10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(x)   Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.

For the Quarterly Period Ended September 30, 2002

(  )   Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from _______ to ________

Commission File Number 000-29121

IGN ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	94-3316902
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
3240 BAYSHORE BOULEVARD, BRISBANE, CA  94005
(Address of principal executive offices)  (Zip Code)
(415) 508-2000
(Registrant’s telephone number, including area code)

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 X   NO___

The number of shares of the registrant’s common stock outstanding as of October 31, 2002 was 2,181,809.

Form 10-Q
Table of Contents

			Page
Part I.       Financial Information
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	3
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2001	4
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4.	Controls and Procedures	33
Part II.      Other Information
	Item 1.	Legal Proceedings	34
	Item 2.	Changes in Securities and Use of Proceeds	34
	Item 3.	Defaults Upon Senior Securities	34
	Item 4.	Submission of Matters to a Vote of Security Holders	34
	Item 5.	Other Information	34
	Item 6.	Exhibits and Reports on Form 8-K	34
	Signatures		35
	Certifications		36

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IGN Entertainment, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)

			September 30, 2002			December 31, 2001 (1)
			(unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	4,667		$	8,285
	Accounts receivable, net			1,672			1,544
	Prepaid expenses and other current assets			652			626
		Total current assets		6,991			10,455
Restricted cash				781			2,296
Goodwill, net				1,949			2,218
Fixed assets, net				1,114			6,118
Other assets				92			227
		Total assets	$	10,927		$	21,314
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable		$	1,360		$	1,732
	Accrued liabilities and other			2,116			2,245
	Deferred revenue			988			1,410
	Current equipment financing obligations			—			1,538
	Current accrued restructuring charges			234			—
		Total current liabilities		4,698			6,925
Accrued restructuring charges, less current portion				1,374			—
Deferred rent				431			562
Long-term equipment financing obligations				—			75
Stockholders’ equity:
	Common stock, $0.001 par value: 100,000,000 shares authorized, 2,159,682 and 1,804,052 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively			2			2
	Treasury stock, 270,501 and 269,311 shares at September 30, 2002 and December 31, 2001, respectively			(1,176	)		(1,172	)
	Additional paid-in capital			152,074			150,004
	Other stockholders’ equity			(91	)		(165	)
	Accumulated deficit			(146,385	)		(134,917	)
		Total stockholders’ equity		4,424			13,752
		Total liabilities and stockholders’ equity	$	10,927		$	21,314

⁽¹⁾ The balance sheet at December 31, 2001 has been derived from the audited consolidated financial  statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

See notes to condensed consolidated financial statements

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IGN Entertainment, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)

				Three Months Ending September 30,						Nine Months Ending September 30,
				2002			2001			2002			2001
Revenue				$	2,276		$	2,100		$	7,160		$	6,921
Cost of revenue					280			592			1,054			2,552
	Gross profit				1,996			1,508			6,106			4,369
Operating expenses:
	Production and content				962			1,509			2,912			5,735
	Engineering and development				694			1,468			2,722			5,303
	Sales and marketing				1,301			1,799			3,957			8,750
	General and administrative				450			719			1,630			3,306
	Stock-based compensation (1)				141			106			182			1,897
	Amortization of goodwill and intangible assets				—			849			—			3,092
	Restructuring & impairment charges				2,324			—			7,356			3,991
	Gain on sale of assets				—			—			(1,114	)		—
		Total operating expenses			5,872			6,450			17,645			32,074
Loss from operations					(3,876	)		(4,942	)		(11,539	)		(27,705	)
Interest and other income, net					18			85			71			547
Net loss				$	(3,858	)	$	(4,857	)	$	(11,468	)	$	(27,158	)
Net loss per share - basic and diluted				$	(1.82	)	$	(2.60	)	$	(6.00	)	$	(14.38	)
Shares used in per share calculation					2,121			1,866			1,911			1,888
(1)  Stock-based compensation relates to the following:
		Cost of revenue		$	—		$	—		$	—		$	4
		Production and content			141			27			147			299
		Engineering and development			—			5			20			143
		Sales and marketing			—			18			15			305
		General and administrative			—			56			—			1,146
			Total	$	141		$	106		$	182		$	1,897

See notes to condensed consolidated financial statements

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IGN Entertainment, Inc.
Consolidated Statement of Cash Flows (unaudited)
(in thousands)

					Nine Months Ended September 30,
					2002			2001
Cash flows from operations
	Net loss				$	(11,468	)	$	(27,158	)
	Reconciliation to net cash used in operations:
		Depreciation and amortization				1,505			6,404
		Stock-based compensation				182			1,897
		Non-cash restructuring and asset impairment charges				3,569			1,708
		Gain on sale of assets				(1,114	)		—
		Other non-cash items, net				(18	)		247
		Changes in assets and liabilities:
			Accounts receivable			(59	)		2,248
			Prepaid expenses and other assets			109			1,125
			Accounts payable and accrued liabilities			(436	)		(4,457	)
			Deferred revenue			(16	)		462
			Accrued restructuring			1,543			10
			Deferred rent			111			403
				Net cash used in operating activities		(6,092	)		(17,111	)
Cash flows from investing activities
	Establishment of facility letters of credit					(69	)		—
	Reduction in facility letters of credit					1,584			1,341
	Purchases of fixed assets					(647	)		(532	)
	Proceeds from sale of assets					1,000			—
	Net refund on tenant improvements					335			1,143
				Net cash provided by investing activities		2,203			1,952
Cash flows from financing activities
	Proceeds from issuance of common stock, net of issuance costs					1,768			—
	Proceeds from other issuance of common stock to employees, net of (repurchases)					120			(84	)
	Repayment of equipment financing obligations					(1,613	)		(1,236	)
	Purchase of stock for treasury					(4	)		(935	)
				Net cash provided by (used in) financing activities		271			(2,255	)
Net decrease in cash and cash equivalents						(3,618	)		(17,414	)
Cash and cash equivalents at beginning of period						8,285			26,479
Cash and cash equivalents at end of period					$	4,667		$	9,065

See notes to condensed consolidated financial statements

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IGN Entertainment, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. FINANCIAL STATEMENT PRESENTATION

          The condensed consolidated financial statements include IGN Entertainment, Inc. and its wholly owned subsidiaries (collectively herein referred to as “IGN”) after elimination of intercompany amounts.

          The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q but do not include all of the information and footnotes required by generally accepted accounting principles and should, therefore, be read in conjunction with our annual report on Form 10-K, as amended by Amendment No. 1 to Form 10-K for the year ended December 31, 2001. These financial statements include all normal recurring adjustments that we believe necessary for a fair presentation of the statements. Certain reclassifications, none of which affected net loss, have been made to the prior periods’ amounts in order to conform to the current period’s presentation.

          The results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2002.

2. THE COMPANY

          IGN is an Internet media property that operates a network of destination web sites for members of Generation i (“Gen i”^TM) and the companies that want to reach them. We define Gen i as young adults, primarily 13 to 30 years of age, who regularly use the Internet. 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 property, our revenue is derived principally from:

• advertising, marketing and commerce programs sold to companies that wish to reach our audience for branding, education and sales of their products and services;

• a subscription program, IGN Insider, whereby paid subscribers have access to premium content and services on our web sites; and

• our on-line game store where customers can purchase computer and video game related merchandise.

          We serve our advertising and marketing customers by providing targeted access and communication to our audience as well as contextual integration of their products and services. 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 on-line community forum including message boards, classifieds and interactive games; an on-line store with access to purchase third party merchandise and other relevant services.

          We organize our web sites around networks and channels that target different segments of the Gen i audience. Currently, our networks are:

• IGN Games, which contains separate channels for all the different gaming platforms, as well as separate channels for our on-line store, message boards, codes and guides; and

• IGN Entertainment, which contains separate channels covering DVDs, male lifestyle, gear, movies, music and science-fiction.

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3. NET LOSS PER SHARE

          Basic and diluted net loss per share are presented in conformity with the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share,” for all periods presented.

          In accordance with SFAS No. 128, basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase.

          The following table presents the calculation of basic and diluted net loss per common share (in thousands, except per share data):

		Three Months Ended September 30,						Nine Months Ended September 30,
			2002			2001			2002			2001
Net loss		$	(3,858	)	$	(4,857	)	$	(11,468	)	$	(27,158	)
Basic and diluted:
	Weighted average shares of common stock outstanding		2,158			1,942			1,951			1,980
	Less: weighted average shares subject to repurchase		(37	)		(76	)		(40	)		(92	)
	Weighted average shares used in computing basic and diluted net loss per share		2,121			1,866			1,911			1,888
Basic and diluted net loss per share		$	(1.82	)	$	(2.60	)	$	(6.00	)	$	(14.38	)

4. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

          During 2001, we implemented a restructuring program to enhance the focus and cost effectiveness of our business.  As part of this program we enacted reductions in force, exited our non-IGN.com networks and restructured certain of our facility leases. 

          In the third quarter of 2002 we re-evaluated our facilities requirements and made the decision to attempt to sublet our New York and Connecticut office space. The market for office space in these locations has significantly declined from the dates we entered into our leases. As a result, we recorded a restructuring charge of $2,324,000, of which $1,660,000 represents the discounted rent and operating expenses over the remaining life of the leases, net of expected and estimated sublease income, and $664,000 to write-off the remaining book value of leasehold improvements in these facilities.   As of September 30, 2002, our accrued restructuring balance was $1,608,000.  IGN’s estimates used to compute this charge are based upon many factors including projections of current and forecast sublease rates, brokerage costs and vacancy rates.  Additional charges or gains may result if actual experience differs from projections.

          In the first quarter of 2002 we recorded restructuring charges of $4,959,000 for facility exit costs related to the restructuring of our Brisbane headquarters lease and $73,000 related to employee separation costs.

          We believe that additional restructuring charges may be incurred in the future in connection with ongoing cost reduction efforts.

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          Components of and changes in accrued restructuring charges for the nine months ended September 30, 2002 were as follows (in thousands):

	Severance			Lease			Total
Balance at December 31, 2001	$	65		$	—		$	65
Provisions		73			3,714			3,787
Cash payments, net		(138	)		(2,106	)		(2,244	)
Balance at September 30, 2002	$	—		$	1,608		$	1,608
Estimated remaining cash payments as of September 30, 2002, net	$	—		$	1,872		$	1,872

          In the year ended December 31, 2001, we recorded restructuring charges of $2,500,000 consisting of $1,772,000 of facility exit costs and abandoned facility assets and $728,000 in employee termination costs.  Of these charges, $1,958,000 were recorded in the first quarter of 2001 consisting of $1,631,000 of facility exit costs and abandoned facility assets and $327,000 in employee termination costs.  In the second quarter of 2001, $404,000 of restructuring charges were recorded consisting of $135,000 in facility exit costs and $269,000 in employee termination costs.

          Asset impairment charges arise when the expected future discounted cash flows to be generated from a long-lived intangible asset, goodwill in our case, are less than the present carrying value. In the second quarter of 2001, we recorded an impairment charge of $1,629,000 against the remaining unamortized goodwill of our 1999 acquisition of Extreme Interactive Media, Inc. when we discontinued operation of that site. 

5. GOODWILL AND OTHER INTANGIBLE ASSETS

          IGN adopted FASB SFAS No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002.  IGN was required to evaluate its existing goodwill and intangible assets and make any necessary reclassifications in order to comply with the new criteria in SFAS No. 142. The following disclosures are required to be presented at the time SFAS No. 142 is adopted and for all periods presented until all periods are accounted for in accordance with SFAS No. 142. These disclosures include presenting income for periods presented before the adoption of SFAS No. 142 adjusted to exclude the effects of adopting the new standard.

	Three Months Ending September 30,						Nine Months Ending September 30,
	2002			2001			2002			2001
	(in thousands, except per share data)
Net loss	$	(3,858	)	$	(4,857	)	$	(11,468	)	$	(27,158	)
Add back goodwill amortization		—			849			—			3,092
Adjusted net loss	$	(3,858	)	$	(4,008	)	$	(11,468	)	$	(24,066	)
Basic and diluted net loss per share	$	(1.82	)	$	(2.60	)	$	(6.00	)	$	(14.38	)
Add back goodwill amortization per share		—			0.45			—			1.64
Adjusted basic and diluted net loss per share	$	(1.82	)	$	(2.15	)	$	(6.00	)	$	(12.74	)

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6. GAIN ON SALE OF ASSETS

          On January 16, 2002 we completed the sale of our HighSchoolAlumni network to Reunion.com, a private company for approximately $1,000,000 in cash.  In the first quarter of 2002, we recorded a gain of $1,114,000 in association with the transaction, which represents cash received plus the deferred revenue balance as of January 15, 2002 related to the unrecognized portion of subscription money received on our HighSchoolAlumni subscription program less the net unamortized value of our 1999 acquisition of Ameritrack.

7. COMMITMENTS

          We are under a lease commitment through February 2004 for our headquarters facility in Brisbane, CA.  We also lease sales and support offices in Los Angeles and New York with commitment dates through July 2003 and October 2004, respectively. 

          In addition to the facilities mentioned above, 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 (See Note 4. Restructuring and Asset Impairment Charges).  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. Estimated sublease amounts net of estimated costs and vacancy rates for the existing sublease and for periods not currently under sublease, have been included in determining our restructuring accrual.

          As of September 30, 2002, in connection with our Brisbane and excess New York facility leases, we are committed under irrevocable standby letters of credit totaling $781,000 as security deposits for these facilities.  These amounts are classified as restricted cash on the accompanying balance sheets at September 30, 2002 and December 31, 2001.

          The following table details our current lease commitments and amounts under sublease (table represents commitments actually under contract as of September 30, 2002 and does not include estimates of potential future sublease income used in computing restructuring charges):

		Gross Lease Commitments		Sublease Income			Net Lease Commitments
					(in thousands)
Three Months Ended December 31, 2002		$	313	$	(87	)	$	226
Years Ended December 31,
	2003		1,252		(501	)		751
	2004		856		(317	)		539
	2005		741		—			741
	2006		688		—			688
	2007		688		—			688
	2008 and thereafter		1,835		—			1,835
Total minimum lease payments		$	6,373	$	(905	)	$	5,468

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8. STOCKHOLDERS’ EQUITY

	Common Stock						Additional Paid in Capital		Other Stockholders’ Equity			Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount
				(in thousands, except share data)
Balance at December 31, 2001		1,804,052		$	(1,170	)	$	150,004	$	(165	)	$	(134,917	)	$	13,752
Issuance of common stock to employees, net of repurchases		71,105			—			120								120
Purchase of treasury stock		(1,190	)		(4	)										(4	)
Forgiveness of notes receivable from stockholders										74						74
Issuance of common stock in private placement for cash, net of issuance costs		285,715			—			1,768								1,768
Stock-based compensation								182								182
Net loss													(11,483	)		(11,483	)
Balance at September 30, 2002		2,159,682		$	(1,174	)	$	152,074	$	(91	)	$	(146,400	)	$	4,409

          On June 20, 2002, IGN 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 and a term of five years.  In connection with this sale, we raised gross proceeds of approximately $2,000,000 and incurred approximately $232,000 of cash based issuance costs and issued a warrant to purchase up to 6,500 shares of common stock, with an exercise price of $10.00 per share and a term of five years, to a placement agent for its services in the private placement.

          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.  Repurchases may be made from time to time at market prices and as market and business conditions warrant.  No time limit has been set for the completion of the program.  As of September 30, 2002, IGN had repurchased 270,501 shares at an average purchase price of $4.35 per share.  No treasury stock purchases were made in the second or third quarters of 2002.

          In July 2002, Rick Boyce resigned as president of IGN and joined our Board of Directors.  The Board of Directors approved the exercise period for Mr. Boyce’s vested options be extended 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 purchase price of the vested options and the fair market value of the stock on the date of the extension.

9. CONCENTRATION OF CREDIT RISK

          IGN is exposed to concentration of credit risk principally from accounts receivable and revenue.  One customer accounted for 10% of revenue for the three months ended September 30, 2002 and 13% of our net accounts receivable balance as of September 30, 2002; no customers accounted for more than 10% of revenue for the nine months ended September 30, 2002.  Loss of or non-performance by this significant customer could adversely affect IGN’s financial position, liquidity or results from operations.

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10. 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 the first, second or third quarters of 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 has elected early adoption of the standard which has not had a material effect on operations. 

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Item 2- Management’s Discussion and Analysis of Financial Condition and Results of Operations

          Certain statements contained in this Form 10-Q 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-Q, 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, negative cash flows from operations, the need to increase revenue or decrease costs to survive 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 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 in this quarterly report on Form 10-Q.

          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.

Overview

          IGN’s business model and focus have significantly evolved 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 entertainment and gaming network and virtually all of our revenue in the first nine months of 2002 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 on-line 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.

          Our operating activities to date have been focused on developing 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 that our revenue will grow or that we will ever achieve or maintain profitability. We have experienced significant declines in our advertising revenue from Internet and Internet-related companies, which have been only partially offset by revenue from companies in more traditional lines of business.  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

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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 connection with 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 and intangibles, stock-based compensation, restructuring costs and a gain on the sale of assets.  This supplemental consolidated financial 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.  We urge readers to review and consider carefully GAAP financial information contained within our SEC filings and in our earnings releases in addition to supplemental disclosures.

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 on-going basis, we evaluate estimates, including those related to revenue recognition, bad debts, intangible assets 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 

          We recognize revenues once the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery of our obligation to our customer has occurred;

• the price to be charged to the buyer is fixed or determinable; and

• collectibility of the fees to be charged is reasonably assured.

          We derive our revenue principally from short-term contracts for various size and types of impression-based or time-based advertisements. This revenue is recognized at the lesser of the straight-line basis over the term of the contract or the ratio of impressions delivered over total committed impressions, provided that we do not have any significant remaining obligations and collection of the resulting receivable is reasonably assured. To the extent that minimum committed impression levels or other obligations are not met, we defer recognition of the corresponding revenue until such levels have been achieved. 

          Revenue also includes fees from sponsorship, fixed slotting fees, variable lead generation, commerce partnerships and other marketing programs under contracts in which we commit to provide our business customers with promotional opportunities or web-based services in addition to impression-based advertising. We generally receive a fixed fee and/or incremental payments for lead generation, customer delivery or traffic driven to the commerce partner’s site. Revenue that includes delivery of various types of impressions and services is recognized based on the lesser of the straight-line basis over the term of the contract or upon delivery when no minimum guaranteed deliverable exists.

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          For all sales, we use either a binding insertion order or signed agreement as evidence of an arrangement.

          We also recognize revenue from subscription fees that we charge our users for access to premium content and services on our web sites.  Subscription fees are recorded, net of any discounts, ratably over the subscription period (generally one month to one year) and deferred revenue is recorded for amounts received before services are provided. Transaction costs are recognized in the period the transaction occurs.

          We assess collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. We generally do not request collateral from our customers. If we determine that collection of a fee is not reasonably assured based on our current evaluation of these factors, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

          Our arrangements do not generally include acceptance clauses. However, if an arrangement includes an acceptance provision, acceptance occurs upon the earlier of receipt of a written customer acceptance or expiration of the acceptance period.

Allowance for doubtful accounts

          Our management must make estimates of the collectability of our accounts receivable. 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 the adequacy of the allowance for doubtful accounts. The use of different estimates or assumptions could produce different 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 and intangible assets

          We assess the impairment of goodwill and intangible 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:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and

• significant negative industry or economic trends.

          When we determine that the carrying value of goodwill and intangibles 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.

Restructuring charges

          As of September 30, 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 results in additional charges or gains.

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Results of Operations for the Three and Nine Months Ended September 30, 2002 and 2001

	Three Months Ended September 30,				Nine Months Ended September 30,
	2002		2001		2002		2001
	(in thousands)				(in thousands)
Revenue	$	2,276	$	2,100	$	7,160	$	6,921

          Revenue was $2,276,000 and $2,100,000 for the three months ended September 30, 2002 and 2001, respectively, which represents an increase of 8%.  Revenue for the nine months ended September 30, 2002 and 2001, was $7,160,000 and $6,921,000, respectively, which represents an increase of 3%.  Our increased revenue in both comparative periods is due to the combination of the general growth in gaming and consumer advertising spending and to increased subscription revenue from our IGN network, offset by reductions in revenue from our discontinued ChickClick network and our sold HighSchoolAlumni network.  Subscription revenue grew as a percentage of total revenue to 20% from 6% for the three months ended September 30, 2002 and 2001, respectively.  Subscription revenue grew as a percentage of total revenue to 15% from 2% for the nine months ended September 30, 2002 and 2001, respectively

          To date, we have derived revenue principally from short-term contracts for impression-based advertisements, including Flash, Unicast and click-within advertising units, as well as banners, buttons and textlinks.  Under these contracts, we typically provide advertisers with a number of “impressions,” or a number of times a user may view their advertisements, for which we receive a fee. 

          Revenue also includes fees from commerce partnerships, sponsorship, fixed slotting fees, variable lead generation, content licenses, and other marketing programs under contracts in which we commit to provide our business customers with promotional opportunities and web site and editorial services in addition to traditional impression-based advertising. These agreements typically provide not only for the delivery of advertising impressions on our web sites, but also time or location based exclusive placement on our networks, special content and promotional offers and the design and development of customized content or sites to enhance the promotional objectives of the advertiser or commerce partner.

          In April 2001 we initiated a subscription program for our IGN users.  Through September 2002, our IGN Insider subscription base has grown to approximately 68,000 users and we have collected approximately $1,950,000 of which approximately $500,000 was collected in the third quarter of 2002.  As of September 30, 2002, we had $658,000 of deferred subscription revenue on our balance sheet.  Subscription revenue for the three months ended September 30, 2002 and 2001 was $444,000 and $134,000, respectively.  Subscription revenue for the nine months ended September 30, 2002 and 2001 was $1,104,000 and $164,000, respectively.  Our subscription revenue has grown in consecutive periods because new subscribers and subscribers renewing existing subscriptions have exceeded subscriptions that lapse or are canceled.  We expect this trend will continue through 2002, however, as our subscription model is new and evolving we can not accurately predict future subscription revenue due to uncertainties in the numbers of new subscribers and the retention of existing subscribers.  

          We currently believe that full year 2002 revenues will increase over our full year 2001 revenues; however, given the current unpredictability in advertising spending and weakness in advertising demand, there can be no assurance that we will maintain 2002 revenue levels in future periods.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Cost of Revenue	$	280		$	592		$	1,054		$	2,552
Percentage of revenue		12	%		28	%		15	%		37	%

          Cost of revenue consists primarily of expenses related to hosting our web sites, costs of third-party content and tools, credit card processing fees and guaranteed payments or a portion of our revenue owed to affiliates for advertising and marketing placed on their web sites.  For the three months ended September

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30, 2002 and 2001, cost of revenue was $280,000 and $592,000, respectively, which represents a decrease of 53%.  For the nine months ended September 30, 2002 and 2001, cost of revenue was $1,054,000 and $2,552,000, which represents a decrease of 59%.  In both comparative periods, our decreased cost of revenue is primarily due to a reduction in the number of affiliates, lower hosting costs due to a more favorable hosting contract with our outside service provider and less reliance upon third-party content.  Beginning in late 2000, we reduced costs from our affiliate program by renegotiating, terminating or not renewing our affiliate contracts.  As of September 30, 2002, all but one of our affiliate contracts have been terminated.  For the nine months ended September 30, 2002, affiliate costs were less than 1% of cost of revenue as compared to 39% in the prior year’s comparative period.  

          We currently believe that cost of revenue will decrease for the full year 2002, in both absolute dollars and as a percent of revenue, as compared to 2001. 

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 and intangible assets, restructuring and impairment charges and gain on sale of assets. Total operating expenses for the three months ended September 30, 2002 and 2001 were $5,872,000 and $6,450,000, respectively, which represents a 9% decline. Total operating expenses for the nine months ended September 30, 2002 and 2001 were $17,645,000 and $32,074,000, respectively, which represents a 45% decline.  In both comparative periods, the decline in operating expenses is primarily a result of our headcount reductions, expense control efforts, the full amortization of deferred stock-based compensation as of December 31, 2001 and the elimination of goodwill amortization charges in 2002 due to the adoption of a SFAS No. 142 effective January 1, 2002.  Partially, offsetting these declines, restructuring and impairment charges increased in both 2002 comparative periods due primarily to the restructuring of our excess Brisbane, California; New York; and Connecticut office facilities.

          We currently believe that each of production and content, engineering and development, sales and marketing and general and administrative expenses will decrease, in both absolute dollars and as a percentage of revenue, for the full year 2002 as compared to 2001. 

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Production and Content	$	962		$	1,509		$	2,912		$	5,735
Percentage of revenue		42	%		72	%		41	%		83	%

          Production and content expenses consist primarily of personnel and related costs for editorial, artistic and production staff. In addition, these expenses include costs of freelance writers.

          Production and content costs were $962,000 and $1,509,000 for the three months ended September 30, 2002 and 2001, which represents a decrease of 36%; and $2,912,000 and $5,735,000 for the nine months ended September 30, 2002 and 2001, respectively, which represents a decrease of 49%.  In both comparative periods, the decreases were due primarily to the reduction of our editorial, artistic and production staff and the reduced usage of freelance writers, artists and computer-related expenses for the creation of content for our web sites. In connection with our efforts to control our expenses, we eliminated certain channels within our networks and in the fourth quarter of 2001 we curtailed operations of our HighSchoolAlumni and ChickClick networks and ultimately sold our HighSchoolAlumni network in January 2002.

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Engineering and Development	$	694		$	1,468		$	2,722		$	5,303
Percentage of revenue		30	%		70	%		38	%		77	%

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

          Engineering and development expenses were $694,000 and $1,468,000 for the three months ended September 30, 2002 and 2001, respectively, which represents a decrease of 53%; and $2,722,000 and $5,303,000 for the nine months ended September 30, 2002 and 2001, respectively, which represents a decrease of 49%.  In both comparative periods, the decreases were due primarily to reduction of personnel, consulting and recruiting fees, reduced or discontinued equipment support and maintenance agreements and decreased depreciation as certain equipment became fully depreciated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Sales and Marketing	$	1,301		$	1,799		$	3,957		$	8,750
Percentage of revenue		57	%		86	%		55	%		126	%

          Sales and marketing expenses consist primarily of personnel and related costs for our direct sales force, sales and advertising operations support personnel and marketing staff.  In addition, these expenses include costs of tradeshows and promotional activities.

          Sales and marketing expenses were $1,301,000 and $1,799,000 for the three months ended September 30, 2002 and 2001, respectively, which represents a decrease of 28%; and $3,957,000 and $8,750,000 for the nine months ended September 30, 2002 and 2001, respectively, which represents a decrease of 55%.  In both comparative periods, these decreases were due primarily to the reduction of our advertising, marketing and branding activities, and decreases in our sales and marketing staff.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
General and Administrative	$	450		$	719		$	1,630		$	3,306
Percentage of revenue		20	%		34	%		23	%		48	%

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

          General and administrative expenses were $450,000 and $719,000 for the three months ended September 30, 2002 and 2001, respectively, which represents a decrease of 37%; and $1,630,000 and $3,306,000 for the nine months ended September 30, 2002 and 2001, respectively, which represents a decrease of 51%.  In both comparative periods these decreases were due primarily to the general reduction in accounting and finance, human resources and other administrative staff.

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IGN Entertainment, Inc.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Stock-based Compensation	$	141		$	106		$	182		$	1,897
Percentage of revenue		6	%		5	%		3	%		27	%

          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 purchase 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 (generally four years) using a graded amortization method; any unamortized portion was reversed upon an options cancellation.  As of December 31, 2001, we had fully expensed any deferred stock-based compensation recorded with 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 strike price of these awards.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Amortization of Goodwill and Intangible Assets	$	—		$	849		$	—		$	3,092
Percentage of revenue		0	%		40	%		0	%		45	%

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 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 written-down 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. IGN adopted this accounting standard as of January 1, 2002. 

          No impairment charges were recorded during the nine months ended September 30, 2002; however, future impairment reviews may result in periodic write-downs.  As of September 30, 2002, the balance of our goodwill was $1,949,000.

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IGN Entertainment, Inc.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Restructuring and Asset Impairment Charges	$	2,324		$	—		$	7,356		$	3,991
Percentage of revenue		102	%		0	%		103	%		58	%

          During 2001, we implemented a restructuring program to enhance the focus and cost effectiveness of our business.  As part of this program we enacted reductions in force, exited our non-IGN.com networks and restructured certain of our facility leases. 

          In the third quarter of 2002 we re-evaluated our facilities requirements and made the decision to attempt to sublet our Connecticut and New York office space. The market for office space in these locations has significantly declined from the dates we entered into our leases. As a result, we recorded a restructuring charge of $2,324,000, of which $1,660,000 represents the discounted rent and operating expenses over the remaining life of the leases, net of expected and estimated sublease income, and $664,000 to write-off the remaining book value of leasehold improvements in these facilities.   As of September 30, 2002, our accrued restructuring balance was $1,608,000.  IGN’s estimates used to compute this charge are based upon many factors including projections of current and forecast sublease rates, brokerage costs and vacancy rates.  Additional charges or gains may result if actual experience differs from projections.

          In the first quarter of 2002, we recorded restructuring charges of $4,959,000 for facility exit costs related to the restructuring of our Brisbane headquarters lease and $73,000 related to employee separation costs.

          We believe that additional restructuring charges may be incurred in the future in connection with ongoing cost reduction efforts.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Gain on Sale of Assets	$	—		$	—		$	(1,114	)	$	—
Percentage of revenue		0	%		0	%		16	%		0	%

          On January 16, 2002 we completed the sale of our HighSchoolAlumni 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 subscription program, less the net unamortized value of our 1999 acquisition of Ameritrack. 

	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
	(in thousands)						(in thousands)
Interest and Other Income, net	$	18		$	85		$	71		$	547
Percentage of revenue		1	%		4	%		1	%		8	%

          Interest and other income, net was $18,000 and $85,000 for the three months ended September 30, 2002 and 2001, respectively, which represents a decrease of 79%; and $71,000 and $547,000 for the nine months ended September 30, 2002, respectively, which represents a decrease of 87%.  These decreases were due primarily to our decreasing cash and cash equivalent position as a result of our operating losses, including restructuring charges.

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IGN Entertainment, Inc.

Liquidity and Capital Resources

	Nine Months Ended September 30,
	2002			2001
	(In thousands)
Cash (used in) operating activities	$	(6,092	)	$	(17,111	)
Cash provided by investing activities	$	2,203		$	1,952
Cash provided by (used in) financing activities	$	271		$	(2,255	)

          Cash used by operations totaled $6,092,000 during the nine months ended September 30, 2002 compared to $17,111,000 during the comparative 2001 period. This decrease resulted primarily from the decrease in operating expenses during the first three quarters of 2002 and the resulting decrease in net loss. Working capital at September 30, 2002 was $2,293,000.  Cash and cash equivalents at September 30, 2002 were $4,667,000.

          Net cash provided from investment activities for the nine months ended September 30, 2002 was $2,203,000.  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.  The letter of credit reduction of $1,584,000 combined with an additional $416,000 in cash comprised the $2,000,000 we used to buyout our Brisbane facility lease.  We also received a refund of $335,000 on tenant improvements associated with our New York facility, purchased $647,000 of fixed assets and established new facility letters of credit for $69,000.

          Net cash provided from financing activities for the nine months ended September 30, 2002 was $271,000.  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 September 30, 2002, IGN repurchased 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 or third quarter of 2002.

          As of September 30, 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 represents a decrease from our original letters of credit for these facilities of $5,111,000.  During 2001, $2,815,000 of our letters of credit 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 September 30, 2002 and December 31, 2001 have been classified as restricted cash on our balance sheets.

          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 details our current lease commitments and amounts under sublease (table represents commitments actually under contract as of September 30, 2002 and does not include estimates of potential future sublease income used in computing restructuring charges):

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		Gross Lease Commitments		Sublease Income			Net Lease Commitments
		(in thousands)
Three Months Ended December 31, 2002		$	313	$	(87	)	$	226
Years Ended December 31,
	2003		1,252		(501	)		751
	2004		856		(317	)		539
	2005		741		—			741
	2006		688		—			688
	2007		688		—			688
	2008 and thereafter		1,835		—			1,835
Total minimum lease payments		$	6,373	$	(905	)	$	5,468

          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 experienced substantial expenditures as we grew our operations and personnel.  Although we have significantly reduced our costs beginning in the second quarter of 2000, we still have not achieved positive cash flows from operations.  We believe that 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 2002. 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” in Item 2 of this report.

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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 recently restructured our business and implemented a new and unproven business model. 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 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 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.

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 2002. The report of our independent auditor, Ernst & Young LLP, on our 2001 financial statements contains an explanatory paragraph describing conditions that raise substantial doubt about our ability to continue as a going concern.  We expect that the independent auditor’s report for our 2002 financial statements will contain a similar paragraph.  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

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IGN Entertainment, Inc.

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:

• our ability to increase revenues;

• the rate at which we expand or contract our sales and marketing operations;

• the extent to which we expand or contract our content and service offerings;

• the extent to which we develop and upgrade our technology and data network infrastructure;

• the timing of, and extent to which we are faced with, unanticipated marketing or technological challenges or competitive pressures;

• our ability to successfully transfer liability for or restructure long-term facility leases for facilities that exceed our present capacity needs;

• the amount and timing of leasehold improvements and capital equipment purchases;

• the response of competitors to our content and service offerings; and

• the willingness of advertisers to become and remain our customers.

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

          Our business might fail if we do not increase and sustain our revenues from existing sources, such as advertising sales, subscription fees and corporate partnerships.  Even if we increase our 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:

• growth of our user base;

• the attractiveness of our user base to advertisers;

• our ability to derive useful consumer patterns and other information from our users;

• acceptance by advertisers of the Internet as an advertising medium;

• our ability to create an adequate supply of viewed web content on which to sell advertising space; and

• keeping our web sites technologically flexible in order to accommodate the latest advertiser demands.

          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.

          We also derive revenue from subscriptions.  Our subscription model is new and evolving and only in its sixth 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

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IGN Entertainment, Inc.

program is not accepted by new and current subscribers, our subscription revenue and traffic would decline.  A decline in traffic could result in decreased advertising revenues.

          Additionally, we earn revenue from several larger corporate partnerships through which we provide customers with various commerce, content and marketing 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.

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 have only recently restructured our business to focus solely on the interactive entertainment market; 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 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

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IGN Entertainment, Inc.

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 Yahoo!, AOL, CNET, 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.

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 80 full-time employees as of October 31, 2002. Further, we significantly reduced our relationships with affiliated web sites, introduced a pay-for-access subscription model and opened an online store.  These significant changes have

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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 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, 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 experienced, and we expect to continue to experience, difficulty in hiring and retaining skilled employees with appropriate qualifications.  For example, during the third quarter of 2002, our president voluntarily resigned.  His duties and responsibilities were allocated among and assumed by existing officers and employees.

          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.

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          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 on-line. 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 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.

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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 on-line 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 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

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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 on-line 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 On-line 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 on-line 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 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.  

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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 on-line 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:

• user privacy and expression;

• taxation and pricing;

• the rights and safety of children;

• intellectual property;

• defamation;

• sweepstakes and promotions; and 

• information security.

          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 on-line 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 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 on-line services could also increase our costs of doing business, discourage Internet communications and reduce demand for our services.

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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:
•	actual or anticipated variations in our quarterly results of operations;
•	our cash position;
•	our limited amount or availability of public float shares;
•	changes in ownership percentage as a result of the issuance of equity securities;
•	changes in the market valuations of other Internet content and service companies;
•	public perception of Internet content and service companies;
•	public perception of growth prospects for the video game and entertainment industries;
•	announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
•	changes in financial estimates or recommendations by securities analysts;
•	additions or departures of key personnel;
•	additions or departures of key customers;
•	our ability to attract or retain subscribers; and
•	failure to maintain minimum Nasdaq listing requirements.

In addition, broad market and industry factors may materially and adversely affect the market price of our common stock, regardless of our operating performance. The Nasdaq Stock Market, and the market for Internet and technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

Should our stockholders sell a substantial number of shares of common stock in the public market, the price of our common stock could fall.

          Our current stockholders include individuals or firms that hold a substantial number of shares that they are entitled to sell in the public market. Sales of a substantial number of these shares could reduce the market price of our common stock. These sales could make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

The sale of the common stock or the perception that shares of common stock will be sold under our recently filed Form S-3 registration statement could lower our stock price and negatively impact our ability to raise capital through the public markets. 

          Sales in the public market of the common stock covered by our registration statement filed on Form   S-3 (No. 333-96637) with the SEC could lower our stock price and impair our ability to raise funds in additional stock offerings.  Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, might adversely affect the prevailing market price of our common stock and make it more difficult for us to raise funds through a public offering of our equity securities.  

          In addition, the nature of some of the selling stockholders named in the Form S-3 could be perceived negatively by other investors or potential investors and could cause our stock price to decline.  Chris Anderson, our chairman and a beneficial owner of more than 30% of our outstanding common stock, Mark Jung, our chief executive officer, and affiliates of Michael Orsak, one of our directors, offer a substantial majority of all the shares covered by the Form S-3.  Other investors or potential investors could

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interpret this participation to indicate, for example, that these selling stockholders lack confidence in IGN.  This and any other negative interpretations arising from the participation of these selling stockholders in the Form S-3, could cause our stock price to decline.

Our officers and directors and their affiliates exercise significant control over us, which could disadvantage other stockholders.

          Our executive officers and directors and their affiliates together owned approximately 53% of our outstanding common stock as of October 31, 2002. Christopher Anderson, the chairman of our board of directors, owned approximately 38% of our outstanding common stock alone.  Another stockholder owned approximately 14% of our outstanding common stock.  As a result, these stockholders exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of control could disadvantage other stockholders with interests different from those of our officers, directors and their affiliates. For example, our officers, directors and their affiliates could delay or prevent someone from acquiring or merging with us even if the transaction would benefit other stockholders.

Class action litigation resulting from volatility of the trading price of our common stock would likely result in substantial costs and a diversion of management’s attention and resources.

          Volatility in the trading price of our common stock could result in securities class action litigation. Any litigation would likely result in substantial costs and a diversion of management’s attention and resources.

If our common stock ceases to be listed for trading on the Nasdaq SmallCap Market, the value and liquidity of your investment may be adversely affected.

          We cannot assure you that we will be able to meet or maintain all of the requirements for continued listing on the Nasdaq SmallCap Market in the future.  For example, we must attract a new independent member to our Board of Directors and our Audit Committee in the near future to comply with current listing requirements.  Additional requirements that we must meet to remain listed on the Nasdaq SmallCap Market include (i) maintaining a minimum bid price of $1.00 per share, and (ii) having either (a) stockholders’ equity of $2,500,000, (b) a market capitalization of $35,000,000, or (c) net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years) of $500,000.  Currently, we satisfy these selected quantitative requirements (i) and (ii).  Given our market capitalization is currently less than $35,000,000 and our net income from operations (in the latest fiscal year or in two of the last three fiscal years) was less than $500,000, it is reasonably possible that our stockholders’ equity, which was $4,424,000 as of September 30, 2002, could decline below $2,500,000 in future periods and that such decline could jeopardize our continued listing on the Nasdaq SmallCap Market.  If we do not meet Nasdaq listing requirements, we expect that our common stock would be traded on the NASD Over-The-Counter Bulletin Board.  If our common stock were to be delisted from the Nasdaq SmallCap Market, the liquidity of your investment would be diminished and the volatility of the trading price of our common stock would increase. Further, our stock could then potentially be subject to what are known as the “penny stock” rules, which place additional requirements on broker-dealers who sell or make a market in such securities. Consequently, if we were removed from the Nasdaq SmallCap Market, the ability or willingness of broker-dealers to sell or make a market in our common stock might decline. As a result, your ability to resell your shares of our common stock could be harmed.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

          Our exposure to market risk is limited to interest income sensitivity, which is affected by changes in the general level of interest rates in the United States, particularly since the majority of our investments are short-term and issued by corporations or divisions of the United States government. We place our investments with high quality issuers and limit the amount of credit exposure to any one issuer. Due to the

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nature of our short-term investments, we believe that we are not subject to any material market risk exposure.

          We had no foreign currency hedging or other derivative financial instruments as of September 30, 2002.

Item  4 - Controls and Procedures

          Within the 90-day period prior to the filing of this report, evaluations were carried out under the supervision and with the participation of IGN’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon those evaluations, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective for the purpose of ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. 

          No significant changes have been made, to our knowledge, in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluations.

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Part II - OTHER INFORMATION

Item 1 -		Legal Proceedings
		Not applicable
Item 2 -		Changes in Securities and Use of Proceeds
		Not applicable
Item 3 -		Defaults Upon Senior Securities
		Not applicable
Item 4 -		Submission of Matters to a Vote of Security Holders
		No matters were submitted to a vote of security holders during the third quarter of 2002.
Item 5 -		Other Information
		Not applicable
Item 6 -		Exhibits and Reports on Form 8-K
	(a)	Exhibits

Exhibit Number	Description
10.01	Sublease agreement, dated as of July 15, 2002, between Registrant and INT Media Group, Inc.

(b)	Reports on Form 8-K
	No current reports on Form 8-K were filed during the period covered by this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			IGN ENTERTAINMENT, INC.
Date:		November 14, 2002	By	/s/ MARK A. JUNG
				Mark A. Jung Chief Executive Officer and Director
Date:	November 14, 2002		By	/s/ JAMES R. TOLONEN
				James R. Tolonen Chief Financial Officer, Chief Operating Officer and Director (Principal Financial Officer)

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CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

            I, Mark A. Jung, certify that:

1.         I have reviewed this quarterly report on Form 10-Q of IGN Entertainment, Inc.;

2.         Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.         Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.         The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)     evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.         The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)     all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.         The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  November 14, 2002	By:	/s/ MARK A. JUNG
		Mark A. Jung Chief Executive Officer

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IGN Entertainment, Inc.

CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

            I, James R. Tolonen, certify that:

1.         I have reviewed this quarterly report on Form 10-Q of IGN Entertainment, Inc.;

2.         Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.         Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.         The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)     evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.         The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)     all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.         The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  November 14, 2002	By:	/s/ JAMES R. TOLONEN
		James R. Tolonen Chief Financial Officer and Chief Operating Officer

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IGN Entertainment, Inc.

QUARTERLY REPORT ON FORM 10-Q
INDEX TO EXHIBITS

Exhibit Number	Description
10.01	Sublease agreement, dated as of July 15, 2002, between Registrant and INT Media Group, Inc.

EX-10.01

Exhibit 10.01

SUBLEASE

                    THIS SUBLEASE AGREEMENT (as the same may be amended or otherwise modified from time to time, this “Sublease”) is made as of July 15, 2002 by and between IGN ENTERTAINMENT, INC. f/k/a SNOWBALL.COM, INC., a Delaware corporation (“Sublandlord”), and INT MEDIA GROUP, INC., a Delaware corporation (“Subtenant”).

WITNESSETH:

                    WHEREAS, by Lease dated March 1, 2000 between 475 PARK AVENUE SO. CO. (“Prime Landlord”), as landlord, and Sublandlord, as tenant (as the same may be further amended or otherwise modified from time to time, is hereinafter referred to as the “Prime Lease”), Sublandlord leased certain premises from Prime Landlord consisting of the entire 4^th Floor (the “Premises”) in the building commonly known as and located at 475 Park Avenue South, New York, New York (the “Building”); and

                    WHEREAS, Sublandlord desires to sublease to Subtenant the Premises (consisting of the entire 4^th floor of the Building) and Subtenant desires to sublease the Premises from Sublandlord, which Premises Sublandlord and Subtenant agree contains 16,000 rentable square feet and is more particularly shown on the floor plan attached hereto as EXHIBIT A.

                    NOW, THEREFORE, upon and subject to the terms and conditions of this Sublease, and in consideration of the premises and the mutual agreements hereinafter set forth, Sublandlord and Subtenant, for themselves, their heirs, executors, legal representatives, successors and assigns, hereby covenant and agree as follows.

ARTICLE I.
TERM

                    1.          Premises; Sublease Term.  Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases from Sublandlord the Premises, on the terms and conditions hereinafter set forth.  The term of this Sublease (the “Term”) shall commence on the date (the “Commencement Date”) which is the later to occur of (i) August 1, 2002, or (ii) the date on which the Prime Landlord consents to this Sublease as provided in Article XI below, in either case, provided that Subtenant is given occupancy of the Premises, and shall expire at 11:59 p.m. on the earlier of (i) the second (2^nd) anniversary of the date that is the last day of the calendar month in which the Commencement Date occurs (the “Expiration Date”), or (ii) such earlier date upon which the Prime Lease may expire or be terminated as provided in the Prime Lease or upon which the Term hereof may expire or be terminated as provided in this Sublease.  Upon obtaining the consent of the Prime Landlord to this Sublease, Sublandlord and Subtenant shall execute a Commencement Date Letter in the form annexed hereto as EXHIBIT B acknowledging the Commencement Date of this Sublease.

                    2.          Early Termination Option and Sublandlord Employees.  Provided Subtenant is not in default hereunder, Subtenant shall have the option to terminate this Sublease

on September 30, 2002 by giving Sublandlord prior written notice on or before September 30, 2002 (time being of the essence) (the “Termination Notice”).  In the event of such early termination, Subtenant shall, together with the Termination Notice, deliver to Sublandlord an early termination fee equal to One Hundred Thirty Six Thousand and XX/100 ($136,000.00) Dollars.

                    3.          Renewal Option.  Provided Subtenant is not in default hereunder, Subtenant shall have the option to renew this Sublease for an additional twelve (12) months following the expiration of the Term (the “Renewal Term”) by giving Sublandlord three (3) months prior written notice (time being of the essence).  In the event Subtenant exercises its option to renew this Sublease, such Renewal Term shall be governed by the terms and conditions of this Sublease, including without limitation, the Base Rent.

ARTICLE II.
RENT AND ADDITIONAL RENT

                    1.          Base Rent.  Subtenant shall pay to Sublandlord, without notice or demand, and without set-off, deduction, abatement or offset, the base rent (hereinafter referred to as “Base Rent”), in the annual amounts (as set forth below) payable in equal monthly installments (as set forth below) in advance on the first day of each and every calendar month (or portion thereof), commencing on the Commencement Date and throughout the Term, prorated for any partial month based upon the actual number of days in such month.  Notwithstanding the foregoing, provided Subtenant is not in default under this Sublease, and provided further that Subtenant has not exercised its option to terminate this Sublease pursuant to Section 2 of Article I above, the payment of Base Rent for the fourth (4^th) and twelfth (12^th) full months of the Term shall be abated.

PERIOD	RATE/SQ. FT.		ANNUAL RENT		MONTHLY RENT
Commencement Date – 7/31/03	$	34.00	$	544,000.00	$	45,333.33
8/1/03 – 7/31/04	$	34.53	$	552,480.00	$	46,040.00
Extension Term (if exercised) 8/1/04 – 7/31/05	$	35.11	$	561,760.00	$	46,813.33

                    2.          Additional Rent.

                                 (a)   Intentionally deleted.

                                 (b)   Subtenant acknowledges that the Base Rent includes charges for electricity based on the Rent Inclusion Factor more particularly described in the Prime Lease.  Electricity consumed by Subtenant shall be determined and paid in all respects in accordance with the provisions of Article 23 of the Prime Lease (as incorporated herein).  Sublandlord states that the charges for electricity based on the Rent Inclusion Factor were approximately $4,900.00 per month.

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                                (c)    “Subtenant Surcharges” shall mean any and all amounts (other than “minimum rent” payable pursuant to the Prime Lease and other than the “Wage Rate escalation” and the “real estate taxes escalation” payable pursuant to the Prime Lease) which, by the terms of the Prime Lease, become due and payable by Sublandlord to Prime Landlord during the Term hereunder as additional rent thereunder or otherwise and which would not have been due and payable but for the acts, requests for services and/or failure to act of Subtenant, its agents, officers, contractors, invitees, employees or visitors under this Sublease or in any way relating to the Premises including, but not limited to (i) any increase in insurance premiums as may be stated in the Prime Lease attributable to Subtenant’s use of or acts or omissions in the Premises; (ii) any fee imposed by Sublandlord or Prime Landlord for the review of Subtenant’s plans and specifications for the Premises; (iii) any fees for any special or after hours services provided to Subtenant or in connection with Subtenant’s use of the Premises; (iv) the cost of any additional services provided to the Premises, or arising from Subtenant’s use and occupancy of the Premises; (v) the cost of any additional charges for electric energy that Sublandlord is required to pay to Prime Landlord pursuant to the provisions of Article 23 of the Prime Lease based on Subtenant’s increased usage of electricity above current levels; or (vi) any other sums which shall be payable to Prime Landlord pursuant to the Prime Lease with respect to the Premises or any part thereof.

                    3.          Advance Rent.  Upon Subtenant’s execution and delivery of this Sublease for Sublandlord’s execution, Subtenant shall tender payment of $45,333.33 as the first full monthly installment of Base Rent due under this Sublease.  If the Commencement Date falls on a day other than the first (1^st) day of a calendar month, Base Rent for the second month shall be prorated based upon the actual number of days in the first partial month.

                    4.           Reconciliation.

                                 (a)    Within a reasonable time after receipt by Sublandlord of any statement or written demand from Prime Landlord which includes demand for payment of any amounts payable hereunder as Subtenant Surcharges or other amounts payable by Subtenant hereunder other than Base Rent (“Additional Rent”), Sublandlord shall deliver to Subtenant a copy of such statement or demand.  Subtenant shall pay to Sublandlord the amount of such Additional Rent within twenty (20) business days after Subtenant’s receipt of such statement or demand, but in no event shall Subtenant be obligated to make such payment more than thirty (30) days before such payment is due under the Prime Lease; provided, however, that in any instance in which Subtenant shall receive any such statement or demand directly from Prime Landlord, Subtenant may pay the amount of the same directly to Prime Landlord.  Sublandlord agrees that if Subtenant pays the amount due directly to Prime Landlord, in accordance with the preceding sentence, any obligation of Subtenant to pay the same to Sublandlord shall be satisfied by the payment to Prime Landlord.

                                 (b)    Payments shall be made pursuant to this Section 4 notwithstanding the fact that the statement to be provided by Sublandlord is furnished to Subtenant after the expiration of the Term of this Sublease and notwithstanding the fact that by its terms this Sublease shall have expired or have been cancelled or terminated, provided however, Subtenant shall not be responsible to pay any such amounts that are invoiced to Subtenant or Sublandlord

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(which would otherwise be payable by Subtenant hereunder) to the extent that such invoices are received later than the one (1) year anniversary of the expiration or termination date. 

                                 (c)    Within a reasonable time after the receipt by Sublandlord from Prime Landlord of any statement of insurance premiums or electricity or other utility expenses, Sublandlord will furnish Subtenant with a copy of such statement and copies of any additional related material received by Sublandlord from Prime Landlord in connection therewith. 

                                 (d)    If Sublandlord shall receive from Prime Landlord any refund of any amounts in respect of which Subtenant shall have paid Additional Rent to Sublandlord or Prime Landlord under the provisions of this Article, Sublandlord shall retain out of such refund the reasonable costs and expenses, if any, of obtaining such refund, including but not limited to reasonable attorneys’ fees and disbursements, and shall then pay to Subtenant, within ten (10) days after receipt of such refund by Sublandlord, the portion of the remainder of such refund which is equitably attributable to amounts paid by Subtenant as Additional Rent hereunder.

                                 (e)    All Additional Rent including Subtenant’s Surcharges and all reasonable costs, charges and expenses which Subtenant assumes, agrees or is obligated to pay to Sublandlord pursuant to this Sublease shall be deemed to be additional rent, and in the event of non-payment, Sublandlord shall have all the rights and remedies with respect thereto as are herein provided for in case of nonpayment of the Base Rent reserved hereunder.

                    5.          Late Charge.  If Subtenant fails to pay in full when due any installment of Base Rent, Additional Rent or any other amount and such failure continues for twenty (20) days after the applicable due date and written notice is given to Subtenant, then, in addition to the amount due, Subtenant shall, on demand, pay interest thereon from the due date until the date paid at the rate of one and one-half percent (1-1/2%) per month on the sum due.

                    6.          Payment.   Base Rent, Additional Rent, Subtenant Surcharges and all other sums payable to Sublandlord under this Sublease (sometimes herein referred to, collectively, as “Rent”), shall be paid to Sublandlord in lawful money of the United States of America (x) by good check, subject to collection, to the following address:

IGN Entertainment, Inc.

3240 Bayshore Boulevard

Brisbane, CA 94005

Attention: Accounts Receivable

or (y) by federal wire transfer in accordance with Sublandlord’s wiring instructions to be furnished to Subtenant upon Subtenant’s request therefor, or to such other party or address as Sublandlord may designate by notice to Subtenant.  Sublandlord’s acceptance of late Rent payments shall not excuse such delay nor any future delays in payment nor constitute a waiver of rights, notwithstanding any endorsement or restriction that Subtenant may include with such payment.  If Subtenant shall default in the timely payment of its monetary obligations under this Sublease by reason of a check being returned for insufficient funds or similar default, then, upon notice from Sublandlord, Sublandlord shall have the right to require that Subtenant thereafter make all payments by certified check or wire transfer.  Any payments to be made pursuant to this

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Article shall be made notwithstanding the fact that the statement to be provided by Sublandlord is furnished to Subtenant after the expiration of the Term of this Sublease and notwithstanding the fact that by its terms this Sublease shall have expired or have been cancelled or terminated provided however, Subtenant shall not be responsible to pay any such amounts that are invoiced to Subtenant or Sublandlord (which would otherwise be payable by Subtenant hereunder) to the extent that such invoices are received later than the one (1) year anniversary of the expiration or termination date.

                    7.          Tax on Subtenant’s Personal Property.   Subtenant shall pay directly to the taxing authority all tax due on Subtenant’s equipment or personal property, if such tax is billed separately by the taxing authority, or shall, on demand, reimburse Sublandlord for such tax, if Sublandlord is billed for such tax.

                    8.          Survival.   Subject to the terms of this Article II, the provisions of this Article shall survive the expiration or any earlier cancellation or termination of this Sublease.

ARTICLE III.
ACCESS, SERVICES, MAINTENANCE, REPAIRS

                    1.          Interruptions.   Sublandlord shall not be liable for any damage or loss, directly or indirectly resulting from, nor shall the Rent herein reserved be abated (except as provided in Article IX hereof) or a constructive or other eviction be deemed to have occurred by reason of (x) any installation, use or interruption of use of any equipment in connection with the furnishing or supplying of any services or (y) any failure or delay in furnishing any services when such failure or delay is caused by accident or breakdown, or by the making of repairs or improvements required by governmental restrictions or by voluntary compliance with governmental guidelines.  Neither Sublandlord, nor its employees or agents shall be liable to Subtenant for any damage, injury, loss or claim (including claims for the interruption of or loss to Subtenant’s business) based on or arising out of any cause whatsoever including, without limitation, the following: repair to any portion of the Premises; interruption in the use of the Premises or any equipment therein; any accident or damage resulting from any use or operation (whether by Sublandlord, Subtenant or any other person or entity) of elevators or heating, cooling, electrical, sewage or plumbing equipment or apparatus; termination of the Term by reason of damage to or condemnation of the Premises; fire, robbery, theft, vandalism, mysterious disappearance or any other casualty; actions of any other tenant of the Building or of any other person or entity; failure or inability to furnish any service or utility; and leakage in any part of the Premises from water, rain, ice or snow that may leak into, or flow from, any part of the Premises, or from drains, pipes or plumbing fixtures in the Premises.  Without limitation of the foregoing, under no circumstances shall Sublandlord be liable to Subtenant for consequential damages arising under or in connection with this Sublease or Subtenant’s use of the Premises.  Any property placed by Subtenant or its employees, agents, contractors, guests or invitees in or about the Premises shall be at the sole risk of Subtenant, and Sublandlord shall not in any manner be responsible therefor.  If any employee of Sublandlord receives any package or article delivered for Subtenant, then such employee shall be acting as Subtenant’s agent for such purpose and not as Sublandlord’s agent.  Nothing contained in this paragraph shall be deemed to limit Sublandlord’s obligations under Section 2(e) or 3 of Article VI hereof.

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                    2.          Prime Landlord Actions.  Subtenant acknowledges and agrees that Sublandlord shall not be responsible for a breach of any of the representations and warranties of the Prime Landlord under the Prime Lease, nor shall Sublandlord be responsible or liable in any manner for making any repairs or otherwise complying with any of Prime Landlord’s obligations or providing any of the services and/or utilities required to be provided by Prime Landlord under the Prime Lease; provided, however, that nothing contained in this paragraph shall be deemed to limit Sublandlord’s obligations under Sections 2(e) or 3 of Article VI hereof.  Subtenant agrees to look solely to Prime Landlord for the breach of such representations and warranties or the making of such repairs, complying with such obligations or providing any such services and/or utilities.

ARTICLE IV.
SUBLEASED PREMISES

                    1.          Condition of Premises.  Subtenant acknowledges that it has inspected the Premises and accepts possession thereof broom clean and free of Sublandlord’s personal property (other than the FFE (as defined herein)) and otherwise strictly in its “AS IS” condition as of the Commencement Date.  SUBLANDLORD EXPRESSLY DISCLAIMS ALL WARRANTIES, REPRESENTATIONS, OR COVENANTS, EXPRESS OR IMPLIED, REGARDING THE CONDITION OF THE PREMISES OR THEIR SUITABILITY FOR SUBTENANT’S USE.  IN MAKING AND EXECUTING THIS SUBLEASE, SUBTENANT HAS NEITHER RELIED UPON NOR BEEN INDUCED BY ANY STATEMENT OR REPRESENTATION BY SUBLANDLORD, ANY BROKER OR AGENT, OR OTHERWISE.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, SUBLANDLORD SHALL NOT BE OBLIGATED TO MAKE, ARRANGE FOR, OR EFFECT ANY ALTERATIONS, REPAIRS OR IMPROVEMENTS TO THE PREMISES. 

                    2.          No Alterations without Consent.

                                 (a)    Subtenant shall make no alterations or improvements to the Premises without first receiving Sublandlord’s prior written consent in each instance, which consent shall be deemed given if Prime Landlord consents in writing to the proposed alterations or improvements (or if Prime Landlord is not required to consent to such alterations or improvements), and same shall be subject to Subtenant’s compliance with the applicable provisions of the Prime Lease.  Sublandlord shall not be in violation of this Section if Sublandlord withholds its consent because Prime Landlord withholds its consent (reasonably or unreasonably) for any reason, whether or not it is entitled to under the Prime Lease.  Except as otherwise set forth in this Section 2, all alterations and improvements shall be made subject to and in accordance with Article 5 of the Prime Lease (as incorporated herein), provided, however, Subtenant shall only be required to restore those alterations and improvements, on or prior to expiration of the Term, as to which Sublandlord or Prime Landlord, as the case may be, shall have advised Subtenant of a restoration requirement at the time Sublandlord approved of same.

                                 (b)    Subtenant shall indemnify and hold Sublandlord harmless from any and all loss, cost, damage, liability or expense (including reasonable attorneys’ fees) arising out of any alterations by Subtenant and, without limiting the generality of the foregoing, Subtenant

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shall cause Prime Landlord and Sublandlord to be named as an additional insured on all liability insurance maintained by Subtenant or its contractors with respect thereto.

                                 (c)    Sublandlord shall cooperate at no cost to Sublandlord with Subtenant’s efforts to obtain Prime Landlord’s consent, approval or other action under the Prime Lease relative to any alterations made or proposed to be made by Subtenant, but Sublandlord shall not be liable for any failure of the Prime Landlord to grant any such consent or approval or to take such other action; provided, however, that nothing contained in this paragraph shall be deemed to limit Sublandlord’s obligations under Sections 2(e) or 3 of Article VI hereof.

                    3.          Surrender and Restoration; Holding Over.

                                 (a)   Upon the expiration or earlier termination of the Term, Subtenant shall, at its sole cost and expense (i) quietly surrender the Premises without notice, (ii) deliver all keys to the Premises to Sublandlord, (iii) subject to Section 2(a) of this Article IV, return the Premises in the same order and condition as delivered at the time of Subtenant’s occupancy, ordinary wear and tear excepted, (iv) remove from the Premises all such leasehold improvements installed by Subtenant and designated for removal by Prime Landlord at the time Sublandlord consented thereto, (v) remove from the Premises all of Subtenant’s furniture, fixtures, signs and equipment and personal property, and (vi) repair all damage caused by any such removal described in (iv) and (v) above. 

                                 (b)   If Subtenant vacates the Premises without complying with the requirements set forth in this Section, then Sublandlord (in addition to any other rights and remedies which may be available to it) may remove such items and make such repairs, and charge Subtenant for all reasonable costs incurred, plus ten percent (10%) thereof for Sublandlord’s administrative cost, all of which shall be due and payable to Sublandlord on demand.  Should any of Subtenant’s leasehold improvements and other property remain on the Premises after expiration or termination of the Term, such property shall be deemed abandoned and Sublandlord may dispose of it at Subtenant’s expense to the extent same was required to be removed by Subtenant hereunder and, in any event, without any liability whatsoever with respect thereto.  Subtenant’s obligations described in this Section  shall survive the expiration date or earlier termination of the Term.

                                 (c)    Subtenant acknowledges that it is extremely important for Subtenant to surrender possession of the Premises when and as required by this Sublease, so that Sublandlord may comply with its obligations under the Prime Lease.  If Subtenant fails to surrender the Premises at the expiration or earlier termination of the Term, then, in addition to any amounts due to Prime Landlord by Sublandlord pursuant to the terms of Article 28 of the Prime Lease by reason of Subtenant’s failure to surrender the Premises, Subtenant shall pay to Sublandlord immediately upon demand, an amount equal to one hundred fifty percent (150%) of the Base Rent and, in addition, to continue to pay any Additional Rent due (calculated on a daily basis) for each day after the expiration or termination of the Term that Subtenant has failed to completely surrender possession of the Premises as required by this Sublease.  Sublandlord’s acceptance of such amount shall not prohibit or restrict Sublandlord’s other rights and remedies, including Sublandlord’s right to evict Subtenant and to recover damages. 

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                    4.          Regarding the Prime Lease.  Sublandlord represents that a true and complete copy of the Prime Lease as of the date hereof, except as to certain intentionally omitted provisions, which provisions are expressly made inapplicable to Subtenant and the Premises, is annexed hereto as EXHIBIT C.  Sublandlord represents to Subtenant that, as of the date hereof, (i) the Prime Lease is unmodified and is in full force and effect, (ii) all “minimum rent” and “real estate taxes escalations” and “Wage Rate escalations” (as such terms are used in the Prime Lease) billed to date and payable by Sublandlord, as tenant under the Prime Lease, has been paid, (iii) to Sublandlord’s actual knowledge, neither Prime Landlord nor Sublandlord is in material default under the Prime Lease, (iv) to Sublandlord’s actual knowledge, no act or omission of Sublandlord has occurred that would entitle the Prime Landlord to terminate the Prime Lease, and (v) the Prime Lease evidences the entire written agreement between Sublandlord and Prime Landlord with respect to the Premises.  Subtenant acknowledges having reviewed the Prime Lease (as so redacted), and by its execution of this Sublease acknowledges receipt and approval of same.

ARTICLE V.
USE; COMPLIANCE WITH LAWS AND RULES AND REGULATIONS

                    1.          Use.  Subtenant may use the Premises for general, executive and administrative office use only and in no event for any use prohibited or restricted by the Prime Lease or by law.  Subtenant shall not commit or permit to be committed on the Premises any act or omission prohibited by the Prime Lease.

                    2.          Compliance with Laws, and Rules and Regulations.  Subtenant shall, at its sole cost and expense, from and after the Commencement Date, to the extent required under the Prime Lease, comply with, and cause the Premises to comply with, all laws, regulations and ordinances applicable to the Premises and to Subtenant’s use and occupancy thereof, provided, however, that in no event shall Subtenant be required to make any capital improvements to the Premises necessitated by any law, regulation, ordinance or other legal requirement, unless such capital improvement is necessitated or caused by the Subtenant’s use or manner of use of the Premises, other than the uses expressly permitted hereunder.  Subtenant shall also comply with all rules and regulations stated in the Prime Lease to the extent applicable to the Premises.

ARTICLE VI.
INCORPORATION OF PRIME LEASE

                    1.           Incorporation.

                                 (a)   Subject to the provisions of subparagraphs (b) and (c) below, all of the covenants, agreements, terms, provisions and conditions of the Prime Lease are incorporated herein as if set forth at length herein, except those which by their nature or purport are inapplicable or inappropriate to the subleasing of the Premises pursuant to this Sublease or are inconsistent with or modified by any of the terms, covenants or conditions of this Sublease, in which case the terms of this Sublease shall prevail.

                                 (b)    Notwithstanding the generality of the preceding clause (a), it is agreed as follows: for the purposes of the incorporation of the terms and provisions of the Prime Lease

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herein, the term “Tenant” in the Prime Lease shall mean and refer to the Subtenant hereunder, the term “Landlord” in the Prime Lease shall mean and refer to Sublandlord hereunder (except with respect to any obligation on the part of “Landlord” as used in the Prime Lease to (i) provide utilities or services of any kind whatsoever to the Premises, (ii) maintain and repair the Building and the structural, mechanical or building systems therein, or (iii) rebuild or replace the Building in the event of a fire, casualty or condemnation, as to which, the term “Landlord” as used in the Prime Lease shall mean and refer to the Prime Landlord); the term the “Demised Premises” in the Prime Lease shall mean and refer to the Premises hereunder; the term “minimum rent” or words of similar import in the Prime Lease shall mean and refer to the Base Rent hereunder; the term “Lease” or “lease” or words of similar import in the Prime Lease shall mean and refer to this Sublease; and the terms “alterations, additions or improvements” or words of similar import in the Prime Lease shall mean any alterations, installations, additions and improvements, made pursuant to and in compliance with this Sublease.

                                 (c)   The following Articles, Sections, Exhibits, provisions and documents of the Prime Lease shall not be part of this Sublease and are not incorporated herein:

(i)	Sections 2.02, 2.04, 3.01(a), 3.02, 3.03, 3.04, 25.03 and 25.04;
(ii)	Articles 22, 24, 26, 31, 37, 38, 39, 40 and 41; and
(iii)	the fourth (4th), fifth (5th), sixth (6th) and seventh (7th) sentences of Section 25.01.

                                 (d)    Subtenant agrees that, with respect to those provisions of the Prime Lease that have been incorporated in this Sublease, any rights, powers or privileges of Sublandlord which are or by their nature would be exercisable with respect to Subtenant, the Premises, the conduct or manner of conduct of Subtenant’s activities therein, work to be performed therein or any other matter or thing relating thereto may also be exercised directly by Prime Landlord with respect to Subtenant and/or the Premises, unless Sublandlord expressly revokes such authority in a writing to Subtenant; provided, however, that in no instance shall Prime Landlord have the right to waive any default of Subtenant under this Sublease or to amend, modify, cancel, terminate or accept a surrender of this Sublease.

                                 (e)   Except as otherwise specifically provided herein, all time limits provided in the provisions of the Prime Lease incorporated herein for the giving of notice, the making of demands, the performance of any act, condition or covenant, or the exercise of any right, remedy, or option, are amended for the purposes of this Sublease by lengthening or shortening the same in each instance by five (5) days, as appropriate, so that notices may be given, demands made, any act, condition or covenant performed, or any right, remedy or option hereunder exercised by Sublandlord or Subtenant, as the case may be, within the time limit relating thereto contained in the Prime Lease.  If the Prime Lease allows less than five (5) days for Sublandlord to perform any act, or to undertake to perform such act, or to correct a failure relating to the Premises or this Sublease, then Subtenant shall nevertheless be allowed three (3) days to perform such act, undertake and/or to correct such failure. 

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                    2.          Subordination to Prime Lease.

                                 (a)    Subtenant acknowledges and agrees that this Sublease and the estate hereby granted are subject and subordinate to all of the terms, covenants, provisions, conditions and agreements contained in the Prime Lease and to all leases, mortgages, encumbrances and other agreements and/or matter to which the Prime Lease is now or may hereafter become subject and subordinate.  This clause shall be self-operative and no further instrument of subordination shall be required.  Subtenant shall, however, execute any certificates confirming such subordination which Sublandlord or Prime Landlord may request no later than five (5) business days after receipt of such request.  Subtenant also agrees that this Sublease shall be subject and subordinate to the Prime Lease; provided, however, that no amendment or modification of the Prime Lease hereafter entered into shall either materially increase the obligations of Subtenant hereunder or materially adversely affect Subtenant’s rights, powers or privileges hereunder.

                                 (b)    Subtenant covenants and agrees (i) to perform and to observe all of the terms, covenants, provisions, conditions and agreements of the Prime Lease (including any and all rules and regulations enacted under and pursuant to the Prime Lease which shall be in effect from time to time during the term of this Sublease) on Sublandlord’s part to be performed and observed to the extent the same have been incorporated herein and are applicable to Subtenant or to the Premises, but nothing herein shall require the payment by Subtenant of “minimum rent” payable by Sublandlord pursuant to the Prime Lease, (ii) that Subtenant will not do or cause to be done or suffer or permit any act or thing to be done which would or might cause the Prime Lease or the rights of Sublandlord as tenant thereunder to be cancelled, terminated or forfeited or which would make Sublandlord liable for any increase of the additional rent payable by Sublandlord pursuant to the Prime Lease, unless Subtenant, on demand, reimburses Sublandlord for any such additional rent increases as provided in this Sublease, or for any damages, claims or penalties; and (iii) to indemnify and hold harmless Sublandlord of, from and against any and all liabilities, losses, damages, suits, penalties, claims and demands of every kind or nature (including, without limitation, reasonable attorneys’ fees and disbursements and expenses of defense and of enforcing this indemnity) arising by reason of Subtenant’s failure to comply with the foregoing or arising from the use, occupancy or manner of use and/or occupancy of the Premises by Subtenant (except to the extent that such use is expressly permitted hereunder), its assignees or sub-subtenants, or their respective employees, agents, servants, contracts, visitors or licensees or from any business conducted therein, or from any work or thing whatsoever or any condition created by or any other act or omission of Subtenant, its assignees or sub-subtenants, or their respective employees, agents, servants, contracts, visitors or licensees, in or about the Premises or any other part of the Building.

                                 (c)   In the event of any default on the part of Subtenant under any of the terms, covenants, conditions, provisions or agreements of the Prime Lease which have been incorporated herein or of this Sublease, in either case, beyond any applicable notice and grace period, Sublandlord shall have all rights and remedies at law or in equity against Subtenant, including, but not limited to, such rights and remedies as are available to Sublandlord against Subtenant under the provisions of the Prime Lease, as incorporated herein.

                                 (d)   Upon the expiration or termination of the Prime Lease, this Sublease shall automatically expire and terminate.  If the Prime Lease terminates as a result of a default or breach by Subtenant under this Sublease, then Subtenant shall be liable to and indemnify

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Sublandlord from the damage suffered as a result of such termination, provided that the foregoing indemnity shall be limited to actual damages and not consequential damages.  Sublandlord shall be permitted to agree with Prime Landlord to terminate the Prime Lease without liability to Subtenant provided Prime Landlord is prepared to enter into a direct lease with Subtenant on the same terms and conditions as are contained in the Prime Lease and at the rental rate and with the expiration date and extension option provided in this Sublease.  Notwithstanding the foregoing, if the Prime Lease gives Sublandlord any right to terminate the Prime Lease in the event of the partial or total damage, destruction, or condemnation of the Premises or the Building or project of which the Premises are a part or otherwise, the exercise of such right by Sublandlord shall not constitute a default or breach hereunder, and Subtenant agrees that Sublandlord shall be free to exercise any such right(s) as may be available to Sublandlord without first obtaining any approval from, or consulting with, Subtenant.  Sublandlord shall indemnify and hold Subtenant harmless from and against all claims, liabilities, penalties, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) which shall arise directly (i.e., actual damages and not consequential damages) from this Sublease having been cancelled or terminated without Subtenant’s prior written consent, except (x) as set forth in Section 7(a) of Article XI hereof, or (y) as expressly permitted in this Section 2(d), or (z) if Subtenant shall be in default beyond any applicable notice and cure period under this Sublease or if such cancellation or termination shall result from Subtenant’s default beyond any applicable notice and cure period with respect to Subtenant’s performance of Subtenant’s obligations under this Sublease, it being agreed that the foregoing indemnity shall be limited to actual damages and not consequential damages.

                                 (e)   Subject to the next sentence, Sublandlord shall not be required to dispute any determinations or other assertions or claims of Prime Landlord regarding the obligations of Sublandlord under the Prime Lease for which Subtenant is responsible under the terms of this Sublease.  Notwithstanding anything to the contrary contained herein, Sublandlord, at Subtenant’s sole cost and expense, agrees upon written request from Subtenant to exercise commercially reasonable good faith efforts in attempting to cause Prime Landlord to perform its obligations under the Prime Lease for the benefit of Subtenant.  Subtenant shall promptly reimburse Sublandlord for any and all costs which Sublandlord shall incur in expending such efforts on behalf of Subtenant, and Subtenant does hereby indemnify and agree to hold Sublandlord harmless from and against any and all claims, liabilities, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Sublandlord in expending such efforts, except to the extent caused by Sublandlord’s gross negligence or willful misconduct.  Nothing in this Section 2(e) shall require Sublandlord to commence a lawsuit or arbitration proceeding against Prime Landlord.

                    3.          Default by Prime Landlord.  If Prime Landlord shall default under any of the provisions of the Prime Lease, such default shall not constitute a default by Sublandlord under this Sublease and Sublandlord shall not be obligated to cure Prime Landlord’s default.  Except as otherwise provided in Section 2(e) of this Article, Sublandlord shall have no obligation to enforce any right or remedy under the Prime Lease for Subtenant’s benefit and Sublandlord shall have no liability to Subtenant for any default under the Prime Lease by Prime Landlord, even if such default causes an interruption of services or utilities serving the Premises or terminates the term of the Prime Lease before its scheduled expiration.  If, after written request from Subtenant pursuant to the above Section 2(e), Sublandlord shall fail or refuse to use good

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faith efforts to take timely and appropriate action for the enforcement of Sublandlord’s rights against Prime Landlord or, if Sublandlord has used such commercially reasonable good faith efforts, but Prime Landlord has not performed its obligations under the Prime Lease, Subtenant shall have the right, at Subtenant’s sole cost and expense, to take any lawful action in its own name and, for that purpose and only to such extent, all of the rights of Sublandlord to enforce the obligations of Prime Landlord under the Prime Lease are hereby conferred upon and are conditionally assigned to Subtenant and Subtenant hereby is subrogated to such rights (including, without limitation, the benefit of any recovery or relief); provided, however, if any such action or proceeding against Prime Landlord in Subtenant’s name is barred by reason of lack of privity, non-assignability or otherwise, then, at Subtenant’s option, Subtenant may take such action or proceeding in Sublandlord’s name, and Sublandlord shall execute all documents reasonably requested by Subtenant as necessary, to allow such action or proceeding to proceed, provided further, however that (x) Subtenant shall only have such rights if Subtenant shall not be in default beyond applicable notice and grace periods under this Sublease and (y) Sublandlord shall have the right to require Subtenant to discontinue such action if in the reasonable opinion of Sublandlord such action may cause a cancellation, forfeiture or termination of the Prime Lease or Sublandlord’s estate and rights thereunder with respect to the Premises.  Subtenant shall indemnify and hold Sublandlord harmless from and against any and all losses, costs, liability, claims, damages, expenses (including, without limitation, attorneys’ fees), penalties and fines to which Sublandlord may be exposed and which Sublandlord may incur in connection with or arising out of the taking of any such action by Subtenant.

                    4.          Quiet Enjoyment.  Sublandlord covenants with Subtenant that upon Subtenant paying Base Rent, Additional Rent and observing all of the terms and conditions under this Sublease on Subtenant’s part to be performed, Subtenant shall peasably and quietly enjoy the Premises without hinderance or molestation, subject to the terms of this Sublease.

                    5.          Survival.   The provisions of this Article shall survive the expiration or sooner termination of this Sublease.

ARTICLE VII.
ASSIGNMENT AND SUBLETTING

                    1.          Restrictions.   Any consent of Sublandlord required under Article 11 of the Prime Lease (as incorporated herein) to (i) a proposed assignment of this Sublease, (ii) a further sublet of all or a portion of the Premises, (iii) any other type of use, occupancy or license agreement or (iv) any mortgage, security interest or other encumbrance with respect to this Sublease, shall also require the consent of Prime Landlord to the extent required under said Article 11 of the Prime Lease.

ARTICLE VIII.
INSURANCE

                    1.          Subtenant’s Insurance.  Supplementing the insurance requirements of the Prime Lease, with which Subtenant covenants and agrees to comply, all liability insurance shall name Sublandlord, Prime Landlord (with respect to the Premises) and any mortgagee of whose identity Subtenant has been informed as additional insureds.  All property insurance shall

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contain an endorsement that such insurance shall remain in full force and effect notwithstanding that the insured may have waived its claims against any person prior to the occurrence of a loss.  Sublandlord shall be the loss payee on property insurance insuring Sublandlord’s property and the deductible amounts thereof shall be subject to Sublandlord’s approval and shall be paid by Subtenant promptly following any casualty to Sublandlord’s property.  Subtenant shall deliver a certificate of insurance to Sublandlord on or before the Commencement Date and at least annually thereafter, no less than thirty (30) days prior to the earliest expiration date on such certificate.

                    2.          Waiver of Subrogation Provisions.  Each party shall include in each of its insurance policies covering loss, damage or destruction by fire or other casualty a waiver of the insurer’s right of subrogation against the other party and Prime Landlord or, if such waiver should be unobtainable or unenforceable, (a) an express agreement that such policy shall not be invalidated if the insured waives before the casualty the right of recovery against any party responsible for a casualty covered by such policies, or (b) any other form of permission for the release of the other party and Prime Landlord.  If such waiver, agreement or permission shall cease to be obtainable, the other party and Prime Landlord shall be named as an additional insured in the Comprehensive General Liability policy, provided, however, that Subtenant shall at no time be named a loss payee under any of Sublandlord’s or Prime Landlord’s insurance policies.  Notwithstanding the foregoing, any failure by Subtenant as an additional insured promptly to endorse to the order of Sublandlord or Prime Landlord, as the case may be, any instrument for the payment of money under a policy of which Sublandlord or Prime Landlord, as the case may be, is the owner or original or primary insured shall be a default under this Sublease.

ARTICLE IX.
DAMAGE AND DESTRUCTION/EMINENT DOMAIN

                    1.          Damage and Destruction.  If the Premises are damaged or destroyed, but the Prime Lease is not terminated, then this Sublease shall continue, and Subtenant’s right to an abatement of the Base Rent due under this Sublease and/or repairs to the Premises from Prime Landlord under the Prime Lease shall be dependent upon whether Sublandlord receives, with respect to the Premises, an abatement of Base Rent (as such term is defined in the Prime Lease) or repairs under the Prime Lease.  To the extent that Sublandlord receives such an abatement of Base Rent under the Prime Lease, such abatement of Base Rent shall be passed on to Subtenant (which shall in no event exceed the amount of Base Rent and Additional Rent Subtenant shall have paid or as shall be payable under this Sublease, in each case, on a per square foot basis and applicable to the area so damaged for such period), after retention by Sublandlord of the actual out of pocket costs and expenses, if any, in obtaining such abatement.  All other Base Rent, Additional Rent and other sums due under this Sublease shall continue to be due and payable as provided under this Sublease, unaffected by such damage or destruction or reduction in Base Rent.  If such damage or destruction results from any act or omission of Subtenant, then Subtenant shall indemnify against and hold Sublandlord harmless from all losses, costs and expenses (including reasonable attorneys’ fees) incurred by Sublandlord as a result thereof, such indemnification to operate whether or not Subtenant has placed and maintained the insurance specified in this Article, and whether or not proceeds from such insurance (such insurance having been placed and maintained) actually are collectible from the insurance company.  Prime

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Landlord or Sublandlord may exercise any and all rights to terminate the Prime Lease in the event of any damage or destruction, whether or not such damage or destruction affects the Premises and without regard to the effect of such termination on the Sublease.  If Prime Landlord or Sublandlord is required, or elects, to rebuild or restore improvements, alterations, additions and the like under the Prime Lease, then Prime Landlord or Sublandlord and its employees, agents and contractors may have access to the Premises and may store materials in or about the Premises as reasonably necessary for Prime Landlord or Sublandlord to complete such rebuilding or repair, without the same constituting a constructive eviction or giving Subtenant any right to terminate this Sublease or offset or abate rent, except to the limited extent Base Rent may be reduced under the conditions expressly set forth above.  Subtenant hereby waives all rights to terminate this Sublease because of damage or destruction of the Premises or any portion thereof.  Subtenant hereby waives all claims for damages for injury, inconvenience, or interference with quiet enjoyment or Subtenant’s business, or any other loss occasioned by Prime Landlord’s or Sublandlord’s work or entry under any provision of this Sublease.

                    2.          Release.   Each party hereby releases the other party from any claim (including a property damage claim for negligence) which it might otherwise have against the releasee for any loss, cost or expense resulting from damage to or destruction of its property resulting from fire or other casualty (including rental value or business interruption) occurring during the Term.

                    3.          Eminent Domain.  If the Prime Lease terminates with respect to all or any part of the Premises as a result of all or any part of the Premises being taken through the exercise of, or under threat of, power of eminent domain, the Sublease shall terminate as to the part so taken immediately prior to termination of the Prime Lease with respect to the same part so taken.  Sublandlord may exercise any and all rights to terminate the Prime Lease in the event of any taking, whether or not such taking affects the Premises and without regard to the effect of such termination on this Sublease.  Subtenant waives all claims to and assigns to Sublandlord all awards, compensation, damages, income, rent and interest that would otherwise be payable to Subtenant in connection with all such takings.  Further, Subtenant waives all claims against Sublandlord or the entity exercising the power of eminent domain for the value of the leasehold estate created by this Sublease or any unexpired portion of the Term.  Subtenant may claim against the entity exercising the power of eminent domain only for the value, if any, of improvements installed by Subtenant in the Premises and Subtenant’s personal property (and not any of Sublandlord’s property), if such improvements and personal property are so taken, and for any moving expenses incurred by Subtenant, but only if such award is compensable separate and apart from and does not diminish any other award to Sublandlord or Prime Landlord.

ARTICLE X.
NOTICES

                    1.          Method and Form of Notices.  Notices, demands and other communications between the parties shall be in writing and shall be given or made by registered or certified mail, return receipt requested, postage prepaid, or by personal delivery, or by nationally recognized overnight delivery service, pre-paid, addressed as follows:

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                    If to Subtenant:

	INT Media Group, Inc. 475 Park Avenue South – 4th Floor New York, NY 10016 Attention:  President
	and
	INT Media Group, Inc. 23 Old Kings Highway South Darien, CT 06820 Attention:  President
with a copy to:
	Willkie Farr & Gallagher 787 Seventh Avenue New York, NY 10019 Attn:  Richard K. DeScherer, Esq.
If to Sublandlord:
	IGN Entertainment, Inc. 3240 Bayshore Boulevard Brisbane, CA 94005 Attn:  Jim Tolonen, CFO/COO
	and
	IGN Entertainment, Inc. 475 Park Avenue South, 4th Floor New York, NY 10016 Attention: Craig Abruzzo, Senior Counsel
with a copy to:
	Scott Stone, P.C. 44 Church Street White Plains, NY 10601 Attention: Scott Stone, Esq.

Such notices shall be deemed effective on the date of addressee’s receipt or refusal, as the case may be, if given by personal delivery, or on the business day after dispatching same, if given by a nationally recognized overnight delivery service, or three (3) business days after mailing by registered or certified mail.  Either party may change its notice address by giving notice of such change to the other party as stated in this Article.  Subtenant agrees that as and when it shall receive any notice or other communication from Prime Landlord or any governmental entity regarding or in any way affecting Sublandlord, or the Premises, Subtenant shall promptly

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forward a copy of such notice or other communication to Sublandlord in the manner prescribed herein.

ARTICLE XI.
MISCELLANEOUS

                    1.          Brokers.    Subtenant and Sublandlord each represent and warrant to the other that it has not employed or dealt with any broker concerning this transaction other than Cushman & Wakefield, Inc. (Alex Chudnoff and Steven Bauer) (collectively, “Broker”) with respect to the Premises and/or this Sublease.  Sublandlord shall pay Broker a commission with respect to this Sublease pursuant to a separate agreement.  Each party hereby agrees to indemnify the other with respect to any costs or expenses incurred by the indemnified party by reason of a breach of the foregoing representation by the indemnifying party.  This paragraph shall survive any expiration or earlier termination of this Sublease.

                    2.          Survival.    The parties agree to execute and deliver, from time to time, as circumstances may require, any other instruments necessary to effect the provisions of this Sublease.  All of Subtenant’s obligations that accrue during the Term shall survive the expiration or earlier termination of this Sublease, except as otherwise expressly provided herein.

                    3.          Entire Sublease.   This Sublease contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings and agreements.  This Sublease cannot be changed in any manner except by a written agreement signed by the parties hereto.

                    4.          Governing Law.   If any provision of this Sublease shall be determined to be invalid or unenforceable, the remainder of this Sublease and the application of all such provisions shall be valid and enforceable as permitted by law.  This Sublease shall be governed in all respects by the laws of the State of New York without reference to the conflict-of-laws or choice-of-laws provisions.

                    5.          Execution by Counterparts; Format.   This Sublease may be executed in counterparts which shall be construed together as one instrument.  Each exhibit attached hereto is made a part of this Sublease.  Headings are for convenience only and shall not affect the interpretation of this Sublease.  All references to “dollars” or “$” shall mean the currency of the United States.

                    6.          Successors and Assigns   This Sublease shall apply and inure to and bind Sublandlord and Subtenant and their respective heirs, successors, and assigns, however the agreements and obligations of Sublandlord stated in this Sublease shall be binding upon Sublandlord and its successors and assigns only during its and their respective ownership of Sublandlord’s interest hereunder provided that the assignee of Sublandlord’s interest hereunder assumes all of Sublandlord’s obligations hereunder.  Subtenant shall attorn to each of Sublandlord’s successors and assigns.

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                    7.          Consent of Prime Landlord.

                                  (a)  This Sublease is subject to the consent of Prime Landlord in accordance with the terms of the Prime Lease and shall have no effect until Prime Landlord shall have given its consent in the form required by Prime Landlord and this Sublease is executed by and delivered to both Sublandlord and Subtenant.  Upon execution and delivery of this Sublease by both parties, Sublandlord shall seek Prime Landlord’s consent to this Sublease.  In connection therewith, Subtenant shall furnish all information pertaining to the Subtenant requested by Prime Landlord pursuant to the terms of the Prime Lease and reasonably cooperate with Sublandlord in its efforts to obtain written consent to this Sublease from Prime Landlord.  Sublandlord shall have no obligation to pay any fee or charge of any nature whatsoever not specifically required to be paid under the Prime Lease in connection with or as a condition to obtaining such consent and shall suffer and incur no liability to Subtenant for its failure to obtain such consent.  Notwithstanding anything in this Sublease to the contrary, if the consent of Prime Landlord is not received within thirty (30) days after the execution and delivery hereof, either Sublandlord or Subtenant shall, until such time as Prime Landlord’s consent hereto is received, have the right to terminate this Sublease upon notice to the other, in which event any amounts paid by Subtenant to Sublandlord hereunder shall be returned to Subtenant, and neither party hereto shall thereafter have any further obligations to the other in respect of this Sublease.

                                  (b)   Subtenant agrees that in all instances in which the consent or approval of Sublandlord is required pursuant to the terms hereof and the consent or approval of Prime Landlord is required under the Prime Lease for the same act or thing, Subtenant must obtain Sublandlord’s prior written consent notwithstanding the obtaining of Prime Landlord’s consent, and Sublandlord (in addition to any other conditions Sublandlord may be allowed to impose) may condition its approval on the granting by Prime Landlord of its consent or approval to such act or thing.  Except to the extent otherwise expressly set forth herein to the contrary, Subtenant agrees that Sublandlord shall not have any duty or responsibility with respect to obtaining the consent or approval of Prime Landlord when the same is required under the terms of the Prime Lease, other than the transmission by Sublandlord to Prime Landlord of Subtenant’s request for such consent or approval.

                    8.          Authority.   The parties affirm and covenant that each has the authority to enter into this Sublease, to abide by the terms hereof, and that the signatories hereto are authorized representatives of their respective entities to execute and bind such entity to this Sublease.

                    9.          Estoppel Certificates.  Subtenant shall execute and deliver to Sublandlord, within ten (10) days after request, a certificate certifying to Sublandlord, Prime Landlord and such other parties as Sublandlord shall designate all matters reasonably requested by Sublandlord.  Sublandlord shall execute and deliver to Subtenant, within ten (10) days after request, a certificate certifying to such parties as Subtenant shall designate all matters reasonably requested by Subtenant.

                    10.        Other Provisions.  Time is of the essence with respect to each of Subtenant’s obligations under this Sublease.  Subtenant shall not record this Sublease or any memorandum or other notice thereof without Sublandlord’s written consent, which may be withheld in Sublandlord’s sole discretion.  Breach of this covenant shall constitute an event of default entitling Sublandlord to all of its remedies under this Sublease.  By reason of this

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Sublease, Sublandlord and Subtenant have no relationship other than sublandlord and subtenant, respectively, and specifically, but without limiting the foregoing, are not partners in any venture.

                    11.        Waiver of Damages.  Subtenant hereby waives any claim for monetary damages against Sublandlord which Subtenant may have based upon any assertion that Sublandlord has unreasonably withheld or unreasonably delayed any consent or approval requested by Subtenant, and Subtenant agrees that its sole and exclusive remedy shall be an action or proceeding to enforce any related provision or for specific performance, injunction or declaratory judgment.

                    12.        Signage and Directory Listings.  Subtenant shall, subject to the terms and conditions of the Prime Lease, be entitled (a) to use the directory listings on the Building directory otherwise available to Sublandlord with respect to the Premises and (b) to install signs identifying Subtenant anywhere inside the Building lobbies, elevators and hallways and inside and on the door of the Premises provided that such signs are permitted by Prime Landlord and the Prime Lease and are otherwise in compliance with the applicable provisions of the Prime Lease and the Building rules and regulations.

                    13.        Rules of Construction.  This Section sets forth certain rules of construction, which shall apply to this Sublease and all agreements and Exhibits supplemental to this Sublease, unless the context otherwise requires.  Feminine, masculine or neuter pronouns shall be substituted for those of another form, and the plural or singular shall be substituted for the other number, in any place in which the context may require.  The term “person” includes natural persons as well as corporations, partnerships and other entities.  The terms “include,” “such as” and the like shall be construed as if followed by the phrase “without being limited to.”  The terms “herein,” “hereunder” and the like shall refer to this Sublease as a whole, not to any particular Section or other part, unless expressly so stated.  The term “Subtenant” shall include any and all occupants of the Premises after the Commencement Date.  The terms “consent,” “approval” and the like shall mean prior written consent and approval.  References to days, months or years shall refer to calendar days (i.e. Sunday, Monday, etc.), calendar months (i.e. January, February, March, etc.), or calendar years (i.e. 2001, 2002, etc.) unless expressly so stated.  The terms “business day,” “work day” and the like shall mean any day other than Saturday, Sunday or a day observed under the Prime Lease as a holiday.  Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Prime Lease.  In the event of any conflict between the terms and conditions of this Sublease and the terms and conditions of the Prime Lease, the terms and conditions of this Sublease shall control and prevail.

                    14.        Sublandlord Furniture.  Sublandlord represents and warrants that it is the owner of certain office furniture and equipment more particularly described on EXHIBIT D attached hereto (the “FFE”).  Sublandlord has agreed to license the use of such FFE to Subtenant during the Term hereof as part of the Base Rent payable hereunder.  Subtenant shall have the obligation to, at its sole cost and expense, (i) repair and maintain the FFE in good order and condition, subject to reasonable wear and tear, and (ii) indemnify Sublandlord for any losses, costs or other expenses arising out of Subtenant’s use thereof or with respect thereto.  Sublandlord represents and warrants that the equipment is in good working order.

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                    15.        Telecommunications Services.  Sublandlord is the vendee on service contracts for telecommunications lines (i.e. voice, data and ISP) (collectively the “Telecommunications Services”) as follows:  (i) AT&T in the approximate amount of between $2,300.00 - $2,400.00 per month; and (ii) Phone Extra in the approximate amount of $1,461.38 per quarter.  Subtenant shall pay, as Additional Rent hereunder, to Sublandlord all amounts for the Telecommunications Services that Sublandlord is required to pay for such Telecommunications Services through and including the date that Subtenant surrenders the Premises pursuant to its termination option pursuant to Article I Section 2, excluding any charges for minimum usage fees and penalties.  In the event that Subtenant has not exercised its option to terminate this Sublease pursuant to Article I Section 2, then Subtenant shall have the option to terminate the Telecommunications Services by giving prior written notice to Sublandlord on or before September 30, 2002.  If Subtenant does not exercise its option to terminate the Telecommunications Services pursuant to this Section 15, then Subtenant shall continue to pay, as Additional Rent hereunder, to Sublandlord all amounts for the Telecommunications Services that Sublandlord is required to pay for such Telecommunications Services through the earlier to occur of (i) the expiration or earlier termination of this Sublease, or (ii) the expiration or earlier termination of the respective Telecommunications Services contracts.

                    16.        Supplemental Air-Conditioning.  Subtenant acknowledges that Sublandlord has installed the System (as defined in Article 42 of the Prime Lease), and that Subtenant shall, during the Term hereof, have all of the obligations of Sublandlord, as Tenant, under the Prime Lease with respect thereto.  Sublandlord represents and warrants that the System is in good working order.  Notwithstanding anything to the contrary contained in this Sublease, Sublandlord shall pay for any incremental electric charges incurred for the use of the System together with the cost of any permits, licenses or other certificates that are required in order to maintain the System.

                    17.        Leased Equipment.  Sublandlord is the lessee of the following equipment (the “Leased Equipment”) more particularly described on EXHIBIT E attached hereto:

                                   1.           Copier(s)

                                   Subtenant shall, during the Term hereof or for such shorter period of the applicable equipment lease agreement, have the right to use the Leased Equipment, and Subtenant shall pay, as Additional Rent hereunder, to Sublandlord fifty (50%) percent of the actual amounts that Sublandlord is required to pay for the use of such Leased Equipment for such period until the expiration of the current terms of such equipment leases, after which Subtenant may, at its option, lease its own equipment and cooperate with Sublandlord to arrange for the return of the Leased Equipment or renew the respective equipment lease(s) for the Leased Equipment, in which event Subtenant shall be required to pay for one hundred (100%) percent of the rental payment and any maintenance or service contracts with respect to such Leased Equipment that has been renewed (the “Renewed Leased Equipment”).  Notwithstanding the foregoing to the contrary, Sublandlord shall pay for the cost of any maintenance or service agreements with respect to such Leased Equipment, except for the Renewed Leased Equipment.  Subtenant shall have the obligation to, at its sole cost and expense, (i) repair and maintain the Leased Equipment in good order and condition, subject to reasonable wear and tear, and (ii) indemnify Sublandlord for any losses, costs or other expenses arising out of Subtenant’s use

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thereof or with respect thereto.  Sublandlord agrees to remove all other equipment from the Premises other than the Leased Equipment and the FFE.

ARTICLE XII.
SECURITY

                    1.          Security.   Upon notice to Subtenant of Prime Landlord’s consent to this Sublease, Subtenant shall deposit with Sublandlord either (x) the Security Amount (as defined below), by certified or official bank check (the “Security Deposit”) or (y) an unconditional, irrevocable letter of credit in the amount of the Security Amount, substantially in a form attached hereto as EXHIBIT F (or another form hereafter agreed upon by Sublandlord and Subtenant) and issued by a bank reasonably satisfactory to Sublandlord (the “Letter of Credit”), as security for the full and faithful performance by Subtenant of each and every term, covenant and condition of this Sublease.  As used herein, the term “Security Amount” shall mean Ninety Thousand Six Hundred Sixty-Six and 66/100 ($90,666.66) Dollars.  The Letter of Credit shall provide that it is assignable by Sublandlord without charge and shall either (A) expire on the date which is 60 days after the scheduled expiration of this Sublease (the “LC Date”) or (B) be automatically self-renewing until the LC Date.  If any Letter of Credit is not renewed at least thirty (30) days prior to the expiration thereof or if Subtenant holds over in the Premises without the consent of Sublandlord after the expiration or termination of this Sublease, Sublandlord may draw upon the Letter of Credit and hold the proceeds thereof as security for the performance of Subtenant’s obligations under this Sublease or utilize such proceeds as provided herein.  Upon delivery to Sublandlord of a new Letter of Credit, Sublandlord shall return to Subtenant such proceeds.  If Sublandlord shall have so drawn upon the Security Deposit or the Letter of Credit (or the proceeds thereof), Subtenant shall, upon demand, deposit with Sublandlord a sum equal to the amount so drawn by Sublandlord, or restore the amount of the Letter of Credit to the Security Amount.  In the event that Subtenant defaults beyond all applicable notice and cure periods in respect of any of the terms, provisions, covenants and conditions of this Sublease, including but not limited to payment of any Base Rent or Additional Rent, Sublandlord may use, apply or retain the whole or any part of the Security Deposit so deposited or draw on the Letter of Credit for the payment of any such Base Rent or Additional Rent in default or for any other sum which Sublandlord may expend or be required to expend by reason of Subtenant’s default, including any damages or deficiency in the reletting of the Premises, whether such damage or deficiency may accrue before or after summary proceedings or other re-entry by Sublandlord.  In the event Sublandlord uses any portion of the Security Deposit or Letter of Credit during the Term of this Sublease, Subtenant shall, within ten (10) days thereafter, deposit with Sublandlord such additional sums, so that, at all times, Sublandlord is holding an amount equal to the Security Amount in cash or letter of credit.  In the event that Subtenant shall fully and faithfully comply with all the terms, provisions, covenants and conditions of this Sublease, the Letter of Credit or Security Deposit or any balance of the proceeds thereof, shall be returned to Subtenant within sixty (60) days after the earlier of (x) the time fixed as the expiration of the herein demised Term or (y) if Subtenant is not in default under this Sublease and provided Subtenant has not caused the termination of this Sublease, the earlier termination of this Sublease.  In the absence of evidence satisfactory to Sublandlord of any assignment of the right to receive the Security Deposit or Letter of Credit, or the remaining balance of the proceeds thereof, Sublandlord may

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return the same to the original Subtenant, regardless of one or more assignments of the Sublease itself.  If, as of the date of this Sublease, Subtenant has delivered to Sublandlord a Security Deposit, then Subtenant may, at any time, substitute for such Security Deposit, a Letter of Credit reasonably acceptable to Sublandlord, which shall be deemed acceptable if in the form substantially of Exhibit F, and otherwise meeting the requirements of this Section.  Upon Sublandlord’s receipt of such acceptable substitute Letter of Credit, Sublandlord shall return the original Security Deposit to Subtenant.  Sublandlord agrees that simultaneously with presenting the Letter of Credit pursuant to this Section, Sublandlord shall present a statement to the issuer thereof (with a copy thereof given to Subtenant contemporaneously therewith) executed by a duly authorized representative of Sublandlord stating that a default has occurred hereunder beyond any applicable grace or cure periods and is continuing under this Sublease and that Sublandlord is entitled to draw on the Letter of Credit.

          IN WITNESS WHEREOF, this Sublease has been duly executed by the parties hereto as of the day and year first above written.

SUBLANDLORD:
IGN ENTERTAINMENT, INC. f/k/a SNOWBALL.COM, INC.
By	/s/ Craig Abruzzo
Name:	Craig Abruzzo
Title:	Director of Business Affairs
SUBTENANT:
INT MEDIA GROUP, INC.
By	/s/ Christopher Cambell
Name:	Christopher Cambell
Title:	President

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EXHIBIT A

THE PREMISES

EXHIBIT B

FORM OF COMMENCEMENT DATE LETTER

August _____, 2002

INT Media Group, Inc.
475 Park Avenue South
New York, NY 10016

RE: Sublease by and between IGN Entertainment, Inc., as Sublandlord, and INT Media Group, Inc., as Subtenant, dated July _____, 2002 (the “Sublease”)

Dear Sirs:

            This letter will memorialize our understanding and agreement with regard to the above-referenced Sublease.  We hereby acknowledge that the Sublease was conditioned upon obtaining the consent of the Prime Landlord, which consent was granted on ________________________, 2002.  As such, we hereby agree as follows:

1.       The Commencement Date of the Sublease is _____________________, 2002; and

2.       The Expiration Date of this Sublease is ______________________, 2004.

            Except as modified hereby, all of the other terms and conditions of the Sublease are hereby ratified and confirmed in all respects.

            If the foregoing accurately reflects your understanding, please acknowledge same by executing a copy of this letter and returning an originally executed copy to our office.

	Very truly yours,
	IGN ENTERTAINMENT, INC.
	By:
ACKNOWLEDGED AND AGREED:
INT MEDIA GROUP, INC.
By:

EXHIBIT C

PRIME LEASE

EXHIBIT D

FFE

Herman Miller Aeron Chairs	70
Built-in Cubicles	96
Small Filing Cabinets	55
Chairs	15
Conference Tables	7 (1 Large)
Allard “cinema” Chairs	4
Allard “cinema” Sofas	2
Lounge Chairs	3
Small end tables	3
Bar Stools	4
Coke Machine (empty)	1
Water Fountain (Hot and Cold)	1
Book Shelves	8
Receptionist Desk	1

ARTICLE XIII.Telecom Equipment

Lucent MLX 10DP Phones	72
Lucent MLX 20DP Main Switchboard	1
Legend phone switch	1
Macovoice 200 voice mail system	1

                         1.          Networking Equipment

Cisco 2611 Router	1
Cisco 2924XL Switch	6
Cisco 2912XL Switch	1

EXHIBIT E

LEASED EQUIPMENT

Equipment through the Pitney Bowes Company:

          A.   Copier Access (schedule 303) 

                    1.     Model  C600, Serial No. 6090186 copier
                    2.     Model No. C970 sorter for C600
                            $447.07/mo

          B.   Copier/Access:  Acct No 5437066 (schedule 302) Peripheral equip for C600
                    1.      Model No. 9722   Serial No. 0021160
                             $120.16/mo

Equipment through the AOE RICOH Company:

          A.   Copiers:

1. AFCIO220  Serial No. H2400500900 (NY) Ref No. 000000000120922
Customer No. 352079
$345.79/mo

EXHIBIT F

FORM OF LETTER OF CREDIT