-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PpjUfalcItqTWPXOcsxcW711QBbrpr8ka2iN1AeT1oIdRYL6ECBnI7d1eRxw08Hi D4I0Bqwju+16CE2NzyW5EQ== /in/edgar/work/0000927016-00-004004/0000927016-00-004004.txt : 20001115 0000927016-00-004004.hdr.sgml : 20001115 ACCESSION NUMBER: 0000927016-00-004004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEWSEDGE CORP CENTRAL INDEX KEY: 0000858912 STANDARD INDUSTRIAL CLASSIFICATION: [7370 ] IRS NUMBER: 043016142 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26540 FILM NUMBER: 765287 BUSINESS ADDRESS: STREET 1: 80 BLANCHARD RD CITY: BURLINGTON STATE: MA ZIP: 01803 BUSINESS PHONE: 7812293000 MAIL ADDRESS: STREET 1: DESKTOP DATA INC STREET 2: 80 BLANCHARD RD CITY: BURLINGTON STATE: MA ZIP: 01803 FORMER COMPANY: FORMER CONFORMED NAME: DESKTOP DATA INC DATE OF NAME CHANGE: 19950629 10-Q 1 0001.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended: September 30, 2000 ------------------ OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-26540 ------- NewsEdge Corporation (Exact name of registrant as specified in its charter) DELAWARE 04-3016142 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 80 Blanchard Road Burlington, Massachusetts 01803 (Address of principal executive offices) (781) 229-3000 (Registrant's telephone number, including area code) Indicate by 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 60 days. Yes X . No ___. --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of each class Outstanding at October 31, 2000 - ------------------- ------------------------------- Common Stock, par value $.01 18,602,527 NEWSEDGE CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Number Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 5 Notes to the Condensed Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 16 PART II - OTHER INFORMATION Item 2 Changes in Securities and Use of Proceeds Item 6(a) Exhibits 24 Item 6(b) Reports on Form 8-K 24 Signature 25 Exhibit Index 26
2 PART I - FINANCIAL INFORMATION ITEM 1 NEWSEDGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
September 30, December 31, 2000 1999 ------------ ------------ ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 19,905 $ 20,278 Accounts receivable 11,469 11,280 Due from WinStar (Note 3) 2,000 -- Prepaid expenses and deposits 5,549 5,132 ------------ ------------ Total current assets 38,923 36,690 ------------ ------------ Property and equipment, net 7,891 9,398 ------------ ------------ Other assets 1,122 1,766 ------------ ------------ Total assets $ 47,936 $ 47,854 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,924 $ 2,869 Accrued expenses 13,200 14,837 Deferred revenue, current 24,322 23,010 Current portion of long-term obligations 24 303 ------------ ------------ Total current liabilities 42,470 41,019 ------------ ------------ Deferred revenue, noncurrent 77 124 ------------ ------------ Stockholders' equity: Common stock 190 181 Additional paid-in capital 132,581 130,136 Cumulative translation adjustment (184) (58) Accumulated deficit (124,472) (120,822) Treasury stock, at cost; 432,000 shares (2,726) (2,726) ------------ ------------ Total stockholders' equity 5,389 6,711 ------------ ------------ Total liabilities & stockholders' equity $ 47,936 $ 47,854 ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 NEWSEDGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------- --------------------------- 2000 1999 2000 1999 ---------- ---------- ----------- ----------- Total revenues $ 17,868 $ 18,749 $ 52,869 $ 55,550 Costs and expenses: Cost of revenues 6,736 7,387 21,907 22,723 Customer support expenses 1,265 1,182 4,108 3,701 Development expenses 2,313 2,012 7,940 6,497 Sales and marketing expenses 7,634 7,493 25,085 23,237 General and administrative expenses 966 735 4,979 2,185 Merger, disposition and other charges -- -- (453) -- ---------- ---------- ----------- ----------- Total costs and expenses 18,914 18,809 63,566 58,343 ---------- ---------- ----------- ----------- Loss from operations (1,046) (60) (10,697) (2,793) Interest income and other, net 284 389 788 1,277 ---------- ---------- ----------- ----------- Income (loss) from continuing operations before provision for income taxes (762) 329 (9,909) (1,516) Provision for income taxes 127 15 166 67 ---------- ---------- ----------- ----------- Net income (loss) from continuing operations (889) 314 (10,075) (1,583) Loss from discontinued operations, net -- (4,056) (1,859) (7,956) Net gain on disposal of Individual.com, Inc. 2,017 -- 8,284 -- ---------- ---------- ----------- ----------- Income (loss) from discontinued operations 2,017 (4,056) 6,425 (7,956) ---------- ---------- ----------- ----------- Net income (loss) $ 1,128 $ (3,742) $ (3,650) $ (9,539) ========== ========== =========== =========== Basic and diluted net income (loss) per share Continuing operations $ (0.05) $ 0.02 $ (0.56) $ (0.09) Discontinued operations 0.11 (0.24) 0.36 (0.46) ---------- ---------- ----------- ----------- Total $ 0.06 $ (0.22) $ (0.20) $ (0.55) ========== ========== =========== =========== Weighted average common shares outstanding - Basic 18,251 17,333 17,877 17,330 ========== ========== =========== =========== Weighted average common shares outstanding - Diluted 18,303 17,333 17,877 17,330 ========== ========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 NEWSEDGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Nine Months Ended September 30, --------------------------- 2000 1999 -------- -------- Cash flows from operating activities: Net loss $ (3,650) $ (9,539) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,333 2,965 Gain on disposal of Individual.com, Inc. (8,284) -- Changes in assets and liabilities: Accounts receivable (966) 1,824 Prepaid expenses and deposits (417) (3,561) Accounts payable and accrued expenses 1,006 (418) Deferred revenue 1,293 (1,938) -------- -------- Net cash used in operating activities (7,685) (10,667) -------- -------- Cash flows from investing activities: Net proceeds from disposal of Individual.com, Inc. 7,385 -- Purchases of property and equipment (2,080) (3,318) Decrease (increase) in other assets 5 (536) Decrease in investments, net -- 3,782 -------- -------- Net cash provided by (used in) investing activities 5,310 (72) -------- -------- Cash flows from financing activities: Proceeds from private placement, net of issuance costs 1,782 -- Proceeds from issuances related to stock plans, including tax benefits 672 1,500 Principal payments under capital leases (279) (340) Decrease in long-term obligations (47) (415) Purchase of treasury stock -- (675) -------- -------- Net cash provided by financing activities 2,128 70 -------- -------- Effect of exchange rate on cash and cash equivalents (126) (85) -------- -------- Decrease in cash and cash equivalents (373) (10,754) Cash and cash equivalents, beginning of period 20,278 37,808 -------- -------- Cash and cash equivalents, end of period $ 19,905 $ 27,054 ======== ======== Supplemental disclosure of cash flow information: Cash paid for income taxes $ 55 $ 60 -------- -------- Cash paid for interest $ 8 $ 56 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 NEWSEDGE CORPORATION AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Nature of the Business NewsEdge Corporation ("the Company" or "NewsEdge") is a leading provider of eContent applications for business web sites and enterprise intranets. The Company's mission is to make news and information valuable for business. NewsEdge services provide access to value-added news over the Internet or customer intranets. The Company aggregates and adds value to news and information from over 2,000 sources published by over one hundred global content providers. This information is customized and filtered so that users can readily find the most important, relevant stories from the overwhelming volume of daily news that is available. NewsEdge Corporation is headquartered in Burlington, Massachusetts, with sales offices and distributors throughout North America, South America, Europe, Asia and the Middle East. On December 7, 1999, the Company entered into a purchase and sale agreement with RoweCom, Inc., whereby RoweCom would purchase all of the outstanding shares of common stock of the Company for approximately $227 million. The acquisition was subject to the approval of the stockholders of both companies. On March 6, 2000, the agreement was mutually terminated by both parties. The Company incurred costs of $1.4 million, comprised of legal, employee retention and acquisition-related expenses charged to operations during the first quarter of 2000. During the second quarter of 2000, the Company incurred an additional $668,000 relating to remaining employee retention expenses. In March 2000, the Company's Board of Directors approved, and in early May 2000, the Company announced a strategic expansion of its traditional business focus. In order to capitalize on its media sources, personalization strategy, and international sales and support infrastructure, the Company has moved into the eContent business marketplace by offering competitive eContent applications for business web sites and enterprise intranets. eContent is the constantly changing information required for web-sites to encourage and foster high frequency usage and support other web-based interactions. The Company believes that syndicated eContent and contextual commerce (the ability to map business content to transaction opportunities) offerings, in addition to providing infrastructure and solution applications to the Company's clients, will allow the Company to drive traffic and commerce on its client web sites. The Company incurred $2.1 million of non-recurring expenses during the nine months ended September 30, 2000 related to transitioning the Company to its new strategic direction. These costs were comprised primarily of asset write-offs and reserves. 2 Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements of the Company presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 1999 included in the Company's Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company and its subsidiaries. Quarterly operating results are not necessarily indicative of the results that would be expected for the full year. 6 Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents and Investments Cash equivalents consist of highly-liquid investments purchased with an original maturity of three months or less. Reclassifications Certain prior year amounts have been reclassified to conform with current year's presentation. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is not expected to have a material impact on the Company's consolidated financial statements. The Securities and Exchange Commission released Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, on December 3, 1999. This SAB provides additional guidance on the accounting for revenue recognition, including both broad conceptual discussions as well as certain industry-specific guidance. The guidance is effective in the fourth quarter 2000. The Company does not expect the adoption of SAB 101 to have a material impact on the Company's results of operations. In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of Accounting Principles Board (APB), Opinion No. 25. The interpretation clarifies the application of APB Opinion No. 25 in certain situation, as defined. The interpretation is effective July 1, 2000, but covers certain events occurring during the period after December 15, 1998, but before the effective date. To the extent that events covered by this interpretation occur during the period after December 15, 1998 but before the effective date, the effects of applying this interpretation would be recognized on a prospective basis from the effective date. Accordingly, upon initial application of the final interpretation, (i) no adjustments would be made to the financial statements for periods before the effective date and (ii) no expense would be recognized for any additional compensation cost measured that is attributable to periods before the effective date. The Company expects that the adoption of this interpretation would not have any effect on the accompanying financial statements. 7 3. Discontinued Operations On February 18, 2000, the Company entered into a purchase and sale agreement to sell its ownership interest in its wholly owned subsidiary, Individual.com, Inc. Upon the initial closing, the Company sold 80% of its ownership interest in Individual.com, Inc. for a purchase price of $8.0 million payable in installments receivable through December 2000, of which the Company received $2.5 million in February 2000 and $2.5 million in May 2000. The purchase and sale of the remaining 20% of Individual.com, Inc., which was due to be completed on February 28, 2001, was completed on August 1, 2000, under the terms of an amended agreement, pursuant to which the Company received a $3.0 million payment in September 2000 and is due to receive final payments of $1.0 million on December 26, 2000 and $1.0 million on February 28, 2001. In the third quarter of 2000, the Company recorded the remaining $2.0 million gain on the sale transaction based on the sale of the remaining 20% of Individual.com, Inc. The Company has recorded a net gain on the sale of Individual.com totaling $6.3 million in prior quarters. The Company also made payments to retain the Individual.com workforce, which along with other transaction fees, have been included as a reduction in the gain on the sale. The Company has presented the operating results of Individual.com, Inc. as discontinued operations for all periods presented. Included in these results are revenues from the Individual.com business for the three- and nine-month periods ending September 30, 2000 of $0 and $297,000, respectively, as compared to $945,000 and $3.1 million, respectively for the same periods in 1999. The Company has not restated the consolidated balance sheet for the net assets of Individual.com, Inc., which total $1.2 million at December 31, 1999. 3. Segment Reporting On December 31, 1998, NewsEdge Corporation adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. This pronouncement established standards for public companies relating to the reporting of financial and descriptive information about their operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance of the business. The Company evaluates its continuing operations in two product segments: Enterprise and Other. The Company pursues the market for news and current awareness through one primary line of business: the Enterprise business. The Enterprise business uses direct selling and telesales efforts and targets large organizations and individual websites. The Enterprise services deliver news and information to large numbers of users within organizations through their corporate intranet or local area networks and to destination websites as a content service for visitors of those sites. In addition to the Enterprise business, the Company also reports a segment of Other, which consists of services which were phased out by the Company during 1999. Segment data excludes information pertaining to the discontinued operations of Individual.com, Inc. (see Note 3). The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance of its segments based on revenues and segment profitability. Segment profitability is defined by the Company as profit or loss from operations before income taxes, interest and merger, disposition and other charges. Noncash expenses included in the segment profitability measure have been detailed separately in the table below. The Company does not evaluate the assets of each operating segment separately as the majority of such assets are commingled and transferable among the different segments. 8
Three Months Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 2000 1999 2000 1999 --------------------- --------------------- (in thousands) Revenues: Enterprise $ 17,868 $ 18,465 $ 52,869 $ 54,235 Other -- 284 -- 1,315 ---------------------- --------------------- Total revenues $ 17,868 $ 18,749 $ 52,869 $ 55,550 ====================== ===================== Loss from continuing operations before mergers, dispositions and other charges, interest and income taxes: Enterprise $ (1,046) $ 94 $(10,697) $ (2,567) Other -- (154) -- (226) Noncash expenses by segment: Enterprise $ 898 $ 806 $ 3,333 $ 2,389 Other -- 21 -- 69
5. Comprehensive Income The Company adopted SFAS No. 130, Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130 requires that items defined as other comprehensive income, such as foreign currency translation adjustments, be separately classified in the financial statements and that the accumulated balance of other comprehensive income be reported separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The components of comprehensive income for the three and nine months ended September 30, 2000 and 1999 are as follows:
Three Months Ended Nine Months Ended September 30, September 30, (in thousands) --------------------------------------------------------------- 2000 1999 2000 1999 --------------------------------------------------------------- Comprehensive income (loss): Net loss $ 1,128 $(3,742) $(3,650) $(9,539) Other comprehensive income (loss): Foreign currency adjustment (97) 29 (126) (85) --------------------------------------------------------------- Comprehensive loss $(1,031) $(3,713) $(3,776) $(9,624) ===============================================================
9 6. Earnings Per Share In accordance with SFAS No. 128, Earnings per Share, basic and diluted earnings per share were computed by dividing net loss by the weighted average number of common shares outstanding during the first nine months of 2000 and 1999. Diluted earnings per share for the three months ended September 30, 2000 was computed by dividing net income by the diluted weighted average number of common shares outstanding. Diluted earnings per share for the nine months ended September 30, 2000 excludes shares issuable from the assumed exercise of 5,337,200 and 4,121,673 of stock options and warrants as of September 30, 2000 and 1999, respectively, as their effect would be antidilutive. 7. Private Placement On August 4, 2000, the Company consummated a sale of 868,234 shares of its common stock for an aggregate purchase price of $1,845,000. The purchase price was reduced by fees paid in connection with the private placement in the amount of $63,000. The sale was accomplished by a private placement of the Common Stock to primarily officers, directors and affiliates of the Company. In connection with the private placement, the Company also issued warrants to purchase approximately 492,000 shares of Common Stock with an exercise price of $4.00 per share. 10 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Except for the historical information contained herein, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding, among other items, (i) the Company's growth strategies; (ii) anticipated trends in the Company's business; (iii) the Company's ability to expand its service offerings; and (iv) the Company's ability to satisfy working capital requirements. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company's control. Actual results could differ materially from these forward-looking statements as a result of a number of factors including, but not limited to, those factors described in "Certain Factors Affecting Future Operating Results" contained herein. Introduction and Overview NewsEdge Corporation (the "Company" or "NewsEdge") is a leading provider of eContent applications for business web sites and enterprise intranets. The Company's mission is to make news and information valuable for business. NewsEdge services provide access to value added news over the Internet or customer Intranets. The Company aggregates and adds value to news and information from over 2,000 sources published by over one hundred global content providers. This information is customized and filtered so that users can readily find the most important, relevant stories from the overwhelming volume of daily news that is available. The market for news and current awareness is pursued by the Company through its Enterprise business, which uses a direct selling effort and targets large organizations. The Enterprise services deliver news and information to large numbers of users within organizations through their corporate Intranet or local area networks and to destination websites as a content service for visitors of those sites. The Company's Enterprise revenues consist primarily of subscription fees related to the various Enterprise service offerings and eContent products and services. Additionally, Enterprise revenues include royalty revenues generated from content sales billed directly by third party information providers to customers, revenue generated from professional consulting services and revenue generated from installations and related computer hardware sales. Individual.com, Inc. operated the Company's single-worker news service business unit, which derived its revenues from targeted advertising and electronic commerce. On February 18, 2000, the Company, Office.com and Individual.com, Inc. entered into the purchase and sale agreement providing for the sale by the Company of all the issued and outstanding capital stock of Individual.com, Inc. to Office.com. An initial purchase and sale of 4.0 million of the shares occurred on February 18, 2000. The purchase and sale of the remaining 1.0 million shares, or 20% of Individual.com, Inc. occurred on August 1, 2000. Under the terms of the amended stock purchase agreement, the Company, which had received installment payments of $2.5 million in February 2000 and $2.5 million in May 2000, received a $3.0 million payment in September 2000, and the Company is due to receive a $1.0 million payment on December 26, 2000 and a final payment of $1.0 million on February 28, 2001. In the third quarter of 2000, the Company recorded the remaining $2.0 million gain on the sale transaction based on the sale of the remaining 20% of Individual.com, Inc. The Company has recorded a net gain on the sale of Individual.com totaling $6.3 million in prior quarters. The Company also made payments to retain the Individual.com workforce, which along with other transaction fees, have been included as a reduction in the gain on the sale. In addition to the Enterprise business, the Company also reports a segment of "other" revenue, which consists of services which were phased out by the Company during 1999. The Company's "other" revenues consist primarily of subscription fees generated from sales of services. The Company now reports the Individual.com business as discontinued operations. Subscription agreements across all product segments are primarily for an initial term of twelve months, payable in advance, and are automatically renewable for successive one-year periods unless the customer delivers notice of termination prior to the expiration date of the then current agreement. Subscription revenues associated with these agreements are recognized ratably over the subscription term, beginning upon installation of the service. Accordingly, a substantial portion of the Company's revenues is recorded as deferred revenue. 11 Certain newswires offered by the Company for use within its services are purchased by the customer directly from the news provider and payments are made directly from the NewsEdge customer to the provider. For some of these newswires, the Company receives royalty revenue based on payments made by the customer to the news provider. For other newswires that are resold by the Company to the NewsEdge customer, the Company bills the customer for the newswire directly and then pays a royalty to the news provider. Such royalty expenses are included in the Company's cost of revenues. The Company is headquartered in Burlington, Massachusetts, with sales offices and distributors throughout North America, South America, Europe, Asia and the Middle East. On December 7, 1999, the Company entered into a purchase and sale agreement with RoweCom, Inc., whereby RoweCom would purchase all of the outstanding shares of common stock of the Company for approximately $227 million. The acquisition was subject to the approval of the stockholders of both companies. On March 6, 2000, the agreement was mutually terminated by both parties. The Company incurred costs of $2.1 million, comprised of legal, retention and acquisition related expenses charged to operations for the nine-month period ended September 30, 2000. In March 2000, the Company's Board of Directors approved, and in early May 2000, the Company announced a strategic expansion of its traditional business focus. In order to capitalize on its media sources, personalization strategy, and international sales and support infrastructure, the Company has moved into the eContent business marketplace by offering competitive eContent applications for business web sites and enterprise intranets. eContent is the constantly changing information required for web-sites to encourage and foster high frequency usage and support other web-based interactions. The Company believes that syndicated eContent and contextual commerce (the ability to map business content to transaction opportunities) offerings, in addition to providing infrastructure and solution applications to the Company's clients, will allow the Company to drive traffic and commerce on its client's web sites. The Company incurred $2.1 million of non-recurring expenses charged to operations during the nine months ended September 30, 2000, which relate to transitioning the Company to its new strategic direction. These costs were comprised primarily of asset write-offs and reserves. Results of Operations for the Three- and Nine- Month Periods Ended September 30, 2000 as Compared to the Three-and Nine- Month Periods Ended September 30, 1999 Revenues Total revenues for the three-month period ended September 30, 2000 decreased 4.3% to $17.9 million compared to $18.7 million for the same period in 1999. Total revenues for the nine months ended September 30, 2000 decreased 4.9% to $52.9 million compared to $55.6 million during the same period in 1999. The decrease is primarily due to declines in revenues from both the Company's enterprise product line and other terminated lines. Total revenue, excluding terminated lines, for the three-month period ended September 30, 2000 decreased 3.2% to $17.9 million as compared to $18.5 million in 1999. Total revenue, excluding terminated lines, for the nine months ended September 30, 2000 decreased 2.4% to $52.9 million as compared to $54.2 million for the same period in 1999. The decreases reflect disappointing new orders rates at the end of the fourth quarter of 1999 when our sales force was distracted by the then impending RoweCom merger transaction and the highly competitive environments that has been affecting our enterprise business. Other revenues consist of revenues from product lines being terminated or de-emphasized by the Company. During the three- and nine-months ended September 30, 1999 the Company recorded $284,000 and $1.3 million in other revenues, respectively. No amounts were recorded during the comparable period in 2000 as these product lines have been completely terminated by the Company. 12 Cost of revenues Cost of revenues consists primarily of royalties paid to information providers, payroll and related expense for the editorial and news operations staff, as well as data transmission and computer-related costs for the support and delivery of the Company's services. Cost of revenues for the three-month period ended September 30, 2000 decreased to $6.7 million from $7.4 million for the same period in 1999. Cost of revenues for the nine-month period ended September 30, 2000 decreased to $21.9 million from $22.7 million for the same period in 1999. As a percentage of total revenues, cost of revenues for the three-month period ended September 30, 2000 decreased to 37.7% from 39.4% during the same period in 1999. The percentage decrease in the three-month periods ended September 30, 2000 and 1999 was primarily due to the impact of the higher margin eContent business. As a percentage of total revenues, cost of revenues for the nine-month period ended September 30, 2000 increased to 41.4% from 40.9% for the same period in 1999. The percentage increase in the nine-month period ended September 30, 2000 compared to the same period in 1999 was primarily due to new fixed-price contracts with information providers. On a sequential basis, the gross margin as a percentage of revenue increased from 57.0% in the second quarter of 2000 to 62.3% in the third quarter of 2000, reflecting the continued impact of a larger percentage of the Company's sales coming from higher margin eContent business. Customer support expenses Customer support expenses consist primarily of costs associated with technical support of the Company's installed base of customers. Customer support expenses for the three-month period ended September 30, 2000 increased 8.3% to $1.3 million as compared to $1.2 million for the same period in 1999. Customer support expenses for the nine-month period ended September 30, 2000 increased 11% to $4.1 million as compared to $3.7 million for the same period in 1999. The increase in customer support expenses resulted primarily from higher headcount and related expenses. As a percentage of total revenues, customer support expenses for the three-month period ended September 30, 2000 increased to 7.1% from 6.3% in the same period in 1999. Excluding nonrecurring charges, customer support expenses for the nine-month period ended September 30, 2000 were 7.7% of total revenues. As a percentage of total revenues, customer support expenses for the nine-month period ended September 30, 2000 increased to 7.8% from 6.7% in the same period in 1999. Development expenses Development expenses consist primarily of costs associated with the design, programming, and testing of the Company's software and services. Development expenses for the three-month period ended September 30, 2000 increased 15% to $2.3 million as compared to $2.0 million for the same period in 1999. Development expenses for the nine-month period ended September 30, 2000 increased 21.5% to $7.9 million as compared to $6.5 million for the same period in 1999. The increase for the nine-month period ended September 30, 2000 was primarily due to $600,000 of expenses, which represent a write-off of a software asset, related to the Company's new strategic direction, and the remainder of the increase was due to investment in new product development related to the Company's new strategy. As a percentage of total revenues, development expenses for the three-month period ended September 30, 2000 increased to 12.9% from 10.7% in the same period in 1999. Excluding nonrecurring charges, development expenses for the nine-month period ended September 30, 2000 were 13.9% of total revenues. As a percentage of total revenues, development expenses for the nine-month period ended September 30, 2000 increased to 15.0% from 11.7% in the same period in 1999. 13 Sales and marketing expenses Sales and marketing expenses consist primarily of compensation costs (including sales commissions and bonuses), travel expenses, trade shows and other marketing programs. Sales and marketing expenses for the three-month period ended September 30, 2000 increased 1.3% to $7.6 million as compared to $7.5 million for the same period in 1999. Sales and marketing expenses for the nine-month period ended September 30, 2000 increased 8.2 % to $25.1 million as compared to $23.2 million for the same period in 1999. The increase for the nine-month period ended September 30, 2000, was primarily comprised of $1.0 million of expenses related to the non-recurring charges for transitioning the Company to its new strategic direction, which included $400,000 for a reserve for bad debts. The remaining $900,000 of the increase in sales and marketing expenses was primarily due to increased investments and spending in domestic and international sales force and sales management headcount, related payroll expenses, events and direct mail campaigns. As a percentage of total revenues, sales and marketing expenses for the three-month period ended September 30, 2000 increased to 42.7% from 40.0% in the same period in 1999. Excluding nonrecurring charges, sales and marketing expenses for the nine-month period ended September 30, 2000 were 45.6% of total revenues. As a percentage of total revenues, sales and marketing expenses for the nine-month period ended September 30, 2000 increased to 47.4% from 41.8% in the same period in 1999. General and administrative expenses General and administrative expenses consist primarily of expenses for finance, office operations, administration and general management activities, including legal, accounting and other professional fees. General and administrative expenses for the three-month period ended September 30, 2000 increased $231,000 to $966,000 as compared to $735,000 for the same period in 1999. General and administrative expenses for the nine-month period ended September 30, 2000 increased $2.8 million to $5.0 million as compared to $2.2 million for the same period in 1999. The increase for the nine-month period ended September 30, 2000 was primarily a result of costs related to the terminated merger agreement with RoweCom amounting to $2.1 million. The remainder of the increase was due to approximately $500,000 of expenses related to the nonrecurring charge for transitioning the Company to its new strategic direction. As a percentage of total revenues, general and administrative expenses for the three-month period ended September 30, 2000 increased to 5.4% from 3.9% in the same period in 1999. Excluding nonrecurring charges, general and administrative expenses for the nine-month period ended September 30, 2000 were 4.7% of total revenues. As a percentage of total revenues, general and administrative expenses for the nine-month period ended September 30, 2000 increased to 9.4% from 3.9% in the same period in 1999. Loss from Operations Operating loss for the quarter ended September 30, 2000 was $1.0 million compared to a loss of $60,000 for the same period in 1999. The $1.0 million operating loss in the third quarter of 2000 represents approximately a 50% sequential reduction from the $2.1 million loss in the second quarter of 2000, which excludes one-time items. This sequential reduction is due to approximately $200,000 sequential revenue increase and approximately $850,000 reduction in total expenses. The expense reduction is a result of the Company's cost reduction efforts that began as part of its transition to the eContent strategy and the improved gross margin from the Company's eContent business. Merger, disposition and other expenses Merger, disposition and other related expenses for the nine-month period ended September 30, 2000 consist of the reversal of acquisition-related reserves no longer deemed necessary by the Company. There were no merger, disposition and other related expenses during the nine-month period ended September 30, 1999. Interest income and other, net Interest income and other, net for the three- and nine-month periods ended September 30, 2000 decreased to $284,000 and $788,000, respectively from $389,000 and $1,277,000, respectively for the same periods in 1999. The decrease is due to a reduction in interest income associated with lower cash and investment balances. 14 Provision for income taxes The provision for income taxes for the three- and nine-month periods ended September 30, 2000 increased to $127,000 and $166,000, respectively from $15,000 and $67,000, respectively for the same period in 1999. Components of the provisions include state taxes due in states that do not have net operating loss carry-forwards available, foreign tax liabilities and the alternative minimum tax due under the Internal Revenue Code of 1986, as amended. The Company has not recorded a deferred tax benefit in the periods presented for the potential future benefit of its tax loss carry-forwards as the Company has concluded that it is not likely such deferred tax asset would be realized. Discontinued operations In February 2000, the Company's Board of Directors decided to sell its ownership interest in Indivdiual.com, Inc., due to the lack of growth in revenue, increase in expenses and ongoing funding. The Company has reported the historical operating results of its Individual.com business segment as discontinued operations. Revenues from the discontinued operations for the three-and nine month periods ending September 30, 2000 were $0 and $297,000, respectively, (for January 1, 2000 to the February 18, 2000 disposal date) as compared to $945,000 and $3,101,000, respectively for the same periods in 1999. Expenses from discontinued operations for the three- and nine-month periods ended September 30, 2000, were $0 and $2.2 million, respectively (for January 1, 2000 to the February 18, 2000 sale date to Winstar) compared to $5.0 million and $11.1 million, respectively for the same periods in 1999. See Note 3 in the accompanying Notes to Condensed Consolidated Financial Statements. Net Income (Loss) The net income for the three-month period ended September 30, 2000 was $1.1 million, or $0.06 per share which compares to a net loss of $3.7 million, or $0.22 per share during the same period in 1999. The third quarter of 2000 results reflect the favorable impact of a $2.0 million net gain relating to the sale of the remaining 20% of Individual.com, Inc. on August 1, 2000. In addition, the results for the quarter ended September 30, 1999 include the operating loss from discontinued operations of approximately $4.1 million. As a result, the Company recorded a net loss from continuing operations of $889,000 for the quarter ended September 30, 2000, or $0.05 per share, compared to net income from continuing operations of $314,000, or $0.02 per share for the same period in 1999. The net loss from continuing operations was primarily due to decreased revenue in from in the third quarter of 2000 compared to the third quarter of 1999. The net loss from continuing operations of $889,000, in the third quarter of 2000 improved on a sequential basis by approximately 50.0% from the $1.8 million, net loss from continuing operations in the second quarter of 2000, excluding one-time items. The net loss for the nine-month period ended September 30, 2000 was $3.7 million, or $0.20 per share, which compares to a net loss of $9.5 million, or $0.55 per share, during the same period in 1999. The nine-month ended September 30, 2000 results reflect the favorable impact of the $8.3 million net gain on the sale of the Company's equity interest in Individual.com, Inc., offset by $1.9 million of operating loss from discontinued operations for the period prior to the sale. The net loss from continuing operations for the nine-month period ended September 30, 2000 increased to $10.1 million, or $0.56 per share, compared to $1.6 million, or $0.09 per share for the same period in 1999. The increase resulted from two nonrecurring charges taken in the first nine months of 2000 totaling $4.1 million, of which $2.0 million was related to retention payments, transaction costs, and expenses incurred as part of the termination of the RoweCom, Inc. acquisition. An additional $2.1 million charge relates to asset write-offs and reserves associated with costs to be incurred in transitioning the Company to the new strategy. Excluding all the year-to-date nonrecurring charges, net loss from continuing operations for the nine months ended September 30, 2000 was $6.0 million, which compares to a net loss of $1.6 million for the same period in 1999. The increase in the net loss was due to declines in revenue and interest income in addition to increased expenses primarily within sales and marketing and development. 15 Liquidity and Capital Resources The Company's cash and cash equivalents totaled $19.9 million at September 30, 2000, as compared to $20.3 million at December 31, 1999, a decrease of $400,000. The Company's operations used $7.7 million of cash in the nine-months ended September 30, 2000. The use of cash in operations primarily resulted from the Company's net operating loss for the period, of which $1.9 million was from Individual.com, Inc. (a discontinued business). These amounts were partially offset by depreciation and amortization expense. The Company's investing activities provided $5.3 million of cash for the period, due primarily to the $7.4 million net cash proceeds from the sale of Individual.com, Inc., partially offset by approximately $2.1 million fixed asset purchases. The Company's financing activities provided $2.1 million for the period, derived primarily from year-to-date stock option exercises and a sale of 868,234 shares of its common stock consummated on August 4, 2000 in which the Company received $1,782,000. The sale was accomplished by a private placement of the Common Stock to primarily officers, directors and affiliates of the Company. In connection with the private placement, the Company also issued warrants to purchase approximately 492,000 shares of Common Stock with an exercise price of $4.00 per share. In connection with the sale of Individual.com Inc., the Company expects to receive an additional $2.0 million of which $1.0 million is due on December 26, 2000 and the final $1.0 million is due on February 28, 2001. The Company continues to investigate the possibility of investments in or acquisitions of complementary businesses, services or technologies, although the Company has not entered into any commitments or negotiations with respect to any such transactions. On August 4, 2000, the Company consummated a sale of 868,234 shares of its Common Stock for an aggregate purchase price of $1,845,000. The purchase price was reduced by fees paid in connection with the private placement in the amount of $63,000. The sale was accomplished by a private placement of the Common Stock to primarily officers, directors and affiliates of the Company. In connection with the private placement, the Company also issued warrants to purchase approximately 492,000 shares of Common Stock with an exercise price of $4.00 per share. The Company believes that its current cash and cash equivalents, the final proceeds from the sale of Individual.com, Inc., and the impact of expense reduction programs will be sufficient to satisfy working capital and capital expenditure requirements for at least the next twelve months. Certain Factors Affecting Future Operating Results The Company operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company's control. Actual results could differ materially as a result of a variety of factors. The discussion highlights some of the risks, which may affect future operating results. Management of Growth and Hiring of Additional Personnel The Company has experienced growth in its new eContent revenues and expansion of its operations, which have placed significant demands on the Company's management, development, sales and customer support staff. Continued growth will require the Company to hire and retain more development, selling and customer support personnel. The Company has at times experienced difficulty in recruiting and retaining qualified personnel. Recruiting and retaining qualified personnel is an intensely competitive and time-consuming process. There can be no assurance that the Company will be able to attract and retain the necessary personnel to accomplish its growth strategies. Continued difficulties with the recruiting and retention of personnel could adversely affect the Company's ability to satisfy customer demand in a timely fashion or to support satisfactorily its customers and operations, which could in turn, materially adversely affect its business, operating results and financial condition. 16 Fluctuations in Quarterly Results The Company's quarterly operating results may fluctuate significantly in the future depending on factors such as: . demand for its services; . changes in service mix; . the size, timing and renewal of contracts with corporate customers and content providers; . the effects of new service announcements by the Company and its competitors; . the performance of the Company's technology; . the ability of the Company to develop, market and introduce new and enhanced versions of its services on a timely basis; and . the level of product and price competition. A substantial portion of the Company's cost of revenue, which consists principally of fees payable to information providers, communications costs and personnel expenses, is relatively fixed in nature. The operating expense levels of the Company are based, in significant part, on their expectations of future revenue. If quarterly revenues are below management's expectations, results of operations would be adversely affected because a relatively small amount of the Company's costs and expenses will vary with its revenues. Future Operating Results Uncertain The Company's ability to increase its revenues will depend upon its ability to expand its sales force, increase sales to new customers and penetration into existing customers, as well as its ability to successfully implement its plans to provide digital eContent to business web-sites. In addition, as of September 30, 2000, the Company had an accumulated deficit of approximately $124.5 million. The time required for the Company to reach profitability is highly uncertain and there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all. As a result, it is possible that in some future quarter the Company's operating results will be below the expectations of public market analysts and investors. In such event, the price of the Company's Common Stock would likely be materially adversely affected. Although the Company experienced growth in revenues in recent years, there can be no assurance that, in the future, the Company will sustain revenue growth or be profitable on a quarterly or annual basis. On May 31, 2000, the Company received a notice from the NASDAQ Stock Market, Inc. ("NASDAQ") indicating that, as of March 31, 2000, the Company was not in compliance with the net tangible assets maintenance standards required for continued listing on the NASDAQ National Market System. The Company attended a hearing before a NASDAQ panel to evaluate the Company's ability to satisfy the maintenance standards established by NASDAQ. On August 24, 2000, the Company received notice that the Company's stock will continue to be traded on the NASDAQ National Market System. Limited Operating History in eContent Business Because the Company commenced its strategic expansion into its eContent line of business in May 2000, it has limited financial and operating data and a limited operating history relevant to its eContent business. Accordingly, it is difficult to evaluate the prospects of the Company's eContent business. The Company's eContent business model is unproven, which creates a risk that its performance will not meet the expectations of investors and that the value of the Company's common stock will decline. 17 Dependence on Continued Growth in Use of the Internet The Company distributes certain services across multiple delivery platforms, including the Internet, private networks based on Lotus Notes and other groupware products and electronic mail. Because the Company recently expanded its strategic focus to target operators of commercial web-sites, demand for its services will depend in large part on continued growth in the use of the Internet. There are critical issues concerning the commercial use of the Internet that remain unresolved. As a result, there can be no assurance that communication or commerce over the Internet will continue to develop at historical rates or that extensive content will continue to be provided over the Internet. The Internet may not prove to be a viable commercial marketplace for a number of reasons, including potentially inadequate development of the necessary infrastructure, timely development and commercialization of performance improvements or delays in the development or adoption of new standards and protocols required to handle increased levels of Internet activity. If the necessary infrastructure or complementary services necessary to make the Internet a viable commercial marketplace are not developed, or if the Internet does not become a viable commercial marketplace, the Company's business, results of operations, and financial condition could be materially adversely affected. Legal Uncertainties and Governmental Regulation of the Internet Could Inhibit Growth of the Internet and E-Commerce Many legal questions relating to the Internet remain unsettled and these areas of uncertainty may be resolved in ways that damage the Company's business. It may take years to determine whether and how existing laws governing matters such as intellectual property, privacy, libel and taxation apply to the Internet. In addition, new laws and regulations that address issues such as user privacy, commerce, advertising and the characteristics of and quality of products or services are becoming more prevalent. As use of the Internet and the prevalence of e-commerce grow, there may be calls for further regulation such as more stringent consumer protection laws. In addition, the Company's distribution arrangements and customer contracts could subject it to the laws of foreign jurisdictions in unpredictable ways. These possibilities could affect the Company adversely in a number of ways. New regulation could make the Internet less attractive to users, resulting in slower growth in its use and acceptance than the Company expects. Complying with new regulations could result in additional cost to the Company, which could reduce its margins, or it could leave the Company at risk of potentially costly legal action. The Company may be affected indirectly by legislation that fundamentally alters the practicality or cost-effectiveness of utilizing the Internet, including the cost of transmitting over various forms of network architecture, such as telephone networks or cable systems, or the imposition of various forms of taxation on Internet-related activities. Regulators continue to evaluate the best telecommunications policy regarding the transmission of Internet traffic. Competition The business information services industry is intensely competitive and is characterized by rapid technological change and entry into the field by extremely large and well-capitalized companies. The Company competes or may compete directly or indirectly with the following categories of companies: . large, well-established news and information providers such as Dow Jones, Lexis/Nexis, Pearson, and Thomson; . eContent providers such as ScreamingMedia.com, Inc., iSyndicate and WAVO: . market data services companies such as ADP, Bloomberg and Bridge; . traditional print media companies that are increasingly searching for opportunities for on-line provision of news, including through the establishment of web sites on the Internet; 18 . large providers of LAN-based software systems such as Lotus/IBM and Microsoft, which could, in the future, ally with competing news and information providers; and . to a lesser degree, consumer-oriented, advertising-subsidized web-based services and Internet access providers. Many of the market participants named above have substantially greater financial, technical and marketing resources than the Company. Increased competition, on the basis of price or otherwise, may require price reductions or increased spending on marketing or software development, which could have a material adverse effect on the Company's business and results of operations. Risks Relating to Acquisitions Management may from time to time consider acquisitions of assets or businesses that it believes may enable the Company to obtain complementary skills and capabilities, offer new services, expand its customer base or obtain other competitive advantages. Such acquisitions involve potential risks, including difficulties in assimilating the acquired company's operations, technology, services and personnel, completing and integrating acquired in-process technology, diverting management's resources, uncertainties associated with operating in new markets and working with new employees and customers, and the potential loss of the acquired company's key employees. Dependence on Cooperative Marketing Arrangements The Company has entered into certain cooperative marketing agreements and informal arrangements with software vendors, web-site sponsors and operators of online services, including Microsoft, Netscape, Yahoo! and Dow Jones. These companies presently market services that compete directly with those of the Company. If the Company's marketing activities with such companies were terminated, reduced, curtailed, or otherwise modified, the Company may not be able to replace or supplement such efforts alone or with others. If these companies were to develop and market their own business information services or those of the Company's competitors, the Company's business and results of operations and financial condition may be materially and adversely affected. Dependence on News Providers A significant percentage of the Company's customers subscribe to services provided by one or more of Press Association Inc., a subsidiary of The Associated Press, Dow Jones, The Financial Times and Thompson. The Company's agreements with news providers are generally for terms of one to three years, with automatic renewal unless notice of termination is provided before the end of the term by either party. These agreements may also be terminated by the provider if the Company fails to fulfill its obligations under the agreement. Many of these news and information providers compete with one another and, to some extent, with the Company. Termination of one or more significant news provider agreements would decrease the news and information which the Company can offer its customers and could have a material adverse effect on the Company's business, results of operations and financial condition. Also, an increase in the fees required to be paid by the Company to its information providers would have an adverse effect on the Company's gross margins and results of operations. 19 Dependence on News Transmission Sources The Company's news and information for certain of the NewsEdge services is transmitted using one or more of four methods: leased telephone lines, satellites, FM radio transmission or the Internet. None of these methods of news and information transmission is within the control of the Company, and the loss or significant disruption of any of them could have a material adverse effect on the Company's business. Many newswire providers have established their own broadcast communications networks using one or more of these four vehicles. In these cases, the Company's role is to arrange communications between the news provider and the NewsEdge customer's server. For sources which do not have their own broadcast communications capability, news and information is delivered to the Company news consolidation facility, where it is reformatted for broadcast to NewsEdge servers and retransmitted to customers through one of two methods: . an arrangement between the Company and WAVO Corporation, a common carrier communications vendor; or . the Company's own NewsEdge Network, a proprietary entitlement and delivery system launched in the fall of 1998 that takes advantage of both leased line and Internet delivery. WAVO presently also markets services that compete directly with those of the Company. WAVO is also the communications provider for many newswires offered by the Company through NewsEdge services. The Company's agreement with WAVO expires on December 31, 2002. This agreement can be terminated earlier in the event of a material breach by the Company of the agreement. If the agreement with WAVO were terminated on short notice, or if WAVO were to encounter technical or financial difficulties adversely affecting its ability to continue to perform under the agreement or otherwise, the Company's business could be materially and adversely affected. The Company believes that if WAVO were unable to fulfill its obligations, other sources of retransmission would be available to the Company including the NewsEdge Network, although the transition from WAVO to those sources could result in delays or interruptions of service that could have a material adverse affect on the Company's business, results of operations and financial condition. WAVO did experience technical difficulties in May 1998 due to the disablement of the PanAmSat Galaxy IV satellite. This disablement caused an interruption in the delivery of news services to between one-third and one-half of the Company's customers. The interruption was resolved in approximately ten days and did not have a material impact on the Company's financial results. Risk of System Failure or Inadequacy The Company's operations are dependent on its ability to maintain its computer and telecommunications systems in effective working order. These systems and operations are vulnerable to damage or interruption from human error, natural disasters, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. Although the Company has limited back-up capability, this measure does not eliminate the significant risk to the Company's operations from a natural disaster or system failure at its principal site. In addition, any failure or delay in the timely transmission or receipt of news feeds and computer downloads from its information providers, due to system failure of the information providers, the public network or otherwise, could disrupt the Company's operations. The Company's insurance policies may not adequately compensate us for any losses that it may incur because of any failures in its system or interruptions in delivery of content. The Company's business, results of operations and financial condition could be materially adversely affected by any event, damage or failure that interrupts or delays our operations. 20 Rapid Technological Change The business information services, software and communications industries are subject to rapid technological change, which may render existing services obsolete or require significant unanticipated investments in research and development. The Company's future success will depend, in part, upon its ability to enhance its service offerings and keep pace with technological developments. The Company's future success will depend on its ability to enhance its existing services, to develop new services that address the needs of its customers and to respond to technological advances and emerging industry standards and practices, each on a timely basis. Services as complex as those offered by the Company entail significant technical risks, often encounter development delays and may result in service failures when first introduced or as new versions are released. Any such delays in development or failures that occur after commercial introduction of new or enhanced services may result in loss of or delay in market acceptance, which could have a material adverse effect upon the Company's business, results of operations and financial condition. Protection and Potential Loss of the Company's Proprietary Rights and Intellectual Property The Company is heavily dependent upon proprietary technology. In addition, the Company relies on a combination of trade secret, copyright and trademark laws and non-disclosure agreements to protect its proprietary rights in its software and technology. There can be no assurance that such measures are or will be adequate to protect the Company's proprietary technology. In addition, there can be no assurance that the Company's competitors will not independently develop technologies that are substantially equivalent or superior to the Company's technologies or services. The Company licensed the proprietary SMART filtering software, which is used as the filtering engine within the Company's news Refinery, from Cornell Research Foundation, Inc. ("Cornell University"). Under the terms of the license agreement with Cornell University, the Company had exclusive worldwide rights until February 1999 to design, develop, market, and sell systems and services based on the SMART software for the retrieval and dissemination of data from recent and continually changing data sources. Provided that the Company does not default on the license agreement, the Company will retain a continuing worldwide, non-exclusive, perpetual royalty-free right to use the SMART software; and in addition, the Company owns, and will continue to own, all enhancements to the SMART software that it has developed. There can be no assurance, however, that Cornell University has not or will not license the SMART software to a third party, including a competitor of the Company. In addition, Cornell University may terminate the license agreement if the Company has materially breached the agreement and such breach remains uncured for 60 days after written notice of such breach has been given. If the license agreement for the SMART technology were to terminate, there can be no assurance that a replacement solution could be developed or acquired, on a timely basis or at all, and on favorable terms to the Company. Consequently, any termination of the Company's license agreement with Cornell University would have a material adverse effect on the Company's business, results of operations, and financial condition. Potential Litigation of Third Party Claims Concerning the Infringement of Proprietary Right There has been substantial litigation in the information services industry involving intellectual property rights. Although the Company believes that it is not infringing the intellectual property rights of others, there can be no assurance that such claims, if asserted, would not have a material adverse effect on the Company's business, results of operations, and financial condition. In addition, inasmuch as the Company licenses the informational content that is included in its services from third parties, its exposure to copyright infringement actions may increase because the Company must rely upon such third parties for information as to the origin and ownership of such licensed content. Although the Company generally obtains representations as to the origins and ownership of such licensed informational content and generally obtains indemnification to cover any breach of any such representations, there can be no assurance that such representations will be accurate or that such indemnification will provide adequate compensation for any breach of such representations. In the future, litigation may be necessary to enforce and protect trade secrets, copyrights and other intellectual property rights of the Company. The Company may also be subject to litigation to defend against claimed infringement of the rights of others or to determine the scope and validity of the intellectual property rights of others. Any such litigation would be costly and divert management's attention, either of which would have a material adverse effect on the Company's business, results of operations, and financial condition. Adverse determinations in such litigation could result in the loss of the Company's proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties, and prevent the Company from selling its services, any one of which could have a material adverse effect on the Company's business, results of operations, and financial condition. 21 Potential Liability for Information Transmitted The Company may be subject to claims for defamation, libel, copyright or trademark infringement or based on other theories relating to the information it publishes through its services. These types of claims have been brought, sometimes successfully, against online services as well as print publications in the past. The Company's insurance may not adequately protect it against these claims. In addition, the Company's proprietary software technologies enable it to deliver content received from participating content providers only to customers who have been authorized to access that content. The Company might inadvertently distribute content to a customer who is not authorized to receive it, which could subject it to a claim for damages from the information provider or harm to its reputation in the market place. Maintenance of Reputation and Name Recognition The Company believes that establishing and maintaining a good reputation and name recognition are critical for attracting and retaining customers and employees. The Company also believes that the importance of reputation and name recognition is increasing and will continue to increase due to the growing number of providers of Internet services. If the Company's reputation is damaged or if potential customers are not familiar with the Company, it may be unable to attract new, or retain existing, customers and employees. Promotion and enhancement of NewsEdge's name will depend largely on its success in continuing to provide effective services. If customers do not perceive NewsEdge services to be effective or of high quality, the Company's brand name and reputation will suffer. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is not expected to have a material impact on the Company's consolidated financial statements. The Securities and Exchange Commission released Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, on December 3, 1999. This SAB provides additional guidance on the accounting for revenue recognition, including both broad conceptual discussions as well as certain industry-specific guidance. The guidance is effective in the fourth quarter 2000. The Company does not expect the adoption of SAB 101 to have a material impact on the Company's results of operations. In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of Accounting Principles Board (APB), Opinion No. 25. The interpretation clarifies the application of APB Opinion No. 25 in certain situation, as defined. The interpretation is effective July 1, 2000, but covers certain events occurring during the period after December 15, 1998 but before the effective date. To the extent that events covered by this interpretation occur during the period after December 15, 1998 but before the effective date, the effects of applying this interpretation would be recognized on a prospective basis from the effective date. Accordingly, upon initial application of the final interpretation, (i) no adjustments would be made to the financial statements for periods before the effective date and (ii) no expense would be recognized for any additional compensation cost measured that is attributable to periods before the effective date. We expect that the adoption of this interpretation would not have any effect on the accompanying financial statements. 22 Item 3. Quantitative and Qualitative Disclosures about Market Risk The following discussion about the Company's market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The Company is exposed to market risk related to changes in interest rates and foreign currency exchange rates. As of June 30, 2000, the Company did not use derivative financial instruments for speculative or trading purposes. Interest Rate Risk The Company invests in short-term and cash equivalent investment instruments such as U.S. treasury notes, U.S. Government agencies and corporate bonds. These held-to-maturity securities are subject to interest rate risk and will fall in value if market interest rates increase. The Company has the ability to hold its fixed income investments until maturity, and therefore the Company would not expect its operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on its securities portfolio. Foreign Currency Exchange Risk As a global concern, the Company faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on the Company's financial results. Historically, the Company's primary exposures have been related to non-dollar-denominated operating expenses in Canada. The majority of Company sales are denominated in U.S. dollars. The Company has not determined what impact, if any, the introduction of the Euro will have on its foreign exchange exposure. The Company is prepared to hedge against fluctuations in the Euro if this exposure becomes material. As of September 30, 2000, the assets and liabilities of the Company related to non-dollar-denominated currencies was not material. 23 NEWSEDGE CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On August 4, 2000 the Company consummated a sale of 868,234 shares of its common stock for an aggregate purchase price of $1,845,000 or $2.125 per share, such amount being equal to the last reported sale price reported on the Nasdaq National Market on August 4, 2000. In connection with the sale of its common stock, the Company also issued a series of warrants for a total of approximately 492,000 shares of Common Stock at an exercise price of $4.00 per share. The common stock and warrants were issued primarily to officers, directors and affiliates of the Company. The purchasers were (i) Regan Partners, LP, (ii) Regan International Fund, Ltd., (iii) The Wellcome Trust, (iv) Basil Regan , (v) Murat H. Davidson, Jr., (vi) H.G. Wellington, Custodian for the benefit of the Murat H Davidson, Jr. Rollover IRA, (vii) Michael Kolowich, (viii) Clifford M. Pollan, (ix) Ronald Benanto, (x) Bart Farber and (xi) Rory Cowan. The common stock and warrants were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. The warrants were fully vested at the time of issuance and shall be void on August 4, 2004. Item 6. Exhibits and Reports Filed on Form 8-K. 6(a) Exhibits. 4.1, 10.1 - Form of Common Stock Warrant, dated August 4, 2000, issued by the Company to certain investors and schedule of warrant holders. 10.2 - Form of Common Stock Purchase Agreement, dated August 4, 2000, between the Company and certain investors and schedule of investors. 27.1 - Financial Data Schedule for the three-month period ended September 30, 2000. 6(b) REPORTS ON FORM 8-K On August 7, 2000, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission , disclosing under Item 5 that the Company consummated a sale of 868,234 shares of its common stock on August 4, 2000 for an aggregate purchase price of approximately $1,845,000. The sale was accomplished by a private placement of the common stock primarily to officers, directors and affiliates of the Company. In connection with the private placement, the Company also issued warrants to purchase approximately 492,000 shares of Common Stock with an exercise price of $4.00 per share. On August 8, 2000, the Company filed a Current Report on Form 8-K/A with the Securities and Exchange Commission, disclosing under Item 5 that the Company, Office.com Inc and Individual.com, Inc., entered into an amendment to that certain stock purchase agreement, dated as of February 18, 2000, for the sale by the Company of its remaining 20% interest in Individual to Office.com, Inc on August 1, 2000, rather than February 28, 2001 as originally contemplated. 24 NEWSEDGE CORPORATION AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEWSEDGE CORPORATION (Registrant) Date: November 14, 2000 /s/ Ronald Benanto -------------------------------- Ronald Benanto Vice President - Finance and CFO 25 NEWSEDGE CORPORATION AND SUBSIDIARIES EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 4.1, 10.1 Form of Common Stock Warrant, dated August 4, 2000, issued by the Company to certain investors and schedule of warrant holders. 10.2 Form of Common Stock Purchase Agreement, dated August 4, 2000, between the Company and certain investors and schedule of investors. 27.1 Financial Data Schedule for September 30, 2000. EX-4.1/10.1 2 0002.txt COMMON STOCK WARRANT Exhibit 4.1, 10.1 This Warrant has not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws, and may not be sold or transferred unless such sale or transfer is in accordance with the registration requirements of such Act and applicable laws or some other exemption from the registration requirements of such Act and applicable laws is available with respect thereto. FORM OF COMMON STOCK PURCHASE WARRANT Warrant No. ____ Number of Shares _________ NewsEDGE Corporation -------------------- August 4, 2004 ____ 1. Issuance. This Warrant is issued to _________________ ("Purchaser") by -------- NewsEDGE Corporation, a Delaware corporation (hereinafter with its successors called the "Company"). 2. Purchase Price; Number of Shares. Subject to the terms and conditions -------------------------------- hereinafter set forth, the registered holder of this Warrant (the "Holder"), commencing on the date hereof, is entitled upon surrender of this Warrant with the subscription form annexed hereto duly executed, at the office of the Company, 80 Blanchard Road, Burlington, MA 01803, or such other office as the Company shall notify the Holder of in writing, to purchase from the Company at a price per share (the "Purchase Price") of $4.00, fully paid and nonassessable shares of Common Stock, $.01 par value, of the Company (the "Common Stock"). Until such time as this Warrant is exercised in full or expires, the Purchase Price and the securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter provided. 3. Payment of Purchase Price. The Purchase Price may be paid in cash or by ------------------------ check. 4. Partial Exercise. This Warrant may be exercised in part, and the Holder ---------------- shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant, covering the number of shares in respect of which this Warrant shall not have been exercised. 5. Issuance Date. The person or persons in whose name or names any ------------- certificate representing shares of Common Stock is issued hereunder shall be deemed to have become the holder of record of the shares represented thereby as at the close of business on the date this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed. 6. Expiration Date; Automatic Exercise. This Warrant shall expire at the ----------------------------------- close of business on August 4, 2004, and shall be void thereafter. Notwithstanding the foregoing, this Warrant shall automatically be deemed to be exercised in full pursuant to the provisions of Section 4 hereof, without any further action on behalf of the Holder, immediately prior to the time this Warrant would otherwise expire pursuant to the preceding sentence. 7. Reserved Shares; Valid Issuance. The Company covenants that it will at ------------------------------- all times from and after the date hereof reserve and keep available such number of its authorized shares of Common Stock, free from all preemptive or similar rights therein, as will be sufficient to permit the exercise of this Warrant in full. The Company further covenants that such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof. 8. Dividends. If after the Original Issue Date (as defined in Section 15 --------- hereof) the Company shall subdivide the Common Stock, by split-up or otherwise, or combine the Common Stock, or issue additional shares of Common Stock in payment of a stock dividend on the Common Stock, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Purchase Price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination. 9. Mergers and Reclassifications. If after the Original Issue Date there ----------------------------- shall be any reclassification, capital reorganization or change of the Common Stock (other than as a result of a subdivision, combination or stock dividend provided for in Section 9 hereof), or any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the outstanding Common Stock), or any sale or conveyance to another corporation or other business organization of all or substantially all of the assets of the Company, then, as a condition of such reclassification, reorganization, change, consolidation, merger, sale or conveyance, lawful provisions shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall thereafter have the right to purchase, at a total price not to exceed that payable upon the exercise of this Warrant in full, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased by the Holder immediately prior to such reclassification, reorganization, change, consolidation, merger, sale or conveyance, and in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including without limitation, provisions for the adjustment of the Purchase Price and the number of shares issuable hereunder) shall thereafter be applicable in relation to any shares of stock or other securities and property thereafter deliverable upon exercise hereof. 10. Fractional Shares. In no event shall any fractional share of Common ----------------- Stock be issued upon any exercise of this Warrant. If, upon exercise of this Warrant as an entirety, the Holder would, except as provided in this Section 11, be entitled to receive a fractional share of Common Stock, then the Company shall issue the next higher number of full shares of Common Stock, issuing a full share with respect to such fractional share. 11. Certificate of Adjustment. Whenever the Purchase Price is adjusted, as ------------------------- herein provided, the Company shall promptly deliver to the Holder a certificate of a firm of independent public accountants setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. 12. Notices of Record Date, Etc. In the event of: --------------------------- (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, (b) any reclassification of the capital stock of the Company, capital reorganization of the Company, consolidation or merger involving the Company, or sale or conveyance of all or substantially all of its assets, or (c) any voluntary or involuntary dissolution, liquidation or winding- up of the Company,then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which any such reclassification, reorganization, consolidation, merger, sale or conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record in respect of such event are to be determined. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any such action is to be taken. 13. Amendment. The terms of this Warrant may be amended, modified or waived --------- only with the written consent of the Company and the holders of Warrants representing at least two-thirds of the number of shares of Common Stock then issuable upon the exercise of the Warrants. No such amendment, modification or waiver shall be effective as to this Warrant unless the terms of such amendment, modification or waiver shall apply with the same force and effect to all of the other Warrants then outstanding. 14. Warrant Register; Transfers, Etc. --------------------------------- (a). The Company will maintain a register containing the names and addresses of the registered holders of the Warrants. The Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be given by certified mail or delivered to the Holder at its address as shown on the warrant register (b). Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Holder with respect to any or all of the shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, for transfer of this Warrant as an entirety by the Holder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, by the Holder for transfer with respect to a portion of the shares of Common Stock purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Holder hereof, and shall issue to such Holder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred (c). In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new warrant of like tenor and denomination and deliver the same (i) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction) and of indemnity reasonably satisfactory to the Company, provided, however, that so long as Purchaser is the registered holder of this Warrant, no indemnity shall be required other than its written agreement to indemnify the Company against any loss arising from the issuance of such new warrant 15. No Impairment. The Company will not, by amendment of its Second Amended ------------- and Restated Articles of Incorporation or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder. 16. Governing Law. The provisions and terms of this Warrant shall be ------------- governed by and construed in accordance with the internal laws of the State of Delaware. 18. Successors and Assigns. This Warrant shall be binding upon the ---------------------- Company's successors and assigns and shall inure to the benefit of the Holder's successors, legal representatives and permitted assigns. 19. Business Days. If the last or appointed day for the taking of any action ------------- required or the expiration of any right granted herein shall be a Saturday or Sunday or a legal holiday in 2004, then such action may be taken or right may be exercised on the next succeeding day which is not a Saturday or Sunday or such a legal holiday. Dated: August 4, 2000 NewsEDGE Corporation By:_____________________________ Name:___________________________ Title:__________________________ Subscription To:____________________ Date:_________________________ The undersigned hereby subscribes for __________ shares of Common Stock covered by this Warrant. The certificate(s) for such shares shall be issued in the name of the undersigned or as otherwise indicated below: _________________________________ Signature _________________________________ Name for Registration _________________________________ Mailing Address Assignment For value received ____________________________ hereby sells, assigns and transfers unto ______________________________________ _________________________________________________________________ Please print or typewrite name and address of Assignee _________________________________________________________________ the within Warrant, and does hereby irrevocably constitute and appoint _______________________ its attorney to transfer the within Warrant on the books of the within named Company with full power of substitution on the premises. Dated:_______________________ _____________________________ In the Presence of: ____________________________ Schedule of Warrant Holders - --------------------------------------------------------------- Name Warrants - ---- -------- - --------------------------------------------------------------- Ronald Benanto 5,333 - --------------------------------------------------------------- Rory Cowan 20,000 - --------------------------------------------------------------- Murat H. Davidson, Jr. 13,333 - --------------------------------------------------------------- H.G. Wellington, custodian for the benefit of the Murat H. Davidson, Jr. 13,333 Rollover IRA - --------------------------------------------------------------- Bret Faber 13,333 - --------------------------------------------------------------- Michael Kolowich 8,000 - --------------------------------------------------------------- Cliff Pollan 5,333 - --------------------------------------------------------------- Basil Regan 13,333 - --------------------------------------------------------------- Regan International Fund, Ltd. 73,333 - --------------------------------------------------------------- Regan Partners, LP 173,333 - --------------------------------------------------------------- The Wellcome Trust 153,333 - --------------------------------------------------------------- EX-10.2 3 0003.txt COMMON STOCK PURCHASE AGREEMENT Exhibit 10.2 FORM OF COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT dated as of August 4, 2000 between NewsEDGE Corporation, a Delaware corporation (the "Company"), and ______________ (the "Purchaser"). WHEREAS, the Company wishes to issue and sell to the Purchaser an aggregate of _____________ shares (the "Shares") of the authorized but unissued Common Stock, $.01 par value, of the Company (the "Common Stock"); and WHEREAS, the Purchaser wishes to purchase the Shares on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the parties desire to provide for certain restrictions on the Purchaser's Shares, as set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I PURCHASE OF SHARES SECTION 1.01 Purchase, Sale, Issuance and Delivery of the Shares. The --------------------------------------------------- Company agrees to issue and sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Company, an aggregate of __________ shares of Common Stock at a purchase price of $_____ per share, for an aggregate purchase price of $____________ (the "Aggregate Purchase Price"). At the Closing (as defined below) or subsequent closings, the Company may enter into substantially this same form of purchase agreement with certain other investors (the "Other Purchasers"). Purchaser and the Other Purchasers are hereinafter sometimes collectively referred to as the "Purchasers," and this Agreement and the agreements executed by the Other Purchasers are hereinafter sometimes collectively referred to as the "Agreements." SECTION 1.02 Closing. The closing shall take place at the offices of Testa, ------- Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110, immediately following the full execution and delivery of this Agreement, or at such other location, date and time as may be agreed upon between the Purchaser and the Company (such closing being called the "Closing" and such date and time being called the "Closing Date"). At the Closing, the Company shall issue and deliver to the Purchaser a stock certificate or certificates in definitive form, registered in the name of the Purchaser, representing the Shares being purchased at the Closing. As payment in full for the Shares being purchased by it under this Agreement, and against delivery of the stock certificate or certificates therefor as aforesaid, on the Closing Date the Purchaser shall (i) deliver to the Company a check payable to the order of the Company, in the amount of the Aggregate Purchase Price, or (ii) transfer such sum to the account of the Company by wire transfer. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY The Company represents and warrants to the Purchaser that: SECTION 2.01 Organization, Qualifications and Corporate Power. The Company ------------------------------------------------ is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has the corporate power to execute, deliver and perform this Agreement, and to issue, sell and deliver the Shares to be delivered under this Agreement. SECTION 2.02 Authorization of Agreements, Etc. -------------------------------- (a) The execution and delivery by the Company of this Agreement, the performance by the Company of its obligations hereunder and the issuance, sale and delivery of the Shares have been duly authorized by all requisite corporate action. (b) The Shares have been duly authorized and, when issued in accordance with this Agreement, will be validly issued, fully paid and nonassessable shares of Common Stock. SECTION 2.03 Validity. This Agreement has been duly executed and delivered -------- by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms. SECTION 2.04 Litigation. There is no action, suit, investigation or ---------- proceeding pending against, or to the knowledge of the Company, threatened against, the Company before any court or arbitrator or any governmental body, agency or official which, if determined adversely, would have a material adverse effect on the Company and its subsidiaries, taken as a whole. SECTION 2.05 SEC Filings. The Company is a reporting company under the ----------- Securities Exchange Act of 1934, as amended (the "Exchange Act") and is not in default of the requirements applicable to reporting issuers under the Exchange Act. The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months preceding the date of this Agreement. The following documents complied in all material respects with the requirements of the Exchange Act as of their respective filing dates, and the information contained therein was true and correct in all material respects as of the date of such documents, and each of the following documents as of the date thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading: (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, its Quarterly Reports on Form 10-Q for the three-month periods ended March 31, 2000 and June 30, 2000, its Current Reports on Form 8-K dated March 6, 2000, March 14, 2000 and March 23, 2000 and its Proxy Statement for the Annual Meeting of Stockholders held on June 15, 2000; and (b) all other documents, if any, filed by the Company with the Securities and Exchange Commission (the "SEC") since the filing of the Quarterly Report on Form 10-Q for the three-month period ended June 30, 2000 pursuant to the reporting requirements of the Exchange Act. SECTION 2.06. Listing. The Company shall use its best efforts to ------- comply with all requirements of the National Association of Securities Dealers, Inc. and The Nasdaq Stock Market, Inc. with respect to the issuance of the Shares and the listing of the Shares on the Nasdaq Stock Market. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Company that: SECTION 3.01 Authorization. Purchaser has full power and authority to enter ------------- into this Agreement and to carry out his or its obligations hereunder. This Agreement constitutes the valid and binding obligation of Purchaser, enforceable in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to or affecting the rights of creditors generally and subject to the fact that equitable remedies are discretionary and may not be granted by a court of competent jurisdiction. SECTION 3.02 Investment. Purchaser is acquiring the Shares for its/his own ---------- account, for investment purposes only, and not with a view to the sale, assignment, transfer or other distribution thereof. Purchaser recognizes that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and Purchaser agrees that it/he will not sell, assign, transfer, or otherwise distribute the Shares in violation of the Securities Act. SECTION 3.03 Investigation. Purchaser is knowledgeable and experienced in ------------- the making of investments, is able to bear the economic risk of loss of its/his investment in the Company, has been granted the opportunity to make a thorough investigation of the affairs of the Company, and has availed itself/himself of such opportunity either directly or through its authorized representatives. The foregoing representation shall not be construed in any way so as to limit, define or in any way affect the Company's liability arising from the warranties and representations of the Company in this or any other agreement with Purchaser or any affiliate of Purchaser. SECTION 3.04 Reliance. Purchaser has been advised that the Shares have not -------- been and are not being registered under the Securities Act or under the "blue sky" laws of any jurisdiction and that the Company in issuing the Shares is relying upon, among other things, the representations and warranties of Purchaser contained in this Section 4 in concluding that such issuance is a "private offering" and does not require compliance with the registration provisions of the Securities Act. SECTION 3.05 No Brokers. There are no valid claims for brokerage ---------- commissions, finder's fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Purchaser. SECTION 3.06 Legends. Purchaser understands and agrees that each ------- certificate representing the Shares delivered to Purchaser hereunder shall bear legends substantially as follows: "The shares represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be sold or transferred unless the registration provisions of said Act have been complied with or unless in the opinion of counsel satisfactory to the Company both as to opinion and counsel compliance with such provisions is not required." The acquisition by Purchaser of the Shares shall constitute a confirmation by him or it of the foregoing representations. ARTICLE IV CONDITIONS TO CLOSING The obligations of the parties under this Agreement are subject to the satisfaction, on or before the Closing Date, of the following conditions: SECTION 4.01 Representations and Warranties. The representations and ------------------------------ warranties contained in this Agreement shall be true, complete and correct on and as of the Closing Date. SECTION 4.02 Performance. The Company and the Purchaser shall have ----------- performed and complied with all agreements contained herein required to be performed or complied with by it prior to or at the Closing Date. ARTICLE V REGISTRATION RIGHTS SECTION 5.01 "Piggy-Back" Registrations. ------------------------- (a) If at any time after December 31, 2000 the Company shall determine to register for its own account or the account of others under the Securities Act any of its equity securities, it shall send to Purchaser as a holder of Registrable Shares (as defined below), written notice of such determination and, if within fifteen (15) days after receipt of such notice, if Purchaser shall so request in writing, the Company shall include in such registration statement all or any part of the Registrable Shares Purchaser requests to be registered. "Registrable Shares" means the Shares and any shares of Common Stock issued upon exercise of the Warrant issued by the Company to the Purchaser on the date hereof. ARTICLE VI MISCELLANEOUS SECTION 6.01 Expenses. Except as set forth in Section 5.03, each party --------- hereto will pay its own expenses in connection with the transactions contemplated hereby, whether or not such transactions shall be consummated. SECTION 6.02 Survival of Agreements. All covenants, agreements, ---------------------- representations and warranties made herein, shall survive the execution and delivery of this Agreement and the issuance, sale and delivery of the Shares. SECTION 6.03 Brokerage. Each party hereto will indemnify and hold harmless --------- the others against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party. SECTION 6.04 Parties in Interest. All representations, covenants and ------------------- agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. SECTION 6.05 Notices. All notices provided for in this Agreement shall be ------- given in writing and shall be effective when either served by hand delivery, electronic facsimile transmission, express overnight courier service, or by registered or certified mail, return receipt requested, addressed to the parties at their respective addresses set forth below, or to such other address or addresses as either party may later specify by written notice to the other: (a) if to the Company, at NewsEDGE Corporation, 80 Blanchard Road, Burlington, MA 01803, Attention: President, with a copy to Lawrence S. Wittenberg, Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02110; and (b) if to the Purchaser, at the address appearing on the signature page hereto. SECTION 6.06 Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the internal laws of the State of Delaware, without regard to the conflicts of laws provisions thereof. SECTION 6.07 Entire Agreement. This Agreement constitutes the entire ---------------- Agreement between the parties relative to the subject matter hereof, and supersedes all prior discussions, agreements and understandings, written or oral, and all other communications between the parties relating to the subject matter of this Agreement. SECTION 6.08 Counterparts. This Agreement may be executed in any number of ------------- counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 6.09 Amendments. No provision of this Agreement shall be waived, ----------- amended, modified, superseded, canceled, terminated, renewed or extended except in a written instrument signed by both parties. Any waiver shall be limited to the particular instance and for the particular purpose when and for which it is given and shall not be deemed a waiver of any subsequent breach or default of the same or similar nature. SECTION 6.10 Severability. The invalidity, illegality or unenforceability ------------ of any provision of this Agreement shall in no way effect the validity, legality or enforceability of any other provision of this Agreement. SECTION 6.11 Headings. The headings used in this Agreement are for -------- convenience only and are not to be considered in construing or interpreting any term or provision of this Agreement. SECTION 6.12 Specific Performance. The Purchaser acknowledges that because -------------------- of the nature of the business of the Company and the subject matter of this Agreement, a breach of this Agreement will cause substantial injury to the Company for which money damages will not provide an adequate remedy, and the Purchaser agrees that the Company shall have the right to obtain injunctive relief, including the right to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, in addition to, and not in limitation of, any other remedies available to the Company under applicable law. IN WITNESS WHEREOF, the Company and the Purchaser have executed this Agreement as of the day and year first above written. COMPANY: NEWSEDGE CORPORATION By:_________________________________ Print Name:_________________________ Title:______________________________ PURCHASER: ____________________________________ By:_________________________________ Print Name:_________________________ Title:______________________________ Purchaser's Address:________________ ____________________________________ ____________________________________ Purchaser's Tax ID Number:__________ Schedule of Shareholders - --------------------------------------------------------------- Name Shares - ---- ------ - --------------------------------------------------------------- Ronald Benanto 9,412 - --------------------------------------------------------------- Rory Cowan 35,294 - --------------------------------------------------------------- Murat H. Davidson, Jr. 23,529 - --------------------------------------------------------------- H.G. Wellington, custodian for the benefit of the Murat H. Davidson, Jr. 23,529 Rollover IRA - --------------------------------------------------------------- Bret Faber 23,529 - --------------------------------------------------------------- Michael Kolowich 14,118 - --------------------------------------------------------------- Cliff Pollan 9,412 - --------------------------------------------------------------- Basil Regan 23,529 - --------------------------------------------------------------- Regan International Fund, Ltd. 129,412 - --------------------------------------------------------------- Regan Partners, LP 305,882 - --------------------------------------------------------------- The Wellcome Trust 270,588 - --------------------------------------------------------------- EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-2000 DEC-31-2000 JUL-01-2000 JAN-01-2000 SEP-30-2000 SEP-30-2000 19,905 19,905 0 0 13,469 13,469 0 0 0 0 38,923 38,923 25,508 25,508 17,617 17,617 47,936 47,936 42,470 42,470 0 0 0 0 0 0 190 190 5,199 5,199 47,936 47,936 17,868 52,869 17,868 52,869 6,736 21,907 18,914 63,566 0 0 0 0 0 0 (762) (9,909) 127 166 (889) (10,075) 2,017 6,425 0 0 0 0 1,128 (3,650) 0.06 (0.20) 0.06 (0.20)
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