##### 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, 2006
 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 March 31, 2006
 PAGEPART I  FINANCIAL INFORMATION
    
    
    3Item 1 Unaudited Condensed Consolidated Financial Statements
    
    
    3Unaudited Condensed Consolidated Balance Sheets as of December 31, 2005 and March 31, 2006
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2006
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2006
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4 Controls and Procedures
    
    
    24PART II  OTHER INFORMATION
    
    
    25Item 1 Legal Proceedings
    
    
    25Item 1A Risk Factors
    
    
    25Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3 Defaults Upon Senior Securities
    
    
    34Item 4 Submission of Matters to a Vote of Security Holders
    
    
    34Item 5 Other Information
    
    
    34Item 6 Exhibits
    
    
    34SIGNATURES
    
    
    36EXHIBIT INDEX
    
    
    37EXHIBIT 12.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  Page 2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
PlanetOut Inc.
 
 Item 1. Unaudited Condensed Consolidated Financial Statements
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share amounts)
 December 31,
    
    
    March 31,2005
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,461
    
    
    $
    11,335Restricted cash
    
    
    
    
    
    
    160Accounts receivable, net
    
    
    6,030
    
    
    
    6,911Inventory
    
    
    1,349
    
    
    
    1,488Prepaid expenses and other current assets
    
    
    2,571
    
    
    
    6,452Total current assets
    
    
    28,411
    
    
    
    26,346Property and equipment, net
    
    
    8,167
    
    
    
    8,293Goodwill
    
    
    28,699
    
    
    
    32,581Intangible assets, net
    
    
    10,909
    
    
    
    13,334Other assets
    
    
    1,152
    
    
    
    1,160Total assets
    
    $
    77,338
    
    
    $
    81,714LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,334
    
    
    $
    1,658Accrued liabilities
    
    
    2,750
    
    
    
    2,693Deferred revenue, current
portion
    
    
    8,749
    
    
    
    11,261Capital lease obligations, current portion
    
    
    309
    
    
    
    351Notes payable, current
portion
    
    
    222
    
    
    
    158Deferred rent, current
portion
    
    
    286
    
    
    
    317Total current
liabilities
    
    
    13,650
    
    
    
    16,438Deferred revenue, less current portion
    
    
    1,771
    
    
    
    2,320Capital lease obligations, less current portion
    
    
    212
    
    
    
    495Notes payable, less current
portion
    
    
    7,075
    
    
    
    7,075Deferred rent, less current
portion
    
    
    1,578
    
    
    
    1,528Total liabilities
    
    
    24,286
    
    
    
    27,856Minority interest in consolidated subsidiaries
    
    
    
    
    
    
    Stockholders equity:Common stock: $0.001 par value, 100,000 shares authorized, 17,248 and 17,308 shares
issued and outstanding
at December 31, 2005 and March 31, 2006, respectively
    
    
    17
    
    
    
    17Additional paid-in capital
    
    
    88,333
    
    
    
    88,691Note receivable from
stockholder
    
    
    (603
    )
    
    
    Accumulated other comprehensive loss
    
    
    (123
    )
    
    
    (146
    )Accumulated deficit
    
    
    (34,572
    )
    
    
    (34,704
    )Total stockholders
equity
    
    
    53,052
    
    
    
    53,858Total liabilities and stockholders equity
    
    $
    77,338
    
    
    $
    81,714
  Page 3




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PlanetOut Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 Three months ended March 31,2005
    
    
    2006Revenue:Advertising services
    
    $
    1,392
    
    
    $
    5,347Subscription services
    
    
    4,853
    
    
    
    6,270Transaction services
    
    
    420
    
    
    
    5,956Total revenue
    
    
    6,665
    
    
    
    17,573Operating costs and expenses:(*)Cost of revenue
    
    
    2,125
    
    
    
    9,430Sales and marketing
    
    
    2,456
    
    
    
    3,944General and administrative
    
    
    1,248
    
    
    
    3,080Depreciation and amortization
    
    
    820
    
    
    
    1,224Total operating costs and
expenses
    
    
    6,649
    
    
    
    17,678Income (loss) from operations
    
    
    16
    
    
    
    (105
    )Equity in net loss of
unconsolidated affiliate
    
    
    (9
    )
    
    
    Interest expense
    
    
    (38
    )
    
    
    (197
    )Other income, net
    
    
    239
    
    
    
    170Income (loss) before income taxes
and minority interest
    
    
    208
    
    
    
    (132
    )Provision for income taxes
    
    
    (29
    )
    
    
    Minority interest in loss of
consolidated affiliate
    
    
    
    
    
    
    Net income (loss)
    
    $
    179
    
    
    $
    (132
    )Net income (loss) per share:Basic
    
    $
    0.01
    
    
    $
    (0.01
    )Diluted
    
    $
    0.01
    
    
    $
    (0.01
    )Weighted-average shares used to compute net income
(loss) per share:Basic
    
    
    16,939
    
    
    
    17,261Diluted
    
    
    18,269
    
    
    
    17,261(*)Includes stock-based
compensation (benefit) as follows
(see Note 2):Cost of revenue
    
    $
    12
    
    
    $
    5Sales and marketing
    
    
    7
    
    
    
    1General and administrative
    
    
    (43
    )
    
    
    79Total stock-based compensation (benefit)
    
    $
    (24
    )
    
    $
    85
  Page 4




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PlanetOut Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Three months ended March 31,2005
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    179
    
    
    $
    (132
    )Adjustments to reconcile net income (loss) to net cash used in
operating activities:Depreciation and amortization
    
    
    820
    
    
    
    1,224Stock-based compensation expense (benefit)
    
    
    (24
    )
    
    
    85Amortization of deferred rent
    
    
    218
    
    
    
    (19
    )Loss on disposal or write-off of property and equipment
    
    
    
    
    
    
    21Equity in net loss of unconsolidated affiliate
    
    
    9
    
    
    
    Changes in operating assets and liabilities, net of acquisition effects:Accounts receivable
    
    
    583
    
    
    
    (620
    )Inventory
    
    
    
    
    
    
    (139
    )Prepaid expenses and other assets
    
    
    (896
    )
    
    
    754Accounts payable
    
    
    (1,185
    )
    
    
    248Accrued and other liabilities
    
    
    (165
    )
    
    
    (95
    )Deferred revenue
    
    
    364
    
    
    
    (3,334
    )Net cash used in operating activities
    
    
    (97
    )
    
    
    (2,007
    )Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    (5,379
    )Purchases of property and equipment
    
    
    (1,179
    )
    
    
    (469
    )Changes in restricted cash
    
    
    
    
    
    
    (160
    )Net cash used in investing activities
    
    
    (1,179
    )
    
    
    (6,008
    )Cash flows from financing activities:Proceeds from exercise of common stock options and warrants
    
    
    277
    
    
    
    273Proceeds from repayment of note receivable from stockholder
    
    
    
    
    
    
    843Principal payments under capital lease obligations and notes payable
    
    
    (422
    )
    
    
    (204
    )Net cash provided by (used in) financing activities
    
    
    (145
    )
    
    
    912Effect of exchange rate on cash and cash equivalents
    
    
    (2
    )
    
    
    (23
    )Net decrease in cash and cash equivalents
    
    
    (1,423
    )
    
    
    (7,126
    )Cash and cash equivalents, beginning of period
    
    
    43,128
    
    
    
    18,461Cash and cash equivalents, end of period
    
    $
    41,705
    
    
    $
    11,335Supplemental disclosure of noncash flow investing and financing activities:Property and equipment and related maintenance acquired under capital leases
    
    $
    34
    
    
    $
    561Unearned stock-based compensation
    
    $
    (238
    )
    
    $
    
  Page 5




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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  Basis of Presentation and Summary of Significant Accounting Policies
 Unaudited Interim Financial Information
  Principles of Consolidation
  Use of Estimates
  Restricted Cash
  Page 6




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Inventory
  Property and Equipment
   Internal Use Software and Website Development Costs
 Accounting for Costs of Computer Software Developed or Obtained for Internal Use Accounting for Web Site Development Costs
 Goodwill
 Goodwill and Other Intangible Assets.
 Page 7




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Revenue Recognition
 Revenue Arrangements with Multiple Deliverables
  Reporting Revenue Gross as a Principal Versus
Net as an Agent,
 Advertising
  Equity Incentive Plans
  Stock-Based Compensation
 Share-Based Payment
 Page 8




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Accounting for Stock Issued to Employees
  Accounting for Stock-based Compensation
 Transition and Disclosure (as amended)
   Three months endedMarch 31, 2005Net income, as reported:
    
    $
    179Add: Employee stock-based compensation expense included in
reported net income (loss), net of tax
    
    
    (23
    )Less: Total employee stock-based compensation expense
determined under fair value, net of tax
    
    
    (85
    )Pro forma net income
    
    $
    71Net income per shareAs reported  basic
    
    $
    0.01As reported  diluted
    
    $
    0.01Pro forma  basic
    
    $
    0.00Pro forma  diluted
    
    $
    0.00
  Page 9




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##### Table of Contents



Three months ended March 31,2005
    
    2006Expected lives (in years)
    
    
    5
    
    
    
    7Risk free interest rates
    
    
    3.59 - 4.01
    %
    
    
    4.32 - 4.57
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    85
    %
    
    
    75
    %
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (in years)
    
    
    ValueOutstanding at January 1, 2006
    
    
    2,112
    
    
    $
    5.03Granted
    
    
    48
    
    
    
    9.08Exercised
    
    
    (57
    )
    
    
    4.76Cancelled
    
    
    (25
    )
    
    
    5.45Outstanding at March 31, 2006
    
    
    2,078
    
    
    
    5.12
    
    
    
    7.17
    
    
    $
    10,445Vested and expected to vest at March 31, 2006
    
    
    2,067
    
    
    
    5.10
    
    
    
    7.14
    
    
    $
    10,129Options exercisable at March 31, 2006
    
    
    1,987
    
    
    
    5.07
    
    
    
    7.09
    
    
    $
    10,091
   Page 10




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##### Table of Contents



Weighted AverageGrant-DateShares
    
    
    Fair ValueUnvested at January 1, 2006
    
    
    
    
    
    $
    Granted
    
    
    3
    
    
    
    8.20Unvested at March 31, 2006
    
    
    3
    
    
    
    8.20
 Restricted Stock Grant
 th
 Net Income (Loss) Per Share
   Three months ended March 31,2005
    
    
    2006Numerator:Net income (loss)
    
    $
    179
    
    
    $
    (132
    )Denominator:Weighted-average shares
    
    
    16,939
    
    
    
    17,261Effect of dilutive securities:Dilutive common stock equivalents
    
    
    1,330
    
    
    
    Dilutive potential common shares
    
    
    1,330
    
    
    
    18,269
    
    
    
    17,261Net income (loss) per share:Basic
    
    $
    0.01
    
    
    $
    (0.01
    )Diluted
    
    $
    0.01
    
    
    $
    (0.01
    )
 Page 11




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##### Table of Contents



Three months ended March 31,2005
    
    
    2006Common stock options and warrants
    
    
    846
    
    
    
    2,078Common stock subject to repurchase
    
    
    2
    
    
    
    2848
    
    
    
    2,080
 Segment Reporting
 Disclosures About Segments of
an Enterprise and Related Information,
 Event Marketing
 Revenue Recognition Reporting Revenue Gross as a Principal versus Net as an Agent, Income
Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred
  Variable Interest Entities
 Consolidation of Variable Interest Entities, primary beneficiary
  Page 12




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Recent Accounting Pronouncements
 Accounting Changes and Error
Corrections, Accounting Changes, Reporting
Accounting Changes in Interim Financial Statements,
 Note 3  Business Combinations, Goodwill and Intangible Assets
 RSVP Productions Inc. Acquisition
   Cash
    
    $
    1,289Other current assets
    
    
    4,987Property and equipment, net
    
    
    116Definite lived intangible assets:Customer relationships
    
    
    1,810Indefinite lived intangible assets:Tradenames
    
    
    940Goodwill
    
    
    3,958Accounts payable and other current liabilities
    
    
    (60
    )Deferred revenue
    
    
    (6,395
    )Total preliminary purchase price
    
    $
    6,645
  Three months ended March 31,2005
    
    
    2006(Unaudited)Revenue
    
    $
    10,368
    
    
    $
    19,288Net income (loss)
    
    $
    322
    
    
    $
    (632
    )Basic income (loss) per share
    
    $
    0.02
    
    
    $
    (0.04
    )
 Goodwill
  Page 13




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##### Table of Contents



December 31,
    
    
    Goodwill
    
    
    
    
    
    
    March 31,Acquisition
    
    2005
    
    
    Acquired
    
    
    Adjustments
    
    
    2006Acquisitions prior to December 31, 2004
    
    $
    3,403
    
    
    $
    
    
    
    $
    
    
    
    $
    3,403LPI
    
    
    25,296
    
    
    
    
    
    
    
    (76
    )
    
    
    25,220RSVP
    
    
    
    
    
    
    3,958
    
    
    
    
    
    
    
    3,958$
    28,699
    
    
    $
    3,958
    
    
    $
    (76
    )
    
    $
    32,581
   Intangible Assets
  December 31, 2005
    
    
    March 31, 2006Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Carrrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(In thousands)
    
    
    
    
    
    
    
    
    
    
    (In thousands)Other intangible assets:Customer lists and user bases
    
    $
    8,678
    
    
    $
    3,469
    
    
    $
    5,209
    
    
    $
    10,488
    
    
    $
    3,794
    
    
    $
    6,694Tradenames
    
    
    8,040
    
    
    
    2,340
    
    
    
    5,700
    
    
    
    8,980
    
    
    
    2,340
    
    
    
    6,640Other intangibles
    
    
    726
    
    
    
    726
    
    
    
    
    
    
    
    726
    
    
    
    726
    
    
    
    $
    17,444
    
    
    $
    6,535
    
    
    $
    10,909
    
    
    $
    20,194
    
    
    $
    6,860
    
    
    $
    13,334
   Fiscal Years:
 2006 (remaining nine months)
    
    $
    1,2032007
    
    
    1,4232008
    
    
    1,3952009
    
    
    1,2572010
    
    
    1,093Thereafter
    
    
    323$
    6,694
 Page 14




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##### Table of Contents



Note 4  Other Balance Sheet Components
 December 31,
    
    
    March 31,2005
    
    
    2006(In thousands)Accounts receivable:Trade accounts receivable
    
    $
    7,033
    
    
    $
    8,503Less: Allowance for doubtful accounts
    
    
    (259
    )
    
    
    (472
    )Less: Provision for returns
    
    
    (744
    )
    
    
    (1,120
    )$
    6,030
    
    
    $
    6,911
  December 31,
    
    
    March 31,2005
    
    
    2006(In thousands)Inventory:Finished goods available for sale
    
    $
    954
    
    
    $
    1,052Materials for future publications
    
    
    395
    
    
    
    436Total
    
    $
    1,349
    
    
    $
    1,488
 December 31,
    
    
    March 31,2005
    
    
    2006(In thousands)Prepaid expenses and other current assets:Prepaid expenses and other current assets
    
    $
    2,328
    
    
    $
    3,834Deposits on leased voyages
    
    
    
    
    
    
    2,618Receivable from landlord for tenant improvement allowance, current portion (Note 2)
    
    
    243
    
    
    
    $
    2,571
    
    
    $
    6,452
 December 31,
    
    
    March 31,2005
    
    
    2006(In thousands)Property and equipment:Computer and network equipment
    
    $
    7,879
    
    
    $
    8,457Furniture and fixtures
    
    
    1,396
    
    
    
    1,422Computer software
    
    
    2,523
    
    
    
    2,587Leasehold improvements
    
    
    1,555
    
    
    
    1,580Capitalized software and website development costs
    
    
    4,783
    
    
    
    5,05518,136
    
    
    
    19,101Less: Accumulated depreciation and amortization
    
    
    (9,969
    )
    
    
    (10,808
    )$
    8,167
    
    
    $
    8,293
  December 31,
    
    
    March 31,2005
    
    
    2006(In thousands)Other assets:Other assets
    
    $
    921
    
    
    $
    1,160Interest on note receivable from stockholder (Note 5)
    
    
    231
    
    
    
    $
    1,152
    
    
    $
    1,160
 Page 15




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December 31,
    
    
    March 31,2005
    
    
    2006(In thousands)Accrued liabilities:Accrued payroll and related liabilities
    
    $
    989
    
    
    $
    1,003Other accrued liabilities
    
    
    1,761
    
    
    
    1,690$
    2,750
    
    
    $
    2,693
 Note 5  Related Party Transaction
  Note 6  Notes Payable
    Note 7 Commitments and Contingencies
 Deposit Commitments
  Contingencies
   Page  16




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##### Table of Contents




 Note 8  Subsequent Event
  Page  17




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##### 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, 2005.
 Overview
 The Advocate Out
 Out The Advocate Out The Advocate,
    Results of Operations
  Page  18




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##### Table of Contents



Three months ended March 31,2005
    
    
    2006(As a percentage of total revenue; unaudited)Consolidated statements of operations data:Revenue:Advertising services
    
    
    20.9
    %
    
    
    30.4
    %Subscription services
    
    
    72.8
    
    
    
    35.7Transaction services
    
    
    6.3
    
    
    
    33.9Total revenue
    
    
    100.0
    
    
    
    100.0Operating costs and expenses:Cost of revenue
    
    
    31.9
    
    
    
    53.7Sales and marketing
    
    
    36.8
    
    
    
    22.4General and administrative
    
    
    18.8
    
    
    
    17.5Depreciation and amortization
    
    
    12.3
    
    
    
    7.0Total operating costs and expenses
    
    
    99.8
    
    
    
    100.6Income (loss) from operations
    
    
    0.2
    
    
    
    (0.6
    )Equity in net loss of unconsolidated affiliate
    
    
    (0.1
    )
    
    
    Interest expense
    
    
    (0.6
    )
    
    
    (1.1
    )Other income, net
    
    
    3.6
    
    
    
    0.9Income (loss) before income taxes
    
    
    3.1
    
    
    
    (0.8
    )Provision for income taxes
    
    
    (0.4
    )
    
    
    Minority interest in loss of consolidated
affiliate
    
    
    
    
    
    
    Net income (loss)
    
    
    2.7
    %
    
    
    (0.8
    )%
 Summary
   gratis
   Page  19




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##### Table of Contents



Revenue
 Advertising Services.
  Subscription Services. gratis
  Transaction Services.
  Operating Costs and Expenses
 Cost of Revenue.
  Sales and Marketing.
  Page  20




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General
and Administrative.
  Depreciation and Amortization.
  Other Income and Expenses
 Equity in Net Loss of Unconsolidated Affiliate.
 Interest Expense.
 Other Income, Net.
 Liquidity and Capital Resources
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Off-balance Sheet Liabilities
  Other Contractual Commitments
  Payments Due by PeriodRemainder ofTotal
    
    
    2006
    
    
    2007-2008
    
    
    2009-2010
    
    
    2011 & After(In thousands)Contractual obligations:Capital lease obligations
    
    $
    989
    
    
    $
    343
    
    
    $
    524
    
    
    $
    120
    
    
    $
    2Operating leases
    
    
    16,043
    
    
    
    2,044
    
    
    
    5,272
    
    
    
    5,267
    
    
    
    3,460Purchase obligations
    
    
    308
    
    
    
    308
    
    
    
    
    
    
    
    
    
    
    
    Deposit commitments
    
    
    17,683
    
    
    
    7,730
    
    
    
    9,953
    
    
    
    
    
    
    
    Notes payable
    
    
    8,177
    
    
    
    694
    
    
    
    7,483
    
    
    
    
    
    
    
    Total contractual obligations:
    
    $
    43,200
    
    
    $
    11,119
    
    
    $
    23,232
    
    
    $
    5,387
    
    
    $
    3,462
 Capital Lease Obligations.
 Operating Leases.
 Purchase Obligations.
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Deposit Commitments.
 Notes payable.
   Critical Accounting Policies
    Stock-based compensation. Share-Based Payment Accounting for Stock Issued to Employees
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Seasonality and Inflation
   Recent Accounting Pronouncements
 Accounting Changes and Error
Corrections, Accounting Changes, Reporting
Accounting Changes in Interim Financial Statements,
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
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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 sustain profitability, our financial
condition and stock price could suffer.
  If our efforts to attract and retain subscribers are not successful, our revenue will decrease.
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Our limited operating history makes it difficult to evaluate our business.
  We expect our operating results to fluctuate, which may lead to volatility in our stock price.
  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;
    
    the potential impairment of relationships with and difficulty in attracting and retaining employees of the
acquired companies or
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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.
  If we do not continue to attract and retain qualified personnel, we may not be able to expand our
business.
  Our success depends, in part, upon the growth of Internet advertising and upon our ability to
accurately predict the cost of customized campaigns.
   If advertisers do not find the LGBT market to be economically profitable, our business will be
harmed.
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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;
    
    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 e-mail message to an
address on that states registry if the e-mail 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
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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 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 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 Act because a portion of one of the businesses
we acquired in the LPI acquisition is primarily involved
in production of adult content. Enforcement of these
regulations has been stayed pending resolution of a legal
challenge to their constitutionality on the grounds that
the regulations exceed the DOJs statutory authority and
violate First Amendment and privacy rights, among others.
If the legal challenge is unsuccessful, we will be subject
to significant and burdensome recordkeeping compliance
requirements and/or we will have to evaluate and implement
additional registration and recordkeeping processes and
procedures, each of which would result in additional
expenses to us. Further, if our members and subscribers
feel these additional registration and recordkeeping
processes and procedures are too burdensome, this may
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.
  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.
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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.
    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,
 We may need additional capital and may not be able to raise additional funds on favorable terms or
at all, which could increase our costs, limit our ability to grow and dilute the ownership
interests of existing stockholders.
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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 and proposed 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.
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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.
   Repurchases of Equity Securities.
 (c) Total Numberof
    
    (d) Maximum NumberShares Purchased
    
    or Approximate Dollaras
    
    Value) of Shares that(a) Total
    
    (b) Average
    
    Part of Publicly
    
    MayNumber of
    
    Price Paid
    
    Announced Plans
    
    Yet Be PurchasedShares
    
    per
    
    or
    
    Under thePeriod
    
    Purchased (1)
    
    Share
    
    Programs
    
    Plans or ProgramsJanuary 1,
2006  January 31,
2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    February 1, 2006 
February 28, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    March 1, 2006 
March 31, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
 
 (1)
    
    PlanetOut does not have any publicly announced plans or
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Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits
 (a) Exhibits
 ExhibitNumber
    
    Description of Documents2.1
    
    Asset Purchase Agreement dated January 19, 2006, by and among: RSVP Productions,
Inc., a Minnesota corporation; PlanetOut Inc., a Delaware corporation;
Shuttlecraft Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of PlanetOut; and Paul Figlmiller, an individual (filed as Exhibit 2.1
to our Current Report on Form 8-K, File No. 000-50879, filed on January 24, 2006,
and incorporated herein by reference). Certain schedules (and similar
attachments) to Exhibit 2.1 have been omitted in accordance with Item 601(b)(2)
of Regulation S-K. PlanetOut will furnish a supplemental copy of any omitted
schedule (or similar attachment) to the Commission upon request.3.1
    
    Amended and Restated Certificate of Incorporation, as currently in effect (filed
as Exhibit 3.3 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).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).10.22
    
    Loan and Security Agreement dated January 19, 2006, by and among RSVP
Productions, Inc., a Minnesota corporation, and PlanetOut Inc., a Delaware
corporation (filed as Exhibit 2.2 to our Current Report on Form 8-K, File No.
000-50879, filed on January 24, 2006, and incorporated herein by reference).10.23
    
    Employment Agreement, dated as of February 28, 2006 and effective February 28,
2006, by and among PlanetOut Inc. and Daniel J. Miller (filed as Exhibit 99.1 to
our Current Report on Form 8-K, File No. 000-50879, filed on March 6, 2006 and
incorporated herein by reference).10.24
    
    Amended and Restated Employment Agreement dated as of April 26, 2004 by and
between Mark D. Elderkin and PlanetOut Inc. (filed as Exhibit 10.25 to our
Registration Statement on Form S-1, File No. 333-114988, initially filed on April
29, 2004, and amended as described in Exhibit 99.1 to our Current Report on Form
8-K, File No. 000-50879, filed on January 31, 2006, each of which is incorporated
herein by reference).
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ExhibitNumber
    
    Description of Documents10.25
    
    Outside Director Compensation Program (a description of which is filed as Exhibit
99.1 to our Current Report on Form 8-K, File No. 000-50879, filed on December 23,
2005, and amended as described in Exhibit 99.1 to our Current Report on Form 8-K,
File No. 000-50879, filed January 31, 2006, each of which is incorporated herein
by reference).12.1
    
    Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certificate 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
    
    Certificate 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
    
    Certificate of Chief Executive Officer pursuant to Section 18 U.S.C section 1350.32.2
    
    Certificate of Chief Financial Officer pursuant to Section 18 U.S.C. section 1350.
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SIGNATURES
  PLANETOUT INC.Date: May 10, 2006By:
    
    /s/ DANIEL J. MILLER

Daniel J. MillerSenior Vice President, Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
 ExhibitNumber
    
    Description of Documents2.1
    
    Asset Purchase Agreement dated January 19, 2006, by and among: RSVP Productions,
Inc., a Minnesota corporation; PlanetOut Inc., a Delaware corporation;
Shuttlecraft Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of PlanetOut; and Paul Figlmiller, an individual (filed as Exhibit 2.1
to our Current Report on Form 8-K, File No. 000-50879, filed on January 24, 2006,
and incorporated herein by reference). Certain schedules (and similar
attachments) to Exhibit 2.1 have been omitted in accordance with Item 601(b)(2)
of Regulation S-K. PlanetOut will furnish a supplemental copy of any omitted
schedule (or similar attachment) to the Commission upon request.3.1
    
    Amended and Restated Certificate of Incorporation, as currently in effect (filed
as Exhibit 3.3 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).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).10.22
    
    Loan and Security Agreement dated January 19, 2006, by and among RSVP
Productions, Inc., a Minnesota corporation, and PlanetOut Inc., a Delaware
corporation (filed as Exhibit 2.2 to our Current Report on Form 8-K, File No.
000-50879, filed on January 24, 2006, and incorporated herein by reference).10.23
    
    Employment Agreement, dated as of February 28, 2006 and effective February 28,
2006, by and among PlanetOut Inc. and Daniel J. Miller (filed as Exhibit 99.1 to
our Current Report on Form 8-K, File No. 000-50879, filed on March 6, 2006 and
incorporated herein by reference).10.24
    
    Amended and Restated Employment Agreement dated as of April 26, 2004 by and
between Mark D. Elderkin and PlanetOut Inc. (filed as Exhibit 10.25 to our
Registration Statement on Form S-1, File No. 333-114988, initially filed on April
29, 2004, and amended as described in Exhibit 99.1 to our Current Report on Form
8-K, File No. 000-50879, filed on January 31, 2006, each of which is incorporated
herein by reference).10.25
    
    Outside Director Compensation Program (a description of which is filed as Exhibit
99.1 to our Current Report on Form 8-K, File No. 000-50879, filed on December 23,
2005, and amended as described in Exhibit 99.1 to our Current Report on Form 8-K,
File No. 000-50879, filed January 31, 2006, each of which is incorporated herein
by reference).12.1
    
    Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certificate 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
    
    Certificate 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
    
    Certificate of Chief Executive Officer pursuant to Section 18 U.S.C section 1350.32.2
    
    Certificate of Chief Financial Officer pursuant to Section 18 U.S.C. section 1350.
 Page  37