Company Background and Basis of Presentation | 6 Months Ended |
Jun. 30, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | ' |
1. Company Background and Basis of Presentation |
In February 2013, Demand Media, Inc. (“Demand Media”) announced that its board of directors authorized Demand Media to pursue the separation of its business into two distinct publicly traded entities: a new company named Rightside Group, Ltd. (“Rightside,” the “Company,” “our,” “we,” or “us”) focused on domain name services, and Demand Media, a digital media company. On August 1, 2014, Demand Media consummated a tax free distribution of all of the outstanding shares of our common stock on a pro rata basis to Demand Media stockholders (the “separation” or the “spin‑off”) as of the record date. After the spin‑off, we began operating as an independent, publicly traded company. |
We were incorporated on July 11, 2013 as a direct, wholly owned subsidiary of Demand Media, a New York Stock Exchange (“NYSE”) listed company that, prior to the spin-off, was a diversified digital media and domain name services company. During the periods presented, Demand Media owned all of the outstanding shares of our capital stock. We have one class of common stock issued and outstanding, and no preferred stock is outstanding. During the periods presented, we did not have any material assets or liabilities, nor did we engage in any business or other activities, other than in connection with the spin‑off. In connection with the spin‑off, Demand Media contributed or transferred certain of the subsidiaries and assets relating to Demand Media’s domain name services business to us, and we or our subsidiaries assumed all of the liabilities relating to Demand Media’s domain name services business. |
We provide domain name registration and related value‑added service subscriptions to third parties through our wholly owned subsidiaries, eNom, Incorporated (“eNom”) and Name.com. We are also a significant participant in the Internet Corporation for Assigned Names and Numbers’ (“ICANN”) substantial expansion of the number of available generic Top Level Domain (“gTLDs”), with the first gTLDs delegated in October 2013 (“New gTLD Program”). As part of the New gTLD Program, our domain name services business entered into its first registry operator agreements with ICANN becoming an accredited registry for new gTLDs, and eNom and Name.com also entered into contracts necessary to participate in the New gTLD Program. We began to provide back‑end domain name registry and related services for gTLDs owned by a third‑party domain name registry and we have operations for our own gTLDs. |
Basis of Presentation |
These condensed combined financial statements have been prepared on a stand‑alone basis and are derived from the condensed consolidated financial statements and accounting records of Demand Media. The condensed combined financial statements reflect our financial position, results of operations, equity and cash flows as a separate company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We reclassified our Statement of Operations to reflect a single‑step presentation. This reclassification was applied to all periods presented on a consistent basis. |
On August 1, 2014, the 1,000 shares of the Company’s common stock, par value $0.0001 per share, issued and outstanding immediately prior to the separation from Demand Media, Inc. were automatically reclassified as and became 18,412,985 shares of common stock, par value $0.0001 per share. Basic and diluted earnings per share and the weighted average number of shares outstanding were retrospectively restated adjusting for such reclassification. |
The accompanying condensed combined financial statements include eNom, Hot Media, Inc. and their respective subsidiaries as well as six international Demand Media subsidiaries. Rightside represented the domestic and international operations associated with Demand Media’s domain name services business. |
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Our condensed combined financial statements assume the allocation to us of certain Demand Media corporate expenses relating to Rightside (refer to Note 12—Transactions with Related Parties and Parent Company Investment for further information). The accounting for income taxes is computed for our company on a separate tax return basis (refer to Note 8—Income Taxes for further information). |
All significant intercompany accounts and transactions, other than those with Demand Media, have been eliminated in preparing the combined financial statements. All transactions between us and Demand Media have been included in these combined financial statements and are deemed to be settled. The total net effect of the settlement of these transactions is reflected in the combined statements of cash flow as a financing activity and in the combined balance sheets as “Parent company investment.” Parent company investment in the condensed combined balance sheets represents Demand Media’s historical investment in our company, the net effect of cost allocations from transactions with Demand Media and our accumulated earnings. |
The condensed financial statements include expense allocations for certain: |
| · | | corporate functions historically provided by Demand Media, including, but not limited to, finance, legal, information technology, human resources, communications, compliance, and other shared services; |
| · | | employee benefits and incentives; and |
| · | | stock‑based compensation. |
These expenses have been allocated to us on a direct basis when identifiable, with the remainder allocated on a pro rata basis calculated as a percentage of our revenue, headcount or expenses to Demand Media’s consolidated results. We consider the basis on which these expenses were allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented. The allocations do not, however, reflect the expense that we would have incurred as an independent company for the periods presented. Actual costs that may have been incurred if we had been a stand‑alone company would depend on a number of factors, including, but not limited to, the chosen organizational structure, the costs of being a stand‑alone publicly traded company, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. Following our separation from Demand Media, we will perform these functions using our own resources and purchased services. For an interim period, however, some of these functions will continue to be provided by Demand Media under a transition services agreement, which are planned to extend for a period up to 18 months. Costs incurred by Demand Media to complete the spin‑off were not allocated to us. |
The condensed combined financial statements include certain assets and liabilities that have historically been held at the Demand Media corporate level but are specifically identifiable or otherwise allocable to us. |
The accompanying interim condensed combined balance sheet at June 30, 2014, the condensed combined statements of operations and condensed combined statements of comprehensive income (loss) for the three and six month periods ended June 30, 2014 and 2013, the condensed combined statements of cash flows for the six month periods ended June 30, 2014 and 2013 and the condensed combined statement of stockholders’ equity for the six month period ended June 30, 2014 are unaudited. |
In the opinion of management, the unaudited interim condensed combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our statement of financial position as of June 30, 2014 and our results of operations for the three and six month periods ended June 30, 2014 and 2013 and our cash flows for the six month periods ended June 30, 2014 and 2013. The results for the three and six month period ended June 30, 2014 are not necessarily indicative of the results expected for the full year. The condensed combined balance sheet as of December 31, 2013 has been derived from our audited combined financial statements for the year ended December 31, 2013 included in our Form 10 as filed with the SEC on July 14, 2014. |
The interim unaudited condensed combined financial statements have been prepared in accordance with GAAP, for interim financial information. They do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our audited combined financial statements and notes thereto included elsewhere in our Form 10 as filed with the SEC on July 14, 2014. |
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