U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 1-10932
INDIVIDUAL INVESTOR GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3487784
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1633 Broadway, 38th Floor, New York, New York 10019
(Address of principal executive offices)
(212) 843-2777
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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 .
State the number of shares outstanding of each of the registrant's
classes of common equity, as of the latest practicable date: As of July 31,
1998, registrant had outstanding 8,490,849 shares of Common Stock, $.01 par
value per share.
1
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INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
INDEX
Part 1. Financial Information
Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets (Unaudited)
as of June 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements
of Operations (Unaudited) for the three and six
months ended June 30, 1998 and 1997 4
Consolidated Condensed Statements
of Cash Flows (Unaudited) for the six months
ended June 30, 1998 and 1997 5
Notes to Consolidated Condensed
Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
Part 2. Other Information
Item 2. Sales of Unregistered Securities 15
Item 4. Submission of matters to a vote of
security holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
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<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<S> <C> <C>
June 30, December 31,
ASSETS 1998 1997
-------------- --------------
Current assets:
Cash and cash equivalents $5,719,194 $3,533,622
Accounts receivable (net of allowances of $508,052 in 2,531,705 2,993,299
1998 and $533,693 in 1997)
Fair market value of investment in discontinued operations 3,279,178 -
Prepaid expenses and other current assets 214,134 224,801
--------------- --------------
Total current assets 11,744,211 6,751,722
Investment in fund (Note 2) - 4,037,432
Deferred subscription expense 480,684 426,826
Property and equipment - net 467,866 556,070
Other assets 384,917 384,917
=============== ==============
Total assets 13,077,678 12,156,967
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,994,977 2,093,987
Accrued expenses 758,485 803,502
Deferred revenue 352,620 343,250
--------------- --------------
Total current liabilities 4,106,082 3,240,739
Deferred subscription revenue 2,457,606 2,661,129
--------------- --------------
Total liabilities 6,563,688 5,901,868
--------------- --------------
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares - -
Common stock, $.01 par value; authorized
18,000,000 shares; issued and outstanding 8,490,849 84,908 71,461
shares in 1998 and 7,146,071 shares in 1997
Additional paid-in capital 24,899,068 19,514,363
Accumulated Deficit (18,469,986) (13,330,725)
--------------- --------------
Total stockholders' equity 6,513,990 6,255,099
--------------- --------------
=============== ==============
Total liabilities and stockholders' equity $13,077,678 $12,156,967
=============== ==============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
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<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C> <C> <C>
Three Months Ended June 30, Six Months Ended June 30,
-----------------------------------------------------------
1998 1997 1998 1997
------------- -------------- ------------- -------------
Revenues:
Advertising $2,398,533 $2,032,030 $5,191,797 $4,361,742
Circulation 918,905 940,469 1,769,861 2,119,711
List rental and other 344,092 246,775 653,845 583,436
------------- -------------- ------------- -------------
Total revenues 3,661,530 3,219,274 7,615,503 7,064,889
------------- -------------- ------------- -------------
Operating expenses:
Editorial, production and distribution 2,968,414 2,168,385 5,868,888 4,324,876
Promotion and selling 1,606,059 1,453,143 3,248,728 2,842,275
General and administrative 1,743,493 1,110,537 2,893,153 2,143,124
Depreciation and amortization 78,268 67,172 151,579 132,597
------------- -------------- ------------- -------------
Total operating expenses 6,396,234 4,799,237 12,162,348 9,442,872
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Operating loss from continuing operations (2,734,704) (1,579,963) (4,546,845) (2,377,983)
------------- -------------- ------------- -------------
Interest income 13,708 20,246 43,663 31,189
------------- -------------- ------------- -------------
Net loss from continuing operations (2,720,996) (1,559,717) (4,503,182) (2,346,794)
------------- -------------- ------------- -------------
Discontinued operations (Note 2):
Income (loss) from discontinued operations 187,831 243,242 (189,629) (1,387,894)
Loss on disposal of discontinued operations (446,450) - (446,450) -
------------- -------------- ------------- -------------
(Loss) income from discontinued operations (258,619) 243,242 (636,079) (1,387,894)
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Net loss ($2,979,615) ($1,316,475) ($5,139,261) ($3,734,688)
------------- -------------- ------------- -------------
Basic and dilutive loss per common share:
Continuing operations ($0.37) ($0.25) ($0.62) ($0.37)
Discontinued operations ($0.04) $0.04 ($0.09) ($0.22)
------------- -------------- ------------- -------------
Net loss ($0.41) ($0.21) ($0.71) ($0.59)
------------- -------------- ------------- -------------
Average number of common shares used in
computing basic and dilutive
loss per common share 7,286,385 6,403,673 7,245,021 6,279,607
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
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<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
Six Months Ended June 30,
-------------------------------
1998 1997
------------- -------------
Cash flows from operating activities:
Net loss ($5,139,261) ($3,734,688)
Less:
Loss from discontinued operations (636,079) (1,387,894)
------------- --------------
Loss from continuing operations (4,503,182) (2,346,794)
Reconciliation of net loss to net cash
used in operating activities:
Depreciation and amortization 151,579 132,597
Loss on sale of equipment 1,258 -
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 461,594 461,902
Prepaid expenses and other current assets 10,667 (152,288)
Deferred subscription expense (53,858) 332,849
Increase (decrease) in:
Accounts payable and accrued expenses 855,973 (592,755)
Deferred subscription revenue (203,523) (596,215)
Deferred revenue 9,370 302,103
Net cash provided by discontinued operations 122,175 143,276
------------- --------------
Net cash used in operating activities (3,147,947) (2,315,325)
------------- --------------
Cash flows from investing activities:
Purchase of property and equipment (65,684) (118,925)
Proceeds from sale of equipment 1,051 -
Withdrawals from fund, net - 900,000
------------- -------------
Net cash (used in) provided by investing activities (64,633) 781,075
------------- -------------
Cash flows from financing activities:
Proceeds from exercise of stock options (Note 3) 398,152 538,229
Proceeds from issuance of common stock (Note 5) 5,000,000 2,250,000
------------- -------------
Net cash provided by financing activities 5,398,152 2,788,229
------------- -------------
Net increase in cash and cash equivalents 2,185,572 1,253,979
Cash and cash equivalents, beginning of period 3,533,622 1,544,451
============= =============
Cash and cash equivalents, end of period $5,719,194 $2,798,430
============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
5
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INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements include the accounts
of Individual Investor Group, Inc. and its subsidiaries (the "Company").
Such financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes as required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report for the year
ended December 31, 1997 on Form 10-KSB.
2. DISCONTINUED OPERATIONS
On April 30, 1998 the Company's Board of Directors decided to
discontinue the Company's investment management services business. A
wholly-owned subsidiary, WisdomTree Capital Management, Inc. ("WTCM"),
serves as general partner of (and is an investor in) a domestic private
investment fund. The Company is also a limited partner in the fund. As a
result of the Board's decision WTCM will dissolve the domestic investment
fund, liquidate its investments and distribute the net assets to all
investors as promptly as possible. In July 1998 the fund distributed
approximately 70% of the June 30, 1998 capital balances to its partners in
cash and securities. The remainder of the net assets will be distributed as
soon as the investments held by the fund are liquidated. The operating
results relating to investment management services have been segregated
from continuing operations and reported as a separate line item on the
statement of operations. As a result the Company has restated its financial
statements for the corresponding periods of the prior year.
<TABLE>
<CAPTION>
Operating results from discontinued operations are as follows:
<S> <C> <C> <C> <C>
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
Investment management services revenues $ 35,848 $ 176,019 $ 137,183 $ 297,193
Net (depreciation) appreciation in fund 163,817 134,147 (276,497) (1,531,170)
Operating expenses (11,834) (66,924) (50,315) (153,917)
----------- ----------- ----------- -----------
(Loss) income from discontinued operations $ 187,831 $ 243,242 ($ 189,629) ($1,387,894)
----------- ----------- ----------- -----------
</TABLE>
6
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Under generally accepted accounting principles, loss on disposal of
discontinued operations of $446,450 includes actual losses from the date
the Board resolved to discontinue the investment management services
operations, plus a provision for additional losses based on managemnet's
best estimate of the amount to be realized on dissolution of the fund,
including applicabe severance and legal fees.
The fair market value of the Company's investment in the fund
decreased from $4,037,432 at December 31, 1997 to $3,279,178 at June 30,
1998. This decrease resulted from net losses on the Company's investment in
the fund. In July 1998 the Company received approximately $2.3 million of
its investment, including cash of approximately $1.4 million and the
remainder in securities. No assurance can be given that the Compnay will
realize the remaining amount of its investment in the liquidation the
domestic fund.
Selected unaudited financial information for the fund as of
June 30, 1998 and December 31, 1997 is as follows:
June 30, December 31,
1998 1997
------ ------
Assets (at fair value) $28,405,685 $71,245,441
Liabilities 268,030 32,104,302
Partners' capital 28,137,655 39,141,139
The net loss for the fund for the three and six months ended June 30,
1998 totaled $2,728,158 and $6,506,361 respectively, as compared to a net
gain of $3,337,034 and net loss of $13,301,680 for the same periods in
1997.
The Company, through WTCM, also provides investment management
services to an offshore private investment fund. On May 21, 1998 the sole
voting shareholder of the offshore fund, in consultation with WTCM,
resolved to wind up the fund and appointed a liquidator to distribute the
assets of the fund to its investors in accordance with Cayman Islands law.
In July 1998 approximately 55% of the net assets of the offshore fund were
distributed in cash to its investors. The remainder of the assets will be
distributed promptly following the liquidation of the investments held by
the fund. The Company has no investment in the offshore fund.
WTCM is also entitled to receive a special allocation equal to 20% of
the net income, if any, of each of the funds (not including income earned
on its own investment with respect to the domestic fund), subject to
certain limitations, calculated at each funds year end, which is December
31st for the domestic fund and June 30th for the offshore fund. The amount
of the special allocation for the offshore fund calculated as of June 30,
1998 was $109,319. The Company does not expect to receive a special
allocation during 1998 from the domestic fund based on the negative
performance of that fund to date.
7
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3. STOCK OPTIONS
During the three and six months ended June 30, 1998, the Company
granted 124,000 and 162,500 options, respectively, to purchase the
Company's Common Stock; 84,938 options were exercised year to date
providing proceeds of $398,152 (none were exercised in the second quarter);
and 401,810 and 421,810 options were canceled, respectively. Of the total
granted, all options were granted under Company stock option plans which
expire at various dates through June 2008.
4. LOSS PER COMMON SHARE
Net loss per weighted average common share for the three and six month
periods ended June 30, 1998 and 1997 were computed using the weighted
average number of common shares outstanding during each period. The
exercise of stock options and warrants were not assumed in the computation
of loss per common share, as the effect would have been antidilutive.
Previously reported net loss per share amounts are the same as required by
the adoption of Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," which became effective in the fourth quarter of 1997.
5. SALE OF COMMON STOCK
On June 26, 1998 the Company entered into a Stock Purchase Agreement
with Wise Partners, L.P. providing for the sale of 1,259,842 shares of
Common Stock for an aggregate purchase price of $5,000,000, which was based
on the closing "ask" price of the common stock on June 25, 1998. Wise
Partners, L.P. is a limited partnership of which the Chief Executive
Officer of the Company, Jonathan L. Steinberg, is the General Partner.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
When used in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission, the words or phrases "will likely
result," "management expects," or "the Company expects," "will continue,"
"is anticipated," "estimated" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are cautioned not to
place undue reliance on any such forward-looking statements, each of which
speak only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company has no obligation to publicly release the result of
any revisions which may be made to any forward-looking statements to
reflect anticipated events or circumstances occurring after the date of
such statements.
Three and Six Months Ended June 30, 1998 as Compared to the Three and
Six Months Ended June 30, 1997
Operating Losses From Continuing Operations
The Company's operating loss from continuing operations increased by
$1,154,741 and $2,168,862, to $2,734,704 and $4,546,845 for the three and
six months ended June 30, 1998, respectively, as compared to the
corresponding periods of the previous fiscal year. The increase in
operating loss relates primarily to three factors: the continued investment
in the development of the Company's online service, the decrease in
advertising pages and revenues for Individual Investor magazine, and high
levels of severance and other expenses incurred in the second quarter
relating to changes in senior management and key advertising sales
personnel.
The Company's online service, www.iionline.com, incurred a negative
contribution (before deducting general and administrative ("G&A") expenses)
of $543,890 and $1,004,994 for the three and six months ended June 30,
1998, respectively, as compared with $210,162 and $334,368 in 1997. This
increase is due to higher levels of expenses incurred for the development
and redesign of the service, offset in part by revenues totaling $351,386
and $580,807 for the three and six months in 1998 (there were no revenues
in the corresponding periods of 1997). Individual Investor magazine
incurred a negative contribution (before deducting G&A expenses) of
$273,051 and $356,532 for the three and six months ended June 30, 1998, as
compared to a negative contribution of $7,330 and positive contribution
$321,246 for the same periods in 1997. This is primarily due to a decrease
of advertising revenues in the 1998 periods compared to 1997, together with
an increase in operating expenses related to a larger subscriber base.
General and administrative expenses increased by 57% and 35% to $1,743,493
and $2,893,153 for the three and six months ended June 30, 1998,
respectively, compared to $1,110,537 and $2,143,124 for the same periods in
1997.
9
<PAGE>
Revenues
Revenues from continuing operations for the three and six months ended
June 30, 1998 were $3,661,530 and $7,615,503, respectively, a 14% and 8%
increase from the corresponding periods of the previous fiscal year.
Advertising revenues for the three and six months ended June 30, 1998
were $2,398,533 and $5,191,797, respectively, an 18% and 19% increase over
the corresponding periods of 1997. Of this increase, the Company's website,
www.iionline.com, generated $351,386 and $580,807 for the three and six
months ended June 30, 1998 (there were no revenues in the corresponding
periods of 1997). Ticker advertising revenues for the three and six months
ended June 30, 1998 were $537,974 and $986,906, respectively, a 182% and
103% increase from the corresponding periods in 1997. This relates
primarily to six issues published in 1998 compared to four in 1997,
together with 20% circulation and rate increases effected in February 1998.
Individual Investor advertising revenues for the three and six months ended
June 30, 1998 were $1,509,173 and $3,624,085, respectively, a 18% and 6%
decrease from 1997. As a result of the increase in paid circulation of
Individual Investor, effective November 1997 the Company increased its
advertising rates by 18%. However, total advertising pages for Individual
Investor decreased by 46 and 72 total pages for the three and six months
ended June 30, 1998 reflecting the fact that the sales department was in a
period of transition. The Company went without a Publisher from July 1997
until April 1998 and also terminated it's west coast representative in May
1998 and replaced it with two in house representatives located in Los
Angeles and San Francisco.
Circulation revenues for the three and six months ended June 30, 1998,
were $918,905 and $1,769,861, respectively, a 2% and 17% decrease when
compared to the corresponding periods of the previous fiscal year.
Individual Investor subscription revenues for the three and six months
ended June 30, 1998, were $640,145 and $1,224,166, respectively, a 7%
increase and 4% decrease from 1997. Special Situations Report subscription
revenues for the three and six months ended June 30, 1998 were $103,980 and
$197,397, respectively, a 46% and 60% decrease when compared to 1997. This
is a result of a decrease in paid subscribers to approximately 5,300 as of
June 30,1998, as compared to 10,300 in June 1997. In addition, the Company
does not currently impose a charge for use of its online service.
List rental and other revenues for the three and six months ended June
30, 1998, were $344,092 and $653,845, respectively, a 39% and 12% increase
from the corresponding periods of the previous fiscal year. List rental
revenues for the three and six months ended June 30, 1998 were $228,758 and
$389,526, respectively, a 25% increase and 15% decrease when compared to
the corresponding periods of the previous fiscal year. The year to date
decrease in list rental revenue is primarily attributable to reduced demand
and the decrease in the number of subscribers to Special Situations Report.
Other revenues for the three and six months ended June 30, 1998 were
$115,334 and $264,319, respectively, a 82% and 114% increase from the
corresponding periods of the previous fiscal year. This was due primarily
to an increase in the sale of reprints from Individual Investor and Ticker
magazines and increased revenues generated from an affinity credit card
agreement.
10
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Operating Expenses
Total operating expenses from continuing operations for the three and
six months ended June 30, 1998 were $6,396,234 and $12,162,348
respectively, a 33% and 29% increase from the corresponding periods of the
previous fiscal year.
Editorial, production and distribution expenses for the three and six
months ended June 30, 1998 were $2,968,414 and $5,868,888, respectively, a
37% and 36% increase from the corresponding periods of the previous fiscal
year. The increase is primarily related to the continuing development,
redesign, and ongoing maintenance of the Company's web site
www.iionline.com. The Company incurred online expenses totaling $557,994
and $1,070,666 for the three and six months ended June 30,1998,
respectively, a 166% and 215% increase from the corresponding periods of
the previous fiscal year. Management anticipates expenses relating to
online services to increase as development continues. Production and
distribution expenses relating to all three publications for the three and
six months ended June 30, 1998 were $1,562,776 and $3,144,392,
respectively, a 19% and 18% increase from 1997, primarily due to additional
copies printed for a larger subscriber base in both Individual Investor and
Ticker. Editorial costs for the three and six months ended June 30, 1998
were $605,227 and $1,189,721, respectively, a 23% and 24% increase from the
corresponding periods of the previous fiscal year, mostly due to an
increase in staffing levels to aid the growth in the Company's current
publications as well as its online service.
Promotion and selling expenses for the three and six months ended June
30, 1998 were $1,606,059 and $3,248,728, respectively, a 11% and 14%
increase from the corresponding periods of the previous fiscal year. This
increase primarily is due to online advertising expenses of $337,282 and
$515,135 for the three and six months ended June 30, 1998, respectively, as
compared to no online advertising cost for the corresponding periods in
1997. Subscription expenses for the three and six months ended June 30,
1998 were $472,527 and $1,117,086, respectively, a 26% and 14% decrease
from 1997. Advertising salaries, commissions and other related costs for
the Company's three publications, for the three and six months ended June
30, 1998, were $729,566 and $1,479,971, respectively, as compared to
$835,046 and $1,581,942 for the same periods in 1997.
General and administrative expenses for the three and six months ended
June 30, 1998 increased 57% and 35%, to $1,743,493 and $2,893,153,
respectively, as compared to $1,110,537 and $2,143,124 for the same periods
in 1997. Substantially all of this increase resulted from incremental
expenses (severance, legal fees and executive search fees) incurred in the
second quarter totaling approximately $560,000 relating to changes in
senior management personnel and key advertising sales personnel.
Depreciation and amortization expense for the three and six months
ended June 30, 1998, increased 17% and 14%, to $78,268 and $151,579,
respectively. The increase in 1998 is primarily attributable to
depreciation of office furniture and computer equipment purchased for
additional personnel hired over the past year.
Interest and other income for the three and six months ended June 30,
1998 decreased 32% and increased 40% to $13,708 and $43,663, respectively.
These changes are primarily due to varying levels of cash invested by the
Company.
11
<PAGE>
Discontinued Operations
On April 30, 1998 the Company's Board of Directors decided to
discontinue the Company's investment management services business.
Accordingly, the operating results relating to investment management
services have been segregated from continuing operations and reported as a
separate line item on the statement of operations.
Net loss from discontinued operations for the three and six months
ended June 30, 1998 were $258,619 and $636,079 respectively, as compared to
income of $243,242 and a loss of $1,387,894 for the corresponding periods
in 1997. Under generally accepted accounting principles, loss on disposal
of discontinued operations of $446,450 includes actual losses from the date
the board resolved to discontinue the investment management services
business, plus a provision for additional losses based on management's best
estimate of the amount to be realized on dissolution of the fund.
Investment management services revenues for the three and six months
ended June 30, 1998 were $200,825 and $302,159, respectively, a 14% and 2%
increase from the corresponding periods of the previous fiscal year.
Revenues from investment management services are a combination of
management fees, being 1 to 1-1/2 percent of assets under management, and a
special profit allocation, being 20% of defined performance. Management
fees earned by the Company totaled $91,506 and $192,839 for the three and
six months ended June 30, 1998, respectively, as compared to $114,402 and
$177,336 for the same period in 1997. In addition, the special profit
allocation relating to the offshore fund, which is recognized in the second
quarter, increased to $109,319 in 1998 from $61,617 in 1997.
The net depreciation in fund totaled $317,942 and $758,255 for the
three and six months ended June 30, 1998, as compared to appreciation of
$134,147 and depreciation of $1,531,170 for the corresponding periods in
1997. Net appreciation (depreciation) in fund directly relates to the
realized and unrealized earnings of the amount invested by the Company in
the domestic fund's portfolio which, because of the nature of the
investments, will vary significantly from period to period and may result
in losses as well as income. As of June 30, 1998 the value of the Company's
investment in the domestic fund was $3,279,178. As a result of the Board's
decision WTCM will dissolve the domestic and offshore investment funds,
liquidate fund investments and distribute the net assets to all investors
as promptly as possible. During July 1998 the Company received
approximately $2.3 million of its investment, including approximately $1.4
million in cash and the remainder in securities, as a result of the
foregoing liquidation. No assurance can be given that the Company will
realize the remaining amount of it's investment in the liquidation of the
domestic fund.
Net Loss
The Company's net loss for the three and six months ended June 30,
1998 were $2,979,615 and $5,139,261 as compared to a net loss of $1,316,475
and $3,734,688 for the corresponding periods in 1997. No income taxes were
provided in 1998 or 1997 due to the net loss. The net loss per weighted
average common share for the three and six months ended June 30, 1998 were
($0.41) and ($0.71), respectively, as compared to ($0.21) and ($0.59) for
the corresponding periods in 1997. The increase in net loss can be
attributed to several factors, most notably the continued investment in the
development of the Company's online service, the decrease in advertising
revenues for Individual Investor magazine, several one-time charges
relating to changes in senior management and advertising sales personnel,
and the termination of the Company's investment management services
operations.
12
<PAGE>
Liquidity and Capital Resources
As of June 30, 1998, the Company had working capital of $7,638,129
including cash and cash equivalents totaling $5,719,194. As of June 30,
1998 the fair market value of the Company's investment in the discontinued
operations was $3,279,178, which is available, subject to market
fluctuations and liquidity, to provide working capital to fund the
Company's operations as the domestic fund is liquidated and its assets are
distributed to its partners. During July 1998 the Company received
approximately $2.3 million of its investment in cash and securities. No
assurance can be given that the Company will realize the remaining amount
of its investment upon final liquidation of the fund.
On June 26, 1998 the Company entered into a Stock Purchase Agreement
with Wise Partners, L.P. providing for the sale of 1,259,842 shares of
Common Stock for an aggregate purchase price of $5,000,000, which was based
on the closing "ask" price of the common stock on June 25, 1998. Wise
Partners, L.P. is a limited partnership of which the Chief Executive
Officer of the Company, Jonathan L. Steinberg, is the General Partner. In
addition, during the first six months of 1998 the Company received $398,152
from exercises of stock options.
Management expects advertising revenues to grow as the year continues
with an improved advertising management structure, including a new
publisher hired in April 1998, and other new key sales personnel as well as
increased awareness of Ticker in the marketplace and the effect of the new
rate increase for Ticker implemented in February 1998. The Company expects
to realize higher revenues from a full year of operations of
www.iionline.com, as well as generate additional revenues from this rapidly
growing medium.
The Company incurred a net loss of $2,979,615 and $5,139,261 for the
three and six months ended June 30, 1998 respectively. The Company's
current level of revenues are not sufficient to cover its expenses. Under
its current business plan, during 1998 the Company does not intend to
significantly reduce its expenses, expects to continue to invest in its
existing products and anticipates losses to continue in 1998 and into 1999.
Therefore, profitability will be achieved in future periods only if the
Company can substantially increase its revenues while controlling increases
in expenses. The Company intends to continue to increase its investment in
its online service since it believes that this line of business offers the
greatest opportunity for generating substantial revenues over the longer
term. No assurance can be given that advertising revenues for Individual
Investor and Ticker will increase because higher advertising rates may not
be accepted by advertisers, advertising pages may continue to decline for
Individual Investor, and the advertising mix may change. Although the
13
<PAGE>
Company has recently added key advertising sales personnel personnel
and has hired a new publisher in April 1998, no assurance can be given that
these changes will result in advertising revenue increases. The Company
also believes that a stock market correction or "bear" market would affect
its ability to sell advertising to the financial advertiser categories. In
addition, although the Company has developed a specific marketing strategy
for www.iionline.com, no assurance can be given that this strategy will be
successful. The Company has not yet determined the costs that it will incur
in connection with its anticipated relocation to new space in early 1999,
although it can be expected to be at a significantly higher rate per square
foot. Based on the Company's business plan, the Company believes that its
working capital and its investment in the fund will be sufficient to fund
its operations and capital requirements through 1998. Thereafter, if
revenues have not been significantly increased above current levels, the
Company will need to raise additional capital in order to sustain
operations. No assurance can be given as to the availability of additional
financing or, if available, the terms upon which it may be obtained. Any
such additional financing may result in dilution of an investor's equity
investment in the Company. Failure to obtain additional financing on
favorable terms could have a substantial adverse effect on the Company's
future ability to conduct operations. There can be no assurance that
additional losses will not be incurred in the future, or that the Company
will be able to operate profitably in the future.
In August 1997 the Company retained the investment banking firm of
Bear, Stearns & Co. Inc. ("Bear Stearns") to assist the Company in
exploring strategic initiatives to enhance shareholder value, the process
for which is continuing. With the assistance of Bear Stearns, the Company
has focused on various alternatives including identifying, evaluating, and
approaching potential strategic partners seeking investment positions in
the Company's financial information services business.
Year 2000
The Company has evaluated the potential impact of the situation
commonly referred to as the "Year 2000 Issue" ("Y2K"). Y2K concerns the
inability of information systems, primarily computer software programs, to
properly recognize and process date sensitive information relating to the
year 2000 and beyond. Many of the world's computer systems currently record
years in a two-digit format. Such computer systems will be unable to
properly interpret dates beyond the year 1999, which could lead to business
disruptions in the U.S and internationally. The potential costs and
uncertainties associated with Y2K will depend on a number of factors,
including software, hardware and the nature of the industry in which a
company operates.
To ensure that the Company's computer systems are Y2K compliant, the
Company has been reviewing each of its systems and programs over the past
year. The Company is also working with all of its major external vendors
and suppliers to assess their compliance efforts and the Company's exposure
to them. Any entities which the Company interacts with electronically, such
as its outside subscription fulfillment service, customers, creditors and
banks, can have an effect on its abilities to address this issue.
As a result of researching the Company's hardware and software, and
discussing Y2K with the Company's external vendors and suppliers, it has
been determined that, based upon available information, additional costs
associated with Y2K should not have a material effect on the Company's
operating results or financial condition.
14
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
PART II- OTHER INFORMATION
ITEM 2 - Sales of Unregistered Securities
<S> <C> <C> <C> <C> <C>
- ---------- ------------------ ------------ --------------------------- ------------- -----------------------
Consideration received and Exemption from If option, warrant or
Date of Title of security Number Sold description of underwriting registration convertible security, terms
Sale or other discounts to market claimed of exercise or conversion
price afforded to purchasers
- ---------- ------------------ ------------ --------------------------- ------------- ------------------------
4/98 -6/98 options to purchase 124,000 options granted - no Section 4(2) vesting over a period of
common stock granted consideration received by three to five years from
to employees, Company until exercise date of grant, subject to
directors and certain conditions of
consultants continued service;
exercisable for a period
lasting ten years from date
of grant at exercise prices
ranging from $3.9375 to $7.25
06/26/98 Sale of Securities to 1,259,842 The Company received Section 4(2)
Wise Partners, L.P. $5,000,000 in consideration
for these shares
- ---------- ------------------- ----------- -------------------------- ------------- -------------------------
</TABLE>
ITEM 4 - Submission of Matters to a Vote of Security Holders
On June 17, 1998, the Company held the annual meeting of stockholders
for the purpose electing two directors of the Company, Bruce L. Sokoloff
and Peter M. Ziemba, for a term of three years. The shares of Common Stock
voted on the matter were as follows 6,512,504 shares were cast in favor and
54,060 shares were withheld for the election of both directors.
ITEM 5 - Other Information
Notice to Stockholders Regarding 1999 Annual Meeting of Stockholders:
Pursuant to Rule 14a-4 promulgated by the Securities Exchange
Commission, stockholders are advised that the Company's management will be
permitted to exercise discretionary voting authority under proxies it
solicits and obtains for the Company's 1999 Annual Meeting of Stockholders
with respect to any proposal presented by a stockholder at such meeting,
without any discussion of the proposal in the company's proxy statement for
such meeting, unless the Company receives notice of such proposal at its
principal office in New York, New York not later than March 24, 1999.
15
<PAGE>
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Agreement with Robert Schmidt dated May 25,1998
10.2 Agreement with Scot Rosenblum dated June 20, 1998
10.3 Stock Purchase Agreement, dated June 26, 1998 between Registrant and
Wise Partners L.P. (Incorporated by reference from Exhibit 10.3
filed with the Schedule 13-D of Wise Partners L.P. on July 6, 1998)
27 Financial Data Schedule June 30, 1998
27.3 Financial Data Schedule June 30, 1997
(b) The Company did not file any reports on Form 8-K during the Quarter
Ended June 30, 1998
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DATE: August 13, 1998
INDIVIDUAL INVESTOR GROUP, INC. (Registrant)
By: /s/ Jonathan L. Steinberg
----------------------------------
Jonathan Steinberg, CEO and Chairman of the Board
By: /s/ Henry G. Clark
----------------------------------
Henry G. Clark, Vice President Finance
(Principal Financial and Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
10.1 Agreement with Robert Schmidt dated May 25,1998 19-30
10.2 Agreement with Scot Rosenblum dated June 20, 1998 31
10.3 Stock Purchase Agreement, dated June 26, 1998
between Registrant and Wise Partners L.P.
(Incorporated by reference from Exhibit 10.3
filed with the Schedule 13-D of Wise Partners L.P.
on July 6, 1998)
27 Financial Data Schedule June 30, 1998 32
27.3 Financial Data Schedule June 30, 1997 33
18
<PAGE>
AGREEMENT
AGREEMENT, dated May 20, 1998, by and between Individual Investor Group,
Inc., a corporation organized and existing under the laws of the State of
Delaware with an address at 1633 Broadway, 38th Floor, N.Y., N.Y. 10019 (the
"Company") and Robert H. Schmidt, an individual residing in the State of New
York with an address at 322 East 57th Street, Apt. 4A, New York, N.Y. 10022
("Schmidt").
WHEREAS, Schmidt has been employed by the Company since July 27, 1994, as
President, Chief Operating Officer, and a Director of the Company pursuant to
that certain Employment Agreement dated as of July 27, 1994 (the "Employment
Agreement"); the Company and Schmidt are the parties to that certain Stock
Option Agreement dated May 9, 1997 (the "Option Agreement"); the Company and
Schmidt are the parties to that certain Indemnification Agreement dated as of
July 27, 1994 (the "Indemnification Agreement"), and; the Company and Schmidt
now mutually desire to provide for the orderly termination of the employment
relationship which existed between them and otherwise make provision respecting
certain economic and other matters relating to the Employment Agreement, Option
Agreement and Indemnification Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
l. Termination of Employment.
(A) Termination. Effective as of the date hereof, Schmidt resigns his
positions as President, Chief Operating Officer, and Director of the Company,
and all other offices and capacities held by him with the Company and/or any
subsidiary of the Company. Effective as of the close of business on June 15,
1998 (the "Termination Date"), Schmidt's employment by the Company (and/or any
subsidiary of the Company) is hereby terminated. Schmidt may take two weeks
vacation between the date of this Agreement and the Termination Date. Schmidt
shall not be compensated for any unused vacation.
(B) Transition. Between the date of this Agreement and the Termination
Date, Schmidt shall use his best efforts to assist in the orderly transition of
all matters and files to such persons as Jonathan Steinberg may direct.
Subsequent to the Termination Date, Schmidt shall make himself reasonably
available to the Company or its agents for consultation regarding matters
relating to Schmidt's work at the Company.
19
<PAGE>
2. Payments, Benefits and Other Arrangements.
(A) Employment Compensation. The Company shall make regular payroll
payments to Schmidt on May 30, 1998 and June 15, 1998 at the current rate of pay
($112,500 per annum), and shall pay one months' expense allowance ($8,333.33) on
May 30, 1998 and one-half of the one-months' expense allowance ($4,166.67) on
June 15, 1998.
(B) Severance Payment. Conditioned upon the delivery by the escrow agent of
the Releases from each party hereto to the other described in Section (A) of
this Agreement, the Company shall make a payment to Schmidt in the amount of
Fifty-One Thousand Dollars Five Hundred ($51,500), net of applicable withholding
taxes (the "Payment"), on or before July 1, 1998 (the "Payment Date"). After
making the Payment to Schmidt, the Company shall have no other or further
obligation to Schmidt arising from his employment, except as provided herein.
(C) Option Agreement. Notwithstanding anything to the contrary contained in
the Option Agreement, which is hereby amended to the extent that any of the
following provisions are inconsistent with the existing terms of the Option
Agreement, it is acknowledged and agreed that: (i) Schmidt shall be vested in
options to purchase a total of 498,335 shares of the common stock of the Company
(the "Vested Options"), including specifically the options vested as indicated
on the Option Schedule as follows:
Number of Shares Exercise Price
300,000 5.25
145,001 5.75
26,667 5.88
26,667 7.50
(ii) the Vested Options shall not become exercisable until 90 days following the
Termination Date and shall remain exercisable through the close of business on
the fourth (4th) anniversary of the date they first become exercisable and not
thereafter; and (iii) the termination of employment effected by this Agreement
shall not cause the acceleration of vesting of any other options under the
Option Agreement and Schmidt waives and relinquishes the right to vest in any
other options included in the Option Agreement other than the Vested Options.
20
<PAGE>
(D) Medical and Dental Benefits. The medical coverage heretofore afforded
Schmidt by the Company will be paid by the Company through December 31, 1998.
Thereafter Schmidt may continue coverage for 18 months pursuant to COBRA rules
and regulations at his own expense. The Company will promptly after the
Termination Date furnish Schmidt with a "HIPA" certificate and otherwise comply
with all applicable laws for the purpose of allowing Schmidt to transfer to
another health plan without a break or limitation in coverage. In the event
Schmidt elects COBRA coverage he shall reimburse the Company the total amount of
the monthly premium rate for each month coverage is continued beyond December
1998.
(E) Expenses. The Company shall reimburse Schmidt for regular business
expenses incurred prior to the Termination Date on behalf of the Company and in
accordance with regular Company procedures, provided that no items in excess of
$50 shall be included without prior approval of Jonathan Steinberg.
(F) Certain Matters. Chatsworth Capital Corporation ("Chatsworth") acted as
a finder with respect to the Company's introduction of the INDI 500 to the Trust
Department of Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill"). The Company
is currently negotiating an understanding with Merrill. The Company intends to
resolve any outstanding items in a proposed written agreement and to accurately
document and enter the agreement between the Company and Chatsworth respecting
Chatsworth's role and compensation in certain of the income which may be
received from Merrill through September 17, 2001. The Company acknowledges that
Schmidt, under a separate agreement between Schmidt and Chatsworth, has a right
to a Twenty-Five (25%) share in any income the Company may be required to pay to
Chatsworth; the Company shall have no obligation with respect to Chatsworth's
payment obligations to Schmidt., but the Company shall permit, and shall not
challenge, Schmidt's participation in any payments to Chatsworth by the Company.
(G) Indemnification Agreement. Schmidt's "Corporate Status", as such term
is defined in the Indemnification Agreement, is terminated effective the date of
this Agreement.
3. Mutual Release, Non-Disparagement and Confidentiality.
(A) Coincident with the execution of this Agreement and conditioned upon
Schmidt making the deliveries required in this paragraph, the Company shall
deliver to Schmidt a Release executed in the form attached hereto as Exhibit A,
and; conditioned upon receipt of the Release from the Company to Schmidt,
Schmidt shall deliver to the Company a Release executed in the form attached
hereto as Exhibit B; both such Releases shall be held in escrow until May 29,
1998 unless Schmidt earlier rescinds this Agreement and/or his Release, the
effect of such recision being return of both the Releases and termination of
this Agreement such that it shall have been of no force or effect, and absent
such recision the escrow agent shall simultaneously deliver the respective
Releases from each party to the other on or before June 5, 1998. Lori Katz, Esq.
of the Battle Fowler firm shall serve as escrow agent.
21
<PAGE>
(B) The Company and Schmidt agree that the termination of employment
effected hereunder is by mutual agreement. The Company shall refer all inquiries
regarding Schmidt from prospective employees or other third parties seeking to
establish a business relationship with Schmidt to Jonathan Steinberg or his
successor, if any, as Chief Executive Officer. Mr. Steinberg shall respond to
all such inquiries consistent with the foregoing statement. Following the
execution of this Agreement, either the Company or Schmidt may make disclosure
to Company personnel not already privy to information regarding this Agreement
regarding the fact that Schmidt's employment has been terminated by mutual
agreement. Schmidt agrees that he shall take no action and shall make no
statement or comment which may, directly or indirectly, disparage the reputation
of the Company and/or its subsidiaries and/or its or their officers, directors,
personnel and/or publications. The Company shall take no action and shall make
no statement or comment which may, directly or indirectly, disparage the
reputation of Schmidt.
(C) The Company and Schmidt agree to keep the terms of this Agreement
confidential, except that (i) Schmidt may make disclosure of the terms to his
immediate family members and may disclose any terms that have previously been
disclosed by the Company, (ii) the Company may make such disclosure as is deemed
necessary to comply with applicable securities laws or as may be requested by
regulatory authorities (including any press release and/or inclusion of up to
this entire Agreement in any filing with the S.E.C.), and (iii) either party may
make disclosure to its professional advisors or in any legal proceedings brought
by either party to enforce its rights hereunder.
4. Miscellaneous.
(A) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties, their heirs, executors, administrators, successors and
assigns (if any) permitted under paragraph 4(J), and the parties, their heirs,
executors, administrators, and successors and assigns, shall execute any
instruments in writing which may be necessary or proper in carrying out its
purposes and intent and any and all necessary governmental or regulatory filings
with regard thereto.
(B) Choice of Law, Jurisdiction and Venue. This Agreement shall be
construed under and in accordance with the laws of the State of New York,
without regard to choice of law principles. The parties agree that the State
Courts of the State of New York shall have sole and exclusive jurisdiction over
any action brought to enforce the terms of this Agreement and the parties hereto
consent to the personal jurisdiction and venue of the courts of the State of New
York in the County of New York for such purposes.
22
<PAGE>
(C) Survival. The agreements and representations and warranties of the
parties hereto contained in this Agreement shall survive any termination of this
Agreement. The agreements and obligations of the Company contained in this
Agreement shall survive any merger, acquisition, change of control and/or
bankruptcy or other insolvency of the Company.
(D) Confidentiality. Schmidt agrees that he shall not divulge, furnish, or
make accessible to anyone including present or former employees of the Company
(other than in the regular course of business of the Company prior to the
Termination Date and after the Termination Date only in response to specific
inquiry made by a duly authorized representative of the Company seeking
consultation with Schmidt as contemplated in paragraph 1(B)) any knowledge or
information with respect to confidential or secret processes, inventions,
discoveries, improvements, formulae, plans, material, devices, ideas, or other
know-how, whether intellectual property or not, with respect to any confidential
or secret engineering, development, or research work or with respect to any
other confidential or secret aspects of the Company's business (including,
without limitation, customer lists, subscription lists, supplier lists, and
pricing arrangements with customers, subscribers, or suppliers). Schmidt further
agrees that he shall not make use of, nor permit to be used, any confidential
notes, memoranda, specifications, programs, data, information or other materials
of any nature whether oral or written relating to any matter within the scope of
the business of the Company or concerning any of its dealings or affairs
otherwise than for the benefit of the Company, it being agreed that any of the
foregoing shall be and remain the sole and exclusive property of the Company and
that immediately upon the termination of Schmidt's employment, Schmidt shall
deliver any or all copies of the foregoing to the Company.
(E) Work for Hire. Schmidt agrees that all ideas, marketing concepts,
slogans, advertising campaigns, characters, proposals and plans invented or
developed by him which relate directly or indirectly to the business of the
Company or arose out of his employment with the Company or the use of the
Company's property or resources including, without limitation, any ideas,
proposals and plans which may be copyrighted, trademarked, patented or otherwise
protected (collectively, "Intellectual Property") are and will be the property
of the Company. Schmidt understands and agrees that any and all such
Intellectual Property constitute a "work for hire" under the U.S. Copyright Law.
In the event any such Intellectual Property is not regarded as a "work for
hire," Schmidt hereby assigns to the Company the sole and exclusive right to
such Intellectual Property. Schmidt agrees that upon request of the Company, he
will execute and deliver any and all documents or instruments and take any other
23
<PAGE>
action which the Company shall deem necessary to assign to and vest completely
in the Company all right, title and interest in such Intellectual Property, to
perfect trademark, copyright and patent protection with respect thereto, or to
otherwise protect the Company's trade secrets and proprietary interest in such
Intellectual Property. Schmidt will, at the request and expense of the Company,
sign and execute all such deeds or documents, and provide such cooperation,
including truthful testimony, as the Company and its duly authorized agents may
reasonably require: (i) to apply for, obtain and vest in the name of the Company
alone (unless the Company otherwise directs) trademarks, copyrights, patents or
other analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and (ii) to defend any
opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such trademarks,
copyrights, patents or other analogous protection. In the event Schmidt does
not, within five (5) days, execute and deliver such documents reasonably
necessary to vest in the Company all right, title and interest in such
Intellectual Property, Schmidt hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as Schmidt's agent and
attorney-in-fact, to act for and in Schmidt's behalf and stead to execute and
file any such application or applications and to do all other lawfully permitted
acts to further the prosecution and issuance of trademarks, copyright, patents
or other analogous protection thereon with the same legal force and effect as if
executed by Schmidt.
(F) Schmidt agrees that for a period of One (1) year following the
Termination Date he will not: (i) in any geographic area where the Company
conduct business, engage or participate in, directly or indirectly (whether as
an officer, director, employee, partner, consultant, holder of an equity or debt
investment, lender, or in any other manner or capacity), the business of
financial publishing, or; (ii) solicit any officer, director, employee, or agent
of the Company to become an officer, director, employee, or agent of Schmidt,
his affiliates, or anyone else.
(G) If either the Company or Schmidt commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 3(B), 3(C) or 4(D), the
other shall have the right and remedy:
(i) to have the provisions of this Agreement specifically enforced, it
being acknowledged that any such breach or threatened breach will cause
irreparable injury and that money damages will not provide an adequate remedy;
and
(ii) with respect to a breach by Schmidt of the provisions of
paragraphs 4(D), 4(E), or 4(F), the Company may require Schmidt to account for
and pay over to the Company all compensation, profits, monies, accruals,
increments, or other benefits (collectively "Benefits") derived or received by
Schmidt as a result of any transactions constituting a breach of any of the
provisions of paragraphs 4(D), 4(E), or 4(F), and Schmidt hereby agrees to
account for and pay over such Benefits to the Company.
24
<PAGE>
(H) Headings. The headings used in this Agreement are used for
administrative purposes only and do not constitute substantive matters to be
considered in construing the terms of this Agreement.
(I) Notice. Any notice herein provided for shall be in writing and shall be
deemed duly given when delivered to the other to whom it is addressed. Any
notice herein provided for shall be sent to the address first above indicated in
this Agreement or such other address as either party may indicate by notice to
the other.
(J) Merger. This Agreement terminates the Employment Agreement, and amends
the Option Agreement, and this Agreement and the Option Agreement, as amended,
and the Indemnification Agreement embody the entire understanding and agreement
of the parties hereto in relation to the subject matter hereof, and no promise,
condition, representation or warranty, express or implied, not herein set forth
shall bind any party hereto. None of the terms and conditions of this Agreement
may be changed, modified, waived or canceled orally or otherwise except by a
writing signed by both the parties hereto, specifying such change, modification,
waiver or cancellation. A waiver at any time of compliance with any of the terms
and conditions of this Agreement shall not be considered a modification,
cancellation or waiver of such terms and conditions of any preceding or
succeeding breach thereof unless expressly so stated.
(K) Non-Assignability. This Agreement shall only be assignable by Schmidt
to his successors or assigns in the event of death or incapacity, and shall only
be assignable and shall be assigned by the Company to any legal successor.
(L) Attorney Fees and Penalty. If either party seeks redress in the State
Courts of the State of New York to enforce its rights under this Agreement, the
party prevailing in such action shall be entitled to its reasonable attorney's
fees and expenses as deemed appropriate by the court, including those relating
to the prosecution or resistance of any proceeding in all appellate courts
before or after final decision of a court of competent jurisdiction.
25
<PAGE>
(M) Age Discrimination Claims. Schmidt acknowledges that he has been
represented by an attorney in connection with the preparation and execution of
this Agreement. Schmidt acknowledges that he has been advised that he has a
period of Twenty-One (21) days within which to consider the terms of this
Agreement and his Release prior to signing this Agreement and Release; however,
Schmidt has voluntarily chosen to sign this Agreement prior to the end of the 21
day period. Schmidt has the right to rescind this Agreement and the Release
given in connection herewith, in their entirety, for a period of Seven (7)
calendar days following the date of this Agreement and the Release by delivering
written notice of such recision to the Chief Executive Officer of the Company
and the escrow agent named in Section 3(A) of this Agreement within such period,
in which event this Agreement shall have no further force and effect.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
and on behalf of the parties hereto as of the date first hereinabove written and
each such party executes this Agreement on the understanding and agreement that
each has hereby bound and obligated itself hereby.
INDIVIDUAL INVESTOR GROUP, INC.
By: _______________________________
Jonathan Steinberg, Chairman & CEO
_______________________________
Robert H. Schmidt
26
<PAGE>
Exhibit A
RELEASE
To all to whom these Presents shall come or may Concern, Know That:
Individual Investor Group, Inc. ("IIG"), a corporation organized under the
laws of the State of Delaware, WisdomTree Capital Management, Inc., a
corporation organized and existing under the laws of the State of New York, I.I.
Strategic Consultants, Inc., a corporation organized and existing under the laws
of the State of Delaware, WisdomTree Administration, Inc., a corporation
organized and existing under the laws of the State of Delaware, I.I.
Interactive, Inc., a corporation organized and existing under the laws of the
State of Delaware, Advanced Marketing Ventures, Inc., a corporation organized
and existing under the laws of the State of Delaware, WisdomTree Capital
Advisors, LLC, a limited liability corporation organized and existing under the
laws of the State of New York, and each being fully authorized to execute this
Release (hereinafter collectively referred to as the RELEASORS), in exchange for
consideration heretofore received by IIG and each of the RELEASORS the receipt
and sufficiency of which is hereby acknowledged, do hereby release and forever
discharge Robert H. Schmidt, an individual (hereinafter referred to as
RELEASEE), RELEASEE's heirs, executors, administrators, successors and assigns
from all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, extents,
executions, claims, and demands of any kind whatsoever, in law, admiralty or
equity, which against the RELEASEE, any or all of the RELEASORS or RELEASORS'
successors and assigns ever had, now have or hereafter can, shall or may have
for, upon, or by reason of any matter, cause or thing whatsoever from the
beginning of the world to the day of the date of this RELEASE if and to the
extent such matter, cause or thing arises from any act or failure to act by
Robert H. Schmidt that he demonstrates was known to the non-employee Directors
of IIG on or prior to May 20, 1998; except for matters arising out of a breach
of the obligations under an Agreement, dated May 20, 1998 between IIG and Robert
H. Schmidt.
Whenever the text hereof requires, the use of the singular number shall
include the appropriate plural number as the text of the within instrument may
require. This RELEASE may not be changed orally.
IN WITNESS WHEREOF, each of the undersigned as RELEASOR, has caused this
RELEASE to be executed by its duly authorized officer on May 20, 1998.
Individual Investor Group, Inc. WisdomTree Capital Management, Inc.
By:_______________________________ By:_______________________________
Jonathan Steinberg, Chairman & CEO Jonathan Steinberg, Chairman & CEO
I.I. Strategic Consultants, Inc. WisdomTree Administration, Inc.
By:_______________________________ By:_______________________________
Jonathan Steinberg, Chairman & CEO Jonathan Steinberg, Chairman & CEO
I.I. Interactive, Inc. Advanced Marketing Ventures, Inc.
By:_______________________________ By:_______________________________
Jonathan Steinberg, Chairman & CEO Jonathan Steinberg, Chairman & CEO
WisdomTree Capital Advisors, L.L.C.
By: ______________________________
Jonathan Steinberg, Chairman & CEO
27
<PAGE>
ACKNOWLEDGMENTS
State of New York )
) ss.:
County of New York )
On the 20th day of May, 1998, before me personally came Jonathan Steinberg
to me known, who being by me duly sworn, did depose and say that he has an
office address at c/o Individual Investor Group, Inc., 1633 Broadway, 38th
Floor, New York, New York 10019; that he is the Chairman and Chief Executive
Officer of each of the corporations on whose behalf he has executed the above
instrument; and that he signed his name thereto by authority of the Board of
Directors of each of the said corporations.
_______________________________
Notary Public
Exhibit B
28
<PAGE>
RELEASE
To all to whom these Presents shall come or may Concern, Know That:
Robert H. Schmidt, an individual residing in the State of New York and
being fully authorized and competent to execute this Release (hereinafter
referred to as RELEASOR), in exchange for consideration heretofore received by
RELEASOR the receipt and sufficiency of which is hereby acknowledged, does
hereby release and forever discharge Individual Investor Group, Inc. ("IIG"), a
corporation organized and existing under the laws of the State of Delaware,
WisdomTree Capital Management, Inc., a corporation organized and existing under
the laws of the State of New York, I.I. Strategic Consultants, Inc., a
corporation organized and existing under the laws of the State of Delaware,
WisdomTree Administration, Inc., a corporation organized and existing under the
laws of the State of Delaware, I.I. Interactive, Inc., a corporation organized
and existing under the laws of the State of Delaware, Advanced Marketing
Ventures, Inc., a corporation organized and existing under the laws of the State
of Delaware, WisdomTree Capital Advisors, LLC, a limited liability corporation
organized and existing under the laws of the State of New York, WisdomTree
Associates, L.P., a limited partnership organized and existing under the laws of
the State of New York, and WisdomTree Offshore, Ltd., a Company organized and
existing under the laws of the Cayman Islands, and each of their respective
successors and assigns, officers, directors, employees and agents, and each of
their respective heirs, executors, administrators, successors and assigns
(hereinafter referenced to as RELEASEES), from, all actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgements, extents, executions, claims, and
demands of any kind whatsoever, in law, admiralty or equity, which against the
RELEASEES, the RELEASOR, RELEASOR'S, heirs, executors, administrators,
successors and assigns ever had, now have or hereafter can, shall or may have
for, upon, or by reason of any matter, cause or thing whatsoever from the
beginning of the world to the day of the date of this RELEASE, except for
matters arising out of any breach of the obligations under an Agreement, dated
May 20, 1998 between IIG and RELEASOR.
Whenever the text hereof requires, the use of singular number shall include
the appropriate plural number as the text of the within instrument may require.
This RELEASE may not be changed orally.
IN WITNESS WHEREOF, the undersigned as RELEASOR, has executed this RELEASE
May 20, 1998.
---------------------------------
Robert H. Schmidt
29
<PAGE>
ACKNOWLEDGMENT
State of New York )
) ss.:
County of New York )
On the 20th day of May, 1998, before me personally came Robert H. Schmidt
to me known to be the person described in and who executed the foregoing
instrument, and acknowledged that he executed the same.
----------------------------------
Notary Public
30
<PAGE>
INDIVIDUAL INVESTOR GROUP, INC.
1633 Broadway
New York, New York 10019
As of June 5, 1998
Mr. Scot Rosenblum
Dear Scot:
This letter will confirm certain matters relating to your voluntary
termination of employment by Individual Investor Group, Inc. (ACompany@) as of
June 23, 1998 ("Termination Date").
Your signature below will confirm, effective as of the date hereof, your
resignation as a director of the Company and all subsidiaries of the Company,
and your resignation, effective as of the Termination Date, as an officer of the
Company and all subsidiaries of the Company.
Pursuant to Section 3 (A) of the Stock Option Agreement, dated as of May 9,
1997, between the Company and you ("Option Agreement"), upon your voluntary
termination of employment, the portions of the Option (as defined in the Option
Agreement) that are exercisable as of the Termination Date may be exercised for
a period of one year thereafter or until the expiration of the Exercise Period,
whichever is shorter, and the portions of the Option that are not exercisable as
of the Termination Date immediately terminate on the Termination Date.
Notwithstanding the provisions of the Option Agreement, (a) you hereby agree as
follows: (i) you will not sell any shares of Common Stock of the Company
issuable upon exercise of the Option ("Option Shares") until September 23, 1998;
(ii) subject to clause (v) below, you will not sell more than 25,0000 Option
Shares between September 23, 1998 and December 22, 1998; (iii) subject to clause
(v) below, you will not sell more than 75,000 Option Shares (plus any Option
Shares you were permitted to sell pursuant to clause (ii) but did not sell)
between December 23, 1998 and June 22, 1999; (iv) after June 22, 1999 you will
not have any contractual restriction on the sale of Option Shares; and (v)
provided, however, that if on any one day the trading volume of the Company's
Common Stock (exclusive of any sale of Option Shares by you on that day) shall
exceed 200,000, any sale of Option Shares by you on that day and on the next
trading day shall not be counted toward the volume limitations set forth in
clauses (ii) and (iii); and (b) the Company hereby agrees that the portions of
the Option that are exercisable as of the Termination Date may be exercised by
you until the earlier of (i) September 22, 2002, or ten years from the date of
grant of the applicable portion of the Option as indicated on the Option
Schedule annexed to the Option Agreement.
This letter shall constitute an amendment to the Option Agreement.
Please confirm your agreement below.
Very truly yours,
Individual Investor Group, Inc.
_________________________________
By: Jonathan Steinberg
Chairman and Chief Executive Officer
ACCEPTED AND AGREED:
_______________________
Scot Rosenblum
31
<PAGE>
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