TheStreet 10Q 2004 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

Commission File Number 000-25779

TheStreet.com, Inc.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

06-1515824
(I.R.S. Employer Identification Number)

14 Wall Street
New York, New York 10005
(Address of principal executive offices, including zip code)

(212) 321-5000
(Registrant’s telephone number, including area code)

Indicate by 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 _____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES X NO _____

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

(Title of Class)
Common Stock, par value $0.01 per share

(Number of Shares Outstanding
as of August 5, 2004)
24,644,158

TheStreet.com, Inc.
Form 10-Q

For the Three Months Ended June 30, 2004

Part I - FINANCIAL INFORMATION		1
Item 1.	Interim Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21

PART II - OTHER INFORMATION		30
Item 1.	Legal Proceedings	31
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	31
Item 6.	Exhibits and Reports on Form 8-K	31
SIGNATURES		33

Part I – FINANCIAL INFORMATION

Item 1.

Interim Condensed Consolidated Financial Statements

THESTREET.COM, INC
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2004			December 31, 2003

		(unaudited)			(Note 1)
ASSETS
Current Assets:	��
Cash and cash equivalents	$	26,252,018		$	22,247,400
Restricted cash		300,000			300,000
Short-term investments		2,005,000			4,010,904
Accounts receivable, net of allowance for doubtful accounts of $137,065 as of June 30, 2004 and $129,096 as of December 31, 2003		1,958,814			1,637,822
Other receivables		253,187			202,336
Receivables from related parties		—			214,788
Prepaid expenses and other current assets		1,722,273			1,303,891

Total current assets		32,491,292			29,917,141
Property and equipment, net of accumulated depreciation and amortization of $12,189,471 as of June 30, 2004 and $11,744,173 as of December 31, 2003		2,560,005			2,553,063
Other assets		288,451			343,450
Goodwill		1,990,312			1,990,312
Other intangibles, net		493,333			493,333
Restricted cash		2,305,000			1,900,000

Total assets	$	40,128,393		$	37,197,299

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,095,647		$	787,409
Accrued expenses		4,372,866			3,144,949
Deferred revenue		8,627,532			6,839,171
Current portion of note payable		92,990			89,895
Other current liabilities		40,153			71,859

Total current liabilities		14,229,188			10,933,283
Note payable		173,987			221,269
Other liabilities		55,399			55,399

Total liabilities		14,458,574			11,209,951

Stockholders’ Equity
Preferred stock; $0.01 par value; 10,000,000 shares authorized; none issued and outstanding		—			—
Common stock; $0.01 par value; 100,000,000 shares authorized; 30,046,529 shares issued and 24,603,113 shares outstanding at June 30, 2004, and 29,463,299 shares issued and 24,041,199 shares outstanding at December 31, 2003		300,465			294,633
Additional paid-in capital		185,951,412			184,502,124
Treasury stock at cost; 5,443,416 shares at June 30, 2004 and 5,422,100 shares at December 31, 2003		(7,289,822	)		(7,215,410	)
Accumulated deficit		(153,292,236	)		(151,593,999	)

Total stockholders’ equity		25,669,819			25,987,348

Total liabilities and stockholders’ equity	$	40,128,393		$	37,197,299

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements

THESTREET.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,

	2004			2003			2004			2003

		(unaudited)						(unaudited)

Net revenue:
Subscription	$	5,687,179		$	4,349,720		$	11,096,674		$	8,622,609
Advertising		1,915,072			1,476,076			3,343,046			2,676,819
Commission		1,208,801			167,076			1,985,591			167,076
Other		331,544			401,295			637,587			583,905

Total net revenue		9,142,596			6,394,167			17,062,898			12,050,409


Operating expense:
Cost of services		4,005,470			3,581,633			8,082,830			6,993,250
Sales and marketing		3,114,509			1,694,571			6,195,704			3,352,804
General and administrative		2,028,391			1,860,265			4,217,552			3,615,596
Depreciation and amortization		196,629			606,754			408,534			1,372,712
Noncash compensation		—			32,985			—			271,405

Total operating expense		9,344,999			7,776,208			18,904,620			15,605,767

Operating loss		(202,403	)		(1,382,041	)		(1,841,722	)		(3,555,358	)

Net interest income		72,082			109,174			143,485			226,847

Net loss	$	(130,321	)	$	(1,272,867	)	$	(1,698,237	)	$	(3,328,511	)


Net loss per share - basic and diluted:	$	(0.01	)	$	(0.05	)	$	(0.07	)	$	(0.14	)


Weighted average basic and diluted shares outstanding		24,569,299			23,852,528			24,404,721			23,752,807

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements

THESTREET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Six Months Ended June 30,

	2004			2003

	(unaudited)
Cash Flows from Operating Activities:
Net loss	$	(1,698,237	)	$	(3,328,511	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Noncash compensation expense		—			271,405
Provision for (recovery of) doubtful accounts		8,000			(43,839	)
Depreciation and amortization		408,534			1,372,712
Changes in operating assets and liabilities:
Accounts receivable		(328,992	)		271,064
Other receivables		(50,851	)		(63,636	)
Receivables from related parties		214,788			31,109
Prepaid expenses and other current assets		(418,382	)		(443,727	)
Other assets		116,013			92,780
Accounts payable and accrued expenses		1,536,155			(506,174	)
Deferred revenue		1,788,361			1,394,353
Other current liabilities		(31,706	)		1,133

Net cash provided by (used in) operating activities		1,543,683			(951,331	)

Cash Flows from Investing Activities:
Purchase of short-term investments		(4,000,000	)		(2,000,000	)
Sale of short-term investments		6,005,904			4,805,247
Capital expenditures		(476,490	)		(222,713	)

Net cash provided by investing activities		1,529,414			2,582,534

Cash Flows from Financing Activities:
Proceeds from the exercise of stock options		1,455,120			390,235
Note payable		(44,187	)		(41,294	)
Restricted cash		(405,000	)		172,629
Purchase of treasury stock		(74,412	)		—

Net cash provided by financing activities		931,521			521,570

Net increase in cash and cash equivalents		4,004,618			2,152,773
Cash and cash equivalents, beginning of period		22,247,400			21,565,018

Cash and cash equivalents, end of period	$	26,252,018		$	23,717,791


Supplemental disclosures of cash flow Information:

Cash payments made for interest	$	15,704		$	17,252

Supplemental disclosures of noncash investing and financing activities:

During 2003, $172,629 of restricted cash that was invested in short-term investments became unrestricted.

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements

TheStreet.com, Inc.

Notes to Condensed Consolidated Financial Statements

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Business

TheStreet.com, Inc., together with its wholly-owned subsidiaries (collectively, the “Company”), operates its businesses in two segments, electronic publishing and securities research and brokerage. Our electronic publishing segment provides investment commentary, analysis and news to both retail and professional customers, which we distribute through our production of web sites, email reports and newsletters, syndicated radio programming, and conferences. Our electronic publishing segment receives revenue from subscription sales, advertising and sponsorship sales, as well as content syndication and conference attendees. Our securities research and brokerage segment provides proprietary equity research and brokerage services to institutional clients, and, as a broker-dealer, receives revenue from trading commissions, a standard payment method in the professional markets.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Exchange Act Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, refer to the financial statements and accompanying footnotes included in the Company’s annual report on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange Commission on March 15, 2004.

2. STOCK-BASED COMPENSATION

The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by Financial Accounting Standards Board Statement No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“FASB No. 148”), and elected to continue to account for stock options granted to employees and directors based on the accounting set forth in Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Stock options granted during the six-month period ended June 30, 2004 were exercisable at prices equal to the fair market value of the Company’s common stock on the dates the options were granted; accordingly, no compensation expense has been recognized for the stock options granted.

Effective December 10, 2002, stock option grant agreements to members of the senior management team were amended to provide that in the event of a change of control of the Company, as defined, 50% of each member’s then unvested options would vest and become exercisable. The Company is unable to estimate the number of options that ultimately will be retained that otherwise would have been forfeited absent the modification and, as a result, no expense has been recorded. Additionally, such maximum possible future compensation expense is not considered to be material.

Had compensation for the Company’s outstanding stock options granted to employees and directors been determined consistent with the provisions of SFAS No. 123, the effect on the Company’s net loss and basic and diluted net loss per share would have been changed to the following pro forma amounts:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,

	2004			2003			2004			2003

Net loss, as reported	$	(130,321	)	$	(1,272,867	)	$	(1,698,237	)	$	(3,328,511	)
Add: noncash compensation, as reported		—			32,985			—			271,405
Less: noncash compensation, pro forma		(482,452	)		(619,740	)		(1,104,677	)		(1,879,858	)

Net loss, pro forma	$	(612,773	)	$	(1,859,622	)	$	(2,802,914	)	$	(4,936,964	)

Basic and diluted net loss per share, as reported	$	(0.01	)	$	(0.05	)	$	(0.07	)	$	(0.14	)

Basic and diluted net loss per share, pro forma	$	(0.02	)	$	(0.08	)	$	(0.11	)	$	(0.21	)

3. TREASURY STOCK

From January 2001 through October 2002, the Company purchased 5,422,100 shares of its common stock under a repurchase program authorized by the Board of Directors in December 2000. The program provides for the repurchase of up to $10 million worth of the Company’s common stock, from time to time, in private purchases or in the open market. In February 2004, the Company’s Board of Directors approved the resumption of its stock repurchase program under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the program. During the six-month period ended June 30, 2004, the Company purchased 21,316 shares of common stock at an aggregate cost of $74,412 under this program. Since the inception of the program, the Company has purchased a total of 5,443,416 shares of common stock at an aggregate cost of $7,289,822.

4. LEGAL PROCEEDINGS

On December 5, 2001, a class action lawsuit alleging violations of the federal securities laws was filed in the United States District Court for the Southern District of New York naming as defendants TheStreet.com, Inc., certain of its former officers and directors and James J. Cramer, a current director, and certain underwriters of the Company’s initial public offering (The Goldman Sachs Group, Inc., Chase H&Q, Thomas Weisel Partners LLC, FleetBoston Robertson Stephens, and Merrill Lynch Pierce Fenner & Smith, Inc.). Plaintiffs allege that the underwriters of TheStreet.com, Inc.’s initial public offering violated the securities laws by failing to disclose certain alleged compensation arrangements (such as undisclosed commissions or stock stabilization practices) in the offering’s registration statement. The plaintiffs seek damages and statutory compensation against each defendant in an amount to be determined at trial, plus pre-judgment interest thereon, together with costs and expenses, including attorneys’ fees. Similar suits were filed against over 300 other issuers that had initial public offerings between 1998 and December 2001, and they have all been consolidated into a single action. Pursuant to a Court Order dated October 9, 2002, each of the individual defendants to the action has been dismissed without prejudice. On June 8, 2004, the Company and its individual defendants (together with the Company’s insurance carriers) entered into a settlement with the plaintiffs. The settlement is subject to a hearing on fairness and approval by the court overseeing the litigation.

Although the lawsuit against the Company is an independent cause of action vis-à-vis the lawsuits pending against other issuers in the consolidated proceeding, and no issuer is liable for any wrongdoing allegedly committed by any other issuer, the proposed settlement between the plaintiffs and the issuers is being done on a collective basis and includes all but one of the 299 issuer defendants eligible to participate. Generally, under the terms of the settlement, in exchange for the delivery by the insurers of the Company and the other defendants of an undertaking guaranteeing that the plaintiffs will recover, in the aggregate, $1 billion from the underwriters (the “Recovery Deficit”), and the assignment to the plaintiffs by the issuers of their interests in claims against the underwriters for excess compensation in connection with their IPOs, the plaintiffs will release the non-bankrupt issuers from all claims against them (the bankrupt issuers will receive a covenant not to sue) and their individual defendants. The Recovery Deficit payable by the insurers to the plaintiffs will be equal to the difference, if any, between $1 billion and the actual amount the plaintiffs recover from the underwriters by reason of the IPO litigation and the assigned claims. Neither the Company nor any other issuer will be required to pay any portion of the Recovery Deficit, if any, and the insurers will cover all further legal defense costs incurred by the issuers, as well as notice costs and administrative costs and expenses. However, in the event the settlement is not approved by the court and the Company or any of its individual defendants is reinstated as a defendant in the lawsuit, any unfavorable outcome of this litigation could have an adverse impact on the Company’s business, financial condition, results of operations, and cash flows.

5. BUSINESS SEGMENT INFORMATION

Effective January 1, 2003, the Company’s operations were classified into two business segments, media and financial services. Effective July 1, 2003, these segments were renamed “electronic publishing” and “securities research and brokerage” to better reflect the Company’s operating activities. The Company’s electronic publishing segment provides investment commentary, analysis and news to both retail and professional customers. The Company’s securities research and brokerage segment generates independent proprietary equity research for use by institutional clients, and as a broker-dealer, is able to accept payment for its product through trading commissions, a standard payment method in the professional markets. Commission revenue is recorded on a trade date basis. Beginning with the first quarter of 2003, these segments were evaluated separately by key management in assessing performance and allocating resources.

To use administrative and other overhead resources efficiently, certain functions necessary to the operation of the Company’s securities research and brokerage segment, which is operated by Independent Research Group LLC (“IRG”), a wholly owned subsidiary of TheStreet.com, Inc., including administrative, financial, legal and technology functions, are handled by the Company’s electronic publishing segment, which is operated by TheStreet.com. Expenses related to the performance of these functions are allocated to the securities research and brokerage segment based upon a services agreement between the two companies. Costs are allocated pro rata, based upon the number of personnel employed by IRG as a percentage of the total number of personnel of TheStreet.com and IRG combined. Management of the Company believes this allocation method to be reasonable. Costs allocated to the securities research and brokerage segment totaled $578,112 and $179,357, for the three-month periods ended June 30, 2004 and 2003, respectively, and $1,043,952 and $308,943, for the six-month periods ended June 30, 2004 and 2003, respectively.

The information presented below includes certain intercompany transactions and, therefore, is not necessarily indicative of the results had the operations existed as stand-alone businesses. Eliminations include intercompany sales of subscription-based products, which are billed at rates consistent with pricing arrangements for bulk product subscription sales. These intercompany transactions are eliminated in consolidation.

	For the Three Months Ended June 30, 2004

	Electronic publishing		Securities research and brokerage			Eliminations		Total

Statement of Operations Data:
Subscription revenue	$	5,735,981	$	—		$	48,802	$	5,687,179
Advertising revenue		1,915,072		—			—		1,915,072
Commission revenue		—		1,208,801			—		1,208,801
Other revenue		331,544		—			—		331,544

Total net revenue	$	7,982,597	$	1,208,801		$	48,802	$	9,142,596

Depreciation and amortization	$	160,390	$	36,239		$	—	$	196,629

Net interest income	$	69,979	$	2,103		$	—	$	72,082

Net income (loss)	$	1,319,468	$	(1,449,789	)	$	—	$	(130,321	)

Cash flows: additions to long-lived assets	$	198,082	$	45,115		$	—	$	243,197

	For the Six Months Ended June 30, 2004

	Electronic publishing		Securities research and brokerage			Eliminations		Total

Statement of Operations Data:
Subscription revenue	$	11,246,814	$	—		$	150,140	$	11,096,674
Advertising revenue		3,343,046		—			—		3,343,046
Commission revenue		—		1,985,591			—		1,985,591
Other revenue		637,587		—			—		637,587

Total net revenue	$	15,227,447	$	1,985,591		$	150,140	$	17,062,898

Depreciation and amortization	$	344,939	$	63,595		$	—	$	408,534

Net interest income	$	139,842	$	3,643		$	—	$	143,485

Net income (loss)	$	1,161,844	$	(2,860,081	)	$	—	$	(1,698,237	)

Cash flows: additions to long-lived assets	$	431,375	$	45,115		$	—	$	476,490

	For the Three Months Ended June 30, 2003

	Electronic publishing			Securities research and brokerage			Eliminations		Total

Statement of Operations Data:
Subscription revenue	$	4,376,495		$	—		$	26,775	$	4,349,720
Advertising revenue		1,476,076			—			—		1,476,076
Commission revenue		—			167,076			—		167,076
Other revenue		401,295			—			—		401,295

Total net revenue	$	6,253,866		$	167,076		$	26,775	$	6,394,167

Depreciation and amortization	$	582,717		$	24,037		$	—	$	606,754

Net interest income	$	108,606		$	568		$	—	$	109,174

Net loss	$	(608,700	)	$	(664,167	)	$	—	$	(1,272,867	)

Cash flows: additions to long-lived assets	$	93,635		$	—		$	—	$	93,635

	For the Six Months Ended June 30, 2003

	Electronic publishing			Securities research and brokerage			Eliminations		Total

Statement of Operations Data:
Subscription revenue	$	8,649,384		$	—		$	26,775	$	8,622,609
Advertising revenue		2,676,819			—			—		2,676,819
Commission revenue		—			167,076			—		167,076
Other revenue		583,905			—			—		583,905

Total net revenue	$	11,910,108		$	167,076		$	26,775	$	12,050,409

Depreciation and amortization	$	1,321,091		$	51,621		$	—	$	1,372,712

Net interest income	$	220,095		$	6,752		$	—	$	226,847

Net loss	$	(2,182,200	)	$	(1,146,311	)	$	—	$	(3,328,511	)

Cash flows: additions to long-lived assets	$	222,713		$	—		$	—	$	222,713

	As of June 30, 2004

	Electronic publishing		Securities research and brokerage		Eliminations		Total

Balance Sheet Data:
Total assets	$	45,515,763	$	2,394,159	$	7,781,529	$	40,128,393

Total liabilities	$	13,649,839	$	1,040,164	$	231,429	$	14,458,574

	As of June 30, 2003

	Electronic publishing		Securities research and brokerage		Eliminations		Total

Balance Sheet Data:
Total assets	$	38,684,592	$	624,926	$	1,700,075	$	37,609,443

Total liabilities	$	10,964,836	$	352,565	$	149,975	$	11,167,426

NET LOSS PER SHARE OF COMMON STOCK

The Company computes net loss per share 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 common share (“Basic EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per common share (“Diluted EPS”) is computed by dividing net loss by the weighted average number of common shares and dilutive common share equivalents then outstanding. Diluted EPS is identical to basic EPS since stock options were excluded from the calculation, as their effect is antidilutive.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements contained in this quarterly report on Form 10-Q relating to plans, strategies, objectives, economic performance and trends and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, the factors set forth under the heading “Risk Factors” and elsewhere in this quarterly report, and in other documents filed by the Company with the Securities and Exchange

Commission from time to time, including, without limitation, the Company’s annual report on Form 10-K for the year ended December 31, 2003. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “potential”, or “continue” or similar terms or the negative of these terms. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and notes thereto.

Overview

History

TheStreet.com, Inc., together with its wholly-owned subsidiaries (collectively, the “Company”), operates its businesses in two segments, electronic publishing and securities research and brokerage. The Company’s electronic publishing segment provides investment commentary, analysis and news to both retail and professional customers, which it distributes through its production of web sites, email reports and newsletters, syndicated radio programming, and conferences. The electronic publishing segment receives revenue from subscription sales, advertising and sponsorship sales, as well as content syndication and conference attendees. The Company’s securities research and brokerage segment provides proprietary equity research and brokerage services to institutional clients, and, as a broker-dealer, receives revenue from trading commissions, a standard payment method in the professional markets.

In October 2002, the Company began the development of a separate, wholly owned subsidiary, Independent Research Group LLC (“IRG”), to bring high-quality, independent equity research to institutional clients. In April 2003, IRG was admitted to the National Association of Securities Dealers, Inc. (“NASD”) as a broker-dealer. IRG established correspondent clearing relationships with two brokerage firms and began receiving commission revenue in May 2003. On January 5, 2004, IRG announced the commencement of in-house equity trading operations on behalf of its clients.

Current State of the Company

The Company’s total net revenue for the three-month and six-month periods ended June 30, 2004 increased approximately 43% and 42%, to $9.1 million and $17.1 million, respectively, as compared to $6.4 million and $12.1 million, respectively, for the three-month and six-month periods ended June 30, 2003. The Company’s reported net loss for the three-month and six-month periods ended June 30, 2004 improved approximately 90% and 49% to $0.1 million and $1.7 million, respectively, as compared to $1.3 million and $3.3 million, respectively, for the three-month and six-month periods ended June 30, 2003.

Approximately $7.9 million and $15.1 million, or 87% and 88% of the Company’s total revenue for the three-month and six-month periods ended June 30, 2004, respectively, was received by its electronic publishing segment, which is operated through TheStreet.com, Inc. Subscription revenue for the Company’s electronic publishing segment in the three-month and six-month periods ended June 30, 2004 increased by approximately 31% and 29%, to $5.7 million and $11.1 million, respectively, as compared to $4.3 million and $8.6 million, respectively, for the three-month and six-month periods ended June 30, 2003, due to subscription growth in several products, including its newest product, TheStreet.com Stocks Under $10. On the expense side, during the three-month period ended June 30, 2004 as compared to the three-month period ended June 30, 2003, the Company’s electronic publishing segment experienced decreases in depreciation and amortization, sales and use tax expenses, and conference related costs, partially offset by an increase in online marketing expenses. During the six-month period ended June 30, 2004 as compared to the six-month period ended June 30, 2003, the Company’s electronic publishing segment experienced decreases in depreciation and amortization, noncash compensation expense and conference related costs, partially offset by an increase in online marketing expenses. As a result, overall expenses of the electronic publishing segment decreased by approximately 3%, to $6.7 million, for the three-month period

ended June 30, 2004, and 1%, to $14.2 million, for the six-month period ended June 30, 2004, as compared to $7.0 and $14.3 million, respectively, for the three-month and six-month periods ended June 30, 2003.

The year over year revenue growth in the Company’s electronic publishing segment during both the three-month and six-month periods ended June 30, 2004 was due in large part to the Company’s success in marketing its products to a wider audience. The Company increased sales and marketing expenditures for its electronic publishing segment during the three-month and six-month periods to $2.0 million and $4.3 million, respectively, as it expanded its online marketing efforts in order to position its electronic publishing segment to take advantage of several trends the Company believes are developing in the marketplace for online financial content: increased demand for financial and investing content that is free from the conflicts that have plagued traditional Wall Street research, increased demand for financial and investing products that provide consumers with specific recommendations and increased willingness of consumers to pay for value-added content online. We expect to continue this marketing initiative, which involves the promotion of our consumer services via online advertising and email marketing programs with a variety of web sites, both large and small. We expect sales and marketing expense for this segment to be reduced in the third quarter of 2004, due to seasonality, and then to increase again in the fourth quarter. Because the online advertising contracts we enter into in connection with this marketing initiative generally have short terms and early cancellation provisions, we can adjust our expenditures on a weekly or monthly basis, depending on the return-on-investment of the campaigns.

The Company’s securities research and brokerage segment is operated through its IRG subsidiary, which was created in the fourth quarter 2002. Since IRG was essentially a start-up business in 2003 and began receiving revenue in May 2003 after its admission to the NASD as a broker-dealer at the end of April, the segment incurred $1.3 million in expenses and received only $0.2 million in revenue in the six-month period ended June 30, 2003. Due to expansion of both its research and sales and marketing staffs in the six-month period ended June 30, 2004 and commencement in January 2004 of in-house execution of client trades, IRG’s revenues and expenses experienced significant growth, increasing to nearly $2.0 million in revenue and $4.7 million in expenses during the six-month period ended June 30, 2004. The industry trend among large brokerage firms to reduce the size and expense of their research departments and the subsequent reduction of coverage have led to the greater availability of talented research analysts. The Company believes that pressure by investors on buy-side institutions to justify expenses and the desire to obtain research from firms without conflicts of interest has made them more likely to select small, independent firms offering unbiased, high quality research than in the past, and less likely to select large, so-called “bulge-bracket” firms, where commissions bundle together execution costs with the costs of producing high volumes of research and other services. In order to take advantage of these trends, the Company expects to continue to devote significant resources to this segment in the remainder of 2004, further increasing IRG’s staff, mainly in its research department. Any growth in staff is likely to result in higher compensation expense, and we expect that the increase in revenue-generating activities that results from the additional staff will increase variable expenses, such as trading costs. The timing of any such staff increases is dependent upon the availability of talented research analysts and sales and marketing personnel, making it difficult to project increases in expenses or revenue. To accommodate the expected growth in staff, in May 2004, IRG entered into an agreement to lease new principal office space at 44 Wall Street in New York City, New York. See “—Commitments and Contingencies.”

The Company believes that its current cash and cash equivalents and short-term investments will be sufficient to meet the anticipated cash needs of both the Company’s electronic publishing segment and its securities research and brokerage segment for at lease the next 12 months. See “—Liquidity and Capital Resources.”

Critical Accounting Policies

Stock Based Compensation

The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by Financial Accounting Standards Board Statement No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“FASB No. 148”), and elected to continue to account for stock options granted to employees and directors based on the accounting set forth in Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Stock options granted during the six months ended June 30, 2004 and 2003 were exercisable at prices equal to the fair market value of the Company’s common stock on the dates the options were granted; accordingly, no compensation expense has been recognized for such stock options.

The impact of stock-based compensation expense based upon the fair value method would be significant to the reported results of operations and per share amounts. See Note 2 to the condensed consolidated financial statements.

Revenue Recognition

The Company generates its revenue primarily from subscriptions, advertising, and commissions.

Subscription revenue represents customer subscriptions that provide subscribers access to investment commentary, advice, research, analysis and news. Subscriptions are generally charged to customers’ credit cards or are charged directly to companies that subscribe to the service. These are generally billed in advance on a monthly, quarterly, semi-annual or annual basis. The Company calculates net subscription revenue by deducting refunds and cancellation chargebacks from gross revenue. Net subscription revenue is recognized ratably over the subscription period. Deferred revenue liabilities relate to subscription fees for which amounts have been collected but for which revenue has not been recognized.

Advertising revenue, derived from the sale of internet sponsorship arrangements, and from the delivery of banner and email advertisements on the Company’s web sites, as well as from conference sponsorships, is recognized ratably over the period the advertising is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Although infrequent, Company obligations could include guarantees of a minimum number of times that users of the Company’s web sites “click-through” to the advertisers web site, or take additional specified action, such as opening an account. In such cases, revenue is recognized as the guaranteed “click-throughs” or other relevant delivery criteria are fulfilled.

Commission revenue arises from trades placed through the Company’s broker-dealer subsidiary by its institutional clients. Commission revenue and related expenses are recognized on a trade date basis.

Other revenue consists primarily of revenue related to James J. Cramer’s daily radio program, RealMoney with Jim Cramer, syndication revenue, conference attendee revenue and reprint revenue.

Goodwill and Other Intangible Assets

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 requires companies to stop amortizing goodwill and certain other intangible assets with an indefinite useful life. Instead, goodwill and other intangible assets deemed to have an indefinite useful life will be subject to an annual review for impairment. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life).

Upon the adoption of SFAS 142 in the first quarter of 2002, the Company stopped the amortization of goodwill and certain other intangible assets with an indefinite life, and completed the required transitional fair value impairment test on its goodwill and certain other intangible assets, the results of which had no impact on the Company’s financial statements. Based upon annual impairment tests as of September 30, 2003 and 2002, no impairment was indicated for the Company’s goodwill and intangible assets with indefinite lives.

Income Taxes

The Company accounts for its income taxes in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes” (“SFAS No. 109”). Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in the period that the tax change occurs. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely that some or all of the deferred tax asset will not be realized.

Results of Operations

To use administrative and other overhead resources efficiently, certain functions necessary to the operation of the Company’s securities research and brokerage segment, which is operated by IRG, including administrative, financial, legal and technology functions, are handled by the Company’s electronic publishing segment, which is operated by TheStreet.com. Expenses related to the performance of these functions are allocated to the securities research and brokerage segment based upon a services agreement between the two companies. Costs are allocated pro rata, based upon the number of personnel employed by IRG as a percentage of the total number of personnel of TheStreet.com and IRG combined. Costs allocated to the securities research and brokerage segment for the three-month and six-month periods ended June 30, 2004 totaled $578,112 and $1,043,952, respectively, as compared to $179,357 and $308,943 for the three-month and six-month periods ended June 30, 2003, respectively.

Comparison of Three Months Ended June 30, 2004 and June 30, 2003

Net Revenue

	For the Three Months Ended June 30,				Change

	2004		2003		Amount			Percent

Net revenue:
Subscription	$	5,687,179	$	4,349,720	$	1,337,459		31	%
Advertising		1,915,072		1,476,076		438,996		30	%
Commission		1,208,801		167,076		1,041,725		624	%
Other		331,544		401,295		(69,751	)	(17	%)

Total net revenue	$	9,142,596	$	6,394,167	$	2,748,429		43	%

Subscription. Subscription revenue is derived from annual, semi-annual, quarterly and monthly subscriptions. All subscription revenue is attributable to the Company’s electronic publishing segment.

The increase in subscription revenue is primarily associated with Action Alerts PLUS, The Telecom Connection and RealMoney Pro Advisor, the sum of which totals $1,659,537, partially offset by a decrease in revenue associated with TheStreet View and Street Insight, the sum of which totals $236,639. For the three months ended June 30, 2004, approximately 64% of the Company’s net subscription revenue was derived from annual subscriptions, as compared to approximately 65% for the three months ended June 30, 2003.

The Company calculates net subscription revenue by deducting refunds and cancellation chargebacks from gross revenue. Refunds and cancellation chargebacks totaled less than 1% of gross subscription revenue during each of the three-month periods ended June 30, 2004, and June 30, 2003.

Advertising. Advertising revenue is derived from internet sponsorship arrangements and from the delivery of banner and e-mail advertisements, as well as from conference sponsorships. All advertising revenue is attributable to the Company’s electronic publishing segment.

The increase in advertising revenue is primarily the result of continued improvements in the online advertising market, which led to increased spending by the Company’s advertisers, and in the overall performance of advertising campaigns delivered by the Company, resulting in the ability to charge higher advertising rates.

For the three months ended June 30, 2004, 79% of the Company’s advertising revenue was derived from advertising sponsorship contracts, as compared to 80%, excluding conference sponsorship revenue, for the three months ended June 30, 2003. The number of advertisers for the three months ended June 30, 2004, was 46, as compared to 52, excluding conference sponsorships, for the three months ended June 30, 2003.

For the three months ended June 30, 2004, the Company’s top five advertisers accounted for approximately 49% of its total advertising revenue as compared to approximately 41%, excluding conference sponsorship revenue, for the three months ended June 30, 2003.

Commission. Commission revenue arises from trades placed through the Company’s broker-dealer subsidiary by its institutional clients, allowing it to collect commissions on such trades in payment for both the equity research it provides to them, as well as for the institutional products produced by the Company’s electronic publishing segment. Clients began trading through the Company’s broker-dealer subsidiary as of May 13, 2003. All commission revenue is attributable to the Company’s securities research and brokerage segment. The increase in commission revenue is the result of growth in the securities research and brokerage business conducted by the Company’s broker-dealer subsidiary since commencement of trading activity.

Other. Other revenue consists primarily of revenue related to James J. Cramer’s daily radio program, RealMoney with Jim Cramer, syndication revenue, and reprint revenue. All of the Company’s other revenue is attributable to its electronic publishing segment.

The decrease in other revenue is primarily the result of the absence during the three months ended June 30, 2004 of conference attendee revenue, which totaled $94,675 during the three months ended June 30, 2003, partially offset by increased revenue related to Mr. Cramer’s radio program totaling $31,071.

Operating Expense

	For the Three Months Ended June 30,				Change

	2004		2003		Amount			Percent

Operating expense:
Cost of services	$	4,005,470	$	3,581,633	$	423,837		12	%
Sales and marketing		3,114,509		1,694,571		1,419,938		84	%
General and administrative		2,028,391		1,860,265		168,126		9	%
Depreciation and amortization		196,629		606,754		(410,125	)	(68	%)
Noncash compensation		—		32,985		(32,985	)	(100	%)

Total operating expense	$	9,344,999	$	7,776,208	$	1,568,791		20	%

Cost of services.

The increase in cost of services on a consolidated Company-wide basis is primarily the result of higher compensation and related costs combined with increased recruiting fees and commissions paid to non-employee contributors, the sum of which totals $517,383, partially offset by the absence of conference related expenses, which totaled $83,706 during the three months ended June 30, 2003.

Cost of services for the Company’s electronic publishing segment includes compensation and benefits for its editorial, technology and product development staffs, as well as fees paid to outside contributors, licensing fees payable to content providers, direct costs related to conference hosting, expenses for contract programmers and developers, communication lines and other technology costs. Cost of services for the Company’s electronic publishing segment increased to $3,071,303 for the three months ended June 30, 2004, as compared to $3,052,188 for the three months ended June 30, 2003. This increase is primarily the result of higher compensation and related costs combined with increased commissions paid to non-employee contributors, the sum of which totals $188,857, partially offset by the absence during the three months ended June 30, 2004 of conference related expenses, which totaled $83,706 during the three months ended June 30, 2003, and reduced data costs totaling $45,891.

Cost of services for the Company’s securities research and brokerage segment includes compensation and benefits for its research and broker staffs, as well as licensing fees payable to content providers, communication lines and other technology costs. Cost of services for the Company’s securities research and brokerage segment increased to $934,167 for the three months ended June 30, 2004, inclusive of costs allocated from the Company’s electronic publishing segment totaling $218,494, as compared to $529,445 for the three months ended June 30, 2003, inclusive of costs allocated from the Company’s electronic publishing segment totaling $118,828. This increase is primarily the result of higher compensation and related costs, partially the result of increased intercompany cost allocations, combined with increased recruiting fees and travel and entertainment expenses, the sum of which totals $363,015.

Sales and marketing.

The increase in sales and marketing expense on a consolidated Company-wide basis is primarily the result of higher marketing-related costs, increased compensation and related costs and higher external trading related costs and credit card processing fees, the sum of which totals $1,434,677.

Sales and marketing expense for the Company’s electronic publishing segment consists primarily of advertising and promotion, promotional materials, content distribution fees, and compensation expense for its direct sales force and customer service departments. Sales and marketing expense for the Company’s electronic publishing segment increased to $1,978,420 for the three months ended June 30, 2004, as compared to $1,531,337 for the three months ended June 30, 2003. This increase is primarily the result of higher marketing-related costs and credit card processing fees totaling $712,907, partially offset by reduced compensation and related costs totaling $234,256.

Sales and marketing expense for the Company’s securities research and brokerage segment consists primarily of compensation expense for its direct sales force, direct trading costs, as well as marketing and promotion expenses. Sales and marketing expense for the Company’s securities research and brokerage segment increased to $1,136,089 for the three months ended June 30, 2004, inclusive of costs allocated from the Company’s electronic publishing segment totaling $4,680, as compared to $163,234 for the three months ended June 30, 2003, inclusive of costs allocated from the Company’s electronic publishing segment totaling $2,385. This increase is primarily the result of higher compensation and related costs due to the build up of the segment’s sales force combined with increased external trading related costs due to the increase in commission revenue, the sum of which totals $931,374.

General and administrative.

The increase in general and administrative expense on a consolidated Company-wide basis is primarily the result of higher compensation and related costs combined with increased accounting and legal professional fees, the sum of which totals $234,062, partially offset by decreased sales and use and franchise taxes, the sum of which totals $77,566.

General and administrative expense for the Company’s electronic publishing segment consists primarily of compensation for general management, finance and administrative personnel, occupancy costs, professional fees, equipment rental and other office expenses. General and administrative expense for the Company’s electronic publishing segment decreased to $1,522,995 for the three months ended June 30, 2004, as compared to $1,771,945 for the three months ended June 30, 2003. This decrease is primarily the result of lower sales and use and franchise taxes, as well as reduced accounting and legal professional fees, the sum of which totals $122,384, combined with lower rent expense and insurance premiums totaling $89,553 which were mainly caused by increased intercompany cost allocations.

General and administrative expense for the Company’s securities research and brokerage segment consist primarily of occupancy costs, professional fees, insurance costs and other office expenses. General and administrative expense for the Company’s securities research and brokerage segment increased to $505,396 for the three months ended June 30, 2004, inclusive of costs allocated from the Company’s electronic publishing segment totaling $316,353, as compared to $88,320 for the three months ended June 30, 2003, inclusive of costs allocated from the Company’s electronic publishing segment totaling $33,215. This increase is primarily the result of higher compensation and related costs, accounting and legal professional fees, rent and insurance premiums, the sum of which totals $360,529 and is primarily the result of increased intercompany cost allocations.

Depreciation and amortization.

Depreciation and amortization expense for the Company’s electronic publishing segment decreased to $160,390 for the three months ended June 30, 2004, as compared to $582,717 for the three months ended June 30, 2003. This decrease is attributable to fully depreciated assets and reduced capital expenditures.

Depreciation and amortization expense for the Company’s securities research and brokerage segment increased to $36,239 for the three months ended June 30, 2004, as compared to $24,037 for the three months ended June 30, 2003. All depreciation and amortization expenses are the result of costs allocated from the Company’s electronic publishing segment.

Noncash compensation.

There was no noncash compensation expense for the three months ended June 30, 2004, as compared to $32,985 for the three months ended June 30, 2003. All noncash compensation expense for the three months ended June 30, 2003 was attributable to the Company’s electronic publishing segment, and related to options granted to a non-employee in January 2002.

Net Interest Income

	For the Three Months Ended June 30,				Change

	2004		2003		Amount			Percent

Net interest income	$	72,082	$	109,174	$	(37,092	)	(34%)

Net interest income for the Company’s electronic publishing segment decreased to $69,979 for the three months ended June 30, 2004, as compared to $108,606 for the three months ended June 30, 2003. This decrease is the result of lower interest rates, partially offset by higher cash balances.

Net interest income for the Company’s securities research and brokerage segment increased to $2,103 for the three months ended June 30, 2004, inclusive of net interest expense allocated from the Company’s electronic publishing segment totaling $2,346, as compared to $568 for the three months ended June 30, 2003, inclusive of interest expense allocated from the Company’s electronic publishing segment totaling $892. This increase is primarily the result of higher cash balances, partially offset by lower interest rates.

Comparison of Six Months Ended June 30, 2004 and June 30, 2003

Net Revenue

	For the Six Months Ended June 30,				Change

	2004		2003		Amount		Percent

Net revenue:
Subscription	$	11,096,674	$	8,622,609	$	2,474,065	29	%
Advertising		3,343,046		2,676,819		666,227	25	%
Commission		1,985,591		167,076		1,818,515	1088	%
Other		637,587		583,905		53,682	9	%

Total net revenue	$	17,062,898	$	12,050,409	$	5,012,489	42	%

Subscription. All subscription revenue is attributable to the Company’s electronic publishing segment.

The increase in subscription revenue is primarily associated with Action Alerts PLUS, The Telecom Connection and RealMoney Pro Advisor, the sum of which totals $2,987,249, partially offset by a decrease in revenue associated with TheStreet View, RealMoney.com, The Chartman’s Top Stocks and The Trading Reports, the sum of which totals $502,536. For the six months ended June 30, 2004, approximately 64% of the Company’s net subscription revenue was derived from annual subscriptions, as compared to approximately 65% for the six months ended June 30, 2003.

The Company calculates net subscription revenue by deducting refunds and cancellation chargebacks from gross revenue. Refunds and cancellation chargebacks totaled less than 1% of gross subscription revenue during each of the six-month periods ended June 30, 2004, and June 30, 2003.

Advertising. All advertising revenue is attributable to the Company’s electronic publishing segment.

For the six months ended June 30, 2004, 78% of the Company’s advertising revenue was derived from sponsorship contracts, as compared to 83%, excluding conference sponsorship revenue, for the six months ended June 30, 2003. The number of advertisers for the six months ended June 30, 2004, was 56, as compared to 75, excluding conference sponsorships, for the six months ended June 30, 2003.

For the six months ended June 30, 2004, the Company’s top five advertisers accounted for approximately 48% of its total advertising revenue as compared to approximately 44%, excluding conference sponsorship revenue, for the six months ended June 30, 2003.

Commission. All commission revenue is attributable to the Company’s securities research and brokerage segment. The segment began receiving trading commissions as of May 13, 2003. The increase in commission revenue is the result of growth in the securities research and brokerage business conducted by the Company’s broker-dealer subsidiary since commencement of trading activity.

Other. All of the Company’s other revenue is attributable to its electronic publishing segment.

The increase in other revenue is primarily the result of additional revenue related to Mr. Cramer’s radio program as well as increased syndication revenue, the sum of which totals $160,231, partially offset by the absence during the six months ended June 30, 2004 of conference attendee revenue, which totaled $94,675 during the six months ended June 30, 2003.

Operating Expense

	For the Six Months Ended June 30,				Change

	2004		2003		Amount			Percent

Operating expense:
Cost of services	$	8,082,830	$	6,993,250	$	1,089,580		16	%
Sales and marketing		6,195,704		3,352,804		2,842,900		85	%
General and administrative		4,217,552		3,615,596		601,956		17	%
Depreciation and amortization		408,534		1,372,712		(964,178	)	(70	%)
Noncash compensation		—		271,405		(271,405	)	(100	%)

Total operating expense	$	18,904,620	$	15,605,767	$	3,298,853		21	%

Cost of services.

The increase in cost of services on a consolidated Company-wide basis is primarily the result of higher compensation and related costs combined with increased recruiting fees and commissions paid to non-employee contributors, the sum of which totals $1,074,763, partially offset by the absence of conference related expenses, which totaled $84,664 during the six months ended June 30, 2003.

Cost of services for the Company’s electronic publishing segment increased to $6,247,734 for the six months ended June 30, 2004, as compared to $6,083,390 for the six months ended June 30, 2003. This increase is primarily the result of higher compensation and related costs combined with increased commissions paid to non-employee contributors, the sum of which totals $310,192, partially offset by the absence during the three months ended June 30, 2004 of conference related expenses, which totaled $84,664 during the three months ended June 30, 2003, and reduced data costs totaling $60,263.

Cost of services for the Company’s securities research and brokerage segment increased to $1,835,096 for the six months ended June 30, 2004, inclusive of costs allocated from the Company’s electronic publishing segment totaling $391,581, as compared to $909,860 for the six months ended June 30, 2003, inclusive of costs allocated from the Company’s electronic publishing segment totaling $199,997. This increase is primarily the result of higher compensation and related costs, partially the result of increased intercompany cost allocations, combined with increased recruiting fees and travel and entertainment expenses, the sum of which totals $816,623.

Sales and marketing.

Sales and marketing expense for the Company’s electronic publishing segment increased to $4,260,739 for the six months ended June 30, 2004, as compared to $3,186,747 for the six months ended June 30, 2003. This increase is primarily the result of higher marketing-related costs, as well as increased credit card processing fees, the sum of which totals $1,417,540, partially offset by reduced compensation and related costs totaling $321,205.

Sales and marketing expense for the Company’s securities research and brokerage segment increased to $1,934,965 for the six months ended June 30, 2004, inclusive of costs allocated from the Company’s electronic publishing segment totaling $8,549, as compared to $166,057 for the six months ended June 30, 2003, inclusive of costs allocated from the Company’s electronic publishing segment totaling $3,908. This increase is primarily the result of higher compensation and related costs due to the build up of the segments sales force combined with increased external trading related costs due to the increase in commission revenue, the sum of which totals $1,661,990.

General and administrative.

The increase in general and administrative expense on a consolidated Company-wide basis is primarily the result of higher compensation and related costs combined with increased accounting and legal professional fees and insurance premiums, the sum of which totals $560,911.

General and administrative expense for the Company’s electronic publishing segment decreased to $3,352,033 for the six months ended June 30, 2004, as compared to $3,451,585 for the six months ended June 30, 2003. This decrease is primarily the result of decreased rent expense totaling $121,511, which was mainly caused by increased intercompany cost allocations.

General and administrative expense for the Company’s securities research and brokerage segment increased to $865,519 for the six months ended June 30, 2004, inclusive of costs allocated from the Company’s electronic publishing segment totaling $576,735, as compared to $164,011 for the six months ended June 30, 2003, inclusive of costs allocated from the Company’s electronic publishing segment totaling $54,440. This increase is primarily the result of higher compensation and related costs, accounting and legal professional fees, rent and insurance premiums, the sum of which totals $613,102 and is primarily the result of increased intercompany cost allocations.

Depreciation and amortization.

Depreciation and amortization expense for the Company’s electronic publishing segment decreased to $344,939 for the six months ended June 30, 2004, as compared to $1,321,091 for the six months ended June 30, 2003. This decrease is attributable to fully depreciated assets and reduced capital expenditures.

Depreciation and amortization expense for the Company’s securities research and brokerage segment increased to $63,595 for the six months ended June 30, 2004, as compared to $51,621 for the six months ended June 30, 2003. All depreciation and amortization expenses are the result of costs allocated from the Company’s electronic publishing segment.

Noncash compensation.

There was no noncash compensation expense for the Company’s electronic publishing segment for the six months ended June 30, 2004, as compared to $269,590 for the six months ended June 30, 2003.

There was no noncash compensation expense for the Company’s securities research and brokerage segment for the six months ended June 30, 2004, as compared to $1,815 for the six months ended June 30, 2003, all of which resulted from costs allocated from the Company’s electronic publishing segment.

The noncash compensation expense for the six months ended June 30, 2003 included $205,434 relating to the issuance, in 1998 and the first three months of 1999, of options at exercise prices that were less than the fair market value of the underlying shares of common stock on the dates of grant, and $65,971 relating to options granted to a non-employee in January 2002.

Net Interest Income

	For the Six Months Ended June 30,				Change

	2004		2003		Amount			Percent

Net interest income	$	143,485	$	226,847	$	(83,362	)	(37%	)

Net interest income for the Company’s electronic publishing segment decreased to $139,842 for the six months ended June 30, 2004, as compared to $220,095 for the six months ended June 30, 2003. This decrease is the result of lower interest rates partially offset by higher cash balances.

Net interest income for the Company’s securities research and brokerage segment decreased to $3,643 for the six months ended June 30, 2004, inclusive of net interest expense allocated from the Company’s electronic publishing segment totaling $3,492, as compared to $6,752 for the six months ended June 30, 2003, inclusive of net interest income allocated from the Company’s electronic publishing segment totaling $2,838. This decrease is the result of increased intercompany cost allocations partially offset by higher cash balances.

Liquidity and Capital Resources

The Company invests in money market funds and other short-term, investment grade instruments that are highly liquid, of high-quality, and can have maturities of up to two years, with the intent that such funds can easily be made available for operating purposes. As of June 30, 2004, the Company’s cash and cash equivalents, current and noncurrent restricted cash, and short-term investments amounted to $30,862,018, representing 77% of total assets.

Cash generated from operations was sufficient to cover expenses during the six months ended June 30, 2004. Net cash provided by operating activities totaled $1,543,683 for the six-months ended June 30, 2004, as compared to net cash used in operating activities totaling $951,331 for the six-months ended June 30, 2003. The improvement is primarily related to the reduced net loss incurred by the Company, together with increases in accounts payable and accrued expenses due to IRG’s buildup of its operations as well as TheStreet.com, Inc.’s higher level of expenditures, and increased amounts of cash received from subscription sales. This was partially offset by reduced amounts of noncash expenses as well as an increase in accounts receivable due to higher advertising sales.

Net cash provided by operating activities of $1,543,683 for the six months ended June 30, 2004 was primarily due to the Company’s a net loss of $1,698,237. This net loss was offset by an increase in deferred revenue totaling $1,788,361 resulting from higher subscription sales, as well as an increase in accounts payable and accrued expenses totaling $1,536,155 primarily related to directors and officers insurance premiums, bonus accruals, the buildup of IRG’s operations and TheStreet.com, Inc.’s higher level of expenditures.

Net cash provided by investing activities of $1,529,414 for the six months ended June 30, 2004 consisted of net sales of short-term investments, partially offset by capital expenditures. Capital expenditures generally consisted of purchases of computer software and hardware, as well as purchases of telephone equipment, office furniture and fixtures and leasehold improvements related to IRG’s new office space.

Net cash provided by financing activities of $931,521 for the six months ended June 30, 2004 consisted primarily of the proceeds from the exercise of stock options, partially offset by an increase in restricted cash pledged as a security deposit for IRG’s new office space, the purchase of treasury stock and a decrease in note payable.

The Company has a total of $2,605,000 of cash invested in certificates of deposit and money market investments that serves as collateral for outstanding letters of credit, and is therefore restricted. The letters of credit serve as security deposits for operating leases. Of this total, the Company anticipates that $300,000 will become unrestricted within the next 12 months, and is therefore classified as a current asset on the Condensed Consolidated Balance Sheet. The Company anticipates that the remaining $2,305,000 of restricted cash will become unrestricted at various times through 2015.

The Company believes that its current cash and cash equivalents and short-term investments will be sufficient to meet the Company’s anticipated cash needs of both the Company’s electronic publishing segment and its securities research and brokerage segment for at least the next 12 months. The Company is committed to expenditures in an aggregate amount of approximately $3.2 million through June 30, 2005, in respect of the contractual obligations set forth in the table below under “Commitments and Contingencies.” Thereafter, if cash generated from operations is insufficient to satisfy the Company’s liquidity requirements, the Company 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 the Company, or at all. Strategic relationships, if necessary to raise additional funds, may require the Company to provide rights to certain of its content. The failure to raise capital when needed could materially adversely affect the Company’s business,

results of operations and financial condition. If additional funds are raised through the issuance of equity securities, the percentage ownership of the Company’s then-current stockholders would be reduced. Furthermore, these equity securities might have rights, preferences or privileges senior to those of the Company’s common stock.

Commitments and Contingencies

The Company is committed under operating leases, principally for office space, furniture and fixtures, and equipment. Certain leases are subject to rent reviews and require payment of expenses under escalation clauses. In May 2004, IRG entered into an agreement to lease new principal office space at 44 Wall Street in New York City, New York. Rent and equipment rental expenses decreased to $410,406 and $819,143 for the three-month and six-month periods ended June 30, 2004, respectively, as compared to $420,200 and $851,533 for the three-month and six-month periods ended June 30 2003, respectively. The decrease is due to a reduction in lease payment obligations in connection with a move to new office space in San Francisco. Additionally, the Company has employment agreements with certain of its employees and outside contributors, whose future minimum payments are dependent on the future fulfillment of their services thereunder. Total future minimum payments are as follows:

	Payments Due by Period

Contractual obligations:	Total	Less Than 1 Year	1 – 3 Years	4 – 5 Years	After 5 Years

Operating leases	$10,939,883	$1,514,523	$3,462,532	$2,779,062	$3,183,766
Employment agreements	1,580,617	1,231,000	349,617	—	—
Outside contributor agreements	355,723	355,723	—	—	—
Note payable	266,977	92,990	173,987

Total contractual cash obligations	$13,143,200	$3,194,236	$3,986,136	$2,779,062	$3,183,766

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Company believes that its market risk exposures are immaterial, as the Company does not have instruments for trading purposes and reasonable possible near-term changes in market rates or prices are not expected to result in material near-term losses in earnings, material changes in fair values or cash flows for all instruments.

Item 4.

Controls and Procedures

The Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the quarterly period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2004, the design and operation of these disclosure controls and procedures were effective. During the quarterly period covered by this report, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Risk Factors

You should carefully consider the following material risks facing the Company. If any of the following risks occur, the Company’s business, results of operations or financial condition could be materially adversely affected.

The Company Has a History of Losses and May Incur Further Losses

Other than the fourth quarter of 2003, in which the Company earned net income of $154,000, or $0.01 per share, the Company has incurred operating losses in each fiscal quarter since its formation, and may continue to experience operating losses in the future. As of June 30, 2004, the Company had an accumulated deficit of approximately $153.3 million. The Company will need to generate significant revenue in order to cover the significant operating expenses it expects to incur during the remainder of 2004. Accordingly, the Company can make no assurances that it will be able to achieve profitability, under accounting principles generally accepted in the United States, on a quarterly or annual basis in the future.

The Company’s Quarterly Financial Results May Fluctuate and its Future Revenue Is Difficult to Forecast

The Company’s quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outside the Company’s control, including:

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the level of interest and investment in the stock market by both individual and institutional investors;

•

demand for advertising on the Company’s web sites, which is affected by seasonal weakness in the first and third quarters, advertising budget cycles of our customers, and the demand for advertising on the internet generally;

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subscription price reductions attributable to decreased demand or increased competition;

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new products or services introduced by the Company’s competitors;

•

content distribution fees or other costs incurred by the Company;

•

costs associated with system downtime affecting the internet generally or the Company’s web sites in particular; and

•

general economic and market conditions.

Although we generated net income in the fourth quarter of 2003, you should not rely on the results for that period as an indication of future performance. We recorded a net loss for both the first and second quarters of 2004 and we may not generate net income for any remaining quarter in fiscal 2004. The Company forecasts its current and future expense levels based on expected revenue and the Company’s operating plans. Because of the above factors, as well as other material risks facing the Company, as described elsewhere in this report, the Company’s operating results may be below the expectations of public market analysts and investors in some future quarters. In such an event, the price of the Company’s common stock is likely to decline.

The Company May Have Difficulty Increasing its Subscription Revenue, a Significant Portion of Which is Generated by James J. Cramer and Other Key Writers

The Company continues to seek to increase its subscription revenue, which represents the single most significant portion of the Company’s total revenues, approximating 62% for the three months ended June 30, 2004 and 68% for the three months ended June 30, 2003. The Company believes it has significantly enhanced its subscription offerings to differentiate them from other financial and investing products available in the marketplace, having introduced, in recent years, publications containing a broad variety of features from a multitude of contributors, as well as more narrowly targeted, trading-oriented newsletters, some of which are the work of an individual writer. While the Company believes that the success of its publications is dependent in part upon its brands, some of these publications, particularly the newsletters, nonetheless reflect the talents, efforts, personalities and reputations of their respective

writers. As a result, the services of these key writers, particularly Company co-founder James J. Cramer, form an essential element of our subscription revenues. Accordingly, the Company seeks to compensate and provide incentives for these key writers through competitive salaries, stock ownership and bonus plans, and has entered into employment agreements with several of them, including Mr. Cramer, whose current employment agreement, dated February 22, 2004, will expire on February 21, 2005. However, the Company can make no assurances that these programs will enable it to retain key writers or, should the Company lose the services of one or more of its key writers to death, disability, loss of reputation or other reason, to attract new writers acceptable to readers of the Company’s publications. The loss of services of one or more of the Company’s key writers could have a material adverse affect on the Company’s business, results of operations and financial condition.

The Loss of the Services of Other Key Employees Could Affect the Company’s Business

The Company’s continued success also depends upon the retention of other key employees, including executives to operate its business, technology personnel to run its publishing, commerce, communications and other systems, and salespersons to sell its subscription products and its advertising space. In addition, the success of the Company’s proprietary equity research business, operated through its IRG subsidiary, depends on its executives, as well as research analysts and traders. Several of the Company’s key employees are bound by employment or non-competition agreements. In addition, the Company seeks to compensate its key executives, as well as other employees, through competitive salaries, stock ownership and bonus plans, but the Company can make no assurances that these programs will allow it to retain key employees or hire new employees. The loss of one or more of the Company’s key employees, or the Company’s inability to attract experienced and qualified replacements, could materially adversely affect the Company’s business, results of operations and financial condition.

The Company Is Subject to Risks and Uncertainties Associated With its Proprietary Equity Research Business, Which Is in the Early Stages of Development

In October 2002, the Company formed IRG as a wholly-owned subsidiary to operate its proprietary equity research business. IRG began coverage of equities in the second quarter of 2003, when it became a registered broker-dealer. Although IRG recorded approximately $1.2 million in revenue during the second quarter of 2004, it is still in the early stages of development. As the Company develops and operates this emerging business, the Company will continue to encounter risks, uncertainties, expenses and difficulties relating to the attraction and retention of talented analysts and other staff, regulatory compliance, brand development, market acceptance of its products, trading errors, and the strength of the market for equity securities and equity research overall, among others. The limited operating history of IRG makes it difficult to evaluate the business and its prospects or to accurately predict future revenue or results of operations for the business. Accordingly, the prospects for this business should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in an early stage of development. The Company can make no assurances that it will successfully develop and operate its proprietary equity research business or achieve profitability for this business.

IRG’s Revenue May Not Be Sufficient to Cover its Expenses

IRG’s current business plan involves the production of proprietary equity research, the marketing of investment analysis and research products produced by TheStreet.com, and the dissemination of the foregoing to institutional money managers and hedge funds at no charge to these customers. In return, IRG expects that these institutional money managers and hedge funds will voluntarily pay for this research using so-called “soft dollars,” by electing to execute transactions through IRG. See “Business – Marketing – Marketing of Professional Products – Soft Dollar Brokers” and “Business – Marketing – Marketing of Institutional Research and Brokerage Services” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. However, IRG does not expect to conduct other revenue generating activities at this time, and there is no guarantee that these activities will generate sufficient revenue to cover IRG’s expenses. Furthermore, in response to the recent mutual fund scandal, several members of Congress have introduced mutual fund reform legislation that could, if passed, affect the use of soft dollars to pay for research services. See “Risk Factors – Government Regulation and Legal Uncertainties – Securities Industry Regulation.”

The Company May Have Difficulty Increasing its Advertising Revenue, a Significant Portion of Which Is Concentrated Among the Company’s Top Advertisers

The Company’s ability to increase its advertising revenue depends on a variety of factors, including general market conditions, seasonal fluctuations in financial news consumption and overall online usage, the Company’s ability to increase its unique visitors and page view inventory, and the Company’s ability to win its share of advertisers’ total advertising budgets from other web sites, television, radio and print media. If the Company’s advertising revenue decreases because of these factors, the Company’s business, results of operations and financial condition could be materially adversely affected.

In the second quarter of 2004, the Company’s top five advertisers accounted for approximately 49% of its total advertising revenue, as compared to approximately 48% for the first quarter of 2004 and approximately 41% for the second quarter of 2003, excluding conference sponsorship revenue. Furthermore, although the Company continues to work to attract advertisers from outside the financial services industry, such as automotive and luxury goods, a large proportion of the Company’s top advertisers are concentrated in financial services, particularly in the online brokerage business. If these industries were to weaken significantly, or if other factors caused the Company to lose a number of its top advertisers, the Company’s business, results of operations and financial condition could be materially adversely affected. As is typical in the advertising industry, the Company’s advertising contracts have short notice cancellation provisions.

Intense Competition Could Reduce the Company’s Market Share and Harm its Financial Performance

The Company’s ability to compete successfully depends on many factors, including the quality and timeliness of its content and that of the Company’s competitors, the success of the Company’s recommendations and research, the ease of use of services developed either by the Company or its competitors and the effectiveness of the Company’s sales and marketing efforts. We face competition for customers, advertisers, employees and contributors from a wide variety of financial news and information sources, as well as other types of companies, including:

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online business, finance or investing web sites;

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publishers and distributors of traditional media focused on finance and investing, including print publications and radio and television programs; and

•

investment newsletter publishers.

As our business has expanded into new areas, such as equity research and brokerage services, and advisory reports, the Company also faces significant competition from a new set of competitors, including:

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established Wall Street investment banking firms;

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large financial institutions;

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equity research boutiques; and

•

other securities professionals that offer similar information and that have firmly established customer relationships.

Many of these competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than the Company does. Increased competition could result in price reductions, reduced margins or loss of market share, any of which could materially adversely affect the Company’s business, results of operations and financial condition. Accordingly, the Company cannot guarantee that it will be able to compete effectively with its current or future competitors or that this competition will not significantly harm its business.

The Company Faces Risks Associated with the Growth and Diversification of its Business

The Company’s business has grown and diversified in recent quarters and now includes a variety of professional and consumer subscription products, as well as a separate, wholly owned, broker-dealer subsidiary, which offers proprietary equity research and trading to its institutional clients. We intend to continue to grow and diversify our business, both organically and possibly through acquisitions of other companies. Such growth and diversification may require significant time and resource commitments from the Company’s senior management, which will limit the amount of time these individuals will have available to devote to the Company’s existing operations. Growth in diversity and complexity may also impact our evolving business in ways we have not anticipated. The efficient operation of the Company will depend on our ability to successfully manage the increasing complexity of the commerce, publishing, financial reporting, and other systems we depend on. Acquisitions by the Company could result in the incurrence of debt and contingent liabilities. Any failure or any inability to effectively manage and integrate the growth and diversification of the Company could have a material adverse effect on its business, financial condition and results of operations.

System Failure May Result in Reduced Traffic, Reduced Revenue and Harm to the Company’s Reputation

The Company’s ability to provide timely, updated information depends on the efficient and uninterrupted operation of its computer and communications hardware and software systems. Similarly, the Company’s ability to track, measure and report the delivery of advertisements on its site depends on the efficient and uninterrupted operation of a third-party system. The Company’s operations depend in part on the protection of its data systems and those of its third party provider against damage from human error, natural disasters, fire, power loss, water damage, telecommunications failure, computer viruses, acts of terrorism, vandalism, sabotage, and similar unexpected adverse events. Although the Company utilizes the services of a third party data-center host, there is no guarantee that the Company’s internet access and other data operations will be uninterrupted, error-free or secure. The Company’s data center host filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in December 2003 and certain of its businesses, including internet hosting, have been purchased out of bankruptcy. Although the sale transaction closed as expected in the first quarter of 2004, the Company cannot assure you that the services provided by the hosting company or its successor will continue to be at the level the Company has heretofore received. Any system failure, including network, software or hardware failure, that causes an interruption in the Company’s service or a decrease in responsiveness of its web sites could result in reduced traffic, reduced revenue and harm to the Company’s reputation, brand and the Company’s relations with its advertisers and strategic partners. The Company’s insurance policies may not adequately compensate the Company for such losses. In such event, the Company’s business, results of operations and financial condition could be materially adversely affected.

Difficulties In New Product Development Could Harm the Company’s Business

In the past few years, the Company has introduced a significant number of new products and services, and expects to continue to do so. However, the Company may experience difficulties that could delay or prevent it from introducing new products and services in the future, or cause the costs to be higher than anticipated. Additionally, the Company at times relies on third parties, including software companies, application service providers and technology consulting firms, to help it develop and implement new products and services. If these third parties are not able to fulfill their responsibilities to the Company on schedule or if the technology developed by them for the Company’s use does not function as anticipated, implementation may be delayed and costs may be higher than anticipated. Any of the foregoing occurrences could materially adversely affect the Company’s business, results of operations and financial condition.

We have also invested significant resources to enhance the design, production and distribution of our products, and to accommodate the high volume of traffic we often receive as a result of important financial news events. Nevertheless, the Company’s web sites and distributed products have in the past experienced, and may in the future experience, publishing problems, slower response times or other problems for a variety of reasons. These

occurrences could cause the Company’s readers to choose other methods to obtain their financial and investment commentary, analysis and news. In such a case, the Company’s business, results of operations and financial condition could be materially adversely affected.

Failure to Establish and Maintain Successful Strategic Relationships With Other Companies Could Decrease the Company’s Subscriber and Reader Base

The Company still relies on establishing and maintaining successful strategic relationships with other companies to attract and retain a portion of its current subscriber and reader base. There is intense competition for relationships with these firms and placement on these sites, and the Company may have to pay significant fees to establish additional relationships with large, high-traffic partners or maintain existing relationships in the future. From time to time, we enter into agreements with advertisers that require us to exclusively feature these parties in sections of our web sites. Existing and future exclusivity arrangements may prevent us from entering into other advertising or sponsorship arrangements or other strategic relationships. If the Company does not successfully establish and maintain its strategic relationships on commercially reasonable terms or if these relationships do not attract significant numbers of subscribers or readers, the Company’s business, results of operations and financial condition could be materially adversely affected.

Difficulties Associated With the Company’s Brand Development May Harm its Ability to Attract Subscribers

The Company believes that maintaining and growing awareness about its products is an important aspect of its efforts to continue to attract users. The Company’s new products do not have widely recognized brands, and the Company will need to increase awareness of these brands among potential users. Additionally, the Company’s broker-dealer subsidiary, Independent Research Group LLC, does not have a widely recognized brand. The Company’s 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 the Company’s marketing efforts or advertising campaigns. Accordingly, the Company can make no assurances that such efforts will be successful in raising awareness of TheStreet.com, RealMoney, Street Insight, Action Alerts PLUS or other brands or in persuading potential users to subscribe to the Company’s products or potential clients to utilize the equity research and trading services of IRG.

Failure to Maintain the Company’s Reputation for Trustworthiness May Harm its Business

It is very important that the Company maintain its reputation as a trustworthy organization. The occurrence of events, including the Company’s misreporting a news story, the non-disclosure of a stock ownership position by one or more of the Company’s writers, the manipulation of a security by one or more of the Company’s outside contributors, or other breach of the Company’s compliance policies, could harm the Company’s reputation for trustworthiness and reduce readership. These events could materially adversely affect the Company’s business, results of operations and financial condition.

The Company May Face Liability for, or Incur Costs to Defend, Information Published in its Products

The Company may be subject to claims for defamation, libel, copyright or trademark infringement or based on other theories relating to the information the Company publishes in its products. These types of claims have been brought, sometimes successfully, against online services as well as other print publications in the past. The Company could also be subject to claims based upon the content that is accessible from its web sites through links to other web sites. The Company’s insurance may not adequately protect it against these claims.

The Company May Not Adequately Protect its Own Intellectual Property and May Incur Costs to Defend Against, or Face Liability for, Intellectual Property Infringement Claims of Others

To protect the Company’s rights to its intellectual property, the Company relies on a combination of trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with its employees, affiliates, customers, strategic partners and others. The protective steps the Company has taken may be inadequate to deter misappropriation of its proprietary information. The Company may be unable to detect the unauthorized use of, or take appropriate steps to enforce, its intellectual property rights. The Company has registered several trademarks in the United States and also has pending U.S. applications for other trademarks. Failure to adequately protect the Company’s intellectual property could harm its brand, devalue its proprietary content and affect its ability to compete effectively. In addition, although the Company believes that its proprietary rights do not infringe on the intellectual property rights of others, other parties may assert infringement claims against the Company or claims that the Company has violated a patent or infringed a copyright, trademark or other proprietary right belonging to them. The Company incorporates licensed third-party technology in some of its services. In these license agreements, the licensors have generally agreed to defend, indemnify and hold the Company harmless with respect to any claim by a third party that the licensed software infringes any patent or other proprietary right. The Company cannot assure you that these provisions will be adequate to protect it from infringement claims. Protecting the Company’s intellectual property rights, or defending against infringement claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources on the Company’s part, which could materially adversely affect the Company’s business, results of operations and financial condition.

Government Regulation and Legal Uncertainties

Internet Communications, Commerce and Privacy Regulation. The growth and development of the market for internet commerce and communications has prompted both federal and state laws and regulations concerning the collection and use of personally identifiable information (including consumer credit and financial information under the Gramm-Leach-Bliley Act), consumer protection, the content of online publications, the taxation of online transactions and the transmission of unsolicited commercial email, popularly known as “spam.” More laws and regulations are under consideration by various governments, agencies and industry self-regulatory groups. Although the Company’s compliance with applicable federal and state laws, regulations and industry guidelines has not had a material adverse effect on it, new laws and regulations may be introduced and modifications to existing laws may be enacted that require the Company to make changes to its business practices. On December 16, the President signed into law the “Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003,” also known as the “CAN-SPAM Act of 2003.” This federal law, which became effective on January 1, 2004, pre-empted the even more rigorous “anti-spam” statute passed by the state of California in September 2003, and established uniform standards, penalties, and an enforcement regime for the sending of unsolicited commercial email. Although the Company believes that its practices are in compliance with applicable laws, regulations and policies, if the Company were required to defend its practices against investigations of state or federal agencies or if the Company’s practices were deemed to be violative of applicable laws, regulations or policies, the Company could be penalized and its activities enjoined. Any of the foregoing could increase the cost of conducting online activities, decrease demand for the Company’s products and services, lessen the Company’s ability to effectively market its products and services, or otherwise materially adversely affect the Company’s business, financial condition and results of operations.

Securities Industry Regulation. Over the past three years, the Company’s activities have evolved to include, among other things, the offering of stand-alone products providing stock recommendations and analysis to subscribers, in contrast to providing such information as part of a larger online financial publication of more general and regular circulation. As a result, the Company registered in 2002 with the SEC as an investment advisor under the Investment Advisers Act of 1940. In addition, IRG has registered with the SEC and been admitted as a member of the NASD as a broker-dealer in connection with its recently begun activities as a broker-dealer and provider of proprietary and third-party research. The securities industry in the United States is subject to extensive regulation

under both federal and state laws. A failure to comply with regulations applicable to securities industry participants could materially and adversely affect the Company’s and IRG’s business, results of operations and financial condition.

Investment advisors such as TheStreet.com are subject to SEC regulations covering all aspects of the operation of their business, including, among others:

•

advertising,

•

record-keeping,

•

conduct of directors, officers and employees, and

•

supervision of advisory activities.

Likewise, broker-dealers are subject to regulations of the SEC, state regulators and self-regulatory organizations, such as the NASD, covering all aspects of the operation of their business, including, among others:

•

recommendations of securities,

•

equity research,

•

execution of customers’ orders,

•

capital structure,

•

record-keeping,

•

advertising,

•

conduct of directors, officers and employees, and

•

supervision of securities and research activities.

Violations of the regulations governing the actions of investment advisors and broker-dealers may result in the imposition of censures or fines, the issuance of cease-and-desist orders, and the suspension or expulsion of a firm, its officers, or its employees from the securities business.

The Company’s ability to comply with all applicable securities laws and rules is largely dependent on its establishment and maintenance of appropriate compliance systems (including proper supervisory procedures and books and records requirements), as well as its ability to attract and retain qualified compliance personnel.

Furthermore, because the Company operates in industries subject to extensive regulation, new regulation, changes in existing regulation, or changes in the interpretation or enforcement of existing laws and rules can have a significant impact on the Company’s ability to compete in the securities industry. For example, the enactment of the Sarbanes-Oxley Act of 2002 and other actions by various regulatory authorities and industry organizations imposed significant new requirements on broker-dealers and securities analysts issuing research reports on equity securities and their supervisors. The requirements include an obligation to disclose conflicts and prohibitions designed to promote objectivity and independence of securities analysts. To date, IRG has not experienced any material adverse affect as a result of these requirements, and the Company does not expect any such material adverse affect on the growth and development of IRG.

Additionally, the recent scandal over late trading and market timing in the mutual fund industry has intensified regulatory scrutiny of trading and other practices of mutual funds, including the use of soft dollars to pay for research. Soft dollar practices evolved after the 1975 passage of an amendment to the Exchange Act that permitted money managers, so long as they followed certain rules, to pay commission rates that were higher than the lowest available rates, in exchange for research products to assist them in the performance of their investment decision-making responsibilities, without violating their fiduciary duty to clients to obtain the best possible execution at the lowest commission rate available. Since then, there have been sporadic efforts by regulators and industry reformers to curb or abolish the practice, which some money managers use to pay for products and services that do not fall within the rules, in potential breach of this duty.

As a result, although the mutual fund scandal has little to do with soft dollar practices, of the five mutual fund industry reform bills currently pending in Congress since late last year, four, as currently drafted, would impose additional disclosure requirements on mutual funds and their investment advisers concerning their usage of soft dollars, and one, the “Mutual Fund Reform Act of 2004,” would prohibit mutual funds from using them altogether. IRG’s products are purely research, and thus, in the Company’s view, their use by money managers is comfortably within current interpretations of the scope of the regulatory “safe harbor” for lawful and appropriate use of commissions. However, the passage of any new or currently proposed legislation that significantly curbed or abolished soft dollar practices, or action by the SEC or other federal and state governmental regulatory authorities or self-regulatory organizations to further regulate the activities of broker-dealers and investment advisors in general, could affect the Company’s business in the future in a manner that could harm the Company’s business, results of operations and financial condition.

Any Failure of the Company’s Internal Security Measures or Breach of its Privacy Protections Could Cause the Company to Lose Users and Subject it to Liability

Users who subscribe to the Company’s subscription-based products are required to furnish certain personal information (including name, mailing address, phone number, email address and credit card information), which the Company uses to administer its services. The Company also requires users of some of its free products and features to provide the Company with some personal information during the membership registration process. Additionally, the Company relies on security and authentication technology licensed from third parties to perform real-time credit card authorization and verification.

In this regard, the Company’s users depend on the Company to keep their personal information safe and private and not to disclose it to third parties or permit its security to be breached. If the Company’s users perceive that the Company is not protecting their privacy, or if the information security measures of the Company or its agents are breached, the Company’s users could be discouraged from registering to use the Company’s web sites or other products, which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Control by Principal Stockholders, Officers and Directors Could Adversely Affect the Company’s Stockholders

The Company’s officers, directors and greater-than-five-percent stockholders (and their affiliates), acting together, would have the ability to control the Company’s management and affairs, and substantially all matters submitted to stockholders for approval (including the election and removal of directors and any merger, consolidation or sale of all or substantially all of the Company’s assets). Some of these persons acting together, even in the absence of control, would be able to exert a significant degree of influence over such matters. The interests of persons having this concentration of ownership may not always coincide with the Company’s interests or the interests of other stockholders. This concentration of ownership, for example, may have the effect of delaying, deferring or preventing a change in control of the Company, impeding a merger, consolidation, takeover or other business combination involving the Company or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could materially adversely affect the market price of the common stock.

Volatility of the Company’s Stock Price Could Adversely Affect the Company’s 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. The trading price of the Company’s stock has been and may continue to be subject to wide fluctuations. From April 1 through June 30, 2004, the closing sale price of the Company’s common stock on the Nasdaq National Market ranged from $3.24 to $4.55. As of August 5, 2004, the closing sale price was $3.22. The Company’s stock price may fluctuate

in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by the Company or its competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in the Company’s markets. In addition, the stock market in general, and the market prices for internet-related companies in particular, have experienced extreme volatility. These fluctuations may adversely affect the price of the Company’s common stock, regardless of its operating performance.

Anti-Takeover Provisions Could Prevent or Delay a Change of Control

Provisions of the Company’s 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 the Company, even if doing so would be beneficial to the Company’s stockholders.

The Company Does Not Intend to Pay Dividends

The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain any future earnings for funding growth.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

On December 5, 2001, a class action lawsuit alleging violations of the federal securities laws was filed in the United States District Court for the Southern District of New York naming as defendants TheStreet.com, certain of its former officers and directors and James J. Cramer, a current director, and certain underwriters of the Company’s initial public offering (The Goldman Sachs Group, Inc., Chase H&Q, Thomas Weisel Partners LLC, FleetBoston Robertson Stephens, and Merrill Lynch Pierce Fenner & Smith, Inc.). Plaintiffs allege that the underwriters of TheStreet.com’s initial public offering violated the securities laws by failing to disclose certain alleged compensation arrangements (such as undisclosed commissions or stock stabilization practices) in the offering’s registration statement. The plaintiffs seek damages and statutory compensation against each defendant in an amount to be determined at trial, plus pre-judgment interest thereon, together with costs and expenses, including attorneys’ fees. Similar suits were filed against over 300 other issuers that had initial public offerings between 1998 and December 2001, and they have all been consolidated into a single action. Pursuant to a Court Order dated October 9, 2002, each of the individual defendants to the action has been dismissed without prejudice. On June 8, 2004, the Company and its individual defendants (together with the Company’s insurance carriers) entered into a settlement with the plaintiffs. The settlement is subject to a hearing on fairness and approval by the court overseeing the litigation.

administrative costs and expenses. However, in the event the settlement is not approved by the court and the Company or any of its individual defendants is reinstated as a defendant in the lawsuit, any unfavorable outcome of this litigation could have an adverse impact on the Company’s business, financial condition, results of operations, and cash flows.

Item 2.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The following table presents information related to repurchases of its common stock made by the Company during the three months ended June 30, 2004.

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs *

April 1 – 30, 2004	—	$	—	—	$	2,771,838
May 1 – 31, 2004	18,716	$	3.27	18,716	$	2,710,177
June 1 – 30, 2004	—	$	—	—	$	2,710,177

Total	18,716	$	3.27	18,716	$	2,710,177

* In December 2000, the Company’s Board of Directors authorized the repurchase of up to $10 million worth of the Company’s common stock, from time to time, in private purchases or in the open market. In February 2004, the Company’s Board approved the resumption of this program under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the program. The program does not have a specified expiration date.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Submission of Matters to a Vote of Security Holders

The following matters were submitted to a vote at the annual meeting of stockholders of the Company, held on May 26, 2004, and the results of the voting are as indicated with respect to each matter:

(i) the election of James M. Meyer (votes for: 16,665,232; withheld: 3,226,129), Daryl Otte (votes for: 19,850,350; withheld: 41,011), and William R. Gruver (votes for: 19,850,350; withheld: 41,011) as Class II directors of the Company, to serve until the annual meeting in 2007; and

(ii) the ratification of the appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2004 (votes for: 19,891,361; votes against: 34,210; abstained: 2,905).

Item 5.

Other Information.

Not applicable.

Item 6.

Exhibits and Reports on Form 8-K

(a) Exhibits

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission:

Exhibit Number		Description

*3.1		Amended and Restated Certificate of Incorporation

**3.2		Amended and Restated Bylaws

*4.1		Amended and Restated Registration Rights Agreement, dated as of December 21, 1998, among TheStreet.com and the stockholders named therein

*4.2		TheStreet.com Rights Agreement

†4.3		Amendment No. 1, dated as of August 7, 2000, to Rights Agreement

††4.4		Specimen Certificate for TheStreet.com’s common stock

10.1		Agreement of Lease, dated as of May 10, 2004, between 44 Wall Owner, LLC, as Landlord, and Independent Research Group LLC, as Tenant

31.1		Rule 13a-14(a) Certification of CEO

31.2		Rule 13a-14(a) Certification of CFO

32.1		Section 1350 Certification of CEO

32.2		Section 1350 Certification of CFO

Incorporated by reference to Exhibits to the Company’s Registration Statement on Form S-1 filed February 23, 1999 (File No. 333-72799).

Incorporated by reference to Exhibits to the Company’s 1999 Annual Report on Form 10-K filed March 30, 2000.

†

Incorporated by reference to Exhibits to the Company’s 2000 Annual Report on Form 10-K filed April 2, 2001.

††

Incorporated by reference to Exhibits to Amendment 3 to the Company’s Registration Statement on Form S-1 filed April 19, 1999.


	(b)	Reports on Form 8-K

On July 22, 2004, the Company furnished a report on Form 8-K containing a press release issued by the Company in connection with the announcement of its second quarter 2004 financial results.

On June 1, 2004, the Company furnished a report on Form 8-K containing press releases issued by the Company in connection with the announcement of previously reported financial results.

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.

	THESTREET.COM, INC.
Date: August 9, 2004	By:	/s/ Thomas J. Clarke, Jr.

		Thomas J. Clarke, Jr. Chairman of the Board and Chief Executive Officer


Date: August 9, 2004	By:	/s/ Lisa A. Mogensen

		Lisa A. Mogensen Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description

*3.1		Amended and Restated Certificate of Incorporation

**3.2		Amended and Restated Bylaws

*4.1		Amended and Restated Registration Rights Agreement, dated as of December 21, 1998, among TheStreet.com and the stockholders named therein

*4.2		TheStreet.com Rights Agreement

†4.3		Amendment No. 1, dated as of August 7, 2000, to Rights Agreement

††4.4		Specimen Certificate for TheStreet.com’s common stock

10.1		Agreement of Lease, dated as of May 10, 2004, between 44 Wall Owner, LLC, as Landlord, and Independent Research Group LLC, as Tenant

31.1		Rule 13a-14(a) Certification of CEO

31.2		Rule 13a-14(a) Certification of CFO

32.1		Section 1350 Certification of CEO

32.2		Section 1350 Certification of CFO

Incorporated by reference to Exhibits to the Company’s Registration Statement on Form S-1 filed February 23, 1999 (File No. 333-72799).

Incorporated by reference to Exhibits to the Company’s 1999 Annual Report on Form 10-K filed March 30, 2000.

†

Incorporated by reference to Exhibits to the Company’s 2000 Annual Report on Form 10-K filed April 2, 2001.

††

Incorporated by reference to Exhibits to Amendment 3 to the Company’s Registration Statement on Form S-1 filed April 19, 1999.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. junior Avg

TheStreet Inactive 10-Q2004 Q2 Quarterly report

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