Item 1. Business.
Spice Entertainment Companies, Inc. and its subsidiaries (collectively
"Spice" or the "Company") is a leading international provider of adult
television entertainment. Formed in 1987, our networks and programming
are available in over 50 countries and on the Internet.
1997 was an important year for the Company. We refinanced our senior
credit facility and completed the disposition of our remaining non-strategic
assets, enabling us to focus our energies on our core adult entertainment
business. We then successfully launched a new more profitable domestic
television network, Spice Hot. On February 3, 1998, the Company entered into a
letter agreement to be acquired by Playboy Entertainment, Inc. ("Playboy") for a
combination of cash and stock. The proposed transaction is subject to several
conditions and is described below in RECENT DEVELOPMENTS.
The Company operates through four operating units: Spice Networks
domestic adult pay-per-view networks, Spice International - international adult
networks and programming, Spice Direct - direct to the consumer products and
services and Spice Productions - adult film production and licensing.
Approximately 50% of our gross revenues for 1997 are derived from our
three domestic adult pay-per-view television networks, Spice, the Adam & Eve
Channel and Spice Hot ("Spice Networks"). (Pay-per-view television enables a
household with an addressable set top decoder or a satellite receiver to
purchase a block of programming for a set fee.) Spice Hot, our newest network
offers more erotic content. From its launch in October 1997, Spice Hot is now
carried by over 25 cable systems and as of April 1, 1998, was available
nationwide in over 4.4 million addressable cable and direct broadcast satellite
("DBS") households. Spice and The Adam & Eve Channel feature cable version adult
movies and related programming. The Spice Networks are available to over 15
million cable addressable households and over 3.3 million DBS households.
Spice International is responsible for expanding the global
distribution of our adult television networks and programming. In Europe, we
operate and distribute The Adult Channel, originated from the United Kingdom,
and The Home Video Channel. The Adult Channel is distributed in the cable and
direct-to-home ("DTH") markets and is currently available in over 40 countries
in Europe. We also distribute the Spice and Spice Hot networks throughout Latin
America and Spice programming in the Pacific Rim through agreements in Japan.
Spice Direct focuses on products and services marketed directly to
consumers. Spice Direct, through agreements with third parties, provides
audiotext services promoted on the Spice Networks. Spice Direct is also
responsible for the productive utilization of our transponder capacity and
provides network playback and programming services to third parties. Spice
Direct also operates Cyberspice, our adult Internet website. Spice Productions
licenses adult movies from the leading producers of adult movies both in this
country and abroad. In order to satisfy the special demands of our television
broadcast business, Spice Productions itself now produces approximately two
adult movies per month. The Company owns the rights to an extensive library of
adult films. We exhibit the films from our library on the Spice Networks and The
Adult Channel and license films to third parties.
The following table sets forth the percentage of revenues contributed
by each of our operating units during each of the last three fiscal years:
Years Ended December 31,
1997 1996 1995
------ ------ ------
Spice Networks ............................. 54.9% 45.3% 43.0%
Spice Direct ............................... 22.5 5.5 6.1
Spice International ........................ 18.5 17.6 20.3
------ ------ ------
Total from Continuing Operations ........... 95.9 68.4 69.4
Discontinued Operations (SEG) .............. -- 19.1 15.2
Suspended/Terminated Operations (CVSP & CPV) 4.1 12.5 15.4
------ ------ ------
Total Revenue .............................. 100.0% 100.0% 100.0%
====== ====== ======
The Company was incorporated in 1987 under the laws of the State of
Delaware and has its principal executive offices at 536 Broadway, New York, NY
Proposed Transaction With Playboy. On February 3, 1998, the Company and
Playboy executed a letter agreement providing for Playboy's acquisition of all
of the outstanding shares of the Company's Common Stock for cash and Playboy
stock (the "Proposed Transaction"). The February 3, 1998 agreement provided that
for each share of the Company's Common Stock, Company stockholders will receive:
-- $3.60 in cash; and
-- 0.1524 shares of Playboy Class B Stock, subject to a collar designed
to provide a minimum value of $2.11 or a maximum value of $2.69 per
share of Common Stock.
The February 3, 1998 agreement also provided for tax, working capital and other
adjustments to the purchase price.
The terms of the Proposed Transaction were modified by an amendment
agreement dated April 15, 1998 which, among other things, eliminated the
purchase price adjustments, other than the collar, and modified the
consideration to be received by Company stockholders. Under the amended
agreement, for each share of the Company's Common Stock, Company stockholders
-- $3.60 in cash; and
-- 0.1371 shares of Playboy Class B Stock, subject to a collar designed
to provide a minimum value of $2.20 or a maximum value of $2.88 per
share of Common Stock.
As part of the Proposed Transaction, the Company will transfer to a
to-be-named spin-off company (referred to as "Spinco")its digital operations
center for video and Internet broadcasts (the "Operations Facility"), its option
to acquire the outstanding stock or assets of Emerald Media, Inc. ("EMI"), a
leading provider of adult entertainment in the C-band market, and certain rights
to a library of adult films. The Company will distribute all of the Spinco
capital stock to its stockholders. It is anticipated that the Spinco
distribution will occur at the closing of Playboy's acquisition of Spice as part
of the merger consideration. Spinco will apply to list its common stock on the
Nasdaq SmallCap market. Spinco intends to exercise the EMI Option after the
Spinco will retain rights to distribute explicit programming in the
U.S., Canada and sovereign islands of the Caribbean in the C-band DTH market.
Spinco will also retain EMI's explicit Internet websites and will have C-band
DTH broadcast rights to the explicit version of films from the Company's
existing library and for use on EMI's websites. Spinco will also have the right
to the explicit version of titles licensed by Playboy under any of the Company's
existing production agreements on a royalty-free basis. Spinco will provide
Playboy with playback services from the Operations Facility for all of Spice's
cable network services that Playboy continues to distribute pursuant to a
service contract. The service contract will provide for a fair market value
service fee and have a two-year term.
The Proposed Transaction is subject to definitive documentation,
Company stockholder approval, receipt of a fairness opinion and other customary
closing conditions. The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, has expired and Playboy has completed its
due diligence review of the Company.
Playboy and the Company intend to promptly complete preparation of
definitive documentation and obtain the approval of the Company's shareholders.
Closing of the transaction is expected during the end of the second or beginning
of the third calendar quarter. There is no assurance that any definitive
agreement regarding the sale of the Company will be reached or that the
transaction will be completed.
Refinancing. On January 15, 1997, the Company replaced its credit
facility with PNC Bank, N.A. ("PNC") with a new credit facility with Darla,
L.L.C. ("Darla"). PNC had provided a credit facility to the Company that had an
outstanding principal balance of approximately $14.6 million at December 31,
1996. As part of these arrangements, we had issued PNC a warrant to acquire
100,000 shares of our common stock. Pursuant to a Settlement Agreement dated as
of January 15, 1997, by and among PNC and the Company, we paid PNC $9.6 million,
issued a $400,000 two-year promissory note and replaced the warrant previously
granted to PNC with a new warrant to purchase 597,000 shares of common stock in
satisfaction of the PNC credit facility. PNC released its security interest in
Pursuant to an Amended and Restated Loan and Security Agreement dated
as of January 15, 1997, Darla provided the Company with a new credit facility
(the "Darla Credit Facility") consisting of a $10.5 million term loan and a
revolving credit facility of up to $3.5 million. The term loan proceeds were
used to satisfy the $9.6 million cash payment provided for under the agreement
with PNC and to pay Darla a loan commitment fee. The Darla Credit Facility
matures on July 15, 1999 with quarterly principal amortization totaling $2.5
million due in the last year of the loan. The loan bears interest at 5% over the
Citibank prime rate but not less than 13%. The Company has exercised its right
to accrue three percentage points of the interest and added it to the principal
of the loan. The accrued amount will be forgiven if the Darla Credit Facility is
paid in full within two years.
As part of this transaction, we issued 24,250 shares of $100 face value
Convertible Preferred Stock Series 1997-A (the "Preferred Stock"). The Preferred
Stock has an 8% coupon which we have elected for the first four quarterly
periods to pay by issuing additional shares of Preferred Stock. The Preferred
Stock is convertible after two years into the Company's common stock at a 10%
discount from the then current market price. The Preferred Stock is convertible
earlier in other circumstances including when our stock price exceeds $5.00 per
share for 30 trading days. As a result of this provision, the Preferred Stock is
currently convertible. We agreed to register the shares of common stock
underlying the Preferred Stock by entering into a Registration Rights Agreement
As part of the Loan Agreement, we entered into various agreements with
Darla pledging the stock of all of our domestic operating subsidiaries and The
Home Video Channel Limited ("HVC") and granting Darla a security interest in our
domestic assets. The Darla loan agreement contains various financial covenants
including minimum levels of revenues and adjusted EBITDA (earnings before
interest, taxes, depreciation and amortization) for each quarter. We did not
meet these covenants for the quarter ended September 30, 1997. On November 14,
1997, Darla and the Company executed an amendment to the Darla loan agreement
which revised the revenue and adjusted EBITDA covenants for the balance of the
loan's term and waived the financial covenant violations for the quarter ended
September 30, 1997.
Emerald Media. In an effort to productively utilize available
transponder capacity, we began providing transponder services to Emerald Media,
Inc. ("EMI") in the fourth quarter of 1996. EMI is a provider of explicit adult
television networks distributed in the domestic C-band DTH market. As part of
these arrangements, EMI granted us an option to acquire its business or stock
for a formula-determined amount. EMI expanded its operations and now operates
several explicit adult television networks in the C-band DTH market. Our
agreements with EMI were modified and we currently provide services on three
transponders to EMI and handle playback for all of the EMI networks from our
Operations Facility. The EMI Option was modified and now has an exercise price
of $755,000. The Company will contribute the EMI Option to Spinco as part of the
Operations Facility. In the second quarter of 1995, we entered into
agreements with IBM and others to construct the Operations Facility at our New
York City headquarters. Approximately $2.1 million of the Operation Facility's
cost was to be financed by a capital lease with IBM Credit Corporation ("ICC").
After making an initial $435,000 lease payment, we subsequently renegotiated the
lease with IBM and ICC in November 1996. Under the revised agreement, ICC
provided an additional $525,000 of financing which we used to purchase video
file servers and tape archives from Digital Equipment Corporation ("DEC"). IBM
and ICC agreed to reduce the monthly lease payments to $37,000 per month and we
agreed to begin making lease payments in February 1997. We are currently using
the Operations Facility to playback three of our own networks and the EMI
networks. The Company intends to transfer the Operations Facility to Spinco as
part of the Proposed Transaction
Sale of Controlling Interest in Danish Satellite Television A/S
("DSTV"). In February 1995, HVC formed DSTV which launched Eurotica, a satellite
delivered subscription network based in Denmark that features explicit version
adult movies and adult entertainment. Eurotica is marketed to the DTH and cable
markets throughout Europe and currently has subscribers in over 25 countries.
Eurotica never achieved profitability, in part due to limited distribution and
On July 9, 1997, DSTV entered into a facilities agreement with
Rendez-Vous Television International S.A. ("RDT") whereby RDT agreed to pay DSTV
an amount equal to the cost of operating Eurotica plus 20% in exchange for the
right to market Eurotica in the DTH market on a royalty free-basis. On September
12, 1997, HVC sold 51% of its interest in DSTV to RDT for approximately $45,000.
RDT also paid the Company approximately $355,000 for a continued license of
DSTV's library of adult films and agreed to license 120 adult films from the
Company in the future. We believe that RDT has defaulted on certain of its
obligations under these agreements and we are currently evaluating our
alternatives with regard to this situation.
Adoption of Anti-Takeover Defenses. During 1997, the Company adopted an
array of anti-takeover defenses. These included a Stockholders Rights Plan,
amendments to the Company's by-laws and employment agreements with the Company's
The purpose of the Stockholders Rights Plan is to give the Company time
to analyze a potential hostile take-over and to force a hostile acquirer to
negotiate with the Company's Board of Directors. The following summarizes the
way the Stockholder Rights Plan achieves these goals: The Stockholder Rights
Plan provides for the issuance of rights to each stockholder which are attached
to the Common Stock. If a person acquires a specified percentage of the
Company's Common Stock or commences a tender offer for the Company which has not
been approved by the Board of Directors, the Board of Directors can cause the
rights to detach. The detached rights give the Company's stockholders, other
than the hostile acquirer, the right to acquire stock at a price that will
result in a substantial reduction in the value of the hostile acquirer's Common
Stock and make it more expensive to acquire control of the Company. Because the
Board of Directors has the right to determine whether the rights should detach,
it is likely that a potential acquirer will negotiate with the Board of
Directors rather than attempting a hostile takeover of the Company. For more
information on the Stockholder Rights Plan, refer to the description contained
in the Company's Current Report on Form 8-K filed on June 18, 1997 and the copy
of the plan attached to that Form 8-K.
The amendments to the Company's by-laws include provisions that require
advance notice to the Company of (i) stockholder nominations to the board of
directors and (ii) stockholder proposed amendments to the Company's Certificate
of Incorporation and by-laws. The by-laws also require a super-majority vote of
directors for certain actions to be taken.
The employment agreements with the senior officers generally provide
for severance payments if an officer's employment is terminated within 18 months
of a change in control.
Termination of Audiotext Service Provider. Capital Distribution, Inc.,
d/b/a Cupid Network Television ("Cupid") provided audiotext services (telephone
chat lines) promoted on the Spice Network under a Telephone Services Agreement
dated October 20, 1995. Cupid paid the Company a fee based on the number of
Spice Network subscribers. Cupid subcontracted the operation of the chat lines
to Amtec Audiotext Inc. ("Amtec"). Cupid also provided merchandise services
under an Amended and Restated Distribution Agreement promoted on Spice and The
Adam & Eve Channel.
The Company believed Cupid had breached its agreements with the Company
and we attempted to terminate both agreements. Cupid instituted arbitration
seeking to prevent the Company from terminating the agreements. The parties
agreed to a settlement in a Settlement Agreement dated May 15, 1997 ("Settlement
Agreement") that provided for, among other things, the adjournment of the
arbitration, termination of the Distribution Agreement and modification of the
Telephone Services Agreement.
In the first quarter of 1998, Cupid defaulted in the payment of service
fees under the Telephone Services Agreement. The Company and Cupid are
negotiating a termination of that agreement. American Telnet replaced Cupid and
now provides the audiotext services promoted on the Spice network.
ELIMINATION OF NON-CORE BUSINESSES
Hit Movie Network. During the second quarter of 1997, we withdrew from
the hit movie pay-per-view business, a business that did not achieve
profitability. As an initial step in limiting our exposure to fund the business'
operating losses, we contributed our hit-movie network, the Cable Video Store
Network, to a partnership, CVS Partners ("CVSP"). The other CVSP partner,
WilTech Cable Television Services, Inc. ("WCTV"), a subsidiary of The Williams
Companies, Inc., agreed to fund the partnership. In the first quarter of 1997
and in the face of continuing losses, the CVSP partners elected to shut down the
business and terminated satellite delivery of the network on March 31, 1997.
On June 3, 1997, the CVSP partners executed an agreement to dissolve
the partnership. Under the terms of the dissolution agreement, WCTV agreed to
pay us $580,000, representing past and future transponder services. We agreed to
be responsible for winding down the partnership and they contributed an
additional $1,030,000 to the partnership which was used to fund the wind-down of
Spector Entertainment Group, Inc. In the fourth quarter of 1996, we
determined that Spector Entertainment Group, Inc. ("SEG"), a provider of
telecommunications, television production and related services primarily to the
pari-mutuel wagering industry, was no longer a strategic fit with our core adult
entertainment business. On February 7, 1997, and pursuant to a Settlement
Agreement (the "SEG Settlement Agreement") dated January 29, 1997 among the
Company, SEG and various Spector family members and affiliates (the "Spector
Group"), we conveyed all of our SEG stock to certain members of the Spector
Group in exchange for the 700,000 shares of our common stock we had previously
issued in the transaction when we acquired SEG.
As part of the SEG Settlement Agreement, we also entered into a
Transponder Services Agreement with SEG under which we provided transponder
services to SEG for $80,000 a month for two years, subject to SEG's right to
terminate upon 90 days prior notice. SEG exercised its termination right and the
agreement was terminated on July 15, 1997.
As part of the original acquisition of SEG, we granted certain members
of the Spector Group a put to sell all of the stock of another corporation they
owned for a formula-determined number of shares of our common stock. As part of
the SEG Settlement Agreement, this put was terminated.
Television and Movie Production. The Company, through its
wholly-owned subsidiary Cinema Products Video, Inc. ("CPV"), was engaged in the
production and distribution of movies, television series and programs and
CD-ROMs. After suspending CPV's production activities at the end of 1995, we
elected to terminate all of CPV's activities in 1996.
Multimedia Games. We formed a joint venture with TV Games, Inc.
("TVG"), a wholly-owned subsidiary of Multimedia Games, Inc. ("MGAM") to develop
and promote high stakes proxy play Class II tribal bingo games. The parties were
unable to agree on a business plan or a strategy for going forward with the
joint venture. Pursuant to a Purchase Agreement dated June 28, 1996, we
exchanged our interest in the joint venture and the 275,000 shares of MGAM stock
we had previously acquired for (i) the cancellation of an aggregate of $775,000
of liabilities owed to MGAM and TVG, (ii) a $100,000 promissory note due on July
25, 1996 and (iii) a $400,000 promissory note due in three years. We retained a
warrant to acquire 175,000 shares of MGAM stock that we had acquired when the
joint ventured was formed.
In the third quarter of 1997, we exercised the warrant and sold the
MGAM shares realizing approximately $1.3 million in excess of the warrant
exercise price. In the last quarter of 1997, we sold the $400,000 note to a
group of investors for $350,000.
Introduction. The Spice Networks are among the leading domestic adult
pay-per-view networks and for 1997 accounted for over 50% of our revenues. Adult
programming is an important source of revenue for cable and DTH operators,
typically accounting for between 30% to 50% of the operators' net pay-per-view
revenues, surpassing, in many systems, net revenues from hit movies and events.
("Sex Still Sells," Multichannel News, April 7, 1997.) We believe that
pay-per-view television distribution of adult programming is the preferred
delivery vehicle for adult entertainment primarily for three reasons:
-- the convenience of purchasing pay-per-view programming; the
-- ability to make a private purchase; and the ability to make a
-- spontaneous entertainment decision.
The Company believes that as the universe of addressable households
(those households capable of ordering pay-per-view programming) expands, adult
programming will continue to be a mainstay of operators' pay-per-view
programming offerings. According to Paul Kagan and other industry analysts, less
than 50% of all cable households are currently addressable. The Spice Networks
and the other pay-per-view adult television networks are currently available in
over 75% of all addressable homes. Industry analysts expect that the universe of
addressable households will grow and that adult television programming will be
available in an even greater portion of that growing universe.
Television and entertainment industry analysts Veronis, Suhler and
Associates project strong gains in addressable households, spending on
pay-per-view movies and adult movie service revenue. The Veronis, Suhler 1996
Communications Industry Forecast projects an increase in addressable households
from 25.4 million in 1996 to 40.3 million in 2001 and a 14.4% compound annual
growth rate in pay-per-view movie spending from 1996 through 2001. Showtime
Event Television, in its annual "State of the PPV" report, noted that the
pay-per-view business surpassed the $1.2 billion revenue mark in 1997, with
adult pay-per-view programming accounting for $253 million.
Pay-per-view television enables a subscriber with an addressable set
top decoder or satellite receiver to purchase a block of programming, an
individual movie or an event, for a set fee. Pay-per-view programming can be
delivered via any number of delivery methods including via cable television,
"direct to home" to households with large satellite dishes receiving a C-band
low power analog or digital signal (the "C-band DTH market") or with small
satellite dishes receiving a Ku-band medium or high power digital signal such as
currently offered by DirecTV, Primestar and Echostar (referred to as "DBS
services"), wireless cable systems and via new technologies such as cable modem
and the Internet. The Spice Networks are currently distributed by all of these
delivery methods. The following chart depicts the number of addressable
households for each of the Spice Networks since 1989.
The following table is an EDGAR representation of the data points used in
the printed graphic presentation:
SPICE NETWORKS GROWTH
Y/E 1989 Y/E 1990 Y/E 1991 Y/E 1992 Y/E 1993 Y/E 1994 Y/E 1995 Y/E 1996 Y/E 1997
-------- -------- -------- -------- -------- -------- -------- -------- --------
Spice 0.8 2.3 3.9 4.9 7.4 9.3 12.8 16.3 17.3
AEC 0.4 3.2 3.6 4.4
Spice Hot 0.5
Spice Hot. In response to growing Spice customer demand for more erotic
product and the greater mainstream acceptance of adult programming, we
introduced a new television network, Spice Hot. Spice Hot features hot cable
version adult movies, a more erotic version of the cable version featured on
Spice and The Adam & Eve Channel.
Our preliminary results indicate that the buy-rates for systems that
have replaced Spice with Spice Hot have typically increased between 40% to over
100% over those for Spice. (The buy-rate is the number of purchases per month
divided by the number of addressable households.) In addition, Spice Hot
commands a higher retail price. Spice Hot is designed to replace Spice in a
cable or a DBS system. By replacing Spice with Spice Hot we believe our cable
and DBS affiliates can increase their adult pay-per-view revenues without using
up valuable channel capacity.
The Paul Kagan Pay TV Newsletter (No. 445, November 30, 1997) reported
an increase in revenue per addressable household of 84% and 122% in the two
cable systems that recently launched Spice Hot. Buy-rates increased 40% in one
system (part-time Spice Hot carriage) and 66% in another (24 hour a day Spice
Hot carriage) even with a $2.00 increase in retail prices.
As of April 1, 1998, we have entered into over 25 affiliation
agreements for Spice Hot including agreements with a major DBS provider and 6 of
the top 15 largest multiple system operators. As of April 1, 1998, Spice Hot was
available in over 4.4 million addressable households. Since entering into an
affiliation agreement with a major DBS provider and a top ten cable system
operator, we have secured additional affiliation agreements with other cable
system operators. We believe the acceptance by major cable system and DBS
operators and the nationwide availability of Spice Hot from a major DBS operator
has and will continue to prompt other cable systems to offer Spice Hot so they
can remain on a competitive footing with their programming offerings.
The Spice Hot affiliation agreements have multi-year terms and restrict
replacement of Spice Hot with another comparable adult service during their
terms. Certain of the Spice Hot affiliation agreement provide Spice with early
termination rights if the Proposed Transaction with Playboy is consummated.
Section 505. In part, we launched Spice Hot to make up the revenue that
we lost as a result of legislation which effectively restricted the carriage
hours of the Spice Networks in many cable systems. Section 505 of the
Telecommunications Act of 1996 (the "1996 Act") requires full audio and video
scrambling of channels such as the Spice Networks. See GOVERNMENT REGULATION,
Section 505. If a cable system operator cannot comply with the full scrambling
requirement, then the channel must be blocked between 6:00 A.M. and 10:00 PM.
(The hours between 10:00 P.M. and 6:00 A.M. are referred to as the "safe harbor
hours.") Several of our cable affiliates do not comply with the full scrambling
requirements and were forced to carry the Spice Networks only during the safe
harbor hours. The reduction in carriage hours had and will continue to have a
detrimental affect on revenues from affected cable systems.
We developed several means of mitigating the adverse impact of Section
505. These included new feature start times to coincide with the safe harbor
hours, alternate audio feeds of music for broadcast in place of the audio track
of the Spice Networks during non-safe harbor hours, proposed changes in
packaging and retail prices - increasing the retail price and offering a longer
block of programming - and aggressive marketing. We found that affected cable
systems that adopted one or more of our revenue preserving suggestions had a
much lower revenue loss from Section 505 than those systems that did not follow
our suggestions. For 1997, we estimate that the aggregate revenue loss
attributable to Section 505 was approximately $600,000.
Digital Cable Rollout. Cable operators have begun to introduce digital
programming as a means of upgrading their cable systems and to counteract
competition from the DBS operators. Spice and the Adam & Eve Channel are
currently available on Telecommunications, Inc. ("TCI") All TV digital platform.
Digital cable television has many advantages over analog cable television
including more channels, better audio and video quality and advanced set-top
boxes that are addressable, provide a secure fully scrambled signal and have
integrated program guides and advanced ordering technology. (We have found that
our buy-rate, on a system by system basis, tends to increase when the more
advanced ordering technology is used.)
While there are advantages to digital cable television, we believe the
rollout of digital cable will have a mixed impact on our business. In the short
term, many TCI systems have recaptured analog channels to make room for the
digital tier of programming. In some cases, TCI systems eliminated analog
carriage of Spice and/or the Adam & Eve Channel. While Spice and the Adam & Eve
Channel are included in the preferred grouping of digital channels that most TCI
systems utilize when they rollout digital cable television, we estimate that we
lost an aggregate of 600,000 addressable households in the fourth quarter of
1997 and first quarter of this year due to the slow rollout of digital set-top
boxes. On the other hand, other multiple system operators have not had to
recapture analog channels and the digital rollout has increased our business by
adding new Spice and/or Adam & Eve Channel addressable households, all with 24
hour a day carriage.
As digital cable becomes more widely available, industry analysts
predict the digital rollout will foster an increase in the number of addressable
households and result in better buy-rates for adult television programming
because of the use of advanced ordering technology and from the 24 hour a day
carriage of adult television networks. The capital costs of the digital rollout
are large and the rollout has been slower than originally forecasted. The net
effect of all of these factors cannot be accurately predicted at this time.
Programming. Each of the Spice Networks features approximately 60
titles per month, approximately 10 of which are first time exhibitions. Spice
and Spice Hot have virtually identical program schedules to facilitate switching
between the two networks when the two are exhibited on a shared channel, using
the same program guides. Spice and the Adam & Eve Channel have no crossover of
Spice and the Adam & Eve Channel feature "cable version" adult films.
Cable version adult films (as contrasted with the explicit or hard core
versions) are specially produced and edited to conform to strict, internally
developed guidelines which are generally accepted as the standard in the
industry. Spice Hot features the "hot cable" version which is more erotic than
the cable version.
Competition. The Company competes with all other forms of entertainment
including broadcast, premium and other pay-per-view television services. In the
adult category, we compete with other outlets for adult entertainment including
video stores, adult bookstores, mail order companies and the Internet. We have
one principal competitor in our adult pay-per-view television market niche and
compete with cable systems who program their own adult movies and from video
file server based video delivery systems. Based on our calculation of the number
of Spice Networks addressable households and the number of addressable
households served by our competition as disclosed in their public filings, we
believe that our networks are the most widely distributed domestic adult
pay-per-view networks in the cable market.
We have been pursuing global distribution of our adult networks and
programming since our 1994 acquisition of The Home Video Channel Limited
("HVC"). This past year was one of mixed results. While we have gained a strong
foothold in the nascent Latin American market through our agreements with Sky
Latin America and others, we have lost market share in the UK DTH market for The
Adult Channel primarily as a result of competition. We have restructured the
management of the Spice International division and instituted a business plan to
address the loss of UK DTH market share.
HVC. HVC owns and operates The Adult Channel, a satellite delivered
subscription service that features cable version adult movies and related
programming similar to those exhibited on the Spice network. The Adult Channel,
which is broadcast four hours a day commencing at midnight, is available to
approximately 2 million cable households and approximately 4 million DTH
satellite households in the United Kingdom. The Adult Channel is also available
to DTH satellite households throughout Continental Europe and currently has
subscribers in over 40 countries.
HVC also operates a cable exclusive movie service featuring action and
horror movies which began digital satellite delivery in the second quarter of
1996. The Home Video Channel is offered during the evening hours and is
programmed during the pre-midnight hours to segue into The Adult Channel. The
two services are offered to cable operators as a seamless 8:00 P.M. to 4:00 A.M.
programming service at a package price.
In the UK, the Adult Channel has lost DTH subscribers and market share
over the last 18 months. Several factors have contributed to this decline,
primarily the launch of two competing services in 1995 and increased piracy. In
addition The Adult Channel currently uses a transponder that has adversely
affected its business in two ways. First, many potential DTH viewers cannot
receive The Adult Channel without additional equipment. Second, The Adult
Channel follows a foreign language service with limited distribution. This
curtails any benefits derived from HVC's practice of broadcasting the first 10
minutes of the Adult Channel unencrypted to secure potential impulse buying and
broaden brand awareness. HVC also began directly handling subscriber management
services ("SMS") (the function of receiving and processing subscriber orders).
There were problems in the transition to HVC of these services which adversely
affected revenues and increased costs.
In an effort to address these issues, we restructured HVC's management
and instituted certain changes to our business plan for 1998. To remedy the
shortcomings with its transponder, HVC secured replacement transponder services
from British Sky Broadcasting Limited ("Sky") that will begin in August 1998.
The new transponder is both less expensive than The Adult Channel's current
transponder and is receivable by potential DTH subscribers without additional
equipment. The Adult Channel will follow SCi-Fi and The History Channel, two
widely distributed networks. HVC also switched to the Sky encryption technology
in October 1997 to curtail signal piracy. We have also increased The Adult
Channel's programming budget for 1998 with an added emphasis on European
programming. The Company has also increased HVC's advertising budget and
reallocated it to the UK DTH market in an effort to regain lost market share.
HVC has expanded its distribution of The Adult Channel throughout the
rest of Europe. We have authorized agents throughout Western Europe who
distribute DTH subscriptions to The Adult Channel through sales of "smart
cards." HVC has entered into an agency agreement with Nuevas Estructuras
Televisivas who has secured affiliation agreements for The Adult Channel in over
thirty Spanish cable systems. The Adult Channel is now carried on the Canal
Digital AS platform which serves subscribers in Scandinavia and we are in the
final stages of negotiations to secure carriage on the Canal Plus digital
platform serving subscribers in the Benelux countries. HVC is in the final
stages of securing a German broadcast license for The Adult Channel. If we are
successful in obtaining a German Broadcast license, Deutsche Telekom has
expressed interest in distributing The Adult Channel. Deutsche Telekom has more
than 16 million cable homes.
HVC has entered into affiliation agreements for The Adult Channel in
Eastern Europe, securing carriage in cable systems located in Russia, Lithuania,
Estonia and Slovenia. However, one of our more promising programming
arrangements was with Metromedia which operated cable systems in Rumania and
Russia. Several of the Rumanian cable systems have ceased distribution of The
Adult Channel as a result of the devaluation of the Rumanian currency.
DSTV. As described above in "RECENT DEVELOPMENTS," HVC sold a
majority of its interest in DSTV to RDT.
Other International Arrangements. The Company entered into a license
agreement with Pay Per View Japan Inc. ("PPVJ") to be the exclusive adult
pay-per-view program provider to PPVJ's Perfect Choice TV, the first digital
television program provider in Japan. We supply PPVJ with Spice-branded
programming specially selected and edited for the Japanese market. Perfect
Choice was launched on January 15, 1997 and while the initial results were
positive, the Company's licensing fees have been dropping. We believe this is
because of the availability of multiple channels of Japanese sourced-adult
programming and we plan to adjust our programming to fit this market. Perfect
Choice has announced its intention to merge with J Sky B, the News Corporation's
Japanese affiliate. We are uncertain as to the impact of the proposed merger on
our Japanese activity.
Recently, the Company entered into an affiliation agreement with Sky
Latin America L.L.C. for carriage of Spice and Spice Hot on its various DTH
platforms that serve Latin America. Spice and Spice Hot are currently available
in Mexico and Colombia. This arrangement has been expanded to include commercial
We are also in discussions with cable and DTH operators in the Pacific
Rim, Taiwan and China and other areas for carriage of the Company's networks and
Spice Direct is responsible for the direct marketing of our products
and services to consumers including the operation of Cyberspice, our Internet
website. Spice Direct also arranges for the productive use of our transponder
capacity and network playback services and licenses our programming to third
Audiotext Services. Spice Direct manages the adult-oriented
pay-per-call telephone lines (audiotext services) promoted on the Spice
Networks. On the Spice Network, these services were provided by Capital
Distribution, Inc., d/b/a Cupid Network Television ("Cupid") until its recent
replacement by American Telnet, Inc. American Telnet and Allstate Communications
Incorporated ("Allstate") provide audiotext services promoted on Spice Hot. PHE,
Inc. ("PHE") and VCA Labs, Inc. ("VCA") retained the right, as part of the
Company's acquisition of Adam & Eve Communications, Inc., to promote audiotext
services on The Adam & Eve Channel.
The audiotext services are promoted on all the Spice Networks with
advertisements that we produce or are produced exclusively for us by adult film
producers. This enables us to control our networks' on-air look. Under the prior
agreement with Cupid, we received a fee based on the number of Spice Network
subscribers. Under the agreements with Allstate and American Telnet, we receive
a percentage of revenues from the audiotext services. PHE and VCA are
contractually obligated to pay us a sliding percentage of their revenues from
the audiotext services promoted on the Adam & Eve Channel.
The operators of the audiotext services are responsible for the
administration of the telephone lines and are contractually required to comply
with all applicable rules and regulations. The telephone lines feature
computerized audio programs and live operators on both 800 and 900 telephone
lines. The audiotext service providers employ the operators and administrators
of the telephone lines promoted on our networks. As described above in RECENT
DEVELOPMENTS, Cupid provided the audiotext services promoted on the Spice
Network until March 20, 1998. Cupid defaulted in the payment of service fees
under the Telephone Services Agreement and the Company and Cupid have agreed to
a negotiated termination of that agreement. American Telnet now provides the
audiotext services promoted on the Spice network.
Merchandising. In between feature movies on Spice and the Adam & Eve
Channel, we previously exhibited home shopping segments that offered
adult-themed products in provocatively staged segments. We believed that we
could make more productive use of the interstitial time and as part of the
Settlement Agreement with Cupid the Company and Cupid agreed to terminate the
home shopping segments in the third quarter of this year.
Cyberspice. In 1994, we began Cyberspice as an on-line bulletin board
service which utilized our adult programming and cross-promoted the Spice
Networks. Cyberspice was converted to a website on the Internet in the second
quarter of 1995. E.O.L. Communications Corp. ("EOL") was responsible for
maintaining and operating the Internet server where Cyberspice resides (a set of
functions referred to as "hosting") until May 31, 1997. EOL included Cyberspice
in a bouquet of EOL operated adult pay sites. Under the arrangement with EOL,
we received a portion of all revenues generated by customers of EOL's pay sites
who accessed those sites through Cyberspice.
In June 1997, we transferred hosting of Cyberspice to Media on Demand,
Inc., ("MOD"). Under our agreement with MOD, we share revenues generated by
Cyberspice from pay services including audiotext services and merchandise sales.
In addition, MOD encodes Spice Hot and transmits a simultaneous webcast of Spice
Hot (a broadcast of Spice Hot which can be viewed by a subscriber from the
Internet) which is offered on a pay-per-view or monthly subscription basis. We
are also developing with MOD a database accessible library of video clips from
our adult film library. Cyberspice subscribers will be able to select video
clips meeting user-designed criteria for download on a pay basis. Under a
revenue sharing arrangement with Babenet, an affiliate of VCA, Cyberspice
subscribers can access Babenet's live nude chat services. See "GOVERNMENT
REGULATION, On-Line Services."
Transponder and Playback Services. We began to digitally compress our
Spice Networks on September 1, 1996 which made three transponders available for
productive utilization. We designed the Operations Facility with the ability to
increase the number of networks for which we can provide playback services with
nominal incremental capital cost.
Pursuant to agreements dated as of August 30, 1996, the Company began
providing transponder services to EMI, which at that time owned and operated a
single explicit television network distributed in the C-band DTH market. EMI
acquired two additional networks in February 1997 and launched two more in the
third quarter of 1997 and the first quarter of 1998. The Company has provided
transponder services for three of EMI's networks since February 1997 and
provides digital compressed transponder services for another television network.
We also provide playback services for the EMI networks.
As described above in RECENT DEVELOPMENTS, we intend to contribute the
Operations Facility and the EMI Option to Spinco as part of the Proposed
Transaction with Playboy. If the Proposed Transaction, including the spin-off,
is consummated, it is anticipated that Spinco will exercise the EMI Option and
operate the EMI networks and the Operations Facility.
Spice Productions is responsible for licensing and producing adult
movies for use on our networks and for other program licensing arrangements.
With a full-time staff of five, Spice Productions screens adult movies to select
the ones that meet our strict criteria for exhibition on our networks. We have
an extensive library of adult movies with worldwide rights in perpetuity in over
450 titles and more limited rights in over 250 titles for a more limited period
We license rights to adult films under two general categories of
license agreements: agreements where we acquire most of the rights to the adult
movie (referred to as "production agreements") and agreements where we acquire
more limited rights (referred to as "license agreements").
Production Agreements. Under our production agreements, we generally
acquire worldwide television rights (pay-per-view, subscription, premium and
broadcast television rights) in perpetuity for delivery using all known and to
be developed methods of delivery including via the Internet, for both the cable
and explicit version of each movie. We also have the right to edit the movies
and create the hot cable version featured on Spice Hot.
We have a long-term production agreement with VCA and more limited
production agreements with, among others, All-Channel Films, Elegant Angel
Video, Eyeland Pictures, Fred H. Schulte, Golden Orchid Productions, Lone Wolf
Productions, Parco L.L.C., Sin City Entertainment, Primal Productions, Ultra
Image Productions, Wellwood Entertainment, Inc. and Wicked Pictures. VCA
supplies approximately one-fourth of the adult films which we license under
production agreements. The Company believes that the VCA Production Agreement
was automatically renewed for an additional five-year term commencing April 10,
1998. VCA has disputed the automatic renewal of the agreement but continues to
supply movies under the Production Agreement. We are currently in discussion
with VCA to modify the terms of the Production Agreement for the renewal term.
We have also entered into production agreements with foreign producers
as part of the Company's strategy to globalize our programming and to meet local
License Agreements. Under the terms of our license agreements, the
Company will typically license the cable and explicit versions for adult films
in the United States and/or Europe for between one to three years. The license
agreements permit unlimited exhibitions in return for a flat license fee. Most
of the movies exhibited on the Adam & Eve Channel are licensed under these
arrangements. We license adult movies from the adult film producers mentioned
above and others.
In-House Productions. Most adult films are produced for sale in the
home video market which has a different target audience than our networks. To
more directly meet the special demands of our broadcast-based television network
business, we started to produce our own adult movies in 1997. Spice Production
currently makes, on average, two adult movies per month. We hire adult film
producers and stars to make these productions. To date we have completed 13
movies with approximately 18 more scheduled for the balance of the year. We are
currently exploring the license of home video rights to our movies for
distribution by third parties.
Satellite Transmission. The Company delivers its video programming to
cable systems and DTH customers via digitally compressed satellite transmission.
We believe that this is the most efficient delivery method currently available
for distribution of the Spice Networks. Satellite delivery of video programming
is accomplished as follows: The video programming (movies and interstitial
programming) is played back at a facility such as our Operations Facility. The
program signal is then encrypted so that the signal is unintelligible unless it
is passed through the proper decoding devices. The signal may be transmitted
(uplinked) to the satellite as an analog signal or digitally compressed and
combined with other signals. (By digitally compressing several channels, we can
spread the cost of a transponder over several networks.) The signal is
transmitted from an earth station to a designated transponder on a
The transponder receives the analog or digitally compressed program
signal uplinked by the earth station, amplifies the signal and broadcasts
(downlinks) it to satellite dishes located within the satellite's area of signal
coverage. The signal coverage of the domestic satellite utilized by the Company
is the Continental United States, portions of Mexico, the Caribbean, and Canada.
The signal coverage of the satellite utilized by the Adult Channel is
Continental Europe and portions of North Africa. Each transponder can retransmit
four or more complete digitally compressed color television signals or one
analog color television signal.
For cable systems, the encrypted digitally compressed signal received
by the cable system's satellite dish is then decoded and decompressed using, for
the Company's domestic television networks, General Instrument Digicipher II
decoders. The cable system then rescrambles the signal using scrambling
technology compatible with the addressable set top boxes deployed in its system
and then distributes the signal throughout its cable system. For DTH
subscribers, their set top box contains the descrambling equipment.
To offer pay-per-view services, the set top boxes must have an
electronic "address" and the cable system or satellite service provider must be
able to remotely control each customer's set top box and cause it to descramble
the television signal for a specified period of time after the customer has made
a purchase of a premium service or a pay-per-view event. The ability to control
the scrambling and descrambling of a signal from a cable system's facilities -
known as addressability - is essential for the marketing and delivery of
pay-per-view programming services.
In Europe, DTH subscribers purchase "smart cards" from distributors,
including appliance and electronics stores. These smartcards are programmed to
permit reception of a premium programming service. The smart cards are then
inserted into the satellite receiver or set top box which descrambles the signal
for a specified period of time.
Service Providers. We utilize transponder services for our domestic
networks pursuant to a February 7, 1995 Agreement ("Transponder Agreement") with
AT&T Corp. The Transponder Agreement initially provided for services on five
transponders on AT&T's T4 Satellite. This was reduced to four transponders when
AT&T preempted one of our transponders. At our request, the Transponder
Agreement `s term was also shortened from the end of the satellite's useful life
(estimated to be 12 years) to October 31, 2004 pursuant to a letter agreement
dated March 31, 1997 between the Company and Loral Skynet (which acquired AT&T's
satellite business). In exchange, we granted Loral a right to preempt one of our
transponders after September 1, 1997. To date, Loral has not exercised its
preemption right. See "MANAGEMENT DISCUSSION AND ANALYSIS."
HVC obtained part-time transponder services for The Adult Channel from
Societe Europeenne des Satellites S.A. ("SES"), the owner of the Astra 1C
satellite, through January 31, 1997. This arrangement was replaced with an
agreement effective February 1, 1997 with Filmnet AB for part-time transponder
services on Astra 1A. The agreement with Filmnet AB was replaced with an
agreement with Asia TV Limited for part-time transponder services on Astra 1D
through November 30, 1998.
HVC has secured part-time transponder services on Astra 1B from Sky
pursuant to an agreement that will commence on August 1, 1998 and continue
through December 31, 2002. The Company is attempting to release its Astra 1D
transponder capacity back to Asia TV Limited after a one month period of dual
illumination during August 1998. Commencing in June 1, 1996, The Home Video
Channel began digital satellite distribution to cable systems on the Intelsat
satellite pursuant to a five-year agreement with British Telecommunications plc
dated April 24, 1996.
The Operations Facility, which became operational in February 1997,
currently handles playback for three of the Company's networks and the EMI
networks utilizing video file servers. This application of new technology loads
and stores digitized programming in the memory of the video file servers. Under
automated software control, the programming is then "streamed" from the video
file servers and transmitted, over fiber optic cable, to the uplink facility. By
employing this technology, the Company has been able to add additional networks
quickly and efficiently.
The Company contracted with Atlantic Satellite Communications, Inc.
("Atlantic") for fiber connectivity from the Operations Facility to Atlantic's
uplink facility and for uplink services pursuant to a three-year agreement dated
as of February 24, 1997.
As discussed above, our domestic network signals are encrypted and
digitally compressed using Digicipher encoders (manufactured by General
Instruments) which is currently the industry standard scrambling technology. The
Company leased a General Instruments Digicipher encoder and 1,210 decoders from
Vendor Capital Group. The decoders were then provided to Spice Networks
HVC provides playback services for The Adult Channel. British
Telecommunications currently handles uplink services for The Adult Channel until
Sky takes over in August 1998. HVC previously used the News Datacom Videocrypt
encryption technology and its own proprietary smart card. HVC now uses a more
advanced secure generation of this encryption technology and uses the Sky smart
card. Over 90% of UK DTH subscribers use the Sky card. Satellite Encryption
Services Ltd., a Sky affiliate, is responsible for authorizing and deauthorizing
Sky cards on HVC's behalf. TV Direct Limited used to handle subscriber
management services (order processing) for HVC until HVC began handling this
For 1997, our principal customers were EMI which accounted for
approximately 14% of consolidated revenues and TCI, DirecTV and Time Warner,
Spice Networks customers, each of which accounted for approximately 9% of
consolidated revenues. TCI and Time Warner accounted for 18% and 9%,
respectively, of our consolidated revenues for 1996 and 11% and 7%,
respectively, of our consolidated revenues for 1995.
Congress enacted the 1996 Act, a comprehensive overhaul of the Federal
Communications Act of 1934. The 1996 Act contains several provisions which may
impact the Company. (All Section references which follow refer to the Act.)
Section 505. Section 505 requires full audio and video scrambling of
channels which are primarily dedicated to sexually explicit programming. If a
multi-channel video programming distributor (which includes a cable system
operator) cannot comply with the full scrambling requirement, then the channel
must be blocked between 6:00 AM and 10:00 PM. (referred to as "time
channeling"). The Spice Networks feature "sexually explicit" programming within
the contemplation of Section 505. While the Company fully scrambles its signal,
several of the Company's cable affiliates lack the technical capability to fully
scramble the audio and, to a lesser extent, the video portion of the signal.
The Company filed an action in Delaware District Court challenging the
constitutionality of Section 505. After initially granting the Company's
application for a temporary restraining order enjoining enforcement of Section
505, the District Court denied the Company's application for a preliminary
injunction. On March 24, 1997, the Supreme Court affirmed the District Court's
decision and Section 505 took effect on or about May 1, 1997.
When Section 505 took effect, the Company's revenues were adversely
affected with several cable systems moving to time channeling. The Company
developed several means of mitigating the adverse impact of Section 505. These
included new feature start times to coincide with the safe harbor hours,
alternate audio feeds of music for broadcast in place of the audio track of the
Spice Networks during non-safe harbor hours, proposed changes in packaging and
retail prices - increasing the retail price and offering a longer block of
programming - and aggressive marketing.
While we continue to believe that Section 505 is unconstitutional
because there are other less restrictive means of blocking access by minors and
others to unwanted partially scrambled television programming (both ours and
other types of programming that some may find offensive), we believe we can
successfully operate our business within the legal framework established by
Closed Captioning. Section 713 of the 1996 Act also directed the
Federal Communications Commission ("FCC") to adopt rules requiring that video
programming be accessible via closed captioning unless exempted. The FCC issued
a Report and Order on August 22, 1997 which provided rules on closed captioning.
Under the rules, responsibility for closed captioning falls on the video
programming distributors (broadcasters, cable and DBS operators) unless they do
not have editorial control over the programming. In that case, responsibility
falls on the programmer. The rules also provide transitional rules for phased-in
implementation of closed captioning which require that 95% of new programming -
programming created after the January 1, 1998 effective date of the rules must
be closed captioned after a staged 8 or 10 year transition period. The rules
require that 75% of library programming - programming published or completed
prior to the January 1, 1998 effective date - must be closed captioned after a
10-year transition period.
The rules contain exemptions from the closed captioning requirement
based on economic burden. These include exemptions for new networks, late night
programming, local origination and public education programming, interstitial
programming, advertising and a revenue-based exemption. An exemption may also be
granted upon a showing of "undue burden." The FCC plans to establish a
petitioning process for exemptions based on undue burden. Applications for
exemptions for undue burden may be based on:
1. the nature and cost of the closed captioning;
2. the impact on the program provider;
3. the financial resources of the program provider; or
4. the type of operations of the program provider.
We are currently evaluating the impact of the closed captioning
rules on our business and whether to file an exemption application claiming
undue burden. If the Spice Networks are required to include closed captioning,
the Company will be adversely affected as a result of the additional costs
incurred to comply with the rules. It is not possible, at this time to quantify
the cost of closed captioning the movies exhibited on the Spice Networks.
Moreover, if we elect to file an exemption application, it is uncertain whether
such an application would be granted.
On-Line Services. The 1996 Act also contained provisions aimed at
curbing indecent material on the Internet. The Supreme Court declared this
provision unconstitutional. The Company plans to carefully monitor future
developments in laws regulating adult content on the Internet, and will adjust
its practices and procedure accordingly. While the provision of the 1996 Act
regulating the Internet is not in effect, the Company has conformed its
practices with a safe harbor provision contained in the 1996 Act. Under this
provision, content providers will have no liability if certain adult material is
made available only to persons with a credit card, which the Act presumes can be
obtained only by person over 18 years of age. The webcast of Spice Hot and other
more explicit material and services on Cyberspice are available only to persons
who both certify that they are over the age of 18 and who have a credit card.
Other Provisions of the 1996 Act. The 1996 Act will also affect our
businesses in other ways. The principal purpose of the 1996 Act was to promote
deployment of advanced telecommunications and information technologies in the
marketplace by deregulating pricing in the cable television industry and
increasing competition in the telecommunications industry by permitting the
entry of the cable and telephone companies into each other's markets. The effect
of increased competition on the Company's networks is unclear at this point in
CURRENCY RATES AND REGULATIONS
Our foreign operations are subject to the risk of fluctuation in
currency exchange rates and to exchange controls. The Company cannot predict the
extent to which such controls and fluctuations in currency rates may affect its
operations in the future or its ability to remit dollars abroad. See Note 3 to
the Consolidated Financial Statements "Summary of Significant Accounting
Policies - Foreign Currency Translation."
At March 31, 1997, the Company had a total of 104 employees.
Item 2. Properties.
We lease the following locations:
New York, NY 10012 24,750 square feet(1)
2716 Ocean Park Blvd., Suite 1007
Santa Monica, CA 90405 2,625 square feet
1755 Park Street, Suite 200
Naperville, IL 60563 330 square feet(2)
1300 West Belmont Avenue, Suite 201
Chicago, IL 60657 150 square feet(2)
120 International Parkway
Heathrow, FL 60563 330 square feet(2)
Home Video Channel Limited
Aquis House, Station Rd.
Hayes, Middlesex UB3 4DX
United Kingdom 5,020 square feet
We believe our leased locations are suitable and adequate for the conduct of our
1) We also use a portion of the roof at the headquarters for equipment
relating to the Operations Facility.
2) We lease offices in professional suites. In addition to the square
footage indicated, we have use of common areas in the professional