##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2007
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from                    to
 Commission file number: 000-17287
 Outdoor Channel Holdings, Inc.
  Delaware
    
    33-0074499(State or other Jurisdiction 
of incorporation or organization)
    
    (IRS Employer Identification Number)
 43445 Business Park Drive, Suite 103
Temecula, California 92590
 (951) 699-6991
  þ o
  o þ o
 o þ
  Class
    
    Number of Shares Outstanding at August 1, 2007Common Stock, $0.001 par value
    
    26,077,816




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2




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##### 



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q/A
For The Period Ended June 30, 2007
 Table of Contents
  
 Part I. Financial Information
    
    
    4Item 1.
    
    Financial Statements
    
    
    4Condensed
Consolidated Balance Sheets as of June 30, 2007 (Unaudited and As
Restated) and December 31, 2006 (As Restated)
    
    
    4Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2006 (As Restated)
    
    
    5Unaudited Condensed Consolidated Statement of Stockholders Equity for the Six Months Ended June 30, 2007 (As Restated)
    
    
    6Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006 (As Restated)
    
    
    7Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    33Part II. Other Information
    
    
    36Item 1.
    
    Legal Proceedings
    
    
    36Item 1A.
    
    Risk Factors
    
    
    36Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3.
    
    Defaults Upon Senior Securities
    
    
    46Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    46Item 5.
    
    Other Information
    
    
    46Item 6.
    
    Exhibits
    
    
    46Signatures
    
    
    
    
    46EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  3




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PART IFINANCIAL INFORMATION
 
 ITEM 1.  Financial Statements.
 OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
  June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)(As Restated,
    
    
    (As Restated,Note 11)
    
    
    Note 10)AssetsCurrent assets:Cash and cash equivalents
    
    $
    18,689
    
    
    $
    14,226Investment in available-for-sale securities
    
    
    47,747
    
    
    
    42,144Accounts receivable, net of allowance for doubtful accounts of $200 and $180
    
    
    7,896
    
    
    
    6,816Income tax refund receivable
    
    
    222
    
    
    
    2,299Deferred tax assets, net
    
    
    590
    
    
    
    608Prepaid programming costs
    
    
    2,213
    
    
    
    2,713Other current assets
    
    
    1,150
    
    
    
    835Assets of discontinued operations
    
    
    
    
    
    
    1,344Total current assets
    
    
    78,507
    
    
    
    70,985Property, plant and equipment, net
    
    
    12,102
    
    
    
    12,494Amortizable intangible assets, net
    
    
    541
    
    
    
    820Goodwill
    
    
    43,124
    
    
    
    43,816Deferred tax assets, net
    
    
    10,965
    
    
    
    11,344Deposits and other assets
    
    
    2,171
    
    
    
    2,101Assets of discontinued operations
    
    
    
    
    
    
    3,390Totals
    
    $
    147,410
    
    
    $
    144,950Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    3,089
    
    
    $
    2,765Accrued severance payments
    
    
    179
    
    
    
    341Deferred revenue
    
    
    526
    
    
    
    610Current portion of deferred obligation
    
    
    56
    
    
    
    40Customer deposits
    
    
    12
    
    
    
    53Liabilities of discontinued operations
    
    
    
    
    
    
    463Total current liabilities
    
    
    3,862
    
    
    
    4,272Accrued severance payments, net of current portion
    
    
    33
    
    
    
    44Deferred obligations
    
    
    293
    
    
    
    326Liabilities of discontinued operations
    
    
    
    
    
    
    1,362Total liabilities
    
    
    4,188
    
    
    
    6,004Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 25,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $0.001 par value; 75,000 shares authorized: 26,082 and
25,507 shares issued and outstanding
    
    
    26
    
    
    
    26Additional paid-in capital
    
    
    172,062
    
    
    
    165,205Accumulated other comprehensive income
    
    
    14
    
    
    
    48Accumulated deficit
    
    
    (28,880
    )
    
    
    (26,333
    )Total stockholders equity
    
    
    143,222
    
    
    
    138,946Totals
    
    $
    147,410
    
    
    $
    144,950
  4




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    (As Restated,
    
    
    (As Restated,
    
    
    (As Restated,Note 11)
    
    
    Note 11)
    
    
    Note 11)
    
    
    Note 11)Revenues:Advertising
    
    $
    6,634
    
    
    $
    5,660
    
    
    $
    12,991
    
    
    $
    11,393Subscriber fees
    
    
    4,775
    
    
    
    4,341
    
    
    
    9,524
    
    
    
    8,724Total revenues
    
    
    11,409
    
    
    
    10,001
    
    
    
    22,515
    
    
    
    20,117Cost of services:Programming
    
    
    1,633
    
    
    
    2,180
    
    
    
    3,104
    
    
    
    3,721Satellite transmission fees
    
    
    636
    
    
    
    614
    
    
    
    1,232
    
    
    
    1,252Production and operations
    
    
    904
    
    
    
    898
    
    
    
    2,274
    
    
    
    2,067Other direct costs
    
    
    17
    
    
    
    6
    
    
    
    55
    
    
    
    9Total cost of services
    
    
    3,190
    
    
    
    3,698
    
    
    
    6,665
    
    
    
    7,049Other expenses:Advertising
    
    
    1,816
    
    
    
    1,601
    
    
    
    2,530
    
    
    
    3,762Selling, general and administrative
    
    
    6,801
    
    
    
    4,455
    
    
    
    15,001
    
    
    
    9,187Depreciation and amortization
    
    
    658
    
    
    
    777
    
    
    
    1,307
    
    
    
    1,384Total other expenses
    
    
    9,275
    
    
    
    6,833
    
    
    
    18,838
    
    
    
    14,333Loss from operations
    
    
    (1,056
    )
    
    
    (530
    )
    
    
    (2,988
    )
    
    
    (1,265
    )Interest expense
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    154Other income
    
    
    812
    
    
    
    643
    
    
    
    1,515
    
    
    
    1,266Income (loss) from continuing operations
before income taxes
    
    
    (244
    )
    
    
    37
    
    
    
    (1,473
    )
    
    
    (153
    )Income tax provision
    
    
    819
    
    
    
    219
    
    
    
    353
    
    
    
    191Loss from continuing operations
    
    
    (1,063
    )
    
    
    (182
    )
    
    
    (1,826
    )
    
    
    (344
    )Income (loss) from discontinued operations,
net of tax
    
    
    (7
    )
    
    
    319
    
    
    
    29
    
    
    
    329Net income (loss)
    
    $
    (1,070
    )
    
    $
    137
    
    
    $
    (1,797
    )
    
    $
    (15
    )Basic earnings (loss) per common share data:From continuing operations
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.07
    )
    
    $
    (0.01
    )From discontinued operations
    
    $
    
    
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.01Basic earnings per common share
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    Diluted earnings (loss) per common share data:From continuing operations
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.07
    )
    
    $
    (0.01
    )From discontinued operations
    
    $
    
    
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.01Diluted earnings per common share
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    Weighted average number of common shares
outstanding:Basic
    
    
    25,857
    
    
    
    24,752
    
    
    
    25,728
    
    
    
    24,600Diluted
    
    
    25,857
    
    
    
    24,752
    
    
    
    25,728
    
    
    
    24,600
  5




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statement of Stockholders Equity
 For the Six Months Ended June 30, 2007
  AccumulatedAdditional
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalBalance, December 31,
2006 (as restated,
Note 11)
    
    
    25,507
    
    
    $
    26
    
    
    $
    165,205
    
    
    $
    48
    
    
    $
    (26,333
    )
    
    $
    138,946Comprehensive income:Net income (loss)
(as restated, Note
11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,797
    )
    
    
    (1,797
    )Effect of change
in fair value of
available-for-sale
securities, net of
deferred taxes of
($23)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    (34
    )Total
comprehensive
income (loss)
(as restated,
Note 11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,831
    )Common stock issued
upon exercise of
stock options
    
    
    362
    
    
    
    
    
    
    
    598
    
    
    
    
    
    
    
    
    
    
    
    598Issuance of
restricted stock to
employees and service
providers for
services to be
rendered, net of
forfeited shares
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based employee
and service provider
compensation expense
    
    
    
    
    
    
    
    
    
    
    6,531

    
    
    
    
    
    
    
    
    
    
    
    6,531Purchase and
retirement of
treasury stock
related to employee
and service provider
share-based
compensation activity
    
    
    (26
    )
    
    
    
    
    
    
    (272
    )
    
    
    
    
    
    
    
    

    
    (272
    )Cumulative effect of
adoption of new
accounting
pronouncement (Note
9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750
    )
    
    
    (750
    )Balance, June 30, 2007
    
    
    26,082
    
    
    $
    26
    
    
    $
    172,062
    
    
    $
    14
    
    
    $
    (28,880
    )
    
    $
    143,222
  6




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Cash Flows
  Six Months EndedJune 30,2007
    
    
    2006(As Restated,
    
    
    (As Restated,Note 11)
    
    
    Note 11)Operating activities:Net income (loss)
    
    $
    (1,797
    )
    
    $
    (15
    )Adjustments to reconcile income to net cash provided by operating activities of
continuing operations:Income from discontinued operations
    
    
    (29
    )
    
    
    (329
    )Depreciation and amortization
    
    
    1,551
    
    
    
    1,456Provision for doubtful accounts
    
    
    68
    
    
    
    74Share-based employee and service provider compensation
    
    
    6,531
    
    
    
    1,679Deferred tax provision (benefit)
    
    
    360
    
    
    
    (577
    )Tax benefits from exercise of stock options in excess of recognized expense
    
    
    (7
    )
    
    
    (199
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,148
    )
    
    
    (1,383
    )Income tax refund receivable
    
    
    2,077
    
    
    
    991Prepaid programming costs
    
    
    500
    
    
    
    (512
    )Other current assets
    
    
    (315
    )
    
    
    (584
    )Deposits and other assets
    
    
    (314
    )
    
    
    (682
    )Accounts payable and accrued expenses
    
    
    398
    
    
    
    243Deferred revenue
    
    
    (84
    )
    
    
    318Customer deposits
    
    
    (41
    )
    
    
    Accrued severance payments
    
    
    (173
    )
    
    
    (8
    )Deferred obligations
    
    
    (17
    )
    
    
    34Net cash provided by operating activities of continuing operations
    
    
    7,560
    
    
    
    506Investing activities:Purchases of property, plant and equipment
    
    
    (709
    )
    
    
    (2,217
    )Proceeds from sale of discontinued operations
    
    
    3,589
    
    
    
    Purchases of available-for-sale securities
    
    
    (59,550
    )
    
    
    (82,303
    )Proceeds from sale of available-for-sale securities
    
    
    53,890
    
    
    
    86,573Net cash provided by (used in) investing activities of continuing operations
    
    
    (2,780
    )
    
    
    2,053Financing activities:Principal payments on long-term debt and capital leases
    
    
    
    
    
    
    (349
    )Proceeds from exercise of stock options
    
    
    598
    
    
    
    601Purchase of treasury stock
    
    
    (272
    )
    
    
    (33
    )Tax benefits from exercise of stock options in excess of recognized expense
    
    
    7
    
    
    
    199Net cash provided by financing activities of continuing operations
    
    
    333
    
    
    
    418Cash flows from discontinued operations:Net cash used in operating activities of discontinued operations
    
    
    (581
    )
    
    
    (119
    )Net cash used in investing activities of discontinued operations
    
    
    (69
    )
    
    
    (24
    )Net cash used in financing activities of discontinued operations
    
    
    
    
    
    
    (9
    )Net cash used in discontinued operations
    
    
    (650
    )
    
    
    (152
    )Net increase in cash and cash equivalents
    
    
    4,463
    
    
    
    2,825Cash and cash equivalents, beginning of period
    
    
    14,226
    
    
    
    17,672Cash and cash equivalents, end of period
    
    $
    18,689
    
    
    $
    20,497Supplemental disclosure of cash flow information:Interest paid
    
    $
    
    
    
    $
    155Income taxes paid
    
    $
    8
    
    
    $
    Supplemental disclosures of noncash investing and financing activities:Effect of net decrease in fair value of available-for-sale securities, net
of deferred taxes
    
    $
    (34
    )
    
    $
    (23
    )Property, plant and equipment costs incurred but not paid
    
    $
    30
    
    
    $
    64Effect of net increase in fair value of cash flow hedge
    
    $
    
    
    
    $
    131
  7




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Notes to Unaudited Condensed Consolidated Financial Statements
  NOTE 1ORGANIZATION AND BUSINESS
 Description of Operations
   Recent Accounting Pronouncements
   Restatement of 2007 Financial Statements
  NOTE 2UNAUDITED INTERIM FINANCIAL STATEMENTS
  8




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NOTE 3STOCK INCENTIVE PLANS
  
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Nature of Award:Restricted stock
    
    $
    467
    
    
    $
    138
    
    
    $
    702
    
    
    $
    235Options
    
    
    186
    
    
    
    710
    
    
    
    881
    
    
    
    1,444Performance units
    
    
    2,098
    
    
    
    
    
    
    
    4,948
    
    
    
    Total share-based compensation expense
    
    $
    2,751
    
    
    $
    848
    
    
    $
    6,531
    
    
    $
    1,679
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Classification of Compensation Expense:Cost of services:Production and operations
    
    $
    88
    
    
    $
    46
    
    
    $
    79
    
    
    $
    82Other expenses:Selling, general and administrative
    
    
    2,663
    
    
    
    802
    
    
    
    6,452
    
    
    
    1,597Total share-based compensation expense
    
    $
    2,751
    
    
    $
    848
    
    
    $
    6,531
    
    
    $
    1,679
  9




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Six Months EndedJune 30,2007
    
    2006Risk-free interest rate
    
    
    4.9  5.0
    %
    
    
    4.3  4.9
    %Dividend yield
    
    
    0%
    
    
    
    0%Weighted average expected life
    
    0.8 years
    
    3.78 yearsVolatility factor
    
    
    39.2  39.5
    %
    
    
    52.3  58.9
    %Weighted average volatility factor
    
    
    39.4%
    
    
    
    54.6%
  NOTE 4EARNINGS (LOSS) PER COMMON SHARE
   10




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerators:Loss from continuing operations
    
    $
    (1,063
    )
    
    $
    (182
    )
    
    $
    (1,826
    )
    
    $
    (344
    )Denominators:Weighted average common shares
outstandingbasic and diluted
    
    
    25,857
    
    
    
    24,752
    
    
    
    25,728
    
    
    
    24,600Diluted weighted average
common shares outstanding
    
    
    25,857
    
    
    
    24,752
    
    
    
    25,728
    
    
    
    24,600
 NOTE 5EQUITY TRANSACTIONS
 Issuances of Common Stock by the Company
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Number of options exercised
    
    
    30
    
    
    
    319
    
    
    
    362
    
    
    
    492Cash proceeds
    
    $
    152
    
    
    $
    418
    
    
    $
    598
    
    
    $
    600Tax benefit from options exercised
    
    $
    32
    
    
    $
    172
    
    
    $
    723
    
    
    $
    844
    11




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Stock Options
  Weighted
    
    
    AggregateWeighted
    
    
    Average
    
    
    IntrinsicShares
    
    
    Average
    
    
    Remaining
    
    
    Value(in
    
    
    Exercise
    
    
    Contractual
    
    
    (inOptions
    
    thousands)
    
    
    Price
    
    
    Term
    
    
    thousands)Outstanding at beginning of period
    
    
    3,272
    
    
    $
    9.48Granted
    
    
    
    
    
    
    Exercised
    
    
    (362
    )
    
    
    1.65Forfeited
    
    
    (160
    )
    
    
    13.48Outstanding at end of period
    
    
    2,750
    
    
    $
    10.28
    
    
    
    2.37
    
    
    $
    6,333Vested or expected to vest at end of period
    
    
    2,701
    
    
    $
    10.22
    
    
    
    2.34
    
    
    $
    6,332Exercisable at end of period
    
    
    2,056
    
    
    $
    9.25
    
    
    
    1.93
    
    
    $
    6,325
   Restricted Stock
  WeightedShares
    
    
    Average(in
    
    
    Grant-Datethousands)
    
    
    Fair ValueNonvested at beginning of period
    
    
    314
    
    
    $
    12.73Granted
    
    
    273
    
    
    
    10.48Vested
    
    
    (48
    )
    
    
    12.66Forfeited
    
    
    (34
    )
    
    
    13.66Nonvested at end of period
    
    
    505
    
    
    $
    11.46
  12




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Expense to be Recognized
  As of June 30, 2007Weighted AverageExpense Yet
    
    
    Remainingto be
    
    
    Requisite ServiceRecognized
    
    
    PeriodsStock options
    
    $
    3,651
    
    
    2.67 yearsRestricted stock
    
    
    4,709
    
    
    2.59 yearsPerformance units
    
    
    1,635
    
    
    0.41 yearsTotal
    
    $
    9,995
    
    
    2.26 years
 NOTE 6RELATED PARTY TRANSACTIONS
   NOTE 7DISCONTINUED OPERATIONS
   13




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Membership Division revenue
    
    $
    363
    
    
    $
    1,034
    
    
    $
    1,632
    
    
    $
    2,329Income (loss) from operations
    
    
    15
    
    
    
    (273
    )
    
    
    73
    
    
    
    (238
    )Income (loss) from
discontinued operations, net
of tax
    
    $
    (7
    )
    
    $
    319
    
    
    $
    29
    
    
    $
    329
  December 31,2006Assets held for sale:Current assets
    
    $
    1,344Property, plant and equipment, net
    
    
    3,352Deposits and other assets
    
    
    38Total assets of discontinued operations
    
    $
    4,734Liabilities of discontinued operations:Current liabilities
    
    $
    463Deferred revenue, net of current portion
    
    
    1,362Total liabilities of discontinued operations
    
    
    1,825Net assets of discontinued operations
    
    $
    2,909
 NOTE 8INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES
   As of
    
    
    As ofJune 30, 2007
    
    
    December 31, 2006Auction rate securities
    
    $
    46,910
    
    
    $
    41,250Equities
    
    
    837
    
    
    
    894Total available-for-sale securities
    
    $
    47,747
    
    
    $
    42,144
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest income
    
    $
    795
    
    
    $
    625
    
    
    $
    1,479
    
    
    $
    1,232Dividend income
    
    
    17
    
    
    
    18
    
    
    
    36
    
    
    
    34Total other income
    
    $
    812
    
    
    $
    643
    
    
    $
    1,515
    
    
    $
    1,266
 14




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##### Table of Contents



NOTE 9INCOME TAX PROVISION
    NOTE
10RESTATEMENT OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2006 AND
FOR THE SIX MONTHS ENDED JUNE 30, 2006
  
    
    the
recognition of deferred tax asset related to certain options to acquire common shares of TOC that
were outstanding on September 8, 2004 when we completed its acquisition,
    
    certain revenue cutoff
issues which generally result in intra-period timing fluctuations,
    
    accounting for the cost
escalation provisions related to the term of the lease of our headquarters,
    
    recognition of
additional income tax expense for a short-fall in our windfall benefit pool,
    
    adjustment to the
estimated useful life of our leasehold improvements to match the terms of our lease of our
headquarters, and the
    
    exclusion from expense recognition of restricted shares issued to a service
provider with performance conditions that when met would result in some or all of the shares being
vested.
    15




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##### Table of Contents



As OriginallyReported
    
    As Restated
    
    ChangeCurrent deferred tax assets, net
    
    $
    575
    
    
    $
    608
    
    
    $
    33Total current assets
    
    
    70,952
    
    
    
    70,985
    
    
    
    33Property, plant and equipment, net
    
    
    12,445
    
    
    
    12,494
    
    
    
    49Goodwill
    
    
    44,457
    
    
    
    43,816
    
    
    
    (641
    )Deferred tax assets, net
    
    
    10,956
    
    
    
    11,344
    
    
    
    388Total assets
    
    
    145,121
    
    
    
    144,950
    
    
    
    (171
    )Accounts payable and accrued expenses
    
    
    2,766
    
    
    
    2,765
    
    
    
    (1
    )Current portion of deferred obligation
    
    
    
    
    
    
    40
    
    
    
    40Total current liabilities
    
    
    4,233
    
    
    
    4,272
    
    
    
    39Deferred obligations
    
    
    344
    
    
    
    326
    
    
    
    (18
    )Total liabilities
    
    
    5,983
    
    
    
    6,004
    
    
    
    21Additional paid-in capital
    
    
    165,779
    
    
    
    165,205
    
    
    
    (574
    )Accumulated deficit
    
    
    (26,715
    )
    
    
    (26,333
    )
    
    
    382Total stockholders equity
    
    
    139,138
    
    
    
    138,946
    
    
    
    (192
    )Total liabilities and stockholders equity
    
    $
    145,121
    
    
    $
    144,950
    
    
    $
    (171
    )
   NOTE 11RESTATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  16




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##### Table of Contents



As OriginallyReported
    
    As Restated
    
    ChangeAccounts receivable
    
    $
    7,677
    
    
    $
    7,896
    
    
    $
    219Current deferred tax assets, net
    
    
    580
    
    
    
    590
    
    
    
    10Other current assets
    
    
    1,392
    
    
    
    1,150
    
    
    
    (242
    )Total current assets
    
    
    78,520
    
    
    
    78,507
    
    
    
    (13
    )Property, plant and equipment, net
    
    
    11,985
    
    
    
    12,102
    
    
    
    117Goodwill
    
    
    44,457
    
    
    
    43,124
    
    
    
    (1,333
    )Deferred tax assets, net
    
    
    10,896
    
    
    
    10,965
    
    
    
    69Total assets
    
    
    148,569
    
    
    
    147,410
    
    
    
    (1,159
    )Accounts payable and accrued expenses
    
    
    3,180
    
    
    
    3,089
    
    
    
    (91
    )Current portion of deferred obligation
    
    
    
    
    
    
    56
    
    
    
    56Total current liabilities
    
    
    3,897
    
    
    
    3,862
    
    
    
    (35
    )Deferred obligations
    
    
    323
    
    
    
    293
    
    
    
    (30
    )Other long term liabilities
    
    
    
    
    
    
    750
    
    
    
    750Total liabilities
    
    
    4,253
    
    
    
    4,188
    
    
    
    (65
    )Additional paid-in capital
    
    
    170,731
    
    
    
    172,062
    
    
    
    1,331Accumulated deficit
    
    
    (26,455
    )
    
    
    (28,880
    )
    
    
    (2,425
    )Total stockholders equity
    
    
    144,316
    
    
    
    143,222
    
    
    
    (1,094
    )Total liabilities and stockholders equity
    
    $
    148,569
    
    
    $
    147,410
    
    
    $
    (1,159
    )
   As OriginallyReported
    
    As Restated
    
    ChangeFor the three months ended June 30, 2007Advertising revenue
    
    $
    6,753
    
    
    $
    6,634
    
    
    $
    (119
    )Total revenues
    
    
    11,528
    
    
    
    11,409
    
    
    
    (119
    )Production and operations
    
    
    897
    
    
    
    904
    
    
    
    7Total cost of services
    
    
    3,183
    
    
    
    3,190
    
    
    
    7Advertising expense
    
    
    1,766
    
    
    
    1,816
    
    
    
    50Selling, general and administrative
    
    
    6,272
    
    
    
    6,801
    
    
    
    529Depreciation and amortization
    
    
    662
    
    
    
    658
    
    
    
    (4
    )Total other expenses
    
    
    8,700
    
    
    
    9,275
    
    
    
    575Loss from operations
    
    
    (355
    )
    
    
    (1,056
    )
    
    
    (701
    )Income (loss) from continuing operations before
income taxes
    
    
    457
    
    
    
    (244
    )
    
    
    (701
    )Income tax provision
    
    
    106
    
    
    
    819
    
    
    
    713Income (loss) from continuing operations
    
    
    351
    
    
    
    (1,063
    )
    
    
    (1,414
    )Net income (loss)
    
    
    344
    
    
    
    (1,070
    )
    
    
    (1,414
    )Earnings (loss) per common share:Basic from continuing operations
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.05
    )Diluted from continuing operations
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.05
    )Basic earnings per common share
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.05
    )Diluted earnings per common share
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.05
    )Weighted average number of basic common shares
    
    
    25,495
    
    
    
    25,857
    
    
    
    362Weighted average number of diluted common shares
    
    
    26,242
    
    
    
    25,857
    
    
    
    (385
    )
 17




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##### Table of Contents



As OriginallyReported
    
    As Restated
    
    ChangeFor the three months ended June 30, 2006Advertising revenue
    
    $
    5,663
    
    
    $
    5,660
    
    
    $
    (3
    )Total revenues
    
    
    10,004
    
    
    
    10,001
    
    
    
    (3
    )Production and operations
    
    
    947
    
    
    
    898
    
    
    
    (49
    )Other direct costs
    
    
    42
    
    
    
    6
    
    
    
    (36
    )Total cost of services
    
    
    3,783
    
    
    
    3,698
    
    
    
    (85
    )Advertising expense
    
    
    1,555
    
    
    
    1,601
    
    
    
    46Selling, general and administrative
    
    
    4,451
    
    
    
    4,455
    
    
    
    4Depreciation and amortization
    
    
    827
    
    
    
    777
    
    
    
    (50
    )Loss from operations
    
    
    (612
    )
    
    
    (530
    )
    
    
    82Income (loss) from continuing operations before
income taxes
    
    
    (45
    )
    
    
    37
    
    
    
    82Income tax provision
    
    
    (28
    )
    
    
    219
    
    
    
    247Loss from continuing operations
    
    
    (17
    )
    
    
    (182
    )
    
    
    (165
    )Net income (loss)
    
    
    302
    
    
    
    137
    
    
    
    (165
    )Earnings (loss) per common share:Basic from continuing operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )Diluted from continuing operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )Basic earnings per common share
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    Diluted earnings per common share
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    Weighted average number of basic common shares
    
    
    24,763
    
    
    
    24,752
    
    
    
    (11
    )Weighted average number of diluted common shares
    
    
    24,763
    
    
    
    24,752
    
    
    
    (11
    )
  As OriginallyReported
    
    As Restated
    
    ChangeFor the six months ended June 30, 2007Advertising revenue
    
    $
    12,773
    
    
    $
    12,991
    
    
    $
    218Total revenues
    
    
    22,297
    
    
    
    22,515
    
    
    
    218Production and operations
    
    
    2,370
    
    
    
    2,274
    
    
    
    (96
    )Total cost of services
    
    
    6,761
    
    
    
    6,665
    
    
    
    (96
    )Advertising expense
    
    
    2,480
    
    
    
    2,530
    
    
    
    50Selling, general and administrative
    
    
    12,895
    
    
    
    15,001
    
    
    
    2,106Depreciation and amortization
    
    
    1,374
    
    
    
    1,307
    
    
    
    (67
    )Total other expenses
    
    
    16,749
    
    
    
    18,838
    
    
    
    2,089Loss from operations
    
    
    (1,213
    )
    
    
    (2,988
    )
    
    
    (1,775
    )Income (loss) from continuing operations before
income taxes
    
    
    302
    
    
    
    (1,473
    )
    
    
    (1,775
    )Income tax provision (benefit)
    
    
    70
    
    
    
    353
    
    
    
    283Loss from continuing operations
    
    
    232
    
    
    
    (1,826
    )
    
    
    (2,058
    )Income (loss) from discontinued operations, net of tax
    
    
    28
    
    
    
    29
    
    
    
    1Net income (loss)
    
    
    260
    
    
    
    (1,797
    )
    
    
    (2,057
    )Earnings (loss) per common share:Basic from continuing operations
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    (0.08
    )Diluted from continuing operations
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    (0.08
    )Basic earnings per common share
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    (0.08
    )Diluted earnings per common share
    
    $
    0.01
    
    
    $
    (0.07
    )
    
    $
    (0.08
    )Weighted average number of basic common shares
    
    
    25,384
    
    
    
    25,728
    
    
    
    344Weighted average number of diluted common shares
    
    
    25,758
    
    
    
    25,728
    
    
    
    (30
    )
 18




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##### Table of Contents



As OriginallyReported
    
    As Restated
    
    ChangeFor the six months ended June 30, 2006Advertising revenue
    
    $
    11,385
    
    
    $
    11,393
    
    
    $
    8Total revenues
    
    
    20,109
    
    
    
    20,117
    
    
    
    8Production and operations
    
    
    2,152
    
    
    
    2,067
    
    
    
    (85
    )Other direct costs
    
    
    96
    
    
    
    9
    
    
    
    (87
    )Total cost of services
    
    
    7,221
    
    
    
    7,049
    
    
    
    (172
    )Advertising expense
    
    
    3,665
    
    
    
    3,762
    
    
    
    97Selling, general and administrative
    
    
    9,127
    
    
    
    9,187
    
    
    
    60Depreciation and amortization
    
    
    1,429
    
    
    
    1,384
    
    
    
    (45
    )Total other expenses
    
    
    14,221
    
    
    
    14,333
    
    
    
    112Loss from operations
    
    
    (1,333
    )
    
    
    (1,265
    )
    
    
    68Interest expense
    
    
    153
    
    
    
    154
    
    
    
    1Income (loss) from continuing operations before
income taxes
    
    
    (220
    )
    
    
    (153
    )
    
    
    67Income tax provision
    
    
    (36
    )
    
    
    191
    
    
    
    227Loss from continuing operations
    
    
    (184
    )
    
    
    (344
    )
    
    
    (160
    )Net income (loss)
    
    
    145
    
    
    
    (15
    )
    
    
    (160
    )Earnings (loss) per common share:Basic from continuing operations
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    Diluted from continuing operations
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    Basic earnings per common share
    
    $
    0.01
    
    
    $
    
    
    
    $
    (0.01
    )Diluted earnings per common share
    
    $
    0.01
    
    
    $
    
    
    
    $
    (0.01
    )Weighted average number of basic common shares
    
    
    24,613
    
    
    
    24,600
    
    
    
    (13
    )Weighted average number of diluted common shares
    
    
    24,613
    
    
    
    24,600
    
    
    
    (13
    )
   As OriginallyReported
    
    As Restated
    
    ChangeBalance at December 31, 2006Additional paid-in capital
    
    $
    165,779
    
    
    $
    165,205
    
    
    $
    (574
    )Accumulated deficit
    
    
    (26,715
    )
    
    
    (26,333
    )
    
    
    382Total stockholders equity
    
    
    139,138
    
    
    
    138,946
    
    
    
    (192
    )Net income (loss)
    
    
    260
    
    
    
    (1,797
    )
    
    
    (2,057
    )Total comprehensive income (loss)
    
    
    226
    
    
    
    (1,831
    )
    
    
    (2,057
    )Share-based employee and service
provider compensation expense
    
    
    4,626
    
    
    
    6,531
    
    
    
    1,905Cumulative effect of adoption of
new accounting pronouncement
    
    
    
    
    
    
    (750
    )
    
    
    (750
    )Balance at June 30, 2007Additional paid-in capital
    
    
    170,731
    
    
    
    172,062
    
    
    
    1,331Accumulated deficit
    
    
    (26,455
    )
    
    
    (28,880
    )
    
    
    (2,425
    )Total stockholders equity
    
    $
    144,316
    
    
    $
    143,222
    
    
    $
    (1,094
    )
 19




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##### Table of Contents



As OriginallyReported
    
    As Restated
    
    ChangeFor the six months ended June 30, 2007Net income (loss)
    
    $
    260
    
    
    $
    (1,797
    )
    
    $
    (2,057
    )Income from discontinued operations
    
    
    (28
    )
    
    
    (29
    )
    
    
    (1
    )Depreciation and amortization
    
    
    1,618
    
    
    
    1,551
    
    
    
    (67
    )Share-based employee and service provider
compensation
    
    
    4,626
    
    
    
    6,531
    
    
    
    1,905Deferred tax provision (benefit)
    
    
    77
    
    
    
    360
    
    
    
    283Change in:Accounts receivable
    
    
    (929
    )
    
    
    (1,148
    )
    
    
    (219
    )Other current assets
    
    
    (557
    )
    
    
    (315
    )
    
    
    242Accounts payable and accrued expenses
    
    
    414
    
    
    
    398
    
    
    
    (16
    )Deferred obligations
    
    
    (21
    )
    
    
    (17
    )
    
    
    4Net cash provided by operating activities
of continued operations
    
    
    7,493
    
    
    
    7,560
    
    
    
    67Purchases of property, plant and equipment
    
    
    (634
    )
    
    
    (709
    )
    
    
    (75
    )Net cash used in investing activities of
continuing operations
    
    
    (2,705
    )
    
    
    (2,780
    )
    
    
    (75
    )Net cash used in operating activities of
discontinued operations
    
    
    (582
    )
    
    
    (581
    )
    
    
    1Net cash used in discontinued operations
    
    
    (651
    )
    
    
    (650
    )
    
    
    1Property, plant and equipment costs
incurred but not paid
    
    $
    
    
    
    $
    30
    
    
    $
    30
 20




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##### Table of Contents



As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2006Net income (loss)
    
    $
    145
    
    
    $
    (15
    )
    
    $
    (160
    )Depreciation and amortization
    
    
    1,491
    
    
    
    1,456
    
    
    
    (35
    )Share-based employee and service provider compensation
    
    
    1,714
    
    
    
    1,679
    
    
    
    (35
    )Deferred tax provision (benefit)
    
    
    (806
    )
    
    
    (577
    )
    
    
    229Tax benefits from exercise of stock options in excess of
recognized expense
    
    
    (705
    )
    
    
    (199
    )
    
    
    506Change in:Accounts receivable
    
    
    (1,376
    )
    
    
    (1,383
    )
    
    
    (7
    )Deposits and other assets
    
    
    (680
    )
    
    
    (682
    )
    
    
    (2
    )Accounts payable and accrued expenses
    
    
    91
    
    
    
    243
    
    
    
    152Deferred obligations
    
    
    24
    
    
    
    34
    
    
    
    10Net cash provided by operating activities of continuing operations
    
    
    (152
    )
    
    
    506
    
    
    
    658Purchases of property, plant and equipment
    
    
    (2,065
    )
    
    
    (2,217
    )
    
    
    (152
    )Net cash provided by investing activities of continuing operations
    
    
    2,205
    
    
    
    2,053
    
    
    
    (152
    )Tax benefits from exercise of stock options in excess of
recognized expense
    
    
    705
    
    
    
    199
    
    
    
    (506
    )Net cash provided by financing activities of continuing operations
    
    
    924
    
    
    
    418
    
    
    
    506Property, plant and equipment costs incurred but not paid
    
    $
    
    
    
    $
    64
    
    
    $
    64
   As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the three months ended June 30, 2007Restricted stock
    
    $
    422
    
    
    $
    467
    
    
    $
    45Options
    
    
    242
    
    
    
    186
    
    
    
    (56
    )Performance units
    
    
    1,653
    
    
    
    2,098
    
    
    
    445Total share-based compensation expense
    
    $
    2,317
    
    
    $
    2,751
    
    
    $
    434
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the three months ended June 30, 2007Cost of services:Production and operations
    
    $
    
    
    
    $
    88
    
    
    $
    88Other expenses:Selling, general and administrative
    
    
    2,317
    
    
    
    2,663
    
    
    
    346Total share-based compensation expense
    
    $
    2,317
    
    
    $
    2,751
    
    
    $
    434
 21




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As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2007Restricted stock
    
    $
    575
    
    
    $
    702
    
    
    $
    127Options
    
    
    745
    
    
    
    881
    
    
    
    136Performance units
    
    
    3,306
    
    
    
    4,948
    
    
    
    1,642Total share-based compensation expense
    
    $
    4,626
    
    
    $
    6,531
    
    
    $
    1,905
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2007Cost of services:Production and operations
    
    $
    
    
    
    $
    79
    
    
    $
    79Other expenses:Selling, general and administrative
    
    
    4,626
    
    
    
    6,452
    
    
    
    1,826Total share-based compensation expense
    
    $
    4,626
    
    
    $
    6,531
    
    
    $
    1,905
  As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the three months ended June 30, 2006Restricted stock
    
    $
    143
    
    
    $
    138
    
    
    $
    (5
    )Options
    
    
    756
    
    
    
    710
    
    
    
    (46
    )Performance units
    
    
    
    
    
    
    
    
    
    
    Total share-based compensation expense
    
    $
    899
    
    
    $
    848
    
    
    $
    (51
    )
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the three months ended June 30, 2006Cost of services:Production and operations
    
    $
    
    
    
    $
    46
    
    
    $
    46Other expenses:Selling, general and administrative
    
    
    899
    
    
    
    802
    
    
    
    (97
    )Total share-based compensation expense
    
    $
    899
    
    
    $
    848
    
    
    $
    (51
    )
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2006Restricted stock
    
    $
    244
    
    
    $
    235
    
    
    $
    (9
    )Options
    
    
    1,470
    
    
    
    1,444
    
    
    
    (26
    )Performance units
    
    
    
    
    
    
    
    
    
    
    Total share-based compensation expense
    
    $
    1,714
    
    
    $
    1,679
    
    
    $
    (35
    )
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2006Cost of services:Production and operations
    
    $
    
    
    
    $
    82
    
    
    $
    82Other expenses:Selling, general and administrative
    
    
    1,714
    
    
    
    1,597
    
    
    
    (117
    )Total share-based compensation expense
    
    $
    1,714
    
    
    $
    1,679
    
    
    $
    (35
    )
 22




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As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the three months ended June 30, 2007Income (loss) from continuing operations
    
    $
    351
    
    
    $
    (1,063
    )
    
    $
    (1,414
    )Denominators:Weighted average common shares outstanding 
basic and diluted
    
    
    25,495
    
    
    
    25,857
    
    
    
    362Diluted weighted average common shares outstanding
    
    
    25,495
    
    
    
    25,857
    
    
    
    362
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2007Income (loss) from continuing operations
    
    $
    232
    
    
    $
    (1,826
    )
    
    $
    (2,058
    )Denominators:Weighted average common shares outstanding 
basic and diluted
    
    
    25,384
    
    
    
    25,728
    
    
    
    344Diluted weighted average common shares outstanding
    
    
    25,384
    
    
    
    25,728
    
    
    
    344
  As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the three months ended June 30, 2006Income (loss) from continuing operations
    
    $
    (17
    )
    
    $
    (182
    )
    
    $
    (165
    )Denominators:Weighted average common shares outstanding 
basic and diluted
    
    
    24,763
    
    
    
    24,752
    
    
    
    (11
    )Diluted weighted average common shares outstanding
    
    
    24,763
    
    
    
    24,752
    
    
    
    (11
    )
 As OriginallyReported
    
    
    As Restated
    
    
    ChangeFor the six months ended June 30, 2006Income (loss) from continuing operations
    
    $
    (184
    )
    
    $
    (344
    )
    
    $
    (160
    )Denominators:Weighted average common shares outstanding 
basic and diluted
    
    
    24,613
    
    
    
    24,600
    
    
    
    (13
    )Diluted weighted average common shares outstanding
    
    
    24,613
    
    
    
    24,600
    
    
    
    (13
    )
   As OriginallyReported
    
    
    As Restated
    
    
    ChangeStock options
    
    $
    2,085
    
    
    $
    3,651
    
    
    $
    1,566Restricted stock
    
    
    4,821
    
    
    
    4,709
    
    
    
    (112
    )Performance units
    
    
    3,306
    
    
    
    1,635
    
    
    
    (1,671
    )Total
    
    $
    10,212
    
    
    $
    9,995
    
    
    $
    (217
    )
 23




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As OriginallyReported
    
    As Restated
    
    ChangeStock options
    
    
    1.4
    
    
    
    2.67
    
    
    
    1.27Restricted stock
    
    
    1.8
    
    
    
    2.59
    
    
    
    0.79Performance units
    
    
    0.5
    
    
    
    0.41
    
    
    
    (0.09
    )Total
    
    
    1.3
    
    
    
    2.26
    
    
    
    0.96
    24




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
 Safe Harbor Statement
   Effects of Restatements
  25




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General
  Gold Prospector & Treasure Hunters in the Great Outdoors
 26




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Recent Accounting Pronouncements
   Comparison of Operating Results for the Three Months Ended June 30, 2007 and June 30, 2006
  Change
    
    
    % of Total Revenue2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006(As Restated, Note 11)
    
    
    (As Restated, Note 11)
    
    
    (As Restated, Note 11)Revenues:Advertising
    
    $
    6,634
    
    
    $
    5,660
    
    
    $
    974
    
    
    
    17.2
    %
    
    
    58.1
    %
    
    
    56.6
    %Subscriber fees
    
    
    4,775
    
    
    
    4,341
    
    
    
    434
    
    
    
    10.0
    
    
    
    41.9
    
    
    
    43.4Total revenues
    
    
    11,409
    
    
    
    10,001
    
    
    
    1,408
    
    
    
    14.1
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    1,633
    
    
    
    2,180
    
    
    
    (547
    )
    
    
    (25.1
    )
    
    
    14.3
    
    
    
    21.8Satellite transmission fees
    
    
    636
    
    
    
    614
    
    
    
    22
    
    
    
    3.6
    
    
    
    5.6
    
    
    
    6.1Production and operations
    
    
    904
    
    
    
    898
    
    
    
    6
    
    
    
    0.7
    
    
    
    7.9
    
    
    
    9.0Other direct costs
    
    
    17
    
    
    
    6
    
    
    
    11
    
    
    
    183.3
    
    
    
    0.1
    
    
    
    0.1Total cost of services
    
    
    3,190
    
    
    
    3,698
    
    
    
    (508
    )
    
    
    13.7
    
    
    
    27.9
    
    
    
    37.0Other expenses:Advertising
    
    
    1,816
    
    
    
    1,601
    
    
    
    215
    
    
    
    13.4
    
    
    
    15.9
    
    
    
    16.0Selling, general and
administrative
    
    
    6,801
    
    
    
    4,455
    
    
    
    2,346
    
    
    
    52.7
    
    
    
    59.6
    
    
    
    44.5Depreciation and amortization
    
    
    658
    
    
    
    777
    
    
    
    (119
    )
    
    
    (15.3
    )
    
    
    5.8
    
    
    
    7.8Total other expenses
    
    
    9,275
    
    
    
    6,833
    
    
    
    2,442
    
    
    
    35.7
    
    
    
    81.3
    
    
    
    68.3Loss from operations
    
    
    (1,056
    )
    
    
    (530
    )
    
    
    (526
    )
    
    
    99.2
    
    
    
    (9.2
    )
    
    
    (5.3
    )Interest expense
    
    
    
    
    
    
    76
    
    
    
    (76
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    0.8Other income
    
    
    812
    
    
    
    643
    
    
    
    169
    
    
    
    26.3
    
    
    
    7.1
    
    
    
    6.5Income (loss) from continuing
operations before income taxes
    
    
    (244
    )
    
    
    37
    
    
    
    (281
    )
    
    
    759.5
    
    
    
    (2.1
    )
    
    
    0.4Income tax provision
    
    
    819
    
    
    
    219
    
    
    
    600
    
    
    
    274.0
    
    
    
    7.2
    
    
    
    2.2Loss from continuing operations
    
    
    (1,063
    )
    
    
    (182
    )
    
    
    (881
    )
    
    
    484.1
    
    
    
    (9.3
    )
    
    
    (1.8
    )Income (loss) from discontinued
operations, net of tax
    
    
    (7
    )
    
    
    319
    
    
    
    (326
    )
    
    
    (102.2
    )
    
    
    (0.1
    )
    
    
    3.2Net income (loss)
    
    $
    (1,070
    )
    
    $
    137
    
    
    $
    (1,207
    )
    
    
    (881.0
    )%
    
    
    (9.4
    )%
    
    
    1.4
    %
 27




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Comparison of Operating Results for the Six Months Ended June 30, 2007 and June 30, 2006
 
 Change
    
    
    % of Total Revenue2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006(As Restated, Note 10)
    
    
    (As Restated, Note 10)
    
    
    (As Restated, Note 10)Revenues:Advertising
    
    $
    12,991
    
    
    $
    11,393
    
    
    $
    1,598
    
    
    
    14.0
    %
    
    
    57.7
    %
    
    
    56.6
    %Subscriber fees
    
    
    9,524
    
    
    
    8,724
    
    
    
    800
    
    
    
    9.2
    
    
    
    42.3
    
    
    
    43.4Total revenues
    
    
    22,515
    
    
    
    20,117
    
    
    
    2,398
    
    
    
    11.9
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    3,104
    
    
    
    3,721
    
    
    
    (617
    )
    
    
    (16.6
    )
    
    
    13.8
    
    
    
    18.5Satellite transmission fees
    
    
    1,232
    
    
    
    1,252
    
    
    
    (20
    )
    
    
    (1.6
    )
    
    
    5.5
    
    
    
    6.2Production and operations
    
    
    2,274
    
    
    
    2,067
    
    
    
    207
    
    
    
    10.0
    
    
    
    10.1
    
    
    
    10.3Other direct costs
    
    
    55
    
    
    
    9
    
    
    
    46
    
    
    
    511.1
    
    
    
    0.2
    
    
    
    Total cost of services
    
    
    6,665
    
    
    
    7,049
    
    
    
    (384
    )
    
    
    (5.4
    )
    
    
    29.6
    
    
    
    35.0Other expenses:Advertising
    
    
    2,530
    
    
    
    3,762
    
    
    
    (1,232
    )
    
    
    (32.7
    )
    
    
    11.2
    
    
    
    18.7Selling, general and
administrative
    
    
    15,001
    
    
    
    9,187
    
    
    
    5,814
    
    
    
    63.3
    
    
    
    66.6
    
    
    
    45.7Depreciation and amortization
    
    
    1,307
    
    
    
    1,384
    
    
    
    (77
    )
    
    
    (5.6
    )
    
    
    5.8
    
    
    
    6.9Total other expenses
    
    
    18,838
    
    
    
    14,333
    
    
    
    4,505
    
    
    
    31.4
    
    
    
    83.6
    
    
    
    71.3Loss from operations
    
    
    (2,988
    )
    
    
    (1,265
    )
    
    
    (1,723
    )
    
    
    136.2
    
    
    
    (13.2
    )
    
    
    (6.3
    )Interest expense
    
    
    
    
    
    
    154
    
    
    
    (154
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    0.8Other income
    
    
    1,515
    
    
    
    1,266
    
    
    
    249
    
    
    
    19.7
    
    
    
    6.7
    
    
    
    6.3Loss from continuing operations
before income taxes
    
    
    (1,473
    )
    
    
    (153
    )
    
    
    (1,320
    )
    
    
    862.7
    
    
    
    (6.5
    )
    
    
    (0.8
    )Income tax provision
    
    
    353
    
    
    
    191
    
    
    
    162
    
    
    
    84.8
    
    
    
    1.6
    
    
    
    0.9Loss from continuing operations
    
    
    (1,826
    )
    
    
    (344
    )
    
    
    (1,482
    )
    
    
    430.8
    
    
    
    (8.1
    )
    
    
    (1.7
    )Income (loss) from discontinued
operations, net of tax
    
    
    29
    
    
    
    329
    
    
    
    (300
    )
    
    
    (91.2
    )
    
    
    0.1
    
    
    
    1.6Net income (loss)
    
    $
    (1,797
    )
    
    $
    (15
    )
    
    $
    (1,782
    )
    
    
    11,880.0
    %
    
    
    (8.0
    )%
    
    
    (0.1
    )%
 Revenues
   28




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Cost of Services
    29




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Other Expenses
     30




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Loss from Operations
  Interest Expense
  Other Income
  Income (Loss) from Continuing Operations Before Income Taxes
  31




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Income Tax Provision
  Loss from Continuing Operations
  Income (Loss) from Discontinued Operations, Net of Tax
  Net Income (Loss)
  Liquidity and Capital Resources
   32




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
    
 ITEM 4. CONTROLS AND PROCEDURES.
 Evaluation of disclosure controls and procedures.
 33




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Managements report on internal control over financial reporting.
    Remediation plan for material weakness in internal control over financial reporting.
  34




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Changes in internal control over financial reporting.
 35




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PART IIOTHER INFORMATION
 
 ITEM 1. Legal Proceedings.
  
 ITEM 1A. Risk Factors.
  We do not control the methodology used by Nielsen to estimate our subscriber base or television
ratings, and changes, or inaccuracies, in such estimates could cause our advertising revenue to
decrease.
  Cable and satellite service providers could discontinue or refrain from carrying Outdoor Channel,
or decide to not renew our distribution agreements, which could substantially reduce the number of
viewers and harm our operating results.
  We may not be able to grow our subscriber base at a sufficient rate to offset planned increased
costs, decreased revenue or at all, and as a result our revenues and profitability may not increase
and could decrease.
  36




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If we offer favorable terms or incentives to service providers in order to grow our subscriber
base, our operating results may be harmed or your percentage of the Company may be diluted.
  If, in our attempt to increase our number of subscribers, we structure favorable terms or
incentives with one service provider in a way that would require us to offer the same terms or
incentives to all other service providers, our operating results may be harmed.
  If our channels are placed in unpopular program packages by cable or satellite service providers,
or if service fees are increased for our subscribers, the number of viewers of our channel
may decline which could harm our business and operating results.
  Consolidation among cable and satellite operators may harm our business.
  37




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We may not be able to effectively manage our future growth, and our growth may not continue, which
may substantially harm our business and prospects.
  We may not be able to secure additional national advertising accounts, and as a result, our
revenues and profitability may be negatively impacted.
  We have found a material weakness in our internal controls over financial reporting, and we cannot
be certain in the future that we will be able to report that our controls are without material
weakness or to complete our evaluation of those controls in a timely fashion.
    Expenses relating to programming costs are generally increasing and a number of factors can cause
cost overruns and delays, and our operating results may be adversely impacted if we are not able to
successfully recover the costs of developing and acquiring new programming.
  38




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Our operating results may vary significantly, and historical comparisons of our operating results
are not necessarily meaningful and should not be relied upon as an indicator of future performance.
  
    
    carriage decisions of cable and satellite service providers;
    
    demand for advertising, advertising rates and offerings of competing media;
    
    changes in the growth rate of cable and satellite subscribers;
    
    cable and satellite service providers capital and marketing expenditures and
their impact on programming offerings and penetration;
    
    seasonal trends in viewer interests and activities;
    
    pricing, service, marketing and acquisition decisions that could reduce
revenues and impair quarterly financial results;
    
    the mix of cable television and satellite-delivered programming products and
services sold and the distribution channels for those products and services;
    
    our ability to react quickly to changing consumer trends;
    
    increased compensation expenses resulting from the hiring of highly qualified
employees;
    
    specific economic conditions in the cable television and related industries;
and
    
    changing regulatory requirements.
  Changes to financial accounting standards or our accounting estimates may affect our reported
operating results.
  39




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If we fail to develop and distribute popular programs, our viewership would likely decline, which
could cause advertising and subscriber fee revenues to decrease.
  The market in which we operate is highly competitive, and we may not be able to compete
effectively, particularly against competitors with greater financial resources, brand recognition,
marketplace presence and relationships with service providers.
   Changes in corporate governance and securities disclosure and compliance practices have increased
and may continue to increase our legal compliance and financial reporting costs.
  The satellite infrastructure that we use may fail or be preempted by another signal, which could
impair our ability to deliver programming to our cable and satellite service providers.
  40




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Natural disasters and other events beyond our control could interrupt our signal.
  Seasonal increases or decreases in advertising revenue may negatively affect our business.
  We may be unable to access capital, or offer equity as an incentive for increased subscribers, on
acceptable terms to fund our future growth and operations.
  We may not be able to attract and retain key personnel.
  New video recording technologies may reduce our advertising revenue.
 ®
 Cable and satellite television programming signals have been stolen or could be stolen in the
future, which reduces our potential revenue from subscriber fees and advertising.
  41




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Because we expect to become increasingly dependent upon our intellectual property rights, our
inability to protect those rights could negatively impact our ability to compete.
  We may face intellectual property infringement claims that could be time-consuming, costly to
defend and result in our loss of significant rights.
  Some of our existing stockholders can exert control over us and may not make decisions that are in
the best interests of all stockholders.
  The market price of our common stock has been and may continue to be subject to wide fluctuations.
  Anti-takeover provisions in our certificate of incorporation, our bylaws and under Delaware law
may enable our incumbent management to retain control of us and discourage or prevent a change of
control that may be beneficial to our stockholders.
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
    
    allow the authorized number of directors to be changed only by resolution of
our board of directors;
    
    establish a classified board of directors, providing that not all members of
the board be elected at one time;
    
    require a 66 2/3% stockholder vote to remove a director, and only for cause;
    
    authorize our board of directors to issue without stockholder approval blank
check preferred stock that, if issued, could operate as a poison pill to dilute the stock
ownership of a potential hostile acquirer to prevent an acquisition that is not approved by
our board of directors;
    
    require that stockholder actions must be effected at a duly called
stockholder meeting and prohibit stockholder action by written consent;
    
    establish advance notice requirements for stockholder nominations to our
board of directors or for stockholder proposals that can be acted on at stockholder meetings;
    
    except as provided by law, allow only our board of directors to call a
special meeting of the stockholders; and
    
    require a 66 2/3% stockholder vote to amend our certificate of incorporation
or bylaws.
  Technologies in the cable and satellite television industry are constantly changing, and our
failure to acquire or maintain state-of-the-art technology may harm our business and competitive
advantage.
  The cable and satellite television industry is subject to substantial governmental regulation for
which compliance may increase our costs and expose us to penalties for failure to comply.
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If our goodwill becomes impaired, we will be required to take a noncash charge which could have a
significant effect on our reported net earnings.
  44




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Future issuance by us of preferred shares could adversely affect the holders of existing shares,
and therefore reduce the value of existing shares.
  We do not expect to pay dividends in the foreseeable future.
  45




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##### Table of Contents



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.
 ExhibitNumber
    
    Description3.1
    
    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)31.1
    
    Certification by Chief Executive Officer31.2
    
    Certification by Chief Financial Officer32.1 *
    
    Section 1350 Certification by Chief Executive Officer32.2 *
    
    Section 1350 Certification by Chief Financial Officer
 
 *
    
    Pursuant to Commission Release No. 33-8238, this certification will be treated as
accompanying this Quarterly Report on Form 10-Q and not filed as part of such 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 the Securities Exchange Act of 1934, as amended, and this
certification will not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the registrant specifically incorporates it by reference. 
 SIGNATURES
  OUTDOOR CHANNEL HOLDINGS, INC./s/ Shad L. BurkeShad L. BurkeAuthorized Officer, Interim Chief Financial Officer, ChiefAccounting Officer and Principal Accounting OfficerDate: February 1, 2008
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