##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2007
 or
 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: 000-50879
 PLANETOUT INC.
  DELAWARE
    
    94-3391368(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 1355 SANSOME STREET, SAN FRANCISCO,CALIFORNIA
    
    94111(Address of Principal Executive Offices)
    
    (Zip Code)
 (415) 834-6500
 þ o
  o þ o
  o þ




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##### 



PlanetOut Inc.
INDEX
Form 10-Q
For the Quarter ended March 31, 2007
 PAGEPART I  FINANCIAL INFORMATION
    
    
    1Item 1 Financial Statements
    
    
    1Unaudited Condensed Consolidated Balance Sheets as of December 31, 2006 and March 31, 2007
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2006 and 2007
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4 Controls and Procedures
    
    
    24PART II  OTHER INFORMATION
    
    
    24Item 1 Legal Proceedings
    
    
    24Item 1A Risk Factors
    
    
    25Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3 Defaults Upon Senior Securities
    
    
    35Item 4 Submission of Matters to a Vote of Security Holders
    
    
    35Item 5 Other Information
    
    
    36Item 6 Exhibits
    
    
    36SIGNATURES
    
    
    37EXHIBIT INDEX
    
    
    38EXHIBIT 10.29EXHIBIT 12.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  i




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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 PlanetOut Inc.
 
 Item 1. Financial Statements
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 December 31,
    
    
    March 31,2006
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,674
    
    
    $
    6,272Short-term investments
    
    
    2,050
    
    
    
    4,796Restricted cash
    
    
    2,854
    
    
    
    164Accounts receivable, net
    
    
    9,337
    
    
    
    7,823Inventory
    
    
    1,690
    
    
    
    2,073Prepaid expenses and other current assets
    
    
    11,336
    
    
    
    11,380Total current assets
    
    
    36,941
    
    
    
    32,508Property and equipment, net
    
    
    10,923
    
    
    
    11,037Goodwill
    
    
    32,572
    
    
    
    32,620Intangible assets, net
    
    
    12,132
    
    
    
    11,776Other assets
    
    
    1,021
    
    
    
    863Total assets
    
    $
    93,589
    
    
    $
    88,804LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,782
    
    
    $
    2,075Accrued expenses and other liabilities
    
    
    3,707
    
    
    
    4,393Deferred revenue, current portion
    
    
    14,569
    
    
    
    15,647Capital lease obligations, current portion
    
    
    694
    
    
    
    771Notes payable, current portion net of discount
    
    
    8,817
    
    
    
    11,695Deferred rent, current portion
    
    
    228
    
    
    
    243Total current liabilities
    
    
    29,797
    
    
    
    34,824Deferred revenue, less current portion
    
    
    1,474
    
    
    
    1,511Capital lease obligations, less current portion
    
    
    1,504
    
    
    
    1,542Notes payable, less current portion and discount
    
    
    8,100
    
    
    
    4,781Deferred rent, less current portion
    
    
    1,569
    
    
    
    1,537Total liabilities
    
    
    42,444
    
    
    
    44,195Commitments and contingencies (Note 7)Stockholders equity:Common stock: $0.001 par value, 100,000 shares authorized, 17,629 and
17,683 shares issued and outstanding at December 31, 2006 and
March 31, 2007, respectively
    
    
    17
    
    
    
    17Additional paid-in capital
    
    
    89,532
    
    
    
    89,840Accumulated other comprehensive loss
    
    
    (122
    )
    
    
    (92
    )Accumulated deficit
    
    
    (38,282
    )
    
    
    (45,156
    )Total stockholders equity
    
    
    51,145
    
    
    
    44,609Total liabilities and stockholders equity
    
    $
    93,589
    
    
    $
    88,804
  1




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##### Table of Contents



PlanetOut Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Three months ended March 31,2006
    
    
    2007Revenue:Advertising services
    
    $
    5,347
    
    
    $
    5,325Subscription services
    
    
    6,270
    
    
    
    5,646Transaction services
    
    
    5,956
    
    
    
    5,788Total revenue
    
    
    17,573
    
    
    
    16,759Operating costs and expenses: (*)Cost of revenue
    
    
    9,430
    
    
    
    12,265Sales and marketing
    
    
    3,944
    
    
    
    4,832General and administrative
    
    
    3,080
    
    
    
    4,455Depreciation and amortization
    
    
    1,224
    
    
    
    1,697Total operating costs and expenses
    
    
    17,678
    
    
    
    23,249Loss from operations
    
    
    (105
    )
    
    
    (6,490
    )Interest expense
    
    
    (197
    )
    
    
    (551
    )Other income, net
    
    
    170
    
    
    
    167Loss before income taxes
    
    
    (132
    )
    
    
    (6,874
    )Provision for income taxes
    
    
    
    
    
    
    Net loss
    
    $
    (132
    )
    
    $
    (6,874
    )Net loss per share:Basic
    
    $
    (0.01
    )
    
    $
    (0.39
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.39
    )Weighted-average shares used to compute net
loss per share:Basic
    
    
    17,261
    
    
    
    17,451Diluted
    
    
    17,261
    
    
    
    17,451
 
 (*)
    
    Stock-based compensation is allocated as follows (see Note 2): Cost of revenue
    
    $
    5
    
    
    $
    80Sales and marketing
    
    
    1
    
    
    
    39General and administrative
    
    
    79
    
    
    
    186Total stock-based compensation
    
    $
    85
    
    
    $
    305
  2




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PlanetOut Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Three months ended March 31,2006
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (132
    )
    
    $
    (6,874
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,224
    
    
    
    1,697Provision for doubtful accounts
    
    
    24
    
    
    
    53Stock-based compensation
    
    
    85
    
    
    
    305Amortization of debt discount
    
    
    
    
    
    
    50Amortization of deferrred rent
    
    
    (19
    )
    
    
    (17
    )Loss on disposal or write-off of property and equipment
    
    
    21
    
    
    
    17Changes in operating assets and liabilities, net of acquisition effects:Accounts receivable
    
    
    (644
    )
    
    
    1,461Inventory
    
    
    (139
    )
    
    
    (383
    )Prepaid expenses and other assets
    
    
    754
    
    
    
    40Accounts payable
    
    
    248
    
    
    
    293Accrued expenses and other liabilities
    
    
    (95
    )
    
    
    686Deferred revenue
    
    
    (3,334
    )
    
    
    1,115Net cash used in operating activities
    
    
    (2,007
    )
    
    
    (1,557
    )Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (5,379
    )
    
    
    Purchases of property and equipment
    
    
    (469
    )
    
    
    (1,155
    )Purchases of short-term investments
    
    
    
    
    
    
    (2,746
    )Changes in restricted cash
    
    
    (160
    )
    
    
    2,690Net cash used in investing activities
    
    
    (6,008
    )
    
    
    (1,211
    )Cash flows from financing activities:Proceeds from exercise of common stock and warrants
    
    
    273
    
    
    
    3Proceeds from repayment of note receivable from stockholder
    
    
    843
    
    
    
    Principal payments under capital lease obligations and notes payable
    
    
    (204
    )
    
    
    (667
    )Net cash provided by (used in) financing activities
    
    
    912
    
    
    
    (664
    )Effect of exchange rate on cash and cash equivalents
    
    
    (23
    )
    
    
    30Net decrease in cash and cash equivalents
    
    
    (7,126
    )
    
    
    (3,402
    )Cash and cash equivalents, beginning of period
    
    
    18,461
    
    
    
    9,674Cash and cash equivalents, end of period
    
    $
    11,335
    
    
    $
    6,272Supplemental disclosure of noncash investing and financing activities:Property and equipment and related maintenance acquired under capital leases
    
    $
    561
    
    
    $
    307
  3




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PlanetOut Inc.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  The Company
  The Advocate, Out, The Out Traveler HIVPlus
 Note 2  Summary of Significant Accounting Policies
 Unaudited Interim Financial Information
  Principles of Consolidation and Basis of Presentation
   Reclassifications
  Use of Estimates
  4




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##### Table of Contents



Cash Equivalents and Short-term Investments
  Restricted Cash
  Inventory
  Property and Equipment
  Website Development Costs and Internal Use Software
 Accounting for Costs of Computer Software Developed or
Obtained for Internal Use Accounting for Web Site Development Costs
 Goodwill
 Goodwill and Other Intangible Assets
 5




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##### Table of Contents



Revenue Recognition
 Revenue Arrangements with Multiple Deliverables
  Reporting Revenue Gross as a Principal Versus
Net as an Agent,
 6




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##### Table of Contents



Advertising
  Stock-Based Compensation
 Share-Based
Payment
 Income Taxes
 Accounting for Uncertainty
in Income Taxes  an Interpretation of FASB Statement
No. 109
   Net Income (Loss) Per Share
   7




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##### Table of Contents



Three months ended March 31,2006
    
    
    2007Numerator:Net loss
    
    $
    (132
    )
    
    $
    (6,874
    )Denominator:Weighted-average shares used to compute Basic EPS
    
    
    17,261
    
    
    
    17,451Effect of dilutive securities:Dilutive common stock equivalents
    
    
    
    
    
    
    Dilutive potential common shares
    
    
    
    
    
    
    Weighted-average shares used to compute Diluted EPS
    
    
    17,261
    
    
    
    17,451Net loss per share:Basic
    
    $
    (0.01
    )
    
    $
    (0.39
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.39
    )
  Three months ended March 31,2006
    
    
    2007Common stock options and warrants
    
    
    2,078
    
    
    
    1,804Common stock subject to repurchase
    
    
    2
    
    
    
    2,080
    
    
    
    1,804
 Variable Interest Entity
 Consolidation of Variable Interest
Entities,
  Recent Accounting Pronouncements
 The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115
 Fair Value Measurements
 8




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##### Table of Contents



Note 3  Goodwill and Intangible Assets
 Goodwill
  December 31,
    
    
    
    
    
    
    March 31,2006
    
    
    Adjustments
    
    
    2007Reportable segments:Online
    
    $
    3,403
    
    
    $
    
    
    
    $
    3,403Publishing
    
    
    25,187
    
    
    
    48
    
    
    $
    25,235Travel and Events
    
    
    3,982
    
    
    
    
    
    
    $
    3,982$
    32,572
    
    
    $
    48
    
    
    $
    32,620
   Intangible Assets
  December 31, 2006
    
    
    March 31, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountCustomer lists and user bases
    
    $
    10,488
    
    
    $
    4,996
    
    
    $
    5,492
    
    
    $
    10,488
    
    
    $
    5,352
    
    
    $
    5,136Tradenames
    
    
    8,980
    
    
    
    2,340
    
    
    
    6,640
    
    
    
    8,980
    
    
    
    2,340
    
    
    
    6,640Other intangible assets
    
    
    726
    
    
    
    726
    
    
    
    
    
    
    
    726
    
    
    
    726
    
    
    
    $
    20,194
    
    
    $
    8,062
    
    
    $
    12,132
    
    
    $
    20,194
    
    
    $
    8,418
    
    
    $
    11,776
   9




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##### Table of Contents



Fiscal Years:2007 (remaining nine months)
    
    $
    1,0672008
    
    
    1,3962009
    
    
    1,2572010
    
    
    1,0932011
    
    
    2772012
    
    
    46$
    5,136
 Note 4  Other Balance Sheet Components
 December 31,
    
    
    March 31,2006
    
    
    2007(In thousands)Accounts receivable:Trade accounts receivable
    
    $
    10,906
    
    
    $
    9,147Less: Allowance for doubtful accounts
    
    
    (520
    )
    
    
    (458
    )Less: Provision for returns
    
    
    (1,049
    )
    
    
    (866
    )$
    9,337
    
    
    $
    7,823
   December 31,
    
    
    March 31,2006
    
    
    2007(In thousands)InventoryMaterials for future publications
    
    $
    370
    
    
    $
    533Work in process
    
    
    
    
    
    
    115Finished goods available for sale
    
    
    1,386
    
    
    
    1,4831,756
    
    
    
    2,131Less: reserve for obsolete inventory
    
    
    (66
    )
    
    
    (58
    )$
    1,690
    
    
    $
    2,073
  10




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##### Table of Contents



December 31,
    
    
    March 31,2006
    
    
    2007(In thousands)Prepaid expenses and other current assets:Prepaid expenses and other current assets
    
    $
    4,183
    
    
    $
    4,142Deposits on leased voyages and vacations
    
    
    7,153
    
    
    
    7,238$
    11,336
    
    
    $
    11,380
 December 31,
    
    
    March 31,2006
    
    
    2007(In thousands)Property and equipment:Computer equipment and software
    
    $
    13,857
    
    
    $
    14,914Furniture and fixtures
    
    
    1,239
    
    
    
    1,232Leasehold improvements
    
    
    2,269
    
    
    
    2,325Website development costs
    
    
    6,855
    
    
    
    7,09824,220
    
    
    
    25,569Less: Accumulated depreciation and amortization
    
    
    (13,297
    )
    
    
    (14,532
    )$
    10,923
    
    
    $
    11,037
  December 31,
    
    
    March 31,2006
    
    
    2007(In thousands)Accrued expenses and other liabilities:Accrued payroll and related liabilities
    
    $
    1,499
    
    
    $
    2,084Other accrued liabilities
    
    
    2,208
    
    
    
    2,309$
    3,707
    
    
    $
    4,393
 Note 5  Related Party Transactions
  Note 6  Notes Payable
  11




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##### Table of Contents



December 31,
    
    
    March 31,2006
    
    
    2007Notes payable to vendors
    
    $
    47
    
    
    $
    24LPI note
    
    
    7,075
    
    
    
    7,075Orix term loan
    
    
    7,187
    
    
    
    6,719Orix revolving loan
    
    
    3,000
    
    
    
    3,00017,309
    
    
    
    16,818Less: discount
    
    
    (392
    )
    
    
    (342
    )16,917
    
    
    
    16,476Less: current portion, net of discount
    
    
    8,817
    
    
    
    11,695Notes payable, less current portion and discount
    
    $
    8,100
    
    
    $
    4,781
     Year Ending December 31,2007 (remaining nine months)
    
    $
    11,5052008
    
    
    4,8752009
    
    
    438$
    16,818
 Note 7  Commitments and Contingencies
 Deposit Commitments
  12




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##### Table of Contents



Contingencies
  Note 8  Stock-Based Compensation
 Stock Options
  SharesOutstanding at January 1, 2007
    
    
    1,747Exercised
    
    
    (8
    )Forfeited/expired/cancelled
    
    
    (55
    )Outstanding at March 31, 2007
    
    
    1,684
  Restricted Stock
  SharesUnvested at January 1, 2007
    
    
    215Granted
    
    
    77Vested
    
    
    (62
    )Forfeited
    
    
    (30
    )Unvested at March 31, 2007
    
    
    200
  13




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##### Table of Contents



Year Ending December 31,2007 (remaining nine months)
    
    
    622008
    
    
    622009
    
    
    532010
    
    
    23200
  Note 9  Segment Information
     14




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##### Table of Contents



Three months ended March 31, 2007Travel andOnline
    
    
    Publishing
    
    
    Events
    
    
    ConsolidatedRevenue:Advertising services
    
    $
    1,906
    
    
    $
    3,417
    
    
    $
    2
    
    
    $
    5,325Subscription services
    
    
    4,269
    
    
    
    1,377
    
    
    
    
    
    
    
    5,646Transaction services
    
    
    362
    
    
    
    1,031
    
    
    
    4,395
    
    
    
    5,788Total revenue
    
    
    6,537
    
    
    
    5,825
    
    
    
    4,397
    
    
    
    16,759Direct operating costs and expenses:Cost of revenue
    
    
    3,078
    
    
    
    3,773
    
    
    
    5,414
    
    
    
    12,265Sales and marketing
    
    
    2,489
    
    
    
    1,617
    
    
    
    726
    
    
    
    4,832Total direct operating costs and expenses
    
    
    5,567
    
    
    
    5,390
    
    
    
    6,140
    
    
    
    17,097Contribution margin (loss)
    
    $
    970
    
    
    $
    435
    
    
    $
    (1,743
    )
    
    
    (338
    )Other operating costs and expenses:General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,455Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,697Total other operating costs and expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,152Loss from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,490
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,874
    )
 Three months ended March 31, 2006Travel andOnline
    
    
    Publishing
    
    
    Events
    
    
    ConsolidatedRevenue:Advertising services
    
    $
    1,847
    
    
    $
    3,500
    
    
    $
    
    
    
    $
    5,347Subscription services
    
    
    4,828
    
    
    
    1,442
    
    
    
    
    
    
    
    6,270Transaction services
    
    
    592
    
    
    
    1,230
    
    
    
    4,134
    
    
    
    5,956Total revenue
    
    
    7,267
    
    
    
    6,172
    
    
    
    4,134
    
    
    
    17,573Direct operating costs and expenses:Cost of revenue
    
    
    2,654
    
    
    
    3,761
    
    
    
    3,015
    
    
    
    9,430Sales and marketing
    
    
    2,765
    
    
    
    1,023
    
    
    
    156
    
    
    
    3,944Total direct operating costs and expenses
    
    
    5,419
    
    
    
    4,784
    
    
    
    3,171
    
    
    
    13,374Contribution margin
    
    $
    1,848
    
    
    $
    1,388
    
    
    $
    963
    
    
    
    4,199Other operating costs and expenses:General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,080Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,224Total other operating costs and expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,304Loss from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (132
    )
 Note 10  Subsequent Events
  15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with the financial statements and
related notes which appear elsewhere in this document. This discussion contains forward-looking
statements that involve risks and uncertainties. In some cases, you can identify forward-looking
statements by terminology including would, could, may, will, should, expect, intend,
plan, anticipate, believe, estimate, predict, potential or continue, the negative of
these terms or other comparable terminology. These statements are only predictions. Forward-looking
statements include statements about our business strategy, future operating performance and
prospects. You should not place undue reliance on these forward-looking statements. Our actual
results could differ materially from those anticipated in these forward-looking statements as a
result of various factors, including those discussed below and elsewhere in this document and in
our Form 10-K filed for the year ended December 31, 2006.
 Overview
  The Advocate Out The Out Traveler HIVPlus
 Executive Operating and Financial Summary
      16




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##### Table of Contents



Results of Operations
  Online Segment
  Three months ended March 31,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Online revenue:Advertising services
    
    $
    1,847
    
    
    $
    1,906
    
    
    $
    59
    
    
    
    3
    %Subscription services
    
    
    4,828
    
    
    
    4,269
    
    
    
    (559
    )
    
    
    (12
    %)Transaction services
    
    
    592
    
    
    
    362
    
    
    
    (230
    )
    
    
    (39
    %)Total online revenue
    
    
    7,267
    
    
    
    6,537
    
    
    
    (730
    )
    
    
    (10
    %)Online direct operating costs and expenses:Cost of revenue
    
    
    2,654
    
    
    
    3,078
    
    
    
    424
    
    
    
    16
    %Sales and marketing
    
    
    2,765
    
    
    
    2,489
    
    
    
    (276
    )
    
    
    (10
    %)Total online direct operating costs and expenses
    
    
    5,419
    
    
    
    5,567
    
    
    
    148
    
    
    
    3
    %Online contribution margin
    
    $
    1,848
    
    
    $
    970
    
    
    $
    (878
    )
    
    
    (48
    %)
    17




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##### Table of Contents



Publishing Segment
  Three months ended March 31,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Publishing revenue:Advertising services
    
    $
    3,500
    
    
    $
    3,417
    
    
    $
    (83
    )
    
    
    (2
    %)Subscription services
    
    
    1,442
    
    
    
    1,377
    
    
    
    (65
    )
    
    
    (5
    %)Transaction services
    
    
    1,230
    
    
    
    1,031
    
    
    
    (199
    )
    
    
    (16
    %)Total publishing revenue
    
    
    6,172
    
    
    
    5,825
    
    
    
    (347
    )
    
    
    (6
    %)Publishing direct operating costs and expenses:Cost of revenue
    
    
    3,761
    
    
    
    3,773
    
    
    
    12
    
    
    
    0
    %Sales and marketing
    
    
    1,023
    
    
    
    1,617
    
    
    
    594
    
    
    
    58
    %Total publishing direct operating costs and expenses
    
    
    4,784
    
    
    
    5,390
    
    
    
    606
    
    
    
    13
    %Publishing contribution margin
    
    $
    1,388
    
    
    $
    435
    
    
    $
    (953
    )
    
    
    (69
    %)
    18




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##### Table of Contents



Travel and Events Segment
  Three months ended March 31,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Travel and events revenue:Advertising services
    
    $
    
    
    
    $
    2
    
    
    $
    2
    
    
    
    0
    %Transaction services
    
    
    4,134
    
    
    
    4,395
    
    
    
    261
    
    
    
    6
    %Total travel and events revenue
    
    
    4,134
    
    
    
    4,397
    
    
    
    263
    
    
    
    6
    %Travel and events direct operating costs and expenses:Cost of revenue
    
    
    3,015
    
    
    
    5,414
    
    
    
    2,399
    
    
    
    80
    %Sales and marketing
    
    
    156
    
    
    
    726
    
    
    
    570
    
    
    
    365
    %Total travel and events direct operating costs and expenses
    
    
    3,171
    
    
    
    6,140
    
    
    
    2,969
    
    
    
    94
    %Travel and events contribution margin (loss)
    
    $
    963
    
    
    $
    (1,743
    )
    
    $
    (2,706
    )
    
    
    (281
    %)
     19




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##### Table of Contents



Other Operating Costs and Expenses
  General and Administrative.
  Depreciation and Amortization.
  Other Income and Expenses
 Interest Expense.
 Other Income, Net.
 Liquidity and Capital Resources
    20




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##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  21




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##### Table of Contents



Payments Due by PeriodRemainder ofTotal
    
    
    2007
    
    
    2008-2009
    
    
    2010-2011
    
    
    2012 & AfterContractual obligations:Capital leases
    
    $
    2,764
    
    
    $
    748
    
    
    $
    1,680
    
    
    $
    334
    
    
    $
    2Operating leases
    
    
    15,499
    
    
    
    2,263
    
    
    
    6,338
    
    
    
    5,832
    
    
    
    1,066Deposit commitments
    
    
    6,060
    
    
    
    4,931
    
    
    
    1,129
    
    
    
    
    
    
    
    Notes payable
    
    
    18,190
    
    
    
    12,444
    
    
    
    5,746
    
    
    
    
    
    
    
    Other
    
    
    660
    
    
    
    499
    
    
    
    161
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    43,173
    
    
    $
    20,885
    
    
    $
    15,054
    
    
    $
    6,166
    
    
    $
    1,068
 Capital Leases.
 Operating Leases.
 Deposit Commitments.
 Notes Payable.
   Other.
 Critical Accounting Policies
   Income Taxes
 Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
 22




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##### Table of Contents



Seasonality and Inflation
   Recent Accounting Pronouncements
 The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115
 Fair Value Measurements
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risk
  23




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##### Table of Contents



Foreign Currency Risk
 
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  24




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##### Table of Contents



Item 1A. Risk Factors
 We have a history of significant losses. If we do not regain and sustain profitability, our
financial condition and stock price could suffer.
  We
will need additional capital and may not be able to raise additional funds on favorable terms or at all, which could result in us being in default under our Loan Agreement with Orix, increase our
costs, limit our ability to continue operations and dilute the ownership interests of existing
stockholders.
    We may not be able to repay our existing debt; failure to do so or refinance the debt could prevent
us from implementing our strategy and realizing anticipated profits.
  Restrictions and covenants in our Loan Agreement with Orix may limit our ability to operate our
business and could prevent us from obtaining needed funds in the future.
   25




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##### Table of Contents



If we are unable to generate revenue from advertising or if we were to lose our existing
advertisers, our business will suffer.
       Our success depends, in part, upon the growth of Internet advertising and upon our ability to
accurately predict the cost of customized campaigns.
   26




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##### Table of Contents



If our efforts to attract and retain subscribers are not successful, our revenue will decrease.
    If we are unable to successfully market our 2007 RSVP larger ship itineraries, our business will
suffer.
    27




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##### Table of Contents



We expect our operating results to fluctuate, which may lead to volatility in our stock price.
  Our limited operating history makes it difficult to evaluate our business.
  If we fail to manage our growth, our business will suffer.
  If we are unable to successfully expand our international operations, our business will suffer.
   Recent and potential future acquisitions could result in operating difficulties and unanticipated
liabilities.
  
    
    the difficulty of integrating the acquired assets and personnel of the acquired businesses into our operations;
    
    the potential absorption of significant management attention and significant financial resources for the ongoing
development of our business;
 28




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##### Table of Contents




    
    the potential impairment of relationships with and difficulty in attracting and retaining employees of the
acquired companies or our employees as a result of the integration of acquired businesses;
    
    the difficulty of integrating the acquired companys accounting, human resources and other administrative systems;
    
    the potential impairment of relationships with subscribers, customers and partners of the acquired companies or
our subscribers, customers and partners as a result of the integration of acquired businesses;
    
    the difficulty in attracting and retaining qualified management to lead the combined businesses;
    
    the potential difficulties associated with entering new lines of business with which we have little experience,
such as some of the businesses we have acquired from LPI and RSVP;
    
    the difficulty of complying with additional regulatory requirements that may become applicable to us as the
result of an acquisition, such as various regulations that may become applicable to us as a result of our
acquisition of LPI, including the acquisition of a related entity that produces some content and other materials
intended for mature audiences; and
    
    the impact of known or unknown liabilities associated with the acquired businesses. For example, in our RSVP
business, should some of the third parties with whom we contract in connection with arranging our travel
itineraries fail to perform their obligations for any reason, as a third-party Austrian riverboat tour operator
with whom we contracted did in August 2006, we may be forced to cancel or reschedule planned trips, lose deposits
we have made to vendors, refund customer deposits, reimburse other costs to our customers and lose customers for
those and other travel itineraries as a result.
  If we do not continue to attract and retain qualified personnel, we may not be able to expand our
business.
  Our core revenue-generating software applications are written on a technology platform that
is becoming increasingly difficult to support. As we convert our applications onto more stable,
supportable platformsa process that requires time and financial investmentwe face the risk of not
being able to maintain or enhance the functionality of our websites. As a result we may lose
market share and our revenue will decline.
  Any significant disruption in service on our websites or in our computer and communications
hardware and software systems
 29




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##### Table of Contents



could harm our business.
  If we are unable to compete effectively, we may lose market share and our revenue may decline.
   If we are unable to protect our domain names, our reputation and brand could be harmed if third
parties gain rights to, or use, these domain names in a manner that would confuse or impair our
ability to attract and retain customers.
  30




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##### Table of Contents



If we fail to adequately protect our trademarks and other proprietary rights, or if we get involved
in intellectual property litigation, our revenue may decline and our expenses may increase.
   Existing or future government regulation in the United States and other countries could limit our
growth and result in loss of revenue.
  
    
    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, which may
result in our members canceling their membership or failing
to subscribe or renew their subscription, resulting in
reduced revenue;
    
    provide advance notice of any changes to our privacy
policies or to our policies on sharing non-public
information with third parties, and if our members or
subscribers disagree with these policies or changes, they
may wish to cancel their membership or subscription, which
will reduce our revenue;
    
    with limited exceptions, give consumers the right to
prevent sharing of their non-public personal information
with unaffiliated third parties, and if a significant
portion of our members choose to request that we dont
share their information, our advertising revenue that we
receive from renting our mailing list to unaffiliated third
parties may decline;
    
    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, which may result in our members or subscribers
deciding to cancel their membership or subscription,
reducing our membership base and subscription revenue;
    
    comply with current or future anti-spam legislation by
limiting or modifying some of our marketing and advertising
efforts, such as email campaigns, which may result in a
reduction in our advertising revenue; for instance, two
states recently passed legislation creating a do not
contact registry for minors that would make it a criminal
violation to send an email message to an address on that
states registry if the email message contained an
advertisement for or even a link to a website that offered
products or services that minors are prohibited from
accessing;
 31




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##### Table of Contents




    
    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; if these modifications render our services
less attractive to our members or subscribers, for example,
by limiting the amount or type of personal information our
members or subscribers could post to their profiles, they
may cancel their memberships or subscriptions, resulting in
reduced revenue;
    
    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
multiple states and countries, which if we fail to so
qualify, may prevent us from enforcing our contracts in
these states or countries and may limit our ability to grow
our business;
    
    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 viewing on some of our websites and through some
of the businesses we acquired from LPI which may render our
services less attractive to our members or subscribers and
result in a decline in our revenue; and
    
    limit or prevent access, from some jurisdictions, to some
or all of the member-generated content available through
our websites, which may render our services less attractive
to our members or subscribers and result in a decline in
our revenue. For example, in June 2005, the United States
Department of Justice (the DOJ) adopted regulations
purporting to implement the Child Protection and Obscenity
Act of 1988, as amended (the CPO Act), by requiring
primary and secondary producers, as defined in the
regulations, of certain adult materials to obtain, maintain
and make available for inspection specified records, such
as a performers name, address and certain forms of photo
identification as proof of a performers age. Failure to
properly obtain, maintain or make these records available
for inspection upon request of the DOJ could lead to an
imposition of penalties, fines or imprisonment. We could be
deemed a secondary producer under the CPO Act because we
allow our members to display photographic images on our
websites as part of member profiles. In addition, we may be
deemed a primary producer under the CPO Act because a
portion of one of the businesses we acquired in the LPI
acquisition is involved in production of adult content.
Enforcement of these regulations as to secondary producers
has been stayed pending resolution of a legal challenge on
the grounds that the regulations exceed the DOJs statutory
authority to regulate secondary producers, among other
grounds. In July 2006, the Adam Walsh Child Protection and
Safety Act of 2006 (the Walsh Act) became law, amending
the CPO Act by expanding the definition of the adult
materials covered by the CPO Act and by requiring secondary
producers to maintain and make available specified records
under the CPO Act. Additionally, in July 2006, the FBI
began conducting CPO Act record inspections, including
inspections of businesses that were secondary producers
under the CPO Act. In March 2007, the court hearing the
legal challenge to the CPO Act issued partial summary
judgment in favor of the DOJ and requested further briefing
on how the Walsh Act affected the stay on enforcement of
the CPO Act against secondary producers. The court may
rule that the Walsh Act requires that the stay on
enforcement of the CPO Act against secondary producers be
lifted. If that occurs or if the FBI continues to inspect
businesses that are secondary producers and there are no
legal challenges to the Walsh Act or these challenges are
unsuccessful, we will be subject to significant and
burdensome recordkeeping compliance requirements and we
will have to evaluate and implement additional registration
and recordkeeping processes and procedures, each of which
would result in additional expenses to us. If our members
and subscribers feel these additional restrictions or
registration and recordkeeping processes and procedures are
too burdensome, this is likely to result in an adverse impact on our
subscriber growth and churn which, in turn, will have an
adverse effect on our financial condition and results of
operations. 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, which
will result in a loss of features that we believe our
members and subscribers find attractive, and in turn could
result in a decline in our subscribers growth.
  The risks of transmitting confidential information online, including credit card information, may
discourage customers from subscribing to our services or purchasing goods from us.
  32




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##### Table of Contents



If we are unable to provide satisfactory customer service, we could lose subscribers.
  We may be the target of negative publicity campaigns or other actions by advocacy groups that could
disrupt our operations because we serve the LGBT community.
  Adult content in our media properties may be the target of negative publicity campaigns or subject
us to restrictive or costly regulatory compliance.
  If one or more states or countries successfully assert that we should collect sales or other taxes
on the use of the Internet or the online sales of goods and services, our expenses will increase,
resulting in lower margins.
    33




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##### Table of Contents



We are exposed to pricing and production capacity risks associated with our magazine publishing
business, which could result in lower revenues and profit margins.
 The Advocate, Out, The Out Traveler HIVPlus,
 In the event of an earthquake, other natural or man-made disaster, or power loss, our operations
could be interrupted or adversely affected, resulting in lower revenue.
  Recent regulations related to equity compensation could adversely affect our ability to attract and
retain key personnel.
  In the event we are unable to satisfy regulatory requirements relating to internal control over
financial reporting, or if these internal controls are not effective, our business and our stock
price could suffer.
  Our stock price may be volatile and you may lose all or a part of your investment.
  34




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##### Table of Contents



Our Stockholder Rights Plan, along with provisions in our charter documents and under Delaware law,
could discourage a takeover that stockholders may consider favorable.
  
    
    authorize our board of directors, without stockholder approval, to issue up to 5,000,000 shares of undesignated
preferred stock;
    
    provide for a classified board of directors;
    
    prohibit our stockholders from acting by written consent;
    
    establish advance notice requirements for proposing matters to be approved by stockholders at stockholder meetings; and
    
    prohibit stockholders from calling a special meeting of stockholders.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  (c) Total Number
    
    
    (d) Maximum Number(a) Total
    
    
    
    
    
    
    of
    
    
    (or ApproximateNumber of
    
    
    (b) Average
    
    
    Shares Purchased
    
    
    Dollar Value) ofShares
    
    
    Price Paid
    
    
    as Part of Publicly
    
    
    Shares that MayPurchased
    
    
    per
    
    
    Announced
    
    
    Yet Be Purchased UnderPeriod
    
    (1)
    
    
    Share
    
    
    Plans or Programs
    
    
    the Plans or ProgramsJanuary 1, 2007  January 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    February 1, 2007  February 28, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1, 2007  March 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
 
 (1)
    
    PlanetOut does not have any publicly announced plans or programs to repurchase shares of its common stock. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  35




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##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
 (a) Exhibits
 ExhibitNumber
    
    Description of Documents3.1
    
    Amended and Restated Certificate of Incorporation, as currently in effect (filed as
Exhibit 4.1 to our Current Report on Form 8-K, File No. 000-50879, filed on January
8, 2007, and incorporated herein by reference).3.2
    
    Amended and Restated Bylaws, as currently in effect (filed as Exhibit 3.4 to our
Registration Statement on Form S-1, File No. 333-114988, initially filed on April
29, 2004, declared effective on October 13, 2004, and incorporated herein by
reference).4.1
    
    Specimen of Common Stock Certificate (filed as Exhibit 4.1 to our Registration
Statement on Form S-1, File No. 333-114988, initially filed on April 29, 2004,
declared effective on October 13, 2004, and incorporated herein by reference).4.2
    
    Form of Senior Debt Indenture (filed as Exhibit 4.5 to our Registration Statement
on Form S-3, File No. 333-133536, filed on April 25, 2006 and incorporated herein
by reference).4.3
    
    Form of Subordinated Debt Indenture (filed as Exhibit 4.6 to our Registration
Statement on Form S-3, File No. 333-133536, filed on April 25, 2006 and
incorporated herein by reference).4.4
    
    Rights Agreement dated as of January 4, 2007 among PlanetOut Inc. and Wells Fargo
Bank, N.A. (filed as Exhibit 99.2 to our Current Report on Form 8-K, File No.
000-50879, filed on January 8, 2007 and incorporated herein by reference).4.5
    
    Form of Rights Certificate (filed as Exhibit 99.3 to our Current Report on Form
8-K, File No. 000-50879, filed on January 8, 2007 and incorporated herein by
reference).10.27
    
    Amendment No. 2, dated February 14, 2007 and effective as of December 30, 2006, to
Loan and Security Agreement by and between PlanetOut Inc., PlanetOut USA Inc., LPI
Media Inc., SpecPub, Inc., RSVP Productions, Inc. and ORIX Venture Finance, LLC
(filed as Exhibit 99.1 to our Current Report on Form 8-K, File No. 000-50879, filed
on February 20, 2007 and incorporated herein by reference).10.28
    
    Employment Agreement, dated February 14, 2007, by and between William Bain and
PlanetOut Inc. (filed as Exhibit 99.2 to our Current Report on Form 8-K, File No.
000-50879, filed on February 20, 2007 and incorporated herein by reference).10.29
    
    Limited Waiver to Loan and Security
Agreement and Amendment No. 3 dated May 9, 2007 to Loan and
Security Agreement by and between PlanetOut Inc., PlanetOut USA Inc.,
LPI Media Inc., SpecPub, Inc., RSVP Productions, Inc. and ORIX
Venture Fianace, LLC.12.1
    
    Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certification of Chief Executive Officer pursuant to the Securities Exchange Act
Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to the Securities Exchange Act
Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 18 U.S.C section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Section 18 U.S.C. section 1350.
 36




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##### Table of Contents



SIGNATURES
  PLANETOUT INC.Date: May 10, 2007
    By:
    /s/ DANIEL J. MILLERDaniel J. MillerSenior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting Officer) 37




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Documents3.1
    
    Amended and Restated Certificate of Incorporation, as currently in effect (filed as
Exhibit 4.1 to our Current Report on Form 8-K, File No. 000-50879, filed on January
8, 2007, and incorporated herein by reference).3.2
    
    Amended and Restated Bylaws, as currently in effect (filed as Exhibit 3.4 to our
Registration Statement on Form S-1, File No. 333-114988, initially filed on April
29, 2004, declared effective on October 13, 2004, and incorporated herein by
reference).4.1
    
    Specimen of Common Stock Certificate (filed as Exhibit 4.1 to our Registration
Statement on Form S-1, File No. 333-114988, initially filed on April 29, 2004,
declared effective on October 13, 2004, and incorporated herein by reference).4.2
    
    Form of Senior Debt Indenture (filed as Exhibit 4.5 to our Registration Statement
on Form S-3, File No. 333-133536, filed on April 25, 2006 and incorporated herein
by reference).4.3
    
    Form of Subordinated Debt Indenture (filed as Exhibit 4.6 to our Registration
Statement on Form S-3, File No. 333-133536, filed on April 25, 2006 and
incorporated herein by reference).4.4
    
    Rights Agreement dated as of January 4, 2007 among PlanetOut Inc. and Wells Fargo
Bank, N.A. (filed as Exhibit 99.2 to our Current Report on Form 8-K, File No.
000-50879, filed on January 8, 2007 and incorporated herein by reference).4.5
    
    Form of Rights Certificate (filed as Exhibit 99.3 to our Current Report on Form
8-K, File No. 000-50879, filed on January 8, 2007 and incorporated herein by
reference).10.27
    
    Amendment No. 2, dated February 14, 2007 and effective as of December 30, 2006, to
Loan and Security Agreement by and between PlanetOut Inc., PlanetOut USA Inc., LPI
Media Inc., SpecPub, Inc., RSVP Productions, Inc. and ORIX Venture Finance, LLC
(filed as Exhibit 99.1 to our Current Report on Form 8-K, File No. 000-50879, filed
on February 20, 2007 and incorporated herein by reference).10.28
    
    Employment Agreement, dated February 14, 2007, by and between William Bain and
PlanetOut Inc. (filed as Exhibit 99.2 to our Current Report on Form 8-K, File No.
000-50879, filed on February 20, 2007 and incorporated herein by reference).10.29
    
    Limited Waiver to Loan and Security
Agreement and Amendment No. 3 dated May 9, 2007 to Loan and
Security Agreement by and between PlanetOut Inc., PlanetOut USA Inc.,
LPI Media Inc., SpecPub, Inc., RSVP Productions, Inc. and ORIX
Venture Fianace, LLC.12.1
    
    Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certification of Chief Executive Officer pursuant to the Securities Exchange Act
Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to the Securities Exchange Act
Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 18 U.S.C section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Section 18 U.S.C. section 1350.
 38