**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**(MarkOne)**
| **x**      | ** ** | **Quarterly Report Pursuant to Section 13 or 15(d)  of the Securities Exchange Act of 1934**  |
|------------|------------|-----------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                    |
| ** ** | ** ** | **For the  quarterly period ended March 31, 2007**                                            |
| ** ** | ** ** | ** **                                                                                    |
| **o**      | ** ** | **Transition Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |

 

**For the transition periodfrom                   to                   **

**Commission file number: 000-17287**

**OutdoorChannel Holdings, Inc.**

(Exact name of Registrant as specified in its charter)

| **Delaware**                       |   | **33-0074499**                        |
|------------------------------------|--------|---------------------------------------|
| (State or other  Jurisdiction      |   | (IRS Employer  Identification Number) |
| of incorporation  or organization) |   |                                  |

 

**43445Business Park Drive, Suite 103**

**Temecula,California 92590**

(Address and zip code of principal executive offices)

**(951)699-6991**

(Issuer’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed sincelast report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past90 days.  xYes     oNo

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o |   | Accelerated filer x |   | Non-accelerated filer o |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  oYes     x No

Indicate the numberof shares outstanding of each of the issuer’s classes of common stock, as ofthe latest practicable date:
| Class                           | ** ** | **Number of Shares Outstanding at April 30,  2007** |
|---------------------------------|------------|-----------------------------------------------------|
| Common Stock,  $0.001 par value |       | 25,832,613                                          |

 

 

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**OUTDOORCHANNEL HOLDINGS, INC. AND SUBSIDIARIES**

**QuarterlyReport on Form 10-Q**

**For The Period Ended March 31, 2007**

**Table of Contents**
|                | ** ** | **Part  I. Financial Information**                                                                                  |   |   |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------|--------|--------|
|           |       |                                                                                                                |   |   |
| **Item  1.**   |       | Financial  Statements                                                                                               |   |   |
|           |       |                                                                                                                |   |   |
|           |       | Condensed  Consolidated Balance Sheets as of March 31, 2007 (Unaudited) and December 31,  2006                      |   |   |
|           |       |                                                                                                                |   |   |
|           |       | Unaudited Condensed  Consolidated Statements of Operations for the Three Months Ended March 31,  2007 and 2006      |   |   |
|           |       |                                                                                                                |   |   |
|           |       | Unaudited Condensed  Consolidated Statement of Stockholders’ Equity for the Three Months Ended  March 31, 2007 |   |   |
|           |       |                                                                                                                |   |   |
|           |       | Unaudited Condensed  Consolidated Statements of Cash Flows for the Three Months Ended March 31,  2007 and 2006      |   |   |
|           |       |                                                                                                                |   |   |
|           |       | Notes  to Unaudited Condensed Consolidated Financial Statements                                                     |   |   |
|           |       |                                                                                                                |   |   |
| **Item 2.**    |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         |   |   |
|           |       |                                                                                                                |   |   |
|           |       | Recent Accounting  Developments                                                                                     |   |   |
|           |       |                                                                                                                |   |   |
| **Item 3.**    |       | Quantitative  and Qualitative Disclosures About Market Risk                                                         |   |   |
|           |       |                                                                                                                |   |   |
| **Item 4.**    |       | Controls and  Procedures                                                                                            |   |   |
|           |       |                                                                                                                |   |   |
|           | ** ** | **Part II. Other  Information**                                                                                     |   |   |
|           |       |                                                                                                                |   |   |
| **Item 1.**    |       | Legal Proceedings                                                                                                   |   |   |
|           |       |                                                                                                                |   |   |
| **Item 1A.**   |       | Risk  Factors                                                                                                       |   |   |
|           |       |                                                                                                                |   |   |
| **Item 2.**    |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                                        |   |   |
|           |       |                                                                                                                |   |   |
| **Item 3.**    |       | Defaults Upon  Senior Securities                                                                                    |   |   |
|           |       |                                                                                                                |   |   |
| **Item 4.**    |       | Submission of  Matters to a Vote of Security Holders                                                                |   |   |
|           |       |                                                                                                                |   |   |
| **Item 5.**    |       | Other Information                                                                                                   |   |   |
|           |       |                                                                                                                |   |   |
| **Item  6.**   |       | Exhibits                                                                                                            |   |   |
|           |       |                                                                                                                |   |   |
| **Signatures** |       |                                                                                                                |   |   |

 

* * *

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**PART I—FINANCIAL INFORMATION**

**ITEM 1.****  Financial Statements.**

**OUTDOOR CHANNEL HOLDINGS, INC. ANDSUBSIDIARIES**

**Condensed Consolidated Balance Sheets**

(In thousands, except per share data)
| ** **                                                                                                        | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                        | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                        |       |                     |       |                        |       |
| Current assets:                                                                                                   |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                                        |       | $                        | 32,498     |                        | $          | 15,447 |   |
| Investment in  available-for-sale securities                                                                      |       | 31,588                   |       | 42,144                      |       |
| Accounts  receivable, net of allowance for doubtful accounts of $218 and $208                                     |       | 6,523                    |       | 6,845                       |       |
| Income tax  refund receivable                                                                                     |       | 222                      |       | 2,299                       |       |
| Deferred tax  assets, net                                                                                         |       | 606                      |       | 592                         |       |
| Prepaid  programming costs                                                                                        |       | 2,466                    |       | 2,713                       |       |
| Other current  assets                                                                                             |       | 1,012                    |       | 929                         |       |
| Total current  assets                                                                                             |       | 74,915                   |       | 70,969                      |       |
|                                                                                                              |       |                     |       |                        |       |
| Property, plant and  equipment at cost, net:                                                                      |       |                     |       |                        |       |
| Membership  division                                                                                              |       | 3,352                    |       | 3,352                       |       |
| Outdoor Channel                                                                                                   |       | 12,173                   |       | 12,445                      |       |
| Property, plant  and equipment, net                                                                               |       | 15,525                   |       | 15,797                      |       |
| Amortizable intangible  assets, net                                                                               |       | 680                      |       | 820                         |       |
| Goodwill                                                                                                          |       | 44,457                   |       | 44,457                      |       |
| Deferred tax assets,  net                                                                                         |       | 13,615                   |       | 13,775                      |       |
| Deposits and other  assets                                                                                        |       | 2,171                    |       | 2,139                       |       |
| Totals                                                                                                            |       | $                        | 151,363    |                        | $          | 147,957 |   |
|                                                                                                              |       |                     |       |                        |       |
| **Liabilities  and Stockholders’ Equity**                                                                    | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                              |       |                     |       |                        |       |
| Accounts payable  and accrued expenses                                                                            |       | $                        | 3,604      |                        | $          | 2,902 |   |
| Accrued  severance payments                                                                                       |       | 284                      |       | 341                         |       |
| Current portion  of deferred revenue                                                                              |       | 249                      |       | 225                         |       |
| Customer  deposits                                                                                                |       | 568                      |       | 155                         |       |
| Total current liabilities                                                                                         |       | 4,705                    |       | 3,623                       |       |
|                                                                                                              |       |                     |       |                        |       |
| Accrued severance  payments, net of current portion                                                               |       | 41                       |       | 44                          |       |
| Deferred revenue, net  of current portion                                                                         |       | 1,968                    |       | 1,972                       |       |
| Deferred satellite rent  obligations                                                                              |       | 333                      |       | 344                         |       |
| Total  liabilities                                                                                                |       | 7,047                    |       | 5,983                       |       |
|                                                                                                              |       |                     |       |                        |       |
| Commitments and contingencies                                                                                     |       |                     |       |                        |       |
| Stockholders’ equity:                                                                                        |       |                     |       |                        |       |
| Preferred stock;  25,000 shares authorized; none issued                                                           |       | —                   |       | —                      |       |
| Common stock,  $0.001 par value; 75,000 shares authorized:   25,843 and 25,507 shares issued and outstanding |       | 26                       |       | 26                          |       |
| Additional  paid-in capital                                                                                       |       | 166,994                  |       | 164,589                     |       |
| Accumulated  other comprehensive income:                                                                          |       |                     |       |                        |       |
| Net unrealized  gains on available-for-sale securities                                                            |       | 47                       |       | 48                          |       |
| Total  accumulated other comprehensive income                                                                     |       | 47                       |       | 48                          |       |
| Accumulated  deficit                                                                                              |       | (22,751                  | )          | (22,689                     | )          |
| Total  stockholders’ equity                                                                                  |       | 144,316                  |       | 141,974                     |       |
| Totals                                                                                                            |       | $                        | 151,363    |                        | $          | 147,957 |   |

 

See Notes toUnaudited Condensed Consolidated Financial Statements.

3

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**OUTDOORCHANNEL HOLDINGS, INC. AND SUBSIDIARIES**

**Unaudited Condensed ConsolidatedStatements of Operations**

(In thousands, except per share data)
| ** **                                                                     | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Revenues:                                                                      |       |                                             |       |   |   |
| Advertising                                                                    |       | $                                                | 6,048      |   | $ | 5,685 |   |
| Subscriber fees                                                                |       | 4,749                                            |       | 4,383 |   |
| Membership  income                                                             |       | 1,129                                            |       | 1,221 |   |
|                                                                           |       |                                             |       |   |   |
| Total revenues                                                                 |       | 11,926                                           |       | 11,289 |   |
|                                                                           |       |                                             |       |   |   |
| Cost of services:                                                              |       |                                             |       |   |   |
| Programming                                                                    |       | 1,474                                            |       | 1,544 |   |
| Satellite  transmission fees                                                   |       | 596                                              |       | 638 |   |
| Production and  operations                                                     |       | 1,473                                            |       | 1,205 |   |
| Other direct  costs                                                            |       | 208                                              |       | 208 |   |
|                                                                           |       |                                             |       |   |   |
| Total costs  of  services                                                 |       | 3,751                                            |       | 3,595 |   |
|                                                                           |       |                                             |       |   |   |
| Other expenses:                                                                |       |                                             |       |   |   |
| Advertising                                                                    |       | 736                                              |       | 2,162 |   |
| Selling, general  and administrative                                           |       | 7,467                                            |       | 5,544 |   |
| Depreciation and  amortization                                                 |       | 773                                              |       | 673 |   |
|                                                                           |       |                                             |       |   |   |
| Total other  expenses                                                          |       | 8,976                                            |       | 8,379 |   |
|                                                                           |       |                                             |       |   |   |
| Loss from operations                                                           |       | (801                                             | )          | (685 | ) |
|                                                                           |       |                                             |       |   |   |
| Interest expense                                                               |       | —                                           |       | (78 | ) |
|                                                                           |       |                                             |       |   |   |
| Other income                                                                   |       | 703                                              |       | 623 |   |
|                                                                           |       |                                             |       |   |   |
| Loss before income  taxes                                                      |       | (98                                              | )          | (140 | ) |
|                                                                           |       |                                             |       |   |   |
| Income tax provision  (benefit)                                                |       | (36                                              | )          | 17 |   |
|                                                                           |       |                                             |       |   |   |
| Net loss                                                                       |       | $                                                | (62        | ) | $ | (157 | ) |
|                                                                           |       |                                             |       |   |   |
| Loss per common share —  basic and diluted                                |       | $                                                | (0.00      | ) | $ | (0.01 | ) |
|                                                                           |       |                                             |       |   |   |
| Weighted average number of common shares outstanding — basic and  diluted |       | 25,273                                           |       | 24,462 |   |

 

See Notes toUnaudited Condensed Consolidated Financial Statements.

4

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**OUTDOORCHANNEL HOLDINGS, INC. AND SUBSIDIARIES**

**Unaudited Condensed ConsolidatedStatement of Stockholders’ Equity**

**Forthe Three Months Ended March 31, 2007**

(In thousands)
| ** **                                                                                                             | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | **Accumulated**        | ** ** | ** **  | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|---------------------------------------|------------|------------------------|------------|-------------|------------|
| ** **                                                                                                             | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**                           | ** ** | **Income (Loss)** | ** ** | **Deficit** | ** ** | **Total** | ** ** |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Balance, January 1,  2007                                                                                              |       | 25,507                |       | $                       | 26         |                                  | $          | 164,589                |       | $           | 48         |   | $ | (22,689 | ) | $ | 141,974 |   |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Comprehensive loss:                                                                                                    |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Net loss                                                                                                               |       |                  |       |                    |       |                                  |       |                   |       | (62         | )          | (62 | ) |
| Effect of change  in fair value of available-for-sale securities, net of deferred taxes                                |       |                  |       |                    |       |                                  |       | (1                     | )          |        |       | (1 | ) |
| Total  comprehensive loss                                                                                              |       |                  |       |                    |       |                                  |       |                   |       |        |       | (63 | ) |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Common stock issued  upon exercise of stock options                                                                    |       | 332                   |       |                    |       | 446                                   |       |                   |       |        |       | 446 |   |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Issuance of restricted  stock to employees and service providers for services to be rendered, net of  forfeited shares |       | 20                    |       |                    |       |                                  |       |                   |       |        |       |   |   |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Stock-based employee  and service provider compensation expense                                                        |       |                  |       |                    |       | 2,309                                 |       |                   |       |        |       | 2,309 |   |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Purchase and retirement  of treasury stock related to employee and service provider stock-based  compensation activity |       | (16                   | )          |                    |       | (167                                  | )          |                   |       |        |       | (167 | ) |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Change in estimate of  tax benefit from exercise of stock options                                                      |       |                  |       |                    |       | (183                                  | )          |                   |       |        |       | (183 | ) |
|                                                                                                                   |       |                  |       |                    |       |                                  |       |                   |       |        |       |   |   |
| Balance, March 31, 2007                                                                                                |       | 25,843                |       | $                       | 26         |                                  | $          | 166,994                |       | $           | 47         |   | $ | (22,751 | ) | $ | 144,316 |   |

 

See notes tounaudited condensed consolidated financial statements.

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**OUTDOORCHANNEL HOLDINGS, INC. AND SUBSIDIARIES**

**Unaudited Condensed ConsolidatedStatements of Cash Flows**

(In thousands)
| ** **                                                                                                | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Operating activities:                                                                                     |       |                                             |       |   |   |
| Net loss                                                                                                  |       | $                                                | (62        | ) | $ | (157 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities:                          |       |                                             |       |   |   |
| Depreciation and  amortization                                                                            |       | 889                                              |       | 676 |   |
| Provision for  doubtful accounts                                                                          |       | 60                                               |       | 67 |   |
| Stock-based  employee and service provider compensation                                                   |       | 2,309                                            |       | 815 |   |
| Deferred tax  provision (benefit), net                                                                    |       | (36                                              | )          | 17 |   |
| Tax benefits  from exercise of stock options in excess of recognized expense                              |       | —                                           |       | (651 | ) |
|                                                                                                      |       |                                             |       |   |   |
| Changes in  operating assets and liabilities:                                                             |       |                                             |       |   |   |
| Accounts  receivable                                                                                      |       | 262                                              |       | (1,560 | ) |
| Income tax  refund receivable                                                                             |       | 2,077                                            |       | — |   |
| Prepaid  programming costs                                                                                |       | 247                                              |       | (194 | ) |
| Other current  assets                                                                                     |       | (83                                              | )          | (388 | ) |
| Deposits and  other assets                                                                                |       | (147                                             | )          | (69 | ) |
| Accounts payable  and accrued expenses                                                                    |       | 702                                              |       | 638 |   |
| Deferred revenue                                                                                          |       | 20                                               |       | 659 |   |
| Customer  deposits                                                                                        |       | 413                                              |       | 482 |   |
| Accrued  severance payments                                                                               |       | (60                                              | )          | (4 | ) |
| Deferred satellite  rent obligations                                                                      |       | (11                                              | )          | 12 |   |
| Net cash  provided by operating activities                                                                |       | 6,580                                            |       | 343 |   |
|                                                                                                      |       |                                             |       |   |   |
| Investing activities:                                                                                     |       |                                             |       |   |   |
| Purchases of  property, plant and equipment                                                               |       | (362                                             | )          | (1,189 | ) |
| Purchases of  available-for-sale securities                                                               |       | (16,726                                          | )          | (32,638 | ) |
| Proceeds from  sale of available-for-sale securities                                                      |       | 27,280                                           |       | 34,150 |   |
| Net cash  provided by investing activities                                                                |       | 10,192                                           |       | 323 |   |
|                                                                                                      |       |                                             |       |   |   |
| Financing activities:                                                                                     |       |                                             |       |   |   |
| Principal  payments on long-term debt and capital leases                                                  |       | —                                           |       | (182 | ) |
| Proceeds from  exercise of stock options                                                                  |       | 446                                              |       | 183 |   |
| Purchase of  treasury stock                                                                               |       | (167                                             | )          | — |   |
| Tax benefits  from exercise of stock options in excess of recognized expense                              |       | —                                           |       | 651 |   |
| Net cash  provided by financing activities                                                                |       | 279                                              |       | 652 |   |
|                                                                                                      |       |                                             |       |   |   |
| Net increase in  cash and cash equivalents                                                                |       | 17,051                                           |       | 1,318 |   |
| Cash and cash  equivalents, beginning of period                                                           |       | 15,447                                           |       | 18,276 |   |
| Cash and cash  equivalents, end of period                                                                 |       | $                                                | 32,498     |   | $ | 19,594 |   |
|                                                                                                      |       |                                             |       |   |   |
| Supplemental disclosure  of cash flow information:                                                        |       |                                             |       |   |   |
|                                                                                                      |       |                                             |       |   |   |
| Interest paid                                                                                             |       | $                                                | —     |   | $ | 78 |   |
|                                                                                                      |       |                                             |       |   |   |
| Income taxes paid                                                                                         |       | $                                                | 1          |   | $ | — |   |
|                                                                                                      |       |                                             |       |   |   |
| Supplemental  disclosures of non-cash investing and financing activities:                                 |       |                                             |       |   |   |
|                                                                                                      |       |                                             |       |   |   |
| Effect of net  increase (decrease) in fair value of available-for-sale securities, net of  deferred taxes |       | $                                                | (1         | ) | $ | 12 |   |
|                                                                                                      |       |                                             |       |   |   |
| Change in  estimate of tax benefit from exercise of stock options                                         |       | $                                                | 183        |   | — |   |
|                                                                                                      |       |                                             |       |   |   |
| Retirement of  treasury stock                                                                             |       | $                                                | 167        |   | — |   |
|                                                                                                      |       |                                             |       |   |   |
| Effect of net increase  in fair value of cash flow hedge                                                  |       | $                                                | —     |   | $ | 79 |   |

 

See Notes toUnaudited Condensed Consolidated Financial Statements.

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**OUTDOORCHANNEL HOLDINGS, INC. AND SUBSIDIARIES**

**Notes to Unaudited CondensedConsolidated Financial Statements**

(In thousands, except per share data)

**NOTE1—ORGANIZATION AND BUSINESS**

**Descriptionof Operations**

OutdoorChannel Holdings, Inc. or “Outdoor Channel Holdings,” is incorporated under thelaws of the State of Delaware. Collectively, with its subsidiaries, the terms “we,”“us,” “our” and the “Company” refer to Outdoor Channel Holdings, Inc. as aconsolidated entity, except where noted or where the context makes clear thereference is only to Outdoor Channel Holdings, Inc. or one of our subsidiaries.Outdoor Channel Holdings, Inc. wholly owns GPAA, Inc. which in turn wholly ownsThe Outdoor Channel, Inc. (“TOC”) and also is the sole member of GPAA, LLC.Outdoor Channel Holdings is also the sole member of 43455 BPD, LLC the entitythat owns the building that houses our broadcast facility. TOC operates OutdoorChannel, which is a national television network devoted to traditional outdooractivities, such as hunting, fishing and shooting sports, as well as off-roadmotor sports and other related lifestyle programming. In addition, TOC alsooperates Outdoor Channel 2 HD, which also is a national television networkfeaturing programming produced utilizing high definition technology.

Ourrevenues include advertising fees from advertisements aired on Outdoor Channel,including fees paid by outside producers to purchase advertising time inconnection with the airing of their programs on Outdoor Channel, and fromadvertisements in “Gold Prospectors & Treasure Hunters in the GreatOutdoors” magazine; subscriber fees paid by cable and satellite serviceproviders that air Outdoor Channel; membership fees from members in bothLDMA-AU, Inc. (“Lost Dutchman’s”) and Gold Prospector’s Association of America,LLC (“GPAA”); and other income including income from sales of products andservices related to gold prospecting, gold expositions, expeditions andoutings.

**NOTE2—UNAUDITED INTERIM FINANCIAL STATEMENTS**

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements reflect all adjustments, consisting of normal recurring adjustments,necessary to present fairly the financial position of the Company as of March31, 2007 and its results of operations and cash flows for the three monthsended March 31, 2007 and 2006. Information included in the consolidated balancesheet as of December 31, 2006 has been derived from, and certain terms usedherein are defined in, the audited financial statements of the Company as ofDecember 31, 2006 (the “Audited Financial Statements”) included in the Company’sAnnual Report on Form 10-K (the “10-K”) for the year ended December 31, 2006that was previously filed with the Securities and Exchange Commission (the “SEC”).Pursuant to the rules and regulations of the SEC, certain information anddisclosures normally included in financial statements prepared in accordancewith accounting principles generally accepted in the United States of Americahave been condensed or omitted from these financial statements unlesssignificant changes have taken place since the end of the most recent fiscalyear. Accordingly, these unaudited condensed consolidated financial statementsshould be read in conjunction with the Audited Financial Statements and theother information also included in the 10-K.

Certain amounts inthe 2006 unaudited condensed consolidated financial statements have beenreclassified to conform to the 2007 presentation. The results of the Company’soperations for the three months ended March 31, 2007 are not necessarilyindicative of the results of operations for the full year ending December 31,2007.

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect reported amounts of assets and liabilities as ofthe dates of the condensed consolidated balance sheets and reported amounts ofrevenues and expenses for the periods presented. Accordingly, actual resultscould materially differ from those estimates.

**NOTE3—STOCK INCENTIVE PLANS**

Effective January1, 2006, we adopted Statement of Financial Accounting Standards No. 123(revised 2004), “Share-Based Payment” (“SFAS 123R”). We have elected to use themodified prospective transition method. This method requires compensation costto be recognized in the financial statements over the service period for thefair value of all awards (including awards to employees) granted after the dateof adoption as well as for existing awards for which the requisite service hadnot been rendered as of the date of adoption and requires that prior periodsnot be restated. Our stock incentive plans provide for the granting ofqualified and nonqualified options, restricted stock and stock appreciationrights (“SARs”) to our officers, directors and employees. Outstanding optionsare generally exercisable from 90 days to four years after the date of thegrant and expire no more than ten years after the grant. We satisfy theexercise of options and awards of restricted stock by issuing previouslyunissued common shares. Currently we have not awarded any SARs. Prior toSeptember 30, 2006 we had not awarded any performance units but did so inthe fourth quarter of 2006. Prior to the adoption of SFAS 123R, we used theintrinsic value method to account for stock options granted to employees andmade no charges against earnings with

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respect to thoseoptions at the date of grant since our employee options had exercise pricesthat were equal to the market price, however, as explained in the 10-K, we didrecognize a charge in the third quarter of 2004 when we issued fully-vestedoptions to purchase shares in Outdoor Channel Holdings in exchange forfully-vested options held by employees of TOC on September 8, 2004. SFAS 123Rrequires that we elect an approved method to calculate the historical pool ofwindfall tax benefits upon adoption of SFAS 123R within one year of itsadoption. We have elected the method outlined in SFAS 123R, sometimesreferred to as the “long haul” method, for this calculation.

We have not capitalizedany share-based compensation to any of our assets. We expense awards at theearliest of its vesting schedule or pro rata on a straight line basis over therequisite service period. The following table summarizes share-basedcompensation expense for the three months ended March 31, 2007 and 2006:
|                                         | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                              | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
|                                    |       |                                                               |       |   |   |
| Restricted stock                        |       | $                                                                  | 153        |   | $ | 102 |   |
| Options                                 |       | 503                                                                |       | 713 |   |
| Performance units                       |       | 1,653                                                              |       | — |   |
| Total share-based  compensation expense |       | $                                                                  | 2,309      |   | $ | 815 |   |

 

During the quarterended March 31, 2007 one employee transitioned to a service provider, thereforeon a go forward basis the Company will follow the guidance in Emerging IssueTask Force “Accounting for Equity Instruments that are Issued to Other ThanEmployees for Acquiring, or in Conjuction with Selling, Goods or Services”Issue No. 96-18 (“EITF 96-18”) related to accounting for these options. Noother options were issued during this period. As of March 31, 2007, the fairvalue of these stock options was estimated to be $0.47 per share. During thethree months ended March 31, 2007, the impact on stock-based compensationexpense related to a change in our estimated forfeiture rate related to thseoptions was to decrease expense by $131. This change in estimate did notmaterially impact loss per common share. We granted 60 employee stock optionsin the three months ended March 31, 2006 which had a weighted average fairvalue estimated to be $6.78 per share. The estimated values were derived byusing the Black-Scholes option pricing model with the following respectiveassumptions:
|                                    | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                         | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
|                               |       |                                                               |       |   |   |
| Risk-free interest rate            |       | 4.9                                                                | %          | 4.3 – 4.6 | % |
| Dividend yield                     |       | 0                                                                  | %          | 0 | % |
| Expected life of the  option       |       | 308 days                                                           |       | 3.75 years |   |
| Volatility factor                  |       | 39.5                                                               | %          | 55.8 – 58.9 | % |
| Weighted average volatility factor |       | 39.5                                                               | %          | 58.4 | % |

 

Expectedvolatilities are based on historical volatility of our stock. We have adoptedthe guidance of the SEC’s Staff Accounting Bulletin No. 107 that notes ifshare options have “plain vanilla” characteristics, a simplified method ofestimating the expected life of the option may be employed temporarily. Thesimplified method utilizes the average of the vested term and the originalcontract term. We have experienced certain events that indicate that ourlong-term historical experience is no longer valid. As such we adopted thesimplified method. Our short-term historical experience with exercise andpost-vesting employment termination behavior supports this method fordetermining the options’ expected life. When sufficient historical experiencehas been obtained, we will use such experience for future estimations of theexpected life. The expected life represents the period of time that optionsgranted are expected to be outstanding. The risk-free rate is based on the U.S.Treasury rate with a maturity date corresponding to the options’ expected life.

**NOTE4—LOSS PER COMMON SHARE**

We have presented “basic”and “diluted” loss per common share in the accompanying condensed consolidatedstatements of operations in accordance with the provisions of Statement ofFinancial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”).Basic loss per common share is calculated by dividing net loss by the weightedaverage number of common shares outstanding during each period. The calculationof diluted loss per common share is similar to that of basic loss per commonshare, except that the denominator is increased to include the number ofadditional common shares that would have been outstanding if all potentiallydilutive common shares of the Company were issued during the period if any suchissuances would have had a dilutive effect.

8

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For the threemonths ended March 31, 2007 and 2006, the computation of diluted loss percommon share does not take into account any of our outstanding stock optionsand restricted stock because the effect of their assumed exercise would beanti-dilutive. The number of shares potentially issuable by the Company atMarch 31, 2007 and 2006 upon the exercise of stock options and upon the vestingof restricted stock that were not included in the computation of net loss per commonshare because they were anti-dilutive totaled 3,991 and 3,558, respectively.

**NOTE5—EQUITY TRANSACTIONS**

**Issuancesof Common Stock by the Company**

For the three monthsended March 31, 2007 and 2006, we received cash from the exercise of options asfollows:
|                              | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                   | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
|                         |       |                                                               |       |   |   |
| Number of options  exercised |       | 332                                                                |       | 174 |   |
| Cash proceeds                |       | $                                                                  | 446        |   | $ | 183 |   |
|                              |            |                                                                    |            |  |  |  |  |

 

During the three monthsended March 31, 2007, we issued employees 34 shares of restricted stock while14 shares of restricted stock have been canceled due to employee turnover.During the third quarter of 2006, we issued 56 shares to service providers. Therights to 6 shares issued to service providers vest annually over a five-yearperiod. The rights to 50 shares vest upon specific performance related tosubscriber growth. 

Under SFAS 123R, thefair value of restricted stock and options, adjusted for a forfeitureassumption, at the respective dates of grant (which represents deferredcompensation not required to be recorded initially in the condensedconsolidated balance sheet) will be amortized to share-based compensationexpense as the rights to the restricted stock and options vest with anequivalent amount added to additional paid-in capital. Changes to forfeitureassumptions are based on actual experience and are recorded in accordance withthe rules related to accounting for changes in estimates. For the serviceproviders, however, the future charge will be recognized in accordance with EITF96-18 and will be retroactively adjusted to reflect the fair market value atthe end of each reporting period until the restricted stock or options vest atwhich point the related charge will be adjusted for the final time. Previouslywe had estimated that all 50 of the performance related restricted shares wouldvest by the end of 2007. We revise this estimate at the end of each reportingperiod and as of March 31, 2007 we believe that 35 shares will vest by the endof 2007. We do not expect any of these shares will potentially vest beyond2007. Based on the closing price on December 29, 2006, (the last trading day of2006) this change in estimated number of shares reduced stock-basedcompensation expense in the three months ended March 31, 2007 by $197. Based onthe closing market price on March 30, 2007 (the last trading day of thequarter) of $10.22 per share, the fair value of these 56 shares of restrictedstock was $572. The reduction of stock-based compensation expense in the threemonths ended March 31, 2006 that resulted because of a lower period end stockprice for these shares was $106. The combined effect of the two changes inestimate on loss per common share was to decrease the loss by $0.01. Assumingthe closing market price as of March 31, 2007 does not change over theremaining vesting period, we would have $136 of expense yet to be recognized.

9

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**StockOptions**

Descriptions ofOutdoor Channel Holdings’ stock option plans are included in Note 11 of theCompany’s Annual Report on Form 10-K for the year ended December 31, 2006. Asummary of the status of the options granted under Outdoor Channel Holdings’stock option plans and outside of those plans as of March 31, 2007 and 2006 andthe changes in options outstanding during the three months then ended ispresented in the table that follows:
|                                      | ** ** | **As of March 31,** | ** ** | **As of March 31,**                       | ** ** |
|--------------------------------------|------------|------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                           | ** ** | **2007**                           | ** ** | **2006**                                                 | ** ** |
| ** **                           | ** ** | **Shares  (in  thousands)**        | ** ** | **Weighted   Average   Exercise   Price** | ** ** | **Shares  (in   thousands)** | ** ** | **Weighted   Average   Exercise   Price** | ** ** |
| ** **                           | ** ** | ** **                         | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Outstanding at  beginning of period  |       | 3,272                              |       | $                                                        | 9.48       |   | 3,564 |   | $ | 7.31 |   |
| Options granted                      |       | —                             |       | —                                                   |       | 60 |   | 14.26 |   |
| Options exercised                    |       | (332                               | )          | 1.34                                                     |       | (174 | ) | 1.05 |   |
| Options canceled or  expired         |       | (20                                | )          | 13.77                                                    |       | (13 | ) | 11.85 |   |
| Outstanding at end of  period        |       | 2,920                              |       | 10.38                                                    |       | 3,437 |   | 7.73 |   |
| Options exercisable at end of period |       | 1,953                              |       | 8.97                                                     |       | 2,395 |   | 5.82 |   |
|                                      |            |                                    |            |                                                          |            |  |  |  |  |  |  |

 

Certain additionalinformation regarding our stock options follows:
|                                                                                                                                                   | ** ** | **2007**   | ** **    | **2006**   | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|---------------|------------|------------|
| ** **                                                                                                                                        | ** ** | ** ** | ** **    | ** ** | ** ** |
| Option price range at  March 31,                                                                                                                  |       | $          | 0.92 - $15.75 |       | $          | 0.92 - $15.75 |   |
| Weighted-average  grant-date fair value of 60 options granted during 2006, with an exercise  price equal to the market price at the date of grant |       | $          | —        |       | $          | 6.78 |   |
| Weighted-average  remaining contractual life of options exercisable at March 31,                                                             |       | 3.2 years  |          | 3.0 years  |       |
| Aggregate intrinsic  value of options outstanding at March 31,                                                                               |       | $          | 5,827         |       | $          | 14,076 |   |
| Aggregate intrinsic  value of options exercisable at March 31,                                                                               |       | $          | 5,770         |       | $          | 13,945 |   |
| Aggregate intrinsic value of options exercised during period                                                                                      |       | $          | 3,204         |       | $          | 1,754 |   |

 

**RestrictedStock**

A summary of the statusof Outdoor Channel Holdings’ nonvested restricted shares as of March 31,2007 and 2006 and the changes in restricted shares outstanding during the yearsthen ended is presented in the table that follows:
|                                   | ** ** | **As of March 31,** | ** ** | **As of March 31,**                             | ** ** |
|-----------------------------------|------------|------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                           | ** ** | **2006**                                                       | ** ** |
| ** **                        | ** ** | **Shares  (in   thousands)**  | ** ** | **Weighted   Average   Grant-Date  Fair Value** | ** ** | **Shares  (in   thousands)** | ** ** | **Weighted   Average  Grant-Date   Fair Value** | ** ** |
| ** **                        | ** ** | ** **                         | ** ** | ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Nonvested at beginning  of period |       | 364                                |       | $                                                              | 12.42      |   | 127 |   | $ | 14.43 |   |
| Granted                           |       | 34                                 |       | 12.85                                                          |       | — |   | — |   |
| Vested                            |       | (13                                | )          | 12.06                                                          |       | — |   | — |   |
| Canceled or expired               |       | (14                                | )          | 13.63                                                          |       | (6 | ) | 14.95 |   |
| Nonvested at end of period        |       | 371                                |       | 12.43                                                          |       | 121 |   | 14.14 |   |
|                                   |            |                                    |            |                                                                |            |  |  |  |  |  |  |

 

10

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**Expense to be Recognized**

Expense associatedwith our stock based compensation plans yet to be recognized as compensationexpense over the employees’ remaining requisite service periods as of March 31,2007 and 2006 are as follows:
|                    | ** ** | **March 31, 2007**                 | ** ** | **March 31, 2006**                                          | ** ** |
|--------------------|------------|----------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **         | ** ** | **Expense Yet  to be  Recognized** | ** ** | **Weighted Average  Remaining  Requisite Service  Periods** | ** ** | **Expense Yet  to be  Recognized** | ** ** | **Weighted Average  Remaining  Requisite Service  Periods** | ** ** |
|               |       |                                         |       |                                                                  |       |   |   |   |   |
| Stock options      |       | $                                            | 3,220      |                                                                  | 1.4        |   | $ | 6,171 |   | 1.9 |   |
| Restricted stock   |       | 3,246                                        |       | 1.8                                                                   |       | 1,418 |   | 2.3 |   |
| Performance  units |       | 4,959                                        |       | 0.8                                                                   |       | — |   | — |   |
|               |       |                                         |       |                                                                  |       |   |   |   |   |
| Total              |       | $                                            | 11,425     |                                                                  | 1.2        |   | $ | 7,589 |   | 2.0 |   |

 

**NOTE6—RELATED PARTY TRANSACTIONS**

We lease ouradministrative facilities from Musk Ox Properties, LP, which in turn is ownedby Messrs. Perry T. Massie and Thomas H. Massie, principal stockholders,directors and officers of Outdoor Channel Holdings. The lease agreement has afive-year term, expiring on December 31, 2010, with 2 five-year renewal optionsat our discretion. Monthly rent payments under this lease agreement were $29with a 3% per year escalator clause. Rent expense paid to Musk Ox Properties,LP totaled approximately $90 and $87 in the three months ended March 31, 2007and 2006, respectively. On April 24, 2007, in conjunction with the sale of theMembership Division (see Note 10-Subsequent Events), which resulted in ouroccupying less space, we have amended the lease with Musk Ox Properties, LP.The monthly rent is reduced to $17 per month through the end of 2007 with a 3%per year escalator thereafter.

**NOTE7—INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES**

Our short terminvestments in marketable debt and equity securities are classified asavailable-for-sale and are recorded at fair value at the end of each period.Gross realized gains and losses on sales of these securities during the threemonths ended March 31, 2007 and 2006 and all amounts related to suchinvestments prior to the three months ended March 31, 2007 and the year endedDecember 31, 2006 were not material. Included in investments inavailable-for-sale securities at March 31, 2007 and December 31, 2006 areinvestments in auction rate securities with short-term interest rates thatgenerally can be reset every 28 days. The auction rate securities havelong-term maturity dates and provide us with enhanced yields. However, webelieve we have the ability to quickly liquidate them at their original cost,although there is no guaranty and, accordingly, they are carried at cost, whichapproximates fair value, and classified as current assets. We had unrealizednet holding gains on marketable equity securities at March 31, 2007 andDecember 31, 2006 of $47 and $48, respectively, that are in “accumulated othercomprehensive income”.

The investment inavailable-for-sale securities is as follows:
|                                      | ** ** | **As of  March 31, 2007** | ** ** | **As of  December 31, 2006** | ** ** |
|--------------------------------------|------------|------------------------------------------|------------|---------------------------------------------|------------|
| ** **                           | ** ** | ** **                               | ** ** | ** **                                  | ** ** |
| Auction rate  securities             |       | $                                        | 30,695     |                                        | $          | 41,250 |   |
| Equities                             |       | 893                                      |       | 894                                         |       |
| Total  available-for-sale securities |       | $                                        | 31,588     |                                        | $          | 42,144 |   |

 

11

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We consider the yields werecognize from auction rate securities and from cash held in our money marketaccounts to be interest income. Yields we recognize from our investments inequity securities we consider to be dividend income. Both are recorded in otherincome for the three months ended March 31, 2007 and 2006 as follows:
|                     | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|---------------------|------------|--------------------------------------------------------------------|------------|
| ** **          | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| ** **          | ** ** | ** **                                                         | ** ** | ** ** | ** ** |
| Interest income     |       | $                                                                  | 684        |   | $ | 608 |   |
| Dividend income     |       | 19                                                                 |       | 15 |   |
| Total other  income |       | $                                                                  | 703        |   | $ | 623 |   |

 

**NOTE8—INCOME TAX PROVISION**

The income taxbenefit reflected in the accompanying unaudited condensed consolidatedstatement of operations for the three months ended March 31, 2007 and 2006 isdifferent than that computed based on the applicable statutory Federal incometax rate of 34%. That portion of the current year SFAS 123R compensationexpense relating to qualified incentive stock options, or ISOs, is recognizedfor financial statement purposes but is generally not deductible for taxpurposes and thus is treated as a permanent difference between the two. For thethree months ended March 31, 2007 and 2006, we recognized a charge of $54 and$151, respectively, related to ISOs under SFAS 123R compensation expense.

In June 2006, theFinancial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accountingfor Uncertainty of Income Taxes – an interpretation of FAS No. 109,” (“FIN 48”)which addresses the uncertainty of income taxes recognized in accordance withStatement of Financial Accounting Standards No. 109 “Accounting for IncomeTaxes”. FIN 48 prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. FIN 48 is effective for fiscal years thatbegin after December 15, 2006. We have adopted FIN 48 as of January 1, 2007, asrequired. We file income tax returns in the United States and various state andlocal tax jurisdictions. We have net operating loss and credit carryforwardsthat will be subject to examination beyond the year in which they areultimately utilized. We believe any future potential adjustments of thesecarryforwards will be immaterial to our financial statements. Our policy is torecord interest and penalties on uncertain tax positions as income tax expense.As of March 31, 2007, we believe that there are no significant uncertain taxpositions, and no amounts have been recorded for interest and penalties. We donot anticipate any events that would require us to record a liability relatedto any uncertain income tax position in 2007 as prescribed by FIN 48.

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**NOTE9—SEGMENT INFORMATION**

Pursuant to theProvisions of Statement of Financial Accounting Standards No. 131, “DisclosuresAbout Segments of an Enterprise and Related Information” (“SFAS 131”), wereport segment information in the same format as reviewed by our ChiefOperating Decision Maker (the “CODM”). We segregate our business activitiesinto TOC and the Membership Division. TOC is a separate business activity thatbroadcasts television programming on Outdoor Channel and Outdoor Channel 2 HD24 hours a day, seven days a week. TOC generates revenue from advertising fees(which include fees paid by outside producers to purchase advertising time inconnection with the airing of their programs on Outdoor Channel) and subscriberfees. Lost Dutchman’s and GPAA membership sales and related activities arereported in the Membership Division. The Membership Division also includesmagazine sales, advertisements within the magazine, the sale of products andservices related to gold prospecting, gold expositions, expeditions andoutings. Intersegment sales, which are excluded in the presentation below,amounted to $120 and $149 in each of the three months ended March 31, 2007 and2006, respectively.

In April 2007, webegan to actively pursue the sale of our Membership Division (see Note 10–SubsequentEvents). We have disclosed the Membership Division as part of continuingoperations in accordance with the provisions of SFAS 144. 

Information withrespect to these reportable segments as of and for the three months ended March31, 2007 and 2006 is as follows:
| ** **                                                | ** ** | **Revenues** | ** ** | **Loss  Before Income  Taxes** | ** ** | **Total  Assets** | ** ** | **Depreciation  and  Amortization** | ** ** | **Additions to  Property,  Plant and  Improvements** | ** ** |
|-----------------------------------------------------------|------------|--------------|------------|-------------------------------------|------------|-------------------|------------|-------------------------------------|------------|----------------------------------------------------------------|------------|
| **As of and for the Three Months  Ended: March 31, 2007** |       |         |       |                                |       |              |       |                                |       |                                                           |       |
| ** **                                                |       |         |       |                                |       |              |       |                                |       |                                                           |       |
| TOC                                                       |       | $            | 10,657     |                                | $          | 679               |       | $                                   | 78,769     |                                                           | $          | 828 |   | $ | 301 |   |
| Membership Division                                       |       | 1,269        |       | 73                                  |       | 5,600             |       | 61                                  |       | 61                                                             |       |
| Subtotals of  Segments                                    |       | 11,926       |       | 752                                 |       | 84,369            |       | 889                                 |       | 362                                                            |       |
| Corporate*                                                |       | —       |       | (850                                | )          | 66,994            |       | —                              |       | —                                                         |       |
| Totals                                                    |       | $            | 11,926     |                                | $          | (98               | )          | $                                   | 151,363    |                                                           | $          | 889 |   | $ | 362 |   |
|                                                      |       |         |       |                                |       |              |       |                                |       |                                                           |       |
| **March 31, 2006**                                        |       |         |       |                                |       |              |       |                                |       |                                                           |       |
| TOC                                                       |       | $            | 9,910      |                                | $          | 554               |       | $                                   | 80,956     |                                                           | $          | 605 |   | $ | 1,177 |   |
| Membership Division                                       |       | 1,379        |       | 189                                 |       | 5,854             |       | 71                                  |       | 12                                                             |       |
| Subtotals of  Segments                                    |       | 11,289       |       | 743                                 |       | 86,810            |       | 676                                 |       | 1,189                                                          |       |
| Corporate*                                                |       | —       |       | (883                                | )          | 68,128            |       | —                              |       | —                                                         |       |
| Totals                                                    |       | $            | 11,289     |                                | $          | (140              | )          | $                                   | 154,938    |                                                           | $          | 676 |   | $ | 1,189 |   |

 

----

*We capturecorporate overhead that is applicable to both segments, but not directlyrelated to operations in a separate business unit, as “Corporate.” The expensesallocated to Corporate consisted primarily of: professional fees includingpublic relations, accounting and legal fees, taxes associated with beingincorporated in Delaware, board fees, and other corporate fees not associateddirectly with either TOC or the Membership Division. Corporate assets consistprimarily of cash not held in our operating accounts, available-for-salesecurities, deferred tax assets, net and income tax refund receivable. 

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**NOTE10—SUBSEQUENT EVENTS**

In December 2006,our Board of Directors authorized a special committee of the board to considervarious alternatives regarding the strategic plans of the Membership Division.  On April 20, 2007, after considering andanalyzing various alternatives including the continued operation, the possiblesale or the liquidation of such division, the special committee concluded thatthe operations of the Membership Division is no longer strategic to the corebusiness of The Outdoor Channel, Inc. and approved the sale of such division toMr. Thomas H. Massie, a principal stockholder, director and officer of OutdoorChannel Holdings.  On April 24, 2007, weconsummated the sale of the businesses, for cash, for a purchase price of$3,589 which is the combined carrying value of the businesses.  Included in the carrying value wasapproximately $2,025 of cash and $389 of net intercompany receivable which waspaid by the parent to the Membership Division in April 2007.

The balance as ofMarch 31, 2007 of major classes of assets and liabilities of the MembershipDivision, including $389 of intercompany receivables, are as follows:
|                              | ** ** | **As of March 31, 2007** | ** ** |
|------------------------------|------------|----------------------------------------------|------------|
| ** **                   | ** ** | ** **                                   | ** ** |
| Total current assets         |       | $                                            | 2,609      |   |
| Total fixed assets           |       | 3,352                                        |       |
| Total other assets           |       | 28                                           |       |
| Total assets                 |       | 5,989                                        |       |
|                         |       |                                         |       |
| Total current  liabilities   |       | 963                                          |       |
| Total long-term  liabilities |       | 1,437                                        |       |
| Total  liabilities           |       | 2,400                                        |       |
| Net carrying value           |       | $                                            | 3,589      |   |

 

* * *

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**ITEM2.****        MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

**SafeHarbor Statement**

The informationcontained in this report may include forward-looking statements. Ouractual results could differ materially from those discussed in anyforward-looking statements. The statements contained in this report that arenot historical are “forward-looking statements” within the meaning ofSection 27A of the Securities Act of 1933, as amended (the “Securities Act”),and Section 21E of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), including statements, without limitation, regarding our expectations,beliefs, intentions or strategies regarding the future. We intend that suchforward-looking statements be subject to the safe-harbor provisions containedin those sections. Such forward-looking statements relate to, among otherthings: (1) expected revenue and earnings growth and changes in mix;(2) anticipated expenses including advertising, programming, personnel andothers; (3) Nielsen Media Research, which we refer to as Nielsen,estimates regarding total households and cable and satellite homes subscribingto and viewers (ratings) of The Outdoor Channel; and (4) other matters. Weundertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.

These statementsinvolve significant risks and uncertainties and are qualified by importantfactors that could cause our actual results to differ materially from thosereflected by the forward-looking statements. Such factors include but are notlimited to risks and uncertainties which are included in Part II, Item 1A RiskFactors below and other risks and uncertainties discussed elsewhere in thisreport. In assessing forward-looking statements contained herein, readers areurged to read carefully all cautionary statements contained in thisForm 10-Q and in our other filings with the Securities and ExchangeCommission. For these forward-looking statements, we claim the protection ofthe safe harbor for forward-looking statements in Section 27A of theSecurities Act and Section 21E of the Exchange Act.

**General**

Through ourindirect wholly owned subsidiary, The Outdoor Channel, Inc. or TOC, we ownand operate Outdoor Channel which is a national television network devotedprimarily to traditional outdoor activities, such as hunting, fishing andshooting sports, as well as off-road motor sports and other outdoor relatedlifestyle programming. TOC revenues include (1) advertising fees fromadvertisements aired on Outdoor Channel and fees paid by third-partyprogrammers to purchase advertising time in connection with the airing of theirprograms on Outdoor Channel; and (2) subscriber fees paid by cable andsatellite service providers that air Outdoor Channel. Outdoor Channel Holdingsalso wholly owns 43455 BPD, LLC that owns the building housing our broadcastfacility.

We also own andoperate businesses we refer to as the “Membership Division”. These businessesinclude: LDMA-AU, Inc., which we refer to as Lost Dutchman’s, and GoldProspector’s Association of America, LLC, which we refer to as GPAA. LostDutchman’s is a national gold prospecting campground club with properties inArizona, California, Colorado, Georgia, Michigan, North Carolina, Oregon andSouth Carolina. Among other services offered, GPAA is the publisher of the*Gold Prospector & Treasure Hunters in theGreat Outdoors* magazine. In addition, we are the owner of a2,300 acre property near Nome, Alaska used to provide outings for a fee tothe members of Lost Dutchman’s and GPAA. Membership fees are earned frommembers in both Lost Dutchman’s and GPAA and other income including magazinesales, products and services related to gold prospecting, gold expositions,expeditions and outings.

In December 2006,our Board of Directors authorized a special committee of the board to considervarious alternatives regarding the strategic plans of the MembershipDivision.  On April 20, 2007, afterconsidering and analyzing various alternatives including the continuedoperation, the possible sale or the liquidation of such division, the specialcommittee concluded that the operations of the Membership Division is no longerstrategic to the core business of The Outdoor Channel, Inc. and approved thesale of such division to Mr. Thomas H. Massie, a principal stockholder,director and officer of Outdoor Channel Holdings.  On April 24, 2007, we consummated the sale ofthe businesses, for cash, for a purchase price of $3,589,000 which is thecombined carrying value of the businesses. Included in the carrying value was approximately $2,025,000 of cash and$389,000 of net intercompany receivable which was paid by the parent to theMembership Division in April 2007.  Inthis report, we have disclosed the Membership Division as part of continuingoperations in accordance with the provisions of SFAS 144, and we will bereporting the sale of the Membership Division as discontinued operations insubsequent filings.

**Recent Accounting Developments**

InSeptember 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair ValueMeasurements” which establishes a consistent framework for measuring fair valueand expands disclosures on fair value measurements. SFAS 157 is effective forfiscal years beginning after November 15, 2007. We have not determined theimpact, if any, the adoption of SFAS 157 will have on our consolidatedfinancial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair ValueOption for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159permits entities to choose to measure many financial assets and financialliabilities at fair value. Unrealized gains and losses on items for which thefair value option has been elected will be reported in earnings. SFAS 159 iseffective for fiscal years beginning after November 15, 2007. We have notdetermined the impact, if any, the adoption of SFAS 159 will have on ourconsolidated financial statements.

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The FASB hadissued certain other accounting pronouncements as of March 31, 2007 that willbecome effective in subsequent periods; however, our management does notbelieve that any of those pronouncements would have significantly affected ourfinancial accounting measurements or disclosures had they been in effect duringthe three months ended March 31, 2007.

**Comparisonof Operating Results for the Three Months Ended March 31, 2007 and March 31,2006**

The followingtable discloses certain financial information for the periods presented,expressed in terms of dollars, dollar change, percentage change and as apercent of total revenue (all dollar amounts are in thousands):
| ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** | **% of Total Revenue** | ** ** |
|--------------------------------------------|------------|------------|------------|------------|------------|------------|------------|---------------------------------------|------------|
| ** **                                 | ** ** | **2007**   | ** ** | **2006**   | ** ** | **$**      | ** ** | **%**                                 | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues:                                  |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Advertising                                |       | $          | 6,048      |       | $          | 5,685      |       | $                                     | 363        |   | 6.4 | % | 50.7 | % | 50.4 | % |
| Subscriber fees                            |       | 4,749      |       | 4,383      |       | 366        |       | 8.4                                   |       | 39.8 |   | 38.8 |   |
| Membership income                          |       | 1,129      |       | 1,221      |       | (92        | )          | (7.5                                  | )          | 9.5 |   | 10.8 |   |
| Total revenues                             |       | 11,926     |       | 11,289     |       | 637        |       | 5.6                                   |       | 100.0 |   | 100.0 |   |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Cost of  services:                         |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Programming                                |       | 1,474      |       | 1,544      |       | (70        | )          | (4.5                                  | )          | 12.4 |   | 13.7 |   |
| Satellite transmission fees                |       | 596        |       | 638        |       | (42        | )          | (6.6                                  | )          | 5.0 |   | 5.7 |   |
| Production and operations                  |       | 1,473      |       | 1,205      |       | 268        |       | 22.2                                  |       | 12.3 |   | 10.7 |   |
| Other direct costs                         |       | 208        |       | 208        |       | —     |       | —                                |       | 1.7 |   | 1.8 |   |
| Total cost of services                     |       | 3,751      |       | 3,595      |       | 156        |       | 4.3                                   |       | 31.4 |   | 31.9 |   |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Other expenses:                            |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Advertising                                |       | 736        |       | 2,162      |       | (1,426     | )          | (66.0                                 | )          | 6.2 |   | 19.1 |   |
| Selling, general and   administrative |       | 7,467      |       | 5,544      |       | 1,923      |       | 34.7                                  |       | 62.6 |   | 49.1 |   |
| Depreciation and amortization              |       | 773        |       | 673        |       | 100        |       | 14.9                                  |       | 6.5 |   | 6.0 |   |
| Total other expenses                       |       | 8,976      |       | 8,379      |       | 597        |       | 7.1                                   |       | 75.3 |   | 74.2 |   |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Loss from  operations                      |       | (801       | )          | (685       | )          | (116       | )          | 16.9                                  |       | (6.7 | ) | (6.1 | ) |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Interest expense                           |       | —     |       | (78        | )          | 78         |       | (100.0                                | )          | — |   | (0.7 | ) |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Other income                               |       | 703        |       | 623        |       | 80         |       | 12.8                                  |       | 5.9 |   | 5.5 |   |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Loss before  income taxes                  |       | (98        | )          | (140       | )          | 42         |       | (30.0                                 | )          | (0.8 | ) | (1.3 | ) |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Income tax  provision (benefit)            |       | (36        | )          | 17         |       | (53        | )          | (311.8                                | )          | (0.3 | ) | 0.1 |   |
|                                       |       |       |       |       |       |       |       |                                  |       |   |   |   |   |
| Net loss                                   |       | $          | (62        | )          | $          | (157       | )          | $                                     | 95         |   | (60.5 | )% | (0.5 | )% | (1.4 | )% |

 

**Revenues**

Our revenuesinclude revenues from (1) advertising fees; and (2) subscriber fees.Advertising revenue is generated from the sale of advertising time on OutdoorChannel including advertisements shown during a program (also known as short-form advertising)and infomercials in which the advertisement is the program itself (also knownas long-form advertising). Advertising revenue is also generated from feespaid by third party programmers that purchase advertising time in connectionwith the airing of their programs on Outdoor Channel. 

Membership incomeis generated by our activities other than the operation of Outdoor Channel andincludes membership sales, magazine sales, merchandise sales, and from the saleof advertising space in publications such as the *GoldProspectors & Treasure Hunters in the Great Outdoors* magazineand sponsored outings and expeditions in connection with GPAA and LostDutchman’s. On April 24, 2007, we consummated the sale of these businesses, forcash, for a purchase price of $3,589,000 which is the combined carrying valueof the businesses (see Note 10–Subsequent Events). In this report, we havedisclosed the Membership Division as continuing operations in accordance withthe provisions of SFAS 144, and we will be reporting the sale of the MembershipDivision as discontinued operations in subsequent filings.

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**Resultsof Operations**

Total revenues forthe three months ended March 31, 2007 were $11,926,000, an increase of$637,000, or 5.6%, compared to revenues of $11,289,000 for the three monthsended March 31, 2006. The net increases were the result of changes inseveral items comprising revenue as discussed below.

Advertising revenue forthe three months ended March 31, 2007 was $6,048,000, an increase of$363,000 or 6.4% compared to $5,685,000 for the three months endedMarch 31, 2006. For March 2007, Nielsen estimated that OutdoorChannel had 30.0 million viewers compared to 26.2 million for the same period ayear ago. The increase in advertising revenue for the three months endedMarch 31, 2007 principally reflects higher prices paid for advertisingtime with some incremental advertising inventory retained by us to sell. Thesefactors contributing to the increase were offset somewhat by less revenuegenerated from third party programming as a slightly higher percentage of ourinventory was retained for our in-house sales. We expect demand for ouradvertising inventory will continue to be strong reflecting our position withinour programming genre and niche.

Nielsen revises itsestimate of the number of subscribers to our channel each month, and for May2007 Nielsen decreased its estimate to 29.4 million subscribers. Nielsen is theleading provider of television audience measurement and advertising informationservices worldwide, and its estimates and methodology are generally acceptedand used in the advertising industry. Although we realize Nielsen’s estimate istypically greater than the number of subscribers on which a network is paid bythe service providers, we are currently experiencing a greater difference inthese two different numbers of subscribers than we would expect. We anticipatethis difference to decrease as we grow our total subscriber base. There can beno assurances that Nielsen will continue to report growth of its estimate ofour subscribers and in fact at some point Nielsen might even report additionaldeclines in our subscriber estimate. If that were to happen, we could suffer areduction in advertising revenue.

Subscriber feesfor the three months ended March 31, 2007 were $4,749,000, an increase of$366,000 or 8.4% compared to $4,383,000 for the three months endedMarch 31, 2006. The increase in subscriber fees for the period wasprimarily due to an increased number of paying subscribers both from newaffiliates and from existing distributors as well as contractual subscriber feerate increases with existing service providers carrying Outdoor Channel. 

We plan toaccelerate our subscriber growth utilizing various means including deploymentof rate relief for new and existing subscribers and payment of subscriberacquisition or launch support fees among other tactics. Such launch supportfees are capitalized and amortized over the period that the pay televisiondistributor is required to carry the newly acquired TOC subscriber. To theextent revenue is associated with the incremental subscribers, the amortizationis charged to offset the related revenue. Any excess of launch supportamortization over the related subscriber fee revenue is charged to expense. Asa result of a combination of these tactics, we anticipate subscriber feerevenue; net will decrease over the short-term future as we deploy thisstrategy.

Membership incomefor the three months ended March 31, 2007 was $1,129,000, a decrease of$92,000 or 7.5% compared to $1,221,000 for the three months endedMarch 31, 2006. The decline was principally due to the timing of thereceipt of payments related to memberships. Receipt of payments impacts ourrevenue recognition related to memberships purchased with time payments.

**Cost ofServices**

Our cost of servicesconsists primarily of the cost of providing our broadcast signal andprogramming to the distributors for transmission to the consumer and costsassociated with the production and delivery of our magazine and cost ofmerchandise sold. Cost of services includes (1) programming costs; (2)satellite transmission fees; (3) production and operations costs; and (4) otherdirect costs. Total cost of services for the three months ended March 31, 2007was $3,751,000, an increase of $156,000 or 4.3%, compared to $3,595,000 for thethree months ended March 31, 2006. As a percentage of revenues, total cost ofservices was 31.4% and 31.9% in the three months ended March 31, 2007 and 2006,respectively. Our level of cost of services reflects the similar levels ofservice being provided during the comparative quarters. The improved ratereflects the impact of price increases noted above.

Programmingexpenses for the three months ended March 31, 2007 were $1,474,000, adecrease of $70,000 or 4.5% compared to $1,544,000 for the three months endedMarch 31, 2006. The decrease is principally a result of replacing one showtitle mid-quarter with another lower cost title reflecting a temporary changein programming strategy.

Our policy is tocharge costs of specific show production to programming expense over theexpected airing period beginning when the program first airs. The cost ofprogramming is generally first recorded as prepaid programming costs and isthen charged to programming expense based on the anticipated airing schedule.The anticipated airing schedule has typically been over 2 or 4 quarters thatgenerally does not extend over more than 2 years. As the anticipated airingschedule changes, the timing and amount of the charge to expense isprospectively adjusted accordingly. At the time we determine a program is

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unlikely to air orre-air, we charge programming expense with the remaining associated costrecorded in prepaid programming. We do not make any further expense or assetadjustments if in subsequent periods demand brings episodes to air that hadpreviously been fully expensed. Programming expenses are expected to stabilizeover the near term. Further, we are considering a new programming strategywhich will include more airings per show including a greater number of repeatepisodes within the quarter and potentially more quarters extending over moreyears. As this plan is developed we will reconsider the appropriate timing ofthe charge to expense of our programming costs.

Satellitetransmission fees for the three months ended March 31, 2007 were $596,000,a decrease of $42,000, or 6.6%, compared to $638,000 for the three months endedMarch 31, 2006. We do not expect significant fluctuations in satellitetransmission fees other than marginal adjustments.

Production and operationscosts for the three months ended March 31, 2007 were $1,473,000, an increase of$268,000, or 22.2%, compared to $1,205,000 for the three months ended March 31,2006. The increase in costs principally relates to increased spending relatedto an annual programming event and costs related to the support of our newbroadcast facility have contributed to the increased production and operationcosts.

Other direct costs forthe three months ended March 31, 2007 and 2006 were $208,000. These costs areother support costs that will vary marginally quarter to quarter and we expectwill grow at a slower rate of growth than our revenue.

**OtherExpenses**

Other expenses consist ofthe cost of (1) advertising; (2) selling, general and administrativeexpenses; and (3) depreciation and amortization.  

Total otherexpenses for the three months ended March 31, 2007 were $8,976,000, anincrease of $597,000 or 7.1%, compared to $8,379,000 for the three months endedMarch 31, 2006. As a percentage of revenues, total expenses were 75.3% and74.2% in the three months ended March 31, 2007 and 2006, respectively. Theincrease in other expenses was due to several factors including $1,003,000 fromthe recognized expense related to performance units granted to our new CEO inthe fourth quarter of 2006, additional depreciation expense resulting from ourbroadcast facility which was placed into service effective April 1, 2006,increased accounting fees incurred in the first quarter of 2007 related to aheavier financial reporting effort than normal and increased professional feesrelated to consultants hired to help us execute our business plan as well ashelping us assess our Membership Division segment. Offsetting some of theaggregate increase is less spending on advertising costs as more fullydescribed below.

Advertisingexpenses for the three months ended March 31, 2007 were $736,000, adecrease of $1,426,000 or 66.0% compared to $2,162,000 for the three monthsended March 31, 2006. We reduced our spending on advertising in the firstquarter related to our print media campaigns and our race program sponsorship.We believe that our advertising expenses will substantially increase over theshort-term future as we continue to deploy tactics to increase our subscriberbase and the number of viewers watching our programming. 

Selling, generaland administrative expenses for the three months ended March 31, 2007 were$7,467,000, an increase of $1,923,000 or 34.7% compared to $5,544,000 for thethree months ended March 31, 2006. As a percentage of revenues, selling,general and administrative expenses were 62.6% and 49.1% in the three monthsended March 31, 2007 and 2006, respectively. We granted our new CEO twotraunches of performance units of 400,000 shares each which vest in 50,000share increments based upon our stock price reaching stipulated levels. We havecalculated their fair value using a lattice model. The first traunch has anestimated value of $4,634,000 and has an expected service period of 0.6 years.In the three months ended March 31, 2007, we recognized $745,000 related tothis grant. The second grant of 400,000 performance units which also vest in50,000 share increments based upon our stock price reaching stipulated levelswas calculated to have a fair value of $4,474,000 and an expected serviceperiod of 1.1 years. In the three months ended March 31, 2007, we recognized$908,000 of compensation expense related to this grant. The remainder of theincrease in selling, general and administrative fees related primarily toincreased research fees to support our selling efforts, consulting fees pertainingto assistance in the execution of our strategic plan, accounting fees forheavier than normal financial reporting and for the audit of our evaluation ofthe effectiveness of our internal control over financial reporting in 2007related to the 2006 fiscal year and to other operating costs.

We anticipate thatselling, general and administrative costs will continue to increase over theforeseeable future. Such increases are expected to result from the amortizationof subscriber acquisition fees, also referred to as launch support fees whichmight be in the form of advertising support, in excess of the relatedsubscriber revenue as well as other marketing, advertising and promotionexpenses as we continue to work to gain increased distribution of our channel,as well as from increases in other corporate expenses. We anticipate we willincur compensation costs in the amount of $6,612,000 in the year endingDecember 31, 2007 related to the performance units granted to our new CEO.

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Depreciation andamortization for the three months ended March 31, 2007 were $773,000, anincrease of $100,000 or 14.9% compared to $673,000 for the three months endedMarch 31, 2006. The increase in depreciation primarily relates to our broadcastfacility which was placed into service April 1, 2006.

**Lossfrom Operations**

Loss fromoperations for the three months ended March 31, 2007 was $801,000, achange of $116,000 compared to $685,000 for the three months endedMarch 31, 2006. As discussed above, this larger loss was driven by theexpense of performance units and was partially offset by growth of our revenueand less spending on advertising. As we continue to strive to grow oursubscriber base which involves increased advertising expenditures, possiblesubscriber rate relief to our carriage partners and the ongoing and plannedpayment of launch or advertising support, we will continue to incur increasedexpenses such as broadband, marketing and advertising that are unlikely to beimmediately offset by revenues. As a result, we anticipate our operatingmargins will be negatively impacted for the short-term future until scale isachieved to reverse the trend. There can be no assurance that these strategieswill be successful.

**InterestExpense**

Interest expensefor the three months ended March 31, 2006 was $78,000. We did not incurinterest in the three months ended March 31, 2007. This is attributable tohaving obtained two term loans in November 2005 with original aggregateprincipal amount of $4,950,000 with effective fixed interest rates of 6.59% and6.35% which we repaid in October 2006. We do not expect to incur interestexpense in the foreseeable future.

**OtherIncome**

Other income forthe three months ended March 31, 2007 was $703,000, an increase of $80,000compared to $623,000 for the three months ended March 31, 2006. Thisimprovement was primarily due to increased dividends and interest earned on ourincreased average balances of our investment in available-for-sale securitiesand cash and cash equivalent balances.

**LossBefore Income Taxes**

Loss before incometaxes as a percentage of revenues was 0.8% for the three months endedMarch 31, 2007 compared to 1.3% for the three months ended March 31,2006.

The TOC segment’sincome before income taxes increased to $679,000 for the three months endedMarch 31, 2007 from $554,000 for the three months ended March 31,2006. Expressed as a percentage of revenue, the TOC segment’s income beforeincome taxes increased to 6.4% for the three months ended March 31, 2007,compared to 5.6% for the three months ended March 31, 2006. The increasewas due mainly to positive revenue growth from the noted advertising priceincreases and subscriber growth offset by the recognition of performance unitcompensation costs related to our new CEO. Additionally we decreased ourspending in print advertising and discontinued our race program. We expect thatthe TOC segment income before income taxes will be challenged as we continue torecognize the performance unit charges, invest in new advertising programs andoffer subscriber rate relief in order to stimulate subscriber growth.

The MembershipDivision segment’s income before income taxes decreased to $73,000 for thethree months ended March 31, 2007 compared to $189,000 for the threemonths ended March 31, 2006. Expressed as a percentage of revenues, theMembership Division segment’s income before income taxes declined to 5.8% forthe three months ended March 31, 2007 compared to 13.7% for the threemonths ended March 31, 2006. Revenue decreased $110,000 or 8% in the threemonths ended March 31, 2007 which was principally due to timing of receiptof payments related to memberships which has an impact on our revenuerecognition.

Corporate incurreda loss before income taxes for the three months ended March 31, 2007amounting to $850,000, a change of $33,000 compared to a loss of $883,000 forthe three months ended March 31, 2006. The expenses allocated to Corporateinclude: professional fees such as public relations, accounting and legal fees,business insurance, board of directors fees and expenses and an allocation ofcorporate officers’ payroll and related expenses. We experienced growth inaccounting related fees in the three months ended March 31, 2007 compared tothe same period a year earlier due to heavier than normal financial reporting.Offsetting the growth in accounting fees was a decline in legal fees related tospecific projects in 2006 that did not repeat in 2007.

**IncomeTax Provision (Benefit)**

Income taxprovision (benefit) for the three months ended March 31, 2007 was abenefit of $36,000, a change of $53,000 as compared to a provision of $17,000for the three months ended March 31, 2006. We have projected a loss forthe year ending December 31, 2007, principally as a result of stock-basedcompensation expense which includes approximately $6.6 million related toperformance units issued to our CEO which will only vest if certain levels ofour stock price are reached and

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maintained forspecified periods of time. As a result, we have projected the income tax ratefor the year to be approximately 37% representing the combined effects of stateand federal income taxes. As of March 31, 2006, we had estimated that we wouldrealize a profit for the year ended December 31, 2006. As such, we recorded aprovision for the three months ended March 31, 2006.

**NetLoss**

Net loss for thethree months ended March 31, 2007 was $62,000, a change of $95,000compared to $157,000 for the three months ended March 31, 2006. Thesmaller loss was due to the reasons stated above.

**Liquidityand Capital Resources**

We generated$6,580,000 of cash in our operating activities in the three months ended March31, 2007, compared to $343,000 in the three months ended March 31, 2006 and hada cash and cash equivalent balance of $32,498,000 at March 31, 2007, anincrease of $17,051,000 from the balance of $15,447,000 at December 31,2006. We also had short-term investments classified as available-for-salesecurities of $31,588,000 at March 31, 2007, a decrease of $10,556,000 from thebalance of $42,144,000 at December 31, 2006. The investments at March 31,2007 were comprised principally of auction rate securities aggregating to$30,695,000 with interest rates that generally reset every 28 days. Theauction rate securities have long-term maturity dates and provide us withenhanced yields. Various equity securities, aggregating to $893,000, makeup the remainder of the March 31, 2007 balance. We believe we have the abilityto quickly liquidate the auction rate securities and commercial paper at theiroriginal cost although there is no guaranty we would be able to do so. Networking capital increased to $70,210,000 at March 31, 2007, compared to$67,346,000 at December 31, 2006.

The increase in cash flowfrom operating activities in the three months ended March 31, 2007 compared tothe same period in 2006 was due to a number of factors including the receipt offederal and state income tax refunds resulting from our utilization of our netoperating loss for both the 2005 income tax returns and, as appropriate,carryback opportunities, improvements in the timing of the collection of ouraccounts receivable, greater increases in non-cash costs and operating expensesas compared to the increase in costs and operating expenses as a whole, and ourability to recognize tax benefits from exercise of stock options in excess ofrecognized expense in 2006 but due to our 2007 outlook, we can not recognize acorresponding amount in 2007.

Net cash providedby investing activities was $10,192,000 in the three months ended March 31,2007 compared to $323,000 for the three months ended March 31, 2006. Theincrease in cash provided by investing activities was related principally tothe net difference of sales and purchases of short-term auction rate securitiespartially plus a decrease in capital expenditures. During the firstquarter of 2006, there were capital expenditures related to the final build-outstage of our new broadcast facility. 

Cash provided byfinancing activities was $279,000 in the three months ended March 31, 2007compared to $652,000 for the three months ended March 31, 2006. The cashprovided by financing activities in the three months ended March 31, 2007 wasprincipally the proceeds from the exercise of stock options offset by thepurchase of treasury stock as employees used stock to satisfy withholding taxesrelated to vesting of restricted shares. During the three months ended March 31, 2006, cash provided by financingactivities was principally the result of realizing tax benefits from theexercise of stock options in excess of recognized expense plus the proceedsfrom the exercise of stock options. During the three months ended March 31,2007, we could not recognize the tax benefits from the exercise of stockoptions in excess of recognized expense because we do not project that we willbe able to realize this year’s benefit during this year. For the three monthsended March 31, 2006, cash provided by financing activities was offset byprincipal payments on outstanding debt. 

OnNovember 2, 2005, we renewed our revolving line of credit agreement (the “revolver”)with U.S. Bank N.A. (the “Bank”), extending the maturity date toSeptember 7, 2007 and increasing the total amount which can be drawn uponunder the revolver from $5,000,000 to $8,000,000. The revolver providesthat the interest rate shall be LIBOR plus 1.25%. The revolver iscollateralized by substantially all of our assets. This credit facilitycontains customary financial and other covenants and restrictions, as amendedon November 2, 2005, including a change of control provision and certainminimum profitability metrics (which, as amended, exclude the effects ofnon-cash stock based employee compensation expense) measured at each quarterend. As of March 31, 2007 and as of the date of this report, we did nothave any amounts outstanding under this credit facility.

As ofMarch 31, 2007, wehad sufficient cash on hand and expected cash flow from operations to meet ourshort-term cash flow requirements. Management believes that our existing cashresources including cash on-hand and anticipated cash flows from operationswill be sufficient to fund our operations at current levels and anticipatedcapital requirements through at least June 1, 2008. To the extentthat such amounts are insufficient to finance our working capital requirementsor our desire to expand operations beyond current levels, we could seekadditional financing. There can be no assurance that equity or debt financingwill be available if needed or, if available, will be on terms favorable to us.

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**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK.**

At March 31, 2007and December 31, 2006, our investment portfolio included fixed-incomesecurities of $30,695,000 and $41,250,000, respectively. These securities aresubject to interest rate risk and will decline in value if interest ratesincrease. However, due to the short duration of our investment portfolio, animmediate 10% change in interest rates would have no material impact on ourfinancial condition, operating results or cash flows. Declines in interestrates over time will, however, reduce our interest income while increases ininterest rates over time may increase our interest expense.

We do not have asignificant level of transactions denominated in currencies other than U.S.dollars and as a result we have very limited foreign currency exchange raterisk. The effect of an immediate 10% change in foreign exchange rates wouldhave no material impact on our financial condition, operating results or cashflows.

As of March 31,2007 and as of the date of this report, we did not have any outstandingborrowings. The rate of interest on our line-of-credit is variable, but wecurrently have no outstanding balance under this credit facility. Because ofthese reasons, an immediate 10% change in interest rates would have nomaterial, immediate impact on our financial condition, operating results orcash flows.

**ITEM 4. CONTROLS AND PROCEDURES.**

*Evaluationof disclosure controls and procedures.* We maintain disclosurecontrols and procedures designed to provide reasonable assurance of achievingthe objective that information in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified andpursuant to the regulations of the Securities and Exchange Commission.Disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e)under the Exchange Act, include controls and procedures designed to ensure theinformation required to be disclosed by us in the reports we file or submitunder the Exchange Act is accumulated and communicated to our management,including our Chief Executive Officer and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure. It shouldbe noted that our system of controls, however well designed and operated, canprovide only reasonable, and not absolute, assurance that the objectives of thesystem are met.

Our management,with the participation of our Chief Executive Officer and Chief FinancialOfficer, evaluated the effectiveness of our disclosure controls and proceduresas of March 31, 2007, the end of the period covered by this report. Based onthis evaluation, we have concluded that as a result of a material weakness inour internal control over financial reporting discussed below, our disclosurecontrols and procedures were not effective as of March 31, 2007.

*Management’s report on internal control over financialreporting.*Management is responsible for establishing andmaintaining adequate internal control over financial reporting, as defined inRule 13a-15(f) of the Exchange Act. Our internal control over financialreporting includes those policies and procedures that (a) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and disposition of assets; (b) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles,and that receipts and expenditures are being made only in accordance withauthorizations of our management and directors; and (c) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition,use or disposition of our assets that could have a material effect on thefinancial statements.

Internal control overfinancial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsprepared for external purposes in accordance with generally accepted accountingprinciples. Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the riskthat controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.

Management conducted anevaluation of the effectiveness of our internal control over financialreporting as of December 31, 2006, based on the framework set forth in InternalControl—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. Management reviewed the resultsof this evaluation with the Audit Committee of our Board of Directors, andbased on this evaluation, management determined that as of December 31, 2006 amaterial weakness existed relating to inadequate financial department staffingand a lack of financial accounting expertise necessary to properly account forcertain complex or non-routine transactions. This deficiency has not beenfully remediated as of March 31, 2007, the date of this report.

Notwithstanding theexistence of this material weakness, we believe that the consolidated financialstatements included in this report fairly present in all material respects ourfinancial condition, results of operations and cash flows for the periodspresented.  Until this deficiency is remediated, management has concludedthat there is more than a remote likelihood that a material misstatement to theannual or interim consolidated financial statements could occur and not beprevented or detected

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by the Company’s controlsin a timely manner. Accordingly, management has determined that thiscontrol deficiency continues to constitute a material weakness. Because of thismaterial weakness, we have concluded that we did not maintain effectiveinternal control over financial reporting as of March 31, 2007 based on thecriteria in Internal Control—Integrated Framework.

*Remediation plan for material weakness in internal controlover financial reporting.*The lack of staff resources andfinancial expertise arose as a result of several issues including timeconstraints imposed on the accounting staff  as a result of our heavierthan normal financial reporting requirements during the fourth quarter of 2006carrying into the first quarter of 2007, employee turnover and our inability totimely fill accounting and financial-related positions. Our management, withthe oversight of our Audit Committee, has devoted considerable effort toremediate the material weakness identified above. However, as of March 31,2007, we had not fully remediated the material weakness in our internal controlover financial reporting.

We are activelyrecruiting to fill additional open positions within the accountingdepartment. In addition, we are implementing accounting software that willenhance our capabilities across many accounting disciplines, particularly as itrelates to share-based compensation. We will more fully develop thetechnical expertise of our existing staff and fill open positions withqualified replacements. We have engaged additional outside consultants tobolster our U.S. GAAP expertise until and after we have been successful inbringing the expertise in-house.  Webelieve that we have been even more active in using such trained personnel inthe three months ended March 31, 2007 and believe this action has had asignificantly positive impact on our internal controls over financialreporting.

Many of the remedialactions we have taken are very recent, and other remedial actions are yet to beimplemented including the hiring of additional personnel. Because ourremediation efforts include the hiring of additional personnel many of thecontrols in our current system of internal controls will still rely extensivelyon manual review and approval, and management will not be able to conclude thatthe material weakness has been eliminated until such additional personnel hasbeen hired and the controls have been successfully operated and tested. We,along with our Audit Committee, will continue to monitor and evaluate theeffectiveness of these remedial actions and make further changes as deemedappropriate.

*Changesin internal control over financial reporting.* Other than asnoted above, during the quarter ended March 31, 2007, there was no change inour internal control over financial reporting that materially affected, or isreasonably likely to materially affect, our internal control over financialreporting subsequent to the date referred to above.

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**PART II—OTHER INFORMATION**

**ITEM 1.  ****               Legal Proceedings.**

None.

**ITEM 1A.****               RiskFactors.**

Our business andoperations are subject to a number of risks and uncertainties, and thefollowing list should not be considered to be a definitive list of all factorsthat may affect our business, financial condition and future operatingresults and should be read in conjunction with the risks and uncertainties, includingrisk factors, contained in our other filings with the Securities and ExchangeCommission. Any forward-looking statements made by us are made with theintention of obtaining the benefits of the “safe harbor” provisions of theSecurities Litigation Reform Act and a number of factors, including, butnot limited to those discussed below, could cause our actual results andexperiences to differ materially from the anticipated results or expectationsexpressed in any forward-looking statements.

**We do notcontrol the methodology used by Nielsen to estimate our subscriber base ortelevision ratings, and changes, or inaccuracies, in such estimates could causeour advertising revenue to decrease.**

Our ability to selladvertising is largely dependent on the size of our subscriber base andtelevision ratings estimated by Nielsen. We do not control the methodology usedby Nielsen for these estimates, and estimates regarding Outdoor Channel’ssubscriber base made by Nielsen is theirs alone and does not represent opinions,forecasts or predictions of Outdoor Channel Holdings, Inc. or its management.Outdoor Channel Holdings, Inc. does not by its reference to Nielsen ordistribution of the Nielsen Universe Estimate imply its endorsement of orconcurrence with such information. In particular, we believe that we may besubject to a wider difference between the number of subscribers as estimated byNielsen and the number of subscribers reported by our cable and satellite MSOsthan is typically expected because we are not fully distributed and aresometimes carried on poorly penetrated tiers. In addition, if Nielsen modifiesits methodology or changes the statistical sample it uses for these estimates,such as the demographic characteristics of the households, the size of oursubscriber base and our ratings could be negatively affected resulting in adecrease in our advertising revenue.

**Cableand satellite service providers could discontinue or refrain from carryingOutdoor Channel, or decide to not renew our distribution agreements, whichcould substantially reduce the number of viewers and harm our operatingresults.**

The success of OutdoorChannel is dependent, in part, on our ability to enter into new carriageagreements and maintain existing agreements or arrangements with, and carriageby, satellite systems and multiple system operators’, which we refer to asMSOs, affiliated regional or individual cable systems. Although we currentlyhave arrangements or agreements with, and are being carried by, all the largestMSOs and satellite service providers, having such relationship or agreementwith a MSO does not ensure that an MSOs affiliated regional or individual cablesystems will carry or continue to carry Outdoor Channel or that the satelliteservice provider will carry our channel. Under our current contracts andarrangements, TOC typically offers satellite systems and cable MSOs, along withtheir cable affiliates, the right to broadcast Outdoor Channel to theirsubscribers, but such contracts or arrangements do not require that OutdoorChannel be offered to all subscribers of, or any tiers offered by, the serviceprovider. Because certain carriage arrangements do not specify on which servicelevels Outdoor Channel is carried, such as analog versus basic digital, expandeddigital or specialty tiers, and in which geographic markets Outdoor Channelwill be offered, we have no assurance that Outdoor Channel will be carried andavailable to viewers of any particular MSO or to all satellite subscribers. Inaddition, if we are unable to fully comply with the terms of such agreements,the service providers could discontinue carrying Outdoor Channel. Lastly, weare currently not under any long-term contract with some of the serviceproviders that are currently distributing our channel. Our distributionagreements with six of the major service providers, accounting forapproximately 59% of our subscriber base as of August 2006, will haveterminated as of May 1, 2007. If we are unable to renew these distributionagreements, we could lose a substantial number of subscribers. If cable andsatellite service providers discontinue or refrain from carrying OutdoorChannel, or decide to not renew our distribution agreement with them, thiscould reduce the number of viewers and harm our operating results.

**Wemay not be able to grow our subscriber base at a sufficient rate to offsetplanned increased costs, decreased revenue or at all, and as a result ourrevenues and profitability may not increase and could decrease.**

A major component of ourgrowth strategy is based on increasing the number of subscribers to ourchannels. Growing our subscriber base depends upon many factors, such as thesuccess of our marketing efforts in driving consumer demand for our channels;overall growth in cable and satellite subscribers; the popularity of ourprogramming; our ability to negotiate new carriage agreements, or amendmentsto, or renewals of, current carriage agreements, and maintain existingdistribution; plus other factors that are beyond our control. There can be noassurance that we will be able to maintain or increase the subscriber base ofour channels on cable and satellite systems or that our current carriage willnot decrease as a result of a

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number of factors or thatwe will be able to maintain our current subscriber fee rates. In particular,negotiations for new carriage agreements, or amendments to, or renewals of,current carriage agreements, are lengthy and complex, and we are not able topredict with any accuracy when such increases in our subscriber basemay occur, if at all, of if we can maintain our current subscriber feerates. If we are unable to grow our subscriber base, our subscriber andadvertising revenues may not increase and could decrease. In addition, aswe plan and prepare for such projected growth in our subscriber base, we planto increase our expenses accordingly. If we are not able to increase ourrevenue to offset these increased expenses, and if our subscriber fee revenuedecreases, our profitability could decrease.

**If weoffer favorable terms or incentives to service providers in order to grow oursubscriber base, our operating results may be harmed or your percentage ofthe Company may be diluted.**

Although we currentlyhave plans to offer incentives to service providers in an attempt to increasethe number of our subscribers, we may not be able to do so economically orat all. If we are unable to increase the number of our subscribers on acost-effective basis, or if the benefits of doing so do not materialize, ourbusiness and operating results would be harmed. In particular, it may benecessary to reduce our subscriber fees in order to grow our subscriberbase.  In addition, if we make anyupfront cash payments to service providers for an increase in our subscriberbase, our cash flow could be adversely impacted, and we may incur negativecash flow for some time. In addition, if we were to make such upfront cashpayments or provide other incentives to service providers, we expect toamortize such amounts ratably over the term of the agreements with the serviceproviders. However, if a service provider terminates any such agreement priorto the expiration of the term of such agreement, then under current accountingrules we may incur a large expense in that quarter in which the agreementis terminated equal to the remaining un-amortized amounts and our operatingresults could accordingly be adversely affected. In addition, if we offerequity incentives, the terms and amounts of such equity may not be favorable tous or our stockholders.

**If, inour attempt to increase our number of subscribers, we structure favorable termsor incentives with one service provider in a way that would require us to offerthe same terms or incentives to all other service providers, our operatingresults may be harmed.**

Many of our existingagreements with cable and satellite service providers contain “most favorednation” clauses. These clauses typically provide that if we enter into anagreement with another service provider on more favorable terms, these termsmust be offered to the existing service provider, subject to some exceptionsand conditions. Future agreements with service providers may also containsimilar “most favored nation” clauses. If, in our attempt to increase ournumber of subscribers, we reduce our subscriber fees or structure launchsupport fees or other incentives to effectively offer more favorable terms toany service provider, these clauses may require us to offer similarincentives to other service providers or reduce the effective subscriber feerates that we receive from other service providers, and this could negativelyaffect our operating results.

**If ourchannels are placed in unpopular program packages by cable or satellite serviceproviders, or if service fees are increased for our subscribers, the number ofviewers of our channel may decline which could harm our business andoperating results.**

We do not control thechannels with which our channel is packaged by cable or satellite serviceproviders. The placement by a cable or satellite service provider of ourchannel in unpopular program packages could reduce or impair the growth of thenumber of our viewers and subscriber fees paid by service providers to us. Inaddition, we do not set the prices charged by cable and satellite serviceproviders to their subscribers when our channel is packaged with othertelevision channels. The prices for the channel packages in which our channelis bundled may be set too high to appeal to individuals who mightotherwise be interested in our network. Further, if our channel is bundled byservice providers with networks that do not appeal to our viewers or is movedto packages with fewer subscribers, we may lose viewers. These factorsmay reduce the number of viewers of our channel, which in turn wouldreduce our subscriber fees and advertising revenue.

**Consolidationamong cable and satellite operators may harm our business.**

Cable and satelliteoperators continue to consolidate, making us increasingly dependent on feweroperators. If these operators fail to carry Outdoor Channel, use theirincreased distribution and bargaining power to negotiate less favorable termsof carriage or to obtain additional volume discounts, our business andoperating results would suffer.

**We maynot be able to effectively manage our future growth, and our growthmay not continue, which may substantially harm our business andprospects.**

We have undergone rapidand significant growth in revenue and subscribers over the last several years.There are risks inherent in rapid growth and the pursuit of new strategicobjectives, including among others: investment and development of appropriateinfrastructure, such as facilities, information technology systems and otherequipment to support a growing organization; hiring and training newmanagement, sales and marketing, production, and other personnel and thediversion of management’s attention and resources from critical areas andexisting projects; and implementing systems and procedures to

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successfully managegrowth, such as monitoring operations, controlling costs, maintaining effectivequality and service, and implementing and maintaining adequate internalcontrols. Although we have recently moved into our new Temecula, Californiabroadcast facility, we expect that additional expenditures will be required aswe continue to upgrade our facilities. We cannot assure you that we will beable to successfully manage our growth, that future growth will occur or thatwe will be successful in managing our business objectives. We can provide noassurance that our profitability or revenues will not be harmed by futurechanges in our business. Our operating results could be harmed if such growthdoes not occur, or is slower or less profitable than projected.

**We maynot be able to secure additional national advertising accounts, and as aresult, our revenues and profitability may be negatively impacted.**

Our ability to secureadditional national advertising accounts, which generally pay higheradvertising rates, depends upon the size of our audience, the popularity of ourprogramming and the demographics of our viewers, as well as strategies taken byour competitors, strategies taken by advertisers and the relative bargainingpower of advertisers. Competition for national advertising accounts and relatedadvertising expenditures is intense. We face competition for such advertisingexpenditures from a variety of sources, including other cable network companiesand other media. We cannot assure you that our sponsors will pay advertisingrates for commercial air time at levels sufficient for us to make a profit orthat we will be able to attract new advertising sponsors or increaseadvertising revenues. If we are unable to attract national advertising accountsin sufficient quantities, our revenues and profitability may be harmed.

**We have found a material weaknessin our internal controls over financial reporting and we cannot be certain inthe future that we will be able to report that our controls are withoutmaterial weakness or to complete our evaluation of those controls in a timelyfashion.**

Pursuant to Section 404of the Sarbanes-Oxley Act of 2002 (“Section 404”), and the rules andregulations promulgated by the SEC to implement Section 404, we are required toinclude in our Form 10K an annual report by our management regarding theeffectiveness of our internal control over financial reporting. The reportincludes, among other things, an assessment of the effectiveness of ourinternal control over financial reporting as of the end of our fiscal year.This assessment must include disclosure of any material weaknesses in ourinternal control over financial reporting identified by management. As ofDecember 31, 2006, our internal control over financial reporting wasineffective due to the presence of a material weakness, as more fully describedin Item 9A of this Form 10-K. We are actively working to correct this materialweakness, which will continue until we are able to hire additional staff in ouraccounting department and successfully operate and test our controls with suchstaff in place. 

If we fail to maintain aneffective system of disclosure controls or internal control over financialreporting, we may discover material weaknesses that we would then be requiredto disclose. We may not be able to accurately or timely report on our financialresults, and we might be subject to investigation by regulatory authorities.This could result in a loss of investor confidence in the accuracy andcompleteness of our financial reports, which may have an adverse effect on ourstock price. 

In addition, all internalcontrol systems, no matter how well designed, have inherent limitations.Therefore, even those systems determined to be effective can provide onlyreasonable assurance with respect to the preparation and presentation offinancial statements. Projections of any evaluation of controls effectivenessto future periods are subject to risks. Over time, controls may becomeinadequate because of changes in conditions or deterioration in the degree of compliancewith policies or procedures.

**Expensesrelating to programming costs are generally increasing and a number of factorscan cause cost overruns and delays, and our operating results may beadversely impacted if we are not able to successfully recover the costs ofdeveloping and acquiring new programming.**

The average cost ofprogramming has increased recently for the cable industry and such increasesmay continue. We plan to build our programming library through theacquisition of long-term broadcasting rights from third party producers,in-house production and outright acquisition of programming, and thismay lead to increases in our programming costs. The development,production and editing of television programming requires a significant amountof capital and there are substantial financial risks inherent in developing andproducing television programs. Actual programming and production costsmay exceed their budgets. Factors such as labor disputes, death ordisability of key spokespersons or program hosts, damage to film negatives,master tapes and recordings or adverse weather conditions may cause costoverruns and delay or prevent completion of a project. If we are not able tosuccessfully recover the costs of developing or acquiring programming throughincreased revenues, whether the programming is produced by us or acquired fromthird-party producers, our business and operating results will be harmed.

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**Ouroperating results may be negatively impacted if our Outdoor Channel 2 HDnetwork is not as successful as we anticipate.**

In July 2005, welaunched an all new, all native high definition network called Outdoor Channel2 HD. There can be no assurance that Outdoor Channel 2 HD will not incurunexpected costs and expenses. Distribution of Outdoor Channel 2 HD will dependon successfully executing new or amended distribution agreements with cable andsatellite service providers. There can be no assurance that such agreements canbe made, and if they are made, that they will be on terms favorable to us orthat they will not require us to grant periods of free service and/or marketingcommitments to encourage carriage. The public may not adopt HD consumertelevision equipment in numbers sufficient to allow profits for anadvertiser-supported service. Bandwidth constraints may keep OutdoorChannel 2 HD from achieving sufficient distribution from service providers toreach profitability. Competition for quality HD content may increase thecosts of programming for Outdoor Channel 2 HD beyond our control or expectations.All of these factors, combined or separately, could increase costs or restrainrevenue and adversely affect our operating results.

**Ouroperating results may vary significantly, and historical comparisons ofour operating results are not necessarily meaningful and should not be reliedupon as an indicator of future performance.**

Our operations areinfluenced by many factors. These factors may cause our financial resultsto vary significantly in the future and our operating results may not meetthe expectations of securities analysts or investors. If this occurs, the priceof our stock may decline. Factors that can cause our results to fluctuateinclude, but are not limited to:

·              carriagedecisions of cable and satellite service providers;

·              demandfor advertising, advertising rates and offerings of competing media;

·              changesin the growth rate of cable and satellite subscribers;

·              cableand satellite service providers’ capital and marketing expenditures and theirimpact on programming offerings and penetration;

·              seasonaltrends in viewer interests and activities;

·              pricing,service, marketing and acquisition decisions that could reduce revenues andimpair quarterly financial results;

·              themix of cable television and satellite-delivered programming products andservices sold and the distribution channels for those products and services;

·              ourability to react quickly to changing consumer trends;

·              specificeconomic conditions in the cable television and related industries; and

·              changing regulatoryrequirements.

Due to the foregoing andother factors, many of which are beyond our control, our revenue and operatingresults vary from period to period and are difficult to forecast. Our expenselevels are based in significant part on our expectations of futurerevenue. Therefore, our failure to meet revenue expectations would seriouslyharm our business, operating results, financial condition and cash flows.Further, an unanticipated decline in revenue for a particular calendar quartermay disproportionately affect our profitability because our expenses wouldremain relatively fixed and would not decrease correspondingly.

**Changesto financial accounting standards or our accounting estimates may affectour reported operating results.**

We prepare our financial statementsto conform to accounting principles generally accepted in the UnitedStates of America which are subject to interpretations by the FinancialAccounting Standards Board, the Securities and Exchange Commission and variousbodies formed to interpret and create appropriate accounting policies. A changein those policies can have a significant effect on our reported results andmay even affect our reporting of transactions completed before a change isannounced. Accounting policies affecting many other aspects of our business,including rules relating to business combinations and employee stockoption grants, have recently been revised or are under review. Changes to thoserules or the questioning of current practices may adversely affectour reported financial results or the way we conduct our business. In addition,our preparation of financial statements in accordance with GAAP requires thatwe make estimates, judgments and assumptions that affect the recorded amountsof assets and liabilities, disclosure of those assets and liabilities at thedate of the financial statements and the recorded amounts of revenue andexpenses during the reporting period. A change in the facts and circumstancessurrounding those estimates, including the interpretation of the terms andconditions of our contractual obligations, could result in a change to ourestimates and could impact our operating results.

**If wefail to develop and distribute popular programs, our viewership would likelydecline, which could cause advertising and subscriber fee revenues to decrease.**

Our operating resultsdepend significantly upon the generation of advertising revenue. Our ability togenerate advertising revenues is largely dependent on our Nielsen ratings,which estimates the number of viewers of Outdoor Channel, and this directlyimpacts the level of interest of advertisers and rates we are able to charge.If we fail to program popular shows that

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maintain or increase ourcurrent number of viewers, our Nielsen ratings could decline, which in turncould cause our advertising revenue to decline and adversely impact ourbusiness and operating results. In addition, if we fail to program popularshows the number of subscribers to our channel may also decrease,resulting in a decrease in our subscriber fee and advertising revenue.

**Themarket in which we operate is highly competitive, and we may not be ableto compete effectively, particularly against competitors with greater financialresources, brand recognition, marketplace presence and relationships withservice providers.**

We compete for viewerswith other pay cable television and broadcast networks, including Versus(formerly OLN), Spike TV, ESPN2 and others. If these or other competitors, manyof which have substantially greater financial and operational resources thanus, significantly expand their operations with respect to outdoor-relatedprogramming or their market penetration, our business could be harmed. Inaddition, certain technological advances, including the deployment of fiber opticcable, which are already substantially underway, are expected to allow cablesystems to greatly expand their current channel capacity, which could diluteour market share and lead to increased competition for viewers from existing ornew programming services.

We also compete withtelevision network companies that generally have large subscriber bases andsignificant investments in, and access to, competitive programming sources. Insome cases, we compete with cable and satellite service providers that have thefinancial and technological resources to create and distribute their owntelevision networks, such as Versus, which is owned and operated by Comcast. Inorder to compete for subscribers, we may be required to reduce our subscriberfee rates or pay either launch fees or marketing support or both forcarriage in certain circumstances in the future which may harm ouroperating results and margins. We may also issue our securities from timeto time in connection with our attempts for broader distribution of The OutdoorChannel and the number of such securities could be significant. We compete foradvertising sales with other pay television networks, broadcast networks, andlocal over-the-air television stations. We also compete for advertising saleswith satellite and broadcast radio and the print media. We compete with othercable television networks for subscriber fees from, and affiliation agreementswith, cable and satellite service providers. Actions by the FederalCommunications Commission, which we refer to as the FCC, and the courts haveremoved certain of the impediments to entry by local telephone companies intothe video programming distribution business, and other impediments could beeliminated or modified in the future. These local telephone companiesmay distribute programming that is competitive with the programmingprovided by us to cable operators.

**Changesin corporate governance and securities disclosure and compliance practices haveincreased and may continue to increase our legal compliance and financialreporting costs.**

The Sarbanes-Oxley Act of2002 required us to change or supplement some of our corporate governance andsecurities disclosure and compliance practices. The Securities and ExchangeCommission and NASDAQ have revised, and continue to revise, their regulationsand listing standards. These developments have increased, and may continueto increase, our legal compliance and financial reporting costs.

**Thesatellite infrastructure that we use may fail or be preempted by anothersignal, which could impair our ability to deliver programming to our cable andsatellite service providers.**

Our ability to deliverprogramming to service providers, and their subscribers, is dependent upon thesatellite equipment and software that we use to work properly to distribute ourprogramming. If this satellite system fails, or a signal with a higher priorityreplaces our signal, which is determined by our agreement with the owner of thesatellite, we may not be able to deliver programming to our cable andsatellite service provider customers and their subscribers within the timeperiods advertised. We have negotiated for back-up capability with oursatellite provider on an in-orbit spare satellite, which provides us carriageon the back-up satellite in the event that catastrophic failure occurs on theprimary satellite. Our contract provides that our main signal is subject topreemption and until the back-up satellite is in position, we could lose oursignal for a period of time. A loss of our signal could harm our reputation andreduce our revenues and profits.

**Naturaldisasters and other events beyond our control could interrupt our signal.**

Our systems andoperations may be vulnerable to damage or interruption from earthquakes,floods, fires, power loss, telecommunication failures and similar events. Theyalso could be subject to break-ins, sabotage and intentional acts of vandalism.Since our production facilities for Outdoor Channel are all located inTemecula, California, the results of such events could be particularlydisruptive because we do not have readily available alternative facilities fromwhich to conduct our business. Our business interruption insurance may notbe sufficient to compensate us for losses that may occur. Despite anyprecautions we may take, the occurrence of a natural disaster or otherunanticipated problems at our facilities could result in interruptions in ourservices. Interruptions in our service could harm our reputation and reduce ourrevenues and profits.

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**Seasonalincreases or decreases in advertising revenue may negatively affect ourbusiness.**

Seasonal trends arelikely to affect our viewership, and consequently, could cause fluctuations inour advertising revenues. Our business reflects seasonal patterns ofadvertising expenditures, which is common in the broadcast industry. For thisreason, fluctuations in our revenues and net income could occur from period toperiod depending upon the availability of advertising revenues. Due, in part,to these seasonality factors, the results of any one quarter are notnecessarily indicative of results for future periods, and our cash flows maynot correlate with revenue recognition.

**We maybe unable to access capital, or offer equity as an incentive for increasedsubscribers, on acceptable terms to fund our future growth and operations.**

Our future capital andsubscriber growth requirements will depend on numerous factors, including thesuccess of our efforts to increase advertising revenues, the amount ofresources devoted to increasing distribution of Outdoor Channel, and acquiringand producing programming for Outdoor Channel. As a result, we could berequired to raise substantial additional capital through debt or equityfinancing or offer equity as an incentive for increased distribution. To theextent that we raise additional capital through the sale of equity orconvertible debt securities, or offer equity incentives for subscriber growth,the issuance of such securities could result in dilution to existingstockholders. If we raise additional capital through the issuance of debtsecurities, the debt securities would have rights, preferences and privilegessenior to holders of common stock and the terms of such debt could imposerestrictions on our operations. We cannot assure you that additional capital,if required, will be available on acceptable terms, or at all. If we are unableto obtain additional capital, or must offer equity incentives for subscribergrowth, our current business strategies and plans and ability to fund futureoperations may be harmed.

**We maynot be able to attract and retain key personnel.**

Our success depends to asignificant degree upon the continued contributions of the principal members ofour sales, marketing, production and management personnel, many of whom wouldbe difficult to replace. Other than our CEO, Roger L. Werner, Jr., none of ouremployees are under contract and all of our employees are “at-will.” Any of ourofficers or key employees could leave at any time, and we do not have “keyperson” life insurance policies covering any of our employees. The competitionfor qualified personnel has been strong in our industry. This competition couldmake it more difficult to retain our key personnel and to recruit new highlyqualified personnel. The loss of Perry T. Massie, our Chairman of theBoard, Roger L. Werner, Jr., our CEO and President, Thomas H. Massie, ourExecutive Vice President, William A. Owen, our Chief Financial Officer, orThomas E. Hornish, our COO and General Counsel, could adversely impact ourbusiness. To attract and retain qualified personnel, we may be required togrant large option or other stock-based incentive awards, which may behighly dilutive to existing stockholders. We may also be required to paysignificant base salaries and cash bonuses to attract and retain theseindividuals, which payments could harm our operating results. If we are notable to attract and retain the necessary personnel we may not be able toimplement our business plan.

**Newvideo recording technologies may reduce our advertising revenue.**

A number of new personalvideo recorders, such as TiVo® in the United States, have emerged in recentyears. These recorders often contain features allowing viewers to watchpre-recorded programs without watching advertising. The effect of theserecorders on viewing patterns and exposure to advertising could harm ouroperations and results if our advertisers reduce the advertising rates they arewilling to pay because they believe television advertisements are lesseffective with these technologies.

**Cableand satellite television programming signals have been stolen or could bestolen in the future, which reduces our potential revenue from subscriber feesand advertising.**

The delivery ofsubscription programming requires the use of conditional access technology tolimit access to programming to only those who subscribe to programming and areauthorized to view it. Conditional access systems use, among other things,encryption technology to protect the transmitted signal from unauthorizedaccess. It is illegal to create, sell or otherwise distribute software ordevices to circumvent conditional access technologies. However, theft of cableand satellite programming has been widely reported, and the access or “smart”cards used in cable and satellite service providers’ conditional access systemshave been compromised and could be further compromised in the future. Whenconditional access systems are compromised, we do not receive the potentialsubscriber fee revenues from the cable and satellite service providers.Further, measures that could be taken by cable and satellite service providersto limit such theft are not under our control. Piracy of our copyrightedmaterials could reduce our revenue from subscriber fees and advertising andnegatively affect our business and operating results.

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**Becausewe expect to become increasingly dependent upon our intellectual propertyrights, our inability to protect those rights could negatively impact ourability to compete.**

Approximately 72% of programswe aired in 2006 (exclusive of infomercials) on Outdoor Channel were providedby third-party television and film producers. In order to build a library ofprograms and programming distribution rights, we must obtain all of thenecessary rights, releases and consents from the parties involved in developinga project or from the owners of the rights in a completed program. There can beno assurance that we will be able to obtain the necessary rights on acceptableterms, or at all, or properly maintain and document such rights. In addition,protecting our intellectual property rights by pursuing those who infringe ordilute our rights can be costly and time consuming. If we are unable to protectour portfolio of trademarks, service marks, copyrighted material andcharacters, trade names and other intellectual property rights, our businessand our ability to compete could be harmed.

**We mayface intellectual property infringement claims that could be time-consuming,costly to defend and result in our loss of significant rights.**

Other parties may assertintellectual property infringement claims against us, and our productsmay infringe the intellectual property rights of third parties. From timeto time, we receive letters alleging infringement of intellectual propertyrights of others. Intellectual property litigation can be expensive andtime-consuming and could divert management’s attention from our business. Ifthere is a successful claim of infringement against us, we may be requiredto pay substantial damages to the party claiming infringement or enter intoroyalty or license agreements that may not be available on acceptable ordesirable terms, if at all. Our failure to license the proprietary rights on atimely basis would harm our business.

**Some ofour existing stockholders can exert control over us and may not makedecisions that are in the best interests of all stockholders.**

Our current officers,directors and greater than 5% stockholders together currently control greaterthan 50% of our outstanding common stock. As a result, these stockholders,acting together, would be able to exert significant influence over all mattersrequiring stockholder approval, including the election of directors andapproval of significant corporate transactions. In addition, this concentrationof ownership may delay or prevent a change in control of our company, evenwhen a change may be in the best interests of stockholders. In addition,the interests of these stockholders may not always coincide with ourinterests as a company or the interests of other stockholders. Accordingly,these stockholders could cause us to enter into transactions or agreements thatyou would not approve.

**Themarket price of our common stock has been and may continue to be subjectto wide fluctuations.**

Our stock hashistorically been and continues to be traded at relatively low volumes andtherefore has been subject to price volatility. Various factors contribute tothe volatility of our stock price, including, for example, low trading volume,quarterly variations in our financial results, increased competition andgeneral economic and market conditions. While we cannot predict the individualeffect that these factors may have on the market price of our commonstock, these factors, either individually or in the aggregate, could result insignificant volatility in our stock price during any given period of time.There can be no assurance that a more active trading market in our stock willdevelop. As a result, relatively small trades may have a significantimpact on the price of our common stock. Moreover, companies that haveexperienced volatility in the market price of their stock often are subject tosecurities class action litigation. If we were the subject of suchlitigation, it could result in substantial costs and divert management’sattention and resources.

**Anti-takeoverprovisions in our certificate of incorporation, our bylaws and under Delawarelaw may enable our incumbent management to retain control of us anddiscourage or prevent a change of control that may be beneficial to ourstockholders.**

Provisions of Delawarelaw, our certificate of incorporation and bylaws could discourage, delay orprevent a merger, acquisition or other change in control that stockholdersmay consider favorable, including transactions in which you mightotherwise receive a premium for your shares. These provisions also could limitthe price that investors might be willing to pay in the future for shares ofour common stock, thereby depressing the market price of our common stock.Furthermore, these provisions could prevent attempts by our stockholders toreplace or remove our management. These provisions:

·              allowthe authorized number of directors to be changed only by resolution of ourboard of directors;

·              establisha classified board of directors, providing that not all members of the board beelected at one time;

·              requirea 66 2/3% stockholder vote to remove a director, and only for cause;

·              authorizeour board of directors to issue without stockholder approval blank checkpreferred stock that, if issued, could operate as a “poison pill” to dilute thestock ownership of a potential hostile acquirer to prevent an acquisition thatis not approved by our board of directors;

·              require thatstockholder actions must be effected at a duly called stockholder meeting andprohibit stockholder action by

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written consent;

·              establishadvance notice requirements for stockholder nominations to our board ofdirectors or for stockholder proposals that can be acted on at stockholdermeetings;

·              exceptas provided by law, allow only our board of directors to call a special meetingof the stockholders; and

·              require a 66 2/3%stockholder vote to amend our certificate of incorporation or bylaws.

In addition, because weare incorporated in Delaware, we are governed by the provisions of Section 203of the Delaware General Corporation Law, which may, unless certain criteria aremet, prohibit large stockholders, in particular those owning 15% or more of ouroutstanding voting stock, from merging or combining with us for a prescribedperiod of time.

**Technologiesin the cable and satellite television industry are constantly changing, and ourfailure to acquire or maintain state-of-the-art technology may harm ourbusiness and competitive advantage.**

The technologies used inthe cable and satellite television industry are rapidly evolving. Manytechnologies and technological standards are in development and have thepotential to significantly transform the ways in which programming iscreated and transmitted. We cannot accurately predict the effects thatimplementing new technologies will have on our programming and broadcastingoperations. We may be required to incur substantial capital expendituresto implement new technologies, or, if we fail to do so, may facesignificant new challenges due to technological advances adopted bycompetitors, which in turn could result in harming our business and operatingresults.

**Thecable and satellite television industry is subject to substantial governmentalregulation for which compliance may increase our costs and expose us topenalties for failure to comply.**

The cable televisionindustry is subject to extensive legislation and regulation at the federal andlocal levels, and, in some instances, at the state level, and many aspects ofsuch regulation are currently the subject of judicial proceedings andadministrative or legislative proposals. Similarly, the satellite televisionindustry is subject to federal regulation. Operating in a regulated industryincreases our cost of doing business as a video programmer.

The Cable TelevisionConsumer Protection and Competition Act of 1992, to which we refer as the 1992Cable Act, includes provisions that preclude cable operators affiliated withvideo programmers from favoring their programmers over competitors. The 1992Cable Act also effectively precludes such programmers from selling theirprogramming exclusively to cable operators. These provisions potentiallybenefit independent programmers such as us by limiting the ability of cableoperators affiliated with programmers from carrying only programming in whichthey have an ownership interest and from offering exclusive programmingarrangements. However, the United States Court of Appeals for the District ofColumbia Circuit vacated the FCC rule limiting the carriage of affiliatedprogrammers by cable operators. Although the FCC issued further notices ofproposed rulemaking in 2001 and 2005 addressing this issue, it has not adoptednew rules. The exclusivity provision is scheduled to expire inOctober 2007, but the FCC has initiated a rulemaking proceeding todetermine if a further extension is necessary to protect competition anddiversity. 

Regulatory carriagerequirements also could reduce the channel capacity available to carry OutdoorChannel. The 1992 Cable Act granted television broadcasters a choice ofmust-carry rights or retransmission consent rights. The rules adopted bythe FCC generally provide for mandatory carriage by cable systems of all localfull-power commercial television broadcast signals selecting must-carry rightsand, depending on a cable system’s channel capacity, non-commercial televisionbroadcast signals. Such statutorily mandated carriage of broadcast stations,coupled with the provisions of the Cable Communications Policy Act of 1984,which require cable television systems with 36 or more “activated” channels toreserve a percentage of such channels for commercial use by unaffiliated thirdparties and permit franchise authorities to require the cable operator toprovide channel capacity, equipment and facilities for public, educational andgovernment access channels, could reduce carriage of Outdoor Channel bylimiting its carriage in cable systems with limited channel capacity. In 2001,the FCC adopted rules relating to the cable carriage of digital televisionsignals. Among other things, the rules clarify that a digital-onlytelevision station can assert a right to analog or digital carriage on a cablesystem. The FCC initiated a further proceeding to determine whether televisionbroadcasters may assert the rights to carriage of both analog and digitalsignals during the transition to digital television and to carriage of alldigital signals. In 2005, the FCC decided that television broadcasters do nothave such additional must-carry rights. Broadcasters formally have requestedthat the FCC reconsider this decision and are seeking legislative change torequire such carriage. In June 2006, this matter was scheduled to be heard bythe FCC at its open meeting, but was removed from the agenda withoutdiscussion. The imposition of such additional must-carry regulation, inconjunction with any limited cable system channel capacity, would increase thelikelihood that cable operators may be forced to drop some cableprogramming services and could reduce carriage of Outdoor Channel.

The TelecommunicationsAct of 1996 required the FCC to establish rules and an implementationschedule to ensure that video programming is fully accessible to thehearing impaired through closed captioning. The rules adopted by the FCCrequire substantial closed captioning over a six to ten year phase-in period,which began in 2000, with only limited exemptions. As a result, we willcontinue to incur additional costs for closed captioning. Failure to meet theseclosed

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captioning requirementscould cause a service provider to discontinue carrying Outdoor Channel andresult in regulatory action by the FCC.

If we distributetelevision programming through other types of media, we may be required toobtain federal, state and local licenses or other authorizations to offer suchservices. We may not be able to obtain licenses or authorizations in atimely manner, or at all, or conditions could be imposed upon licenses andauthorizations that may not be favorable to us. In the future, increasedregulation of rates could, among other things, put downward pressure on therates charged by cable programming services, and affect the ability orwillingness of cable system operators to retain or to add Outdoor Channelnetwork on their cable systems.

In addition,government-mandated a la carte carriage or small tiers of channels by cablesystem operators could adversely impact our viewership levels if OutdoorChannel is sold a la carte or moved to such a tier. In response to a requestfrom the Committee on Energy and Commerce of the House of Representatives, theFCC’s Media Bureau conducted a study in 2004 regarding, among other things,government-mandated a la carte or mini-tier packaging of programming servicesin which each subscriber would purchase only those channels that he or shedesired instead of the larger bundles of different channels as is typicaltoday. The Media Bureau’s report in 2004 observed that such packaging wouldincrease the cost of programming to consumers and injure programmers. OnFebruary 9, 2006, the Media Bureau released a further report which statedthat the 2004 report was flawed and which concluded that a-la-carte sales couldbe in the best interests of consumers. Although the FCC cannot mandatea-al-carte sales, its endorsement of the concept could encourage Congress toconsider proposals to mandate a-ala-carte sales or otherwise seek to imposegreater regulatory controls on how cable programming is sold. If, in response toany statue enacted by Congress, or any rate or other government regulation,cable system operators implement channel offerings that require subscribers toaffirmatively choose to pay a separate fee to receive Outdoor Channel, eitherby itself or in combination with a limited number of other channels, the numberof viewers for Outdoor Channel could be reduced.

The regulation ofprogramming services, cable television systems and satellite licensees issubject to the political process and has been in constant flux over the pastdecade. Further material changes in the law and regulatory requirements aredifficult to anticipate and our business may be harmed by futurelegislation, new regulation, deregulation or court decisions interpreting lawsand regulations.

**We mustcomply with many local, states, federal and environmental regulations, forwhich compliance may be costly and may expose us to substantial penalties.**

Our recreational outdooractivity entities, GPAA and Lost Dutchman’s, share the general risks of alloutdoor recreational activities such as personal injury, environmentalcompliance and real estate and environmental regulation. In addition to thegeneral cable television industry regulations, we are also subject to variouslocal, state and federal regulations, including, without limitation,regulations promulgated by federal and state environmental, health and laboragencies. Our prospecting clubs are subject to various local, state and federalstatutes, ordinances, rules and regulations concerning zoning, developmentand other utilization of their properties. We cannot predict what impactcurrent or future regulations may have on these businesses. In addition,failure to maintain required permits or licenses, or to comply with applicableregulations, could result in substantial fines or costs or revocation of ouroperating licenses, which would have a material adverse effect on our businessand operating results.

**If ourgoodwill becomes impaired, we will be required to take a non-cash charge whichcould have a significant effect on our reported net earnings.**

A significant portion ofour assets consists of goodwill.  Inaccordance with Statement of Financial Accounting Standards No. 142, “Goodwilland Other Intangible Assets”, or SFAS 142, we test goodwill for impairmentduring the fourth quarter of each year, and on an interim date if factors orindicators become apparent that would require an interim test. A significantdownward revision in the present value of estimated future cash flows for areporting unit could result in an impairment of goodwill under SFAS 142 and anon-cash charge would be required. Such a charge could have a significanteffect on our reported net earnings.

**Futureissuance by us of preferred shares could adversely affect the holders ofexisting shares, and therefore reduce the value of existing shares.**

We are authorized toissue up to 25,000,000 shares of preferred stock. The issuance of any preferredstock could adversely affect the rights of the holders of shares of our commonstock, and therefore reduce the value of such shares. No assurance can be giventhat we will not issue shares of preferred stock in the future.

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**We donot expect to pay dividends in the foreseeable future.**

We do not anticipatepaying cash dividends on our common stock in the foreseeable future. Anypayment of cash dividends will also depend on our financial condition,operating results, capital requirements and other factors and will be at thediscretion of our board of directors. Furthermore, at the time of any potentialpayment of a cash dividend we may subject to contractual restrictions on,or prohibitions against, the payment of dividends.

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**ITEM 2.****                  Unregistered Sales of Equity Securities andUse of Proceeds.**

None.

**ITEM 3.****                  Defaults Upon Senior Securities.**

None.

**ITEM 4.****                  Submission of Matters to a Vote of SecurityHolders.**

None.

**ITEM 5.****                  Other Information.**

None.

**ITEM 6.****                  Exhibits.**
| Exhibit  Number | ** ** | **Description** |
|-----------------|------------|-----------------|
|            |       |            |
| 3.1             |       |            | Certificate of Incorporation of Outdoor Channel  Holdings, Inc, a Delaware corporation (filed as Exhibit 3.1 to the  Company’s Current Report on Form 8-K filed on September 20, 2004 and  incorporated herein by reference) |
| 3.2             |       |            | By-Laws of Outdoor Channel Holdings, Inc., a  Delaware corporation (filed as Exhibit 3.2 to the Company’s Current  Report on Form 8-K filed on September 20, 2004 and incorporated herein  by reference) |
| 4.1             |       |            | Instruments defining the rights of security holders,  including debentures (see Exhibits 3.1 and 3.2 above and Exhibit 4.1 to the  Company’s Form 10-Q for the period ended June 30, 2005) |
| 10.1            |       |            | Purchase Agreement by and between The Gold Business,  LLC, Outdoor Channel Holdings, Inc. and Gold Prospector’s Association of  America, Inc. dated April 24, 2007. |
| 10.2            |       |            | First Amendment to Lease dated April 24, 2007, by  and between Musk Ox Properties, L.P. and Outdoor Channel Holdings, Inc. |
| 31.1            |       |            | Certification by Chief Executive Officer |
| 31.2            |       |            | Certification by Chief Financial Officer |
| 32.1            | *          |            | Section 1350 Certification by Chief Executive  Officer |
| 32.2            | *          |            | Section 1350 Certification by Chief Financial  Officer |

 

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*       Pursuant to Commission Release No. 33-8238, this certification will be treatedas “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part ofsuch report for purposes of Section 18 of the Securities Exchange Act of 1934,as amended, or otherwise subject to the liability of Section 18 of theSecurities Exchange Act of 1934, as amended, and this certification will not bedeemed to be incorporated by reference into any filing under the Securities Actof 1933, as amended, or the Securities Exchange Act of 1934, as amended, exceptto the extent that the registrant specifically incorporates it by reference.

**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|            | ** ** | **OUTDOOR CHANNEL HOLDINGS, INC.**                                                              |
|------------|------------|-------------------------------------------------------------------------------------------------|
|       |       |                                                                                            |
|       |       | /s/ William A. Owen                                                                             |   |
| ** ** | ** ** | **William A. Owen**                                                                             |
|       |       | Authorized Officer, Chief Financial Officer and  Controller  (Principal and Accounting Officer) |
|       |       | Date: May 10, 2007                                                                              |

 

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