Care Concepts isn't Care Concepts anymore; they're Interactive Brand Development (IBD), and they have backed out of buying troubled third-party payment processor Internet Billing Company (iBill) as of December 3, according to a proxy filing with the Securities and Exchange Commission.
The filing indicated IBD and iBill owner PHSL Worldwide – the former Penthouse International – agreed mutually to stop the deal to buy iBill and its parent Media Billing, with the filing saying Media Billing "has received consideration" at about $10 million, including 20,000 shares of non-voting stock convertible to 20 million shares of common stock, and Media Billing agreed to forgive $500,000 of IBD debt.
According to a copy of the filing, which was obtained by AVNOnline.com, the major reason IBD cited for backing out of the deal was a possible conflict of interest tied to IBD's move to buy XTV Investments. IBD said that XTV activities could be considered similar to or competitive with iBill clients using iBill processing, which in turn prodded PHSL and iBill to decide it wasn't in either's interest for IBD to buy Media Billing and iBill.
XTV was created by Holio.net's David Koenig and is now owned by parties with affiliation or association to PHSL's main stockholder, Molina Vector Investment Trust, according to the IBD filing.
But the proxy filing also noted potential reasons for a threatened de-listing of Interactive stock by the American Stock Exchange. Interactive, known still as Care Concepts, had said at the time they would work to resolve the situation and go ahead with the iBill buy, even to look at relisting the stock on another exchange by late January 2005 if the AMEX didn't relist them.
IBD said the AMEX objected over concerns that iBill might inadvertently involve itself "in transactions with Web merchants that offer pornographic materials on the Internet in violation of federal and state laws."
IBD also said in the filing they believe their future growth will come from sales and services tied to video-on-demand products marketed by two other properties they plan to buy, XTV and Nexcend.
"The video-on-demand market is in the emerging stages of development and involves a limited number of cable system operators," IBD said in the filing. "The success of this market requires that cable system operators, particularly the seven largest domestic cable system operators, continue to upgrade their cable networks to support digital two-way transmission service and successfully market video-on-demand and similar services to their cable television subscribers.
"Cable system operators have only begun commercial deployment of video-on-demand service to residential cable subscribers within the past year and, accordingly, to date our digital video systems have been commercially available only to a limited number of subscribers," the IBD filing continued. "As a result, the ability of our digital video systems to support a substantial number of subscribers is commercially unproven. If cable system operators fail to make the capital expenditures necessary to upgrade their networks or determine that broad deployment of video-on-demand services is not viable as a business proposition or if our digital video systems cannot support a substantial number of subscribers while maintaining a high level of performance, our revenues will not grow as we have planned."
IBD also said a potential change in the regulatory climate and a need to raise capital in the event Penthouse properties experience concurrent inability to raise subscriber revenues – even with IBD holding a minority stake and no operational control or leverage in the Penthouse picture – entered into their new planning.
"While, to our knowledge, neither Penthouse Media Group nor XTV has been subject to any enforcement action to prohibit the dissemination of any of its content to its customers, new laws or amendments to current ones may enable or facilitate governmental bodies to prohibit or proscribe the publication of material defined as 'obscene' or in similar terms," the filing said.
"For example, if a territory determines that the Website content and the film, video and photo productions that comprise certain of the products and services offered by Penthouse Media Group or XTV is obscene according to their legal definition of that term, which definitions are in constant flux," IBD continued, "such companies may be prohibited from carrying on business in certain jurisdictions, and may be subject to civil or criminal penalties."
