SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 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 0-25779
TheStreet.com, Inc.
-------------------
(Exact name of Registrant as specified in its charter)
Delaware 06-1515824
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14 Wall Street, 14th Floor
New York, New York 10005
(Address of principal executive offices)
(212) 321-5000
--------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed,
since last report.)
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 90 days.
YES X . NO .
------- --------
Number of shares of Common Stock outstanding at August 8, 2000: 26,806,684
Common Stock, par value $0.01 per share 26,806,684
--------------------------------------- ----------
(Class) (Number of Shares)
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THESTREET.COM, INC.
FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 2000
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Part I - FINANCIAL INFORMATION.....................................................................................1
Item 1. Condensed Consolidated Financial Statements......................................................1
Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999..................1
Condensed Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2000 and 1999.....................................................................2
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999.....................................................................3
Notes to Condensed Consolidated Financial Statements.............................................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................5
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................26
PART II - OTHER INFORMATION.......................................................................................27
Item 1. Legal Proceedings...............................................................................27
Item 2. Changes in Securities and Use of Proceeds.......................................................27
Item 3. Defaults Upon Senior Securities.................................................................27
Item 4. Submission of Matters to a Vote of Security Holders.............................................27
Item 5. Other Information...............................................................................28
Item 6. Exhibits and Reports on Form 8-K................................................................28
SIGNATURES........................................................................................................29
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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THESTREET.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999
June 30, 2000 December 31, 1999
--------------------------- --------------------
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 65,043,180 $ 108,239,811
Short-term investments 25,639,711 11,175,322
Accounts receivable, net of allowance for doubtful
accounts of $822,899 and $300,000 as of June 30,
2000 and December 31, 1999, respectively. 4,604,131 2,467,164
Other receivables 1,246,785 2,607,162
Prepaid expenses and other current assets 4,432,834 4,122,057
-------------------- ---------------------
Total current assets 100,966,641 128,611,516
Property and equipment, net of accumulated
depreciation and amortization of $2,366,901
and $769,707 as of June 30, 2000 and
December 31, 1999, respectively. 15,212,398 10,199,653
Other assets 320,812 410,717
Goodwill and intangibles, net of accumulated
amortization of $375,559 and $0 as of
June 30, 2000 and December 31, 1999, respectively. 2,417,790 2,078,349
Long-term investment 2,250,000 2,250,000
-------------------- ---------------------
Total assets $ 121,167,641 $ 143,550,235
==================== =====================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligation $ 385,370 $ -
Accounts payable 4,142,821 4,290,538
Accrued expenses 9,825,955 6,675,541
Deferred revenue 4,360,477 2,858,945
Other current liabilities 971,141 242,456
-------------------- ---------------------
Total current liabilities 19,685,764 14,067,480
Long term portion of capital lease obligation 1,775,185 -
Deferred rent 2,139,495 2,182,100
Minority Interest 12,741,880 15,886,741
-------------------- ---------------------
Total liabilities 36,342,324 32,136,321
-------------------- ---------------------
STOCKHOLDERS' EQUITY
Common Stock; $0.01 par value;
100,000,000 shares authorized; 25,465,602 and
25,248,434 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively. 254,656 252,484
Additional paid-in capital 173,095,966 174,363,323
Deferred compensation (2,821,077) (5,450,860)
Advertising receivable (9,694,559) (10,042,062)
Accumulated comprehensive income (615,342) (20,618)
Accumulated deficit (75,394,327) (47,688,353)
-------------------- ---------------------
Total stockholders' equity 84,825,317 111,413,914
-------------------- ---------------------
Total liabilities and stockholders' equity $ 121,167,641 $ 143,550,235
==================== =====================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
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THESTREET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------- ---------------------------------------
2000 1999 2000 1999
----------------- ------------------ ------------------- -----------------
(unaudited) (unaudited)
Net revenues:
<S> <C> <C> <C> <C>
Advertising & E-Commerce revenues $ 4,610,202 $ 1,740,440 $ 7,564,836 $ 2,864,208
Subscription revenues 2,127,411 934,219 4,164,897 1,646,979
Other revenues 299,304 585,752 1,029,780 740,047
------------ ------------ ------------ ------------
Total net revenues 7,036,917 3,260,411 12,759,513 5,251,234
Cost of revenues 4,019,822 2,076,666 7,935,948 3,680,923
------------ ------------ ------------ ------------
Gross profit 3,017,095 1,183,745 4,823,565 1,570,311
------------ ------------ ------------ ------------
Operating expenses:
Product development expenses 5,074,066 1,425,928 10,565,731 2,826,254
Sales and marketing expenses 9,583,125 3,357,033 17,745,893 5,510,843
General and administrative expenses 4,797,622 3,448,816 9,667,807 6,434,927
Noncash compensation expense 281,656 632,427 826,385 1,830,175
------------ ------------ ------------ ------------
Total operating expenses 19,736,469 8,864,204 38,805,816 16,602,199
------------ ------------ ------------ ------------
Loss from operations (16,719,374) (7,680,459) (33,982,251) (15,031,888)
Interest income 1,478,501 870,477 3,131,416 1,121,289
------------ ------------ ------------ ------------
Loss before provision for income
taxes and minority interest (15,240,873) (6,809,982) (30,850,835) (13,910,599)
Provision for income taxes -- 18,825 -- 94,750
Minority interest 1,417,697 -- 3,144,861 --
------------ ------------ ------------ ------------
Net loss $(13,823,176) $ (6,828,807) $(27,705,974) $(14,005,349)
============ ============ ============ ============
Net loss per share - basic and diluted $ (0.54) $ (0.38) $ (1.09) $ (0.97)
============ ============ ============ ============
Weighted average basic and diluted
shares outstanding 25,403,586 20,459,328 25,347,314 17,418,182
============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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THESTREET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
For the Six Months Ended June 30,
---------------------------------------------
2000 1999
------------------- ---------------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (27,705,974) $ (14,005,349)
Adjustments to reconcile net loss to cash
used in operating activities:
Noncash compensation expense 826,385 1,830,175
Noncash advertising expense 347,503 --
Provision for doubtful accounts 542,957 40,000
Minority Interest (3,144,861) --
Depreciation and amortization 1,934,581 134,408
Increase in accounts receivable (2,679,924) (249,050)
Decrease in other receivables 1,360,377 590,094
Increase in prepaid expenses and other
current assets (310,777) (34,140)
Decrease (increase) in other assets 35,970 (60,761)
Increase in accounts payable and accrued
expenses 3,002,697 1,580,802
Increase in deferred revenue 1,501,532 900,451
Increase in other current liabilities 728,685 --
Increase in deferred rent 70,000 --
------------- ----------------
Net cash used in operating activities (23,490,849) (9,273,370)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (32,354,389) --
Sale of short-term investments 17,890,000 --
Capital expenditures (6,820,438) (1,022,152)
Acquisition of BiGFiSH Management, Inc. (250,000) --
------------- ----------------
Net cash used in investing activities (21,534,827) (1,022,152)
-------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale/leaseback 2,160,555 --
Proceeds from issuance of common stock 263,214 112,787,893
Repayments under line of credit -- (3,333)
------------- ----------------
Net cash provided by financing activities 2,423,769 112,784,560
------------- ----------------
Effect of exchange rate on changes in cash (594,724) --
Net decrease in cash (43,196,631) 102,489,038
Cash and cash equivalents, beginning of
period 108,239,811 24,611,958
--------------- -----------------
Cash and cash equivalents, end of period $ 65,043,180 $ 127,100,996
=============== ==================
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Income taxes $ -- $ 94,750
Noncash investing and financing activities:
Equipment acquired under capital leases $ 2,388,239 $ --
Issuance of common stock - BiGFiSH
acquisition $ 275,000 $ --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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THESTREET.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
BUSINESS
TheStreet.com, Inc. ("TheStreet.com") is a leading provider of
original, timely, comprehensive and trustworthy financial news and
commentary -- through its network of free and subscription-based web sites,
and through conferences, books, and wireless and broadband initiatives.
TheStreet.com combines the most important qualities of traditional print
journalism - accuracy, intelligence, fairness and wit - with the web's
advantages as a financial news medium - timeliness, interactivity and
global distribution. Our content is generated by a staff of over 120
professional reporters and editors, in addition to more than 30 outside
contributors. We update our sites with original stories throughout each
business day and with many additional features on the weekends. We offer
our readership additional tools and features such as real-time quotes,
portfolio trackers, public company earnings information and charts and
analysis.
BASIS OF PRESENTATION
The information presented as of June 30, 2000 and 1999, and for
the three and six month periods then ended, is unaudited, but in the
opinion of management of TheStreet.com, the accompanying unaudited
financial statements contain all adjustments (consisting only of normal
recurring adjustments) which TheStreet.com considers necessary for the fair
presentation of its financial position as of June 30, 2000, the results of
its operations for the three and six month periods ended June 30, 2000 and
1999, and its cash flows for the six month periods ended June 30, 2000 and
1999. The financial statements included herein have been prepared in
accordance with generally accepted accounting principles and the
instructions to Form 10-Q. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in
conjunction with TheStreet.com's audited financial statements and
accompanying notes for the year ended December 31, 1999, included in
TheStreet.com's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.
The consolidated financial statements include the accounts of
TheStreet.com, Inc. and its 63% owned subsidiary, TheStreet.com (UK)
Limited. All intercompany balances and transactions have been eliminated in
consolidation.
Results for the interim period are not necessarily indicative of
results that may be expected for the entire year.
2. NET LOSS PER SHARE OF COMMON STOCK
TheStreet.com computes net loss per share of common stock in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128"). Under the provisions of SFAS No.
128, basic net loss per share ("Basic EPS") is computed by dividing net
loss by the weighted average number of shares of common stock outstanding.
The following table reconciles the numerator and denominator for the
calculation:
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FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------------------- --------------------------------------
6/30/2000 6/30/1999 6/30/2000 6/30/1999
------------------ ------------------- ------------------ -------------------
(UNAUDITED) (UNAUDITED)
NUMERATOR:
<S> <C> <C> <C> <C>
Net Loss $ (13,823,176) $ (6,828,807) $ (27,705,974) $ (14,005,349)
Preferred Stock Dividends - (454,143) - (1,572,836)
Accretion of Redeemable
Convertible Series B
Preferred Stock - (408,600) - (1,252,569)
------------------ ------------------- ------------------ -------------------
Net Loss Available to Common
Shareholders $ (13,823,176) $ (7,691,550) $ (27,705,974) $ (16,830,754)
================== =================== ================== ===================
DENOMINATOR:
Weighted Average Basic &
Diluted Shares Outstanding 25,403,586 20,459,328 25,347,314 17,418,182
NET LOSS PER SHARE $ (0.54) $ (0.38) $ (1.09) $ (0.97)
</TABLE>
3. INITIAL PUBLIC OFFERING
On May 14, 1999, TheStreet.com completed its initial public
offering (the "IPO") and sold an aggregate of 6,325,000 shares of
TheStreet.com's common stock to the public (including 741,667 shares from
TheStreet.com and 83,333 shares from Kevin English, then TheStreet.com's
Chairman of the Board, Chief Executive Officer and President, pursuant to
the exercise of the underwriters' overallotment option). Net proceeds to
TheStreet.com were $108,788,000, after deducting underwriting discounts and
commissions and expenses payable by TheStreet.com in connection with the
IPO.
4. ACQUISITION OF BIGFISH MANAGEMENT, INC.
On May 11, 2000, we acquired all of the outstanding common stock
of BiGFiSH Management, Inc., a conference and event production firm, for
$250,000 cash and 42,107 shares of our common stock, having a value on the
closing date of $275,000. As the acquired company had only nominal assets,
the entire purchase price of $525,000 was recorded as goodwill.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements
within the meaning of Section 27(a) of the Securities Act of 1933,
as amended (the "Securities Act"), and Section 21(E) of the Securities
Exchange Act of 1934, as amended, including, without limitation, statements
regarding our expectations, beliefs, intentions or future strategies that
are signified by the words "expects", "anticipates", "intends", "believes",
or similar language. All forward-looking statements included in this
quarterly report on Form 10-Q are based on information available to us on
the date hereof, and we assume no obligation to update any such
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ.
The following discussion and analysis should be read in
conjunction with the unaudited condensed consolidated financial statements
and notes thereto.
OVERVIEW
TheStreet.com, Inc. is a leading provider of original, timely,
comprehensive and trustworthy financial news and commentary -- through its
network of free and subscription-based web sites, and through conferences,
books, and wireless and broadband initiatives. TheStreet.com combines the
most important qualities of traditional print journalism - accuracy,
intelligence, fairness and wit - with the web's advantages as a financial
news medium - timeliness, interactivity and global distribution. Our
content is generated by a staff of over 120 professional reporters and
editors, in addition to more than 30 outside contributors. We update our
sites with original stories throughout each business day and with many
additional features on the weekends. We offer our readership additional
tools and features such as real-time quotes, portfolio trackers, public
company earnings information and charts and analysis.
We originally organized in September 1996 as a limited liability
company funded by our co-founders, Mr. James J. Cramer and Dr. Martin
Peretz. In May 1998, we were re-organized from a limited liability company
into a C corporation, and in May 1999, we completed our initial public
offering. In September 1999, we formed a subsidiary, TheStreet.com (Europe)
Limited, to begin our international expansion by creating a London-based
counterpart to TheStreet.com to be known as TheStreet.co.uk. During
December of 1999, we acquired ipoPros.com, Inc., a company with a
subscription-based online website offering research, ratings, data and news
about initial and secondary stock offerings. We are based in New York City
with bureaus in San Francisco and London and correspondents in Silicon
Valley, Tokyo, Hong Kong, Berlin and Washington, D.C.
We currently derive our revenues from advertising and e-commerce,
retail and professional subscriptions, content syndication fees and other
sources. Of these, our two principal sources of revenue are advertisers and
subscribers.
We have a number of strategic relationships with third parties
that continue to help create brand awareness and increase subscription and
advertising revenues, including the following: a subscription distribution
agreement with DLJdirect; an e-commerce marketing partnership with American
Express Travel Related Services Company; content distribution agreements
with Yahoo!, America Online, Intuit, Motorola, ON24, Lycos and CNET;
content syndication alliances with Microsoft MSN MoneyCentral and News
Digital Media's FoxSports.com website; and joint ventures with media
companies such as The New York Times Co., and Ha'aretz Group, a leading
Israeli newspaper publisher.
TheStreet.co.uk website was launched on February 15, 2000 as a
free site and publishes financial news and analysis to UK investors.
TheStreet.co.uk derives its revenues primarily from advertising.
TheStreet.co.uk has entered into content syndication agreements with local
portals, including AOL UK and Lycos UK, and has signed advertising
agreements with E*Trade United Kingdom and DLJdirect United Kingdom.
RECENT DEVELOPMENTS
On April 27, 2000, we announced the acquisition of BiGFiSH
Management, Inc., adding a conference division to TheStreet.com. The
conference division helps us both leverage our existing talent base to
generate various revenue streams including sponsorships, and to expand our
brand awareness to a broader audience. BiGFiSH produced its first
conference on June 28, 2000.
TheMarker.com, an Israeli finance and technology news site
published by BusinessNet On-line Ltd., in which we own a minority stake
along with the Ha'aretz Group, launched in Hebrew in April. The site
currently has 40,000 registered users, up from 11,000 users the first week
of its launch. TheMarker.com plans to launch an English language version
shortly. We will share content with them, bringing news about Israeli
technology companies, many of which are Nasdaq-traded, to our readers.
On May 17, 2000, we announced the cancellation of our television
show on the Fox News Channel and the termination of our joint venture
agreement with Fox News Network.
On June 16, 2000, we relaunched our subscription-based web site,
located at www.thestreet.com, as a free site. In addition, we launched a
new subscription-based site, located at www.RealMoney.com, aimed towards an
audience of active investors and focused on providing commentary and
analysis on a real-time basis. Subscribers to TheStreet.com were
automatically converted to RealMoney.com subscribers at the effective time
of the relaunch. On August 1, 2000, we launched www.TheStreetPros.com, a
new subscription-based site which is aimed at an audience of professional
investors.
On August 7, 2000, we entered into a Securities Purchase Agreement
with Go2Net, Inc. ("Go2Net") and Vulcan Ventures Inc. ("Vulcan"), pursuant
to which, among other things, each of Go2Net and Vulcan purchased 670,167
shares of our common stock, par value $.01 per share, at a purchase price
of $5.56 per share. In addition, we granted each of Go2Net and Vulcan an
option to purchase up to an additional 7.45% (for a total of 14.9%) of our
common stock outstanding immediately after the issuance of such stock, at a
purchase price of $13.50 per share. Each option is exercisable at any time
during the six months after its grant. We also entered into a Co-Branding
and Marketing Agreement with Go2Net, pursuant to which, among other things,
we will license Go2Net's proprietary message board technology platform,
giving our RealMoney.com subscriber base the ability to view and post
messages in a co-branded environment, and syndicate content and index
headlines from our free site to Silicon Investor, Go2Net's personal finance
web site.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
NET REVENUES
Advertising & E-Commerce Revenues. Advertising and e-commerce
revenues are derived from Internet sponsorship arrangements and from the
delivery of banner and e-mail advertisements, as well as from conference
sponsorships. Advertising and e-commerce revenues increased to $4,610,202
for the three months ended June 30, 2000, as compared to $1,740,440 for the
three months ended June 30, 1999. This increase is primarily the result of
agreements with new advertisers and e-commerce partners, as well as
revenues from TheStreet.co.uk. For the three months ended June 30, 2000,
53% of our advertising and e-commerce revenues were derived from
sponsorship contracts, as compared to 75% for the three months ended June
30, 1999, reflecting our decreased dependence on sponsors as a source of
revenue. Our number of advertisers for the second quarter of 2000 was 167,
as compared to 83 for the second quarter of 1999. For the three months
ended June 30, 2000, our top five advertisers accounted for approximately
22% of our total advertising and e-commerce revenues, as compared to
approximately 46% for the three months ended June 30, 1999, reflecting an
increase in our advertiser base. During the three months ended June 30,
2000, our sites worldwide averaged over 42 million page views per month, as
compared to 15 million page views per month during the three months ended
June 30, 1999. Unique visitors averaged 2.9 million (U.S.) and 0.1 million
(U.K.) per month during the three months ended June 30, 2000, as compared
to 1.0 million unique visitors per month during the three months ended June
30, 1999.
Subscription Revenues. Subscription revenues are derived from
annual and monthly subscriptions. Subscription revenues increased to
$2,127,411 for the three months ended June 30, 2000, as compared to
$934,219 for the three months ended June 30, 1999. This increase is
primarily the result of the growth in our subscriber base. For the three
months ended June 30, 2000, approximately 82% of our net subscription
revenue was derived from annual subscriptions, as compared to 77% for the
three months ended June 30, 1999. We calculate net subscription revenues by
deducting from gross revenues cancellation chargebacks and any refunds.
During the three months ended June 30, 2000, cancellation chargebacks and
refunds accounted for approximately 7% of total subscription revenues.
Our subscriber base has decreased to approximately 109,000 annual
and monthly subscribers as of June 30, 2000 (not including free trials, but
including subscribers paid for as part of bulk subscription contracts), as
compared to approximately 116,000 as of March 31, 2000. We anticipate this
trend to continue as a result of our new strategy of a network of both free
and paid sites under TheStreet.com name.
Other Revenues. Other revenues are primarily derived from barter
arrangements, TheStreet.com television show on the Fox News Channel (prior
to its termination on or about May 28, 2000), conference attendees,
syndication revenues and reprint revenues. Other revenues decreased to
$299,304 for the three months ended June 30, 2000, as compared to $585,752
for the three months ended June 30, 1999. This decrease is primarily the
result of a one-time consulting services arrangement in April 1999 related
to content syndication. Barter transactions are recognized at the fair
value as determined by the comparable advertising market rates at the time
of placement. In future periods, management intends to maximize cash
advertising revenue and to avoid barter transactions, although the Company
will continue to enter into barter relationships when deemed appropriate.
COST OF REVENUES
Cost of revenues includes compensation and benefits for editorial
staff, fees paid to outside contributors and content licensing fees payable
to content providers. Cost of revenues increased to $4,019,822 for three
months ended June 30, 2000, as compared to $2,076,666 for the three months
ended June 30, 1999. This increase is primarily the result of the
additional salaries and related expenses incurred as a result of the growth
of our editorial staff to 124 employees as of June 30, 2000, which includes
the editorial staff for TheStreet.co.uk, as compared to our editorial staff
of 66 employees as of June 30, 1999. Additionally, costs have increased due
to the growth in the number of research tools made available to our
subscribers, an increased number of outside contributors, and costs related
to TheStreet.co.uk.
PRODUCT DEVELOPMENT EXPENSES
Product development expenses include compensation and benefits for
software developers and graphic designers, expenses for contract
programmers and developers, communication lines and other technology costs.
Product development expenses increased to $5,074,066 for the three months
ended June 30, 2000, as compared to $1,425,928 for the three months ended
June 30, 1999. This increase is primarily the result of costs related to
the expansion of our capacity to handle the anticipated increase in traffic
following the conversion of TheStreet.com from a single, subscription-based
site to a network of free and paid sites, as well as additional salaries
and related expenses incurred as a result of an increase in our technology
and product development headcount to 67 employees as of June 30, 2000,
which includes technology staff for TheStreet.co.uk and ipoPros.com, Inc.,
as compared to 24 employees as of June 30, 1999.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of advertising and
promotion on television, radio, online and in print, advertising agency
fees, promotional materials, content distribution fees, and compensation
expenses for our direct sales force and customer service department. Sales
and marketing expenses increased to $9,583,125 for the three months ended
June 30, 2000, as compared to $3,357,033 for the three months ended June
30, 1999. This increase is primarily the result of additional salaries and
related expenses incurred as a result of an increase in our sales and
marketing headcount to 72 employees as of June 30, 2000, which includes
staff from TheStreet.co.uk, as compared to 51 as of June 30, 1999, costs
associated with an advertising campaign designed to drive traffic to our
newly free site, as well as an increased number of content distribution
deals. For the three months ended June 30, 2000, our advertising expenses
consisted primarily of production, which was expensed as incurred, and
agency fees. In addition, in connection with our barter transactions, we
recorded barter advertising expenses during the three months ended June 30,
2000 and 1999, which is equivalent to the barter advertising revenues we
recorded in those periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of
compensation for general management, finance and administrative personnel,
occupancy costs, professional fees, equipment rental and other office
expenses. General and administrative costs increased to $4,797,622 for the
three months ended June 30, 2000, as compared to $3,448,816 for the three
months ended June 30, 1999. This increase is primarily the result of
administrative costs associated with TheStreet.co.uk operations, increased
outside counsel fees associated with the cancellation of TheStreet.com
television show in May 2000, and additional costs to support the growth of
our business, such as occupancy costs, professional service fees, insurance
costs, and equipment rental. General and administrative expenses for the
three months ended June 30, 2000 include goodwill amortization of $189,863
related to the acquisition of ipoPros.com, Inc. in December 1999 and
BiGFiSH Management, Inc. in May 2000.
NONCASH COMPENSATION EXPENSE
In 1998, and the first three months of 1999, we granted options to
purchase shares of our common stock at exercise prices that were less than
the fair market value of the underlying shares of common stock on the date
of grant. This resulted in noncash compensation expense incurred over the
period that these specific options vest. The noncash compensation expense
was $281,656 for the three months ended June 30, 2000. The remaining
noncash compensation expense for 2000 is currently estimated to be
approximately $553,000, a lower amount than previously estimated,
reflecting the resignations during the first and second quarters of certain
individuals from the Company, which has the effect of decreasing the
noncash compensation expense incurred in future quarters.
MINORITY INTEREST
For the three months ended June 30, 2000, minority interest was
$1,417,697. This amount accounts for the minority interest held by outside
investors in the net losses of TheStreet.com (Europe) Limited of
$1,638,197, offset by preferred dividends of $220,500.
INTEREST INCOME
For the three months ended June 30, 2000, interest income was
$1,478,501, as compared to $870,477 for the three months ended June 30,
1999. This increase is primarily the result of interest earned on the net
proceeds from the IPO for the entire three months of the second quarterly
period of 2000 as compared to a partial period in 1999.
SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
NET REVENUES
Advertising & E-Commerce Revenues. Advertising and e-commerce
revenues increased to $7,564,836 for the six months ended June 30, 2000, as
compared to $2,864,208 for the six months ended June 30, 1999. This
increase is primarily the result of increased sales of Internet
sponsorship, banner and e-mail advertisements, revenues from conference
attendees, as well as revenues from TheStreet.co.uk. For the six months
ended June 30, 2000, 53% of our advertising and e-commerce revenues were
derived from sponsorship contracts, as compared to 81% for the six months
ended June 30, 1999. Our number of advertisers for the six months ended
June 30, 2000 was 218, as compared to 114 for the six months ended June 30,
1999. For the six months ended June 30, 2000, our top five advertisers
accounted for approximately 25% of our total advertising and e-commerce
revenues, as compared to approximately 51% for the six months ended June
30, 1999.
Subscription Revenues. Subscription revenues increased to
$4,164,897 for the six months ended June 30, 2000, as compared to
$1,646,979 for the six months ended June 30, 1999. This increase is
primarily the result of the growth in our subscriber base. For the six
months ended June 30, 2000, approximately 80% of our net subscription
revenue was derived from annual subscriptions, as compared to 73% for the
six months ended June 30, 1999. We calculate net subscription revenues by
deducting from gross revenues cancellation chargebacks and any refunds.
During the six months ended June 30, 2000, cancellation chargebacks and
refunds accounted for approximately 7% of total subscription revenues.
Other Revenues. Other revenues increased to $1,029,780 for the six
months ended June 30, 2000, as compared to $740,047 for the six months
ended June 30, 1999. This increase is primarily the result of unique barter
arrangements with online and print media companies, as well as revenues
from TheStreet.com television show, offset by the absence of a one-time
consulting services arrangement in April 1999 related to content
syndication.
COST OF REVENUES
Cost of revenues increased to $7,935,948 for six months ended June
30, 2000, as compared to $3,680,923 for the six months ended June 30, 1999.
This increase is primarily the result of additional salaries and related
expenses incurred as a result of the growth of our editorial staff to 124
employees as of June 30, 2000, which includes the editorial staff for
TheStreet.co.uk, as compared to our editorial staff of 66 employees as of
June 30, 1999. Additionally, costs have increased due to the growth in the
number of research tools made available to our subscribers, an increased
number of outside contributors, and costs related to TheStreet.co.uk.
PRODUCT DEVELOPMENT EXPENSES
Product development expenses increased to $10,565,731 for the six
months ended June 30, 2000, as compared to $2,826,254 for the six months
ended June 30, 1999. This increase is primarily the result of costs related
to the expansion of our capacity to handle the anticipated increase in
traffic following the conversion of TheStreet.com from a single,
subscription-based site to a network of free and paid sites, as well as
additional salaries and related expenses incurred as a result of an
increase in our technology and product development headcount to 67
employees as of June 30, 2000, which includes technology staff for
TheStreet.co.uk and ipoPros.com, Inc., as compared to 24 employees as of
June 30, 1999.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased to $17,745,893 for the six
months ended June 30, 2000, as compared to $5,510,843 for the six months
ended June 30, 1999. This increase is primarily the result of costs
associated with additional salaries and related expenses incurred as a
result of an increase in our sales and marketing headcount to 72 employees
as of June 30, 2000, which includes staff from TheStreet.co.uk, as compared
to 51 as of June 30, 1999, costs of an ad campaign designed to drive
traffic to our newly free site, as well as an increased number of content
distribution deals.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative costs increased to $9,667,807 for the
six months ended June 30, 2000, as compared to $6,434,927 for the six
months ended June 30, 1999. This increase is primarily the result of
administrative costs associated with TheStreet.co.uk operations, increased
outside counsel fees associated with the cancellation of TheStreet.com
television show in May 2000, and additional costs to support the growth of
our business, such as occupancy costs, professional service fees, insurance
costs, and equipment rental. General and administrative expenses for the
six months ended June 30, 2000 include goodwill amortization of $350,559
related to the acquisition of ipoPros.com, Inc. in December 1999 and
BiGFiSH Management, Inc. in May 2000.
NONCASH COMPENSATION EXPENSE
In 1998, and the first three months of 1999, we granted options to
purchase shares of our common stock at exercise prices that were less than
the fair market value of the underlying shares of common stock on the date
of grant. This resulted in noncash compensation expense incurred over the
period that these specific options vest. The noncash compensation expense
was $826,385 for the six months ended June 30, 2000. We estimate that this
expense will total approximately $1.4 million for the year ended December
31, 2000. The remaining noncash compensation expense beyond the year 2000
is currently estimated to be $2.3 million.
MINORITY INTEREST
For the six months ended June 30, 2000, minority interest was
$3,144,861. This amount accounts for the minority interest held by outside
investors in the net losses of TheStreet.com (Europe) Limited of
$3,585,861, offset by preferred dividends of $441,000.
INTEREST INCOME
For the six months ended June 30, 2000, interest income was
$3,131,416, as compared to $1,121,289 for the six months ended June 30,
1999. This increase is primarily the result of interest earned on the net
proceeds from the IPO for the entire first six months of 2000 as compared
to a partial period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
We currently invest in money market funds and other short-term,
investment grade instruments that are highly liquid, of high-quality, and
have maturities of less than one year, with the intent that such funds
easily be made available for operating purposes. As of June 30, 2000, our
cash, cash equivalents, and short-term investments amounted to $90,682,891,
representing 75% of our total assets.
We believe that our market risk exposures are immaterial as we do
not have instruments for trading purposes, and reasonable possible
near-term changes in market rates or prices will not result in material
near-term losses in earnings, material changes in fair values or cash flows
for all instruments.
Cash used in operating activities of $23,490,849 for the six
months ended June 30, 2000 was primarily due to a net loss of $27,705,974,
offset by noncash charges and increases in accounts payable and accrued
expenses, deferred revenue, and other current liabilities, and decreases in
other receivables, partially offset by the minority interest in the net
losses of The Street.co.uk and an increases in accounts receivable and
prepaid expenses and other current assets.
Cash used in investing activities of $21,534,827 for the six
months ended June 30, 2000 consisted of net purchases of short-term
investments, capital expenditures, and the acquisition of BiGFiSH
Management, Inc. Capital expenditures have generally consisted of purchases
of computer hardware related to increasing our capacity and enhancing our
web sites.
Cash provided by financing activities of $2,423,769 for the six
months ended June 30, 2000 consisted primarily of proceeds from a
sale/leaseback transaction related to computer equipment purchased by
TheStreet.co.uk and issuances of common stock upon the exercise of stock
options.
We believe that our current cash and cash equivalents and
short-term investments will be sufficient to meet our anticipated cash
needs for at least the next 12 months. Thereafter, if cash generated from
operations is insufficient to satisfy our liquidity requirements, we may
need to raise additional funds through public or private financings,
strategic relationships or other arrangements. There can be no assurance
that additional funding, if needed, will be available on terms attractive
to us, or at all. Strategic relationships, if necessary to raise additional
funds, may require us to provide rights to certain of our content. The
failure to raise capital when needed could materially adversely affect our
business, results of operations and financial condition. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of our then-current stockholders would be reduced. Furthermore,
these equity securities might have rights, preferences or privileges senior
to those of our common stock.
YEAR 2000 COMPLIANCE
To date our systems and software have not experienced any material
disruption due to the onset of the Year 2000. However, we cannot assure
that we will not experience disruptions in the future as a consequence of
Year 2000 issues. We cannot quantify the amount of our potential exposure,
but do not believe it to be material.
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
You should carefully consider the following risks before making an
investment decision. The risks described below are all the material risks
facing TheStreet.com. We may also face some non-material risks which we
have not discussed in the following description of our risk factors. If any
of the following risks occur, our business, results of operations or
financial condition could be materially adversely affected.
WE HAVE A HISTORY OF LOSSES AND WE ANTICIPATE LOSSES WILL CONTINUE
As of June 30, 2000, we had an accumulated deficit of $75.4
million. We have not achieved profitability and expect to continue to incur
net losses in 2000 and subsequent fiscal periods. We expect to continue to
incur significant operating expenses and, as a result, will need to
generate significant revenues to achieve profitability, which may not
occur. Even if we do achieve profitability, we may be unable to sustain or
increase profitability on a quarterly or annual basis in the future.
We recently announced that we expect our U.S. operations to become
EBITDA-positive beginning in the second half of 2001, but we cannot
guarantee that this will happen. EBITDA is a measure of earnings before
interest, taxes, depreciation or amortization are taken into account. If we
are unable to achieve EBITDA-positive results beginning in the second half
of 2001, the price of our common stock may decrease.
RISKS ASSOCIATED WITH OUR NEW STRATEGY
Our New Strategy May Not Be Successful
We recently converted our main web site, TheStreet.com, to a free
site, accompanied by a network of free and subscription sites. We believe
that the successful implementation of this new strategy will increase our
number of unique visitors and page views, and that we will be able to
increase our advertising revenues as a result. In order to raise
recognition of TheStreet.com brand and to drive traffic to our newly free
flagship site, in July 2000 we launched a multimedia advertising campaign
centered on the New York metropolitan area. However, potential users of our
sites may not be exposed to, or may not be receptive to our advertising
campaign. Even if any such potential users do visit our sites, there is no
guarantee that our offerings will capture their attention. Accordingly, we
cannot assure you that our new strategy, even if executed properly, will
help us attract significantly increased traffic, or that we will be able to
increase our advertising revenues as a result.
Unforeseen Development Difficulties May Hinder Or Prevent The
Continued Implementation Of Our New Strategy
Although the launch of our network of free and subscription sites
occurred on schedule in the second quarter of 2000, we are continuing to
enhance our design and our technological infrastructure to further improve
our sites, and to accommodate the expected increase in traffic.
Nevertheless, unforeseen development difficulties could prevent us from
implementing such improvements or cause the costs to implement such
improvements, including design, technology and related costs, to be higher
than anticipated. Additionally, the enhanced technological infrastructure
may not support the anticipated increase in traffic.
We Depend On Third Parties For Assistance In Technological
Implementation
We are dependent on third parties, including software companies,
application service providers and technology consulting firms, to help us
implement many of the products that materially contribute to the success of
our new strategy. If these third parties are not able to fulfill their
responsibilities to us on schedule or if the technology developed by them
for our use does not function as anticipated, the implementation of such
products may be delayed and the cost of implementation may be higher than
anticipated.
We May Have Difficulty Increasing Our Capacity To Sell Our
Increased Advertising Inventory
We also plan to substantially increase the size of our advertising
sales force in order to sell the increased advertising inventory that would
result from having a network of multiple sites and from the expected
increase in traffic. However, if we are unable to quickly attract and
integrate new advertising sales staff and retain current staff, we may not
be able to increase or sustain our advertising revenues. Additionally, we
expect that our overall advertising rates will decrease under this
strategy. If we are unable to attract significantly increased traffic and
advertising revenues under this strategy, or if we are unable to
successfully implement the strategy on schedule and in a cost-effective
manner, our business, results of operations and financial condition could
be materially adversely affected.
We May Have Difficulty Retaining Current Subscribers After We Go
Free
We will seek to retain our current subscribers under our new
strategy and to attract new subscribers by marketing our subscription-based
services to readers of our free content. We may not be able to retain our
current subscribers and attract additional subscribers in a cost-effective
manner. If our subscription base declines or our cost of subscriber
acquisition increases, our business, results of operations and financial
condition could be materially adversely affected.
We Face A Possible Decline In Our User Demographic As We Attract A
Larger Mainstream Audience
Currently, our financially oriented readers provide an upscale
demographic that is desirable to advertisers, enabling us to charge
advertising rates that we believe to be among the highest of financial web
sites. Our desirable reader demographic has enabled us to build a growing
advertising business. To reach this attractive audience, our advertisers
pay rates that we believe are among the highest of financial web sites.
However, as our mainstream traffic increases, particularly in connection
with the implementation of our new strategy to offer our content for free,
we expect to experience dilution of our reader demographic, which would
likely result in a decrease in our ability to command premium advertising
rates, particularly on our free site.
If We Are Unable To Attract Or Retain Qualified Editorial Staff
And Outside Contributors, Our Business Could Be Harmed
Our future success depends substantially upon the continued
efforts of our editorial staff and outside contributors to produce
original, timely, comprehensive and trustworthy content. Only a few of our
editors and writers are bound by employment agreements. Competition for
financial journalists is intense, and we may not be able to retain existing
or attract additional highly qualified editors and writers in the future.
If we lose the services of a significant number of our editorial staff and
outside contributors, or are unable to continue to attract additional
editors and writers with appropriate qualifications, our business, results
of operations and financial condition could be materially adversely
affected.
In addition, we believe that some of our writers, including Mr.
James J. Cramer, Mr. Herb Greenberg, Mr. Adam Lashinsky and Mr. Dave
Kansas, have a large and loyal following among our readers. Mr. Cramer has
an employment agreement with us that terminates in February 2003. Mr.
Greenberg has an employment agreement with us that terminates in March
2001. Mr. Lashinsky has an employment agreement with us that terminates in
February 2003. Mr. Kansas has an employment agreement with us that
terminates in April 2002. If we lose the services of prominent members of
our editorial staff, including Mr. Greenberg, Mr. Lashinsky or Mr. Kansas,
or popular outside contributors, including Mr. Cramer, a significant number
of our subscribers may not renew their subscriptions or the number of our
readers may decrease. A significant reduction in the number of our
subscribers or readers could materially adversely affect our business,
results of operations and financial condition.
Potential Fluctuations In Our Quarterly Financial Results Make
Financial Forecasting Difficult
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside our
control.
We believe that advertising sales in traditional media, such as
television and radio, generally are lower in the first and third calendar
quarters of each year. Similar seasonal or other patterns may develop in
our industry.
We believe that quarter-to-quarter comparisons of our operating
results may not be a good indication of our future performance, nor would
our operating results for any particular quarter be indicative of future
operating results. In some future quarters our operating results may be
below the expectations of public market analysts and investors. In such an
event, the price of our common stock is likely to decrease.
Our Future Success Depends On Our Ability To Attract And Retain
Personnel In Key Business Positions
Our future success depends upon our ability to attract and retain
personnel in key business positions. The loss of one or more of our key
personnel, or our inability to attract replacements, could materially
adversely affect our business, results of operations and financial
condition. A few of our employees have entered into non-competition
agreements with us. However, competition in the Internet industry is
intense, and other employees may leave us and work for our competitors or
start their own competing businesses.
Our ability to develop and maintain both our site and our
corporate computer network is dependent on our ability to recruit and
retain technology personnel. Certain technology employees have left the
company to pursue new opportunities and we will need to replace these
employees. Competition for skilled technologists is intense, and we may not
be able to retain existing or attract additional technology personnel with
appropriate expertise.
Our Limited Operating History Makes Evaluating Our Business Difficult
We commenced operations in June 1996 and launched our web site in
November 1996. Accordingly, we have only a limited operating history upon
which you can evaluate our business and prospects. An investor in our
common stock must consider the risks, expenses and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets,
including web-based financial news and information companies.
We Depend On Our Top Advertisers For A Significant Portion Of Our
Advertising Revenues, And The Loss Of Several Of Our Top
Advertisers Would Harm Our Business
In the second quarter of 2000, our top five advertisers accounted
for approximately 22% of our total advertising revenues. Our business,
results of operations and financial condition could be materially adversely
affected by the loss of a number of our top advertisers, and such a loss
could be concentrated in a single quarter. Further, if we do not continue
to increase our revenue from financial-services advertisers or attract
advertisers from non-financial industries, our business, results of
operations and financial condition could be materially adversely affected.
We believe that we charge advertising rates that are among the highest of
financial web sites. However, as we convert our main site to a free site,
we believe our overall advertising rates will decrease. As is typical in
the advertising industry, our advertising contracts have cancellation
provisions.
Our International Expansion Increases Expenses And May Create
Compliance And Operational Difficulties
We are expanding our business into international markets.
TheStreet.co.uk, a site intended for investors in the United Kingdom and
majority owned by TheStreet.com, was launched in February 2000. However,
there can be no assurance that the site will continue to operate
successfully, and delays or operational difficulties could adversely affect
our business, results of operations, and financial condition. The success
of TheStreet.co.uk depends on its ability to continue to finance ongoing
operations; attract and retain key personnel, advertisers, users and
strategic partners; prevent system failures; manage growth; and
successfully compete with other well-financed news organizations.
As we expand internationally, we will continue to incur
significant additional costs that will result in additional losses. Also,
we will continue to encounter many of the risks associated with
international business expansion, generally. These risks include, but are
not limited to, language barriers, cultural differences, changes in
currency exchange rates, political and economic instability, difficulties
with regulatory compliance and difficulties with enforcing contracts and
other legal obligations.
Intense Competition Could Reduce Our Market Share And Harm Our
Financial Performance
An increasing number of financial news and information sources
compete for consumers' and advertisers' attention and spending. We expect
this competition to continue to increase. We compete for advertisers,
readers, staff and outside contributors with many types of companies,
including:
- online services or web sites focused on business, finance
and investing, such as CBS.MarketWatch.com, CNBC.com,
CNNfn.com, The Wall Street Journal Interactive Edition,
DowJones.com, SmartMoney.com; Microsoft MSN MoneyCentral and
The Motley Fool;
- publishers and distributors of traditional media, including
print, radio and television, such as The Wall Street
Journal, Fortune, Bloomberg Business Radio and CNBC;
- providers of terminal-based financial news and data, such as
Bloomberg Business News, Reuters News Service, Dow Jones
Markets and Bridge News Service;
- web "portal" companies, such as Yahoo! and America Online;
and
- online brokerage firms, many of which provide financial and
investment news and information, such as Charles Schwab,
E*TRADE and Merrill Lynch.
Our ability to compete depends on many factors, including the
originality, timeliness, comprehensiveness and trustworthiness of our
content and that of our competitors, the ease of use of services developed
either by us or our competitors and the effectiveness of our sales and
marketing efforts.
Many of our existing competitors, as well as a number of potential
new competitors, have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than we do. This may allow them to devote greater
resources than we can to the development and promotion of their services.
These competitors may also engage in more extensive research and
development, undertake more far-reaching marketing campaigns, adopt more
aggressive pricing policies (including offering more of their financial
news and commentary for free) and make more attractive offers to existing
and potential employees, outside contributors, strategic partners and
advertisers. Our competitors may develop content that is equal or superior
to ours or that achieves greater market acceptance than ours. It is also
possible that new competitors may emerge and rapidly acquire significant
market share. We may not be able to compete successfully for advertisers,
readers, staff or outside contributors, which could materially adversely
affect our business, results of operations and financial condition.
Increased competition could result in price reductions, reduced margins or
loss of market share, any of which could materially adversely affect our
business, results of operations and financial condition.
We also compete with other web sites, television, radio and print
media for a share of advertisers' total advertising budgets. If advertisers
perceive the Internet or our web sites to be a limited or an ineffective
advertising medium, they may be reluctant to devote a portion of their
advertising budget to Internet advertising or to advertising on our web
sites.
A Failure To Establish And Maintain Strategic Relationships With
Other Companies Could Decrease Our Subscriber And Reader Base,
Which May Harm Our Business
We depend on establishing and maintaining content syndication and
headline indexing relationships with high-traffic web sites for a
significant portion of our current subscriber and reader base. There is
intense competition for relationships with these firms and placement on
these sites, and we may have to pay significant fees to establish
additional content syndication and headline indexing relationships or
maintain existing relationships in the future. In addition, the success of
our newly-launched professional product, TheStreetPros.com, will depend in
part on our ability build a subscriber base through the establishment and
maintenance of subscription distribution relationships with financial
services firms. We may be unable to enter into or successfully renew
relationships with these firms or sites on commercially reasonable terms or
at all. These relationships may not attract significant numbers of
subscribers or readers.
Many companies that we may approach for a strategic relationship
or who already have strategic relationships with us also provide financial
news and information from other sources. As a result, these companies may
be reluctant to enter into or maintain strategic relationships with us. Our
business, results of operations and financial condition could be materially
adversely affected if we do not establish additional, and maintain
existing, strategic relationships on commercially reasonable terms or if
any of our strategic relationships do not result in an increase in the
number of subscribers or readers of our web sites.
Failure To Retain And Integrate Our Advertising Sales Force Could
Result In Lower Advertising Revenues
We depend on our internal advertising sales department to maintain
and increase our advertising sales, and as our main site becomes free and
our dependency on advertising revenue increases, we expect to expand our
advertising sales staff significantly. As of June 30, 2000, our U.S.
advertising sales department consisted of 18 employees and our U.K.
advertising sales department consisted of five employees. We will need to
quickly add and successfully integrate a number of new advertising sales
staff members under our new strategy. The success of our advertising sales
department is subject to a number of risks, including the competition we
face from other companies in hiring and retaining sales personnel and the
length of time it takes new sales personnel to become productive. Our
business, results of operations and financial condition could be materially
adversely affected if we do not effectively expand and maintain an
effective advertising sales department.
We May Be Unable To Manage Our Growth, Which May Harm Our Business
We have experienced rapid growth in our operations. Our rapid
growth has placed, and our anticipated future growth will continue to
place, a significant strain on our managerial, operational and financial
resources. To manage our growth, we must continue to implement and improve
our managerial controls and procedures and operational and financial
systems. In addition, our future success will depend on our ability to
expand, train and manage our workforce, in particular our editorial,
advertising sales and business development staff. As of June 30, 2000, we
had a total of 230 U.S. employees, as compared to 158 employees as of June
30, 1999. As of June 30, 2000, TheStreet.co.uk had 58 employees. We expect
that the number of our employees, both in the U.S. and in the U.K., will
continue to increase for the foreseeable future. We will need to integrate
these employees into our workforce successfully. We cannot assure you that
we have made adequate allowances for the costs and risks associated with
this expansion, that our systems, procedures or controls will be adequate
to support our operations, or that our management will be able to
successfully offer and expand our services. If we are unable to manage our
growth effectively, our business, results of operations and financial
condition could be materially adversely affected.
We May Be Unable To Grow Through Acquisitions And Integrate Future
Acquisitions Into Our Business
We intend to pursue a growth strategy that may involve
acquisitions of other companies. However, we may be unable to successfully
pursue and complete acquisitions in a timely and cost-effective manner.
Further, the pursuit and integration of acquisitions will require
substantial attention from our senior management, which will limit the
amount of time these individuals will have available to devote to our
existing operations. There can be no assurance that we can successfully
integrate these acquisitions into our business or implement our plans
without delay or substantial cost. In addition, future acquisitions by us
could result in the incurrence of debt and contingent liabilities, which
could have a material adverse effect upon our financial condition and
results of operations. Any failure or any inability to effectively manage
and integrate growth may have a material adverse effect on our financial
condition and results of operations.
Increases In Traffic May Strain Our Systems
In the past, we have experienced significant spikes in traffic on
our web site when there have been important financial news events. In
addition, the number of our readers has continued to increase over time and
we expect our reader base to increase significantly now that our main site
has been converted to a totally free site. Accordingly, our web sites must
accommodate a high volume of traffic, often at unexpected times. Although
we have upgraded and continue to upgrade our systems in connection with the
launch of our network of sites, our web site has in the past, and may in
the future, experience publishing problems, slower response times than
usual or other problems for a variety of reasons. These occurrences could
cause our readers to perceive our web sites as not functioning properly
and, therefore, cause them to use other methods to obtain their financial
news and information. In such a case, our business, results of operations
and financial condition could be materially adversely affected.
We Face A Risk Of System Failure That May Result In Reduced
Traffic, Reduced Revenue And Harm To Our Reputation
Our ability to provide timely information and continuous news
updates depends on the efficient and uninterrupted operation of our
computer and communications hardware and software systems. Similarly, our
ability to track, measure and report the delivery of advertisements on our
site depends on the efficient and uninterrupted operation of a third-party
system. In February 2000, our Internet-hosting agreement with Exodus
Communications, Inc. was renewed, and we currently continue to maintain all
of our production servers at Exodus's New Jersey data center. Our
operations depend on Exodus's ability to protect its own systems and our
systems in its data center against damage from fire, power loss, water
damage, telecommunications failure, vandalism and similar unexpected
adverse events. Although Exodus provides comprehensive facilities
management services, including human and technical monitoring of all
production servers 24 hours per day, seven days per week, Exodus does not
guarantee that our Internet access will be uninterrupted, error-free or
secure. Any disruption in the Internet access to our web sites provided by
Exodus could materially adversely affect our business, results of
operations and financial condition. In addition, in September 1999, we
entered into an agreement with USinternetworking, Inc. under which USi
provides us with a mirror site for partial disaster recovery in the event
of the failure of our primary systems. In December 1999, we did experience
system failures that required us to use USi's mirror site for a short
period of time. Our own internal systems and operations, as well as those
of Exodus and USi, may be subject to damage or interruption from human
error, natural disasters, fire, water damage, power loss, telecommunication
failures, break-ins, sabotage, computer viruses, intentional acts of
vandalism and similar events. Any system failure, including network,
software or hardware failure, that causes an interruption in our service or
a decrease in responsiveness of our web sites could result in reduced
traffic, reduced revenue and harm to our reputation, brand and our
relations with our advertisers and e-commerce partners. In February 2000,
many prominent web sites were subjected to "distributed denial-of-service"
attacks, during which their servers were inundated with requests for data,
causing them to overload and preventing legitimate traffic from getting
through, which rendered the sites unresponsive to users for a period of
time. Like most other web sites, we may be vulnerable to such attacks and
other deliberate attempts to disrupt our technological operations. Our
insurance policies may not adequately compensate us for any losses that we
may incur because of any failures in our system or interruptions in our
delivery of content. Our business, results of operations and financial
condition could be materially adversely affected by any event, damage or
failure that interrupts or delays our operations.
Any Failure Of Our Internal Security Measures Or Breach Of Our
Privacy Protections Could Cause Us To Lose Users And Subject Us To
Liability
Users who subscribe to one of our subscription-based web sites are
required to furnish certain personal information (including name, email
address and credit card information), which we use to administer our
services. Although we no longer need credit-card information to process
subscription payments for our main site, now that it has converted to a
free site, we continue to gather credit card information for the
subscription-based sites in our network. In addition, in the near future,
we plan to implement a registration system that will collect certain
information (although not payment information) from users of our free main
site who wish to gain access to certain features of our site. In addition,
we rely on a third party hosting service to host our newly-launched
professional web site. If the security measures that we or such third party
use to protect personal information are ineffective, we may lose users and
our business may be harmed. Additionally, both we and such third party rely
on security and authentication technology licensed from third parties to
perform real-time credit card authorization and verification. We cannot
predict whether technological developments could allow these security
measures to be circumvented. We may need to use significant resources to
prevent security breaches or to alleviate problems caused by any security
breaches. If we or our third party hosting partner are not able to prevent
all security breaches, our business, results of operations and financial
condition could be materially adversely affected.
Our users depend on us to keep their personal information private
and to disclose it to third parties. We therefore maintain a strict privacy
policy, under which we will not furnish, rent or sell to third parties any
personal information about our subscribers or other users. We have retained
the ability to modify the privacy policy at any time. Like most web sites
that require some form of registration, we use "cookies" (small data files
placed by a web server on a user's hard drive to enable the server to track
the user's movement on the site) in order to help our subscribers navigate
throughout the site, and we use individual tracking information obtained
from the cookies for internal purposes, such as to administer subscriber
accounts and process purchases in our online store. In addition, companies
that serve banners and other advertisements on our site use their own
cookies, enabling them to limit the frequency with which a user is shown a
particular ad. Some Internet users and industry observers have expressed
privacy concerns about cookies. If our users perceive that we are not
protecting their privacy, our business, results of operations and financial
condition could be materially adversely affected.
Difficulties Associated With Our Brand Development May Harm Our
Ability To Attract Subscribers And Readers
We believe that maintaining and growing awareness about the
TheStreet.com brand is an important aspect of our efforts to continue to
attract users. The importance of brand recognition will increase in the
future because of the growing number of web sites providing financial news
and information. The new sites that we have introduced, RealMoney.com and
TheStreetPros.com, do not have widely recognized brands, and we will need
to increase awareness of these brands among potential users. In order to
raise recognition of TheStreet.com brand and to drive traffic to our newly
free flagship site, in July 2000 we embarked on a multimedia advertising
campaign centered on the New York metropolitan area. However, this and
other efforts to build brand awareness may not be cost effective or
successful in reaching potential users, and some potential users may not be
receptive to our advertising campaign or other efforts. Accordingly, we
cannot assure you that such efforts will be successful in raising awareness
of TheStreet.com brand or in persuading potential users to visit our sites.
Failure To Maintain Our Reputation For Trustworthiness May Reduce
The Number Of Our Readers, Which May Harm Our Business
It is very important that we maintain our reputation as a
trustworthy news organization. The occurrence of events, including our
misreporting a news story or the non-disclosure of a stock ownership
position by one or more of our writers in breach of our compliance policy,
could harm our reputation for trustworthiness. These events could result in
a significant reduction in the number of our readers, which could
materially adversely affect our business, results of operations and
financial condition.
Potential Liability For Information Displayed On Our Web Sites May
Require Us To Defend Against Legal Claims, Which May Cause
Significant Operational Expenditures
We may be subject to claims for defamation, libel, copyright or
trademark infringement or based on other theories relating to the
information we publish on our web sites. These types of claims have been
brought, sometimes successfully, against online services as well as other
print publications in the past. We could also be subject to claims based
upon the content that is accessible from our web sites through links to
other web sites. We recently introduced stock ticker-based message boards
that allow users to post comments about individual stocks. We undertake no
obligation to moderate these message boards, and potential liability for
providers of message board services has not yet been well established. We
may choose to allow our editorial staffers or outside contributors to post
on our boards, thus increasing our potential liability. Our insurance may
not adequately protect us against these claims.
Year 2000 Complications May Disrupt Our Operations And Harm Our
Business
Many currently installed computer systems and software products
were coded during their production to accept only two-digit entries to
identify a year in the date code field. To date our systems and software
have not experienced any material disruption due to the onset of the Year
2000, and our vendors and strategic partners have not reported experiencing
any Year 2000 problems. However, because we and our subscribers and readers
are dependent, to a very substantial degree, upon the proper functioning of
our and their computer systems, any future occurrence of Year 2000 problems
or the failure of our Year 2000 contingency plans could materially disrupt
our operations or the ability of our subscribers and readers to access our
web sites, which could materially adversely affect our business, results of
operations and financial condition.
Failure To Protect Our Intellectual Property Rights Could Harm Our
Brand-Building Efforts And Ability To Compete Effectively
To protect our rights to our intellectual property, we rely on a
combination of trademark and copyright law, trade secret protection,
confidentiality agreements and other contractual arrangements with our
employees, affiliates, clients, strategic partners and others. The
protective steps we have taken may be inadequate to deter misappropriation
of our proprietary information. We may be unable to detect the unauthorized
use of, or take appropriate steps to enforce, our intellectual property
rights. We have registered our trademarks in the United States and we have
pending U.S. and foreign applications for other trademarks. Effective
trademark, copyright and trade secret protection may not be available in
every country in which we offer or intend to offer our services. Failure to
adequately protect our intellectual property could harm our brand, devalue
our proprietary content and affect our ability to compete effectively.
Further, defending our intellectual property rights could result in the
expenditure of significant financial and managerial resources, which could
materially adversely affect our business, results of operations and
financial condition.
We May Have To Defend Against Intellectual Property Infringement
Claims, Which May Cause Significant Operational Expenditures
Although we believe that our proprietary rights do not infringe on
the intellectual property rights of others, other parties may assert
infringement claims against us or claims that we have violated a patent or
infringed a copyright, trademark or other proprietary right belonging to
them. We incorporate licensed third-party technology in some of our
services. In these license agreements, the licensors have generally agreed
to defend, indemnify and hold us harmless with respect to any claim by a
third party that the licensed software infringes any patent or other
proprietary right. We cannot assure you that these provisions will be
adequate to protect us from infringement claims. Any infringement claims,
even if not meritorious, could result in the expenditure of significant
financial and managerial resources on our part, which could materially
adversely affect our business, results of operations and financial
condition.
Difficulties In Developing New And Enhanced Services And Features
For Our Web Sites Could Harm Our Business
We intend to introduce additional and enhanced services in order
to retain our current readers and attract new readers. If we introduce a
service that is not favorably received, our current readers may choose a
competitive service over ours or fail to renew their subscriptions. We may
also experience difficulties that could delay or prevent us from
introducing new services. These difficulties may include the loss of, or
inability to obtain or maintain, third-party technology license agreements.
Furthermore, the new services we may introduce could contain errors that
are discovered after these services are introduced. In these cases, we may
need to significantly modify the design or implementation of such services
on our web sites to correct these errors. Our business, results of
operations and financial condition could be materially adversely affected
if we experience difficulties in introducing new services or if these new
services are not accepted by our readers.
Our Ability To Maintain And Increase Our Readership Depends On The
Continued Growth In Use And Efficient Operation Of The Web
The web-based information market is new and rapidly evolving. Our
business would be materially adversely affected if web usage does not
continue to grow or grows slowly. Web usage may be inhibited for a number
of reasons, such as:
o inadequate network infrastructure;
o security and privacy concerns;
o inconsistent quality of service; and
o unavailability of cost-effective, high-speed access to the
Internet.
Our readers depend on Internet service providers, online service
providers and other web site operators for access to our web sites. Many of
these services have experienced significant service outages in the past and
could experience service outages, delays and other difficulties due to
system failures unrelated to our systems. These occurrences could cause our
readers to perceive the web in general or our web sites in particular as an
unreliable medium and, therefore, cause them to use other media to obtain
their financial news and information. We also depend on a number of
information providers to deliver information and data feeds to us on a
timely basis. Our web sites could experience disruptions or interruptions
in service due to the failure or delay in the transmission or receipt of
this information, which could materially adversely affect our business,
results of operations and financial condition.
A General Decline In Online Advertising Or Our Inability To Adapt
To Trends In Online Advertising Could Harm Our Advertising
Revenues
No standards have been widely accepted to measure the
effectiveness of web advertising. If standards do not develop, existing
advertisers may not continue or increase their levels of web advertising.
If standards develop and we are unable to meet these standards, advertisers
may not continue advertising on our site. Furthermore, advertisers that
have traditionally relied upon other advertising media may be reluctant to
advertise on the web. Our business, results of operations and financial
condition could be materially adversely affected if the market for web
advertising declines or develops more slowly than expected. Different
pricing models are used to sell advertising on the web. It is difficult to
predict which, if any, will emerge as the industry standard. This
uncertainty makes it difficult to project our future advertising rates and
revenues. We cannot assure you that we will be successful under alternative
pricing models that may emerge. Moreover, "filter" software programs that
limit or prevent advertising from being delivered to a web user's computer
are available. Widespread adoption of this software could materially
adversely affect the commercial viability of web advertising, which could
materially adversely affect our advertising revenues. In addition, some
Internet commentators, privacy advocates and federal and state officials
have recently suggested that legislation may be needed to better safeguard
online privacy, by the limitation or elimination of the use of cookies or
by other methods. If such legislation is passed, it is likely to restrict
the ability of online advertisers to target their ads, which may result in
a decrease in online advertising rates or online advertising spending
generally. Such a decrease could materially adversely affect our
advertising revenues.
We compete with other web sites, television, radio and print media
for a share of advertisers' total advertising budgets. If advertisers
perceive the web in general or our web sites in particular to be a limited
or an ineffective advertising medium, they may be reluctant to devote a
portion of their advertising budget to online advertising or to advertising
on our web sites.
Government Regulation And Legal Uncertainties Relating To The Web
Could Increase Our Costs Of Transmitting Data And Increase Our
Legal And Regulatory Expenditures And Could Decrease Our
Readership
Existing domestic and international laws or regulations and
private industry guidelines specifically regulate communications or
commerce on the web. Further, laws and regulations that address issues such
as user privacy, pricing, online content regulation, taxation of e-commerce
transactions and the characteristics and quality of online products and
services are under consideration by federal, state, local and foreign
governments and agencies and by private industry groups. Several
telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online services
providers in a manner similar to the regulation of long distance telephone
carriers and to impose access fees on such companies. This regulation, if
imposed, could increase the cost of transmitting data over the web.
Moreover, it may take years to determine the extent to which existing laws
relating to issues such as intellectual property ownership and
infringement, libel, obscenity and personal privacy are applicable to the
web. The Federal Trade Commission and government agencies in certain states
have been investigating certain Internet companies regarding their use of
personal information. We could incur additional expenses if any new
regulations regarding the use of personal information are introduced or if
these agencies chose to investigate our privacy practices. Any new laws or
regulations relating to the web, or certain application or interpretation
of existing laws, could decrease the growth in the use of the web, decrease
the demand for our web sites or otherwise materially adversely affect our
business.
Concerns About Web Security Could Reduce Our Advertising Revenues,
Decrease Our Reader Base And Increase Our Web Security
Expenditures
Concern about the transmission of confidential information over
the Internet has been a significant barrier to electronic commerce and
communications over the web. Any well-publicized compromise of security
could deter more people from using the web or from using it to conduct
transactions that involve the transmission of confidential information,
such as signing up for a paid subscription, executing stock trades or
purchasing goods or services. Because many of our advertisers seek to
advertise on our web sites to encourage people to use the web to purchase
goods or services, our business, results of operations and financial
condition could be materially adversely affected if Internet users
significantly reduce their use of the web because of security concerns. We
may also incur significant costs to protect ourselves against the threat of
security breaches or to alleviate problems caused by these breaches.
Shares Eligible For Public Sale After Our Initial Public Offering
or After Our Recent Investment Could Adversely Affect Our Stock
Price
As of August 8, 2000, there were outstanding 26,806,684 shares of
our common stock. Of these shares, the shares sold in our initial public
offering are freely tradeable except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. The remaining
shares are "restricted securities," subject to the volume limitations and
other conditions of Rule 144 under the Securities Act.
Many of these restricted shares, because they were obtained in
1998 private placements by holders who are not affiliates of the Company,
are now eligible for sale under Rule 144. In addition, after the first
anniversary of our initial public offering, some holders of common stock
have the right to request the registration of their shares under the
Securities Act of 1933, as amended. Upon the effectiveness of that
registration statement, all shares covered by that registration statement
will be freely transferable. Additionally, in connection with the
investments by Go2Net and Vulcan, we granted them the right to request the
registration of the shares they purchased. Upon the effectiveness of that
registration statement, the shares each purchased and, if one or both
exercises its option, the shares each purchases upon exercise of its
option, will be freely transferable. We cannot predict if future sales of
our common stock by these holders, or the availability of our common stock
for sale, will materially adversely affect the market price for our common
stock or our ability to raise capital by offering equity securities.
Control By Principal Stockholders, Officers And Directors Could
Adversely Affect Our Stockholders
Our officers, directors and greater-than-five-percent stockholders
(and their affiliates), acting together, have the ability to control
substantially all matters submitted to our stockholders for approval
(including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets) and to
control our management and affairs. Accordingly, this concentration of
ownership may have the effect of delaying, deferring or preventing a change
in control of us, impeding a merger, consolidation, takeover or other
business combination involving us or discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us,
which in turn could materially adversely affect the market price of the
common stock.
Volatility Of Our Stock Price Could Adversely Affect Our
Stockholders
The stock market has experienced significant price and volume
fluctuations and the market prices of securities of technology companies,
particularly Internet-related companies, have been highly volatile.
Investors may not be able to resell their shares at or above the price at
which they bought them.
In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often
been instituted against that company. The institution of similar litigation
against us could result in substantial costs and a diversion of our
management's attention and resources, which could materially adversely
affect our business, results of operations and financial condition.
Anti-Takeover Provisions Could Prevent Or Delay A Change Of Control
Provisions of our amended and restated certificate of
incorporation and amended and restated bylaws and Delaware law could make
it more difficult for a third party to acquire us, even if doing so would
be beneficial to our stockholders.
We Do Not Intend To Pay Dividends
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain any future earnings for funding growth
and, therefore, do not expect to pay any dividends in the foreseeable
future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On May 22, 2000, Fox News Network, L.L.C. ("Fox News") filed a
complaint in New York State Supreme Court against us, alleging that we
anticipatorily repudiated a letter agreement, dated May 7, 1999, between us
and Fox News (the "Letter Agreement"), to jointly produce a financial news
television program for the Fox News Channel. We had terminated the Letter
Agreement after unidentified Fox News spokespeople unilaterally announced a
new policy concerning the discussion of stock on the television program
without obtaining our consent. The complaint contains two counts against
us. It asks for unspecified damages including attorneys' fees and
injunctive relief requiring us to co-produce the television program and to
fulfill all outstanding obligations under the Letter Agreement until the
alleged expiration of the Letter Agreement in 2002. Fox News has also asked
for injunctive relief preventing us from shopping the television program to
other networks. Fox News also named our co-founder, director, and
shareholder, Mr. James J. Cramer as a defendant, claiming that Mr. Cramer
breached a separate agreement to appear a certain number of times on
TheStreet.com television program during a twelve-month period and to obtain
permission from Fox News before appearing on other networks. Both we and
Mr. Cramer have raised counterclaims against Fox News. The parties have
just begun discovery in this lawsuit and Cramer has filed a summary
judgment motion against Fox News. While this case is in its earliest
stages, TheStreet.com intends to defend the lawsuit vigorously.
In addition to the Fox News lawsuit, from time to time, we become
involved in various routine legal proceedings in the ordinary course of our
business. We believe that the outcome of all pending legal proceedings and
unasserted claims in the aggregate, including the Fox News lawsuit, will
not have a material adverse effect on our results of operations, financial
position or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
The following matters were submitted to a vote at the annual
meeting of stockholders of the Company, held on July 12, 2000:
(i) the election of James J. Cramer, Michael Golden and Martin
Peretz, as Class I directors of the Company, to serve until the annual
meeting in 2003; (FOR: 20,443,663; AGAINST: 92,939; ABSTAINED: 0)
(ii) the approval of an amendment to the Company's Amended and
Restated 1998 Stock Incentive Plan (the "Plan") to increase the number of
shares of common stock available for grant pursuant to awards under the
Plan from 4,400,000 to 6,900,000 shares; (FOR: 12,428,527; AGAINST:
343,902; ABSTAINED: 24,771)
(iii) the ratification of the appointment of Arthur Andersen LLP
as our independent certified public accountants for the fiscal year ending
December 31, 2000; (FOR: 20,471,239; AGAINST: 55,879; ABSTAINED: 9,484)
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
*3.1 Amended and Restated Certificate of Incorporation
**3.2 Amended and Restated Bylaws
*4.1 The Street.com Rights Plan
**4.2 Amended and Restated 1998 Stock Incentive Plan
27.1 Financial Data Schedule
(b) Reports on Form 8-K
We did not file any reports on Form 8-K during the
Quarter Ended June 30, 2000.
* Incorporated by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 dated February 23, 1999 (File
No. 333-72799).
** Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K dated March 30, 2000 (File No. 0-25779).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: August 11, 2000 TheStreet.com, Inc.
(Registrant)
By: /s/ Thomas J. Clarke, Jr.
------------------------------
Name: Thomas J. Clarke, Jr.
Title: Chief Executive Officer
Date: August 11, 2000 By: /s/ Lisa A. Mogensen
--------------------
Name: Lisa A. Mogensen
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
*3.1 Amended and Restated Certificate of Incorporation
**3.2 Amended and Restated Bylaws
*4.1 The Street.com Rights Plan
**4.2 Amended and Restated 1998 Stock Incentive Plan
27.1 Financial Data Schedule
* Incorporated by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 dated February 23, 1999 (File
No. 333-72799).
** Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K dated March 30, 2000 (File No. 0-25779).
