Interactive Brand Development cancels Penthouse unit acquisition financed via convertibles

By Ted A. Knutson

Washington, Dec. 14 - Interactive Brand Development, Inc. has formally canceled plans for a convertibles-financed acquisition of Internet Billing Co. LLC from Penthouse magazine publisher PHSL Worldwide, Inc.

Interactive Brand Development announced the purchase in July. But the American Stock Exchange threatened the company with delisting Sept. 20, claiming Internet Billing might inadvertently do business with potentially illegal pornographic Web site operators.

Three days later, Interactive Brand Development put the closing of the sale on hold, hoping that an AMEX blessing for the purchase would eventually come.

Which it did not.

After the AMEX delisting notice, Interactive Brand Development made $16.475 million in private debt and equity placements, mostly to Penthouse investors to pay for the Internet Billing purchase.

As a break-up fee, Interactive Brand Development will pay PHSL a $1 million promissory note and approximately $9.04 million in common stock

In addition Interactive Brand Development will ask permission from holders the of its 10% convertible notes due September 15, 2009 and investors in its 35,000 share, $3.5 million original price 6% Series E convertible preferred stock held by Penthouse investor Monarch Pointe Fund LP; 34,500 share, $3.45 million original price Series F convertible preferred stock held by Penthouse investor Castlerigg Master Investments Limited, and 45,000 Series G convertible preferred stock held by Penthouse investor GMI Investment Partners to make the Series G securities convertible into common stock.

About 29,900 shares Series G stock placed in escrow was originally to have been turned into 39,916,666 shares of common stock by Dec. 31

All of the convertibles were issued to pay for the ill-fated acquisition.

Deerfield Beach, Fla.-based Interactive Brand Development made the announcement in an 8-K filing with the Securities and Exchange Commission.

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