##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2006
 Commission File Number: 0-17932
 
 Web.com, Inc.
 ( Exact name of registrant as specified in its charter )
 Minnesota
    
    41-1404301(State or other jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)
 303 Peachtree Center Avenue, Suite 500, Atlanta, GA 30303  (Address, including Zip Code, of principal executive offices )
 (404) 260-2477  (Registrants telephone number, including area code )
 Securities registered pursuant to Section 12(b) of the Act:
 Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
Registered on The NASDAQ Global Market
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   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PART IITEM 1. Business
    
    
    3ITEM 1A. Risk Factors
    
    
    8ITEM 1B. Unresolved Staff Comments
    
    
    15ITEM 2. Properties
    
    
    15ITEM 3. Legal Proceedings
    
    
    15ITEM 4. Submission Of Matters To A Vote Of Security Holders
    
    
    17PART IIITEM 5. Market For Registrants Common Equity, Related Stockholder Matters and issuer purchases of equity securities
    
    
    17ITEM 6. Selected Financial Data
    
    
    19ITEM 7. Managements Discussion And Analysis Of Financial Condition and Results Of Operations
    
    
    19ITEM 7A. Quantitative and Qualitative disclosures about market risk
    
    
    31ITEM 8. Financial Statements and Supplementary Data
    
    
    33Index To consolidated Financial Statements
    
    

33ITEM 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
    
    
    66ITEM 9A. Controls And Procedures
    
    
    66ITEM 9B. Other Information
    
    
    67PART IIIItem 10. Directors, Executive Officers and corporate governance
    
    
    68Item 11. Executive Compensation
    
    
    68Item 12. Security Ownership Of Certain Beneficial Owners And Management
    
    
    68Item 13. Certain Relationships And Related Transactions and Director Independence
    
    
    68Item 14. Principal Accountant Fees And Services
    
    
    68PART IVITEM 15. Exhibits and Financial Statement Schedules
    
    
    E-1EX-21.01 SUBSIDIARIES OF THE REGISTRANTEX-23.01 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-24.01 POWER OF ATTORNEYEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO
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PART I
 
 ITEM 1. Business
 Statements contained in this Form 10-K that are not purely historical are forward-looking
statements and are being provided in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Words such as anticipates, expects, intends,
plans, believes, seeks, estimates, and similar expressions identify forward-looking
statements. These forward-looking statements include but are not limited to statements regarding
Web.coms expectations of the Companys future liquidity needs, its expectations regarding its
future operating results including its planned increase in its revenue levels and the actions the
Company expects to take in order to maintain its existing customers and expand its operations and
customer base. All forward-looking statements are made as of the date hereof and are based on
current management expectations and information available to the Company as of such date. The
Company assumes no obligation to update any forward-looking statement. It is important to note
that actual results could differ materially from historical results or those contemplated in the
forward-looking statements. Forward-looking statements involve a number of risks and
uncertainties, and include risks associated with our target markets and risks pertaining to
competition, other trend information and the Companys ability to successfully enhance its
operations. Factors that could cause actual results to differ materially include, but are not
limited to, those identified in Item 1A. Risk Factors and in other Company filings with the
Securities and Exchange Commission. All references to Web.com or the Company in this Annual
Report on Form 10-K mean Web.com, Inc., a Minnesota corporation, and all entities owned or
controlled by Web.com, Inc., except where it is made clear that the term only means the parent
company. The Company was formerly known as Interland, Inc., and any references to Interland are
for historical purposes only and refer to the same entity. All tabular amounts are stated in
thousands.
 Overview
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Acquisition and Impairment of WebSource Media, LLC
  ex parte th
     Products and Services
  4




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Strategic Vendor Relationships
  Sales and Marketing
  Distribution Relationships
  
    
    Enterprise Development Partnersdeliver Web.com hosting products and services through a
robust, highly-scalable private label solution. These partners offer a customized mix of
the companys software, infrastructure, and support.
    
    Licensed Partnerssell our Trellix® Site Builder software over their hosting
infrastructure.
    
    Resellersmay sell Web.coms products under the partners or Web.coms brand name. Most
often these companies offer services or products of their own such as small business
services, website design, or provide and install personal computers. Our patented
technology, competitive pricing, and world-class customer support allow resellers to create
and grow reliable, scalable and profitable businesses.
    
    Retail Partnerssuch as Office Depot, OfficeMax, and Target offer our hosting and site
building solutions in a pre-packaged software kit.
 Customers
  5




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Network Infrastructure, Technology and Operations
   Data Centers
  Network Operations Center
  Proprietary Technology
  International Revenues
  Competition
    6




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Intellectual Property
         Government Regulation
  Employees
  7




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Environmental Regulations
  
 ITEM 1a. risk factors
 You should carefully consider the following factors and all other information contained in this
Form 10-K before you make any investment decisions with respect to the Companys securities. The
risks and uncertainties described below may not be the only risks the Company faces.
 Web.com has incurred losses since inception and could incur losses in the future.
  
    
    Adapting network infrastructure and administrative resources to accommodate additional customers and future growth;
    
    Developing products, distribution, marketing, and management for the broadest-possible market;
    
    Broadening customer technical support capabilities;
    
    Developing or acquiring new products and associated technical infrastructure;
    
    Developing additional indirect distribution partners;
    
    Increased costs from third party service providers;
    
    Improving network security features; and
    
    Legal fees and settlements associated with litigation and contingencies.
  Web.coms management and Board of Directors may be unable to execute their plans to turn around the
Company, grow its revenues and achieve profitability and positive cash flows.
  Ours is a recurring-revenue subscriber business and as such the effects of a net loss of monthly
recurring revenue is magnified.
  8




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Unfavorable results of existing litigation may cause Web.com to have additional expenses or
operating losses that exceed the Companys ability to pay.
  Because Web.coms historical financial information is not representative of its future results,
investors and analysts will have difficulty analyzing Web.coms future earnings potential.
  Web.com has a limited operating history and its business model is still evolving, which makes it
difficult to evaluate its prospects.
  Quarterly and annual operating results may fluctuate, which could cause Web.coms stock price to be
volatile.
  
    
    Demand for and market acceptance of the Companys services and products;
    
    Introduction of new services or enhancements by Web.com or its competitors;
    
    Costs of implementing new network security features, CRM systems, and billing modules;
    
    Technical difficulties or system downtime affecting the Internet generally or its hosting operations specifically;
    
    Customer retention;
    
    Increased competition and consolidation within the web hosting and applications hosting markets;
    
    Changes in its pricing policies and the pricing policies of its competitors;
    
    Gains or losses of key strategic partner relationships;
    
    Impairment charges;
    
    Restructuring charges;
    
    Merger and integration costs;
    
    Litigation expenses;
    
    Insurance expenses; and
    
    Marketing expenses.
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Web.com operates in a new and evolving market with uncertain prospects for growth and may not be
able to generate and sustain growth in its customer base.
  Because Web.coms target markets are volatile, the Company may face a loss of customers or a high
level of non-collectible accounts.
  
    
    Capitalizing on infrastructure efficiencies to become a profitable provider at the
lowest sustainable price;
    
    Automating customer care and technical support to reduce the cost per call, and to
minimize the time spent by Company personnel;
    
    Intensive training and supervision of customer care and technical support personnel to
maximize customer satisfaction; and,
    
    Increasing the number and breadth of services to differentiate the Company from
competition.
  Web.com could incur liabilities in the future relating to its discontinued PC Systems business,
which could cause additional operating losses.
  Because Web.com faces intense competition, it may not be able to operate profitably in its markets .
  10




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
    
    Develop and expand their network infrastructures and service offerings more rapidly;
    
    Adapt to new or emerging technologies and changes in customer requirements more quickly;
    
    Devote greater resources to the marketing and sale of their services; and,
    
    Adopt more aggressive pricing policies than the Company can develop.
  Impairment of Web.coms intellectual property rights could negatively affect its business or could
allow competitors to minimize any advantage that Web.coms proprietary technology may give it .
     If Web.com is unable to attract and retain key personnel, it may not be able to compete effectively
in its market .
  Web.com depends on its reseller sales channel to market and sell many of its services. Web.com
does not control its resellers, and if it fails to develop or maintain good relations with
resellers, it may not achieve the growth in customers and revenues that it expects .
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Web.com is vulnerable to system failures, which could harm its reputation, cause its customers to
seek reimbursement for services paid for and not received, and cause its customers to seek another
provider for services .
  
    
    Cause customers or end users to seek damages for losses incurred;
    
    Require the Company to replace existing equipment or add redundant facilities;
    
    Damage the Companys reputation for reliable service;
    
    Cause existing customers to cancel their contracts; or
    
    Make it more difficult for the Company to attract new customers.
 Web.coms data centers are maintained by third parties.
   Data centers and communications networks are vulnerable to security breaches that could cause
disruptions in service, liability to third parties, or loss of customers.
   12




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Disruption of Web.coms services caused by unknown software or hardware defects could harm its
business and reputation.
  Providing services to customers with critical websites and web services could potentially expose
Web.com to lawsuits for customers lost profits or other damages.
  Web.com could face liability for information distributed through its network.
  Web.coms business operates in an uncertain legal environment where future government regulation
and lawsuits could restrict Web.coms business or cause unexpected losses .
  Web.coms stock price may be volatile which could cause an investment in its common stock to
decrease significantly.
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
    
    Variations in operating results and analyst earnings estimates;
    
    The volatility of stock in the sectors within which it conducts business;
    
    Announcements by Web.com or its competitors regarding introduction of new services;
    
    General changes in economic conditions;
    
    Changes in the volume of trading in its common stock; and
    
    The Companys inability to reduce the rate of account cancellations, or to
increase the rate of account additions, or both.
  Web.com could face liability and expense in connection with its acquisition of WebSource Media and
related litigation.
     Substantial future sales of shares by shareholders could negatively affect Web.coms stock price.
  Web.com could lose its ability to process credit card transactions
  
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ITEM 1B. Unresolved Staff Comments
  
 ITEM 2. Properties
   
 ITEM 3. Legal Proceedings
       15




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ITEM 4. Submission Of Matters To A Vote Of Security Holders
  
 PART II
 
 ITEM 5. Market For Registrants Common Equity, Related Stockholder Matters and issuer
purchases of equity securities
  Quarter Ended
    
    High
    
    
    LowDecember 31, 2006
    
    $
    4.28
    
    
    $
    3.63September 30, 2006
    
    $
    5.98
    
    
    $
    3.96June 30, 2006
    
    $
    6.45
    
    
    $
    5.25March 31, 2006
    
    $
    6.02
    
    
    $
    3.90December 31, 2005
    
    $
    4.94
    
    
    $
    2.79November 30, 2005
    
    $
    4.03
    
    
    $
    2.50August 31, 2005
    
    $
    2.70
    
    
    $
    1.90May 31, 2005
    
    $
    2.53
    
    
    $
    1.86February 28, 2005
    
    $
    3.27
    
    
    $
    2.56November 30, 2004
    
    $
    3.94
    
    
    $
    3.12
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Authorized shares of common stock
  Shareholder Rights Plan
     Holders Of Record
  18




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Dividends
  
 ITEM 6. Selected Financial Data
    FourYear
    
    MonthsEnded
    
    EndedDec. 31,
    
    Dec. 31,
    
    Years Ended August 31,(In thousands, except per share amounts)
    
    2006
    
    2005
    
    2005
    
    2004
    
    2003
    
    2002Statements of operations data:Revenues
    
    $
    49,140
    
    
    $
    16,292
    
    
    $
    88,608
    
    
    $
    102,745
    
    
    $
    106,638
    
    
    $
    101,628Goodwill impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,587
    
    
    
    89,928
    
    
    
    Asset impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,009
    
    
    
    13,868
    
    
    
    Income (loss) from continuing operations
    
    
    (13,269
    )
    
    
    (2,894
    )
    
    
    (19,450
    )
    
    
    (102,959
    )
    
    
    (178,791
    )
    
    
    (5,272
    )Net Income (loss)
    
    
    (13,724
    )
    
    
    (3,040
    )
    
    
    (19,889
    )
    
    
    (104,663
    )
    
    
    (173,879
    )
    
    
    (11,293
    )Earnings (loss) per share, continuing operationsBasic and Diluted
    
    
    (0.80
    )
    
    
    (0.18
    )
    
    
    (1.21
    )
    
    
    (6.40
    )
    
    
    (12.19
    )
    
    
    (0.38
    )Net Income (loss) per shareBasic and Diluted
    
    
    (0.83
    )
    
    
    (0.19
    )
    
    
    (1.24
    )
    
    
    (6.50
    )
    
    
    (11.85
    )
    
    
    (0.82
    )Balance sheet data:Total assets
    
    
    38,428
    
    
    
    51,124
    
    
    
    56,559
    
    
    
    84,912
    
    
    
    207,042
    
    
    
    395,278Total debt
    
    
    3,674
    
    
    
    5,543
    
    
    
    3,369
    
    
    
    5,744
    
    
    
    12,499
    
    
    
    31,166Shareholders equity
    
    
    20,956
    
    
    
    28,222
    
    
    
    29,943
    
    
    
    48,899
    
    
    
    152,658
    
    
    
    297,730
  
 ITEM 7. Managements Discussion And Analysis Of Financial Condition and Results Of
Operations
 On October 17, 2005, the Board of Directors approved a change in fiscal year end from August 31 to
December 31, effective as of December 31, 2005. As a result, the financial periods presented and
discussed below will be defined as follows: (i) year ended December 31, 2006 represents the twelve
months ended December 31, 2006; (ii) four-month transition period ended December 31, 2005
represents the four months ended December 31, 2005; (iii) year ended August 31, 2005 represents the
twelve months ended August 31, 2005; and (iv) year ended August 31, 2004 represents the twelve
months ended August 31, 2004. All tabular dollar amounts are stated in thousands, except per share
amounts.
 Overview
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Critical Accounting Policies and Estimates
   
    
    Revenue Recognition Revenues from continuing operations through August 2005 were
primarily generated from shared and dedicated Internet Web hosting, managed services,
eCommerce services, applications hosting, domain name registrations, and website
development services. After August 31, 2005, the Company no longer provided dedicated
web hosting product services. Revenues are recognized as the services are provided.
Hosting contracts generally are for service periods ranging from one to twenty-four
months and sometimes require up-front set-up fees, which are deferred and recognized
ratably over the customers expected service period. Deferred revenues represent the
liability for advance billings to customers for services not yet provided. The Company
may permit an early termination of a term contract subject to penalties.
    
    Stock-Based Compensation Effective September 1, 2005 the Company records
stock-based compensation in accordance with Statement of financial Accounting Standards
No. 123(R), Share Based Payment (SFAS No. 123(R)), which requires measurement of all
employee stock-based compensation awards using a fair-value method and the recording of
such expense in the consolidated financial statements. The Company applies the
Black-Scholes option pricing model and recognizes compensation cost on a straight-line
basis over the vesting periods for the awards. Inherent in this model are assumptions
related to expected stock-price volatility, option life, risk-free interest rate and
dividend yield.
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While the risk-free interest rate and dividend yield are less subjective assumptions,
typically based on factual data derived from public sources, the expected stock-price
volatility, forfeiture rate and option life assumptions require a greater level of
judgment which make them critical accounting estimates. The Company uses an expected
stock-price volatility assumption that is based on historical volatilities of the
underlying stock which is obtained from public data sources. With regard to the
weighted-average option life and forfeiture rate assumptions, the Company considers the
behavior of past grants and in accordance with Staff Accounting Bulletin No. 107 (SAB
107), uses the safe-harbor calculations recommended when the Companys historic trends
of exercises are limited.
    
    Valuation of Accounts Receivable Judgment is required when the Company assesses the
likelihood of ultimate realization of recorded accounts receivable, including assessing
the likelihood of collection and the credit-worthiness of customers. If the financial
condition of the Companys customers were to deteriorate or their operating climate were
to change, resulting in an impairment of either their ability or willingness to make
payments, an increase in the allowance for doubtful accounts would be required.
Similarly, a change in the payment behavior of customers generally may require an
adjustment in the calculation of an appropriate allowance. Each month management
reviews customer payment patterns, historical credit card charge-backs, customer
cancellation trends, and comparative aged receivables balances in order to determine the
appropriate amount of allowance for doubtful accounts receivable to record. The
majority of customer payments are made by credit card and all trade receivable balances
over 60 days are fully reserved. Additionally, all trade balances 60 days or less are
reserved based on historical data. The Company believes that the current allowance for
doubtful accounts receivable is adequate to cover a reasonably expected level of
uncollectible accounts receivable as of the balance sheet date.
    
    Property, Plant, Equipment and Long Lived Assets- The Company utilizes significant
amounts of property, plant and equipment in providing service to its customers. For
financial statement reporting purposes, the Company uses straight-line depreciation for
property, equipment, and leasehold improvements over its estimate of their useful lives.
The Company uses estimated useful lives of two to five years for equipment and
software. Changes in technology or changes in the intended use of property, plant, and
equipment may cause the estimated period of use or the value of these assets to change.
The Company periodically confirms the appropriateness of estimated economic useful lives
for each category of property, plant, and equipment. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows expected to result from
the use and eventual disposition of the asset.
    
    Goodwill and Intangible Assets- In accordance with SFAS No. 142 Goodwill and Other
Intangible Assets (SFAS 142), the Company periodically evaluates goodwill and
intangible assets for potential impairment. The Company tests for the impairment of
goodwill and intangible assets annually and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of goodwill
below its carrying amount by determining whether the Companys carrying value exceeds
its fair value. Fair value is ascertained by using quoted values of the Companys stock
and by using discounted values of expected future cash flows. If impairment of carrying
value based on estimated future cash flows exists, the Company measures the impairment
through the use of discounted cash flows. Judgments regarding the existence of
impairment indicators are based on legal factors, market conditions, and operational
considerations. Future events could cause the Company to conclude that impairment
indicators exist and that other intangible assets associated with acquired businesses
are impaired. Management retained valuation specialists to assist in the valuation of
its intangible assets for purposes of determining the implied fair value of goodwill at
May 31, 2004. Upon completion of the annual assessment, the Company recorded a non-cash
impairment charge of $66.6 million to remove the remainder of the carrying value of
goodwill existing at that date. In addition, the company recorded an impairment charge
of $7.0 million for its other intangible assets. Other intangible assets are amortized
over an estimate of their period of economic benefit.
    
    Contingencies The Company is subject to proceedings, lawsuits and other claims
related to lawsuits and other legal and regulatory proceedings that arise in the
ordinary course of business. The Company is required to assess the likelihood of any
adverse judgments or outcomes of these matters as well as potential ranges of probable
losses. A determination of the amount of the loss accrual required, if any, for these
contingencies, is made after careful analysis of each individual issue. The Company
consults with legal counsel and other experts where necessary to assess any
contingencies. The required accrual may change in the future due to new developments in
each matter or changes in approach such as a change in settlement strategy in dealing
with these matters.
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Key Metrics
       Discontinued Operations
 PC Systems
    22




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Sale of Accounts
 Hostcentric Shared Accounts and Related Assets
     Dedicated Accounts and Related Assets
   Results of Continuing Operations
  23




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Year Ended
    
    
    Four Months Ended December 31,
    
    
    Years Ended August 31,December 31, 2006
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004(Unaudited)Revenues
    
    $
    49,140
    
    
    
    100.0
    %
    
    $
    16,292
    
    
    
    100.0
    %
    
    $
    30,573
    
    
    
    100.0
    %
    
    $
    88,608
    
    
    
    100.0
    %
    
    $
    102,745
    
    
    
    100.0
    %Operating costs and expenses:Network operating costs
    
    
    9,010
    
    
    
    18.3
    %
    
    
    2,963
    
    
    
    18.2
    %
    
    
    7,474
    
    
    
    24.4
    %
    
    
    22,903
    
    
    
    25.8
    %
    
    
    28,254
    
    
    
    27.5
    %Sales and marketing
    
    
    14,054
    
    
    
    28.6
    %
    
    
    3,411
    
    
    
    20.9
    %
    
    
    5,264
    
    
    
    17.2
    %
    
    
    18,503
    
    
    
    20.9
    %
    
    
    19,948
    
    
    
    19.4
    %Technical support
    
    
    6,811
    
    
    
    13.9
    %
    
    
    2,348
    
    
    
    14.4
    %
    
    
    5,050
    
    
    
    16.5
    %
    
    
    13,084
    
    
    
    14.8
    %
    
    
    17,965
    
    
    
    17.5
    %General and administrative
    
    
    24,684
    
    
    
    50.2
    %
    
    
    7,204
    
    
    
    44.2
    %
    
    
    9,847
    
    
    
    32.2
    %
    
    
    30,489
    
    
    
    34.4
    %
    
    
    30,835
    
    
    
    30.0
    %Bad debt expense
    
    
    1,134
    
    
    
    2.3
    %
    
    
    373
    
    
    
    2.3
    %
    
    
    632
    
    
    
    2.1
    %
    
    
    1,761
    
    
    
    2.0
    %
    
    
    3,690
    
    
    
    3.6
    %Depreciation and amortization
    
    
    5,415
    
    
    
    11.0
    %
    
    
    1,750
    
    
    
    10.7
    %
    
    
    7,705
    
    
    
    25.2
    %
    
    
    21,239
    
    
    
    24.0
    %
    
    
    30,650
    
    
    
    29.8
    %Restructuring costs
    
    
    
    
    
    
    0.0
    %
    
    
    1,626
    
    
    
    10.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    2,616
    
    
    
    3.0
    %
    
    
    756
    
    
    
    0.7
    %Impairment of investment in and advances to WebSource Media
    
    
    3,488
    
    
    
    7.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Goodwill impairment
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    66,587
    
    
    
    64.8
    %Asset impairment
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    7,009
    
    
    
    6.8
    %(Gain) Loss on sale of accounts
    
    
    (14
    )
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (1,210
    )
    
    
    -1.4
    %
    
    
    
    
    
    
    0.0
    %Other expense (income), net
    
    
    61
    
    
    
    0.0
    %
    
    
    (165
    )
    
    
    -1.0
    %
    
    
    (14
    )
    
    
    0.0
    %
    
    
    (41
    )
    
    
    0.0
    %
    
    
    (192
    )
    
    
    -0.2
    %Total operating costs and expenses
    
    
    64,643
    
    
    
    131.5
    %
    
    
    19,510
    
    
    
    119.8
    %
    
    
    35,958
    
    
    
    117.6
    %
    
    
    109,344
    
    
    
    123.4
    %
    
    
    205,502
    
    
    
    200.0
    %Operating loss
    
    
    (15,503
    )
    
    
    -31.5
    %
    
    
    (3,218
    )
    
    
    -19.8
    %
    
    
    (5,385
    )
    
    
    -17.6
    %
    
    
    (20,736
    )
    
    
    -23.4
    %
    
    
    (102,757
    )
    
    
    -100.0
    %Interest income (expense), net
    
    
    982
    
    
    
    2.0
    %
    
    
    324
    
    
    
    2.0
    %
    
    
    95
    
    
    
    0.3
    %
    
    
    436
    
    
    
    0.5
    %
    
    
    (202
    )
    
    
    -0.2
    %Loss from continuing operations before income taxes
    
    
    (14,521
    )
    
    
    -29.6
    %
    
    
    (2,894
    )
    
    
    -17.8
    %
    
    
    (5,290
    )
    
    
    -17.3
    %
    
    
    (20,300
    )
    
    
    -22.9
    %
    
    
    (102,959
    )
    
    
    -100.2
    %Income tax benefit
    
    
    1,252
    
    
    
    2.5
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    850
    
    
    
    1.0
    %
    
    
    
    
    
    
    0.0
    %Loss from continuing operations
    
    
    (13,269
    )
    
    
    -27.0
    %
    
    
    (2,894
    )
    
    
    -17.8
    %
    
    
    (5,290
    )
    
    
    -17.3
    %
    
    
    (19,450
    )
    
    
    -22.0
    %
    
    
    (102,959
    )
    
    
    -100.2
    %Net loss per share from continuing operations
    
    $
    (0.80
    )
    
    
    
    
    
    $
    (0.18
    )
    
    
    
    
    
    $
    (0.33
    )
    
    
    
    
    
    $
    (1.21
    )
    
    
    
    
    
    $
    (6.40
    )
   Revenues
 Year Ended
    
    
    Four Months EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    Years ended August 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004(Unaudited)Hosting revenue
    
    $
    45,567
    
    
    $
    15,172
    
    
    $
    29,053
    
    
    $
    83,937
    
    
    $
    97,601Other revenue
    
    
    3,573
    
    
    
    1,120
    
    
    
    1,520
    
    
    
    4,671
    
    
    
    5,144Total revenue
    
    $
    49,140
    
    
    $
    16,292
    
    
    $
    30,573
    
    
    $
    88,608
    
    
    $
    102,745
 Year-Ended December 31, 2006 Compared to Year Ended August 31, 2005
  24




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Network Operating Costs
  Sales and Marketing
  Technical Support
  General and Administrative
   Bad Debt Expense
  Depreciation and Amortization
  25




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##### Table of Contents



Impairment of Investment in and Advances to WebSource Media
  Gain on Sale of Accounts
  Interest Income (Expense), net
  Income
Tax Benefit
  Loss From Discontinued Operations
    Four-Month
Period Ended December 31, 2005 Compared to the unaudited Four Months Ended December 31, 2004
  Revenues
   26




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##### Table of Contents



Network Operating Costs
  Sales and Marketing
  Technical Support
  General and Administrative
   Bad Debt Expense
  Depreciation and Amortization
  Restructuring Costs
  27




---



##### Table of Contents



Interest Income (Expense), net
  Loss from Discontinued Operations
   Year Ended August 31, 2005 Compared to Year Ended August 31, 2004
 Revenues
    Network Operating Costs
  Sales and Marketing
   28




---



##### Table of Contents



Technical Support
  General and Administrative
  Bad Debt Expense
  Depreciation and Amortization
  Restructuring Costs
  Goodwill Impairment
  Intangible Asset Impairment
  29




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##### Table of Contents



Interest Income (Expense), Net
  Liquidity and Capital Resources
 Four months endedDecember 31,
    
    
    December 31,2006
    
    
    2005Cash and cash equivalents
    
    
    13,288
    
    
    
    17,370Restricted cash
    
    
    7,828
    
    
    
    9,291Total cash, cash equivalents and marketable debt securities
    
    $
    21,116
    
    
    $
    26,661Cash (used in) provided by operating activities
    
    $
    (422
    )
    
    $
    (7,790
    )Cash (used in) provided by investing activities
    
    
    (1,487
    )
    
    
    10,405Cash used in financing activities
    
    
    (1,334
    )
    
    
    (1,090
    )Net (decrease) increase in cash
    
    $
    (3,243
    )
    
    $
    1,525
           Contractual Obligations
  Contractual Obligations (in thousands)
    
    Total
    
    1 year
    
    2-3 years
    
    4-5 yearsReal Property Leases
    
    $
    9,648
    
    
    $
    2,701
    
    
    $
    5,547
    
    
    $
    1,399Long-term Debt
    
    $
    3,874
    
    
    
    1,844
    
    
    
    1,937
    
    
    
    93Contractual Obligations
    
    $
    55
    
    
    
    55
    
    
    
    
    
    
    
    Operating Leases
    
    $
    73
    
    
    
    25
    
    
    
    36
    
    
    
    12Total Commitments
    
    $
    13,650
    
    
    $
    4,625
    
    
    $
    7,520
    
    
    $
    1,504
  30




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##### Table of Contents



Recently Issued Accounting Standards
   Off-Balance Sheet Arrangements
  Directors & Officers Insurance
   
 ITEM 7A . Quantitative And Qualitative Disclosures About Market Risk
  31




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32




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Index To consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    34Consolidated Financial Statements:Consolidated Statements of Operations for the Year Ended December 31, 2006, the Four-Month Period Ended December 31, 2005 and the Years Ended August 31, 2005 and 2004
    
    
    36Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    37Consolidated Statements of Shareholders Equity for the Year Ended December 31, 2006, the Four-Month Period Ended December 31, 2005 and the Years Ended August 31, 2005 and 2004
    
    
    38Consolidated Statements of Cash Flows for the Year Ended December 31, 2006, the Four-Month Period Ended December 31, 2005 and the Years Ended August 31, 2005 and 2004
    
    
    39Notes to Consolidated Financial Statements
    
    
    40Quarterly Financial Information (Unaudited)
    
    
    65
 33




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##### Table of Contents



Consolidated financial statements
   Internal control over financial reporting
 Internal
Control  Integrated Framework Internal Control  Integrated Framework
  34




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35




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##### Table of Contents



Web.com, Inc.
 
 Consolidated statements of operations
 (In thousands except per share amounts)
 Year Ended
    
    
    Four Months Ended
    
    
    Years Ended August 31,December 31, 2006
    
    
    December 31, 2005
    
    
    2005
    
    
    2004Revenues
    
    $
    49,140
    
    
    $
    16,292
    
    
    $
    88,608
    
    
    $
    102,745Operating costs and expenses:Network operating costs,exclusive of depreciation and amortization (1)
    
    
    9,010
    
    
    
    2,963
    
    
    
    22,903
    
    
    
    28,254Sales and marketing
    
    
    14,054
    
    
    
    3,411
    
    
    
    18,503
    
    
    
    19,948Technical support
    
    
    6,811
    
    
    
    2,348
    
    
    
    13,084
    
    
    
    17,965General and administrative
    
    
    24,684
    
    
    
    7,204
    
    
    
    30,489
    
    
    
    30,835Bad debt expense
    
    
    1,134
    
    
    
    373
    
    
    
    1,761
    
    
    
    3,690Depreciation and amortization
    
    
    5,415
    
    
    
    1,750
    
    
    
    21,239
    
    
    
    30,650Restructuring costs
    
    
    
    
    
    
    1,626
    
    
    
    2,616
    
    
    
    756Impairment of investment in and advances to WebSource Media
    
    
    3,488
    
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,587Asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,009Gain on sale of accounts
    
    
    (14
    )
    
    
    
    
    
    
    (1,210
    )
    
    
    Other expense (income), net
    
    
    61
    
    
    
    (165
    )
    
    
    (41
    )
    
    
    (192
    )Total operating costs and expenses
    
    
    64,643
    
    
    
    19,510
    
    
    
    109,344
    
    
    
    205,502Operating loss
    
    
    (15,503
    )
    
    
    (3,218
    )
    
    
    (20,736
    )
    
    
    (102,757
    )Interest income (expense), net
    
    
    982
    
    
    
    324
    
    
    
    436
    
    
    
    (202
    )Loss from continuing operations before income taxes
    
    
    (14,521
    )
    
    
    (2,894
    )
    
    
    (20,300
    )
    
    
    (102,959
    )Income tax benefit
    
    
    1,252
    
    
    
    
    
    
    
    850
    
    
    
    Loss from continuing operations
    
    
    (13,269
    )
    
    
    (2,894
    )
    
    
    (19,450
    )
    
    
    (102,959
    )Income (loss) from discontinued operations, net of tax
    
    
    (455
    )
    
    
    (146
    )
    
    
    (439
    )
    
    
    (1,704
    )Net loss
    
    $
    (13,724
    )
    
    $
    (3,040
    )
    
    $
    (19,889
    )
    
    $
    (104,663
    )Net loss per share, basic and diluted:Continuing operations
    
    $
    (0.80
    )
    
    $
    (0.18
    )
    
    $
    (1.21
    )
    
    $
    (6.40
    )Discontinued operations
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    (0.10
    )$
    (0.83
    )
    
    $
    (0.19
    )
    
    $
    (1.24
    )
    
    $
    (6.50
    )Number of shares used in per share calculation:Basic and diluted
    
    
    16,537
    
    
    
    16,272
    
    
    
    16,044
    
    
    
    16,096(1)   Excludes depreciation and
amortization as follows:Network operating costs
    
    $
    4,129
    
    
    $
    820
    
    
    $
    11,853
    
    
    $
    25,021
  36




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Web.com, Inc.
 
 consolidated balance sheets
 (In thousands)
 As of December 31,2006
    
    
    2005AssetsCurrent assetsCash and cash equivalents
    
    $
    13,288
    
    
    $
    17,370Trade receivables, net of allowance of $160 and $83, respectively
    
    
    2,074
    
    
    
    1,812Other receivables
    
    
    525
    
    
    
    1,180Prepaids and other current assets
    
    
    1,154
    
    
    
    2,026Restricted investments
    
    
    162
    
    
    
    276Total current assets
    
    
    17,203
    
    
    
    22,664Restricted investments
    
    
    7,666
    
    
    
    9,015Securities, held-to-maturity
    
    
    
    
    
    
    53Property plant and equipment, net
    
    
    4,128
    
    
    
    6,303Goodwill
    
    
    1,003
    
    
    
    921Intangibles, net
    
    
    5,233
    
    
    
    6,568Other assets
    
    
    3,195
    
    
    
    5,600Total assets
    
    $
    38,428
    
    
    $
    51,124Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    1,623
    
    
    $
    934Accrued expenses
    
    
    4,709
    
    
    
    6,232Accrued restructuring charges
    
    
    2,345
    
    
    
    4,416Current portion of long-term debt and capital lease obligations
    
    
    1,703
    
    
    
    1,693Deferred revenue
    
    
    4,687
    
    
    
    4,637Total current liabilities
    
    
    15,067
    
    
    
    17,912Long-term debt and capital lease obligations
    
    
    1,971
    
    
    
    3,850Deferred revenue, long-term
    
    
    314
    
    
    
    206Other liabilities
    
    
    120
    
    
    
    934Total liabilities
    
    
    17,472
    
    
    
    22,902Commitments and contingencies (notes 20 & 21)Shareholders equityCommon stock, $.01 par value, authorized 26 and 21 million shares,
issued and outstanding 16.8 and 16.6 million shares, respectively
    
    
    168
    
    
    
    166Additional capital
    
    
    331,949
    
    
    
    325,493Warrants
    
    
    2,128
    
    
    
    2,128Note receivable from shareholder
    
    
    (735
    )
    
    
    (735
    )Accumulated deficit
    
    
    (312,554
    )
    
    
    (298,830
    )Total shareholders equity
    
    
    20,956
    
    
    
    28,222Total liabilities and shareholders equity
    
    $
    38,428
    
    
    $
    51,124
  37




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##### Table of Contents



Web.com, Inc.
 
 consolidated statements of shareholders equity
 (In thousands)
 NoteReceivable
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Additional
    
    
    
    
    
    
    Deferred
    
    
    From
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Warrants
    
    
    Compensation
    
    
    Shareholder
    
    
    Deficit
    
    
    EquityBalance, August 31, 2003
    
    
    16,322
    
    
    $
    164
    
    
    $
    322,523
    
    
    $
    4,990
    
    
    $
    (1,046
    )
    
    $
    (2,735
    )
    
    $
    (171,238
    )
    
    $
    152,658Stock sold
    
    
    47
    
    
    
    
    
    
    
    226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226Repurchase and retirement of stock and
note receivable
    
    
    (273
    )
    
    
    (3
    )
    
    
    (1,997
    )
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    Retirement of warrants
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    (387
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    678Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104,663
    )
    
    
    (104,663
    )Balance, August 31, 2004
    
    
    16,096
    
    
    $
    161
    
    
    $
    321,091
    
    
    $
    4,603
    
    
    $
    (320
    )
    
    $
    (735
    )
    
    $
    (275,901
    )
    
    $
    48,899Stock sold
    
    
    266
    
    
    
    3
    
    
    
    610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    613Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    
    
    
    
    
    
    
    
    320Retirement of warrants
    
    
    
    
    
    
    
    
    
    
    1,797
    
    
    
    (1,797
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,889
    )
    
    
    (19,889
    )Balance, August 31, 2005
    
    
    16,362
    
    
    $
    164
    
    
    $
    323,498
    
    
    $
    2,806
    
    
    $
    
    
    
    $
    (735
    )
    
    $
    (295,790
    )
    
    $
    29,943Stock sold
    
    
    7
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Acquisition of WILLC, Inc.
    
    
    187
    
    
    
    2
    
    
    
    755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    757Amortization of stock based compensation
    
    
    
    
    
    
    
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    537Retirement of warrants
    
    
    
    
    
    
    
    
    
    
    678
    
    
    
    (678
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,040
    )
    
    
    (3,040
    )Balance, December 31, 2005
    
    
    16,556
    
    
    $
    166
    
    
    $
    325,493
    
    
    $
    2,128
    
    
    $
    
    
    
    $
    (735
    )
    
    $
    (298,830
    )
    
    $
    28,222Stock sold
    
    
    220
    
    
    
    2
    
    
    
    532
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    534Amortization of stock based compensation
    
    
    
    
    
    
    
    
    
    
    5,924
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,924Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,724
    )
    
    
    (13,724
    )Balance, December 31, 2006
    
    
    16,776
    
    
    $
    168
    
    
    $
    331,949
    
    
    $
    2,128
    
    
    $
    
    
    
    $
    (735
    )
    
    $
    (312,554
    )
    
    $
    20,956
  38




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##### Table of Contents



Web.com, Inc.
 
 CONSOLIDATED STATEMENTS
OF CASH FLOWS  (In thousands)
 Year Ended
    
    
    Four Months Ended
    
    
    Years EndedDecember 31,
    
    
    December 31,
    
    
    August 31,2006
    
    
    2005
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (13,724
    )
    
    $
    (3,040
    )
    
    $
    (19,889
    )
    
    $
    (104,663
    )Adjustments to reconcile net loss to net cash provided by(used in)
operating activities from continuing operations:Loss from discontinued operations
    
    
    455
    
    
    
    146
    
    
    
    439
    
    
    
    1,704Depreciation and amortization
    
    
    5,415
    
    
    
    1,750
    
    
    
    21,239
    
    
    
    30,650Bad debt expense
    
    
    1,134
    
    
    
    373
    
    
    
    1,761
    
    
    
    3,690Loss (Gain)
on sale of assets
    
    
    61
    
    
    
    
    
    
    
    (41
    )
    
    
    (159
    )Goodwill and asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,596Impairment of investment in and advances to WebSource Media
    
    
    3,488
    
    
    
    
    
    
    
    
    
    
    
    (Gain) / losses on sale of accounts
    
    
    (14
    )
    
    
    
    
    
    
    (1,210
    )
    
    
    Stock-based compensation
    
    
    5,924
    
    
    
    537
    
    
    
    320
    
    
    
    678Restructuring costs
    
    
    
    
    
    
    1,626
    
    
    
    2,616
    
    
    
    756Deferred
income taxes
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities
net of effect of acquisitions and dispositions:Receivables
    
    
    (741
    )
    
    
    (1,765
    )
    
    
    (837
    )
    
    
    (1,514
    )Income tax recoverable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    612Other current assets
    
    
    807
    
    
    
    692
    
    
    
    271
    
    
    
    (206
    )Accounts payable, accrued expenses and deferred revenue
    
    
    (3,186
    )
    
    
    (8,109
    )
    
    
    (6,613
    )
    
    
    (9,203
    )Cash (used in) provided by operating activities of continuing operations
    
    
    (422
    )
    
    
    (7,790
    )
    
    
    (1,944
    )
    
    
    (4,059
    )CASH FLOWS FROM INVESTING ACTIVITIESExpenditures for property, plant, and equipment
    
    
    (1,900
    )
    
    
    (1,110
    )
    
    
    (9,392
    )
    
    
    (11,892
    )Payment for purchase of WebSource Media
    
    
    (3,261
    )
    
    
    
    
    
    
    
    
    
    
    Cash received from sale of dedicated assets
    
    
    
    
    
    
    11,267Release of funds from escrow account from sale of accounts
    
    
    2,247
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from sale of accounts
    
    
    
    
    
    
    
    
    
    
    2,517
    
    
    
    Payment of fees on sale of dedicated accounts
    
    
    
    
    
    
    
    
    
    
    (338
    )
    
    
    Purchase of held-to-maturity investment securities
    
    
    
    
    
    
    (3
    )
    
    
    (50
    )
    
    
    Proceeds from held-to-maturity investment securities
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    1,500Purchases of auction rate securities
    
    
    
    
    
    
    
    
    
    
    (8,000
    )
    
    
    (7,500
    )Proceeds from auction rate securities
    
    
    
    
    
    
    
    
    
    
    20,525
    
    
    
    22,800Deposits of restricted cash and other deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,800
    )Net change in restricted investments
    
    
    1,461
    
    
    
    266
    
    
    
    1,335
    
    
    
    7,734Acquisitions, net of cash acquired
    
    
    (87
    )
    
    
    (15
    )
    
    
    
    
    
    
    242Cash (used in) provided by investing activities of continuing operations
    
    
    (1,487
    )
    
    
    10,405
    
    
    
    6,597
    
    
    
    10,084CASH FLOWS FROM FINANCING ACTIVITIESRepayments of debt and capital lease obligations
    
    
    (1,868
    )
    
    
    (1,115
    )
    
    
    (2,375
    )
    
    
    (11,536
    )Proceeds from issuance of common stock
    
    
    534
    
    
    
    25
    
    
    
    613
    
    
    
    226Cash used in financing activities of continuing operations
    
    
    (1,334
    )
    
    
    (1,090
    )
    
    
    (1,762
    )
    
    
    (11,310
    )Net cash (used in) provided by continuing operations
    
    
    (3,243
    )
    
    
    1,525
    
    
    
    2,891
    
    
    
    (5,285
    )Net cash used in discontinued operations (Revised  See note 2)Operating cash flows
    
    
    (839
    )
    
    
    (1,046
    )
    
    
    (1,203
    )
    
    
    (1,742
    )Investing cash flows
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financing cash flows
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total cash flows used in discontinued operations
    
    
    (839
    )
    
    
    (1,046
    )
    
    
    (1,203
    )
    
    
    (1,742
    )Net (decrease) increase in cash and cash equivalents
    
    
    (4,082
    )
    
    
    479
    
    
    
    1,688
    
    
    
    (7,027
    )Cash and cash equivalents at beginning of period
    
    
    17,370
    
    
    
    16,891
    
    
    
    15,203
    
    
    
    22,230Cash and cash equivalents at end of period
    
    $
    13,288
    
    
    $
    17,370
    
    
    $
    16,891
    
    
    $
    15,203Interest paid, net of amounts capitalized
    
    
    177
    
    
    
    77
    
    
    
    305
    
    
    
    927Non-cash investing and financing activities:Stock issued for WILLC acquisition
    
    
    
    
    
    
    757
    
    
    
    
    
    
    
    
  39




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##### Table of Contents



Web.com, Inc.
 
 notes to consolidated financial statements
 1. General
 Business
 History of operating losses
 Increase in authorized shares of common stock
 2. Summary of Significant Accounting Policies
 Basis of Presentation
 Use of estimates
 Revenue recognition -
 Basic and diluted income (loss) per share
 40




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
  Comprehensive income
 Financial instruments and concentration of credit risk
  Restricted investments
 Goodwill and other intangibles
 Property, plant and equipment
 41




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 Advertising
 Income taxes
 Stock-based employee compensation
   Changes to the Statement of Cash Flows Relating to Discontinued Operations
 Recently issued accounting standards
  3. Sale of Accounts
 Dedicated Accounts and Related Assets
  42




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
    Hostcentric Shared Accounts and Related Assets
    4. Discontinued Operations
  43




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
      5. Acquisitions
 Web Internet, LLC
    Fair Value(In Thousands)Current assets
    
    $
    373Property and equipment
    
    
    145Customer
account acquisitions
    
    
    470Trade names and trademarks
    
    
    4,000Goodwill
    
    
    921Current liabilities
    
    
    (3,040
    )Non-current liabilities
    
    
    (1,661
    )Net assets acquired
    
    $
    1,208
 WebSource Media, LLC
  44




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
   ex parte
      45




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
   6. Investment Securities
  7. Receivables
 As ofDecember 31,
    
    December 31,2006
    
    2005(In thousands)Trade receivables
    
    $
    2,234
    
    
    $
    1,895Allowance for doubtful accounts
    
    
    (160
    )
    
    
    (83
    )Non-trade
receivables  Peer 1
    
    
    316
    
    
    
    999Other
    
    
    209
    
    
    
    181$
    2,599
    
    
    $
    2,992
   Four-MonthsYear Ended
    
    Ended
    
    Years Ended August 31,December 31, 2006
    
    December 31, 2005
    
    2005
    
    2004(In thousands)
    
    (In thousands)
    
    (In thousands)Allowance for Doubtful AccountsBalance at beginning of period
    
    $
    83
    
    
    $
    34
    
    
    $
    381
    
    
    $
    373Additions charged to bad debt expense
    
    
    1,134
    
    
    
    373
    
    
    
    1,761
    
    
    
    3,690Reductions and write-offs
    
    
    (1,057
    )
    
    
    (324
    )
    
    
    (2,108
    )
    
    
    (3,682
    )Balance at end of period
    
    $
    160
    
    
    $
    83
    
    
    $
    34
    
    
    $
    381
 46




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 8. Property, Plant And Equipment
 As ofEstimated
    
    December 31,
    
    
    December 31,useful lives
    
    2006
    
    
    2005(In years)
    
    (In thousands)Computer equipment
    
    3
    
    $
    9,829
    
    
    $
    7,797Software
    
    2
    
    
    3,200
    
    
    
    4,336Office equipment
    
    5
    
    
    2,099
    
    
    
    1,984Leasehold improvements
    
    3-5
    
    
    1,687
    
    
    
    1,482Assets in progress
    
    
    
    
    144
    
    
    
    1,00216,959
    
    
    
    16,601Less: Accumulated depreciation
and amortization
    
    
    
    
    (12,831
    )
    
    
    (10,298
    )Property, plant and equipment, net
    
    
    
    $
    4,128
    
    
    $
    6,303
  9. Acquired Intangibles And Goodwill
     47




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 Four monthsYear Ended
    
    
    Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    August 31,
    
    
    August 31,2006
    
    
    2005
    
    
    2005
    
    
    2004(In thousands)Balance at beginning of period
    
    $
    921
    
    
    $
    
    
    
    $
    
    
    
    $
    66,646Goodwill acquired
    
    
    
    
    
    
    921
    
    
    
    
    
    
    
    Impairment write-down
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,646
    )Other adjustments
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    $
    1,003
    
    
    $
    921
    
    
    $
    
    
    
    $
    The following table summarizes intangible assets by asset class and related accumulated
amortization:As of December 31, 2006
    
    
    As of December 31, 2005Gross carrying
    
    
    Accumulated
    
    
    Gross carrying
    
    
    Accumulatedamount
    
    
    amortization
    
    
    amount
    
    
    amortization(In thousands)Amortizable intangible assets:Core technology
    
    $
    15,505
    
    
    $
    14,957
    
    
    $
    15,505
    
    
    $
    14,451Customer account acquisitions
    
    
    14,543
    
    
    
    14,496
    
    
    
    14,543
    
    
    
    14,073Customer relationships
    
    
    1,317
    
    
    
    1,317
    
    
    
    1,317
    
    
    
    1,317Trademarks
    
    
    7,770
    
    
    
    3,132
    
    
    
    7,770
    
    
    
    2,726Total
    
    $
    39,135
    
    
    $
    33,902
    
    
    $
    39,135
    
    
    $
    32,567Aggregate amortization expense:For the year ended December 31, 2006
    
    $
    1,335For the four months ended December 31, 2005
    
    
    
    
    
    
    
    
    
    $
    940Estimated amortization expense:For the year ended December 31, 2007
    
    $
    1,332For the year ended December 31, 2008
    
    
    667For the year ended December 31, 2009
    
    
    267For the year ended December 31, 2010
    
    
    267For the year ended December 31, 2011
    
    
    267Thereafter
    
    
    2,433Total estimated expense
    
    $
    5,233
 48




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 10. Other Assets
 As ofDecember 31,
    
    
    December 31,2006
    
    
    2005(In thousands)Directors and officers liability insurance deposit
    
    $
    2,800
    
    
    $
    2,800Funds held in escrow-sale of dedicated assets to Peer 1
    
    
    350
    
    
    
    2,800Other
    
    
    45
    
    
    
    Total Other Assets
    
    $
    3,195
    
    
    $
    5,600
  11. Accrued Expenses
  As ofDecember 31,
    
    
    December 31,2006
    
    
    2005(In thousands)Accrued payroll and related liabilities
    
    $
    1,595
    
    
    $
    806Accrued legal fees, legal settlements, and professional fees
    
    
    883
    
    
    
    681Other
    
    
    2,231
    
    
    
    4,745Total accrued expenses
    
    $
    4,709
    
    
    $
    6,232
 12. Restructuring And Facility Exit Costs
 2001 Plan
   49




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
    Property,
    
    
    
    
    
    EmployeeLease
    
    plant, and
    
    Other exit
    
    termination
    
    Goodwill andabandonments
    
    equipment
    
    costs
    
    benefits
    
    Intangibles
    
    Total(In thousands)Balance at August 31, 2000
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Plan charges
    
    
    9,404
    
    
    
    26,915
    
    
    
    3,528
    
    
    
    727
    
    
    
    69,704
    
    
    
    110,278Cash paid
    
    
    (683
    )
    
    
    
    
    
    
    
    
    
    
    (498
    )
    
    
    
    
    
    
    (1,181
    )Non-cash write downs
    
    
    
    
    
    
    (26,915
    )
    
    
    
    
    
    
    
    
    
    
    (69,704
    )
    
    
    (96,619
    )Balance at August 31, 2001
    
    $
    8,721
    
    
    $
    
    
    
    $
    3,528
    
    
    $
    229
    
    
    $
    
    
    
    $
    12,478Cash paid
    
    
    (1,625
    )
    
    
    
    
    
    
    (487
    )
    
    
    (229
    )
    
    
    
    
    
    
    (2,341
    )Other adjustments
    
    
    538
    
    
    
    
    
    
    
    (1,862
    )
    
    
    
    
    
    
    
    
    
    
    (1,324
    )Balance at August 31, 2002
    
    $
    7,634
    
    
    $
    
    
    
    $
    1,179
    
    
    $
    
    
    
    $
    
    
    
    $
    8,813Cash paid
    
    
    (1,701
    )
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    
    
    
    
    (1,900
    )Other adjustments
    
    
    (297
    )
    
    
    
    
    
    
    (980
    )
    
    
    
    
    
    
    
    
    
    
    (1,277
    )Balance at August 31, 2003
    
    $
    5,636
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,636Cash paid
    
    
    (2,192
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,192
    )Other adjustments
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178Balance at August 31, 2004
    
    $
    3,622
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,622Cash paid
    
    
    (2,072
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,072
    )Other adjustments
    
    
    2,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,217Balance at August 31, 2005
    
    $
    3,767
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,767Cash paid
    
    
    (541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (541
    )Balance at December 31, 2005
    
    $
    3,226
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,226Cash paid
    
    
    (1,496
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,496
    )Balance at December 31, 2006
    
    $
    1,730
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,730
 2003 Plan
   50




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
   Property,
    
    
    
    
    
    EmployeeLease
    
    plant, and
    
    Other exit
    
    terminationabandonments
    
    equipment
    
    costs
    
    benefits
    
    Total(In thousands)Balance at August 31, 2002
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Plan charges
    
    
    2,061
    
    
    
    1,317
    
    
    
    1,886
    
    
    
    1,317
    
    
    
    6,581Cash paid
    
    
    (2,130
    )
    
    
    (227
    )
    
    
    (426
    )
    
    
    (1,165
    )
    
    
    (3,948
    )Other adjustments
    
    
    79
    
    
    
    46
    
    
    
    (236
    )
    
    
    (121
    )
    
    
    (232
    )Non-cash write down
    
    
    
    
    
    
    (871
    )
    
    
    
    
    
    
    
    
    
    
    (871
    )Balance at August 31, 2003
    
    $
    10
    
    
    $
    265
    
    
    $
    1,224
    
    
    $
    31
    
    
    $
    1,530Cash paid
    
    
    (6
    )
    
    
    (236
    )
    
    
    (227
    )
    
    
    (31
    )
    
    
    (500
    )Other adjustments
    
    
    (4
    )
    
    
    (29
    )
    
    
    (453
    )
    
    
    
    
    
    
    (486
    )Balance at August 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    544
    
    
    $
    
    
    
    $
    544Cash paid
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )Other adjustments
    
    
    
    
    
    
    
    
    
    
    (532
    )
    
    
    
    
    
    
    (532
    )Balance at August 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 2004 Plan
   EmployeeLease
    
    terminationabandonments
    
    benefits
    
    Total(In thousands)Balance at August 31, 2003
    
    $
    
    
    
    $
    
    
    
    $
    Plan charges
    
    
    279
    
    
    
    785
    
    
    
    1,064Cash paid
    
    
    (72
    )
    
    
    (765
    )
    
    
    (837
    )Balance at August 31, 2004
    
    $
    207
    
    
    $
    20
    
    
    $
    227Other adjustments
    
    
    (18
    )
    
    
    
    
    
    
    (18
    )Cash paid
    
    
    (189
    )
    
    
    (20
    )
    
    
    (209
    )Balance at August 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
 51




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 2005 Transition Period Plan
   EmployeeLease
    
    
    Other
    
    
    terminationabandonments
    
    
    costs
    
    
    benefits
    
    
    TotalBalance at
August 31, 2004
    
    $
    
    
    
    $
    

    
    
    $
    
    
    
    $
    Plan charges
    
    
    
    
    
    
    950
    
    
    
    
    
    
    
    950Balance at
August 31, 2005
    
    $
    
    
    
    $
    950

    
    
    $
    
    
    
    $
    950Plan charges
    
    
    1,068
    
    
    
    
    
    
    
    786
    
    
    
    1,854Cash paid
    
    
    
    
    
    
    (750
    )
    
    
    (664
    )
    
    
    (1,414
    )Adjustments
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )Balance at December 31, 2005
    
    $
    1,068
    
    
    $
    
    
    
    $
    122
    
    
    $
    1,190Cash paid
    
    
    (453
    )
    
    
    
    
    
    
    (122
    )
    
    
    (575
    )Balance at December 31, 2006
    
    $
    615
    
    
    $
    
    
    
    $
    
    
    
    $
    615
 13. Other Liabilities
  14. Long-Term Debt And Capital Lease Obligations
 As of December 31,2006
    
    
    2005(In thousands)Capital lease obligations
    
    $
    
    
    
    $
    167Notes payable
    
    
    3,674
    
    
    
    5,3763,674
    
    
    
    5,543Less current portion
    
    
    (1,703
    )
    
    
    (1,693
    )Long-term debt and capital lease obligations
    
    $
    1,971
    
    
    $
    3,850
   52




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
   15. Warrants
   16. Stock purchase and incentive plans
      53




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
     Year Ended
    
    Four Months EndedDecember 31,
    
    December 31,2006
    
    2005Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    71.69
    %
    
    
    77.43
    %Risk-free interest rate
    
    
    4.83
    %
    
    
    4.14
    %Expected term (in years)
    
    5.8 years
    
    5.8 years
    54




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
   Fiscal year ended August 31,2005
    
    
    2004(In thousands)Net loss as reported
    
    $
    (19,889
    )
    
    $
    (104,663
    )Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects
    
    
    320
    
    
    
    678Deduct: Total stock-based employee compensation
expense determined under fair value method-
based methods for all awards, net of tax effects
    
    
    (2,361
    )
    
    
    (2,117
    )Proforma net loss
    
    $
    (21,930
    )
    
    $
    (106,102
    )Loss per share:Basic and diluted  as reported
    
    $
    (1.24
    )
    
    $
    (6.50
    )Basic and diluted  pro forma
    
    $
    (1.37
    )
    
    $
    (6.59
    )Weighted average shares outstandingBasic and diluted
    
    
    16,044
    
    
    
    16,096
  Fiscal year ended August 31,2005
    
    2004Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    74.08
    %
    
    
    32.0
    %Risk-free interest rate
    
    
    4.14
    %
    
    
    2.7
    %Expected term (in years)
    
    5.8 years
    
    3.0 years
  55




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 Weighted-
    
    Aggregate
    
    Weighted-AverageShares
    
    Average
    
    Intrinsic Value (1)
    
    Contractual Life(000s)
    
    Exercise Price
    
    (000s)
    
    Remaining in YearsOutstanding at December 31, 2005
    
    
    3,514
    
    
    $
    4.22Granted
    
    
    912
    
    
    $
    5.62Exercised
    
    
    (191
    )
    
    $
    2.81Expired
    
    
    (450
    )
    
    $
    10.40Forfeited
    
    
    (257
    )
    
    $
    3.15Outstanding at December 31, 2006
    
    
    3,528
    
    
    $
    3.98
    
    
    $
    744
    
    
    
    7.37Exercisable at December 31, 2006
    
    
    2,950
    
    
    $
    4.03
    
    
    $
    483
    
    
    
    7.13
 (1)
    
    The intrinsic value of a stock option is the amount by which the current market value of the
underlying stock exceeds the exercise price of the option.
  Weighted-AverageShares
    
    Grant-DateNonvested
Shares
    
    (000s)
    
    Fair ValueBalance at August 31, 2005
    
    
    1,922
    
    
    $
    1.53Granted
    
    
    881
    
    
    
    2.11Vested
    
    
    (303
    )
    
    
    1.57Balance at December 31, 2005
    
    
    2,500
    
    
    $
    1.73Granted
    
    
    912
    
    
    
    3.76Cancelled
    
    
    (428
    )
    
    
    2.90Vested
    
    
    (2,254
    )
    
    
    1.97Balance at December 31, 2006
    
    
    730
    
    
    $
    2.81
   56




---



##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage

    Weighted
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Number of
    
    Remaining Life

    Average
    
    Number of
    
    Exercise(In thousands, except per share amounts)
    
    Shares
    
    (Years)
    Exercise Price
    Shares
    
    
    Price$1.90
    
    
    83
    
    
    
    8.42
    
    
    
    1.90
    
    
    
    83
    
    
    $
    1.90$2.29
    
    
    1,875
    
    
    
    6.57
    
    
    
    2.29
    
    
    
    1,875
    
    
    
    2.29$2.55  $2.86
    
    
    358
    
    
    
    7.26
    
    
    
    2.73
    
    
    
    189
    
    
    
    2.69$2.90  $4.12
    
    
    355
    
    
    
    8.83
    
    
    
    3.39
    
    
    
    145
    
    
    
    3.24$4.24  $5.75
    
    
    210
    
    
    
    9.39
    
    
    
    4.74
    
    
    
    17
    
    
    
    4.25$5.93
    
    
    503
    
    
    
    9.25
    
    
    
    5.93
    
    
    
    503
    
    
    
    5.93$5.94  $19.90
    
    
    63
    
    
    
    5.78
    
    
    
    11.39
    
    
    
    58
    
    
    
    11.88$20.30  $39.40
    
    
    74
    
    
    
    3.84
    
    
    
    27.51
    
    
    
    74
    
    
    
    27.51$54.90  $132.70
    
    
    7
    
    
    
    3.08
    
    
    
    93.09
    
    
    
    6
    
    
    
    93.093,528
    
    
    
    7.37
    
    
    
    3.98
    
    
    
    2,950
    
    
    
    4.03
   Weighted-AverageShares
    
    Contractual Life(000s)
    
    Remaining in YearsOutstanding at December 31, 2005
    
    
    Awarded
    
    
    233Released
    
    
    (5
    )Forfeited
    
    
    (23
    )Outstanding at December 31, 2006
    
    
    205
    
    
    
    9.65
 17. Retirement Plan
   57




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Web.com, Inc.
 notes to consolidated financial statements
 18. RELATED PARTY TRANSACTIONS
      58




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 19. Income Taxes
  Four Months
    
    
    Years EndedYear Ended
    
    
    Ended
    
    
    August 31,December 31, 2006
    
    
    December 31, 2005
    
    
    2005
    
    
    2004(In thousands)
    
    
    (In thousands)
    
    
    (In thousands)
    
    
    (In thousands)Current:U.S. Federal
    
    $
    (1,157
    )
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    (119
    )
    
    
    
    
    
    
    (850
    )
    
    
    (1,276
    )
    
    
    
    
    
    
    (850
    )
    
    
    Deferred:U.S. Federal
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    State
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    Income tax (benefit) provision
    
    $
    (1,252
    )
    
    $
    
    
    
    $
    (850
    )
    
    $
    
   Four Months
    
    
    Years EndedYear Ended
    
    
    Ended
    
    
    August 31,December 31, 2006
    
    
    December 31, 2005
    
    
    2005
    
    
    2004(In thousands)
    
    
    (In thousands)
    
    
    (In thousands)
    
    
    (In thousands)U.S. federal income tax at statutory rate
    
    $
    (4,937
    )
    
    $
    (984
    )
    
    $
    (7,105
    )
    
    $
    (36,035
    )State taxes, net of federal benefit and state
tax credits
    
    
    (130
    )
    
    
    (88
    )
    
    
    (1,015
    )
    
    
    (5,148
    )Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,635Change in effective tax rate
    
    
    273
    
    
    
    8,232
    
    
    
    
    
    
    
    Valuation allowance
    
    
    3,280
    
    
    
    (6,690
    )
    
    
    7,270
    
    
    
    14,524Tax reserve reversals
    
    
    (1,276
    )
    
    
    
    
    
    
    
    
    
    
    Stock equity adjustments
    
    
    268
    
    
    
    31
    
    
    
    
    
    
    
    Investment
impairment
    
    
    1,117
    
    
    
    
    
    
    
    
    
    
    
    Net
operating loss adjustment
    
    
    
    
    
    
    (509
    )
    
    
    
    
    
    
    Other
    
    
    153
    
    
    
    8
    
    
    
    
    
    
    
    24Income tax (benefit) provision
    
    $
    (1,252
    )
    
    $
    
    
    
    $
    (850
    )
    
    $
    
 59




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
  As of December 31,2006
    
    
    2005(In thousands)Current deferred tax assets:Receivables and other allowances
    
    $
    56
    
    
    $
    31Accrued expenses
    
    
    1,251
    
    
    
    1,963Deferred revenue
    
    
    1,650
    
    
    
    1,718Accrued compensation and stock options
    
    
    301
    
    
    
    165Valuation allowance
    
    
    (3,244
    )
    
    
    (3,877
    )Total current deferred tax assets
    
    
    14
    
    
    
    Current deferred tax liabilitiesStock-based compensation
    
    
    (79
    )
    
    
    Total current deferred tax liabilities
    
    
    (79
    )
    
    
    Net current deferred tax liabilities
    
    
    (65
    )
    
    
    Noncurrent deferred tax assetsAcquired intangibles
    
    
    6,231
    
    
    
    7,053Property, plant and equipment
    
    
    562
    
    
    
    512Stock-based compensation
    
    
    1,847
    
    
    
    164Deferred revenue
    
    
    110
    
    
    
    76Other reserves
    
    
    19
    
    
    
    322Capital loss carryforward
    
    
    430
    
    
    
    430Net operating loss carryforwards
    
    
    121,311
    
    
    
    118,252Valuation allowance
    
    
    (129,934
    )
    
    
    (126,022
    )Total noncurrent deferred tax assets
    
    
    576
    
    
    
    787Noncurrent deferred tax liabilitiesAcquired intangibles
    
    
    (535
    )
    
    
    (787
    )Total noncurrent deferred tax liabilities
    
    
    (535
    )
    
    
    (787
    )Net noncurrent deferred tax assets
    
    $
    41
    
    
    $
    
       Year Ended
    
    
    Four monthsDecember 31,
    
    
    Ended
    
    
    Year Ended2006
    
    
    December 31, 2005
    
    
    August 31, 2005
    
    
    August 31, 2004Deferred Tax Asset Valuation Allowance
    
    
    
    
    
    
    
    
    
    
    
    
    (In thousands)Balance at beginning of year
    
    $
    129,898
    
    
    
    136,588
    
    
    $
    133,511
    
    
    $
    116,792Change in net cumulative tax differences
    
    
    3,280
    
    
    
    (6,690
    )
    
    
    3,077
    
    
    
    16,719Balance at end of year
    
    $
    133,178
    
    
    $
    129,898
    
    
    $
    136,588
    
    
    $
    133,511
 60




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 20. Commitments
  OperatingLeases andOther FutureMinimum
    
    
    Long-termCommitments
    
    
    debt(In thousands)2007
    
    
    2,782
    
    
    
    1,8442008
    
    
    2,786
    
    
    
    1,9372009
    
    
    2,797
    
    
    
    932010
    
    
    1,411
    
    
    
    Total
    
    $
    9,776
    
    
    $
    3,874
 21. CONTINGENCIES
       61




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Web.com, Inc.
 notes to consolidated financial statements
         62




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Web.com, Inc.
 notes to consolidated financial statements
      22. Geographic Information
  Year
    
    
    Four MonthsEnded
    
    
    Ended
    
    
    Years EndedRevenues by Geographic Area
    
    December 31,
    
    
    December 31,
    
    
    August 31,
    
    
    August 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004(Based on customer location)United States
    
    $
    46,169
    
    
    $
    15,204
    
    
    $
    77,850
    
    
    $
    91,173Non- U.S.
    
    
    2,971
    
    
    
    1,088
    
    
    
    10,758
    
    
    
    11,572Total
    
    $
    49,140
    
    
    $
    16,292
    
    
    $
    88,608
    
    
    $
    102,745
  Year Ended
    
    
    Four Months EndedDecember 31,
    
    
    December 31,
    
    
    Years ended August 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004Hosting revenue
    
    $
    45,567
    
    
    $
    15,172
    
    
    $
    83,937
    
    
    $
    97,601Other revenue
    
    
    3,573
    
    
    
    1,120
    
    
    
    4,671
    
    
    
    5,144Total revenue
    
    $
    49,140
    
    
    $
    16,292
    
    
    $
    88,608
    
    
    $
    102,745
 63




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##### Table of Contents



Web.com, Inc.
 notes to consolidated financial statements
 23. Transition Period Comparative Data
  For the four months endedDecember 31,
    
    December 31,2005
    
    2004(Unaudited)Revenues
    
    $
    16,292
    
    
    $
    30,573Operating loss
    
    
    (3,218
    )
    
    
    (5,385
    )Interest income (expense), net
    
    
    324
    
    
    
    95Net loss from continuing operations
    
    
    (2,894
    )
    
    
    (5,290
    )Income/(loss) from discontinued operations, net of tax
    
    
    (146
    )
    
    
    608Net loss
    
    $
    (3,040
    )
    
    $
    (4,682
    )Net income/(loss) per share, basic and diluted:Continuing operations
    
    $
    (0.18
    )
    
    $
    (0.33
    )Discontinued operations
    
    
    (0.01
    )
    
    
    0.04$
    (0.19
    )
    
    $
    (0.29
    )Number of shares used in per share calculation:Basic and diluted
    
    
    16,272
    
    
    
    16,016
 24. subsequent events
   64




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##### Table of Contents



Quarterly Financial Information (Unaudited)
 (in thousands, except per share information)
 Four MonthsYear Ended December 31, 2006

    
    
    Ended DecemberFirst
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    December 31,Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    2005(In thousands, except per share amounts)Revenues
    
    $
    12,262
    
    
    $
    12,053
    
    
    $
    12,348
    
    
    $
    12,477
    
    
    $
    16,292Loss from continuing operations
    
    
    (5,244
    )
    
    
    (5,727
    )
    
    
    (477
    )
    
    
    (1,821
    )
    
    
    (2,894
    )Net Loss
    
    
    (5,503
    )
    
    
    (5,713
    )
    
    
    (594
    )
    
    
    (1,914
    )
    
    ($
    3,040
    )Loss per share, basic and diluted:Continuing operations
    
    $
    (0.32
    )
    
    $
    (0.35
    )
    
    $
    (0.03
    )
    
    $
    (0.10
    )
    
    ($
    0.18
    )Discontinued operations
    
    
    (0.02
    )
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )$
    (0.34
    )
    
    $
    (0.35
    )
    
    $
    (0.04
    )
    
    $
    (0.10
    )
    
    ($
    0.19
    )First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(In thousands, except per share amounts)Year Ended August 31, 2005Revenues
    
    $
    23,061
    
    
    $
    22,622
    
    
    $
    22,307
    
    
    $
    20,618Loss from continuing operations
    
    
    (3,797
    )
    
    
    (4,183
    )
    
    
    (6,074
    )
    
    
    (5,396
    )Net Loss
    
    
    (3,196
    )
    
    
    (4,272
    )
    
    
    (6,247
    )
    
    
    (6,174
    )Loss per share, basic and diluted:Continuing operations
    
    $
    (0.24
    )
    
    $
    (0.26
    )
    
    $
    (0.38
    )
    
    $
    (0.33
    )Discontinued operations
    
    
    0.04
    
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.05
    )$
    (0.20
    )
    
    $
    (0.27
    )
    
    $
    (0.39
    )
    
    $
    (0.38
    )
 65




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##### Table of Contents



ITEM 9. Changes In And Disagreements With Accountants On Accounting And Financial
Disclosure







ITEM 9A. Controls And Procedures


Disclosure Controls and Procedures




Inherent Limitations




Changes in Internal Control over Financial Reporting




Managements report on internal control over financial reporting




66



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##### Table of Contents



Internal Control  Integrated Framework
 
 ITEM 9B. Other Information
  67




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##### Table of Contents



PART III
  
 Item 10. Directors And Executive Officers and corporate governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership Of Certain Beneficial Owners And Management
  
 Item 13. Certain Relationships And Related Transactions and director independence
  
 Item 14.
Principal Accountant Fees And Services
  68




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##### Table of Contents



PART IV
 
 ITEM 15. Exhibits and Financial Statement Schedules
 List of documents filed as part of this ReportFinancial Statements.Consolidated Financial Statements:Consolidated Statements of Operations for the Years Ended December 31, 2006, the
Four-Month Period Ended December 31, 2005, and the Years Ended August 31, 2005 and 2004Consolidated Balance Sheets as of December 31, 2006 and 2005Consolidated Statements of Shareholders Equity for the Year Ended December 31, 2006,
the Four-Month Period Ended December 31, 2005, and the Years Ended August 31, 2005 and
2004Consolidated Statements of Cash Flows for the Year Ended December 31, 2006, the
Four-Month Period Ended December 31, 2005, and the Years Ended August 31, 2005, and 2004Notes to Consolidated Financial StatementsReport of Independent Registered Public Accounting FirmQuarterly Financial Information (Unaudited)Financial Statement Schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the Schedules, or because the
information required is included in the financial statements and notes thereto.
  FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number2.12(1)
    
    Asset Purchase Agreement dated
    
    8-K
    
    9/7/05
    
    2.1as of August 31, 2005 by and
between Peer 1 Acquisition
Corporation and Interland, Inc.2.13 (1)
    
    Asset Purchase Agreement
    
    8-K
    
    11/30/05
    
    2.1between Interland, Inc., Web
Internet, LLC and William Pemble
dated November 29, 20052.14(1)(2)
    
    Agreement and Plan of
    
    8-K
    
    5/23/06
    
    2.1Merger dated as of May 19, 2006,
by and among WebSource Media,
LLC, Marc Smith, Web Astro
Acquisition, L.P., and Web.com,
Inc.3.01
    
    Unofficial Restated Articles of
    
    10-Q
    
    5/31/02
    
    3.01Incorporation of Registrant (as
amended through April 24, 2002)3.01(b)
    
    Articles of Amendment to
    
    10-K
    
    8/31/03
    
    3.01(b)Articles of Incorporation of
Registrant3.01(c)
    
    Articles of Merger,
    
    8-K
    
    3/21/06        3
    
    .01(c)effective March 20, 2006
 E-1




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number3.01(d)
    
    Amendment to Articles of
    
    8-K
    
    4/3/06        3
    
    .01(d)Incorporation, dated March 31,
20063.01(e)
    
    Certificate of Designation,
    
    8-K
    
    8/7/06
    
    3.1Rights and Preferences of Series
A Junior Participating Preferred
Stock, as filed with the
Secretary of State of Minnesota
on August 7, 20063.02
    
    Unofficial Restated Bylaws of
    
    10-Q
    
    5/31/02
    
    3.02the Registrant (as amended
through April 24, 2002)4.01
    
    Form of Stock Certificate of the
    
    10-K
    
    8/31/01
    
    3.04Registrant4.03
    
    August 30, 2002 Registration
    
    S-3
    
    9/24/02
    
    4.03Rights Agreement by and among
Interland, Inc., Spire Capital
Partners, L.P., Spire
Investment, L.L.C., and
Waller-Sutton Media Partners,
L.P.4.04
    
    August 30, 2002 Stock
    
    S-3
    
    9/24/02
    
    4.04Restriction Agreement by and
among Spire Capital Partners,
L.P., Spire Investment, L.L.C.,
and Waller-Sutton Media
Partners, L.P.4.05
    
    March 28, 2002 Amendment to
    
    10-Q
    
    5/31/02
    
    10.112Stock Rights Agreement by and
among Interland, Inc., Bryan
Heitman and Gabriel Murphy4.06
    
    July 11, 2002 Amendment to Stock
    
    S-3/A
    
    9/24/02
    
    4.06Rights Agreement by and among
Interland, Inc., Bryan Heitman
and Gabriel Murphy4.07
    
    December 31, 2002 Amendment to
    
    S-3/A
    
    3/17/03
    
    4.07Stock Rights Agreement by and
among Interland, Inc., Bryan
Heitman and Gabriel Murphy4.08
    
    Form of Warrant
    
    S-3
    
    1/22/03
    
    4.074.09
    
    Form of Rights Certificate
    
    8-K
    
    8/7/06
    
    4.14.10
    
    Rights Agreement dated as
    
    8-K
    
    8/7/06
    
    4.2of August 4, 2006, by and
between Web.com, Inc. and Wells
Fargo Shareowner Services, as
Rights Agent
 E-2




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.35(a)+
    
    Micron Electronics 1995 Stock
    
    S-8
    
    1/14/00
    
    4.1Option Plan, as amended through
August 29, 200110.35(b)+
    
    Form of Notice of Grant for
    
    10-K
    
    8/31/01
    
    10.35(b)Micron Electronics 1995 Stock
Option Plan10.35(c)+
    
    Interland 1995 Stock Option
    
    10-K
    
    8/31/01
    
    10.35(c)Plan, as amended August 30, 200110.35(d)+
    
    Form of Notice of Grant for
    
    10-K
    
    8/31/01
    
    10.35(d)Interland 1995 Stock Option Plan10.36(a)+
    
    Micron Electronics 1995 Employee
    
    10-Q
    
    6/1/95
    
    10.36Stock Purchase Plan, as amended
through August 5, 200110.36(b)+
    
    Interland 1995 Employee Stock
Purchase Plan, as amended August
6, 2001 and April 24, 2002
    
    10-K
    
    11/15/04
    
    10.36(b)10.36(c)+
    
    Interland, Inc. 2002 Equity
    
    S-8
    
    10/3/03
    
    4.1Incentive Plan10.38+
    
    Form of Indemnification
    
    10-K
    
    8/31/95
    
    10.38Agreement between the Registrant
and its officers and directors10.39+
    
    Form of Six-Month Termination
    
    10-K
    
    8/31/95
    
    10.39Agreements for certain officers
of the Registrant10.42
    
    Amended and Restated Component
    
    8-K
    
    9/10.99
    
    10.42Recovery Agreement, dated
effective September 2, 1999,
between the Registrant and MTI10.44+
    
    Form of Twelve-Month Termination
    
    10-K
    
    8/28/97
    
    10.44Agreements for certain officers
of the Registrant10.45+
    
    Form of Two-Year Termination
    
    10-K
    
    8/28/97
    
    10.45Agreements for certain officers
of the Registrant10.47+
    
    Form of Employment and
    
    10-Q
    
    2/26/98
    
    10.47Non-compete Agreement, with
12-month termination provision,
for certain officers of the
Registrant10.48+
    
    Form of Employment and
    
    10-Q
    
    2/26/98
    
    10.48Non-compete Agreement, with
6-month termination provision,
for certain officers of the
Registrant
 E-3




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.56+
    
    Form of Employment, Severance
    
    10-K
    
    9/3/98
    
    10.56and Non-compete Agreement for
Certain Officers of the
Registrant10.58+
    
    The Registrants Executive
    
    10-Q
    
    12/2/99
    
    10.58Incentive Plan, as amended10.65
    
    Executive Sales Representative
    
    8-K
    
    9/10/99
    
    10.65Agreement effective September 2,
1999, between the Registrant and
Micron Semiconductor Products,
Inc.10.68+
    
    Amended Non Qualified Stock
    
    10-Q
    
    6/1/00
    
    10.68Option Agreement, dated April 6,
200010.69+
    
    Amended Non Qualified Stock
    
    10-Q
    
    6/1/00
    
    10.69Option Agreement, dated April 6,
200010.70(a)+
    
    HostPro, Inc. 2000 Equity
    
    10-K
    
    8/31/00
    
    10.70Incentive Plan I10.70(b)+
    
    HostPro, Inc. 2000 Equity
    
    10-K
    
    8/31/00
    
    10.71Incentive Plan II10.70(c)+
    
    Form of Notice of Grant for
    
    10-K
    
    8/31/00
    
    10.72HostPro, Inc. 2000 Equity
Incentive Plans10.70(d)+
    
    Form of Notice of Grant for
    
    10-K
    
    8/31/00
    
    10.73HostPro, Inc. 2000 Equity
Incentive Plans10.70(e)+
    
    Micron Electronics 2001 Equity
    
    10-Q
    
    5/31/01
    
    10.89Incentive Plan, as amended as of
March 22, 200110.70(f)+
    
    Interland 2001 Equity Incentive
    
    10-K
    
    8/31/01
    
    10.70(f)Plan, as amended August 6, 200110.70(g)+
    
    Form of Notice of Grant for
    
    10-K
    
    8/31/01
    
    10.70(g)Interland 2001 Equity Incentive
Plan10.76
    
    Amendment Number 1 to Amended
    
    10-Q
    
    11/30/00
    
    10.76and Restated Component Recovery
Agreement, dated November 16,
2000, between the Registrant and
MTI10.77
    
    Commercial Lease, dated March
    
    8-K
    
    4/10/01
    
    99.0122, 2001, between MTI and the
Registrant10.78
    
    Commercial Sublease, dated March
    
    8-K
    
    4/10/01
    
    99.0222, 2001, between MTI and the
Registrant10.79+
    
    The Registrants Severance Plan
    
    10-Q
    
    3/1/01
    
    10.79for Employees  2001 Amendment
and Restatement10.80+
    
    The Registrants Change in
    
    10-Q
    
    3/1/01
    
    10.80Control Severance Plan10.81+
    
    HostPro, Inc. 2000 Incentive
    
    10-Q
    
    3/1/01
    
    10.81Plan II  Notice of Grant to
Joel Kocher
 E-4




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.84+
    
    Retention Agreement between the
    
    10-Q
    
    3/1/01
    
    10.84Registrant and Sid Ferrales,
dated as of December 1, 200010.89
    
    MTI Shareholder Agreement dated
    
    10-Q
    
    4/10/01
    
    2.01as of March 22, 2001 between the
Registrant and MTI10.93
    
    Operating lease for property
    
    10-Q
    
    5/31/01
    
    10.92located at 1450 Eagle Flight
Way, Boise, Idaho, dated as of
January 7, 200010.94
    
    Operating lease for property
    
    10-Q
    
    5/31/01
    
    10.93located at 3326 160th Avenue SE,
Bellevue, Washington, dated as
of December 16, 199910.96(a)+
    
    Interland-Georgia Stock
    
    S-8
    
    9/17/01
    
    4.05(a)Incentive Plan10.96(b)+
    
    First Amendment to
    
    S-8
    
    9/17/01
    
    4.05(b)Interland-Georgia Stock
Incentive Plan10.96(c)+
    
    Second Amendment to
    
    S-8
    
    9/17/01
    
    4.05(c)Interland-Georgia Stock
Incentive Plan10.96(d)+
    
    Third Amendment to
    
    S-8
    
    9/17/01
    
    4.05(d)Interland-Georgia Stock
Incentive Plan10.96(e)+
    
    Fourth Amendment to
    
    S-8
    
    9/17/01
    
    4.05(e)Interland-Georgia Stock
Incentive Plan10.101(a)
    
    Amended and Restated Lease
    
    S-1/A
    
    5/18/00
    
    10.22(a)Agreement between
Interland-Georgia and 101
Marietta Street Associated dated
September 29, 199910.101(b)
    
    First Amendment to Amended and
    
    S-1/A
    
    5/18/00
    
    10.22(b)Restated Lease Agreement between
Interland-Georgia and 101
Marietta Street Associates dated
November 23, 199910.104(a)
    
    SunTrust Plaza Garden Offices
    
    10-K
    
    8/31/01
    
    10.104(a)Lease Agreement by and between
SunTrust Plaza Associates, LLC
and Interland-Georgia dated May
15, 200010.104(b)
    
    First Amendment to Lease
    
    10-K
    
    8/31/01
    
    10.104(b)Agreement by and between
SunTrust Plaza Associates, LLC
and Interland-Georgia dated
September 27, 200010.105
    
    Amended and Restated
    
    10-K
    
    8/31/01
    
    10.105Registration Rights Agreement
between the Registrant, MTI and
certain shareholders of
Interland named therein dated
August 6, 2001
 E-5




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.109
    
    February 8, 2002 Investor Rights
    
    10-Q
    
    2/28/02
    
    10.109Agreement by and among
Interland, Inc., PAR Investment
Partners, L.P., Hartford Capital
Appreciation Fund, and certain
other stockholders10.112
    
    Amendment to Stock Rights
    
    10-Q
    
    5/31/02
    
    10.112Agreement dated as of March 28,
2002 by and among10.115(2)
    
    Microsoft Services Provider
    
    10-K
    
    8/31/02
    
    10.115License Agreement dated as of
January 15, 200210.116
    
    Escrow Agreement dated as of
    
    10-Q
    
    5/31/03
    
    10.1June 13, 2003, by and among
Interland, Inc., William B.
Bunting, Steve Harter, and
Dominique Bellanger, and
SunTrust Bank, a Georgia banking
corporation (the Escrow Agent)10.118+
    
    Employment Agreement dated as of
    
    10-K/A
    
    8/31/03
    
    10.118January 13, 2003 by and between
Interland and William Jones10.119+
    
    Employment Agreement dated as of
    
    10-K/A
    
    8/31/03
    
    10.119August 5, 2002 by and between
Interland and Tiffani D. Bova10.120
    
    Promissory Note in the principal
    
    10-Q
    
    2/29/04
    
    10.117amount of $4,780,475 dated
February 11, 2004 in favor or
U.S. Bancorp Oliver-Allen
Technology Leasing.10.121(2)
    
    Hosting Provider Program
    
    10-Q
    
    2/29/04
    
    10.118Agreement dated February 24,
2004 between INTERLAND, INC. and
Red Hat, Inc.10.124+
    
    Director Compensation Policy
    
    8-K
    
    4/19/05
    
    10.1effective as of June 1, 200510.125+
    
    Amendment to Stock Options,
    
    8-K
    
    5/31/05
    
    10.125dated as of May 24, 200510.126+
    
    Form of Employment Agreement by
    
    8-K
    
    6/13/05
    
    10.126and between Interland, Inc. and
Juan G. Troncoso and Richard A.
Pitrolo10.126(b)+
    
    Amendment No. 1 to
    
    8-K
    
    11/7/06
    
    10.2Employment Agreement dated
November 1, 2006, by and among
Web.com, Inc. and Gonzalo
Troncoso
 E-6




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.127+
    
    Form of Employment Agreement
    
    8-K
    
    8/3/05
    
    10.1dated as of July 28, 2005 with
Jeffrey Stibel10.127(b)+
    
    Amendment No. 1 to
    
    8-K
    
    11/7/06
    
    10.1Employment Agreement dated
November 1, 2006, by and among
Web.com, Inc. and Jeffrey M.
Stibel10.128+
    
    Form of Employment Agreement
    
    8-K
    
    8/3/05
    
    10.2dated as of July 28, 2005 with
Peter Delgrosso10.129+
    
    Form of Option Agreement dated
    
    8-K
    
    8/3/05
    
    10.3as of July 28, 2005 with Jeffrey
Stibel10.130
    
    Form of Subscription Agreement
    
    8-K
    
    8/3/05
    
    10.4dated July 28, 2005 with Jeffrey
Stibel10.131+
    
    Form of Option Agreement dated
    
    8-K
    
    8/3/05
    
    10.5as of July 28, 2005 with Peter
Delgrosso10.132
    
    Form of Separation Agreement and
    
    8-K
    
    8/3/05
    
    10.6Mutual Release of Claims
executed August 3, 2005 by and
between Interland, Inc. and Joel
Kocher10.133
    
    Separation Agreement and Full
    
    8-K
    
    8/11/05
    
    10.1Release of Claims executed
August 3, 2005 by and between
Interland, Inc. and William J.
Jones10.134
    
    Escrow Agreement dated as of
    
    8-K
    
    9/7/05
    
    10.1August 31, 2005 by and between
Interland, Inc., Peer 1
Acquisition Corporation and
SunTrust Bank10.135+
    
    Interland, Inc. 2005 Equity
    
    8-K
    
    9/7/05
    
    10.2Incentive Plan10.135+
    
    Form of Notice of Grant to be
    
    8-K
    
    9/7/05
    
    10.3issued under the 2005 Equity
Incentive Plan10.137
    
    Settlement and Mutual
    
    8-K
    
    11/3/05
    
    10.1Release Agreement between
Interland, Inc. and Novell, Inc.
dated October 28, 200510.138
    
    Intellectual Property
    
    8-K
    
    11/30/05
    
    10.1Purchase and Sale Agreement
between Interland, Inc. and Web
Service Company, Inc. dated
November 29, 2005
 E-7




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.139
    
    Agreement between
    
    8-K
    
    12/7/05
    
    10.1Interland, Inc. and Joel Kocher
dated December 6, 200510.140
    
    Settlement Agreement
    
    8-K
    
    12/13/05
    
    10.1between Interland, Inc. and
WilTel Communications, LLC dated
August 31, 2005 and signed
December 8, 200510.141
    
    Amended and Restated Line
    
    8-K
    
    12/29/05
    
    10.1of Credit Note and Loan
Agreement by Interland, Inc.
dated December 22, 200510.142
    
    Security and Pledge
    
    8-K
    
    12/29/05
    
    10.2Agreement among Interland, Inc.,
WDC Holdco, inc. and Web Service
Company, Inc. dated December 22,
200510.143+
    
    Employment Agreement
    
    8-K
    
    12/29/05
    
    10.3between William Pemble and
Interland, Inc. dated December
23, 200510.144
    
    Restricted Stock Agreement
    
    8-K
    
    12/29/05
    
    10.4between Interland, Inc. and
William Pemble dated December
23, 200510.145
    
    Restricted Stock Agreement
    
    8-K
    
    12/29/05
    
    10.5between Interland, Inc. and
Kathy Trahey dated December 23,
200510.146
    
    Restricted Stock Agreement
    
    8-K
    
    12/29/05
    
    10.6between Interland, Inc. and
Vivek Chawla dated December 23,
200510.147
    
    Restricted Stock Agreement
    
    8-K
    
    12/29/05
    
    10.7between Interland, Inc. and
Robert Friedman dated December
23, 2005
 E-8




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.148+
    
    First Amendment to
    
    8-K
    
    2/8/06
    
    10.1Employment Agreement and Release
of Claims between Interland,
Inc. and William Pemble dated
February 7, 200610.149
    
    First Amendment to
    
    8-K
    
    2/8/06
    
    10.2Transition Services Agreement
between Interland, Inc. and Web
Internet, LLC dated February 7,
200610.150+
    
    Employment Agreement of
    
    8-K
    
    4/3/06
    
    10.1Joseph A. Newcomb10.151+
    
    Restricted Stock Agreement
    
    8-K
    
    4/3/06
    
    10.2of Joseph A. Newcomb dated March
31, 200610.152+
    
    Stock Option Agreement of
    
    8-K
    
    4/3/06
    
    10.3Joseph A. Necomb10.153+
    
    Form of Notice of Grant
    
    8-K
    
    4/3/06
    
    10.4(Restricted Stock) under the
2006 Equity Incentive Plan10.154+
    
    Form of Notice of Grant
    
    8-K
    
    4/3/06
    
    10.5(Fully-Vested Option) under the
2006 Equity Incentive Plan10.155+
    
    2006 Equity Incentive Plan
    
    8-K
    
    4/3/06        1
    
    0.13610.156
    
    Registration Rights
    
    8-K
    
    5/23/06
    
    10.1Agreement dated as of May 19,
2006, by and among Web.com,
Inc., Marc Smith and Keith
Hendrick as Stockholders
Representatives, and the
Investors named therein10.157
    
    Consideration Agreement
    
    8-K
    
    5/23/06
    
    10.2dated as of May 19, 2006, by and
among WebSource Medica, LLC,
Marc Smith, Web Astro
Acquisition, L.P., and Web.com,
Inc.
 E-9




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##### Table of Contents



FILEDINCORPORATED BY
    
    PREVIOUSLY
    
    
    FILEDREFERENCE
    
    ON FORM 10-K
    
    
    HEREWITHExhibit
    
    Description
    
    Form
    
    Date
    
    Number10.158
    
    Form of Warrant Agreement
    
    8-K
    
    5/23/06
    
    10.3dated as of May 19, 2006 , by
and among Web.com, Inc. and each
of the Investors14.00
    
    Code of Ethics
    
    10-Q
    
    4/28/05
    
    14.021.01
    
    Subsidiaries of the Registrant
    
    
    
    
    
    
    
    
    
    
    
    
    X23.01
    
    Consent of Independent
    
    
    
    
    
    
    
    
    
    
    
    
    XRegistered Public Accounting
Firm24.01
    
    Power of
Attorney
    
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Chief Financial
    
    
    
    
    
    
    
    
    
    
    
    
    XOfficer pursuant to Section 302
of the Sarbanes-Oxley Act of
200232.1
    
    Certification of Chief Executive
    
    
    
    
    
    
    
    
    
    
    
    
    XOfficer under Section 906 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Financial
    
    
    
    
    
    
    
    
    
    
    
    
    XOfficer under Section 906 of the
Sarbanes-Oxley Act of 200231.1
    
    Certification of Chief Executive
    
    
    
    
    
    
    
    
    
    
    
    
    XOfficer pursuant to Section 302
of the Sarbanes-Oxley Act of
2002
 
 *
    
    INLD indicates the exhibit is incorporated by reference to the Registrants prior filings
with the SEC. INLD indicates the exhibit is incorporated by reference to Interland-Georgias
prior filings with the SEC,+
    
    Management contract or compensatory arrangement or plan.(1)
    
    Schedules and exhibits have been omitted from the exhibit. A list of omitted schedules and
exhibits is set forth immediately following the table of contents of the exhibit. Copies will
be provided to the Commission upon request.(2)
    
    The Company has requested confidential treatment for portions of this exhibit pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934. E-10




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##### Table of Contents



WEB.COM, INC.Date:
March 20, 2007
    
    /s/  Gonzalo TroncosoBy:
    
    Gonzalo TroncosoExecutive Vice President
and Chief Financial Officer
  Signature
    
    Title
    
    Date/s/  Jeffrey M. StibelJeffrey M. Stibel
    
    Chief
Executive Officer
(principal executive officer)
    
    March 20, 2007/s/  Gonzalo TroncosoGonzalo Troncoso
    
    Executive
Vice President and
Chief Financial Officer
(principal accounting officer)
    
    March 20, 2007/s/  John B. BalousekJohn B. Balousek
    
    Director
    
    March 20, 2007/s/  John Patrick CrecineJohn Patrick Crecine
    
    Director
    
    March 20, 2007/s/  Alex KazeraniAlex Kazerani
    
    Director
    
    March 20, 2007/s/  Robert T. SlezakRobert T. Slezak
    
    Director
    
    March 20, 2007/s/  Seymour HoltzmanSeymour Holtzman
    
    Chairman
of the Board of Directors
    
    March 20, 2007/s/  Efrem GerszbergEfrem Gerszberg
    
    Director
    
    March 20, 2007
 E-11