##### 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: September 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 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 September 30, 2007
 PAGEPART I  FINANCIAL INFORMATION
    
    
    1Item 1 Financial Statements
    
    
    1Unaudited Condensed Consolidated Balance Sheets as of December 31, 2006 and September 30, 2007
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2006 and 2007
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4 Controls and Procedures
    
    
    29PART II  OTHER INFORMATION
    
    
    29Item 1 Legal Proceedings
    
    
    29Item 1A Risk Factors
    
    
    29Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3 Defaults Upon Senior Securities
    
    
    39Item 4 Submission of Matters to a Vote of Security Holders
    
    
    39Item 5 Other Information
    
    
    39Item 6 Exhibits
    
    
    39SIGNATURE
    
    
    41EXHIBIT INDEX
    
    
    42EXHIBIT 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,
    
    
    September 30,2006
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,674
    
    
    $
    11,025Short-term investments
    
    
    2,050
    
    
    
    Restricted cash
    
    
    2,854
    
    
    
    166Accounts receivable, net
    
    
    8,963
    
    
    
    6,270Inventory
    
    
    1,690
    
    
    
    1,204Prepaid expenses and other current assets
    
    
    4,137
    
    
    
    2,280Current assets of discontinued operations
    
    
    7,573
    
    
    
    1,613Current assets held for sale
    
    
    
    
    
    
    2,687Total current assets
    
    
    36,941
    
    
    
    25,245Property and equipment, net
    
    
    10,737
    
    
    
    9,303Goodwill
    
    
    28,590
    
    
    
    7,538Intangible assets, net
    
    
    9,763
    
    
    
    6,445Other assets
    
    
    1,021
    
    
    
    570Long-term assets of discontinued operations
    
    
    6,537
    
    
    
    1,636Long-term assets held for sale
    
    
    
    
    
    
    2,721Total assets
    
    $
    93,589
    
    
    $
    53,458LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,691
    
    
    $
    1,541Accrued expenses and other liabilities
    
    
    3,310
    
    
    
    3,307Deferred revenue, current portion
    
    
    8,989
    
    
    
    6,369Capital lease obligations, current portion
    
    
    694
    
    
    
    826Notes payable, current portion net of discount
    
    
    8,817
    
    
    
    Deferred rent, current portion
    
    
    228
    
    
    
    278Current liabilities of discontinued operations
    
    
    6,068
    
    
    
    1,701Current liabilities related to assets held for sale
    
    
    
    
    
    
    2,451Total current liabilities
    
    
    29,797
    
    
    
    16,473Deferred revenue, less current portion
    
    
    1,474
    
    
    
    915Capital lease obligations, less current portion
    
    
    1,504
    
    
    
    1,201Notes payable, less current portion and discount
    
    
    8,100
    
    
    
    Deferred rent, less current portion
    
    
    1,569
    
    
    
    1,441Long-term liabilities related to assets held for sale
    
    
    
    
    
    
    613Total liabilities
    
    
    42,444
    
    
    
    20,643Commitments and contingencies (Note 8)Stockholders equity:Common stock: $0.001 par value, 100,000 shares authorized, 1,763 and
4,097 shares issued and outstanding at December 31, 2006 and
September 30, 2007, respectively
    
    
    17
    
    
    
    40Additional paid-in capital
    
    
    89,532
    
    
    
    114,289Accumulated other comprehensive loss
    
    
    (122
    )
    
    
    (102
    )Accumulated deficit
    
    
    (38,282
    )
    
    
    (81,412
    )Total stockholders equity
    
    
    51,145
    
    
    
    32,815Total liabilities and stockholders equity
    
    $
    93,589
    
    
    $
    53,458
  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 September 30,
    
    
    Nine months ended September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenue:Advertising services
    
    $
    6,386
    
    
    $
    7,296
    
    
    $
    19,051
    
    
    $
    19,361Subscription services
    
    
    5,831
    
    
    
    5,393
    
    
    
    18,422
    
    
    
    16,734Transaction services
    
    
    1,823
    
    
    
    1,037
    
    
    
    5,663
    
    
    
    3,731Total revenue
    
    
    14,040
    
    
    
    13,726
    
    
    
    43,136
    
    
    
    39,826Operating costs and expenses: (*)Cost of revenue
    
    
    6,221
    
    
    
    7,079
    
    
    
    19,405
    
    
    
    21,949Sales and marketing
    
    
    3,777
    
    
    
    4,126
    
    
    
    11,432
    
    
    
    12,297General and administrative
    
    
    2,845
    
    
    
    3,683
    
    
    
    8,617
    
    
    
    11,959Restructuring
    
    
    58
    
    
    
    581
    
    
    
    892
    
    
    
    581Depreciation and amortization
    
    
    1,192
    
    
    
    1,703
    
    
    
    3,549
    
    
    
    5,077Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,100Total operating costs and expenses
    
    
    14,093
    
    
    
    17,172
    
    
    
    43,895
    
    
    
    72,963Loss from operations
    
    
    (53
    )
    
    
    (3,446
    )
    
    
    (759
    )
    
    
    (33,137
    )Interest expense
    
    
    (218
    )
    
    
    (770
    )
    
    
    (616
    )
    
    
    (1,918
    )Other income, net
    
    
    95
    
    
    
    160
    
    
    
    374
    
    
    
    424Loss from continuing operations before
income taxes
    
    
    (176
    )
    
    
    (4,056
    )
    
    
    (1,001
    )
    
    
    (34,631
    )(Provision) benefit for income taxes
    
    
    (38
    )
    
    
    6
    
    
    
    (38
    )
    
    
    6Loss from continuing operations
    
    
    (214
    )
    
    
    (4,050
    )
    
    
    (1,039
    )
    
    
    (34,625
    )Loss from discontinued operations, net of taxes
    
    
    (1,280
    )
    
    
    (1,205
    )
    
    
    (941
    )
    
    
    (8,505
    )Net loss
    
    $
    (1,494
    )
    
    $
    (5,255
    )
    
    $
    (1,980
    )
    
    $
    (43,130
    )Loss per share from continuing operations:Basic and diluted
    
    $
    (0.12
    )
    
    $
    (1.03
    )
    
    $
    (0.60
    )
    
    $
    (14.12
    )Loss per share from discontinued operations:Basic and diluted
    
    $
    (0.74
    )
    
    $
    (0.31
    )
    
    $
    (0.54
    )
    
    $
    (3.47
    )Net loss per share:Basic and diluted
    
    $
    (0.86
    )
    
    $
    (1.34
    )
    
    $
    (1.14
    )
    
    $
    (17.58
    )Weighted-average shares used to compute net loss
per share  basic and diluted
    
    
    1,733
    
    
    
    3,920
    
    
    
    1,730
    
    
    
    2,453(*) Includes stock-based compensation as follows (see Note 2):Cost of revenue
    
    $
    11
    
    
    $
    36
    
    
    $
    17
    
    
    $
    164Sales and marketing
    
    
    16
    
    
    
    2
    
    
    
    18
    
    
    
    37General and administrative
    
    
    34
    
    
    
    129
    
    
    
    12
    
    
    
    417Total stock-based compensation
    
    $
    61
    
    
    $
    167
    
    
    $
    47
    
    
    $
    618
  2




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##### Table of Contents



PlanetOut Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine months ended September 30,2006
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (1,980
    )
    
    $
    (43,130
    )Net loss from discontinued operations, net of tax
    
    
    941
    
    
    
    8,505Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    3,549
    
    
    
    5,077Impairment of goodwill
    
    
    
    
    
    
    21,100Non-cash services expense
    
    
    
    
    
    
    135Provision for doubtful accounts
    
    
    293
    
    
    
    162Restructuring
    
    
    19
    
    
    
    203Stock-based compensation expense
    
    
    47
    
    
    
    618Amortization of debt discount
    
    
    
    
    
    
    392Amortization of deferred rent
    
    
    (59
    )
    
    
    (78
    )Loss on disposal or write-off of property and equipment
    
    
    15
    
    
    
    486Changes in operating assets and liabilities, net of acquisition effects
and classification of assets and liabilities related to assets held for sale:Accounts receivable
    
    
    (1,593
    )
    
    
    1,405Inventory
    
    
    (83
    )
    
    
    (522
    )Prepaid expenses and other assets
    
    
    (1,405
    )
    
    
    1,245Accounts payable
    
    
    1,021
    
    
    
    (24
    )Accrued expenses and other liabilities
    
    
    1,357
    
    
    
    278Deferred revenue
    
    
    36
    
    
    
    (555
    )Net cash provided by (used in) operating activities of continuing operations
    
    
    2,158
    
    
    
    (4,703
    )Net cash used in operating activities of discontinued operations
    
    
    (3,986
    )
    
    
    (1,986
    )Net cash used in operating activities
    
    
    (1,828
    )
    
    
    (6,689
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (2,632
    )
    
    
    (2,830
    )(Purchases) sales  of short-term investments
    
    
    (769
    )
    
    
    2,050Changes in restricted cash
    
    
    (4,080
    )
    
    
    2,688Acquisitions, net of cash acquired
    
    
    76
    
    
    
    Acquisitions of discontinued operations, net of cash acquired
    
    
    (5,479
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    (12,884
    )
    
    
    1,908Cash flows from financing activities:Proceeds from exercise of common stock and warrants
    
    
    312
    
    
    
    78Proceeds
from equity financing, net of transaction costs of $2,183
    
    
    
    
    
    
    24,017Proceeds from issuance of notes payable
    
    
    10,500
    
    
    
    Proceeds from repayment of note receivable from stockholder
    
    
    843
    
    
    
    Principal payments under capital lease obligations and notes payable
    
    
    (614
    )
    
    
    (17,890
    )Tax withholding payments reimbursed by restricted stock
    
    
    
    
    
    
    (93
    )Net cash provided by financing activities
    
    
    11,041
    
    
    
    6,112Effect of exchange rate on cash and cash equivalents
    
    
    (9
    )
    
    
    20Net increase (decrease) in cash and cash equivalents
    
    
    (3,680
    )
    
    
    1,351Cash and cash equivalents, beginning of period
    
    
    18,461
    
    
    
    9,674Cash and cash equivalents, end of period
    
    $
    14,781
    
    
    $
    11,025Supplemental disclosure of noncash investing and financing activities:Property and equipment and related maintenance acquired under capital leases
    
    $
    2,135
    
    
    $
    461Issuance of common stock warrants in connection with debt issuance
    
    $
    445
    
    
    $
    
  3




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##### Table of Contents



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
  Reverse Stock Split
  4




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##### Table of Contents



Reclassifications
  Use of Estimates
  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
 5




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##### Table of Contents



Goodwill
 Goodwill and Other Intangible Assets
   Revenue Recognition
 Revenue Arrangements with Multiple Deliverables
  6




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##### Table of Contents



Reporting Revenue Gross as a Principal Versus
Net as an Agent,
 Advertising
  Stock-Based Compensation
 Share-Based
Payment
 Income Taxes
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109
   7




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##### Table of Contents



Net Income (Loss) Per Share
    Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Numerator:Net loss
    
    $
    (1,494
    )
    
    $
    (5,255
    )
    
    $
    (1,980
    )
    
    $
    (43,130
    )Denominator for basic and diluted net loss
per share:Weighted-average shares
    
    
    1,733
    
    
    
    3,920
    
    
    
    1,730
    
    
    
    2,453Net loss per share:Basic and diluted
    
    $
    (0.86
    )
    
    $
    (1.34
    )
    
    $
    (1.14
    )
    
    $
    (17.58
    )
  Nine months ended September 30,2006
    
    2007Common stock options and warrants
    
    
    208
    
    
    
    227
 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,
    
    
    
    
    
    
    
    
    
    
    September 30,2006
    
    
    Adjustments
    
    
    Impairment
    
    
    2007Reportable segment:Online
    
    $
    3,403
    
    
    $
    
    
    
    $
    
    
    
    $
    3,403Publishing
    
    
    25,187
    
    
    
    48
    
    
    
    (21,100
    )
    
    
    4,135$
    28,590
    
    
    $
    48
    
    
    $
    (21,100
    )
    
    $
    7,538
  Intangible Assets
  December 31, 2006
    
    
    September 30, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountCustomer lists and user bases
    
    $
    8,678
    
    
    $
    4,615
    
    
    $
    4,063
    
    
    $
    6,758
    
    
    $
    4,633
    
    
    $
    2,125Tradenames
    
    
    8,040
    
    
    
    2,340
    
    
    
    5,700
    
    
    
    6,660
    
    
    
    2,340
    
    
    
    4,320Other intangible assets
    
    
    726
    
    
    
    726
    
    
    
    
    
    
    
    726
    
    
    
    726
    
    
    
    $
    17,444
    
    
    $
    7,681
    
    
    $
    9,763
    
    
    $
    14,144
    
    
    $
    7,699
    
    
    $
    6,445
   9




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##### Table of Contents



Fiscal Years:2007 (remaining three months)
    
    $
    1772008
    
    
    7022009
    
    
    6802010
    
    
    566$
    2,125
 Note 4  Assets and Liabilities Related to Assets Held for Sale
 Accounting for the Impairment or Disposal of Long-Lived Assets
   10




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##### Table of Contents



Current assets held for sale:Accounts receivable, net
    
    $
    1,013Inventory
    
    
    1,008Prepaid expenses and other current assets
    
    
    666$
    2,687Long-term assets held for sale:Property and equipment, net
    
    $
    102Intangible assets, net
    
    
    2,567Other assets
    
    
    52$
    2,721Current liabilities related to assets held for sale:Accounts payable
    
    $
    126Accrued expenses and other liabilities
    
    
    281Deferred revenue, current portion
    
    
    2,037Capital lease obligations, current portion
    
    
    7$
    2,451Long-term liabilities related to assets held for sale:Deferred revenue, less current portion
    
    $
    587Capital lease obligations, less current portion
    
    
    26$
    613
 Note 5  Other Balance Sheet Components
  December 31,
    
    
    September 30,2006
    
    
    2007(In thousands)Accounts receivable:Trade accounts receivable
    
    $
    10,532
    
    
    $
    7,077Less: Allowance for doubtful accounts
    
    
    (520
    )
    
    
    (280
    )Less: Provision for returns
    
    
    (1,049
    )
    
    
    (527
    )$
    8,963
    
    
    $
    6,270
   11




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##### Table of Contents



December 31,
    
    
    September 30,2006
    
    
    2007(In thousands)Inventory:Materials for future publications
    
    $
    370
    
    
    $
    293Work in process
    
    
    
    
    
    
    13Finished goods available for sale
    
    
    1,386
    
    
    
    9401,756
    
    
    
    1,246Less: reserve for obsolete inventory
    
    
    (66
    )
    
    
    (42
    )$
    1,690
    
    
    $
    1,204
  December 31,
    
    
    September 30,2006
    
    
    2007(In thousands)Property and equipment:Computer equipment and software
    
    $
    13,694
    
    
    $
    10,312Furniture and fixtures
    
    
    1,202
    
    
    
    1,076Leasehold improvements
    
    
    2,245
    
    
    
    2,296Website development costs
    
    
    6,855
    
    
    
    6,19423,996
    
    
    
    19,878Less: Accumulated depreciation and amortization
    
    
    (13,259
    )
    
    
    (10,575
    )$
    10,737
    
    
    $
    9,303
  December 31,
    
    
    September 30,2006
    
    
    2007(In thousands)Accrued expenses and other liabilities:Accrued payroll and related liabilities
    
    $
    1,163
    
    
    $
    1,481Other accrued liabilities
    
    
    2,147
    
    
    
    1,826$
    3,310
    
    
    $
    3,307
 Note 6  Related Party Transactions
  12




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##### Table of Contents



Note 7  Notes Payable
  December 31,
    
    
    September 30,2006
    
    
    2007Notes payable to vendors
    
    $
    47
    
    
    $
    LPI note
    
    
    7,075
    
    
    
    Orix term loan
    
    
    7,187
    
    
    
    Orix revolving loan
    
    
    3,000
    
    
    
    17,309
    
    
    
    Less: discount
    
    
    (392
    )
    
    
    16,917
    
    
    
    Less: current portion, net of discount
    
    
    8,817
    
    
    
    Notes payable, less current portion and discount
    
    $
    8,100
    
    
    $
    
     13




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##### Table of Contents



Note 8  Commitments and Contingencies
  Note 9  Stock-Based Compensation
 Stock Options
  SharesOutstanding at January 1, 2007
    
    
    175Exercised
    
    
    (16
    )Forfeited/expired/cancelled
    
    
    (19
    )Outstanding at September 30, 2007
    
    
    140
  Restricted Stock
  SharesUnvested at January 1, 2007
    
    
    21Granted
    
    
    46Vested
    
    
    (15
    )Forfeited
    
    
    (3
    )Unvested at September 30, 2007
    
    
    49
  14




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##### Table of Contents



Year Ending December 31,2007 (remaining three months)
    
    
    12008
    
    
    192009
    
    
    172010
    
    
    1249
  Note 10  Stockholders Equity
 Equity Financing
  Note 11  Segment Information
 
   15




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##### Table of Contents



Three months ended
    
    
    Three months endedSeptember 30, 2006
    
    
    September 30, 2007Online
    
    
    Publishing
    
    
    Total
    
    
    Online
    
    
    Publishing
    
    
    TotalRevenue:Advertising services
    
    $
    2,646
    
    
    $
    3,740
    
    
    $
    6,386
    
    
    $
    2,443
    
    
    $
    4,853
    
    
    $
    7,296Subscription services
    
    
    4,473
    
    
    
    1,358
    
    
    
    5,831
    
    
    
    4,010
    
    
    
    1,383
    
    
    
    5,393Transaction services
    
    
    448
    
    
    
    1,375
    
    
    
    1,823
    
    
    
    279
    
    
    
    758
    
    
    
    1,037Total revenue
    
    
    7,567
    
    
    
    6,473
    
    
    
    14,040
    
    
    
    6,732
    
    
    
    6,994
    
    
    
    13,726Direct operating costs and expenses:Cost of revenue
    
    
    2,446
    
    
    
    3,775
    
    
    
    6,221
    
    
    
    2,842
    
    
    
    4,237
    
    
    
    7,079Sales and marketing
    
    
    2,440
    
    
    
    1,337
    
    
    
    3,777
    
    
    
    2,125
    
    
    
    2,001
    
    
    
    4,126Total direct operating costs and expenses
    
    
    4,886
    
    
    
    5,112
    
    
    
    9,998
    
    
    
    4,967
    
    
    
    6,238
    
    
    
    11,205Contribution margin
    
    $
    2,681
    
    
    $
    1,361
    
    
    
    4,042
    
    
    $
    1,765
    
    
    $
    756
    
    
    
    2,521Other operating costs and expenses:General and administrative
    
    
    
    
    
    
    
    
    
    
    2,845
    
    
    
    
    
    
    
    
    
    
    
    3,683Restructuring
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    581Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    
    
    
    
    
    
    
    
    1,703Total other operating costs and expenses
    
    
    
    
    
    
    
    
    
    
    4,095
    
    
    
    
    
    
    
    
    
    
    
    5,967Loss from operations
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    (3,446
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    (123
    )
    
    
    
    
    
    
    
    
    
    
    (610
    )(Provision) benefit for income taxes
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    6Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,280
    )
    
    
    
    
    
    
    
    
    
    
    (1,205
    )Net loss
    
    
    
    
    
    
    
    
    
    $
    (1,494
    )
    
    
    
    
    
    
    
    
    
    $
    (5,255
    )
 Nine months ended
    
    
    Nine months endedSeptember 30, 2006
    
    
    September 30, 2007Online
    
    
    Publishing
    
    
    Total
    
    
    Online
    
    
    Publishing
    
    
    TotalRevenue:Advertising services
    
    $
    7,242
    
    
    $
    11,809
    
    
    $
    19,051
    
    
    $
    6,891
    
    
    $
    12,470
    
    
    $
    19,361Subscription services
    
    
    13,985
    
    
    
    4,437
    
    
    
    18,422
    
    
    
    12,519
    
    
    
    4,215
    
    
    
    16,734Transaction services
    
    
    1,617
    
    
    
    4,046
    
    
    
    5,663
    
    
    
    959
    
    
    
    2,772
    
    
    
    3,731Total revenue
    
    
    22,844
    
    
    
    20,292
    
    
    
    43,136
    
    
    
    20,369
    
    
    
    19,457
    
    
    
    39,826Direct operating costs and expenses:Cost of revenue
    
    
    7,394
    
    
    
    12,011
    
    
    
    19,405
    
    
    
    9,766
    
    
    
    12,183
    
    
    
    21,949Sales and marketing
    
    
    7,774
    
    
    
    3,658
    
    
    
    11,432
    
    
    
    7,019
    
    
    
    5,278
    
    
    
    12,297Total direct operating costs and expenses
    
    
    15,168
    
    
    
    15,669
    
    
    
    30,837
    
    
    
    16,785
    
    
    
    17,461
    
    
    
    34,246Contribution margin
    
    $
    7,676
    
    
    $
    4,623
    
    
    
    12,299
    
    
    $
    3,584
    
    
    $
    1,996
    
    
    
    5,580Other operating costs and expenses:General and administrative
    
    
    
    
    
    
    
    
    
    
    8,617
    
    
    
    
    
    
    
    
    
    
    
    11,959Restructuring
    
    
    
    
    
    
    
    
    
    
    892
    
    
    
    
    
    
    
    
    
    
    
    581Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    3,549
    
    
    
    
    
    
    
    
    
    
    
    5,077Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,100Total other operating costs and expenses
    
    
    
    
    
    
    
    
    
    
    13,058
    
    
    
    
    
    
    
    
    
    
    
    38,717Loss from operations
    
    
    
    
    
    
    
    
    
    
    (759
    )
    
    
    
    
    
    
    
    
    
    
    (33,137
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    (242
    )
    
    
    
    
    
    
    
    
    
    
    (1,494
    )(Provision) benefit for income taxes
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    6Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (941
    )
    
    
    
    
    
    
    
    
    
    
    (8,505
    )Net loss
    
    
    
    
    
    
    
    
    
    $
    (1,980
    )
    
    
    
    
    
    
    
    
    
    $
    (43,130
    )
 Note 12  Restructuring
  16




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Note 13  Discontinued Operations
  RSVP Productions, Inc.
  PNO DSW Events, LLC
   Three months ended
    
    
    Three months endedSeptember 30, 2006
    
    
    September 30, 2007RSVP
    
    
    DSW
    
    
    Total
    
    
    RSVP
    
    
    DSW
    
    
    TotalTotal revenue
    
    $
    1,293
    
    
    $
    75
    
    
    $
    1,368
    
    
    $
    7,855
    
    
    $
    
    
    
    $
    7,855Operating costs and expenses
    
    
    2,565
    
    
    
    84
    
    
    
    2,649
    
    
    
    9,065
    
    
    
    
    
    
    
    9,065Loss from operations
    
    
    (1,272
    )
    
    
    (9
    )
    
    
    (1,281
    )
    
    
    (1,210
    )
    
    
    
    
    
    
    (1,210
    )Other income, net
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    5
    
    
    
    
    
    
    
    5Loss from discontinued operations
    
    $
    (1,272
    )
    
    $
    (8
    )
    
    $
    (1,280
    )
    
    $
    (1,205
    )
    
    $
    
    
    
    $
    (1,205
    )
 17




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##### Table of Contents



Nine months ended
    
    
    Nine months endedSeptember 30, 2006
    
    
    September 30, 2007RSVP
    
    
    DSW
    
    
    Total
    
    
    RSVP
    
    
    DSW
    
    
    TotalTotal revenue
    
    $
    5,414
    
    
    $
    726
    
    
    $
    6,140
    
    
    $
    17,023
    
    
    $
    2
    
    
    $
    17,025Operating costs and expenses
    
    
    6,397
    
    
    
    639
    
    
    
    7,036
    
    
    
    25,516
    
    
    
    38
    
    
    
    25,554Income (loss) from operations
    
    
    (983
    )
    
    
    87
    
    
    
    (896
    )
    
    
    (8,493
    )
    
    
    (36
    )
    
    
    (8,529
    )Other income, net
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    24
    
    
    
    
    
    
    
    24Minority interest
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) from
discontinued operations
    
    $
    (982
    )
    
    $
    41
    
    
    $
    (941
    )
    
    $
    (8,469
    )
    
    $
    (36
    )
    
    $
    (8,505
    )
  December 31, 2006
    
    
    September 30, 2007RSVP
    
    
    DSW
    
    
    Total
    
    
    RSVPCurrent assets of discontinued operations:Accounts receivable
    
    $
    374
    
    
    $
    
    
    
    $
    374
    
    
    $
    1,059Prepaid expenses and other current assets
    
    
    7,172
    
    
    
    27
    
    
    
    7,199
    
    
    
    554$
    7,546
    
    
    $
    27
    
    
    $
    7,573
    
    
    $
    1,613Long-term assets of discontinued operations:Property and equipment, net
    
    $
    186
    
    
    $
    
    
    
    $
    186
    
    
    $
    191Goodwill
    
    
    3,982
    
    
    
    
    
    
    
    3,982
    
    
    
    Intangible assets, net
    
    
    2,369
    
    
    
    
    
    
    
    2,369
    
    
    
    1,444Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1$
    6,537
    
    
    $
    
    
    
    $
    6,537
    
    
    $
    1,636Current liabilities of discontinued operations:Accounts payable
    
    $
    85
    
    
    $
    6
    
    
    $
    91
    
    
    $
    95Accrued expenses and other liabilities
    
    
    397
    
    
    
    
    
    
    
    397
    
    
    
    306Deferred revenue, current portion
    
    
    5,580
    
    
    
    
    
    
    
    5,580
    
    
    
    1,300$
    6,062
    
    
    $
    6
    
    
    $
    6,068
    
    
    $
    1,701
 18




---



##### Table of Contents



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
   Accounting for the Impairment or Disposal of Long-Lived
Assets
 The Advocate Out The Out Traveler HIVPlus
 Executive Operating and Financial Summary
    19




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Results of Operations
  Online Segment
  Three months ended September 30,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Online revenue:Advertising services
    
    $
    2,646
    
    
    $
    2,443
    
    
    $
    (203
    )
    
    
    (8
    %)Subscription services
    
    
    4,473
    
    
    
    4,010
    
    
    
    (463
    )
    
    
    (10
    %)Transaction services
    
    
    448
    
    
    
    279
    
    
    
    (169
    )
    
    
    (38
    %)Total online revenue
    
    
    7,567
    
    
    
    6,732
    
    
    
    (835
    )
    
    
    (11
    %)Online direct operating costs and expenses:Cost of revenue
    
    
    2,446
    
    
    
    2,842
    
    
    
    396
    
    
    
    16
    %Sales and marketing
    
    
    2,440
    
    
    
    2,125
    
    
    
    (315
    )
    
    
    (13
    %)Total online direct operating costs and expenses
    
    
    4,886
    
    
    
    4,967
    
    
    
    81
    
    
    
    2
    %Online contribution margin
    
    $
    2,681
    
    
    $
    1,765
    
    
    $
    (916
    )
    
    
    (34
    %)
 20




---



##### Table of Contents



Nine months ended September 30,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Online revenue:Advertising services
    
    $
    7,242
    
    
    $
    6,891
    
    
    $
    (351
    )
    
    
    (5
    %)Subscription services
    
    
    13,985
    
    
    
    12,519
    
    
    
    (1,466
    )
    
    
    (10
    %)Transaction services
    
    
    1,617
    
    
    
    959
    
    
    
    (658
    )
    
    
    (41
    %)Total online revenue
    
    
    22,844
    
    
    
    20,369
    
    
    
    (2,475
    )
    
    
    (11
    %)Online direct operating costs and expenses:Cost of revenue
    
    
    7,394
    
    
    
    9,766
    
    
    
    2,372
    
    
    
    32
    %Sales and marketing
    
    
    7,774
    
    
    
    7,019
    
    
    
    (755
    )
    
    
    (10
    %)Total online direct operating costs and expenses
    
    
    15,168
    
    
    
    16,785
    
    
    
    1,617
    
    
    
    11
    %Online contribution margin
    
    $
    7,676
    
    
    $
    3,584
    
    
    $
    (4,092
    )
    
    
    (53
    %)
    21




---



##### Table of Contents



Publishing Segment
  Three months ended September 30,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Publishing revenue:Advertising services
    
    $
    3,740
    
    
    $
    4,853
    
    
    $
    1,113
    
    
    
    30
    %Subscription services
    
    
    1,358
    
    
    
    1,383
    
    
    
    25
    
    
    
    2
    %Transaction services
    
    
    1,375
    
    
    
    758
    
    
    
    (617
    )
    
    
    (45
    %)Total publishing revenue
    
    
    6,473
    
    
    
    6,994
    
    
    
    521
    
    
    
    8
    %Publishing direct operating costs and expenses:Cost of revenue
    
    
    3,775
    
    
    
    4,237
    
    
    
    462
    
    
    
    12
    %Sales and marketing
    
    
    1,337
    
    
    
    2,001
    
    
    
    664
    
    
    
    50
    %Total publishing direct operating costs and expenses
    
    
    5,112
    
    
    
    6,238
    
    
    
    1,126
    
    
    
    22
    %Publishing contribution margin
    
    $
    1,361
    
    
    $
    756
    
    
    $
    (605
    )
    
    
    (44
    %)
  Nine months ended September 30,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    $
    
    
    %Publishing revenue:Advertising services
    
    $
    11,809
    
    
    $
    12,470
    
    
    $
    661
    
    
    
    6
    %Subscription services
    
    
    4,437
    
    
    
    4,215
    
    
    
    (222
    )
    
    
    (5
    %)Transaction services
    
    
    4,046
    
    
    
    2,772
    
    
    
    (1,274
    )
    
    
    (31
    %)Total publishing revenue
    
    
    20,292
    
    
    
    19,457
    
    
    
    (835
    )
    
    
    (4
    %)Publishing direct operating costs and expenses:Cost of revenue
    
    
    12,011
    
    
    
    12,183
    
    
    
    172
    
    
    
    1
    %Sales and marketing
    
    
    3,658
    
    
    
    5,278
    
    
    
    1,620
    
    
    
    44
    %Total publishing direct operating costs and expenses
    
    
    15,669
    
    
    
    17,461
    
    
    
    1,792
    
    
    
    11
    %Publishing contribution margin
    
    $
    4,623
    
    
    $
    1,996
    
    
    $
    (2,627
    )
    
    
    (57
    %)
  th The Advocate
  22




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Other Operating Costs and Expenses
  General and Administrative.
  Restructuring.
  Depreciation and Amortization.
  Impairment of Goodwill.
 23




---



##### Table of Contents



Other Income and Expenses
 Interest Expense.
 Other Income, Net.
 Discontinued Operations
  RSVP Productions, Inc.
  PNO DSW Events, LLC
  24




---



##### Table of Contents



Three months ended
    
    
    Three months endedSeptember 30, 2006
    
    
    September 30, 2007RSVP
    
    
    DSW
    
    
    Total
    
    
    RSVP
    
    
    DSW
    
    
    TotalTotal revenue
    
    $
    1,293
    
    
    $
    75
    
    
    $
    1,368
    
    
    $
    7,855
    
    
    $
    
    
    
    $
    7,855Operating costs and expenses
    
    
    2,565
    
    
    
    84
    
    
    
    2,649
    
    
    
    9,065
    
    
    
    
    
    
    
    9,065Loss from operations
    
    
    (1,272
    )
    
    
    (9
    )
    
    
    (1,281
    )
    
    
    (1,210
    )
    
    
    
    
    
    
    (1,210
    )Other income, net
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    5
    
    
    
    
    
    
    
    5Loss from discontinued operations
    
    $
    (1,272
    )
    
    $
    (8
    )
    
    $
    (1,280
    )
    
    $
    (1,205
    )
    
    $
    
    
    
    $
    (1,205
    )
  September 30, 2006
    
    
    September 30, 2007RSVP
    
    
    DSW
    
    
    Total
    
    
    RSVP
    
    
    DSW
    
    
    TotalTotal revenue
    
    $
    5,414
    
    
    $
    726
    
    
    $
    6,140
    
    
    $
    17,023
    
    
    $
    2
    
    
    $
    17,025Operating costs and expenses
    
    
    6,397
    
    
    
    639
    
    
    
    7,036
    
    
    
    25,516
    
    
    
    38
    
    
    
    25,554Income (loss) from operations
    
    
    (983
    )
    
    
    87
    
    
    
    (896
    )
    
    
    (8,493
    )
    
    
    (36
    )
    
    
    (8,529
    )Other income, net
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    24
    
    
    
    
    
    
    
    24Minority interest
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) from
discontinued operations
    
    $
    (982
    )
    
    $
    41
    
    
    $
    (941
    )
    
    $
    (8,469
    )
    
    $
    (36
    )
    
    $
    (8,505
    )
  December 31, 2006
    
    September 30, 2007RSVP
    
    
    DSW
    
    
    Total
    
    
    RSVPCurrent assets of discontinued operations:Accounts receivable
    
    $
    374
    
    
    $
    
    
    
    $
    374
    
    
    $
    1,059Prepaid expenses and other current assets
    
    
    7,172
    
    
    
    27
    
    
    
    7,199
    
    
    
    554$
    7,546
    
    
    $
    27
    
    
    $
    7,573
    
    
    $
    1,613Long-term assets of discontinued operations:Property and equipment, net
    
    $
    186
    
    
    $
    
    
    
    $
    186
    
    
    $
    191Goodwill
    
    
    3,982
    
    
    
    
    
    
    
    3,982
    
    
    
    Intangible assets, net
    
    
    2,369
    
    
    
    
    
    
    
    2,369
    
    
    
    1,444Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1$
    6,537
    
    
    $
    
    
    
    $
    6,537
    
    
    $
    1,636Current liabilities of discontinued operations:Accounts payable
    
    $
    85
    
    
    $
    6
    
    
    $
    91
    
    
    $
    95Accrued expenses and other liabilities
    
    
    397
    
    
    
    
    
    
    
    397
    
    
    
    306Deferred revenue, current portion
    
    
    5,580
    
    
    
    
    
    
    
    5,580
    
    
    
    1,300$
    6,062
    
    
    $
    6
    
    
    $
    6,068
    
    
    $
    1,701
 Liquidity and Capital Resources
  25




---



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26




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by PeriodRemainder ofTotal
    
    
    2007
    
    
    2008-2009
    
    
    2010-2011
    
    
    2012 & AfterContractual obligations:Capital leases
    
    $
    2,467
    
    
    $
    261
    
    
    $
    1,789
    
    
    $
    415
    
    
    $
    2Operating leases
    
    
    13,378
    
    
    
    705
    
    
    
    5,841
    
    
    
    5,766
    
    
    
    1,066Total contractual obligations
    
    $
    15,845
    
    
    $
    966
    
    
    $
    7,630
    
    
    $
    6,181
    
    
    $
    1,068
 Capital Leases.
 Operating Leases.
 Critical Accounting Policies
   Income Taxes
 Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
   27




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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
   Foreign Currency Risk
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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
  
 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.
  If we are unable to generate revenue from advertising or if we were to lose our existing
advertisers, our business will suffer.
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Our success depends, in part, upon the growth of Internet advertising and upon our ability to
accurately predict the cost of customized campaigns.
   If our efforts to attract and retain subscribers are not successful, our revenue will decrease.
    30




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Our core revenue-generating software applications are written on a technology platform that has
become 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 may further decline.
  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.
  Recent and potential future acquisitions and divestitures could result in operating difficulties
and unanticipated liabilities.
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
    
    potential goodwill write downs associated with acquisitions of businesses where the previously anticipated
synergies of the combined entities had not been realized. For example, during the second quarter of fiscal 2007,
we recorded an estimated impairment charge of $21.1 million due to lower revenue than expected related to our
advertising business;
    
    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;
    
    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 or the divestiture
of our prior businesses;
    
    the difficulty in attracting and retaining qualified management to lead the combined or retained businesses;
    
    the potential difficulties associated with entering new lines of business with which we have little experience,
such as some of the businesses we acquired from LPI;
    
    the difficulty of complying with additional regulatory requirements that may become applicable to us as the
result of an acquisition; and
    
    the impact of known or unknown liabilities associated with the acquired businesses.
  If we do not continue to attract and retain qualified personnel, our business may suffer.
  We may need additional capital and may not be able to raise additional funds on favorable terms or
at all, which could limit our ability to continue operations and dilute the ownership interests of
existing stockholders.
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Any significant disruption in service on our websites or in our computer and communications
hardware and software systems 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.
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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;
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##### Table of Contents




    
    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;
    
    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 was 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 allegedly 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.
In April 2007, the court lifted the stay on enforcement against
secondary producers. Additionally, in June 2007, the DOJ issued new
proposed regulations to implement the Walsh Act and amended CPO Act.
The public comment period for the proposed regulations closed in
September 2007. It is anticipated that these new proposed regulations
will be challenged in court on various constitutional grounds and that
another stay against enforcement of these regulations will be sought.
If the FBI continues to inspect businesses that are allegedly
secondary producers and there are no legal challenges to the CPO Act,
the Walsh Act or the new regulations purporting to implement these
acts, or if these challenges are unsuccessful, we may 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.
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The risks of transmitting confidential information online, including credit card information, may
discourage customers from subscribing to our services or purchasing goods from us.
  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.
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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.
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Our stock price may be volatile and you may lose all or a part of your investment.
   The sales of common stock by our stockholders could depress the price of our shares.
  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
  38




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##### Table of Contents



(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 ProgramsJuly 1, 2007  July 31, 2007
    
    

    $
    
    
    
    
    August 1, 2007  August 31, 2007
    
    

    
    
    
    
    
    September 1, 2007  September 30, 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
   Number of Votes
    
    BrokerFor
    
    Against
    
    Abstain
    
    Non-VotesAmendment to amended and restated certificate of incorporation
    
    
    3,026,188
    
    
    
    57,655
    
    
    
    1,695
    
    
    
    
 
 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 3.1 to our Current Report on Form 8-K, File No. 000-50879, filed on October
4, 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 Current Report on
Form 8-K, File No. 000-50879, filed on October 4, 2007, 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).
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##### Table of Contents



ExhibitNumber
    
    Description of Documents4.3
    
    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).4.6
    
    Warrant Certificate issued to Allen & Company, LLC dated May 15, 2007 (filed as
Exhibit 99.1 to our Current Report on Form 8-K, File No. 000-50879, filed on May
18, 2007 and incorporated herein by reference).4.7
    
    Amendment to Rights Agreement among PlanetOut Inc. and Wells Fargo Bank, N.A. dated
June 28, 2007 (filed as Exhibit 4.7 to our Quarterly Report on Form 10-Q, File No.
000-50879, for the quarter ended June 30, 2007, and incorporated herein by
reference).10.24
    
    Summary of Compensation Terms for Daniel Steimle (filed as Exhibit 99.1 to our
Current Report on Form 8-K, File No. 000-50879, filed on October 4, 2007, and
incorporated herein by reference).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.
 40




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##### Table of Contents



SIGNATURE
  PLANETOUT INC.Date: November 8, 2007By:
    
    /s/ DANIEL E. STEIMLE

 Daniel E. SteimleInterim Chief Financial Officer(Principal Financial and Accounting
Officer)
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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 3.1 to our Current Report on Form 8-K, File No. 000-50879, filed on October
4, 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 Current Report on
Form 8-K, File No. 000-50879, filed on October 4, 2007, 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).4.6
    
    Warrant Certificate issued to Allen & Company, LLC dated May 15, 2007 (filed as
Exhibit 99.1 to our Current Report on Form 8-K, File No. 000-50879, filed on May
18, 2007 and incorporated herein by reference).4.7
    
    Amendment to Rights Agreement among PlanetOut Inc. and Wells Fargo Bank, N.A. dated
June 28, 2007 (filed as Exhibit 4.7 to our Quarterly Report on Form 10-Q, File No.
000-50879, for the quarter ended June 30, 2007, and incorporated herein by
reference).10.24
    
    Summary of Compensation Terms for Daniel Steimle (filed as Exhibit 99.1 to our
Current Report on Form 8-K, File No. 000-50879, filed on October 4, 2007, and
incorporated herein by reference).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.
 42