Company Background, Separation from Demand Media and Basis of Presentation | 1. Company Background, Separation from Demand Media and Basis of Presentation In February 2013, Demand Media, Inc. (“Demand Media”), a New York Stock Exchange listed company, announced that it would pursue the separation of its business into two distinct publicly-traded companies: a new company named Rightside Group, Ltd. (together with its subsidiaries, “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 completed 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”) as of the record date. After the Separation, we began operating as an independent, publicly-traded company. We were incorporated on July 11, 2013, as a subsidiary of Demand Media. Prior to the Separation, 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 outstanding. In connection with the Separation, Demand Media contributed or transferred certain of the subsidiaries and assets relating to its 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. We are also a participant in the expansion of generic Top Level Domains (“gTLDs”) by the Internet Corporation for Assigned Names and Numbers (“ICANN”), with the first gTLDs delegated in October 2013 (the “New gTLD Program”). We became an accredited registry for new gTLDs as part of the New gTLD Program. Separation from Demand Media Prior to the Separation, the authorized shares of Rightside capital stock were increased from 1,000 shares to 120.0 million shares, divided into the following classes: 100.0 million shares of common stock, par value $0.0001 per share, and 20.0 million shares of preferred stock, par value $0.0001 per share. The 1,000 shares of Rightside common stock, par value $0.0001 per share, that were previously issued and outstanding were automatically reclassified as and became 18.4 million shares of common stock, par value $0.0001 per share. The Separation was consummated through a tax-free transaction involving the distribution of all Rightside common stock held by Demand Media to Demand Media’s stockholders on August 1, 2014. Upon the Separation, holders of Demand Media common stock on the record date received one share of Rightside common stock for every five shares of Demand Media common stock. Rightside became an independent, publicly-traded company on the NASDAQ Global Select Market using the symbol: “NAME.” We entered into various agreements with Demand Media which provide for the allocation between Rightside and Demand Media of certain assets, liabilities, and obligations, and govern the relationship between Rightside and Demand Media after the Separation. After the Separation on August 1, 2014 Our financial statements are presented on a consolidated basis, as we became a separate consolidated group. Our balance sheet, statement of operations, and statement of cash flows include the accounts of Rightside and our wholly-owned subsidiaries. These financial statements reflect our financial position, results of operations, statement of comprehensive loss, equity and cash flows as a separate company and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Prior to the Separation on August 1, 2014 Our financial statements were presented on a combined basis as carve-out financial statements, as we were not a separate consolidated company. Our financial statements were derived from the financial statements and accounting records of Demand Media. O ur financial statements assume the allocation to us of certain Demand Media corporate expenses relating to Rightside (refer to Note 9—Transactions with Related Parties for further information). The accounting for income taxes was computed for our company on a separate tax return basis. All significant intercompany accounts and transactions, other than those with Demand Media, have been eliminated in preparing the financial statements. All transactions between us and Demand Media have been included in these financial statements and are deemed to be settled as of August 1, 2014. The total net effect of the settlement of these transactions was reflected in the statements of cash flow as a financing activity. These financial statements included expense allocations for certain: (1) corporate functions historically provided by Demand Media, including, but not limited to, finance, legal, information technology, human resources, communications, compliance, and other shared services; (2) employee benefits and incentives; and (3) stock-based compensation expense. These expenses were 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 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 the Separation, we are performing a majority of these functions using our own resources and purchased services. For an interim period, some of these functions 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 Separation were not allocated to us. Interim Financial Statements We have prepared the unaudited interim financial statements on the same basis as the audited financial statements and have included all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our statement of financial position, results of operations, and cash flows. The results for the three and six months ended June 30, 2015 and 2014, are not necessarily indicative of the results expected for the full year. The interim unaudited financial statements have been prepared in accordance with GAAP. They do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Therefore, these financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 23, 2015. |