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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(Mark One)

Commission file number:  000-29121

Securities Registered Pursuant to Section 12(b) of the Act: NONE

Securities Registered Pursuant to Section 12(g) of the Act:

COMMON STOCK $0.001 PAR VALUE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes   o No   x

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

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2002 based upon the closing sale price of such shares on June 28, 2002 as reported on the NASDAQ SmallCap Market, was approximately $4,929,784.

As of February 28, 2003, there were 2,201,449 shares of the registrant’s common stock outstanding.

Portions of the registrant’s definitive Proxy Statement for the registrant’s May 2003 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, are incorporated by reference into Part III of this annual report on Form 10-K.

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IGN ENTERTAINMENT, INC.

FORM 10-K

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IGN, IGN.com, IGN Insider, IGN Unplugged, and their respective logos are the trademarks of IGN Entertainment, Inc.  All other trademarks or trade names appearing elsewhere in this annual report are the property of their respective holders.

FORWARD-LOOKING STATEMENTS

          Certain statements contained in this annual report on Form 10-K that are not statements of historical facts are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such statements are based on beliefs of management, as well as assumptions made by and information currently available to management.  Such statements are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions.  All statements, other than statements of historical fact, included in this annual report on Form 10-K regarding our strategy, future operations, financial position, estimated revenue, projected costs, prospects, plans and objectives of management are forward-looking statements.  Words such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘anticipates,’’ ‘‘projects,’’ ‘‘predicts,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘seeks’’ and ‘‘estimates’’ and variations of these words and similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These statements are only predictions and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The risks, uncertainties and assumptions referred to above include our unproven business model, history of losses, prospects for obtaining additional financing, and other risks that are described from time to time in our Securities and Exchange Commission reports, including but not limited to the items discussed in “Risk Factors” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 in this report.  We assume no obligation and do not intend to update these forward-looking statements.

PART I

          IGN is an Internet media company that operates a network of web sites that comprise the Internet’s leading information and entertainment destination for teen and young adult gamers. Our web sites are primarily focused on editorial content, products and services relating to computer and video gaming and other forms of video and audio entertainment.  As an Internet media company, our revenue is derived principally from:

          We provide our business customers with various advertising and marketing solutions, targeted communications to our audience and contextual integration of their products and services into our content. We serve our audience by providing both free and subscription based editorial content, including previews and reviews of the latest video games and accessories; an online community forum including message boards, classifieds and interactive games; an online store with access to purchase third party merchandise and other related services.

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          We organize our web sites around networks and channels that target different segments of the teen and young adult demographic. Currently, our networks are:

          As of December 31, 2002, IGN had approximately 5.6 million registered users, the substantial majority of which were male, located in the United States, and between 13 and 34 years old.  By offering our business customers targeted access to a large audience with these attractive demographic characteristics, we seek to generate marketing and advertising revenue in a variety of forms.  IGN offers its business customers a full spectrum of integrated marketing solutions and products include fixed placement and impression-based advertising and sponsorships, permission marketing, custom publishing, e-commerce, direct e-mail marketing and content licensing.  In addition, we offer our customers opt-in registration, e-mail and newsletter programs to reach our audience directly.  We also license our content and provide full-service hosting and editorial production. 

          Prior to 2002, in addition to IGN, we operated several online networks, including ChickClick.com and HighSchoolAlumni.com; each of which targeted different demographics.  In response to difficult market conditions, during 2001 we began to focus on our IGN networks and subsequently ceased operations of our ChickClick.com network in the fourth quarter of 2001 and sold our HighSchoolAlumni.com network in January 2002.   

Content

          We believe that the large number of the users who visit our networks do so for the compelling content contained on the web sites that make up each network. This content is derived primarily from our  in-house editorial staff and freelance writers. As of December 31, 2002, our editorial staff consisted of approximately 25 professional in-house writers and 20 freelance writers.

          Our network of web sites can broadly be classified into video games and young adult lifestyle and entertainment. Our video games related web sites, which make up the majority of our content, offer previews, reviews, interviews, screen shots, movie samples, codes, and guides for games across all platforms including PlayStation2, XBox, Game Boy Advance and GameCube. Within our entertainment related web sites, we provide content on electronic accessories, movies, television, books, science fiction, music and cars.  We also provide our users with engaging services such as e-mail, discussion boards, contests and promotions, and search capabilities.

Revenue Sources

          Our business model provides our business customers with a wide range of advertising and marketing programs to reach our audience.  These programs include fixed placement and impression-based advertisements, sponsorships, fixed slotting fees, variable lead generation, content licenses, commerce partnerships as well as a variety of other marketing programs.  

          We also derive revenue from subscription fees we charge for access to our premium content and services.  Additionally, as part of our partnership with a third party fulfillment vendor, we receive a percentage of items sold through our online store.

          No customer accounted for 10% of our 2002, 2001 or 2000 revenues.  Virtually all of our 2002, 2001 and 2000 revenue was derived from sources within in the United States.

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Advertising and marketing programs

          Since our inception we have focused in part on generating a majority of our advertising revenue from sponsors and merchants seeking an integrated and cost-effective means to reach the teen and young adult demographic via the Internet. We derive a significant portion of our advertising revenue from fixed placement and impression-based advertisements that are displayed on pages throughout our networks. From each of these, viewers can hyperlink directly to the advertiser’s own web site or to custom mini-sites within our networks, thus providing the advertiser the opportunity to interact directly with a potential customer. Under these contracts, we sell time-based fixed placements or we guarantee advertisers a minimum number of impressions for which we receive a fixed fee.  We believe that we are a leader in offering new and evolving web-based advertising units and programs, which helps our customers to achieve higher awareness and recognition with our audience.

          Our sponsorship arrangements are designed to achieve broad marketing objectives such as brand promotion, brand awareness, product introductions and online research. To help sponsors achieve these goals, we develop individually tailored sponsorship programs that may include any combination of fixed placement or impression based advertisements, promotions, contests, sponsorships of specific categories and direct merchandise slotting opportunities. We also develop content to support the marketing initiatives of advertisers. In addition, sponsors may communicate with their customers on our message boards and through chats, and may gain insights into their customers’ preferences and buying habits through polls and special events. Sponsorships allow us to cater to the specific goals of advertisers in the areas of impressions, product research, market research, new product launches, list development, product information, repositioning, new account openings, lead generation and transactions. Our sponsorship agreements generally have terms of up to one year with revenue based upon contract duration. 

Subscriptions

          In the second quarter of 2001, we began offering subscriptions for premium content and services.   For the years ended December 31, 2002 and 2001, approximately 15% and 5% of our revenue was from subscriptions.  Because cash is received upfront and subscription revenue is amortized over the subscription period (generally one month to one year), we had $715,000 and $703,000 of unrecognized deferred subscription revenue on our balance sheets as of December 31, 2002 and 2001, respectively.  At December 31, 2002, we had over 73,000 subscribers, or approximately 1.3% of our registered users.

Sales

          As of December 31, 2002, we had a direct sales organization of 12 sales professionals. Our sales teams consult regularly with advertisers and agencies on design and placement of advertisements, sponsorships and promotions across our networks. We also have several sales professionals who concentrate primarily on strategic sponsorships and promotions, seeking to establish relationships with senior level executives and to develop larger partnership packages linking our users with the partner’s brand.  In addition, several individuals in our product marketing group work directly with advertisers who wish to develop user opt-in registration or call- to-action programs on a fee-per-user or per-action generated basis. 

          At December 31, 2002, we also had 11 sales support and advertising operations staff who provide advertisers with information and expertise intended to help them market their products and services more effectively to teens and young adults.  We currently have sales offices in New York City, Brisbane and Los Angeles.

Marketing

          During the first half of 2000, to increase awareness of our various network brands, we targeted potential advertising customers in a variety of online and offline media, including newspapers, print

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magazines, outdoor locations such as commuter rail lines and bus tails, and online sites.  During the second half of 2000 through 2001 we implemented cost reduction programs to reduce our operating losses and eliminated most of our marketing initiatives. Despite the decreased initiatives, page views on our networks continue to be significant, which we believe is due to the viral nature of our audience and the expanding gaming market.

          We engage in media and public relations campaigns on an ongoing basis with business and financial contacts and key industry analysts. Our public relations efforts are a key component of our overall marketing and brand awareness strategy. We plan to continue to develop a media outreach program based on market research that we organize and conduct with third parties. We also manage tradeshow attendance  and public relations activities targeted to the consumer press to encourage publicity on new channels, services and partners. The primary purpose of our public relations activities is to increase our share of our target audience and increase overall visibility of our networks to customers and potential customers.

          In addition, as of December 31, 2002, we had 11 employees in investor and public relations, creative services and product management.

Technology

          Our web site hosting infrastructure is co-located at our headquarters in Brisbane and at Cable & Wireless Internet Data Center in Santa Clara, California. Cable & Wireless is responsible for providing us with a high-speed, scalable, fault-tolerant Internet connection, clean power and physical security. Packaged software enables full text search, bulk e-mail delivery, web serving and traffic analysis. We developed our membership, personalization, advertising delivery and community software using standard application servers and Oracle database systems. Our advertising selection and management system is DoubleClick’s NetGravity software. We have developed traffic analysis software to compute industry-standard and advanced metrics.

          Our editorial infrastructure is located at our headquarters in Brisbane and at Cable & Wireless.  We internally developed our editorial, publishing and certain user services software.  We believe this software gives us a strategic advantage in allowing a rapid and standardized approach to collecting, storing, and using a variety of content and services from a variety of sources.  We may also quickly reconfigure page layout to reflect editorial and advertising standards, and changing preferences across our networks.  We believe our hosting and editorial networks are fault-tolerant, scalable and economical.

          Our significant non-derivable data is presently split between a storage array at our headquarters in Brisbane and a storage array at Cable & Wireless, or in backup data stored off-site.

Competition

          The demand for Internet advertising revenue has decreased significantly over the past several years.  Moreover, the market for Internet users and online advertisers is highly fragmented, rapidly changing and characterized by thousands of competitors.  With no substantial barriers to entry, we believe that the number of Internet companies competing for web-based advertising revenue will increase greatly in the future. We also provide certain of our content and services to our customers on a subscription fee basis while many of our competitors offer similar content and services at a lesser fee or free of charge.  Companies or sites that are primarily focused on targeting teens and young adult gamers include CNET, Yahoo!, AOL, MSN, Terra Lycos, Electronic Arts and MTV. In addition to these direct competitors, we will likely face competition in the future from:

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          We also could face competition in the future from traditional media companies, a number of which, including Time Warner, CBS and NBC, have combined with, made acquisitions of, or made investments in significant Internet companies. Finally, we compete for advertisers and advertising revenue with traditional forms of media, such as television, newspapers, magazines and radio.

          Many of our current and potential competitors have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition and larger existing customer bases than we do. These competitors are able to undertake more extensive marketing campaigns for their brands and services, adopt more aggressive advertising pricing policies, can offer content and services similar to ours at a lesser or no charge to users, and make more attractive offers to potential employees, distribution partners, commerce companies, advertisers and third-party content providers. Further, these competitors may develop communities that are larger or more desirable than ours or that achieve greater market acceptance than ours. In addition, many of our current advertising customers and strategic partners also have established collaborative relationships with certain of our competitors or potential competitors and other frequently visited web sites. Accordingly, we cannot assure you that:

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          We cannot assure you that we will be able to compete successfully against our current or future competitors. Competitive pressures faced by us may have a material adverse effect on our business, our financial condition and the results of our operations.

Proprietary Rights and Licensing

          We regard our copyrights, trademarks, service marks, trade secrets, technology and other intellectual property rights as important to our success. In particular, we rely upon our domain names and trademarks to increase brand awareness among our users and advertisers. We currently have registered approximately 110 domain names, including all names currently in use across our networks. Our trademarks will remain in effect indefinitely, but only to the extent that we continue to use them in commerce. We have not applied for the registration of all of our trademarks and service marks and may not be successful in obtaining the trademarks and service marks that we have applied for. 

          To protect our intellectual property rights, we rely on a combination of copyright and trademark laws, trade secret protection, and confidentiality agreements with employees and third parties and protective contractual provisions. Prior to entering into discussions with potential content providers and affiliates regarding our business and technologies, we generally require that they enter into nondisclosure agreements with us. If these discussions result in a license or other business relationship, we also generally require that the agreement setting forth each party’s rights and obligations include provisions for the protection of our intellectual property rights. Licensees of these rights may take or fail to take actions that would diminish the value of our rights or reputation.

          Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our products or services or obtain and use information that we regard as proprietary. The laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States. We do not currently have any patents or patent applications pending in any foreign country. In addition, others may be able independently to develop substantially equivalent intellectual property. If we do not protect our intellectual property effectively, our business could suffer.

Employees

          As of December 31, 2002, we had a total of 84 full-time employees, including 29 in sales and marketing, 11 in engineering and development, 34 in production and content and 10 in finance and administration.  Average 2002 headcount by department was 23 in sales and marketing, 10 in engineering, 28 in production and content and 11 in general and administrative.

          Other than as described in our Proxy Statement for our May 2003 Annual Meeting of Stockholders, none of these individuals is bound by an employment agreement. None of our employees is represented by a labor union or collective bargaining agreement.  We have not experienced any work stoppages and we consider our relations with our employees to be good.

          Our principal editorial, sales, marketing, development and administrative offices presently occupy approximately 18,550 square feet in Brisbane, California, under a lease that expires in February 2004.  We believe that this one building will be adequate for our needs in the foreseeable future.  We also lease sales and support offices in New York and Los Angeles.

          In addition to the properties mentioned above, we are under lease obligations for abandoned facilities in New York and Connecticut.  The obligations for these leases have been accounted for under SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” (see Note 5. “Restructuring and Asset Impairment Charges” in Item 8. of this report).

          We are not a party to any material legal proceedings.

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          No matters were submitted to a vote of security holders during the fourth quarter of 2002.

          The following table presents information regarding our executive officers as of February 28, 2003:

          Mark A. Jung has served as our Chief Executive Officer since February 1999 and as a director since our incorporation in January 1999. He also served as our President from February 1999 through October 2000.  Prior to joining us, from July 1997 to January 1999, he served as an independent industry consultant to various companies. From February 1992 to July 1997, he co-founded and served as Chief Executive Officer, a director and, from February 1996 to July 1997, Chairman of Worldtalk Communications Corporation, an Internet security company. Mr. Jung holds a Bachelor of Science degree in electrical engineering from Princeton University and a Master of Business Administration from Stanford University.

          Kenneth H. Keller has served as our Vice President, Engineering since March 1999. From January 1999 to March 1999, he served as a consultant to us. Prior to joining us, from May 1996 to December 1998, he was a self-employed business consultant, entrepreneur and investor. From April 1995 to April 1996, he served as Director of Development of Excite, Inc., an Internet media company. From January 1995 to April 1995, Mr. Keller was between occupations. Mr. Keller holds a Bachelor of Science degree in mathematics from Carnegie Mellon University and a Master of Science degree and Ph.D. in computer science from the University of California at Berkeley.

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PART II

          Our common stock is traded on the NASDAQ SmallCap market under the symbol “IGNX”; from July 25, 2001 through May 10, 2002 it had traded under the symbol “SNOW”.  From March 20, 2000, to July 24, 2001, our common stock was traded on the NASDAQ National Market under “SNOW”.  Prior to March 20, 2000, there was no public market for our common stock.  Our stock was moved from the NASDAQ National Market to the SmallCap Market due to our failure to maintain NASDAQ National Market minimum listing criteria.  The following table sets forth, for the periods indicated, the high and low closing sales prices per share of the common stock as reported on the NASDAQ National Market and NASDAQ SmallCap Market during the applicable periods, as adjusted for our one-for-three and one-for-six reverse stock splits, which were effective March 6, 2001 and September 24, 2001, respectively: 

          On February 28, 2003, the closing price of our common stock was $6.12 per share.  As of this date, there were approximately 82 holders of record of our common stock.  This number does not include the number of persons whose stock is held in nominee, or “street name”, accounts through brokers.

Dividend Policy

          We have never declared or paid any cash dividends on our capital stock.  We presently intend to retain future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future.

          The following table of selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes to those statements and other financial information included elsewhere in this Form 10-K.

          The following consolidated statement of operations data for each of the five years ended December 31, 2002, and the consolidated balance sheet data as of the years then ended are derived from our audited consolidated financial statements and those of our predecessor division of Imagine Media.  From our inception as a division of Imagine Media in January 1997 through our incorporation on January 6, 1999, our financial statement information is presented on a carved-out basis derived from the historical books and records of Imagine Media.  Imagine Media’s corporate accounting systems were not designed to track cash receipts and payments and liabilities on a division-specific basis.  For 1998 and for the period

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from January 1, 1999 through our date of incorporation on January 6, 1999, our financial statements include all revenue and expenses directly attributable to IGN, including an allocation of the costs of facilities, salaries, and employee benefits based on relative headcount.  Additionally, incremental administrative, finance and management costs have been allocated to IGN.  All of the allocations reflected in the 1998 and 1999 statements are based on assumptions that management believes are reasonable under the circumstances.  However, these allocations and estimates are not necessarily indicative of the costs that would have resulted if IGN had operated on a stand-alone basis.

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         Certain statements contained in this Form 10-K that are not statements of historical facts are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on beliefs of management, as well as assumptions made by and information currently available to management. Such statements also are based on current expectations, estimates and projections, beliefs and assumptions about our industry. All statements, other than statements of historical fact, included in this Form 10-K, regarding our strategy, future operations, financial position, estimated revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. Words such as “may,” “will,” “should,” “anticipates,” “projects,” “predicts,” “expects,” “intends,” “plans,” “believes,” “seeks,” “continues” and “estimates” and variations of these words and similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements are only predictions and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The risks, uncertainties and assumptions referred to above include our unproven current business model, history of losses, prospects for obtaining additional financing and other risks that are described from time to time in our SEC reports, including but not limited to the items discussed in “Risk Factors” set forth below.

          Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. IGN undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, or to explain why actual results differ. Readers should carefully review the risk factors described in this section below and any subsequently filed SEC reports.

          The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 6, Selected Financial Data, Item 8, Financial Statements and Supplementary Data and Item 15, Exhibits, Financial Statement Schedules and Reports on Form 8-K.  This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.  Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those discussed below and elsewhere in this report.  We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. 

Overview

          IGN’s business model, focus and sources of revenue have significantly changed since our inception. Our response to the difficult market conditions of 2001 was to focus on our core strengths and eliminate certain of our operations.  Commencing in the fourth quarter of 2001, we focused our business on our IGN.com entertainment and gaming network and virtually all of 2002 revenue was derived from IGN-related advertising sales and subscriptions.  We have diversified our revenue by adding new product lines, including a subscription-based access model and an online game store. We have significantly reduced operating costs, mainly by reducing headcount, renegotiating our facilities leases, decreasing marketing efforts and reducing the number of our affiliates.  However, we still have not achieved profitability on an annual basis.

          Our operating activities to date have been focused on enhancing the quality of our content and services; expanding our audience and the usage of our services; establishing relationships with users and the companies who want to reach this large web-centric audience; building sales momentum and marketing our networks and IGN brands; developing our computer software and hardware infrastructure; and growing our subscriber base.

          Due in part to the financial difficulties experienced by Internet and Internet-related companies and reductions in advertising budgets of many companies that advertise on the Internet, we cannot assure you

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that our revenue will grow or that we will ever achieve or maintain profitability. Further, our experience is that trends in advertising spending are often unpredictable and subject to seasonality.  We anticipate that unpredictability in advertising spending and weakness in advertising demand will continue until overall business conditions improve and advertising expenditures rebound.  Accordingly, we anticipate that we will incur additional operating losses on a quarterly or annual basis.

          In this Forms 10-K we present supplemental weighted average share data for our 2000 and 1999 fiscal years.  This supplemental presentation assumes the conversion of all shares of preferred stock into common, effective as to the original issue date for the preferred stock.   Additionally, in our earnings releases and investor conference calls we provide supplemental consolidated financial information that excludes from our reported earnings and earnings per share the effects of certain expenses such as the amortization of goodwill, stock-based compensation, restructuring costs and a gain on the sale of assets.  This supplemental information is reported as pro forma earnings and pro forma earnings per share in addition to information that is reported based on generally accepted accounting principles in the United States (“GAAP”).  We believe that such pro forma operating results provide additional measures of our operational performance as it excludes certain non-cash and other expenses that we believe are not necessarily indicative of our on-going operations.  We urge readers to review and consider carefully GAAP financial information contained within our SEC filings and in our earnings releases.

Critical Accounting Policies

          The discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with GAAP.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate estimates, including those related to revenue recognition, bad debts, goodwill and restructuring.  Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

          We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue recognition 

         Our revenue is principally generated from short-term contracts for various sizes and types of time-based fixed placement and impression-based advertisements. In accordance with GAAP, the recognition of these revenues is partly based on our assessment of the probability of collection of the resulting accounts receivable balance. As a result, the timing or amount of revenue recognition may have been different if different assessments of the probability of collection of accounts receivable had been made at the time the transactions were recorded in revenue.

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Collectibility of accounts receivable

          Our management must make estimates of the collectibility of our accounts receivable, both for purposes of determining whether revenue may be recognized on a given arrangement, and to determine the adequacy of our allowance for doubtful accounts. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms when evaluating whether to recognize revenue on a given arrangement and when evaluating the adequacy of the allowance for doubtful accounts. The use of different estimates or assumptions could produce different decisions regarding revenue recognition and allowance balances.  If our estimates of collectibility are inaccurate or if the financial condition of our customers were to deteriorate, subsequent to the date of our arrangements with them, this could result in an impairment of their ability to make payments and we may be required to make additional allowances. 

Valuation of goodwill

          We assess the impairment of goodwill assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

          When we determine that the carrying value of goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Significant judgement is involved in both the estimation of future cash flows, as well as the discount rate used in the analysis.

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Restructuring charges

          As of December 31, 2002 we carried an accrual for the unpaid portion of restructuring charges we expensed in the third quarter of 2002 relative to our excess New York and Connecticut facilities.  Significant factors used in calculating this accrual include estimates of sublease income, vacancy rates and brokerage costs.  Changing economic conditions in future periods could lead management to revise its estimates which could result in adjustments to our estimated obligations under these lease arrangements.

Recent Accounting Pronouncements

          In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a segment of a business. SFAS No. 144 was effective for fiscal years beginning after December 15, 2001, with earlier application encouraged.  We have adopted SFAS No. 144 as of January 1, 2002 and did not record any asset impairment charges in 2002; however, future impairment reviews may result in periodic write-downs.

          In June 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities.”  SFAS No. 146 addresses the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities.  The scope of SFAS No. 146 also includes (1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS No. 146 will be effective for financial statements issued for fiscal years beginning after December 31, 2002, with earlier application encouraged. Management elected to early adopt the standard effective July 1, 2002 which has not had a material effect on operations. 

          In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, “Guarantor’s Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others.”  FIN No. 45 clarifies the guarantor’s requirements relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees and requires the guarantor to recognize at the inception of a guarantee in a liability for the fair value of the guarantee obligation.  FIN No. 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued.  The provisions for the initial recognition and measurement of guarantees are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002.  We have adopted the disclosure requirements for our financial statements included in this form 10-K. The accounting profession and regulatory agencies continue to discuss various provisions of this pronouncement with the objective of providing additional guidance on its application. These discussions and the issuance of any new interpretations, once finalized, could lead to an unanticipated impact on our future financial results.  Therefore, although we currently do not believe these provisions will have a material effect on our operating results or financial position, we will continue to evaluate the impact of FIN 45.

          In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment to FASB Statement No. 123, Accounting for Stock-Based Compensation.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. We have no current plans to adopt the accounting provisions of SFAS No. 123 and, therefore, the adoption of SFAS No. 148 will not have a material impact on our financial position or results of operations.

Results of Operations for Years Ended December 31, 2002, 2001 and 2000

          Our total 2002 revenue was $11,350,000, an increase of $1,663,000, or 17% from 2001.  The increase was primarily due to increased advertising spending from our major advertisers in the video game industry and to increased subscription revenue from a larger subscriber base.  This increase was partially offset by the loss of revenues from a larger ChickClick.com and HighSchoolAlumni.com networks, which were sold or abandoned by January 2002.  Subscription revenue as a percentage of total revenue was approximately 15% and 5% in 2002 and 2001, respectively.

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          Our total 2001 revenue was $9,687,000, a decrease of $11,555,000, or 54%, from 2000. The decline in 2001 revenue from 2000 was largely due to an industry-wide weakness in the online advertising market and the associated decrease in marketing and advertising spending by this market segment. Many of our 2000 customers did not continue or renew their advertising and marketing programs with us in 2001. Specifically, a large portion of our 2000 revenue was from “dot.coms”, who significantly reduced their online advertising spending in 2001 or were no longer in business. Our subscription model was not implemented until 2001. 

          We currently believe that 2003 revenues will increase over 2002 revenues; however, given the current unpredictability in advertising spending and weakness in advertising demand and our subscriptions model is new and evolving, we cannot assure you that we will maintain 2002 revenue levels in future periods.

          Cost of revenue consists primarily of expenses related to hosting fees associated with operating our web sites, costs of third-party fulfillment technologies, amounts owed to our affiliates for advertising and marketing placed on their web sites and costs of content and community tools.

          During the fourth quarter of 2000, to better reflect the affiliates’ relative size and importance to our business in view of the cost/benefit of the relationships, we began to renegotiate, terminate or let expire many of our affiliate contracts and as of the second quarter of 2002 virtually all relationships had been terminated.  Costs associated with our affiliates comprised 2%, 35% and 60% of our 2002, 2001 and 2000, total cost of revenue, respectively.

          Cost of revenue was $1,348,000 in 2002, a decrease of $1,613,000, or 55% from 2001. Cost of revenue in 2001 was $2,961,000 a decrease of $8,891,000, or 75%, from 2000.  These decreases reflected a reduction in the number of affiliates, lower bandwidth costs due to a more favorable hosting contract with our outside service provider, and less reliance upon third party content. 

          We currently believe that cost of revenue will increase slightly in absolute dollars for the full year 2003 as compared to 2002. 

Operating Expenses

          We categorize operating expenses into production and content, engineering and development, sales and marketing, general and administrative, stock-based compensation, amortization of goodwill, restructuring and impairment charges and gain on sale of assets. Total operating expenses for 2002 were $21,335,000, a decrease of $16,332,000 or 43% from 2001.  Total 2001 operating expenses were $37,667,000, a decrease of $38,118,000, or 50% from 2000. In both comparative periods, the decline in operating expenses was primarily a result of our headcount reductions and expense control efforts including the restructuring of our facility leases and reduction in advertising spending.

          We currently believe that each of production and content, engineering and development, sales and marketing and general and administrative expenses will increase slightly for the full year 2003 as compared to 2002.

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          Production and content expenses consist primarily of payroll and related expenses for editorial, artistic and production staff; payments to freelance writers and artists; telecommunications and computer-related expenses for the creation of content for our web sites; and corporate overhead cost allocations.

          Production and content expenses were $3,704,000 in 2002, a decrease of $3,323,000, or 47%, from 2001.  Production and content expenses were $7,027,000 in 2001, a decrease of $4,815,000, or 41%, from 2000.  These decreases were due primarily to the reduction of our editorial, artistic and production staff and efforts to reduce usage of freelance writers, artists and computer-related expenses for the creation of content of our web sites. Production and content expenses also decreased in both comparative periods as a result of the restructuring of our facility leases. These reductions came as a response to lower revenue levels; specifically, we eliminated certain channels within our networks and in the fourth quarter of 2001 we curtailed operations of our HighSchoolAlumni.com and our ChickClick.com networks.  Virtually all of our 2002 production and content expense related to our IGN.com network.

          Engineering and development expenses consist primarily of personnel and related costs; consultant and outside contractor costs; software and hardware maintenance; depreciation costs for our development and programming efforts, including internal information services costs; and corporate overhead cost allocations. To date, all engineering and development expenses have been expensed as incurred.

          Engineering and development expenses were $3,330,000 in 2002, a decrease of $3,077,000, or 48%, from 2001.  Engineering and development expenses were $6,407,000, a decrease of $3,047,000, or 32%, from 2000.  In both comparative periods, the decreases were due primarily to decreased depreciation as certain equipment became fully depreciated, the reduction of engineering staff and reduced or discontinued equipment support and maintenance agreements.

          Sales and marketing expenses consist primarily of personnel and related costs for our direct sales force; product management and advertising operations support personnel; marketing staff; and corporate overhead cost allocations. In addition, these expenses include the costs of tradeshows and marketing activities. 

          Sales and marketing expenses were $5,741,000 in 2002, a decrease of $4,381,000, or 43%, from 2001.  This decrease was primarily due to our reduction of sales and marketing staff.

          Sales and marketing expenses were $10,122,000 in 2001, a decrease of $28,256,000, or 74% from 2000.  This decrease was due primarily to our reduction of marketing initiatives and sales and marketing staff.  Specifically, during early 2000, we conducted a national television, radio and outside media campaign to increase awareness of IGN among our target audience and our prospective customers.  During the second half of 2000 IGN, as part of our overall cost control efforts, we eliminated virtually all advertising and marketing initiatives.

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          General and administrative expenses consist primarily of personnel and related costs for corporate functions including accounting and finance, human resources, facilities and legal as well as corporate overhead costs allocations.

          General and administrative expenses were $2,136,000 in 2002, a decrease of $2,109,000, or 50%, from 2001. This decrease was primarily due to a reduction in finance and human resources staff, decreased finance and human resources consulting services and decreased legal fees.

          General and administrative services were $4,245,000 in 2001, a decrease of $1,726,000, or 29%, from 2000.  This decrease was due largely to the general reduction in accounting and finance, human resources and other administrative staff in response to reductions in staff in other functional areas.  Additionally, during the first quarter of 2000 we recorded an expense associated with a one-time, non-cash contribution of 5,556 shares of our common stock, with a fair value of $1,000,000, to a charitable foundation. 

          In July 2002, Rick Boyce resigned as president of IGN and joined our Board of Directors.  The Board of Directors approved an extension of the exercise period for Mr. Boyce’s then vested options through his tenure as a director.   A one-time stock-based compensation charge of $141,000 was recorded in the third quarter of 2002 for the difference between the exercise price of the vested options and the fair market value of the stock on the date of the extension.  In the first quarter of 2002, we recorded stock-based compensation expense of $41,000 primarily due to employees who had certain portions of their stock option vesting accelerated as part of their termination packages.

          Prior to 2002, stock-based compensation expense mainly represented the amortized aggregate difference between the exercise price of stock options granted prior to becoming a public market company, and the deemed fair market value of the underlying stock as of the original grant date.  We initially recorded this aggregate difference as deferred stock-based compensation on the balance sheet and amortized the difference over the life of the respective options using a graded amortization method; any unamortized portion was reversed upon an option’s cancellation.  As of December 31, 2001, we had fully expensed any deferred stock-based compensation recorded with respect to these types of transactions. 

          Certain option awards granted in the past are accounted for as variable awards and, accordingly, may result in stock-based compensation charges in future periods, if our stock price exceeds the exercise price of these awards.

          Prior to December 31, 2001, we amortized goodwill over its expected useful life, generally three to five years.

          In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets,” which became effective January 1, 2002, requiring the use of a nonamortization approach to account for

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purchased goodwill and certain intangibles. Under this nonamortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead will be reviewed for impairment and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. We adopted this accounting standard as of January 1, 2002.  No impairment charges were recorded during 2002; however, future impairment reviews may result in periodic write-downs.  As of December 31, 2002, the balance of our goodwill was $1,949,000.

          During 2001, the Board of Directors approved and we implemented a restructuring program driven by the decline in revenue from 2000 levels and correspondingly, our need to improve our cost structure by consolidating excess facilities, decreasing headcount and exiting our non-IGN.com networks.

          IGN recorded 2002 restructuring charges of $7,356,000 which consisted of $7,283,000 in facility-related charges and $73,000 in severance-related charges.  In 2001, IGN recorded restructuring charges of $4,171,000 which consisted of $1,771,000 in facility-related charges, $728,000 in severance-related charges and $1,672,000 in other asset impairment charges.

          We expect these restructuring activities will result in annual operating savings of approximately $790,000, compared with 2002.

Facilities  Facility-related charges of $7,283,000 in 2002 were attributable to the abandonment and buyout of our excess Brisbane headquarters facility lease and the abandonment and subletting of our New York and Connecticut sales facilities.  In the first quarter of 2002, we amended the lease for our Brisbane headquarters where we reduced our leased square footage and reduced the term of our lease commitment.  In connection with this amendment, we recorded a facility-related restructuring charge of $4,959,000 which consisted of a lease buyout charge and the write-off of certain leasehold improvements.  In the third quarter of 2002, we recorded facility-related restructuring charges of $2,324,000 representing the abandonment of our excess New York and Connecticut facilities.   This facility-related charge consisted of the write-off of certain leasehold improvements with the majority being attributable to the remaining rent obligations offset by estimated sublease income. The estimated costs of abandoning these leased facilities, including estimated sublease income, were based primarily on market information.  As of December 31, 2002, we had an accrued restructuring liability of $1,551,000 which represents the discounted difference between approximately $5,400,000 in remaining rental obligations offset by approximately $3,700,000 in estimated sublease income.  Actual future cash requirements could differ materially from the accrual at December 31, 2002, particularly if actual sublease income is significantly different from the current estimate. The remaining facility-related liability is expected to be paid-off by 2010.

          Our facility-related restructuring charges of $1,771,000 in 2001 were attributable to the abandonment of some excess facility capacity under our Brisbane headquarters lease consisting primarily of rent obligations associated with this excess facility capacity.

Other Impairment   In 2001, we ceased operating certain of our websites.  We had acquired the content of these websites through the acquisition of two companies.  At the time we ceased operating these websites, we had assets of $1,672,000 representing unamortized goodwill that had been recorded as part of the purchase of these two companies.  Because we did not expect future cash flows from these websites, the entire unamortized goodwill of $1,672,000 was expensed.

          We may incur additional restructuring charges in the future in connection with our ongoing cost reduction efforts.

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          On January 16, 2002 we completed the sale of our HighSchoolAlumni.com network to Reunion.com, a private company, for approximately $1,000,000 in cash.  The gain on sale of assets represents cash received, plus the deferred revenue balance on the date of sale related to the unrecognized portion of subscription money received from our HighSchoolAlumni.com subscription program, less the net unamortized value of our 1999 acquisition of Ameritrack.

          Interest and other income, net was $69,000 in 2002, a decrease of $520,000, or 88%, from 2001.  Interest and other income, net was $589,000 in 2001, a decrease $1,002,000, or 63% from 2000. The decrease in both comparative periods is decrease was due primarily to our decreasing cash and cash equivalent position due to our operating losses as well as to decreasing interest rates.

Provision for Income Taxes

          No provision for federal and state income taxes has been recorded because we have experienced net operating losses since inception.  As of December 31, 2002, we had approximately $115,000,000 of federal net operating loss carryforwards, which expire in 2019 through 2022.  Due to the uncertainty regarding the ultimate use of the net operating loss carryforwards, we have not recorded any benefit for losses, and a valuation allowance has been recorded for the entire amount of the net deferred tax asset.  Additionally, utilization of the net operating loss may be subject to annual limitation due to the ownership change limitation provided by the Internal Revenue Code and similar state provisions.

          As of December 31, 2002, we had approximately $96,000,000 of state net operating loss carryforwards, which expire in 2009 through 2013.

Liquidity and Capital Resources

          Since our incorporation in January 1999, we have financed our operations primarily through private placements of preferred stock, our initial public offering, borrowings under equipment lease lines, and private placement equity financing. Cash and cash equivalents were $3,407,000 at December 31, 2002.

          Our capital requirements depend on numerous factors, including market acceptance of our products and services, the resources we allocate to developing our networks, our marketing and selling capabilities and maintenance of our brands. Since our inception we made substantial expenditures to grow our operations and personnel.  Although we have significantly reduced our costs since the beginning of the second quarter of 2000, we still have not achieved positive cash flows from operations.  We believe that

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our available cash, cash equivalents and short-term investments and cash flows from operations will be sufficient to meet our anticipated needs for working capital and capital expenditures at least until the end of our fiscal year 2003; however, we do not know with certainty whether our cash reserves and any cash flows from operations or financing will be sufficient to fund our operations beyond 2003. Our independent auditor Ernst & Young LLP has qualified its report on our 2002 financial statements contained in this report as to our ability to continue as a going concern. To meet our longer term liquidity needs, we may need to raise additional funds, establish additional credit facilities, seek other financing arrangements or further reduce costs and expenses. Additional funding may not be available on favorable terms, on a timely basis or at all. See our risk factor entitled “We have negative cash flow and may not have sufficient cash to continue operations or, even if we can continue operations, to effectively manage our working capital requirements and fund our operations for the period required to achieve profitability,” as set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

          Cash used by operations was $7,425,000 in 2002, $18,793,000 in 2001 and $48,958,000 in 2000.  The year over year decreasing cash usage was primarily a result of year over year decreased operating expenses and the resulting decreases in net loss. Working capital at December 31, 2002 was $2,714,000.  Cash and cash equivalents at December 31, 2002 were $3,407,000.

          Net cash provided from investment activities during 2002 was $2,194,000.  This was due largely to proceeds of $1,000,000 from the sale of our HighSchoolAlumni web site and a reduction in our facility letters of credit of $1,584,000.  We applied the available cash resulting from the reduction of our facilities letters of credit, and an additional $416,000 in cash towards the further restructuring of our Brisbane facility lease in March 2002.  We also received a refund of $335,000 on tenant improvements associated with our New York facility, purchased $656,000 of fixed assets and established new facility letters of credit for $69,000.

          Net cash provided from financing activities for 2002 was $353,000.  This largely consisted of cash proceeds of $2,000,000 less $232,000 in cash-based issuance costs related to our June 20, 2002, private placement in which we issued and sold to institutional investors 285,715 shares of common stock at a price of $7.00 per share and warrants to purchase up to 85,715 shares of common stock with an exercise price of $9.00 per share.  Partially offsetting these proceeds, in January 2002, we paid off the remaining $1,613,000 balance on our equipment lease obligations.

          In December 2000, the Board of Directors authorized a stock repurchase program under which IGN is authorized to repurchase up to 277,778 shares of our common stock in the open market for cash.  From the inception of this program through December 31, 2002, we repurchased in the aggregate 270,501 shares at an average purchase price of $4.35 per share; 1,190 of these shares were repurchased in the first quarter of 2002 with no shares repurchased in the second, third or fourth quarters of 2002.

          As of December 31, 2002, we had $781,000 remaining in letters of credit as security deposits associated with our headquarters facility in Brisbane, California and our excess New York facility. This amount reflects a decrease from our original obligation of $5,111,000 under these leases letters of credit.  During 2001, letters of credit of $2,815,000 were released in connection with the return of two of our Brisbane buildings to our landlord.   In the first quarter of 2002, $1,584,000 was forfeited to our landlord and $69,000 of new letters of credit were established under the terms of our March 2002 facility lease restructuring. Our letter of credit security deposits as of December 31, 2002 and 2001 have been classified as restricted cash on our balance sheets. These letters of credit expire at various times through 2010.

          In addition to our headquarters facility in Brisbane, California, we currently lease sales and support offices in Los Angeles and New York.   In addition to our currently occupied facilities, we are under lease commitments for excess facilities in Connecticut and New York through June 2005 and October 2010, respectively.  These excess facilities have been accounted for under our current restructuring program.  With respect to our excess New York facility, in July 2002 we entered into a sublease agreement with a term through July 2004 and two twelve month options to renew thereafter.

          The following table summarizes our future minimum lease payments under all non-cancelable operating leases that expire at various times through 2010 and future sublease income under non-cancelable sublease as of December 31, 2002:

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RISK FACTORS

You should carefully consider the risks described below and in the other documents incorporated by reference before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones facing IGN. Additional risks and uncertainties not presently known to us or that we do not currently believe are important to an investor may also harm our business operations. If any of the events, contingencies, circumstances or conditions described in the following risks actually occur, our business, financial condition or our results of operations could be seriously harmed. If that occurs, the trading price of our common stock could decline, and you may lose part or all of your investment.

Risks Related to Our Business

Our current business model is unproven and may fail.

          Our prospects and the merits of investing in our stock will be difficult for you to evaluate because we have restructured our business and implemented a new and unproven business model in 2002. As of the first quarter of 2002, we have sold or ceased operating all our destination web sites except our IGN network, and now focus our content and services almost exclusively on the interactive entertainment market, with a particular emphasis on video game-related information. If our business model proves to be unsuccessful, the trading price of our stock will fall and our business may fail.  Accordingly, our prospects and the merits of investing in our stock must be considered in light of the risks, expenses and difficulties encountered by Internet-related companies who have restructured their business and adopted new business models.  To effectively execute our current business model, we expect that in the future we will need to increase revenues, raise additional funds, establish additional credit facilities, seek other financing arrangements or further reduce costs and expenses.  We may not increase revenues significantly in the future or additional funding may not be available on favorable terms, on a timely basis or at all. 

We have negative cash flow and may not have sufficient cash to continue operations or, even if we can continue operations, to effectively manage our working capital requirements and fund our operations for the period required to achieve profitability.

          We do not know with certainty whether our cash reserves and any cash flows from operations or financing will be sufficient to fund our operations beyond 2003. The report of our independent auditor, Ernst & Young LLP, on our 2002 financial statements contained in this report contains an explanatory paragraph describing conditions that raise substantial doubt about our ability to continue as a going concern.    We have limited cash and credit available, and may be unable to raise additional financing or establish additional lines of credit to meet our anticipated and unanticipated working capital requirements.  In the event we raise capital via equity financing, our existing stockholders could experience significant dilution.  If adequate funds are not available to satisfy either short- or long-term capital requirements, we might be required to significantly limit our operations or delay or abandon some of our planned future expenditures, any of which actions could harm our business. Our future capital requirements depend upon many factors, including:

We have not achieved profitability and anticipate continued losses.

          From our inception though the middle of 2000, we devoted substantially all our resources to rapidly develop our business.  Beginning in the later half of 2000, in response to weakening market conditions, we began to decrease expenses and restructure our business and have incurred substantial charges relating to facility exit costs, goodwill impairment and employee severance.  Despite our restructuring and expense management efforts, we have never been profitable on an annual basis and do not anticipate profitability for at least another year.  Further, in the future we may increase our operating expenses to develop additional subscription offerings, buyout or restructure some or all of our long-term facility leases, develop additional networks, expand our sales and marketing operations, develop and upgrade our technology and purchase equipment and leasehold improvements to support our operations and network infrastructure. We also may incur costs relating to the acquisition of technologies and content. Yet, whether or not we increase expenditures, we still may not generate sufficient revenue to attain profitability for any sustained period.  Even if we do achieve profitability, we might not be able to sustain profitability on a quarterly or annual basis in the future.

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Our future success depends on our ability to increase and sustain advertising and marketing revenues.

          Our business might fail if we do not increase and sustain our advertising and marketing revenues. Even if we increase our advertising and marketing revenues from existing sources in any given period, we still may have to create new sources of revenue to survive. 

          Currently, the majority of our revenues are derived from paid advertisements displayed on our web sites.  Our ability to maintain current levels of, increase, or sustain new levels of, advertising revenue depends upon:

          Our advertising orders tend to be specific campaign-based, cancelable without penalty and run over relatively short periods of time. In the current economic climate, advertisers have a great deal of negotiating power; the advertisers for whom we compete have a large selection of media in which to advertise and can dictate many of the terms of their orders.  Accordingly, we are exposed to a great deal of competitive pressure and potentially severe fluctuations in our financial results.  In addition, we are experiencing a shift in the source of advertising revenues from Internet companies to companies in more traditional lines of business. These advertisers often have substantially different requirements and expectations than Internet companies with respect to advertising programs. If we are unsuccessful in adapting to the needs of our advertisers or if we are otherwise unable to attract and retain advertisers, our business could be harmed.

          Additionally, we earn revenue from several larger corporate marketing partnerships through which we provide customers with various commerce and content initiatives.  These partnerships are usually under contract with terms longer than six months but have termination rights at various points during their respective terms.  Our customers can and do decrease their spending levels and/or cancel these agreements on relatively short notice without penalty.  We cannot assure you that these customers will continue to do business with us.  The termination of any of these longer-term agreements, if not replaced with new customers and/or contracts, would cause our revenue to decline.

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Our future success depends on our ability to increase and sustain subscription revenues.

          Our subscription model is new and evolving and only in its seventh quarter of operation.  Under this program, we offer premium content and services to customers on a subscription fee basis.  Some of our competitors offer content and services similar to ours at no charge to users.  If our users are unwilling to pay or if competing subscription programs better meet user expectations, our traffic and subscription revenue would decline. 

          Furthermore, even if users subscribe with us, we cannot assure you that they will renew their subscriptions or accept our services.  If our subscription program is not accepted by new and current subscribers, our subscription revenue and traffic would decline. 

          Because our subscriber base is significantly smaller than our active user base, certain initiatives used in attempt to increase subscribers, such as making articles available only to paid subscribers, may result in decreased traffic. Our efforts to increase subscription revenues may result in declining traffic and as a result advertising revenues may decline. 

Our revenues are greatly dependent upon the general video game industry.

          Our traffic and revenues are directly related to events in, and the success of, the video game industry, particularly the platform and software markets thereof.  For instance, when new video game platforms and/or software titles are released, our traffic and our advertising and subscription revenues tend to increase as companies desire to promote their new products to our audience, and as our audience wishes to gain access to information about these new products.  The increased traffic related to the events in, or success of, the video game industry also generates business for us from advertisers outside of the video game industry that wish to promote their products and services to individuals with the demographic characteristics of our user population.  Accordingly, a downturn in the video game industry, particularly in the platform and software markets thereof, or a shift in consumer interest in such products, would decrease traffic, advertising demand and subscription revenue.  Any such decrease could harm our business.

Additional financings could disadvantage our existing stockholders.

          If we raise additional funds through the issuance of equity securities, the percentage ownership of our existing stockholders would be reduced and the value of their investments might decline. In addition, any new securities issued might have rights, preferences or privileges senior to those securities held by our existing stockholders. If we raise additional funds through the issuance of debt, we might become subject to restrictive covenants.

Our ability to successfully raise awareness of our brand and web sites is crucial to our success.

          We believe that broader recognition and a favorable user perception of our IGN brand and web sites are essential to our future success. As we significantly decreased marketing related expenditures during 2001 and 2002, we became reliant mainly upon word of mouth for proliferation of our brand awareness. If our brand awareness is not promoted through word of mouth, or if current or future marketing efforts are not accepted by our audience, our user base and revenue would decline.

Our quarterly revenue and operating results may fluctuate in future periods and we may fail to meet expectations, which may reduce the trading price of our common stock.

          We cannot forecast our revenue and operating results with precision, particularly because we are in the early stages of operating our new business model; we are dependent upon general activity in the video game industry and development schedules for such video game platform or software products are frequently unreliable; our current products and services are relatively new and evolving; and our liquidity prospects are uncertain.  In particular, advertising revenue is greatly subject to fluctuation as companies tend to advertise more in typically strong consumer spending periods, which are dependent upon overall economic conditions.  Additionally, fluctuations occur as customer product releases and associated advertising tends to increase around holiday or tradeshow periods and declines in periods of weaker demand. Further, the U.S. economy is much weaker now than when we

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started our business, and reductions of marketing and advertising budgets or delay in spending of budgeted resources could continue to have a negative impact on our advertising revenue.  This weakness has and could continue to have serious consequences for our business and operating results and, even if these conditions improve, we cannot assure you that marketing budgets and advertising spending will increase from current levels.  If revenue in a particular period does not meet expectations, it is unlikely that we will be able to adjust our level of expenditures significantly for the same period. If our operating results fail to meet expectations, the trading price of our common stock would decline.

Financial results for any particular period will not predict results for future periods.

          Because of the uncertain nature of the rapidly changing markets we serve, we believe that period-to-period comparisons are not necessarily meaningful and are not necessarily indicative of future performance. We anticipate that the results of our operations will fluctuate significantly in the future as a result of a variety of factors, including: general developments in the video game industry; the long sales cycle we face selling advertising and promotions; our ability to attract new and to retain existing audience and subscribers; seasonal trends in Internet usage, advertising placements, electronic commerce and video game product launches; and other factors discussed in this section. As a result, it is likely that in some future quarters or years our results of operations will fall below the expectations of investors, which would cause the trading price of our common stock to decline.

If we fail to perform in accordance with the terms of our advertising agreements, we would lose revenue.

          Our advertising agreements typically provide for minimum performance levels, such as click-throughs by web users or impressions. If we fail to perform in accordance with these terms, we typically must provide free advertising to the customer until the minimum level is met, causing us to lose revenue and/or incur additional costs. Further, these performance levels are often based on the customer’s own records, which could be disadvantageous to us in cases of disagreement. In addition to minimum performance levels, we occasionally guarantee the availability of advertising space in connection with promotion arrangements and content agreements and often guarantee exclusive placement on our network for our largest customers, which precludes us from permitting certain competitors of these customers to offer products and services on our network that are similar to those offered by our exclusive customers. If we cannot fulfill the guarantees we make to our customers, or if we lose potential customers whose advertisements, sponsorships and promotions conflict with those of other customers or our exclusive customers fail to renew their contracts, we will lose revenue and our future growth may be impeded.

Internet advertising is a highly competitive industry and some of our competitors may be more successful in attracting and retaining customers. 

          The market for Internet advertising and services is highly competitive, and we expect that competition will continue to intensify.  Negative competitive developments could have a material effect on our business. Many of our current competitors, including CNET, Yahoo!, AOL, MSN, Terra Lycos, Electronic Arts and MTV, as well as a number of potential new competitors, compete vigorously in this market.  Further, many of our target and current customers own or have interests in certain of our competitors, which creates a competitive disadvantage and makes us susceptible to significant pricing pressures.  In addition to having greater traffic and financial backing, many of our competitors have significantly greater editorial, technical, marketing, sales and other resources than we do. Our competitors may develop content and service offerings that are superior to ours or achieve greater market acceptance than ours or may combine or be purchased by advertisers to achieve market dominance.  We must continue to attract and retain users to compete successfully for advertising revenue. If we fail to attract and retain more users, our market share, brand acceptance and revenue would decline.

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Our failure to manage our restructuring could result in our inability to effectively operate our new business.

          We have significantly reduced our operations and anticipate that further change will be required to address potential market problems and opportunities.  If we fail to manage this change, we will be unable to effectively operate our business.  From a peak of approximately 380 full-time employees in March 2000, we have reduced our workforce, through attrition and lay offs, to approximately 85 full-time employees as of December 31, 2002. Further, we virtually eliminated all relationships with affiliated web sites, introduced a pay-for-access subscription model and opened an online store.  These significant changes have placed, and we expect them to continue to place, a strain on our management, operational and financial resources. In particular, the reduction in workforce could have negative consequences on our ability to sell advertising, produce content and to attract new users, or to maintain our web site’s availability and performance. 

Technical problems or intentional service adjustments with either our internal or our outsourced computer and communications systems could interrupt or decrease our service, resulting in decreased customer satisfaction, the possible loss of users and advertisers and a decline in revenue.

          Our operations depend on our ability to maintain our computer systems and equipment in effective working order. Our web sites must accommodate a high volume of traffic and deliver frequently updated information. Any sustained or repeated system failure or interruption would reduce the attractiveness of our web sites to customers and advertisers and could cause us to lose users and advertisers to our competitors. This would cause our revenue to decline. In addition, interruptions in our systems could result from the failure of our telecommunications providers to provide the necessary data communications capacity in the time frame we require. Unanticipated problems affecting our systems have caused from time to time in the past, and could cause in the future, slower response times and interruptions in our services.

          We depend on third parties for co-location of our data servers and cannot guarantee the security of our servers. Our primary servers currently reside in facilities in the San Francisco Bay area.  Currently, these facilities do not provide the ability to switch instantly to another back-up site in the event of failure of the main server site. This means that an outage at one facility could result in our system being unavailable for at least several hours. This downtime could result in increased costs and lost revenues which would be detrimental to our business.

          Fire, earthquakes, power loss, water damage, telecommunications failures, terrorism, vandalism and other malicious acts, and similar unexpected adverse events, may damage our computer systems and interrupt service. Moreover, scheduled upgrades and changes to our computer systems may increase our operating cost or result in unsatisfactory performance. Our computer systems’ continuing and uninterrupted performance is critical to our success. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures or interruptions in our systems.

          Any such interruptions in our ability to continue operations could damage our reputation, harm our ability to retain existing customers and to obtain new customers and could result in lost revenue, any of which could substantially harm our business and results of operations.

If we lose key personnel or are unable to hire additional qualified personnel, or if our management team is unable to perform effectively, we will not be able to implement our business strategy or operate our business effectively.

          Our success depends upon the continued services of our senior management and other key personnel, many of whom would be difficult to replace. The loss of any of these individuals would adversely affect our ability to implement our business strategy and to operate our business effectively. In particular, the services of Mark Jung, our chief executive officer, would be difficult to replace. None of our officers or key employees is covered by “key person” life insurance policies.

          Our success also depends upon our ability to continue to attract, retain and motivate skilled employees. We believe that there are only a limited number of persons with the requisite skills to serve in many key positions and it is difficult to attract, retain and motivate these persons. We have in the past

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experienced, and we expect to continue to experience, difficulty in hiring and retaining skilled employees with appropriate qualifications. 

          Further, we have conducted several workforce reductions over our brief operating history.  These reductions can cause anxiety and uncertainty and could adversely affect employee morale. As a result, our remaining personnel may seek employment with larger, more established companies or companies they perceive as having less volatile stock prices.

          Competitors and others have in the past attempted, and may in the future attempt, to recruit our employees. We could incur increasing salary, benefit and recruiting expenses because of the difficulty in hiring and retaining employees.

          Finally, our success depends on the ability of our management to perform effectively, both individually and as a group. If our management is unable to operate effectively in their respective roles or as a team, we will not be able to implement our business strategy or operate our business effectively.

We may be subject to legal liability for online services.

          We host a wide variety of services that enable individuals to exchange information, generate content, conduct business and engage in various online activities on an international basis, including public message posting and email services. The law relating to the liability of providers of these online services for activities of their users is currently unsettled both within the United States and abroad. Claims may be threatened or brought against us for defamation, negligence, copyright or trademark infringement, unlawful activity, tort, including personal injury, fraud, or other theories based on the nature and content of information that we provide links to or that may be posted online or generated by our users or with respect to auctioned materials. Due to the unsettled nature of the law in this area, we may be subject to liability in domestic or other international jurisdictions in the future. Our defense of any such actions could be costly and involve significant distraction of our management and other resources.

          It is also possible that, if any information provided directly by us contains errors or is otherwise negligently provided to users, third parties could make claims against us.  For example, we offer web-based email services, which expose us to potential risks, such as liabilities or claims resulting from unsolicited email, lost or misdirected messages, illegal or fraudulent use of email, or interruptions or delays in email service. Investigating and defending any of these types of claims is expensive, even to the extent that the claims do not ultimately result in liability.

We may have to litigate to protect our intellectual property rights, or to defend claims that we have infringed the rights of others, which could subject us to significant liability and be time consuming and expensive.

          Our success depends significantly upon our copyrights, trademarks, service marks, trade secrets, technology and other intellectual property rights. The steps we have taken to protect our intellectual property may not be adequate and third parties may infringe or misappropriate our intellectual property. If this occurs, we may have to litigate to protect our intellectual property rights. Such litigation could disrupt our ongoing business, increase our expenses and distract our management’s attention from the operation of our business. We have not applied for the registration of all of our trademarks and service marks, and effective trademark, service mark, copyright and trade secret protection may not be available in every country in which our content, services and products are made available online. If we were prevented from using our trademarks, we would need to re-implement our web sites and rebuild our brand identity with our customers, users and affiliates. This would increase our operating expenses substantially.

          Companies frequently resort to litigation regarding intellectual property rights. From time to time, we have received, and we may in the future receive, notices of claims of infringement by IGN or one of our affiliates of other parties’ proprietary rights. We may have to litigate to defend claims that we have infringed upon the intellectual property rights of others. Any claims of this type could subject us to significant liability, be time-consuming and expensive, divert management’s attention, require the change of our trademarks and the alteration of content, require us to redesign our web sites or services or require us to

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pay damages or enter into royalty or licensing agreements. These royalty or licensing agreements, if required, might not be available on acceptable terms or at all. If a successful claim of infringement were made against us and we could not develop non-infringing intellectual property or license the infringed or similar intellectual property on a timely and cost-effective basis, we might be unable to continue operating our business as planned.

We have adopted anti-takeover defenses that could delay or prevent an acquisition of our company, even an acquisition that would be beneficial to our stockholders.

          Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock. Issuance of the preferred stock would make it more difficult for a third party to acquire a majority of our outstanding voting stock, even if doing so would be beneficial to our stockholders. Without any further vote or action on the part of the stockholders, the board of directors has the authority to determine the price, rights, preferences, privileges and restrictions of the preferred stock. This preferred stock, if issued, might have conversion rights and other preferences that work to the disadvantage of the holders of common stock.

          Our certificate of incorporation, bylaws and equity compensation plans include provisions that may deter an unsolicited offer to purchase IGN. These provisions, coupled with the provisions of the Delaware General Corporation Law, may delay or impede a merger, tender offer or proxy contest involving IGN. Furthermore, our board of directors has been divided into three classes, only one of which will be elected each year. Directors will only be removable by the affirmative vote of at least 66 2/3% of all classes of voting stock. These factors may further delay or prevent a change of control of IGN and may be detrimental to our stockholders.

Our ability to implement our business strategy and our ultimate success depend on continued growth in the use of the Internet and the ability of the Internet infrastructure to support this growth.

          Our business strategy depends on continued growth in the use of the Internet and increasing the number of users who visit our sites. A decrease in the growth of web usage would impede our ability to implement our business strategy and our ultimate success. If the Internet continues to experience significant growth in the number of users, frequency of use and amount of data transmitted, the Internet infrastructure might not be able to support the demands placed on it or the performance or reliability of the Internet might be adversely affected. Web sites have experienced interruptions in service as a result of outages and other delays occurring throughout the Internet network infrastructure. If these outages or delays occur frequently in the future, Internet usage, as well as the usage of our web sites, could grow more slowly than expected or decline. Security and privacy concerns may also slow growth. Because our revenue ultimately depends upon Internet usage generally as well as usage on our web sites, our business may suffer as a result of declines in Internet usage.

Risks Related to Our Industry

Since our revenue is derived primarily from selling advertisements, our revenue might decline and we might not grow if advertisers do not continue or increase their usage of the Internet as an advertising medium.

          In the past, we have derived, and we expect to continue to derive in the future, a majority of our revenue from selling advertisements and other marketing initiatives. However, the prospects for continued demand and market acceptance for Internet marketing products are uncertain. In particular, during the economic slowdown of the U.S. economy, there has been a reduction of advertising and marketing spending and a negative public perception of online media companies as well as technology companies in general. If advertisers do not continue or increase their usage of the Internet, our revenue might decline or not grow. Most advertising agencies and potential advertisers, particularly local advertisers, have only limited experience advertising on the Internet and may not devote a significant portion of their advertising expenditures to Internet advertising. Moreover, advertisers that have traditionally relied on other

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advertising media may not advertise on the Internet. In addition, advertising on the Internet is at a much earlier stage of development in international markets than it is in the United States and may not fully develop in these markets. As the Internet evolves, advertisers may find Internet advertising to be a less attractive or effective means of promoting their products and services relative to traditional methods of advertising and may not continue to allocate funds for Internet advertising. Many historical predictions by industry analysts and others concerning the growth of the Internet as a commercial medium have overstated the growth of the Internet and should not be relied upon. This growth may not occur or may occur more slowly than estimated. In fact, due to the current economic slowdown, our advertising revenue has declined.

          We cannot assure you that customers will continue to purchase advertising or marketing programs or commerce partnerships on our web pages, or that market prices for web-based advertising will not decrease due to competitive or other factors. In addition, if a large number of Internet users use filter software programs that limit or remove advertising from the user’s monitor, advertisers may choose not to advertise on the Internet. Moreover, there are no widely accepted standards for the measurement of the effectiveness of Internet advertising, and standards may not develop sufficiently to support Internet advertising as a significant advertising medium.

We might have to expend significant capital or other resources to protect our networks from unauthorized access, computer viruses and other disruptive problems.

          Internet and online service providers have in the past experienced, and may in the future experience, interruptions in service as a result of the accidental or intentional actions of Internet users, current and former employees or others. We might be required to expend significant capital or other resources to protect against the threat of security breaches or to alleviate problems caused by such breaches. Nevertheless, security measures that we implement might be circumvented. Eliminating computer viruses and alleviating other security problems may also require interruptions, delays or cessation of service to users accessing web pages that deliver our content and services. In addition, a party who circumvents our security measures could misappropriate proprietary information or cause interruptions in our operations.

We may be sued regarding privacy concerns, subjecting us to significant liability and expense.

          If a party were able to penetrate our network security or otherwise misappropriate our users’ personal information or credit card information, we could be subject to significant liability and expense. We may be liable for claims based on unauthorized purchases with credit card information, impersonation or other similar fraud claims. Claims could also be based on other misuses of personal information, such as unauthorized marketing purposes. These claims could result in costly litigation. The Federal Trade Commission and state agencies have been investigating various Internet companies regarding their use of personal information. In 1998, the United States Congress enacted the Children’s Online Privacy Protection Act of 1998. We depend upon collecting personal information from our customers and the regulations promulgated under this act have made it more difficult for us to collect personal information from some of our customers. We could incur additional expenses if new regulations regarding the use of personal information are introduced or if our privacy practices are investigated. Furthermore, the European Union recently adopted a directive addressing data privacy that may limit the collection and use of information regarding Internet users. This directive and regulations enacted by other countries may limit our ability to target advertising or to collect and use information internationally.

Information displayed on and communication through our and our affiliate web sites could expose us to significant liability and expense.

          We face possible liability for defamation, negligence, copyright, patent or trademark infringement and other claims, such as product or service liability, based on the nature and content of the materials published on or downloaded from our and our affiliate web sites. These types of claims have been brought, sometimes successfully, against Internet companies and print publications in the past, and the potential liability associated with these claims is significant. We could also be subjected to claims based upon the online content that is accessible from our web sites through links to other web sites or through content and materials that may be posted in chat rooms or bulletin boards. We do not verify the accuracy of the

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information supplied by third-party content providers, including freelance writers and affiliates. We also offer email services which may subject us to potential risks, such as liabilities or claims resulting from unsolicited email, lost or misdirected messages, illegal or fraudulent use of email or interruptions or delays in email service. The law in these areas is unclear. Accordingly, we are unable to predict the potential extent of our liability. Our insurance may not cover potential claims of this type and our defense of any such actions could be costly and involve significant distraction of our management and other resources.  

Changes in regulation of domain names may result in the loss or change of our domain names, a reduction in brand awareness among our customers and a diminished ability to attract advertisers and generate revenue.

          We hold various domain names relating to our networks and brands. In the United States, the National Science Foundation has appointed a limited number of entities as the current exclusive registrars for the “.com,” “.net” and “.org” generic top level domains. We expect future changes in the United States to include a transition from the current system to a system controlled by a non-profit corporation and the creation of additional top level domains. Requirements for holding domain names also are expected to be affected. These changes may result in the loss or change of our domain names, a reduction in brand awareness among our customers and a diminished ability to attract advertisers and generate revenue. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. Therefore, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. In addition, we may lose our domain names to third parties with trademarks or other proprietary rights in those names or similar names.

Future regulation of the Internet may slow its growth, resulting in decreased demand for our services and increased costs of doing business.

          Although we are subject to regulations applicable to businesses generally, few laws or regulations exist that specifically regulate communications and commerce over the Internet. We expect more stringent laws and regulations relating to the Internet to be enacted due to the increasing popularity and use of the Internet and other online services. Future regulation of the Internet may slow its growth, resulting in decreased demand for our services and increased costs of doing business. New and existing laws and regulations are likely to address a variety of issues, including:

          Currently we may be subject to Sections 5 and 12 of the Federal Trade Commission Act, which regulate advertising in all media, including the Internet, and require advertisers to have substantiation for advertising claims before disseminating advertisements. The Federal Trade Commission recently brought several actions charging deceptive advertising via the Internet, and is actively seeking new cases involving advertising via the Internet. We also may be subject to the provisions of the recently enacted Communications Decency Act, which, among other things, imposes substantial monetary fines and/or criminal penalties on anyone who distributes or displays certain prohibited material over the Internet or knowingly permits a telecommunications device under its control to be used for this purpose. In addition, government agencies may impose regulatory access fees on Internet usage. If this were to occur, the cost of communicating on the Internet could increase substantially, potentially decreasing the use of the Internet.

          Finally, the applicability to the Internet and other online services of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. Any new legislation or regulation, the application of laws and

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regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online services could also increase our costs of doing business, discourage Internet communications and reduce demand for our services.

Risks Related to the Securities Markets

We expect to experience volatility in our stock price, which could negatively affect your investment.

          The trading price of our common stock is likely to be highly volatile in response to a number of factors, such as: