UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
Commission File Number 000-25779
THESTREET, INC.
(Exact name of Registrant as specified in its charter)
Delaware | 06-1515824 |
(State or other jurisdiction of | (I.R.S. Employer Identification Number) |
incorporation or organization) |
14 Wall Street
New York, New York 10005
(Address of principal executive offices, including zip code)
(212) 321-5000
(Registrant’s telephone number, including area code)
Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant as required to submit and post such files). Yes x No 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 Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
(Number of Shares Outstanding | |
(Title of Class) | as of May 8, 2013) |
Common Stock, par value $0.01 per share | 33,882,952 |
TheStreet, Inc.
Form 10-Q
As of and for the Three Months Ended March 31, 2013
ii |
Part I – FINANCIAL INFORMATION
Item 1. | Interim Condensed Consolidated Financial Statements. |
THESTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2013 | December 31, 2012 | |||||||
(unaudited) | (audited) | |||||||
assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents (Note 3) | $ | 29,817,517 | $ | 23,845,360 | ||||
Marketable securities (Note 3) | 17,045,356 | 18,096,091 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $195,292 as of March 31, 2013 and $165,291 as of December 31, 2012 | 4,990,607 | 5,750,753 | ||||||
Other receivables, net | 886,538 | 1,134,142 | ||||||
Prepaid expenses and other current assets | 1,270,987 | 1,450,742 | ||||||
Total current assets | 54,011,005 | 50,277,088 | ||||||
Property and equipment, net of accumulated depreciation and amortization of $14,798,360 as of March 31, 2013 and $14,633,037 as of December 31, 2012 | 5,306,110 | 5,672,000 | ||||||
Marketable securities (Note 3) | 12,149,600 | 17,298,227 | ||||||
Other assets | 27,006 | 69,957 | ||||||
Goodwill | 25,726,239 | 25,726,239 | ||||||
Other intangibles, net of accumulated amortization of $7,077,177 as of March 31, 2013 and $6,699,283 as of December 31, 2012 | 10,810,113 | 11,190,557 | ||||||
Restricted cash (Note 3) | 1,301,000 | 1,301,000 | ||||||
Total assets | $ | 109,331,073 | $ | 111,535,068 | ||||
liabilities and stockholders’ equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 2,440,528 | $ | 3,813,955 | ||||
Accrued expenses | 4,812,138 | 5,921,152 | ||||||
Deferred revenue | 22,382,355 | 21,080,759 | ||||||
Other current liabilities | 623,782 | 632,618 | ||||||
Total current liabilities | 30,258,803 | 31,448,484 | ||||||
Deferred tax liability | 288,000 | 288,000 | ||||||
Other liabilities | 4,301,819 | 4,340,749 | ||||||
Total liabilities | 34,848,622 | 36,077,233 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock; $0.01 par value; 10,000,000 shares authorized; 5,500 issued and outstanding as of March 31, 2013 and December 31, 2012; the aggregate liquidation preference totals $55,000,000 as of March 31, 2013 and December 31, 2012 | 55 | 55 | ||||||
Common stock; $0.01 par value; 100,000,000 shares authorized; 40,369,452 shares issued and 33,474,123 shares outstanding as of March 31, 2013, and 39,855,468 shares issued and 33,027,752 shares outstanding as of December 31, 2012 | 403,695 | 398,555 | ||||||
Additional paid-in capital | 271,751,728 | 270,943,151 | ||||||
Accumulated other comprehensive income | (50,344 | ) | (128,994 | ) | ||||
Treasury stock at cost; 6,895,329 shares as of March 31, 2013 and 6,827,716 shares as of December 31, 2012 | (12,099,328 | ) | (11,974,261 | ) | ||||
Accumulated deficit | (185,523,355 | ) | (183,780,671 | ) | ||||
Total stockholders’ equity | 74,482,451 | 75,457,835 | ||||||
Total liabilities and stockholders’ equity | $ | 109,331,073 | $ | 111,535,068 |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements
1 |
THESTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
(unaudited) | ||||||||
Net revenue: | ||||||||
Subscription services | $ | 10,396,464 | $ | 9,189,981 | ||||
Media | 2,183,737 | 3,625,846 | ||||||
Total net revenue | 12,580,201 | 12,815,827 | ||||||
Operating expense: | ||||||||
Cost of services | 6,242,746 | 6,435,162 | ||||||
Sales and marketing | 3,416,147 | 4,090,249 | ||||||
General and administrative | 3,463,775 | 3,822,521 | ||||||
Depreciation and amortization | 943,056 | 1,287,262 | ||||||
Restructuring and other charges | 385,610 | 1,713,498 | ||||||
Gain on disposition of assets | (56,586 | ) | — | |||||
Total operating expense | 14,394,748 | 17,348,692 | ||||||
Operating loss | (1,814,547 | ) | (4,532,865 | ) | ||||
Net interest income | 71,863 | 96,087 | ||||||
Loss before income taxes | (1,742,684 | ) | (4,436,778 | ) | ||||
Provision for income taxes | — | — | ||||||
Net loss | (1,742,684 | ) | (4,436,778 | ) | ||||
Preferred stock cash dividends | — | 96,424 | ||||||
Net loss attributable to common stockholders | $ | (1,742,684 | ) | $ | (4,533,202 | ) | ||
Basic and diluted net loss per share | ||||||||
Net loss | $ | (0.05 | ) | $ | (0.14 | ) | ||
Preferred stock cash dividends | — | (0.00 | ) | |||||
Net loss attributable to common stockholders | $ | (0.05 | ) | $ | (0.14 | ) | ||
Weighted average basic and diluted shares outstanding | 33,278,477 | 32,342,541 |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements
2 |
THESTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three
Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Net loss | $ | (1,742,684 | ) | $ | (4,436,778 | ) | ||
Unrealized gain on marketable securities | 78,650 | 53,914 | ||||||
Comprehensive loss | $ | (1,664,034 | ) | $ | (4,382,864 | ) |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements
3 |
THESTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
(unaudited) | ||||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (1,742,684 | ) | $ | (4,436,778 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation expense | 420,522 | 532,908 | ||||||
Provision for doubtful accounts | (25,761 | ) | 65,769 | |||||
Depreciation and amortization | 943,056 | 1,287,262 | ||||||
Restructuring and other charges | 393,195 | 847,980 | ||||||
Deferred rent | (80,633 | ) | (79,989 | ) | ||||
Noncash barter activity | — | 48,183 | ||||||
Gain on disposition of assets | (56,586 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 720,575 | 521,152 | ||||||
Other receivables, net | 367,768 | 84,845 | ||||||
Prepaid expenses and other current assets | 179,754 | (544,764 | ) | |||||
Other assets | (11,881 | ) | 28,186 | |||||
Accounts payable | (1,373,427 | ) | 39,265 | |||||
Accrued expenses | (1,169,674 | ) | (1,386,689 | ) | ||||
Deferred revenue | 1,419,780 | 507,501 | ||||||
Other current liabilities | (24,657 | ) | 75,207 | |||||
Net cash used in operating activities | (40,653 | ) | (2,409,962 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Purchase of marketable securities | — | (35,700,010 | ) | |||||
Sale and maturity of marketable securities | 6,278,012 | 14,485,094 | ||||||
Capital expenditures | (196,721 | ) | (486,657 | ) | ||||
Proceeds from the disposition of assets | 56,586 | — | ||||||
Net cash provided by (used in) investing activities | 6,137,877 | (21,701,573 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Cash dividends paid on common stock | — | (802,601 | ) | |||||
Cash dividends paid on preferred stock | — | (96,424 | ) | |||||
Proceeds from the sale of common stock | — | 135,000 | ||||||
Purchase of treasury stock | (125,067 | ) | (733,501 | ) | ||||
Net cash used in financing activities | (125,067 | ) | (1,497,526 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 5,972,157 | (25,609,061 | ) | |||||
Cash and cash equivalents, beginning of period | 23,845,360 | 44,865,191 | ||||||
Cash and cash equivalents, end of period | $ | 29,817,517 | $ | 19,256,130 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash payments made for interest | $ | — | $ | — | ||||
Cash payments made for income taxes | $ | — | $ | — |
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements
4 |
TheStreet, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. | DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION |
Business
TheStreet, Inc., together with its wholly owned subsidiaries (“TheStreet”, “we”, “us” or the “Company”), is a leading digital media company focused on the financial and mergers and acquisitions environment. The Company’s collection of digital services provides users, subscribers and advertisers with a variety of content and tools through a range of online, social media, tablet and mobile channels. Our mission is to provide investors and advisors with actionable ideas from the world of investing, finance and business, and dealmakers with sophisticated analysis of the mergers and acquisitions environment in order to break down information barriers, level the playing field and help all individuals and organizations grow their wealth. With a robust suite of digital services, TheStreet offers the tools and insights needed to make informed decisions about earning, investing, saving and spending money.
Since its inception in 1996, TheStreet believes it has distinguished itself from other financial media companies with its journalistic excellence, unbiased approach and interactive multimedia coverage of the financial markets, economy, industry trends, investment and financial planning.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and for quarterly reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements require the use of management estimates and include the accounts of the Company as required by GAAP. Operating results for the three month period ended March 31, 2013 is not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.
For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission (“SEC”) on February 22, 2013 (“2012 Form 10-K”).
For the three months ended March 31, 2012, the Company accrued quarterly expenses related to its full year cash incentive compensation on a straight-line basis based on the Company’s estimate of expected full year cash incentive compensation. Beginning with the three months ended June 30, 2012 and continuing through March 2013, the Company accrued cash incentive compensation expense based upon achievement of quarterly performance objectives.
The Company has evaluated subsequent events for recognition or disclosure.
5 |
Recent Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board (the “FASB”) issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”). The guidance gives companies the option to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If the qualitative assessment supports that it is more likely than not that the fair value of the asset exceeds its carrying amount, the company would not be required to perform a quantitative impairment test. If the qualitative assessment does not support the fair value of the assets, then a quantitative assessment is performed. ASU 2012-02 applies to public entities for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We do not expect the adoption of ASU 2012-02 to have a material impact on the Company’s consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”), to require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. An entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. This standard is effective for interim and annual periods beginning after December 15, 2012 and is to be applied on a prospective basis. We adopted ASU 2013-02 and will disclose significant amounts reclassified out of accumulated other comprehensive income as such transactions arise. ASU 2013-02 affects financial statement presentation and has no impact on our results of unaudited consolidated financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentation.
2. | ACQUISITION |
On September 11, 2012, the Company acquired 100% of the equity of The Deal, LLC (“The Deal”). The Deal is a digital platform that delivers sophisticated coverage of the mergers and acquisitions environment, primarily through The Deal Pipeline, a leading provider of transactional information services.
The results of operations of The Deal were included in the condensed consolidated financial statements for the three months ended March 31, 2013. Unaudited pro forma consolidated financial information is presented below as if the acquisition of The Deal had occurred on January 1, 2012. The results have been adjusted to account for the amortization of acquired intangible assets and to eliminate interest expense related to short term notes payable to related parties of The Deal, which liabilities were not assumed by the Company. The pro forma information presented below does not purport to present what actual results would have been if the acquisitions had occurred at the beginning of such period, nor does the information project results for any future period. The unaudited pro forma consolidated financial information should be read in conjunction with the historical financial information of the Company included in this report, as well as the historical financial information included in other reports and documents filed with the Securities and Exchange Commission. The unaudited pro forma consolidated financial information for the three months ended March 31, 2012 is as follows:
Total revenue | $ | 15,420,945 | ||
Net loss | $ | 5,918,971 | ||
Basic and diluted net loss per share | $ | 0.18 |
6 |
3. | CASH AND CASH EQUIVALENTS, MARKETABLE SECURITIES AND RESTRICTED CASH |
The Company’s cash and cash equivalents primarily consist of money market funds and checking accounts totaling approximately $29.8 million. Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, corporate floating rate notes, and two municipal auction rate securities (“ARS”) issued by the District of Columbia with a par value of approximately $1.9 million. As of March 31, 2013, the total fair value and cost basis of these marketable securities was approximately $29.2 million. With the exception of the ARS, the maximum maturity for any investment is three years. The ARS pay interest in accordance with their terms at each respective auction date, typically every 35 days, and mature in the year 2038. The Company accounts for its marketable securities in accordance with the provisions of ASC 320-10. The Company classifies these securities as available for sale and the securities are reported at fair value. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income and excluded from net loss. Additionally, the Company has a total of approximately $1.3 million of cash that serves as collateral for outstanding letters of credit, and which cash is therefore restricted. The letters of credit serve as security deposits for the Company’s office space in New York City.
March 31, 2013 | December 31, 2012 | |||||||
Cash and cash equivalents | $ | 29,817,517 | $ | 23,845,360 | ||||
Current and noncurrent marketable securities | 29,194,956 | 35,394,318 | ||||||
Restricted cash | 1,301,000 | 1,301,000 | ||||||
Total cash and cash equivalents, current and noncurrent marketable securities and restricted cash | $ | 60,313,473 | $ | 60,540,678 |
4. | FAIR VALUE MEASUREMENTS |
The Company measures the fair value of its financial instruments in accordance with ASC 820-10, which refines the definition of fair value, provides a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The statement establishes consistency and comparability by providing a fair value hierarchy that prioritizes the inputs to valuation techniques into three broad levels, which are described below:
• | Level 1: Inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs). | |
• | Level 2: Inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or vary substantially). | |
• | Level 3: Inputs are unobservable inputs that reflect the entity’s own assumptions in pricing the asset or liability (used when little or no market data is available). |
Financial assets and liabilities included in our financial statements and measured at fair value as of March 31, 2013 are classified based on the valuation technique level in the table below:
Description: | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Cash and cash equivalents (1) | $ | 29,817,517 | $ | 29,817,517 | $ | — | $ | — | ||||||||
Marketable securities (2) | 29,194,956 | 27,554,956 | — | 1,640,000 | ||||||||||||
Total at fair value | $ | 59,012,473 | $ | 57,372,473 | $ | — | $ | 1,640,000 |
7 |
(1) | Cash and cash equivalents, totaling approximately $29.8 million, consists primarily of money market funds and checking accounts for which we determine fair value through quoted market prices. |
(2) | Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds and corporate floating rate notes for which we determine fair value through quoted market prices. Marketable securities also consist of two municipal ARS issued by the District of Columbia having a fair value totaling approximately $1.6 million as of March 31, 2013. Historically, the fair value of ARS investments approximated par value due to the frequent resets through the auction process. Due to events in credit markets, the auction events, which historically have provided liquidity for these securities, have been unsuccessful. The result of a failed auction is that these ARS holdings will continue to pay interest in accordance with their terms at each respective auction date; however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems the securities, the securities mature or until such time as other markets for these ARS holdings develop. For each of our ARS, we evaluate the risks related to the structure, collateral and liquidity of the investment, and forecast the probability of issuer default, auction failure and a successful auction at par, or a redemption at par, for each future auction period. Temporary impairment charges are recorded in accumulated other comprehensive (loss) income, whereas other-than-temporary impairment charges are recorded in our consolidated statement of operations. As of March 31, 2013, the Company determined there was a decline in the fair value of its ARS investments of approximately $210 thousand from its cost basis, which was deemed temporary and was included within accumulated other comprehensive loss. The Company used a discounted cash flow model to determine the estimated fair value of its investment in ARS. The assumptions used in preparing the discounted cash flow model include estimates for interest rate, timing and amount of cash flows and expected holding period of ARS. |
The following table provides a reconciliation of the beginning and ending balance for the Company’s marketable securities measured at fair value using significant unobservable inputs (Level 3):
Marketable Securities | ||||
Balance at January 1, 2013 | $ | 1,540,000 | ||
Increase in fair value of investment | 100,000 | |||
Balance at March 31, 2013 | $ | 1,640,000 |
5. | STOCK-BASED COMPENSATION |
For a detailed description of past equity-based compensation activity, please refer to the Company’s 2012 Form 10-K. There have been no significant changes in the Company’s equity-based compensation accounting policies and assumptions from those that were disclosed in the 2012 Form 10-K.
The Company estimates the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model. This determination is affected by the Company’s stock price as well as assumptions regarding expected volatility, risk-free interest rate, and expected dividends. The weighted-average grant date fair value per share of stock option awards granted during the three months ended March 31, 2013 and 2012 was $0.58 and $0.48, respectively, using the Black-Scholes model with the weighted-average assumptions presented below. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options.
8 |
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Expected option lives | 3.5 years | 3.5 years | ||||||
Expected volatility | 42.55% | 52.01% | ||||||
Risk-free interest rate | 0.53% | 0.59% | ||||||
Expected dividend yield | 0.00% | 5.51% |
As of March 31, 2013, there remained 253,123 shares available for future awards under the Company’s 2007 Performance Incentive Plan (the “2007 Plan”). In connection with awards under both the 2007 Plan and awards issued outside of the Plan, the Company recorded approximately $814 thousand and $533 thousand of non-cash stock-based compensation for the three month periods ended March 31, 2013 and 2012, respectively. As of March 31, 2013, there was approximately $2.4 million of unrecognized stock-based compensation expense remaining to be recognized over a weighted-average period of 2.3 years.
A summary of the activity of the 2007 Plan, and awards issued outside of the Plan pertaining to stock option grants is as follows:
Shares Underlying Awards | Weighted Average Exercise Price | Aggregate Intrinsic Value ($000) | Weighted Average Remaining Contractual Life (In Years) | |||||||||||||
Awards outstanding, December 31, 2012 | 3,251,849 | $ | 2.22 | |||||||||||||
Options granted | 409,500 | $ | 1.83 | |||||||||||||
Options cancelled | (67,050 | ) | $ | 3.02 | ||||||||||||
Options expired | (41,152 | ) | $ | 4.66 | ||||||||||||
Awards outstanding, March 31, 2013 | 3,553,147 | $ | 2.13 | $ | 576 | 4.98 | ||||||||||
Awards vested and expected to vest at March 31, 2013 | 3,163,760 | $ | 2.18 | $ | 501 | 4.91 | ||||||||||
Awards exercisable at March 31, 2013 | 875,182 | $ | 3.34 | $ | 55 | 3.60 |
A summary of the activity of the 2007 Plan pertaining to grants of restricted stock units is as follows:
9 |
Shares Underlying Awards | Weighted Average Exercise Price | Aggregate Intrinsic Value ($000) | Weighted Average Remaining Contractual Life (In Years) | |||||||||||||
Awards outstanding, December 31, 2012 | 913,027 | $ | — | |||||||||||||
Restricted stock units granted | 338,018 | $ | — | |||||||||||||
Restricted stock units settled by delivery of common stock upon vesting | (513,984 | ) | $ | — | ||||||||||||
Restricted stock units cancelled | (21,227 | ) | $ | — | ||||||||||||
Awards outstanding, March 31, 2013 | 715,834 | $ | — | $ | 1,367 | 1.47 | ||||||||||
Awards vested and expected to vest at March 31, 2013 | 644,209 | $ | — | $ | 1,230 | 2.39 | ||||||||||
Awards exercisable at March 31, 2013 | — | $ | — | $ | — | — |
A summary of the status of the Company’s unvested share-based payment awards as of March 31, 2013 and changes in the three-month period then ended, is as follows:
Unvested Awards | Number of Shares | Weighted Average Grant Date Fair Value | ||||||
Shares underlying awards unvested at December 31, 2012 | 3,834,606 | $ | 1.05 | |||||
Shares underlying options granted | 409,500 | $ | 0.58 | |||||
Shares underlying restricted stock units granted | 338,018 | $ | 1.69 | |||||
Shares underlying options vested | (586,064 | ) | $ | 0.55 | ||||
Shares underlying restricted stock units vested | (513,984 | ) | $ | 3.02 | ||||
Shares underlying options cancelled | (67,050 | ) | $ | 1.00 | ||||
Shares underlying restricted stock units cancelled | (21,227 | ) | $ | 3.25 | ||||
Shares underlying awards unvested at March 31, 2013 | 3,393,799 | $ | 0.84 |
For the three months ended March 31, 2013 and 2012, the total fair value of share-based awards vested was approximately $1.2 million and $1.9 million, respectively. For both the three months ended March 31, 2013 and 2012, the total intrinsic value of options exercised was $0 (no options were exercised in either period). For the three months ended March 31, 2013 and 2012, 409,500 and 1,953,500 stock options, respectively, and 338,018 and 199,998 restricted stock units, respectively, were granted to employees of the Company. Additionally, for both the three months ended March 31, 2013 and 2012, no stock options were exercised, and 513,984 and 883,256 shares, respectively, were issued under restricted stock unit grants yielding no cash proceeds to the Company.
10 |
6. | STOCKHOLDERS’ EQUITY |
Treasury Stock
In December 2000, the Company’s Board of Directors authorized the repurchase of up to $10 million worth of the Company’s Common Stock, from time to time, in private purchases or in the open market. In February 2004, the Company’s Board of Directors approved the resumption of the stock repurchase program (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. However, the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a single class, is necessary for the Company to repurchase its Common Stock (except for the purchase or redemption from employees, directors and consultants pursuant to agreements providing us with repurchase rights upon termination of their service with us), unless after such purchase we have unrestricted cash (net of all indebtedness for borrowed money, purchase money obligations, promissory notes or bonds) equal to at least two times the product obtained by multiplying the number of shares of Series B Preferred Stock outstanding at the time such dividend is paid by the liquidation preference. During the three-month periods ended March 31, 2013 and 2012, the Company did not purchase any shares of Common Stock under the Program. Since inception of the Program, the Company has purchased a total of 5,453,416 shares of Common Stock at an aggregate cost of approximately $7.3 million. In addition, pursuant to the terms of the Company’s 2007 Plan, and certain procedures adopted by the Compensation Committee of the Board of Directors, in connection with the exercise of stock options by certain of the Company’s employees, and the issuance of shares of Common Stock in settlement of vested restricted stock units, the Company may withhold shares in lieu of payment of the exercise price and/or the minimum amount of applicable withholding taxes then due. Through March 31, 2013, the Company had withheld an aggregate of 1,230,305 shares which have been recorded as treasury stock. In addition, the Company received an aggregate of 208,270 shares as partial settlement of the working capital and debt adjustment from the acquisition of Corsis Technology Group II LLC, 104,055 of which were received in December 2008 and 104,215 of which were received in September 2009, and 3,338 shares as partial settlement of the working capital adjustment from the acquisition of Kikucall, Inc., which were received in March 2011. These shares have been recorded as treasury stock.
Dividends
Beginning with the third quarter of 2012, the Company’s Board of Directors suspended the payment of a quarterly dividend, but will continue to consider a future dividend payment each quarter. There was no dividend paid during the first quarter of 2013. During the first quarter of 2012, the Company paid a quarterly cash dividend of $0.025 per share on its Common Stock and its Series B Preferred Stock on a converted common share basis. This dividend payment totaled approximately $899 thousand.
7. | LEGAL PROCEEDINGS |
The Company is party to legal proceedings arising in the ordinary course of business or otherwise, none of which is deemed material.
8. | NET LOSS PER SHARE OF COMMON STOCK |
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of restricted stock units (using the treasury stock method), the incremental common shares issuable upon the exercise of stock options (using the treasury stock method), and the conversion of the Company’s convertible preferred stock and warrants (using the if-converted method). For the three months ended March 31, 2013 and 2012, approximately 4.0 million and 4.3 million unvested restricted stock units, vested and unvested options and warrants to purchase Common Stock, respectively, were excluded from the calculation, as their effect would be anti-dilutive because the exercise prices were greater than the average market price of the Common Stock during the respective periods and because the Company recorded a net loss.
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The following table reconciles the numerator and denominator for the calculation.
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Basic and diluted net loss per share: | ||||||||
Numerator: | ||||||||
Net loss | $ | (1,742,684 | ) | $ | (4,436,778 | ) | ||
Preferred stock cash dividends | — | (96,424 | ) | |||||
Numerator for basic and diluted earnings per share - | ||||||||
Net loss available to common stockholders | $ | (1,742,684 | ) | $ | (4,533,202 | ) | ||
Denominator: | ||||||||
Weighted average basic and diluted shares outstanding | 33,278,477 | 32,342,541 | ||||||
Basic and diluted net loss per share: | ||||||||
Net loss | $ | (0.05 | ) | $ | (0.14 | ) | ||
Preferred stock cash dividends | — | (0.00 | ) | |||||
Net loss available to common stockholders | $ | (0.05 | ) | $ | (0.14 | ) |
9. | INCOME TAXES |
The Company accounts for its income taxes in accordance with ASC 740-10. Under ASC 740-10, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. ASC 740-10 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized based on all available positive and negative evidence.
As of December 31, 2012, the Company had approximately $150 million of federal and state net operating loss carryforwards. Subject to potential Section 382 limitations as discussed below, the federal losses are available to offset future taxable income through 2032 and expire from 2021 through 2032. Since the Company does business in various states and each state has its own rules with respect to the number of years losses may be carried forward, the state net operating loss carryforwards expire from 2013 through 2032. The net operating loss carryforward as of December 31, 2012 includes approximately $16 million related to windfall tax benefits for which a benefit would be recorded to additional paid in capital when realized. Based on operating results for the three months ended March 31, 2013 and nine month projections, management expects to generate a tax loss in 2013 and no tax benefit has been recorded. The Company has a full valuation allowance against its deferred tax assets as management concluded that it was more likely than not that the Company would not realize the benefit of its deferred tax assets by generating sufficient taxable income in future years. The Company expects to continue to provide a full valuation allowance until, or unless, it can sustain a level of profitability that demonstrates its ability to utilize these assets.
In accordance with Section 382 of the Internal Revenue Code, the ability to utilize the Company’s net operating loss carryforwards could be limited in the event of a change in ownership and as such a portion of the existing net operating loss carryforwards may be subject to limitation. Such an ownership change would create an annual limitation on the usage of the Company’s net operating loss carryforward. As such, a portion of the existing net operating loss carryforwards may be subject to limitation. During the year ended December 31, 2009, the Company acquired approximately $3 million of net operating loss carryforwards when it acquired the stock of Kikucall, Inc.
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10. | BUSINESS CONCENTRATIONS AND CREDIT RISK |
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains all of its cash, cash equivalents and restricted cash in five domestic financial institutions, and performs periodic evaluations of the relative credit standing of these institutions. As of March 31, 2013, the Company’s cash, cash equivalents and restricted cash primarily consisted of money market funds and checking accounts.
For the three months ended March 31, 2013 and 2012, no individual client accounted for 10% or more of consolidated revenue. As of March 31, 2013, no individual client accounted for more than 10% of our gross accounts receivable balance. As of March 31, 2012, one individual client accounted for more than 10% of our gross accounts receivable.
The Company’s customers are primarily concentrated in the United States and we carry accounts receivable balances. The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. To date, actual losses have been within management’s expectations.
11. | RESTRUCTURING AND OTHER CHARGES |
In March 2009, the Company announced and implemented a reorganization plan, including an approximate 8% reduction in the Company’s workforce, to align the Company’s resources with its strategic business objectives. Additionally, effective March 21, 2009, the Company’s then Chief Executive Officer tendered his resignation, effective May 8, 2009, the Company’s then Chief Financial Officer tendered his resignation, and in December 2009, the Company sold its Promotions.com subsidiary and entered into negotiations to sublease certain office space maintained by Promotions.com. As a result of these activities, the Company incurred restructuring and other charges of approximately $3.5 million during the year ended December 31, 2009 (the “2009 Restructuring”).
The following table displays the activity of the 2009 Restructuring reserve account during the three months ended March 31, 2013 and 2012:
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Beginning balance | $ | 220,297 | $ | 674,365 | ||||
Payments | (31,006 | ) | (28,382 | ) | ||||
Ending balance | $ | 189,291 | $ | 645,983 |
In December 2011, the Company announced a management transition under which the Company’s chief executive officer would step down from his position by March 31, 2012. Additionally, in December 2011, a senior vice president separated from the Company. As a result of these activities, the Company incurred restructuring and other charges of approximately $1.8 million during the year ended December 31, 2011 (the “2011 Restructuring”).
The following table displays the activity of the 2011 Restructuring reserve account during the three months ended March 31, 2013 and 2012:
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Beginning balance | $ | 1,541 | $ | 1,178,647 | ||||
Payments | (1,541 | ) | (40,365 | ) | ||||
Ending balance | $ | — | $ | 1,138,282 |
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During the year ended December 31, 2012, the Company implemented a targeted reduction in force. Additionally, in accessing the ongoing needs of the organization, the Company elected to discontinue using certain software as a service, consulting and data providers, and elected to write-off certain previously capitalized software development projects. The actions were taken after a review of the Company’s cost structure with the goal of better aligning the cost structure with the Company’s revenue base. These restructuring efforts resulted in restructuring and other charges of approximately $3.4 million during the year ended December 31, 2012. Additionally, as a result of the Company’s acquisition of The Deal, LLC (“the Deal”) in September 2012, the Company discontinued the use of The Deal’s office space and implemented a reduction in force to eliminate redundant positions, resulting in restructuring and other charges of approximately $3.5 million during the year ended December 31, 2012. Collectively, these activities are referred to as the “2012 Restructuring”.
The following table displays the activity of the 2012 Restructuring reserve account during the three months ended March 31, 2013 and 2012:
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Beginning balance | $ | 2,680,006 | $ | — | ||||
Initial charge | — | 1,713,498 | ||||||
Noncash deductions | — | (847,980 | ) | |||||
Reduction to prior estimate | (7,586 | ) | — | |||||
Payments | (849,308 | ) | (27,367 | ) | ||||
Ending balance | $ | 1,823,112 | $ | 838,151 |
During the three months ended March 31, 2013, the Company recognized restructuring and other charges totaling approximately $386 thousand primarily related to noncash stock-based compensation costs in connection with the accelerated vesting of certain restricted stock units.
12. | OTHER LIABILITIES |
Other liabilities consist of the following:
March 31, 2013 | December 31, 2012 | |||||||
Deferred rent | $ | 2,873,658 | $ | 2,954,944 | ||||
Noncurrent restructuring charge | 1,002,280 | 1,062,940 | ||||||
Deferred revenue | 401,881 | 283,698 | ||||||
Other liabilities | 24,000 | 39,167 | ||||||
Total other liabilities | $ | 4,301,819 | $ | 4,340,749 |
13. | SUBSEQUENT EVENT |
On April 22, 2013, the Company announced the acquisition of The DealFlow Report, The Life Settlements Report and the PrivateRaise database from DealFlow Media, Inc. These newsletters and databases, and the employees providing their content, will be incorporated into TheStreet’s institutional platform, The Deal. The acquisition is part of the Company’s ongoing mergers and acquisitions strategy.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Special Note Regarding Forward-Looking Statements – all statements contained in this quarterly report on Form 10-Q (the “Report”) that are not descriptions of historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are inherently subject to risks and uncertainties, and actual results could differ materially from those reflected in the forward-looking statements due to a number of factors, which include, but are not limited to, the factors set forth under the heading “Risk Factors” and elsewhere in this Report, and in other documents we file with the Securities and Exchange Commission from time to time, including, without limitation, the Company’s annual report on Form 10-K for the year ended December 31, 2012 (“2012 Form 10-K”). Certain forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or similar terms or the negative of these terms. All statements relating to our plans, strategies and objectives are deemed forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The forward-looking statements speak only as of the date of the filing of this Report; we have no obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise.
The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and notes thereto.
Overview
TheStreet, Inc., together with its wholly owned subsidiaries (“TheStreet”, “we”, “us” or the “Company”), is a leading digital media company focused on the financial and mergers and acquisitions environment. The Company’s collection of digital services provides users, subscribers and advertisers with a variety of content and tools through a range of online, social media, tablet and mobile channels. Our mission is to provide investors and advisors with actionable ideas from the world of investing, finance and business, and dealmakers with sophisticated analysis of the mergers and acquisitions environment in order to break down information barriers, level the playing field and help all individuals and organizations grow their wealth. With a robust suite of digital services, TheStreet offers the tools and insight needed to make informed decisions about earning, investing, saving and spending money. Since our inception in 1996, we believe that we have distinguished ourselves from other digital media companies with our journalistic excellence, unbiased approach and interactive multimedia coverage of the financial markets, economy, industry trends, investment and financial planning.
We report revenue in two categories: subscription services and media. Subscription services is comprised of subscriptions, licenses and fees for access to securities investment information, stock market commentary, rate services and transactional information pertaining to the mergers and acquisitions environment. Media is comprised of fees charged for the placement of advertising and sponsorships within our services.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying condensed consolidated financial statements include, but are not limited to, the following:
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| useful lives of intangible assets, |
| useful lives of fixed assets, |
| the carrying value of goodwill, intangible assets and marketable securities, |
| allowances for doubtful accounts and deferred tax assets, |
| accrued expense estimates, |
| reserves for estimated tax liabilities, |
| estimates in connection with the allocation of the purchase price of The Deal, LLC to the fair value of the assets acquired and liabilities assumed, |
| certain estimates and assumptions used in the calculation of the fair value of equity compensation issued to employees, and |
| restructuring charges. |
We perform annual impairment tests of goodwill and other intangible assets with indefinite lives as of September 30 each year or when circumstances arise that indicate a possible impairment might exist. Based upon our annual impairment test performed as of September 30, 2012, no impairment was indicated as the Company’s fair value, inclusive of a control premium, exceeded its book value by approximately 13%. The fair value of the Company’s goodwill was estimated using a market approach, based upon actual prices of the Company’s Common Stock and the estimated fair value of the Company’s outstanding Preferred Shares. The fair value of the Company’s outstanding Preferred Shares requires significant judgments, including the estimation of the amount of time until a liquidation event occurs as well as an appropriate cash flow discount rate. Further, in assigning a fair value to the Company’s Preferred Stock, the Company also considered that the preferred shareholders are entitled to receive a $55 million liquidation preference upon liquidation or dissolution of the Company or upon any change of control event. Additionally, the holders of the Preferred Shares are entitled to receive dividends and to vote as a single class together with the holders of the Common Stock on an as-converted basis and, provided certain preferred share ownership levels are maintained, are entitled to representation on the Company’s board of directors, and may unilaterally block issuance of certain classes of capital stock, the purchase or redemption of certain classes of capital stock, including Common Stock (with certain exceptions) and any increases in the per-share amount of dividends payable to the holders of the Common Stock. A decrease in the price of the Company’s Common Stock, or changes in the estimated value of the Company’s preferred shares, could materially affect the determination of the fair value and could result in an impairment charge to reduce the carrying value of goodwill, which could be material to the Company’s financial position and results of operations.
As of December 31, 2012, the Company performed an interim impairment test of its goodwill due to certain potential impairment indicators, including the loss of certain key personnel. The fair value of the Company’s goodwill was estimated using a market approach, based upon actual prices of the Company’s Common Stock excluding any control premium, and the estimated fair value of the company’s outstanding preferred shares. As a result of this December 31, 2012 impairment test, the Company concluded that goodwill was not impaired.
During the three months ended March 31, 2012, the Company accrued quarterly expenses related to its full year cash incentive compensation on a straight-line basis based on the Company’s estimate of expected full year cash incentive compensation. Beginning with the three months ended June 30, 2012 and continuing through March 2013, the Company has accrued cash incentive compensation expense based upon achievement of quarterly performance objectives and, therefore, no accounting estimates have been required since March 31, 2012.
A summary of our critical accounting policies and estimates can be found in our 2012 Form 10-K.
Contingencies
Accounting for contingencies, including those matters described in the Commitments and Contingencies section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2012 Form 10-K, is highly subjective and requires the use of judgments and estimates in assessing their magnitude and likely outcome. In many cases, the outcomes of such matters will be determined by third
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parties, including governmental or judicial bodies. The provisions made in the consolidated financial statements, as well as the related disclosures, represent management’s best estimate of the then current status of such matters and their potential outcome based on a review of the facts and in consultation with outside legal counsel where deemed appropriate. The Company would record a material loss contingency in its consolidated financial statements if the loss is both probable of occurring and reasonably estimated. The Company regularly reviews contingencies and as new information becomes available may, in the future, adjust its associated liabilities.
Results of Operations
Comparison of Three Months Ended March 31, 2013 and March 31, 2012
Revenue
For the Three Months Ended March 31, | ||||||||||||||||||||
2013 | Percent of Total Revenue | 2012 | Percent of Total Revenue | Percent Change | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Subscription services | $ | 10,396,464 | 83 | % | $ | 9,189,981 | 72 | % | 13 | % | ||||||||||
Media | 2,183,737 | 17 | % | 3,625,846 | 28 | % | -40 | % | ||||||||||||
Total revenue | $ | 12,580,201 | 100 | % | $ | 12,815,827 | 100 | % | -2 | % |
Subscription services. Subscription service revenue is comprised of subscriptions, licenses and fees for access to securities investment information, stock market commentary, rate services and transactional information pertaining to the mergers and acquisitions environment. Revenue is recognized ratably over the contract period.
Subscription services revenue for the three months ended March 31, 2013 increased by approximately $1.2 million, or 13%, when compared to the three months ended March 31, 2012. The increase was primarily the result of approximately $1.9 million of revenue related to the operations of The Deal, LLC (“The Deal”), which was acquired on September 11, 2012 and therefore did not contribute any revenue in the prior year period. Excluding The Deal, revenue for the three months ended March 31, 2013 decreased by approximately $716 thousand, or 8%, when compared to the three months ended March 31, 2012. The decrease was primarily related to a 10% decline in the weighted-average number of subscriptions which was partially offset by a 3% increase in the average revenue recognized per subscription. The decrease in the weighted average number of subscriptions was primarily impacted by the trailing twelve month trends of churn of our existing subscriber base and our ability to acquire new subscribers. While our average monthly churn rates for the trailing twelve months ended March 31, 2013, as compared to the trailing twelve months ended March 31, 2012, have shown an improvement, the number of new subscribers in the twelve months ended March 31, 2013 were not sufficient to offset the losses due to churn. The increase in the average revenue recognized per subscription during the period was primarily the result of the mix of products sold and higher product pricing.
Media. Media revenue is comprised of fees charged for the placement of advertising and sponsorships within our services.
Media revenue for the three months ended March 31, 2013 decreased by approximately $1.4 million, or 40%, when compared to the three months ended March 31, 2012. The decrease in media revenue was primarily the result of reduced demand from both repeat advertisers as well as new advertisers.
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Operating Expense
For the Three Months Ended March 31, | ||||||||||||||||||||
2013 | Percent of Total Revenue | 2012 | Percent of Total Revenue | Percent Change | ||||||||||||||||
Operating expense: | ||||||||||||||||||||
Cost of services | $ | 6,242,746 | 50 | % | $ | 6,435,162 | 50 | % | -3 | % | ||||||||||
Sales and marketing | 3,416,147 | 27 | % | 4,090,249 | 32 | % | -16 | % | ||||||||||||
General and administrative | 3,463,775 | 28 | % | 3,822,521 | 30 | % | -9 | % | ||||||||||||
Depreciation and amortization | 943,056 | 7 | % | 1,287,262 | 10 | % | -27 | % | ||||||||||||
Restructuring and other charges | 385,610 | 3 | % | 1,713,498 | 13 | % | -77 | % | ||||||||||||
Gain on disposition of assets | (56,586 | ) | -0 | % | — | — | N/A | |||||||||||||
Total operating expense | $ | 14,394,748 | $ | 17,348,692 | -17 | % |
Cost of services. Cost of services expense includes compensation, benefits, outside contributor costs related to the creation of our content, licensed data and the technology required to publish our content.
Cost of services expense as a percentage of revenue approximated 50% in the three months ended March 31, 2013, unchanged from the prior year period. Cost of services expense decreased by approximately $192 thousand, or 3%, over the periods. The decrease was primarily the result of lower compensation expense due to a 28% decrease in average headcount (excluding the impact of headcount of The Deal), reduced expenses relating to the data used on the Company’s Web sites, computer services and supplies costs, use of nonemployee content providers, hosting and internet related costs, and increased reimbursed expenses relating to a third party services agreement, the aggregate of which decreased by approximately $1.4 million. These cost decreases were partially offset by increased revenue share payments made to certain distribution partners, as the company has shifted its strategy more towards a contributor/freelance model with fewer full time editorial staff, as well as costs associated with the operations of The Deal which was acquired on September 11, 2012 and therefore did not contribute any expense in the prior year period, the aggregate of which increased by approximately $1.3 million.
Sales and marketing. Sales and marketing expense consists primarily of compensation expense for the direct sales force, marketing services, and customer service departments, advertising and promotion expenses and credit card processing fees.
Sales and marketing expense as a percentage of revenue decreased to 27% in the nine months ended March 31, 2013, from 32% in the prior year period. Sales and marketing expense decreased by approximately $674 thousand, or 16%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 32% decrease in average headcount (excluding the impact of headcount of The Deal) combined with lower advertising and promotion related spending, and travel and entertainment costs, the aggregate of which decreased by approximately $1.6 million. These cost decreases were partially offset by increased consulting fees, as well as costs associated with the operations of The Deal which was acquired on September 11, 2012 and therefore did not contribute any expense in the prior year period, the aggregate of which increased by approximately $955 thousand. Sales and marketing expense includes $48 thousand of barter expense in the three month period ended March 31, 2012. There was no barter expense during the three months ended March 31, 2013.
General and administrative. General and administrative expense consists primarily of compensation for general management, finance and administrative personnel, occupancy costs, professional fees, insurance and other office expenses.
General and administrative expense as a percentage of revenue decreased to 28% in the three months ended March 31, 2013, from 30% in the prior year period. General and administrative expense decreased by approximately $359 thousand, or 9%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 23% decrease in average headcount (excluding the impact of headcount of The Deal), combined with lower
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recruiting fees and statistical data costs, the aggregate sum of which decreased by approximately $891 thousand. These cost decreases were partially offset by increased professional, consulting and tax related expenses, the aggregate of which increased by approximately $558 thousand.
Depreciation and amortization. Depreciation and amortization expense as a percentage of revenue decreased to 7% in the three months ended March 31, 2013, from 10% in the prior year period. Depreciation and amortization expense decreased by approximately $344 thousand, or 27%, over the periods. The decrease was primarily the result of increased amortization during the three months ended March 31, 2012 resulting from reductions to the estimated useful life of certain capitalized Web site development projects.
Restructuring and other charges. During the three months ended March 31, 2013, the Company recognized restructuring and other charges totaling approximately $386 thousand primarily related to noncash stock-based compensation costs in connection with the accelerated vesting of certain restricted stock units.
Net Interest Income
For the Three Months Ended March 31, | Percent | |||||||||||
2013 | 2012 | Change | ||||||||||
Net interest income | $ | 71,863 | $ | 96,087 | -25% |
The decrease in net interest income was primarily the result of reduced cash balances combined with lower interest rates on bank deposits.
Net Loss
Net loss for the three months ended March 31, 2013 totaled approximately $1.7 million, or $0.05 per basic and diluted share, compared to net loss totaling approximately $4.4 million, or $0.14 per basic and diluted share, for the three months ended March 31, 2012. The decrease in the net loss was primarily the result of the Company’s overall cost cutting initiatives and a reduction in restructuring and other charges, partially offset by costs associated with the operation of The Deal.
Liquidity and Capital Resources
We generally have invested in money market funds and other short-term, investment grade instruments that are highly liquid and of high quality, with the intent that such funds are available for sale for acquisition and operating purposes. As of March 31, 2013, our cash, cash equivalents, marketable securities and restricted cash amounted to approximately $60.3 million, representing 55% of total assets. Our cash and cash equivalents primarily consisted of money market funds and checking accounts. Our marketable securities of approximately $29.2 million consisted of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds and corporate floating rate notes, with a maximum maturity of three years, and two auction rate securities issued by the District of Columbia with a fair value of approximately $1.6 million that mature in the year 2038. Our total cash-related position is as follows:
March 31, 2013 | December 31, 2012 | |||||||
Cash and cash equivalents | $ | 29,817,517 | $ | 23,845,360 | ||||
Current and noncurrent marketable securities | 29,194,956 | 35,394,318 | ||||||
Restricted cash | 1,301,000 | 1,301,000 | ||||||
Total cash and cash equivalents, current and noncurrent marketable securities and restricted cash | $ | 60,313,473 | $ | 60,540,678 |
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Financial instruments that subject us to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. We maintain all of our cash, cash equivalents and restricted cash in five domestic financial institutions, and we perform periodic evaluations of the relative credit standing of these institutions.
Net cash used in operating activities for the three-month period ended March 30, 2012 totaled approximately $41 thousand, as compared to net cash used in operating activities totaling approximately $2.4 million for the three-month period ended March 31, 2012. The improvement in net cash used in operating activities was primarily related to a decrease in the net loss from continuing operations, an increase in deferred revenue resulting from improved subscription sales and a decrease in prepaid expenses, partially offset by reduced noncash expenses and a decrease in accounts payable primarily related to the timing of invoice payments. Excluding cash used in operating activities totaling approximately $882 thousand related to the Company’s restructuring and other charges activity, net cash provided by operating activities would have totaled approximately $841 thousand.
Net cash provided by investing activities of approximately $6.1 million for the three-month period ended March 31, 2013 was primarily the result of approximately $6.3 million of the net maturities of marketable securities, partially offset by approximately $197 thousand of capital expenditures.
Net cash used in financing activities of approximately $125 thousand for the three-month period ended March 31, 2013 resulted from the purchase of treasury stock by retaining shares issuable upon the vesting of restricted stock units in connection with minimum tax withholding requirements.
We have a total of approximately $1.3 million of cash that serves as collateral for outstanding letters of credit, and which cash is therefore restricted. The letters of credit serve as security deposits for our office space in New York City.
We believe that our current cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months. We are committed to cash expenditures in an aggregate amount of approximately $2.9 million through March 31, 2014, primarily related to operating leases.
As of December 31, 2012, we had approximately $150 million of federal and state net operating loss carryforwards. Based on operating results for the three months ended March 31, 2013 and nine month projections, management expects to generate a tax loss in 2013 and no tax benefit has been recorded. We maintain a full valuation allowance against our deferred tax assets as management concluded that it was more likely than not that we would not realize the benefit of our deferred tax assets by generating sufficient taxable income in future years. We expect to continue to provide a full valuation allowance until, or unless, we can sustain a level of profitability that demonstrates our ability to utilize these assets.
In accordance with Section 382 of the Internal Revenue Code, the ability to utilize the Company’s net operating loss carryforwards could be limited in the event of a change in ownership and as such a portion of the existing net operating loss carryforwards may be subject to limitation. Such an ownership change would create an annual limitation on the usage of the Company’s net operating loss carryforward. As such, a portion of the existing net operating loss carryforwards may be subject to limitation. During the year ended December 31, 2009, the Company acquired approximately $3 million of net operating loss carryforwards when it acquired the stock of Kikucall, Inc.
Treasury Stock
Pursuant to the terms of the Company’s 1998 Stock Incentive Plan and our 2007 Performance Incentive Plan, and certain procedures adopted by the Compensation Committee of our Board of Directors, in connection with the exercise of stock options by certain of our employees, and the issuance of shares of Common Stock in settlement of vested restricted stock units, we may withhold shares in lieu of payment of the exercise price and/or the minimum amount of applicable withholding taxes then due. Through March 31, 2013, we have withheld an aggregate of 1,230,305 shares which have been recorded as treasury stock. In addition, we received an aggregate of 208,270 shares as partial settlement of the working capital and debt adjustment from the acquisition of Corsis
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Technology Group II LLC, 104,055 of which were received in October 2008 and 104,215 of which were received in September 2009, and 3,338 shares as partial settlement of a working capital adjustment related to our acquisition of Kikucall, Inc., which shares we received in March 2011. These shares have been recorded as treasury stock.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
We believe that our market risk exposures are immaterial as we do not have instruments for trading purposes, and reasonable possible near-term changes in market rates or prices will not result in material near-term losses in earnings, material changes in fair values or cash flows for all instruments.
We maintain all of our cash, cash equivalents and restricted cash in five domestic financial institutions, and we perform periodic evaluations of the relative credit standing of these institutions. However, no assurances can be given that the third party institutions will retain acceptable credit ratings or investment practices.
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In addition, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that during the period covered by this report, that there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.
Item 1. | Legal Proceedings. |
The Company is party to legal proceedings arising in the ordinary course of business or otherwise, none of which is deemed material.
Item 1A. | Risk Factors. |
In addition to the other information set forth in this report, you should carefully consider the information set forth in Part 1, Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2012, which we filed with the SEC on February 22, 2013.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
In December 2000, the Company’s Board of Directors authorized the repurchase of up to $10 million worth of the Company’s Common Stock, from time to time, in private purchases or in the open market. In February 2004, the Company’s Board of Directors approved the resumption of the stock repurchase program (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for
21 |
repurchase under the Program. The Program does not have a specified expiration date and is subject to certain limitations. During the first quarter of 2013, the Company made no repurchases. As of March 31, 2013, $2,678,878 remained available for purchases under the Program. The terms of the Company’s Series B Preferred Stock restrict the Company’s ability to repurchase shares of Common Stock and as a result, the Company does not expect to repurchase any shares of Common Stock under the Program in the near future.
Item 3. | Defaults Upon Senior Securities. |
Not applicable.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information. |
Not applicable.
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Item 6. | Exhibits. |
The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:
Exhibit | Incorporated by Reference | ||||
Number | Description | Form | File No. | Exhibit | Filing Date |
3.1 | Amended and Restated Bylaws of the Company. | 8-K | 000-25779 | 3.1 | March 8, 2013 |
10.1+ | Agreement for Grant of Incentive Stock Options dated as of February 25, 2013 between the Company and John Ferrara. | ||||
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
32.1 | Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
32.2 | Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
101.INS* | XBRL Instance Document | ||||
101.SCH* | XBRL Taxonomy Extension Schema Document | ||||
101.CAL* | XBRL Taxonomy Extension Calculation Document | ||||
101.DEF* | XBRL Taxonomy Extension Definitions Document | ||||
101.LAB* | XBRL Taxonomy Extension Labels Document | ||||
101.PRE* | XBRL Taxonomy Extension Presentation Document |
+ | Indicates management contract or compensatory plan or arrangement |
* | Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections |
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THESTREET, INC. | ||||
Date: May 10, 2013 | By: | /s/ Elisabeth DeMarse | ||
Name: | Elisabeth DeMarse | |||
Title: | Chief Executive Officer (principal executive officer) | |||
Date: May 10, 2013 | By: | /s/ John Ferrara | ||
Name: | John Ferrara | |||
Title: | Chief Financial Officer (principal financial officer) |
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EXHIBIT INDEX
The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:
Exhibit | Incorporated by Reference | ||||
Number | Description | Form | File No. | Exhibit | Filing Date |
3.1 | Amended and Restated Bylaws of the Company. | 8-K | 000-25779 | 3.1 | March 8, 2013 |
10.1+ | Agreement for Grant of Incentive Stock Options dated as of February 25, 2013 between the Company and John Ferrara. | ||||
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
32.1 | Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
32.2 | Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
101.INS* | XBRL Instance Document | ||||
101.SCH* | XBRL Taxonomy Extension Schema Document | ||||
101.CAL* | XBRL Taxonomy Extension Calculation Document | ||||
101.DEF* | XBRL Taxonomy Extension Definitions Document | ||||
101.LAB* | XBRL Taxonomy Extension Labels Document | ||||
101.PRE* | XBRL Taxonomy Extension Presentation Document |
+ | Indicates management contract or compensatory plan or arrangement |
* | Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections |
Exhibit 10.1
THESTREET, INC.
AGREEMENT FOR GRANT
OF
NON-QUALIFIED STOCK OPTION
February 25, 2013
John C. Ferrara
Dear John:
This letter (the “Letter”) sets forth the terms and conditions of the stock option (“Option”) hereby awarded to you by TheStreet, Inc. (the “Company”).
This award is made outside of, and not from, the Company’s 2007 Performance Incentive Plan (the “Plan”). Nevertheless, this award is subject to the terms and conditions set forth in the Plan, any rules and regulations adopted by the Board of Directors of the Company (the “Board”) or the committee of the Board which administers the Plan (the “Committee”), and this Letter. The provisions of the Plan are hereby incorporated by reference and any term used in this Letter and not defined herein shall have the meaning set forth in the Plan. Unless otherwise indicated, section references contained in this Letter shall refer to the corresponding sections of this Letter. The Option shall be deemed to be a non-qualified stock option within the meaning of the Internal Revenue Code of 1986, as amended. This award is intended to be granted as NASDAQ inducement grants qualifying for the exception to stockholder approval of stock option grants under NASDAQ rule 5635(c)(4) and, therefore, as a condition to receipt of the award, you must complete and execute the attached Investment Representation included herein as Attachment 1.
1. | Option Grant |
You have been granted an Option to purchase 325,000 shares of the Company’s Common Stock (“Common Stock”) to the extent the Option is exercisable as set forth below. The Option may not be sold, transferred, assigned, pledged or otherwise encumbered by you, in whole or in part; provided that the foregoing shall not affect your right to name a beneficiary under Section 13 of the Plan. The Option may be exercised only by you, except that in the event of your death, the Option may be exercised (at any time prior to its expiration or termination as provided in Sections 8 and 11) by the executor or administrator of your estate or by a person who acquired the right to exercise your Option by will or pursuant to the laws of descent and distribution. Until such time as stock certificates for the shares of Common Stock represented by the purchase of all or portion of the Option have been delivered to you in accordance with Section 4, you shall have none of the rights of a stockholder with respect to the Common Stock with respect to such shares.
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2. | Option Exercise Price |
The price at which you may purchase the shares of Common Stock underlying the Option is $1.86 per share.
3. | Term of Option |
Your Option shall expire, to the extent that it has not previously terminated, on February 25, 2020. However, your Option may terminate prior to such expiration date as provided in Sections 8 and 11. Regardless of the provisions of Sections 5 or 8 or any other provision hereof, in no event can your Option be exercised after the expiration date set forth in this Section 3.
4. | Exercisability of Option |
Your Option will become exercisable with respect to the following number(s) of shares of Common Stock on the following date(s) as set forth below, provided that you are in the Service (as defined below) of the Company or one of its subsidiaries on such date and the Option has not been terminated in accordance with Sections 8 or 11:
Date | Number of Shares of Common Stock | |
February 25, 2014 | 81,250 | |
The 25th calendar day of each month between March 25, 2014 and February 25, 2017, inclusive | 1/36th of 243,750 shares, rounded down to the nearest whole share inclusive of any prior remaining fractions |
For purposes hereof, you shall be considered to be in the “Service” of the Company or one of its subsidiaries if you are an employee of, or otherwise providing services to, the Company (or one if its subsidiaries, as applicable) on the applicable vesting date; provided that if you are not an employee of the Company or one of its subsidiaries on the applicable vesting date, you are providing services to the Company or one of its subsidiaries on the applicable vesting date pursuant to a written agreement signed by the Company or one of its subsidiaries that expressly agrees that the vesting of the Option shall continue during such period of service.
To the extent that your Option has become exercisable with respect to a number of shares of Common Stock, you may exercise the Option to purchase all or any portion of such shares of Common Stock at any time on or before the date the Option expires or terminates; provided that you may only purchase a whole number of shares of Common Stock.
5. | Accelerated Vesting in Certain Events |
Notwithstanding Section 4, upon the occurrence of any of the following events, the then-unvested portion of the Option shall become exercisable and may be exercised; provided that
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such portion of the Option only may be exercised within ninety (90) calendar days from the occurrence of such event (but in no event beyond the date set forth in Section 3): (i) the termination of your employment by the Company or any subsidiary thereof without Cause (as defined below) or by you for Good Reason (as defined below) prior to a Change of Control (as defined in the Plan) if such termination is related to the Change of Control; or (ii) a Change of Control, unless (A) either (x) the Company is the surviving corporation in the Change of Control and the award reflected in this Letter is equitably adjusted pursuant to Section 4.4 of the Plan or (y) the award reflected in this Letter is assumed or replaced by a Successor (as defined below) and (B) the award as so adjusted, assumed or replaced (x) has substantially the same potential economic benefits and vesting terms as did the award immediately prior to the Change of Control and (y) provides that the award immediately shall become fully vested and exercisable upon the termination of your employment (by the Company or any subsidiary thereof or by a Successor or any affiliate thereof) without Cause or by you for Good Reason at any time (provided that such portion of the Option only may be exercised within ninety (90) calendar days from such termination (but in no event beyond the date set forth in Section 3)). If you are employed by a Successor or any affiliate thereof following a Change of Control, references in this Letter to the Company shall be understood to be references to the Successor or any such affiliate regarding matters related to the occurrence of non-occurrence of events from and after the date you become employed by the Successor or such affiliate.
For purposes of this Letter, “Cause” shall be determined by the Committee in the exercise of its good faith judgment, in accordance with the following guidelines: (i) your willful misconduct or gross negligence in the performance of your obligations, duties and responsibilities of your position with the Company (including those as an employee of the Company set forth in the Company’s Code of Business Conduct and Ethics dated June 1, 2006, as same may be amended from time to time provided such amendment affects all executive officers of the Company), (ii) your dishonesty or misappropriation, in either case that is willful and material, relating to the Company or any of its funds, properties, or other assets, (iii) your inexcusable repeated or prolonged absence from work (other than as a result of, or in connection with, a Disability), (iv) any unauthorized disclosure by you of Confidential Information or proprietary information of the Company in violation of Section 12(d) which is reasonably likely to result in material harm to the Company, (v) your conviction of a felony (including entry of a guilty or nolo contender plea) involving fraud, dishonesty, or moral turpitude, (vi) a violation of federal or state securities laws, or (vii) the failure by you to attempt to perform faithfully the duties and responsibilities of your position with the Company, or other material breach by you of this Letter, provided any such failure or breach described in clauses (i), (ii), (iii), (iv), (vi) and (vii) is not cured, to the extent cure is possible, by you within thirty (30) days after written notice thereof from the Company to you; provided, however, that no failure or breach described in clauses (i), (ii), (iii), (iv), (vi) and (vii) shall constitute Cause unless (x) the Company first gives you written notice of its intention to terminate your employment for Cause and the grounds of such termination no fewer than ten (10) days prior to the date of termination; and (y) you are provided an opportunity to appear before the Board, with or without legal representation at your election to present arguments on your own behalf; and (z) if you elect to so appear, such failure or breach is not cured, to the extent cure is possible, within thirty (30) days after written notice from the Company to you that, following such appearance, the Board has determined in good faith that Cause exists and has not, following the initial notice from the Company, been cured;
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provided further, however, that notwithstanding anything to the contrary in this Letter and subject to the other terms of this proviso, the Company may take any and all actions, including without limitation suspension (but not without pay), it deems appropriate with respect to you and your duties at the Company pending such appearance and subsequent to such appearance during which such failure or breach has not been cured. No act or failure to act on your part will be considered “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interests of the Company.
For purposes of this Letter, “Disability” shall mean physical or mental incapacity of a nature which prevents you, in the good faith judgment of the Committee, from performing your duties and responsibilities as Chief Financial Officer for a period of ninety (90) consecutive days or one hundred and fifty (150) days during any year, with each year under this Letter commencing on each anniversary of the date hereof.
For purposes of this Letter, “Good Reason” shall have the meaning ascribed to such term in Treasury Regulation Section 1.409A-1(n)(2)(ii), as determined in good faith by the Committee.
6. | Manner of Exercise |
You may exercise your Option by giving notice to the Company (or to such service provider as the Company may designate), following such procedures as may be communicated to you from time to time.
The shares of Common Stock represented by the exercise of your Option may consist of authorized but unissued shares or treasury shares of the Company, as determined from time to time by the Committee.
7. | Satisfaction of Option Exercise Price |
The Option may be exercised by payment of the option exercise price in cash (including check, bank draft, money order, or wire transfer). In addition, your Option may be exercised using such broker cashless exercise procedure or other procedure as the Company may establish from time to time.
8. | Termination of Service |
(a) General. If your Service terminates for any reason other than for Cause, the Option will terminate ninety (90) calendar days after such termination of Service. Following the termination of your Service, no additional portions of the Option will become exercisable, and the Option will be exercisable only to the extent exercisable on the date of such termination of Service. If your Service terminates for Cause, the Option shall be immediately terminated and may not be exercised.
(b) Adjustments by the Committee. The Committee may, in its discretion, exercised before or after your termination of Service, declare all or any portion of the Option immediately
4 |
exercisable and/or permit all or any part of the Option to remain exercisable for such period designated by it after the time when the Option would have otherwise terminated as provided in Section 8(a), but not beyond the expiration date of your Option as set forth in Section 3 above.
(c) Committee Determinations. The Committee shall have absolute discretion to determine the date and circumstances of the termination of your Service, and its determination shall be final, conclusive and binding upon you.
9. | Restrictions on Option Exercise; Delivery of Shares |
(a) Even though your Option may be otherwise exercisable, your right to exercise the Option will be suspended if the Committee determines that your exercise of the Option would violate applicable laws or regulations. The suspension will last until the exercise would be lawful. Any such suspension will not extend the term of your Option.
(b) Even though your Option may be otherwise exercisable, the Committee may refuse to permit such exercise if it determines, in its discretion, that any of the following circumstances is present:
(i) | the shares of Common Stock to be acquired upon such exercise are required to be registered or qualified under any federal or state securities law, or to be listed on any securities exchange or quotation system, and such registration, qualification, or listing has not occurred; |
(ii) | the consent or approval of any government regulatory body is required and has not been obtained; |
(iii) | the satisfaction of withholding tax is required and has not occurred; |
(iv) | representations by you or other information is determined by counsel for the Company to be necessary or desirable in order to comply with any federal or state securities laws or regulations, and you have not provided such representations or information; or |
(v) | an agreement by you with respect to the disposition of shares of Common Stock to be acquired upon exercise of your Option is determined by the Committee to be necessary or desirable in order to comply with any federal or state securities laws or regulations, or is required by the terms of this Letter, and you have not executed such agreement. |
(c) Shares of Common Stock to be delivered to you in connection with any exercise of the Option shall be delivered to you as soon as practicable and, at the Company’s election, the Company may effect such delivery by causing such number of shares of Common Stock to be deposited via DWAC into a brokerage account in your name. Common Stock delivered upon the exercise of the Option will be fully transferable (subject to any applicable securities law restrictions) and not subject to forfeiture (other than as set forth in Section 11), and will entitle the holder to all rights of a stockholder of the Company.
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(d) The Company will use reasonable commercial efforts to (i) file and cause to remain effective and current a Registration Statement on Form S-8 (or successor form) with the Securities and Exchange Commission covering shares subject to the Option until such times as all of the shares of Common Stock underlying your Option are either delivered hereunder or the Option has expired or been terminated pursuant to the terms of this Letter, and (ii) until three (3) months after you cease being an “affiliate” of the Company, to maintain a resale prospectus thereunder (or otherwise register under the Securities Act of 1933, as amended) the Common Stock underlying your Option.
10. | Income Tax Withholding |
In connection with the exercise of your Option, you will be required to pay, pursuant to such arrangements as the Company may establish from time to time, any applicable federal, state and local withholding tax liability. If you fail to satisfy your withholding obligation in a time and manner satisfactory to the Committee, the Company shall have the right to withhold the required amount from your salary or other amounts payable to you.
11. | Additional Termination Events and Claw-Back |
Notwithstanding anything else in this Letter, the unexercised portion of the Option shall be terminated (regardless of the extent to which it is exercisable) if any one of the following occurs: (i) you engage in Competitive Activity (as defined below) with the Company or any of its subsidiaries during your employment by the Company or any of its subsidiaries or during the Non-Compete Period (as defined below); or (ii) you breach any of the Restrictive Covenants set out in Section 12 (collectively, the “Restrictive Covenants”) within one (1) year after the cessation of your employment with the Company or any subsidiary. For purposes of this Letter, the term “Non-Compete Period” shall mean the six (6) month period immediately following your termination of service with the Company; provided, however, that if your termination of service occurs during the period commencing fifteen (15) days prior to a Change of Control (as defined in the Plan) and ending on the twelve (12) month anniversary of such Change of Control, the Non-Compete Period shall be twelve (12) months.
The Company reserves the right (as provided below) to claw-back shares of Common Stock delivered under this Letter pursuant to each exercise of the Option by you if you engage in Competitive Activity during the Non-Compete Period or violate any of the Restrictive Covenants within one (1) year after the delivery of such shares of Common Stock. If the Committee determines, in its good faith discretion, that all or some portion of the shares of Common Stock delivered to you will be clawed-back, then you shall be required to repay to the Company the Repayment Amount (as defined below) with respect to such shares of Common Stock. You may satisfy the payment obligation set forth in the preceding sentence by paying the Company cash, by delivering to the Company shares of Common Stock, or by remitting to the Company a combination of cash and shares of Common Stock, such that the Fair Market Value (measured as of the day before your delivery to the Company of shares of Common Stock) of any shares of Common Stock you deliver to the Company, plus the amount of any cash you pay to the Company, equals the Repayment Amount. The “Repayment Amount” with respect to the shares
6 |
of Common Stock delivered to you upon any exercise of the Option shall mean the lesser of the Exercise Date Spread Value (as defined below) with respect to such exercise of the Option and the Delivery Date Spread Value (as defined below) with respect to such exercise of the Option, in each case reduced by the amount of taxes paid by you with respect to such exercise of the Option; provided that neither the Exercise Date Spread Value nor the Delivery Date Spread Value shall be less than zero. With respect to each exercise you made of the Option, the “Exercise Date Spread Value” is the amount, if any, by which the Fair Market Value (measured as of the date of exercise) of the number of shares of Common Stock underlying the Option with respect to which the Option was exercised on such date, exceeded the aggregate option exercise price for such shares. With respect to each exercise you made of the Option, the “Delivery Date Spread Value” is the amount, if any, by which the Fair Market Value (measured as of the day before you remit the Repayment Amount to the Company) of the number of shares of Common Stock underlying the Option with respect to which the Option was exercised, exceeded the aggregate option exercise price for such shares. In addition to any other remedy available to the Company under applicable law, the Company shall have the right to offset any other amounts payable to you by the amount of any required repayment by you which has not been repaid.
For purposes of this Letter, “Competitive Activity” means your service as a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or you permit your name to be used in connection with the activities of, any other business or organization anywhere in the United States, or in any other geographic area in which the Company or any of its subsidiaries operates or with respect to which the Company provides financial news and commentary coverage (or from which such other business or organization provides financial news and commentary coverage of the United States), which engages in a business that competes with any business in which the Company or any subsidiary is engaged (a “Competing Business”); provided, however, that, notwithstanding the foregoing, it shall not be a Competitive Activity for you to (i) become the registered or beneficial owner of up to three percent (3%) of any class of capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that you do not otherwise participate in the business of such corporation or (ii) work in a non-competitive business of a company which is carrying on a Competing Business, the revenues of which represent less than twenty percent (20%) of the consolidated revenues of that company, or, as a result thereof, owning compensatory equity in that company.
For purposes of this Letter, “Fair Market Value” of a share of Common Stock on any date shall be (i) if the principal market for the Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day (or, if such exchange is not open on such day, on the next day such exchange is open) as reported by such exchange or on a consolidated tape reflecting transactions on such exchange, or (ii) if the principal market for the Common Stock is not a national securities exchange, the closing average of the highest bid and lowest asked prices per share of Common Stock on such day (or, if such exchange is not open on such day, on the next day such exchange is open) as reported by the market upon which the Common Stock is quoted, or an independent dealer in the Common Stock, as determined by the Company in good faith; provided, however, that if clauses (i) and (ii) are all inapplicable, or if no trades have been made and no quotes are available for such day, the Fair Market Value of the Common Stock shall be determined by the Committee in good faith by any method consistent
7 |
with applicable regulations adopted by the United States Treasury Department relating to stock options or stock valuation.
12. | Restrictive Covenants |
a. | Non-Solicitation of Employees |
You agree that, during your employment by the Company or any subsidiary and through the end of one (1) year after the cessation of your employment with the Company or any subsidiary, you will not solicit for employment or hire, in any business enterprise or activity, any employee of the Company or any subsidiary who was employed by the Company or a subsidiary during your period of employment by the Company or a subsidiary provided that (a) the foregoing shall not be violated by any general advertising not targeted at any Company or subsidiary employees nor by you serving as a reference upon request, and (b) you may solicit and hire any one or more former employees of the Company or its subsidiaries who had ceased being such an employee for a period of at least six (6) months prior to any such solicitation or hiring.
b. | Non-Solicitation of Clients and Vendors |
You agree that, during your employment by the Company or any subsidiary and through the end of one (1) year after the cessation of your employment with the Company or any subsidiary, you will not solicit, in any business enterprise or activity, any client, customer, licensee, licensor, third-party service provider or vendor (a “Business Relation”) of the Company or any subsidiary who was a Business Relation of the Company or any subsidiary during your period of employment by the Company or any subsidiary to (i) cease being a Business Relation of the Company or any subsidiary or (ii) become a Business Relation of a Competing Business unless (without you having solicited such third party to cease such relationship) such third party ceased being a Business Relation of the Company or any subsidiary for a period of at least six (6) months prior to such solicitation.
c. | Non-Disparagement |
During your employment by the Company or any subsidiary and indefinitely thereafter, neither party shall make any statements, written or oral, to any third party which disparage, criticize, discredit or otherwise operate to the detriment of you or the Company, its present or former officers, shareholders, directors and employees and their respective business reputation and/or goodwill, provided, however, that nothing in this Section 12(c) shall prohibit either party from (i) making any truthful statements or disclosures required by applicable law regulation or (ii) taking any action to enforce its rights under this Letter or any other agreement in effect between the parties.
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d. | Confidentiality |
1) | During your employment by the Company or any subsidiary and indefinitely
thereafter, you shall keep secret and retain in strictest confidence, any and all Confidential Information relating to the Company,
except where your disclosure or use of such Confidential Information is in furtherance of the performance by you of your duties
to the Company and not for personal benefit or the benefit of any interest adverse to the Company’s interests. For purposes
of this Letter, “Confidential Information” shall mean any information including without limitation plans,
specifications, models, samples, data, customer lists and customer information, computer programs and documentation, and other
technical and/or business information, in whatever form, tangible or intangible, that can be communicated by whatever means available
at such time, that relates to the Company’s current business or future business contemplated during your employment, products,
services and development, or information received from others that the Company is obligated to treat as confidential or proprietary
(provided that such confidential information shall not include any information that (a) has become generally available to the public
or is generally known in the relevant trade or industry other than as a result of an improper disclosure by you, or (b) was available
to or became known to you prior to the disclosure of such information on a non-confidential basis without breach of any duty of
confidentiality to the Company), and you shall not disclose such confidential information to any Person (as defined below) other
than the Company, except with the prior written consent of the Company, as may be required by law or court or administrative order
(in which event you shall so notify the Company as promptly as practicable), or in performance of your duties on behalf of the
Company. Further, this Section 12(d) shall not prevent you from disclosing Confidential Information in connection with any litigation,
arbitration or mediation to enforce this Letter or other agreement between the parties, provided such disclosure is necessary for
you to assert any claim or defense in such proceeding. For purposes of this Letter, “Person” shall mean an individual, corporation, partnership, limited liability company, limited liability partnership, association, trust or other unincorporated organization or entity. |
2) | Upon your termination of employment for any reason, you shall return to the Company all copies, reproductions and summaries of Confidential Information in your possession and use reasonable efforts to erase the same from all media in your possession, and, if the Company so requests, shall certify in writing that you have done so, except that you may retain such copies, reproductions and summaries during any period of litigation, arbitration or mediation referred to in Section 12(d)(1). All Confidential Information is and shall remain the property of the Company (or, in the case of information that the Company receives from a third party which it is obligated to treat as confidential, then the property of such third party); provided, you shall be entitled to retain copies of (i) information |
9 |
showing your compensation or relating to reimbursement of expenses, (ii) information that is required for the preparation of your personal income tax return, (iii) documents provided to you in your capacity as a participant in any employee benefit plan, policy or program of the Company and (iv) this Letter and any other agreement by and between you and the Company with regard to your employment or termination thereof. |
3) | All Intellectual Property (as hereinafter defined) and Technology (as hereinafter defined) created, developed, obtained or conceived of by you during your employment, and all business opportunities presented to you during your employment, shall be owned by and belong exclusively to the Company, provided that they reasonably relate to any of the business of the Company on the date of such creation, development, obtaining or conception, and you shall (i) promptly disclose any such Intellectual Property, Technology or business opportunity to the Company, and (ii) execute and deliver to the Company, without additional compensation, such instruments as the Company may require from time to time to evidence its ownership of any such Intellectual Property, Technology or business opportunity. For purposes of this Letter, (x) the term “Intellectual Property” means and includes any and all trademarks, trade names, service marks, service names, patents, copyrights, and applications therefor, and (y) the term “Technology” means and includes any and all trade secrets, proprietary information, invention, discoveries, know-how, formulae, processes and procedures. |
The parties acknowledge that the restrictions contained in this Section 12 are a reasonable and necessary protection of the immediate interests of the Company, and any violation of these restrictions could cause substantial injury to the Company and that the Company would not have entered into this Letter, without receiving the additional consideration offered by you in binding yourself to any of these restrictions. In the event of a breach or threatened breach by you of any of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining you from such breach or threatened breach; provided, however, that the right to apply for an injunction shall not be construed as prohibiting the Company from pursuing any other available remedies for such breach or threatened breach.
13. | No Guarantee of Continuation of Service |
This grant of this Option does not constitute an assurance of continued Service for any period or in any way interfere with the Company’s right to terminate your Service.
14. | Administration |
The Committee has the sole power to exercise its good faith judgment to interpret the Plan and this Letter and to act upon all matters relating this grant to the extent provided in the Plan and not inconsistent with the terms of this Letter. Any decision, determination, interpretation, or other action taken pursuant to the provisions of the Plan and this Letter by the Committee shall be final, binding, and conclusive.
10 |
15. | Section 409A |
Notwithstanding anything to the contrary in the Plan or this Letter to the contrary, no benefits to be paid or provided to you, if any, pursuant to this Letter that, when considered together with any other severance payments or separation benefits, are considered deferred compensation not exempt under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until you have a “separation from service” within the meaning of Section 409A. For purposes of this Letter, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended or any regulations or Treasury guidance promulgated thereunder (“Section 409A”).
Notwithstanding any provision of the Plan or this grant to the contrary, if you are a “specified employee” as determined by the Board or the Committee, in accordance with Section 409A, you shall not be entitled to any Deferred Payments until the earlier of (i) the date which is six (6) months and one (1) day after your termination of employment for any reason other than death (except that during such six (6) month period you may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A-1(b)(9) or that constitute a short-term deferral within the meaning of Section 409A), or (ii) the date of your death.
Notwithstanding any provision of the Plan or this Letter to the contrary, to the extent any compensation or award which constitutes deferred compensation within the meaning of Section 409A shall vest upon the occurrence of a Change of Control and such Change of Control does not constitute a “change in the ownership or effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A, then notwithstanding such vesting, payment will be made to you on the earliest of (i) your “separation from service” with the Company (determined in accordance with Section 409A) or, if you are a specified employee within the meaning of Section 409A, such later date as provided in the preceding paragraph, (ii) the date payment otherwise would have been made, or (iii) the date of your death.
This Option is intended to be exempt from or comply with the requirements of Section 409A so that none of the benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. If any provision of this Letter or of any award of compensation, including equity compensation or benefits would cause you to incur any additional tax or interest under Section 409A, the parties agree to negotiate in good faith to reform such provision in such manner as to maintain, to the maximum extent practicable, the original intent and economic terms of the applicable provision without violating the provisions of Section 409A.
16. | Amendment |
The Committee may from time to time amend the terms of this grant in accordance with the terms of the Plan in effect at the time of such amendment, but no amendment which is unfavorable to you can be made without your written consent.
11 |
The Plan is of unlimited duration, but may be amended, terminated or discontinued by the Board of Directors of the Company at any time. However, no amendment, termination or discontinuance of the Plan will unfavorably affect this grant.
Notwithstanding the foregoing, the Committee expressly reserves the right to amend the terms of the Plan and this grant with your consent which shall not be unreasonably withheld to the extent it determines that such amendment is necessary or desirable for an exemption from or compliance with the distribution, acceleration and election requirements of Section 409A of the Code.
17. | Notices |
Unless otherwise provided herein, any notice, exercise of rights or other communication required or permitted to be given hereunder shall be in writing and shall be given by overnight delivery service such as Federal Express or personal delivery against receipt, or mailed by registered or certified mail (return receipt requested), to the party to whom it is given at, in the case of the Company, Compensation Committee Chair, TheStreet, Inc., 14 Wall Street, 15th Floor, New York, NY 10005, or, in the case of you, at your principal residence address as then reflected on the records of the Company or such other address as such party may hereafter specify by notice to the other party hereto. Any notice or other communication shall be deemed to have been given as of the date so personally delivered or transmitted by telecopy or like transmission or on the next business day after sent by overnight delivery service for next business day delivery or on the fifth business day after sent by registered or certified mail.
18. | Representations |
The Company hereby represents and warrants that the execution and delivery of this Letter and the performance by the Company of its obligations hereunder have been duly authorized by all necessary corporate action of the Company.
19. | Amendment |
This Letter may be amended only by a written agreement signed by the parties hereto.
20. | Binding Effect |
This Letter shall be binding upon and inure to the benefit of the Company and any Successor. As used herein, a “Successor” shall mean any successor organization that succeeds to the Company (or to any direct or indirect successor) by merger or consolidation or operation of law, or by acquisition of all or substantially all of the assets of the Company (or of any direct or indirect successor).
12 |
21. | Governing Law |
This Letter shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts to be performed wholly within the state and without regard to its conflict of laws provisions that would defer to the laws of another jurisdiction, except to the extent the laws of the State of Delaware mandatorily govern.
22. | Severability |
If any provision of this Letter shall for any reason be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Moreover, if any one or more of the provisions of this Letter shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowable by applicable law. To the extent permitted by applicable law, each party hereto waives any provision of law that renders any provision of this Letter invalid, illegal or unenforceable in any way.
23. | Execution in Counterparts |
This Letter may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same instrument.
24. | Entire Agreement |
This Letter sets forth the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and thereof.
25. | Titles and Headings |
Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any of the provisions of this Letter.
26. | Consent to Jurisdiction |
The parties hereto each hereby irrevocably submit to the exclusive jurisdiction of any New York State or Federal court sitting in the Borough of Manhattan, City of New York in any action or proceeding to enforce the provisions of this Letter, and waives the defense of inconvenient forum to the maintenance of any such action or proceeding.
13 |
This Letter contains the formal terms and conditions of your award and accordingly should be retained in your files for future reference. The Company may require you to provide evidence of your acknowledgment of this Letter using such means of notification as may be communicated to you by the Company or its service provider.
Very truly yours, | ||||
THESTREET, INC. | ||||
By: | /s/ Elisabeth DeMarse | |||
Name: Elisabeth DeMarse Title: Chairman, President and Chief Executive Officer |
AGREED TO AND ACCEPTED:
/s/ John Ferrara | |
John C. Ferrara |
14 |
ATTACHMENT 1
INVESTMENT REPRESENTATIONS
In connection with the grant to you of the Option, you represent and warrant as follows by signing below at the bottom of this Exhibit A:
(i) By checking one or more of the boxes as follows, that you are an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended (the “Act”):
___ a. A natural person with an individual net worth, or joint net worth with a spouse, in excess of $1,000,000 (excluding the value of the primary residence of such individual).
___ b. A natural person (i) who has had an individual income in excess of $200,000 in each of the past two years or a joint income with a spouse in excess of $300,000 in those two years and (ii) who reasonably expects to reach the same income level in the current year.
X c. A director or executive officer of the Company.
(ii) You possess such knowledge and experience in finance, securities, investments and other business matters as to be able to protect your interests in connection with the potential investment in the Company, and this potential investment is not material when compared to your total financial capacity. You have adequate means for providing for your current needs and possible contingencies, have no need for liquidity regarding this potential investment, and have no reason to expect a change in your circumstances, financial or other, that may cause or require sale of this potential investment.
(iii) You understand the many risks of an investment in the Company and can afford to bear such risks, including, but not limited to, the risk of losing your entire investment.
(iv) You would be acquiring the securities to be offered under the Option for your own account for investment and not with a view to the sale or distribution thereof or the granting of any participation therein, and you have no present intention of distributing or selling to others any of such securities or granting any participation therein. You have no agreement or other arrangement, formal or informal, with any person to sell, transfer, pledge or otherwise dispose of any of such securities that would guarantee to you any profit, or protect you against loss, regarding such securities, and you have no plans to enter into any such agreement or arrangement.
_______ | Yes, I am an accredited investor as defined in Section (i) and I can also make the representations in sections (ii), (iii), and (iv). |
_______ | No, I am not an accredited investor as defined in Section (i) and/or I cannot also make the representations in sections (ii), (iii), and (iv). |
15 |
OPTIONEE | COMPANY. | |||
/s/ John Ferrara | By: | /s/ Elisabeth DeMarse | ||
Name: John C. Ferrara | Name: Elisabeth DeMarse | |||
Dated: February 25, 2013 | Title: Chairman, President and CEO |
16 |
Exhibit 31.1
CERTIFICATION
I, Elisabeth DeMarse, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of TheStreet, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 10, 2013 | By: | /s/ Elisabeth DeMarse | ||
Name: | Elisabeth DeMarse | |||
Title: | Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATION
I, John Ferrara, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of TheStreet, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 10, 2013 | By: | /s/ John Ferrara | |||
Name: | John Ferrara | ||||
Title: | Chief Financial Officer (principal financial officer) |
Exhibit 32.1
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TheStreet, Inc. (the “Company”) for the quarterly period ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elisabeth DeMarse, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Elisabeth DeMarse | ||
Name: | Elisabeth DeMarse | |
Title: | Chief Executive Officer (principal executive officer) | |
May 10, 2013 |
Exhibit 32.2
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TheStreet, Inc. (the “Company”) for the quarterly period ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Ferrara, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ John Ferrara | ||
Name: | John Ferrara | |
Title: | Chief Financial Officer (principal financial officer) | |
May 10, 2013 |
Restructuring and Other Charges (Detail) - Summary of Restructuring Reserve Activity - 2012 (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Initial charge | $ 385,610 | $ 1,713,498 |
Restructuring Reserve 2012 [Member]
|
||
Balance | 2,680,006 | 0 |
Initial charge | 0 | 1,713,498 |
Noncash deductions | 0 | (847,980) |
Reduction to prior estimate | (7,586) | 0 |
Payments | (849,308) | (27,367) |
Balance | $ 1,823,112 | $ 838,151 |
Restructuring and Other Charges (Detail) - Summary of Restructuring Reserve Activity - 2009 (Restructuring Reserve 2009 [Member], USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Restructuring Reserve 2009 [Member]
|
||
Balance | $ 220,297 | $ 674,365 |
Payments | (31,006) | (28,382) |
Balance | $ 189,291 | $ 645,983 |
Fair Value Measurements (Detail) - Summary of Assets and Liabilities Measured at Fair Value (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
|||||
---|---|---|---|---|---|---|---|
Cash and cash equivalents (1) | $ 29,817,517 | [1] | |||||
Marketable securities (2) | 29,194,956 | [2] | 35,394,318 | ||||
Total at fair value | 59,012,473 | ||||||
Fair Value, Inputs, Level 1 [Member]
|
|||||||
Cash and cash equivalents (1) | 29,817,517 | [1] | |||||
Marketable securities (2) | 27,554,956 | [2] | |||||
Total at fair value | 57,372,473 | ||||||
Fair Value, Inputs, Level 2 [Member]
|
|||||||
Cash and cash equivalents (1) | 0 | [1] | |||||
Marketable securities (2) | 0 | [2] | |||||
Total at fair value | 0 | ||||||
Fair Value, Inputs, Level 3 [Member]
|
|||||||
Cash and cash equivalents (1) | 0 | [1] | |||||
Marketable securities (2) | 1,640,000 | [2] | |||||
Total at fair value | $ 1,640,000 | ||||||
|
Restructuring and Other Charges (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Restructuring Reserve 2009 [Member]
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Schedule of Restructuring Reserve Activity [Table Text Block] | The following table displays the activity of the 2009
Restructuring reserve account during the three months ended
March 31, 2013 and 2012:
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Restructuring Reserve 2011 [Member]
|
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Schedule of Restructuring Reserve Activity [Table Text Block] | The following table displays the activity of the 2011
Restructuring reserve account during the three months ended
March 31, 2013 and 2012:
|
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Restructuring Reserve 2012 [Member]
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Schedule of Restructuring Reserve Activity [Table Text Block] | The following table displays the activity of the 2012
Restructuring reserve account during the three months ended
March 31, 2013 and 2012:
|
Subsequent Event (Detail)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Subsequent Event, Description | On April 22, 2013, the Company announced the acquisition of The DealFlow Report, The Life Settlements Report and the PrivateRaise database from DealFlow Media, Inc. These newsletters and databases, and the employees providing their content, will be incorporated into TheStreet's institutional platform, The Deal. The acquisition is part of the Company's ongoing mergers and acquisitions strategy |
Subsequent Event, Date | Apr. 22, 2013 |
Net Loss Per Share of Common Stock (Detail) - Summary of Earnings Per Share Reconcilation (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Numerator: | ||
Net loss (in Dollars) | $ (1,742,684) | $ (4,436,778) |
Preferred stock cash dividends (in Dollars) | 0 | (96,424) |
Net loss available to common stockholders (in Dollars) | $ (1,742,684) | $ (4,533,202) |
Denominator: | ||
Weighted average basic and diluted shares outstanding (in Shares) | 33,278,477 | 32,342,541 |
Basic and diluted net loss per share: | ||
Net loss | $ (0.05) | $ (0.14) |
Preferred stock cash dividends | $ 0 | $ 0.00 |
Net loss available to common stockholders | $ (0.05) | $ (0.14) |
Restructuring and Other Charges (Detail) - Summary of Restructuring Reserve Activity - 2011 (Restructuring Reserve 2011 [Member], USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Restructuring Reserve 2011 [Member]
|
||
Balance | $ 1,541 | $ 1,178,647 |
Payments | (1,541) | (40,365) |
Balance | $ 0 | $ 1,138,282 |
Cash and Cash Equivalents, Marketable Securities and Restricted Cash
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
|
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Cash, Cash Equivalents, and Marketable Securities [Text Block] |
The Company’s cash and cash equivalents primarily consist of money market funds and checking accounts totaling approximately $29.8 million. Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, corporate floating rate notes, and two municipal auction rate securities (“ARS”) issued by the District of Columbia with a par value of approximately $1.9 million. As of March 31, 2013, the total fair value and cost basis of these marketable securities was approximately $29.2 million. With the exception of the ARS, the maximum maturity for any investment is three years. The ARS pay interest in accordance with their terms at each respective auction date, typically every 35 days, and mature in the year 2038. The Company accounts for its marketable securities in accordance with the provisions of ASC 320-10. The Company classifies these securities as available for sale and the securities are reported at fair value. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income and excluded from net loss. Additionally, the Company has a total of approximately $1.3 million of cash that serves as collateral for outstanding letters of credit, and which cash is therefore restricted. The letters of credit serve as security deposits for the Company’s office space in New York City.
|