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F-8
Demand Media, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share amounts)
1. Company Background and Overview
Demand Media, Inc., together with its consolidated subsidiaries (the “Company”) is a Delaware corporation
headquartered in Santa Monica, California. The Company’s business is focused on an Internet-based model for the professional
creation of content at scale, and is comprised of two service offerings, Content & Media and Registrar.
Content & Media
The Company’s Content & Media service offering is engaged in creating long-lived media content, primarily
consisting of text articles and videos, and delivering it along with social media and monetization tools to the Company’s owned
and operated websites and network of customer websites. Content & Media services are delivered through the Company’s
Content & Media platform, which includes its content creation studio, social media applications and a system of monetization
tools designed to match content with advertisements in a manner that is optimized for revenue yield and end-user experience.
Registrar
The Company’s Registrar service offering provides domain name registration and related value added service
subscriptions to third parties through its wholly owned subsidiary, eNom.
Initial Public Offering
In January 2011, the Company completed its initial public offering whereby it received proceeds, net of underwriters
discounts but before deducting offering expenses, of $81,817 from the issuance of 5,175 shares of common stock. As a result of
the initial public offering, all shares of the Company’s convertible preferred stock converted into 61,672 shares of common
stock and warrants to purchase common stock or convertible preferred stock net exercised into 477 shares of common stock.
Reverse Stock-Split
In October 2010, the Company’s stockholders approved a 1-for-2 reverse stock split of its outstanding common stock,
and a proportional adjustment to the existing conversion ratios for each series of preferred stock which was effected in
January 2011. Accordingly, all common stock share and per share amounts for all periods presented in these consolidated
financial statements and notes thereto, have been adjusted retrospectively, where applicable, to reflect this reverse split and
adjustment of the preferred stock conversion ratio.
2. Summary of Significant Accounting Policies
A summary of the significant accounting policies consistently applied in the preparation of the accompanying
consolidated financial statements follows.
Principles of Consolidation
The consolidated financial statements include the accounts of Demand Media, Inc. and its wholly owned subsidiaries.
Acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s
purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on
the acquisition dates. All significant intercompany transactions and balances have been eliminated in consolidation.
Investments in affiliates over which the Company has the ability to exert significant influence, but does not control
and is not the primary beneficiary of, including NameJet, LLC (“NameJet”), are accounted for using the equity method of
accounting. Investments in affiliates which the Company has no ability to exert significant influence are accounted for using
the cost method of accounting. The Company’s proportional shares of affiliate earnings or losses accounted for under the equity
method of accounting, which are not material for all periods presented, are included in other income (expense) in the
Company’s consolidated statements of operations. Affiliated companies are not material individually or in the aggregate to the
Company’s financial position, results of operations or cash flows for any period presented.