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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission file number 333-99939

ZIFF DAVIS HOLDINGS INC.

28 East 28th Street

(212) 503-3500

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

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).     YES o          NO þ

          As of May 13, 2005, 2,311,049 shares of common stock, par value $0.001 per share, were outstanding. The issuer’s outstanding common stock is not publicly traded.

ZIFF DAVIS HOLDINGS INC.

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PART I — FINANCIAL INFORMATION

ZIFF DAVIS HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

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

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ZIFF DAVIS HOLDINGS INC.

(dollars in thousands)

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

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ZIFF DAVIS HOLDINGS INC.

(dollars in thousands)

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

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ZIFF DAVIS HOLDINGS INC.

(dollars in thousands)

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

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ZIFF DAVIS HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

NOTE 1 — THE COMPANY AND BASIS OF PRESENTATION

Basis of Presentation

      The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the consolidated financial position of Ziff Davis Holdings Inc. at March 31, 2005 and December 31, 2004 and the results of its consolidated operations and cash flows for the three months ended March 31, 2005 and 2004 and changes in stockholders’ deficit from December 31, 2004 to March 31, 2005 have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. For further information refer to Ziff Davis Holdings Inc.’s audited consolidated financial statements, including the notes to those statements, that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Formation of Ziff Davis Holdings Inc.

      The Company is an integrated media company focused on the technology and videogame markets. The Company is an information services and marketing solutions provider of technology media including publications, websites, conferences, events, eSeminars, eNewsletters, custom publishing, list rentals, research and market intelligence. Ziff Davis Holdings Inc. (“Ziff Davis Holdings” or, collectively with its subsidiaries, the “Company”) is majority owned by various investment funds managed by Willis Stein & Partners Management III, L.L.C., a private equity investment firm. Ziff Davis Holdings is a holding company which indirectly owns 100% of Ziff Davis Media Inc. (“Ziff Davis Media”). Ziff Davis Holdings does not conduct any business, but rather all operations are conducted by Ziff Davis Media and its direct and indirect subsidiaries. Ziff Davis Holdings has no material assets other than its investment in the capital stock of Ziff Davis Media. Ziff Davis Holdings was incorporated in the state of Delaware and was formed to acquire certain publishing assets from Ziff-Davis Inc., an unrelated company. The Company’s major subsidiaries are Ziff Davis Publishing Inc., Ziff Davis Development Inc. and Ziff Davis Internet Inc.

Operations

      The Company reports and manages its business along the following operating segments: the Consumer Tech Group, the Enterprise Group and the Game Group.

      The Consumer Tech Group is principally comprised of four magazines, PC Magazine, Sync, ExtremeTech and the Company’s newest launch, DigitalLife (scheduled to debut June 2005); a number of consumer-focused websites, including pcmag.com and extremetech.com; and the Company’s consumer electronics event, DigitalLife.

      The Enterprise Group is comprised of several businesses in the magazine, Internet, event, research and marketing tools areas. The three magazines in this segment are eWEEK, CIO Insight and Baseline. The Internet properties in this segment are primarily affiliated with the Enterprise Group’s brands, including eweek.com, cioinsight.com, and baselinemag.com, but also include over 30 weekly eNewsletters and the eSeminars™ business, which produces sponsored interactive webcasts. This segment also includes the Company’s Custom Conference Group (“CCG”), which creates and manages several hundred sponsored events per year; Business Information Services (“BIS”), a research and marketing tools unit; and Contract Publishing, which produces custom magazines, white papers, case studies and other sales and marketing collateral for customers.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)

      The Game Group is focused on the videogame market and is principally comprised of three magazines (Electronic Gaming Monthly, Computer Gaming World and Official U.S. PlayStation Magazine) and lup.com, an innovative online destination for gaming enthusiasts. The Game Group discontinued GMR Magazine and reduced the frequency of Xbox Nation during the fourth quarter of 2004.

      For additional information on the Company’s operating segments, see Note 8.

Principles of Consolidation

      The financial statements of the Company as of March 31, 2005 and December 31, 2004 and for the three months ended March 31, 2005 and 2004 are prepared on a consolidated basis and include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Stock-based Compensation

2001 Stock Option Plan

      In the fiscal year ended March 31, 2001, the Company’s Board of Directors adopted the 2001 Ziff Davis Holdings Inc. Employee Stock Option Plan (the “2001 Stock Option Plan”). Statement of Financial Accounting Standard (“SFAS”) No. 123 “Accounting for Stock-Based Compensation” requires that companies with stock-based compensation plans either recognize compensation expense based on the fair value of the options granted or continue to apply the existing accounting rules and disclose pro forma net income and earnings per share assuming the fair value method had been applied. The Company has chosen to continue applying Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for the 2001 Stock Option Plan. The table below details pro forma net loss as if the compensation cost for the Company’s 2001 Stock Option Plan was determined on the fair value basis at the respective grant dates and recognized over the vesting period (adjusted for forfeitures).

2002 Stock Option Plan

      Pursuant to the Company’s Amended and Restated 2002 Employee Stock Option Plan (the “2002 Stock Option Plan”), during 2003, the Company’s Board of Directors authorized the Company’s officers to execute and deliver option agreements. The Company executed the first stock option agreements related to the 2002 Stock Option Plan during the second quarter of 2004 and additional options have since been granted.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)

      The options granted under the 2002 Stock Option plan are variable awards and contain certain cash settlement features as described in the Company’s most recent filing on Form 10-K. They are not exercisable until the earlier of a sale of the Company or 30 days following an initial public offering (as defined in the 2002 Stock Option Plan), or the seventh anniversary of the option grant date. Options generally vest over a five year period, however, vesting accelerates upon a sale of the Company. As of March 31, 2005, the following options were vested: 8,842 of the Series D options, 10,796 of the Series B options, 36,038 of the Series A options and 5,460,229 of the common stock options. Due to the nature of the rights granted to the option holders and the debt classification of the underlying securities in the case of the options on the preferred stock, the Company accounts for the option grants under the 2002 Stock Option Plan using a fair value methodology. The Company utilizes the Black-Scholes option pricing model to calculate the value of the stock options when granted. The value of the options are remeasured at each reporting period and any changes in the value are recorded as compensation expense in that period relative to the vested portion of the outstanding options. There were no changes in value during the three months ended March 31, 2005. The Company did not recognize compensation expense during the three months ended March 31, 2005 as compensation expense related to vesting was offset by forfeitures during the quarter related to these options.

Recent Accounting Pronouncements

      In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”, or SFAS 123R, which replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, or SFAS 123, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The pro forma disclosures previously permitted under SFAS 123, no longer will be an alternative to financial statement recognition. The Company is required to adopt SFAS 123R beginning January 1, 2006. Under SFAS 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company is evaluating the requirements of SFAS 123R and expects that the adoption of SFAS 123R will not have a material impact on its consolidated results of operations.

Reclassifications

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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)

NOTE 2 — INTANGIBLE ASSETS, NET

      As of March 31, 2005 and December 31, 2004, the Company’s intangible assets and related accumulated amortization consisted of the following:

      Amortization expense associated with intangible assets at March 31, 2005 is estimated to be $3,955 for each quarter of 2005 and approximately $15,820 for each year beginning in 2006 through 2010.

NOTE 3 — ACCRUED RESTRUCTURING CHARGES

      During 2004, 2002 and 2001, the Company implemented comprehensive cost reduction and restructuring programs, which included closing or selling unprofitable operations, consolidating facilities and reducing the Company’s workforce in order to decrease excess operating costs. The Company incurred $5,491, $48,950 and $37,412 of Restructuring charges, net in its Condensed Consolidated Statements of Operations for the years ended December 31, 2004 and 2002 and the nine months ended December 31, 2001, respectively.

      As of March 31, 2005, there was $20,542 of accrued restructuring charges included on the Balance Sheet in Accrued expenses and other current liabilities and Accrued expenses — long term. The remaining accrued expenditures primarily related to facilities consolidation expenses. During the three months ended March 31, 2005, the Company made $2,755 of payments primarily related to severance and real estate leases for vacant space. The Company anticipates making further payments in 2005 of approximately $6,250, with the remaining accrued balance being paid through 2019 due to the long-term nature of related real estate lease agreements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)

      The following table summarizes the activity with respect to the accrued restructuring charge balances for the three months ended March 31, 2005:

      The $342 adjustment to the accrual was due primarily to interest accretion on restructured leases which were initially recorded at present value.

NOTE 4 — DEBT

      As of March 31, 2005, the Company was in compliance with all of its debt covenants, and total indebtedness was $308,748, consisting of the following:

	•	$169,817 under the Senior Credit Facility, including $8,200 outstanding under the revolving portion of the Senior Credit Facility,
	•	$12,280 of 12% Senior Subordinated Notes due 2010 (the “12% Notes”) and
	•	$126,651 of Senior Subordinated Compounding Notes due 2009 (the “Compounding Notes”).

      At March 31, 2005, there was approximately $1,000 borrowing capacity available under the Company’s Amended and Restated Credit Agreement (the “Senior Credit Facility”) and existing borrowings bore interest at rates ranging from 7.07% to 7.57%. The Company made a scheduled principal repayment on March 31, 2005 on the Senior Credit Facility of $4,324.

      The Compounding Notes, issued in August 2002, accrue interest in semi-annual periods at rates of 12.0% to 14.0%. For the first four years, interest may be paid, at the Company’s option and subject to certain restrictions under the Senior Credit Facility (now paid off), either in cash or by compounding such interest on the Compounding Notes. During the three months ended March 31, 2005, the Company compounded interest in the amount of $4,214. The $4,324 principal repayment, partially offset by the compounded interest, accounts for the change in total debt from $308,857 at December 31, 2004 to $308,748 at March 31, 2005.

      The issuance of the Compounding Notes is being accounted for in accordance with the provisions of SFAS No. 15, and, accordingly, a liability representing accrued interest on the Compounding Notes was recorded at the date of issuance. This liability represents the difference in estimated cash payments under the new note agreements as compared to the previous note agreements. The March 31, 2005 balance of $72,411 is included within long-term liabilities in the Company’s Condensed Consolidated Balance Sheet as Accrued interest — compounding notes and is being amortized as a reduction of interest expense over the remaining term of the Compounding Notes. During the three months ended March 31, 2005, the Company amortized $3,780 as a reduction of interest expense.

      In April 2005, the Company completed a private placement transaction pursuant to which the Company issued $205,000 of senior secured notes at a floating rate of 3-month LIBOR plus 6.00% which matures in 2012. Interest on the notes is payable quarterly with the first interest payment due on August 1, 2005. The proceeds were used to pay-off the Senior Credit Facility, including accrued interest, and to pay related fees

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)

and expenses. The remaining balance of approximately $27,000 was added to the Company’s existing cash balance and is available for general corporate purposes. At March 31, 2005, the Company reclassified $23,991 of its short-term debt outstanding as long-term debt in accordance with the provisions of SFAS No. 6.

      The Company believes that its cash on hand, coupled with future cash generated from operations, will be sufficient to meet its liquidity, working capital and capital spending needs for 2005. Due to the recent refinancing, none of the Company’s outstanding indebtedness contains any covenants that require it to meet any financial covenants on a quarterly basis. The senior secured floating rate notes contain only incurrence- based covenants that require certain financial criteria if the Company intends to take some action such as incur additional debt or make a restricted payment.

NOTE 5 — MANDATORILY REDEEMABLE PREFERRED STOCK

      The following table details activity in the Redeemable Preferred Stock account for the three months ended March 31, 2005:

      The Company, effective January 1, 2004, has recorded the accrued dividends on the Redeemable Preferred Stock as interest expense and classified the Redeemable Preferred Stock as a long-term liability on the Condensed Consolidated Balance Sheet pursuant to SFAS 150.

NOTE 6 — CONTINGENCIES

      The Company is subject to various claims and legal proceedings that arise in the ordinary course of business. However, it does not expect any of these claims or legal proceedings, either individually or in the aggregate, to have a material adverse effect on its financial condition, results of operations or liquidity.

NOTE 7 — GUARANTOR AND OTHER FINANCIAL INFORMATION

Guarantor Financial Information

      Ziff Davis Holdings and Ziff Davis Media are holding companies and their only assets are the ownership of the capital stock of their subsidiaries and cash balances. All of the Company’s consolidated subsidiaries have guaranteed Ziff Davis Media’s debt on a full, unconditional, joint and several basis. There are no restrictions which limit the ability of the Company’s subsidiaries to transfer funds to Ziff Davis Media in the form of cash dividends, loans or advances. No separate financial information for Ziff Davis Media has been provided herein because Ziff Davis Holdings’ financial information is materially the same as Ziff Davis Media’s financial information as a result of the fact that: (1) Ziff Davis Holdings does not itself conduct any business but rather all of its operations are conducted by Ziff Davis Media and its direct and indirect subsidiaries; (2) Ziff Davis Holdings has no material assets other than its equity interest in Ziff Davis Media; and (3) Ziff Davis Holdings has unconditionally guaranteed the 12% Notes and the Compounding Notes.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)

      The following tables present combining financial data detailing Ziff Davis Holdings, Ziff Davis Media, the guarantor subsidiaries and related elimination entries.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(dollars in thousands, except per share data)