Nevada Nevada |
7370 7370 |
13-3750988 42-1745941 |
||||||||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487-8242 (561) 912-7000 |
Marc H. Bell Chief Executive Officer 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 |
|||||
(Address,
including zip code, and telephone number, including area code, of registrants principal executive offices) |
(Name, address, including zip code, and telephone number, including area code, of agent for service) |
Large accelerated
filer |
[ ] |
Accelerated filer |
[ ] |
|||||||||||
Non-accelerated
filer |
[X] (Do not check if a smaller reporting company) |
Smaller reporting company |
[ ] |
|||||||||||
Title of each class of securities to be registered |
Amount to be registered |
Proposed maximum offering price per unit |
Proposed maximum aggregate offering price |
Amount of registration fee |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
14% Senior
Secured Notes Due 2013 |
$ | 243,785,111 | 100 | % | $ | 243,785,111 | (1) | $ | 28,303.45 | |||||||||
Guarantees of the
14% Senior Secured Notes Due 2013 |
| | | None | (2) | |||||||||||||
14% Cash Pay
Secured Notes Due 2013 |
$ | 11,012,525 | 100 | % | $11,012,525 | (3) | $ | 1,278.55 | ||||||||||
Guarantees of the
14% Cash Pay Secured Notes Due 2013 |
| | | None | (2) | |||||||||||||
11.5%
Convertible Non-Cash Pay Secured Notes Due 2014 |
$ | 250,849,125 | 100 | % | $ | 250,849,125 | (4) | $ | 29,123.58 | |||||||||
Guarantees of the
11.5% Convertible Non-Cash Pay Secured Notes Due 2014 |
| | | None | (2) | |||||||||||||
Common Stock, par
value $0.001 per share |
8,310,763 | (5) | | (5) | | (5) | None | (5) |
(1) |
Represents the maximum principal amount at maturity of the 14% Senior Secured Notes Due 2013 that may be issued pursuant to the exchange offers described in this registration statement. The registration fee was calculated pursuant to Rule 457(f) under the Securities Act of 1933. |
(2) |
Pursuant to Rule 457(n) of the Securities Act of 1933, no registration fee is required for the Guarantees. |
(3) |
Represents the maximum principal amount at maturity of the 14% Cash Pay Secured Notes Due 2013 that may be issued pursuant to the exchange offers described in this registration statement. The registration fee was calculated pursuant to Rule 457(f) under the Securities Act of 1933. |
(4) |
Represents the maximum principal amount at maturity of the 11.5% Convertible Non-Cash Pay Secured Notes that may be issued pursuant to the exchange offers described in this registration statement. The registration fee was calculated pursuant to Rule 457(f) under the Securities Act of 1933. |
(5) |
Based on the number of shares of common stock of FriendFinder Networks Inc. as may be issued upon conversion of all of the 11.5% Convertible Non-Cash Pay Secured Notes due 2014 registered hereby at a conversion price equal to the price per share of common stock offered upon the consummation of FriendFinder Networks Inc.s initial public offering on May 16, 2011, or $10.00 per share; the shares are not subject to an additional fee pursuant to Rule 457(i) of the Securities Act of 1933. |
Exact Name of Subsidiary Guarantor |
State or Other Jurisdiction of Incorporation or Formation |
I.R.S. Employer Identification Number |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Argus
Payments Inc. |
Delaware |
45-2494661 |
||||||||
Big Ego Games
Inc. |
California |
27-3532019 |
||||||||
Big Island
Technology Group, Inc. |
California |
20-8009795 |
||||||||
Blue Hen
Group Inc. |
Delaware |
45-539667 |
||||||||
Confirm ID,
Inc. |
California |
74-3037020 |
||||||||
Danni Ashe,
Inc. |
California |
95-4665271 |
||||||||
Fastcupid,
Inc. |
California |
20-2997869 |
||||||||
FriendFinder
California Inc. |
California |
77-0522750 |
||||||||
FriendFinder
Ventures Inc. |
Nevada |
27-4663125 |
||||||||
FRNK
Technology Group |
California |
94-3277102 |
||||||||
General Media
Art Holding, Inc. |
Delaware |
13-4042637 |
||||||||
General Media
Communications, Inc. |
New
York |
13-3502237 |
||||||||
General Media
Entertainment, Inc. |
New
York |
13-3592960 |
||||||||
Giant
Swallowtail Inc. |
Delaware |
45-2539401 |
||||||||
Global
Alphabet, Inc. |
California |
77-0527649 |
||||||||
GMCI Internet
Operations, Inc. |
New
York |
13-4097655 |
||||||||
GMI On-Line
Ventures, Ltd. |
Delaware |
13-4097656 |
||||||||
Goldenrod
Spear Inc. |
Delaware |
45-2539020 |
||||||||
Magnolia
Blossom Inc. |
Delaware |
45-2538925 |
||||||||
Medley.com
Incorporated |
California |
03-0543594 |
||||||||
NAFT News
Corporation |
California |
27-3634385 |
||||||||
Penthouse
Digital Media Productions Inc. |
New
York |
65-1251056 |
||||||||
Penthouse
Images Acquisitions, Ltd. |
New
York |
13-3599228 |
||||||||
Playtime
Gaming Inc. |
California |
27-3634371 |
||||||||
PMGI Holdings
Inc. |
Delaware |
20-1942663 |
||||||||
PPM
Technology Group, Inc. |
California |
20-8009876 |
||||||||
Pure
Entertainment Telecommunications, Inc. |
New
York |
90-0209626 |
||||||||
Sharkfish,
Inc. |
California |
56-2471221 |
||||||||
Snapshot
Productions, LLC |
Texas |
46-0477091 |
||||||||
Streamray
Inc. |
Nevada |
88-0422716 |
||||||||
Streamray
Studios Inc. |
California |
26-4311009 |
||||||||
Tan Door
Media Inc. |
California |
26-4311100 |
||||||||
Traffic Cat,
Inc. |
California |
56-2471223 |
||||||||
Transbloom,
Inc. |
California |
74-3021168 |
||||||||
Various, Inc.
|
California |
77-0477762 |
||||||||
Video Bliss,
Inc. |
California |
95-4566760 |
||||||||
West Coast
Facilities Inc. |
California |
59-3814751 |
|
The terms of each of the 14% Senior Secured Notes due 2013 (the New Senior Secured Notes), the 14% Cash Pay Secured Notes due 2013 (the New Cash Pay Notes) and the 11.5% Convertible Non-Cash Pay Secured Notes (the New Non-Cash Pay Notes) (collectively, the New Notes) are substantially identical to the terms of each of the outstanding 14% Senior Secured Notes due 2013 (the Old Senior Secured Notes), the outstanding 14% Cash Pay Secured Notes due 2013 (the Old Cash Pay Notes) and our outstanding 11.5% Convertible Non-Cash Pay Secured Notes Due 2014 (the Old Non-Cash Pay Notes) (collectively, the Old Notes), except that the New Notes have been registered under the Securities Act of 1933 and some of the transfer restrictions and registration rights relating to the Old Notes will not apply to the New Notes. |
|
The Old Senior Secured Notes, Old Cash Pay Notes and Old Non-Cash Pay Notes are each governed by an indenture, dated as of October 27, 2010, by and among Interactive Network, Inc. and FriendFinder Networks Inc. as co-issuers, all of our domestic subsidiaries as guarantors, and U.S. Bank, N.A. as the trustee, which we refer to as the Senior Secured Notes Indenture, the Cash Pay Notes Indenture and the Non-Cash Pay Notes Indenture, respectively (collectively, the Indentures). The New Senior Secured Notes, New Cash Pay Notes and New Non-Cash Pay Notes will also be governed by the Senior Secured Notes Indenture, Cash Pay Notes Indenture and Non-Cash Pay Notes Indenture, respectively. |
|
We are offering to exchange up to $243,785,111 of our New Senior Secured Notes, up to $11,012,525 of our New Cash Pay Notes and up to $250,849,125 of our New Non-Cash Pay Notes, that have been registered under the Securities Act of 1933, for a like amount of our privately-placed Old Senior Secured Notes, Old Cash Pay Notes and Old Non-Cash Pay Notes, respectively, on substantially identical terms. |
|
Subject to the satisfaction or waiver of specified conditions, we will exchange the New Notes for all Old Notes that are validly tendered and not withdrawn prior to the expiration of the exchange offers. |
|
The exchange offers will expire at 5:00 p.m., New York City time, on [], 2011, unless extended. |
|
Tenders of Old Notes may be withdrawn at any time before the expiration of the exchange offers. |
|
We will not receive any proceeds from the exchange offers. |
|
The exchange of outstanding Old Notes will not be a taxable exchange for U.S. federal income tax purposes. |
Page |
||||||
---|---|---|---|---|---|---|
Summary
|
1 | |||||
The Exchange
Offers |
11 | |||||
Ratio of
Earning to Fixed Charges |
14 | |||||
Use of
Proceeds |
14 | |||||
Dividend
Policy |
14 | |||||
Risk Factors
|
15 | |||||
Forward-Looking Statements |
40 | |||||
The Exchange
Offers |
42 | |||||
Market Price
of and Dividends on the Registrants Common Equity and Related Stockholder Matters |
49 | |||||
Selected
Consolidated Financial Data |
50 | |||||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
53 | |||||
Business
|
90 | |||||
Description
of Other Indebtedness |
109 | |||||
Description
of Notes |
110 | |||||
Description
of Capital Stock |
122 | |||||
Certain U.S.
Federal Income Tax Considerations |
127 | |||||
Legal Matters
|
128 | |||||
Experts
|
128 | |||||
Where You Can
Find More Information |
128 | |||||
Index to
Consolidated Financial Statements |
F-1 |
|
Social Networking. Approximately 69% of our total net revenues for the three months ended March 31, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. |
|
Live Interactive Video. Approximately 23% of our total net revenues for the three months ended March 31, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that |
allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. |
|
Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. |
|
Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the three months ended March 31, 2011, we averaged more than 6.2 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. |
|
Members. Members are registrants who log into one of our websites and make use of our free products and services. For the three months ended March 31, 2011, we averaged more than 3.7 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. |
|
Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the three months ended March 31, 2011 and for the year ended December 31, 2010, we had a monthly average of approximately 1.0 million paying subscribers. |
|
Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the three months ended March 31, 2011, we averaged approximately 1.5 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 1.6 million purchased minutes by paid users each month. |
|
Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the three months ended March 31, 2011, our average monthly revenue per subscriber was $19.96. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. |
|
Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate |
of loss of subscribers, for the three months ended March 31, 2011 was 16.0% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. |
|
Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the three months ended March 31, 2011 was $44.20. Our CPGA for the year ended December 31, 2010 was $47.25. |
|
Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the three months ended March 31, 2011 was $79.40. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. |
|
Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. |
|
Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. |
|
Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.2 million new registrants and more than 3.7 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. |
|
Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of March 31, 2011 and December 31, 2010, we had more than 250,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the three months ended March 31, 2011 and 45% of our net |
revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the three months ended March 31, 2011 and the year ended December 31, 2010 of $22.1 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. |
|
Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. |
|
Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. |
|
Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. |
|
Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. |
|
Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the three months ended March 31, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. |
Issuers
|
FriendFinder Networks Inc. and Interactive Network, Inc., as co-issuers. |
|||||
Notes Offered
|
$243,785,111 aggregate principal amount of 14% Senior Secured Notes due 2013 (the New Senior Secured Notes). |
|||||
Maturity Date
|
September 30, 2013. |
|||||
Interest Payment
Dates |
Quarterly, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2010. |
|||||
Subsidiary
Guarantees |
On
the issue date, each of our domestic subsidiaries set forth on Schedule A to this prospectus will guarantee the New Senior Secured Notes. The
New Senior Secured Notes may be guaranteed by additional subsidiaries in the future under certain circumstances. |
|||||
Ranking
|
The
New Senior Secured Notes and the guarantees will be our and the guarantors senior first-priority secured obligations and will be: secured on a first-priority basis, by liens on all of our and the guarantors assets, including without limitation, receivables, inventory, furniture, fixtures, equipment, trademarks, copyrights and other intangibles, real property and the capital stock of subsidiaries, including a 100% pledge of the co-issuers stock, subject to customary exceptions; senior in right of payment to the New Non-Cash Pay Notes, but not the Cash Pay Notes with certain exceptions; and pari passu in right of payment to the New Cash Pay Notes, with certain exceptions. |
|||||
Optional
Redemption |
The
New Senior Secured Notes are redeemable prior to maturity at our option in whole but not in part, at 110% of principal, plus accrued and unpaid
interest. |
|||||
Change of Control
|
Upon
a change of control (as defined in the section entitled Description of Notes), we must offer to repurchase the New Senior Secured Notes at
110% of the principal amount, plus accrued and unpaid interest to the purchase date. |
|||||
Certain Covenants
|
The
New Senior Secured Notes Indenture contains certain covenants, including limitations and restrictions on our and our domestic subsidiaries
ability to: incur additional indebtedness; make dividend payments or other restricted payments; create liens; change the nature of its business; |
modify the provisions of any indebtedness, organizational documents and certain other agreements; enter into transactions with affiliates; and engage in fundamental changes, dispositions or acquisitions with respect to all or any part of our business, property or assets. As of the date of this prospectus, all of our domestic subsidiaries are set forth on Schedule A to this prospectus. Our foreign subsidiaries will not be subject to any of the restrictive covenants in the New Senior Secured Notes Indenture. The restrictive covenants set forth in the New Senior Secured Notes Indenture are subject to important exceptions and qualifications. See the section entitled Description of Notes for more information. |
||||||
Conversion Rights
|
None. |
|||||
Risk Factors
|
Potential investors in the New Senior Secured Notes should carefully consider the matters set forth under the caption Risk Factors
prior to making an investment decision with respect to the New Senior Secured Notes. |
Issuers
|
FriendFinder Networks Inc. and Interactive Network, Inc., as co-issuers. |
|||||
Notes Offered
|
$11,012,525 aggregate principal amount of 14% Cash Pay Secured Notes Due 2013 (the New Cash Pay Notes). |
|||||
Maturity Date
|
September 30, 2013. |
|||||
Interest Payment
Dates |
Quarterly, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2010. |
|||||
Subsidiary
Guarantees |
On
the issue date, each of our domestic subsidiaries set forth on Schedule A to this prospectus will guarantee the New Cash Pay Notes. The New Cash
Pay Notes may be guaranteed by additional subsidiaries in the future under certain circumstances. |
|||||
Ranking
|
The
New Cash Pay Notes and the guarantees will be our and the guarantors subordinated second-priority secured obligations and will be: secured on a second-priority basis, by liens on all of our and the guarantors assets, including without limitation, receivables, inventory, furniture, fixtures, equipment, trademarks, copyrights and other intangibles, real property and the capital stock of subsidiaries, including a 100% pledge of the co-issuers stock, subject to customary exceptions; and pari passu in right of payment to the New Senior Secured Notes, with certain exceptions. |
|||||
Optional
Redemption |
The
New Cash-Pay Notes are redeemable prior to maturity at our option in whole but not in part, at 110% of principal, plus accrued and unpaid interest. See
the section entitled Description of Notes for more information. |
Change of Control
|
Upon
a change of control (as defined in the section entitled Description of Notes), we must offer to repurchase the New Cash Pay Notes at 110%
of the principal amount, plus accrued and unpaid interest to the purchase date. |
|||||
Certain Covenants
|
The
New Cash Pay Notes Indenture contains certain covenants, including limitations and restrictions on our and our domestic subsidiaries ability
to: incur additional indebtedness; make dividend payments or other restricted payments; create liens; change the nature of its business; modify the provisions of any indebtedness, organizational documents and certain other agreements; enter into transactions with affiliates; and engage in fundamental changes, dispositions or acquisitions with respect to all or any part of our business, property or assets. As of the date of this prospectus, all of our domestic subsidiaries are set forth on Schedule A to this prospectus. Our foreign subsidiaries will not be subject to any of the restrictive covenants in the New Cash Pay Notes Indenture. The restrictive covenants set forth in the New Cash Pay Notes Indenture are subject to important exceptions and qualifications. See the section entitled Description of Notes for more information. |
|||||
Conversion Rights
|
None. |
|||||
Risk Factors
|
Potential investors in the New Cash Pay Notes should carefully consider the matters set forth under the caption Risk Factors prior to
making an investment decision with respect to the New Cash Pay Notes. |
Issuers
|
FriendFinder Networks Inc. and Interactive Network, Inc., as co-issuers. |
|||||
Notes Offered
|
$250,849,125 aggregate principal amount of 11.5% Convertible Non-Cash Pay Secured Notes Due 2014 (the New Non-Cash Pay
Notes). |
|||||
Maturity Date
|
April
30, 2014. |
|||||
Interest Payment
Dates |
Payable semi-annually, on June 30 and December 31 of each year, commencing on December 31, 2010. |
|||||
Subsidiary
Guarantees |
On
the issue date, each of our domestic subsidiaries set forth on Schedule A to this prospectus will guarantee the New Non-Cash Pay Notes. The New
Non-Cash Pay Notes may be guaranteed by additional subsidiaries in the future under certain circumstances. |
Ranking
|
The
New Non-Cash Pay Notes and the guarantees will be our and the guarantors subordinated second-priority secured obligations and will be: secured on a second-priority basis, by liens on all of our and the guarantors assets, including without limitation, receivables, inventory, furniture, fixtures, equipment, trademarks, copyrights and other intangibles, real property and the capital stock of subsidiaries, including a 100% pledge of the co-issuers stock, subject to customary exceptions; and subordinate in right of payment to the New Senior Secured Notes and the New Cash Pay Notes, with certain exceptions. |
|||||
Optional
Redemption |
The
New Non-Cash Pay Notes are redeemable prior to maturity at our option in whole but not in part, at 100% of principal, plus accrued and unpaid interest,
subject to the rights of the holders of the New Senior Secured Notes under the intercreditor agreement (the Intercreditor Agreement) by and
between the holders of the Old Notes, which provides that no redemption of the New Non-Cash Pay Notes may occur until the New Senior Secured Notes are
repaid in full. See section entitled Description of Notes for more information. |
|||||
Change of Control
|
Upon
a change of control (as defined in the section entitled Description of Notes), we must offer to repurchase the New Non-Cash Pay Notes at
110% of the principal amount, plus accrued and unpaid interest to the purchase date. |
|||||
Certain Covenants
|
The
New Non-Cash Pay Notes Indenture contains certain covenants, including limitations and restrictions on our and our domestic subsidiaries ability
to: incur additional indebtedness; make dividend payments or other restricted payments; create liens; change the nature of its business; modify the provisions of any indebtedness, organizational documents and certain other agreements; enter into transactions with affiliates; and engage in fundamental changes, dispositions or acquisitions with respect to all or any part of our business, property or assets. As of the date of this prospectus, all of our domestic subsidiaries are set forth on Schedule A to this prospectus. Our foreign subsidiaries will not be subject to any of the restrictive covenants in the New Non-Cash Pay Notes Indenture. The restrictive covenants set forth in the New Non-Cash Pay Notes Indenture are subject to important exceptions and qualifications. See the section entitled Description of Notes for more information. |
Conversion Rights
|
Pursuant to New Non-Cash Pay Notes Indenture, you may opt to convert your New Non-Cash Pay Notes, or any portion of the principal amount
thereof, into shares of our common stock at a conversion price equal to the price per share of common stock offered upon the consummation of our
initial public offering on May 16, 2011, or $10.00 per share, up until the close of business on the day prior to the date of payment in full of the New
Non-Cash Pay Notes. The aggregate shares of our common stock available in such conversion shall be limited to approximately 21.1% of our fully diluted
equity as of the date our initial public offering was consummated, pursuant to the New Non-Cash Pay Notes Indenture. For more information on your
conversion rights, see the section entitled, Description of Notes. |
|||||
Risk Factors
|
Potential investors in the New Non-Cash Pay Notes should carefully consider the matters set forth under the caption Risk Factors prior
to making an investment decision with respect to the New Non-Cash Pay Notes and/or converting the New Non-Cash Pay Notes to shares of our common
stock. |
The Exchange
Offers |
We
are offering to exchange up to $243,785,111 of our New Senior Secured Notes, up to $11,012,525 of our New Cash Pay Notes and up to $250,849,125 of our
New Non-Cash Pay Notes, that have been registered under the Securities Act of 1933, for a like amount of our Old Senior Secured Notes, our Old Cash Pay
Notes and our Old Non-Cash Pay Notes, respectively, on substantially identical terms, except that some of the transfer restrictions and registration
rights relating to the Old Notes will not apply to the New Notes. |
|||||
Expiration Date
|
The
exchange offers will expire at 5:00 p.m., New York City time, on [], 2011, unless extended. |
|||||
Condition to the
Exchange Offers |
The
Indentures do not require us to accept the Old Notes for exchange if any of the exchange offers or the making of any exchange by a holder of the Old
Notes would violate any applicable law or interpretation of the staff of the Securities and Exchange Commission. A minimum aggregate principal amount
of Old Notes being tendered is not a condition to the exchange offers. |
|||||
Procedures for
Tendering Old Notes |
To
participate in the exchange offers, you must complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, and
transmit it together with all other documents required in the letter of transmittal, including the Old Notes that you wish to exchange, to U.S Bank,
N.A., as exchange agent, at the address indicated on the cover page of the letter of transmittal by the close of business on the last day of a period
of at least 20 business days from the date notice of the acceptance period is mailed (or longer if required by applicable law). If applicable, you can
alternatively tender your Old Notes by following the procedures for book-entry transfer described in this prospectus. |
If
your Old Notes are held through The Depository Trust Company and you wish to participate in the exchange offers, you may do so through the automated
tender offer program of The Depository Trust Company. If you tender under this program, you will agree to be bound by the letter of transmittal that we
are providing with this prospectus as though you had signed the letter of transmittal. If a broker, dealer, commercial bank, trust company or other nominee is the registered holder of your Old Notes, we urge you to contact that person promptly to tender your Old Notes in the exchange offers. For more information on tendering your Old Notes, please refer to the sections in this prospectus entitled Exchange Offers Terms of the Exchange Offers, Procedures for Tendering and Book-Entry Transfer. |
||||||
Guaranteed
Delivery Procedures |
If
you wish to tender your Old Notes and you cannot get your required documents to the exchange agent on time, you may tender your Old Notes according to
the guaranteed delivery procedures described in Exchange Offers Guaranteed Delivery Procedures. |
|||||
Withdrawal of
Tenders |
Any
holder will be entitled to withdraw its tender, not later than the close of business on the last day of the period provided in the notice of the
exchange offers, by (i) sending to the institution and the address specified in the notice, a telegram, telex, facsimile transmission or letter setting
forth the name of the holder, the principal amount of Old Notes delivered for exchange and a statement that such holder is withdrawing it election to
have such Old Notes exchanged or (ii) effecting such withdrawal in compliance with the applicable procedures of the depositary for the Old
Notes. |
|||||
Acceptance of Old
Notes and Delivery of New Notes |
If you fulfill all conditions required for proper acceptance of Old Notes, we will accept any and all Old Notes that you properly tender in the exchange offers on or before 5:00 p.m. New York City time on the last day of the exchange period provided in the notice of the exchange offers. We will return any Old Notes that we do not accept for exchange to you without expense promptly after the expiration of the exchange period. We will deliver the New Notes promptly after the expiration of the exchange period and acceptance of the Old Notes for exchange. Please refer to the section in this prospectus entitled Exchange Offers Terms of the Exchange Offers. |
|||||
Fees and Expenses
|
No
service charge shall be made to a holder for the exchange offers, but we may require the holder to pay a sum sufficient to cover any transfer tax
assessments or similar governmental charge payable in connection therewith. Each holder shall also pay any underwriting discounts and commissions and
brokerage commissions, if any, relating to the sale or disposition of such holders registrable securities. Please refer to the section in this
prospectus entitled Exchange Offers Fees and Expenses. |
Use of Proceeds
|
We
will not receive any proceeds from the issuance of the New Notes or upon conversion of the New Non-Cash Pay Notes to shares of our common stock. We are
making the exchange offers solely to satisfy our obligations under the Indentures. |
|||||
Dividend Policy
|
We do
not anticipate paying dividends on our common stock for the foreseeable future. |
|||||
Consequences of
Failure to Exchange Old Notes |
Any Old Notes not tendered will remain outstanding and continue to accrue interest. However, you will not be able to resell, offer to resell or otherwise transfer the Old Notes unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act of 1933. |
|||||
U.S. Federal
Income Tax Considerations |
The
exchange of the New Notes for the Old Notes in the exchange offers should not be taxable events for U.S. federal income tax purposes. Please read
Material U.S. Federal Income Tax Considerations. |
|||||
Exchange Agent
|
We
have appointed U.S. Bank, N.A., as exchange agent for the exchange offers. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent addressed as
follows: U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23rd
Floor, Hartford, CT 06103. Eligible institutions may make requests by facsimile at (860) 241-6881. |
|
the number of noteholders; |
|
our operating performance and financial condition; |
|
the market for similar securities; |
|
the interest of securities dealers in making a market in the New Notes; and |
|
prevailing interest rates. |
|
incurred the obligations with the intent to hinder, delay or defraud creditors; or |
|
received less than reasonably equivalent value, or did not receive fair consideration, in exchange for incurring those obligations; and |
(1) |
was insolvent or rendered insolvent by reason of that incurrence; |
(2) |
was engaged in a business or transaction for which the subsidiarys remaining assets constituted unreasonably small capital; or |
(3) |
intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature. |
|
the sum of its debts, including contingent liabilities, is greater than the fair saleable value of all of its assets; |
|
the present fair saleable value of its assets is less than the amount that would be required to pay its probable liabilities on its existing debts, including contingent liabilities, as they become absolute and mature; or |
|
it cannot pay its debts as they become due. |
|
Quarterly variations in our results of operations or those of our competitors. |
|
Announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments. |
|
Disruption to our operations or those of our marketing affiliates. |
|
The emergence of new sales channels in which we are unable to compete effectively. |
|
Our ability to develop and market new and enhanced products on a timely basis. |
|
Commencement of, or our involvement in, litigation. |
|
Any major change in our board or management. |
|
Changes in governmental regulations or in the status of our regulatory approvals. |
|
Changes in earnings estimates or recommendations by securities analysts. |
|
General economic conditions and slow or negative growth of related markets. |
|
establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; |
|
authorize our board of directors to issue blank check preferred stock to increase the number of outstanding shares and thwart a takeover attempt; |
|
require the written request of at least 75% of the voting power of our capital stock in order to compel management to call a special meeting of the stockholders; and |
|
prohibit stockholder action by written consent and require that all stockholder actions be taken at a meeting of our stockholders, unless otherwise specifically required by our articles of incorporation or the Nevada Revised Statutes. |
|
we may be unable to obtain additional financing for working capital, capital expenditures, acquisitions, repayment of debt at maturity and other general corporate purposes; |
|
a significant portion of our cash flow from operations must be dedicated to debt service, which reduces the amount of cash we have available for other purposes; |
|
we may be disadvantaged as compared to our competitors, such as in our ability to adjust to changing market conditions, as a result of the amount of debt we owe; |
|
we may be restricted in our ability to make strategic acquisitions and to exploit business opportunities; and |
|
additional dilution of stockholders may be required to service our debt. |
|
incur or guarantee additional indebtedness; |
|
repurchase capital stock; |
|
make loans and investments; |
|
enter into agreements restricting our subsidiaries abilities to pay dividends; |
|
grant liens on assets; |
|
sell or otherwise dispose of assets; |
|
enter new lines of business; |
|
merge or consolidate with other entities; and |
|
engage in transactions with affiliates. |
|
if we experience excessive chargebacks and/or credits; |
|
if we experience excessive fraud ratios; |
|
if there is an adverse change in policy of the acquiring banks and/or card associations with respect to the processing of credit card charges for adult-related content; |
|
if there is an increase in the number of European and U.S. banks that will not accept accounts selling adult-related content; |
|
if there is a breach of our security resulting in the theft of credit card data; |
|
if there is continued tightening of credit card association chargeback regulations in international commerce; |
|
if there are association requirements for new technologies that consumers are less likely to use; and |
|
if negative global economic conditions result in credit card companies denying more transactions. |
|
cause our customers to lose confidence in our services; |
|
deter consumers from using our services; |
|
harm our reputation; |
|
require that we expend significant additional resources related to our information security systems and result in a disruption of our operations; |
|
expose us to liability; |
|
subject us to unfavorable regulatory restrictions and requirements imposed by the Federal Trade Commission or similar authority; |
|
cause us to incur expenses related to remediation costs; and |
|
decrease market acceptance of the use of e-commerce transactions. |
|
Internet. Several U.S. governmental agencies are considering a number of legislative and regulatory proposals that may lead to laws or regulations concerning different aspects of the internet, including social networking, online content, intellectual property rights, e-mail, user privacy, taxation, access charges, liability for third-party activities and personal jurisdiction. New Jersey enacted the Internet Dating Safety Act in 2008, which requires online dating services to disclose whether they perform criminal background screening practices and to offer safer dating tips on their websites. Other states have enacted or considered enacting similar legislation. While online dating and social networking websites are not currently required to verify the age or identity of their members or to run criminal background checks on them, any such requirements could increase our cost of operations or discourage use of our services. The Childrens Online Privacy Protection Act (COPPA) restricts the ability of online services to collect information from minors. The Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. |
|
Commercial advertising. We receive a significant portion of our print publications advertising revenue from companies that sell tobacco products. Significant limitations on the ability of those companies to advertise in our publications or on our websites because of legislative, regulatory or court action could materially adversely affect our business, financial condition and results of operations. |
|
Adult content. Regulation, investigations and prosecutions of adult content could prevent us from making such content available in certain jurisdictions or otherwise have a material adverse effect on our business, financial condition and results of operations. Government officials may also place additional restrictions on adult content affecting the way people interact on the internet. The governments of some countries, such as China and India, have sought to limit the influence of other cultures by restricting the distribution of products deemed to represent foreign or immoral influences. Regulation aimed at limiting minors access to adult content both in the United States and abroad could also increase our cost of operations and introduce technological challenges by requiring development and implementation of age verification systems. U.S. government officials could amend or construe and seek to enforce more broadly or aggressively the adult content recordkeeping and labeling requirements set forth in 18 U.S.C. Section 2257 and its implementing regulations in a manner that is unfavorable to our business. Court rulings may place additional restrictions on adult content affecting how people interact on the internet, such as mandatory web labeling. |
|
unforeseen operating difficulties and expenditures arising from the process of integrating any acquired business, product or technology, including related personnel, and maintaining uniform standards, controls, procedures and policies; |
|
diversion of a significant amount of managements attention from the ongoing development of our business; |
|
dilution of existing stockholders ownership interests; |
|
incurrence of additional debt; |
|
exposure to additional operational risks and liabilities, including risks and liabilities arising from the operating history of any acquired businesses; |
|
negative effects on reported results of operations from acquisition-related charges and amortization of acquired intangibles; |
|
entry into markets and geographic areas where we have limited or no experience; |
|
the potential inability to retain and motivate key employees of acquired businesses; |
|
adverse effects on our relationships with suppliers and customers; and |
|
adverse effects on the existing relationships of any acquired companies, including suppliers and customers. |
|
competition from pre-existing competitors with significantly stronger brand recognition in the markets we enter; |
|
our erroneous evaluations of the potential of such markets; |
|
diversion of capital and other valuable resources away from our core business; |
|
foregoing opportunities that are potentially more profitable; and |
|
weakening our current brands by over expansion into too many new markets. |
|
challenges caused by distance, language and cultural differences; |
|
local competitors with substantially greater brand recognition, more users and more traffic than we have; |
|
challenges associated with creating and increasing our brand recognition, improving our marketing efforts internationally and building strong relationships with local affiliates; |
|
longer payment cycles in some countries; |
|
credit risk and higher levels of payment fraud in some countries; |
|
different legal and regulatory restrictions among jurisdictions; |
|
political, social and economic instability; |
|
potentially adverse tax consequences; and |
|
higher costs associated with doing business internationally. |
|
your failure to follow the exchange offer procedures or exchange your Old Notes for New Notes; |
|
our ability to service and repay our indebtedness, including our repayment obligations in the event of a change of control; |
|
the insufficiency of the collateral relating to the Old Notes and New Notes or any failure to record and/or perfect security interests in such collateral; |
|
our history of breaching certain covenants in our note agreements and the Indentures and the risk of future breaches; |
|
our failure to maintain financial ratios, satisfy financial tests and remain in compliance with the Indentures; |
|
the lack of a public market for the New Notes; |
|
a courts ability to void the subsidiary guarantees based on fraudulent conveyance laws; |
|
the dilutive effect on the net tangible book value of your shares if you convert the New Non-Cash Pay Notes; |
|
our ability to raise capital in the future; |
|
our ability to continue to pay the increased costs relating to being a public company; |
|
our ability to maintain effective internal controls; |
|
the volatility of our stock price; |
|
the effect of anti-takeover provisions in our articles of incorporation or provisions of Nevada law on any potential change in control; |
|
our history of significant operating losses and the risk of incurring additional net losses in the future; |
|
our reliance on subscribers to our websites for most of our revenue; |
|
competition from other social networking, internet personals and adult-oriented websites; |
|
our reliance on our affiliate network to drive traffic to our websites; |
|
increased subscriber churn or subscriber upgrade and retention costs impact on our financial performance; |
|
our ability to generate significant revenue from internet advertising; |
|
our ability to maintain and enhance our brands; |
|
unfavorable economic and market conditions; |
|
our reliance on credit cards as a form of payment; |
|
our ability to keep up with new technologies and remain competitive; |
|
we may be held secondarily liable for the actions of our affiliates; |
|
our reliance on member-generated content to our websites; |
|
security breaches may cause harm to our subscribers or our systems; |
|
we may be subject to liability arising from our media content; |
|
our ability to safeguard the privacy of the users of our websites; |
|
our ability to enforce and protect our intellectual property rights; |
|
we may be subject to claims that we have violated the intellectual property rights of others; |
|
our ability to obtain or maintain key website addresses; |
|
our ability to scale and adapt our network infrastructure; |
|
the loss of our main data center or backup data center or other parts of our infrastructure; |
|
systems failures and interruptions in our ability to provide access to our websites and content; |
|
companies providing products and services on which we rely may refuse to do business with us; |
|
changes in government laws affecting our business; |
|
we may be liable if one of our members or subscribers harms another or misuses our websites; |
|
risks associated with additional taxes being imposed by any states or countries; |
|
we may have unforeseen liabilities from our acquisition of Various and our recourse may be limited; |
|
we may not be successful in integrating any future acquisitions we make; |
|
risks of international expansion; |
|
our reliance on key personnel; |
|
our ability to attract internet traffic to our websites; |
|
risks associated with currency fluctuations; and |
|
risks associated with our litigation and legal proceedings. |
|
to delay accepting for exchange any Old Notes, |
|
to extend the exchange offers, or |
|
to terminate the exchange offers, |
|
complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal; |
|
have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and |
|
mail or deliver such letter of transmittal or facsimile to the exchange agent prior to 5:00 p.m. New York City time on the last day of the period which is at least 20 business days from the date the notice of the exchange offer is mailed; or |
|
comply with the automated tender offer program procedures of The Depository Trust Company, or DTC, described below. |
|
the exchange agent must receive Old Notes along with the letter of transmittal; or |
|
if applicable, the exchange agent must receive, prior to 5:00 p.m. New York City time on the last day of the period which is at least 20 business days from the date the notice of the exchange offer is mailed, a timely confirmation of book-entry transfer of such Old Notes into the exchange agents account at DTC according to the procedure for book-entry transfer described below or a properly transmitted agents message; or |
|
the holder must comply with the guaranteed delivery procedures described below. |
|
make appropriate arrangements to register ownership of the Old Notes in your name; or |
|
obtain a properly completed bond power from the registered holder of the Old Notes. |
|
by a registered holder who has not completed the box entitled Special Issuance Instructions or Special Delivery Instructions on the letter of transmittal; |
|
for the account of a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondence in the United States, or an eligible guarantor institution. |
|
DTC has received an express acknowledgment from a participant in its automated tender offer program that is tendering old notes that are the subject of such book-entry confirmation; |
|
such participant has received and agrees to be bound by the terms of the letter of transmittal or, in the case of an agents message relating to guaranteed delivery, that such participant has received and agrees to be bound by the notice of guaranteed delivery; and |
|
the agreement may be enforced against such participant. |
|
Old Notes or, if applicable, a timely book-entry confirmation of such Old Notes into the exchange agents account at DTC; and |
|
a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agents message. |
|
the tender is made through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution, |
|
prior to the exchange date, the exchange agent receives from such member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., commercial bank or trust company having an office or correspondent in the United States, or eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery or a properly transmitted agents message and notice of guaranteed delivery: |
|
setting forth your name and address, the registered number(s) of your Old Notes and the principal amount of Old Notes tendered, |
|
stating that the tender is being made thereby, and |
|
guaranteeing that, within three (3) NASDAQ trading days after the applicable exchange date, the letter of transmittal or facsimile thereof, together with the Old Notes or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent, and |
|
the exchange agent receives such properly completed and executed letter of transmittal or facsimile thereof, as well as all tendered Old Notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal, within three (3) NASDAQ trading days after the exchange date. |
|
the exchange agent must receive a written notice of withdrawal at the address indicated on the cover page of the letter of transmittal; or |
|
you must comply with the appropriate procedures of DTCs automated tender offer program system. |
|
specify the name of the person who tendered the Old Notes to be withdrawn; and |
|
identify the Old Notes to be withdrawn, including the principal amount of such Old Notes and include a statement that the holder is withdrawing its election to have such Old Notes exchanged. |
|
Commission registration fees; |
|
fees and expenses of the exchange agent and trustee; |
|
accounting and legal fees and printing costs; and |
|
related fees and expenses. |
|
certificates representing Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of Old Notes tendered; |
|
tendered Old Notes are registered in the name of any person other than the person signing the letter of transmittal; or |
|
a transfer tax is imposed for any reason other than the exchange of Old Notes under the exchange offers, including a transfer tax relating to the sale or disposition of holders registrable securities. |
Price Range of Common Stock |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
High |
Low |
||||||||||
2011 |
|||||||||||
Second
Quarter (commencing May, 11, 2011) |
$ | 10.01 | $ | 3.61 | |||||||
Third Quarter
(through July 26, 2011) |
$ | 5.22 | $ | 3.75 |
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(a) | (b) | (c) | ||||||||||||
Equity
compensation plans approved by security holders |
| | | |||||||||||
Equity
compensation plans not approved by security holders |
551,750 | (1) | $ | 10.00 | 1,186,122 | (1) | ||||||||
Total
|
551,750 | (1) | $ | 10.00 | 1,186,122 | (1) |
(1) |
The information set forth above pertains to our 2008 Stock Option Plan and our 2009 Restricted Stock Plan as of December 31, 2010. For a discussion of our 2008 Stock Option Plan please refer to the section entitled Executive Compensation Executive Compensation Components Long Term Equity Incentive Compensation or refer to Note L, Stock Options of our consolidated financial statements included elsewhere in our IPO prospectus, filed with the SEC on May 10, 2011. |
Consolidated Data |
|||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended March 31, |
Year Ended December 31, |
||||||||||||||||||||||||||||||
2011 |
2010 |
2010 |
2009 |
2008(1) |
2007(1) |
2006 |
|||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||
Statements
of Operations and Per Share Data: |
|||||||||||||||||||||||||||||||
Net revenue
|
$ | 83,520 | $ | 80,205 | $ | 345,997 | $ | 327,692 | $ | 331,017 | $ | 48,073 | $ | 29,965 | |||||||||||||||||
Cost of
revenue |
26,761 | 29,642 | 110,490 | 91,697 | 96,514 | 23,330 | 15,927 | ||||||||||||||||||||||||
Gross profit
|
56,759 | 56,563 | 235,507 | 235,995 | 234,503 | 24,743 | 14,038 | ||||||||||||||||||||||||
Operating
expenses |
|||||||||||||||||||||||||||||||
Product
development |
3,907 | 2,911 | 12,834 | 13,500 | 14,553 | 1,002 | | ||||||||||||||||||||||||
Selling and
marketing |
7,341 | 12,601 | 37,258 | 42,902 | 59,281 | 7,595 | 1,430 | ||||||||||||||||||||||||
General and
administrative |
20,691 | 20,605 | 79,855 | 76,863 | 88,280 | 24,466 | 24,354 | ||||||||||||||||||||||||
Amortization
of acquired intangibles and software |
3,923 | 2,264 | 24,461 | 35,454 | 36,347 | 2,262 | | ||||||||||||||||||||||||
Depreciation
and other amortization |
1,222 | 1,208 | 4,704 | 4,881 | 4,502 | 2,829 | 3,322 | ||||||||||||||||||||||||
Impairment of
goodwill |
| | | | 9,571 | 925 | 22,824 | ||||||||||||||||||||||||
Impairment of
other intangible assets |
| | 4,660 | 4,000 | 14,860 | 5,131 | | ||||||||||||||||||||||||
Total
operating expenses |
37,084 | 43,589 | 163,772 | 177,600 | 227,394 | 44,210 | 51,930 | ||||||||||||||||||||||||
Income (loss)
from operations. |
19,675 | 12,974 | 71,735 | 58,395 | 7,109 | (19,467 | ) | (37,892 | ) | ||||||||||||||||||||||
Interest
expense, net of interest income |
21,950 | 22,837 | (88,508 | ) | (92,139 | ) | (80,510 | ) | (15,953 | ) | (7,918 | ) | |||||||||||||||||||
Other finance
expenses |
| | (4,562 | ) | | | | | |||||||||||||||||||||||
Interest and
penalties related to VAT liability not charged to customers |
500 | 556 | (2,293 | ) | (4,205 | ) | (8,429 | ) | (1,592 | ) | | ||||||||||||||||||||
Net loss on
extinguishment and modification of debt |
| | (7,457 | ) | (7,240 | ) | | | (3,799 | ) | |||||||||||||||||||||
Foreign
exchange gain (loss) principally related to VAT liability not charged to customers |
2,236 | (2,038 | ) | 610 | (5,530 | ) | 15,195 | 546 | | ||||||||||||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| | | 1,561 | | | | ||||||||||||||||||||||||
Gain on
settlement of VAT liability not charged to customers |
| | | 232 | 2,690 | | | ||||||||||||||||||||||||
Gain on
liability related to warrants |
(272 | ) | (43 | ) | 38 | 2,744 | | | | ||||||||||||||||||||||
Other
non-operating (expense) income, net |
(1,082 | ) | 23 | (13,202 | ) | (366 | ) | (197 | ) | 119 | (332 | ) | |||||||||||||||||||
Loss before
income tax benefit |
(3,657 | ) | (8,361 | ) | (43,639 | ) | (46,548 | ) | (64,142 | ) | (36,347 | ) | (49,941 | ) | |||||||||||||||||
Income tax
(expense) benefit |
(24 | ) | 92 | 486 | 5,332 | 18,176 | 6,430 | |
Consolidated Data |
|||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended March 31, |
Year Ended December 31, |
||||||||||||||||||||||||||||||
2011 |
2010 |
2010 |
2009 |
2008(1) |
2007(1) |
2006 | |||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||
Net loss
|
$ | (3,681 | ) | $ | (8,269 | ) | $ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | $ | (29,917 | ) | $ | (49,941 | ) | ||||||||||
Non-cash
dividends on convertible preferred stock |
| | | | | (4,396 | ) | | |||||||||||||||||||||||
Net loss
attributable to common stock |
$ | (3,681 | ) | $ | 8,269 | $ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | $ | (34,313 | ) | $ | (49,941 | ) | |||||||||||
Net loss per
common share basic and diluted(2) |
$ | (0.27 | ) | $ | (0.60 | ) | $ | (3.14 | ) | $ | (3.00 | ) | $ | (3.35 | ) | $ | (5.19 | ) | $ | (8.99 | ) | ||||||||||
Weighted
average common shares outstanding basic and diluted(2) |
13,735 | 13,735 | 13,735 | 13,735 | 13,735 | 6,610 | 5,554 | ||||||||||||||||||||||||
Pro forma net
loss per common share basic and diluted(3) |
$ | (1.37 | ) | ||||||||||||||||||||||||||||
Pro forma
weighted average common shares outstanding basic and diluted(3) |
27,703 |
Consolidated Data |
|||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended March 31, |
Year Ended December 31, |
||||||||||||||||||||||||||||||
2011 |
2010 |
2010 |
2009 |
2008(2) |
2007(2) |
2006 |
|||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||
Consolidated Balance Sheet Data (at period end): |
|||||||||||||||||||||||||||||||
Cash and
restricted cash |
$ | 40,879 | $ | 41,970 | $ | 41,970 | $ | 28,895 | $ | 31,565 | $ | 23,722 | $ | 2,998 | |||||||||||||||||
Total assets
|
525,645 | 532,817 | 532,817 | 551,881 | 599,913 | 649,868 | 70,770 | ||||||||||||||||||||||||
Long-term
debt classified as current due to events of default, net of unamortized discount |
| | | | 415,606 | 417,310 | | ||||||||||||||||||||||||
Long-term
debt, net of unamortized discount |
502,950 | 510,551 | 510,551 | 432,028 | 38,768 | 35,379 | 63,166 | ||||||||||||||||||||||||
Deferred
revenue |
48,366 | 48,302 | 48,302 | 46,046 | 42,814 | 27,214 | 6,974 | ||||||||||||||||||||||||
Total
liabilities |
679,106 | 682,597 | 682,597 | 657,523 | 657,998 | 661,987 | 91,516 | ||||||||||||||||||||||||
Redeemable
preferred stock |
| | | 26,000 | 26,000 | 26,000 | 21,000 | ||||||||||||||||||||||||
Accumulated
deficit |
(234,302 | ) | (230,621 | ) | (230,621 | ) | (187,468 | ) | (144,667 | ) | (98,701 | ) | (68,784 | ) | |||||||||||||||||
Total
stockholders deficiency |
(153,461 | ) | (149,780 | ) | (149,780 | ) | (131,642 | ) | (84,085 | ) | (38,119 | ) | (41,746 | ) |
Consolidated Data |
|||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended March 31, |
Year Ended December 31, |
||||||||||||||||||||||||||||||
2011 |
2010 |
2010 |
2009 |
2008(1) |
2007(1) |
2006 |
|||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||
Other
Data |
|||||||||||||||||||||||||||||||
Net cash
provided by (used in) operating activities |
$ | 9,547 | $ | 9,286 | $ | 42,640 | $ | 39,679 | $ | 50,948 | $ | 4,744 | $ | (16,600 | ) | ||||||||||||||||
Net cash
provided by (used in) investing activities |
(1,761 | ) | (98 | ) | (1,250 | ) | 4,204 | (9,289 | ) | (149,322 | ) | (3,414 | ) | ||||||||||||||||||
Net cash
provided by (used in) financing activities |
(6,672 | ) | 1,451 | (29,405 | ) | (44,987 | ) | (25,336 | ) | 148,961 | 10,569 |
(1) |
Net revenue for the years ended December 31, 2008 and 2007 does not reflect $19.2 million and $8.5 million, respectively, due to a non-recurring purchase accounting adjustment that required the deferred revenue at the date of the acquisition of Various to be recorded at fair value. Management believes that it is appropriate to add back the deferred revenue adjustment because the average renewal rate of the subscriptions that were the basis for the deferred revenue was approximately 63%. The renewal rate on subscriptions that had already been renewed at least one time since the acquisition was 78%. Therefore, management believes that historical results of Various are reflective, including those revenues that were added back to the adjusted net revenue, of our future results. Please refer to the table contained in the Managements Discussion and Analysis of Financial Condition and Results of Operations below entitled Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA. |
(2) |
Basic and diluted loss per share is based on the weighted average number of shares of common stock outstanding, including Series B common stock, and shares underlying common stock purchase warrants which are exercisable at the nominal price of $0.0002 per share. For information regarding the computation of per share amounts, refer to Note C(25), Summary of Significant Accounting Policies Per share data of our consolidated financial statements included elsewhere in this prospectus. |
(3) |
The following pro forma information reflects the following transactions as if they occurred on January 1, 2010: (i) the sale of 5,000,000 shares of our common stock at an initial offering price of $10.00 per share and the receipt of net proceeds of $44.9 million, (ii) the repayment of principal of $40.8 million on outstanding notes, (iii) the issuance of 8,444,853 shares of common stock upon the conversion of the outstanding shares of Series B convertible preferred stock and (iv) the issuance of 4,526,471 shares of common stock underlying 4,003,898 warrants with an exercise price of $0.0002 per share which if not exercised will expire upon the closing of the offering. |
Net loss as
reported |
$ | (43,153 | ) | |||
Pro forma
adjustments: |
||||||
1. A
reduction in interest expense resulting from the repayment of a portion of the Old Senior Secured Notes and Old Second Lien Notes using a weighted
average effective interest rate of 20.3% |
8,300 | |||||
2.
Amortization of the $13.0 million beneficial conversion feature in the Old Non-Cash Pay Notes which mature on April 30, 2014 |
(3,200 | ) | ||||
Pro forma net
loss |
$ | (38,053 | )(a) | |||
Weighted
average common shares outstanding basic and diluted |
13,735 | |||||
Pro forma
adjustments: |
||||||
1. Issuance
of common stock upon the conversion of all of the outstanding shares of Series B Convertible Preferred Stock |
8,445 | |||||
2. An
increase in the shares of common stock underlying certain of our warrants resulting from the anti-dilution provisions of such
warrants |
523 | |||||
3. The sale
of common stock in the IPO |
5,000 | |||||
Pro forma
weighted average shares outstanding |
27,703 | |||||
Pro forma net
loss per common share basic and diluted |
$ | (1.37 | )(a) |
(a) |
The pro forma net loss per common share excludes (i) loss on extinguishment of our Old Senior Secured Notes and Old Cash Pay Notes of $8.5 million and (ii) $2.2 million of cumulative compensation expense related to stock options deemed granted upon the completion of the IPO, representing non-recurring charges directly attributable to the IPO. |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Percentage of
revenue contributed by affiliates |
46 | % | 43 | % | |||||||
Compensation
to affiliates (in millions) |
$ | 16.2 | $ | 19.9 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Percentage of
revenue contributed by affiliates |
45 | % | 44 | % | 43 | % | |||||||||
Compensation
to affiliates (in millions) |
$ | 71.2 | $ | 56.7 | $ | 62.3 |
|
a significant decline in actual or projected revenue; |
|
a significant decline in performance of certain acquired companies relative to our original projections; |
|
an excess of our net book value over our market value; |
|
a significant decline in our operating results relative to our operating forecasts; |
|
a significant change in the manner of our use of acquired assets or the strategy for our overall business; |
|
a significant decrease in the market value of an asset; |
|
a shift in technology demands and development; and |
|
a significant turnover in key management or other personnel. |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
(in thousands) | |||||||||||
Net
revenue |
|||||||||||
Internet
|
$ | 78,134 | $ | 80,476 | |||||||
Entertainment
|
5,386 | 5,729 | |||||||||
Total
|
83,520 | 86,205 | |||||||||
Cost of
revenue |
|||||||||||
Internet
|
23,098 | 26,386 | |||||||||
Entertainment
|
3,663 | 3,256 | |||||||||
Total
|
26,761 | 29,642 | |||||||||
Gross
profit |
|||||||||||
Internet
|
55,036 | 54,090 | |||||||||
Entertainment
|
1,723 | 2,473 | |||||||||
Total
|
56,759 | 56,563 | |||||||||
Income (loss)
from operations |
|||||||||||
Internet
|
20,971 | 13,535 | |||||||||
Entertainment
|
66 | 1,036 | |||||||||
Unallocated
corporate |
(1,362 | ) | (1,597 | ) | |||||||
Total
|
$ | 19,675 | $ | 12,974 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
(in thousands) | |||||||||||||||
Net
revenue |
|||||||||||||||
Internet
|
$ | 321,605 | $ | 306,213 | $ | 306,129 | |||||||||
Entertainment
|
24,392 | 21,479 | 24,888 | ||||||||||||
Total
|
345,997 | 327,692 | 331,017 | ||||||||||||
Cost of
revenue |
|||||||||||||||
Internet
|
97,959 | 78,627 | 81,815 | ||||||||||||
Entertainment
|
12,531 | 13,070 | 14,699 | ||||||||||||
Total
|
110,490 | 91,697 | 96,514 | ||||||||||||
Gross
profit |
|||||||||||||||
Internet
|
223,646 | 227,586 | 224,314 | ||||||||||||
Entertainment
|
11,861 | 8,409 | 10,189 | ||||||||||||
Total
|
235,507 | 235,995 | 234,503 | ||||||||||||
Income (loss)
from operations |
|||||||||||||||
Internet
|
76,142 | 64,962 | 34,345 | ||||||||||||
Entertainment
|
1,140 | (439 | ) | (17,748 | ) | ||||||||||
Unallocated
corporate |
(5,547 | ) | (6,128 | ) | (9,488 | ) | |||||||||
Total
|
$ | 71,735 | $ | 58,395 | $ | 7,109 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Adult
Social Networking Websites |
|||||||||||
New members
|
9,340,877 | 8,809,331 | |||||||||
Beginning
subscribers |
928,314 | 916,005 | |||||||||
New
subscribers(1) |
416,066 | 489,256 | |||||||||
Terminations
|
446,524 | 440,376 | |||||||||
Ending
subscribers |
897,856 | 964,885 | |||||||||
Conversion of
members to subscribers |
4.5 | % | 5.6 | % | |||||||
Churn
|
16.0 | % | 16.0 | % | |||||||
ARPU
|
$ | 19.97 | $ | 20.33 | |||||||
CPGA
|
$ | 45.11 | $ | 54.97 | |||||||
Average
lifetime net revenue per subscriber |
$ | 79.44 | $ | 71.89 | |||||||
Net revenue
(in millions) |
$ | 54,650 | $ | 57,358 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
General
Audience Social Networking Websites |
|||||||||||
New members
|
1,782,481 | 2,245,591 | |||||||||
Beginning
subscribers |
53,198 | 57,431 | |||||||||
New
subscribers(1) |
23,353 | 31,135 | |||||||||
Terminations
|
28,996 | 30,126 | |||||||||
Ending
subscribers |
47,555 | 58,440 | |||||||||
Conversion of
members to subscribers |
1.3 | % | 1.4 | % | |||||||
Churn
|
18.2 | % | 17.5 | % | |||||||
ARPU
|
$ | 19.82 | $ | 21.03 | |||||||
CPGA
|
$ | 27.96 | $ | 29.63 | |||||||
Average
lifetime net revenue per subscriber |
$ | 81.13 | $ | 90.64 | |||||||
Net revenue
(in millions) |
$ | 2,995 | $ | 3,655 | |||||||
Live
Interactive Video Websites |
|||||||||||
Total minutes
|
4,518,128 | 4,857,873 | |||||||||
Average
revenue per minute |
$ | 4.25 | $ | 3.74 | |||||||
Net revenue
(in millions) |
$ | 19,223 | $ | 18,164 |
(1) |
New subscribers are subscribers who have paid subscription fees to one of our websites during the period indicated in the table but who were not subscribers in the immediately prior period. Members who previously were subscribers, but discontinued their subscriptions either by notifying us of their decisions to discontinue or allowing their subscriptions to lapse by failing to pay their subscription fees, are considered new subscribers when they become subscribers again at any point after their previous subscriptions ended. If a current subscriber to one of our websites becomes a subscriber to another one of our websites, such new subscription would also be counted as a new subscriber since such subscriber would be paying the full subscription fee for each subscription. |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Adult
Social Networking Websites |
|||||||||||||||
New members
|
38,216,689 | 22,461,322 | 20,738,807 | ||||||||||||
Beginning
subscribers |
916,005 | 896,211 | 919,146 | ||||||||||||
New
subscribers(1) |
1,771,837 | 1,776,916 | 1,935,533 | ||||||||||||
Terminations
|
1,759,528 | 1,757,122 | 1,958,468 | ||||||||||||
Ending
subscribers |
928,314 | 916,005 | 896,211 | ||||||||||||
Conversion of
members to subscribers |
4.6 | % | 7.9 | % | 9.3 | % | |||||||||
Churn
|
16.0 | % | 16.3 | % | 17.8 | % | |||||||||
ARPU
|
$ | 20.47 | $ | 20.73 | $ | 22.28 | |||||||||
CPGA
|
$ | 48.43 | $ | 47.24 | $ | 51.26 | |||||||||
Average
lifetime net revenue per subscriber |
$ | 79.45 | $ | 79.64 | $ | 74.22 | |||||||||
Net
revenue(2) (in millions) |
$ | 226.6 | $ | 225.4 | $ | 242.7 | |||||||||
General
Audience Social Networking Websites |
|||||||||||||||
New members
|
8,985,965 | 8,994,757 | 11,221,993 | ||||||||||||
Beginning
subscribers |
57,431 | 68,647 | 85,893 | ||||||||||||
New
subscribers(1) |
114,709 | 116,608 | 174,290 | ||||||||||||
Terminations
|
118,942 | 127,824 | 191,536 | ||||||||||||
Ending
subscribers |
53,198 | 57,431 | 68,647 | ||||||||||||
Conversion of
members to subscribers |
1.3 | % | 1.3 | % | 1.6 | % | |||||||||
Churn
|
17.3 | % | 15.5 | % | 18.6 | % | |||||||||
ARPU
|
$ | 20.72 | $ | 18.05 | $ | 19.21 | |||||||||
CPGA
|
$ | 29.04 | $ | 41.61 | $ | 36.68 | |||||||||
Average
lifetime net revenue per subscriber |
$ | 91.02 | $ | 74.71 | $ | 66.70 | |||||||||
Net
revenue(2) (in millions) |
$ | 13.8 | $ | 13.7 | $ | 17.8 | |||||||||
Live
Interactive Video Websites |
|||||||||||||||
Total minutes
|
19,566,551 | 17,293,702 | 19,101,202 | ||||||||||||
Average
revenue per minute |
$ | 3.90 | $ | 3.49 | $ | 2.87 | |||||||||
Net
revenue(2) (in millions) |
$ | 76.3 | $ | 60.4 | $ | 54.9 |
(1) |
See the previous Footnote 1 on page 63. |
(2) |
Net revenue for the year ended December 31, 2008 includes the adding back of $19.2 million due to a non-recurring purchase accounting adjustment that required deferred revenue at the date of acquisition of Various to be recorded at fair value. To provide meaningful comparisons between the years shown, management believes that the historical results of Various are reflective of our future results. |
|
our consolidated results of operations for the three months ended March 31, 2011 compared to the three months ended March 31, 2010; |
|
an analysis of internet segment operating data which are key to an understanding of our operating results and strategies for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010; |
|
our consolidated results of operations for the year ended December 31, 2010 compared to the year ended December 31, 2009; |
|
our consolidated results of operations for the year ended December 31, 2009 compared to the year ended December 31, 2008. |
|
an analysis of internet segment operating data which are key to an understanding of our operating results and strategies for the year ended December 31, 2010 as compared to the year ended December 31, 2009, and for the year ended December 31, 2009 as compared to the year ended December 31, 2008. |
Three Months Ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Net revenue
|
100.0 | % | 100.0 | % | |||||||
Cost of
revenue |
32.0 | 34.4 | |||||||||
Gross profit
|
68.0 | 65.6 | |||||||||
Operating
expenses: |
|||||||||||
Product
development |
4.7 | 3.4 | |||||||||
Selling and
marketing |
8.8 | 14.6 | |||||||||
General and
administrative |
24.8 | 23.9 | |||||||||
Amortization
of acquired intangibles and software |
4.7 | 7.2 | |||||||||
Depreciation
and other amortization |
1.4 | 1.4 | |||||||||
Total
operating expenses |
44.4 | 50.5 | |||||||||
Income from
operations |
23.6 | 15.1 | |||||||||
Interest
expense, net of interest income |
(26.3 | ) | (26.5 | ) | |||||||
Interest and
penalty related to VAT liability not charged to customers |
(0.6 | ) | (0.6 | ) | |||||||
Foreign
exchange (loss) gain principally related to VAT liability not charged to customers |
(2.7 | ) | 2.3 | ||||||||
Gain on
liability related to warrants |
0.3 | 0.0 | |||||||||
Other
non-operating expense (income), net |
1.3 | (0.0 | ) | ||||||||
Loss before
income tax benefit |
(4.4 | ) | (9.7 | ) | |||||||
Income tax
provision (benefit) |
0.0 | (0.1 | ) | ||||||||
Net loss
|
(4.4 | )% | (9.6 | )% |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Net revenue
|
100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Cost of
revenue |
31.9 | 28.0 | 29.2 | ||||||||||||
Gross profit
|
68.1 | 72.0 | 70.8 | ||||||||||||
Operating
expenses: |
|||||||||||||||
Product
development |
3.7 | 4.1 | 4.4 | ||||||||||||
Selling and
marketing |
10.8 | 13.1 | 17.9 | ||||||||||||
General and
administrative |
23.1 | 23.5 | 26.7 | ||||||||||||
Amortization
of acquired intangibles and software |
7.1 | 10.8 | 11.0 | ||||||||||||
Depreciation
and other amortization |
1.3 | 1.5 | 1.3 | ||||||||||||
Impairment of
goodwill |
| | 2.9 | ||||||||||||
Impairment of
other intangible assets |
1.4 | 1.2 | 4.5 | ||||||||||||
Total
operating expenses |
47.4 | 54.2 | 68.7 | ||||||||||||
Income from
operations |
20.7 | 17.8 | 2.1 | ||||||||||||
Interest
expense, net of interest income |
(25.6 | ) | (28.1 | ) | (24.3 | ) | |||||||||
Other finance
expenses |
(1.3 | ) | | | |||||||||||
Interest and
penalty related to VAT liability not charged to customers |
(0.7 | ) | (1.3 | ) | (2.5 | ) | |||||||||
Net loss on
extinguishment and modification of debt |
(2.1 | ) | (2.2 | ) | | ||||||||||
Foreign
exchange (gain) loss principally related to VAT liability not charged to customers |
0.2 | (1.7 | ) | 4.6 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 | |||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| 0.5 | | ||||||||||||
Gain on
settlement of liability related to VAT not charged to customers |
| 0.1 | 0.8 | ||||||||||||
Gain on
liability related to warrants |
0.0 | 0.8 | | ||||||||||||
Other
non-operating expense net |
(3.8 | ) | (0.1 | ) | (0.1 | ) | |||||||||
Loss before
income tax benefit |
(12.6 | ) | (14.2 | ) | (19.4 | ) | |||||||||
Income tax
benefit |
0.1 | 1.6 | 5.5 | ||||||||||||
Net loss
|
(12.5 | )% | (12.6 | )% | (13.9 | )% |
Year Ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
($ in millions) |
2009 |
2008 |
|||||||||
Net revenue
|
$ | 327.7 | $ | 331.0 | |||||||
Purchase
accounting adjustment |
| 19.2 | |||||||||
Adjusted
revenue |
327.7 | $ | 350.2 | ||||||||
Internet
revenue |
$ | 306.2 | $ | 306.1 | |||||||
Purchase
accounting adjustment |
| 19.2 | |||||||||
Adjusted net
internet revenue |
306.2 | 325.3 | |||||||||
Entertainment
revenue |
21.5 | 24.9 | |||||||||
Total
adjusted revenue |
$ | 327.7 | $ | 350.2 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
(in thousands) (unaudited) | |||||||||||
GAAP net loss
|
$ | (3,681 | ) | $ | (8,269 | ) | |||||
Add: Interest
expense, net |
21,950 | 22,837 | |||||||||
Add
(subtract): Income tax provision (benefit) |
24 | (92 | ) | ||||||||
Add:
Amortization of acquired intangible assets and software |
3,923 | 6,264 | |||||||||
Add:
Depreciation and other amortization |
1,222 | 1,208 | |||||||||
EBITDA
|
$ | 23,438 | $ | 21,948 | |||||||
Add:
Broadstream arbitration provision |
1,016 | | |||||||||
Add
(subtract): Loss (gain) related to VAT liability not charged to customers |
2,736 | (1,482 | ) | ||||||||
Adjusted
EBITDA |
$ | 27,190 | $ | 20,466 |
Consolidated Data |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||
2010 | 2009 | 2008 | |||||||||||||
(in thousands) | |||||||||||||||
GAAP net loss
|
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | ||||||
Add: Interest
expense, net |
88,508 | 92,139 | 80,510 | ||||||||||||
Subtract:
Income tax benefit |
(486 | ) | (5,332 | ) | (18,176 | ) | |||||||||
Add:
Amortization of acquired intangible assets and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Add:
Depreciation and other amortization |
4,704 | 4,881 | 4,502 | ||||||||||||
EBITDA
|
$ | 74,034 | $ | 85,926 | $ | 57,217 | |||||||||
Add: Deferred
revenue purchase accounting adjustment(1) |
| | 19,200 | ||||||||||||
Add:
Impairment of goodwill |
| | 9,571 | ||||||||||||
Add:
Impairment of other intangible assets |
4,660 | 4,000 | 14,860 | ||||||||||||
Add:
Broadstream arbitration provision |
13,000 | | | ||||||||||||
Add
(subtract): Loss (gain) related to VAT liability not charged to customers |
1,683 | 7,942 | (9,456 | ) | |||||||||||
Add: Net Loss
on extinguishment and modification of debt |
7,457 | 7,240 | | ||||||||||||
Add: Other
finance expenses |
4,562 | | | ||||||||||||
Subtract:
Non-recurring refund by former owner of litigation costs for legacy patent case |
| (2,685 | ) | | |||||||||||
Adjusted
EBITDA(2) |
$ | 105,396 | $ | 102,423 | $ | 91,392 |
(1) |
Net revenue for the year ended December 31, 2008 does not reflect $19.2 million due to a non-recurring purchase accounting adjustment that required the deferred revenue at the date of the acquisition of Various to be recorded at fair value. Management believes that it is appropriate to add back the deferred revenue adjustment because the average renewal rate of the subscriptions that were the basis for the deferred revenue was approximately 63%. The renewal rate on subscriptions that had already been renewed at least one time since the acquisition was 78%. Therefore, management believes that historical results of Various are reflective of our future results, including those revenues that were added back to adjusted EBITDA. |
(2) |
For the year ended December 31, 2008 and for the quarters ended March 31, 2008, June 30, 2008, September 30, 2008, March 31, 2009 and June 30, 2009, we failed to satisfy our EBITDA covenants with respect to our 2006 Notes and 2005 Notes because of operating performance. For the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 we failed to satisfy our EBITDA covenants with respect to the First Lien Senior Secured Notes and the Second Lien Subordinated Secured Notes due to the liability related to VAT not charged to customers and the purchase accounting adjustment due to the required reduction of the deferred revenue liability to fair value. On October 8, 2009, these events of default were cured. For the quarter ended September 30, 2009, we met our EBITDA covenants with respect to our 2006 Notes and 2005 Notes, each as amended. For the year ended December 31, 2009 and the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010, we met our EBITDA covenants with respect to the First Lien Senior Secured Notes and the Second Lien Subordinated Secured Notes. For more information regarding this and other events of default under our note agreements, see the section entitled Description of Indebtedness. The above mentioned debt was paid off with the proceeds of the New Financing. Our new note agreements contain material debt covenants based on our maintaining specified levels of EBITDA (as it is defined in the particular agreement as noted below). Specifically, we are required to maintain the following EBITDA levels for our outstanding debt: |
|
For each of the fiscal quarters ending through September 30,
2011, September 30, 2012 and September 30, 2013, our EBITDA (as defined) on a consolidated basis for the four consecutive fiscal quarters ending on
such date needs to be greater than $85 million, $90 million and $95 million, respectively. Our EBITDA for the four quarters ended December 31, 2010, as
defined in the relevant documents, was $105.4 million. |
We met our EBITDA covenant requirements for the quarter and year ended December 31, 2010. |
Quarter Ended |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, |
June 30, |
September 30, |
December 31, |
||||||||||||||||
(in thousands, except per share data) |
|||||||||||||||||||
2011 |
|||||||||||||||||||
Net revenue
|
$ | 83,520 | | | | ||||||||||||||
Gross profit
|
56,759 | | | | |||||||||||||||
Income from
operations |
19,675 | | | | |||||||||||||||
Net loss
|
(3,681 | ) | | | | ||||||||||||||
Net loss per
common share basic and diluted |
(0.27 | ) | | | | ||||||||||||||
2010 |
|||||||||||||||||||
Net revenue
|
$ | 86,205 | $ | 84,623 | $ | 86,663 | $ | 88,506 | |||||||||||
Gross profit
|
56,563 | 56,407 | 59,731 | 62,806 | |||||||||||||||
Income from
operations |
12,974 | 15,615 | 21,714 | 21,432 | |||||||||||||||
Net loss
|
(8,361 | ) | (4,987 | ) | (6,352 | ) | (23,453 | ) | |||||||||||
Net loss per
common share basic and diluted |
(0.60 | ) | (0.36 | ) | (0.46 | ) | (1.71 | ) | |||||||||||
2009 |
|||||||||||||||||||
Net revenue
|
$ | 84,125 | $ | 80,800 | $ | 79,514 | $ | 83,253 | |||||||||||
Gross profit
|
59,146 | 58,300 | 58,260 | 60,289 | |||||||||||||||
Income from
operations |
15,017 | 14,545 | 15,839 | 12,994 | |||||||||||||||
Net loss
|
(3,140 | ) | (17,651 | ) | (6,623 | ) | (13,802 | ) | |||||||||||
Net loss per
common share basic and diluted |
(0.23 | ) | (1.29 | ) | (0.48 | ) | (1.00 | ) |
|
For the last four quarters for any period ended through September 30, 2011, September 30, 2012 and September 30, 2013, our EBITDA on a consolidated basis for the year ended on such date needs to be greater than $85.0 million, $90.0 million and $95.0 million, respectively. Our EBITDA for the three months ended March 31, 2011 and the four quarters ended December 31, 2010 was $27.2 million and $105.4 million, respectively. |
Payments due by period |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total |
Less Than 1 Year |
1-3 Years |
3-5 Years |
More Than 5 Years |
|||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||
Long-term
Notes Payable, including current portion: |
|||||||||||||||||||||||
Old Senior
Secured Notes(1) |
$ | 290,885 | $ | 9,267 | $ | 281,618 | $ | | $ | | |||||||||||||
Old Cash Pay
Notes(1) |
13,140 | 419 | 12,721 | | |||||||||||||||||||
Old Non-Cash
Pay Notes(1) |
237,209 | | 237,209 | | | ||||||||||||||||||
Sellers
Agreements(2) |
2,250 | 1,000 | 1,250 | | | ||||||||||||||||||
Operating
Leases(3) |
11,900 | 2,088 | 6,296 | 1,476 | 2,040 | ||||||||||||||||||
Other(4) |
4,548 | 4,116 | 432 | | | ||||||||||||||||||
Total(5) |
$ | 559,932 | $ | 16,890 | $ | 539,526 | $ | 1,476 | $ | 2,040 |
(1) |
We are required to use the net cash proceeds from the IPO of our common stock to repay a portion of the Old Senior Secured Notes and Old Cash Pay Notes pro rata at a redemption price of 110%, plus accrued and unpaid interest. The First Lien and Old Cash Pay Notes mature on September 30, 2013. The Old Non-Cash Pay Notes mature on April 30, 2014. |
(2) |
Agreements with the former owners of Various recorded at present value of 2.3 million using discount rate of 15%. |
(3) |
Represents our minimum rental commitments for non-cancellable operating leases of office space. |
(4) |
Other commitments and obligations are comprised of contracts with software licensing, communications, computer hosting, and marketing service providers. These amounts totaled $4.1 million for less than one year and $0.4 million between one and three years. Contracts with other service providers are for 30 day terms or less. |
(5) |
Interest expense has been excluded from the Contractual Obligations table above. As of March 31, 2011, the Company had $291 million and $13 million of Old Senior Secured Notes and Old Cash Pay Notes, respectively, which would result in an annual cash interest expense obligation of $42.6 million before giving effect to required principal reductions from excess cash flow. No cash interest payments are payable in respect of Old Non-Cash Pay Notes. |
|
Social Networking. Approximately 69% and 70% of our total net revenues for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively, were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. The content on our social networking sites is generated by our users for our users. Our social networking technology platform is extremely scalable and requires limited incremental cost to add additional users or to create new websites catering to additional unique audiences. As a result, we have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. |
|
Live Interactive Video. Approximately 23% and 22% of our total net revenues for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively, were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. Users are charged on a per-minute basis to interact with models. We pay a percentage of the revenues we generate to the studios that employ the models. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. As a result, many studios and their models prefer our platform given our audience size and international reach, and our users prefer our platform as a result of the quality and variety of our models, the reliability of our network and the diversity of interactive features our platform provides. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. |
|
Visitors. Visitors are users who visit our websites but do not necessarily register. Visitors come to our websites through a number of channels, including by being directed from affiliate websites, keyword searches through standard search engines and by word of mouth. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. |
|
Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the three months ended March 31, 2011, we averaged more than 6.2 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. |
|
Members. Members are registrants who log into one of our websites and make use of our free products and services. Members are able to complete their personal profile and access our searchable database of members but do not have the same full-access rights as subscribers. For the three months ended March 31, 2011, we averaged more than 3.7 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. |
|
Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the three months ended March 31, 2011 and for the year ended December 31, 2010, we had a monthly average of approximately 1.0 million paying subscribers. |
|
Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the three months ended March 31, 2011, we averaged approximately 1.5 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 1.6 million purchased minutes by paid users each month. |
|
Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the three months ended March 31, 2011, our average monthly revenue per subscriber was $19.96. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. For more information regarding our revenue, see the sections entitled Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months Ended March 31, 2011 as Compared to the Three Months Ended March 31, 2010 and Year Ended December 31, 2010 as Compared to the Year Ended December 31, 2009. |
|
Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate of loss of subscribers, for the three months ended March 31, 2011 was approximately 16.0%. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. |
|
Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the three months ended March 31, 2011 was $44.20. Our CPGA for the year ended December 31, 2010 was $47.25. |
|
Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the three months ended March 31, 2011 was $79.40. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. |
|
Proprietary and Scalable Technology Platform. |
|
Paid Subscriber-Based Model. |
|
Large and Diverse User Base. |
|
Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. |
|
Convert Visitors, Registrants and Members into Subscribers or Paid Users. |
|
Create Additional Websites and Diversify Offerings. |
|
Expand into and Monetize Current Foreign Markets. |
|
Pursue Targeted Acquisitions. |
|
Generate Online Advertising Revenue. |
English |
German |
Portuguese |
||||||||
Chinese |
Italian |
Spanish |
||||||||
Dutch |
Japanese |
Swedish |
||||||||
French |
Korean |
Tagalog |
|
Blogs Blogs are a simple way to create a regularly updated home page where members can express themselves, learn about others, get more noticed and attract new friends. There are numerous blogs, grouped by subject. |
|
Chatrooms Chatrooms are areas where members can discuss a specific topic or join rooms established by region. A private chatroom lets a member host a chat party by invitation only. |
|
Contests Contests are a means of engaging our members by offering rewards for member-generated content. Examples include Best Holiday Greeting Card, Silly Photos with Clever Captions and many more. Prizes include upgraded memberships, free points, DVDs, T-shirts and mugs. |
|
Cupid Reports Once a member has described an ideal match, the member is automatically notified by e-mail when a person matching that description becomes a member. |
|
Friends Network A member can invite specified members into a personal group, keep track of them, share private photos and send personalized bulletins. |
|
Get Local Websites list local events that are geographically targeted according to a members location. |
|
Groups Groups are the place to find people who share interests and to develop new friendships. Members search for groups by topics, names or keywords and correspond, exchanging ideas. All groups have their own discussion boards and chatrooms, which facilitate communication and relationship building. Popular groups include Single again? Lets get together!, Dancing and Adventures, Romantic Getaways. |
|
Instant Messaging Two different types of our instant messaging system are available: a standard service and a faster Flash system, which offers extra options such as live video and sound. |
|
Loyalty Program Our point based loyalty program is designed to increase participation in our websites membership activities, such as participating in blogs and online magazines and creating video introductions as members are awarded points for participating in these activities. Points can be redeemed for other membership services such as upgraded memberships or more prominence of member profiles in online searches. |
|
Newsletters Our most popular websites periodically send newsletters to members, including photos and brief descriptions of other members, advice on enhancing ones profile to attract more responses from other members and practical tips on dating and relationships. |
|
Online Magazine At magazine pages, members can participate in many ways: read articles with expert advice on dating and relationships, enjoy fiction serials, submit their own articles, vote and comment on their reading, post original polls they have created, give advice and exchange opinions on various subjects, and view archives of articles. |
|
Photo, Video and Voice Sharing Members can post their photographs and create webcam video introductions and voice introductions of themselves, which generates member-to-member contact. |
|
Posting Profiles Members include personal details, such as city of residence and birthday, physical information, such as height and hair color, personal information, such as education, and occupation as well as other information. They describe themselves, specifying hobbies, the type of person they are seeking for a friend or for dating and can present up to 20 photographs. Members are encouraged to make their profiles as unique as possible by including personal details. |
|
Search Members can conduct searches for compatible members according to a substantial list of criteria, including gender, geographical proximity, availability of photos and interests. Search criteria can be saved for repeated use. |
Website |
Description |
Registrants Since Inception |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
AdultFriendFinder.com |
Our
most popular adult social networking and dating website. |
236,591,404 | ||||||||
Amigos.com
|
Spanish version of FriendFinder.com, translated into Spanish, Portuguese and English. |
55,109,975 | ||||||||
AsiaFriendFinder.com |
Chinese version of FriendFinder.com, features traditional and simplified Chinese character sets as well as an English
interface. |
44,985,286 | ||||||||
Cams.com
|
Adult
content live interactive video website where members pay per minute to chat with models who broadcast on the website via their
webcams. |
44,817,933 | ||||||||
FriendFinder.com
|
Website targeted toward singles looking for love, romance and marriage. Also includes many social networking aspects. |
17,212,701 | ||||||||
ALT.com
|
Alternative lifestyle personals website, catering to users with fetish, role-playing and other alternative sexuality
interests. |
15,637,287 | ||||||||
GetItOn.com
|
Adult
social networking and personals website where members from around the world log on to chat and view each other via their webcams. |
12,712,463 | ||||||||
OutPersonals.com
|
Adult-oriented dating website for gay men. |
7,776,113 | ||||||||
Penthouse.com
|
Premium content-based website with varying levels of access to Penthouse pictorials, articles, videos and live webcams shows with Penthouse
Pets. |
4,144,048 | ||||||||
GradFinder.com
|
Alumni directory where members can contact friends from elementary school through college. |
3,451,264 | ||||||||
IndianFriendFinder.com |
Indian version of FriendFinder.com, where users can narrow their searches by specific criteria, including language, religion, diet, and
caste. |
3,222,939 | ||||||||
BigChurch.com
|
Christian dating website with searchable bible passages and daily bible chapter e-mails. |
2,488,786 | ||||||||
SeniorFriendFinder.com |
Website targeted toward people over 40 years of age. |
2,327,118 | ||||||||
FrenchFriendFinder.com |
French version of FriendFinder.com, translated into French and English. |
2,027,569 | ||||||||
FilipinoFriendFinder.com |
Filipino version of FriendFinder.com, translated into Tagalog and English. |
2,003,680 | ||||||||
GermanFriendFinder.com |
German version of FriendFinder.com, translated into German and English. |
1,470,822 | ||||||||
FastCupid.com
|
Social networking and personals website for dating, romance and friendship. |
1,267,947 | ||||||||
Bondage.com
|
Worlds largest BDSM community |
1,257,195 | ||||||||
GayFriendFinder.com |
Dating website for gay men. |
1,196,729 | ||||||||
ItalianFriendFinder.com |
Italian version of FriendFinder.com, translated into Italian and English. |
1,148,536 |
Website |
Description |
Registrants Since Inception | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
KoreanFriendFinder.com |
Korean version of FriendFinder.com, translated into Korean and English. |
1,042,250 | ||||||||
Millionairemate.com |
Dating website targeted toward like-minded people who understand that intelligence, success and drive are key elements to
attraction. |
902,441 | ||||||||
JewishFriendFinder.com |
Jewish dating website. |
626,656 | ||||||||
stripshow.com
|
Low
cost cams site which offers group viewing |
388,166 | ||||||||
icams.com
|
Cams
site dedicated to amateur videos |
302,725 | ||||||||
AllPersonals.com
|
Allows users to join multiple top personal sites at one time |
300,704 | ||||||||
Slim.com
|
Health and wellness website. |
147,607 | ||||||||
HotBox.com
|
Premium content-based website that allows members to search a database of adult movies by favorite actor or by category of
movie. |
116,641 |
|
Notice. Users are provided meaningful notice about the information collected and used for internet related advertising. Users visiting our websites are provided notice via links to our privacy policies usually located on every one of our web pages and other methods of the types of individual information collected for advertising purposes, the technologies employed to collect such information, and how such information is used, including if applicable that other companies operate on the website and may collect such information. |
|
Choice. Users are provided with a choice on how certain information is used. We provide for an opt-out mechanism for e-mail advertising and members of our social networking websites have access to a control panel that allows them to make choices on the type of data that is stored on our servers or made available to the public or other members using our websites. |
|
Security. We strive to provide reasonable security for consumer data. Our security methods are based on the sensitivity of the data, the nature of the services provided, the types of risks related to such data and the reasonable protections available to us for practical implementation. We require our business service providers, such as credit card processors, to contractually maintain appropriate information security procedures based upon the sensitivity of the data and industry practices. We also ask registrants and members to provide their age and we review all member-generated content prior to its appearing on our websites. |
|
Responsiveness. Users have a readily accessible means to contact us to express concerns and complaints regarding privacy matters and we have a team associated with handling such concerns and complaints. Most of our web pages have a link directly to a web based form for providing complaints to us for processing. |
number of users |
number of registrants completing registration |
|||||
number of paid subscriptions |
number of messages sent |
|||||
number of images uploaded |
number of customer service requests |
|||||
number of blogs created |
number of videos uploaded and viewed |
referring link/domain |
referring affiliate/ad buy/traffic source |
|||||
country |
language |
|||||
gender |
email domain |
number of requests served |
time spent per request |
|||||
central processing unit utilization |
memory utilization |
|||||
disc utilization |
|
a percentage of revenue generated and collected; |
|
per registrant or member; and |
|
per subscriber. |
|
Social Networking Websites Unlike most other social networking websites which are free, we have a paid subscription-based business model, which we believe is a significant competitive advantage. Our adult-themed community websites from which the majority of our revenue and earnings are derived, including AdultFriendFinder.com, do not directly compete with other general interest social networking websites because of the adult nature of the content. Our general audience websites, which contribute substantially less of our revenue and earnings, compete with other companies offering social networking websites such as MySpace, Inc., Facebook, Inc. and Friendster, Inc. Our general audience websites provide a wide range of social networking tools including blogs, chatrooms and messaging similar to our competitors. We also believe that a significant advantage to our websites is the ease with which members meet other members who were not known to them prior to joining our network. |
|
Internet Personals Websites We compete with certain elements of the internet personals business provided by companies including Match.com, L.L.C., Yahoo!Personals, a website owned and operated by Yahoo! Inc., Windows Live Profile, run by Microsoft Corporation, eHarmony, Inc., Lavalife Corp., Plentyoffish Media Inc. and Spark Networks Limited websites, including jdate.com, americansingles.com and relationships.com, as well as companies offering adult-oriented internet personals websites such as Cytek Ltd., the operator of SexSearch.com, and Fling Incorporated. |
|
Adult Audience Websites We compete with many adult-oriented and live interactive video websites, such as RedTube.com, Pornhub.com, YouPorn.com, Playboy.com and LiveJasmin.com. These websites are largely distinguished by the quality of the video and the quantity and caliber of the video content. We continue to seek to be at the forefront of video technology by seeking to offer our users the best available experience. As adult content receives wider mainstream acceptance, we expect our websites to benefit from an increased volume of member-generated content that will enhance our large library of adult content which is frequently updated and refreshed. |
|
Adult Entertainment Providers We compete with other publishers of branded mens lifestyle magazines, such as Maxim and Playboy, and we compete with other producers of adult pictorial and video content, such as Playboy Enterprises Inc., tmc Content Group AG and Total Media Agency. |
Location/Principal Use |
Square Feet |
Lease Expiration Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sunnyvale,
California internet |
50,112 | October
31, 2015 |
||||||||
Los Angeles,
California entertainment |
35,400 | April
30, 2014 |
||||||||
New York, New
York entertainment |
16,431 | January
31, 2019 |
||||||||
Boca Raton,
Florida corporate administrative offices |
8,533 | December
31, 2015 |
||||||||
Las Vegas,
Nevada internet |
6,976 | December
31, 2012 |
(a) |
Consolidated EBITDA for the applicable Measurement Period, to |
(b) |
Annualized Consolidated Interest Expense; |
(a) |
any Person that is a Subsidiary on such Determination Date (or would become a Subsidiary on such Determination Date in connection with the transaction that requires the determination of the Consolidated Coverage Ratio) shall be deemed to have been a Subsidiary at all times during such Measurement Period, |
(b) |
any Person that is not a Subsidiary on such Determination Date (or would cease to be a Subsidiary on such Determination Date in connection with the transaction that requires the determination of the Consolidated Coverage Ratio) will be deemed not to have been a Subsidiary at any time during such Measurement Period, |
(c) |
if any Obligor shall have in any manner (i) acquired (including through an asset acquisition or the commencement of activities constituting such operating business), or (ii) disposed of (including by way of an Asset Sale or the termination or discontinuance of activities constituting such operating business) any operating business during such Measurement Period or after the end of such Measurement Period and on or prior to the Determination Date, such calculation shall be made on a pro forma basis in accordance with GAAP as if, in the case of an asset acquisition or the commencement of activities constituting such operating business, all such transactions had been consummated on the first day of such Measurement Period and, in the case of an Asset Sale or termination or discontinuance of activities constituting such operating business, all such transactions had been consummated prior to the first day of such Measurement Period; provided, however, that such pro forma adjustment shall not give effect to the Consolidated EBITDA of any acquired Person to the extent that such Persons net income would be excluded pursuant to clauses (a) through (g) of the definition of Consolidated Net Income; and |
(d) |
any Indebtedness incurred and proceeds thereof received and applied as a result of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio will be deemed to have been so incurred, received and applied on the first day of such Measurement Period. |
(a) |
the net income (or loss) of any Person that is not a Subsidiary of FFN except to the extent of the amount of dividends or other distributions actually paid to FFN or such Subsidiary by such Person during such period, |
(b) |
gains or losses on Asset Sales by FFN or its Subsidiaries, |
(c) |
all extraordinary gains and extraordinary losses, including such gains and losses derived from Extraordinary Receipts, |
(d) |
the cumulative effect of changes in accounting principles, |
(e) |
any net income of any Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, by contract, operation of law, pursuant to its charter or otherwise on the payment of dividends or the making of distributions by such Subsidiary to such Person except that: |
(i) |
such Persons equity in the net income of any such Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been paid or distributed during such period to such Person as a dividend or other distribution (provided that such ability is not due to a waiver of such restriction), and |
(ii) |
such Persons equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income regardless of any such restriction, |
(f) |
in the case of a successor to such Person by consolidation or merger or as a transferee of such Persons assets, any net income or loss of the successor corporation prior to such consolidation, merger or transfer of assets; and |
(g) |
the tax effect of any of the items described in clauses (a) through (f) above. |
(a) |
the aggregate amounts payable in connection with, and other consideration for (in each case, including all transaction costs and all Indebtedness, liabilities and Contingent Obligations incurred or assumed in connection therewith or otherwise reflected in a consolidated balance sheet of any Obligor and the proposed acquisition target and including any earnout or similar payment obligations), any acquisition, whether in one transaction or a series of related transactions, shall not exceed $20,000,000; |
(b) |
if such acquisition is of Capital Stock in any Person, the acquisition shall be of 100% of the Capital Stock of such Person; |
(c) |
the Holders (including Holders of Conru/Mapstead Definitive Securities) shall have received (i) reasonable advance notice of such acquisition including a reasonably detailed description thereof at least 15 days prior to the consummation of such acquisition, (ii) substantially final drafts of the acquisition agreement and related documents at least 5 Business Days prior to the consummation of such acquisition and (iii) on or prior to the date of such acquisition, copies of the final acquisition agreement and related documents certified by an Authorized Officer as being true, correct and complete copies thereof and any other information reasonably requested by the Required Holders; provided, however, no Obligor shall be required to comply with this clause (c) upon the consummation of a Qualified Initial Public Offering or if the value of the acquisition, whether in one transaction or a series of related transactions, and calculated in accordance with clause (a) above does not exceed $500,000; and |
(d) |
as of the date of consummation of such acquisition and after giving effect to all transactions to occur on such date as part of such acquisition, (i) the representations and warranties set forth in each Note Document shall be true and correct in all material respects on and as of such date or, to the extent such representations and warranties expressly relate to an earlier date, on and as of such earlier date and (ii) no Default or Event of Default shall be continuing. |
|
Minimum EBITDA. We shall not permit our Consolidated EBITDA to be less than the amount specified for the applicable period below: |
Period |
Minimum Consolidated EBITDA |
|||||
---|---|---|---|---|---|---|
Four Fiscal
Quarters Ending: |
||||||
December 31,
2010 |
$ | 85,000,000 | ||||
March 31, 2011
|
$ | 85,000,000 | ||||
June 30, 2011
|
$ | 85,000,000 | ||||
September 30,
2011 |
$ | 85,000,000 |
Period |
Minimum Consolidated EBITDA | |||||
---|---|---|---|---|---|---|
December 31,
2011 |
$ | 90,000,000 | ||||
March 31, 2012
|
$ | 90,000,000 | ||||
June 30, 2012
|
$ | 90,000,000 | ||||
September 30,
2012 |
$ | 90,000,000 | ||||
December 31,
2012 |
$ | 95,000,000 | ||||
March 31, 2013
|
$ | 95,000,000 | ||||
June 30, 2013
|
$ | 95,000,000 | ||||
September 30,
2013 |
$ | 95,000,000 |
|
Minimum Liquidity. Our unrestricted cash that is on deposit in accounts that are subject to account control agreements in favor of the Trustee shall not be less than $10,000,000 at any time. |
|
Maximum Senior Leverage. Our ratio of outstanding principal under the Senior Secured Notes to Consolidated EBITDA shall not be greater than the amount specified for the applicable period below: |
Four Fiscal Quarters Ending: |
Senior Leverage Ratio |
|||||
---|---|---|---|---|---|---|
December 31,
2010 |
3.5:1.0 | |||||
March 31, 2011
|
3.5:1.0 | |||||
June 30, 2011
|
3.3:1.0 | |||||
September 30,
2011 |
3.3:1.0 | |||||
December 31,
2011 |
3.0:1.0 | |||||
March 31, 2012
|
3.0:1.0 | |||||
June 30, 2012
|
2.8:1.0 | |||||
September 30,
2012 |
2.8:1.0 | |||||
December 31,
2012 |
2.5:1.0 | |||||
March 31, 2013
|
2.5:1.0 | |||||
June 30, 2013
|
2.2:1.0 | |||||
September 30,
2013 |
2.2:1.0 |
|
Maximum Total Leverage. Our ratio of total indebtedness to Consolidated EBITDA shall not be greater than the amount specified for the applicable period below: |
Four Fiscal Quarters Ending: |
Total Leverage Ratio |
|||||
---|---|---|---|---|---|---|
December 31,
2010 |
6.5:1.0 | |||||
March 31, 2011
|
6.5:1.0 | |||||
June 30, 2011
|
6.5:1.0 | |||||
September 30,
2011 |
6.5:1.0 | |||||
December 31,
2011 |
6.1:1.0 | |||||
March 31, 2012
|
6.1:1.0 | |||||
June 30, 2012
|
6.1:1.0 | |||||
September 30,
2012 |
6.1:1.0 | |||||
December 31,
2012 |
5.7:1.0 | |||||
March 31, 2013
|
5.7:1.0 | |||||
June 30, 2013
|
5.7:1.0 | |||||
September 30,
2013 |
5.7:1.0 |
|
Minimum Coverage Ratio. We shall not permit our ratio of Consolidated EBITDA to Annualized Consolidated Interest Expense to be less than the amount specified for the applicable period below: |
Period |
Consolidated Coverage Ratio |
|||||
---|---|---|---|---|---|---|
Four Fiscal
Quarters Ending: |
||||||
December 31,
2010 |
1.9:1.0 | |||||
March 31, 2011
|
1.9:1.0 | |||||
June 30, 2011
|
2.0:1.0 | |||||
September 30,
2011 |
2.0:1.0 | |||||
December 31,
2011 |
2.2:1.0 | |||||
March 31, 2012
|
2.2:1.0 | |||||
June 30, 2012
|
2.3:1.0 | |||||
September 30,
2012 |
2.3:1.0 | |||||
December 31,
2012 |
2.7:1.0 | |||||
March 31, 2013
|
2.7:1.0 | |||||
June 30, 2013
|
2.9:1.0 | |||||
September 30,
2013 |
2.9:1.0 |
|
Maximum Operating Lease Obligations. Our operating lease obligations shall not, in the aggregate, exceed $4,000,000 annually. |
|
Maximum Capitalized Lease Obligations. We shall not incur new capitalized lease obligations that, in the aggregate, exceed $800,000 annually; provided, however the amortization of the capitalized lease obligations shall count against the $4,000,000 basket for operating lease obligations. |
|
Limitations on Loans, Advances, Capital Expenditures and Investments. None of us shall make any loan, advance, guarantee, other extension of credit, capital contribution or investment, except for certain specified exceptions, including, without limitation, (1) listed existing investments, (2) loans and advances in the ordinary course of business by any Issuer to any wholly owned subsidiary and by any such subsidiary to any Issuer, (3) any acquisition not exceeding $20,000,000 and otherwise satisfying specified conditions, and (4) specified permitted investments, including, without limitation, investment in any Issuer or a wholly owned subsidiary of any Issuer, aggregate investments in any Person not exceeding $1,000,000 and investments in foreign subsidiaries up to $100,000 in the aggregate. |
|
Limitations on Indebtedness and Liens. None of us shall create, assume, guarantee or allow to exist any lien or indebtedness, except for Permitted Liens and Permitted Indebtedness, including, without limitation, listed existing indebtedness and liens, hedging agreements for up to $5,000,000, liens imposed by law in the ordinary course of business and purchase money liens. |
|
Limitations on Dividends and other Restricted Payments. None of us shall make any of various specified restricted payments, including, without limitation, dividends or other distributions, redemptions or sinking fund payments, compensation to any affiliate or employee, and payments or prepayments on subordinated debt, all subject to certain described exceptions, including, without limitation, in-kind interest payments on the Non-Cash Pay Notes and certain specified payments on the Cash Pay Notes. |
|
Limitations on Transactions with Affiliates. None of us shall enter into any transaction with or for the benefit of any affiliate, except for certain specified transactions, including, without limitation, those in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of our business, for fair consideration and on terms no less favorable than would be obtainable in a comparable arms length transaction with a non-affiliated Person. |
|
Limitations on Sale-Leaseback Transactions. None of us shall incur any obligations as lessee in connection with any sale and leaseback transaction. |
|
Limitations on Consolidations, Mergers, Acquisitions and Dispositions of Assets. None of us shall liquidate or dissolve, or merge or consolidate with any Person, or conduct any sale with respect to our business, property or assets, or purchase or otherwise acquire the assets of any Person, except for (1) assets |
acquired in the ordinary course of business, (2) mergers and consolidations between FFN and its wholly owned subsidiaries satisfying certain conditions, (3) specified permitted acquisitions, (4) dispositions of obsolete or worn-out equipment in the ordinary course of business, and (5) liquidation or dissolution of any subsidiary that has no material assets or liabilities. |
|
Reporting requirements. The Issuers are required to file with the Securities and Exchange Commission or make publicly available all information required under Rule 144(c) of the Securities Act of 1933 and comply with Section 314 of the Trust Indenture Act of 1939. In addition, we are required to provide the Trustee and the holders of the New Notes with (1) periodic compliance certificates, (2) notice of any change of name, structure or jurisdiction of organization for any of us, (3) notice of default, material adverse change or material action, suit or proceeding, (4) copies of all information which any of us provides to holders of its debt or securities or to any securities exchange, and (5) notice of any material development with respect to value added tax liability. |
|
restricting dividends on the common stock; |
|
diluting the voting power of the common stock; |
|
impairing the liquidation rights of the common stock; or |
|
delaying or preventing a change in control of us without further action by the stockholders. |
|
acquisition of us by means of a tender offer; |
|
acquisition of us by means of a proxy contest or otherwise; or |
|
removal of our incumbent officers and directors. |
FriendFinder
Networks Inc. and Subsidiaries |
||||||
Unaudited
Financial Statements as of March 31, 2011 and the Three Months Ended March 31, 2011 and 2010 |
||||||
Consolidated
Balance Sheets as of March 31, 2011 and December 31, 2010 (Audited) |
F-2 | |||||
Consolidated
Statements of Operations for the Three Months Ended March 31, 2011 and 2010 |
F-3 | |||||
Consolidated
Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 |
F-4 | |||||
Notes to
Consolidated Financial Statements |
F-5 | |||||
FriendFinder
Networks Inc. and Subsidiaries |
||||||
Audited
Financial Statements as of December 31, 2010 and 2009 and the Three Years ended December 31, 2010, 2009 and 2008 |
||||||
Report of
Independent Registered Public Accounting Firm |
F-20 | |||||
Consolidated
Balance Sheets as of December 31, 2010 and 2009 |
F-21 | |||||
Consolidated
Statements of Operations for the years ended December 31, 2010, 2009 and 2008 |
F-22 | |||||
Consolidated
Statements of Changes in Redeemable Preferred Stock and Stockholders Deficiency |
F-23 | |||||
Consolidated
Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 |
F-24 | |||||
Notes to
Consolidated Financial Statements |
F-26 |
March 31, 2011 |
December 31, 2010 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
(unaudited) |
||||||||||
ASSETS |
||||||||||
Current
assets: |
||||||||||
Cash
|
$ | 27,913 | $ | 34,585 | ||||||
Restricted
cash |
12,966 | 7,385 | ||||||||
Accounts
receivable, less allowance for doubtful accounts of $2,244 and $2,236, respectively |
9,418 | 9,886 | ||||||||
Inventories
|
902 | 1,028 | ||||||||
Prepaid
expenses |
4,296 | 4,534 | ||||||||
Deferred tax
asset |
5,522 | 5,522 | ||||||||
Total current
assets |
61,017 | 62,940 | ||||||||
Film costs, net
|
4,155 | 4,312 | ||||||||
Property and
equipment, net |
7,005 | 6,666 | ||||||||
Goodwill
|
326,540 | 326,540 | ||||||||
Domain names
|
55,897 | 55,890 | ||||||||
Trademarks
|
9,213 | 9,213 | ||||||||
Other
intangible assets, net |
25,211 | 29,134 | ||||||||
Unamortized
debt costs |
20,475 | 22,336 | ||||||||
Deferred
offering costs |
13,482 | 13,267 | ||||||||
Other assets
|
2,650 | 2,519 | ||||||||
$ | 525,645 | $ | 532,817 | |||||||
LIABILITIES |
||||||||||
Current
liabilities: |
||||||||||
Current
installment of long-term debt, net of unamortized discount of $438 and $744, respectively |
$ | 10,248 | $ | 15,009 | ||||||
Accounts
payable |
8,001 | 9,481 | ||||||||
Accrued
expenses and other liabilities |
75,978 | 65,420 | ||||||||
Deferred
revenue |
48,366 | 48,302 | ||||||||
Total current
liabilities |
142,593 | 138,212 | ||||||||
Deferred tax
liability |
30,275 | 30,275 | ||||||||
Long-term debt,
net of unamortized discount of $29,850 and $31,935, respectively |
502,950 | 510,551 | ||||||||
Liability
related to warrants |
3,288 | 3,559 | ||||||||
Total
liabilities |
679,106 | 682,597 | ||||||||
Contingencies
(Note 13) |
||||||||||
STOCKHOLDERS DEFICIENCY |
||||||||||
Preferred
stock, $0.001 par value authorized 22,500,000 shares; issued and outstanding 10,211,556 shares in 2011 and 2010, |
||||||||||
Series A
Convertible Preferred Stock, $0.001 per share authorized 2,500,000 shares; issued and outstanding 1,766,703 shares (liquidation preference $21,000) |
2 | 2 | ||||||||
Series B
Convertible Preferred Stock, $0.001 per share authorized 10,000,000 shares; issued and outstanding 8,444,853 shares (liquidation preference $5,000) |
8 | 8 | ||||||||
Common stock,
$0.001 par value authorized 125,000,000 shares in 2011 and 2010 |
||||||||||
Common stock
voting authorized 112,500,000 shares, issued and outstanding 6,517,746 shares in 2011 and 2010, |
6 | 6 | ||||||||
Series B
common stock non-voting authorized 12,500,000 shares; issued and outstanding 1,839,825 shares in 2011 and 2010 |
2 | 2 | ||||||||
Capital in
excess of par value |
80,823 | 80,823 | ||||||||
Accumulated
deficit |
(234,302 | ) | (230,621 | ) | ||||||
Total
stockholders deficiency |
(153,461 | ) | (149,780 | ) | ||||||
$ | 525,645 | $ | 532,817 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Net
revenue |
|||||||||||
Service
|
$ | 78,655 | $ | 81,171 | |||||||
Product
|
4,865 | 5,034 | |||||||||
Total
|
83,520 | 86,205 | |||||||||
Cost of
revenue |
|||||||||||
Service
|
23,098 | 26,386 | |||||||||
Product
|
3,663 | 3,256 | |||||||||
Total
|
26,761 | 29,642 | |||||||||
Gross profit
|
56,759 | 56,563 | |||||||||
Operating
expenses: |
|||||||||||
Product
development |
3,907 | 2,911 | |||||||||
Selling and
marketing |
7,341 | 12,601 | |||||||||
General and
administrative |
20,691 | 20,605 | |||||||||
Amortization
of acquired intangibles and software |
3,923 | 6,264 | |||||||||
Depreciation
and other amortization |
1,222 | 1,208 | |||||||||
Total
operating expenses |
37,084 | 43,589 | |||||||||
Income from
operations |
19,675 | 12,974 | |||||||||
Interest
expense |
(21,950 | ) | (22,837 | ) | |||||||
Interest
related to VAT liability not charged to customers |
(500 | ) | (557 | ) | |||||||
Foreign
exchange (loss) gain, principally related to VAT liability not charged to customers |
(2,236 | ) | 2,039 | ||||||||
Gain on
liability related to warrants |
272 | 43 | |||||||||
Other income
(expense), net |
1,082 | (23 | ) | ||||||||
Loss before
income tax provision (benefit) |
(3,657 | ) | (8,361 | ) | |||||||
Income tax
provision (benefit) |
24 | (92 | ) | ||||||||
Net
loss |
$ | (3,681 | ) | $ | (8,269 | ) | |||||
Net loss
per common share basic and diluted |
$ | (0.27 | ) | $ | (0.60 | ) | |||||
Weighted
average shares outstanding basic and diluted |
13,735 | 13,735 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Cash flows
from operating activities: |
|||||||||||
Net loss
|
$ | (3,681 | ) | $ | (8,269 | ) | |||||
Adjustments
to reconcile net loss to net cash provided by operating activities: |
|||||||||||
Deferred
income tax benefit |
(92 | ) | |||||||||
Amortization
of acquired intangibles and software |
| 6,264 | |||||||||
Depreciation
and other amortization |
1,222 | 1,208 | |||||||||
Amortization
of film costs |
756 | 957 | |||||||||
Non-cash
interest, including amortization of discount and debt costs |
10,777 | 15,835 | |||||||||
Provision for
doubtful accounts |
44 | 67 | |||||||||
(Gain) on
warrant liability |
(271 | ) | (42 | ) | |||||||
Other
|
193 | 100 | |||||||||
Changes in
operating assets and liabilities: |
|||||||||||
Restricted
cash |
(5,581 | ) | (429 | ) | |||||||
Accounts
receivable |
424 | 3,160 | |||||||||
Inventories
|
126 | 124 | |||||||||
Prepaid
expenses |
238 | (594 | ) | ||||||||
Film costs
|
(599 | ) | (1,009 | ) | |||||||
Deferred
offering costs |
(215 | ) | (2,958 | ) | |||||||
Other assets
|
(131 | ) | (980 | ) | |||||||
Accounts
payable |
(1,480 | ) | 430 | ||||||||
Accrued
expenses and other liabilities |
3,738 | (8,330 | ) | ||||||||
Deferred
revenue |
64 | 3,844 | |||||||||
Net cash
provided by operating activities |
9,547 | 9,286 | |||||||||
Cash flows
from investing activities: |
|||||||||||
Cash received
from escrow in connection with acquisition |
| 824 | |||||||||
Purchases of
property and equipment |
(1,754 | ) | (843 | ) | |||||||
Other
|
(7 | ) | (79 | ) | |||||||
Net cash
(used in) investing activities |
(1,761 | ) | (98 | ) | |||||||
Cash flows
from financing activities: |
|||||||||||
Recovery of
debt issuance costs |
295 | | |||||||||
Repayment of
long-term debt |
(14,753 | ) | (7,737 | ) | |||||||
Net cash
(used in) financing activities |
(14,458 | ) | (7,737 | ) | |||||||
Net
(decrease) increase in cash |
(6,672 | ) | 1,451 | ||||||||
Cash at
beginning of period |
34,585 | 22,600 | |||||||||
Cash at
end of period |
$ | 27,913 | $ | 24,051 | |||||||
Supplemental disclosures of cash flow information: |
|||||||||||
Interest paid
|
$ | 11,172 | $ | 10,726 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Common Stock
|
6,518 | 6,518 | |||||||||
Series B
common stock |
1,840 | 1,840 | |||||||||
Common stock
purchase warrants |
5,377 | 5,377 | |||||||||
13,735 | 13,735 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Series A
Convertible Preferred Stock |
2,000 | 2,000 | |||||||||
Series B
Convertible Preferred Stock |
8,445 | 8,445 | |||||||||
Warrants
|
502 | 502 | |||||||||
Total common
shares issuable |
10,947 | 10,947 |
March 31, 2011 |
December 31, 2010 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Principal |
Unamortized Discount |
Principal |
Unamortized Discount |
||||||||||||||||
Debt issued
by FriendFinder and INI on October 27, 2010(a): |
|||||||||||||||||||
First Lien
Notes due 20112013, including principal of $102,487 and $112,020 ($99,235 and $108,154 net of discount) respectively, issued to Companys
stockholders (b)(e) |
290,885 | 9,678 | 305,000 | 10,974 | |||||||||||||||
Cash Pay
Second Lien Notes due 2013 issued to entities controlled by stockholders who are officers and directors (c)(e) |
13,140 | 238 | 13,778 | 262 | |||||||||||||||
Non-Cash Pay
Second Lien Notes, due 2014, including principal of $233,191 ($213,534 and $212,560 net of discount) issued to Company stockholders , including $$45,310 ($41,491 and $41,302 net of discount) to entities controlled by certain officers and directors respectively (d)(e) |
237,209 | 19,996 | 237,211 | 20,986 | |||||||||||||||
Other (f)
|
2,250 | 374 | 2,250 | 457 | |||||||||||||||
543,484 | 30,286 | 558,239 | 32,679 | ||||||||||||||||
Less
unamortized discount |
(30,286 | ) | (32,679 | ) | |||||||||||||||
Less current
installment of long-term debt, net of unamortized discount of $438 and $744, respectively |
(10,248 | ) | (15,009 | ) | |||||||||||||||
$ | 502,950 | $ | 510,551 |
(a) |
On October 27, 2010, $305,000,000 principal amount of 14% Senior Secured Notes due 2013 were co-issued by FriendFinder and its wholly-owned subsidiary Interactive Network, Inc (INI), the parent of Various, (the New First Lien Notes) of which (a) $200,185,000 was exchanged for $130,485,000 outstanding principal amount of the former First Lien Notes, $49,361,000 outstanding principal amount of the former Second Lien Notes and $14,551,000 outstanding principal amount of the former Senior Secured Notes, (b) $91,400,000 was issued for cash proceeds of $89,572,000 before payment of related fees and expenses of $5,834,000 and (c) $13,415,000 was issued to pay commitment fees to the holders of the former First and Second Lien Notes. Cash of $86,237,000 was used to redeem $36,608,000 outstanding principal amount of the former First Lien Notes at 102% of principal, $30,639,000 outstanding principal amount of former Second Lien Notes (representing the remaining outstanding principal amounts of First and Second Lien Notes) and $18,258,000 |
outstanding principal amount of Senior Secured Notes. Cash was also used to pay $4,132,000 of accrued interest on the exchanged and redeemed notes, an $825,000 redemption premium on certain exchanged First Lien Notes and $435,000 in commitment fees to certain noteholders. |
(b) |
The New First Lien Notes, of which approximately $112,020,000 principal amount were issued to the Companys stockholders, including $7,460,000 to entities controlled by certain officers and directors, were issued with an original issue discount of $6,100,000, or 2.0%. The notes mature on September 30, 2013 and accrue interest at a rate per annum equal to 14.0%. Interest on the notes is payable quarterly on March 31, June 30, September 30 and December 31 of each year. Principal on the New First Lien Notes is payable quarterly to the extent of 75% of Excess Cash Flow, as defined, at 102% of principal, subject to pro-rata sharing with the Cash Pay Second Lien Notes. Excess Cash Flow principal of $23.4 million was paid on the New First |
Lien Notes in the quarters prior to our IPO in May 2011, of which $14.1 million was paid in the quarter ended March 31, 2011 and $9.3 million was paid in May 2011. The New First Lien Notes are guaranteed by domestic subsidiaries of FriendFinder and INI and are collateralized by a first-priority lien on all of the Companys assets as well as a pledge of stock of subsidiaries. The New First Lien Notes are redeemable prior to maturity at the option of the Company, in whole but not in part, at 110% of principal, plus accrued and unpaid interest. In the event of an IPO, the net proceeds must be used to redeem the New First Lien Notes and Cash Pay Second Lien Notes pro-rata at 110% of principal plus accrued and unpaid interest. In addition, noteholders have the option of requiring the Company to repay the New First Lien Notes and Cash Pay Second Lien Notes in full upon a Change of Control, as defined, at 110% of principal. The Company shall also repay the New First Lien Notes and, in certain circumstances, the Cash Pay Second Lien Notes, with proceeds received from any debt or equity financing (including a secondary offering) and asset sales of more than $25 million at 110% of principal, and with proceeds from other asset sales, insurance claims, condemnation and other extraordinary cash receipts at principal, subject to certain exceptions. |
(c) |
The Cash Pay Second Lien Notes, all of which were issued to entities controlled by stockholders who are also officers and directors, were issued with an original issue discount of $276,000, or 2%, mature on September 30, 2013 and have identical terms to those of the New First Lien Notes, except as to matters regarding collateral, subordination, enforcement and voting. Excess Cash Flow principal of $1.1 million was paid on the Cash Pay Second Lien Notes in the quarters prior to our IPO in May 2011, of which $0.6 million was paid in the quarter ended March 31, 2011 and $0.5 million was paid in May 2011. The Cash Pay Second Lien Notes are collateralized by a fully subordinated second lien on substantially all of the assets of the Company, pari passu with the Non-Cash Pay Second Lien Notes, and will vote with the New First Lien Notes on a dollar for dollar basis on all matters except for matters relating to collateral, liens and enforcement of rights and remedies. As to such matters, the Cash Pay Second Lien Notes will vote with the Non-Cash Pay Second Lien Notes. |
(d) |
The Non-Cash Pay Second Lien Notes, of which approximately $228,519,000 principal amount were issued to the Companys stockholders, including $44,402,000 to entities controlled by certain officers and directors, mature on April 30, 2014 and bear interest at 11.5%, payable semi-annually on June 30 and December 31, which may be paid in additional notes at the Companys option. While the New First Lien Notes are in place, interest must be paid with additional notes. During 2010, interest amounting to $4,752,000 was paid through the issuance of additional Non-Cash Pay Second Lien Notes. The Non-Cash Pay Second Lien Notes are guaranteed by the domestic subsidiaries of FriendFinder and INI and collateralized by a second priority lien on all of the Companys assets and a pledge of the stock of subsidiaries; however, such security interest is subordinate to the prior payment of the New First Lien Notes. The Non-Cash Pay Second Lien Notes are redeemable, at the option of the Company, in whole but not in part, at 100% of principal plus accrued and unpaid interest. Upon the payment in full of the New First Lien Notes, principal on the Non-Cash Pay Second Lien Notes is payable quarterly to the extent of 75% of Excess Cash Flow, as defined, at 102% of principal subject to pro-rata sharing with the Cash Pay Second Lien Notes. Upon an IPO, if the New First Lien Notes are paid in full, the net proceeds must be used to redeem the Non-Cash Pay Second Lien Notes and Cash Pay Second Lien Notes on a pro-rata basis at 110% of principal plus accrued and unpaid interest. In addition, noteholders have the option of requiring the Company to repay the Non-Cash Pay Second Lien Notes in full upon a Change of Control, as defined, at 110% of principal plus accrued and unpaid interest. If the New First Lien Notes are paid in full, the Company shall repay the Non-Cash Pay Second Lien Notes and Cash Pay Second Lien Notes on a pro-rata basis with proceeds received from any debt or equity financing (including a secondary offering), and asset sales of more than $25 million at 110% of principal plus accrued and unpaid interest and with proceeds of other asset sales, insurance claims, condemnation and other extraordinary cash receipts at principal, subject to certain exceptions. The Non-Cash Pay Second Lien Notes will be convertible into shares of the Companys common stock upon or after an IPO. The conversion price of the notes will be |
at the per share offering price for the Companys common stock upon consummation of the IPO provided that such conversion option shall be limited to approximately 21.1% of the Companys fully diluted equity. |
(e) |
The New First Lien Notes, the Cash Pay Second Lien Notes and Non-Cash Pay Second Lien Notes (1) require the Company to maintain minimum specified levels of EBITDA and liquidity and financial ratios, including debt and coverage ratios, all as defined; (2) provides for certain limitations including limits on indebtedness, lease obligations, VAT payments and investments; and (3) prohibits dividends and other payments with respect to the Companys equity securities. |
(f) |
In connection with the restructuring of Subordinated Convertible Notes issued in connection with the acquisition of Various, the Company agreed to pay $3.2 million of fees to the former owners of Various of which $1 million is payable in each of 2010 through 2012 and $250,000 is payable in the first quarter of 2013. The obligation was recorded at a present value of $2.3 million using a discount rate of 15%. |
Twelve months
ending March 31, |
||||||
2012
|
10,686 | |||||
2013
|
1,000 | |||||
2014
|
294,589 | |||||
2015
|
237,209 | |||||
Total
|
$ | 543,484 |
Expiration Date(1) |
Exercise Price |
Number of Shares |
Number of Shares as Adjusted Based on IPO(2) (3) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
August 2015
|
$ | 6.20 | 476,573 | 457,843 | ||||||||||
August 2015
|
$ | 10.25 | 25,090 | 24,104 | ||||||||||
August 2015
|
$ | 0.0002 | 243,287 | 233,726 | ||||||||||
August 2016
|
$ | 0.0002 | 441,474 | 424,120 | ||||||||||
December 2017
|
$ | 0.0002 | 4,692,996 | 5,188,509 | ||||||||||
5,879,420 | 6,328,302 |
(1) |
Except for warrants to purchase 1,373,859 shares of common stock at $0.0002 per share which were amended on October 8, 2009, warrants terminate if not exercised concurrently with the consummation of an IPO, if earlier than their stated expiration date. |
(2) |
The number of shares of common stock for which each warrant is exercisable, except for warrants exercisable at $10.25, were decreased immediately prior to the closing of the IPO as the Company has issued prior to such IPO fewer than 1,343,997 shares or options pursuant to an equity incentive or benefit plan. The adjustment provision for warrants exercisable at $10.25 was triggered as the Company had issued fewer than 588,890 shares or options pursuant to an equity incentive or benefit plan prior to the closing of the IPO. |
(3) |
With respect to warrants to acquire 2,441,989 common shares at $0.0002 per share, in order to maintain the warrant holders percentage of fully diluted equity, the number of shares of common stock for which such warrants were exercisable was increased by 680,034 immediately prior to the closing of the IPO based on the number of shares of common stock into which the Non-Cash Pay Second Lien Notes which were exchanged for Subordinated Convertible Notes issued to selling stockholders in the acquisition of Various, were convertible based on the IPO price. |
For the Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Current: |
|||||||||||
Federal
|
$ | | $ | 29 | |||||||
State
|
24 | 118 | |||||||||
$ | 24 | $ | 147 | ||||||||
Deferred: |
|||||||||||
Federal
|
$ | | $ | (208 | ) | ||||||
State
|
| (31 | ) | ||||||||
| (239 | ) | |||||||||
Total tax
provision (benefit) |
$ | 24 | $ | (92 | ) |
March 31, 2011 |
December 31, 2010 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Assets: |
||||||||||
Internet
|
$ | 498,228 | $ | 506,297 | ||||||
Entertainment
|
17,814 | 22,399 | ||||||||
Unallocated
corporate |
9,603 | 4,121 | ||||||||
Total
|
$ | 525,645 | $ | 532,817 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Net revenue
from external customers: |
|||||||||||
Internet
|
$ | 78,134 | $ | 80,476 | |||||||
Entertainment
|
5,386 | 5,729 | |||||||||
Total
|
$ | 83,520 | $ | 86,205 | |||||||
Income from
operations: |
|||||||||||
Internet
|
$ | 20,971 | $ | 13,535 | |||||||
Entertainment
|
66 | 1,036 | |||||||||
Total segment
income from operations |
21,037 | 14,571 | |||||||||
Unallocated
corporate |
(1,362 | ) | (1,597 | ) | |||||||
Total
|
$ | 19,675 | $ | 12,974 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Internet
|
|||||||||||
Subscription
based service |
$ | 58,911 | $ | 62,288 | |||||||
Pay by usage
service |
19,223 | 18,164 | |||||||||
Advertising
|
| 24 | |||||||||
78,134 | 80,476 | ||||||||||
Entertainment |
|||||||||||
Magazine
|
2,723 | 3,299 | |||||||||
Video
entertainment |
2,143 | 1,735 | |||||||||
Licensing
|
520 | 695 | |||||||||
5,386 | 5,729 | ||||||||||
Total
revenues |
$ | 83,520 | $ | 86,205 |
Three Months Ended March 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
2010 |
||||||||||
Net
revenue: |
|||||||||||
United States
|
$ | 44,812 | $ | 44,851 | |||||||
Europe
|
22,533 | 26,635 | |||||||||
Canada
|
4,308 | 4,176 | |||||||||
Other
|
11,867 | 10,543 | |||||||||
Total
|
$ | 83,520 | $ | 86,205 |
(a) |
On December 28, 2007, Broadstream Capital Partners, Inc. (Broadstream) filed a lawsuit against the Company in the State Superior Court of California, County of Los Angeles, Central District, and the Company subsequently removed the case to the Federal District Court for the Central District of California. The complaint alleged breach of contract, breach of covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud arising out of a document titled Non-Disclosure Agreement. The complaint alleged, among other things, that Broadstream entered into a Non-Disclosure Agreement with the Company that required Broadstreams prior written consent for the Company to knowingly acquire Various or any of its subsidiaries and that such consent was not obtained. On April 7, 2008, Broadstream filed its First Amended Complaint, which added a new cause of action for intentional interference with prospective economic advantage. On February 20, 2009, Broadstream filed its Third Amended Complaint, which dismisses the allegations of breach of fiduciary duty and constructive fraud. The complaint seeks damages which plaintiff alleges to be in excess of $20 million, plus interest, costs and punitive damages. Broadstream later asserted up to $557 million in damages plus punitive damages. On July 20, 2009, the Company entered into an agreement with Broadstream under which, without admitting liability, the Company agreed to pay Broadstream $3.0 million in $1.0 million installments due no later than July 2009, January 2010 and July 2010. Such payments were timely made. The agreement provides that upon the earlier of twelve months after the Company has securities registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, or eighteen months after the effective date of the agreement, but not later than twelve months following such earlier date, Broadstream must choose either to (i) refile its complaint in Federal District Court provided that it first repay the Company the $3.0 million or (ii) demand arbitration. If Broadstream elects arbitration, the parties have agreed that there will be an arbitration award to Broadstream of at least $10.0 million but not more than $47.0 million. Giving consideration of the limitation of the arbitration award in relation to damages sought in litigation, management had not concluded that it was probable that Broadstream would demand arbitration. Accordingly, no loss had been provided for as a result of entering into the agreement. In the event that Broadstream elected arbitration, at such time the Company would recognize a loss in connection with the matter of $13.0 million to $50.0 million. |
(b) |
On December 23, 2005, Robert Guccione, our former president, filed an action against the Company and some of its officers, among other defendants, in New York State Court for breach of contract, fraud, unjust enrichment, promissory estoppel, failure to pay severance and conspiracy to defraud. The amount of damages requested in the complaint against the Company is approximately $9.0 million and against the officers is in excess of $10.0 million. Some of the counts in the complaint also demand an unspecified amount of damages. Guccione filed an amended complaint on June 5, 2007 to include additional claims relating to ownership of certain United Kingdom, Jersey and Guernsey trademarks and added as a party Penthouse Publications Limited, an entity with no current affiliation with the Company, as party plaintiff. Guccione agreed to dismiss the count for conspiracy to defraud only. Guccione filed a Second Amended Complaint on December 14, 2007 adding General Media International, Inc. (an entity with no current affiliation with the Company) as party |
plaintiff and a new claim for inducement to breach of contract. The Company filed its motion to dismiss the Second Amended Complaint on January 31, 2008, which was granted in part and denied in part. The court dismissed the claims for unjust enrichment and promissory estoppel. The Company filed its Answer and Affirmative Defenses to the Second Amended Complaint on June 25, 2009. On August 14, 2008, Guccione filed a voluntary petition for Chapter 7 Bankruptcy. Guccione filed a dismissal of the bankruptcy proceedings on November 4, 2009. The Court dismissed the bankruptcy action on November 9, 2009. The settlement agreement between Guccione and his judgment creditors assigns all rights to the New York state court action to his judgment creditors. On January 8, 2010, the Company filed an Amended Answer with counterclaims against Guccione and Penthouse Publications Limited for conversion, breach of fiduciary duty, declaratory relief and indemnification. No specific amount of damages has been requested in the counterclaims. On January 27, 2010, Plaintiffs filed a Reply to the Companys counterclaims. In January and February 2010, certain defendants filed Answers to Plaintiffs Second Amended Complaint with cross-claims against the Company for contribution and indemnification. No specific amount of damages has been requested. In February and March 2010, the Company filed its Answer and Affirmative Defenses to the cross-claims. On October 20, 2010, Guccione passed away. As such, the case is stayed pending substitution of his estate as a party. The Company believes it has meritorious defenses to all claims and intends to vigorously defend the lawsuit. |
(c) |
On or about November 27, 2006, a claimant filed a consumer class action arbitration at Judicial Arbitration and Mediation Services, Inc. or JAMS in San Jose, California, alleging a nationwide class action against Various under a variety of legal theories related to, among other things, representations regarding the number of active users on its internet dating websites, causing the appearance of erroneous member profiles, and a failure to adequately remove or account for alleged erroneous member profiles. The claimant is seeking unspecified damages. Various disputes the claims and intends to defend the arbitration vigorously. |
(d) |
On November 28, 2006, Antor Media Corporation (Antor) filed a complaint against FriendFinder, its subsidiary, General Media Communications, Inc. (GMCI), and several non-affiliate media/entertainment defendants in the U.S. District Court for the Eastern District of Texas, Texarkana Division, for infringement of a Patent entitled Method and Apparatus for Transmitting Information Recorded on Information Storage Means from a Central Server to Subscribers via a High Data Rate Digital Telecommunications Network. No specific amount of damages has been requested. Injunctive relief is also sought. The Company and its subsidiary filed an Answer, Affirmative Defenses and Counterclaims. The United States Patent and Trademark Office (USPTO) issued a non-final office action rejecting Antors patent claims. Antor filed a response to the office action which added 83 new claims to the original 29 rejected claims. In August 2008, the USPTO issued its final office action sustaining its rejection of the original 29 claims and rejecting the 83 new claims. Antor filed its Petition to Vacate Finality of Office Action on the grounds it introduced new grounds for the rejection. Based on the final office action, the Company, GMCI and all other defendants filed an expedited motion to stay the case. In December 2008, pursuant to an order granting a re-examination proceeding, the USPTO issued a non-final office action again rejecting the original 29 claims and the new 83 claims. In February 2009, Antor filed a response in which it agreed to cancel the 83 new claims previously proposed. On May 11, 2009, the Court entered an Order granting Defendants Motion to Stay as modified. On May 22, 2009, the defendant accepted the terms of the Courts proposed Stipulation regarding the use of prior art at trial and filed their Stipulation. On June 5, 2009, the USPTO issued a Final Office Action rejecting all of the Plaintiffs claims. Plaintiff filed an appeal on July 7, 2009 and an appellate brief on October 8, 2009. On February 18, 2010, the USPTO filed an answer brief. On October 21, 2010, the USPTO Board of Patent Appeals entered an order affirming the rejection of Antors claims. On December 21, 2010, Antor filed a request for rehearing which was denied in March 2011. On May 23, 2011, Antor filed its notice of appeal. The case will remain stayed pending the appeal. |
(e) |
Effective July 1, 2008, Various registered in the European Union and on July 29, 2008, began separately charging VAT to its customers. For periods prior thereto, Various recorded a liability for VAT and related interest |
and penalties in connection with revenue from internet services derived from its customers in the various European Union countries. Various reduced its VAT liability for periods prior to July 1, 2008 in the countries where the liability was either paid in full or payments were made pursuant to settlement and payment plans or where determinations were made that payments were not due. Various continues to negotiate settlements of the liabilities or challenge the liability related to VAT for periods prior to July 1, 2008 (see Note 7). |
(f) |
On May 19, 2009 representatives for Summit Trading Limited (Summit) sent a letter to the Companys outside legal counsel, alleging that the Company, Interactive Brand Development, Inc., (an owner of the Companys Series B Common Stock) and entities affiliated with two of the Companys principal stockholders defrauded Summit of financial compensation for services provided to the Companys predecessor entity, General Media, Inc. Among the claims, Summit asserted bad faith, breach of contract and fraud by the Companys management and the Company, and claimed that it is owed an equity interest in the Company, as well as compensatory, punitive and exemplary damages in excess of $500 million. Management believes that the allegations stated in the letter are vague and lack factual basis and merit. Summit has not taken any legal action against the Company. Should Summit take legal action, the Company would vigorously defend the lawsuit. |
(g) |
On November 16, 2010, Patent Harbor, LLC filed a Complaint for patent infringement against, among others, Penthouse Digital Media Productions Inc. (PDMP), in the United States District Court for the Eastern District of Texas. The Complaint alleges an infringement of a U.S. Patent entitled Apparatus and Method for Assembling Content Addressable Video. No specific amount of damages has been requested. However, on November 16, 2010, the Company received a settlement demand from plaintiff in the amount of $800,000. Plaintiff later lowered its demand to $500,000. On January 28, 2011, the Company filed an Answer, Affirmative Defenses and Counterclaims. On February 25, 2011, plaintiff filed its Answer to the Counterclaims. The Company has no insurance coverage for patent infringement claims. The Company disputes the allegations and believes it has meritorious defenses, and plans to vigorously defend the allegations. |
(h) |
On April 13, 2011, Facebook, Inc., or Facebook, filed a complaint against FriendFinder and certain of its subsidiaries in the U.S. District Court for the Northern District of California, alleging trademark infringement with regard to the use of the terms facebook of sex and Facebooks use of the FRIENDFINDER mark. The Complaint contains causes of action for: trademark dilution, false designation of origin, trademark infringement, violation of the Anti-Cybersquating Consumer Protection Act, and for unfair competition. The Complaint also seeks a declaratory judgment that Facebooks use of friend finder is a descriptive fair use that does not infringe Various trademark rights in the FRIENDFINDER mark. No specific amount of damages has been sought. However, the Complaint requests monetary relief, injunctive relief, punitive damages, cancellation of the FRIENDFINDER marks, attorneys fees, other equitable relief, and costs amongst other things. The Company believes that Facebooks claims are without merit and intends to vigorously defend the lawsuit. |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
ASSETS |
|||||||||||
Current
assets: |
|||||||||||
Cash
|
$ | 34,585 | $ | 22,600 | |||||||
Restricted
cash |
7,385 | 6,295 | |||||||||
Accounts
receivable, less allowance for doubtful accounts of $2,236 and $2,152, respectively |
9,886 | 12,142 | |||||||||
Inventories
|
1,028 | 1,339 | |||||||||
Prepaid
expenses |
4,534 | 7,980 | |||||||||
Deferred tax
asset |
5,522 | 11,366 | |||||||||
Total current
assets |
62,940 | 61,722 | |||||||||
Film costs, net
|
4,312 | 4,526 | |||||||||
Property and
equipment, net |
6,666 | 13,812 | |||||||||
Goodwill
|
326,540 | 326,540 | |||||||||
Domain names
|
55,890 | 55,491 | |||||||||
Trademarks
|
9,213 | 13,873 | |||||||||
Other
intangible assets, net |
29,134 | 48,183 | |||||||||
Deferred debt
costs, net |
22,336 | 12,318 | |||||||||
Deferred
offering costs |
13,267 | 9,050 | |||||||||
Receivable from
escrow fund |
| 2,679 | |||||||||
Other assets
|
2,519 | 3,687 | |||||||||
$ | 532,817 | $ | 551,881 | ||||||||
LIABILITIES |
|||||||||||
Current
liabilities: |
|||||||||||
Current
installment of long-term debt, net of unamortized discount of $744 and $1,931, respectively |
15,009 | 56,116 | |||||||||
Accounts
payable |
9,481 | 12,612 | |||||||||
Accrued
expenses and other liabilities |
65,420 | 69,727 | |||||||||
Deferred
revenue |
48,302 | 46,046 | |||||||||
Total current
liabilities |
138,212 | 184,501 | |||||||||
Deferred tax
liability |
30,275 | 37,397 | |||||||||
Long-term debt,
net of unamortized discount of $31,935 and $44,118, respectively |
510,551 | 432,028 | |||||||||
Liability
related to warrants |
3,559 | 3,597 | |||||||||
Total
liabilities |
682,597 | 657,523 | |||||||||
Commitments and
contingencies (Notes P and Q) |
|||||||||||
REDEEMABLE
PREFERRED STOCK |
|||||||||||
Series A
Convertible Preferred Stock, $0.001 per share authorized 2,500,000 shares; issued and outstanding 1,766,703 shares in 2009 (at liquidation
preference) |
| 21,000 | |||||||||
Series B
Convertible Preferred Stock, $0.001 per share authorized 10,000,000 shares; issued and outstanding 8,444,853 shares in 2009 (at liquidation
preference) |
| 5,000 | |||||||||
STOCKHOLDERS DEFICIENCY |
|||||||||||
Preferred
stock, $0.001 par value authorized 22,500,000 shares; issued and outstanding 10,211,556 shares in 2010 and redeemable shares in 2009, shown
above |
|||||||||||
Series A
Convertible Preferred Stock $0.001 per share authorized 2,500,000 shares; issued and outstanding 1,766,703 shares in 2010 (liquidation
preference $21,000) |
2 | | |||||||||
Series B
Convertible Preferred Stock $0.001 per share authorized 10,000,000 shares; issued and outstanding 8,444,853 shares in 2010 (liquidation
preference $5,000) |
8 | | |||||||||
Common stock,
$0.001 par value authorized 125,000,000 shares in 2010 and 2009 |
|||||||||||
Common stock
voting authorized 112,500,000 shares, issued and outstanding 6,517,746 in 2010 and 2009. |
6 | 6 | |||||||||
Series B
common stock non-voting authorized 12,500,000 shares; issued and outstanding 1,839,825 shares in 2010 and 2009 |
2 | 2 | |||||||||
Capital in
excess of par value |
80,823 | 55,818 | |||||||||
Accumulated
deficit |
(230,621 | ) | (187,468 | ) | |||||||
Total
stockholders deficiency |
(149,780 | ) | (131,642 | ) | |||||||
$ | 532,817 | $ | 551,881 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Net
revenue |
|||||||||||||||
Service
|
$ | 324,211 | $ | 309,033 | $ | 309,388 | |||||||||
Product
|
21,786 | 18,659 | 21,629 | ||||||||||||
Total
|
345,997 | 327,692 | 331,017 | ||||||||||||
Cost of
revenue |
|||||||||||||||
Service
|
97,959 | 78,627 | 81,815 | ||||||||||||
Product
|
12,531 | 13,070 | 14,699 | ||||||||||||
Total
|
110,490 | 91,697 | 96,514 | ||||||||||||
Gross profit
|
235,507 | 235,995 | 234,503 | ||||||||||||
Operating
expenses: |
|||||||||||||||
Product
development |
12,834 | 13,500 | 14,553 | ||||||||||||
Selling and
marketing |
37,258 | 42,902 | 59,281 | ||||||||||||
General and
administrative |
79,855 | 76,863 | 88,280 | ||||||||||||
Amortization
of acquired intangibles and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Depreciation
and other amortization |
4,704 | 4,881 | 4,502 | ||||||||||||
Impairment of
goodwill |
| | 9,571 | ||||||||||||
Impairment of
other intangible assets |
4,660 | 4,000 | 14,860 | ||||||||||||
Total
operating expenses |
163,772 | 177,600 | 227,394 | ||||||||||||
Income from
operations |
71,735 | 58,395 | 7,109 | ||||||||||||
Interest
expense, net of interest income |
(88,508 | ) | (92,139 | ) | (80,510 | ) | |||||||||
Other finance
expenses |
(4,562 | ) | | | |||||||||||
Interest and
penalties related to VAT liability not charged to customers |
(2,293 | ) | (4,205 | ) | (8,429 | ) | |||||||||
Net loss on
extinguishment and modification of debt |
(7,457 | ) | (7,240 | ) | | ||||||||||
Foreign
exchange gain (loss), principally related to VAT liability not charged to customers |
610 | (5,530 | ) | 15,195 | |||||||||||
Gain on
settlement of VAT liability not charged to customers |
| 232 | 2,690 | ||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| 1,561 | | ||||||||||||
Gain on
liability related to warrants |
38 | 2,744 | | ||||||||||||
Other
non-operating expenses, net |
(13,202 | ) | (366 | ) | (197 | ) | |||||||||
Loss before
income tax benefit |
(43,639 | ) | (46,548 | ) | (64,142 | ) | |||||||||
Income tax
benefit |
(486 | ) | (5,332 | ) | (18,176 | ) | |||||||||
Net
loss |
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | ||||||
Net loss
per common share basic and diluted |
$ | (3.14 | ) | $ | (3.00 | ) | $ | (3.35 | ) | ||||||
Weighted
average shares outstanding basic and diluted |
13,735 | 13,735 | 13,735 |
Redeemable Preferred Stock |
Stockholders Deficiency |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Series A Convertible |
Series B Convertible |
Preferred Stock |
Common Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Voting |
Series B Non-Voting |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital in Excess of Par Value |
Accumulated Deficit |
Total |
|||||||||||||||||||||||||||||||||||||||||||
Balance
at January 1, 2008 |
1,766,703 | $ | 21,000 | 8,444,853 | $ | 5,000 | 0 | $ | 0 | 3,561,127 | $ | 4 | 1,839,825 | $ | 2 | $ | 60,576 | $ | (98,701 | ) | $ | (38,119 | ) | ||||||||||||||||||||||||||||||||
Exercise of
warrants |
1,686,700 | 1 | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net
loss |
(45,966 | ) | (45,966 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at
December 31, 2008 |
1,766,703 | 21,000 | 8,444,853 | 5,000 | 0 | 0 | 5,247,827 | 5 | 1,839,825 | 2 | 60,575 | (144,667 | ) | (84,085 | ) | ||||||||||||||||||||||||||||||||||||||||
Classification
of warrants as a liability |
(4,756 | ) | (1,585 | ) | (6,341 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of
warrants |
1,269,919 | 1 | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net
loss |
(41,216 | ) | (41,216 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at
December 31, 2009 |
1,766,703 | 21,000 | 8,444,853 | 5,000 | 0 | 0 | 6,517,746 | 6 | 1,839,825 | 2 | 55,818 | (187,468 | ) | (131,642 | ) | ||||||||||||||||||||||||||||||||||||||||
Transfer of
preferred stock from temporary equity to stockholders deficiency |
(1,766,703 | ) | (21,000 | ) | (8,444,853 | ) | (5,000 | ) | 10,211,556 | 10 | 25,990 | 26,000 | |||||||||||||||||||||||||||||||||||||||||||
Other |
(985 | ) | (985 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net
loss |
(43,153 | ) | (43,153 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at
December 31, 2010 |
0 | $ | 0 | 0 | $ | 0 | 10,211,556 | $ | 10 | 6,517,746 | $ | 6 | 1,839,825 | $ | 2 | $ | 80,823 | $ | (230,621 | ) | $ | (149,780 | ) |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Cash flows
from operating activities: |
|||||||||||||||
Net loss
|
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | ||||||
Adjustments
to reconcile net loss to net cash provided by operating activities: |
|||||||||||||||
Deferred
income tax benefit |
(1,278 | ) | (5,332 | ) | (18,550 | ) | |||||||||
Impairment of
intangibles |
4,660 | 4,000 | 24,431 | ||||||||||||
Net loss on
extinguishment and modification of debt |
7,457 | 7,240 | | ||||||||||||
Amortization
of acquired intangibles and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Depreciation
and other amortization |
4,702 | 4,881 | 4,502 | ||||||||||||
Amortization
of film costs |
3,763 | 4,001 | 3,899 | ||||||||||||
Non-cash
interest, including amortization of discount |
45,148 | 47,139 | 30,725 | ||||||||||||
Provision for
doubtful accounts |
839 | 249 | 1,505 | ||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| (1,561 | ) | | |||||||||||
Gain on
settlement of VAT liability not charged to customers |
| (232 | ) | (2,690 | ) | ||||||||||
Gain on
warrant liability |
(38 | ) | (2,744 | ) | | ||||||||||
Other
|
504 | 209 | 32 | ||||||||||||
Changes in
operating assets and liabilities: |
|||||||||||||||
Restricted
cash |
(1,090 | ) | 1,566 | 8,480 | |||||||||||
Accounts
receivable |
1,417 | (3,050 | ) | 5,101 | |||||||||||
Inventories
|
311 | 288 | 88 | ||||||||||||
Prepaid
expenses |
3,446 | (1,652 | ) | (2,820 | ) | ||||||||||
Film costs
|
(3,549 | ) | (3,705 | ) | (4,461 | ) | |||||||||
Deferred debt
costs |
(4,265 | ) | (5,594 | ) | | ||||||||||
Deferred
offering costs |
(4,217 | ) | (6,974 | ) | (2,076 | ) | |||||||||
Other assets
|
1,169 | (1,133 | ) | (864 | ) | ||||||||||
Accounts
payable |
(3,132 | ) | 3,579 | (2,775 | ) | ||||||||||
Accrued
expenses and other liabilities |
3,230 | 1,034 | 440 | ||||||||||||
Deferred
revenue |
2,255 | 3,232 | 15,600 | ||||||||||||
Net cash
provided by operating activities |
42,640 | 39,679 | 50,948 | ||||||||||||
Cash flows
from investing activities: |
|||||||||||||||
Cash received
from escrow in connection with acquisition |
2,679 | 7,321 | | ||||||||||||
Purchases of
property and equipment |
(3,530 | ) | (3,542 | ) | (9,161 | ) | |||||||||
Reduction of
goodwill attributable to reimbursement from prior owners of Various |
| 915 | | ||||||||||||
Other
|
(399 | ) | (490 | ) | (128 | ) | |||||||||
Net cash
(used in) provided by investing activities |
(1,250 | ) | 4,204 | (9,289 | ) | ||||||||||
Cash flows
from financing activities: |
|||||||||||||||
Debt issuance
costs |
(5,834 | ) | | | |||||||||||
Repayment of
long-term debt |
(25,921 | ) | (44,987 | ) | (25,336 | ) | |||||||||
Redemption of
long-term debt |
(86,237 | ) | | | |||||||||||
Issuance of
New First and Second Lien Notes |
89,572 | | | ||||||||||||
Other
|
(985 | ) | | | |||||||||||
Net cash
(used in) financing activities |
(29,405 | ) | (44,987 | ) | (25,336 | ) | |||||||||
Net
increase (decrease) in cash |
11,985 | (1,104 | ) | 16,323 | |||||||||||
Cash at
beginning of period |
22,600 | 23,704 | 7,381 | ||||||||||||
Cash at
end of period |
$ | 34,585 | $ | 22,600 | $ | 23,704 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Supplemental disclosures of cash flow information: |
|||||||||||||||
Cash paid
for: |
|||||||||||||||
Interest paid
|
$ | 43,541 | $ | 45,531 | $ | 53,592 | |||||||||
Income taxes
|
| 1,343 | 17 | ||||||||||||
Non-cash
investing and financing activities: |
|||||||||||||||
Reduction of
Subordinated Convertible Notes and goodwill for bonus indemnification from former stockholders of Various |
| $ | 1,202 | $ | 1,074 | ||||||||||
Accrual and
issuance of notes for debt modification costs |
| $ | 6,041 | | |||||||||||
Effect of
elimination of United Kingdom VAT liability: |
|||||||||||||||
Reduction in
accrued expenses and other liabilities |
| $ | 39,520 | | |||||||||||
Increase in
Subordinated Convertible Notes payable |
| $ | 28,989 | | |||||||||||
Reduction of
goodwill |
| $ | 5,381 | | |||||||||||
Increase in
deferred tax liability |
| $ | 3,587 | | |||||||||||
Exchange of
New First Lien Notes for outstanding First ($126,124) and Second ($48,275) Lien Notes |
$ | 174,399 | | | |||||||||||
Issuance of
New First Lien Notes for commitment fees |
$ | 13,146 | | | |||||||||||
Exchange of
New First Lien Notes and Cash Pay Second Lien Notes for Senior Secured Notes |
$ | 28,053 | | | |||||||||||
Exchange of
Non-Cash Pay Second Lien Notes for outstanding Subordinated Convertible Notes ($161,560) plus $3,514 of accrued interest |
$ | 165,074 | | | |||||||||||
Exchange of
Non-Cash Pay Second Lien Notes for $42,811 of Subordinated Term Notes plus $5,949 of accrued interest |
$ | 45,726 | | |
1. |
Principles of consolidation: |
2. |
Stock splits: |
3. |
Use of estimates: |
4. |
Cash and cash equivalents: |
5. |
Restricted cash: |
6. |
Accounts receivable: |
7. |
Inventories: |
8. |
Property and equipment: |
9. |
Software costs: |
10. |
Film costs: |
11. |
Goodwill, trademarks and other intangibles: |
12. |
Deferred debt costs: |
13. |
Deferred offering costs: |
14. |
Revenue recognition: |
a) |
Internet: |
b) |
Entertainment: |
15. |
Cost of revenue: |
16. |
Product development: |
17. |
Advertising: |
18. |
Loyalty program: |
19. |
Stock-based compensation: |
20. |
Income taxes: |
21. |
Value added taxes: |
22. |
Foreign currency transactions: |
23. |
Concentration of credit risk: |
24. |
Fair value of financial instruments: |
25. |
Per share data: |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Common stock
|
6,518 | 6,518 | 5,248 | ||||||||||||
Series B
common stock |
1,840 | 1,840 | 1,840 | ||||||||||||
Common stock
purchase warrants |
5,377 | 5,377 | 6,647 | ||||||||||||
13,735 | 13,735 | 13,735 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Series A
Convertible Preferred Stock |
2,000 | 2,000 | 2,000 | ||||||||||||
Series B
Convertible Preferred Stock |
8,445 | 8,445 | 8,445 | ||||||||||||
Warrants
|
502 | 502 | 502 | ||||||||||||
Total common
shares issuable |
10,947 | 10,947 | 10,947 |
26. |
Reclassifications |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Paper and
printing costs |
$ | 693 | $ | 804 | |||||||
Editorials
and pictorials |
335 | 535 | |||||||||
$ | 1,028 | $ | 1,339 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Opening
balance |
$ | 4,526 | $ | 4,822 | $ | 4,260 | |||||||||
Content
produced |
3,549 | 3,705 | 4,461 | ||||||||||||
Amortization
|
(3,763 | ) | (4,001 | ) | (3,899 | ) | |||||||||
Ending
balance |
$ | 4,312 | $ | 4,526 | $ | 4,822 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2009 | ||||||||||
Property and
equipment: |
|||||||||||
Leasehold
improvements |
$ | 1,004 | $ | 757 | |||||||
Computer
hardware and software |
39,318 | 36,035 | |||||||||
40,322 | 36,792 | ||||||||||
Less
accumulated depreciation and amortization |
33,656 | 22,980 | |||||||||
$ | 6,666 | $ | 13,812 |
Internet |
Entertainment |
Total |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of
December 31, 2008 |
$ | 334,037 | $ | | $ | 334,037 | ||||||||
Reduction for
elimination of VAT liability (see Note J(f)) |
(5,380 | ) | | (5,380 | ) | |||||||||
Reduction for
reimbursement from sellers of Various |
(915 | ) | | (915 | ) | |||||||||
Reduction for
indemnification from sellers of Various (see Note J(f)) |
(1,202 | ) | | (1,202 | ) | |||||||||
Balance as of
December 31, 2009 and 2010 |
$ | 326,540 | $ | | $ | 326,540 |
December 31, |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
|||||||||||||||||||||
Gross Amount |
Accumulated Amortization |
Gross Amount |
Accumulated Amortization |
Estimated Useful Lives (Years) |
||||||||||||||||||
Amortizable
intangible assets: |
||||||||||||||||||||||
Non-compete
agreements |
$ | 10,600 | $ | 10,600 | $ | 10,600 | $ | 7,305 | 3 | |||||||||||||
Customer
lists |
23,626 | 23,280 | 28,666 | 27,988 | 24 | |||||||||||||||||
Service
contracts |
72,800 | 44,782 | 72,800 | 30,185 | 35 | |||||||||||||||||
Studio
contracts |
3,300 | 2,530 | 3,300 | 1,705 | 4 | |||||||||||||||||
Other
|
2,840 | 2,840 | 2,840 | 2,840 | 3 | |||||||||||||||||
$ | 113,166 | $ | 84,032 | $ | 118,206 | $ | 70,023 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Accrued
liability related to VAT |
$ | 42,235 | $ | 45,719 | |||||||
Chargeback
reserve |
1,137 | 860 | |||||||||
Compensation
and benefits |
1,273 | 1,193 | |||||||||
Accrued
marketing |
$ | 1,148 | $ | 1,328 | |||||||
Legal and
related expenses |
510 | 1,055 | |||||||||
Accrued
interest |
| 7,538 | |||||||||
Accrued
commissions to third party websites |
3,147 | 2,774 | |||||||||
Accrued
waiver fees |
| 2,613 | |||||||||
Accrued loss
related to claim in arbitration (see Note Q (a)) |
10,000 | | |||||||||
Other |
5,970 | 6,647 | |||||||||
$ | 65,420 | $ | 69,727 |
December 31, |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||||||||||
Principal |
Unamortized Discount |
Principal |
Unamortized Discount |
||||||||||||||||
Debt issued
by FriendFinder and INI on October 27, 2010 (a): |
|||||||||||||||||||
First Lien
Notes due 20112013, including principal of $112,020 ($108,154 net of discount) issued to Companys stockholders (b)(e) |
$ | 305,000 | $ | 10,974 | | | |||||||||||||
Cash Pay
Second Lien Notes due 2013 issued to entities controlled by stockholders who are officers and directors (c)(e) |
13,778 | 262 | | | |||||||||||||||
Non-Cash Pay
Second Lien Notes, due 2014, including principal of $233,191 ($212,560 net of discount) issued to Company stockholders, including $45,310 ($41,302 net
of discount) to entities controlled by certain officers and directors(d)(e) |
237,211 | 20,986 | | |
December 31, |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||||||||||
Principal |
Unamortized Discount |
Principal |
Unamortized Discount | ||||||||||||||||
Debt issued
by INI in connection with the acquisition of Various: |
|||||||||||||||||||
First Lien
Senior Secured Notes due 20092011, including principal of $75,722 ($70,715 net of discount) issued to selling stockholders (f) |
| | $ | 189,014 | $ | 12,497 | |||||||||||||
Second Lien
Subordinated Secured Notes due 2011 issued to selling stockholders (f) |
| | 80,000 | 3,300 | |||||||||||||||
Subordinated
Convertible Notes due 2011 issued to selling stockholders (g) |
| | 169,807 | 28,265 | |||||||||||||||
Other (h)
|
2,250 | 457 | 6,250 | 1,142 | |||||||||||||||
Senior
Secured Notes of FriendFinder due 2010 (i) |
| | 46,311 | 845 | |||||||||||||||
Subordinated
Term Notes of FriendFinder due 2011 (j) |
| | 42,811 | | |||||||||||||||
$ | 558,239 | $ | 32,679 | $ | 534,193 | $ | 46,049 | ||||||||||||
Less
unamortized discount |
(32,679 | ) | (46,049 | ) | |||||||||||||||
Less current
installment of long-term debt, net of unamortized discount of $744 and $1,931, respectively |
(15,009 | ) | (56,116 | ) | |||||||||||||||
$ | 510,551 | $ | 432,028 |
(a) |
On October 27, 2010, $305,000,000 principal amount of 14% Senior Secured Notes due 2013 were co-issued by FriendFinder and its wholly-owned subsidiary Interactive Network, Inc (INI), the parent of Various (the New First Lien Notes), of which (a) $200,185,000 was exchanged for $130,485,000 outstanding principal amount of First Lien Notes, $49,361,000 outstanding principal amount of Second Lien Notes and $14,551,000 outstanding principal amount of Senior Secured Notes, (b) $91,400,000 was issued for cash proceeds of $89,572,000 before payment of related fees and expenses of $5,834,000 and (c) $13,415,000 was issued to pay commitment fees to the holders of First Lien Notes and Second Lien Notes. Cash of $86,237,000 was used to redeem $36,608,000 outstanding principal amount of First Lien Notes at 102% of principal, $30,639,000 outstanding principal amount of Second Lien Notes (representing the remaining outstanding principal amounts of First Lien Notes and Second Lien Notes) and $18,258,000 outstanding principal amount of Senior Secured Notes. Cash was also used to pay $4,132,000 of accrued interest on the exchanged and redeemed notes, an $825,000 redemption premium on certain exchanged First Lien Notes and $435,000 in commitment fees to certain noteholders. |
(b) |
The New First Lien Notes, of which approximately $112,020,000 principal amount were issued to the Companys stockholders, including $7,460,000 to entities controlled by certain officers and directors, were issued with an original issue discount of $6,100,000, or 2.0%. The notes mature on September 30, 2013 and accrue interest at a rate per annum equal to 14.0%. Interest on the notes is payable quarterly on March 31, June 30, September 30 and December 31 of each year. Principal on the New First Lien Notes is payable quarterly to the extent of 75% of Excess Cash Flow, as defined, at 102% of principal, subject to pro-rata sharing with the Cash Pay Second Lien Notes. The New First Lien Notes are guaranteed by domestic subsidiaries of FriendFinder and INI and are collateralized by a first-priority lien on all of the Companys assets as well as a pledge of stock of subsidiaries. The New First Lien Notes are redeemable prior to maturity at the option of the Company, in whole but not in part, at 110% of principal, plus accrued and unpaid interest. In the event of an IPO, the net proceeds must be used to redeem the New First Lien Notes and Cash Pay Second Lien Notes pro-rata at 110% of principal plus accrued and unpaid interest. In addition, noteholders have the option of requiring the Company to repay the New First Lien Notes and Cash Pay Second Lien Notes in full upon a Change of Control, as defined, at 110% of principal. The Company shall also repay the New First Lien Notes and, in certain circumstances, the Cash Pay Second Lien Notes, with proceeds received from any debt or equity financing (including a secondary offering) and asset sales of more than $25 million at 110% of principal, and with proceeds from other asset sales, insurance claims, condemnation and other extraordinary cash receipts at principal, subject to certain exceptions. |
(c) |
The Cash Pay Second Lien Notes, all of which were issued to entities controlled by stockholders who are also officers and directors, were issued with an original issue discount of $276,000, or 2%, mature on September 30, 2013 and have identical terms to those of the New First Lien Notes, except as to matters regarding collateral, subordination, enforcement and voting. The Cash Pay Second Lien Notes are collateralized by a fully subordinated second lien on substantially all of the assets of the Company, pari passu with the Non-Cash Pay Second Lien Notes, and will vote with the New First Lien Notes on a dollar for dollar basis on all matters |
except for matters relating to collateral, liens and enforcement of rights and remedies. As to such matters, the Cash Pay Second Lien Notes will vote with the Non-Cash Pay Second Lien Notes. |
(d) |
The Non-Cash Pay Second Lien Notes, of which approximately $228,519,000 principal amount were issued to the Companys stockholders, including $44,402,000 to entities controlled by certain officers and directors, mature on April 30, 2014 and bear interest at 11.5%, payable semi-annually on June 30 and December 31, which may be paid in additional notes at the Companys option. While the New First Lien Notes are in place, interest must be paid with additional notes. During 2010, interest amounting to $4,752,000 was paid through the issuance of additional Non-Cash Pay Second Lien Notes. The Non-Cash Pay Second Lien Notes are guaranteed by the domestic subsidiaries of FriendFinder and INI and collateralized by a second priority lien on all of the Companys assets and a pledge of the stock of subsidiaries; however, such security interest is subordinate to the prior payment of the New First Lien Notes. The Non-Cash Pay Second Lien Notes are redeemable, at the option of the Company, in whole but not in part, at 100% of principal plus accrued and unpaid interest. Upon the payment in full of the New First Lien Notes, principal on the Non-Cash Pay Second Lien Notes is payable quarterly to the extent of 75% of Excess Cash Flow, as defined, at 102% of principal subject to pro-rata sharing with the Cash Pay Second Lien Notes. Upon an IPO, if the New First Lien Notes are paid in full, the net proceeds must be used to redeem the Non-Cash Pay Second Lien Notes and Cash Pay Second Lien Notes on a pro-rata basis at 110% of principal plus accrued and unpaid interest. In addition, noteholders have the option of requiring the Company to repay the Non-Cash Pay Second Lien Notes in full upon a Change of Control, as defined, at 110% of principal plus accrued and unpaid interest. If the New First Lien Notes are paid in full, the Company shall repay the Non-Cash Pay Second Lien Notes and Cash Pay Second Lien Notes on a pro-rata basis with proceeds received from any debt or equity financing (including a secondary offering), and asset sales of more than $25 million at 110% of principal plus accrued and unpaid interest and with proceeds of other asset sales, insurance claims, condemnation and other extraordinary cash receipts at principal, subject to certain exceptions. The Non-Cash Pay Second Lien Notes will become convertible into shares of the Companys common stock upon or after an IPO solely at the option of the holders. The conversion price of the notes will be at the per share offering price for the Companys common stock upon consummation of the IPO provided that such conversion option shall be limited to approximately 21.1% of the Companys fully diluted equity. |
(e) |
The New First Lien Notes, the Cash Pay Second Lien Notes and Non-Cash Pay Second Lien Notes (1) require the Company to maintain minimum specified levels of EBITDA and liquidity and financial ratios, including debt and coverage ratios, all as defined, (2) provides for certain limitations including limits on indebtedness, lease obligations, VAT payments and investments and (3) prohibits dividends and other payments with respect to the Companys equity securities. |
(f) |
The First Lien Senior Secured Notes (First Lien Notes), of which approximately $110,000,000 principal amount were issued to the Companys stockholders including $10,000,000 to entities controlled by certain officers and directors, were issued with an original issue discount of $7,720,000, or approximately 3.0%, were to mature on June 30, 2011, and accrued interest at a rate per annum equal to the sum of the greater of three month LIBOR (0.25% at December 31, 2009) or 4.5%, plus 8.0%. Interest on the notes was payable quarterly on March 31, June 30, September 30 and December 31 of each year. Principal on the First Lien Notes was payable quarterly to the extent of 90% of Excess Cash Flow, as defined, subject to minimum amounts. |
(g) |
The Subordinated Convertible Notes (Convertible Notes) were to mature on December 6, 2011 and bore interest at 6% which was paid in additional Convertible Notes at INIs option. The notes had been recorded at estimated fair value at the date of issuance, resulting in an effective interest rate of approximately 13% and discount of $24,977,000, which was being amortized as interest expense (by use of the interest method) over the term of the notes. During 2008, interest amounting to $6,892,000 was paid through issuance of additional Convertible Notes. The notes were the unsecured obligation of INI and were guaranteed by FriendFinder. The notes were subordinate in right of payment to the First Lien Notes and Second Lien Notes. The guarantee was subordinate to the prior payment of FriendFinders Senior Notes and the guarantee of the First Lien Notes and Second Lien Notes and pari passu in right of payment with FriendFinders Subordinated Term Notes. The notes which had an original principal amount of $170,000,000 were subject to reduction to the extent certain post-closing bonuses of up to $3.5 million were paid by Various over a three-year period and for a post-closing working capital adjustment. During 2009 and 2008, respectively, as a result of payment of $1.3 and $1.4 million in bonuses which were charged to expense, the principal amount of the notes was reduced and the carrying value of the notes was reduced by $1.1 and $1.1 million, respectively, with a corresponding reduction in goodwill. The post-closing working capital adjustment determined by the Company resulted in an indemnity claim which has been reflected as a reduction of $64,279,357 in the principal amount of the notes and a $10,000,000 receivable from an escrow fund set up in connection with the acquisition. |
(h) |
In connection with the acquisition of Various, INI issued a non-interest bearing obligation with a principal balance of $5.0 million to a former owner. In each of 2009 and 2008, $1.0 million of the notes were paid and 3.0 million was paid in 2010. The obligation was recorded at a present value of $3.6 million using a discount rate of 15%. |
(i) |
The Senior Secured Notes were scheduled to mature on July 31, 2010 and bore interest at 15% payable quarterly in cash. The notes were collateralized by a first-priority security interest in all of the Companys assets, other than those of INI and its subsidiaries for which a third-priority secured interest had been granted. |
(j) |
The Subordinated Term Notes, which were held by entities controlled by certain principal stockholders of the Company who are also officers and directors, were to mature on October 1, 2011 and bore interest at 13% payable annually principally through the issuance of additional subordinated notes. The Subordinated Term Notes were collateralized by a second priority security interest in all assets of the Company other than those held by INI and its subsidiaries and were subordinate to the notes issued by INI as well as the Senior Secured Notes issued by FriendFinder. |
Year |
Amount |
|||||
---|---|---|---|---|---|---|
2011
|
$ | 15,753 | ||||
2012
|
1,000 | |||||
2013
|
304,275 | |||||
2014
|
237,211 | |||||
$ | 558,239 |
Expiration Date(1) |
Exercise Price |
Number of Shares(2) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
August 2015
|
$ | 6.20 | (4) | 476,573 | (4) | |||||
August 2015
|
$ | 10.25 | (4) | 25,090 | ||||||
August 2015
|
$ | 0.0002 | 243,287 | |||||||
August 2016
|
$ | 0.0002 | 441,474 | |||||||
December 2017
|
$ | 0.0002 | 4,692,996 | (3) | ||||||
5,879,420 |
(1) |
Except for warrants to purchase 1,373,859 shares of common stock at $0.0002 per share which were amended on October 8, 2009, warrants terminate if not exercised concurrently with the consummation of an IPO, if earlier than their stated expiration date. |
(2) |
The number of shares of common stock for which each warrant is exercisable will be decreased immediately prior to the closing of an IPO in the event that the Company has issued prior to such IPO fewer than 1,343,997 shares or options pursuant to an equity incentive or benefit plan except for the warrants exercisable at $10.25. The adjustment provision for such warrants is triggered if the Company has issued fewer than 588,890 shares or options pursuant to an equity incentive or benefit plan prior to the closing of an IPO. |
(3) |
With respect to warrants to acquire 2,441,989 common shares, in order to maintain the warrant holders percentage of fully diluted equity, the number of shares of common stock for which each such warrant is exercisable shall be increased immediately prior to the closing of an IPO based on the number of shares of common stock into which the Non-Cash Pay Second Lien Notes which were exchanged for Convertible Notes issued to selling stockholders in the acquisition of Various, will be convertible based on the IPO price. |
(4) |
Adjusted for subsequent dilutive issuances of equity securities. |
2010 |
2009 |
2008 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current: |
||||||||||||||
Federal
|
$ | 162 | $ | | $ | 374 | ||||||||
State
|
630 | | | |||||||||||
792 | | 374 | ||||||||||||
Deferred: |
||||||||||||||
Federal
|
(1,118 | ) | (4,688 | ) | (13,615 | ) | ||||||||
State
|
(160 | ) | (644 | ) | (4,935 | ) | ||||||||
(1,278 | ) | (5,332 | ) | (18,550 | ) | |||||||||
Total tax
benefit |
$ | (486 | ) | $ | (5,332 | ) | $ | (18,176 | ) |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Tax benefit
at federal statutory rate (35%) |
$ | 15,274 | $ | 16,292 | $ | 22,450 | |||||||||
State taxes,
net of federal effect |
1,552 | 435 | 3,208 | ||||||||||||
Impairment of
goodwill |
| | (3,350 | ) | |||||||||||
Net operating
loss for which no tax benefit is recognized |
(16,679 | ) | (4,881 | ) | (4,842 | ) | |||||||||
Non-deductible penalties including related foreign exchange gain |
| 97 | 1,119 | ||||||||||||
Write off of
deferred tax asset related to United Kingdom VAT liability which was eliminated (see Note I) |
| (7,785 | ) | | |||||||||||
Gain on
warrant liability |
14 | 960 | | ||||||||||||
Other
|
$ | 326 | $ | 214 | $ | (409 | ) | ||||||||
Tax benefit
|
$ | 486 | $ | 5,332 | $ | 18,176 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Deferred tax
assets: |
|||||||||||
Net operating
loss carryforwards |
$ | 27,424 | $ | 30,430 | |||||||
Allowance for
doubtful accounts |
894 | 861 | |||||||||
Accrued
liability related to VAT |
12,264 | 13,733 | |||||||||
Accrued loss
related to claim in arbitration |
5,200 | | |||||||||
Other
|
590 | 427 | |||||||||
Gross
deferred tax assets |
46,372 | 45,451 | |||||||||
Less
valuation allowance |
(28,627 | ) | (11,948 | ) | |||||||
Net deferred
tax assets |
17,745 | 33,503 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 | ||||||||||
Deferred tax
liabilities: |
|||||||||||
Trademarks
and domain names not subject to amortization |
(23,794 | ) | (25,644 | ) | |||||||
Intangible
assets subject to amortization |
(11,654 | ) | (19,273 | ) | |||||||
Long-term
debt |
(5,875 | ) | (10,634 | ) | |||||||
Property and
equipment, including software |
(217 | ) | (3,222 | ) | |||||||
Other
|
(958 | ) | (761 | ) | |||||||
(42,498 | ) | (59,534 | ) | ||||||||
Net deferred
tax liabilities |
$ | (24,753 | ) | $ | (26,031 | ) |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Deferred tax
asset current |
$ | 5,522 | $ | 11,366 | |||||||
Deferred tax
liability non-current |
(30,275 | ) | (37,397 | ) | |||||||
Net deferred
tax liability |
$ | (24,753 | ) | $ | (26,031 | ) |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Assets: |
|||||||||||||||
Internet
|
$ | 506,297 | $ | 522,179 | $ | 568,999 | |||||||||
Entertainment
|
22,399 | 23,520 | 26,724 | ||||||||||||
Unallocated
corporate |
4,121 | 6,182 | 4,190 | ||||||||||||
Total
|
$ | 532,817 | $ | 551,881 | $ | 599,913 | |||||||||
Net revenue
from external customers: |
|||||||||||||||
Internet
|
$ | 321,605 | $ | 306,213 | $ | 306,129 | |||||||||
Entertainment
|
24,392 | 21,479 | 24,888 | ||||||||||||
Total
|
$ | 345,997 | $ | 327,692 | $ | 331,017 | |||||||||
Income from
operations: |
|||||||||||||||
Internet
|
$ | 76,142 | $ | 64,962 | $ | 34,345 | |||||||||
Entertainment
|
1,140 | (439 | ) | (17,748 | ) | ||||||||||
Total segment
income from operations |
77,282 | 64,523 | 16,597 | ||||||||||||
Unallocated
corporate |
(5,547 | ) | (6,128 | ) | (9,488 | ) | |||||||||
Total
|
$ | 71,735 | $ | 58,395 | $ | 7,109 | |||||||||
Amortization
of acquired intangibles and software (included in income from operations): |
|||||||||||||||
Internet
|
$ | 24,461 | $ | 35,454 | $ | 36,347 | |||||||||
Entertainment
|
| | | ||||||||||||
Unallocated
corporate |
| | | ||||||||||||
Total
|
$ | 24,461 | $ | 35,454 | $ | 36,347 | |||||||||
Depreciation
and other amortization (included in income from operations): |
|||||||||||||||
Internet
|
$ | 4,527 | $ | 4,587 | $ | 4,052 | |||||||||
Entertainment
|
177 | 294 | 450 | ||||||||||||
Unallocated
corporate |
| | | ||||||||||||
Total
|
$ | 4,704 | $ | 4,881 | $ | 4,502 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 | |||||||||||||
Impairment of
goodwill and other assets (included in income from operations): |
|||||||||||||||
Internet
|
$ | | $ | | $ | 6,829 | |||||||||
Entertainment
|
4,660 | 4,000 | 17,602 | ||||||||||||
Total
|
$ | 4,660 | $ | 4,000 | $ | 24,431 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Internet: |
|||||||||||||||
Subscription
based service |
$ | 245,174 | $ | 245,015 | $ | 246,978 | |||||||||
Pay by usage
service |
76,321 | 60,434 | 56,729 | ||||||||||||
Advertising
|
110 | 764 | 2,422 | ||||||||||||
321,605 | 306,213 | 306,129 | |||||||||||||
Entertainment: |
|||||||||||||||
Magazine
|
10,894 | 12,218 | 15,581 | ||||||||||||
Video
entertainment |
10,892 | 6,441 | 6,048 | ||||||||||||
Licensing
|
2,606 | 2,820 | 3,259 | ||||||||||||
24,392 | 21,479 | 24,888 | |||||||||||||
Total
revenues |
$ | 345,997 | $ | 327,692 | $ | 331,017 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Net
revenue: |
|||||||||||||||
United States
|
$ | 178,873 | $ | 177,753 | $ | 192,102 | |||||||||
Europe
|
103,224 | 97,317 | 86,797 | ||||||||||||
Canada
|
17,200 | 15,364 | 16,381 | ||||||||||||
Other
|
46,700 | 37,258 | 35,737 | ||||||||||||
Total
|
$ | 345,997 | $ | 327,692 | $ | 331,017 |
Year |
Operating Leases |
|||||
---|---|---|---|---|---|---|
2011
|
$ | 2,076 | ||||
2012
|
2,125 | |||||
2013
|
2,125 | |||||
2014
|
2,070 |
Year |
Operating Leases | |||||
---|---|---|---|---|---|---|
2015
|
$ | 1,800 | ||||
Thereafter
|
2,217 | |||||
Total
|
$ | 12,413 |
(a) |
On December 28, 2007, Broadstream Capital Partners, Inc. (Broadstream) filed a lawsuit against the Company in the State Superior Court of California, County of Los Angeles, Central District, and the Company subsequently removed the case to the Federal District Court for the Central District of California. The complaint alleged breach of contract, breach of covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud arising out of a document entitled Non-Disclosure Agreement. The complaint alleged, among other things, that Broadstream entered into a Non-Disclosure Agreement with the Company that required Broadstreams prior written consent for the Company to knowingly acquire Various or any of its subsidiaries and that such consent was not obtained. On April 7, 2008, Broadstream filed its First Amended Complaint, which added a new cause of action for intentional interference with prospective economic advantage. On February 20, 2009, Broadstream filed its Third Amended Complaint, which dismisses the allegations of breach of fiduciary duty and constructive fraud. The complaint seeks damages which plaintiff alleges to be in excess of $20 million, plus interest, costs and punitive damages. Broadstream later asserted up to $557 million in damages plus punitive damages. On July 20, 2009, the Company entered into an agreement with Broadstream under which, without admitting liability, the Company agreed to pay Broadstream $3.0 million in $1.0 million installments due no later than July 2009, January 2010 and July 2010. Such payments were timely made. The agreement provides that upon the earlier of twelve months after the Company has securities registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, or eighteen months after the effective date of the agreement, but not later than twelve months following such earlier date, Broadstream must choose either to (i) refile its complaint in Federal District Court provided that it first repay the Company the $3.0 million or (ii) demand arbitration. If Broadstream elects arbitration, the parties have agreed that there will be an arbitration award to Broadstream of at least $10.0 million but not more than $47.0 million. Giving consideration of the limitation of the arbitration award in relation to damages sought in litigation, management had not concluded that it was probable that Broadstream would demand arbitration. Accordingly, no loss had been provided for as a result of entering into the agreement. In the event that Broadstream elected arbitration, at such time the Company would recognize a loss in connection with the matter of $13.0 million to $50.0 million. |
(b) |
On December 23, 2005, Robert Guccione, our former president, filed an action against the Company and some of its officers, among other defendants, in New York State Court for breach of contract, fraud, unjust enrichment, promissory estoppel, failure to pay severance and conspiracy to defraud. The amount of damages requested in the complaint against the Company is approximately $9.0 million and against the officers is in excess of $10.0 million. Some of the counts in the complaint also demand an unspecified amount of damages. Guccione filed an amended complaint on June 5, 2007 to include additional claims relating to ownership of certain United Kingdom, Jersey and Guernsey trademarks and added as a party Penthouse Publications Limited, an entity with no current affiliation with the Company, as party plaintiff. Guccione agreed to dismiss the count for conspiracy to defraud only. Guccione filed a Second Amended Complaint on December 14, 2007 adding General Media International, Inc. (an entity with no current affiliation with the Company) as party plaintiff and a new claim for inducement to breach of contract. The Company filed its motion to dismiss the Second Amended Complaint on January 31, 2008, which was granted in part and denied in part. The court dismissed the claims for unjust enrichment and promissory estoppel. The Company filed its Answer and Affirmative Defenses to the Second Amended Complaint on June 25, 2009. On August 14, 2008, Guccione filed a voluntary petition for Chapter 7 Bankruptcy. Guccione filed a dismissal of the bankruptcy proceedings on November 4, 2009. The Court dismissed the bankruptcy action on November 9, 2009. The settlement agreement between Guccione and his judgment creditors assigns all rights to the New York state court action to his judgment creditors. On January 8, 2010, the Company filed an Amended Answer with counterclaims against Guccione and Penthouse Publications Limited for conversion, breach of fiduciary duty, declaratory relief and indemnification. No specific amount of damages has been requested in the counterclaims. On January 27, 2010, Plaintiffs filed a Reply to the Companys counterclaims. In January and February 2010, certain defendants filed Answers to Plaintiffs Second Amended Complaint with cross-claims against the Company for contribution and indemnification. No specific amount of damages has been requested. In February and March 2010, the Company filed its Answer and Affirmative Defenses to the cross-claims. On October 20, 2010, Guccione passed away. As such, the case is stayed pending substitution of his estate as a party. The Company believes it has meritorious defenses to all claims and intends to vigorously defend the lawsuit. |
(c) |
On November 28, 2006, Antor Media Corporation (Antor) filed a complaint against the Company, its subsidiary, General Media Communications, Inc. (GMCI), and several non-affiliate media/entertainment defendants in the U.S. District Court for the Eastern District of Texas, Texarkana Division, for infringement of a Patent entitled Method and Apparatus for Transmitting Information Recorded on Information Storage Means from a Central Server to Subscribers via a High Data Rate Digital Telecommunications Network. No specific amount of damages has been requested. Injunctive relief is also sought. The Company and its subsidiary filed an Answer, Affirmative Defenses and Counterclaims. The United States Patent and Trademark Office (USPTO) issued a non-final office action rejecting Antors patent claims. Antor filed a response to the office action which added 83 new claims to the original 29 rejected claims. In August 2008, the USPTO issued its final office action sustaining its rejection of the original 29 claims and rejecting the 83 new claims. Antor filed its Petition to Vacate Finality of Office Action on the grounds it introduced new grounds for the rejection. Based on the final office action, the Company, GMCI and all other defendants filed an expedited motion to stay the case. In December 2008, pursuant to an order granting a re-examination proceeding, the USPTO issued a non-final office action again rejecting the original 29 claims and the new 83 claims. In February 2009, Antor filed a response in which it agreed to cancel the 83 new claims previously proposed. On May 11, 2009, the Court entered an Order granting Defendants Motion to Stay as modified. On May 22, 2009, the defendants accepted the terms of the Courts proposed Stipulation regarding the use of prior art at trial and filed their Stipulation. On June 5, 2009, the USPTO issued a Final Office Action rejecting all of the Plaintiffs claims. Plaintiff filed an appeal on July 7, 2009 and an appellate brief on October 8, 2009. On February 18, 2010, the USPTO filed an answer brief. On October 21, 2010, the USPTO Board of Patent Appeals |
entered an order affirming the rejection of Antors claims. On December 21, 2010, Antor filed a request for rehearing which was denied in March 2011. The case will remain stayed pending the appeal. |
(d) |
On or about November 27, 2006, a claimant filed a consumer class action arbitration at Judicial Arbitration and Mediation Services, Inc. or JAMS in San Jose, California, alleging a nationwide class action against Various under a variety of legal theories related to, among other things, representations regarding the number of active users on its internet dating websites, causing the appearance of erroneous member profiles, and a failure to adequately remove or account for alleged erroneous member profiles. The claimant is seeking unspecified damages. Various disputes the claims and intends to defend the arbitration vigorously. |
(e) |
In or about March 2009, a complaint was filed against the Companys subsidiary FriendFinder California, Inc. and other defendants in the State Superior Court of California, County of Los Angeles in connection with their advertising on a free adult content website run by a third party known as Bright Imperial Limited. In April 2009, Various and the Company were added as defendants. The complaint alleges that the defendants aided and abetted Bright Imperial Limited in engaging in below cost competition and unlawful use of loss leaders in violation of California law by providing free, apparently professionally produced adult content. The plaintiff is seeking $10.0 million in damages, trebled to at least $30.0 million, plus injunctive relief and attorneys fees. On May 8, 2009, the Court denied the plaintiffs request for an Order to Show Cause concerning its request for preliminary injunction, citing insufficient evidence among other factors. On May 26, 2009, the Company filed an Anti-SLAPP Motion to Strike the Complaint along with a Motion to Dismiss the claims in the Complaint. On or about July 24, 2009, after the Court granted the Anti-SLAPP motion the plaintiff then stipulated to the form of an Order on the Anti-SLAPP motion that finds in favor of the Company, effectively terminating the case. On August 10, 2009, plaintiff filed his Notice of Appeal to the California Court of Appeal. On January 26, 2011, the California Appellate Court affirmed the trial courts ruling in the Companys favor. |
(f) |
On November 4, 2008, Balthaser Online, Inc. filed a lawsuit for patent infringement against the Company among other defendants, in the U.S. District Court for the Eastern District of Texas, Texarkana Division, seeking unspecified monetary damages as well as injunctive relief. The complaint alleged infringement of Patent entitled Methods, Systems, and Processes for the Design and Creation of Rich-Media Applications via the Internet. The plaintiff filed a first amended complaint naming Various, Inc., FriendFinder California Inc. and Global Alphabet, Inc. as defendants on January 15, 2009. On or about August 28, 2009, pursuant to local rule, the Company served its invalidity contentions. On September 15, 2009, the Court granted the Companys motion to transfer the case to the U.S. District Court for the Northern District of California. The lawsuit was settled on November 30, 2010 for an immaterial amount and the action was dismissed with prejudice. |
(g) |
In or about December 2007, Spark Network Services, Inc. served Various with a complaint for patent infringement seeking unspecified monetary damages as well as injunctive relief. The complaint alleges infringement of a U.S. Patent entitled System for Data Collection and Matching Compatible Profiles. Various moved for a stay of the federal case due to the USPTOs re-examination of the patent at issue and the Federal Court granted the stay. The USPTO issued a final rejection of the patent at issue on September 18, 2009, and the plaintiff filed a notice of appeal on December 17, 2009. In March 2010, the parties entered into a settlement agreement resolving the case and the Federal action was dismissed with prejudice. The settlement did not have a material effect on the Companys financial statements. |
(h) |
On November 5, 2009, Joao Control and Monitoring Systems of Texas, LLC filed a patent infringement lawsuit in the United States District Court for the Eastern District of Texas against the Company and its indirect wholly-owned subsidiary Streamray Inc., and a number of other unrelated adult entertainment companies, alleging infringement of a patent entitled Monitoring Apparatus and Method and seeking unspecified monetary damages as well as injunctive relief. The lawsuit was served on the Company and Streamray Inc. on November 12, 2009. In or about June 2010 the Company filed a motion related to the propriety of the forum |
and Streamray Inc. answered the complaint. On or around July 2010, the parties entered into a settlement agreement resolving the case and the action was dismissed with prejudice. The settlement did not have a material effect on the Companys financial statements. |
(i) |
Effective July 1, 2008, Various registered in the European Union and on July 29, 2008, began separately charging VAT to its customers. For periods prior thereto, Various recorded a liability for VAT and related interest and penalties in connection with revenue from internet services derived from its customers in the various European Union countries. Various reduced its VAT liability for periods prior to July 1, 2008 in the countries where the liability was either paid in full or payments were made pursuant to settlement and payment plans or where determinations were made that payments were not due. Various continues to negotiate settlements of the liabilities or challenge the liability related to VAT for periods prior to July 1, 2008 (see Note I). |
(j) |
On May 19, 2009 representatives for Summit Trading Limited (Summit) sent a letter to the Companys outside legal counsel, alleging that the Company, Interactive Brand Development, Inc., (an owner of the Companys Series B Common Stock) and entities affiliated with two of the Companys principal stockholders defrauded Summit of financial compensation for services provided to the Companys predecessor entity, General Media, Inc. Among the claims, Summit asserted bad faith, breach of contract and fraud by the Companys management and the Company, and claimed that it is owed an equity interest in the Company, as well as compensatory, punitive and exemplary damages in excess of $500 million. Management believes that the allegations stated in the letter are vague and lack factual basis and merit. Summit has not taken any legal action against the Company. Should Summit take legal action, the Company would vigorously defend the lawsuit. |
(k) |
On November 16, 2010, Patent Harbor, LLC filed a Complaint for patent infringement against, among others, Penthouse Digital Media Productions Inc. (PDMP), in the United States District Court for the Eastern District of Texas. The Complaint alleges an infringement of a U.S. Patent entitled Apparatus and Method for Assembling Content Addressable Video. No specific amount of damages has been requested. However, on November 16, 2010, the Company received a settlement demand from plaintiff in the amount of $800,000. Plaintiff later lowered its demand to $500,000. On January 28, 2011, the Company filed an Answer, Affirmative Defenses and Counterclaims. On February 25, 2011, plaintiff filed its Answer to the Counterclaims. The Company has no insurance coverage for patent infringement claims. The Company disputes the allegations and believes it has meritorious defenses, and plans to vigorously defend the allegations. |
(l) |
On April 13, 2011, Facebook, Inc., or Facebook, filed a complaint against the Company and certain of its subsidiaries in the U.S. District Court for the Northern District of California, alleging trademark infringement with regard to the use of the terms face book of sex. The Complaint contains causes of action for: trademark dilution, false designation of origin, trademark infringement, violation of the Anti-Cybersquatting Consumer Protection Act, and for unfair competition. The Complaint also seeks a declaratory judgment that Facebooks use of friend finder on its website is a descriptive fair use that does not infringe Various trademark rights in the FRIENDFINDER mark. No specific amount of damages has been sought. However, the Complaint requests monetary relief, injunctive relief, punitive damages, cancellation of the FRIENDFINDER marks, attorneys fees, other equitable relief, and costs among other things. The Company intends to vigorously defend the lawsuit. |
The Company currently is a party to other legal proceedings and claims. While management presently believes that the ultimate outcome of these proceedings, including the ones discussed above, individually and in the aggregate, will not have a material adverse effect on the Companys financial position, cash flows, or overall trends in results of operations, litigation and arbitration is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting the Company from selling one or more products or services. Were an unfavorable ruling to occur there exists the possibility of a material adverse impact on the business or results |
of operations for the period in which the ruling occurs or future periods. Other than as disclosed above, the Company is unable to estimate the possible loss or range of loss which may result from pending legal proceedings or claims. |
|
to the extent a present or former director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 or in the defense of any claim, issue or matter therein, such person shall be indemnified against expenses, including attorneys fees, actually and reasonably incurred by such person in connection therewith; |
|
the indemnification and advancement of expenses provided for pursuant to Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise; and |
|
the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such persons status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145. |
1. |
any amount paid with respect to a claim, issue or matter for which the agent has been adjudged liable to the corporation and its shareholders in the performance of his or her duty, except for any expenses (exclusive of judgment or settlement amount) specifically authorized by the court in which the proceeding is or was pending in accordance with statutory requirements; |
2. |
any amount paid by the agent in settling or otherwise disposing of a threatened or pending lawsuit by the corporation, with or without court approval; and |
3. |
any expenses incurred in defending a threatened or pending action that is settled or otherwise disposed of without court approval. |
1. |
indemnify a person; |
2. |
pay in advance or reimburse expenses incurred by a person; and |
3. |
purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person. |
(a) |
Exhibits Required by Item 601 of Regulation S-K. |
Exhibit Number |
Description |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
3.4 |
Amended and Restated Articles of Incorporation of FriendFinder Networks Inc., which became effective on January 25, 2010(1) |
|||||||||
3.5 |
Amended and Restated Bylaws of FriendFinder Networks Inc.(1) |
|||||||||
4.1 |
Specimen of Common Stock Certificate** |
|||||||||
4.20 |
Intercreditor and Subordination Agreement, dated as of October 27, 2010, by and among INI and the Company as Co-Issuers, the Guarantors party
thereto, and U.S. Bank, N.A. as Trustee.(1) |
|||||||||
4.21 |
Second Lien Intercreditor Agreement, dated as of October 27, 2010, by and among INI and the Company as Co-Issuers, the Guarantors party
thereto, and U.S. Bank, N.A. as Trustee.(1) |
|||||||||
4.35 |
Form
of 14% Senior Secured Note, Series A, Due 2013 (filed with Exhibit 4.66) |
|||||||||
4.36 |
Form
of 14% Senior Secured Note, Series B, Due 2013 (filed with Exhibit 4.66) |
|||||||||
4.37 |
Form
of Cash Pay Secured Note, Series A, Due 2013 (filed with Exhibit 4.68) |
|||||||||
4.38 |
Form
of Cash Pay Secured Note, Series B, Due 2013 (filed with Exhibit 4.68) |
|||||||||
4.66 |
Indenture, dated as of October 27, 2010, by and among INI and the Company as Co-Issuers, the Guarantors party thereto, and U.S. Bank, N.A. as
Trustee relating to the 14% Senior Secured Notes due 2013(1) |
|||||||||
4.67 |
Indenture, dated as of October 27, 2010, by and among INI and the Company as Co-Issuers, the Guarantors party thereto, and U.S. Bank, N.A. as
Trustee relating to the 11.5% Convertible Non-Cash Pay Secured Notes due 2014(1) |
|||||||||
4.68 |
Indenture, dated as of October 27, 2010, by and among INI and the Company as Co-Issuers, the Guarantors party thereto, and U.S. Bank, N.A. as
Trustee relating to the 14% Cash Pay Secured Notes due 2013(1) |
|||||||||
4.69 |
Security and Pledge Agreement(1) |
|||||||||
4.70 |
Second Lien Cash Pay Security and Pledge Agreement(1) |
|||||||||
4.71 |
Form
of Non-Cash Pay Secured Note, Series A, Due 2014 (filed with Exhibit 4.67) |
|||||||||
4.72 |
Form
of Non-Cash Pay Secured Note, Series B, Due 2014 (filed with Exhibit 4.67) |
|||||||||
5.1 |
Opinion of Akerman Senterfitt** |
|||||||||
5.2 |
Opinion of Brownstein Hyatt Farber Schreck, LLP as to matters of Nevada law** |
Exhibit Number |
Description | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
5.3 |
Opinion of Brownstein Hyatt Farber Schreck, LLP as to matters of California law** |
|||||||||
9.1 |
Voting Agreement dated July 6, 2005, by and among Barry Florescue, Marc H. Bell and Daniel C. Staton(1) |
|||||||||
10.1 |
Form
of Indemnification Agreement between FriendFinder Networks Inc. and its Directors and Officers(1) |
|||||||||
10.2 |
Amended and Restated Management Agreement, dated as of November 1, 2010, by and between the Company and Bell & Staton, Inc.(1) |
|||||||||
10.3 |
Form
of Employment Agreement, dated March , 2011, by and between FriendFinder Networks Inc. and Daniel C. Staton to be effective upon closing of this
offering(1) |
|||||||||
10.4 |
Form
of Employment Agreement, dated March , 2011, by and between FriendFinder Networks Inc. and Marc H. Bell to be effective upon closing of this
offering(1) |
|||||||||
10.5 |
Securities Purchase Agreement dated July 6, 2005, by and among Penthouse Media Group Inc., PET Capital Partners II LLC and Absolute Return
Europe Fund(1) |
|||||||||
10.6 |
Note
Exchange Agreement dated August 17, 2005, by and among Penthouse Media Group Inc., PET Capital Partners LLC and Absolute Return Europe Fund(1) |
|||||||||
10.7 |
Securities Purchase Agreement dated August 10, 2006, by and between Penthouse Media Group Inc. and PET Capital Partners II LLC(1) |
|||||||||
10.8 |
Securities Purchase Agreement dated July 23, 2007, by and among Penthouse Media Group Inc. and the Investors named therein(1) |
|||||||||
10.9 |
Escrow Agreement dated July 23, 2007, by and among Penthouse Media Group Inc., the Investors named therein and Moses & Singer LLP as the
Escrow Agent(1) |
|||||||||
10.10 |
Letter to Absolute Return Europe Fund re: Penthouse Media Group Inc. Series B Offering(1) |
|||||||||
10.11 |
Letter to Florescue Family Corporation re: Penthouse Media Group Inc. Series B Offering(1) |
|||||||||
10.12 |
Letter to Mr. Russell H. Frye re: Penthouse Media Group Inc. Series B Offering(1) |
|||||||||
10.13 |
Assignment Agreement dated December 6, 2007, concerning Stock Purchase Agreement dated September 21, 2007(1) |
|||||||||
10.14 |
Independent Contractor Agreement dated September 21, 2007, by and between Hinok Media Inc. and Various, Inc.(1) |
|||||||||
10.15 |
Amendment to Independent Contractor Agreement dated May 12, 2008, by and between Hinok Media Inc. and Various, Inc.(1) |
|||||||||
10.16 |
Amendment No. 2 to Independent Contractor Agreement, Assignment and Limited Waiver dated October 8, 2009, by and between Hinok Media Inc.,
YouMu, Inc. and Various, Inc.(1) |
|||||||||
10.17 |
Amendment to Letter Agreement, dated October 8, 2009 by and among the Company, Andrew B. Conru Trust Agreement, Mapstead Trust and Messrs.
Conru, Mapstead, Bell and Staton(1) |
|||||||||
10.18 |
Letter Agreement relating to confirmation of certain consent and exchange fees, by and between the Company and Andrew B. Conru Trust Agreement
dated October 27, 2010(1) |
|||||||||
10.19 |
Letter Agreement relating to confirmation of certain consent and exchange fees, by and between the Company and Mapstead Trust dated October
27, 2010(1) |
|||||||||
10.20 |
Subscription Agreement for Non-Cash Pay Secured Notes due 2014, dated as of October 27, 2010(1) |
|||||||||
10.21 |
Employee Proprietary Information Agreement dated September 21, 2007, by and between Andrew B. Conru and Various, Inc.(1) |
|||||||||
10.22 |
Independent Contractor Agreement dated September 21, 2007, by and between Legendary Technology Inc. and Various, Inc.(1) |
|||||||||
10.23 |
Amendment No. 1 to Independent Contractor Agreement dated October 8, 2009, by and between Legendary Technology Inc. and Various, Inc.(1) |
|||||||||
10.24 |
Employee Proprietary Information Agreement dated September 21, 2007, by and between Lars Mapstead and Various, Inc.(1) |
Exhibit Number |
Description | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
10.25 |
Employment Agreement dated September 6, 2007, by and between Penthouse Media Group Inc. and Ezra Shashoua(1) |
|||||||||
10.26 |
Consulting Agreement dated September 11, 2007, by and between Penthouse Media Group Inc. and Ezra Shashoua(1) |
|||||||||
10.27 |
Amended and Restated Employment Agreement, dated July 8, 2008, by and between Penthouse Media Group Inc. and Ezra Shashoua(1) |
|||||||||
10.28 |
Second Amended and Restated Employment Offer, dated as of April 1, 2010, by and between the Company and Ezra Shashoua(1) |
|||||||||
10.29 |
Form
of Employment Agreement, effective as of March , 2011, by and between the Company and Anthony Previte(1) |
|||||||||
10.30 |
Employment Agreement, effective as of January 1, 2011, by and between the Company and Robert Brackett(1) |
|||||||||
10.31 |
Bonus
Award Agreement dated November 13, 2007 by and between Various, Inc. and Robert Brackett(1) |
|||||||||
10.32 |
Amendment to Bonus Award Agreement dated December 5, 2007, by and between Various, Inc. and Robert Brackett(1) |
|||||||||
10.33 |
Employee Proprietary Information Agreement dated November 9, 2007, by and between Various, Inc. and Robert Brackett(1) |
|||||||||
10.34 |
Consulting Agreement dated December 11, 2006, by and between Penthouse Media Group Inc. and Starsmith LLC(1) |
|||||||||
10.35 |
Fourth Amendment to Lease, dated November 1, 2010, by and between 6800 Broken Sound LLC and FriendFinder Networks Inc.(1) |
|||||||||
10.36 |
Lease
dated May 6, 2008 by and between 20 Broad Company LLC and Penthouse Media Group Inc.(1) |
|||||||||
10.37 |
Lease
dated April 24, 2009 by and between NBP Partners I, LLC and Streamray Studios, Inc.(1) |
|||||||||
10.38 |
Lease
dated April 21, 2005 by and between KNK Properties, LLC and Streamray Inc.(1) |
|||||||||
10.39 |
Modification of Lease, dated September 1, 2005, by and between KNK Properties, LLC and Streamray Inc.(1) |
|||||||||
10.40 |
Modification of Lease, dated April 1, 2007, by and between KNK Properties, LLC and Streamray Inc.(1) |
|||||||||
10.41 |
Modification of Lease, dated May 1, 2009, by and between KNK Properties, LLC and Streamray Inc.(1) |
|||||||||
10.42 |
Modification of Lease, dated October 14, 2009, by and between KNK Properties, LLC and Streamray, Inc.(1) |
|||||||||
10.43 |
Lease
dated May 9, 2008, between Batton Associates, LLC, Lessor and Various, Inc., Lessee(1) |
|||||||||
10.44 |
Commercial Lease Agreement dated December 14, 2009 by and between Escondido Partners II, LLC and Steamray Inc.(1) |
|||||||||
10.45 |
Amended and Restated FriendFinder Networks Inc. 2008 Stock Option Plan(1) |
|||||||||
10.46 |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Employees(1) |
|||||||||
10.47 |
Form
of FriendFinder Networks Inc. Stock Option Agreement Non-ISO(1) |
|||||||||
10.48 |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Directors(1) |
|||||||||
10.49 |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Consultants(1) |
|||||||||
10.50 |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Board Consultants(1) |
|||||||||
10.51 |
FriendFinder Networks Inc. 2009 Restricted Stock Plan(1) |
|||||||||
10.52 |
Form
of FriendFinder Networks Inc. 2009 Restricted Stock Plan Restricted Stock Grant Agreement(1) |
|||||||||
10.53 |
Agreement, dated as of December 17, 2009, by and between Daniel C. Staton and FriendFinder Networks Inc.(1) |
Exhibit Number |
Description | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
10.54 |
Agreement, dated as of December 17, 2009, by and between Marc H. Bell and FriendFinder Networks Inc.(1) |
|||||||||
10.55 |
Agreement, dated as of December 17, 2009, by and between Andrew B. Conru Trust Agreement and FriendFinder Networks Inc.(1) |
|||||||||
10.56 |
Agreement, dated as of December 17, 2009, by and between Mapstead Trust, created on April 16, 2002 and FriendFinder Networks Inc.(1) |
|||||||||
12.1 |
Statement re Computation of Ratios* |
|||||||||
21.1 |
List
of Subsidiaries* |
|||||||||
23.1 |
Consent of EisnerAmper LLP* |
|||||||||
23.2 |
Consent of Akerman Senterfitt (included in Exhibit 5.1)** |
|||||||||
23.3 |
Consent of Brownstein Hyatt Farber Schreck, LLP (included in Exhibit 5.2)** |
|||||||||
23.4 |
Consent of Brownstein Hyatt Farber Schreck, LLP (included in Exhibit 5.3)** |
|||||||||
24.1 |
Powers of Attorney (included on signature pages)* |
|||||||||
25.1 |
Statement of Eligibility of Trustee* |
|||||||||
25.2 |
Statement of Eligibility of Trustee* |
|||||||||
25.3 |
Statement of Eligibility of Trustee* |
|||||||||
99.1 |
Form
of Letter of Transmittal for the 14% Senior Secured Notes due 2013** |
|||||||||
99.2 |
Form
of Notice of Guaranteed Delivery for the 14% Senior Secured Notes due 2013** |
|||||||||
99.3 |
Form
of Letter to Brokers for the 14% Senior Secured Notes due 2013** |
|||||||||
99.4 |
Form
of Letter to Clients for the 14% Senior Secured Notes due 2013** |
|||||||||
99.5 |
Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for the 14% Senior Secured Notes due
2013** |
|||||||||
99.6 |
Form
of Letter of Transmittal for the 11.5% Convertible Non-Cash Pay Secured Notes due 2014** |
|||||||||
99.7 |
Form
of Notice of Guaranteed Delivery for the 11.5% Convertible Non-Cash Pay Secured Notes due 2014** |
|||||||||
99.8 |
Form
of Letter to Brokers for the 11.5% Convertible Non-Cash Pay Secured Notes due 2014** |
|||||||||
99.9 |
Form
of Letter to Clients for the 11.5% Convertible Non-Cash Pay Secured Notes due 2014** |
|||||||||
99.10 |
Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for the 11.5% Convertible Non-Cash Pay Secured Notes due
2014** |
|||||||||
99.11 |
Form
of Letter of Transmittal for the 14% Cash Pay Secured Notes due 2013** |
|||||||||
99.12 |
Form
of Notice of Guaranteed Delivery for the 14% Cash Pay Secured Notes due 2013** |
|||||||||
99.13 |
Form
of Letter to Brokers for the 14% Cash Pay Secured Notes due 2013** |
|||||||||
99.14 |
Form
of Letter to Clients for the 14% Cash Pay Secured Notes due 2013** |
|||||||||
99.15 |
Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for the 14% Cash Pay Secured Notes due
2013** |
* |
Filed herewith. |
** |
To be filed by a pre-effective amendment to this Registration Statement on Form S-4. |
(1) |
Incorporated by reference to the exhibit with the corresponding number filed with the Form S-1 (File No. 333-156414) or any of the amendments filed thereto. |
(b) |
Financial Statement Schedules required by Regulation S-X and Item 14(e), Item 17(a) or Item 17(b)(9). |
Description of Financial Statement Schedules |
Page Number |
|||||
---|---|---|---|---|---|---|
Schedule II
Valuation and Qualifying Accounts |
II-14 |
(c) |
Not applicable. |
Balance at Beginning of Period |
Additions Charged to Costs and Expenses |
Deductions Charged to Other Accounts |
Deductions |
Balance at End of Period |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description |
|||||||||||||||||||||||
Year Ended
December 31, 2008: |
|||||||||||||||||||||||
Allowance for
doubtful accounts |
$ | 1,368 | $ | 1505 | $ | | $ | 363 | (a) | $ | 2,510 | ||||||||||||
Deferred tax
asset valuation allowance |
4,782 | 4,842 | | | 9,624 | ||||||||||||||||||
Year Ended
December 31, 2009: |
|||||||||||||||||||||||
Allowance for
doubtful accounts |
2,510 | 249 | | 607 | (a) | 2,152 | |||||||||||||||||
Deferred tax
asset valuation allowance |
9,624 | 4,881 | 2,557 | (b) | | 11,948 | |||||||||||||||||
Year Ended
December 31, 2010: |
|||||||||||||||||||||||
Allowance for
doubtful accounts |
2,152 | 839 | | 755 | (a) | 2,236 | |||||||||||||||||
Deferred tax
asset valuation allowance |
11,948 | 16,679 | | | 28,627 |
(a) |
Accounts receivable amounts considered uncollectible and removed from accounts receivable by reducing the allowance for doubtful accounts |
(b) |
Reduction of the valuation allowance and corresponding increase in deferred tax liability due to elimination of United Kingdom VAT liability. |
(i)
|
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Chairman of the
Board |
July 29,
2011 |
||||||||
/s/ Barry W.
Florescue Barry W. Florescue |
Director |
July 29,
2011 |
||||||||
/s/ Robert B.
Bell Robert B. Bell |
Director |
July 29,
2011 |
||||||||
/s/ James
LaChance James LaChance |
Director |
July 29,
2011 |
||||||||
/s/ Jason
Smith Jason Smith |
Director |
July 29,
2011 |
||||||||
/s/ Toby E.
Lazarus Toby E. Lazarus |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Anthony Previte Name: Anthony Previte Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Anthony
Previte Anthony Previte |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Treasurer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial and Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President and Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial and Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ David Bloom Name: David Bloom Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ David
Bloom David Bloom |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Paul Asher Name: Paul Asher Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Paul
Asher Paul Asher |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
President &
Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ David Bloom Name: David Bloom Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ David
Bloom David Bloom |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Anthony Previte Name: Anthony Previte Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Anthony
Previte Anthony Previte |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Treasurer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Paul Asher Name: Paul Asher Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Paul
Asher Paul Asher |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Anthony Previte Name: Anthony Previte Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Anthony
Previte Anthony Previte |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Treasurer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ Paul Asher Name: Paul Asher Title: Manager & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Paul
Asher Paul Asher |
Manager &
Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ David Bloom Name: David Bloom Title: President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ David
Bloom David Bloom |
President &
Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Anthony Previte Name: Anthony Previte Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Anthony
Previte Anthony Previte |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Anthony Previte Name: Anthony Previte Title: Chief Executive Officer, President & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Anthony
Previte Anthony Previte |
Chief Executive
Officer, President & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Treasurer (Principal Financial & Accounting Officer) |
July 29,
2011 |
By: |
/s/ Marc H. Bell Name: Marc H. Bell Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer & Director (Principal Executive Officer) |
July 29,
2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial & Accounting Officer) |
July 29,
2011 |
||||||||
/s/ Daniel C.
Staton Daniel C. Staton |
Director |
July 29,
2011 |
By: |
/s/ David Bloom Name: David Bloom Title: Chief Executive Officer & Director |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ David
Bloom |