is360,726.

The exercise priceof all stock options granted under the ASOP is determined by the Committee atthe time of grant. The maximum term of each option granted under the ASOP is10 years from the date of grant. Options shall become exercisable at suchtimes and in such installments as the Committee shall provide in the terms ofeach individual option. The 1997 ASOP also provides for all outstanding andunvested options to become fully vested upon the occurrence of certainconditions, including a merger of iVillage with or into another corporation.

Generally, theoptions vest 25% after one year, 6.25% quarterly thereafter, unless theemployee has over one year of continuing service with iVillage, in which case,the options will vest 6.25% every quarter, and expire 7-10 yearsfrom the date of grant. The exercise price of all of the options under the ASOPranges from $1.76 to $5.10, and is determined based upon the fair market valueof iVillage’s common stock on the date of grant.

As of March 31,2006, 12,409 shares were available for future grants under the ASOP.

***1999Employee Stock Option Plan***

In 1999, iVillage’sboard of directors and stockholders adopted iVillage’s Amended and Restated1999 Employee Stock Option Plan, as amended, or the 1999 ESOP. The 1999 ESOPprovides for the granting, at the discretion of the Committee, of: (i) optionsthat are intended to qualify as incentive stock options, within the meaning ofthe Code, to employees and (ii) options not intended to so qualify toemployees, officers, consultants, and directors. The total number of shares ofcommon stock for which options may be granted under the 1999 ESOP is 2,840,163.

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The exercise priceof all stock options granted under the 1999 ESOP is determined by the Committeeat the time of grant. The maximum term of each option granted under the 1999ESOP is 10 years from the date of grant. Options shall become exercisableat such times and in such installments as the Committee shall provide in theterms of each individual option. The 1999 ESOP also provides for alloutstanding and unvested options to become fully vested upon the occurrence ofcertain conditions, including a merger of iVillage with or into anothercorporation.

The exercise priceof all of the options under the 1999 ESOP ranges from $0.57-$72.94, andis determined based upon the fair market value of iVillage’s common stock on thedate of grant. Generally, the options vest 25% after one year, 6.25% quarterlythereafter, unless the employee has over one year of continuing service withiVillage, in which case, the options will vest 6.25% every quarter, and expire 5-10 yearsfrom the date of grant.

As of March 31,2006, there were 271,855 shares available for future grants under the 1999ESOP.

***1999Acquisition Stock Option Plan***

In 1999, iVillage’sboard of directors and stockholders adopted iVillage’s 1999 Acquisition StockOption Plan, as amended, or the 1999 ASOP. The 1999 ASOP provides for thegranting, at the discretion of the Committee, of: (i) options that areintended to qualify as incentive stock options, within the meaning of the Code,to employees of iVillage or any of its subsidiaries, or as part of one or moreof such acquisitions and (ii) options not intended to so qualify toemployees, officers, consultants, and directors of iVillage, or as part of oneor more of such acquisitions. The total number of shares of common stock forwhich options may be granted under the 1999 ASOP is 333,333.

The exercise priceof all stock options granted under the 1999 ASOP is determined by the Committeeat the time of grant. The maximum term of each option granted under the 1999ASOP is 10 years from the date of grant. Options shall become exercisableat such times and in such installments as the Committee shall provide in theterms of each individual option. The 1999 ASOP also provides for alloutstanding and unvested options to become fully vested upon the occurrence ofcertain conditions, including a merger of iVillage with or into anothercorporation.

Generally, theoptions vest 25% after one year, 6.25% quarterly thereafter, unless theemployee has over one year of continuing service with iVillage, in which case,the options will vest 6.25% every quarter, and expire 7-10 yearsfrom the date of grant. The exercise price of all of the options under the 1999ASOP ranges from $1.24-$5.10, and is determined based upon the fairmarket value of iVillage’s common stock on the date of grant.

As of March 31,2006, there were 58,974 shares available for future grants under the 1999 ASOP.

***1999Non-Qualified Stock Option Plan***

In 1999, iVillage’sboard of directors adopted iVillage’s 1999 Non-Qualified Stock Option Plan (asamended, the “NQSOP”). The NQSOP provides for the granting, at the discretionof the Committee, of options to employees. The total number of shares of commonstock for which options may be granted under the NQSOP is 5,682,000.

The exercise priceof all stock options granted under the NQSOP is determined by the Committee atthe time of grant. The maximum term of each option granted under the NQSOP is10 years from the date of grant. Options shall become exercisable at suchtimes and in such installments as the Committee shall provide in the terms ofeach individual option. The NQSOP also provides for all outstanding andunvested options to become fully vested upon the occurrence of certainconditions, including a merger of iVillage with or into another corporation.

The exercise priceof all of the options under the NQSOP ranges from $0.57-$25.38, and isdetermined based upon the fair market value of iVillage’s common stock on thedate of grant. The options vest 25% after one year, and then 6.25% quarterlythereafter, unless the employee has over one year of continuing service withiVillage, in which case, the options will vest 6.25% every quarter, and expire10 years from the date of grant.

As of March 31,2006, there were 204,938 shares available for future grants under the NQSOP.

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***DirectorOption Plan***

In 1999, iVillage’sboard of directors and stockholders adopted iVillage’s 1999 Director OptionPlan, or DOP. The DOP provides for the automatic grant of 1,666 non-qualifiedstock options to non-employee members of iVillage’s board of directors on thedate of each annual stockholders’ meeting. The total number of shares of commonstock for which options may be granted under the DOP is 133,333.

The exercise priceof all stock options granted under the DOP is the fair market value at the timeof grant. The maximum term of each option under the DOP is 10 years fromthe date of grant. The ESOP also provides for all outstanding and unvestedoptions to become fully vested upon the occurrence of certain conditions,including a merger of iVillage with or into another corporation.

The exercise priceof all of the options under the DOP ranges from $1.07-$25.38, and isdetermined based upon the fair market value of iVillage’s common stock on thedate of grant. Generally, the options vest 25% on each anniversary of the grantdate and expire 10 years from the date of grant.

As of March 31,2006, 112,925 shares were available for future grants under the DOP.

***2001Non-Qualified Stock Option Plan***

In 2001, iVillage’sboard of directors adopted iVillage’s 2001 Non-Qualified Stock Option Plan, asamended, or the 2001 NQSOP. The 2001 NQSOP provides for the granting, at thediscretion of the Committee, of options to employees. The total number ofshares of common stock for which options may be granted under the 2001 NQSOP is2,000,000.

The exercise priceof all stock options granted under the 2001 NQSOP is determined by theCommittee at the time of grant. The maximum term of each option granted underthe 2001 NQSOP is 10 years from the date of grant. Options shall becomeexercisable at such times and in such installments as the Committee shallprovide in the terms of each individual option. The 2001 NQSOP also providesfor all outstanding and unvested options to become fully vested upon theoccurrence of certain conditions, including a merger of iVillage with or intoanother corporation.

The exercise priceof all of the options under the 2001 NQSOP ranges from $0.70-$7.62, andis determined based upon the fair market value of iVillage’s common stock onthe date of grant. The options vest 25% after one year, and then 6.25%quarterly thereafter, unless the employee has over one year of continuingservice with iVillage, in which case, the options will vest 6.25% every quarter,and expire 10 years from the date of grant.

As of March 31,2006, there were 160,496 shares available for future grants under the NQSOP.

***Healthology, Inc.Stock Option Plan***

The Healthology, Inc.Stock Option Plan, as amended through January 7, 2005, or the HSOP,provides for the granting to eligible employees and consultants to Healthology,as well as future employees and consultants to iVillage, options to purchaseiVillage’s common stock. As part of the acquisition of Healthology, all optionsgranted under the HSOP which were outstanding as of the effective time of themerger on January 7, 2005, ceased to represent a right to acquire Healthology common stock and constitutedan option to acquire iVillage common stock in substitution of the former Healthologyoptions. The exercise price of each iVillage option substituted for a formerHealthology option equals the exercise price of each former Healthology optiondivided by 1/10.6067. Similarly, the number shares of iVillage common stockwhich can be purchased upon the exercise of each iVillage option equals thenumber of shares subject to each former Healthology option multiplied by1/10.6067. Further, all future options grants under the Stock Option Plan willrepresent rights to acquire iVillage common stock. The total number of sharesof common stock for which options may be granted under the HSOP is 471,400.

The exercise priceof all of the options under the HSOP ranges from $1.07-$13.26, and isdetermined based upon the fair market value of iVillage’s common stock on thedate of grant for options granted after January 7, 2005. For optionsgranted prior to January 7, 2005, the exercise price is determined per theabove paragraph. The options vest 25% after one year, and then 6.25% quarterlythereafter, unless the employee has over one year of continuing service withiVillage, in which case,

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the options will vest6.25% every quarter, and expire 10 years from the date of grant. The HSOPalso provides for all outstanding and unvested options to become fully vestedupon the occurrence of certain conditions, including the requisite approval bythe board of directors and the stockholders of iVillage to merge with or intoanother corporation for a price per share determined by iVillage’s board ofdirectors to be the fair market value.

As of March 31,2006, there were 248,563 shares available for future grants under the HSOP.

A summary of thestatus and activity of all of iVillage’s stock option plans is as follows:

 
| ** **                                    | ** ** | **Options** | ** ** | **Weighted  Average Exercise  Price Per Share** | ** ** |
|-----------------------------------------------|------------|-------------|------------|----------------------------------------------------------------|------------|
| Outstanding,  January 1, 2006            |       | 8,414,354   |       | $                                                              | 4.35       |   |
| Granted                                       |       | —      |       | —                                                         |       |
| Exercised.                                    |       | (65,601     | )          | $                                                              | 2.31       |   |
| Expired/Canceled                              |       | (155,191    | )          | $                                                              | 21.92      |   |
| Outstanding,  March 31, 2006             |       | 8,193,562   |       | $                                                              | 4.04       |   |
| Options exercisable at December 31, 2005 |       | 5,958,134   |       | $                                                              | 4.01       |   |
| Options exercisable at  March 31, 2006   |       | 5,977,286   |       | $                                                              | 3.57       |   |

 

Upon the closing of the merger with NBC Universal, the remainingunrecognized deferred compensation for our stock option awards of approximately$6.0 million will be immediately expensed in our Condensed Consolidated Statementof Operations.

Information about stockoptions outstanding as of March 31, 2006 is as follows:

 
| ** **                                              | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**             | ** ** |
|---------------------------------------------------------|------------|------------------------------|------------|------------------------------------------|------------|
| **Actual Range of Exercise Prices** | ** ** | ** **                   | ** ** | **Number  Outstanding  at 3/31/06** | ** ** | **Weighted  Average  Remaining  Contractual  Life** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value** | ** ** | **Number  Exercisable  at 3/31/06** | ** ** | **Weighted  Average  Remaining  Contractual  Life** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| $0.56—$0.70                                        |       | 149,376                      |       | 4.84                                     |       | $ | 0.63 |   | $ | 1,102,285 |   | 106,938 |   | 4.75 |   | $ | 0.63 |   | $ | 788,990 |   |
| $0.85-$1.26                                             |       | 1,769,113                    |       | 2.93                                     |       | 1.20 |   | 12,052,316 |   | 1,764,673 |   | 2.93 |   | 1.20 |   | 12,021,520 |   |
| $1.32-$1.95                                             |       | 2,081,398                    |       | 3.56                                     |       | 1.51 |   | 13,530,795 |   | 1,983,155 |   | 3.39 |   | 1.50 |   | 12,920,030 |   |
| $2.03-$2.98                                             |       | 833,245                      |       | 7.31                                     |       | 2.71 |   | 4,417,740 |   | 439,877 |   | 7.13 |   | 2.69 |   | 2,341,203 |   |
| $3.50-$5.10                                             |       | 713,028                      |       | 1.48                                     |       | 4.61 |   | 2,421,720 |   | 709,528 |   | 1.47 |   | 4.62 |   | 2,407,216 |   |
| $5.37-$7.69                                             |       | 2,310,865                    |       | 8.05                                     |       | 6.32 |   | 3,914,714 |   | 636,578 |   | 5.68 |   | 6.48 |   | 974,712 |   |
| $8.31-$10.61                                            |       | 10,879                       |       | 3.91                                     |       | 9.91 |   | — |   | 10,879 |   | 3.91 |   | 9.91 |   | — |   |
| $13.26-$19.19                                           |       | 152,259                      |       | 1.86                                     |       | 16.18 |   | — |   | 152,259 |   | 1.86 |   | 16.18 |   | — |   |
| $21.00-$29.75                                           |       | 133,815                      |       | 2.59                                     |       | 25.81 |   | — |   | 133,815 |   | 2.59 |   | 25.81 |   | — |   |
| $33.56-$44.25                                           |       | 38,750                       |       | 0.43                                     |       | 38.56 |   | — |   | 38,750 |   | 0.43 |   | 38.56 |   | — |   |
| $72.94-$72.94                                           |       | 834                          |       | 0.09                                     |       | 72.94 |   | — |   | 834 |   | 0.09 |   | 72.94 |   | — |   |
|  $0.56—$72.94                                 |       | 8,193,562                    |       | 4.85                                     |       | $ | 4.04 |   | $ | 37,439,570 |   | 5,977,286 |   | 3.49 |   | $ | 3.57 |   | $ | 31,453,671 |   |
|                                                         |            |                              |            |                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The total intrinsic value of options exercised during the three monthsended March 31, 2006 and 2005 were $0.4 million and $0.6 million,respectively. The total fair value of shares vested during the three monthsended March 31, 2006 and 2005 were $0.7 million and $0.8 million,respectively.

Due to stock option exercises in the three months ended March 31,2006, the Company recorded $0.1 million of stock-based compensation windfalltax benefits in a memo account since the Company has a full valuation allowanceagainst its deferred tax assets.

 

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***1999Employee Stock Purchase Plan***

We adopted the 1999 EmployeeStock Purchase Plan, or 1999 ESPP, in December 1998, and reserved 83,333shares of our common stock for issuance thereunder. As of March 31, 2006,however, no shares have been issued under the 1999 ESPP. The 1999 ESPP, whichis intended to qualify under Section 423 of the Internal Revenue Code of1986, as amended, or the Code, is administered by the Committee. Under the 1999ESPP, we may withhold a specified percentage (not to exceed 15%) of each salarypayment to participating employees over certain offering periods. Any employeewho is employed for at least 20 hours per week for at least fiveconsecutive months in a calendar year, with or by us or by one of our majority-ownedsubsidiaries, is eligible to participate in the 1999 ESPP. Unless the Committeedetermines otherwise, each offering period runs for 24 months and isdivided into four consecutive purchase periods of approximately six months.

The price at which our commonstock may be purchased under the 1999 ESPP is equal to 85% of the fair marketvalue of our common stock on the first day of the applicable offering period orthe last day of the applicable purchase period, whichever is lower.Participants may end their participation in the offering at any time during theoffering period, and participation ends automatically on termination ofemployment. The maximum number of shares that a participant may purchase on thelast day of any offering period is determined by dividing the payroll deductionsaccumulated during the purchase period by the purchase price. However, noperson may purchase shares under the 1999 ESPP to the extent such person wouldown 5% or more of the total combined value or voting power of all classes ofour capital stock or of any of our subsidiaries, or to the extent that suchperson’s rights to purchase stock under all employee stock purchase plans wouldaccrue at a rate that exceeds $25,000 worth of stock for any calendar year. Theboard of directors may amend the 1999 ESPP at any time. The 1999 ESPP willterminate in December 2009, unless terminated earlier in accordance withits provisions.

***EmploymentAgreement***

In August 2005,and as amended in December 2005, iVillage and its CEO, entered into anemployment agreement which expires in May 2008. Pursuant to thisagreement, the CEO has and is entitled to receive restricted stock units andperformance units which entitle the CEO to cash payments based on the fairmarket value of iVillage’s common stock on the vesting date. The restrictedstock unit and performance stock unit awards are recorded as a liability due tothe cash payout feature. Since the performance awards are based upon marketconditions of the underlying stock price, the lattice model is used to valuethe award under SFAS 123(R). Prior to the adoption of SFAS 123(R), the awardwas recorded under APB 25 and no compensation cost had been recorded. However,since the merger offer price of $8.50 from NBC Universal is lower than theminimum threshold for the CEO to receive a cash payout coupled with thelikelihood of the merger occurring in the near term, there is minimal valueassociated with the performance stock unit award under the lattice model andiVillage did not record compensation expense under SFAS 123(R). Should themerger with NBC Universal not close, iVillage would value the award under thelattice model, which could result in a significant future charge to operations.The restricted awards are valued using the Black-Scholes options pricing model.Changes to the Black Scholes value of the stock during the vesting period areincluded in the calculation of the expense. For the three months ended March 31,2006, the expense related to the restricted stock units was approximately $0.2million. As of March 31, 2006 and December 31, 2005, iVillagemaintained a liability of $0.3 million and $0.2 million, respectively, for therestricted stock units. These amounts are included in Accounts payable andaccrued expenses in the Condensed Consolidated Balance Sheets.

Nonvestedrestricted stock awards as of March 31, 2006 and changes during the threemonths ended March 31, 2006 were as follows: 
| ** **                           | ** ** | **Number of shares** | ** ** | **Weighted average  grant date fair  value** | ** ** |
|--------------------------------------|------------|--------------------------------|------------|-------------------------------------------------------------|------------|
| Nonvested at  December 31, 2005 |       | —                         |       | —                                                      |       |
| Granted                              |       | 70,000                         |       | $                                                           | 8.02       |   |
| Vested                               |       | —                         |       | —                                                      |       |
| Forfeited                            |       | —                         |       | —                                                      |       |
| Nonvested at  March 31, 2006    |       | 70,000                         |       | $                                                           | 8.02       |   |

 

As of March 31,2006, $6.0 million of total unrecognized compensation cost related tostock options is expected to be recognized over a weighted-average period of 2.6 years.

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**Note 3—Goodwill**

Intangible assets with indefinitelives and goodwill are not amortized, but are tested at least annually forimpairment, or if circumstances change that will more likely than not reducethe fair value of the reporting unit below its carrying amount. iVillageperforms its annual impairment analysis in the fourth quarter of the fiscalyear. In December 2005, iVillage completed the annual impairment test andno impairment was recognized.

During the threemonths ended March 31, 2006, iVillage incurred approximately $16,000 ofadditional costs related to the acquisition of Healthology, Inc., whichwas acquired in January 2005 and approximately $36,000 of additionalassets related to the acquisition of HealthCentersOnline, Inc., which wasacquired in April 2005.

The following table sets forththe components of goodwill, net as of March 31, 2006 and December 31,2005 (in thousands):

|                       | ** ** | **December 31,  2005** | ** ** | **Acquisition** | ** ** | **Impairment  Losses** | ** ** | **March 31,  2006** | ** ** |
|-----------------------|------------|-----------------------------|------------|-----------------|------------|------------------------|------------|--------------------------|------------|
| Reporting unit—1 |       | $                           | 39,559     |            | $          | 52                     |       | $                        | —     |   | $ | 39,611 |   |
| Reporting unit—2 |       | 1,693                       |       | —          |       | —                 |       | 1,693                    |       |
| Reporting unit—3 |       | 1,737                       |       | —          |       | —                 |       | 1,737                    |       |
| Reporting unit—4 |       | —                      |       | —          |       | —                 |       | —                   |       |
|                  |       | $                           | 42,989     |            | $          | 52                     |       | $                        | —     |   | $ | 43,041 |   |

 

Reporting unit—1 includes iVillage Inc., Women.com Networks, Inc.,Healthology, Inc., HealthCentersOnline, Inc., iVillage Limited, TheVirtual Mirror, Inc., Knowledgeweb, Inc., and Cooperative BeautyVentures, L.L.C.

Reporting unit—2 includesiVillage Parenting Network, Inc., Lamaze Publishing Company and iVillageIntegrated Properties, Inc.

Reporting unit—3 includes PublicAffairs Group, Inc.

Reporting unit—4 includes Promotions.com, Inc. consisting ofthe Promotions.com and Webstakes.com divisions.

**Note 4—IntangibleAssets**

iVillage reviews for theimpairment of long-lived assets and certain identifiable intangibles wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable in accordance with the provisions of SFAS 144.During the three months ended March 31, 2006, iVillage adjusted the carryingamount of the customer relationship intangible asset by approximately $15,000,which was acquired in April 2005 from iVillage UK Limited.

Identifiable intangible assetsare amortized under the straight-line or accelerated method over the period ofexpected benefit ranging from one to ten years. The following table sets forththe components of the intangible assets subject to amortization as of  March 31, 2006 and December 31,2005 (in thousands):

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| ** **                                          | ** ** | **Range**            | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-----------------------------------------------------|------------|----------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                          | ** ** | **of  useful  life** | ** ** | **Gross  carrying  amount**  | ** ** | **Acquisitions**                | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** |
| Advertiser and  member lists and customer contracts |       | 2-10 years           |       | $                            | 25,381     |                            | $          | (15 | ) | $ | (17,605 | ) | $ | 7,761 |   | $ | 25,381 |   | $ | (16,804 | ) | $ | 8,577 |   |
| Trademarks and  domain names                        |       | 3 years              |       | 4,837                        |       | —                          |       | (3,846 | ) | 991 |   | 4,837 |   | (3,711 | ) | 1,126 |   |
| Licensing  agreement                                |       | 10 years             |       | 2,900                        |       | —                          |       | (1,917 | ) | 983 |   | 2,900 |   | (1,845 | ) | 1,055 |   |
| Technology                                          |       | 3 years              |       | 2,999                        |       | —                          |       | (1,363 | ) | 1,636 |   | 2,999 |   | (1,190 | ) | 1,809 |   |
| Non-competition  agreements                         |       | 1 year               |       | 1,012                        |       | —                          |       | (932 | ) | 80 |   | 1,012 |   | (906 | ) | 106 |   |
| Content                                             |       | 3-4 years            |       | 6,261                        |       | —                          |       | (2,821 | ) | 3,440 |   | 6,261 |   | (2,428 | ) | 3,833 |   |
|                                                |       |                 |       | $                            | 43,390     |                            | $          | (15 | ) | $ | (28,484 | ) | $ | 14,891 |   | $ | 43,390 |   | $ | (26,884 | ) | $ | 16,506 |   |

 

Amortization expense for thethree months ended March 31, 2006 and 2005 was approximately $1.6 millionand $1.2 million, respectively.

Estimated amortization expensefor the twelve months ending March 31, are as follows (in thousands):
| 2007   |   | $      | 6,094  |   |
|--------|--------|--------|--------|--------|
| 2008   |   | 5,406  |   |
| 2009   |   | 2,692  |   |
| 2010   |   | 699    |   |
| 2011   |   | — |   |
|   |   | $      | 14,891 |   |

 

**Note 5—Related-PartyTransactions**

***HearstCommunications, Inc.***

As of March 31, 2006, Hearstowned approximately 25% of iVillage’s outstanding common stock.

In February 2006, the Web Site Services Agreement by and between Hearst and iVillage, datedDecember 19, 2003, or the 2003 Web Site Services Agreement, for servicesrelated to the three teen sites was amended. The amendment is effective as of December 20,2005 and, among other things, (i) extends the term of the ServicesAgreement to December 31, 2006, which may be further extended at Hearst’soption to June 30, 2007 upon certain conditions, (ii) provides for atermination right for convenience upon 120 days notice by either party and atermination right upon a “change in control” of iVillage (as such term isdefined in the Agreement) upon 10 days notice by Hearst, (iii) addsanother Hearst website to which iVillage shall provide services, and (iv) increasesthe maintenance fees due to iVillage for providing the contemplated services. Pursuantto this agreement, Hearst will pay approximately $0.9 million for servicesrendered through December 31, 2006.

From time to time, iVillage hasprovided production services outside the scope of its Web site service andamended and restated magazine content and hosting agreements with Hearst.

Revenues, net of royaltypayments, from Hearst, were approximately $1.4 million for the threemonths ended March 31, 2006 and $1.5 million for the three monthsended March 31, 2005. As of March 31, 2006 and December 31,2005, iVillage recorded a net receivable of approximately $0.3 millionfrom this stockholder, respectively.

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*** ***

***CatalystGroup Design, Inc.***

Our Senior Vice President andEditor in-Chief is the spouse of the Chief Executive Officer of Catalyst GroupDesign, Inc., or Catalyst Group Design. From time to time, iVillage hasentered into agreements with Catalyst Group Design, for services related to theredesign of Web sites and several revenue contracts of iVillage. Todate, iVillage has capitalized approximately $0.1 million of these fees asWeb site development costs. As of March 31, 2006, approximately $0.1million was included in prepaid expenses. For the three months ended March 31,2006 and 2005, approximately $26,000 and $19,000 was expensed, respectively. iVillage owed Catalyst Group Designapproximately $10,000 as of March 31, 2006 and $0.1 million as of December 31,2005.

***WaterfrontMedia, Inc.***

Our Chief Executive Officer andanother board member of iVillage, Habib Kairouz, both serve on the board ofdirectors of one of our customers, Waterfront Media Inc., or WaterfrontMedia. Our Chief Executive Officer owns less than one percent of WaterfrontMedia’s fully diluted securities. As a Managing Partner of Rho Capital Partners, Inc.,Habib Kairouz may be deemed to have indirect beneficial ownership ofapproximately 31% of Waterfront Media’s fully diluted voting securities as aresult of shares owned directly by affiliates of Rho Capital Partners, Inc.

In 2006, iVillage signed oneadvertising agreement with Waterfront Media, which was completed by March 31,2006. Revenues from Waterfront Media were approximately $20,000 for the threemonths ended March 31, 2006 and approximately $0.1 million for thethree months ended March 31, 2005. As of March 31, 2006, iVIllage wasowed a receivable of $20,000. There was no receivable owed to iVillage as of December 31,2005.

***Employment Agreement***

In August 2005,and as amended in December 2005, iVillage and its CEO, entered into anemployment agreement which expires in May 2008. Pursuant to thisagreement, the CEO received restricted stock units and performance units whichentitle the CEO to cash payments based on the fair market value of iVillage’scommon stock on the vesting date. See Note 2-Stock Based Compensation-EmploymentAgreement for further details.

**Note 6—BusinessAcquisitions**

***Healthology, Inc.***

On January 7,2005, iVillage acquired all of the outstanding equity of Healthology, aprivately held company that is a leading producer and distributor ofphysician-generated video- and article-based health and medical information(via the internet). The aggregate purchase price, inclusive of closing costs ofapproximately $0.6 million, was approximately $17.6 million consisting ofapproximately $16.0 million in cash, 205,908 shares of iVillage’s common stockwith the fair value of $1.2 million based on the five day closing price ofiVillage’s common stock as reported by the NASDAQ National Market on the twodays prior to, the day of and the two days following the acquisition date, and$0.3 million of common stock options (See Note 1-Organization and Basisof Presentation-Stock Based Compensation).

No pro formainformation is included as the acquisition of Healthology would not have had amaterial impact on the consolidated results of operations of iVillage.

In the firstquarter of 2006, goodwill related to the acquisition of Healthlolgy increasedapproximately $16,000 primarily due to additional transaction costs during thequarter.

***HealthCentersOnline, Inc.***

On April 8, 2005,iVillage acquired all of the outstanding equity of HealthCentersOnline, Inc.,a privately-held, online destination for physician-edited information on healthconditions, treatments and preventative care for patients. The aggregatepurchase price, inclusive of closing costs of approximately $0.2 million, wasapproximately $12.2 million, consisting of approximately $11.2 million in cashand 166,945 shares of iVillage common stock with a fair value of $1.0

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million based on the fiveday closing price of iVillage’s common stock as reported by the NASDAQ NationalMarket on the two days prior to, the day of and the two days following theannouncement date.

The cost of theacquisition was allocated to the assets acquired and liabilities assumed basedupon their estimated fair values.

In the threemonths ended March 31, 2006, goodwill related to the acquisition ofHealthCenters Online, Inc. increased approximately $36,000 due toadditional pre-acquisition liabilities.

The accompanyingunaudited pro forma summary represents consolidated results of operations foriVillage as if the acquisition of HealthCentersOnline had been consummated on January 1,2005. The pro forma information does not necessarily reflect the actual resultsthat would have been achieved, nor is it necessarily indicative of futureconsolidated results of iVillage.
| ** **                            | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|
| Total revenues                        |       | $        | 21,550     |     | $          | 18,223 |   |
| Net loss                              |       | $        | (3,028     | )        | $          | (1,510 | ) |
| Basic and diluted net  loss per share |       | $        | (0.04      | )        | $          | (0.02 | ) |

 

***iVillageLimited***

On April 29,2005, iVillage, through its subsidiary, iVillage Limited, acquired fromiVillage UK Limited, a subsidiary of Tesco, the iVillage.co.uk Web site andcertain related assets. The purchase price, inclusive of closing costs, wasapproximately $0.6 million and was structured as an asset purchase. Inconnection with the acquisition, iVillage UK Limited and iVillage terminated alicense agreement pursuant to which iVillage previously licensed content andcertain other intellectual property to iVillage UK Limited (See Note 7 —Deferred Gain on Sale of Joint Venture Interest).

In the firstquarter of 2006, the customer relationships intangible asset decreasedapproximately $16,000 due to a purchase price adjustment during the quarter.

No pro formainformation is included as the acquisition of iVillage UK Limited would nothave had a material impact on the consolidated results of operations ofiVillage.

**Note 7—DeferredGain on Sale of Joint Venture Interest**

In March 2003,iVillage and Tesco.com Limited, a division of Tesco, PLC, or Tesco,restructured the terms of their joint venture so that Tesco purchased iVillage’sentire ownership interest in iVillage UK. iVillage and Tesco also entered intoa twenty-year license agreement for the use of certain of iVillage’s contentand intellectual property subject to earlier termination upon the occurrence ofcertain events, for the greater of a minimum monthly license fee or apercentage of iVillage UK’s gross revenues. In April, 2005, in connection withan asset acquisition (See Note 6-Business Acquisitions), iVillage UKLimited and iVillage terminated this license agreement.

All moniesreceived by iVillage under the license agreement were classified as otherincome and were included in the condensed consolidated statements of operationsas a gain on sale of joint venture interest. iVillage has earned no amount forthe three months ended March 31, 2006 and approximately $0.1 million forthe three months ended March 31, 2005 for services provided. As of March 31,2006 and December 31, 2005, iVillage was owed no amount for license fees.

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** **

**Note 8—Commitmentsand Contingencies**

***Leases***

iVillage leases office andequipment, under non-cancelable operating leases expiring at various datesthrough April 2015. The following is a schedule of future minimum leasepayments under non-cancelable operating leases as of March 31, 2006 forthe next five years:
| **Twelve months ending March 31:** | ** ** | ** ** | ** ** | **(in thousands)** | ** ** |
|--------------------------------------------------------|------------|------------|------------|-------------------------|------------|
| 2007                                                   |       | $          | 2,426      |                    |
| 2008                                                   |       | 2,204      |       |
| 2009                                                   |       | 2,148      |       |
| 2010                                                   |       | 2,003      |       |
| 2011                                                   |       | 1,925      |       |
| Thereafter                                             |       | 5,765      |       |
|                                                   |       | $          | 16,471     |                    |

 

In addition, in the ordinarycourse of business, iVillage enters into agreements with various serviceproviders for ad serving, satellite transmissions and license/contentarrangements.

***Technology***

In the event of anunforeseen interruption of service to the satellite technology used by IVPN totransmit its television channels, iVillage would need to find another satelliteprovider and/or invest in alternative technology to distribute this service.

In September 2005,iVillage outsourced certain of its information technology services functions toCorsis. The agreement expires in August 2010 and can be extended for up tofive successive one year periods by iVillage. Under this agreement, iVillagewill pay Corsis approximately $3.3 million in year one, approximately $2.8million in year two and approximately $2.5 million a year for years threethrough five. The aggregate amount of the contract will be expensed utilizingthe straight-line method as the services will be performed evenly over theterm.

In December 2005, iVillageexpanded the scope of outsourced information technology services functions toCorsis to encompass the oversight of the technical functions at three of oursubsidiaries. In consideration, iVillage will pay Corsis an additionalapproximately $0.3 million per quarter from January 1, 2006 through December 31,2007. Thereafter,  Corsis will receive anadditional approximately $0.2 million per quarter through the end of thecontract.

On March 2,2006, iVillage outsourced certain of Heathololgy, Inc.’s informationtechnology services functions to Corsis. For such services, iVillage will payCorsis an additional $0.1 million per quarter for March 2, 2006 through December 31,2007.

***Litigation***

In thenormal course of business, iVillage is subject to proceedings, lawsuits andother claims. Such matters are subject to many uncertainties, and outcomes arenot predictable with assurance. Consequently, the ultimate aggregate amount ofmonetary liability or financial impact with respect to these matters at March 31,2006 cannot be ascertained. While these matters could affect the operatingresults of any one quarter when resolved in future periods and while there canbe no assurance with respect thereto, management believes, with the advice ofoutside legal counsel, that after final disposition any monetary liability orfinancial impact to iVillage from these matters would not be material toiVillage’s results of operations and financial condition.

Several plaintiffshave filed class action lawsuits in federal court against iVillage, several ofits present and former executives and its underwriters in connection with its March 1999initial public offering. A similar class action lawsuit was filed againstWomen.com, several of its former executives and its underwriters in connectionwith Women.com’s October 1999 initial public offering. The complaintsgenerally assert claims under the Securities Act of 1933, as amended,

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the Exchange Act and the rules andregulations of the SEC. The complaints seek class action certification,unspecified damages in an amount to be determined at trial, and costsassociated with the litigation, including attorneys’ fees.

In February 2003,the defendants’ motion to dismiss certain of the plaintiffs’ claims was grantedin part, but, for the most part, denied. In June 2003, a proposedsettlement of this litigation was structured between the plaintiffs, the issuerdefendants, the issuer officers and directors named as defendants, and theissuers’ insurance companies. The proposed settlement generally provides thatthe issuer defendants and related individual defendants will be released fromthe litigation without any liability other than certain expenses incurred todate in connection with the litigation, the issuer defendants’ insurers willguarantee $1.0 billion in recoveries by plaintiff class members, the issuerdefendants will assign certain claims against the underwriter defendants to theplaintiff class members, and the issuer defendants will have the opportunity to recover certain litigation-relatedexpenses if the plaintiffs recover more than $5.0 billion from the underwriterdefendants. The respective boards of directors of iVillage and Women.com eachapproved the proposed settlement in July 2003.

On June 25,2004, the plaintiffs filed a motion for preliminary approval of the settlementwith the court, which was accompanied by a brief filed by the issuer defendantsin support of the plaintiffs’ motion. The court requested that any objectionsto preliminary approval of the settlement be submitted by July 14, 2004,and certain underwriter defendants formally objected to the settlement. Theplaintiffs and issuer defendants separately filed replies to the underwriterdefendants’ objections to the settlement on August 4, 2004. On February 15,2005, the court issued an opinion and order granting preliminary approval tothe settlement and ordering the plaintiffs and issuer defendants to submit tothe court a revised settlement stipulation consistent with the court’s order. Pursuantto the court’s instruction, the parties to the settlement agreement submittedthe revised settlement stipulation on May 2, 2005. On August 31,2005, the Court granted preliminary approval to the amended settlementstipulation.  Notice of the settlementhas been provided to the class members. A fairness hearing, which is requiredbefore the settlement can be finalized and approved, took place on April 24,2006 and the Court has reserved decision with respect to granting approval ofthe final settlement.

We believe, basedupon the advice of outside legal counsel, that the aforementioned lawsuit andclaims asserted against iVillage and its subsidiary pursuant to thesecomplaints are without merit and we intend to vigorously defend against theseclaims. If the proposed settlement in these cases is ultimately not approved bythe courts, defending against these claims could require the expenditure ofsignificant financial and managerial resources, which could harm our business.

On August 16,2005, a complaint was filed in the United States District Court forthe Northern District of California against us and our subsidiary,KnowledgeWeb, Inc, or Knowledgweb, on behalf of Kelli and David Fox. Mr. andMrs. Fox are the founders of Astrology.com, an online astrologicalinformation services Web site that we acquired in 1999, and are parties toseveral agreements with us related to such acquisition. Mr. and Mrs. Foxwere also our employees until 2003. The complaint set forth ten causes ofaction for (1) breach of contract; (2) trademark infringement underthe Lanham Act; (3) common law trademark infringement; (4) federaldilution; (5) California state law dilution; (6) federal falseadvertising; (7) California false advertising; (8) cybersquatting; (9) violationof the right of publicity; and (10) California state unfair competition. Thecomplaint sought a permanent injunction, enjoining us and our subsidiary frominfringing the KELLI FOX mark, among other things; assignment of the KELLI FOXtrademark registrations; cancellation of the kellifox.comdomain name; an order declaring the Marketing Agreement void;compensatory, treble and punitive damages; and attorneys’ fees.

We responded tothe complaint on October 4, 2005, making a motion to dismiss the claimsfor failure to state a claim upon which relief could be granted and for lack ofsubject matter jurisdiction.  On November 23, 2005, the Court enteredan order granting our motion and dismissing the complaint in its entiretyfor failure to state a federal claim for lack of subject matterjurisdiction. The Court did not address the merits of the Foxs’ Californialaw claims.

On December 1,2005, the Foxs filed an action against iVillage and KnowledgeWeb in theSuperior Court of the State of California asserting claims for breach ofcontract, violation of the right of publicity, state law false advertising andunfair competition under California state law. On January 19, 2006, wefiled a demurrer to the complaint, seeking dismissal of all claims. As acompanion motion, we also filed a Motion to Strike various allegations in thecomplaint that had been improperly asserted.  Arguments were heard onthese motions on March 8, 2006. The Court granted the motion withleave to amend, but otherwise denied our motions. Document requests and interrogatoriesdirected to us and KnowledgeWeb, dated March 8, 2006, have beenserved by the Foxs and we served written responses to these requests on April 11,2006.

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On January 19,2006, iVillage and KnowledgeWeb commenced a lawsuit in the SupremeCourt of the State of New York, New York County, by filing an actionagainst the Foxs asserting a cause of action for breach ofcontract. The Foxs moved to dismiss the complaint by motion dated February 17,2006. We opposed that motion on March 2, 2006. The motion wassubmitted to the Court on March 9, 2006 and oral arguments were heard on April 18,2006. At the oral argument the Court decided that iVillage was capable of suingthe Foxs in California under the jurisdictional clause of the SeparationAgreement between iVillage and the Foxs, and dismissed the action so that itcould be brought as part of the California action. We intend to assert theseclaims as cross-claims in the California action when the answer is filed on orbefore May 12, 2006.

We intend to defendand pursue the aforementioned matters vigorously and at this point in time itis not possible to determine the ultimate disposition of this matter.

iVillagereceived a letter, dated December 16, 2005, from Acacia TechnologiesGroup, a division of Acacia Research Corporation, or Acacia, which identifiedthree United States patents related to pop-up and pop-under advertising whichAcacia and its subsidiary/affiliate InternetAd Systems, LLC, allege iVillagehas infringed. The letter also contemplates the entry into a license agreementfor the use of such patented technology. iVillage is presently reviewing thevalidity of these allegations with the assistance of its outside legal advisorsand is considering engaging with Acacia in preliminary discussions related to alicense agreement should it deem it to be necessary.

At thispoint in time, it is not possible to quantify the ultimate impact of theaforementioned allegations on iVillage.

iVillage is notcurrently subject to any other material legal proceedings. iVillage may fromtime to time, however, become a party to various legal proceedings arising inthe ordinary course of business.

**Note 9—CapitalStock**

***Warrants***

At March 31, 2006 and December 31,2005 there were outstanding warrants to purchase 5,282 shares of iVillagecommon stock with an exercise price of $14.35 per share. The warrants expire onJune 9, 2007.

**Note 10—Merger with NBC Universal,Inc**

On March 3,2006, iVillage entered into a merger agreement with NBC Universal and a whollyowned subsidiary of NBC Universal, or the Merger Agreement. The MergerAgreement was approved by iVillage’s board of directors. Subject to variouscustomary conditions, including the obtaining of stockholder approval andexpiration or termination of the waiting period required by applicableantitrust laws, iVillage has agreed to merge with the NBC Universal subsidiary.After the merger, iVillage will be a subsidiary of NBC Universal. Inconsideration, upon the effectiveness of the merger, each of iVillage’sstockholders, other than those who elect to exercise dissenters’ rights, willreceive in cash and without interest $8.50 for each share of our common stockthey hold at that time. Each outstanding option to purchase iVillage commonstock that is unexercised immediately prior to the effective time of the mergerwill become fully vested as of the effective time of the merger and will becancelled in consideration for a cash payment equal to the product of (1) theexcess, if any, of $8.50 over the applicable option exercise price and (2) thenumber of shares of iVillage common stock subject to such option. iVillagecurrently expects the merger to be completed on or about May 15, 2006. Uponthe closing of the merger with NBC Universal, the remaining unrecognizeddeferred compensation for our stock option awards of approximately$6.0 million will be immediately expensed in our consolidated statement ofoperations.

iVillage has maderepresentations, warranties and covenants in the Merger Agreement in favor ofNBC Universal, including, among others, covenants (i) to carry on itsbusiness in the ordinary course consistent with past practice during theinterim period between the execution of the Merger Agreement and completion ofthe merger, (ii) not to engage in certain kinds of transactions duringsuch period, (iii) to cause a stockholder meeting to be held to considerapproval of the merger and the other transactions contemplated by the MergerAgreement, (iv) subject to certain exceptions, for its board of directorsto recommend adoption by its stockholders of the Merger Agreement and thetransactions contemplated by the Merger Agreement, (v) not to solicitproposals relating to alternative business combination transactions, and (vi) subjectto certain exceptions, not to enter into discussions concerning, or provideconfidential information in connection with, alternative

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business combinationtransactions. Under certain circumstances, the Board of Directors of iVillagemay terminate the Merger Agreement in order to accept a superior proposal, asdefined in the Merger Agreement.

The MergerAgreement contains certain termination rights for both iVillage and NBCUniversal, and further provides that, upon termination of the Merger Agreementunder specified circumstances, iVillage may be required to pay NBC Universal atermination fee of $23.5 million.

iVillage utilizedthe services of J.P. Morgan Securities Inc., or JPMorgan, as its financialadvisor. In consideration of their services, JPMorgan is owed approximately$7.1 million upon completion of the merger, of which $1.0 million was paid in March 2006upon issuance of the fairness opinion.

For the threemonths ended March 31, 2006, direct merger costs  were approximately $1.9 million. These costsare included in General and administrative expenses in the CondensedConsolidated Statement of Operations for the three months ended March 31,2006.

Pursuant to avoting agreement that Hearst entered into with NBC Universal at the time thatiVillage entered into the Merger Agreement with NBC Universal, Hearst agreed towaive its rights to terminate the Web Site Services Agreement, dated as of July 1,2004, by and between iVillage and Hearst, or the 2004 Web Site ServicesAgreement, as a result of completion of the merger. Hearst and NBC Universalalso agreed that this agreement would automatically terminate six monthsfollowing completion of the merger.

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**Item 2. Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

Statements in thisQuarterly Report on Form10-Q, including statements contained in “Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations”, constitute “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933, as amended, or Securities Act, and Section 21Eof the Securities Exchange Act of 1934, as amended, or Exchange Act. The wordsor phrases “can be”, “expects”, “may affect”, “may depend”, “anticipates”, “believes”,“estimates”, “plans”, “projects”, and similar words and phrases are intended toidentify such forward-looking statements. These forward-looking statements aresubject to various known and unknown risks and uncertainties and we caution youthat any forward-looking information provided by or on behalf of us is not aguarantee of future results, performance or achievements. Actual results coulddiffer materially from those anticipated in these forward-looking statementsdue to a number of factors, some of which are beyond our control. In additionto the risks discussed below in “Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations” and in our other publicfilings, press releases and statements by our management, factors that maycause our actual results, performance or achievements to differ materially fromany future results, performance or achievements expressed or implied in suchforward looking statements include:

·                  thevolatile and competitive nature of the media industry, in particular theInternet;

·                  changesin domestic and foreign economic, political and market conditions;

·                  theeffect of federal, state and foreign regulation on our business;

·                  theimpact of recent and future acquisitions and joint ventures on our business andfinancial condition;

·                  ourability to establish and maintain relationships with advertisers, sponsors, andother third-party providers and partners; and

·                  theimpact of pending litigation on our business and financial condition.

        Allforward-looking statements in this report are current only as of the date onwhich the statements were made. We do not undertake any obligation to publiclyupdate any forward-looking statement to reflect events or circumstances afterthe date on which any statement is made or to reflect the occurrence ofunanticipated events.

        Whenused in this Quarterly Report on Form 10-Q and unless otherwisespecified, “iVillage,” “we,” “our” and “us” refer to iVillage Inc. and itsconsolidated subsidiaries.

**Overview**

The following management’sdiscussion and analysis is intended to provide information necessary tounderstand our consolidated financial statements and highlight certain otherinformation which, in the opinion of our management, will enhance a reader’sunderstanding of our financial condition, changes in financial condition andresults of operations. It is organized as follows:

·                  The section entitled “iVillage Background,”briefly describes the organization of our business by subsidiary or division.

·                  “Critical Accounting Policies” discusses eachof our most critical accounting policies, including revenue recognition, fixedassets and intangibles, Web site development costs, goodwill, income taxes,allowance for doubtful accounts, stock-based compensation and managementestimates and assumptions.

·                  “Results of Operations” discusses the primaryfactors that are likely to contribute to significant variability of our resultsof operations from period to period and then provides detailed narrativeregarding significant changes in our results of operations for the three monthsended March 31, 2006 compared to those for the three months ended March 31,2005.

·                  “Liquidity and Capital Resources” discussesour liquidity and cash flows for the three months ended March 31, 2006compared to those for the three months ended March 31, 2005, factors thatmay influence our future cash requirements and the status of certaincontractual obligations as of March 31, 2006.

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·                  “Recent Accounting Pronouncements” discussesthe significance of various recent accounting pronouncements to our financialreporting.

**Merger with NBC Universal**

On March 3,2006, we entered into a Merger Agreement with NBC Universal******and a wholly ownedsubsidiary of NBC Universal. The Merger Agreement was approved by our board ofdirectors. Subject to various customary conditions, including the obtaining ofstockholder approval and expiration or termination of the waiting period requiredby applicable antitrust laws, we have agreed to merge with the NBC Universalsubsidiary. After the merger, we will be a subsidiary of NBC Universal. Inconsideration, upon the effectiveness of the merger, each of our stockholders,other than those who elect to exercise dissenters’ rights, will receive in cashand without interest $8.50 for each share of our common stock they hold at thattime. We currently expect the merger to be completed during our second quarterof 2006. Upon the closing of the merger with NBC Universal, the remainingunrecognized deferred compensation for our stock option awards of approximately$6.0 million will be immediately expensed in our consolidated statement ofoperations. See Note 10— Merger with NBC Universal, in our Notes to CondensedConsolidated Financial Statements, for a more complete description of themerger, the Merger Agreement and related agreements.

**iVillage Background**

iVillage is “the Internet forwomen” and consists of several online and offline media-based properties,including iVillage.com, Healthology, HealthCentersOnline, iVillage Limited,iVillage Consulting, GardenWeb.com, gURL.com, Promotions.com, Inc.,Astrology.com, IVPN, and PAG. Following is a synopsis of certain of ouroperational activities, subsidiaries and divisions:

 
| **Subsidiary or  Division** | ** ** | **Operational  Activity**                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| iVillage.com                |       | An online destination  providing practical solutions on a range of topics and everyday support for  women 18 years of age and over.                                                                                                                                                                                                                                                                                                                                 |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Healthology                 |       | Distributes  physician-generated videos and articles providing health and medical  information via the Healthology.com Web site, or Heathology.com, and a  syndication network, and provides Web site creation and development services  to healthcare related organizations.                                                                                                                                                                                       |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| HealthCentersOnline         |       | Acquired on  April 8, 2005, HealthCentersOnline provides healthcare information on  the Internet for patients and their families and helps patients understand  the complex nature of various conditions, diagnostic tests, treatment options  and preventive care. HealthCentersOnline creates health content through a  unique blend of original physician-edited articles, useful health tools and  high impact instructional animations and illustrations. |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| iVillage Limited            |       | On April 29, 2005,  iVillage, through its subsidiary iVillage Limited, acquired from iVillage UK  Limited, a subsidiary of Tesco Stores Limited, certain assets relating to the  iVillage.co.uk Web site, an online destination providing practical solutions  on a range of topics and everyday support for women 18 years of age and over.                                                                                                                   |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| iVillage  Consulting        |       | Assists companies in  the creation and development of Web sites, digital commerce platforms and  other aspects of technological infrastructures, primarily for Hearst  Communications, Inc., and its affiliates, or Hearst, a related party.                                                                                                                                                                                                                   |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| GardenWeb.com               |       | An online destination  offering an online community and reference tools focused on horticulture.                                                                                                                                                                                                                                                                                                                                                                    |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| gURL.com                    |       | An online destination  catering to teenage girls that offers advice, games and interactive content  to girls 13 years of age and older.                                                                                                                                                                                                                                                                                                                             |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

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| Promotions.com, Inc. |   | Comprised of two  divisions: Promotions.com and Webstakes.com, which offer online and offline  promotions and direct marketing programs that are integrated with customers’  marketing initiatives.                                                                                                                                                                                       |
|---------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| Astrology.com             |   | An online destination  for individuals seeking daily horoscopes, astrological content and  personalized forecasts online.                                                                                                                                                                                                                                                                      |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| IVPN                      |   | A holding company for  iVillage Integrated Properties, Inc., or IVIP, the operator of the Newborn  Channel and Lamaze Publishing Company, or Lamaze Publishing, publisher of  Lamaze Parents, which collectively provide informational and instructional  magazines, custom publications, television programming, videos and online  properties of interest to expectant and new parents. |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                           |
| PAG                       |   | Comprised of three divisions: Business Women’s  Network, Diversity Best Practices and Best Practices in Corporate  Communications, each offering an extensive database of pertinent information  and events to subscribing companies and members, and relevant publications.                                                                                                              |

 

The discussion and analysis belowindicates the results of operations of Healthology since January 7, 2005,HealthCentersOnline since April 8, 2005, and certain assets relating tothe iVillage.co.uk Web site since April 29, 2005.

**CriticalAccounting Policies**

**RevenueRecognition**

*iVillage.com*

The discussion and analysis belowrelated to iVillage.com also include information related to our Healthology,HealthCentersOnline, iVillage Limited, Promotions.com, Inc., CooperativeBeauty Ventures LLC, or Substance.com, Women.com and GardenWeb.com subsidiariesand gURL.com, iVillage Consulting and iVillageSolutions divisions.

Revenues from iVillage.com,HealthCentersOnline, iVillage Limited, Substance.com, Women.com and gURL.comare derived primarily from the sale of sponsorship and advertising contracts.Sponsorship revenues are derived principally from contracts designed to supporta customer’s broad marketing objectives, including brand promotion, awareness,product introductions and online research. Sponsorship agreements typicallyinclude the delivery of impressions on our Web sites and occasionally thedesign and development of customized sites that enhance the promotionalobjectives of the sponsor. An impression is the viewing of promotional materialon a Web page, which may include rich media and display or banneradvertisements, links, or other text or images. As part of a few sponsorshipagreements, sponsors selling products may provide us with a commission on salesof their products generated through our Web sites. To date, amounts receivedfrom the sale of sponsor’s products have not been significant.

Advertising revenues are derivedprincipally from short-term advertising contracts in which we typically guaranteea minimum number of impressions or pages to be delivered to users over aspecified period of time for a fixed fee or based on actual impressionsdelivered. Sponsorship and advertising revenues for fixed fee contracts thatare both time and impression based are recognized ratably in the period inwhich the advertisement is displayed, provided that we have no continuingobligations and the collection of the receivable is reasonably assured, at thelesser of the ratio of impressions delivered over total guaranteed impressionsor the straight-line basis over the period of service. To the extent thatminimum guaranteed impressions are not met, we defer recognition of thecorresponding revenues until the guaranteed impressions are achieved.Sponsorship and advertising revenues in which the customer specifies the timingof the delivery of impressions and payment is due upon delivery of impressionsare recognized when the impressions are delivered and the collection of thereceivable is reasonably assured. In certain instances the customer reportsimpression delivery to us. These impression reports are compared to ourinternal data for accuracy.

We also derive sponsorship andadvertising revenues from sponsored links appearing on an iVillage Web page thatis based upon relevant content or a World Wide Web search query result. Theserevenues are earned on a cost per thousand impressions and/or a percentage ofthe advertiser’s net revenue and are recognized upon notification from thesearch engine provider.

Revenues from Healthology are also included insponsorship and advertising revenues. Healthology’s revenues are

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derived primarily fromcontracts in which Healthology creates, provides and distributes health relatedcontent and streaming media, as well as sponsorship and advertising contracts.We recognize revenue from Healthology’s contracts in which we create, provideand distribute health related content and streaming media straight-line overthe expected period we will provide services or upon completed contract whenthe content created is not owned or hosted by Healthology and when thecollection of the receivable is reasonably assured. Changes to the expectedservices period could significantly impact the revenue recognized in a givenquarter. Revenue associated with sponsorship and advertising contracts isrecognized in the same manner as described above.

For contracts with multipleelements with standalone value, namely those that include delivered andundelivered products, we allocate revenue to each element based on evidence ofits fair value under the Financial Accounting Standards Board, or FASB,Emerging Issues Task Force, or EITF, Issue No. 00-21, “Accountingfor Revenue Arrangements with Multiple Deliverables”, or EITF 00-21.Evidence of fair value is the price of a deliverable when it is regularly soldon a stand-alone basis. We recognize revenue allocated to each elementwhen the criteria for revenue set forth above are met.

Barter revenues generallyrepresent exchanges by us of advertising space on our Web sites for reciprocaladvertising space on, or traffic from, other Web sites. Revenues and expensesfrom these barter transactions are recorded based upon the fair value of theadvertisements delivered in accordance with EITF No. 99-17, “Accountingfor Advertising Barter Transactions”. Fair value of advertisements delivered isbased upon our recent practice of receiving cash for similar advertisements.Barter revenues are recognized when the advertisements are displayed oniVillage.com and its affiliated properties. Barter expenses are generallyrecognized when our advertisements are displayed on the reciprocal Web sites orproperties, generally in the same period as when advertisements are displayedon iVillage.com and its affiliated properties. Barter expenses are included aspart of sales and marketing expenses.

We recognize revenues fromiVillage Consulting’s services based upon a number of factors, including actualhours worked at negotiated hourly rates, completed contract or straight-lineover the life of the contract.

We have received revenues frominitiatives involving subscription-based properties, the sale of iVillage-brandedproducts and services, the sale of third-party products, the licensing ofportions of our content and services, and the sale of research. Revenues fromGardenWeb.com are included as part of subscription-based properties. Werecognize revenues from these initiatives when products are shipped and/orprovided to the customer, or straight-line over the life of the agreement andwhen the collection of the receivable is reasonably assured and no furtherobligation remains.

Promotions.com, Inc. generates revenues throughPromotions.com, an online and offline full service promotions services groupand Webstakes.com, a division dedicated to Internet sweepstakes and promotions.

Promotions.com revenues arederived principally from contracts in which Promotions.com typically providescustom services for the creation, administration and implementation of apromotion on a customer’s Web site. Promotions.com’s revenue recognition policyrelated to its services is to recognize revenues as deliverables are met and/orratably over the period of the promotion, provided that no significantobligations remain and collection of the resulting receivable is reasonablyassured.

Webstakes.com revenues arederived primarily from service contracts whereby Webstakes.com recognizesrevenues based on either a “cost-per-click” or a “cost-per-action” pricingmodel. Webstakes.com recognizes revenue related to its cost-per-click pricingmodel when a user has been delivered to the customer’s Web site, the customerhas reported such activity to us, and the collection of the correspondingreceivable is reasonably assured. Revenue is recognized differently in a cost-per-actionpricing model, which requires Webstakes.com to not only deliver theaforementioned user to a customer’s Web site, but also a specific user actionsuch as purchasing a product or registering for more information as a member ofthe customer’s Web site in order for Webstakes.com to earn revenue.Webstakes.com recognizes revenue related to the cost-per-action pricing modelwhen the specific action has been performed on its customer’s Web site, thecustomer has reported such activity to us, and the collection of thecorresponding receivable is reasonably assured.

*Astrology.com*

Revenues from Astrology.comconsist of the sale of astrological charts and other related products to usersof our astrology-related Web sites. We recognize revenues from astrologicalproduct sales, net of any discounts, when products are delivered to customers,the collection of the receivable is reasonably assured and no furtherobligations remain. In addition, Astrology.com earns revenues through thelicensing of its content and revenue share agreements. We recognize revenuesfrom these products when the collection of the receivable is reasonably assuredor as cash is received, and no further obligations remain.

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*IVPN*

IVPN’s revenues have been derivedprimarily from advertising placements in IVPN’s publications and broadcasts ofthe Newborn Channel and the Newborn Channel-Spanish (currently offered asan audio overlay to the Newborn Channel). In addition, sponsorship andadvertising revenues are generated through a sampling and coupon program, whichoffers advertisers the ability to distribute samples, coupons and promotionalliterature to new and expectant parents. Sponsorship and advertising revenuesare recognized on a straight-line basis over the period of service, provided thatIVPN has no continuing obligations and the collection of the receivable isreasonably assured.

IVPN also creates and distributescustom publications and mailings. Revenues from the sale of custom publicationsand mailings are recognized when IVPN completes its creative responsibilitiesand receives the appropriate approvals from the customer and/or through thedistribution of the custom publications, provided that evidence of fair valueis obtained at a minimum on the undelivered deliverable, and the otherrequirements of EITF 00-21 are fulfilled, provided the collection of thereceivable is reasonably assured.

IVPN charges an annual fee paidby hospitals for their receipt of broadcasts of the Newborn Channel. Contractsrelated to this fee typically range from three to five years in length. IVPNrecognizes revenues from these fees ratably over the term of the agreementprovided the collection of the receivable is reasonably assured.

*PAG*

Revenues from PAG are generatedprimarily through subscription-based programs conveying current bestpractices for both diversity issues in the workplace and corporatecommunications, the hosting of events, including an annual two-day summit andgala focusing on diversity and women, and consulting agreements. PAG recognizesrevenue from subscriptions ratably over the term of the subscription agreement,from events when the events are held, and from consulting agreements ratablyover the term of the agreement or upon completion of a deliverable, providedthe collection of the receivable is reasonably assured.

**Capitalized Production Costs**

iVillage capitalizes certaincosts related to the creation and production of content associated with revenuecontracts for Healthology. iVillage expenses these costs generally over theexpected period of benefit.

**Fixed Assets andIntangibles**

Depreciation of equipment,furniture and fixtures and computer software is provided for by thestraight-line method over their estimated useful lives ranging from one to fiveyears. Amortization of leasehold improvements is provided for over the lesserof the term of the related lease or the estimated useful life of theimprovement. The cost of additions, and expenditures which extend the usefullives of existing assets, are capitalized, and repairs and maintenance costsare charged to operations as incurred. Amortization of intangible assets areover the expected life of the related asset and range from one to ten years. Wehave adopted SFAS 144, regarding the recognition and measurement of theimpairment of long-lived assets to be held and used.

**Impairment Assessment**

We assess the recoverability ofour fixed assets and intangible assets by determining whether the unamortizedbalance over the assets remaining life can be recovered through undiscountedforecasted cash flows. If undiscounted forecasted cash flows indicate that theunamortized amounts will not be recovered, an adjustment will be made to reducethe net amounts to an amount consistent with forecasted future cash flowsdiscounted at a rate commensurate with the risk associated when estimatingfuture discounted cash flows. Future cash flows are based on trends ofhistorical performance and our estimate of future performance, givingconsideration to existing and anticipated competitive and economic conditions.

**Web SiteDevelopment Costs**

We account for Web sitedevelopment costs in accordance with the provisions of EITF 00-2, whichrequires that certain costs to develop Web sites be capitalized or expensed,depending on the nature of the costs. Amortization of Web site developmentcosts is provided for by the straight-line method over the estimated usefullife of two years.

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**Goodwill**

SFAS 141 requires all businesscombinations to be accounted for using the purchase method of accounting andthat certain intangible assets acquired in a business combination shall berecognized as assets apart from goodwill. Goodwill is not subject toamortization and is tested for impairment annually, or more frequently ifevents or changes in circumstances indicate that the asset may be impaired inaccordance with SFAS 142. The impairment test consists of a comparison ofthe fair value of the reporting unit with its carrying amount. If the carryingamount of the reporting unit exceeds its fair value then an analysis will beperformed to compare the implied fair value of goodwill with the carryingamount of goodwill. An impairment loss will be recognized in an amount equal tothe difference. Fair value is typically based upon future cash flows discountedat a rate commensurate with the risk involved or market based comparables.After an impairment loss is recognized, the adjusted carrying amount ofgoodwill is its new accounting basis.

**Income Taxes**

We recognize deferred taxes bythe asset and liability method of accounting for income taxes in accordancewith the provisions of SFAS 109. Deferred income taxes are recognized fordifferences between the financial statement and tax bases of assets andliabilities at enacted statutory tax rates in effect for the years in which thedifferences are expected to reverse. The effect on deferred taxes of a changein tax rates is recognized in income in the period that includes the enactmentdate. In assessing the realizability of deferred tax assets, we considerwhether it is more likely than not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income or reversal of deferredtax liabilities during the periods in which those temporary differences becomedeductible. We consider the scheduled reversal of deferred tax liabilities,projected future taxable income, and tax planning strategies in making thisassessment.

The difference between iVillage’sU.S. federal statutory rate of 34%, as well as its state and local rate, net offederal benefit of 7%, when compared to its actual effective tax rate ofapproximately 0%, is principally attributed to the valuation allowance providedfor our deferred tax assets generated during the period and an estimated taxloss for calendar year 2006. iVillage has a full valuation allowance on its netdeferred tax assets. If iVillage generates pre-tax income in future periods, wewill assess the need for a reversal of the valuation allowance. Any suchreversal may be material in the period in which the reversal is recorded. Thedecision to reverse the valuation allowance will, among other things, considerthe profitability of iVillage in recent periods, as well as consideration ofiVillage’s future profitability and available tax planning strategies.

**Allowance forDoubtful Accounts**

We assess the required amount ofallowance for doubtful accounts based on past experience, the review of theagings and analysis of specific customer accounts.

**Stock Based Compensation**

Effective January 1,2006, iVillage adopted the fair value recognition provisions ofSFAS 123(R), using the modified prospective transition method andtherefore has not restated results for prior periods. Upon the adoption of SFAS123(R), iVillage did not have a cumulative effect of accounting change. Underthis transition method, stock-based compensation expense for the first quarterof fiscal 2006 includes compensation expense for all stock-based compensationawards granted prior to, but not yet vested as of January 1, 2006, but dovest in the first quarter of 2006 based on the grant date fair value estimatedin accordance with the original provision of SFAS 123. Stock-basedcompensation expense for all stock-based compensation awards granted after January 1,2006 is based on the grant-date fair value estimated in accordance with theprovisions of SFAS 123(R). iVillage recognizes these compensation costs ona straight-line basis over the requisite service period of the award, which isgenerally the option vesting term of four years. iVillage uses theBlack-Scholes Option Pricing Model which requires extensive use of accountingjudgment and financial estimates, including estimates of the expected termemployees will retain their vested stock options before exercising them, theestimated volatility of our stock price over the expected term and the numberof options that will be forfeited prior to the completion of their vestingrequirements. Application of alternative assumptions could produce significantlydifferent estimates of the fair value of stock-based compensation andconsequently, the related amounts recognized in the Condensed ConsolidatedStatements of Operations. Prior to the adoption of SFAS 123(R), iVillagerecognized stock-based compensation expense in accordance with APB 25. In March 2005,the SEC issued SAB 107 regarding the SEC’s interpretation of SFAS 123(R) andthe valuation of share-based payments for public companies. iVillage hasapplied the provisions of SAB 107 in its adoption of SFAS 123(R). SeeNote 2 to the Condensed Consolidated Financial Statements for a furtherdiscussion on stock-based compensation.

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Thetotal compensation cost related to nonvested awards not yet recognized is$6.0 million and the weighted average period over which it is expected tobe recognized is 2.6 years.

**ManagementEstimates and Assumptions**

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamount of assets and liabilities, disclosure of contingent assets andliabilities at the date of the financial statements, and the reported amountsof revenues and expenses during the reporting period. Actual results coulddiffer from these estimates. Significant estimates and assumptions made byiVillage include those related to the useful lives of fixed assets andintangible assets, the recoverability of fixed assets, goodwill, intangibleassets and deferred tax assets, the allocation of purchase price to thenet assets acquired in acquisitions and deferred tax assets, the allowance fordoubtful accounts, the expected period we will provide services for Healthologyrevenue contracts, which is tied to webcast release dates, forfeiture ratesused to assess the likelihood of stock option awards that will ultimately vest,volatility and expected term related to stock option awards, and the assessmentof expected probable losses (if any) of claims and potential claims.

**Results ofOperations**

In accordance with SFAS 131,segment information is being reported consistent with our method of internalreporting. Operating segments, as defined by SFAS 131, are components ofan enterprise for which separate financial information is available that isevaluated regularly by the chief operating decision maker in deciding how toallocate resources and in assessing performance. We are organized primarily bysubsidiaries and divisions. Our subsidiaries and divisions have no operatingmanagers that report to the chief operating decision maker. The chief operatingdecision maker reviews information at a consolidated results of operationslevel, although the chief operating decision maker does review revenue resultsof subsidiaries and divisions. As a result, our discussion of revenue has beenorganized into separate subsidiaries and divisions, however, operating expensesand results of operations are discussed on a combined basis.

We believe the following factorsmay contribute to the variability of our results of operations from period toperiod:

·                  the timing of our recognition of revenue;

·                  the volatility of the online advertisingmarket;

·                  the timing of our sponsored events andsymposiums;

·                  the loss of a contract from a major customer;

·                  an interruption or malfunction in servicefrom our primary third party service providers;

·                  the date of commencement of a sponsorship andadvertising campaign; and

·                  the date of completion, and receipt ofcustomer approval for the creative and/or distribution services of a custompublication, which is based upon a customer’s advertising and marketinginitiatives.

**Revenues**

The following table sets forthrevenues by property (dollars in thousands):

|                 | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------|------------|------------------------------------------------------|------------|
| ** **      | ** ** | **2006**                                             | ** ** | **(1)** | ** ** | **2005** | ** ** | **(1)** | ** ** |
| iVillage.com(2) |       | $                                                    | 16,453     |   | 76 | % | $ | 12,056 |   | 70 | % |
| Astrology.com   |       | 1,346                                                |       | 6 | % | 1,151 |   | 7 | % |
| IVPN            |       | 3,014                                                |       | 14 | % | 3,404 |   | 20 | % |
| PAG             |       | 737                                                  |       | 3 | % | 663 |   | 4 | % |
| Total revenues  |       | $                                                    | 21,550     |   | 100 | %(3) | $ | 17,274 |   | 100 | %(3) |

----

(1)           Percentof total revenues.

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(2)                                  Included in iVillage.com revenues areiVillage.com, Healthology, HealthCentersOnline, iVillage Limited,Promotions.com, Inc., Substance.com, Women.com and GardenWeb.comproperties and gURL.com, iVillage Consulting and iVillageSolutions divisions.

(3)           Theaggregate of this column does not equal 100% due to rounding.

**iVillage.com**

|                              | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------|------------|------------------------------------------------------|------------|
| ** **                   | ** ** | **2006**                                             | ** ** | **(1)** | ** ** | **2005** | ** ** | **(1)** | ** ** |
| Sponsorship and  advertising |       | $                                                    | 12,939     |   | 79 | % | $ | 7,364 |   | 61 | % |
| Barter                       |       | 1,038                                                |       | 6 | % | 1,670 |   | 14 | % |
| iVillage  Consulting         |       | 1,205                                                |       | 7 | % | 1,327 |   | 11 | % |
| Promotions.com               |       | 755                                                  |       | 5 | % | 1,370 |   | 11 | % |
| Online  services/other       |       | 516                                                  |       | 3 | % | 325 |   | 3 | % |
|                         |       | $                                                    | 16,453     |   | 100 | % | $ | 12,056 |   | 100 | % |

----

(1)             Percentof iVillage.com’s revenues.

Revenues fromiVillage.com accounted for approximately 76% of total revenues for the threemonths ended March 31, 2006, and approximately 70% of total revenues forthe three months ended March 31, 2005. Revenues from iVillage.comincreased approximately $4.4 million, or 36%, for the three months ended March 31,2006, as compared to the corresponding period in 2005.

The increase inrevenues for the three months ended March 31, 2006, as compared to thecorresponding period in 2005, was primarily due to an increase in sponsorshipand advertising revenues, which includes revenues from sponsored links and ourrecent acquisitions, of approximately $5.6 million, offset by a decreasein  barter revenue of approximately $0.6million and Promotions.com, Inc. revenue of approximately $0.6 million. Theincrease in sponsorship and advertising revenues of approximately 76% wasprimarily due to an increase in revenue from Healthology of $2.0 million,identifiable revenues from the acquisition of HealthCentersOnline whichcontributed approximately $1.3 million and iVillage Limited which contributedapproximately $0.9 million, as well as an increased number of advertisers,coupled with higher pricing of contracts in 2006, related to iVillage’swebsites of approximately $1.4 million. Healthology’s revenues increased due toa higher customer base for which Healthology creates, provides and distributeshealth related content and streaming media along with revenues from sponsorshipand advertising contracts which were not sold in the three months ended March 31,2005.

Barter revenuedecreased $0.6 million for the three months ended March 31, 2006, ascompared to the corresponding period in 2005, as barter was used to provideadditional traffic directed to the site relaunch, which occurred in January 2005.

Revenues fromPromotions.com, Inc. decreased $0.6 million, or 45% for the three monthsended March 31, 2006, as compared to the corresponding period in 2005primarily due to a lower number of promotional campaigns created and managed bythe Promotions.com division in 2006, as compared to the corresponding period in2005.

**Astrology.com**

|                 | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------|------------|------------------------------------------------------|------------|
| ** **      | ** ** | **2006**                                             | ** ** | **(1)** | ** ** | **2005** | ** ** | **(1)** | ** ** |
| Online services |       | $                                                    | 809        |   | 60 | % | $ | 867 |   | 75 | % |
| Other           |       | 537                                                  |       | 40 | % | 284 |   | 25 | % |
|            |       | $                                                    | 1,346      |   | 100 | % | $ | 1,151 |   | 100 | % |

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(1)             Percentof Astrology.com’s revenues.

Revenues from Astrology.com accounted forapproximately 6% of total revenues for the three months ended March 31,2006, and approximately 7% of total revenues for the three months ended March 31,2005. Revenues from Astrology.com increased approximately $0.2 million, or 17%,for the three months ended March 31, 2006, as compared to thecorresponding period in 2005, primarily due to an increase in revenue share payments received from third parties inconnection with our distribution agreements. These revenues are included inother.

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** **

**IVPN**

|                              | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------|------------|------------------------------------------------------|------------|
| ** **                   | ** ** | **2006**                                             | ** ** | **(1)** | ** ** | **2005** | ** ** | **(1)** | ** ** |
| Sponsorship and  advertising |       | $                                                    | 2,573      |   | 85 | % | $ | 2,400 |   | 71 | % |
| Custom  publications         |       | —                                               |       | 0 | % | 596 |   | 18 | % |
| Licensing fees               |       | 441                                                  |       | 15 | % | 408 |   | 12 | % |
|                         |       | $                                                    | 3,014      |   | 100 | % | $ | 3,404 |   | 100 | %(2) |

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(1)                                  Percent of IVPN’s revenues.

(2)                                  The aggregate of this column does not equal 100%due to rounding.

Revenues from IVPNaccounted for approximately 14% of total revenues for the three months ended March 31,2006, and approximately 20% of total revenues for the three months ended March 31,2005. Revenues from IVPN decreased approximately $0.4 million, or 11%, for thethree months ended March 31, 2006, as compared to the corresponding periodin 2005.

The decrease inrevenues for the three months ended March 31, 2006, as compared to thecorresponding period in 2005, was primarily due to no custom publicationsrevenue for the three months ended March 31, 2006 compared toapproximately $0.6 million in the corresponding period in 2005, offset by anincrease in sponsorship and advertising revenues of approximately $0.2 million.Sponsorship and advertising revenues increased approximately $0.2 millionprimarily due to the commencement of custom programs which generated revenuesof approximately $0.3 million. This amount was offset by a decrease insponsorship and advertising revenues of approximately $0.1 million due to thediscontinuance of a video offering in 2005.

As of March 31,2006, 756 hospitals had agreed to pay a fee for The Newborn Channel and 751contracts had commenced. This compares to 658 hospitals that agreed to pay afee for The Newborn Channel and 643 contracts that commenced as of March 31,2005.

Revenues from IVPNmay vary based upon the timing and volume of customers’ advertising andmarketing initiatives.

**PAG**

|                              | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------|------------|------------------------------------------------------|------------|
| ** **                   | ** ** | **2006**                                             | ** ** | **(1)** | ** ** | **2005** | ** ** | **(1)** | ** ** |
| Subscription-based  programs |       | $                                                    | 360        |   | 49 | % | $ | 476 |   | 72 | % |
| Events and  publications     |       | 248                                                  |       | 34 | % | 111 |   | 16 | % |
| Consulting/other             |       | 116                                                  |       | 16 | % | 65 |   | 10 | % |
| Barter                       |       | 13                                                   |       | 2 | % | 11 |   | 2 | % |
|                         |       | $                                                    | 737        |   | 100 | %(2) | $ | 663 |   | 100 | % |

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(1)           Percent of PAG’srevenues.

(2)           Theaggregate of this column does not equal 100% due to rounding.

Revenues from PAGaccounted for approximately 3% of total revenues for the three months ended March 31,2006, and approximately 4% of total revenues for the three months ended March 31,2005. Revenues from PAG increased approximately $0.1 million, or 11%, for thethree months ended March 31, 2006, as compared to the corresponding periodin 2005, primarily due to an increase in events and publications revenues ofapproximately $0.1 million and an increase in consulting other revenue ofapproximately $0.1 million, offset by a decrease in subscription-based programsof approximately $0.1 million.

The increase inevents and publications revenues was due to an event held in March 2006with no like event in 2005. The decrease in subscription-based programs ofapproximately $0.1 million was due to a lower membershop base for the threemonths ended March 31, 2006 and compared to the corresponding period in2005.

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**Revenues, Receivables and CustomerConcentration**

Our five largest customers accounted for approximately 19% of totalrevenues for the three months ended March 31, 2006, and approximately 23%of total revenues for the threemonths ended March 31, 2005. In each of the three months ended March 31,2006 and 2005, no one advertiser accounted for more than 10% of total revenues.At March 31, 2006 and  December 31,2005, no single customer accounted for more than 10% of our total net accountsreceivable.

The significanceof revenues from any of our customers can vary on a quarter to quarter basis asa result of the number and timing of such customers’ advertising and marketinginitiatives. We anticipate that our results of operations in any given periodwill continue to depend to a significant extent on revenues from a small numberof customers. The loss of even a smallnumber of our largest customers at any one time may adversely affect ourbusiness, financial condition and results of operations, unless we are able toenter into contracts to replace lost revenue.

**Operating Expenses**

The following table sets forthour operating expenses by type (dollars in thousands):

|                                                | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                     | ** ** | **2006**                                             | ** ** | **(1)** | ** ** | **2005** | ** ** | **(1)** | ** ** |
| Editorial, product  development and technology |       | $                                                    | 8,596      |   | 40 | % | $ | 8,239 |   | 48 | % |
| Sales and marketing                            |       | 7,838                                                |       | 36 | % | 5,936 |   | 34 | % |
| General and  administrative                    |       | 6,284                                                |       | 29 | % | 2,989 |   | 17 | % |
| Depreciation and  amortization                 |       | 2,371                                                |       | 11 | % | 1,804 |   | 10 | % |
| Total operating expenses                       |       | $                                                    | 25,089     |   | 116 | % | $ | 18,968 |   | 110 | %(2) |

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(1)           Percent of totalrevenues.

(2)           Theaggregate of this column does not equal total operating expenses due torounding.

Total operatingexpenses for the three months ended March 31, 2006, as compared to thecorresponding period in 2005, increased approximately $6.1 million, or32%,  ofwhich approximately $2.4 million of direct costs were associated with theacquisitions of HealthCentersOnline on April 8, 2005, and theassets of iVillage UK Limited on April 29, 2005, or collectively, theAcquisitions, approximately $1.9 million were direct expenses associated withour pending merger with NBC Universal, and approximately $0.8 million were dueto a stock-based compensation charge associated with the new requirements ofSFAS 123(R).

**Editorial,Product Development and Technology**

Editorial, productdevelopment and technology expenses consist primarily of the following:

·                  payroll,severance, stock-based compensation and related expenses for the editorial,technology, Web site design and production staffs;

·                  the cost ofcommunications;

·                  relatedexpenditures necessary to support iVillage’s Web sites, software and contentdevelopment, technology and support operations;

·                  consultant costsassociated with the custom services provided by Promotions.com;

·                  costs associatedwith IVPN’s magazines, custom publications, onsert program, which bundlessamples and promotional literature in a poly-bag with a magazine, and thebroadcasting of its programs; and

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·                  an allocation of facility expenses, which isbased on the number of personnel in editorial, product development andtechnology roles.

Editorial, productdevelopment and technology expenses for the three months ended March 31,2006 were approximately $8.6 million, or 40% of total revenues. Editorial, productdevelopment and technology expenses for the three months ended March 31,2005 were approximately $8.2 million, or 48% of total revenues.

Editorial, productdevelopment and technology expenses increased approximately $0.4 million, or4%, for the three months ended March 31, 2006, as compared to thecorresponding period in 2005, primarily due to an increase in payroll,severance, stock-based compensation and related benefits of $0.1 million,consultant expenses of approximately $0.2 million,  licensing/ad serving fees of approximately$0.1 million, expenses for IVPN’s non-custom publication products ofapproximately $0.1 million, as well as other editorial, product development andtechnology expenses incurred in the normal course of business of approximately$0.1 million by the Acquisitions. The increase was partially offset by nocustom publications expense for the three months ended March 31, 2006compared to approximately $0.3 million in the corresponding period in 2005.Payroll, severance, stock-based compensation and related benefits increasedapproximately $0.4 million from the Acquisitions and $0.1 million fromstock-based compensation associated with SFAS 123(R), which was offset by adecrease of approximately $0.4 million from non-Acquisition entities dueprimarily to the outsourcing of the information technology services functionsto Corsis in September 2005. Consultant expenses increased approximately$0.7 million due primarily to the outsourcing of the information technologyservices functions to Corsis, approximately $0.3 million due to increasedrevenue from Healthology and $0.1 million from the Acquisitions, offset by adecrease of approximately $0.9 million in fees associated with ourPromotions.com division due to a renegotiation of our contract with Corsis andlower revenue.

Editorial, productdevelopment and technology expenses decreased as a percentage of total revenuesfor the three months ended March 31, 2006, as compared to thecorresponding period in 2005, due to a higher growth in revenues as compared toeditorial, product development and technology expenses.

**Sales and Marketing**

Sales and marketing expensesconsist primarily of the following:

·                  payroll, commissions, severance, stock-basedcompensation and related expenses for sales and marketing personnel;

·                  advertising and marketing-relatedexpenses; and

·                  an allocation of facility expenses, which isbased on the number of personnel in sales and marketing roles.

Sales andmarketing expenses for the three months ended March 31, 2006 wereapproximately $7.8 million, or 36% of total revenues. Sales and marketingexpenses for the three months ended March 31, 2005 were approximately $5.9million, or 34% of total revenues.

Sales andmarketing expenses increased approximately $1.9 million, or 32%, for the threemonths ended March 31, 2006, as compared to the corresponding period in2005, primarily due to an increase in payroll,commissions, severance, stock-based compensation and related expenses ofapproximately $0.9 million, advertising and marketing expenses ofapproximately $0.3 million, royalty payments of approximately $0.2 millionrelated to Healthology’s sponsorship and advertising revenue, as well as other sales and marketing expensesincurred in the normal course of business of approximately $0.2 million as aresult of the Acquisitions. Payroll,commissions, severance, stock-based compensation and related expenses increasedapproximately $0.9 million of which $0.3 million was related to theAcquisitions, $0.3 million was due to higher revenues and headcount atHealthology and $0.1 million was from stock-based compensationassociated with SFAS 123(R). Advertising and marketing expenses increasedapproximately $0.3 million primarily from higher keyword search buys by theAcquisitions, as well as iVillage.com, of approximately $0.9 million, offset bya decrease in barter expense of approximately $0.5 million. A higher dollaramount of barter was utilized in the first quarter 2005 to provide sometraction for the iVillage Web site relaunch which occurred in January 2005.

Sales andmarketing expenses increased as a percentage of total revenues for the threemonths ended March 31,

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2006, when compared tothe corresponding period in 2005, due to a larger percent growth in sales andmarketing expenses as compared to total revenues.

Included in salesand marketing expenses are barter transactions, which amounted to approximately14% of total sales and marketing costs during the three months ended March 31,2006, compared to approximately 27% of such costs for the corresponding periodin 2005.

**General and Administrative**

General and administrativeexpenses consist primarily of the following:

·                  Payroll, severance, stock-based compensationand related expenses for executive management, finance, human resources andin-house legal counsel;

·                  directors’ and officers’ insurance;

·                  general corporate overhead;

·                  professional fees; and

·                  an allocation of facility expenses, which isbased on the number of personnel in general and administrative roles.

General andadministrative expenses for the three months ended March 31, 2006 wereapproximately $6.3 million, or 29% of total revenues. General andadministrative expenses for the three months ended March 31, 2005 wereapproximately $3.0 million, or 17% of total revenues.

General andadministrative expenses increased approximately $3.3 million for the threemonths ended March 31, 2006, or 110%, as compared to the correspondingperiod in 2005, primarily from direct merger costs incurred as result of thepending merger with NBC Universal of approximately $1.9 million and an increasein payroll, severance, stock-based compensation and related expenses ofapproximately $1.0 million, of which approximately $0.7 million was fromstock-based compensation associated with SFAS 123(R) and $0.1 million wasassociated with the Acquisitions.

General andadministrative expenses increased as a percentage of total revenues for thethree months ended March 31, 2006, when compared to the correspondingperiod in 2005, due to a higher growth in general and administrative expensesas compared to revenues.

**Depreciation and Amortization**

Depreciation andamortization expenses were approximately $2.4 million, or 11% of totalrevenues, for the three months ended March 31, 2006 and approximately $1.8million, or 10% of total revenues, for the three months ended March 31,2005.

Depreciation andamortization expenses increased approximately $0.6 million for the three monthsended March 31, 2006, or 31%, as compared to the corresponding period in2005, primarily due to increased depreciation and amortization costs ofapproximately $0.5 million stemming from the acquisitions ofHealthCentersOnline, Inc. and the assets of iVillage UK Limited.

**Interest Income, Net**

Interest income, net includes primarily interest income from our cashbalances. Interest income, net was approximately $0.5 million, or 2% oftotal revenues, for the three months ended March 31, 2006 andapproximately $0.4 million, or 2% of revenues, the three months ended March 31,2005. Interest income, net increased for the three months ended March 31,2006 as compared to the corresponding period in 2005, primarily due to higherprevailing interest rates.

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**Other Income, Net**

Other income, net was approximately $3,000 for the three months ended March 31,2006, and approximately $0.1 million for the three months ended March 31,2005. Both amounts represent lessthan 1% of total revenues. In 2005, other income, net primarily includes moneysreceived from various legal settlements and a reversal of a previouslyestablished purchase accrual for Promotions.com, Inc.

**Gain on Sale of Joint Venture Interestand Other Assets**

Gain on sale ofjoint venture interest resulted from the restructuring of our Tescorelationship in March 2003, under which a division of Tesco purchased ourentire ownership interest in iVillage UK. The gain on sale also related toamounts we received pursuant to the license agreement entered into with theTesco division contemporaneously with such restructuring.

On April 29,2005, iVillage, through its subsidiary, iVillage Limited, acquired fromiVillage UK Limited, a subsidiary of Tesco, the iVillage.co.uk Web site andcertain related assets. In connection with the Acquisition, iVillage UK Limitedand iVillage terminated a license agreement pursuant to which iVillagepreviously licensed content and certain other intellectual property to iVillageUK Limited. As a result, the approximate $0.1 million we received on aquarterly basis for licensing fees ceased on April 29, 2005.

Gain on sale ofjoint venture interest represented less than 1% of total revenues, for thethree months ended March 31, 2005.

**Net Loss**

We recorded a netloss of approximately $3.0 million, or $0.04 per share, for the three monthsended March 31, 2006. For the comparable period in 2005, we recorded a netloss of approximately $1.3 million, or $0.02 per share.

The increase innet loss for the three months ended March 31, 2006 compared to the sameperiod in 2005 was primarily due to operating expenses from the Acquisitions of$2.4 million, direct costs relating to our pending merger with NBC Universal ofapproximately $1.9 million and a stock-based compensation charge associatedwith the new requirements of SFAS 123(R) of approximately $0.8 million. Thiswas partially offset by an increase in revenues of approximately $4.3 million.

**Liquidity andCapital Resources**

As of March 31, 2006, we had approximately $57.0 million incash and cash equivalents. Cash equivalents include money market accounts. Wemaintain our cash and cash equivalents in highly rated financial institutionsand at times these balances exceed insurable amounts.

Net cash providedby operating activities was approximately $2.9 million for the three monthsended March 31, 2006. For the comparable period in 2005, approximately$1.5 million of net cash was provided by operations. Net cash provided byoperating activities for the comparable three months increased due primarily tohigher collections of accounts receivable of approximately $1.9 million and anincrease in deferred revenue of approximately $0.6 million as compared to autilization of deferred revenue of approximately $0.5 million in 2005. Theseamounts were offset by an increased level of payments made for accounts payableand accrued expenses of approximately $0.4 million and an increase in otherassets of approximately $1.0 million. The increased collections of accountsreceivable in the first quarter of 2006 was primarily due to the increasedrevenue recognized in the fourth quarter of 2005. The increase in other current assets was primarily due to theprepayment of second quarter services to Corsis.

Net cash used ininvesting activities decreased approximately $12.5 million to $2.0 million forthe three months ended March 31, 2006 from approximately $14.5 million forthe three months ended March 31, 2005. The decrease was primarily due tothe acquisition of Healthology for approximately $15.8 million less cashacquired of approximately $1.8 million during the three months ended March 31,2005, offset by higher fixet asset purchases in 2006 of approximately $1.5million.

Net cash providedby financing activities was $0.2 million for both the three months ended March 31,2006 and 2005, respectively. The amount in both periods relate to proceeds fromoption exercises.

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Management believes that iVillage’s current funds will be sufficient toenable iVillage to meet its planned expenditures through the next twelvemonths.

IVPN collects anannual fee from hospitals to receive programming broadcast by IVPN. These feesresult from agreements between IVPN and the hospitals that generally have alength of three to five years. As of March 31, 2006, approximately 74% ofparticipating hospitals have agreed to pay this fee. However, we can make noassurance that all of the hospitals will agree to pay a fee. The total value ofsigned contracts at March 31, 2006 is in excess of $11.2 million, whichwill be recognized as revenue over the next several years.

In July 2004,we entered into the three-year 2004 Web Site Services Agreement with Hearstthat superseded and replaced the amended and restated magazine content licenseand hosting agreement we assumed as part of our acquisition of Women.com.Pursuant to the 2004 Web Site Services Agreement:

·                  Hearstwill pay to us a production and service fee of $4.0 million during thefirst year of the renewed agreement which would increase by approximately$0.2 million in each subsequent year;

·                  Wewill continue to receive a commission on magazine subscription sales and ifmagazine subscription sales do not reach a certain threshold in the second yearof the new agreement, then we will not be entitled to any commission frommagazine subscriptions sales in the third year of the new agreement;

·                  Wewill no longer be required to offer Hearst, and Hearst would no longer beobligated to purchase, advertising on iVillage.com; and

·                  Hearstwill continue to receive a commission from us on a percentage of theadvertising sales from the Hearst magazine Web sites we host, the commissionspaid to and received from Hearst will vary based on performance.

Revenues from thisagreement are recognized on a straight line basis over the life of thecontract. Consequently, our work efforts, which include a significant amount ofproduction services performed during the first year of this agreement, do notcoincide with the timing of our revenue recognition on this agreement.

As of March 31,2006, we have received $7.1 million and earned approximately$7.3 million in connection with this agreement.

In September 2005,we outsourced certain of our information technology services functions toCorsis. The agreement expires in August 2010 and we can extended it for upto five successive one year periods. Under this agreement, we will pay Corsisapproximately $3.3 million in year one, approximately $2.8 million in year twoand $2.5 million a year for years three through five. In December 2005, weexpanded the scope of outsourced information technology services functions toCorsis to encompass the oversight of the technical functions at three of oursubsidiaries. In consideration, we will pay Corsis an additional approximate$0.3 million per quarter from January 1, 2006 through December 31,2007. Thereafter,  Corsis will receive anadditional approximate $0.2 million per quarter through the end of thecontract. On March 2, 2006, iVillage entered into an amendment to itsInformation Technology and Services Agreement with Corsis to outsource certainof Healthology’s information technology services functions. Under this agreement,iVillage will pay Corsis an additional $0.1 million per quarter from March 2,2006 through December 31, 2007.

In February 2006,we amended our 2003 Web Site Services Agreement with Hearst for servicesrelated to the three teen magazine Web sites. The amendment is effective as of December 20,2005 and, among other things, (i) extends the term of the agreement to December 31,2006, which may be further extended at Hearst’s option to June 30, 2007upon certain conditions, (ii) provides for a termination right forconvenience upon 120 days notice by either party and a termination right upon a“change in control” of iVillage (as such term is defined in the Agreement) upon10 days notice by Hearst, (iii) adds another Hearst website to whichiVillage shall provide services, and (iv) increases the maintenance feesdue to iVillage for providing the contemplated services. Pursuant to thisagreement, Hearst will pay approximately $0.9 million for services renderedthrough December 31, 2006.

On March 3,2006, we entered into the Merger Agreement with NBC Universal and a whollyowned subsidiary of NBC Universal. The Merger Agreement was approved by ourboard of directors. Subject to various customary conditions, including theobtaining of stockholder approval and expiration or termination of the waitingperiod required by applicable antitrust laws, we have agreed to merge with theNBC Universal subsidiary. After the merger, we will be a subsidiary of

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NBC Universal. Inconsideration, upon the effectiveness of the merger, each of our stockholders,other than those who elect to exercise dissenters’ rights, will receive in cashand without interest $8.50 for each share of our common stock they hold at thattime. Each outstanding option to purchase iVillage common stock that isunexercised immediately prior to the effective time of the merger will becomefully vested as of the effective time of the merger and will be cancelled inconsideration for a cash payment equal to the product of (1) the excess,if any, of $8.50 over the applicable option exercise price and (2) thenumber of shares of iVillage common stock subject to such option. The MergerAgreement contains certain termination rights for both iVillage and NBCUniversal, and further provides that, upon termination of the Merger Agreementunder specified circumstances, iVillage may be required to pay NBC Universal atermination fee of $23.5 million. While the Merger Agreement prohibits us fromsoliciting competing acquisition proposals, we may accept a superior proposalprior to approval of the Merger Agreement by our stockholders, subject tocompliance with the terms of the Merger Agreement and payment of thistermination fee. We currently expect the merger to be completed during oursecond quarter of 2006.

We have incurredand will continue to incur professional fees and other expenses, including feesand expenses of our external legal counsel, independent auditors and financialadvisors related to the negotiation of the Merger Agreement with NBC Universaland the completion of the merger, substantially all of which will be accrued orpaid during the first two quarters of 2006. In addition, we expect to engage aproxy solicitation firm and will incur printing and mailing expenses for thepreparation of a proxy statement and related proxy materials in connection witha special meeting of stockholders to be held for the purpose of approving themerger. For the three months ended March 31, 2006, we incurred directmerger related expenses of approximately $1.9 million.

Pursuant to avoting agreement that Hearst entered into with NBC Universal at the time thatwe entered into the Merger Agreement with NBC Universal, Hearst agreed to waiveits rights to terminate the 2004 Web site Services Agreement between iVillageand Hearst as a result of completion of the merger. Hearst and NBC Universalalso agreed that this agreement would automatically terminate six monthsfollowing completion of the merger.

We lease officespace and equipment under non-cancelable operating leases expiring at variousdates through April 2015. In addition, in the ordinary course of businesswe enter into agreements with various service providers for ad serving,satellite transmissions and license/content arrangements.

Capitalexpenditures were approximately $2.0 million for the three months ended March 31,2006 and were primarily for computer equipment and software. Our capitalrequirements depend on numerous factors, including:

·                           market acceptance of our services;

·                           the amount of resources we devote to investments in our business,including entering into joint ventures with and/or the acquisition of otherentities;

·                           the resources we devote to marketing;

·                           the resources we devote to building the infrastructure necessary toenable us to sell subscription-based products and services; and

·                           the resources we devote to selling our products and services.

**Off-BalanceSheet Arrangements**

In the ordinarycourse of business, we enter into agreements that contingently require us toindemnify counterparties against third-party claims. These may include:agreements with advertisers and sponsors, under which we may indemnify themagainst claims arising from their use of our products or services; agreementswith customers, under which we may indemnify them against claims arising fromtheir use of our products or services; real estate and equipment leases, underwhich we may indemnify lessors against third-party claims relating to useof their property; agreements with licensees or licensors, under which we mayindemnify the licensee or licensor against claims arising from their use of ourintellectual property or our use of their intellectual property; and agreementswith initial purchasers and underwriters of our securities, under which weindemnify them against claims relating to their participation in thetransactions.

The nature andterms of these indemnifications vary from contract to contract, and generally amaximum obligation is not stated. Because we are unable to estimate ourpotential obligation, and because management does not expect theseindemnifications to have a material adverse effect on our consolidatedfinancial position, results of operations or cash flows, no

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related liabilities arerecorded as of March 31, 2006. We hold insurance policies that mitigate potentiallosses arising from certain indemnifications and, historically, we have notincurred significant costs related to performance under these obligations.

**Item 3.    Quantitative and Qualitative DisclosuresAbout Market Risk.**

As of March 31,2006 and 2005, our financial instruments include cash and cash equivalents.Cash equivalents included interest bearing accounts. We do not use derivativefinancial instruments in our investment portfolio. Our exposure to market riskfor changes in interest rates relates primarily to our interest bearingaccounts. We do not expect interest rate fluctuations to materially affect theaggregate value of our financial assets. While we maintain our cash and cashequivalents in highly rated financial institutions, at times these balancesexceed insurable amounts.

Our consolidatedfinancial statements are denominated in U.S. dollars. For the three monthsended March 31, 2006, we derived 4% of our revenues from operationsoutside of the United States. There are no comparable amounts for the threemonth period ended March 31, 2005. We face foreign currency risksprimarily as a result of the revenues that we receive from services deliveredthrough our foreign subsidiary. This subsidiary incurs most of its expenses inthe local currency. Accordingly, our foreign subsidiary uses the local currencyas its functional currency. We are also exposed to foreign exchange ratefluctuations with respect to the British Pound as the financial results of theforeign subsidiary are translated into U.S. dollars for consolidation. Asexchange rates vary, these results when translated may vary from expectationsand adversely impact net income (loss) and operating performance. Currently, wedo not hedge foreign currency transactions into U.S. dollars because we believethat, over time, the cost of a hedging program will outweigh any benefit ofgreater predictability in our U.S. dollar-denominated results. However, we willfrom time to time reconsider the issue of whether a foreign currency-hedgingprogram would be beneficial to our operations.

**Item 4.    Controls and Procedures.**

(a) *Evaluation of DisclosureControls and Procedures*

Our ChiefExecutive Officer and Chief Financial Officer evaluated the effectiveness ofthe design and operation of our disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d - 15(e) under the Exchange Act)as of the end of the period covered by this report. Our Chief Executive Officerand Chief Financial Officer concluded that, as of the end of the period coveredby this report, our disclosure controls and procedures were effective toprovide reasonable assurance that information that we are required to disclosein the reports that we file or submit under the Securities Exchange Act of1934, as amended, is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to our management, including ourChief Executive Officer and our Chief Financial Officer, as appropriate toallow timely decisions regarding required disclosure.

(b) *Changes in Internal Control over FinancialReporting*

Other than theongoing integration of the financial systems and key controls of ourHealthCentersOnline and iVillage Limited subsidiaries into our New Yorkheadquarters, there were no changes in our internal controls over financialreporting during the three monthsended March 31, 2006 that have materially affected, or are reasonablylikely to materially affect, our internal controls over financial reporting.HealthCentersOnline’s financial systems and key controls were fully integratedby March 31, 2006. We expect the remaining financial systems and keycontrols of our iVillage Limited subsidiary to be fully integrated by June 30,2006.

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**PART IIOTHER INFORMATION**

**Item 1.    LegalProceedings**

Several plaintiffs have filed class action lawsuits in federal courtagainst iVillage, several of its present and former executives and itsunderwriters in connection with its March 1999 initial public offering. Asimilar class action lawsuit was filed against Women.com, several of its formerexecutives and its underwriters in connection with Women.com’s October 1999initial public offering. The complaints generally assert claims under theSecurities Act of 1933, as amended, the Exchange Act and the rules andregulations of the SEC. The complaints seek class action certification,unspecified damages in an amount to be determined at trial, and costsassociated with the litigation, including attorneys’ fees.

In February 2003, the defendants’ motion to dismiss certain of theplaintiffs’ claims was granted in part, but, for the most part, denied. In June 2003,a proposed settlement of this litigation was structured between the plaintiffs,the issuer defendants, the issuer officers and directors named as defendants,and the issuers’ insurance companies. The proposed settlement generallyprovides that the issuer defendants and related individual defendants will bereleased from the litigation without any liability other than certain expensesincurred to date in connection with the litigation, the issuer defendants’insurers will guarantee $1.0 billion in recoveries by plaintiff class members,the issuer defendants will assign certain claims against the underwriter defendantsto the plaintiff class members, and the issuer defendants will have theopportunity to recover certain litigation-related expenses if the plaintiffsrecover more than $5.0 billion from the underwriter defendants. The respectiveboards of directors of iVillage and Women.com each approved the proposedsettlement in July 2003.

On June 25, 2004, the plaintiffs filed a motion for preliminaryapproval of the settlement with the court, which was accompanied by a brieffiled by the issuer defendants in support of the plaintiffs’ motion. The courtrequested that any objections to preliminary approval of the settlement besubmitted by July 14, 2004, and certain underwriter defendants formallyobjected to the settlement. The plaintiffs and issuer defendants separatelyfiled replies to the underwriter defendants’ objections to the settlement on August 4,2004. On February 15, 2005, the court issued an opinion and order grantingpreliminary approval to the settlement and ordering the plaintiffs and issuerdefendants to submit to the court a revised settlement stipulation consistentwith the court’s order. Pursuant to the court’s instruction, the parties to thesettlement agreement submitted the revised settlement stipulation on May 2,2005. On August 31, 2005, the Court granted preliminary approval to theamended settlement stipulation.  Noticeof the settlement has been provided to the class members. A fairness hearing,which is required before the settlement can be finalized and approved, tookplace on April 24, 2006 and the Court has reserved decision with respectto granting approval of the final settlement.

We believe, based upon the advice of outside legal counsel, that theaforementioned lawsuit and claims asserted against us and our subsidiarypursuant to these complaints are without merit and we intend to vigorouslydefend against these claims. If the proposed settlement in these cases isultimately not approved by the courts, defending against these claims couldrequire the expenditure of significant financial and managerial resources,which could harm our business.

On August 16, 2005, a complaint was filed in the UnitedStates District Court for the Northern District of California against us andour subsidiary, KnowledgeWeb, Inc, or Knowledgweb, on behalf of Kelli and DavidFox. Mr. and Mrs. Fox are the founders of Astrology.com, anonline astrological information services Web site that we acquired in1999, and are parties to several agreements with us related to such acquisition.Mr. and Mrs. Fox were also our employees until 2003. The complaintset forth ten causes of action for (1) breach of contract; (2) trademarkinfringement under the Lanham Act; (3) common law trademark infringement; (4) federaldilution; (5) California state law dilution; (6) federal falseadvertising; (7) California false advertising; (8) cybersquatting; (9) violationof the right of publicity; and (10) California state unfair competition. Thecomplaint sought a permanent injunction, enjoining us and our subsidiary frominfringing the KELLI FOX mark, among other things; assignment of the KELLI FOXtrademark registrations; cancellation of the kellifox.comdomain name; an order declaring the Marketing Agreement void;compensatory, treble and punitive damages; and attorneys’ fees.

We responded to the complaint on October 4, 2005 and made a motionto dismiss the claims for failure to state a claim upon which relief could begranted and for lack of subject matter jurisdiction.  On November 23,2005, the Court entered an order granting our motion and dismissingthe complaint in its entirety for failure to state a federal claimfor lack of subject matter jurisdiction. The Court did not address themerits of the Foxs’ California law claims.

On December 1, 2005, the Foxs filed an action against iVillage andKnowledgeWeb in the Superior Court of the

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State of Californiaasserting claims for breach of contract, violation of the right of publicity,state law false advertising and unfair competition under California state law. OnJanuary 19, 2006, we filed a demurrer to the complaint, seekingdismissal of all claims. As a companion motion, we also filed a Motion toStrike various allegations in the complaint that had been improperly asserted.  Argumentswere heard on these motions on March 8, 2006. The Court granted themotion with leave to amend, but otherwise denied our motions. Documentrequests and interrogatories directed to us and KnowledgeWeb, dated March 8,2006, have been served by the Foxs and we served written responses tothese requests on April 11, 2006.

On January 19, 2006, iVillage and KnowledgeWeb commenced alawsuit in the Supreme Court of the State of New York, New YorkCounty, by filing an action against the Foxs asserting a cause ofaction for breach of contract. The Foxs moved to dismiss theComplaint by motion dated February 17, 2006. We opposed that motionon March 2, 2006. The motion was submitted to the Court on March 9,2006 and oral arguments were heard on April 18, 2006. At the oral argumentthe Court decided that iVillage was capable of suing the Foxs in Californiaunder the jurisdictional clause of the Separation Agreement between iVillageand the Foxs, and dismissed the action so that it could be brought as part ofthe California action. We intend to assert these claims as cross-claims in theCalifornia action when the answer is filed on or before May 12, 2006.

We intend to defend and pursue the aforementioned matters vigorously andat this point in time it is not possible to determine the ultimate dispositionof this matter.

We received a letter, dated December 16, 2005, from AcaciaTechnologies Group, a division of Acacia which identified three United Statespatents related to pop-up and pop-under advertising which Acacia and itssubsidiary/affiliate InternetAd Systems, LLC, allege we have infringed. Theletter also contemplates the entry into a license agreement for the use of suchpatented technology. We are presently reviewing the validity of theseallegations with the assistance of our outside legal advisors and are consideringengaging with Acacia in preliminary discussions related to a license agreementshould we deem it to be necessary.

At this point in time, it is not possible to quantify the ultimateimpact of the aforementioned allegations on us.

We are not currently subject to any other material legal proceedings. Wemay from time to time, however, become a party to various legal proceedingsarising in the ordinary course of business.

 

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**Item 1A. Risk Factors.**

*Weoperate in an environment that involves a number of risks and uncertainties.**In addition to the other information set forth in this report, youshould carefully consider the factors discussed in Part I, “Item 1A. RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2005, which could materially affect our business, financial condition or futureresults. The risks described in our Annual Report on Form 10-K andthis report are not the only risks we face. Additional risks and uncertaintiesnot currently known to us or that we currently deem to be immaterial also maymaterially adversely affect our business, financial condition and/or operatingresults . If any such risksactually occur, the trading price of our stock may decline and you could loseall or part of your investment.*

**Risks of ourBusiness**

***Ourbusiness could be adversely impacted by our pending acquisition by NBCUniversal***

We currentlyexpect to complete our merger with NBC Universal on or about May 15, 2006.Uncertainty about the effect and completion of this pending acquisition,however, could adversely affect our business. This uncertainty could lead to aloss of customers and advertisers, a decline in revenue, an impairment in ourability to make necessary operational improvements in our business, aninability to retain or motivate current employees or attract new employees, anda deterioration in our results of operations. These adverse affects may beenhanced by the diversion of our resources, including management time andattention, toward completing the merger.

***Wehave a limited history of profitability, and we may have further continuinglosses from operations.***

We incurred a netloss of $3.0 million for the three months ended March 31, 2006. Weachieved net income of approximately $9.5 million for the year ended December 31,2005 and approximately $2.7 million for the year ended December 31, 2004. Weincurred a net loss of approximately $27.1 million for the year ended December 31,2003. As of March 31, 2006, we had an accumulated deficit of approximately$484.7 million.

Although weachieved net income on an annual basis for the years ended December 31,2005 and December 31, 2004, we have a history of net losses and negativecash flows. We could incur net losses in the future and cannot assure you thatwe will be able to sustain or increase net income on a quarterly or annualbasis. If our revenues grow slower than we anticipate, or if our operatingexpenses exceed expectations or cannot be adjusted accordingly, we couldcontinue to suffer losses.

***Wehave a small number of major customers and the loss of any number of thesecustomers or a material reduction in business we receive from any of thesecustomers could adversely affect our business, financial condition and resultsof operations.***

We anticipate thatour results of operations in any given period will continue to depend to asignificant extent on revenues from a small number of customers. As a result,the loss of even a small number of our largest customers or a materialreduction in the business we receive from any of these customers at any onetime could significantly reduce our revenue, which in turn could adverselyaffect our business, financial condition and results of operations, unless weare able to enter into contracts to replace lost revenues.

Our five largestcustomers accounted for approximately 19% of total revenues for the threemonths ended March 31, 2006, and approximately 23% of total revenues forthe three months ended March 31, 2005. For the three months ended March 31,2006 and 2005, no advertiser accounted for more than 10% of total revenues. At March 31,2006 and December 31, 2005, no single customer accounted for more than 10%of our total net accounts receivable.

The loss of even asmall number of our largest customers at any one time may adversely affect ourbusiness, financial condition and results of operations, unless we are able toenter into contracts to replace lost revenue. Because our largest customershave varied over time in the past, we anticipate that they will continue to doso in the future. The significance of revenues from any one of our customerscan vary on a quarter to quarter basis as a result of the number and timing ofsuch customers’ advertising and marketing initiatives and the mix of productsand services such customers purchase from us.

***We are subject to legal proceedings thatcould result in liability and adversely affect our business.***

From time to time,we have been, and expect to continue to be, subject to legal proceedings thatindividually, or in the aggregate, could adversely affect our business.Notably, several plaintiffs have filed class action lawsuits in federal courtagainst

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us, several of our currentand former executives, and our underwriters in connection with our March 1999 We believe, based upon the advice of outside legal counsel, that theaforementioned lawsuit and claims asserted against us and our subsidiarypursuant to these complaints are without merit and we intend to vigorouslydefend against these claims. If the proposed settlement in the initial publicoffering “laddering” cases is ultimately not approved by the courts, defendingagainst these claims could require the expenditure of significant financial andmanagerial resources, which could harm our business.

**Risks Related toOur Common Stock**

***Our stock price may decrease if the merger is not completed.***

Our MergerAgreement with NBC Universal provides for a cash payment in the amount of $8.50for each outstanding share of our common stock at the time of completion of themerger which is presently expected to be on or about May 15, 2006. Ourstock price, however, may fluctuate based upon investor perceptions regardingthe likelihood of the ultimate completion of the merger. If the merger is notcompleted, our stock price may decline significantly or fluctuate in responseto a number of events and factors, such as market expectations regardingstrategic alternatives, in addition to the factors described elsewhere herein.

***Asof May 9, 2006, Hearst owned approximately 25% of our outstanding commonstock and had three representatives on our board of directors. As a result,Hearst is able to significantly influence our corporate direction and policies.***

Hearst’s board representation andstock ownership allows Hearst to significantly influence our corporatedirection and policies, including any mergers, acquisitions, consolidations,strategic relationships or sales of assets. Hearst’s board representation andstock ownership may also discourage or prevent transactions involving an actualor potential change of control, including transactions in which ourstockholders would otherwise receive a premium for their shares.

As of May 9, 2006, Hearstowned approximately 25% of our outstanding common stock. Pursuant to an amendedand restated stockholder agreement we entered into with Hearst on June 20,2001, we appointed three Hearst representatives to our board of directors, withone Hearst designee appointed to each class of director. The amended andrestated stockholder agreement provides that the number of Hearstrepresentatives is subject to reduction if Hearst’s ownership of our commonstock falls below certain threshold levels. There is also a Hearstrepresentative on our nominating and compensation committees.

Although Hearst is required tovote all shares that it holds in excess of 25% (subject to adjustment) of ouroutstanding voting securities in accordance with the recommendation of ourboard of directors, Hearst may effectively control certain stockholder actions,including approving changes to our certificate of incorporation or by-laws andadopting or changing equity incentive plans. Hearst’s effective control overstockholder actions may also determine the outcome of any merger, consolidation,sale of all or substantially all of our assets or other form of change ofcontrol that we might consider. In addition, the interests of Hearst, whichowns or has significant investments in other businesses, including cabletelevision networks, newspapers, magazines and electronic media, may from timeto time compete with, or otherwise diverge from, our interests, particularlywith respect to new business opportunities and future acquisitions.

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**Item6. Exhibits.**

 
| Number     | ** ** | **Description**                                                                                                                                                                                                                                                                                                             |
|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                  |
| 3.1        |       | Restated Certificate of Incorporation, as amended,  of the Registrant (incorporated by reference from Exhibit 3.1 to the  Registrant’s Form 8-A/A registration statement, filed on  April 4, 2004).                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 3.2        |       | By-Laws, as amended, of the Registrant (incorporated  by reference to Exhibit 3.2 to the Registrant’s Form 10-Q  Quarterly Report for the period ended June 30, 2004, filed on  August 8, 2004).                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 10         |       | Agreement and Plan of Merger, dated as of  March 3, 2006, by and among iVillage Inc., NBC Universal, Inc., and  iVillage Acquisition Corp. (incorporated by reference to Exhibit 2.1 to  the Registrant’s Current Report on Form 8-K, File No. 000-25469,  filed on March 6, 2006).      |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 11         |       | Statement re: computation of net loss per share.                                                                                                                                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 31.1       |       | Certifications of the Chief Executive Officer  pursuant to Rules 13a-14(a) and 15d-14(a) under  the Securities Exchange Act of 1934, as amended.                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 31.2       |       | Certifications of the Chief Financial Officer  pursuant to Rules 13a-14(a) and 15d-14(a) under  the Securities Exchange Act of 1934, as amended.                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 32         |       | Certifications of the Principal Executive Officer  and Principal Financial Officer furnished pursuant to Rules 13a-14(b) and  15d-14(b) under the Securities Exchange Act of 1934, as amended,  and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002. |

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|                                | iVILLAGE INC. |
|--------------------------------|---------------|
|                           | (Registrant)  |
|                           |          |   |
|                           |          |   |
| Dated:  May 10, 2006 | By:           | /s/ DOUGLAS W.  MCCORMICK |
|                           |          | Douglas W. McCormick |
|                           |          | Chairman and  Chief Executive Officer |
|                           |          | (Principal  Executive Officer) |
|                           |          |   |
|                           | ** **    |   |
| Dated:  May 10, 2006 | By:           | /s/ STEVEN A. ELKES |
|                           |          | Steven A. Elkes |
|                           |          | Chief Financial  Officer, |
|                           |          | Executive Vice  President, Operations |
|                           |          | and Business  Affairs, and Secretary |
|                           |          | (Principal  Financial Officer) |

 

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**EXHIBITINDEX**

 
| Number     | ** ** | **Description**                                                                                                                                                                                                                                                                                                             |
|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                  |
| 3.1        |       | Restated Certificate of Incorporation, as amended,  of the Registrant (incorporated by reference from Exhibit 3.1 to the  Registrant’s Form 8-A/A registration statement, filed on  April 4, 2004).                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 3.2        |       | By-Laws, as amended, of the Registrant (incorporated  by reference to Exhibit 3.2 to the Registrant’s Form 10-Q  Quarterly Report for the period ended June 30, 2004, filed on  August 8, 2004).                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 10         |       | Agreement and Plan of Merger, dated as of  March 3, 2006, by and among iVillage Inc., NBC Universal, Inc., and  iVillage Acquisition Corp. (incorporated by reference to Exhibit 2.1 to  the Registrant’s Current Report on Form 8-K, File No. 000-25469,  filed on March 6, 2006).      |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 11         |       | Statement re: computation of net loss per share.                                                                                                                                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 31.1       |       | Certifications of the Chief Executive Officer  pursuant to Rules 13a-14(a) and 15d-14(a) under  the Securities Exchange Act of 1934, as amended.                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 31.2       |       | Certifications of the Chief Financial Officer  pursuant to Rules 13a-14(a) and 15d-14(a) under  the Securities Exchange Act of 1934, as amended.                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                        |
| 32         |       | Certifications of the Principal Executive Officer  and Principal Financial Officer furnished pursuant to Rules 13a-14(b) and  15d-14(b) under the Securities Exchange Act of 1934, as amended,  and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002. |

 

 

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