Juno 2014 Annual Report Download - page 28

Table of Contents
activity of those visitors and members. A decline in the number of visitors or registered or active free social networking members, or a decline in the activity
of those members, could result in decreased pay accounts, decreased content on our websites, and decreased advertising revenues. A decline in the number of
registered or active loyalty marketing service members could also result in decreased advertising revenues. We have experienced a decline in our number of
active members. The failure to increase or maintain the number of visitors to our websites, our base of free members, or the failure to convince our free
members to actively participate in our websites or services, could have a material adverse effect on our business, financial condition, results of operations,
and cash flows.
Failure to maintain our standard pricing could have adverse effects on our financial results.
For competitive and other reasons, we have been offering a large percentage of discounted pricing plans on a promotional basis. In general, these
discounted pricing plans offer a subscription term at a significant discount compared to the standard pricing for such subscription term. Any increases in the
percentage of pay accounts under a discounted pricing plan and any increases in the level of the discounts will likely result in a decrease in subscription
revenues and ARPU, in particular, if such increases continue. Although these discounted pricing plans, by their terms, renew at the then-current standard
pricing for such subscription term upon the expiration of the initial term, we cannot determine the number of pay accounts that will renew at the then-current
standard pricing or at all. We intend to continue offering discounted pricing plans in the future, and we cannot assure you that the volume or level of the
discounts offered during a period will not be higher than anticipated. Our continued use of discounted pricing plans has resulted in our becoming dependent
on offering such plans in order to obtain new pay accounts and retain existing pay accounts and may result in our having to reduce our standard pricing,
which would adversely impact our financial results.
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If the FTD Spin-Off Transaction were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, then the FTD Spin-Off Transaction
could result in significant tax liabilities.
United Online, Inc. received a private letter ruling from the IRS, substantially to the effect that, for U.S. federal income tax purposes, the FTD Spin-Off
Transaction qualifies as a tax-free transaction for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code of 1986, as amended. In
addition, prior to the consummation of the FTD Spin-Off Transaction, United Online, Inc. received a legal opinion, substantially to the effect that the FTD
Spin-Off Transaction so qualifies. The IRS ruling and the tax opinion rely on certain facts, assumptions and undertakings, and certain representations from
United Online, Inc. and FTD, regarding the past and future conduct of both respective businesses and other matters, and the tax opinion relies on the IRS
ruling. Notwithstanding the IRS ruling and the tax opinion, the IRS could determine that the FTD Spin-Off Transaction should be treated as a taxable
transaction if it determines that any of these facts, assumptions, representations, or undertakings is not correct, or that the FTD Spin-Off Transaction should be
taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinion that are not covered by the IRS ruling.
If the FTD Spin-Off Transaction ultimately is determined to be taxable, then a stockholder of United Online, Inc. that received shares of FTD common
stock in the FTD Spin-Off Transaction would be treated as having received a distribution of property in an amount equal to the fair market value of such
shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the
extent of United Online's current and accumulated earnings and profits. Any amount that exceeded United Online's earnings and profits would be treated first
as a non-taxable return of capital to the extent of such stockholder's tax basis in its shares of United Online, Inc. stock with any remaining amount being
taxed as a capital gain. In addition, United Online would recognize a taxable gain in an amount equal to the excess, if any, of the
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