##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 Commission File Number: 000-53690
 HERE MEDIA INC.
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    26-3962587(State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or organization)
    
    Identification No.)10990 WILSHIRE BOULEVARD, PENTHOUSE,
    
    90024LOS ANGELES, CA
    
    (Zip Code)(Address of principal executive offices)
 (310) 806-4288  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which Registered
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value per Share
 Yes
o No þ
 Yes
o No þ
 Yes þ No o
 Yes o No o
 þ
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 Yes o No þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



Here Media Inc.
Form 10-K
For The Fiscal Year Ended December 31, 2009
Table of Contents
 PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    7Item 1B. Unresolved Staff Comments
    
    
    7Item 2. Properties
    
    
    7Item 3. Legal Proceedings
    
    
    7PART IIItem 4. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    8Item 5. Selected Financial Data
    
    
    8Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 6A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 7. Financial Statements and Supplementary Data
    
    
    16Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    40Item 8A. Controls and Procedures
    
    
    40Item 8B. Other Information
    
    
    40PART IIIItem 9. Directors, Executive Officers and Corporate Governance
    
    
    40Item 10. Executive Compensation
    
    
    40Item 11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    40Item 12. Certain Relationships and Related Transactions, and Director Independence
    
    
    40Item 13. Principal Accounting Fees and Services
    
    
    41PART IVItem 14. Exhibits and Financial Statement Schedules
    
    
    41Signatures
    
    
    43Exhibit 10.8Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  Special Note Regarding Forward-Looking Statements
    i




---



##### Table of Contents



PART I
 
 Item 1.
    
    Business
 Company Overview
    Out Out, The
Advocate HIVPlus Out The Advocate Out The Advocate Out Out The Advocate
    1




---



##### Table of Contents



Out The Advocate
  
    
    Road-blocked ad placements, or exclusive use by an advertiser over a limited period of
time, on custom content pages complete with category specific editorial;
 
    
    Custom original video series, such as Show and Tell, Ask the Doctor, On-Air,
Greetings From Here! and The Advocate Money Minute, complete with :10 to :15 second
pre-roll advertising (online video commercials appearing prior to each video);
 
    
    Digital co-branded ads, or ads that span our network of websites, that drive traffic
to the custom content page;
 
    
    In-book advertorial;
 
    
    Event series that enable sponsorship opportunities on all event collateral, such as
brochures and printed and/or emailed invitations;
 
    
    Promotional e-newsletters; and
 
    
    Mobile application for iPhone devices that provides cutting-edge listings to the best
bars, clubs, restaurants, shops, hotels and attractions in metropolitan cities worldwide.
 Revenues
 Advertising Services
     Subscription Services
 Out
  2




---



##### Table of Contents



Out Out Out
 Transaction Services
 Out
  Significant Costs and Expenses
 Program License Agreements
   3




---



##### Table of Contents



Paper and Printing Costs
  Postal Rates
  Product Development and Technology
     Competitive Strengths
 Niche Market Focus
 
    
    Custom Integrated Programs.We believe the extensive reach of our
brands, multiple media properties and marketing vehicles provides
advertisers with unparalleled access to the LGBT community. With the
ability to capitalize on the various assets of our respective brands,
such as in-house production from the here! television network,
editorial content from the print and online versions of Outand The
Advocate, and the strength of a focused sales team, we can truly offer
our advertising clients a unique and unsurpassed ability to target the
LGBT market using a combination of vehicles such as the Internet,
e-mail, print and live events.
    
    Focused Advertising.We believe we provide access to one of the
largest audiences of self-identified gay and lesbian people in the
world. Our advertising programs allow both large national and
international advertisers as well as smaller, local advertisers to
reach the LGBT audience in a cost-effective manner.
  4




---



##### Table of Contents




    
    Targeted Campaigns.In addition to offering advertisers the
opportunity to reach the broader LGBT audience, we offer the
opportunity to more closely target specific audiences. For example,
advertisers have the ability to reach our entire online user base with
run-of-site advertisements or to target only those members who share
certain common attributes such as age, gender, geographic location or
online behaviors. By dividing our online content offerings into topic
sections within channels, we provide our advertisers with the ability
to target their marketing efforts further, by sponsoring topic
sections or running individual advertisements in channels specifically
relevant to their particular products and services or brand strategy.
    
    Research and Analysis.We engage third parties to conduct independent
research on member panels assembled from our online membership base to
assess the effectiveness of specific campaigns as well as to identify
other matters of interest to our advertisers. Campaign studies
examine the effect the campaign had on brand awareness, brand
attributes, message association, brand favorability, purchase intent
and advertisement recall and can include an analysis of the research
and recommendations for future advertising campaigns. In addition to
benefiting the advertiser, this type of research helps educate us on
how to more effectively position and manage campaigns for our
advertisers.
 Diversified Revenue Streams.
 Compelling Content.
 Strong Community Affinity.
 Critical Mass. Out The Advocate Out The Advocate
 Scalable Business Model.
 Growth Strategy
  Capitalizing on Advertising Growth and Relationships .
  5




---



##### Table of Contents



Growing Our User Base Across Multiple Properties .
 Competition
   Intellectual Property
  Regulatory Compliance
  
    
    comply with a law enacted in New Jersey in January 2008, or other similar laws which
may be passed in the future, requiring us to conduct background checks on our members prior
to allowing them to interact with other members on our websites or, alternatively, provide
notice on our websites that we have not conducted background checks on our members;
 
    
    provide advance notice of any changes to our privacy policies or to our policies on
sharing non-public information with third parties;
  6




---



##### Table of Contents




    
    with limited exceptions, give consumers the right to prevent sharing of their
non-public personal information with unaffiliated third parties;
 
    
    provide notice to residents in some states if their personal information was, or is
reasonably believed to have been, obtained by an unauthorized person such as a computer
hacker;
    
    comply with current or future anti-spam legislation by limiting or modifying some of
its marketing and advertising efforts, such as email campaigns;
 
    
    comply with the European Union privacy directive and other international regulatory
requirements by modifying the ways in which we collect and share our users personal
information;
 
    
    qualify to do business in various states and countries, in addition to jurisdictions
where we are currently qualified, because our websites are accessible over the Internet in
those states and countries;
 
    
    limit our domestic or international expansion because some jurisdictions may limit or
prevent access to our services as a result of the availability of some content intended for
mature audiences; and
 
    
    limit or prevent access, from some jurisdictions, to some or all of the
member-generated content available through our websites. Regulations adopted by the United
States Department of Justice (the DOJ) under the Child Protection and Obscenity Act of
1988 (the CPO Act) require primary and secondary producers, as defined in the
regulations, of certain adult materials to obtain and make available for inspection
specified records, such as a performers name, address and certain forms of photo
identification of performers. Gay.com could be deemed a secondary producer under the CPO
Act because Gay.com allows its members to display photographic images on its websites as
part of member profiles. While the CPO Act and related regulations have been the subject
of extensive litigation challenging their constitutionality, they remain in effect in
modified form. We may accordingly be subject to significant and burdensome recordkeeping
compliance requirements and will have to evaluate and implement additional registration and
recordkeeping processes and procedures, each of which would result in additional expenses
or in fines or other sanctions in the event of noncompliance. Alternatively, if we
determine that the recordkeeping and compliance requirements would be too burdensome, we
may be forced to limit the type of content that we allow our members to post to their
profiles.
 Employees
  
 Item 1A.
    
    Risk Factors
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  
 Item 3.
    
    Legal Proceedings
   7




---



##### Table of Contents



PART II
 
 Item 4.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Market Information
  Holders
  Dividends
  Securities authorized for issuance under equity compensation plans
  
 Item 5.
    
    Selected Financial Data
  
 Item 6.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following Managements Discussion and Analysis of Financial Condition and Results of
Operations summarizes the significant factors affecting our operating results,
financial condition and liquidity for the two-year period ended December 31, 2009, should be read
in conjunction with the Financial Statements and Notes to Financial
Statements included elsewhere in this Form 10-K , and contains forward-looking statements regarding
future events and our future results that are subject to the safe harbors created under the
Securities Exchange Act of 1934 (the Exchange Act). These statements are based on our
managements current expectations, estimates, forecasts, and projections about the industries in
which we operate and the beliefs and assumptions of our management. Words such as anticipate,
believe, continue, could, estimate, expect, goal, intend, may, plan, potential,
predict, project, seek, should, target, will, would, variations of such words, and
similar expressions are intended to identify such forward-looking statements. In addition, any
statements that refer to projections of our future financial performance, our anticipated growth
and trends in our businesses, and other characterizations of future events or circumstances are
forward-looking statements. Readers are cautioned that these forward-looking statements are only
predictions rather than statements of fact and are subject to risks, uncertainties, and assumptions
that are difficult to predict, including those identified below and elsewhere in this Annual Report
on Form 10-K . Therefore, actual results may differ materially and adversely from those expressed
in any forward-looking statements. We undertake no obligation to revise or update any
forward-looking statements for any reason.
 Overview
    8




---



##### Table of Contents



Out The
Advocate HIVPlus Out The Advocate Out HIVPlus Out Out
   Executive Operating and Financial Summary
    Outlook
  Liquidity
 Results of Operations
 Revenue
 Advertising Services.
  9




---



##### Table of Contents



Subscription Services. Out
 Transaction
Services. Out
 Operating Costs and Expenses
 Cost of Revenue.
 Sales and Marketing.
 General and Administrative.
 Restructuring.
  10




---



##### Table of Contents



Acquisition Transaction Costs.
 Depreciation and Amortization.
 Interest Expense
  Provision for Income Taxes
  Discontinued Operations
   Total revenue
    
    $
    1,063Operating costs and expenses:Cost of revenue
    
    
    684Sales and marketing
    
    
    193General and administrative
    
    
    184Depreciation and amortization
    
    
    19Total operating costs and expenses
    
    
    1,080Loss from
discontinued operations, net of taxes
    
    $
    (17
    )
 Critical Accounting Policies
    11




---



##### Table of Contents




    
    revenue recognition:
 
    
    valuation allowances;
 
    
    intangible assets and other long-lived assets;
 
    
    capitalized website development costs;
 
    
    program broadcasting rights; and
 
    
    related party transactions.
 Revenue Recognition
 Out Out
       12




---



##### Table of Contents



Out .
 Valuation Allowances
    Intangible Assets and Other Long-lived Assets
  Capitalized Website Development Costs
  Program Broadcasting Rights
    13




---



##### Table of Contents



Related Party Transactions
       Liquidity and Capital Resources
     14




---



##### Table of Contents



Off-Balance Sheet Liabilities
  Seasonality
  Recent Accounting Pronouncements
  
 Item 6A.
    
    Quantitative and Qualitative Disclosures About Market Risk
   15




---



##### Table of Contents



Item 7.
    
    Financial Statements and Supplementary Data
 Here Media Inc.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 PageFinancial Statements:Report of Independent Registered Public Accounting Firm
    
    
    17Balance Sheets
    
    
    18Statements of Operations
    
    
    19Statements of Stockholders Equity (Deficit) and Comprehensive Loss
    
    
    20Statements of Cash Flows
    
    
    21Notes to Financial Statements
    
    
    22
  16




---



##### Table of Contents



17




---



##### Table of Contents



Here Media Inc.
 
 BALANCE SHEETS
 (In thousands, except per share amounts)
 December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,530
    
    
    $
    981Restricted cash
    
    
    
    
    
    
    150Accounts receivable, net
    
    
    3,849
    
    
    
    2,415Inventory
    
    
    713
    
    
    
    579Program broadcasting rights, current portion
    
    
    3,864
    
    
    
    2,606Prepaid expenses and other current assets
    
    
    1,313
    
    
    
    759Total current assets
    
    
    12,269
    
    
    
    7,490Property and equipment, net
    
    
    1,019
    
    
    
    1,379Intangible assets, net
    
    
    430
    
    
    
    2,234Program
broadcasting rights, including $11,784 and $13,199 from related
parties as of December 31, 2008 and 2009, respectively, less current portion
    
    
    8,859
    
    
    
    11,971Other assets
    
    
    286
    
    
    
    551Total assets
    
    $
    22,863
    
    
    $
    23,625LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    2,154
    
    
    $
    6,867Accrued expenses and other liabilities
    
    
    1,291
    
    
    
    3,387Accrued restructuring
    
    
    
    
    
    
    523Due to related parties, current portion
    
    
    5,785
    
    
    
    1,233Deferred revenue, current portion
    
    
    1,305
    
    
    
    2,913Capital lease obligations, current portion
    
    
    44
    
    
    
    273Deferred rent, current portion
    
    
    
    
    
    
    29Total current liabilities
    
    
    10,579
    
    
    
    15,225Lines of credit from related parties
    
    
    
    
    
    
    3,835Deferred revenue, less current portion
    
    
    1,319
    
    
    
    2,016Capital lease obligations, less current portion
    
    
    92
    
    
    
    131Deferred rent, less current portion
    
    
    117
    
    
    
    58Due to related parties, less current portion
    
    
    5,800
    
    
    
    12,435Other long-term liabilities
    
    
    
    
    
    
    158Total liabilities
    
    
    17,907
    
    
    
    33,858Commitments and contingencies (Note 8)Stockholders equity (deficit):Common stock: $0.001 par value, 40,000 shares authorized, 16,630 and 20,701
shares issued and outstanding at December 31, 2008 and 2009, respectively
    
    
    17
    
    
    
    21Preferred stock: $0.001 par value, 10,000 shares authorized, zero shares
issued and outstanding at December 31, 2008 and 2009, respectively
    
    
    
    
    
    
    Special stock: $0.001 par value, 4,200 shares authorized, zero and 4,071 shares
issued and outstanding at December 31, 2008 and 2009, respectively
    
    
    
    
    
    
    4Additional paid-in capital
    
    
    4,939
    
    
    
    5,097Accumulated other comprehensive loss
    
    
    
    
    
    
    (17
    )Accumulated deficit
    
    
    
    
    
    
    (15,338
    )Total stockholders equity (deficit)
    
    
    4,956
    
    
    
    (10,233
    )Total liabilities and stockholders equity (deficit)
    
    $
    22,863
    
    
    $
    23,625
   18




---



##### Table of Contents



Here Media Inc.
 
 STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Year Ended December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)Revenue:Advertising services (*)
    
    $
    6,357
    
    
    $
    13,160Subscription services
    
    
    3,246
    
    
    
    8,500Transaction services (*)
    
    
    14,744
    
    
    
    5,260Total revenue
    
    
    24,347
    
    
    
    26,920Operating costs and expenses:Cost of revenue
    
    
    11,456
    
    
    
    21,445Sales and marketing
    
    
    3,630
    
    
    
    6,740General and administrative
    
    
    7,331
    
    
    
    8,442Restructuring
    
    
    
    
    
    
    1,688Acquisition transaction costs
    
    
    609
    
    
    
    2,363Depreciation and amortization
    
    
    340
    
    
    
    1,448Total operating costs and expenses
    
    
    23,366
    
    
    
    42,126Income (loss) from operations
    
    
    981
    
    
    
    (15,206
    )Interest expense
    
    
    (6
    )
    
    
    (89
    )Income (loss) from continuing operations before income taxes
    
    
    975
    
    
    
    (15,295
    )Provision for income taxes
    
    
    14
    
    
    
    43Income (loss) from continuing operations
    
    
    961
    
    
    
    (15,338
    )Gain from spin-off
    
    
    284
    
    
    
    Loss from discontinued operations, net of taxes
    
    
    (17
    )
    
    
    Net income (loss)
    
    $
    1,228
    
    
    $
    (15,338
    )Net loss per share Basic and diluted
    
    
    
    
    
    $
    (0.81
    )Weighted-average shares used to compute loss per share Basic and diluted
    
    
    
    
    
    
    18,894
 (*)
    
    Supplemental disclosure of related party revenue (see Note 5):
 Advertising services revenue:Non-related parties
    
    $
    6,357
    
    
    $
    12,723Related parties
    
    
    
    
    
    
    437$
    6,357
    
    
    $
    13,160Transaction services revenue:Non-related parties
    
    $
    727
    
    
    $
    2,135Related parties
    
    
    14,017
    
    
    
    3,125$
    14,744
    
    
    $
    5,260
   19




---



##### Table of Contents



Here Media Inc.
 
 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE
LOSS
 (In thousands)
 Accumulated
    
    
    
    
    
    
    TotalAdditional
    
    
    Other
    
    
    
    
    
    
    StockholdersCommon Stock
    
    
    Special Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    EquityShares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Loss
    
    
    Deficit
    
    
    (Deficit)Balance as of
January 1, 2008
    
    
    16,630
    
    
    $
    17
    
    
    
    
    
    
    $
    
    
    
    $
    3,711
    
    
    $
    
    
    
    $
    
    
    
    $
    3,728Net and
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,228
    
    
    
    1,228Transfer of
net income to additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,228
    
    
    
    
    
    
    
    (1,228
    )
    
    
    Balance as of
December 31, 2008
    
    
    16,630
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    4,939
    
    
    
    
    
    
    
    
    
    
    
    4,956Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,338
    )
    
    
    (15,338
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,355
    )Members distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (990
    )
    
    
    
    
    
    
    
    
    
    
    (990
    )Merger with PlanetOut Inc.
    
    
    4,071
    
    
    
    4
    
    
    
    4,071
    
    
    
    4
    
    
    
    892
    
    
    
    
    
    
    
    
    
    
    
    900Contribution of film rights
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    206Balance as of
December 31, 2009
    
    
    20,701
    
    
    $
    21
    
    
    
    4,071
    
    
    $
    4
    
    
    $
    5,097
    
    
    $
    (17
    )
    
    $
    (15,338
    )
    
    $
    (10,233
    )
   20




---



##### Table of Contents



Here Media Inc.
 
 STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)Cash flows from operating activities:Net income (loss)
    
    $
    1,228
    
    
    $
    (15,338
    )Net gain from spin-off and loss from discontinued operations, net of tax
    
    
    (267
    )
    
    
    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    340
    
    
    
    1,448Program broadcasting rights amortization
    
    
    4,228
    
    
    
    5,083Sale of accounts receivable to related parties
    
    
    
    
    
    
    3,200Sale of accounts receivable
    
    
    
    
    
    
    594Contributed services
    
    
    
    
    
    
    206Provision for doubtful accounts
    
    
    79
    
    
    
    53Restructuring
    
    
    
    
    
    
    1,688Amortization of deferred rent
    
    
    (11
    )
    
    
    (128
    )Loss on disposal or write-off of property and equipment
    
    
    
    
    
    
    6Changes in operating assets and liabilities, net of acquisition effects:Accounts receivable
    
    
    (655
    )
    
    
    (2,015
    )Inventory
    
    
    62
    
    
    
    134Program broadcasting rights
    
    
    (4,429
    )
    
    
    (6,900
    )Prepaid expenses and other assets
    
    
    (397
    )
    
    
    1,208Accounts payable
    
    
    292
    
    
    
    3,942Accrued expenses and other liabilities
    
    
    287
    
    
    
    (662
    )Accrued restructuring
    
    
    
    
    
    
    (280
    )Due to related parties
    
    
    474
    
    
    
    1,674Deferred revenue
    
    
    (40
    )
    
    
    24Net cash provided by (used in) operating activities of continuing operations
    
    
    1,191
    
    
    
    (6,063
    )Net cash used in operating activities of discontinued operations
    
    
    (15
    )
    
    
    Net cash provided by (used in) operating activities
    
    
    1,176
    
    
    
    (6,063
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (219
    )
    
    
    (319
    )Cash received in acquisition of PlanetOut Inc.
    
    
    
    
    
    
    915Changes in restricted cash
    
    
    
    
    
    
    1,100Net cash provided by (used in) investing activities
    
    
    (219
    )
    
    
    1,696Cash flows from financing activities:Principal payments under capital lease obligations
    
    
    (19
    )
    
    
    (304
    )Borrowings under lines of credit from related parties
    
    
    
    
    
    
    4,018Repayments under lines of credit from related parties
    
    
    
    
    
    
    (241
    )Loans from (repayments to) related parties
    
    
    1,566
    
    
    
    (638
    )Net cash provided by financing activities
    
    
    1,547
    
    
    
    2,835Effect of exchange rate on cash and cash equivalents
    
    
    
    
    
    
    (17
    )Net increase (decrease) in cash and cash equivalents
    
    
    2,504
    
    
    
    (1,549
    )Cash and cash equivalents, beginning of period
    
    
    26
    
    
    
    2,530Cash and cash equivalents, end of period
    
    $
    2,530
    
    
    $
    981Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    6
    
    
    $
    89Cash paid for taxes
    
    $
    14
    
    
    $
    53Supplemental disclosure of noncash flow investing and financing activities:Contribution of film rights
    
    $
    
    
    
    $
    50Distribution of related party receivable to members
    
    $
    
    
    
    $
    990Assignment of investment in OUTtv from related party
    
    $
    125
    
    
    $
    75Property and equipment acquired under capital leases
    
    $
    117
    
    
    $
    Acquisitions (see Note 2):Assets acquired
    
    $
    6,630
    
    
    $
    7,717Liabilities assumed
    
    
    6,130
    
    
    
    6,817Net fair value of stock issued in acquisition
    
    $
    500
    
    
    $
    900
   21




---



##### Table of Contents



Here Media Inc.NOTES TO FINANCIAL STATEMENTS
 Note 1  The Company and Summary of Significant Accounting Policies
 The Company
   Out, The Advocate HIVPlus
 Principles of Consolidation and Basis of Presentation
     Reclassifications
   22




---



##### Table of Contents



Use of Estimates
  Cash and Cash Equivalents
  Restricted Cash
  Fair Value Disclosures of Financial Instruments
  Concentration of Credit Risk
   Allowance for Doubtful Accounts
   23




---



##### Table of Contents



Sales Returns and Allowances
  Inventory
   Program Broadcasting Rights
     24




---



##### Table of Contents



Property and Equipment
  Internal Use Software and Website Development Costs
  Intangible Assets and Other Long-Lived Assets
  Investment in OUTtv
 Principles of Consolidation and
Basis of Presentation
 Related Party Transactions
   25




---



##### Table of Contents



Revenue Recognition
 Out Out
     26




---



##### Table of Contents



Out .
 Advertising Expense
  Stock-Based Compensation
  Segment Reporting
   27




---



##### Table of Contents



Income Taxes
   Comprehensive Loss
  Income (Loss) Per Share
   Year EndedDecember 31,2009Numerator:Net loss
    
    $
    (15,338
    )Denominator for basic and diluted net loss per share:Weighted-average shares outstanding
    
    
    18,894Net loss per share:Basic and diluted
    
    $
    (0.81
    )
 Recent Accounting Guidance
   28




---



##### Table of Contents



29




---



##### Table of Contents



Note 2  Business Combinations and Intangible Assets
 Business Combinations
 Merger with PlanetOut Inc.
     Cash and cash equivalents
    
    $
    915Restricted cash
    
    
    1,100Accounts receivable, net
    
    
    753Prepaid expenses and other current assets
    
    
    552Property and equipment, net
    
    
    2,145Intangible assets
    
    
    1,973Other assets
    
    
    279Liabilities assumed
    
    
    (6,817
    )Net assets acquired
    
    $
    900
    Acquisition of LPI Media, Inc. and SpecPub, Inc. Assets
    30




---



##### Table of Contents



Accounts receivable, net
    
    $
    3,385Inventory
    
    
    900Prepaid expenses and other current assets
    
    
    1,095Property and equipment, net
    
    
    820Intangible assets, net
    
    
    430Liabilities assumed
    
    
    (6,130
    )Total purchase price
    
    $
    500
  Pro Forma Information
  Year Ended December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)Revenue
    
    $
    56,736
    
    
    $
    33,059Loss from continuing operations
    
    $
    (16,739
    )
    
    $
    (15,936
    )Basic loss from continuing operations per
share
    
    $
    (0.81
    )
    
    $
    (0.77
    )
 Intangible Assets
  December 31, 2008
    
    
    December 31, 2009Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountTradenames
    
    $
    430
    
    
    $
    
    
    
    $
    430
    
    
    $
    1,292
    
    
    $
    
    
    
    $
    1,292Customer lists
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    605
    
    
    
    70
    
    
    
    535Content database
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    506
    
    
    
    99
    
    
    
    407$
    430
    
    
    $
    
    
    
    $
    430
    
    
    $
    2,403
    
    
    $
    169
    
    
    $
    2,234
   Fiscal Years:2010
    
    $
    2902011
    
    
    2902012
    
    
    1912013
    
    
    1212014
    
    
    50$
    942
  31




---



##### Table of Contents



Note 3  Other Balance Sheet Components
 December 31,
    
    
    December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)(In thousands)Accounts receivable:Trade accounts receivable
    
    $
    4,559
    
    
    $
    3,057Less: Allowance for doubtful accounts
    
    
    (191
    )
    
    
    (213
    )Less: Provision for returns
    
    
    (519
    )
    
    
    (429
    )$
    3,849
    
    
    $
    2,415
    December 31,
    
    
    December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)(In thousands)Inventory:Materials for future publications
    
    $
    293
    
    
    $
    148Finished goods available for sale
    
    
    573
    
    
    
    457866
    
    
    
    605Less: reserve for obsolete inventory
    
    
    (153
    )
    
    
    (26
    )$
    713
    
    
    $
    579
  December 31,
    
    
    December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)(In thousands)Prepaid expenses and other current assets:Unamortized direct-response advertising costs
    
    $
    930
    
    
    $
    350Other prepaid expenses and other current
assets
    
    
    383
    
    
    
    409$
    1,313
    
    
    $
    759
  32




---



##### Table of Contents



December 31,
    
    
    December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)(In thousands)Property and equipment:Computer equipment and software
    
    $
    590
    
    
    $
    1,922Furniture and fixtures
    
    
    817
    
    
    
    861Leasehold improvements
    
    
    467
    
    
    
    489Website development costs
    
    
    
    
    
    
    2021,874
    
    
    
    3,474Less: Accumulated depreciation and
amortization
    
    
    (855
    )
    
    
    (2,095
    )$
    1,019
    
    
    $
    1,379
  December 31,
    
    
    December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)(In thousands)Accrued expenses and other liabilities:Accrued payroll and related liabilities
    
    $
    497
    
    
    $
    1,345Other accrued liabilities
    
    
    794
    
    
    
    2,042$
    1,291
    
    
    $
    3,387
 Note 4  Program Broadcasting Rights
  December 31,
    
    
    December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)(In thousands)Program broadcasting rights:Related parties
    
    $
    18,319
    
    
    $
    23,420Non-related parties
    
    
    1,498
    
    
    
    2,608Less accumulated amortization:Related parties
    
    
    (6,535
    )
    
    
    (10,221
    )Non-related parties
    
    
    (559
    )
    
    
    (1,230
    )Program broadcasting rights
    
    
    12,723
    
    
    
    14,577Less: current portion
    
    
    3,864
    
    
    
    2,606Program broadcasting rights, less current
portion
    
    $
    8,859
    
    
    $
    11,971
   Fiscal Years:2010
    
    
    2,6062011
    
    
    2,0292012
    
    
    1,3252013
    
    
    1,0932014
    
    
    999Thereafter
    
    
    6,525$
    14,577
  33




---



##### Table of Contents



Note 5  Related Party Transactions
 Related party revenue and expense
   Year Ended December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)Related party revenue:Advertising services:Regent Releasing
    
    $
    
    
    
    $
    437Total advertising services revenue from related parties
    
    
    
    
    
    
    437Transaction services:Regent Releasing
    
    
    14,017
    
    
    
    2,680Hyperion
    
    
    
    
    
    
    138OUTtv
    
    
    
    
    
    
    295Regent Releasing / RWS
    
    
    
    
    
    
    12Total transaction services revenue from related parties
    
    
    14,017
    
    
    
    3,125Total revenue from related parties
    
    $
    14,017
    
    
    $
    3,562Related party expense:Cost of revenue:Regent Releasing
    
    $
    
    
    
    $
    1Total cost of revenue to related parties
    
    
    
    
    
    
    1Sales and marketing expense:OUTtv
    
    
    
    
    
    
    24Total cost of revenue to related parties
    
    
    
    
    
    
    24Total expense to related parties
    
    $
    
    
    
    $
    25
 Related party deferred revenue
  Related party receivables/payables
   34




---



##### Table of Contents



Program broadcasting rights
   Sale of accounts receivable to related parties
  Note 6  Lines of Credit from Related Parties
   Note 7  Accounts Receivable Factoring
   35




---



##### Table of Contents



Note 8  Commitments and Contingencies
 January 2008 Severance Plan
  Employment Agreements
  Fiscal Years:2010
    
    $
    1,2052011
    
    
    3972012
    
    
    134$
    1,736
 Operating Leases
   Future
    
    
    FutureLease
    
    
    RentalYear Ending December 31,
    
    Payments
    
    
    Income2010
    
    $
    2,539
    
    
    $
    4102011
    
    
    1,698
    
    
    
    3672012
    
    
    1,312
    
    
    
    1882013
    
    
    346
    
    
    
    $
    5,895
    
    
    $
    965
 Capital Leases
  Year Ending December 31,
    
    Capital Leases2010
    
    $
    3202011
    
    
    942012
    
    
    332013
    
    
    20Total minimum lease payments
    
    
    467Less: Amount representing interest
    
    
    (63
    )Present value of capital lease obligations
    
    
    404Less: Current portion
    
    
    (273
    )Long-term portion of capital lease obligations
    
    $
    131
  36




---



##### Table of Contents



Co-location Facility Agreement
  Contingencies
  Note 9  Stockholders Equity
 Common Stock
  Preferred Stock
  Special Stock
  Warrants
   37




---



##### Table of Contents



Note 10  Restructuring
   AccruedRestructuringRestructuring
    
    
    Cash
    
    
    Non-cash
    
    
    As ofCharges
    
    
    Payments
    
    
    Charges
    
    
    December 31, 2009(In thousands)Termination benefits
    
    $
    243
    
    
    $
    (233
    )
    
    $
    
    
    
    $
    10Facilities consolidation expenses
    
    
    1,445
    
    
    
    (761
    )
    
    
    (171
    )
    
    
    513Total
    
    $
    1,688
    
    
    $
    (994
    )
    
    $
    (171
    )
    
    $
    523
 Note 11  Income Taxes
   Year Ended December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)Provision at statutory rate
    
    
    
    %
    
    
    (34.0
    %)State taxes, net of federal benefit
    
    
    
    
    
    
    (5.8
    )Permanent differences
    
    
    
    
    
    
    20.4State tax payable
    
    
    
    
    
    
    (0.3
    )Federal benefit
    
    
    
    
    
    
    0.1Change in valuation allowance
    
    
    
    
    
    
    19.3Net tax provision
    
    
    
    %
    
    
    (0.3
    %)
   Year Ended December 31,2008
    
    
    2009(Combined)
    
    
    (Consolidated)Deferred tax assets:Net operating loss carryforwards
    
    $
    
    
    
    $
    3,848Depreciation and amortization
    
    
    
    
    
    
    (1,341
    )Other
    
    
    
    
    
    
    423
    
    
    
    2,930Less: Valuation allowance
    
    
    
    
    
    
    (2,930
    )$
    
    
    
    $
    
  38




---



##### Table of Contents



Note 12  Discontinued Operations
   Total revenue
    
    $
    1,063Operating costs and expenses:Cost of revenue
    
    
    684Sales and marketing
    
    
    193General and administrative
    
    
    184Depreciation and amortization
    
    
    19Total operating costs and expenses
    
    
    1,080Loss from
discontinued operations, net of taxes
    
    $
    (17
    )
 Note 13  Subsequent Event
   39




---



##### Table of Contents



Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
  Changes in Internal Control over Financial Reporting
  
 Item 8B.
    
    Other Information
  
 PART III
 
 Item 9.
    
    Directors, Executive Officers and Corporate Governance
  
 Item 10.
    
    Executive Compensation
  
 Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 12.
    
    Certain Relationships and Related Transactions, and Director Independence
   40




---



##### Table of Contents



Item 13.
    
    Principal Accounting Fees and Services
  
 PART IV
 
 Item 14.
    
    Exhibits and Financial Statement Schedules
    ExhibitNumber
    
    Description of Documents2.1
    
    
    Agreement and Plan of Merger, dated as of January 8, 2009, by and among Here Media Inc.,
PlanetOut Inc., HMI Merger Sub, Inc. and other parties signatory thereto (incorporated by
reference to Annex C to the Form 242(b) filing with the SEC on May 20, 2009, supplementing the
Prospectus filed on the Registration Statement on Form S-4, effective May 14, 2009)2.2
    
    
    First Amendment to Agreement and Plan of Merger, dated as of April 27, 2009, by and among
PlanetOut Inc., Here Media Inc., HMI Merger Sub, Inc. and the HMI Owners and HMI Entities
signatory thereto (incorporated by reference to Exhibit 2.2 to Amendment No. 3 to the
Registration Statement on Form S-4 filed with the SEC on April 30, 2009)2.3
    
    
    Letter Agreement, dated as of May 13, 2009, by PlanetOut Inc. and Here Media Inc. (incorporated
by reference to Exhibit 2.3 to Amendment No. 4 to the Registration Statement on Form S-4 filed
with the SEC on May 14, 2009)2.4
    
    
    Second Amendment to Agreement and Plan of Merger, dated as of June 1, 2009, by and among
PlanetOut Inc., Here Media Inc., HMI Merger Sub, Inc. and the HMI Owners and HMI Entities
signatory thereto (incorporated by reference to Exhibit 2.1 to PlanetOut Inc.s current report on
Form 8-K filed on June 4, 2009)3.1
    
    
    Amended and Restated Certificate of Incorporation of Here Media Inc. (incorporated by reference
to Exhibit 3.2 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-4 filed
with the SEC on June 10, 2009)3.2
    
    
    Amended and Restated Bylaws of Here Media Inc. (incorporated by reference to Exhibit 3.4 to
Post-Effective Amendment No. 1 to the Registration Statement on Form S-4 filed with the SEC on
June 10, 2009)4.1
    
    
    Form of Certificate representing the Common Stock, par value $0.001 per share, of Here Media Inc.
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 filed with
the SEC on January 15, 2009)4.2
    
    
    Form of Certificate representing the Special Stock, par value $0.001 per share, of Here Media
Inc. (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registration Statement
on Form S-4 filed with the SEC on March 5, 2009)10.1
    
    
    Employment Agreement, dated as of December 15, 2005, between Regent Worldwide Sales, LLC (RWS)
and Tony Shyngle, as amended by Letter Agreement, dated as of July 18, 2007, and further amended
by Letter Agreement, dated as of July 6, 2009 (incorporated by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q, File No. 000-53690, filed with the SEC on August 14, 2009)10.2
    
    
    Bill of Sale, Assignment and Indemnification Agreement, dated as of May 12, 2009, between Regent
Entertainment Media Inc. and Stephen P. Jarchow and Paul Colichman (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-Q, File No. 000-53690, filed with the SEC on
August 14, 2009)10.3
    
    
    First Amendment To Bill of Sale, Assignment and Indemnification Agreement, effective as of May
12, 2009, between Regent Entertainment Media Inc. and Stephen P. Jarchow and Paul Colichman
(incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, File No.
000-53690, filed with the SEC on August 14, 2009)
  41




---



##### Table of Contents



ExhibitNumber
    
    Description of Documents10.4
    
    
    Bill of Sale, Assignment and Indemnification Agreement, dated as of June 5, 2009, between Regent
Entertainment Media Inc. and Stephen P. Jarchow and Paul Colichman (incorporated by reference to
Exhibit 10.4 to our Quarterly Report on Form 10-Q, File No. 000-53690, filed with the SEC on
August 14, 2009)10.5
    
    
    First Amendment To Bill of Sale, Assignment and Indemnification Agreement, effective as of June
5, 2009, between Regent Entertainment Media Inc. and Stephen P. Jarchow and Paul Colichman
(incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q, File No.
000-53690, filed with the SEC on August 14, 2009)10.6
    
    
    Line of Credit Agreement, dated as of August 17, 2009, between Here Media Inc. and Stephen P.
Jarchow (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, File No.
000-53690, filed with the SEC on November 13, 2009)10.7
    
    
    Line of Credit Agreement, dated as of August 17, 2009, between Here Media Inc. and Paul A.
Colichman (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q, File
No. 000-53690, filed with the SEC on November 13, 2009)10.8
    
    
    Purchase and Sale Agreement/Security Agreement, dated December 14, 2009, between Amegy Bank
National Association and Here Media Inc., Here Publishing Inc.,
PlanetOut Inc. and Here Networks
L.L.C.21.1
    
    
    List of subsidiaries.24.1
    
    
    Power of Attorney (see the signature page of this Annual Report on Form 10-K)31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  42




---



##### Table of Contents



SIGNATURES
 th
 HERE MEDIA INC.By:
    /s/ TONY SHYNGLETony ShyngleChief Financial Officer POWER OF ATTORNEY
    Signature
    
    Title
    
    Date/s/ PAUL A. COLICHMAN

Paul A. Colichman
    
    Chief Executive Officer, President and Director
(Principal Executive Officer)
    
    March 30, 2010/s/ TONY SHYNGLE

Tony Shyngle
    
    Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    March 30, 2010/s/ STEPHEN P. JARCHOW

Stephen P. Jarchow
    
    Chairman of the Board of Directors
    
    March 30, 2010
  43