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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2005                                                 
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-50879


PLANETOUT INC.


(Exact name of registrant as specified in its charter)


|                                                                                  |  |                                         
|--------------------------------------------------------------------------------- |  | ----------------------------------------
|DELAWARE                                                                          |  | 94-3391368                              
|(State or other jurisdiction of
    Incorporation or organization)                |  | (I.R.S. Employer
    Identification No.)
|                                                                                 
|1355 Sansome Street,
    San Francisco CA(Address of principal executive offices) |  | 94111(Zip Code)                         

(415) 834-6500


(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the
Act:


None


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock $0.001 par value


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


10-K










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##### 










PlanetOut Inc.


Form 10-K


For The Fiscal Year Ended December 31, 2005


Table of Contents


|             |  |                                                                                                                                  |  |     
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----
|             |  |                                                                                                                                  |  | Page
|             |  |                                                                                                                                  |  |     
|PART I      
|Item 1.      |  | Business                                                                                                                         |  | 4   
|Item 1A.     |  | Risk Factors                                                                                                                     |  | 17  
|Item 1B.     |  | Unresolved Staff Comments                                                                                                        |  | 26  
|Item 2.      |  | Properties                                                                                                                       |  | 26  
|Item 3.      |  | Legal Proceedings                                                                                                                |  | 27  
|Item 4.      |  | Submission of Matters to a Vote of Security
    Holders                                                                          |  | 27  
|PART II     
|Item 5.      |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Purchases of
    Equity Securites |  | 27  
|Item 6.      |  | Selected Financial Data                                                                                                          |  | 29  
|Item 7.      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                        |  | 30  
|Item 7A.     |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                                   |  | 44  
|Item 8.      |  | Financial Statements and Supplementary
    Data                                                                                  |  | 45  
|Item 9.      |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosures                                        |  | 81  
|Item 9A.     |  | Control and Procedures                                                                                                           |  | 81  
|Item 9B.     |  | Other Information                                                                                                                |  | 82  
|PART III    
|Item 10.     |  | Directors and Executive Officers of the
    Registrant                                                                           |  | 82  
|Item 11.     |  | Executive Compensation                                                                                                           |  | 82  
|Item 12.     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                               |  | 82  
|Item 13.     |  | Certain Relationships and Related
    Transactions                                                                               |  | 83  
|Item 14.     |  | Principal Accounting Fees and Services                                                                                           |  | 83  
|PART IV     
|Item 15.     |  | Exhibits and Financial Statements
    Schedules                                                                                  |  | 83  
|Signatures   |  | 86                                                                                                                              
|EXHIBIT 21.1 |  |                                                                                                                                 
|EXHIBIT 23.1 |  |                                                                                                                                 
|EXHIBIT 23.2 |  |                                                                                                                                 
|EXHIBIT 31.1 |  |                                                                                                                                 
|EXHIBIT 31.2 |  |                                                                                                                                 
|EXHIBIT 32.1 |  |                                                                                                                                 
|EXHIBIT 32.2 |  |                                                                                                                                 
|EXHIBIT 21.1
|EXHIBIT 23.1
|EXHIBIT 23.2
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1
|EXHIBIT 32.2







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Special Note Regarding Forward-Looking Statements


10-K,


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PART I







|        |         
|------- | --------
|Item 1. | Business

Company Overview


The Advocate, Out, The Out Traveler, HIVPlus,


run-of e-mails,


e-mail,


member-to e-mail


gratis


Out The
Advocate. Out The Advocate,


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Industry Background




Out The Advocate Will & Grace Queer as Folk Queer Eye for the Straight Guy




| |                                     
| | ------------------------------------
| | LGBT Demographics and Media Coverage

make-up






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| |                     
| | --------------------
| | Advertising Services









| |                      
| | ---------------------
| | Subscription Services









| |                     
| | --------------------
| | Transaction Services





6



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Competitive Strengths




Strong Community Affinity. word-of


Critical Mass. Out The
Advocate


Diversified Revenue Streams.


Scalable Business Model.


Compelling Features.


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Growth Strategy




Growing Our User Base Across Multiple Properties.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cross-Promote Products and Services. We intend to build
    on the critical mass that we have developed online through the
    Gay.com and PlanetOut.com websites and the print leadership that
    we have acquired through The Advocateand Outmagazines by cross-promoting our products and services to
    the LGBT community. Just as we have traditionally promoted our
    various advertising, subscription and transaction services
    through our multiple websites and print properties, we intend to
    expand this multi-platform, cross-promotional strategy to
    encompass the various LPI and RSVP properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Increased Marketing. In addition to cross-promotions
    through our own properties, we plan to expand our multi-channel
    marketing programs to help drive the growth of our visitors,
    members, subscribers, and customers. We plan to continue
    marketing directly to consumers through targeted online
    advertising, keyword buys and affiliate programs, as well as
    through print advertising and advertising in gay and
    lesbian-identified neighborhoods and other high-traffic
    neighborhoods that attract a gay audience. We also plan to
    increase our visibility through sponsorship of, and
    participation at, community events, such as the Dinah Shore
    Weekend in Palm Springs, LGBT Pride celebration events, and the
    2006 Gay Games in Chicago.                                                                                                                                                                                                                                                                                                                                                               
|
| |  | New Products and Services. We intend to offer new
    products and services through our multi-platform network. For
    example, we plan to launch a new family of products and services
    service targeted to lesbians. We already serve a large base of
    women through the PlanetOut.com and Gay.com websites and through
    our various other media properties. We expect that this new
    service will capitalize on this foundation and offer a new
    opportunity for lesbians to come together in an environment
    specifically designed for them. We also intend to offer new and
    enhanced social networking features through our existing
    services, such as blogs, online groups, and new and expanded
    travel itineraries. By enhancing the functionality of our
    offerings and expanding our products and services, we believe we
    can enhance the value of our offerings, attract new users and
    increase our revenue.                                                                                                                                                                                                 
|
| |  | International Expansion. With sales from our
    international subsidiaries accounting for approximately 3% of
    our total revenue in 2005, we believe international expansion
    presents a significant growth opportunity. One initiative
    intended to grow our long-term international revenue was the
    October 2005 launch of the international gratiscampaign.
    As part of this campaign, during an introductory period, users
    outside of the United States and Canada are able to access all
    of our online premium subscription services free of charge.
    While this campaign has increased our marketing expenses and
    reduced the short-term growth in our online premium subscription
    services revenue, it is intended to grow critical mass in
    international markets and lay the foundation for future
    international revenue growth from our family of media and
    entertainment properties. To support the conversion of free
    users to paid subscribers, we plan to roll out multi-currency
    payment options that we believe will contribute to growth in our
    international online subscriber base.

Capitalizing on Advertising Growth and Relationships. e-mail,


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Leveraging and Growing Our Subscriber Base.


Leveraging Leadership and Financial Resources into Other LGBT
Opportunities.


Advertising Services








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Focused Advertising. We believe we deliver access to the
    largest audience of self-identified gay and lesbian people in
    the world. Our advertising programs allow both large national
    and international advertisers as well as smaller, local
    advertisers to reach the LGBT audience in a cost-effective
    manner. Unlike other vehicles that are just
    gay-themed, our media properties are specifically
    targeted to the unique needs and interests of the gay and
    lesbian audience, a group with demographic characteristics that
    we believe are highly attractive to advertisers.
|
| |  | Leading LGBT Media Outlets. In addition to the critical
    mass that we have developed online through the Gay.com, Out.com,
    Advocate.com, and PlanetOut.com websites, we also publish
    leading LGBT print publications, including The Advocateand Outmagazines. This combination of leading online
    and offline media properties is unique in the North America gay
    and lesbian market.                                                                                                                                                                                                                
|
| |  | Coordinated, Multi-Platform Campaigns. We are able to
    leverage our ownership of leading LGBT media properties to offer
    advertisers coordinated, multi-platform campaigns. Recently, we
    added to our                                                                                                                                                                                                                                                                                                                                                                                                       

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | advertising networks new online and offline vehicles, including
    365gay.com, NBC Universals Outzonetv.com website from
    Bravo, and sponsorship of the Gay Games in Chicago and Dinah
    Shore Weekend.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Targeted Campaigns. In addition to offering advertisers
    the opportunity to reach the broader LGBT audience across
    multiple platforms, we offer the opportunity to more closely
    target specific audiences. For example, advertisers have the
    potential to reach our entire online user base with
    run-of-site
    advertisements or to target only those members who share certain
    common attributes such as age, gender or geographic location. In
    2005, we added the ability to target users based on their online
    behaviors. By dividing our online content offerings into topic
    sections within channels, we provide our advertisers with the
    ability to target their marketing efforts further, by sponsoring
    topic sections or running individual advertisements in channels
    specifically relevant to their particular products and services
    or brand strategy. Similarly, through the various LPI
    properties, we offer advertisers the ability to target members
    with particular interests such as politics and current events,
    fashion and entertainment, travel, or specific health issues.
|
| |  | Research and Analysis. We engage third parties to conduct
    independent research on member panels assembled from our online
    membership base regarding the effectiveness of specific
    campaigns as well as other matters of interest to our
    advertisers. Campaign studies examine the effect the campaign
    had on brand awareness, brand attributes, message association,
    brand favorability, purchase intent and advertisement recall and
    can include an analysis of the research and recommendations for
    future advertising campaigns. In addition to benefiting the
    advertiser, this type of research helps educate us on how to
    more effectively position and manage campaigns for our
    advertisers.                                                                                                                                                                                                                                                                                                                                                                                                                    









|                              |  |                    |    |  
|----------------------------- |  | ------------------ | -- | -
|                              |  | Percentage of      |   
|                              |  | Global Advertising |   
|Category                      |  | Revenue in 2005    |   
|                              |  |                    |   
|Healthcare & Pharmaceutical   |  |                    | 20 | %
|Travel                        |  |                    | 16 | %
|Entertainment                 |  |                    | 14 | %
|Automotive                    |  |                    | 11 | %
|Finance                       |  |                    | 8  | %
|Telecommunications & Internet |  |                    | 7  | %
|Consumer Packaged Goods       |  |                    | 6  | %
|Electronics                   |  |                    | 5  | %
|Food/ Beverages               |  |                    | 5  | %
|Retail/ Fashion               |  |                    | 4  | %

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Subscription Services


Out The Advocate




The
Advocate, Cargo, Details, Mens Fitness Out








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Gay.com and PlanetOut.com Premium Membership Service
Operating Metrics (excluding free trial promotions)


|                  |  |      |         |   |      |  |         |    |  |  |         |   |  |    |         |   |    |  |         |    |  |  |         |   |  |    |         |   |    |  |         |   |  |  |         |   |  |  |         |  
|----------------- |  | ---- | ------- | - | ---- |  | ------- | -- |  |  | ------- | - |  | -- | ------- | - | -- |  | ------- | -- |  |  | ------- | - |  | -- | ------- | - | -- |  | ------- | - |  |  | ------- | - |  |  | ------- | -
|                  |  | 2004 |         |   | 2005 | 
|                  |  |      |         |   |      | 
|                  |  | 1Q   |         |   | 2Q   |  |         | 3Q |  |  | 4Q      |   |  | FY |         |   | 1Q |  |         | 2Q |  |  | 3Q      |   |  | 4Q |         |   | FY | 
|                  |  |      |         |   |      |  |         |    |  |  |         |   |  |    |         |   |    |  |         |    |  |  |         |   |  |    |         |   |    | 
|Total Subscribers |  |      | 105,179 |   |      |  | 110,598 |    |  |  | 118,392 |   |  |    | 127,527 |   |    |  | 127,527 |    |  |  | 137,500 |   |  |    | 145,114 |   |    |  | 153,793 |   |  |  | 157,360 |   |  |  | 157,360 |  
|Gross Additions   |  |      | 42,635  |   |      |  | 37,582  |    |  |  | 41,082  |   |  |    | 44,219  |   |    |  | 165,518 |    |  |  | 44,245  |   |  |    | 41,370  |   |    |  | 43,967  |   |  |  | 34,908  |   |  |  | 164,490 |  
|Total Churn       |  |      | 35,901  |   |      |  | 32,163  |    |  |  | 33,288  |   |  |    | 35,084  |   |    |  | 136,436 |    |  |  | 34,272  |   |  |    | 33,756  |   |    |  | 35,288  |   |  |  | 31,341  |   |  |  | 134,657 |  
|Churn Rate        |  |      | 11.8    | % |      |  | 9.9     | %  |  |  | 9.7     | % |  |    | 9.5     | % |    |  | 10.1    | %  |  |  | 8.6     | % |  |    | 8.0     | % |    |  | 7.9     | % |  |  | 6.7     | % |  |  | 7.9     | %
|Net Additions     |  |      | 6,734   |   |      |  | 5,419   |    |  |  | 7,794   |   |  |    | 9,135   |   |    |  | 29,082  |    |  |  | 9,973   |   |  |    | 7,614   |   |    |  | 8,679   |   |  |  | 3,567   |   |  |  | 29,833  |  





| |   |                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Total Subscribers:members with an active, paid
    subscription plan, excluding paid trial subscribers, at the end
    of the period.                                                                                                                                                                                                         
|
| |  | Gross Additions:members who initiate a subscription
    during the period, excluding paid trial subscriptions. Gross
    Additions during a period equals Net Additions plus Total Churn
    during that period.                                                                                                                              
|
| |  | Total Churn:total subscription cancellations during the
    period, including cancellations of paid promotional
    subscriptions, but excluding cancellations of paid 3- and 7-day
    trial subscriptions and free promotional subscriptions.
    Subscription cancellations include subscriptions cancelled due
    to failed credit cards.
|
| |  | Churn Rate:Total Churn divided by the average of the
    Total Subscribers measured at the beginning and end of the
    period, divided by the number of months in the period.                                                                                                                                                                
|
| |  | Net Additions:Total Subscribers at the end of the period
    minus the Total Subscribers at the beginning of the period.                                                                                                                                                                                                                      











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Out The Advocate Out Out The
Advocate


word-of e-mail


Transaction Services


e-commerce Queer as Folk The L Word soon-to Brokeback Mountain on-site




Product Development and Technology


e-mailing


e-commerce e-mail,




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on-site


International Operations










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gratis




Competition






Intellectual Property




Employees




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Executive Officers




|                   |  |     |    |  |          |                                                                               
|------------------ |  | --- | -- |  | -------- | ------------------------------------------------------------------------------
|Name               |  | Age |    |  | Position
|                   |  |     |    |  |         
|Executive officers |  |     |    |  |          |                                                                               
|Lowell R. Selvin   |  |     | 46 |  |          | Chairman of the Board and Chief Executive Officer                             
|Jeffrey T. Soukup  |  |     | 40 |  |          | Chief Operating Officer, Executive Vice President, Treasurer and
    Secretary
|Mark D. Elderkin   |  |     | 42 |  |          | President                                                                     
|Daniel J. Miller   |  |     | 39 |  |          | Chief Financial Officer, Senior Vice President                                
|Donna L. Gibbs     |  |     | 45 |  |          | Senior Vice President, Consumer Marketing and Commerce                        
|Peter Kretzman     |  |     | 49 |  |          | Chief Technology Officer and Senior Vice President                            

Lowell R. Selvin


Jeffrey T. Soukup business-to


Mark D. Elderkin


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Daniel J. Miller


Donna L. Gibbs e-commerce


Peter Kretzman e-business


Available Information


http://www.planetoutinc.com


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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.


word-of






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.




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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
    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;                                                                                           

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.






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If advertisers do not find the LGBT market to be economically
profitable, our business will be harmed.




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.






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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.




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.






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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
    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

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.




24



---



##### Table of Contents





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 is lower revenues and profit margins.


The Advocate,
Out, The Out Traveler HIVPlus,


25



---



##### Table of Contents



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.




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.




26



---



##### Table of Contents





Our stock price may be volatile and you may lose all or a
part of your investment.




e-commerce


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 1B. | Unresolved Staff Comments








|        |           
|------- | ----------
|Item 2. | Properties



27



---



##### Table of Contents












|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings









|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information




|     |                |      |   |       |     |  |   |      | 
|---- | -------------- | ---- | - | ----- | --- |  | - | ---- | 
|     |                | High |   |       | Low | 
|     |                |      |   |       |     | 
|2004 |                |      |   |       |     |  |   |     
|     | Fourth Quarter |      | $ | 14.26 |     |  | $ | 8.45 | 
|2005 |                |      |   |       |     |  |   |     
|     | First Quarter  |      | $ | 13.65 |     |  | $ | 8.10 | 
|     | Second Quarter |      |   | 9.77  |     |  |   | 6.12 | 
|     | Third Quarter  |      |   | 10.39 |     |  |   | 7.31 | 
|     | Fourth Quarter |      |   | 8.99  |     |  |   | 6.83 | 





28



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##### Table of Contents







Unregistered Sales of Equity Securities and Use of
Proceeds


S-1 333-114988)






| |                                 
| | --------------------------------
| | Repurchases of Equity Securities

|                                     |  |              |   |  |            |                 |   |                     |                  |  |                     |  |  |  |   | 
|------------------------------------ |  | ------------ | - |  | ---------- | --------------- | - | ------------------- | ---------------- |  | ------------------- |  |  |  | - | 
|                                     |  |              |   |  |            |                 |   | (d)                 |                 
|                                     |  |              |   |  |            | (c)             |   |                     | Maximum Number   | 
|                                     |  |              |   |  |            | Total Number of |   |                     | (or Approximated | 
|                                     |  | (a)          |   |  | (b)        |                 |   | Shares Purchased    |                  |  | Dollar Value) of    | 
|                                     |  | Total Number |   |  | Average    |                 |   | as Part of Publicly |                  |  | Shares that May Yet | 
|                                     |  | of Shares    |   |  | Price Paid |                 |   | Announced Plans     |                  |  | Be Purchased Under  | 
|Period                               |  | Purchased(1) |   |  | per Share  |                 |   | or Programs         |                  |  | the Plan or Program | 
|                                     |  |              |   |  |            |                 |   |                     |                  |  |                     | 
|October 1, 2005 - October 31, 2005   |  |              |  |  |            |                 |  |                     |                  |  |                    |  |  |  |  | 
|November 1, 2005 - November 30, 2005 |  |              |  |  |            |                 |  |                     |                  |  |                    |  |  |  |  | 
|December 1, 2005 - December 31, 2005 |  |              |  |  |            |                 |  |                     |                  |  |                    |  |  |  |  | 






|    |                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Any of the repurchases were pursuant to contractual rights of
    PlanetOut to repurchase shares of its capital stock from
    employees in connection with the termination of employment.
    PlanetOut does not have any publicly announced plans or programs
    to repurchase shares of its common stock.

29



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

10-K. 10-K. 10-K.


|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |        |        |        |   |       |        |        | 
|-------------------------------------------------------------------------------------------- | ----------------------------- | ---------------------------------------- | ------- | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ----- | ------ | ------ | 
|                                                                                             |                               | Year Ended December 31,                  |        
|                                                                                             |                               |                                          |        
|                                                                                             |                               | 2001(1)                                  |         |       | 2002   |   |        | 2003  |        |   | 2004   |        |        | 2005 |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|                                                                                             |                               | (In thousands, except per share amounts) |        
|Revenue:                                                                                     |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |        |        |        |   |       |       
|                                                                                             | Advertising services          |                                          | $       | 3,602 |        |   | $      | 4,227 |        |   | $      | 4,626  |        |      | $      | 6,541  |        |   | $     | 11,724 |       
|                                                                                             | Subscription services         |                                          |         | 2,459 |        |   |        | 8,030 |        |   |        | 12,727 |        |      |        | 16,775 |        |   |       | 21,135 |       
|                                                                                             | Transaction services          |                                          |         | 1,148 |        |   |        | 1,700 |        |   |        | 1,746  |        |      |        | 1,646  |        |   |       | 2,732  |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|                                                                                             |                               | Total revenue                            |         |       | 7,209  |   |        |       | 13,957 |   |        |        | 19,099 |      |        |        | 24,962 |   |       |        | 35,591 | 
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|Operating costs and expenses:                                                                |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |        |        |        |   |       |       
|                                                                                             | Cost of revenue               |                                          |         | 7,034 |        |   |        | 6,056 |        |   |        | 6,194  |        |      |        | 7,503  |        |   |       | 11,787 |       
|                                                                                             | Sales and marketing           |                                          |         | 6,183 |        |   |        | 5,622 |        |   |        | 6,135  |        |      |        | 8,250  |        |   |       | 10,834 |       
|                                                                                             | General and administrative(2) |                                          |         | 3,397 |        |   |        | 6,730 |        |   |        | 3,566  |        |      |        | 4,169  |        |   |       | 6,468  |       
|                                                                                             | Stock-based compensation(*)   |                                          |         | 759   |        |   |        | 741   |        |   |        | 1,597  |        |      |        | 2,134  |        |   |       | 999    |       
|                                                                                             | Depreciation and amortization |                                          |         | 5,480 |        |   |        | 2,615 |        |   |        | 2,030  |        |      |        | 2,457  |        |   |       | 3,460  |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|                                                                                             |                               | Total costs and expenses                 |         |       | 22,853 |   |        |       | 21,764 |   |        |        | 19,522 |      |        |        | 24,513 |   |       |        | 33,548 | 
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|Income (loss) from operations                                                                |                               |                                          | (15,644 | )     |        |   | (7,807 | )     |        |   | (423   | )      |        |      | 449    |        |        |   | 2,043 |       
|Equity in net loss of unconsolidated affiliate(3)                                            |                               |                                          | (356    | )     |        |   | (22    | )     |        |   | (59    | )      |        |      | (94    | )      |        |   | (57   | )     
|Interest expense                                                                             |                               |                                          | (502    | )     |        |   | (112   | )     |        |   | (193   | )      |        |      | (1,077 | )      |        |   | (238  | )     
|Other income (expense), net                                                                  |                               |                                          | 51      |       |        |   | 96     |       |        |   | 72     |        |        |      | 210    |        |        |   | 1,199 |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|Income (loss) before income taxes                                                            |                               |                                          | (16,451 | )     |        |   | (7,845 | )     |        |   | (603   | )      |        |      | (512   | )      |        |   | 2,947 |       
|Provision for income taxes                                                                   |                               |                                          | (9      | )     |        |   | (9     | )     |        |   | (149   | )      |        |      | (25    | )      |        |   | (207  | )     
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|Net income (loss)                                                                            |                               |                                          | (16,460 | )     |        |   | (7,854 | )     |        |   | (752   | )      |        |      | (537   | )      |        |   | 2,740 |       
|Accretion on redeemable convertible preferred stock                                          |                               |                                          | (940    | )     |        |   | (1,709 | )     |        |   | (1,729 | )      |        |      | (1,402 | )      |        |   |      |       
|Net gain on exchange of preferred stock and warrants in
    connection with recapitalization |                               |                                          | 10,392  |       |        |   |       |       |        |   |       |        |        |      |       |        |        |   |      |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|Net earnings (loss) attributable to common stockholders                                      |                               | $                                        | (7,008  | )     |        | $ | (9,563 | )     |        | $ | (2,481 | )      |        | $    | (1,939 | )      |        | $ | 2,740 |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|Net earnings (loss) per share:                                                               |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |        |        |        |   |       |       
|                                                                                             | Basic                         |                                          | $       | (6.27 | )      |   | $      | (6.17 | )      |   | $      | (1.53  | )      |      | $      | (0.40  | )      |   | $     | 0.16   |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       
|                                                                                             | Diluted                       |                                          | $       | (6.27 | )      |   | $      | (6.17 | )      |   | $      | (1.53  | )      |      | $      | (0.40  | )      |   | $     | 0.15   |       
|                                                                                             |                               |                                          |         |       |        |   |        |       |        |   |        |        |        |      |       

30



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|                                                                        |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |       |       |  |   |     |        | 
|----------------------------------------------------------------------- | -------------------------- | ---------------------------------------- | --- | ----- | ---- | - | --- | ----- |  | - | ----- | ----- |  | ---- | ----- | ----- |  | - | --- | ------ | 
|                                                                        |                            | Year Ended December 31,                  |    
|                                                                        |                            |                                          |    
|                                                                        |                            | 2001(1)                                  |     |       | 2002 |   |     | 2003  |  |   | 2004  |       |  | 2005 |      
|                                                                        |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |      
|                                                                        |                            | (In thousands, except per share amounts) |    
|Weighted-average shares used to compute net earnings:                   |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |       |       |  |   |     |       
|                                                                        | Basic                      |                                          |     | 1,118 |      |   |     | 1,551 |  |   |       | 1,624 |  |      |       | 4,837 |  |   |     | 17,116 | 
|                                                                        |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |      
|                                                                        | Diluted                    |                                          |     | 1,118 |      |   |     | 1,551 |  |   |       | 1,624 |  |      |       | 4,837 |  |   |     | 18,192 | 
|                                                                        |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |      
|(*) Stock-based compensation is allocated as follows (see
    Note 12):
|                                                                       
|                                                                        | Cost of revenue            |                                          | $   | 661   |      |   | $   | 255   |  |   | $     | 502   |  |      | $     | 565   |  |   | $   | 177    | 
|                                                                        | Sales and marketing        |                                          |     | 66    |      |   |     | 117   |  |   |       | 419   |  |      |       | 556   |  |   |     | 254    | 
|                                                                        | General and administrative |                                          |     | 32    |      |   |     | 369   |  |   |       | 676   |  |      |       | 1,013 |  |   |     | 568    | 
|                                                                        |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |      
|Total stock-based compensation                                          |                            | $                                        | 759 |       |      | $ | 741 |       |  | $ | 1,597 |       |  | $    | 2,134 |       |  | $ | 999 |       
|                                                                        |                            |                                          |     |       |      |   |     |       |  |   |       |       |  |      |      

|                                       |  |                    |         |   |      |   |         |      |  |   |         |   |  |      |        |  |  |   |        | 
|-------------------------------------- |  | ------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------ |  |  | - | ------ | 
|                                       |  | As of December 31, |        
|                                       |  |                    |        
|                                       |  | 2001(1)            |         |   | 2002 |   |         | 2003 |  |   | 2004    |   |  | 2005 |       
|                                       |  |                    |         |   |      |   |         |      |  |   |         |   |  |      |       
|                                       |  | (In thousands)     |        
|Consolidated balance sheet data:       |  |                    |         |   |      |   |         |      |  |   |         |   |  |      |        |  |  |   |        | 
|Cash and cash equivalents              |  | $                  | 763     |   |      | $ | 2,082   |      |  | $ | 2,282   |   |  | $    | 43,128 |  |  | $ | 18,461 | 
|Working capital (deficit)              |  |                    | (1,082  | ) |      |   | (1,751  | )    |  |   | (2,804  | ) |  |      | 39,209 |  |  |   | 14,761 | 
|Total assets                           |  |                    | 11,170  |   |      |   | 9,974   |      |  |   | 10,929  |   |  |      | 59,208 |  |  |   | 77,338 | 
|Long-term liabilities                  |  |                    | 343     |   |      |   | 1,856   |      |  |   | 545     |   |  |      | 2,241  |  |  |   | 10,636 | 
|Redeemable convertible preferred stock |  |                    | 33,069  |   |      |   | 38,034  |      |  |   | 41,413  |   |  |      |       |  |  |   |       | 
|Stockholders equity (deficit)         |  | $                  | (22,656 | ) |      | $ | (35,142 | )    |  | $ | (37,717 | ) |  | $    | 48,764 |  |  | $ | 53,052 | 






|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(1) | The acquisition of PlanetOut Corporation was completed in April
    2001.                                             
|   
|(2) | Includes a $2,750,000 lease settlement expense in 2002 as
    further described in Note 8 to the financial statements.
|   
|(3) | Represents a minority interest in Gay.it S.p.A., as further
    described in Note 3 to the financial statements.      






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

10-K, 10-K.


31



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Overview


The
Advocate Out






| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | Expand and improve our online services to attract and retain
    advertising and consumer customers;   
|
| |  | Expand and diversify our revenue streams to sustain long-term
    sales and earning growth; and        
|
| |  | Achieve profitability and operating efficiency targets to
    increase cash flow and shareholder value.







32



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|                                                                               |                               |                         |      |       |      |  |      |       |   |  |      |       |  
|------------------------------------------------------------------------------ | ----------------------------- | ----------------------- | ---- | ----- | ---- |  | ---- | ----- | - |  | ---- | ----- | -
|                                                                               |                               | Year ended December 31, |     
|                                                                               |                               |                         |     
|                                                                               |                               | 2003                    |      |       | 2004 |  |      | 2005  |  
|                                                                               |                               |                         |      |       |      |  |      |       |  
|                                                                               |                               | (As a percentage of     |     
|                                                                               |                               | total revenue)          |     
|Consolidated statement of operations data:                                     |                               |                         |      |       |      |  |      |       |   |  |      |      
|Revenue:                                                                       |                               |                         |      |       |      |  |      |       |   |  |      |      
|                                                                               | Advertising services          |                         |      | 24.2  | %    |  |      | 26.2  | % |  |      | 32.9  | %
|                                                                               | Subscription services         |                         |      | 66.6  |      |  |      | 67.2  |   |  |      | 59.4  |  
|                                                                               | Transaction services          |                         |      | 9.2   |      |  |      | 6.6   |   |  |      | 7.7   |  
|                                                                               |                               |                         |      |       |      |  |      |       |  
|                                                                               | Total revenue                 |                         |      | 100.0 |      |  |      | 100.0 |   |  |      | 100.0 |  
|                                                                               |                               |                         |      |       |      |  |      |       |  
|Operating costs and expenses (including stock-based compensation
    expense): |                               |                         |      |       |      |  |      |       |   |  |      |      
|                                                                               | Cost of revenue               |                         |      | 35.1  |      |  |      | 32.3  |   |  |      | 33.6  |  
|                                                                               | Sales and marketing           |                         |      | 34.3  |      |  |      | 35.3  |   |  |      | 31.2  |  
|                                                                               | General and administrative    |                         |      | 22.2  |      |  |      | 20.8  |   |  |      | 19.8  |  
|                                                                               | Depreciation and amortization |                         |      | 10.6  |      |  |      | 9.8   |   |  |      | 9.7   |  
|                                                                               |                               |                         |      |       |      |  |      |       |  
|                                                                               | Total costs and expenses      |                         |      | 102.2 |      |  |      | 98.2  |   |  |      | 94.3  |  
|                                                                               |                               |                         |      |       |      |  |      |       |  
|Income (loss) from operations                                                  |                               |                         | (2.2 | )     |      |  | 1.8  |       |   |  | 5.7  |      
|Other income (expense), net                                                    |                               |                         | (0.9 | )     |      |  | (3.8 | )     |   |  | 2.6  |      
|                                                                               |                               |                         |      |       |      |  |      |       |  
|Income (loss) before income taxes                                              |                               |                         | (3.1 | )     |      |  | (2.1 | )     |   |  | 8.3  |      
|Provision for income taxes                                                     |                               |                         | (0.8 | )     |      |  | (0.1 | )     |   |  | (0.6 | )    
|                                                                               |                               |                         |      |       |      |  |      |       |  
|Net income (loss)                                                              |                               |                         | (3.9 | )%    |      |  | (2.2 | )%    |   |  | 7.7  | %    
|                                                                               |                               |                         |      |       |      |  |      |       |  

Comparison of the Years Ended December 31, 2005 and
December 31, 2004


Summary










33



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Revenue


Advertising Services.




Subscription Services. gratis




Transaction Services.




34



---



##### Table of Contents



Operating Costs and
Expenses


Cost of Revenue.






Sales and Marketing.






General and Administrative.






Depreciation and Amortization.


35



---



##### Table of Contents







Income from Operations.




Other Income and
Expenses


Other Income (Expense), Net.


Comparison of Years Ended December 31, 2004 and
December 31, 2003


Revenue




Advertising Services.




| |   |                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the improvement in the advertising market generally and in the
    online advertising market specifically;                                                    
|
| |  | the increasing interest of advertisers in targeting the LGBT
    community;                                                                                   
|
| |  | a high renewal rate, with seven of our top ten advertisers for
    the three months ended December 31, 2004 coming from
    renewals by existing advertisers; 
|
| |  | rising cost per thousand impressions, or CPMs, especially in the
    first half of 2004;                                                                      
|
| |  | periodic inventory constraints on some of the most in-demand
    space on our flagship websites, particularly in the three months
    ended December 31, 2004;

36



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| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | periodic advertising capacity constraints during the twelve
    months ended December 31, 2004 on the most popular areas of
    our website serving the United Kingdom, uk.gay.com; and
|
| |  | our decision to suspend advertising on our French language
    website, fr.gay.com, in mid-2003.                                                                                       

Subscription Services.




| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an expansion in the number of customer support representatives
    and their hours of coverage;                                                                                                                                                      
|
| |  | new features including the offer of subscriptions to popular
    magazines with premium memberships beginning in May 2004, the
    launch of payment via PayPal in October 2004, and the launch of
    an expanded messenger service in October 2004;
|
| |  | a price increase for our Gay.com membership services in October
    2004;                                                                                                                                                                            
|
| |  | the migration of approximately 1,400 of our Out&About
    newsletter subscribers to our premium membership services in
    December 2004;                                                                                                            
|
| |  | an increase in marketing and promotional activities beginning in
    the second quarter of 2003, including the Mr. Gay.com
    contest and the Play for Keeps campaign in 2004
    which received widespread press coverage;                       
|
| |  | the effect of unexpected periods of degraded site performance in
    December 2004; and                                                                                                                                                              
|
| |  | a reduction in subscribers and revenue from our PlanetOut.com
    premium membership service, as we have concentrated more of our
    marketing activities on our Gay.com premium membership service.                                                



Transaction Services.


Operating Costs and
Expenses




Cost of Revenue.


37



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##### Table of Contents





Sales and Marketing.


General and Administrative.


Depreciation and Amortization.


Other Costs and
Expenses


Interest Expense.


Equity in Net Loss of Affiliate.


Critical Accounting Policies






38



---



##### Table of Contents





Revenue Recognition.






Advertising Costs.


Valuation Allowances.




39



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##### Table of Contents





Goodwill and Other Long-lived Assets.




Capitalized Website Development Costs.


Liquidity and Capital Resources






|                                                       |                                                      |                                     |       |        |      |   |        |        |   |   |         |         |  
|------------------------------------------------------ | ---------------------------------------------------- | ----------------------------------- | ----- | ------ | ---- | - | ------ | ------ | - | - | ------- | ------- | -
|                                                       |                                                      | Year Ended December 31,             |      
|                                                       |                                                      |                                     |      
|                                                       |                                                      | 2003                                |       |        | 2004 |   |        | 2005   |  
|                                                       |                                                      |                                     |       |        |      |   |        |        |  
|                                                       |                                                      | (In thousands, except percentage of |      
|                                                       |                                                      | total assets)                       |      
|Net cash provided by (used in) continuing operations   |                                                      |                                     |       |        |      |   |        |        |   |   |         |        
|                                                       | Operating activities                                 |                                     | $     | 2,036  |      |   | $      | 4,301  |   |   | $       | 5,488   |  
|                                                       | Investing activities                                 |                                     |       | (1,269 | )    |   |        | (4,836 | ) |   |         | (29,499 | )
|                                                       | Financing activities                                 |                                     |       | (513   | )    |   |        | 41,388 |   |   |         | (639    | )
|                                                       | Effect of exchange rate on cash and cash equivalents |                                     |       | (54    | )    |   |        | (7     | ) |   |         | (17     | )
|                                                       |                                                      |                                     |       |        |      |   |        |        |  
|Net increase (decrease) in cash and cash equivalents   |                                                      | $                                   | 200   |        |      | $ | 40,846 |        |   | $ | (24,667 | )      
|Cash, cash equivalents and marketable securities       |                                                      |                                     |       |        |      |   |        |        |   |   |         |        
|                                                       | Cash and cash equivalents                            |                                     | $     | 2,282  |      |   | $      | 43,128 |   |   | $       | 18,461  |  
|                                                       | Marketable securities                                |                                     |       |        |      |   |        |        |   |   |         |         |  
|                                                       |                                                      |                                     |       |        |      |   |        |        |  
|Total cash, cash equivalents and marketable securities |                                                      | $                                   | 2,282 |        |      | $ | 43,128 |        |   | $ | 18,461  |        
|                                                       | Percentage of total assets                           |                                     |       | 20.9   | %    |   |        | 72.8   | % |   |         | 23.9    | %

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Off-balance Sheet Liabilities




Other Contractual Commitments




|                              |  |                        |        |  |      |   |       |           |  |   |           |  |  |              |       |  |  |   |       | 
|----------------------------- |  | ---------------------- | ------ |  | ---- | - | ----- | --------- |  | - | --------- |  |  | ------------ | ----- |  |  | - | ----- | 
|                              |  | Payments Due by Period |       
|                              |  |                        |       
|                              |  | Total                  |        |  | 2006 |   |       | 2007-2008 |  |   | 2009-2010 |  |  | 2011 & After |      
|                              |  |                        |        |  |      |   |       |           |  |   |           |  |  |              |      
|                              |  | (In thousands)         |       
|Contractual obligations:      |  |                        |        |  |      |   |       |           |  |   |           |  |  |              |       |  |  |   |       | 
|Capital lease obligations     |  | $                      | 596    |  |      | $ | 351   |           |  | $ | 209       |  |  | $            | 36    |  |  | $ |      | 
|Operating leases              |  |                        | 16,676 |  |      |   | 2,824 |           |  |   | 5,272     |  |  |              | 5,272 |  |  |   | 3,308 | 
|Purchase obligations          |  |                        | 643    |  |      |   | 643   |           |  |   |          |  |  |              |      |  |  |   |      | 
|Note payable                  |  |                        | 8,258  |  |      |   | 840   |           |  |   | 7,418     |  |  |              |       |  |  |   |       | 
|                              |  |                        |        |  |      |   |       |           |  |   |           |  |  |              |      
|Total contractual obligations |  | $                      | 26,173 |  |      | $ | 4,658 |           |  | $ | 12,899    |  |  | $            | 5,308 |  |  | $ | 3,308 | 
|                              |  |                        |        |  |      |   |       |           |  |   |           |  |  |              |      

Capital Lease Obligations.


Operating Leases.


Purchase Obligations.






Note payable.


Seasonality and Inflation




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e-commerce




Recent Accounting Pronouncements


46-R), Consolidation of Variable Interest Entities 46-R 46-R primary beneficiary 46-R. 46-R 46-R


46-R.


Share-Based Payment Accounting for
Stock Issued to Employees, Accounting for Stock
Based Compensation Accounting for Stock-Based
Compensation  Transition and Disclosure.


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Accounting for Certain Transactions Involving Stock
Compensation an Interpretation of APB No. 25




Accounting Changes and Error Corrections Accounting
Changes Reporting Accounting Changes in Interim Financial
Statements







|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk







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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

PlanetOut Inc.


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA


|                                              |                                                                                                              |      |  |    | 
|--------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | ---- |  | -- | 
|                                              |                                                                                                              | Page | 
|                                              |                                                                                                              |      | 
|Consolidated Financial Statements:            |                                                                                                              |      |  |   
|                                              | Reports of Independent Registered Public
    Accounting Firms                                                |      |  | 46 | 
|                                              | Consolidated Balance Sheets                                                                                  |      |  | 49 | 
|                                              | Consolidated Statements of Operations                                                                        |      |  | 50 | 
|                                              | Consolidated Statements of Redeemable
    Convertible Preferred Stock and Stockholders Equity
    (Deficit) |      |  | 51 | 
|                                              | Consolidated Statements of Cash Flows                                                                        |      |  | 52 | 
|                                              | Notes to Consolidated Financial
    Statements                                                               |      |  | 53 | 
|Supplementary Financial Data
    (unaudited): |                                                                                                              |      |  |   
|                                              | Quarterly Financial Data for each of the
    years ended December 31, 2004 and 2005                          |      |  | 78 | 
|Financial Statement Schedule:                 |                                                                                                              |      |  |   
|                                              | Valuation and Qualifying Accounts for each
    of the years ended December 31, 2003, 2004 and 2005           |      |  | 80 | 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Consolidated financial statements and financial statement
schedule




Internal control over financial reporting


Managements Annual Report on Internal Control Over
Financial Reporting Internal Control  Integrated
Framework Internal Control 
Integrated Framework




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| |                               
| | ------------------------------
| | /s/ Stonefield Josephson, Inc.
| |                               
| | Stonefield Josephson, Inc.    





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








| |                               
| | ------------------------------
| | /s/ PricewaterhouseCoopers LLP





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PlanetOut Inc.


CONSOLIDATED BALANCE SHEETS


|                                                |                                                                                                                                                                |                                            |       |         |        |  |        |         |        | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------- | ------ |  | ------ | ------- | ------ | 
|                                                |                                                                                                                                                                | December 31,                               |      
|                                                |                                                                                                                                                                |                                            |      
|                                                |                                                                                                                                                                | 2004                                       |       |         | 2005   | 
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | (In thousands, except                      |      
|                                                |                                                                                                                                                                | per share amounts)                         |      
|ASSETS                                         
|Current assets:                                 |                                                                                                                                                                |                                            |       |         |        |  |        |        
|                                                | Cash and cash equivalents                                                                                                                                      |                                            | $     | 43,128  |        |  | $      | 18,461  |       
|                                                | Accounts receivable, net                                                                                                                                       |                                            |       | 2,075   |        |  |        | 6,030   |       
|                                                | Inventory                                                                                                                                                      |                                            |       | 24      |        |  |        | 1,349   |       
|                                                | Prepaid expenses and other current assets                                                                                                                      |                                            |       | 2,185   |        |  |        | 2,571   |       
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | Total current assets                       |       |         | 47,412 |  |        |         | 28,411 | 
|Property and equipment, net                     |                                                                                                                                                                |                                            | 7,011 |         |        |  | 8,167  |        
|Goodwill                                        |                                                                                                                                                                |                                            | 3,403 |         |        |  | 28,699 |        
|Intangible assets, net                          |                                                                                                                                                                |                                            |      |         |        |  | 10,909 |        
|Investment in unconsolidated affiliate          |                                                                                                                                                                |                                            | 57    |         |        |  |       |        
|Other assets                                    |                                                                                                                                                                |                                            | 1,325 |         |        |  | 1,152  |        
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | Total assets                               |       | $       | 59,208 |  |        | $       | 77,338 | 
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                               
|LIABILITIES AND STOCKHOLDERS EQUITY           
|Current liabilities:                            |                                                                                                                                                                |                                            |       |         |        |  |        |        
|                                                | Accounts payable                                                                                                                                               |                                            | $     | 2,040   |        |  | $      | 1,334   |       
|                                                | Accrued liabilities                                                                                                                                            |                                            |       | 1,469   |        |  |        | 2,750   |       
|                                                | Deferred revenue, current portion                                                                                                                              |                                            |       | 3,506   |        |  |        | 8,749   |       
|                                                | Capital lease obligations, current portion                                                                                                                     |                                            |       | 998     |        |  |        | 309     |       
|                                                | Notes payable, current portion                                                                                                                                 |                                            |       | 190     |        |  |        | 222     |       
|                                                | Deferred rent, current portion                                                                                                                                 |                                            |       |        |        |  |        | 286     |       
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | Total current liabilities                  |       |         | 8,203  |  |        |         | 13,650 | 
|Deferred revenue, less current portion          |                                                                                                                                                                |                                            |      |         |        |  | 1,771  |        
|Capital lease obligations, less current portion |                                                                                                                                                                |                                            | 491   |         |        |  | 212    |        
|Notes payable, less current portion             |                                                                                                                                                                |                                            | 142   |         |        |  | 7,075  |        
|Deferred rent, less current portion             |                                                                                                                                                                |                                            | 1,608 |         |        |  | 1,578  |        
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | Total liabilities                          |       |         | 10,444 |  |        |         | 24,286 | 
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|Commitments and contingencies (Note 7)          |                                                                                                                                                                |                                            |       |         |        |  |        |        
|Stockholders equity:                           |                                                                                                                                                                |                                            |       |         |        |  |        |        
|                                                | Common stock: $0.001 par value, 100,000 shares
    authorized, 16,943 and 17,248 shares issued and outstanding
    at December 31, 2004 and 2005, respectively |                                            |       | 17      |        |  |        | 17      |       
|                                                | Additional paid-in capital                                                                                                                                     |                                            |       | 88,387  |        |  |        | 88,333  |       
|                                                | Note receivable from stockholder                                                                                                                               |                                            |       | (603    | )      |  |        | (603    | )     
|                                                | Unearned stock-based compensation                                                                                                                              |                                            |       | (1,619  | )      |  |        |        |       
|                                                | Accumulated other comprehensive loss                                                                                                                           |                                            |       | (106    | )      |  |        | (123    | )     
|                                                | Accumulated deficit                                                                                                                                            |                                            |       | (37,312 | )      |  |        | (34,572 | )     
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | Total stockholders equity                 |       |         | 48,764 |  |        |         | 53,052 | 
|                                                |                                                                                                                                                                |                                            |       |         |        | 
|                                                |                                                                                                                                                                | Total liabilities and stockholders equity |       | $       | 59,208 |  |        | $       | 77,338 | 
|                                                |                                                                                                                                                                |                                            |       |         |        | 



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PlanetOut Inc.


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                       |                               |                                          |        |        |        |   |        |        |        |   |       |        |        | 
|---------------------------------------------------------------------- | ----------------------------- | ---------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ----- | ------ | ------ | 
|                                                                       |                               | Year Ended December 31,                  |       
|                                                                       |                               |                                          |       
|                                                                       |                               | 2003                                     |        |        | 2004   |   |        | 2005   |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|                                                                       |                               | (In thousands, except per share amounts) |       
|Revenue:                                                               |                               |                                          |        |        |        |   |        |        |        |   |       |       
|                                                                       | Advertising services          |                                          | $      | 4,626  |        |   | $      | 6,541  |        |   | $     | 11,724 |       
|                                                                       | Subscription services         |                                          |        | 12,727 |        |   |        | 16,775 |        |   |       | 21,135 |       
|                                                                       | Transaction services          |                                          |        | 1,746  |        |   |        | 1,646  |        |   |       | 2,732  |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|                                                                       |                               | Total revenue                            |        |        | 19,099 |   |        |        | 24,962 |   |       |        | 35,591 | 
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Operating costs and expenses:                                          |                               |                                          |        |        |        |   |        |        |        |   |       |       
|                                                                       | Cost of revenue               |                                          |        | 6,194  |        |   |        | 7,503  |        |   |       | 11,787 |       
|                                                                       | Sales and marketing           |                                          |        | 6,135  |        |   |        | 8,250  |        |   |       | 10,834 |       
|                                                                       | General and administrative    |                                          |        | 3,566  |        |   |        | 4,169  |        |   |       | 6,468  |       
|                                                                       | Stock-based compensation(*)   |                                          |        | 1,597  |        |   |        | 2,134  |        |   |       | 999    |       
|                                                                       | Depreciation and amortization |                                          |        | 2,030  |        |   |        | 2,457  |        |   |       | 3,460  |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|                                                                       |                               | Total costs and expenses                 |        |        | 19,522 |   |        |        | 24,513 |   |       |        | 33,548 | 
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Income (loss) from operations                                          |                               |                                          | (423   | )      |        |   | 449    |        |        |   | 2,043 |       
|Equity in net loss of unconsolidated affiliate                         |                               |                                          | (59    | )      |        |   | (94    | )      |        |   | (57   | )     
|Interest expense                                                       |                               |                                          | (193   | )      |        |   | (1,077 | )      |        |   | (238  | )     
|Other income (expense), net                                            |                               |                                          | 72     |        |        |   | 210    |        |        |   | 1,199 |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Income (loss) before income taxes                                      |                               |                                          | (603   | )      |        |   | (512   | )      |        |   | 2,947 |       
|Provision for income taxes                                             |                               |                                          | (149   | )      |        |   | (25    | )      |        |   | (207  | )     
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Net income (loss)                                                      |                               |                                          | (752   | )      |        |   | (537   | )      |        |   | 2,740 |       
|Accretion on redeemable convertible preferred stock                    |                               |                                          | (1,729 | )      |        |   | (1,402 | )      |        |   |      |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Net earnings (loss) attributable to common stockholders                |                               | $                                        | (2,481 | )      |        | $ | (1,939 | )      |        | $ | 2,740 |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Net earnings (loss) per share:                                         |                               |                                          |        |        |        |   |        |        |        |   |       |       
|                                                                       | Basic                         |                                          | $      | (1.53  | )      |   | $      | (0.40  | )      |   | $     | 0.16   |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|                                                                       | Diluted                       |                                          | $      | (1.53  | )      |   | $      | (0.40  | )      |   | $     | 0.15   |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Weighted-average shares used to compute net earnings:                  |                               |                                          |        |        |        |   |        |        |        |   |       |       
|                                                                       | Basic                         |                                          |        | 1,624  |        |   |        | 4,837  |        |   |       | 17,116 |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|                                                                       | Diluted                       |                                          |        | 1,624  |        |   |        | 4,837  |        |   |       | 18,192 |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|(*) Stock-based compensation is allocated as follows (see
    Note 2): |                               |                                          |        |        |        |   |        |        |        |   |       |       
|                                                                       | Cost of revenue               |                                          | $      | 502    |        |   | $      | 565    |        |   | $     | 177    |       
|                                                                       | Sales and marketing           |                                          |        | 419    |        |   |        | 556    |        |   |       | 254    |       
|                                                                       | General and administrative    |                                          |        | 676    |        |   |        | 1,013  |        |   |       | 568    |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       
|Total stock-based compensation                                         |                               | $                                        | 1,597  |        |        | $ | 2,134  |        |        | $ | 999   |       
|                                                                       |                               |                                          |        |        |        |   |        |        |       



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PlanetOut Inc.


CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE


PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT)


|                                        |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |         |         |  
|--------------------------------------- | --------------------------------------------------------------------------------------------------------- | ----------------------- | ------- | ------- | ------- | - | ------ | ------- | ------- | - | ------ | ------- | ------- | -
|                                        |                                                                                                           | Year Ended December 31, |        
|                                        |                                                                                                           |                         |        
|                                        |                                                                                                           | 2003                    |         |         | 2004    |   |        | 2005    |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | (In thousands)          |        
|Redeemable convertible preferred stock: |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         | $       | 38,034  |         |   | $      | 41,413  |         |   | $      |        |        
|                                        | Unearned stock-based compensation, net of cancellations                                                   |                         |         | 1,643   |         |   |        |        |         |   |        |        |        
|                                        | Issuance of Series D for cash on exercise of options                                                      |                         |         | 1       |         |   |        | 15      |         |   |        |        |        
|                                        | Issuance of Series B preferred stock for cash                                                             |                         |         | 6       |         |   |        |        |         |   |        |        |        
|                                        | Accretion on redeemable convertible preferred stock                                                       |                         |         | 1,729   |         |   |        | 1,402   |         |   |        |        |        
|                                        | Repurchase of Series B convertible preferred stock upon
    termination of employee services              |                         |         |        |         |   |        | (20     | )       |   |        |        |        
|                                        | Conversion of preferred stock into common stock upon completion
    of initial public offering            |                         |         |        |         |   |        | (42,810 | )       |   |        |        |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         | $       | 41,413  |   |        | $       |        |   |        | $       |        |  
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Common stock:                           |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         | $       | 2       |         |   | $      | 2       |         |   | $      | 17      |        
|                                        | Issuance of common stock for cash, net of offering expenses of
    $5,226                                 |                         |         |        |         |   |        | 5       |         |   |        |        |        
|                                        | Conversion of preferred stock into common stock upon completion
    of initial public offering            |                         |         |        |         |   |        | 10      |         |   |        |        |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | 2       |   |        |         | 17      |   |        |         | 17      |  
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Additional paid-in-capital:             |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | 1,595   |         |   |        | 17      |         |   |        | 88,387  |        
|                                        | Issuance of common stock for cash on exercise of options and
    warrants                                 |                         |         | 5       |         |   |        | 44      |         |   |        | 552     |        
|                                        | Unearned stock-based compensation, net of cancellations and tax
    effects of disqualifying dispositions |                         |         | 75      |         |   |        | 3,406   |         |   |        | (687    | )      
|                                        | Issuance of stock and stock options to consultants in exchange
    for services                           |                         |         | 32      |         |   |        | 88      |         |   |        |        |        
|                                        | Accretion on redeemable convertible preferred stock                                                       |                         |         | (1,690  | )       |   |        | (1,402  | )       |   |        |        |        
|                                        | Issuance of common stock for cash, net of offering expenses of
    $5,226                                 |                         |         |        |         |   |        | 42,896  |         |   |        |        |        
|                                        | Issuance of common stock warrants in connection with
    subordinated promissory note                     |                         |         |        |         |   |        | 543     |         |   |        |        |        
|                                        | Conversion of preferred stock into common stock upon completion
    of initial public offering            |                         |         |        |         |   |        | 42,800  |         |   |        |        |        
|                                        | Amount paid to shareholder for fractional shares due to reverse
    stock split                           |                         |         |        |         |   |        | (5      | )       |   |        |        |        
|                                        | Stock-based compensation upon acceleration of unvested options                                            |                         |         |        |         |   |        |        |         |   |        | 81      |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | 17      |   |        |         | 88,387  |   |        |         | 88,333  |  
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Note receivable from stockholder:       |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | (603    | )       |   |        | (603    | )       |   |        | (603    | )      
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | (603    | ) |        |         | (603    | ) |        |         | (603    | )
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Unearned stock-based compensation:      |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | (107    | )       |   |        | (259    | )       |   |        | (1,619  | )      
|                                        | Unearned stock-based compensation, net of cancellations                                                   |                         |         | (1,717  | )       |   |        | (3,406  | )       |   |        | 493     |        
|                                        | Amortization of unearned stock-based compensation, net of
    cancellations                               |                         |         | 1,565   |         |   |        | 2,046   |         |   |        | 600     |        
|                                        | Stock-based compensation upon acceleration of unvested options                                            |                         |         |        |         |   |        |        |         |   |        | 526     |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | (259    | ) |        |         | (1,619  | ) |        |         |        |  
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Accumulated other comprehensive loss:   |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | (45     | )       |   |        | (99     | )       |   |        | (106    | )      
|                                        | Foreign currency translation adjustment                                                                   |                         |         | (54     | )       |   |        | (7      | )       |   |        | (17     | )      
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | (99     | ) |        |         | (106    | ) |        |         | (123    | )
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Accumulated deficit:                    |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | (35,984 | )       |   |        | (36,775 | )       |   |        | (37,312 | )      
|                                        | Accretion on redeemable convertible preferred stock                                                       |                         |         | (39     | )       |   |        |        |         |   |        |        |        
|                                        | Net income (loss)                                                                                         |                         |         | (752    | )       |   |        | (537    | )       |   |        | 2,740   |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | (36,775 | ) |        |         | (37,312 | ) |        |         | (34,572 | )
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Total stockholders equity (deficit)    |                                                                                                           | $                       | (37,717 | )       |         | $ | 48,764 |         |         | $ | 53,052 |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Number of shares                        |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|Redeemable convertible preferred stock: |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | 8,698   |         |   |        | 9,293   |         |   |        |        |        
|                                        | Issuance of Series D for cash on exercise of options                                                      |                         |         | 93      |         |   |        | 4       |         |   |        |        |        
|                                        | Issuance of Series B for cash                                                                             |                         |         | 502     |         |   |        |        |         |   |        |        |        
|                                        | Repurchase of Series B upon termination of employee services                                              |                         |         |        |         |   |        | (26     | )       |   |        |        |        
|                                        | Conversion of preferred stock into common stock upon completion
    of initial public offering            |                         |         |        |         |   |        | (9,271  | )       |   |        |        |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | 9,293   |   |        |         |        |   |        |         |        |  
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|Common stock:                           |                                                                                                           |                         |         |         |         |   |        |         |         |   |        |        
|                                        | Balance, beginning of year                                                                                |                         |         | 1,568   |         |   |        | 1,728   |         |   |        | 16,943  |        
|                                        | Issuance of common stock upon exercise of options and warrants                                            |                         |         | 160     |         |   |        | 223     |         |   |        | 306     |        
|                                        | Issuance of common stock for cash, net of offering expenses of
    $5,226                                 |                         |         |        |         |   |        | 5,348   |         |   |        |        |        
|                                        | Repurchase of unvested common stock upon termination of employee
    services                             |                         |         |        |         |   |        | (3      | )       |   |        | (1      | )      
|                                        | Conversion of preferred stock into common stock upon completion
    of initial public offering            |                         |         |        |         |   |        | 9,647   |         |   |        |        |        
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        
|                                        |                                                                                                           | Balance, end of year    |         |         | 1,728   |   |        |         | 16,943  |   |        |         | 17,248  |  
|                                        |                                                                                                           |                         |         |         |         |   |        |         |        



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PlanetOut Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |         |       |        |         |  
|------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------- | --------------------------------------------------- | ----- | ---- | ------ | ------ | ----- | ------ | ------- | ------- | ----- | ------ | ------- | -
|                                                                                |                                                                                                    | Year Ended December 31,                                                                               |                                  
|                                                                                |                                                                                                    |                                                                                                       |                                  
|                                                                                |                                                                                                    | 2003                                                                                                  |                                   |                                                     | 2004  |      |        | 2005   |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Cash flows from operating activities:                                           |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |        
|                                                                                | Net income (loss)                                                                                  |                                                                                                       | $                                 | (752                                                | )     |      | $      | (537   | )     |        | $       | 2,740   |      
|                                                                                | Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities:      |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |         |      
|                                                                                |                                                                                                    | Depreciation and amortization                                                                         |                                   |                                                     | 2,030 |      |        |        | 2,457 |        |         |         | 3,460 |       
|                                                                                |                                                                                                    | Amortization of unearned stock-based compensation, net of
    cancellation and tax effects            |                                   |                                                     | 1,565 |      |        |        | 2,046 |        |         |         | 405   |       
|                                                                                |                                                                                                    | Stock-based compensation upon acceleration of vesting of
    unvested options                         |                                   |                                                     |      |      |        |        |      |        |         |         | 608   |       
|                                                                                |                                                                                                    | Amortization of warrant and issuance costs in connection with
    senior subordinated promissory note |                                   |                                                     |      |      |        |        | 636   |        |         |         |      |       
|                                                                                |                                                                                                    | Amortization of deferrred rent                                                                        |                                   |                                                     | (31   | )    |        |        | 354   |        |         |         | 256   |       
|                                                                                |                                                                                                    | Issuance of stock and stock options and shares in exchange for
    services                           |                                   |                                                     | 32    |      |        |        | 88    |        |         |         |      |       
|                                                                                |                                                                                                    | Loss on disposal or write-off of property and equipment                                               |                                   |                                                     | 28    |      |        |        | 60    |        |         |         | 71    |       
|                                                                                |                                                                                                    | Equity in net loss of unconsolidated affiliate                                                        |                                   |                                                     | 59    |      |        |        | 94    |        |         |         | 57    |       
|                                                                                |                                                                                                    | Changes in operating assets and liabilities, net of acquisition
    effects:                          |                                   |                                                     |       |      |        |        |       |        |         |         |       |       
|                                                                                |                                                                                                    |                                                                                                       | Accounts receivable               |                                                     |       | (145 | )      |        |       | (792   | )       |         |       | (3,955 | )      
|                                                                                |                                                                                                    |                                                                                                       | Inventory                         |                                                     |       | 1    |        |        |       | 4      |         |         |       | (668   | )      
|                                                                                |                                                                                                    |                                                                                                       | Prepaid expenses and other assets |                                                     |       | (210 | )      |        |       | (1,304 | )       |         |       | 1,221  |        
|                                                                                |                                                                                                    |                                                                                                       | Accounts payable                  |                                                     |       | (496 | )      |        |       | 1,557  |         |         |       | (706   | )      
|                                                                                |                                                                                                    |                                                                                                       | Accrued and other liabilities     |                                                     |       | (577 | )      |        |       | (1,385 | )       |         |       | 1,201  |        
|                                                                                |                                                                                                    |                                                                                                       | Deferred revenue                  |                                                     |       | 532  |        |        |       | 1,023  |         |         |       | 798    |        
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   | Net cash provided by operating activities           |       |      | 2,036  |        |       |        | 4,301   |         |       |        | 5,488   |  
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Cash flows from investing activities:                                           |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |        
|                                                                                | Acquisitions, net of issuance of note payable                                                      |                                                                                                       |                                   |                                                    |       |      |        |       |       |        |         | (25,546 | )    
|                                                                                | Purchases of property and equipment                                                                |                                                                                                       |                                   | (1,299                                              | )     |      |        | (4,866 | )     |        |         | (3,953  | )    
|                                                                                | Changes in restricted cash                                                                         |                                                                                                       |                                   | 30                                                  |       |      |        | 30     |       |        |         |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   | Net cash used in investing activities               |       |      | (1,269 | )      |       |        | (4,836  | )       |       |        | (29,499 | )
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Cash flows from financing activities:                                           |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |        
|                                                                                | Proceeds from issuance of redeemable convertible preferred
    stock, net of offering costs        |                                                                                                       |                                   | 7                                                   |       |      |        |       |       |        |         |        |      
|                                                                                | Proceeds from exercise of common stock and preferred stock
    options and warrants                |                                                                                                       |                                   | 5                                                   |       |      |        | 59     |       |        |         | 552     |      
|                                                                                | Proceeds from senior subordinated promissory note and related
    warrants, net of issuance costs  |                                                                                                       |                                   |                                                    |       |      |        | 4,907  |       |        |         |        |      
|                                                                                | Repurchase of redeemable convertible preferred stock and common
    stock                          |                                                                                                       |                                   |                                                    |       |      |        | (20    | )     |        |         |        |      
|                                                                                | Repayment of senior subordinated promissory notes                                                  |                                                                                                       |                                   |                                                    |       |      |        | (5,000 | )     |        |         |        |      
|                                                                                | Principal payments under capital lease obligations and notes
    payable                           |                                                                                                       |                                   | (525                                                | )     |      |        | (1,454 | )     |        |         | (1,191  | )    
|                                                                                | Purchase of fractional shares due to reverse stock split                                           |                                                                                                       |                                   |                                                    |       |      |        | (5     | )     |        |         |        |      
|                                                                                | Proceeds from issuance of common stock in initial public stock
    offering, net of issuance costs |                                                                                                       |                                   |                                                    |       |      |        | 42,901 |       |        |         |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   | Net cash provided by (used in) financing activities |       |      | (513   | )      |       |        | 41,388  |         |       |        | (639    | )
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Effect of exchange rate on cash and cash equivalents                            |                                                                                                    |                                                                                                       | (54                               | )                                                   |       |      | (7     | )      |       |        | (17     | )      
|Net increase (decrease) in cash and cash equivalents                            |                                                                                                    |                                                                                                       | 200                               |                                                     |       |      | 40,846 |        |       |        | (24,667 | )      
|Cash and cash equivalents, beginning of period                                  |                                                                                                    |                                                                                                       | 2,082                             |                                                     |       |      | 2,282  |        |       |        | 43,128  |        
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Cash and cash equivalents, end of period                                        |                                                                                                    | $                                                                                                     | 2,282                             |                                                     |       | $    | 43,128 |        |       | $      | 18,461  |        
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Supplemental disclosure of cash flow information:                               |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |        
|                                                                                | Interest expense paid                                                                              |                                                                                                       | $                                 | 193                                                 |       |      | $      | 441    |       |        | $       | 105     |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                | Income taxes paid                                                                                  |                                                                                                       | $                                 | 62                                                  |       |      | $      | 86     |       |        | $       | 172     |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|Supplemental disclosure of noncash flow investing and financing
    activities: |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |       |        |         |        
|                                                                                | Property and equipment and related maintenance acquired under
    capital leases                   |                                                                                                       | $                                 | 1,503                                               |       |      | $      | 1,991  |       |        | $       | 113     |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                | Accretion on redeemable convertible preferred stock                                                |                                                                                                       | $                                 | 1,729                                               |       |      | $      | 1,402  |       |        | $       |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                | Unearned stock-based compensation                                                                  |                                                                                                       | $                                 | 1,717                                               |       |      | $      | 3,406  |       |        | $       | 493     |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                | Conversion of preferred stock to common stock upon completion of
    initial public offering       |                                                                                                       | $                                 |                                                    |       |      | $      | 42,810 |       |        | $       |        |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      
|                                                                                | Issuance of note payable in connection with acquisition                                            |                                                                                                       | $                                 |                                                    |       |      | $      |       |       |        | $       | 7,075   |      
|                                                                                |                                                                                                    |                                                                                                       |                                   |                                                     |       |      |        |        |      



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1  The Company




The Advocate, Out, The Out
Traveler, and HIVPlus




Note 2  Summary of Significant Accounting
Policies




| |                      
| | ---------------------
| | Basis of Presentation







| |                            
| | ---------------------------
| | Principles of Consolidation





| |                    
| | -------------------
| | Reverse Stock Split



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                  
| | -----------------
| | Reclassifications





| |                 
| | ----------------
| | Use of Estimates





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                             
| | ----------------------------
| | Concentration of Credit Risk





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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Foreign Currency Translation





| |          
| | ---------
| | Inventory

first-in




| |            
| | -----------
| | Investments





| |                       
| | ----------------------
| | Property and Equipment





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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                    
| | ---------------------------------------------------
| | Internal Use Software and Website Development Costs

Accounting for Costs of Computer Software Developed or
Obtained for Internal Use 00-02, Accounting for Web Site Development Costs 00-02).




| |         
| | --------
| | Goodwill

Goodwill and Other
Intangible Assets.




| |                    
| | -------------------
| | Revenue Recognition



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Reporting
Revenue Gross as a Principal Versus Net as an Agent,




| |            
| | -----------
| | Advertising





| |                             
| | ----------------------------
| | Sales Returns and Allowances





| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Stock-based Compensation

Accounting for Stock Issued to
Employees, Accounting for Stock-Based Compensation Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Awards
Plans


Accounting for Certain Transactions Involving Stock
Compensation an Interpretation of APB No. 25


Accounting
for Equity Instruments that are Issued to Other than Employees
for Acquiring, or in Conjunction with Selling, Goods or
Services




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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                      |                       |                         |        |       |      |   |        |       |   |   |        |       |  
|----------------------------------------------------------------------------------------------------- | --------------------- | ----------------------- | ------ | ----- | ---- | - | ------ | ----- | - | - | ------ | ----- | -
|                                                                                                      |                       | Year Ended December 31, |       
|                                                                                                      |                       |                         |       
|                                                                                                      |                       | 2003                    |        |       | 2004 |   |        | 2005  |  
|                                                                                                      |                       |                         |        |       |      |   |        |       |  
|Net earnings (loss) attributable to common stockholders, as
    reported:                             |                       | $                       | (2,481 | )     |      | $ | (1,939 | )     |   | $ | 2,740  |      
|Add: Employee stock-based compensation expense included in
    reported net income (loss), net of tax |                       |                         | 1,565  |       |      |   | 2,046  |       |   |   | 971    |      
|Less: Total employee stock-based compensation expense determined
    under fair value, net of tax     |                       |                         | (1,959 | )     |      |   | (2,653 | )     |   |   | (3,815 | )    
|                                                                                                      |                       |                         |        |       |      |   |        |       |  
|Pro forma net loss attributable to common stockholders                                                |                       | $                       | (2,875 | )     |      | $ | (2,546 | )     |   | $ | (104   | )    
|                                                                                                      |                       |                         |        |       |      |   |        |       |  
|Net loss per share attributable to common stockholders:                                               |                       |                         |        |       |      |   |        |       |   |   |        |      
|                                                                                                      | As reported  basic   |                         | $      | (1.53 | )    |   | $      | (0.40 | ) |   | $      | 0.16  |  
|                                                                                                      |                       |                         |        |       |      |   |        |       |  
|                                                                                                      | As reported  diluted |                         | $      | (1.53 | )    |   | $      | (0.40 | ) |   | $      | 0.15  |  
|                                                                                                      |                       |                         |        |       |      |   |        |       |  
|                                                                                                      | Pro forma  basic     |                         | $      | (1.77 | )    |   | $      | (0.53 | ) |   | $      | (0.01 | )
|                                                                                                      |                       |                         |        |       |      |   |        |       |  
|                                                                                                      | Pro forma  diluted   |                         | $      | (1.77 | )    |   | $      | (0.53 | ) |   | $      | (0.01 | )
|                                                                                                      |                       |                         |        |       |      |   |        |       |  



|                         |                           |                         |              |      |              |      |             
|------------------------ | ------------------------- | ----------------------- | ------------ | ---- | ------------ | ---- | ------------
|                         |                           | Year Ended December 31,
|                         |                           |                        
|                         |                           | 2003                    |              | 2004 |              | 2005
|                         |                           |                         |              |      |              |     
|Preferred stock options: |                           |                         |              |      |              |     
|                         | Expected lives (in years) |                         | 2.5          |      | 2.5          |      |            
|                         | Risk free interest rates  |                         | 2.15  3.36% |      | 2.77  4.05% |      |            
|                         | Dividend yield            |                         | 10%          |      | 10%          |      |            
|                         | Volatility                |                         | 0%           |      | 0%           |      |            
|Common stock options:    |                           |                         |              |      |              |     
|                         | Expected lives (in years) |                         | 5.0          |      | 5.0          |      | 5.0         
|                         | Risk free interest rates  |                         | 2.15  3.36% |      | 2.77  4.05% |      | 3.59  4.55%
|                         | Dividend yield            |                         | 0%           |      | 0%           |      | 0%          
|                         | Volatility                |                         | 0%           |      | 0  94.6%    |      | 85%         



| |             
| | ------------
| | Income Taxes



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                   
| | ------------------
| | Comprehensive Loss





| |                  
| | -----------------
| | Segment Reporting





| |                            
| | ---------------------------
| | Net Income (Loss) Per Share





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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |                                                         |                                                     |   |        |        |   |   |        |        |   |   |        |       | 
|----------------------- | ------------------------------------------------------- | --------------------------------------------------- | - | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ----- | 
|                        |                                                         | Year Ended December 31,                             |  
|                        |                                                         |                                                     |  
|                        |                                                         | 2003                                                |   |        | 2004   |   |   | 2005   |       
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|Numerator:              |                                                         |                                                     |   |        |        |   |   |        |        |   |   |       
|                        | Net income (loss)                                       |                                                     | $ | (752   | )      |   | $ | (537   | )      |   | $ | 2,740  |      
|                        |                                                         | Accretion on redeemable convertible preferred stock |   |        | (1,729 | ) |   |        | (1,402 | ) |   |        |      | 
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|                        | Net earnings (loss) attributable to common stockholders |                                                     | $ | (2,481 | )      |   | $ | (1,939 | )      |   | $ | 2,740  |      
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|Denominator:            |                                                         |                                                     |   |        |        |   |   |        |        |   |   |       
|                        | Weighted-average shares used to compute basic EPS       |                                                     |   | 1,624  |        |   |   | 4,837  |        |   |   | 17,116 |      
|                        | Effect of dilutive securities:                          |                                                     |   |        |        |   |   |        |        |   |   |        |      
|                        |                                                         | Dilutive common stock equivalents                   |   |        |       |   |   |        |       |   |   |        | 1,076 | 
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|                        | Dilutive potential common shares                        |                                                     |   |       |        |   |   |       |        |   |   | 1,076  |      
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|                        | Weighted-average shares used to compute diluted EPS     |                                                     |   | 1,624  |        |   |   | 4,837  |        |   |   | 18,192 |      
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|Net earnings per share: |                                                         |                                                     |   |        |        |   |   |        |        |   |   |       
|                        | Basic                                                   |                                                     | $ | (1.53  | )      |   | $ | (0.40  | )      |   | $ | 0.16   |      
|                        |                                                         |                                                     |   |        |        |   |   |        |       
|                        | Diluted                                                 |                                                     | $ | (1.53  | )      |   | $ | (0.40  | )      |   | $ | 0.15   |      
|                        |                                                         |                                                     |   |        |        |   |   |        |       



|                                                            |  |                         |        |  |      |  |       |      |  |  |     | 
|----------------------------------------------------------- |  | ----------------------- | ------ |  | ---- |  | ----- | ---- |  |  | --- | 
|                                                            |  | Year Ended December 31, |       
|                                                            |  |                         |       
|                                                            |  | 2003                    |        |  | 2004 |  |       | 2005 | 
|                                                            |  |                         |        |  |      |  |       |      | 
|Redeemable convertible preferred stock                      |  |                         | 9,293  |  |      |  |      |      |  |  |    | 
|Redeemable convertible preferred stock options and warrants |  |                         | 327    |  |      |  |      |      |  |  |    | 
|Common stock options and warrants                           |  |                         | 1,790  |  |      |  | 2,424 |      |  |  | 700 | 
|Common stock subject to repurchase                          |  |                         | 2      |  |      |  | 2     |      |  |  | 2   | 
|                                                            |  |                         |        |  |      |  |       |      | 
|                                                            |  |                         | 11,412 |  |      |  | 2,426 |      |  |  | 702 | 
|                                                            |  |                         |        |  |      |  |       |      | 



| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements

Consolidation of Variable Interest Entities primary beneficiary


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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Share-Based Payment Accounting for
Stock Issued to Employees, Accounting for Stock
Based Compensation Accounting for Stock-Based
Compensation  Transition and Disclosure.








Accounting Changes and Error Corrections Accounting
Changes Reporting Accounting Changes in Interim Financial
Statements


62



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note 3  Equity Investment






|                        |  |              |     |            |      |   |     | 
|----------------------- |  | ------------ | --- | ---------- | ---- | - | --- | 
|                        |  | December 31, |    
|                        |  |              |    
|                        |  | 2004         |     |            | 2005 |  
|                        |  |              |     |            |      |  
|                        |  |              |     | (estimated |     
|                        |  |              |     | unaudited) |     
|Current assets          |  | $            | 490 |            |      | $ | 384 | 
|Non-current assets      |  |              | 82  |            |      |   | 62  | 
|Current liabilities     |  |              | 299 |            |      |   | 314 | 
|Non-current liabilities |  |              |    |            |      |   |    | 

|                         |  |                         |      |   |      |            |      |      |  |   |      |  
|------------------------ |  | ----------------------- | ---- | - | ---- | ---------- | ---- | ---- |  | - | ---- | -
|                         |  | Year Ended December 31, |     
|                         |  |                         |     
|                         |  | 2003                    |      |   | 2004 |            |      | 2005 | 
|                         |  |                         |      |   |      |            |      |      | 
|                         |  |                         |      |   |      | (estimated |     
|                         |  |                         |      |   |      | unaudited) |     
|Net sales revenue        |  | $                       | 692  |   |      | $          | 565  |      |  | $ | 403  |  
|Operating expenses       |  |                         | 806  |   |      |            | 743  |      |  |   | 547  |  
|Net loss from operations |  |                         | (114 | ) |      |            | (178 | )    |  |   | (144 | )
|Net loss                 |  | $                       | (132 | ) |      | $          | (209 | )    |  | $ | (163 | )



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 4  Business Combinations, Goodwill and
Intangible Assets




| |                      
| | ---------------------
| | Business Combinations



|                                     |  |          |      |      |             |     |          |               |  |              |            |   |  |          |           |          |       |   |        |  |  |   |        | 
|------------------------------------ |  | -------- | ---- | ---- | ----------- | --- | -------- | ------------- |  | ------------ | ---------- | - |  | -------- | --------- | -------- | ----- | - | ------ |  |  | - | ------ | 
|                                     |  |          |      |      |             | Net |          |               |  |              |            |   | 
|                                     |  |          |      | Post |             |     | Tangible |               |  | Identifiable |            |   |  |          | Aggregate |         
|                                     |  | Year     |      |      | Acquisition |     |          | Assets        |  |              | Intangible |   |  |          |           | Purchase |      
|Company Name                         |  | Acquired |      |      | Ownership   |     |          | (Liabilities) |  |              | Assets     |   |  | Goodwill |           |          | Price |  
|                                     |  |          |      |      |             |     |          |               |  |              |            |   |  |          |           |          |       |  
|LPI Media, Inc. and related entities |  |          | 2005 |      |             |     | 100      | %             |  | $            | (3,775     | ) |  | $        | 11,100    |          |       | $ | 25,296 |  |  | $ | 32,621 | 



|                                     |  |          |      |  |            |       |       |            |       |       |            |  |            |   |   |  |  |   |        | 
|------------------------------------ |  | -------- | ---- |  | ---------- | ----- | ----- | ---------- | ----- | ----- | ---------- |  | ---------- | - | - |  |  | - | ------ | 
|                                     |  |          |      |  |            |       |       |            |       | Total |           
|                                     |  |          |      |  |            | Trade |       |            | Other |       | Acquired   | 
|                                     |  | Year     |      |  | Customers  |       |       | Names and  |       |       | Intangible |  | Intangible |  
|Company Name                         |  | Acquired |      |  | User Bases |       |       | Trademarks |       |       | Assets     |  | Assets     |  
|                                     |  |          |      |  |            |       |       |            |       |       |            |  |            |  
|LPI Media, Inc. and related entities |  |          | 2005 |  |            | $     | 5,400 |            |       | $     | 5,700      |  |            | $ |  |  |  | $ | 11,100 | 



| |                           
| | --------------------------
| | LPI Media Inc. Acquisition





|                         |  |              |        |   |      |   |        | 
|------------------------ |  | ------------ | ------ | - | ---- | - | ------ | 
|                         |  | December 31, |       
|                         |  |              |       
|                         |  | 2004         |        |   | 2005 |  
|                         |  |              |        |   |      |  
|                         |  | (Unaudited)  |       
|Revenue                  |  | $            | 54,694 |   |      | $ | 60,946 | 
|                         |  |              |        |   |      |  
|Net income               |  | $            | (1,837 | ) |      | $ | 2,734  | 
|                         |  |              |        |   |      |  
|Basic earnings per share |  | $            | (0.38  | ) |      | $ | 0.16   | 
|                         |  |              |        |   |      |  



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |         
| | --------
| | Goodwill







| |                  
| | -----------------
| | Intangible Assets



|                              |  |                   |       |                   |              |   |       |          |       |          |   |  |              |     |        |          |  |   |       |  |  |   |        | 
|----------------------------- |  | ----------------- | ----- | ----------------- | ------------ | - | ----- | -------- | ----- | -------- | - |  | ------------ | --- | ------ | -------- |  | - | ----- |  |  | - | ------ | 
|                              |  | December 31, 2004 |       | December 31, 2005 |             
|                              |  |                   |       |                   |             
|                              |  | Gross             |       |                   |              |   | Net   |          | Gross |          |   |  |              | Net |       
|                              |  | Carrying          |       |                   | Accumulated  |   |       | Carrying |       | Carrying |   |  | Accumulated  |     |        | Carrying | 
|                              |  | Amount            |       |                   | Amortization |   |       | Amount   |       | Amount   |   |  | Amortization |     |        | Amount   | 
|                              |  |                   |       |                   |              |   |       |          |       |          |   |  |              |     |        |          | 
|                              |  | (In thousands)    |       | (In thousands)    |             
|Other intangible assets:      |  |                   |       |                   |              |   |       |          |       |          |   |  |              |     |        |          |  |   |       |  |  |   |        | 
|Customer lists and user bases |  | $                 | 3,278 |                   |              | $ | 3,278 |          |       | $        |  |  |              | $   | 8,678  |          |  | $ | 3,469 |  |  | $ | 5,209  | 
|Tradenames                    |  |                   | 2,340 |                   |              |   | 2,340 |          |       |          |  |  |              |     | 8,040  |          |  |   | 2,340 |  |  |   | 5,700  | 
|Other intangibles             |  |                   | 726   |                   |              |   | 726   |          |       |          |  |  |              |     | 726    |          |  |   | 726   |  |  |   |       | 
|                              |  |                   |       |                   |              |   |       |          |       |          |   |  |              |     |        |          |  |  
|                              |  | $                 | 6,344 |                   |              | $ | 6,344 |          |       | $        |  |  |              | $   | 17,444 |          |  | $ | 6,535 |  |  | $ | 10,909 | 
|                              |  |                   |       |                   |              |   |       |          |       |          |   |  |              |     |        |          |  |  



65



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|              |                     |   |       |       | 
|------------- | ------------------- | - | ----- | ----- | 
|Fiscal Years: |                     |   |       |      
|              | 2006                |   | $     | 1,147 | 
|              | 2007                |   |       | 1,147 | 
|              | 2008                |   |       | 1,119 | 
|              | 2009                |   |       | 980   | 
|              | 2010 and thereafter |   |       | 816   | 
|              |                     |   |      
|              |                     | $ | 5,209 |      
|              |                     |   |      

Note 5  Other Balance Sheet Components


|                                      |  |                |       |   |      |   |       |      |  |   |       |  
|------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                      |  | December 31,   |      
|                                      |  |                |      
|                                      |  | 2003           |       |   | 2004 |   |       | 2005 | 
|                                      |  |                |       |   |      |   |       |      | 
|                                      |  | (In thousands) |      
|Accounts receivable:                  |  |                |       |   |      |   |       |      |  |   |       |  
|Trade accounts receivable             |  | $              | 1,326 |   |      | $ | 2,134 |      |  | $ | 7,033 |  
|Less: Allowance for doubtful accounts |  |                | (43   | ) |      |   | (59   | )    |  |   | (259  | )
|Less: Provision for returns           |  |                |      |   |      |   |      |      |  |   | (744  | )
|                                      |  |                |       |   |      |   |       |      | 
|                                      |  | $              | 1,283 |   |      | $ | 2,075 |      |  | $ | 6,030 |  
|                                      |  |                |       |   |      |   |       |      | 



|                                                   |  |                |        |   |      |   |        |  
|-------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                   |  | December 31,   |       
|                                                   |  |                |       
|                                                   |  | 2004           |        |   | 2005 |  
|                                                   |  |                |        |   |      |  
|                                                   |  | (In thousands) |       
|Property and equipment:                            |  |                |        |   |      |   |        |  
|Computer and network equipment                     |  | $              | 7,130  |   |      | $ | 7,879  |  
|Furniture and fixtures                             |  |                | 918    |   |      |   | 1,396  |  
|Computer software                                  |  |                | 1,683  |   |      |   | 2,523  |  
|Leasehold improvements                             |  |                | 1,191  |   |      |   | 1,555  |  
|Capitalized software and website development costs |  |                | 2,919  |   |      |   | 4,783  |  
|                                                   |  |                |        |   |      |  
|                                                   |  |                | 13,841 |   |      |   | 18,136 |  
|Less: Accumulated depreciation and amortization    |  |                | (6,830 | ) |      |   | (9,969 | )
|                                                   |  |                |        |   |      |  
|                                                   |  | $              | 7,011  |   |      | $ | 8,167  |  
|                                                   |  |                |        |   |      |  

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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                        |  |                |       |  |      |   |       | 
|--------------------------------------------------------------------------------------- |  | -------------- | ----- |  | ---- | - | ----- | 
|                                                                                        |  | December 31,   |      
|                                                                                        |  |                |      
|                                                                                        |  | 2004           |       |  | 2005 |  
|                                                                                        |  |                |       |  |      |  
|                                                                                        |  | (In thousands) |      
|Prepaid expenses and other current assets:                                              |  |                |       |  |      |   |       | 
|Prepaid expenses and other current assets                                               |  | $              | 1,238 |  |      | $ | 2,328 | 
|Receivable from landlord for tenant improvement allowance,
    current portion (Note 2) |  |                | 947   |  |      |   | 243   | 
|                                                                                        |  |                |       |  |      |  
|                                                                                        |  | $              | 2,185 |  |      | $ | 2,571 | 
|                                                                                        |  |                |       |  |      |  

|                                                                                             |  |                |       |  |      |   |       | 
|-------------------------------------------------------------------------------------------- |  | -------------- | ----- |  | ---- | - | ----- | 
|                                                                                             |  | December 31,   |      
|                                                                                             |  |                |      
|                                                                                             |  | 2004           |       |  | 2005 |  
|                                                                                             |  |                |       |  |      |  
|                                                                                             |  | (In thousands) |      
|Other assets:                                                                                |  |                |       |  |      |   |       | 
|Other assets                                                                                 |  | $              | 838   |  |      | $ | 921   | 
|Receivable from landlord for tenant improvement allowance, less
    current portion (Note 2) |  |                | 308   |  |      |   |      | 
|Interest on note receivable from stockholder                                                 |  |                | 179   |  |      |   | 231   | 
|                                                                                             |  |                |       |  |      |  
|                                                                                             |  | $              | 1,325 |  |      | $ | 1,152 | 
|                                                                                             |  |                |       |  |      |  

|                                        |  |                |       |  |      |   |       | 
|--------------------------------------- |  | -------------- | ----- |  | ---- | - | ----- | 
|                                        |  | December 31,   |      
|                                        |  |                |      
|                                        |  | 2004           |       |  | 2005 |  
|                                        |  |                |       |  |      |  
|                                        |  | (In thousands) |      
|Accrued liabilities:                    |  |                |       |  |      |   |       | 
|Accrued payroll and related liabilities |  | $              | 493   |  |      | $ | 989   | 
|Other accrued liabilities               |  |                | 976   |  |      |   | 1,761 | 
|                                        |  |                |       |  |      |  
|                                        |  | $              | 1,469 |  |      | $ | 2,750 | 
|                                        |  |                |       |  |      |  

Note 6  Related Party Transactions




| |                
| | ---------------
| | Note Receivable





| |                             
| | ----------------------------
| | Consulting Service Agreement



67



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##### Table of Contents



PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | Advertising Agreement





| |                                    
| | -----------------------------------
| | Senior Subordinated Promissory Note



Note 7  Commitments and Contingencies




| |                 
| | ----------------
| | Operating Leases





|                         |  |                  |        | 
|------------------------ |  | ---------------- | ------ | 
|Year Ending December 31, |  | Operating Leases |       
|                         |  |                  |       
|2006                     |  | $                | 2,824  | 
|2007                     |  |                  | 2,612  | 
|2008                     |  |                  | 2,660  | 
|2009 and thereafter      |  |                  | 8,580  | 
|                         |  |                  |       
|                         |  | $                | 16,676 | 
|                         |  |                  |       

68



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##### Table of Contents



PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |               
| | --------------
| | Capital Leases



|                                               |  |                |      |  
|---------------------------------------------- |  | -------------- | ---- | -
|Year Ending December 31,                       |  | Capital Leases |     
|                                               |  |                |     
|2006                                           |  | $              | 351  |  
|2007                                           |  |                | 128  |  
|2008                                           |  |                | 81   |  
|2009                                           |  |                | 34   |  
|2010                                           |  |                | 2    |  
|                                               |  |                |     
|Total minimum lease payments                   |  |                | 596  |  
|Less: Amount representing interest             |  |                | (75  | )
|                                               |  |                |     
|Present value of capital lease obligations     |  |                | 521  |  
|Less: Current portion                          |  |                | (309 | )
|                                               |  |                |     
|Long-term portion of capital lease obligations |  | $              | 212  |  
|                                               |  |                |     





| |                      
| | ---------------------
| | Maintenance Agreement







| |                               
| | ------------------------------
| | Co-location Facility Agreement





| |                
| | ---------------
| | Indemnification



69



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |              
| | -------------
| | Contingencies



 www.fr.gay.com www.ooups.com


Note 8  Lease Settlement




Note 9  Notes Payable








70



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 10  Redeemable Convertible Preferred
Stock






|       |  |            |        |        |             |  |       | 
|------ |  | ---------- | ------ | ------ | ----------- |  | ----- | 
|       |  |            |        | Shares |            
|       |  | Shares     |        |        | Issued and  | 
|Series |  | Authorized |        |        | Outstanding | 
|       |  |            |        |        |             | 
|E      |  |            | 1,273  |        |             |  | 812   | 
|D      |  |            | 3,864  |        |             |  | 3,185 | 
|C-1    |  |            | 1,188  |        |             |  | 729   | 
|C-2    |  |            | 1,667  |        |             |  | 801   | 
|C-3    |  |            | 321    |        |             |  | 221   | 
|C-4    |  |            | 2,129  |        |             |  | 1,305 | 
|C-5    |  |            | 1,967  |        |             |  | 1,737 | 
|B      |  |            | 509    |        |             |  | 503   | 
|       |  |            |        |        |             | 
|       |  |            | 12,918 |        |             |  | 9,293 | 
|       |  |            |        |        |             | 



one-to






| |          
| | ---------
| | Dividends



71



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##### Table of Contents



PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |           
| | ----------
| | Redemption





Note 11  Warrants










Note 12  Stock Option Plans






72



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                              |                                                                                                                     |           |       |      |             |  |          |         |   |   |      |      | 
|----------------------------- | ------------------------------------------------------------------------------------------------------------------- | --------- | ----- | ---- | ----------- |  | -------- | ------- | - | - | ---- | ---- | 
|                              |                                                                                                                     | Shares    |       |      |             |  | Weighted |        
|                              |                                                                                                                     | Available |       |      | Options     |  |          | Average |  
|                              |                                                                                                                     | for Grant |       |      | Outstanding |  |          | Price   |  
|                              |                                                                                                                     |           |       |      |             |  |          |         |  
|Balances at December 31, 2002 |                                                                                                                     |           | 716   |      |             |  | 1,737    |         |   | $ | 0.99 |     
|                              | Options granted                                                                                                     |           |       | (102 | )           |  |          | 102     |   |   |      | 0.77 | 
|                              | Options exercised                                                                                                   |           |       |     |             |  |          | (160    | ) |   |      | 0.44 | 
|                              | Options cancelled                                                                                                   |           |       | 107  |             |  |          | (107    | ) |   |      | 0.55 | 
|                              |                                                                                                                     |           |       |      |             |  |          |         |  
|Balances at December 31, 2003 |                                                                                                                     |           | 721   |      |             |  | 1,572    |         |   |   | 1.10 |     
|                              | Additional shares reserved                                                                                          |           |       | 904  |             |  |          |        |   |   |      |     | 
|                              | Options granted                                                                                                     |           |       | (883 | )           |  |          | 883     |   |   |      | 9.25 | 
|                              | Options exercised                                                                                                   |           |       |     |             |  |          | (78     | ) |   |      | 0.56 | 
|                              | Options cancelled                                                                                                   |           |       | 291  |             |  |          | (291    | ) |   |      | 3.83 | 
|                              | Conversion of Series D redeembable convertible preferred
    stock options to common options upon completion of IPO |           |       | 37   |             |  |          | 112     |   |   |      | 4.07 | 
|                              |                                                                                                                     |           |       |      |             |  |          |         |  
|Balances at December 31, 2004 |                                                                                                                     |           | 1,070 |      |             |  | 2,198    |         |   |   | 4.19 |     
|                              | Additional shares reserved                                                                                          |           |       | 545  |             |  |          |        |   |   |      |     | 
|                              | Options granted                                                                                                     |           |       | (461 | )           |  |          | 461     |   |   |      | 8.48 | 
|                              | Options exercised                                                                                                   |           |       |     |             |  |          | (240    | ) |   |      | 1.23 | 
|                              | Options cancelled                                                                                                   |           |       | (466 | )           |  |          | (307    | ) |   |      | 7.16 | 
|                              |                                                                                                                     |           |       |      |             |  |          |         |  
|Balances at December 31, 2005 |                                                                                                                     |           | 688   |      |             |  | 2,112    |         |   | $ | 5.03 |     
|                              |                                                                                                                     |           |       |      |             |  |          |         |  



73



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |                     |       |           |                     |  |          |          |  |   |           |          |  |          |       |  |  |   |       | 
|----------------------- |  | ------------------- | ----- | --------- | ------------------- |  | -------- | -------- |  | - | --------- | -------- |  | -------- | ----- |  |  | - | ----- | 
|                        |  | Options Outstanding |       |           |                    
|                        |  |                     |       |           | Options Exercisable | 
|                        |  |                     |       | Weighted  |                     |  |          |          |  |  
|                        |  |                     |       | Average   |                     |  | Weighted |          |  |   |           | Weighted | 
|                        |  |                     |       | Remaining |                     |  | Average  |          |  |   |           | Average  | 
|                        |  | Number              |       |           | Contractual         |  |          | Exercise |  |   | Number    |          |  | Exercise |      
|Range of Exercise Price |  | of Shares           |       |           | Life (Years)        |  |          | Price    |  |   | of Shares |          |  | Price    |      
|                        |  |                     |       |           |                     |  |          |          |  |   |           |          |  |          |      
|$0.00 - $1.46           |  |                     | 876   |           |                     |  | 6.5      |          |  | $ | 0.45      |          |  |          | 821   |  |  | $ | 0.45  | 
|$1.47 - $2.93           |  |                     | 100   |           |                     |  | 3.7      |          |  |   | 2.26      |          |  |          | 100   |  |  |   | 2.26  | 
|$2.94 - $4.39           |  |                     | 76    |           |                     |  | 5.6      |          |  |   | 4.07      |          |  |          | 76    |  |  |   | 4.07  | 
|$4.40 - $7.33           |  |                     | 34    |           |                     |  | 7.5      |          |  |   | 6.98      |          |  |          | 34    |  |  |   | 6.98  | 
|$7.34 - $8.79           |  |                     | 326   |           |                     |  | 9.2      |          |  |   | 8.29      |          |  |          | 227   |  |  |   | 8.29  | 
|$8.80 - $10.26          |  |                     | 624   |           |                     |  | 8.2      |          |  |   | 9.17      |          |  |          | 620   |  |  |   | 9.17  | 
|$10.27 - $11.72         |  |                     | 2     |           |                     |  | 9.0      |          |  |   | 11.70     |          |  |          | 2     |  |  |   | 11.70 | 
|$11.73 - $13.19         |  |                     | 11    |           |                     |  | 8.7      |          |  |   | 12.35     |          |  |          | 11    |  |  |   | 12.35 | 
|$13.20 - $14.66         |  |                     | 63    |           |                     |  | 6.5      |          |  |   | 13.76     |          |  |          | 63    |  |  |   | 13.76 | 
|                        |  |                     |       |           |                     |  |          |          |  |   |           |          |  |          |      
|                        |  |                     | 2,112 |           |                     |  | 7.3      |          |  | $ | 5.03      |          |  |          | 1,954 |  |  | $ | 4.98  | 
|                        |  |                     |       |           |                     |  |          |          |  |   |           |          |  |          |      







|                              |                                                                                   |                     |    |          |           |  |         |          |   |   |      |      | 
|----------------------------- | --------------------------------------------------------------------------------- | ------------------- | -- | -------- | --------- |  | ------- | -------- | - | - | ---- | ---- | 
|                              |                                                                                   | Options Outstanding |   
|                              |                                                                                   |                     |   
|                              |                                                                                   |                     |    | Weighted |          
|                              |                                                                                   | Shares              |    |          |           |  | Average |         
|                              |                                                                                   | Available for       |    |          | Number of |  |         | Exercise |  
|                              |                                                                                   | Grant               |    |          | Shares    |  |         | Price    |  
|                              |                                                                                   |                     |    |          |           |  |         |          |  
|Balances at December 31, 2002 |                                                                                   |                     | 26 |          |           |  | 229     |          |   | $ | 4.07 |     
|                              | Options granted                                                                   |                     |    |         |           |  |         | (93      | ) |   |      | 4.07 | 
|                              | Options cancelled                                                                 |                     |    | 11       |           |  |         | (11      | ) |   |      | 4.07 | 
|                              |                                                                                   |                     |    |          |           |  |         |          |  
|Balances at December 31, 2003 |                                                                                   |                     | 37 |          |           |  | 125     |          |   |   | 4.07 |     
|                              | Options granted                                                                   |                     |    |         |           |  |         | (4       | ) |   |      | 4.07 | 
|                              | Options cancelled                                                                 |                     |    |         |           |  |         | (9       | ) |   |      | 4.07 | 
|                              | Conversion of Series D options to common stock options upon
    completion of IPO |                     |    | (37      | )         |  |         | (112     | ) |   |      | 4.07 | 
|                              |                                                                                   |                     |    |          |           |  |         |          |  
|Balances at December 31, 2004 |                                                                                   |                     |   |          |           |  |        |          |   | $ |     |     
|                              |                                                                                   |                     |    |          |           |  |         |          |  



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


one-to




| |                                                                 
| | ----------------------------------------------------------------
| | Stock-based Compensation Associated with Awards to
    Employees





Accounting for Certain Transactions Involving Stock
Compensation an Interpretation of APB No. 25






| |                                        
| | ---------------------------------------
| | Option Cancellation and Regrant Program



Accounting for Certain Transactions Involving Stock
Compensation an Interpretation of APB No. 25


75



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                       
| | ----------------------
| | Restricted Stock Grant





| |                                                                            
| | ---------------------------------------------------------------------------
| | Stock-based Compensation Associated with Awards Granted to
    Nonemployees



Note 13  Defined Contribution Plan




Note 14  Income Taxes




76



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##### Table of Contents



PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |  |                         |        |    |      |  |         |      |  |  |        |  
|----------------------------------- |  | ----------------------- | ------ | -- | ---- |  | ------- | ---- |  |  | ------ | -
|                                    |  | Year Ended December 31, |       
|                                    |  |                         |       
|                                    |  | 2003                    |        |    | 2004 |  |         | 2005 | 
|                                    |  |                         |        |    |      |  |         |      | 
|Provision at statutory rate         |  |                         | 34.00  | %  |      |  | 34.00   | %    |  |  | 34.00  | %
|State taxes, net of federal benefit |  |                         | (13.86 | )  |      |  | (1.08   | )    |  |  | 1.82   |  
|Permanent differences               |  |                         | (93.71 | )  |      |  | (116.90 | )    |  |  | 13.10  |  
|Change in valuation allowance       |  |                         | 52.39  |    |      |  | 82.90   |      |  |  | (44.24 | )
|Other                               |  |                         | (3.53  | )  |      |  | (3.80   | )    |  |  | 2.34   |  
|                                    |  |                         |        |    |      |  |         |      | 
|Net tax provision                   |  |                         | (24.71 | )% |      |  | (4.88   | )%   |  |  | 7.02   | %
|                                    |  |                         |        |    |      |  |         |      | 



|                                 |  |              |         |   |      |   |         |      |  |   |         |  
|-------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                 |  | December 31, |        
|                                 |  |              |        
|                                 |  | 2003         |         |   | 2004 |   |         | 2005 | 
|                                 |  |              |         |   |      |   |         |      | 
|Deferred tax assets:             |  |              |         |   |      |   |         |      |  |   |         |  
|Net operating loss carryforwards |  | $            | 15,140  |   |      | $ | 14,637  |      |  | $ | 12,708  |  
|Accruals                         |  |              | 210     |   |      |   | 281     |      |  |   | 1,581   |  
|Other                            |  |              | 101     |   |      |   | 128     |      |  |   | (298    | )
|                                 |  |              |         |   |      |   |         |      | 
|                                 |  |              | 15,451  |   |      |   | 15,046  |      |  |   | 13,991  |  
|Less: Valuation allowance        |  |              | (15,451 | ) |      |   | (15,046 | )    |  |   | (13,991 | )
|                                 |  |              |         |   |      |   |         |      | 
|                                 |  | $            |        |   |      | $ |        |      |  | $ |        |  
|                                 |  |              |         |   |      |   |         |      | 







Note 15  Subsequent Events




| |             
| | ------------
| | Acquisitions



77



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PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Earn-Out




| |              
| | -------------
| | Joint Venture

46-R




| |               
| | --------------
| | Capital Leases





| |                                                      
| | -----------------------------------------------------
| | Termination of Secured Promissory
    Note Receivable



78



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##### Table of Contents



PlanetOut Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Supplementary Data  Selected Quarterly Financial
Data (Unaudited)




|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |        |       |   |     |        |       |   |     |        |        | 
|----------------------------------------------------- | ----------------------------- | --------------------------------------- | ---- | ----- | ------- | - | ---- | ------- | ----- | - | ------- | ----- | ----- | ------- | ---- | ------ | ------- | - | --- | ------- | ----- | - | ------- | ------ | ----- | - | --- | ------ | ----- | - | --- | ------ | ------ | 
|                                                      |                               | Three Months Ended                      |     
|                                                      |                               |                                         |     
|                                                      |                               | Mar 31,                                 |      |       | Jun 30, |   |      | Sep 30, |       |   | Dec 31, |       |       | Mar 31, |      |        | Jun 30, |   |     | Sep 30, |       |   | Dec 31, |       
|                                                      |                               | 2004                                    |      |       | 2004    |   |      | 2004    |       |   | 2004    |       |       | 2005    |      |        | 2005    |   |     | 2005    |       |   | 2005    |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|                                                      |                               | (In thousands except per share amounts) |     
|Revenue:                                              |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |        |       |   |     |        |       |   |     |       
|                                                      | Advertising services          |                                         | $    | 1,097 |         |   | $    | 1,712   |       |   | $       | 1,604 |       |         | $    | 2,128  |         |   | $   | 1,392   |       |   | $       | 2,566  |       |   | $   | 2,106  |       |   | $   | 5,660  |       
|                                                      | Subscription services         |                                         |      | 3,789 |         |   |      | 4,051   |       |   |         | 4,328 |       |         |      | 4,607  |         |   |     | 4,853   |       |   |         | 5,172  |       |   |     | 5,077  |       |   |     | 6,033  |       
|                                                      | Transaction services          |                                         |      | 554   |         |   |      | 347     |       |   |         | 378   |       |         |      | 367    |         |   |     | 420     |       |   |         | 332    |       |   |     | 368    |       |   |     | 1,612  |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|                                                      | Total revenue                 |                                         |      | 5,440 |         |   |      | 6,110   |       |   |         | 6,310 |       |         |      | 7,102  |         |   |     | 6,665   |       |   |         | 8,070  |       |   |     | 7,551  |       |   |     | 13,305 |       
|Operating expenses:                                   |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |        |       |   |     |        |       |   |     |       
|                                                      | Cost of revenues              |                                         |      | 1,994 |         |   |      | 1,812   |       |   |         | 1,826 |       |         |      | 1,871  |         |   |     | 2,113   |       |   |         | 2,305  |       |   |     | 2,167  |       |   |     | 5,202  |       
|                                                      | Sales and marketing           |                                         |      | 1,585 |         |   |      | 2,115   |       |   |         | 2,099 |       |         |      | 2,451  |         |   |     | 2,449   |       |   |         | 2,514  |       |   |     | 2,518  |       |   |     | 3,353  |       
|                                                      | General and administrative    |                                         |      | 1,052 |         |   |      | 994     |       |   |         | 990   |       |         |      | 1,133  |         |   |     | 1,291   |       |   |         | 1,506  |       |   |     | 1,340  |       |   |     | 2,331  |       
|                                                      | Stock-based compensation:(*)  |                                         |      | 479   |         |   |      | 709     |       |   |         | 537   |       |         |      | 409    |         |   |     | (24     | )     |   |         | 142    |       |   |     | 133    |       |   |     | 748    |       
|                                                      | Depreciation and amortization |                                         |      | 470   |         |   |      | 559     |       |   |         | 645   |       |         |      | 783    |         |   |     | 820     |       |   |         | 848    |       |   |     | 787    |       |   |     | 1,005  |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|                                                      |                               | Total operating expenses                |      |       | 5,580   |   |      |         | 6,189 |   |         |       | 6,097 |         |      |        | 6,647   |   |     |         | 6,649 |   |         |        | 7,315 |   |     |        | 6,945 |   |     |        | 12,639 | 
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Income (loss) from operations                         |                               |                                         | (140 | )     |         |   | (79  | )       |       |   | 213     |       |       |         | 455  |        |         |   | 16  |         |       |   | 755     |        |       |   | 606 |        |       |   | 666 |       
|Other income (expense), net                           |                               |                                         | (64  | )     |         |   | (128 | )       |       |   | (223    | )     |       |         | (546 | )      |         |   | 192 |         |       |   | 267     |        |       |   | 310 |        |       |   | 135 |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Income before taxes                                   |                               |                                         | (204 | )     |         |   | (207 | )       |       |   | (10     | )     |       |         | (91  | )      |         |   | 208 |         |       |   | 1,022   |        |       |   | 916 |        |       |   | 801 |       
|Benefit (provision) for income taxes                  |                               |                                         |     |       |         |   | (5   | )       |       |   | (19     | )     |       |         | (1   | )      |         |   | (29 | )       |       |   | (12     | )      |       |   | (75 | )      |       |   | (91 | )     
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Net income (loss)                                     |                               | $                                       | (204 | )     |         | $ | (212 | )       |       | $ | (29     | )     |       | $       | (92  | )      |         | $ | 179 |         |       | $ | 1,010   |        |       | $ | 841 |        |       | $ | 710 |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Accretion on redeemable convertible preferred stock   |                               |                                         | (438 | )     |         |   | (437 | )       |       |   | (438    | )     |       |         | (89  | )      |         |   |    |         |       |   |        |        |       |   |    |        |       |   |    |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Net income available for distribution (loss)          |                               | $                                       | (642 | )     |         | $ | (649 | )       |       | $ | (467    | )     |       | $       | (181 | )      |         | $ | 179 |         |       | $ | 1,010   |        |       | $ | 841 |        |       | $ | 710 |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Net earnings (loss) per share:                        |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |        |       |   |     |        |       |   |     |       
|                                                      | Basic                         |                                         | $    | (0.37 | )       |   | $    | (0.37   | )     |   | $       | (0.25 | )     |         | $    | (0.01  | )       |   | $   | 0.01    |       |   | $       | 0.06   |       |   | $   | 0.05   |       |   | $   | 0.04   |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|                                                      | Diluted                       |                                         | $    | (0.37 | )       |   | $    | (0.37   | )     |   | $       | (0.25 | )     |         | $    | (0.01  | )       |   | $   | 0.01    |       |   | $       | 0.06   |       |   | $   | 0.05   |       |   | $   | 0.04   |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|Weighted-average shares used to compute net earnings: |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |        |       |   |     |        |       |   |     |       
|                                                      | Basic                         |                                         |      | 1,725 |         |   |      | 1,773   |       |   |         | 1,841 |       |         |      | 14,035 |         |   |     | 16,939  |       |   |         | 17,092 |       |   |     | 17,202 |       |   |     | 17,261 |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|                                                      | Diluted                       |                                         |      | 1,725 |         |   |      | 1,773   |       |   |         | 1,841 |       |         |      | 14,035 |         |   |     | 18,269  |       |   |         | 18,249 |       |   |     | 18,200 |       |   |     | 18,194 |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|(*)Stock-based compensation is allocated as follows:  |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |        |       |   |     |        |       |   |     |       
|                                                      | Cost of revenues              |                                         | $    | 149   |         |   | $    | 202     |       |   | $       | 115   |       |         | $    | 99     |         |   | $   | 12      |       |   | $       | 15     |       |   | $   | 10     |       |   | $   | 140    |       
|                                                      | Sales and marketing           |                                         |      | 87    |         |   |      | 200     |       |   |         | 149   |       |         |      | 120    |         |   |     | 7       |       |   |         | 18     |       |   |     | 33     |       |   |     | 196    |       
|                                                      | General and administrative    |                                         |      | 243   |         |   |      | 307     |       |   |         | 273   |       |         |      | 190    |         |   |     | (43     | )     |   |         | 109    |       |   |     | 90     |       |   |     | 412    |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       
|                                                      |                               | $                                       | 479  |       |         | $ | 709  |         |       | $ | 537     |       |       | $       | 409  |        |         | $ | (24 | )       |       | $ | 142     |        |       | $ | 133 |        |       | $ | 748 |       
|                                                      |                               |                                         |      |       |         |   |      |         |       |   |         |       |       |         |      |        |         |   |     |         |       |   |         |       

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PlanetOut Inc.


FINANCIAL STATEMENT SCHEDULE


10-K


|                                 |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |   |        |   |  |   |        | 
|-------------------------------- | ---------------------------- | -------------- | - | ------ | ----------- |  | - | -------------- |  | ------- | ---------- | --- |  | ------------- | - | ------ | - |  | - | ------ | 
|                                 |                              | Balance at     |   |        | Charged or  |  |   |                |  | Charges |            |     | 
|                                 |                              | Beginning      |   |        | Credited to |  |   | Charged to     |  |         | Utilized   |     |  | Balance at    |  
|                                 |                              | of Period      |   |        | Net Income  |  |   | Other Accounts |  |         | Write-offs |     |  | End of Period |  
|                                 |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |  
|                                 |                              | (In thousands) |  
|Allowance for Doubtful Accounts  |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |   |        |   |  |   |       
|                                 | Year ended December 31, 2003 |                | $ | 82     |             |  | $ | 25             |  |         | $          |    |  |               | $ | (64    | ) |  | $ | 43     | 
|                                 | Year ended December 31, 2004 |                |   | 43     |             |  |   | 34             |  |         |            |    |  |               |   | (18    | ) |  |   | 59     | 
|                                 | Year ended December 31, 2005 |                |   | 59     |             |  |   | 112            |  |         |            | 175 |  |               |   | (87    | ) |  |   | 259    | 
|Allowance for Transaction Losses |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |   |        |   |  |   |       
|                                 | Year ended December 31, 2003 |                |   |       |             |  |   | 55             |  |         |            |    |  |               |   |       |   |  |   | 55     | 
|                                 | Year ended December 31, 2004 |                |   | 55     |             |  |   | 35             |  |         |            |    |  |               |   |       |   |  |   | 90     | 
|                                 | Year ended December 31, 2005 |                |   | 90     |             |  |   | 3              |  |         |            |    |  |               |   |       |   |  |   | 93     | 
|Provision for Returns            |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |   |        |   |  |   |       
|                                 | Year ended December 31, 2003 |                |   |       |             |  |   |               |  |         |            |    |  |               |   |       |   |  |   |       | 
|                                 | Year ended December 31, 2004 |                |   |       |             |  |   |               |  |         |            |    |  |               |   |       |   |  |   |       | 
|                                 | Year ended December 31, 2005 |                |   |       |             |  |   | 839            |  |         |            |    |  |               |   | (95    | ) |  |   | 744    | 
|Tax Valuation Allowance          |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |   |        |   |  |   |       
|                                 | Year ended December 31, 2003 |                |   | 15,710 |             |  |   |               |  |         |            |    |  |               |   | (259   | ) |  |   | 15,451 | 
|                                 | Year ended December 31, 2004 |                |   | 15,451 |             |  |   |               |  |         |            |    |  |               |   | (405   | ) |  |   | 15,046 | 
|                                 | Year ended December 31, 2005 |                |   | 15,046 |             |  |   |               |  |         |            |    |  |               |   | (1,055 | ) |  |   | 13,991 | 
|Inventory Obsolescence Reserves  |                              |                |   |        |             |  |   |                |  |         |            |     |  |               |   |        |   |  |   |       
|                                 | Year ended December 31, 2003 |                |   |       |             |  |   |               |  |         |            |    |  |               |   |       |   |  |   |       | 
|                                 | Year ended December 31, 2004 |                |   |       |             |  |   |               |  |         |            |    |  |               |   |       |   |  |   |       | 
|                                 | Year ended December 31, 2005 |                |   |       |             |  |   | 5              |  |         |            | 82  |  |               |   | (2     | ) |  |   | 85     | 

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures

Change in Auditors




S-K


S-K.









|         |                       
|-------- | ----------------------
|Item 9A. | Control and Procedures

Evaluation of Disclosure Controls and Procedures






Managements Report on Internal Control over Financial
Reporting.


13a-15(f) 15d-15(f) Internal
Control-Integrated Framework




81



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Changes in Internal Control over Financial Reporting











|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

www.planetoutinc.com www.planetoutinc.com









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



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|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Financial Statements; See Index to Consolidated
    Financial Statements at Item 8 on page 45 of this
    report.                                      
|
| | Exhibits are incorporated herein by reference or are filed with
    this report as indicated below (numbered in accordance with
    Item 601 of
    Regulation S-K):

|        |    |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                         
|Number  |    | Description of Documents
|        |    |                         
|        | 2  | .1                       |  | Asset Purchase Agreement dated November 8, 2005, by and
    among: LPI Media Inc. and SpecPub, Inc., each a Delaware
    corporation; Triangle Marketing Services, Inc., a Delaware
    corporation and a wholly owned subsidiary of LPI Media Inc.;
    PlanetOut Inc., a Delaware corporation; and Vulcan Acquisition
    Corp. and SpecPub Acquisition Corp., each a Delaware corporation
    and a wholly owned subsidiary of PlanetOut Inc. (filed as
    Exhibit 2.1 to our Current Report on Form 8-K, File
    No. 000-50879, filed on November 14, 2005, and amended as
    disclosed in our current report on Form 8-K/A, File No.
    000-50879, filed on January 20, 2006, each of which is
    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.
|        | 2  | .2                       |  | 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 2.2 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 | .1                       |  | 1996 Stock Option Plan of PlanetOut Corporation (filed as
    Exhibit 10.1 to our Registration Statement on
    Form S-1, File No. 333-114988, initially filed on
    April 29, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|        |    |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                         
|Number  |    | Description of Documents
|        |    |                         
|        | 10 | .2                       |  | 1996 Equity Incentive Plan of PlanetOut Corporation (filed as
    Exhibit 10.2 to our Registration Statement on
    Form S-1, File No. 333-114988, initially filed on
    April 29, 2004 and incorporated herein by reference).                                                                                                                                                                                                                               
|        | 10 | .3                       |  | Secured Promissory Note dated May 2001 and Stock Pledge
    Agreement dated June 29, 2001 by and between PlanetOut
    Partners, Inc. and Mark Elderkin (filed as Exhibit 10.4 to
    our Registration Statement on Form S-1, File
    No. 333-114988, initially filed on April 29, 2004 and
    incorporated herein by reference).                                                                                                                           
|        | 10 | .4                       |  | Online Partners.com, Inc. 1997 Stock Plan (filed as
    Exhibit 10.5 to our Registration Statement on
    Form S-1, File No. 333-114988, initially filed on
    April 29, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                         
|        | 10 | .5                       |  | PlanetOut Partners, Inc. 2001 Equity Incentive Plan (filed as
    Exhibit 10.6 to our Registration Statement on
    Form S-1, File No. 333-114988, initially filed on
    April 29, 2004 and incorporated herein by reference).                                                                                                                                                                                                                               
|        | 10 | .6                       |  | PlanetOut Inc. 2004 Equity Incentive Plan (filed as
    Exhibit 10.7 to our Registration Statement on
    Form S-1, File No. 333-114988, initially filed on
    April 29, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                         
|        | 10 | .7                       |  | PlanetOut Inc. 2004 Executive Officers and Directors Equity
    Incentive Plan (filed as Exhibit 10.8 to our Registration
    Statement on Form S-1, File No. 333-114988, initially
    filed on April 29, 2004 and incorporated herein by
    reference).                                                                                                                                                                                                    
|        | 10 | .8                       |  | Form of PlanetOut Inc. 2004 Equity Incentive Plan Stock Option
    Grant Notice and Agreement (filed as Exhibit 99.7 to our
    Registration Statement on Form S-8, File
    No. 333-121633, initially filed on December 23, 2004
    and incorporated herein by reference).                                                                                                                                                                                  
|        | 10 | .9                       |  | Form of PlanetOut Inc. 2004 Equity Incentive Plan Restricted
    Stock Award Agreement (filed as Exhibit 99.2 to our Current
    Report on Form 8-K, File No. 000-50879, filed on
    December 23, 2005, and incorporated herein by reference).                                                                                                                                                                                                               
|        | 10 | .10                      |  | Office lease dated July 1, 2004 by and between Blue Jean
    Equities West and PlanetOut Inc. (filed as Exhibit 10.12 to
    our Registration Statement on Form S-1, File
    No. 333-114988, initially filed on April 29, 2004 and
    incorporated herein by reference).                                                                                                                                                                                    
|        | 10 | .11                      |  | Form of directors and officers indemnification
    agreement (filed as Exhibit 10.22 to our Registration
    Statement on Form S-1, File No. 333-114988, initially
    filed on April 29, 2004 and incorporated herein by
    reference).                                                                                                                                                                                                                   
|        | 10 | .12                      |  | Amended and Restated Employment Agreement dated as of
    April 26, 2004 by and between Lowell R. Selvin and
    PlanetOut Inc. (filed as Exhibit 10.24 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 December 23, 2005, each of which is
    incorporated herein by reference).
|        | 10 | .13                      |  | 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 | .14                      |  | Amended and Restated Employment Agreement dated as of
    April 26, 2004 by and between Jeffrey T. Soukup and
    PlanetOut Inc. (filed as Exhibit 10.26 to our Registration
    Statement on Form S-1, File No. 333-114988, initially
    filed on April 29, 2004 and incorporated herein by
    reference).                                                                                                                                                 
|        | 10 | .15                      |  | Amended and Restated Investors Rights Agreement by and among the
    registrant and the parties identified on Schedule A thereto
    (filed as Exhibit 10.23 to our Registration Statement on
    Form S-1, File No. 333-114988, initially filed on
    April 29, 2004 and incorporated herein by reference).                                                                                                                                                 
|        | 10 | .16                      |  | Employment Agreement dated as of January 31, 2005 by and
    between Donna L. Gibbs and PlanetOut Inc. (filed as
    Exhibit 99.1 to our Current Report on Form 8-K, File
    No. 000-50879, filed on February 4, 2005, and amended as
    described in Exhibit 99.3 to our Current Report on
    Form 8-K, File No. 000-50879, filed on May 23, 2005,
    each of which is incorporated herein by reference).                                                

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|        |    |                          |  |                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                         
|Number  |    | Description of Documents
|        |    |                         
|        | 10 | .17                      |  | Form of Stock Option Agreement for Non-Employee Directors under
    the PlanetOut Inc. 2004 Equity Incentive Plan (filed as
    Exhibit 99.2 to our Current Report on Form 8-K, File
    No. 000-50879, filed on May 23, 2005, and incorporated
    herein by reference).                                                                                                    
|        | 10 | .18                      |  | PlanetOut Inc. Management by Objective Plan (a description of
    which is filed as Exhibit 99.1 to our Current Report on
    Form 8-K, File No. 000-50879, filed on May 23, 2005
    and incorporated herein by reference).                                                                                                                                                 
|        | 10 | .19                      |  | Employment Agreement dated as of June 30, 2005 and
    effective July 6, 2005, by and among PlanetOut Inc. and
    Peter Kretzman (filed as Exhibit 99.1 to our Current Report
    on Form 8-K, File No. 000-50879, filed on July 7, 2005
    and incorporated herein by reference).                                                                                         
|        | 10 | .20                      |  | 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).
|        | 10 | .21                      |  | Option Acceleration 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 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).                                                                            
|        | 16 | .1                       |  | Letter Regarding Change in Accountants dated June 29, 2005
    from PricewaterhouseCoopers LLP to the Securities and Exchange
    Commission (filed as Exhibit 16.1 to our Current Report on
    Form 8-K, File No. 000-50879, filed on June 30, 2005
    and incorporated herein by reference).                                                                             
|        | 21 | .1                       |  | List of subsidiaries, filed herewith.                                                                                                                                                                                                                                                                                                                                        
|        | 23 | .1                       |  | Consent PricewaterhouseCoopers LLP, Independent Registered
    Public Accounting Firm.                                                                                                                                                                                                                                                                                       
|        | 23 | .2                       |  | Consent of Stonefield Josephson, Inc., Independent Registered
    Public Accounting Firm.                                                                                                                                                                                                                                                                                    
|        | 24 | .1                       |  | Power of Attorney (see the signature page of this Annual Report
    on Form 10-K)                                                                                                                                                                                                                                                                                            
|        | 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.



| |     |                     
| | --- | --------------------
| | By: | /s/ Daniel J. Miller

| |                         
| | ------------------------
| |                         
| | Daniel J. Miller        
| | Chief Financial Officer,
| | Senior Vice President   

POWER OF ATTORNEY


attorneys-in 10-K, attorneys-in attorneys-in






|                                                   |  |                                                                                                 |  |                |  | 
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                          |  | Title                                                                                           |  | Date          
|                                                   |  |                                                                                                 |  |               
|                                                  
|/s/ Lowell R. SelvinLowell R. Selvin               |  | Chief Executive Officer
    (Principal Executive Officer) and
    Chairman of the Board         |  | March 15, 2006
|                                                  
|/s/ Daniel J. MillerDaniel J. Miller               |  | Chief Financial Officer (Principal Financial and Accounting
    Officer), Senior Vice President |  | March 15, 2006
|                                                  
|/s/ Jerry ColonnaJerry Colonna                     |  | Director                                                                                        |  | March 15, 2006
|                                                  
|/s/ H. William
    Jesse, Jr.H. William Jesse, Jr. |  | Director                                                                                        |  | March 15, 2006
|                                                  
|/s/ Karen MageeKaren Magee                         |  | Director                                                                                        |  | March 15, 2006
|                                                  
|/s/ Allen MorganAllen Morgan                       |  | Director                                                                                        |  | March 15, 2006
|                                                  
|/s/ Robert W. KingRobert W. King                   |  | Director                                                                                        |  | March 15, 2006

86