May 21, 2018

PUBLIC NOTICE OF AUCTION OF ASSETS: Penthouse

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NOTICE OF AUCTION OF THE ASSETS OF Penthouse™

1. Overview of the Opportunity. Penthouse™ is the iconic men’s brand. Founded by Bob Guccione in 1965, Penthouse has been a leader in the Adult Entertainment Industry for over 50 years. While the brand was initially launched with Penthouse Magazine, in five decades of market dominance it swelled to include additional magazine titles, a thousand film library, a broadcasting group that currently oversees eight adult cable and satellite channels, a licensing business that includes a broad array of products for sale worldwide, and a digital platform that includes a robust list of adult entertainment websites supported by a dedicated social media following.

Penthouse’s iconic name, diverse and well established asset portfolio, and longstanding relationships will provide a buyer the opportunity to: 1) leverage the Penthouse brand and loyal customer base through today’s ever expanding social media outlets; 2) continue to collect licensing fees under existing agreements, while exploiting new licensing opportunities (e.g. hospitality); 3) acquire over 50-years-worth of content for use through buyer’s current outlets; and 4) monetize currently under-utilized assets.

2. Key Deadlines. Bids are due Wednesday, May 30, 2018 at 5:00 P.M. PST. An auction to be held June 4, 2018. Only qualified bidders may participate in the auction.

3. Stalking Horse Transaction. On January 11, 2018, Penthouse Global Media, Inc. and several of its subsidiaries (collectively, the “Company” or “Penthouse“) filed for bankruptcy in the United States Bankruptcy Court for the Central District of California, San Fernando Valley Division. David Gottlieb is the duly appointed and acting Chapter 11 Trustee in the Company’s bankruptcy cases (the “Trustee”). In connection with the transaction, the Trustee retained Broadway Advisors, LLC to market the Company’s assets for sale via §363 of the Bankruptcy Code and the process approved by the Bankruptcy Court. The Trustee entered into an Asset Purchase Agreement (“APA”) with a stalking horse bidder and that APA has been filed with the Bankruptcy Court.

The transaction outlined in the APA is subject to competitive bidding and the Bankruptcy Court has approved guidelines and requirements for the bidding process and sale auction.

4. Key Sale Terms:

  • $3,000,000.00 opening bid for all of Penthouse’s assets. Parties interested in acquiring less than all of Penthouse’s assets may make an offer for select assets and provide a deposit equal to 10% of their initial bid.
  • Bid increments of at least $100,000 (or such greater amounts in multiples of $100,000), if the offer is for all of Penthouse’s assets.
  • The Trustee seeks to maximize net sale proceeds. He may accept several offers for select assets if the combined value of those bids exceeds the highest offer for all assets.

5. Bid Requirements. A potential bidder must:

  • Deliver, on or before May 30, 2018, an irrevocable offer in the form of an executed Modified APA, without a financing contingency, internal approval or due diligence contingency, at a price that conforms with the overbid procedures and on such other terms that are no less favorable to the Estates than those contained in the APA;
  • The potential bidder must make a Bid Deposit in the amount of $250,000 for the purchase of all assets; or if interested in purchasing select assets, 10% of the offer (assuming the potential bid is deemed a qualified bid); and
  • Provide written evidence reasonably satisfactory to the Trustee of the bidder’s financial ability to fully and timely perform all obligations under the Modified APA, including payment in cash at closing of any successful Bid amount.

6. Additional Information about the Auction and How to Bid:

  • A copy of the Penthouse Acquisition Opportunity is available for download here. The complete terms and provisions of the pending transaction are set forth and encapsulated in the APA itself and this brief description of certain aspects of the APA is not intended as a substitute for review of the applicable terms and provisions of the APA or for a review of the APA in full. The full sales procedures are available upon request, and this summary shall not modify or alter the sale procedures in any way.
  • Additional and more detailed information is available through Broadway Advisors, LLC’s secure web-based document vault. In order to access confidential information, execution of a non­disclosure agreement (NDA) will be required.
  • If you are interested in additional information about the company please contact Leticia T. Lujan at LTL@broadwayadvisors.com to request a copy of the NDA.
  • If you would like to discuss the opportunity in further detail please contact Alfred M. Masse, Managing Principal of Broadway Advisors, LLC at:
    Broadway Advisors, LLC
    511 30th St., Suite A, Newport Beach, CA, 92663
    Alfred M. Masse Principal
    310.418.6552
    amm@broadwayadvisors.com

7. Additional Information About the Company:

  • Penthouse has leveraged its iconic brand into a worldwide licensing business. There are four operating divisions:
    • Penthouse Global Publishing, Inc. publishes Penthouse Magazine as well as Penthouse Letters magazine.
    • Penthouse Global Broadcasting, Inc. operates eight channels in over 100 countries. PGBI accounts for approximately 50% of the companies’ revenue.
    • iPenthouse Global Licensing, Inc. has licensing agreements in hundreds of countries based upon Penthouse trademarks, copyrights and media content. Licenses range from wellness products (toys and sexual aids) to apparel, fragrances and books.
    • Penthouse Global Digital, Inc. runs membership websites as well as several free websites.
  • Penthouse currently has 30 employees, multiple outside consultants and publishing contributors with gross annual revenues of approximately $10,000,000.
  • Industry Overview:
    • While industry sales have been impacted by the accessibility of adult entertainment on free file sharing websites and social media pages, the demand for high quality sexually explicit material continues to grow and is appearing in mainstream media on a regular basis.
    • From Eyes Wide Shut and Boogie Nights to the Fifty Shades franchise, men and women are openly watching and talking about sex. Adult film actors and sex workers who were once kept in the shadows are sharing their stories and becoming household names, i.e. Stormy Daniels.
    • Penthouse has a unique niche in the adult industry, possessing an iconic brand known for quality, taste and sophistication. Leveraging this admirable brand identity into a growing market segment provides distinct licensing opportunities.
    • It is estimated that every single day there are more than 68 million search engine requests for adult films (which is 25 percent of all search requests). The world’s largest pornographic video sharing website has reported 25 billion searches being performed daily on their site alone. These statistics exclude searches for adult toys, role playing costumes, or a plethora of other provocative search terms that demonstrate an increased interest in adult entertainment. Today, the industry remains a multi-billion-dollar industry primed to capitalize on the worlds growing sexual curiosity and impressive technological advancements.
  • Assets Included in the Sale:Assets to be included in the sale include:
    • Intellectual Property
      • Trademarks and Copyrights – The Company owns over 2,000 trademarks and copyrights including Penthouse, Penthouse Letters, Forum, Pet of the Month, Pet of the Year, Penthouse TV, Penthouse.com, PenthouseMagazine.com, and Caligula.
      • Licensing – The Company has over 50 licensing agreements based upon its extensive trademark and media library. For information on products being licensed please see asset categories below.
      • Publishing Rights – The Company has the publishing rights to Penthouse, Penthouse Letters, and Forum in conjunction with the trademarks and copyrights noted above. Current subscriptions are approximately 22,000 for Penthouse and 11,000 for Penthouse Letters.
    • Films – Penthouse’s film catalogue has over 1,200 titles including the 1979 controversial cult classic “Caligula”. The library includes copyright and remake rights.
    • Penthouse Magazine Back Issues, Photographs, and Movie Scripts –dating back to inception as well as thousands of photographs, slides and movie scripts.
    • Broadcasting/Programming –The Company operates 4 channels and licenses content in over 100 countries (including the United States). 2017 domestic and international broadcast revenues (including licensing revenues) are approximately $1.85M and $3.25M respectively.
    • Digital– The Company operates Penthouse.com and Penthouse Magazine.com which include both free and membership services including HD videos, galleries and a portal to web-cam services websites.

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