S-1 1 a2215423zs-1.htm S-1

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As filed with the Securities and Exchange Commission on June 25, 2013

Registration No. 333-                  

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



SFX ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  7990
(Primary Standard Industrial
Classification Code Number)
  90-0860047
(I.R.S. Employer
Identification No.)



SFX Entertainment, Inc.
430 Park Avenue
New York, New York 10022
(646) 561-6400

(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)



Robert F.X. Sillerman
Chief Executive Officer and Chairman
SFX Entertainment, Inc.
430 Park Avenue
New York, New York 10022
(646) 561-6400

(Name, address, including zip code, and telephone number,
including area code, of agent for service)



Copies to:

Aron Izower
Jason Barr
Reed Smith LLP
599 Lexington Avenue
New York, New York 10022
(212) 521-5400
  Colin Diamond
F. Holt Goddard
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
(212) 819-8200



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

 

Title of each class of securities
to be registered

  Proposed maximum
aggregate offering price(1)(2)

  Amount of
registration fee

 

Common Stock, par value $0.001

  $175,000,000   $23,870

 

(1)
Includes the additional shares the underwriters have the option to purchase, if any.
(2)
Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.



The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS   Subject to Completion   June 25, 2013

 

                      Shares

SFX Entertainment, Inc.

Common Stock


This is an initial public offering of our common stock. We are offering all of the shares of common stock offered by this prospectus. We expect the public offering price to be between $             and $             per share.

We have applied to list our common stock on the The Nasdaq Global Market under the symbol "SFXE."

We are an "emerging growth company," as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in "Risk Factors" beginning on page 13 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 
  Per Share
  Total
 
   

Public offering price

  $                 $                
   

Underwriting discounts and commissions(1)

  $                 $                
   

Proceeds, before expenses, to us

  $                 $                
   
(1)
See "Underwriting" for a description of the compensation payable to the Underwriters.

The underwriters may also purchase up to an additional             shares of our common stock at the public offering price, less the underwriting discounts and commissions payable by us, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $             and our total proceeds, after underwriting discounts and commissions but before expenses, will be $             .

The underwriters are offering the common stock as set forth under "Underwriting." Delivery of the shares will be made on or about                           , 2013.

UBS Investment Bank   Barclays   Jefferies

                           , 2013



TABLE OF CONTENTS


Prospectus Summary

    1  

Risk Factors

    13  

Forward-Looking Statements

    46  

Use of Proceeds

    47  

Dividend Policy

    48  

Capitalization

    49  

Dilution

    50  

Unaudited Pro Forma Condensed Combined Consolidated Financial Information

    52  

Selected Historical Financial Information and Other Data

    64  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    66  

Business

    88  

Management

    107  

Executive Compensation

    114  

Certain Relationships and Related Party Transactions

    125  

Material United States Tax Considerations For Non-United States Holders of Common Stock

    128  

Principal Stockholders

    133  

Description of Capital Stock

    135  

Shares Eligible for Future Sale

    144  

Underwriting

    149  

Experts

    153  

Legal Matters

    154  

Where You Can Find More Information

    154  

Index to Consolidated Financial Statements

    F-1  


Through and including                           , 2013 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Neither we nor any of the underwriters have authorized anyone to provide any information or to make any representations other than as contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and provide no assurance as to the reliability of, any information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

Unless derived from our financial statements or otherwise noted, the Australian Dollar, or AUD, amounts presented in this prospectus are translated at the rate of $1.00 = AUD$1.0847, the exchange rate published by Bloomberg as of June 21, 2013 unless otherwise specified to the contrary.

USE OF MARKET AND INDUSTRY DATA

This prospectus includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management's estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third party sources referred to in this prospectus are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this prospectus or ascertained the underlying economic assumptions relied upon by such sources. Internally prepared and third-party market forecasts, in particular, are estimates only and may be inaccurate, especially over long periods of time. Furthermore, references in this prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this prospectus.

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Prospectus summary

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that is important to you. Before investing in our common stock, you should read this prospectus carefully in its entirety, especially the risks of investing in our common stock that we discuss in the "Risk Factors" section of this prospectus and the financial statements and related footnotes beginning on page F-1.

In this prospectus, unless otherwise stated or the context otherwise requires, references to "SFX" and "the Company" refer to SFX Entertainment, Inc. and references to "we," "us," "our" and similar references refer to SFX Entertainment, Inc. together with its consolidated subsidiaries, in each case after giving effect to our completed acquisitions, the planned acquisitions disclosed herein, and the formation of our joint venture. To date, SFX has acquired four businesses and acquired an interest in one joint venture. SFX also expects to complete four acquisitions simultaneously with or shortly after the closing of this offering: its acquisition of a 75% ownership interest in the worldwide business (the "ID&T Business") of ID&T Holding B.V. ("ID&T"), its acquisition of a 60% equity interest in i-Motion GmbH Events & Communication ("i-Motion"), its acquisition of 100% of Totem Onelove Group Pty Ltd and Totem Industries Pty Ltd (collectively, "Totem") and its acquisition of a 70% equity interest in Made Event, LLC and EZ Festivals, LLC (collectively, "Made"). Although we consider these acquisitions to be "probable" within the meaning of Rule 3-05 of Regulation S-X and present information herein on a basis that assumes we complete these acquisitions, their consummation remains subject to closing conditions. Therefore, we cannot provide any assurance that any of our planned acquisitions will be consummated. We discuss the terms of these acquisitions and the conditions to closing in "Risk Factors—Risks Related to Our Acquisition Strategy" and "Business—Our History and Acquisitions—Planned acquisitions."

One of SFX's completed acquisitions is Dayglow LLC and its affiliates (now known as SFX-LIC Operating LLC or "Life in Color"), which for accounting purposes has been determined to be the predecessor entity of SFX. We refer to the results of our predecessor entity as our "Predecessor." SFX is not the same company as, or in any legal way connected to, SFX Entertainment Inc., which was sold to Clear Channel Communications Inc. in 2000, although the Company and SFX Entertainment Inc. do share similar founders and management teams.


COMPANY OVERVIEW

We believe we are the largest producer of live events and entertainment content focused exclusively on the electronic music culture ("EMC"), based on attendance and revenue. We view EMC as a global generational movement driven by a rapidly developing community of avid followers among the millennial generation. Our mission is to enable this movement by providing our fans with the best possible live experiences, music discovery and connectivity with other fans and events. We have significant and growing scale with our global live events and, on a pro forma basis for our completed and planned acquisitions, attracted approximately 2.8 million fans in 2012, a 23.6% increase from 2011. We believe the broad appeal of EMC beyond festival attendance is demonstrated by the deep engagement of our fans, which is evidenced by the time they devote to EMC-related social media and digital activities. For example, our 2012 Tomorrowland festival in Belgium had 7.9 million live views on YouTube and our official Tomorrowland long-form after movies have had over 140 million online views to date.

We present leading EMC festivals and events, including Tomorrowland, Sensation, Mysteryland, Q-Dance, Stereosonic, Electric Zoo, Decibel, Nature One, MayDay, Ruhr-in-Love and Life in Color, many of which have more than a decade of history, passionate followers and vibrant social communities. We are continually investing in our festivals and events to add new and exciting creative elements, expand into new markets, and launch new events, all in order to provide the best

 

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entertainment experiences in the world for EMC fans. Many of the festivals we have or will present have a long history and have achieved substantial popularity and success in Europe while also attracting fans globally. For example, Tomorrowland sold out all of its approximately 180,000 tickets to the 2013 festival in Belgium in one second and saw significant demand from U.S.-based fans, each seeking to purchase multiple tickets. To meet the growing demand of the EMC community in the United States and other regions around the world, we plan to introduce some of the most popular festivals and events to certain areas for the first time. At its original location in Amsterdam, Sensation has consistently sold out since its inception in 2000, including all 45,000 tickets for 2013. Our inaugural Sensation event in North America, held in Toronto in May 2013, attracted over 25,000 attendees. We have announced four additional Sensation events in North America for 2013, which will be held in Las Vegas, Miami, New York, and San Francisco, and our first North American Tomorrowland festival, TomorrowWorld, which we will hold in September 2013.

We are also addressing the demand from the growing EMC community for music, engaging content and social connectivity between and around live events. A key component of this initiative is Beatport, which is the principal source of music for EMC DJs and a trusted destination for the growing EMC community. Beatport is a vital channel for over 200,000 registered DJs and artists to launch music and connect with fans. In addition, Beatport has a rapidly growing fan community, with approximately 40 million unique visitors in 2012 (according to Google Analytics), who primarily use the site to discover and stream music, follow DJs and keep abreast of EMC news, information and events.

The global market directly associated with electronic dance music is projected to be approximately $4.5 billion in 2013, according to the International Music Summit Business Report (the "IMS"). Electronic music has a history of over 20 years of mainstream popularity in Europe and has more recently evolved into a widely followed genre of music in the United States and other international markets. For example, total attendance at what are currently the five largest U.S. EMC festivals grew 41% annually from 2007 to 2012 (although there is no guarantee that this growth rate will continue in the future). This compares to 2% annual revenue growth for the overall North American concert market during the same period, according to Pollstar, a concert industry trade publication. Further reflecting this trend, in 2012 the National Academy of Recording Arts and Sciences added a Dance/Electronic category for the Grammy Awards, Billboard launched a Dance/Electronic chart, and in February 2013, a Dance/Electronic song reached #1 on the Billboard Hot 100 chart for the first time. EMC festivals and events typically feature many different artists and DJs as well as elaborate sets, lighting and special effects centered on different creative themes. These festivals and events have become highly experiential and social happenings that are enjoyed by thousands of fans. These experiences, further propelled via social media and shared by millions of fans globally, are at the heart of the generational movement that is EMC.

Our market is characterized by a high degree of ownership fragmentation, and we believe it is well positioned for consolidation. We have a disciplined acquisition strategy that utilizes our in-house expertise and experience to identify, evaluate and integrate acquisitions. We plan to implement best practices across acquired companies and provide active business development, managerial support and financial discipline to achieve operational efficiencies. This will allow us to bring our fans more and better EMC experiences while preserving the unique identities of these events. We have acquired and formed, or plan to acquire simultaneously with or shortly after consummation of this offering, the following businesses in pursuit of this strategy.

 

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Asset/Status
  Ownership
  2012
Events/
Festivals

  2012 Total
Attendance
(000s)

  Description
 

BEATPORT, LLC "Beatport"

Completed

    100 %   NA     NA   Principal online resource and destination for EMC DJs and enthusiasts, offering music for purchase in multiple downloadable formats (including uncompressed, high quality audio files) and providing unique music discovery tools for DJs and fans.
 

Disco Donnie Presents "DDP"

Completed

    100 %   600 / 8     867   Promoter of EMC events in North America since 2000, including ownership interests in large EMC festivals.
 

ID&T Holding B.V. "ID&T"

Planned

    75 %   35 / 29     964   One of the largest content providers and producers of international EMC live events across 19 countries and four continents. ID&T branded festivals include Tomorrowland, Mysteryland, Sensation, Q-Dance, B2S, Decibel and Defqon.1. At the same time as this acquisition, we will increase our interest in the ID&T JV from 51% to 75%.
 

i-Motion GmbH Events & Communication "i-Motion"

Planned

    60 %   7 / 5     208   Leading promoter and producer of EMC festivals and events in Germany, with key brands including Nature One, Germany's largest open-air EMC festival.
 

Life in Color
"LIC"

Completed

    100 %   138 / 4     424   Promoter and organizer of branded events that feature live music by DJs, acrobatic acts and "paint blasts."
 

Made Event, LLC and
EZ Festivals LLC collectively, "Made"

Planned

    70 %   14 / 1     130   Promoter and producer of EMC festivals and events in the United States, including Electric Zoo, held annually in New York City.
 

MMG Nightlife LLC "MMG"

Completed

    80 %   NA     NA   Management company that manages some of the most popular EMC venues in South Beach, Florida.
 

Totem Onelove Group Pty Ltd and Totem Industries Pty Ltd collectively, "Totem"

Planned

    100 %   15 / 5     247   Promoter and producer of leading Australian EMC festival, Stereosonic, a five city touring outdoor festival held annually in summer (November/December) in conjunction with a touring and promotion business.
 

 

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We have agreed to the following terms in respect of the four planned acquisitions described above. We intend to use the proceeds of this offering to fund the cash portion of the consideration for these acquisitions and consummate them simultaneously with or shortly after the closing of this offering.

Under our option (the "ID&T Option") to purchase a 75% ownership interest of the worldwide business of ID&T (the "ID&T Business"), our acquisition of the ID&T Business will cost $50.0 million in cash (including a subsequent $10.0 million payment) plus the cancellation of a $7.5 million debt owed to us by ID&T. These are in addition to the $2.5 million in cash and 2,000,000 shares of common stock we paid to acquire the ID&T Option.

Under a term sheet with i-Motion, our initial acquisition of a 60% ownership interest in i-Motion will cost $12.0 million, consisting of $8.0 million in cash and $4.0 million in shares of our common stock at the price to the public in this offering.

We have entered into an asset contribution agreement with Totem, under which we have agreed to pay AUD$75.0 million, consisting of AUD$60.0 million (or $55.3 million) in cash and AUD$15.0 million (or $13.8 million) in shares of our common stock at the price to the public in this offering, to acquire 100% of Totem. Under the terms of the agreement, we were obligated to pay an AUD$5.0 million (or $4.8 million as of May 22, 2013) deposit, which we funded on May 22, 2013.

Under our term sheet with Made, our acquisition of a 70% ownership interest in Made will cost $35.0 million, consisting of $20.0 million in cash, $5.0 million in our common stock at the lower of $12.75 per share or the price to the public in this offering, and $10.0 million in promissory notes. On June 24, 2013, we advanced $2.5 million towards the purchase price for this transaction. We will be required to purchase the remaining 30% that is not being sold in 2018.

We describe the terms of these planned acquisitions in greater detail under "Business—Our History and Acquisitions—Planned acquisitions."

Although, we consider each of these acquisitions to be a "probable acquisition" for the purposes of Rule 3-05 of Regulation S-X, in each case, there are substantial potential impediments that could cause us to fail to close a given acquisition or otherwise prevent it from being successful. For more information, see "Risk Factors—Risks Related to Our Acquisition Strategy."

Currently, we generate revenue from several sources. These include music sales on Beatport (20% and 34% of total revenue on a pro forma basis for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively), ticket sales and concessions (63% and 54% of total revenue on a pro forma basis for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively), and other sources including promoter, license fees, sponsorship, and management fees (collectively, 17% and 12% of total revenue on a pro forma basis for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively). On a pro forma basis for our completed and probable acquisitions, we generated revenue of $242.0 million and Adjusted EBITDA of $14.6 million and incurred net losses of $48.9 million for the year ended December 31, 2012, and generated revenue of $36.2 million and Adjusted EBITDA of $(9.2) million and incurred net losses of $31.7 million for the three months ended March 31, 2013.


COMPETITIVE STRENGTHS

We believe we are the largest company exclusively focused on the EMC community, with innovative festivals, live events and premier managed venues. In addition, we attract a large and growing community of EMC followers and key influencers around the world.

History of creativity and innovation.    We create and produce many of the most recognized and well attended EMC festivals and events in the world, including, on a pro forma basis for our probable acquisitions, Tomorrowland, Sensation, Mysteryland, Q-Dance, Stereosonic, Electric Zoo, Decibel,

 

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    Nature One, MayDay, Ruhr-in-Love and Life in Color. At our events and festivals, we use artistic, interactive, performance and visual elements, in addition to the music, to create an all-encompassing and compelling fan experience. For example, Life in Color shows include acrobatic acts and "paint blasts" in addition to DJs, and our other festivals include production elements such as elaborate sets, themes, lasers, fog machines and videos. We believe the appeal of our festivals and events is demonstrated by consistent attendance growth and ticket demand that often outstrips the available capacity. For example, in 2013, Tomorrowland sold out in pre-registration its approximately 180,000 tickets, which was more than triple the tickets it sold in 2009.

Active, year-round relationship with the large and growing EMC community.    We use social media, engaging content and our online property, Beatport, to maintain an active relationship with trend setters and influencers in the broader EMC community, including professional DJs, bloggers and passionate consumers. Beatport has a large community of influencers, including over 200,000 registered DJs. Beatport also has a Klout score (an aggregated measure of social media activity and influence) of 90 out of 100, comparable with other high profile music services such as Spotify (90) and iTunes (92) as of June 2013. We believe our ability to create closer partnerships between Beatport and the most important EMC festivals and events will enable us to deliver more to the EMC community between and around live events.

Substantial global scale and diversification.    Our scale and diversification enables us to serve our fans more effectively than other participants in the EMC market that have typically focused on one geographic market or a narrow portfolio of events. On a pro forma basis in 2012, we produced 52 festivals (defined as having an attendance of 10,000 or more fans) and 809 events (defined as having attendance of fewer than 10,000 fans). Together these attracted 2.8 million attendees in 2012 and included large and small scale events, presented in 25 countries on five continents, that targeted different subsets of the EMC community. In addition, our managed EMC venues hosted over 400,000 attendees and our online properties attracted millions of users around the world in the year ended December 31, 2012.

Early access to emerging talent and trends.    Through our managed venues, Beatport and relationships with influencers, we are able to identify new trends and support new artists, introducing them across our network. Our premier managed EMC venues in South Beach, Florida have proven to be a breeding ground for some of the top DJs in the industry. Similarly, Beatport serves as an important channel for DJs to gain recognition. In addition to influential charts and other discovery tools, Beatport hosts mix contests and other programs to support aspiring DJs. For example, Zedd, one of today's leading DJs, was discovered after he won several remix contests on Beatport and has gone on to play at several of our venues and festivals.

Experienced management team.    Our management team's reputation and experience in music, live entertainment, consumer internet and related businesses make us a valuable partner to creative talent, independent operators and the EMC community more broadly. Members of our senior management team have previously built businesses in live events and entertainment and executed and integrated a number of acquisitions during their careers. We believe our management's experience strengthens our ability to effectively integrate and operate our acquired businesses.

We are an early stage company that has not yet taken full advantage of these strengths, and we are not yet profitable due to the costs associated with startup activities, including making acquisitions, as well as limited time integrating and managing the businesses we have acquired and intend to acquire.


GROWTH STRATEGY

Our goal is to grow our business by supporting the development of the EMC movement. Key elements of our strategy include the following:

 

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Enhance the fan experience.    We strive to continually enhance the experience that new and existing fans enjoy at our live events or online. Our live events include innovative and state-of-the-art sets and performer lineups, featuring both top talent and up-and-coming artists. We are pursuing many initiatives to enhance the fan experience, including continuing to invest in leading edge production, providing smart tickets/event passes, facilitating high quality travel and accommodation logistics, using wireless technologies to ease on-site logistics and social media interaction and featuring quality concessions in partnership with top-tier food and beverage partners. We believe the value of the experiences we offer is compelling enough to attract one or more partners willing to support multiple free events and other fan-friendly initiatives. We are in advanced discussions with several such partners to support these initiatives and enhance the access and experience of our fans. We plan to complement our fans' experience at live events by meeting their demand for information, quality content and connectivity with artists and the broader EMC community away from and around the events.

Bring our festivals into new markets and expand current offerings.    Many of our EMC festivals and events are well known, have an existing global following and have begun to expand geographically. We are using our considerable resources, including managerial talent and local expertise, to accelerate the expansion of our festivals and events into new geographies, many of which have an underserved EMC fan community. For example, in 2012, Tomorrowland saw demand from approximately 200,000 U.S.-based fans seeking to purchase multiple tickets each, of which only 2,000 were successful. We intend to bring some of the most successful festivals in the world to North America, including TomorrowWorld, the first international version of Tomorrowland, scheduled to be held outside Atlanta in September 2013. In response to increasing demand for our events, we are also expanding some of our festivals by increasing their length and capacity. For example, from 2010 to 2011, Tomorrowland expanded to three days from two days and increased attendance to 60,000 per day (180,000 total) from 45,000 per day (90,000 total).

Foster deeper engagement within the EMC community.    We believe our scale of festivals and events, combined with our new generation of executive talent, helps us support the growth of the EMC community. Creating and mixing electronic music is a collaborative process that is highly accessible given the ready availability of music and mixing tools. In addition, the music is typically enjoyed as part of a communal experience, which in turn is commonly shared and perpetuated via social media. We seek to improve our fans' experiences by responding to their growing demand to engage with EMC content and the EMC community. We also plan to create closer partnership and integration between our online properties, such as Beatport, and live EMC happenings to enhance the fan experience between and around events.

Acquire and integrate leading live event and online properties.    We seek to acquire the highest quality festivals, event operators and promoters worldwide, as well as other businesses that are important to the EMC community. We have completed four acquisitions and acquired an interest in one joint venture to date, and we plan to close four more acquisitions on or shortly after the closing of this offering. We are also in active negotiations to acquire several other businesses. To mitigate acquisition risks, we typically seek to retain management teams of the acquired companies under long-term agreements and incentivize them to continue to manage the operations and expansion of the businesses. In addition, we intend to use our senior management's expertise in live events, consumer internet and EMC broadly, to promote best practices across our entire network in order to enhance the fan experience, improve operating and financial performance and ensure the health and safety of our fans, all while allowing producers to maintain creative independence.

 

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RISKS RELATED TO OUR BUSINESS

Investing in our common stock involves substantial risk. You should carefully consider all of the information in this prospectus prior to investing in our common stock. There are several risks related to our business that are described under the section titled "Risk Factors" elsewhere in this prospectus. Among these important risks are the following:

Our success relies, in part, on the strength of our festival and online properties' appeal to fans, and if any of them were to become less popular, our business could suffer.

We may be unsuccessful in developing and expanding our music, video and other content offerings.

We can give no assurance as to when, or if, we will consummate our planned acquisitions.

The number of EMC festivals and events may grow faster than the public's demand which could make it difficult for us to attract customers to our festivals and events.

A number of other companies are seeking to make acquisitions in our industry, which may make our acquisition strategy more difficult or expensive to pursue.

We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock that would dilute your ownership.

We may be unsuccessful in our future acquisition endeavors, if any, which may have an adverse effect on our business; in addition, some of the businesses we acquire may incur significant losses from operations.

Our business and growth may suffer if we are unable to attract and retain key officers or employees, including our Chairman and Chief Executive Officer, Robert F.X. Sillerman, including any loss of officers or employees due to illness or other events outside of our control.

We are uncertain of our ability to manage our growth.

We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act and Section 3(a)(80) of the Exchange Act. Pursuant to Section 102 of the Jumpstart Our Business Startups Act ("JOBS Act"), we have provided reduced executive compensation disclosure and have omitted a compensation discussion and analysis from this prospectus. Pursuant to Section 107 of the JOBS Act, we have elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.


OUR HISTORY

SFX was incorporated in the State of Delaware on June 5, 2012. Between June 5, 2012 and February 13, 2013, SFX was named SFX Holding Corporation. We started our business on July 7, 2011 as SFX EDM Holdings Corporation which is now a wholly-owned subsidiary of SFX Entertainment, Inc.

Our principal executive offices are located at 430 Park Avenue, New York, New York 10022 and our telephone number is (646) 561-6400.

All trademarks and product names or brands appearing in this prospectus are the property of their respective owners.

 

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The offering

Common stock offered by us                shares
Common stock outstanding after this
offering
                      shares
Option to purchase additional shares   The underwriters have an option to purchase a maximum of         additional shares of our common stock from us to cover over-allotments, if any. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of proceeds   We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $             million, assuming the shares are offered at $             per share (the midpoint of the price range set forth on the cover of this prospectus).
   

We intend to use $50.0 million to exercise the ID&T Option and close the acquisition of the 75% ownership interest in the ID&T Business, including $10.0 million to pay the second step payment due to ID&T under the ID&T Option.

   

We intend to use $8.0 million to close the acquisition of 60% of the ownership interests in i-Motion.

   

We intend to use AUD$55.0 million (or $50.7 million) to close the acquisition of substantially all of the assets of Totem.

   

We intend to use $17.5 million to close the acquisition of 70% of the ownership interests in Made.

   

We intend to use the balance to fund working capital, capital expenditures and other general corporate purposes, which may include other acquisitions of complementary businesses.

    See "Use of Proceeds."
Risk factors   See "Risk Factors" beginning on page 13 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
Proposed Nasdaq Global Market symbol   "SFXE"

The number of shares of common stock that will be outstanding after this offering is based on 63,592,902 shares outstanding as of June 24, 2013, and excludes:

18,383,000 shares of common stock issuable upon the exercise of options to purchase common stock that were outstanding as of June 24, 2013, with a weighted average exercise price of $4.62 per share, and options to purchase approximately 635,000 shares of common stock with an exercise price equal to the initial public offering price per share in this offering, which we intend to issue immediately prior to the closing of this offering;

 

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500,000 shares of common stock issuable upon the exercise of warrants to purchase common stock that were outstanding as of June 24, 2013, with a weighted average exercise price of $2.50 per share; and

1,592,000 shares of common stock available for future issuance under our 2013 Equity Compensation Plan.

Unless otherwise indicated, all information in this prospectus:

assumes no exercise of the underwriters' option to purchase additional shares; and

assumes an initial public offering price of $           per share, the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus.

We also intend to file with the U.S. Securities and Exchange Commission (the "SEC") a registration statement on Form S-1 (the ``resale registration statement") relating to the offering and sale from time to time of up to                           shares of our common stock by certain of our existing stockholders named as selling stockholders therein. The offer and sale of these shares are not included in the registration statement of which this prospectus is a part, and none of those shares will be included in this offering. In the event that any of the selling stockholders sell shares of our common stock under the resale registration statement, we will not receive any proceeds from those sales. Each of the selling stockholders have signed lock-up agreements with our underwriters that prohibit them, subject to certain exceptions, from selling their shares during the period ending 180 days after the date of this prospectus, and many of them have signed separate lock-up agreements with us. We intend for the resale registration statement to be declared effective by the SEC following the effectiveness of this prospectus and after we have closed one or more of our planned acquisitions.

 

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Summary historical consolidated financial information and other data

The following table sets forth the summary historical and pro forma consolidated financial information for SFX Entertainment, Inc. (Successor), or "SFX," and the summary historical financial information for Life in Color or "LIC" (Predecessor). The historical results of operations for SFX, as Successor, for the year ended December 31, 2011 do not reflect any of the operations of LIC, as Predecessor. The historical results of operations for SFX, as Successor, for the year ended December 31, 2012 reflect the operations of LIC only from the date of our acquisition of LIC on July 31, 2012.

We derived the summary historical consolidated financial data for SFX as of and for the years ended December 31, 2011 and December 31, 2012 from the audited consolidated financial statements you can find elsewhere in this prospectus. We derived the summary historical consolidated financial data for LIC as of and for the year ended December 31, 2011, for the period from January 1, 2012 through July 31, 2012 and as of July 31, 2012 from the audited consolidated financial statements you can find elsewhere in this prospectus. We derived the summary historical consolidated financial data for SFX as of March 31, 2013 and for the three months ended March 31, 2012 and 2013 from the unaudited consolidated financial statements you can find elsewhere in this prospectus.

We derived the summary unaudited pro forma condensed combined financial data for SFX for the year ended December 31, 2012 and as of and for the three months ended March 31, 2013 from the unaudited pro forma condensed combined financial statements you can find elsewhere in this prospectus. These pro forma financial data give effect to our completed and planned acquisitions, our issuances and sales of equity that have occurred since January 1, 2012, and our borrowing under our First Lien Term Loan Facility, as if each of these had occurred on January 1, 2012 (in the case of the consolidated income data) and on March 31, 2013 (in the case of the consolidated balance sheet data). You should read these data in conjunction with the information set forth under "Unaudited Pro Forma Condensed Combined Financial Information," which describes these transactions and the related adjustments in greater detail.

The financial data set forth below are only a summary and are not complete. They also do not necessarily indicate or represent anything about our future operations. You should read these summary financial data in conjunction with the disclosure under "Use of Proceeds," "Capitalization," "Unaudited Pro Forma Condensed Combined Financial Information," "Selected Historical Financial Information and Other Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and the related notes thereto included elsewhere in this prospectus.

 

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  SFX Entertainment, Inc.
(Successor)
 
 
  Life in Color
(Predecessor)
 
 
   
   
   
   
   
  Pro forma
Three months
ended
March 31,
2013

 
Consolidated statement of
comprehensive income data
(in 000s except per share
amounts)

  Year ended
December 31,
2011

  Seven months
ended
July 31,
2012

  Year ended
December 31,
2011

  Year ended
December 31,
2012

  Three months
ended
March 31,
2012

  Three months
ended
March 31,
2013

  Pro forma
Year ended
December 31,
2012

 
   
 
   
   
   
   
  (Unaudited)
  (Unaudited)
  (Unaudited)
  (Unaudited)
 

Revenue

  $ 9,606   $ 10,986   $   $ 24,815   $   $ 10,153   $ 241,954   $ 36,214  

Total direct costs

    (8,572 )   (8,219 )       (23,019 )       (7,601 )   (176,090 )   (28,372 )
                                   

Gross profit

    1,034     2,767         1,796         2,552     65,864     7,842  

Operating expenses

                                                 

Selling, general and administrative expenses

    (1,142 )   (2,323 )   (101 )   (17,026 )   (1,366 )   (14,246 )   (65,797 )   (23,095 )

Depreciation and amortization

    (41 )   (95 )       (991 )       (2,865 )   (48,810 )   (13,289 )
                                   

Operating income/(loss)

    (149 )   349     (101 )   (16,221 )   (1,366 )   (14,559 )   (48,743 )   (28,542 )

Interest expense

                (34 )       (3,911 )   (21,156 )   (10,479 )

Other income (expense)

    (9 )   13         98         (942 )   2,788     (1,211 )
                                   

Net income/(loss) before provision for income taxes

    (158 )   362     (101 )   (16,157 )   (1,366 )   (19,412 )   (67,111 )   (40,232 )

(Provision)/benefit for income taxes

                (67 )       (572 )   19,165     7,340  
                                   

Net income/(loss)

    (158 )   362     (101 )   (16,224 )   (1,366 )   (19,984 )   (47,946 )   (32,892 )

Less: Net income/(loss) attributable to non-controlling interests

                        (878 )   (942 )   (1,185 )
                                   

Net income/(loss) attributable to SFX Entertainment, Inc.

  $ (158 ) $ 362   $ (101 ) $ (16,224 ) $ (1,366 ) $ (19,106 ) $ (48,888 ) $ (31,707 )
                                   

Loss per share—basic and diluted

    NA     NA   $   $ (0.44 )   N/A   ($ 0.36 )            

Weighted average shares outstanding—basic and diluted

    NA     NA         37,186     N/A     52,929              

Other Financial Data:

                                                 

Adjusted EBITDA(1)

  $ (108 ) $ 1,235   $ (101 ) $ (13,021 )       $ (6,630 ) $ 14,620     (9,220 )

NA—not applicable

 
  Life in Color
(Predecessor)
  SFX Entertainment, Inc.
(Successor)
 
Consolidated balance sheet data
  December 31,
2011

  July 31,
2012

  December 31,
2011

  December 31,
2012

  March 31,
2013

  Pro Forma
March 31, 2013

 
   
 
   
   
   
   
  (Unaudited)
  (Unaudited)
 

Cash

  $ 44   $ 182   $   $ 3,675   $ 21,859   $ 74,329  

Working capital

    (595 )   (835 )   (101 )   (18,005 )   (8,132 )   23,581  

Total assets

    1,111     1,615         66,732     240,961     557,043  

Deferred revenue

    663     830         324     3,028     16,034  

Total liabilities

    1,727     2,107     101     28,059     97,257     172,827  

Stockholders' equity (Deficit)

    (616 )   (492 )   (101 )   8,879     64,489     363,757  

(1)
We define Adjusted EBITDA as net income (loss) before other income (loss), interest expense, income taxes, depreciation and amortization, equity-based compensation expense, and non-recurring items. Adjusted EBITDA is not a recognized term under U.S. generally accepted accounting rules ("GAAP") and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

We present Adjusted EBITDA in this prospectus to provide investors with supplemental information regarding our financial results and operating performance. Adjusted EBITDA should not be used as an indicator of, or an alternative to, net income (as determined in accordance with GAAP) as a measure of our operating performance or to net cash provided by operating, investing or financing activities (as determined in accordance with GAAP) or as a measure of our ability to meet cash needs.

We have included Adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short- and long-term operational plans. In particular, the elimination of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.

We believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

 

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    Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations include the following:

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

    Adjusted EBITDA does not consider the potentially dilutive impact of share-based compensation; and

    other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, limiting their usefulness as a comparative measure.

    Because of these and other limitations, you should consider Adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and other GAAP financial results.

    The following table presents a reconciliation of Adjusted EBITDA to our net income (loss), the most comparable GAAP measure, for each of the periods indicated.

 
   
   
  SFX Entertainment, Inc.
(Successor)
 
 
  Life in Color
(Predecessor)
 
 
   
   
   
   
  Pro forma
Three months
ended
March 31,
2013

 
 
  Year ended
December 31,
2011

  Seven months
ended July 31,
2012

  Year ended
December 31,
2011

  Year ended
December 31,
2012

  Three months
ended
March 31,
2013

  Pro forma
Year ended
December 31,
2012

 
   

Net income (loss)

  $ (158 ) $ 362   $ (101 ) $ (16,224 ) $ (19,984 ) $ (47,946 ) $ (32,892 )

Interest expense

   
   
   
   
34
   
3,911
   
21,156
   
10,479
 

Provision for income taxes

                67     572     (19,165 )   (7,339 )

Depreciation & amortization

    41     95         991     2,865     48,810     13,288  

Equity-based compensation expense

                2,209     5,010     2,209     5,010  

Other (income) expense(a)

    9     (13 )       (98 )         (829 )   1,181  

Non-recurring litigation costs

                    53     1,124     447  

Non-recurring transaction costs(b)

        791               943     7,792     575  

ITDA related to non-consolidated affiliates(c)

                        1,469     31  
                               

Adjusted EBITDA

  $ (108 ) $ 1,235   $ (101 ) $ (13,021 ) $ (6,630 ) $ 14,620   $ (9,220 )
                               

(a)
Other (income) expense represents gain on a sale of assets and other miscellaneous non-recurring items.

(b)
These include acquisition related costs at acquired entities. These do not include expenses that SFX incurred in connection with its formation, the evaluation, negotiation and consummation of acquisitions and this offering and the resale shelf registration statement, which were $0, $0, $101, $8,330, $3,069, $8,330, and $3,069, respectively.

(c)
Represents ID&T's non-consolidated affiliates share of interest expense, income taxes and depreciation and amortization.

 

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Risk factors

This offering and an investment in our common stock involves a high degree of risk. You should consider carefully the following risks and other information contained in this prospectus, including the consolidated financial statements and related footnotes appearing at the end of this prospectus, before you decide whether to buy our common stock. If any of the following risks actually occur, they may materially harm our business, prospects, financial condition and results of operations. In this event, the market price of our common stock could decline and you could lose part or all of your investment.


RISKS RELATED TO OUR BUSINESS AND INDUSTRY

Our success relies, in part, on the strength of our festivals, events and online businesses, and if any of them were to become less popular, our business could suffer.

Through our completed and planned acquisitions, we have come to (or plan to) produce, promote and manage some of the world's most recognized electronic music culture, or EMC, festivals, events and online businesses, including Tomorrowland, Sensation, Mysteryland, Q-Dance, Stereosonic, Electric Zoo, Nature One, MayDay, Ruhr-in-Love, Life in Color and Beatport. Our growth strategy relies on the strength of these brands to attract customers to our festivals and events, both through attendance at the original festivals and in new markets, as well as to our online properties. We also rely on the strength of these brands to secure sponsorships and to facilitate growth in revenue from the sale of music and other content, as well as advertising on our online properties. Maintaining the strength of our festivals, events and online businesses will be challenging, and our relationship with our fans could be harmed for many reasons, including the quality of the experience at a particular festival, our competitors developing more popular events or attracting talent from our businesses, adverse occurrences or publicity in connection with an event and changes to public tastes that are beyond our control and difficult to anticipate. If our key properties become less popular with consumers within the EMC community, our growth strategy would be harmed, which could in turn harm our business and financial results.

Maintaining the popularity of our festivals, events and online businesses requires that we anticipate consumer preferences and offer events that appeal to the EMC community. Our customers' preferences and tastes for these events can change and evolve rapidly, and our competitors actively seek to provide new and compelling experiences at their EMC events. If we fail to anticipate or respond quickly to changes in public taste, our festivals and related offerings may become less attractive to consumers.

We can give no assurances as to when we will consummate our planned acquisitions or whether we will consummate them at all.

We intend to close four planned acquisitions simultaneously with or shortly after the closing of this offering and to use the proceeds of this offering to fund the cash portion of the consideration for those acquisitions. However, each of those acquisitions is subject to conditions to closing, including conditions that are beyond our control, and we may not be able to close any of them successfully. In addition, our planned acquisitions are required to be closed within certain timeframes. Specifically, our option (the "ID&T Option") to purchase 75% of the ownership interests of the worldwide business of ID&T (the "ID&T Business") must be closed on or before July 23, 2013 and the Made acquisition must be closed by August 21, 2013. In the case of i-Motion, the exclusivity period permitted under the term sheet has expired. In the case of Totem, we have the right to determine the closing date, which may not be 60 days after the satisfaction of the closing conditions. If we are unable to meet the closing

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deadlines or otherwise unable to close the planned acquisitions, it would significantly alter our business strategy and impede our prospects for growth. If we are unable to close a particular planned acquisition, we will not be able to produce any of the festivals or events or have ownership or licenses of the brands owned or licensed by that acquisition target, which could include Tomorrowland, Sensation, Mysteryland, Decibel, Nature One, MayDay, Ruhr-in-Love, Electric Zoo or others. Further, we may not be able to identify suitable acquisition candidates to replace these acquisitions, and even if we were to do so, we may only be able to consummate them on less advantageous terms.

In addition, if we do not close a particular planned acquisition, we could lose deposits or other amounts we have paid in connection with it. For example, if our acquisition of Totem does not close by September 30, 2013 for any reason other than a breach of the asset contribution agreement by Totem, Totem will be entitled to retain our AUD$5.0 million (or $4.8 million as of May 22, 2013) deposit. Additionally, regardless of whether we do or do not close the ID&T Option, we are required to pay the sellers of the ID&T Business $10 million on August 24, 2013. Further, if we fail to close our acquisition of 70% of the ownership interests in Made by August 21, 2013, the principals of Made may retain the $2.5 million advance, and we may be required to renegotiate the acquisition in its entirety. If we do close our planned acquisitions, each of these acquisitions will be subject to the other risks inherent in our acquisitions, including the risks disclosed herein under "—Risks Related to Our Acquisition Strategy".

We may be unsuccessful in developing and expanding our music, video and other content offerings.

We intend to develop Beatport as a key point of contact between us and the EMC community. However, our plans face a number of challenges and risks. For example, we are in the nascent stage of developing additional media content, such as news, lifestyle videos and blogs, which we believe will be attractive to members of the EMC community, but we may not be successful in developing these offerings. Consumers may also decide to access similar offerings from our competitors. We also intend to increase our consumers' paid access to music, including through downloads. This strategy faces a number of challenges, including illegal downloading and other piracy, which has depressed sales in the music industry generally, competition from mainstream brands, such as iTunes and others and our inability to obtain and retain licenses to supply artist content. We may fail to enhance the consumer experience, deepen engagement with the EMC community or achieve the improvements we seek to make. Any of these occurrences may prevent us from improving our connection to our customers and bringing more traffic to the Beatport website, further developing Beatport as a key point of contact for the EMC community and increasing ticket sales for our festivals and events. If we fail to properly execute our strategy in this area, it will be harder for us to achieve the growth we expect, and our business and financial results may be adversely affected.

We are vulnerable to the potential difficulties associated with rapid growth.

We believe that our future success depends on our ability to manage the rapid growth that we expect to achieve organically and through acquisitions and the demands and additional responsibilities that our growth will place on our management.

The following factors could present us with difficulties:

a lack of sufficient executive-level personnel;

the inability to develop and monetize our online properties;

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an increased administrative burden on our employees;

the inability to attract, train, manage and retain the qualified personnel necessary to manage and operate a greater number of festivals, events and other business activities; and

the inability to integrate acquired businesses.

If we fail to address these and other challenges associated with our growth, our growth itself may slow or fail to materialize, we may grow without achieving profitability, we may have difficulty with our internal controls and procedures and the quality of our festivals, events and other offerings may decline, among other things. Any of these could harm our business and financial results.

It is possible that the popularity of electronic music and the EMC community will not continue their current growth or even decline.

We have focused our business on the broad market for electronic music and the EMC community, including electronic music festivals and events, venues, sponsorships and ecommerce. Accordingly, our growth strategy is dependent upon the continued growth of the popularity of electronic music and the EMC community. However, this growth is subject to the whims of public taste, which may change over time and become less popular and which may be beyond our control. While interest in electronic music has increased significantly over the past few years, this increase in interest may not continue, and it is possible that the public will not sustain its current level of interest in electronic music. If either were to happen, the demand for and interest in EMC festivals, events and venues and our online properties could fail to meet our expectations or even decline. This would have a material adverse effect on our business and financial results.

The number of EMC festivals and events may grow faster than the public's demand, which could make it difficult for us to attract customers to our festivals and events.

With the growing EMC community, there has been a significant increase in the number of EMC festivals and events caused by the creation of new events and the expansion, both in geography and duration, of existing events. Our growth strategy includes increasing the number of EMC festivals and events we produce each year, as well as increasing the frequency of established events by bringing them to new cities and countries. It is possible that the proliferation of EMC festivals and events will outpace demand. Further, many of the largest festivals attract fans who travel great distances to attend. It is possible that an increase in local availability of quality EMC festivals and events will make it less likely that these fans travel to existing festivals. If either were to occur, it could make it difficult for us to achieve the increase in attendance that is part of our growth strategy or force us to offer tickets at reduced prices, either of which would adversely affect our business and financial results.

In addition, competition for advertising and sponsorships may lead to fewer sponsors of our events or lower sponsorship prices, with a resulting decrease in revenue. Our competitors may offer increased guarantees to artists and more favorable terms and ticketing arrangements to other parties, which we may be unwilling or unable to match. Even if we are willing to match our competitors' terms, the profitability of our events could decline.

If we are forced to cancel or postpone a scheduled festival or event, our business will be adversely impacted and our reputation may be harmed.

We incur a significant amount of up-front costs when we plan and prepare for a festival or event. Accordingly, if a planned festival or event fails to occur, we would lose a substantial amount of sunk

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costs, fail to generate the anticipated revenue and may be forced to issue refunds for tickets sold. If we are forced to postpone a planned festival or event, we would incur substantial additional costs in order to stage the event on a new date, may have reduced attendance and revenue and may have to refund money to ticketholders. In addition, any cancellation or postponement could harm both our reputation and the reputation of the brand under which the festival or event is being held.

We could be compelled to cancel or postpone an event or festival for many reasons, including such things as low attendance, technical problems, issues with permitting or government regulation, as well as extraordinary incidents, such as terrorist attacks, mass-casualty incidents and natural disasters or similar events. We have cancellation insurance policies in place to cover a portion of our losses if we are compelled to cancel an event or festival, but our coverage may not be sufficient and is subject to deductibles. The occurrence of an extraordinary incident at or near the site where a festival or event will be held may make it impossible or difficult to stage the event or make it difficult for attendees to travel to the site of a festival or event. An extraordinary incident may also may make it inappropriate to hold a festival or event at a particular site or at a particular time.

Costs associated with, and our ability to obtain, adequate insurance could adversely affect our profitability and financial condition.

Heightened concerns and challenges regarding property, casualty, liability, artists, business interruption and other insurance coverage have resulted from security incidents, including terrorism, along with varying weather-related conditions and incidents. As a result, we may experience increased difficulty obtaining high policy limits of coverage at reasonable costs, including coverage for acts of terrorism and weather-related property damage.

We cannot guarantee that our insurance policy coverage limits, including insurance coverage for property, casualty, liability, artists and business interruption losses and acts of terrorism, would be adequate under the circumstances should one or multiple events occur at or near any of our venues or events, or that our insurers would have adequate financial resources to pay our related claims. We cannot guarantee that adequate coverage limits will be available, offered at reasonable costs or offered by insurers with sufficient financial soundness. Furthermore, our insurance policies generally do not cover certain activities at our festivals and events, such as pyrotechnics and fireworks although we engage third-party professionals to manage these activities at our events and we are named as additional insureds on their insurance policies. If activities that our insurance policies do not cover result in a significant liability, our financial condition and results of operation could be harmed.

To stage festivals in multiple locations, we may be required to transport complex sets and equipment long distances, which creates increased risk that they will be damaged.

Our larger festivals will require complex sets and other equipment, including those that currently exist, that we construct or that we may purchase from a supplier. We will be required to transport these sets and equipment long distances by land and sea, which creates the risk that they may be damaged or lost if there is an accident or other complication during transport. These sets and equipment are very costly to create and it would be expensive and time consuming to repair or replace them. We have insurance policies in place to cover a portion of our losses for damaged or lost sets and equipment, but our coverage may not be sufficient and is subject to deductibles. Additionally, a supplier's failure to deliver the sets and equipment to us or our loss of these sets and equipment might lead to substantial expenses and could force us to delay or cancel a festival or event. Any of these could adversely affect our business, reputation and financial results.

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There is the risk of personal injuries and accidents in connection with our live music events, which could subject us to personal injury or other claims, increase our expenses and damage our brands.

There are inherent risks in live festivals and events, particularly those like ours, which involve complex staging and special effects. As a result, personal injuries and accidents have occurred in the concert industry, including some that have injured or killed employees and guests. Such incidents at our festival, events or venues could subject us to claims and liabilities, and certain of the businesses we acquired have been subject to such claims. Incidents in connection with our live festivals and events or at any of the venues we manage could also harm our reputation with artists and fans. Any such incident could reduce attendance at our events, causing a decrease in our revenue. While we maintain insurance policies that provide coverage within limits that are sufficient, in management's judgment, to protect us from material financial loss for personal injuries sustained by persons at our venues or accidents in the ordinary course of business, there can be no assurance that such insurance will be adequate at all times and in all circumstances. In particular, if there were to be a major incident involving multiple deaths or injuries at one of our events or venues, it is unlikely our insurance would cover the full liability. We will be responsible for any liabilities not covered by our insurance policies, which would negatively impact our cash flows and results of operations.

In addition, we are subject to state "dram shop" laws and regulations, which generally provide that a person injured by an intoxicated person may seek to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Recent litigation of "dram shop" laws and regulations targeted at restaurant chains has resulted in significant judgments, including many recent instances of punitive damages; such laws may be extended to apply to our events and festivals. While we carry liquor liability coverage as part of our existing comprehensive general liability insurance, we may still be subject to a judgment in excess of our insurance coverage, and we may not be able to obtain or continue to maintain such insurance coverage at reasonable costs, if at all. Regardless of whether any claims against us are valid or whether we are liable, we may be adversely affected by publicity resulting from such laws.

Activities or conduct, such as illegal drug use, at our properties or the festivals and events we produce may expose us to liability, cause us to lose business licenses or government approvals or result in adverse publicity.

We are subject to risks associated with activities or conduct, such as drug use at our festivals, events or venues that are illegal or violate the terms of our business licenses. Illegal activities or conduct at any of our events or venues may result in negative publicity or litigation. We have formed a Medical Procedure and Safety Committee, and we are developing, but have not yet finalized, comprehensive policies aimed at ensuring that the operation of each festival and event is conducted in conformance with local, state and federal laws. We have a "no tolerance" policy on illegal drug use in or around our facilities, and we continually monitor the actions of entertainers, fans and our employees to ensure that proper behavioral standards are met. However, such policies, no matter how well designed and enforced, cannot provide absolute assurance that the policies' objectives are achieved. Because of the inherent limitations in all control systems and policies, there can be no assurance that our policies will prevent deliberate acts by persons attempting to violate or circumvent them. Such consequences may increase our costs, result in the loss or termination of leases for our venues by property owners (including governments and other parties that own the land at our venues), result in our inability to get the necessary permits and locations for our events, lower consumer demand for our events, subject us to liability claims, divert management's attention from our business and make an investment in our

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securities unattractive to current and potential investors, thereby lowering our profitability and stock price.

We face intense competition in the live music and media industries, which could adversely affect our business, financial condition and results of operations.

We operate in the highly competitive live music and media industries, and this competition may prevent us from maintaining or increasing our current revenue. The live music industry, including electronic dance music, competes with other forms of entertainment for consumers' discretionary spending. Within the live music industry, we compete with other promoters and venue operators to attract customers and talent to our events and festivals, as well as sponsors and advertisers. Our competitors may engage in more extensive development efforts for large-scale events, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential advertisers and sponsors.

With respect to our media offerings, we compete for the time and attention of our users with other content providers on the basis of a number of factors, including quality of experience, relevance, popularity and diversity of content, ease of use, price, accessibility, perception of the number of advertisements and brand awareness and reputation. We face competition from providers of interactive on-demand audio content and pre-recorded entertainment, such as Apple's iTunes Music Store, RDIO, Rhapsody, Spotify, Pandora and Amazon, which allow online listeners to select the audio content that they stream or purchase. The audio entertainment marketplace continues to rapidly evolve, providing listeners of online music with a growing number of alternatives and new access models. Our current and future competitors in music may have more well-established brand recognition, more established relationships with consumer product manufacturers and content licenses, greater financial, technical and other resources, more sophisticated technologies or more experience in the markets in which we compete. If we are unable to compete successfully for listeners against other providers by maintaining and increasing our presence and visibility, our Beatport music sales may fail to increase as expected or decline and our advertising sales will suffer.

We are subject to substantial governmental regulation, and our failure to comply with these regulations could adversely affect our business, financial condition and results of operations.

Our operations are subject to federal, state and local laws, statutes, rules, regulations, policies and procedures, both domestically and internationally, which are subject to change at any time, governing matters such as:

construction, renovation and operation of our venues;

licensing, permitting and zoning, including ordinances relating to noise, traffic and pollution;

human health, safety and sanitation requirements;

the service of food and alcoholic beverages;

working conditions, labor, minimum wage and hour, citizenship and employment laws;

the United States Americans with Disability Act;

the United States Foreign Corrupt Practices Act (FCPA) and similar regulations in other countries;

historic landmark rules;

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hazardous and non-hazardous waste and other environmental protection laws;

sales and other taxes and withholding of taxes;

privacy laws and protection of personally identifiable information;

marketing activities via the telephone and online; and

primary ticketing and ticket resale services.

Our failure to comply with these laws and regulations could result in fines and proceedings against us by governmental agencies and consumers, which if material, could adversely affect our business, financial condition and results of operations. In addition, the promulgation of new laws, rules and regulations could restrict or unfavorably impact our business, which could decrease demand for services, reduce revenue, increase costs and subject us to additional liabilities. For example, some legislatures have proposed laws in the past that would impose potential liability on us and other promoters and producers of live music events for entertainment taxes and for incidents that occur at events, particularly those that involve drugs and alcohol. Additionally, new legislation could be passed that may negatively impact our business.

From time to time, federal, state and local authorities and consumers commence investigations, inquiries or litigation with respect to our compliance with applicable consumer protection, advertising, unfair business practice, antitrust (and similar or related laws) and other laws. We may be required to incur significant legal expenses in connection with the defense of future governmental investigations and litigation.

Our business is subject to the risks of international operations.

Following the closing of this offering and the consummation of our planned acquisitions, we will derive a significant portion of our revenue and earnings from our international operations. Operating in multiple foreign countries involves substantial risk. For example, our business activities subject us to a number of laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and security requirements, environmental laws, labor laws, and anti-competition regulations. As we expand into additional countries, the complexity inherent in complying with these laws and regulations increases, making compliance more difficult and costly and driving up the costs of doing business in foreign jurisdictions. Any failure to comply with foreign laws and regulations could subject us to fines and penalties, make it more difficult or impossible to do business in that country and harm our reputation. In addition, this strategy will require us to operate in countries with different business environments, labor conditions, tax obligations or other costs, and local customs, including some that conflict with each other or with which we are unfamiliar. These could make it more difficult to operate our business successfully in these countries.

Operating in multiple countries also subjects us to risk from currency fluctuations. Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar denominated sales and operating expenses. The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of our foreign currency-denominated sales and earnings. This could either reduce the U.S. dollar value of our prices or, if we raise prices in the local currency, it could reduce the overall demand for our offerings. Either could adversely affect our revenue. Conversely, a rise in the price of local currencies relative to the U.S. dollar would adversely impact our profitability. This could either increase the U.S. dollar value of our prices or, if we lower prices in the local currency, it could

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increase the overall demand for our offerings. However, the strengthening of foreign currencies may also increase our costs denominated in those currencies, thus adversely affecting gross margins.

At this time we do not use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. Any future use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.

A deterioration in general economic conditions and their impact on consumer and business spending, particularly by customers in our targeted millennial generation demographic, would adversely affect our revenue and financial results.

Our business and financial results are influenced significantly by general economic conditions, in particular, those conditions affecting discretionary consumer spending and corporate spending. During past economic slowdowns and recessions, many consumers reduced their discretionary spending and advertisers reduced their advertising expenditures. An economic downturn can result in reduced ticket revenue, lower customer spending and more limited and less lucrative sponsorship opportunities.

For consumers, such things as employment levels, fuel prices, interest and tax rates and inflation can significantly impact attendance and spending at our events and their willingness to purchase music from Beatport. For us, these risks may be exacerbated by the fact that our core customer demographic and the majority of attendees at our events and festivals are 18 to 34 years old, and this millennial generation demographic is among the groups most negatively affected by the current economic slowdown. Business conditions, in particular corporate marketing and promotional spending, can also significantly impact our operating results. These factors affect our revenue from sponsorship and advertising. Accordingly, if current economic conditions fail to improve, and especially if they deteriorate, our growth and financial results will be adversely affected.

We may not successfully expand into new geographic markets and businesses, which could adversely affect our business, results of operations and financial condition.

Our growth strategy is based, in part, on the expansion of our festivals and events into new geographic markets where they have not previously taken place and into related lines of business. This strategy entails a number of risks. For example, it is not clear that these new markets will have the demand for these festivals and events that we anticipate, which could adversely affect the ticket sales or pricing for these events. There may also be unforeseen difficulties with holding festivals and events in new markets, including obtaining venues, securing requisite licenses and government approvals, and recruiting artists to the location, among other factors. It is also possible that the audiences in a new location will not find a festival to be as attractive or worthwhile as the audience in the festival's home city. In addition, the demands and time commitment necessary to stage a festival in multiple locations could make it difficult for our management to oversee that festival effectively; for this reason or otherwise, we may fail to replicate the quality of the original festival in its new location. Providing festivals in new locations may also undermine demand for a festival in its original location, because many of the fans of these festivals travel long distances to attend. Finally, EMC fans may prefer their local festivals to ones that we bring from another city or country. The failure to expand our festivals into new geographies would adversely affect our growth and results of operations. Further, because staging festivals in new locations involves substantial expense, we could suffer significant losses if these festivals fail to attract the expected audience in their new locations.

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We also intend to expand into new, related lines of businesses, which will also carry risks, including that the demand for these products may be less than we anticipate and that we may fail to receive a return sufficient to cover our investment in the new business.

Our operations are seasonal and our results of operations vary from quarter to quarter, so our financial performance in certain quarters may not be indicative of, or comparable to, our financial performance in other quarters.

Certain of our businesses are seasonal, and this will impact our results of operations from quarter to quarter. We expect most of our largest festivals and events to occur outdoors, primarily from May through September. As such, we expect our revenues from these events to be higher during the spring and summer, or our second and third quarters, and lower in the winter months, or our first and fourth quarters. Furthermore, because we expect to conduct a limited number of large festivals and events, small variations in this number from quarter to quarter can cause our revenue and net income to vary significantly for reasons that may be unrelated to the performance of our core business. In addition, our Life in Color business produces festivals and events primarily for college campuses, so we expect that the revenues from these activities to be higher during the academic year, which coincides with the first, second and fourth quarters. Furthermore, the venues our MMG business manages generally have higher revenue during the fourth and first quarters as a result of higher travel to Miami during the December holidays, as well as the Winter Music Conference in March. We believe our financial results and cash needs will vary significantly from quarter to quarter depending on, among other things, the timing of EMC festivals and events that are held outdoors, cancellations, ticket on-sales, capital expenditures, seasonal and other fluctuations in our business activity, the timing of guaranteed payments and receipt of ticket sales and fees, financing activities, acquisitions and investments and receivables management. Accordingly, our results for any particular quarter may vary for a number of reasons, including due to the seasonality of our underlying businesses, and we caution investors to evaluate our quarterly results in light of these factors.

We depend on relationships with key event promoters, executives, managers and artists, and adverse changes in these relationships could adversely affect our business, financial condition and results of operations.

Our venue management and event promotion businesses are particularly dependent upon personal relationships, as promoters and executives within entertainment companies such as ours leverage their network of relationships with artists, agents and managers to secure the rights to the performers, celebrities and events that are critical to success. Due to the importance of those industry contacts, the loss of any of our officers or other key personnel who have relationships with artists, agents or managers in the music industry could adversely affect our venue management and event promotion businesses. While we have hiring policies and procedures and conduct background checks of our promoters, executives, managers and artists, they may engage in conduct or have in the past engaged in conduct we do not endorse or that is otherwise improper, which may result in reputational harm to us. In the past, we have terminated our relationships with such personnel, but we cannot provide any assurances that we will learn of misconduct. Also, to the extent artists, agents and managers are replaced with individuals with whom our officers or other key personnel do not have relationships, our competitive position and financial condition could be harmed.

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We rely on key members of management, particularly the Chief Executive Officer and Chairman, Mr. Sillerman, and the loss of their services or investor confidence in them could adversely affect our success, development and financial condition.

Our success depends, to a large degree, upon certain key members of our management, particularly our Chief Executive Officer and Chairman, Robert F.X. Sillerman. Our executive team's expertise and experience in acquiring, integrating and growing businesses, particularly those focused on live music and events, have been and will continue to be a significant factor in our growth and ability to execute our business strategy. In particular, our First Lien Term Loan Facility is personally guaranteed by Mr. Sillerman. If he ceases to serve as our Chief Executive Officer, president, chairman of our board of directors or other equivalent officer, a mandatory prepayment will be triggered under the First Lien Term Loan Facility, which will require us to prepay 30% of any outstanding borrowings thereunder. The loss of any of our executive officers and directors could slow the growth of our business, or it may cease to operate at all, which may result in the total loss of your investment.

We may not be able to attract qualified personnel.

Our ability to expand operations to accommodate our anticipated growth will depend on our ability to attract and retain qualified personnel. However, competition for the types of employees we seek is intense. We face particular challenges in recruiting and retaining personnel who have experience in software engineering, mobile application development and other technical expertise, which is critical to our initiatives. Our ability to meet our business development objectives will depend in part on our ability to recruit, train and retain top quality personnel with advanced skills who understand our technology and business. We cannot provide any assurance that we will be able to attract qualified personnel to execute our business strategies or develop and expand our online properties.

When we acquire new businesses, we typically retain the existing managers and executives of the acquired companies to continue managing and operating the acquired business. We believe that they have the market expertise and network of personal relationships to best implement the growth strategies of the acquired businesses. If we are unable to retain the key personnel of the acquired businesses, we may not be able to achieve the anticipated benefits and synergies of an acquisition. If we are unable to engage and retain the necessary personnel, our business may be materially and adversely affected.

Members of our senior management team, including our Chief Executive Officer, have divided responsibilities and are not required to devote any specified amount of time to our business.

Our Chief Executive Officer and Chairman, Robert F.X. Sillerman, is also the Executive Chairman and Chief Executive Officer of Viggle Inc., which is in the business of developing products and services that encourage consumers to engage with television content. Mr. Sillerman is also a director of Circle Entertainment Inc., which is in the business of developing location-based entertainment venues. Our employment agreement with Mr. Sillerman requires that he devote his time, attention, energy, knowledge, best professional efforts and skills to the duties assigned to him by us, but he is permitted to pursue other professional endeavors and investments that do not violate the terms of his employment agreement, including provisions relative to non-competition and non-solicitation. Mr. Sillerman's employment agreement expressly permits him to engage in certain listed endeavors and investments. Any other professional endeavors to be performed by Mr. Sillerman are subject to the reasonable approval of our board of directors. Importantly, Mr. Sillerman's employment agreement does not require him to devote any specific amount of time to SFX. Accordingly, it is possible that

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Mr. Sillerman will fail to devote the necessary time to our Company. Similarly, under our employment agreements with Mr. Slater, Mr. Finkel, Timothy J. Crowhurst, our President, and Joe Rascoff, our Chief Operating Officer, such officers are permitted to, and such officers have informed us that they intend to, engage in specific endeavors that are listed in their agreements or pre-approved by our board and other endeavors that do not compete with us. Such officers are not contractually required to devote any specified amount of time to our business.

We rely on third-party content, which may not be available to us on commercially reasonable terms or at all.

We contract with third parties to offer their content on our Beatport website. The licensing arrangements with these third parties are generally short-term and do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all.

We are currently reviewing and from time to time will continue to review, our licensing arrangements and the advisability and requirements for entering into arrangements with Performing Rights Organizations and the alternatives to entering into such arrangements. Some third-party content providers and distributors, currently or in the future, may offer competing products and services and could take action to make it more difficult or impossible for us to license their content. Other content owners, providers or distributors may seek to limit our access to, increase the cost of, or otherwise restrict or prohibit our use of such content. We may be unable to continue to offer a wide variety of content at reasonable prices with acceptable usage rules or continue to expand its geographic reach.

All content on Beatport is currently provided free of digital rights management. If our requirements or business model changes, we may have to develop or license new technology to provide other solutions. There is no assurance that we will be able to develop or license such solutions at a reasonable cost and in a timely manner. In addition, certain countries have passed or may propose and adopt legislation that would force us to license our digital rights management, if any, which could weaken the protection of content and subject us to piracy and also negatively affect arrangements with our content providers.

We may be unable to adequately protect our intellectual property rights or may be accused of infringing upon intellectual property rights of third parties.

We may be unable to detect unauthorized use of, or otherwise sufficiently protect, our intellectual property rights or may be accused of infringing upon intellectual property rights of third parties.

We rely on a combination of laws and contractual restrictions with employees, customers, suppliers and others to establish and protect these proprietary rights. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use proprietary information, trademarks, or copyrighted material without authorization which, if discovered, might require legal action to correct. Furthermore, the recently acquired assets and the assets we plan to acquire in connection with our planned acquisitions (including brand names and trademark rights), may have been improperly adopted or inadequately protected prior to our acquisitions of them. This could include failures to obtain assignments of ownership or confidentiality agreements from third parties, failures to clear use of trademarks, or other failures to protect trademarks and other proprietary rights. In addition, third parties may independently and lawfully develop similar intellectual property or duplicate our services.

We will apply to register, or secure by contract when appropriate, our trademarks and service marks as they are developed and used and reserve and register domain names as we deem appropriate. While we

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vigorously protect our trademarks, service marks and domain names as we deem appropriate, effective trademark protection may not be available or may not be sought in every country in which we operate, and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available. Our failure to protect our intellectual property rights in a meaningful manner or challenges to related contractual rights could result in the erosion of brand names or the loss of rights to our owned or licensed marks and limit our ability to control marketing on or through the internet using our various domain names or otherwise, which could adversely affect our business, financial condition, and results of operations. In addition, the loss of, or inability to otherwise obtain, rights to use third-party trademarks and service marks, including the loss of exclusive rights to use third-party trademarks in territories where we present festivals, could adversely affect our business or otherwise result in competitive harm.

From time to time, we are subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of the trademarks, copyrights, patents and other intellectual property or proprietary rights of third parties. The legal proceedings and claims include notices provided to us by content owners of users' violation of the Digital Millennium Copyright Act, which obligate us to investigate and remove infringing user content from the Beatport site. We also face a risk that content licensors may bring claims for copyright infringement or breach of contract if Beatport users exceed the scope of the content licenses. Because EMC involves remixing and sampling of others' music, and because such remixes are typically performed publicly, if our content license agreements do not grant us or our users sufficient use rights, or if we facilitate the performance of music for which we do not have a license, our supply of such content on Beatport could expose us to claims of copyright infringement. We may not be able to successfully defend against such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and also might require us to enter into settlement or license agreements, pay costly damage awards or face an injunction prohibiting us from using the affected intellectual property in connection with our services.

In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect trade secrets or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations. Patent litigation tends to be particularly protracted and expensive.

Moreover, we use open source software in connection with Beatport. Some open source software licenses require users who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or make available any derivative works of the open source code on unfavorable terms or at no cost. While we have assessed the use of open source software in Beatport to ensure that we have not used open source software in a manner that would require us to disclose the source code to the related technology, use requiring such disclosure could inadvertently occur and any requirement to disclose our proprietary source code could be harmful to Beatport.

Regulatory and business practice developments relating to personal information of our customers and/or failure to adequately protect the personal information of our customers may adversely affect our business.

The businesses we have acquired or intend to acquire in the future maintain, or have arrangements with third parties who maintain, information on customers who purchase tickets and other products electronically through their individual websites or otherwise register on the website for access to the content provided. We are in the process of evaluating the information collected to understand if we

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can aggregate and reuse the contact information to inform these individuals of upcoming events, offerings and other products and services that we believe enhance the fan experience. Data protection laws and regulation may impair our ability to use this data in such ways, as certain uses may be prohibited. The use of such customer information is a significant part of our growth strategy in the future. The collection, storage and use of customer information is subject to regulation in many jurisdictions, including the United States and the European Union, and this regulation is becoming more prevalent and stringent. Further, there is a risk that data protection regulators may seek jurisdiction over our activities even in locations in which we do not have an operating entity. This may arise in a number of ways, either because we are conducting direct marketing activities in a particular jurisdiction and the local laws apply to and are enforceable against us, or because one of our databases is controlling the processing of information within that jurisdiction. We are developing but have not yet finalized a comprehensive policy aimed at ensuring adequate protection of our customers' personal information and compliance with applicable law. There is a risk that we will be unable to successfully adopt and implement this policy, which may give rise to liabilities or increased costs. In addition, we could face liability if the third parties to which we grant access to our customer data were to misuse or expose it.

In some countries, the use of cookies and other information placed on users' internet browsers or users' computing devices is currently regulated, regardless of the information contained within or referred to by the cookie. Specifically, in the European Union, this is now subject to national laws being introduced pursuant to the amended Directive 2002/58 on Privacy and Electronic Communications. The effect of these measures may require users to provide explicit consent to such a cookie being used. The laws being introduced pursuant to this measure are not finalized in every European Member State, and we have not determined what effect this could have on our business when we place the cookie on the user's computer or when a third party does so. The effect may be to limit the amount of information we receive in relation to each use of the service and/or to limit our ability to link this information to a unique identity, which would adversely effect our business and financial condition.

In the United States, the Federal Trade Commission ("FTC") is starting to exercise greater authority over how online consumer data is collected and maintained by businesses. Prompted by the FTC's recommendation regarding online tracking, a number of federal legislative proposals have been introduced that would allow users to opt out of online monitoring. A number of states have passed similar legislation and some states are becoming more active in enforcing these laws to protect consumers.

The laws in this area are complex and developing rapidly. For instance, we are aware that there is a proposal for a new general law within Europe, the General Data Protection Regulation, which is likely to be introduced within three years. The proposed regulation is still under discussion, and we have not yet assessed the full effect of these proposals if enacted into law in their current form. There is a risk that internet browsers, operating systems, or other applications might be modified by their developers in response to proposed legislation to limit or block our ability to access information about our users. It is possible that existing or future regulations could make it difficult or impossible for us to collect or use our customer information in the way we would like which would impede our growth strategy and potentially reduce the revenue we hope to generate. It is also possible that we could be found to have violated regulations relating to customer data, which could result in us being sanctioned, suffering fines or other punishment, being restricted in our activities and/or suffering reputational harm. Any of the foregoing could adversely affect our business and financial results.

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We may be subject to disruptions, failures or cyber attacks in our information technology systems and network infrastructures that could have a material adverse effect on us.

We maintain and rely extensively on information technology systems and network infrastructures for the effective operation of our businesses. Techniques used to gain unauthorized access to private networks are constantly evolving, and we may be unable to anticipate or prevent unauthorized access to data pertaining to our customers, including credit card and debit card information and other personally identifiable information. Like all Internet services, our Beatport service, which is supported by our own systems and those of third-party vendors, is vulnerable to computer viruses, Internet worms, break-ins, phishing attacks, attempts to overload servers with denial-of-service or other attacks and similar disruptions from unauthorized use of our and third-party vendor computer systems, any of which could lead to system interruptions, delays or shutdowns, causing loss of critical data or the unauthorized access to personally identifiable information. If an actual or perceived breach of security occurs of our systems or a vendor's systems, we may face civil liability and public perception of our security measures could be diminished, either of which would negatively affect our ability to attract customers, which in turn would harm our efforts to attract and retain advertisers. We also would be required to expend significant resources to mitigate the breach of security and to address related matters.

Further, a disruption, infiltration or failure of our information technology systems or any of our data centers including the systems and data centers of our third-party vendors as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security and loss of critical data, which in turn could materially adversely affect our business. In addition, our ability to integrate, expand, and update our information technology infrastructure is important for our contemplated growth, and any failure to do so could have an adverse effect on our business.

We cannot fully control the actions of third parties who may have access to the customer data we collect and the customer data collected by our third party vendors. The contemplated integration of our Beatport services with applications provided by third parties represents a significant growth opportunity for us, but we may not be able to control such third parties' use of customer data. We may be unable to monitor or control such third parties and the third parties having access to our other websites in their compliance with the terms of our privacy policies, terms of use, and other applicable contracts, and we may be unable to prevent unauthorized access to, or use or disclosure of, customer information. Any such misuse could hinder or prevent our efforts with respect to growth opportunities and could expose us to liability or otherwise adversely affect our business. In addition, these third parties may become the victim of security breaches or have practices that may result in a breach, and we could be responsible for those third party acts or failures to act.

Any failure, or perceived failure, by us or the prior owners of acquired businesses to maintain the security of data relating to our customers and employees, to comply with our posted privacy policies, our predecessors' posted policies, laws and regulations, rules of self-regulatory organizations, industry standards and contractual provisions to which we or they may be bound, could result in the loss of confidence in us, or result in actions against us by governmental entities or others, all of which could result in litigation and financial losses, and could potentially cause us to lose customers, advertisers, revenue and employees.

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We depend on our ability to lease venues for our events, and if we are unable to do so on acceptable terms, or at all, our results of operations could be adversely affected.

Our business requires access to venues to generate revenue from live EMC events. For these events, we generally lease and operate a number of venues under various agreements which include leases or licenses with third parties or booking agreements, which are agreements where we contract to book the events at a venue for a specific period of time. Some of the leases may be between us and governmental entities. Our long-term success will depend in part on the availability of venues, our ability to lease these venues and our ability to enter into booking agreements upon their expiration. As many of these agreements are with third parties over whom we have little or no control, including the government, we may be unable to renew these agreements or enter into new agreements on acceptable terms or at all, and may be unable to obtain favorable agreements with venues. We may continue to expand our operations through the development of live music venues and the expansion of existing live music venues, which poses a number of risks, including:

desirable sites for live music venues may be unavailable or costly;

the attractiveness of our venue locations may deteriorate over time; and

we may be unable to obtain or we may lose local government permits or approvals necessary to use a particular venue.

We depend upon unionized labor for the provision of some services at our events and any work stoppages or labor disturbances could disrupt our business.

Certain of the employees at some of the venues we manage and other independent contractors hired to assist at our festivals and events may be subject to collective bargaining agreements. The applicable union agreements typically expire and may require negotiation in the ordinary course of business. Upon the expiration of any such collective bargaining agreements, however, our partners may be unable to negotiate new collective bargaining agreements on terms favorable, and our business operations may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating such collective bargaining agreements. In addition, our business operations at one or more of our venues may also be interrupted as a result of labor disputes by outside unions attempting to unionize a venue even though there is not unionized labor at that venue currently. A work stoppage at one or more of our owned and/or operated venues or at our promoted events could have a material adverse effect on our business, results of operations, and financial condition. We cannot predict the effect that a potential work stoppage would have on our business.

Our limited operating history makes it difficult to evaluate our current business and future prospects, and we may be unsuccessful in executing our business model.

We began operations as SFX EDM Holdings Corporation on July 7, 2011 and were incorporated as SFX Entertainment, Inc. in Delaware in June 2012. Without giving effect to our Predecessor, we have generated limited revenue, and our operations have consisted exclusively of indentifying, negotiating with and acquiring four companies (including our Predecessor), forming one joint venture and conducting negotiations and due diligence to acquire additional companies. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a developing company starting a new business enterprise, the difficulties that may be encountered with integrating acquired companies and the highly competitive environment in which we operate. Because we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenue to fully meet our expenses and support our anticipated activities.

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We have had a history of losses, and we may be unable to achieve or sustain profitability.

We have never been profitable. We experienced net losses of $0.1 million for the period from inception to December 31, 2011, $16.2 million for the year ended December 31, 2012, and $19.1 million for the period ended March 31, 2013. We expect we will continue to incur net losses in 2013 and significant future expenses as we develop and expand our business. In addition, as a public company, we will incur additional significant legal, accounting and other expenses that we do not incur as a private company and that are not reflected in our existing financial statements. These increased expenditures will make it harder for us to achieve and maintain future profitability. We may incur significant losses in the future for a number of reasons, including unsuccessful acquisitions, costs of integrating new businesses, expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or sustain profitability.


RISKS RELATED TO OUR ACQUISITION STRATEGY

A number of other companies are seeking to make acquisitions in our industry, which may make our acquisition strategy more difficult or expensive to pursue.

The emergence and growth of the EMC has brought increased media attention, and a number of companies and investors have begun making acquisitions of EMC businesses or announced their intention to do so. We compete with many of these companies, and certain of them have greater financial resources than we do for pursuing and consummating acquisitions and to further develop and integrate acquired businesses. Our strategy relies on our ability to consummate a substantial number of acquisitions to foster the growth of our core business and to establish ourselves in other geographic regions and related businesses in which we do not currently operate. The increased focus on acquisitions of EMC companies may impede our ability to acquire these companies because they choose another acquirer. It could also increase the price that we must pay for these companies. Either of these outcomes could reduce our growth, harm our business and prevent us from achieving our strategic goals.

We may be unsuccessful in identifying suitable acquisition candidates which may negatively impact our competitive position and our growth strategy.

In addition to organic growth, our future growth will be driven by our selective acquisition of additional businesses focused on the EMC community, our competitors and complementary businesses. Our growth through acquisitions, to date, has consisted of four acquisitions and one joint venture, and we are in discussions to acquire additional businesses including our planned acquisitions. We may be unable to identify other suitable targets for future acquisition or acquire businesses at favorable prices, which would negatively impact our growth strategy. We may not be able to execute our growth strategy through organic expansion, and if we are unable to identify and successfully acquire new businesses complementary to ours, we may not be able to expand into new geographic markets, develop our online properties or achieve profitability.

The due diligence process that we undertake in connection with acquisitions may not reveal all facts that may be relevant in connection with an investment.

Before making acquisitions and other investments, we conduct due diligence of the target company that we deem reasonable and appropriate based on the facts and circumstances applicable to each acquisition. The objective of the due diligence process is to assess the investment opportunities based on the facts and circumstances surrounding an investment or acquisition. When conducting due diligence, we may be required to evaluate important and complex business, financial, tax, accounting,

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environmental and legal issues. The due diligence process may at times be subjective with respect to newly-organized companies for which only limited information is available. Accordingly, we cannot be certain that the due diligence investigation that we conduct with respect to any investment or acquisition opportunity will reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. For example, instances of fraud, accounting irregularities and other deceptive practices can be difficult to detect. Executive officers, directors and employees may be named as defendants in litigation involving a company we are acquiring or have acquired. Even if we conduct extensive due diligence on a particular investment or acquisition, we may fail to uncover all material issues relating to such investment, including regarding the controls and procedures of a particular target or the full scope of its contractual arrangements. We rely on our due diligence to identify potential liabilities in the businesses we acquire, including such things as potential or actual lawsuits, contractual obligations or liabilities imposed by government regulation. However, our due diligence process may not uncover these liabilities, and where we identify a potential liability, we may incorrectly believe that we can consummate the acquisition without subjecting ourselves to that liability. For each of our acquired businesses, other than Beatport, we have acquired only the assets of the business and not assumed the liabilities. Nonetheless, it is possible that we could still be subject to litigation in respect of these acquired businesses. If our due diligence fails to identify issues specific to an investment or acquisition, we may obtain a lower return from that transaction than the investment would return or otherwise subject ourselves to unexpected liabilities. We may also be forced to write-down or write-off assets, restructure our operations or incur impairment or other charges that could result in our reporting losses. Charges of this nature could contribute to negative market perceptions about us or our shares of common stock.

We may face difficulty in integrating the operations of the businesses we have acquired and may acquire in the future.

Acquisitions have been and will continue to be an important component of our growth strategy; however, we will need to integrate these acquired businesses successfully in order for our growth strategy to succeed and for our Company to become profitable. We will implement, and the management teams of the acquired businesses will adopt, our policies, procedures and best practices, and cooperate with each other in scheduling events, booking talent and in other aspects of their operations. We may face difficulty with the integration of the businesses we acquire, such as coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. Many of the businesses we acquire are not profitable, and we are relying on their adoption of our best practices to operate their businesses more efficiently to achieve and maintain profitability. However, we may fail in implementing our policies and procedures, or the policies and procedures may not be effective or provide the results we anticipate for a particular business. Further, we will be relying on these policies and procedures in preparing our financial and other reports as a public company, so any failure of acquired businesses to properly adopt these policies and procedures could impair our public reporting. Management of the businesses we acquire may not have the operational or business expertise that we require to successfully implement our policies, procedures and best practices.

We note in particular that the auditors for our Predecessor, Disco Productions, Inc. (now operating as SFX Disco Operating LLC) ("DDP"), MMG, i-Motion, Made and Totem identified material weaknesses in the internal controls of these businesses that relate to the proper application of accrual based accounting under GAAP. As of March 31, 2013, our Predecessor, DDP, and MMG constitute 6.4%, 57.6% and 13.3%, respectively, of our revenue. Further, we expect that future target companies may also have material weaknesses in internal controls prior to our acquiring them. The Public Company Accounting Oversight Board ("PCAOB") defines a material weakness as a deficiency, or a

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combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We will be relying on the proper implementation of our policies and procedures to remedy these material weaknesses, and prevent any potential material misstatements in our financial reporting. Any such misstatement could adversely affect the trading price of our common stock, cause investors to lose confidence in our reported financial information, and subject us to civil and criminal fines and penalties. A part of our growth strategy involves expanding our festivals and events into new markets. As a result, festivals and events from different businesses will be operating in similar geographic areas and/or at similar times of year, often for the first time, and these businesses will need to coordinate their strategies to avoid competing with each other for attendees or talent. If our acquired companies fail to integrate in these important ways, or we fail to adequately understand the business operations of our acquired companies, our growth and financial results will suffer.

In addition, our growth strategy also includes the development of online properties that we intend to integrate across all of our acquired businesses. This will require, among other things, the integration of the individual websites and databases of each business we have or will acquire. This will be a complex undertaking that may prove more difficult, expensive and time consuming than we expect. Even if we are able to achieve this integration, it may not achieve the benefits we anticipate. If we fail to do this properly and in a timely manner, it could harm our revenue and relationship with our fans.

We typically retain the management of the businesses we acquire and rely on them to continue running their businesses, which leaves us vulnerable in the event they leave our company.

We seek to acquire businesses that have strong management teams that will continue to run the business after the acquisition. We often rely on these individuals to conduct the day-to-day operations of and pursue the growth of these acquired businesses. Although we typically seek to sign employment agreements with the managers of acquired businesses, it remains possible that these individuals will leave our organization. This would harm the prospects of the businesses they manage, potentially causing us to lose money on our investment and harming our growth and financial results.

Our investments in the ID&T Business and our existing joint venture with ID&T could be adversely affected by any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.

Upon consummation of the transactions contemplated by the ID&T Option, we will directly own a 75% ownership interest in the ID&T Business and indirectly own a 75% ownership interest in the ID&T JV.

Under the terms of our joint venture arrangement with ID&T regarding the ID&T JV we have appointed (and have the right to appoint) a co-Chief Executive Officer and the Chief Financial Officer of the ID&T JV, and ID&T has appointed (and has the right to appoint) a co-Chief Executive Officer and the Chief Creative Officer, who has creative control over the brands that the ID&T JV uses and the events for which they are used.

Under the terms of the ID&T Option, we have the right to appoint a co-Chief Executive Officer and the Chief Financial Officer of ID&T, and the other ID&T interest holders have the right to appoint a co-Chief Executive Officer and the Chief Creative Officer of ID&T, who will have creative control over the brands that ID&T uses and the events for which they are used. The ID&T Option also requires that each of the ID&T JV and ID&T be generally managed by a board of directors or board

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of managers. Although we will be entitled to appoint a majority of the board of each of the ID&T JV and ID&T, most board decisions will require the consent of the managers appointed by the other ID&T interest holders, and accordingly, our ability to control key decisions relating to the operation and development of ID&T will be limited. If we and the other ID&T interest holders have substantial disagreement about the management of the ID&T JV and ID&T (including with respect to operating budgets), then our dispute will be resolved by binding arbitration. Any substantial disagreement between us and the other ID&T interest holders regarding the ID&T JV and ID&T could be a distraction to the proper management of the ID&T JV and ID&T and could cause one or both of their respective businesses and financial results to suffer.

The ID&T Option describes the circumstances under which we and the other ID&T interest holders are permitted to transfer our respective interests in the ID&T JV and the ID&T Business. Under certain circumstances, if the other ID&T interest holders exercise a put right, we will be required to purchase the interests of such holders in ID&T. For more information on the ID&T Option and the put right, see "Business—Our History and Acquisitions—Planned acquisitions." Furthermore, the terms of the ID&T Option and the JV arrangement require us, under certain circumstances, to purchase all or a portion of our common stock that the other ID&T interest holders own.

Our involvement in the ID&T JV and the ID&T Business is subject to certain additional risks, including the following.

The success of the ID&T JV and the ID&T Business relies in large part on the strength of the ID&T brands. Accordingly, the ID&T JV and the ID&T Business are dependent upon the ability of ID&T personnel to properly manage those brands, and any deterioration in the quality of those brands could adversely affect the business of the ID&T JV and the ID&T Business.

We have certain funding obligations under the ID&T JV, and the ID&T Option requires us to provide funding under certain circumstances with respect to the ID&T Business. These funding obligations might restrict the amount of capital that we have available to fund other aspects of our operations.

If we or the other ID&T interest holders are unwilling or unable to provide the ID&T JV or the ID&T Business with needed capital, then one or both of the ID&T JV's and the ID&T Business' businesses and financial results could suffer and could become insolvent, destroying the value of our investment.

The terms of the ID&T JV agreement restrict, and the terms of the ID&T Option require the restriction of, our ability to transfer our interests in the ID&T JV and the ID&T Business.

If the other ID&T interest holders validly exercise their right to require us to purchase the other ID&T interest holders' interests in SFX or in ID&T, we will be required to use or obtain capital to effect such purchase, which could put a strain on our financial resources.

Our current and any future joint ventures are or will be subject to certain risks inherent in these investments.

Investments in joint ventures involve certain unique risks, including, among others, risks relating to:

potential disagreements with our joint venture partner about how to manage the joint venture;

the lack of full control of the joint venture's management, and therefore its actions;

the possibility that our joint venture partner might have or develop business interests or strategies that are contrary to ours;

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the potential need for us to fund future capital to the joint venture, as loans to the joint venture, as capital contributions to the joint venture, or otherwise;

the possible financial distress or insolvency of our joint venture partner, which could lead to our having to contribute its share of additional capital to the joint venture;

the cost of litigation or arbitration (including damage to reputation) in the event of a dispute with our joint venture partner;

negative business and financial performance of the joint venture because of substantial disagreements with our joint venture partner; and

preemptive dissolution of the joint venture because we or our joint venture partner choose, or become obligated, to acquire the equity interests of the other in the joint venture.

Federal and state taxation of business combinations may discourage business combinations.

Federal and state tax consequences are major considerations in any acquisition or business combination we may undertake. Currently, such transactions may be structured to result in tax-free treatment to both companies, pursuant to various federal and state tax provisions. We intend to structure any business combination to minimize the federal and state tax consequences to both us and the target entity; however, there can be no assurance that any particular business combination will meet the statutory requirements of a tax-free reorganization or that we will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes, which may have an adverse effect on us and our target company, reduce the future value of the shares and potentially discourage a business combination.

We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock that would dilute your ownership.

We have financed our operations and acquisitions in large part by issuing shares of our common stock. We expect to continue to do so in the future, which would significantly reduce the percentage ownership of our then existing stockholders, including investors in this offering. Furthermore, any future issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our common stock to decline. In addition, we could issue securities in respect of future transactions that have rights, preferences and privileges senior to those of our common stock. The holders of any of our debt securities or term loans would also have rights superior to the rights of our common stockholders.

We may be required to issue additional shares if certain of our acquired businesses achieve earnout thresholds, and such issuances would dilute your ownership.

We may be required to issue additional shares of our common stock to the sellers of certain acquired businesses if those businesses achieve earnout thresholds, as described below.

The former owners of MMG are entitled to receive an earnout payment based on the EBITDA of the business and assets of SFX Nightlife for the year ended December 31, 2014. If this EBITDA equals or exceeds $5,270,000, the earnout payment will equal (1) $5,059,200 multiplied by (2) the actual EBITDA for the year ended December 31, 2014, divided by $5,270,000. If the EBITDA for the year ended December 31, 2014 is less than $5,270,000 but exceeds $3,372,000, the earnout payment will equal (1) $4,216,000 multiplied by (2) the difference between the actual EBITDA and $3,372,000 divided by $1,898,000. If the EBITDA is equal to or less than $3,372,000 for the year

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    ended December 31, 2014, the former owners of MMG will not receive an earnout payment. Any earnout payment will be composed of 80% cash and 20% shares of our common stock at a price equal to a 30-day volume weighted average closing price per share if our shares are traded on any national securities exchange or the over-the-counter bulletin board.

For a period of five years beginning in the year ended December 31, 2013, ID&T will be entitled to receive 100,000 warrants to purchase shares of our common stock each year if the ID&T JV has achieved an EBITDA of $7.0 million or more in the prior fiscal year. The warrant exercise price will equal the fair market value as determined in good faith by our board of directors but, after our initial public offering, based on our stock's 30-day weighted average closing price.

We have incurred significant indebtedness in connection with our growth strategy, which may grow with future acquisitions, and this increases risk for holders of our common stock and could adversely affect our profitability and financial condition.

At the closing of this offering, we will have a significant amount of debt. As of June 24, 2013, we owed $64.5 million under our First Lien Term Loan Facility, which matures on September 15, 2014 (which may be extended to March 13, 2015 if certain conditions occur). We caution you that we may not have the funds necessary to pay principal and interest on our First Lien Term Loan Facility when it matures. Although we may seek to refinance this debt, we may not be able to do so on acceptable terms or at all. Any failure to pay these debts as they mature would adversely affect our business and the price of our common stock.

If there were an event of default under the First Lien Term Loan Facility, the lenders could elect to declare all amounts outstanding thereunder to be due and payable immediately, with such acceleration being automatic upon certain events of default. It is possible that, if the defaulted debt is accelerated, our assets and cash flow may not be sufficient to fully repay the indebtedness or borrowings under our outstanding debt instruments, and we cannot assure you that we would be able to refinance or restructure the payments on those debt securities. In the event we are unable to repay the First Lien Term Loan Facility upon maturity, or earlier upon any default, holders of our debt, including lenders under the First Lien Term Loan Facility, will have a senior claim on the assets of certain of our subsidiaries ahead of holders of our common stock.

As we continue growing our business and complete additional acquisitions, it is possible that we will increase the amount of our First Lien Term Loan Facility or otherwise incur additional indebtedness, which could have the effect of increasing the risks described above.


RISKS RELATED TO OUR INDEBTEDNESS

Our First Lien Term Loan Facility requires us to make certain mandatory prepayments of principal and interest, which will reduce our ability to use that cash flow to fund our operations, capital expenditures and future business opportunities.

Our First Lien Term Loan Facility requires our indirectly held wholly-owned subsidiary, SFX Intermediate Holdco II LLC (the "Borrower") to make mandatory prepayments (collectively, the "Mandatory Prepayments") equal to:

75.0% of the annual excess cash flow of our wholly-owned subsidiary SFX Intermediate Holdco I LLC ("Holdings") and its subsidiaries, which are substantially all of our current businesses for the year ended December 31, 2013, five days after audited financials are delivered;

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100% of the net proceeds from certain asset sales, casualty events, and debt issuances by Holdings and its subsidiaries (in each case, other than to the extent permitted under the First Lien Term Loan Facility); and

30.0% of the outstanding borrowings within 60 days of the date Mr. Sillerman either announces he will not serve, ceases serving as or is incapable of serving as the chairman of our board of directors, our president, our chief executive officer or other equivalent officer.

Any amounts required to be applied to Mandatory Prepayments under our First Lien Term Loan Facility as described above, would not be available to us for any other purpose, including to fund our future operations, capital expenditures and investments in future business opportunities, which may severely limit our liquidity and adversely affect our ability to grow our business and/or take advantage of unanticipated business opportunities.

Our First Lien Term Loan Facility includes negative covenants that restrict certain of our subsidiaries' ability to operate their business, and this may impede our ability to respond to changes in our business or take certain important actions.

Our First Lien Term Loan Facility includes customary restrictive covenants, subject to certain materiality thresholds and exceptions, including covenants limiting Holdings' and its subsidiaries' ability to:

incur certain types of indebtedness and liens;

merge with, make an investment in or acquire property or assets of another company;

make capital expenditures;

pay dividends;

repurchase shares of our outstanding stock;

negative pledge;

modify certain documents;

make loans;

dispose of assets;

prepay the principal on any other indebtedness;

liquidate, wind up or dissolve; or

enter into certain transactions with affiliates.

These restrictions could limit our ability to take certain actions necessary to properly grow and manage our business, such as obtaining future financing, making needed capital expenditures, responding to and withstanding future downturns in our business or the economy in general or otherwise conducting corporate activities that are necessary or desirable. Holdings and its subsidiaries are generally not permitted to make dividends or cash distributions to us or to finance the operations of us or any of our subsidiaries that are not subsidiaries of Holdings. We may also be prevented from taking advantage of business opportunities that arise because of limitations these restrictive covenants impose on us. If it becomes necessary or desirable to obtain a waiver or amendment of these covenants, it may be costly or time consuming for us to do so, and we may not be able to obtain a waiver or amendment on any terms at all. A breach of any of these covenants or restrictions, even as a result of events beyond our control, could result in an event of default under the First Lien Term Loan Facility.

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Fluctuations in interest rates could adversely affect our liquidity, interest expense and financial results.

Our First Lien Term Loan Facility has variable interest rates. If any of the variable rates increase, our debt service costs will increase. Increased debt service costs would adversely affect our cash flow. To the extent these interest rates increase, our interest expense may increase, and we may have difficulty making interest payments and funding our other costs. While we may enter into interest hedging contracts, we may not be able to do so on a cost-effective basis, any hedging transactions it might enter into may not achieve their intended purpose and shifts in interest rates may have a material adverse effect on our business, financial condition and/or results of operations.

Certain events could lead to our First Lien Term Loan Facility being in default or otherwise require us to pay principal and accrued interest on this debt prior to its maturity.

Our First Lien Term Loan Facility includes events of default if we breach our loan covenants and upon the occurrence of certain events. This could cause us to be required to immediately repay the principal and accrued interest owing under this facility.

For example, Mr. Sillerman has entered into a guarantee agreement (the "Sillerman Guarantee") with Barclays Bank PLC, as collateral agent for the benefit of the other lender parties, in which he personally guaranteed all our obligations under the First Lien Term Loan Facility. We will be in default of the First Lien Term Loan Facility if the Sillerman Guarantee ceases to be in full force and effect or if Mr. Sillerman breaches any material term of the Sillerman Guarantee. An event of default will also occur upon a change in control. A change in control is defined in the First Lien Term Loan Facility to include the occurrence of any of the following: (i) Holdings ceases to be wholly-owned, directly or indirectly, by us or Borrower ceases to be directly wholly-owned by Holdings; (ii) at any time prior to our initial public offering (so long as we raise net proceeds of at least $100 million) Mr. Sillerman and certain affiliates and senior management cease to own, directly or indirectly, at least 40% of our outstanding voting equity or any "person" or "group" other than Mr. Sillerman and certain affiliates and senior management beneficially own a greater percentage of our voting equity than Mr. Sillerman and certain affiliates; (iii) at any time after our initial public offering (so long as we raise net proceeds of at least $100 million) Mr. Sillerman and certain affiliates and senior management cease to own, directly or indirectly, at least 30% of our outstanding voting equity or a greater percentage of our voting equity than Mr. Sillerman and certain affiliates and senior management; or (iv) the majority of the seats (other than vacant seats) on our board of directors cease to be occupied by persons who were, on March 15, 2013, either members of our board of directors or nominated for election by a majority of our board of directors or whose election or nomination was previously approved by a majority of such directors.

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RISKS RELATED TO OUR COMMON STOCK AND THIS OFFERING

Some of our stockholders have repurchase rights that require us to purchase their shares under certain conditions, and our financial position would be adversely impacted if those stockholders exercise those rights.

We have granted certain repurchase rights to the holders of our stock. The terms of these repurchase rights, including information with respect to their expiration, are set forth in the table below.

Holder(s) of Repurchase Right
  Number of Shares   Price   Relevant Date and Trigger Events
Baron Small Cap Fund   2,500,000   $4.00/share   We have agreed to repurchase these shares upon Baron's election if the SEC has not declared effective a registration statement covering the resale of the shares of our common stock held by this investor by January 15, 2013. This investor has not exercised its repurchase right. If we become required to repurchase these shares, we must do so over a ten-month period on a pro rata basis. We believe this repurchase right will expire and be unexercisable following the effectiveness of the resale registration statement that we are filing with the SEC shortly after the filing of this prospectus.

Entertainment Events Funding LLC

 

4,000,000

 

$2.50/share

 

We have agreed to repurchase these shares if the SEC has not declared effective a registration statement covering the resale of the shares of our common stock held by this investor by January 15, 2013. This investor has not exercised its repurchase right. If we are required to repurchase these shares, we must do so over a ten-month period on a pro rata basis. These repurchase rights are based on the "most favored nation" rights we granted Entertainment Events Funding LLC under its subscription agreement, which require that (until immediately prior to our initial public offering), we provide to them the same right or benefit we provide to a third-party purchasing or receiving our common stock. We believe this repurchase right will expire and be unexercisable following the effectiveness of the resale registration statement that we are filing with the SEC shortly after the filing of this prospectus.

Disco Productions

 

1,000,000

 

$5.00/share

 

We have agreed to repurchase these shares if we do not have a registration statement declared effective or our shares are not registered pursuant to Section 12 of the Exchange Act by June 30, 2014. We believe this repurchase right will expire and be unexercisable following the closing of this initial public offering.

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Holder(s) of Repurchase Right
  Number of Shares   Price   Relevant Date and Trigger Events

ID&T

 

All shares and warrants held by ID&T issued to them in connection with the ID&T JV (this could include up to 2.0 million shares; warrants to purchase 500,000 shares; and, for a period of 5 years beginning the year ended December 31, 2013, 100,000 warrants to purchase shares of our common stock if the ID&T JV has achieved an EBITDA of $7.0 million or more in the prior fiscal year)

 

$10.0 million

 

We have agreed to repurchase these securities if we do not complete our initial public offering by May 26, 2014. We believe this repurchase right will expire and be unexercisable following the closing of this initial public offering.

ID&T

 

2,000,000

 

$10.00/share

 

We have agreed to repurchase these shares if we do not complete our initial public offering by March 20, 2014. We believe this repurchase right will expire and be unexercisable following the closing of this initial public offering.

Former equity holders of Beatport

 

5,000,000

 

$5.00/share

 

On or after March 15, 2014, the former equity holders of Beatport will have the right to require us to repurchase from them the shares of our common stock issued as consideration in the merger. This right will not apply to any shares that have been registered in our initial public offering at an initial offering price of at least $5.00 per share or in a subsequent resale registration or are subsequently eligible for resale under Rule 144 following such initial public offering. We believe this repurchase right will expire and be unexercisable following the effectiveness of the resale registration statement that we are filing with the SEC shortly after the filing of this prospectus.

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Holder(s) of Repurchase Right
  Number of Shares   Price   Relevant Date and Trigger Events

Insight Venture Partners V, L.P.

Insight Venture Partners V (Employee Co-Investors), L.P.

Insight Venture Partners (Cayman) V, L.P.

 

Up to 1,000,000

 

$10.00/share

 

On or after March 15, 2014, these parties can require us to repurchase shares of our common stock that we have not registered in our initial public offering or registered in a resale registration following such initial public offering, or that are not eligible for resale under Rule 144 following such initial public offering. If prior to the date that these shares are registered for resale or become subsequently eligible for resale under Rule 144 following our initial public offering, we enter into an agreement for the acquisition by any third party of beneficial ownership of more than 50% of the voting power in our voting shares (including by merger or consolidation) or the sale of all of our assets to a third-party in one or a series of related transactions, then this repurchase right will automatically accelerate and become exercisable. If we do not pay these investors the repurchase price of $10.00 per share within ten business days following receipt of notice from the investors of their exercise of this repurchase right, then the repurchase price will increase at a rate of 10% per annum (compounded quarterly) until the date of payment. We believe this repurchase right will expire and be unexercisable following the effectiveness of the resale registration statement that we are filing with the SEC shortly after the filing of this prospectus.

Totem

 

Number of shares to be equal to the quotient of AUD$15.0 million (or $13.8 million) divided by our initial public offering share price

 

Initial Public Offering Share Price

 

Upon closing of our acquisition of Totem, we are obligated to issue Totem the number of shares equal to the quotient obtained by dividing AUD$15.0 million (or $13.8 million) by our initial public offering share price.

We granted Totem the right, during the 30 calendar day period beginning on the second anniversary of the closing date, to require us to repurchase at our initial public offering price per share all of the shares of our common stock that we issued to Totem as consideration under the asset contribution agreement.
 

In addition, we granted to the former owners of MMG a put right exercisable at any time between January 1, 2015 and June 30, 2015 to require us to acquire their 20% non-dilutable interest in our subsidiary, SFX-Nightlife Operating LLC. The consideration to be paid by us upon exercise of the put right would be equal to 20% of the product of SFX-Nightlife's EBITDA for the 2014 fiscal year multiplied by 6.

If any of these holders of our shares exercise their repurchase rights, we may not have sufficient cash reserves to pay the amount due. If we are able to pay these amounts, the payment may impede our ability to fund other aspects of our business, including potential acquisitions, capital expenditures, other investments or our working capital requirements, which would harm our operating results and the price of our common stock.

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Our Chief Executive Officer and Chairman has the ability to control all matters submitted to stockholders for approval.

Our Chief Executive Officer and Chairman of our board of directors, Robert F.X. Sillerman, beneficially owns shares of our common stock, in the aggregate, representing approximately 57.0% of our outstanding capital stock as of June 24, 2013. As a result, he controls all matters submitted to our stockholders for approval, as well as our management and affairs. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

Although we do not plan to take advantage of the "controlled company" exemption from certain NASDAQ corporate governance requirements, if we elect to do so in the future, our stockholders will not have the same protections afforded to stockholders of other companies.

Under the NASDAQ rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a "controlled company" and may elect not to comply with certain NASDAQ corporate governance requirements. Robert F.X. Sillerman, who is our founder, Chief Executive Officer and Chairman of our board of directors controls 57.0% of our voting power, and as such, we are eligible to take advantage of the "controlled company" exemption. We currently do not intend to rely on this exemption, but we may elect to do so in the future. If we were to elect to be treated as a "controlled company" in the future, we would be exempt from certain NASDAQ corporate governance requirements, including the requirements that (1) a majority of the board of directors consist of independent directors, (2) compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee that is composed entirely of independent directors and (3) director nominees be selected or recommended by a majority of the independent directors or by a nominating committee composed solely of independent directors. If we decide to take advantage of the controlled company exemption to certain NASDAQ corporate governance requirements, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.

We are an emerging growth company within the meaning of the Securities Act of 1933, and as such, we will take advantage of certain modified disclosure requirements.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the listing requirements of NASDAQ, and other applicable securities rules and regulations. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

However, we are an "emerging growth company" within the meaning of the rules under the Securities Act of 1933, as amended, or the Securities Act. For as long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including not being required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

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We intend to take advantage of these reporting exemptions until we are no longer an emerging growth company.

We would cease to be an emerging growth company upon the earliest of: (1) the first fiscal year following the fifth anniversary of this offering, (2) the first fiscal year after our annual gross revenue is $1 billion or more, (3) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities or (4) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year.

We cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an emerging growth company within the meaning of the rules under the Securities Act, and we will take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards as they become applicable to public companies. We cannot predict if investors will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

We expect the initial public offering price of our common stock to be substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. Based on an assumed initial public offering price of $    per share, which is the midpoint of the price range listed on the cover page of this prospectus, you will experience immediate dilution of $    per share, representing the difference between our net tangible book value per share after giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately    % of the aggregate price paid by all purchasers of our stock but will own only approximately    % of our common stock outstanding after this offering. See "Dilution" for more detail.

Future sales of our common stock may cause our stock price to fall.

If our existing stockholders sell a large amount of our common stock following this offering, the market price of our common stock could decline significantly. In addition, the perception in the public market that our existing stockholders might sell shares of common stock could depress the market price of our common stock, whether or not they actually do so or plan to do so.

Immediately after this offering,       shares of our common stock will be outstanding. This includes the       shares of common stock that we are selling in this offering, which will be freely tradable in the

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public market immediately after this offering (unless purchased by an "affiliate," as such term is defined in Rule 144 under the Securities Act).

We expect that the remaining       shares, representing       % of our total outstanding shares of common stock following this offering, will become available for resale in the public market as shown in the chart below. Our directors and executive officers, the holders of all of our outstanding shares and vested options and participants in the directed share program have signed lock-up agreements with the underwriters covering a period of 180 days following the date of this prospectus. UBS Securities LLC, Barclays Capital Inc. and Jefferies LLC may, in their sole discretion and without notice, waive the provisions of these lock-up agreements in respect of all or any portion of these shares of common stock. As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

Number of Shares
and % of Total
Outstanding

  Date Available for Sale Into Public Market
 

             shares or    %

  On the date of this prospectus. All of these shares are subject to lock-up agreements signed with the underwriters, and       shares, or       %, are subject to lock-up agreements signed with us.
 

             shares or    %

  Upon the effectiveness of a registration statement we have filed on form S-1 to cover the resale of these shares from time to time in the future. We expect this registration statement to become effective on or shortly after the closing date of this offering. All of these shares are subject to lock-up agreements signed with the underwriters, and       shares, or       %, are subject to lock-up agreements signed with us.
 

             shares or    %

  Up to and including 180 days after the date of this prospectus. All of these shares are subject to lock-up agreements signed with the underwriters, and       shares, or       %, are subject to lock-up agreements signed with us.
 

             shares or    %

  More than 180 days after the date of this prospectus, of which       shares, or       %, are subject to volume, manner of sale and other limitations under Rule 144. All of these shares are subject to lock-up agreements signed with the underwriters, and       shares, or       %, are subject to lock-up agreements signed with us.
 

In addition,       shares of common stock will be eligible for sale upon exercise of vested options. Following this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of common stock subject to outstanding options under our 2013 Equity Compensation Plan. See "Executive compensation—Equity incentives." Once these shares are registered, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates.

For more information about the terms of the lock-up agreements our shareholders have agreed to with the underwriters and with us, and for more details about possible future sales of these shares, see "Shares Eligible for Future Sale."

All remaining shares of common stock held by existing stockholders, and any shares of our common stock purchased by affiliates in this offering pursuant to the directed share program described below under "Underwriting—Directed Share Program," will be subject to the restrictions imposed by Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if

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registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which rules are summarized below, or another exemption.

An active, liquid and orderly trading market for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment.

Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price of our common stock will be determined through negotiations with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares of common stock following this offering. In addition, the trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your common stock at or above the price you paid in this offering, or at all.

Prior to this offering, there has been no public market for our common stock, and we cannot assure you that a market for our common stock will develop or that the market price of shares of our common stock will not decline following the offering.

We cannot assure you that a trading market will develop for our common stock after this offering or, if one develops, that such trading market can be sustained. We intend to apply to have our common stock listed on the Nasdaq Global Market, but we cannot assure you that our application will be approved. In addition, we cannot predict the prices at which our common stock will trade. The initial public offering price for our common stock will be determined through our negotiations with the underwriters based on numerous factors, including the information set forth in this prospectus, our prospects and the prospects of our industry, an assessment of our management, our prospects for future earnings, the general condition of the securities markets, the recent market prices of, and demand for, publicly traded common stock of generally comparable companies and other factors deemed relevant by the underwriters and us. Neither we nor the underwriters can assure you that the initial public offering price will bear any relationship to the market price at which our common stock may trade after our initial public offering. Shares of companies offered in an initial public offering often trade at a discount to the initial offering price due to underwriting discounts and commissions and related offering expenses.

If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. See "Dividend Policy."

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The market price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial purchase price.

If you purchase shares of our common stock in the offering, you may not be able to resell those shares at or above the purchase price. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

actual or anticipated fluctuations in our revenue and other operating results;

the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

additional shares of our common stock being sold into the market by us or our existing stockholders or the anticipation of such sales;

announcements by us or our competitors of significant events or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

changes in operating performance and stock market valuations of companies in our industry;

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

lawsuits threatened or filed against us;

developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and

other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

We have identified material weaknesses in our internal controls over financial reporting that, if not properly remediated, could result in material misstatements in our financial statements in future periods.

We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal controls over financial reporting for that purpose. However, in connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2012, we identified certain deficiencies relating to our internal control over financial reporting that constitute a material weakness under standards established by the PCAOB.

The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

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We have identified the following material weaknesses.

A lack of contemporaneous documentation in connection with awards of stock based compensation. This resulted in our treating certain awards granted in 2012 as having been granted in 2013 for accounting purposes.

Improperly characterizing certain acquisition transactions as having closed prior to our obtaining the control necessary for such a characterization. These acquisition transactions subsequently failed to close.

An unusually large amount of audit adjustments noted and recorded in connection with the 2012 audit, primarily in respect of accruals, cut offs and purchase accounting for consummated business transactions. In addition, certain significant transactions were not accounted for properly, one of which resulted in our restating our 2012 results to move certain amounts previously included in equity to temporary equity. We believe that this was related, in part, to a lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, as well as the lack of robust accounting systems.

We have taken and will take a number of actions to correct these material weaknesses including, but not limited to, adding experienced accounting and financial personnel, retaining third party consultants to review our internal controls and recommend improvements, implementing improvements to our closing procedures and consolidation processes, and improving our accounting software as it relates to accounts payable. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting." We may need to take additional measures to fully mitigate these issues, and the measures we have taken, and expect to take, to improve our internal controls may not be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified material weakness or other material weaknesses will not result in a material misstatement of our annual or interim financial statements. In addition, other material weaknesses may be identified in the future. If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.

In addition, we and the auditors for our Predecessor, DDP, MMG, i-Motion, Made and Totem have identified a material weakness in the internal controls of each of these businesses that relates to the proper application of accrual based accounting under GAAP. To remedy these material weaknesses and prevent any potential material misstatements in our financial reporting we will be relying on the proper implementation of our policies and procedures, the hiring of new accounting staff at the acquired business and at the corporate level, and the implementation of our accounting software at our acquired companies and improvements to that software generally. However, it is possible that these efforts will be unsuccessful with regard to the internal controls of one or more of these businesses. Further, future target companies may also have material weakness in internal controls prior to our acquiring them.

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If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock.

As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. As a public company, we will eventually be required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404. We are in the process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation, which process is time consuming, costly and complicated. If in the future we identify material weaknesses in our internal control over financial reporting, including at some of our acquired companies, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

We will incur increased costs as a result of operating as a public company, particularly once we cease to be an emerging growth company, and our management will be required to devote substantial time to new compliance initiatives.

As a public reporting company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and NASDAQ, on which we plan to seek to list our common stock for trading, have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial costs to maintain the same or similar coverage.

Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including, once we cease to be an emerging growth company, an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed time period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor, when required, our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

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Forward-looking statements

This prospectus contains forward-looking statements within the meaning of the U.S. federal securities laws, which involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Unaudited Pro Forma Condensed Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned "Risk Factors."

In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding:

our ability to integrate the companies we have acquired and plan to acquire in the future;

our ability to close the acquisitions of our planned acquisition targets;

our ability to identify and acquire leading EMC-related businesses;

our belief that the EMC community will grow;

our ability to increase the number of festivals and events we produce;

our ability to effectively partner Beatport more closely with live events;

our ability to produce festivals and events in-house through our joint venture with ID&T and our planned acquisitions;

our ability to grow our music and video retailing efforts;

our ability to make, and the expected timing of, payments on our senior secured first lien credit agreement, as amended (the "First Lien Term Loan Facility");

our ability to grow EMC festival attendance;

our belief that additional or alternative venues will be readily available if necessary;

our belief that our liability insurance will provide sufficient protection;

our belief that our capital expenditure requirements and liquidity needs will be met; and

our ability to grow our online properties.

Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

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Use of proceeds

We estimate that the net proceeds to us from our issuance and sale of shares of common stock in this offering will be approximately $        million (or approximately $        million if the underwriters exercise their option to purchase additional shares of common stock in full), assuming an initial public offering price of $       per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $       per share would increase (decrease) our net proceeds from this offering by approximately $        million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions.

We intend to use the net proceeds we receive from this offering as follows:

$50.0 million to exercise the ID&T Option and close the acquisition of the 75% ownership interest in the ID&T Business, including $10.0 million to pay the second step payment due to ID&T under the ID&T Option;

$8.0 million to close the acquisition of 60% of the ownership interests in i-Motion;

AUD$55.0 million (or $50.7 million) to close the acquisition of substantially all of the assets of Totem;

$17.5 million to close the acquisition of 70% of the ownership interests in Made; and

the balance, if any, to fund working capital, capital expenditures and other general corporate purposes, which may include other acquisitions of complementary businesses.

For additional information regarding our liquidity and outstanding indebtedness, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition (the Registrant)—Liquidity and Capital Resources."

This expected use of net proceeds of this offering represents our intentions based upon our current plans and business conditions. Our management will retain broad discretion over the allocation of any net proceeds used for capital expenditures or other general corporate purposes.

Pending use of the proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade and interest-bearing instruments.

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Dividend policy

We have not paid any dividends on our common stock to date and do not anticipate paying any dividends on our common stock in the foreseeable future. We intend to retain earnings, if any, for the future operation and expansion of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our results of operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by applicable laws and other factors that our board of directors may deem relevant.

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Capitalization

The following table sets forth our capitalization as of March 31, 2013:

on an actual basis;

on a pro forma basis giving effect to our planned acquisitions, our borrowing of an additional $15.0 million under our First Lien Term Loan Facility and the application of those proceeds as described herein, our issuance of shares of our common stock in private placements since March 31, 2013 and the termination of rights held by certain of our existing stockholders to cause us to repurchase their shares; and

on a pro forma, as adjusted basis to give further effect to the issuance and sale by us of shares of our common stock in this offering at an assumed price to the public of $             per share, the midpoint of the estimated public offering price range set forth on the cover of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

You should read the following table in conjunction with "Use of Proceeds," "Selected Historical and Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements and unaudited pro forma financial information and related notes thereto appearing elsewhere in this prospectus.

 
  As of March 31, 2013  
($ in 000s)
  Actual
  Pro Forma
  Pro Forma
As Adjusted

 
   

Debt:

                   

Current portion of long-term debt

    5,513     15,513        

Mandatorily redeemable non-controlling interest

        23,378        

First Lien Term Loan Facility

    48,526     63,226        
               

Total debt

  $ 54,039   $ 102,117   $    
               

Temporary Equity:

                   

Redeemable non-controlling interest

    4,835     4,835        

Redeemable common stock

    74,380     15,624        

Shareholders' Equity:

                   

Common stock

    45     62        

Additional paid-in capital

    77,464     364,640        

Due from shareholders

    (36 )   (1,536 )      

Non controlling interest

    22,447     36,022        

Accumulated deficit

    (35,431 )   (35,431 )      
               

Total Equity

    64,489     363,757        
               

Total Capitalization

  $ 197,743   $ 486,333   $    
               

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Dilution

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the price per share to the public in this offering and the net tangible book value per share of common stock upon the completion of this offering. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the book value per share attributable to the existing stockholders for presently outstanding stock.

Our net tangible book value per share represents our total tangible assets less total liabilities, which is our net tangible book value, divided by our weighted average shares outstanding. As of March 31, 2013, our net tangible book value was approximately $(10.4) million, or $(0.20) per share.

After giving effect to the sale of our common stock at an assumed initial public offering price of $         per share (the midpoint of the price range set forth on the cover of this prospectus), and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of March 31, 2013 would have been approximately $          million, or $         per share.

This represents an immediate increase in net tangible book value of $         per share to our existing stockholders and an immediate dilution of $         per share to new investors purchasing shares of common stock at the price to the public in this offering.

The following table illustrates this dilution to new investors on a per share basis.

Assumed initial public offering price per share

                     $    

Net tangible book value per share as of March 31, 2013, before giving effect to this offering

  $                                  

Increase in net tangible book value per share attributable to the sale of shares in this offering

  $                                  
             

Net tangible book value per share after this offering

                     $               
             

Dilution in net tangible book value per share to new investors

                     $               
             

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) our net tangible book value after this offering by $          million and increase (decrease) the dilution to new investors by $         per share, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full from us, the net tangible book value after the offering would be $         per share, the increase in the net tangible book value per share to existing shareholders would be $         and the dilution per share to new investors would be $         per share, in each case assuming an initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus).

The following table summarizes, as of March 31, 2013, the total number of shares of our common stock we issued and sold, the total consideration we received and the average price per share paid to us by our existing stockholders and to be paid by new investors purchasing shares of our common stock in this offering. The table assumes an initial public offering price of $         per share (the

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midpoint of the price range set forth on the cover of this prospectus) and deducts underwriting discounts and commissions and estimated offering expenses payable by us.

 
  Shares purchased   Total consideration    
 
 
  Average price
per share

 
 
  Number
  Percent
  Amount
  Percent
 
   

Existing stockholders

                      % $                               % $                

New investors

                                                                              $            
                       

Total

                             100.0 % $                    100.0 %      
                         

Each $1.00 increase or decrease in the assumed initial public offering price of $         per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the total consideration paid by new investors and total consideration paid by all stockholders by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us. In addition, to the extent any outstanding options or warrants to purchase common stock or convertible preferred stock are exercised, new investors will experience further dilution.

Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters' option to purchase additional shares. If the underwriters exercise their option to purchase additional shares in full from us, our existing stockholders would own       % and our new investors would own       % of the total number of shares of our common stock outstanding upon the completion of this offering.

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Unaudited pro forma condensed combined financial information

We prepared the following unaudited pro forma condensed combined financial statements by applying certain pro forma adjustments to the historical consolidated financial statements of SFX Entertainment, Inc. The pro forma adjustments give effect to the following transactions (the "Transactions"):

our acquisition on July 31, 2012 of Dayglow LLC and its affiliates ("Dayglow") (now operating as SFX-Life in Color, LLC, or "LIC"), which is our Predecessor;

our acquisition on June 19, 2012 of Disco Productions, Inc. (now operating as SFX-Disco Operating LLC) ("DDP");

our acquisition on December 31, 2012 of an 80% ownership interest in MMG Nightlife, LLC ("MMG");

the January 1, 2013 creation of ID&T JV North America ("ID&T JV"), in which we hold a 51% interest, and our planned acquisition of an additional 24% interest;

our acquisition on March 15, 2013 of BEATPORT, LLC ("Beatport");

our planned acquisition of a 75% ownership interest in ID&T Holding B.V. ("ID&T");

our planned acquisition of a 60% ownership interest in the i-Motion GmbH Events & Communication ("i-Motion"), with a commitment to acquire the remaining 40% in 2015;

our planned acquisition of Totem Onelove Group Pty Ltd and Totem Industries Pty Ltd ("Totem");

our planned acquisition of a 70% ownership interest in Made Event, LLC and EZ Festivals, LLC (collectively, "Made"), with a commitment to acquire the remaining 30% in 2018;

our borrowing of $49.5 million under the First Lien Term Loan Facility ("First Lien Term Loan Facility") on March 15, 2013 and the amendment for an additional borrowing of $15.0 million on June 5, 2013;

a $10.0 million private placement of equity on April 1, 2013;

the estimated net proceeds from this offering and the application of the estimated proceeds therefrom, as described under "Use of Proceeds;" and

the simultaneous registration for the resale by selling stockholders of certain shares of common stock issued in connection with acquisitions and in private placement transactions.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2012 and for the three months ended March 31, 2013 gives effect to the Transactions as if each of them had occurred on January 1, 2012. The unaudited pro forma condensed combined balance sheet as of March 31, 2013 gives effect to each of our planned acquisitions, our amendment and additional borrowing under our First Lien Term Loan Facility, the private placement of equity, this offering and the use of proceeds therefrom, and the registration for the resale of shares by the selling stockholders. As if each of them had occurred on March 31, 2013.

These pro forma condensed combined financial statements include adjustments for our planned acquisitions because we believe each of these acquisitions are probable under the standards of Rule 3-05 of Regulation S-X. We note that these acquisitions have not been consummated and may never be consummated, including due to reasons outside of our control. See "Risk Factors—Risks Related to Our Acquisition Strategy" and "Business—Our History and Acquisitions—Planned acquisitions" for more information.

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The historical financial statements of SFX Entertainment, Inc. and each of the businesses acquired or whose acquisition is planned appear elsewhere in this prospectus, with the exception of the interim financial statements of Totem as of and for the three months ended March 31, 2013. These are not required to be included in this prospectus because Totem is a foreign entity. We have based the historical financial information for those periods for Totem on preliminary results for the quarter as reported by its management.

Our determination to consider LIC to be our Predecessor was based on several factors. First, the acquisitions of LIC and DDP were negotiated simultaneously, with DDP closing only six weeks in advance of the LIC acquisition. Second, LIC's historical operations as a producer of live EMC events and festivals are more representative of the core operations around which we are building our global EMC platform than DDP's historical operations as a promoter of live EMC events. Finally, the purchase price for our acquisition of LIC was $12.1 million, which was larger than the $9.0 million purchase price for our acquisition of DDP.

We have based the pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. We describe in greater detail the assumptions underlying the pro forma adjustments in the accompanying notes, which you should read in conjunction with these unaudited pro forma condensed combined financial statements. In many cases, we based these assumptions on preliminary information and estimates. The actual adjustments to our audited consolidated financial statements will depend upon a number of factors and additional information that will be available on or after the closing date of this offering. Accordingly, the actual adjustments that will appear in our financial statements will differ from these pro forma adjustments, and those differences may be material.

We will account for each of the acquisitions in the Transactions using the acquisition method of accounting for business combinations under U.S. GAAP. Under the acquisition method of accounting, the total consideration paid is allocated to an acquired company's tangible and intangible assets, liabilities, and any non-controlling interest based on their estimated fair values as of the acquisition date. As of the date of this prospectus, we have not completed the valuation studies necessary to finalize the acquisition date fair values of the assets acquired and liabilities assumed and the related allocation of purchase price for ID&T JV and Beatport. Accordingly, the values of the assets and liabilities set forth in these unaudited pro forma condensed combined financial statements for these businesses are preliminary. We have not completed the Transactions for our planned acquisitions and therefore the estimated purchase price and fair value of the assets acquired and liabilities assumed is preliminary. Once we complete our final valuation processes, for both our consummated and planned acquisitions, we may report changes to the value of the assets acquired and liabilities assumed, as well as the amount of goodwill, and those changes could differ materially from what we present here.

We provide these unaudited pro forma condensed combined financial statements for informational purposes only. These unaudited pro forma condensed combined financial statements do not purport to represent what our results of operations or financial condition would have been had the Transactions actually occurred on the assumed dates, nor do they purport to project our results of operations or financial condition for any future period or future date. You should read these unaudited pro forma condensed combined financial statements in conjunction with "Use of Proceeds," "Capitalization," "Selected Historical Financial Information and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the historical financial statements, including the related notes thereto, appearing elsewhere in this prospectus.

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 2013

(in 000s)
  SFX
Entertainment,
Inc.
  ID&T   i-Motion   Totem   Made   Acquisition
Related Pro
Forma
Adjustments
  Pro Forma for
Acquisitions
  IPO Proceeds   Consolidated
Pro Forma
Results
 

Assets

                                                       

Cash

  $ 21,859   $ 18,792   $ 537   $ 5,072   $ 517   $ (130,698 )(1) $ (83,921 ) $ 158,250 (1) $ 74,329  

Accounts receivable

    1,586     2,111     418     170     1,451     (584 )(2)   5,152         5,152  

Due from related parties

    2,085     1,948     82     280             4,395         4,395  

Due from promoters

    1,856                         1,856         1,856  

Prepaid expenses

    3,454         387     255     293         4,389         4,389  

Other current assets

    618     58,868     816     20           (49,818 )(3)   10,504         10,504  
                                       

Total current assets

    31,458     81,719     2,240     5,797     2,261     (181,100 )   (57,625 )   158,250     100,625  
                                       

Property, plant and equipment, net

    3,349     2,494     362     282     66         6,553         6,553  

Goodwill

    50,072                     60,414  (4)   110,486         110,486  

Intangible assets, net

    104,043     392     22     19         181,244  (4)   285,720         285,720  

Other assets

    52,039     3,817     211             (2,408 )(1)   53,659         53,659  
                                       

Total assets

  $ 240,961   $ 88,422   $ 2,835   $ 6,098   $ 2,327   $ 58,150   $ 398,793   $ 158,250   $ 557,043  
                                       

Liabilities and Equity

                                                       

Accounts payable and accrued expenses

  $ 13,202   $ 6,491   $ 592   $ 4,058   $ 1,150   $ (584 )(2) $ 24,909       $ 24,909  

Notes payable

    5,513                     10,000  (6)   15,513         15,513  

Label and royalties payable

    12,861                         12,861         12,861  

Deferred revenue

    3,028     11,033     761     157     1,055         16,034         16,034  

Due to related parties

    2,366     31,590     1             (30,025 )(3)   3,932         3,932  

Other current liabilities

    2,620     912     253     4     6         3,795         3,795  
                                       

Total current liabilities

    39,590     50,026     1,607     4,219     2,211     (20,609 )   77,044         77,044  
                                       

Long-term debt

    (0 )           38             38         38  

Deferred tax liabilities

    545                         545         545  

First lien term loan

    48,526                     14,700  (1)   63,226         63,226  

Mandatorily redeemable non-controlling interest

                        23,378  (8)   23,378         23,378  

Other liabilities

    8,596                         8,596         8,596  
                                       

Total liabilities

    97,257     50,026     1,607     4,257     2,211     17,469     172,827         172,827  
                                       

Commitments and contingencies

                                     

Redeemable Common Stock

   
74,380
   
   
   
   
   
(58,756

)(8)
 
15,624
   
   
15,624
 

Redeemable non-controlling interest

    4,835                           4,835         4,835  

Stockholder's equity/(deficit)

                                                       

Common stock

    45     37     64     1         (85 )(8)   62         62  

APIC

    77,464     8,679         1,904         118,343  (8)   206,390     158,250 (1)   364,640  

Due from stockholder for stock subscription

    (36 )                   (1,500 )(8)   (1,536 )       (1,536 )

Non-controlling interests

    22,447     83                 13,492  (8)   36,022         36,022  

Accumulated equity / (deficit)

    (35,431 )   29,597     1,164     (64 )   116     (30,813 )(8)   (35,431 )       (35,431 )
                                       

Total liabilities and stockholders' equity

  $ 240,961   $ 88,422   $ 2,835   $ 6,098   $ 2,327   $ 58,150   $ 398,793   $ 158,250   $ 557,043  
                                       

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the three months ended March 31, 2013

(in 000s except per share amounts)
  SFX
Entertainment,
Inc.

  BEATPORT
01/01 - 03/15

  ID&T
  i-Motion
  Totem
  Made
  Pro Forma
Adjustments

  Consolidated
Pro Forma
Results

 
   

Revenue

  $ 10,153   $ 10,025   $ 3,233   $ 820   $ 10,453   $ 1,530       $ 36,214  

Direct costs

    (7,601 )   (7,089 )   (2,493 )   (510 )   (9,371 )   (1,308 )       (28,372 )
                                   

Gross profit

    2,552     2,936     740     310     1,082     222         7,842  

Selling, general and administrative expenses

    (14,246 )   (3,097 )   (4,420 )   (650 )   (439 )   (231 )   (12 )(2)   (23,095 )

Depreciation

    (118 )   (347 )   (193 )   (28 )               (686 )

Amortization

    (2,747 )   (16 )       (4 )   (14 )       (9,822 )(5)   (12,603 )
                                   

Operating income/(loss)

    (14,559 )   (524 )   (3,873 )   (372 )   629     (9 )   (9,834 )   (28,542 )
                                   

Other income/(expense)

    (942 )   (263 )   34,844     59               (34,909 )(2)   (1,211 )

Interest income/(expense)

    (3,911 )   6     8           (10 )       (6,572 )(7)   (10,479 )

(Provision)/benefit for income tax

    (572 )   (52 )   905     87               6,972  (10)   7,340  
                                   

Net Income/(loss)

    (19,984 )   (833 )   31,884     (226 )   619     (9 )   (44,343 )   (32,892 )
                                   

Less: Net income/(loss) attributable to noncontrolling interests

    (878 )       (1 )               (306 )(9)   (1,185 )
                                   

Net income/(loss) attributable to SFX Entertainment, Inc

  $ (19,106 ) $ (833 ) $ 31,885   $ (226 ) $ 619   $ (9 ) $ (44,037 ) $ (31,707 )
                                   

Loss Per Share—Basic and Diluted

  $ (0.36 )                                    (12)      

Weighted Average Shares Outstanding

    52,929                                      (11)      

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 2012

(in 000s except per share amounts)
  SFX
Entertainment,
Inc.

  Life in Color
(1/1/12 -
7/31/12)

  Disco
Productions
(1/1/12 -
6/19/12)

  MMG (1/1/12 -
12/31/12)

  BEATPORT
  ID&T
  i-Motion
  Totem
  Made
  Pro Forma
Adjustments

  Consolidated
Pro Forma
Results

 
   

Revenue

  $ 24,815   $ 10,986   $ 12,888   $ 4,588   $ 48,461   $ 67,406   $ 14,689   $ 42,303   $ 18,056   $ (2,238 )(2) $ 241,954  

Direct costs

    (23,019 )   (8,219 )   (12,616 )       (33,393 )   (48,140 )   (8,827 )   (30,020 )   (14,094 )   2,238  (2)   (176,090 )
                                               

Gross profit

    1,796     2,767     272     4,588     15,068     19,266     5,862     12,283     3,962         65,864  

Selling, general and administrative expenses

    (17,026 )   (2,323 )   (1,046 )   (2,011 )   (14,641 )   (18,923 )   (3,482 )   (5,891 )   (1,040 )   586  (2)   (65,797 )

Depreciation

    (75 )   (95 )           (1,277 )   (1,533 )   (107 )       (66 )       (3,153 )

Amortization

    (916 )               (483 )       (13 )   (76 )       (44,169 )(5)   (45,657 )
                                               

Operating income/(loss)

    (16,221 )   349     (774 )   2,577     (1,333 )   (1,190 )   2,260     6,316     2,856     (43,583 )   (48,743 )
                                               

Other income/(expense)

    98     13     26     21     (78 )   2,556     152                 2,788  

Interest income/(expense)

    (34 )       (373 )       37     203     24     (27 )   1     (20,987 )(7)   (21,156 )

(Provision)/benefit for income tax

    (67 )               (160 )   (98 )   (777 )   14     (145 )   20,398 (10)   19,165  
                                               

Net income/(loss)

    (16,224 )   362     (1,121 )   2,598     (1,534 )   1,471     1,659     6,303     2,712     (44,172 )   (47,946 )
                                               

Less: Net income attributable to noncontrolling interests

                        73                 869  (9)   942  
                                               

Net income/(loss) attributable to SFX Entertainment, Inc.

  $ (16,224 ) $ 362   $ (1,121 ) $ 2,598   $ (1,534 ) $ 1,398   $ 1,659   $ 6,303   $ 2,712   $ (45,041 ) $ (48,888 )
                                               

Loss Per Share—Basic and Diluted

  $ (0.44 )                                                      (12)      

Weighted Average Shares Outstanding

    37,186                                                        (11)      

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
($ in 000s, except per share amounts)

In connection with our four planned acquisitions, we have preliminary agreements reflecting the following terms.

We acquired an option (the "ID&T Option") to buy a 75% ownership interest in ID&T and will also increase our ownership in the ID&T JV, from 51% to 75%. We paid $2,500 in cash and issued 2,000,000 shares of our common stock to acquire the option. The exercise price of the ID&T Option is $50,000 in cash (including $10,000 payable 90 days after we receive certain financial statements from ID&T and $40,000 payable upon closing) and 2,000,000 shares of our common stock. In addition, we would relinquish our right to be repaid the $7,500 we advanced ID&T in connection with the ID&T JV.

We have agreed in principle to acquire a 60% ownership interest in i-Motion for $8,000 in cash and $4,000 in shares of common stock, at the initial offering price of our common stock in this offering. In addition, we would be obligated to buy the remaining 40% interest after the end of 2014 at a price equal to 40% of 5.5 times the average EBITDA for i-Motion for 2013 and 2014, which would be paid two-thirds in cash and one-third in shares of common stock. For the purposes of these pro forma condensed combined financial statements, we consider our obligation to purchase the remaining equity in this business as making that non-controlling interest mandatorily redeemable, and accordingly, we characterize it as a liability of ours.

We have entered into an asset contribution agreement to acquire 100% of the Totem business for AUD$60,000 in cash and AUD$15,000 in shares of common stock valued at the price to the public in this offering. The seller has the right to put these shares back to us on the second anniversary of the closing of this acquisition, therefore these shares will be treated as temporary equity.

We have agreed in principle to acquire a 70% ownership interest in Made for $20,000 in cash, $5,000 in shares of common stock, and a $10,000 promissory note to be paid at the earlier of March 31, 2014 or the completion of the 2013 audit. The common shares issued would be valued at the greater of the price to the public in this offering and $12.75. We would be obligated to buy the remaining 30% of Made in 2018 at a price equal to 30% of 10 times the average EBITDA for Made for 2017, which will be paid in cash, or, if the total amount payable exceeds $10 million, 80% in cash and 20% in shares of common stock. For the purposes of these pro forma condensed combined financial statements, we consider our obligation to purchase the remaining equity in this business as making that non-controlling interest mandatorily redeemable, and accordingly, we characterize it as a liability of ours. In addition, the minority interest holders are entitled to receive annually 40% of net income in 2013 and 30% thereafter until the final payment in 2018.

Unless otherwise noted, dollar amounts presented in this section are translated from the Australian Dollar (AUD) and Euro (EUR) using the following rates:

 
  € (EUR)
  $ (AUD)
 
   

Profit & Loss

             

Fiscal Year: 2012

    1.286     1.036  

Fiscal Quarter: Q1 2013

    1.321     1.039  

Balance Sheet

             

Period Ending: 3/31/13

    1.282     1.042  

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
($ in 000s, except per share amounts)


FOOTNOTES:

(1)
The pro forma adjustment to cash reflects:

a.
the net proceeds of this offering; plus

b.
the cash we received, net of expenses, from the private issuances of equity that occurred on April 1, 2013, and the additional borrowing under the amendment to our First Lien Term Loan Facility, less

c.
the cash we expect to pay in connection with our pending acquisitions and the cash on the balance sheet of the targeted businesses that we do not expect to receive as part of the acquisition.

Net IPO proceeds

        $ 158,250  
             

Pro forma adjustments to cash:

             

Common stock issuance April 1, 2013

    10,000        

Net proceeds 2nd draw of term loan(a)

    14,608        

Made Acquisition cash consideration

    (20,000 )      

Totem Acquisition cash consideration

    (62,496 )      

ID&T Option cash consideration

    (50,000 )      

i-Motion acquisition cash consideration

    (8,000 )      

ID&T cash not acquired

    (14,810 )      
             

Total net pro forma adjustments to cash

  $ (130,698 )      
             

(a)
The second draw of the term loan reflects $15,000 in borrowing, net of $300 in original issue discount and $92 in deferred charges (which are reflected as an adjustment to other assets).

(b)
$2,500 paid to ID&T on March 20, 2013 for the ID&T Option, which was recorded at cost, in other assets was applied as part of the purchase price.
(2)
Elimination of Intercompany Transactions—We made adjustments to the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 to eliminate transactions between LIC and DDP for the period prior to our acquisition of LIC in the amount of $2,238. From time to time, LIC and DDP have participated and will participate in the promotion and production of certain events. The revenues and costs associated with these events create intercompany amounts that will be eliminated as part of our consolidated financial statements for periods after July 31, 2012, the first date that both LIC and DDP were our consolidated subsidiaries. The adjustments in the unaudited pro forma condensed combined financial statements eliminate the intercompany amounts between the two entities on the same basis for periods prior to that date.

We made adjustments to the unaudited pro forma condensed combined balance sheet to eliminate payables and receivables between ID&T and the ID&T JV at March 31, 2013 of $584 relating to licensing fees payable to ID&T from the ID&T JV's formation costs.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
($ in 000s, except per share amounts)

    We adjusted the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2013 to eliminate an approximately $34,909 gain that ID&T recognized related to their sale of the 51% ownership in the ID&T JV to us.

    We eliminated approximately $12 and $586 in licensing fees for the three months ended March 31, 2013 and the year ended December 31, 2012, respectively, associated with intellectual property that i-Motion licenses, but that we will acquire as part of the acquisition. Therefore, we have included amortization expense for the intellectual property in these unaudited pro forma condensed combined financial statements.

(3)
Assets and Liabilities Not Acquired—We adjusted the unaudited pro forma condensed combined balance sheet to eliminate approximately $49,818 of other current assets held by ID&T that will not be included in the ID&T acquisition. These include $42,126 in our securities and related instruments and $7,692 in receivable from ID&T shareholders. In addition, we eliminated approximately $30,025 in liabilities recorded by ID&T for (i) our prepayment in relation to the ID&T Option and (ii) the $7,500 advance we provided ID&T against future earnings of the ID&T JV.

(4)
Purchase Price Allocation/Goodwill—Under acquisition accounting, we recognize the assets and liabilities acquired at their fair value on the acquisition date, with any excess in purchase price over these values being allocated to goodwill.


For our four planned acquisitions, management has made an initial fair value estimate of the assets acquired and liabilities assumed as of March 31, 2013. These initial estimates will likely differ from the final valuation, once we have consummated the acquisition and received the valuation report of a third-party expert; and this difference could be material. We have made no adjustments to the fair value of the assets acquired (other than intangible assets) and liabilities assumed. We believe that due to the short term nature of the majority of the assets acquired and liabilities assumed that their carrying values, as included in the historical financial statements of the entities, approximates their respective fair values. The acquired goodwill for these acquisitions is primarily related to synergies with our combined businesses and assembled workforce.


We also engaged an expert to value the assets acquired and liabilities assumed of our acquisitions that occurred in 2012 and during the three months ended March 31, 2013. The valuations for the acquisitions that occurred in the first quarter of 2013 have not been completed and therefore the results could differ from the final valuations. These preliminary valuations and the results of operations from these businesses are included in our actual financial statements from the date of their respective acquisitions.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
($ in 000s, except per share amounts)


The following table shows the preliminary purchase price, estimated acquisition-date fair values of the acquired assets and liabilities assumed, non-controlling interest, and calculation of goodwill for the planned acquisitions as of March 31, 2013, the date of our most recent balance sheet.

 
  ID&T
  i-Motion
  Totem
  Made
  Total
 
   

Cash consideration

  $ 52,500   $ 8,000   $ 62,496   $ 20,000   $ 142,996  

Forgiveness of advance

    7,500                 7,500  

Note to seller

                10,000     10,000  

Common stock

    14,380     4,000     15,624     5,882     39,886  

Common shares to be issued

    2,000                          
                       

Total Purchase Price

  $ 74,380   $ 12,000   $ 78,120   $ 35,882   $ 200,382  
                       

Net tangible assets acquired

    23,404     2,812     6,079     2,326     34,621  

Liabilities assumed

    (20,001 )   (1,607 )   (4,257 )   (2,211 )   (28,076 )

Goodwill

    23,865     4,693     19,070     12,786     60,414  

Intangible assets

    71,988     14,102     57,228     38,359     181,677  

Mandatorily redeemable non-controlling Interest

        (8,000 )       (15,378 )   (23,378 )

Non-controlling interest

    (24,876 )               (24,876 )
                       

Total purchase price allocation

  $ 74,380   $ 12,000   $ 78,120   $ 35,882   $ 200,382  
                       
(5)
Intangible Assets—We based the estimated useful lives of the most significant acquired intangible assets on the amount and timing in which we expect to receive an economic benefit. We assigned these intangible assets useful lives ranging from 3 - 7 years based upon a number of factors, including contractual agreements, consumer awareness and economic factors pertaining to the combined companies.


The estimates are preliminary and therefore fair values and weighted-average useful lives of the intangibles assets for the planned acquisitions will likely differ from the final estimates of fair value and useful lives. The estimates of fair value and weighted-average useful lives could be impacted by a variety of factors including legal, regulatory, contractual, competitive, economic or other factors. Increased knowledge about these factors could result in a change to the estimate fair value of these intangible assets and/or the weighted-average useful lives from what we have assumed in these unaudited pro forma condensed combined financial statements. In addition, the combined effect of any such changes could result in a significant increase or decrease to related amortization expense estimates.


The figures set forth below do not reflect the value of any intangible assets to the extent already set forth in the historical financial statements of the acquired businesses.

 
  ID&T
  i-Motion
  Totem
  Made
  Total
  Estimated
Useful Life

 
   

Fan Database

  $ 14,319   $ 2,838   $ 11,442   $ 7,672   $ 36,271     3  

Trademarks / names

    44,066     9,856     40,065     23,015     117,002     7  

Non Compete Agreements

    13,603     1,408     5,721     7,672     28,404     5  
                             

Total Intangible Assets

  $ 71,988   $ 14,102   $ 57,228   $ 38,359   $ 181,677        
                             

We amortize intangible assets over their estimated useful life. The amortization of intangible assets shown below assumes the assets were acquired on January 1, 2012 and amortized over the period

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
($ in 000s, except per share amounts)

    associated with each statement of income. For DDP, LIC, MMG, and Beatport the additional amortization expense only covers the periods prior to their acquisition.

 
  LIC
  Disco
  MMG
  ID&T
  i-Motion
  Beatport
  Totem
  Made
  Total
Amortization
Expense

 
     
   
   
 

Three Months Ended March 31, 2013

                3,447     659     1,214     2,657     1,845     9,822  

Year Ended December 31, 2012

    609     420     2,885     13,789     2,636     5,845     10,605     7,380     44,169  
(6)
Note Payable—Reflects two notes payable in aggregate amount of $10,000 to be incurred in connection with the acquisition of Made that become due on March 31, 2014 or any earlier date on which Made's 2013 audited financial statements are available.

(7)
Long-Term Debt—On March 15, 2013, we entered into our First Lien Term Loan Facility having a principal amount of $49,500 and bearing a variable interest rate. The rate utilized to calculate the adjustment to pro forma interest expense was 8.75%, which is the current rate in effect under our First Lien Term Loan Facility. In addition, Mr. Sillerman provided a personal guarantee of our First Lien Term Loan Facility. The value associated with the warrants and common stock issued in connection with the personal guarantee was $25,430, which is amortized over the life of the loan as interest expense along with related transaction costs. On June 5, 2013, we borrowed an additional $15,000 under our First Lien Term Loan Facility, for a total principal amount of $64,500.


In connection with our First Lien Term Loan Facility, our unaudited pro forma condensed combined statement of income includes an adjustment to interest expense, as follows.


For the year ended December 31, 2012:

Interest on First Lien Term Loan Facility

  $ 5,644  

Original issue discount on First Lien Term Loan Facility and amortization of Mr. Sillerman's guarantee

    15,343  
       

Total adjustment interest expense

  $ 20,987  
       

For the three months ended March 31, 2013:

For the period from January 1 - March 15, 2013
   
 
   

Interest on $49,500 First Lien Term Loan Facility

  $ 902  

$49,500 First Lien Term Loan Facility original issue discount, deferred financing fees and amortization of Mr. Sillerman's guarantee

    5,263  
       

    6,165  

 

For the three months ended March 31, 2013
   
 
   

Interest on $15,000 First Lien Term Loan Facility

  $ 328  

$15,000 First Lien Term Loan Facility original issue discount and amortization of deferred financing fees

    79  
       

    407  
       

Total interest expense

  $ 6,572  
       

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
($ in 000s, except per share amounts)

(8)
Adjustments to Equity—The following table details the pro forma adjustments to equity accounts, temporary equity, and mandatorily redeemable non-controlling interest.

 
  Common
Stock

  APIC
  Non-Controlling
Interest

  Accumulated
Equity/Deficit

  Due from
Shareholders

  Total
Equity

  Redeemable
Common Stock

  Mandatory
Redeemable
NCI (Liab.)

 
   

ID&T

  $ (37 ) $ 24,502   $ 13,492   $ (29,597 )     $ 8,360          

i-Motion

    (64 )   4,000         (1,164 )       2,772         8,000  

Made

        5,882         (116 )       5,766         15,378  

Totem

    (1 )   (1,904 )       64         (1,841 )   15,624      

Termination of repurchase put

    17     75,863             (1,500 )   74,380     (74,380 )    

April 1, 2013 Issuance

        10,000                 10,000          

                                               
                                   

Total

  $ (85 ) $ 118,343   $ 13,492   $ (30,813 ) $ (1,500 ) $ 99,437   $ (58,756 ) $ 23,378  
                                   

Initial Public Offering

      $ 158,250               $ 158,250          
                                   
(9)
Non-controlling Interests—The MMG acquisition was for the purchase of an 80% ownership stake in MMG, the ID&T acquisition will be for 75% ownership, and the ID&T JV will be for an increase to 75%. The unaudited pro forma condensed combined statement of income accounts for the non-controlling interest we will not be acquiring as follows.

 
  12/31/2012
  3/31/2013
 
   

Net Income—MMG

  $ 2,598     N/A  

Net Income Attributable to Non-Controlling Interest—MMG 20%

  $ 520     N/A  

Net Income—ID&T*

 
$

1,398
 
$

(3,025

)

Net Income Attributable to Non-Controlling Interest—ID&T 25%

  $ 350   $ (756 )

Net Income—ID&T JV

   
N/A
 
$

(1,875

)

Net Income Attributable to Non-Controlling Interest—ID&T JV 25%

    N/A   $ (469 )

Amount already recorded 49%

    N/A   $ (919 )
           

Adjustment 24%

    N/A   $ 450  
           

Total Non-Controlling Interests

  $ 869   $ (306 )
           

*
Excludes the gain of $34,909 from ID&T's sale of 51% of ID&T JV to us (See footnote 2).
(10)
Provision for Income Tax—The income tax effects reflected in the pro forma adjustments are based on an estimated statutory rate of 38%.

(11)
Weighted Average Shares Outstanding—The pro forma weighted average shares outstanding takes into account our common shares outstanding on December 31, 2012 and March 31, 2013 and

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
($ in 000s, except per share amounts)

    adds to that amount common shares issued after that date in respect to the Transactions. In each case, we assume that the shares were issued and became outstanding on January 1, 2012.

 
  Common Shares  
 
  December 31, 2012
  March 31, 2013
 
   

Common Shares outstanding at period end:

    48,261,027     62,262,902  

Acquisitions:

             

Beatport

    5,000,000        

Shares issued for ID&T JV

    2,000,000        

Shares issued for ID&T Option

    2,000,000        

Shares issued for i-Motion

             

Shares issued for Made

             

Shares issued for Totem

             

Private placements

             

January 8, 2013

    2,000,000        

February 11, 2013

    1,000,000        

February 22, 2013

    2,000,000        

April 1, 2013

    1,000,000     1,000,000  

Shares issued in IPO

             
           

Total pro forma weighted average shares outstanding

             
           
(12)
Earnings Per Share—The following table details the pro forma adjustments to EPS based upon the assumed distribution of net income to the non-controlling interest in the planned acquisition of Made.

 
  Year Ended
December 31, 2012

  Three Months Ended
March 31, 2013

 
   

Net loss attributable to SFX Entertainment, Inc. 

  $ (48,888 ) $ (31,707 )

Less: Distribution to Made NCI*

    814      
           

Net loss attributable to SFX Entertainment, Inc. after distribution to NCI

  $ (49,702 ) $ (31,707 )
           

Weighted average shares outstanding and used in the computation of basic net income per share

             
           

Net loss attributable to SFX Entertainment, Inc. common shareholders per share—basic

  $     $    
           

*
Assumed 30% dividend for the year ended December 31, 2012. No dividend is provided for the three months ended March 31, 2013.

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Selected historical financial information and other data

The following table sets forth the selected historical financial information for SFX Entertainment, Inc. or "SFX" (Successor), and the selected historical financial information for Life in Color or "LIC" (Predecessor). The historical results of operations for SFX, as Successor, for the year ended December 31, 2011 do not reflect any of the operations of LIC, as Predecessor. The historical results of operations for SFX, as Successor, for the year ended December 31, 2012 reflect the operations of LIC only from the date of SFX's acquisition of LIC on July 31, 2012.

We derived the selected historical consolidated financial data for SFX as of and for the years ended December 31, 2011 and 2012 from the audited consolidated financial statements you can find elsewhere in this prospectus. We derived the selected historical consolidated financial data for LIC as of and for the year ended December 31, 2011, as of and for the period from January 1, 2012 and as of July 31, 2012 from the audited consolidated financial statements you can find elsewhere in this prospectus. We derived the selected historical consolidated financial data for SFX as of March 31, 2013 and for the three months ended March 31, 2012 and March 31, 2013 from the unaudited consolidated financial statements you can find elsewhere in this prospectus.

You should read these selected financial data in conjunction with the disclosure under "Use of Proceeds," "Capitalization," "Unaudited Pro Forma Condensed Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and the related notes thereto included elsewhere in this prospectus.

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  Life in Color
(Predecessor)
  SFX Entertainment, Inc.
(Successor)
 
Consolidated statement of comprehensive income data
(in 000s except per share amounts)

  Year ended
December 31,
2011

  Seven months
ended
July 31,
2012

  Year ended
December 31,
2011

  Year ended
December 31,
2012

  Three months
ended
March 31,
2012

  Three months
ended
March 31,
2013

 
   

Revenue

  $ 9,606   $ 10,986   $   $ 24,815   $   $ 10,153  

Total direct costs

    (8,572 )   (8,219 )       (23,019 )       (7,601 )
                           

Gross profit

    1,034     2,767         1,796         2,552  

Operating expenses

                                     

Selling, general and administrative expenses

    (1,142 )   (2,323 )   (101 )   (17,026 )   (1,366 )   (14,246 )

Depreciation and amortization

    (41 )   (95 )       (991 )       (2,865 )

Operating income/(loss)

    (149 )   349     (101 )   (16,221 )   (1,366 )   (14,559 )

Interest expense

                (34 )       (3,911 )

Other income/(expense)

    (9 )   13         98         (942 )
                           

Net income (loss) before provision for income taxes

    (158 )   362     (101 )   (16,157 )   (1,366 )   (19,412 )

Provision for income taxes

                  67         572  
                           

Net income/(loss)

    (158 )   362     (101 )   (16,224 )   (1,366 )   (19,984 )

Less: Net income/(loss) attributable to non-controlling interests

                        (878 )
                           

Net income attributable to SFX Entertainment, Inc.

  $ (158 ) $ 362   $ (101 ) $ (16,244 ) $ (1,366 ) $ (19,106 )
                           

Loss per share—basic and diluted

    NA     NA   $   $ (0.44 )   NA   $ (0.36 )

Weighted average shares outstanding—basic and diluted

    NA     NA         37,186     NA     52,929  

NA—not applicable

 
  Life in Color
(Predecessor)
  SFX Entertainment, Inc.
(Successor)
 
Consolidated balance sheet data
  December 31,
2011

  July 31,
2012

  December 31,
2011

  December 31,
2012

  March 31,
2013

 
   

Cash

  $ 44   $ 182   $   $ 3,675     21,859  

Working capital

    (595 )   (835 )   (101 )   (18,005 )   (8,132 )

Total assets

    1,111     1,615         66,732     240,961  

Deferred revenue

    663     830         324     3,028  

Total liabilities

    1,727     2,107     101     28,059     97,257  

Stockholders' equity (deficit)

    (616 )   (492 )   (101 )   8,879     64,489  

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Management's discussion and analysis of financial condition and results of operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, the financial statements for Life in Color, LLC as our predecessor, and related notes appearing elsewhere in this prospectus. Unless otherwise stated or the context otherwise requires, references to "SFX" and "the Company" refer to SFX Entertainment, Inc. and references to "we," "us," "our" and similar references refer to SFX Entertainment, Inc. together with its consolidated subsidiaries, in each case after giving effect to our completed acquisitions, the planned acquisitions disclosed herein, and the formation of our joint venture. To date, SFX has acquired four businesses and acquired an interest in one joint venture. SFX also expects to complete four acquisitions simultaneously with or shortly after the closing of this offering: its acquisition of 75% of the worldwide business (the "ID&T Business") of ID&T Holding B.V. ("ID&T"), its acquisition of a 60% equity interest in i-Motion GmbH Events & Communication ("i-Motion"), its acquisition of 100% of Totem Onelove Group Pty Ltd and Totem Industries Pty Ltd (collectively, "Totem") and its acquisition of a 70% equity interest in Made Event, LLC and EZ Festivals, LLC (collectively, "Made"). Although we consider these acquisitions to be "probable" within the meaning of Rule 3-05 of Regulation S-X and present information herein on a basis that assumes we complete these acquisitions, their consummation remains subject to closing conditions. Therefore, we cannot provide any assurance that any of these planned acquisitions will be consummated. We discuss the terms of these acquisitions and the conditions to closing in "Risk Factors—Risks Related to Our Acquisition Strategy" and "Business—Our History and AcquisitionsPlanned acquisitions."

The following discussion contains "forward-looking statements" that reflect our future plans, estimates, beliefs, and expected performance. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. See "Risk Factors" and "Forward-Looking Statements."


OVERVIEW

We believe we are the largest producer of live events and entertainment content focused exclusively on the electronic music culture ("EMC"), based on attendance and revenue. We view EMC as a global generational movement driven by a rapidly developing community of avid followers among the millennial generation. Our mission is to enable this movement by providing our fans with the best possible live experiences, music discovery and connectivity with other fans and events. We have significant and growing scale with our global live events and, on a pro forma basis for our completed and planned acquisitions, attracted approximately 2.8 million fans in 2012, a 23.6% increase from 2011. We believe the broad appeal of EMC beyond festival attendance is demonstrated by the deep engagement of our fans, which is evidenced by the time they devote to EMC-related social media and digital activities. For example, our 2012 Tomorrowland festival in Belgium had 7.9 million live views on YouTube and our official Tomorrowland long-form after movies have had over 140 million online views to date.

We present leading EMC festivals and events, including Tomorrowland, Sensation, Mysteryland, Q-Dance, Stereosonic, Electric Zoo, Decibel, Nature One, MayDay, Ruhr-in-Love and Life in Color, many of which have more than a decade of history, passionate followers and vibrant social communities. We are continually investing in our festivals and events to add new and exciting creative elements, expand into new markets, and launch new events, all in order to provide the best entertainment experiences in the world for EMC fans. Many of the festivals we have or will present have a long history and have achieved substantial popularity and success in Europe while also attracting fans globally. For example, Tomorrowland sold out all of its approximately 180,000 tickets

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to the 2013 festival in Belgium in one second and saw significant demand from U.S.-based fans, each seeking to purchase multiple tickets. To meet the growing demand of the EMC community in the United States and other regions around the world, we plan to introduce some of the most popular festivals and events to certain areas for the first time. At its original location in Amsterdam, Sensation has consistently sold out since its inception in 2000, including all 45,000 tickets for 2013. Our inaugural Sensation event in North America, held in Toronto in May 2013, attracted over 25,000 attendees. We have announced four additional Sensation events in North America for 2013, which will be held in Las Vegas, Miami, New York, and San Francisco, and our first North American Tomorrowland festival, TomorrowWorld, which we will hold in September 2013.

We started our business in July 2011 and were incorporated in Delaware in June 2012. Our operations and assets consist almost entirely of businesses that we acquired during 2012 and 2013. These include:

our acquisition on July 31, 2012, of Dayglow LLC and its affiliates, now operating as SFX-LIC Operating LLC ("Life in Color" or "LIC"), which, on a combined basis, is our Predecessor;

our acquisition on June 19, 2012, of Disco Productions, Inc., now operating as SFX-Disco Operating LLC ("DDP");

our acquisition on December 31, 2012, of an 80% ownership interest in MMG Nightlife LLC ("MMG");

our acquisition on March 15, 2013 of BEATPORT, LLC ("Beatport"); and

our entry into a joint venture with ID&T Holding B.V. ("ID&T"), in which we own a 51% interest, with ID&T holding the remaining 49% (the "ID&T JV"); we will consolidate the results of operations of the joint venture, which commenced operations in 2013.

We have agreed to terms in respect of the four planned acquisitions described above: our exercise of our option to purchase of a 75% ownership interest of the worldwide business of ID&T (the "ID&T Business"), our acquisition of a 60% ownership interest of i-Motion, our asset contribution agreement with Totem and our acquisition of a 70% ownership interest of Made. We intend to use the proceeds of this offering to fund the cash portion of the consideration for these acquisitions and consummate them simultaneously with or shortly after the closing of this offering.

Under the ID&T Option, our acquisition of the ID&T Business will cost $50.0 million in cash (including a $10.0 million payment payable upon ID&T's delivery of certain financial information) plus the cancelation of a $7.5 million debt owed to us by ID&T. These are in addition to the $2.5 million in cash and 2,000,000 shares of common stock we paid to acquire the ID&T Option.

Under an agreed upon term sheet we entered into with i-Motion, we will pay $12.0 million, consisting of $8.0 million in cash and $4.0 million in shares of our common stock at the initial offering price of our common stock in this offering, to acquire 60% of the equity interests of i-Motion.

We have entered into an asset contribution agreement with Totem, under which we have agreed to pay AUD$75.0 million, consisting of AUD$60.0 million (or $55.3 million) in cash and AUD$15.0 million (or $13.8 million) in shares of our common stock at the initial offering price of our common stock in this offering, to acquire 100% of Totem. Under the terms of the agreement, we were obligated to pay an AUD$5.0 million (or $4.8 million as of May 22, 2013) deposit, which we funded on May 22, 2013.

Under a binding term sheet we entered into with Made, we will pay $35.0 million, consisting of $20.0 million in cash, $5.0 million in our common stock at the lower of $12.75 per share or the initial public offering price in this offering, and $10.0 million in promissory notes, to acquire 70% of the equity interests of Made. We will be required to purchase the remaining 30% that is not being sold in 2018. On June 24, 2013, we advanced $2.5 million towards the purchase price for this transaction.

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FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We currently generate revenue from ticket sales, concessions of food, beverages and merchandise, promoter and management fees, sponsorships, music sales and advertising. On a pro forma basis for the year ended December 31, 2012, we derived 80.0% of our revenue from live events, including ticket sales, artist bookings, food, beverage and merchandise concessions, single-event sponsorships and promoter and management fees. During the same period, we derived 20.0% from digital music sales.

On a pro forma basis for the three months ended March 31, 2013, we derived 65.9% of our revenue from live events, including ticket sales, artist bookings, food, beverage and merchandise concessions, single-even sponsorships and promoter and management fees. During the same period we derived 34.1% from digital music sales.

On a pro forma basis for the year ended December 31, 2012, we generated revenue of $193.5 million from live events, of which $152.7 million, or 78.9%, was from ticket sales and concessions, and $40.8 million, or 21.1% was from other sources, including promoter and management fees. On a pro forma combined basis for the year ended December 31, 2012, we produced and promoted a total of 861 live events, including 52 festivals of greater than 10,000 attendees. Total attendance at our festivals and events was approximately 2.8 million, and we hosted several events weekly at our managed EMC venues attracting another 400,000 attendees. On a pro forma combined basis, our live events had a gross margin of 26.3%.

On a pro forma basis for the three months ended March 31, 2013, we generated revenue of $23.9 million from live events, of which $19.7 million, or 82.5%, was from ticket sales and concessions, and $4.2 million, or 17.5% was from other sources, including promoter and management fees. On a pro forma combined basis for the three months ended March 31, 2013, we produced and promoted a total of 157 live events, including 4 festivals of greater than 10,000 attendees. Total attendance at our festivals and events was approximately 299,000. On a pro forma combined basis, our live events had a gross margin of 17.6%.

As we integrate the businesses we have acquired and our planned acquisitions, in the medium and long-term, we anticipate meaningful growth in our live event revenue, primarily due to growing the number of large festivals around the world and increasing the total number of attendees at such festivals and other events. For example in North America, through our existing ID&T JV, we will produce the TomorrowWorld festival outside of Atlanta in September 2013. We have already held one Sensation event in Toronto, Canada. We intend to hold additional Sensation and Q-Dance events in other North American cities, and intend to introduce Mysteryland and other festivals in the future. In addition, we plan to bring these and other events to new regions around the world. We also plan to develop additional revenue streams around these events.

In 2012 and the three months ended March 31, 2013, the majority of our revenue consisted of ticket sales. A significantly smaller portion of our live event revenue in 2012 and the three months ended March 31, 2013, was derived from the sale of food, beverages and merchandise. For indoor festival events, the venue owner typically retains any revenue attributable to food and beverage sales; however, for outdoor festivals we generally operate the concessions and retain the food and beverage revenue. In the medium- to long-term, we expect continued growth in live event attendance, in particular large-scale outdoor festivals, to drive meaningful growth in food and beverage revenue. In addition, we expect to continue our strategy of acquiring live event production companies in 2013 and beyond, which would increase our live event revenue.

We expect the gross margin for our live events to increase in the near and medium-term as festivals become more established, as initiation and start-up costs are eliminated, and attendance grows.

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On a pro forma basis for the year ended December 31, 2012, we generated $48.5 million in revenue from music sales with a gross margin of 31.1% and for the three months ended March 31, 2013, we generated $12.3 million in revenue from music sales with a gross margin of 29.6%. The majority of our music revenue is derived from the sale of professional quality uncompressed audio files via Beatport, which DJs require to produce and perform new electronic music tracks. We believe that in the near and medium-term, revenue from our online properties, including Beatport, will experience significant growth as we introduce new content, products and access offerings to address growing demand within the EMC community.

QUARTERLY TRENDS

Our results of operations, and in particular the revenue we generate from a given activity, varies substantially from quarter to quarter. We expect most of our largest festivals to occur outdoors primarily in warmer months. For example, ID&T stages most of its festivals in August and September in Europe, and Totem stages most of its festivals in November and December in Australia. As such, we expect our revenues from these festivals to be higher during the third and fourth quarters, and lower in the first and second quarters. Further, because we expect to conduct a limited number of large festivals, small variations in this number from quarter to quarter can cause our revenue and net income to vary significantly for reasons that may be unrelated to the performance of our core business. Other portions of our business are generally not subject to seasonal fluctuation or experience much lower seasonal fluctuation, such as MMG, which receives higher revenues in the winter months in Miami, and LIC, which is more active during the school year. Overall, on a pro forma basis for our planned acquisitions, we currently expect our revenue to be higher in our third and fourth quarters than in our first and second quarters. In the future, we expect these fluctuations to change and perhaps become less pronounced as we grow our business, stage more festivals and events, including in the Southern Hemisphere, and acquire additional businesses. We believe our cash needs will vary significantly from quarter to quarter depending on, among other things, the timing of festivals and events, cancellations, ticket on-sales, capital expenditures, seasonal and other fluctuations in our business activity, the timing of guaranteed payments and receipt of ticket sales and fees, financing activities, acquisitions and investments and receivables management.

BASIS AND PRESENTATION

Our acquisition of DDP and LIC were negotiated simultaneously, with DDP closing only six weeks prior to the LIC acquisition. Because LIC and DDP were acquired contemporaneously, we focused on the core operations of each company, as well as the purchase price in the respective transaction to determine which company we should treat as our predecessor company. LIC's historical operations as a producer of live EMC events and festivals are more representative of the core operations around which we are building our global EMC business. The purchase price for LIC totaled $12.1 million. DDP's historical operations were more focused on the promotion of live EMC events to the exclusion of large-scale festivals. The purchase price for DDP totaled $9.0 million. Upon review of these facts and discussions with our advisors, we determined that LIC was our predecessor ("Predecessor").

Based on the current status of our corporate evolution and our designation of LIC as our predecessor, we have presented this Management's Discussion and Analysis of Financial Condition and Results of Operations as follows:

(1)
a discussion of the results of operations of our Predecessor, LIC, for the seven months ended July 31, 2012, (the last day of operations of our Predecessor) and the nine months ended September 30, 2011;

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(2)
a discussion of the results of operations of our Predecessor, LIC, for each of the years ended December 31, 2011, and December 31, 2010;

(3)
a discussion of the results of operations of SFX Entertainment, Inc. and subsidiaries (the "Registrant") for the year ended December 31, 2012 and for the three months ended March 31, 2013;

(4)
a discussion of the results of operations of the Registrant for the period from July 7, 2011 (Inception) through December 31, 2011; and

(5)
a discussion of the financial condition of the Registrant.

PREDECESSOR

On July 31, 2012, we acquired our Predecessor and Advanced Concert Productions LLC. At the time of this transaction, our Predecessor was a promoter and organizer of branded events that featured live DJs, acrobatic acts and "paint blasts," during which participants were sprayed with colorful, harmless paint to provide a more interactive experience. Advanced Concert Productions LLC was the production company for our Predecessor's live events.

Our Predecessor principally derived its revenue from ticket sales to events that it promoted and produced and recognized this revenue at the time the event occurred. When our Predecessor acted as the principal promoter of an event and took on the risks and rewards of such event, it recognized the gross revenue from ticket sales. When it acted as agent and did not bear the risks of such event, it recognized only its net share of revenue.

Our Predecessor's principal costs of generating revenue were direct operating expenses associated with the promotion and production of events, including venue costs, artist performance fees, travel expenses, show-specific advertising and marketing, ticketing processing fees, and other show-related production expenses.

RESULTS OF OPERATIONS—PREDECESSOR

Seven months ended July 31, 2012 (last day of operations of our Predecessor) and the nine months ended September 30, 2011

Revenue

Our Predecessor's revenue increased by $4.7 million, or 75.0%, to $11.0 million for the seven months ended July 31, 2012 from $6.3 million for the nine months ended September 30, 2011. The increase in revenue is primarily attributable to increases in the number of events, attendees per event, and average ticket price earned per attendee. Our Predecessor generated $9.9 million in ticket revenue (89.9% of total revenue), $0.5 million in licensing fees (4.6% of total revenue), and $0.6 million in other revenue (5.5% of total revenue) for the seven months ended July 31, 2012.

The number of events during the seven months ended July 31, 2012 increased to 90 from 51 events for the nine months ended September 30, 2011 due to new market penetration. Total attendance increased to approximately 236,773 for the seven months ended July 31, 2012, from 163,299 for the nine months ended September 30, 2011, an increase of 73,474, or 45.0%, due to an increasing number of events.

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Direct operating expenses

Our Predecessor's direct operating expenses increased by $3.3 million, or 68.7%, to $8.2 million for the seven months ended July 31, 2012 from $4.9 million for the nine months ended September 30, 2011. The increase in direct operating expenses is primarily attributable to increases in production and venue costs of $1.7 million, artist and talent costs of $0.7 million, and promotional costs of $0.7 million associated with the increased number of events.

Selling, general, and administrative expenses

Our Predecessor's selling, general, and administrative expenses increased by $1.7 million, or 283.3%, to $2.3 million for the seven months ended July 31, 2012 from $0.6 million for the nine months ended September 30, 2011. The increase is primarily attributable to increases in professional services fees of $0.8 million incurred in conjunction with the sale of our Predecessor to us and an increase in payroll expense of $0.4 million due to increased headcount.

Depreciation and amortization

Our Predecessor's depreciation and amortization increased by $0.1 million for the seven months ended July 31, 2012 compared to the nine months ended September 30, 2011. The increase resulted from additions of approximately $0.4 million in property, plant and equipment.

Year ended December 31, 2011 compared to year ended December 31, 2010

Revenue

Our Predecessor's revenue increased by $8.5 million, or 749.3%, to $9.6 million for the year ended December 31, 2011 from $1.1 million for the year ended December 31, 2010. This increase is primarily attributable to an increase in the size and number of events as well as increased attendance at its events. Our Predecessor entered new markets and hosted larger capacity events in key cities during 2011. Our Predecessor hosted 75 events in 2011.

Our Predecessor generated $9.3 million in ticket revenue (96.7% of total revenue), and $0.1 million in licensing fees (1.2% of total revenue) for the year ended December 31, 2011.

Direct operating expenses

Our Predecessor's direct operating expenses increased by $7.7 million, or 928.6%, to $8.6 million for the year ended December 31, 2011 from $0.8 million for the year ended December 31, 2010. The increase in direct operating expenses is primarily attributable to increases in production and venue costs of $5.3 million, artist and talent costs of $1.2 million, and promotional costs of $0.7 million associated with the increased number of events.

Selling, general, and administrative expenses

Our Predecessor's selling, general, and administrative expenses increased by $0.9 million, or 355.4%, to $1.1 million for the year ended December 31, 2011 from $0.3 million for the year ended December 31, 2010. The increase is primarily attributable to increases in payroll of $0.6 million, reflecting headcount additions associated with corporate growth as our Predecessor increased its number of events in the year ended December 31, 2011.

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Other expenses (income)

Other expenses totaled $8,000 for the year ended December 31, 2011 compared to other income of $25,000 for the year ended December 31, 2010. In 2010, other income included a gain on the forgiveness of a loan totaling $21,000, which was the primary driver of the year over year change.

RESULTS OF OPERATIONS—SUCCESSOR

We started our business on July 7, 2011, and we did not have any significant operations in the year ended December 31, 2011 and the three months ended March 31, 2012 other than $(0.6) million in corporate related costs. As such, we have not provided a comparison of our results of operations for the year ended December 31, 2012 to 2011 and for the three months ended March 31, 2013 to 2012 because such a comparison would not be meaningful.

For the three months ended March 31, 2013

Revenue

Revenue for the three months ended March 31, 2013 totaled $10.2 million, of which we generated $7.9 million (77.3% of total revenue) from festivals and live events that we produced, promoted or managed, including 149 events, including one festival of greater than 10,000 attendees. Total attendance at our festivals and events was approximately 235,000 attendees. In addition, $2.3 million of revenue was contributed from our digital music sales (22.7% of total revenue).

Musical talent costs

Musical talent costs consist of fees paid to performing artists at festivals and venues. For the three months ended March 31, 2013 music talent costs totaled $3.2 million related to our live events.

Production costs

Production costs consist of costs incurred to produce events, including crew and material costs associated with staging and construction, venue costs, promotional, merchandising and travel costs, as well as Beatport's royalty and other digital music sales related expenses. For the three months ended March 31, 2013 production costs totaled $4.4 million, of this approximately $2.8 million in connection with our 149 live events. Beatport incurred $1.6 million of production costs predominately related to royalty fees.

Depreciation and amortization

Depreciation and amortization was associated with property, plant and equipment additions with depreciable lives ranging from three to seven years. Amortization expense represents the amortization of intangible assets from the date of acquisition. For the three months ended March 31, 2013, depreciation and amortization totaled $2.9 million primarily associated with the same drivers as for the fiscal year, but with an additional expenses of approximately $0.7 million related to the amortization of management agreements and $1.5 million in amortization related to the intangible assets of our recent acquisitions of Beatport and the ID&T JV.

Selling, general, and administrative expenses

Selling, general, and administrative expenses for the three months ended March 31, 2013 totaled $14.2 million, of which $3.8 million included legal, accounting, and professional fees and $5.0 million of non-cash stock based compensation expenses.

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Provision for Income Taxes

Provision for income taxes for the three months ended March 31, 2013 totaled $0.6 million.

Year ended December 31, 2012

Our consolidated financial statements for the year ended December 31, 2012 include costs associated with our formation and startup costs, costs associated with identifying and evaluating our initial target acquisitions, and the results of operations for DDP beginning on June 20, 2012 and for LIC beginning on August 1, 2012, the day after their respective dates of acquisition.

Revenue

Revenue for the year ended December 31, 2012 totaled $24.8 million. This revenue was generated primarily from ticket sales related to the festivals and events that were produced and promoted by two of our acquired entities, DDP and LIC, after we acquired them. For the year ended December 31, 2012, we produced and promoted a total of 353 events, including eight festivals of greater than 10,000 attendees. Total attendance at our festivals and events was approximately 701,000. For the year ended December 31, 2012, we generated $22.9 million in ticket revenue (92.4% of total revenue), and $1.9 million from other sources (7.6% of total revenue).

Musical talent costs

Musical talent costs consist of fees paid to performing artists at festivals and venues. Musical talent costs for the year ended December 31, 2012 totaled $8.0 million. For the three months ended March 31, 2013 music talent costs totaled $3.2 million related to our live events.

Production costs

Production costs consist of costs incurred to produce events, including crew and material costs associated with staging and construction, venue costs, promotional, merchandising and travel costs, as well as Beatport's royalty and other digital music sales related expenses. Production costs for the year ended December 31, 2012 totaled $15.0 million, all related to our live events.

Depreciation and amortization

Depreciation and amortization for the year ended December 31, 2012 totaled $1.0 million and was associated with property, plant and equipment additions with depreciable lives ranging from three to seven years. Amortization expense represents the amortization of intangible assets from the date of acquisition through December 31, 2012.

Selling, general, and administrative expenses

Selling, general, and administrative expenses for the year ended December 31, 2012 totaled $17.0 million, of which $8.2 million included legal, accounting, and advisory fees incurred primarily in connection with our formation and the evaluation and negotiation of acquisitions. In addition, selling general and administrative expenses included $2.2 million of non-cash stock based compensation expense and $2.3 million of salary expense.

Provision for Income Taxes

Provision for income taxes for the year ended December 31, 2012 of $0.1 million resulted primarily from deferred taxes related to timing differences offset by a valuation allowance.

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For the period from July 7, 2011 (inception) through December 31, 2011

General and administrative expenses

We incurred expenses of $0.1 million for the period from July 7, 2011 (Inception) through December 31, 2011. These expenses were primarily legal expenses incurred in connection with our formation. We incurred no expenses for the year ended December 31, 2010 as we did not begin operations until July 2011.

FINANCIAL CONDITION—SUCCESSOR

Liquidity and capital resources

We have funded our operations from July 7, 2011 (Inception) through June 5, 2013, including our acquisitions, with $62.5 million in net proceeds raised from the issuance of equity and $64.5 million of debt incurred.

As of December 31, 2012, we had cash and cash equivalents totaling $3.7 million.

On December 31, 2012, we issued a promissory note to Robert F.X. Sillerman in the principal amount of $7.0 million. The note's interest rate was 9% per annum and had a maturity date of March 31, 2013. As of April 3, 2013, the promissory note was fully repaid.

On December 31, 2012, we acquired certain assets and liabilities of MMG for $16.9 million. The purchase price comprised $5.0 million in cash, a 0.24% promissory note in the principal amount of $8.5 million, having a maturity date of February 28, 2013, and $3.4 million in our common stock valued at $5.00 per share. On March 15, 2013, we made a payment of $3.0 million to MMG and the promissory note was amended and restated to provide that the remaining amount of $5.5 million plus interest will mature and be payable on May 15, 2013.

On January 8, 2013, we closed a private placement transaction with an investor in which we issued 2,000,000 shares of common stock at a price per share of $5.00 for $10.0 million in net proceeds.

On February 22, 2013, we closed a private placement transaction with an investor in which we issued 2,000,000 shares of common stock at a price per share of $5.00 for $10.0 million in net proceeds.

On March 15, 2013, we acquired Beatport in a merger transaction for $58.6 million, consisting of $33.6 million in cash and $25.0 million in our stock valued at $5.00 per share.

On March 20, 2013, we entered into an option agreement with ID&T (the "ID&T Option") whereby we obtained the right to purchase a 75% equity interest in the ID&T Business. We paid $2.5 million in cash and issued 2,000,000 shares of our common stock to acquire the ID&T Option. The exercise price of the ID&T Option is $50.0 million in cash (including $10.0 million due 90 days after delivery by ID&T of audited financial statements for 2012). Additionally, to exercise the ID&T Option we must relinquish our right to be repaid by ID&T the $7.5 million we advanced to ID&T on March 15, 2013, which was to be repaid to us from ID&T's future distributions from the ID&T JV.

On April 1, 2013, we closed a private placement transaction with investors in which we issued 1,000,000 shares of common stock at a price per share of $10.00 for an aggregate purchase price of $10.0 million.

At December 31, 2012, we issued a secured promissory note in the principal amount of $8.5 million as part of the acquisition of certain assets and liabilities of MMG. On March 15, 2013 a payment of $3.0 million was made to Nightlife Holding, LLC and the promissory note was amended and restated

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to provide that the remaining amount of $5.5 million plus interest will be payable on May 15, 2013. On May 15, 2013 the note was fully paid off.

On May 22, 2103, we paid Totem a deposit of AUD$5.0 million (or $4.8 million as of May 22, 2013) as acquisition consideration.

On June 24, 2013, we paid a deposit of $2.5 million to Made as acquisition consideration.

Based on our current business plan, we believe that the combination of our current sources of liquidity, the proceeds from private sales of our common stock, the proceeds from this offering and the proceeds from the First Lien Term Loan Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months. We are in advanced discussions with a number of commercial lenders regarding a new $65.0 million revolving credit facility that would replace our First Lien Term Loan Facility and potentially an incremental facility. The new revolving credit facility would be conditioned on the completion of this initial public offering and would be closed concurrently with the closing of this initial public offering.

We intend to continue to acquire additional companies in the live events and consumer Internet industries, and we are currently in the process of exploring a variety of financing options in conjunction with consummating further acquisitions. There can be no assurance that we will be able to successfully raise the capital required to complete future acquisitions.

If our current estimates of revenue, expenses or capital or liquidity requirements change or are inaccurate, or if cash generated from operations is insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities, or arrange debt financing. In addition, we may seek additional financing to give us financial flexibility to pursue attractive acquisition or investment opportunities that may arise in the future. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all.

First lien term loan facility

On March 15, 2013, certain of our subsidiaries entered into a $49.5 million term loan facility (the "First Lien Term Loan Facility") with Barclays Bank PLC as administrative agent and Barclays Bank PLC, UBS Securities LLC, and Jefferies Group LLC as lenders. The borrower under the First Lien Term Loan Facility is our indirect, wholly-owned subsidiary SFX Intermediate Holdco II LLC (the "Borrower). The First Lien Term Loan Facility is guaranteed by SFX Intermediate Holdco I LLC, the immediate parent company of the Borrower ("Holdings"), the Borrower, LIC, Pita I, LLC, Beatport, Beatport Japan, LLC, SFX-Nightlife Operating LLC, SFX-IDT N.A. Holding LLC, the ID&T JV, ID&T/SFX Q-Dance LLC, ID&T/SFX Sensation LLC, ID&T/SFX Mysteryland LLC, ID&T/SFX TomorrowWorld LLC and all of Holdings' future subsidiaries (the "Guarantors"), and by Mr. Sillerman as further described below. The First Lien Term Loan Facility is secured by a first-priority security interest in all the existing and future assets of the Borrower and the Guarantors.

Mr. Sillerman entered into a guarantee agreement (the "Sillerman Guarantee") with Barclays Bank PLC, as collateral agent for the benefit of the other lender parties, in which he personally guaranteed all our obligations under the First Lien Term Loan Facility.

On June 5, 2013 the First Lien Term Loan Facility was amended (the "Amendment") to increase the facility amount by $15 million, to a total of $64.5 million. The Guarantors reaffirmed their guarantees of the First Lien Term Loan Facility in the Amendment, and Mr. Sillerman entered into an amendment to the Sillerman Guarantee to reaffirm his guarantee thereunder in connection with the Amendment.

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Borrowings under the First Lien Term Loan Facility bear interest, at the Borrower's option, at a rate per annum equal to either (a) (i) a rate per annum equal to the highest of (1) the rate of interest per annum publicly announced from time to time by the Administrative Agent under the First Lien Term Loan Facility as its prime rate in effect on such day at its principal office in New York City, (2) (x) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the business day next succeeding such day plus (y) 0.50%, (3) (x) a rate per annum equal to (I) the offered rate which appears on the page of the Reuters Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being LIBOR01 page) for deposits in U.S. dollars being delivered in the London interbank market for a one-month term, determined by the Administrative Agent under the First Lien Term Loan Facility as of approximately 11:00 a.m. (London, England time) two Business Days prior to the applicable borrowing or conversion date divided by (II) one minus the applicable reserve percentage (with a rate floor of 1.25% per annum) plus (y) 1.00% and (4) 2.25% per annum, plus (a) 6.50% per annum or (b) (i) a rate per annum equal to (1) for each one, two, three or six month (or if agreed to by all the lenders under the First Lien Term Loan Facility, nine or twelve months) interest period as selected by the Borrower, the offered rate which appears on the page of the Reuters Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being LIBOR01 page) for deposits (for delivery on the first day of such interest period) with a term equivalent to such interest period in U.S. dollars, determined by the Administrative Agent under the First Lien Term Loan Facility as of approximately 11:00 a.m. (London, England time), two Business Days prior to the commencement of such interest period divided by (2) one minus the applicable reserve percentage (with a rate floor of 1.25% per annum) plus (ii) 7.50% per annum. Upon the occurrence and during the continuance of any Event of Default under the First Lien Term Loan Facility, all outstanding borrowings thereunder will automatically bear interest at a rate per annum equal to the applicable interest rate plus 2.00% per annum.

The First Lien Term Loan Facility matures on September 15, 2014, provided that the maturity date will be extended to March 13, 2015 if we contribute to the Borrower at least $50.0 million of proceeds from our initial public offering (so long as we raise net proceeds of at least $100.0 million) and the Borrower uses such proceeds to make a prepayment equal to at least 50.0% of the borrowings then outstanding under the First Lien Term Loan Facility.

The Borrower may prepay the First Lien Term Loan Facility at any time without penalty, subject to breakage costs. The Borrower is also required to make prepayments (subject to certain basket amounts and exceptions) (collectively, the "Mandatory Prepayments") equal to:

75.0% of the annual excess cash flow of Holdings and its subsidiaries for the year-ended December 31, 2013;

100% of the net proceeds from certain asset sales, casualty events, and debt issuances, by Holdings and its subsidiaries; and

30.0% of the outstanding borrowings within 60 days of the date Mr. Sillerman either announces he will not serve as our chairman, president, chief executive officer, or equivalent officer, ceases serving as our chairman, president, chief executive officer, or equivalent officer, or is incapable of serving as our chairman, president, chief executive officer, or equivalent officer.

The First Lien Term Loan Facility includes customary affirmative covenants, subject to certain materiality thresholds and exceptions, including covenants to deliver certain information and notices; preservation of existence; compliance with laws; payment of obligations; maintenance of properties; maintenance of insurance; keeping of books and records; limitations on use of proceeds under the First

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Lien Term Loan Facility; and requirements to join future subsidiaries of Holdings as guarantors and secured parties. The First Lien Term Loan Facility includes customary restrictive covenants, subject to certain materiality thresholds and exceptions, including covenants limiting the Borrower and the loan parties' ability to

incur certain types of indebtedness and liens;

merge with, make an investment in or acquire property or assets of another company;

make capital expenditures;

pay dividends;

repurchase shares of our outstanding stock;

a negative pledge;

modifying certain documents;

make loans;

dispose of assets;

prepay the principal on other indebtedness;

liquidate, wind up or dissolve; or

enter into certain transactions with affiliates.

The First Lien Term Loan Facility does not include any financial covenants.

The First Lien Term Loan Facility includes customary events of default, subject to certain materiality thresholds and cure periods, including: the Sillerman Guarantee ceasing to be in full force and effect or Mr. Sillerman breaching any material term of the Sillerman Guarantee; or a change in control occurring. A change in control is defined in the First Lien Term Loan Facility to include the occurrence of any of the following: (i) Holdings ceases to be wholly-owned directly or indirectly, by us or Borrower ceases be directly wholly-owned by Holdings; (ii) at any time prior to our initial public offering (so long as we raise net proceeds of at least $100 million) and for any reason whatsoever, Mr. Sillerman and certain affiliates and senior management cease to own, directly or indirectly, at least 40% of our outstanding voting equity or any "person" or "group" own a greater percentage of our voting equity than beneficially owned by Mr. Sillerman and certain affiliates and senior management; (iii) at any time after our initial public offering (so long as we raise net proceeds of at least $100 million) and for any reason whatsoever, Mr. Sillerman and certain affiliates cease to own, directly or indirectly, at least 30% of our outstanding voting equity or any "person" or "group" other than Mr. Sillerman and certain affiliates and senior management beneficially own a greater percentage of our voting equity than beneficially owned by Mr. Sillerman and certain affiliates and senior management; or (iv) the majority of the seats (other than vacant seats) on our board of directors cease to be occupied by persons who either were members of our board of directors on March 15, 2013 or were nominated for election by a majority of our board of directors who were directors at the time of the closing of the First Lien Term Loan Facility or whose election or nomination for election was previously approved by a majority of such directors.

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Cash flows

Year ended December 31, 2012

Cash flows from operating activities

Cash used in operating activities totaled $6.6 million for the year ended December 31, 2012 and were principally attributable to the operations of DDP and LIC, whose results have been included since their respective dates of acquisition in 2012 and corporate overhead. The principal driver of this was our net loss of $16.2 million, partially offset by non-cash expense of $2.2 million plus changes in our working capital of $6.8 million.

No cash was used by operating activities for the period from July 7, 2011 (Inception) to December 31, 2011. While we incurred legal expenses of $0.1 million in conjunction with our formation during this period, the expenses were accrued at December 31, 2011 and not settled in cash until the following year. We incurred no expenses in 2010, as we did not begin operations until July 2011.

Cash flows from investing activities

Cash used by investing activities totaled $29.2 million for the year ended December 30, 2012. Cash totaling $16.1 million was used to fund the purchase of our three acquisitions in 2012, DDP, MMG and LIC, and $0.6 million was used to fund the purchase of equipment used in the production of events. $12.5 million was used to fund our investment in the ID&T JV.

There was no cash used in investing activities for the period from July 7, 2011 (Inception) to December 31, 2011.

Cash flows from financing activities

Cash provided by financing activities for the year ended December 31, 2012 totaled $39.5 million, and was comprised of the net proceeds from the issuance of our common stock of $32.5 million and proceeds from notes payable of $7.0 million.

There was no cash used for financing activities for the period from July 7, 2011 (Inception) to December 31, 2011.

For the three months ended March 31, 2013

Cash flows from operating activities

Cash used in operating activities totaled $6.7 million for the three months ended March 31, 2013 and was principally attributable to our net loss of $20.0 million, partially offset by non-cash depreciation and amortization expense of $2.9 million, $5.0 million in stock compensation expense, and $4.1 million of interest and deferred income tax provisions less a decrease in working capital of $1.3 million.

No cash was used by operating activities for the three months ended March 31, 2012. While we incurred legal, formation, and general operating expenses of $1.4 million in conjunction with our formation during this period, the expenses were accrued at March 31, 2012 and not settled in cash until a later date.

Cash flows from investing activities

Cash used by investing activities totaled $35.5 million for the three months ended March 31, 2013. Cash totaling $21.9 million was used to fund the purchase of Beatport, net of cash acquired,

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$2.5 million to acquire the ID&T Option, $3.0 million payment for the Nightlife Holdings, LLC note, a $7.5 million advance to ID&T and $0.6 million to purchase equipment and software.

There was no cash used in investing activities for the three months ended March 31, 2012.

Cash flows from financing activities

Cash provided by financing activities for the three months ended March 3, 2013 totaled $60.4 million, and was comprised of the net proceeds from the issuance of our common stock of $20.0 million, net proceeds from the First Lien Term Loan Facility of $47.0, and the payment of a related party note of $6.6 million.

There was no cash used for financing activities for the three months ended March 31, 2012.

Capital expenditures

Our capital expenditures for the year ended December 31, 2012 was $0.6 million for the companies that we owned as of December 31, 2012.

Contractual and commercial commitments

Our contractual obligations as of March 31, 2013 are as follows.

 
  Payments due by period  
($ in 000s)
  Total
  Less than
1 year

  1-3 years
  3-5 years
  More than
5 years

 
   

Senior Secured Credit Facility(a)

  $ 56,399   $ 4,733   $ 51,666   $   $  

Notes payable(b)

    5,513     5,513              

Operating leases(c)

    2,929     1,113     1,815          

Other long-term obligations(d)

    2,500         2,500          
                       

Total

  $ 66,400   $ 11,360   $ 55,981   $   $  
                       

(a)
On March 15, 2013, our subsidiary, SFX Intermediate Holdco II LLC, entered into a credit agreement with Barclays Bank PLC and other lenders, which provided for a $49.5 million senior secured first lien term loan facility. The First Lien Term Loan Facility matures on September 15, 2014, provided that the maturity date will be extended to March 13, 2015 if we contribute to the Borrower at least $50.0 million of proceeds from our initial public offering (so long as we raise net proceeds of at least $100.0 million) and the Borrower uses such proceeds to make a prepayment equal to at least 50.0% of the borrowings then outstanding under the First Lien Term Loan Facility.

(b)
This is the remaining portion of the note we executed with the former equity holders of Nightlife Holdings LLC as part of the purchase agreement at December 31, 2012. The note accrues interest at a 0.22% rate and was paid off on May 15, 2013.

(c)
The operating leases include the following: our corporate headquarters in New York the ID&T JV's corporate office in New York; Beatport's offices in Colorado, Los Angeles, Luxembourg and Germany; LIC's corporate office and operating lease warehouse facility in Florida; MMG's corporate office in Florida; and Disco's corporate office in North Carolina.

(d)
Other long-term obligations includes contingent consideration for the former owners of Nightlife Holdings LLC. The amount disclosed in the table is based on projected 2014 EBITDA (as defined in our agreement with the former owners of MMG).

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Our contractual obligations on a pro forma basis as of March 31, 2013, are as follows.

 
  Payments due by period  
($ in 000s)
  Total
  Less than
1 year

  1-3 years
  3-5 years
  More than
5 years

 
   

Senior Secured Credit Facility(a)

  $ 73,073   $ 5,751   $ 67,322   $   $  

Notes payable(b)

                     

Operating leases

    2,928     1,113     1,815          

Purchasing obligations(c)

    23,378           8,000           15,378  

Other long-term obligations

    2,500         2,500          
                       

Total

  $ 101,879   $ 6,864   $ 79,637   $   $ 15,378  
                       

(a)
On June 5, 2013, we drew down an additional $15.0 million on this loan facility.

(b)
The Note that was outstanding with the former shareholders of Nightlife Holdings at March 31, 2013 was paid off in full on May 15, 2013.

(c)
The purchasing obligations include the following; upon closing the i-Motion transaction, we will be required to purchase the remaining 40% that is not being sold for an estimated fair value of $8.0 million by December 2014; and upon closing the planned Made acquisition, we will be required to purchase the remaining 30% that is not being sold for an estimated $15.4 million in 2018.

INTERNAL CONTROL OVER FINANCIAL REPORTING

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2012, we identified the following material weaknesses in our internal control over financial reporting.

A lack of contemporaneous documentation in connection with awards of stock based compensation. This resulted in treating certain awards informally communicated to recipients in 2012 as having been granted in 2013 for accounting purposes.

Improperly characterizing certain acquisition transactions as having closed prior to us obtaining the control necessary for such a characterization. These acquisition transactions subsequently failed to close.

There were an unusually large amount of closing adjustments in connection with the audit for the year ended December 31, 2012, primarily in respect of accruals, cut-offs and purchase accounting. In addition, certain significant transactions were not accounted for properly. Further, we restated our previously issued consolidated financial statements as of and for the year ended December 31, 2012 to correct classification for certain shares of common stock and non-controlling interest. We determined that certain shares of common stock were issued in 2012 with redemption features, which should have been classified as temporary equity in accordance with the provisions of ASC 480-10-S99 for public companies. Additionally, in connection with the acquisition of MMG, we entered into a contract which allows us to call the remaining interest we do not own, as well as providing that the minority interest holder may put their interest to us at a multiple of six times 20% of SFX Nightlife's 2014 EBITDA. Similarly, we determined that the non-controlling interest should have been classified as redeemable non-controlling interest and included as part of temporary equity, as required for public companies. We believe that these issues are related, in part, to a lack of

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    sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, as well as the lack of robust accounting systems.

In addition, the auditors for our Predecessor, DDP and MMG have identified a material weakness in the internal controls of each of these businesses that relates to the proper application of accrual based accounting under GAAP.

We believe that measures we have already implemented, and additional measures we expect to implement in the future, will remediate these material weaknesses in our internal control over financial reporting and in the internal controls of our acquired businesses. To date, we have taken, or are in the process of taking, the following actions.

Adding new accounting and financial personnel, both as senior managers and as junior staff. To date, we have hired several senior members of our accounting and finance team, including hiring a new Chief Financial Officer with over 20 years of experience in finance and capital markets, a Chief Accounting Officer with over 30 years of financial management and audit experience, a Director of SEC reporting with over ten years of experience in public accounting and a corporate treasurer with 25 years of relevant experience. We intend to hire additional experienced personnel to work as senior members of our accounting team and have also hired or will hire several staff accountants to work both at the corporate level and at our acquired businesses.

Engaging the services of an accounting controls expert with over 40 years of accounting experience, including 22 years as controller of a music publishing company. This individual is acting as a consultant to assist us in analyzing and implementing controls and processes at our acquired companies and to review our operations and make recommendations regarding systems and procedures.

Engaging an accounting firm to provide an outsourced internal audit function, with a view to providing internal control procedure recommendations and support for documenting our compliance with Sarbanes-Oxley.

Hiring a general counsel and an associate general counsel and appointing a full board of directors that includes a compensation committee and independent compensation expert and that has a formal policy regarding the issuance of stock based compensation.

Implementing improvements to our closing procedures and consolidation processes and improvements to our accounting software as it relates to accounts payable. We have also purchased an enterprise-wide accounting system that we plan to implement during the course of 2013, including at acquired companies.

We plan to continue to evaluate our internal controls and make enhancements as appropriate. If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. See "Risk Factors—We have identified material weaknesses in our internal controls over financial reporting that, if not properly remediated, could result in material misstatements in our financial statements in future periods."

Notwithstanding these material weaknesses, we believe that our restated consolidated financial statements included elsewhere in this prospectus fairly represent our consolidated financial position as of, and our consolidated results of operations for the year ended December 31, 2012.

Off-balance sheet arrangements

We had no off-balance sheet arrangements or guarantees of third-party obligations at March 31, 2013, December 31, 2012 and December 31, 2011.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates, and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates and such differences could be material.

Our significant accounting policies are discussed in Note 1 of our consolidated financial statements. We believe that the following are the most critical to understanding and evaluating our reported financial results. We have reviewed these critical accounting estimates and related disclosures with our Audit Committee.

Stock-Based Compensation

We measure and recognize expense for stock-based compensation based on the grant date fair value of the award on a straight-line basis over the requisite service period. Because our stock is not publicly traded, we must estimate the fair value of our common stock for purposes of determining the fair value of our option awards, as discussed in "—Valuations of Common Stock" below. Determining the fair value of stock-based awards at the grant date requires judgment. We use the Black-Scholes option pricing model to determine the fair value of our stock option awards. We used a third-party valuation firm to perform the option pricing under the Black-Scholes model. The determination of the grant date fair value of our stock option awards using an option pricing model is affected by the estimated fair value per share of the common stock underlying those options as well as assumptions regarding a number of other complex and subjective variables. These variables include the risk-free interest rates, expected dividends, our expected stock price volatility over the expected term of the options, and stock option exercise and cancellation behaviors, which are estimated as follows:

Risk-Free Interest Rate. The risk-free interest rate assumption used is based on observed market interest rates appropriate for the term of employee options.

Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

Expected Volatility. Because we do not have a trading history for our common stock, we have estimated the expected stock price volatility for our common stock by taking the average historic price volatility for industry peers based on price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of public companies in the live event industry. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

Expected Term. We estimated the expected term for a "plain vanilla" option using the simplified method allowed under current guidance, which uses the midpoint between the graded vesting period and the contractual termination date.

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