| Organization, Nature of Business and Summary of Operations and Significant Accounting Policies | (1)
Organization, Nature of Business and Summary of Operations and Significant Accounting Policies Organization
and Nature of Business TheStreet,
Inc. together with its wholly owned subsidiaries (“TheStreet”, “we”, “us” or the “Company”),
is a leading financial news and information provider. Our business-to-business (“B2B”)
and business-to-consumer (“B2C”) content and products provide individual and institutional investors, advisors and
dealmakers with actionable information from the worlds of finance and business. Our
B2B business products have helped diversify our business from primarily serving retail investors to also providing an indispensable
source of business intelligence for both high net worth individuals and executives in the top firms in the world. The Deal delivers
sophisticated news and analysis on changes in corporate control including mergers and acquisitions, private equity, corporate
activism and restructuring. BoardEx is an institutional relationship capital management database and platform which holds in-depth
profiles of almost 1 million of the world's most important business leaders. Our third B2B business product, RateWatch, publishes
bank rate market information including competitive deposit, loan and fee rate data. Our B2B business derives revenue primarily
from subscription products, events/conferences and information services. Our
B2C business is led by our namesake website, TheStreet.com Use
of Estimates The
preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects
of revisions are reflected in the consolidated financial statements in the period they are deemed to be necessary. Significant
estimates made in the accompanying consolidated financial statements include, but are not limited to, the following:
useful lives of intangible assets,
useful lives of property and equipment;
the carrying value of goodwill, intangible assets
and marketable securities,
allowances for doubtful accounts and deferred
tax assets,
accrued expense estimates,
reserves for estimated tax liabilities,
certain estimates and assumptions used in the
calculation of the fair value of equity compensation issued to employees,
restructuring charges, and
the calculation of a contingent earn-out payment
from the acquisition of Management Diagnostics Limited.
Consolidation
The
consolidated financial statements have been prepared in accordance with GAAP and include the accounts of TheStreet, Inc. and its
wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Revenue
Recognition We
report revenue in two categories: business to business and business to consumer. Business to business revenue is primarily comprised
of subscriptions that provide access to director and officer profiles, relationship capital management services, bank rate data
and transactional information pertaining to the mergers and acquisitions environment as well as events/conferences, information
services and other miscellaneous revenue. Business to consumer revenue is primarily comprised of subscriptions that provide access
to securities investment information and stock market commentary, advertising and sponsorships and other miscellaneous revenue. Subscriptions
are charged to customers’ credit cards or are directly billed to corporate subscribers, and are generally billed in advance
on a monthly, quarterly or annual basis. The Company calculates net subscription revenue by deducting from gross revenue an estimate
of potential refunds from cancelled subscriptions as well as chargebacks of disputed credit card charges. Net subscription revenue
is recognized ratably over the subscription periods. Deferred revenue relates to payments for subscription fees for which revenue
has not been recognized because services have not yet been provided. Subscription
revenue is subject to estimation and variability due to the fact that, in the normal course of business, subscribers may for various
reasons contact us or their credit card companies to request a refund or other adjustment for a previously purchased subscription.
With respect to many of our business to consumer products, we offer the ability to receive a refund during the first 30 days but
none thereafter. Accordingly, we maintain a provision for estimated future revenue reductions resulting from expected refunds
and chargebacks related to subscriptions for which revenue was recognized in a prior period. The calculation of this provision
is based upon historical trends and is reevaluated each quarter. The provision was not material for the years ended December 31,
2016 and 2015. Advertising
revenue is comprised of fees charged for the placement of advertising and sponsorships, primarily within TheStreet.com Cash,
Cash Equivalents and Restricted Cash The
Company considers all short-term investment-grade securities with original maturities of three months or less from the date of
purchase to be cash equivalents. As of December 31, 2016, the Company has a total of approximately $500 thousand of cash that
serves as collateral for an outstanding letter of credit, which cash is classified as restricted. The letter of credit serves
as a security deposit for the Company’s office space in New York City. Property
and Equipment Property
and equipment are stated at cost, net of accumulated depreciation and amortization. Property and equipment are depreciated on
a straight-line basis over the estimated useful lives of the assets. The estimated useful life of computer equipment, computer
software and telephone equipment is three years and of furniture and fixtures is five years. Leasehold improvements are amortized
on a straight-line basis over the shorter of the respective lease term or the estimated useful life of the asset. If the useful
lives of the assets differ materially from the estimates contained herein, additional costs could be incurred, which could have
an adverse impact on our expenses. Capitalized
Software and Website Development Costs The
Company expenses all costs incurred in the preliminary project stage for software developed for internal use and capitalizes all
external direct costs of materials and services consumed in developing or obtaining internal-use computer software in accordance
with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other .
The
Company also accounts for its Website development costs under ASC 350 , Capitalized
software and Website development costs are amortized using the straight-line method over the estimated useful life of the software
or Website, which varies based upon the project. Total amortization expense was approximately $1.8 million and $1.0 million, for
the years ended December 31, 2016 and 2015, respectively. Goodwill
and Indefinite Lived Intangible Assets Goodwill
represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses
acquired. Under the provisions of ASC 350, goodwill and indefinite lived intangible assets are required to be tested
for impairment on an annual basis and between annual tests whenever circumstances arise that indicate a possible impairment might
exist. We perform our annual impairment tests as of October 1 each year. Impairment exists when the carrying amount
of goodwill or indefinite lived intangible assets of a reporting unit exceed their implied fair value, resulting in an impairment
charge for this excess. During
the year ended December 31, 2015, the business was managed as a single segment where subscription and advertising products were
sold throughout the Company, financial results were reviewed on a consolidated basis and separate and discrete financial information
was not available. During 2016, the Company reassessed the identification of operating segments due to changes in key personnel,
including the Chief Operating Decision Maker, and during the fourth quarter of 2016 began to provide separate and discrete segment
financial information. We currently regard our Company to operate in three distinct operating segments: The Deal / BoardEx, RateWatch
and Business to Consumer. These operating segments also represent the Company’s reporting units. Prior periods have been
adjusted to reflect the change in operating segments. The
Company tests goodwill for impairment using a quantitative analysis consisting of a two-step approach. The first step
of our quantitative analysis consists of a comparison of the carrying value of each of our reporting units, including goodwill,
to the estimated fair value of each of our reporting units using a market approach for the valuation of our Common Stock, based
upon actual prices of the Company’s Common Stock, and the income approach for the estimated fair value of the Company’s
outstanding Preferred Shares. The Company also performed an income approach to confirm the reasonableness of these result by using
the discounted cash flow methodology. If step one resulted in the carrying value of the reporting unit exceeding the
fair value of such reporting unit, we would then proceed to step two which would require us to calculate the amount of impairment
loss, if any, that we would record for such reporting unit. The calculation of the impairment loss in step two would
be equivalent to the reporting unit’s carrying value of goodwill less the implied fair value of such goodwill. Our
use of a discounted cash flow methodology includes estimates of future revenue based upon budget projections and growth rates
which take into account estimated inflation rates. We also develop estimates for future levels of gross and operating
profits and projected capital expenditures. Our methodology also includes the use of estimated discount rates based
upon industry and competitor analysis as well as other factors. The estimates that we use in our discounted cash flow methodology
involve many assumptions by management that are based upon future growth projections. ASU
2011-08, Testing for Goodwill Impairment Based
upon the annual impairment test performed as of October 1, 2016, we concluded that The Deal / BoardEx reporting unit goodwill
was impaired while the RateWatch and Business to Consumer reporting units’ were not impaired by approximately 16% and 33%,
respectively. During the fourth quarter of 2016, the Company’s stock price declined from an average price of $1.115 on the
valuation date to $0.855 as of December 31, 2016. This triggering event resulted in the Company performing a second impairment
review as of December 31, 2016. Based on this analysis, we also concluded that The Deal / BoardEx reporting unit goodwill was
impaired as of December 31, 2016, while the RateWatch and Business to Consumer reporting units’ were not impaired by approximately
26% and 21%, respectively. As
a result of our impairment testing, we recorded an impairment charge of approximately $11.6 million to The Deal / BoardEx reporting
unit. The
fair value of the Company’s outstanding Preferred Shares requires significant judgments, including the estimation of the
amount of time until a liquidation event occurs as well as an appropriate cash flow discount rate. Further, in assigning a fair
value to the Company’s Preferred Stock, the Company also considered that the preferred shareholders are entitled to receive
a $55 million liquidation preference upon liquidation or dissolution of the Company or upon any change of control event. Additionally,
the holders of the Preferred Shares are entitled to receive dividends and to vote as a single class together with the holders
of the Common Stock on an as-converted basis and, provided certain preferred share ownership levels are maintained, are entitled
to representation on the Company’s board of directors and may unilaterally block issuance of certain classes of capital
stock, the purchase or redemption of certain classes of capital stock, including Common Stock (with certain exceptions) and any
increases in the per-share amount of dividends payable to the holders of the Common Stock. A decrease in the price of the Company’s
Common Stock, or changes in the estimated value of the Company’s Preferred Shares, could materially affect the determination
of the fair value and could result in an impairment charge to reduce the carrying value of goodwill, which could be material to
the Company’s financial position and results of operations. In
conducting our 2016 annual indefinite lived intangible asset impairment test with the assistance of our independent appraisal
firm, we determined its fair value using the relief-from-royalty method. The application of the relief-from-royalty method requires
the estimation of future income and the conversion of that income into an estimate of value. Future income related to a trade
name is measured in terms of the savings that a company realizes by owning the indefinite lived trade name, thereby avoiding royalty
payments to use the trade name in the absence of ownership. To calculate the royalty savings, we estimate (i) future revenue attributable
to the RateWatch trade name; (ii) a royalty rate that a hypothetical licensee would be willing to pay for its use; and (iii) a
discount rate to reduce future after-tax royalty savings to present value. We selected an appropriate royalty rate by searching
various transaction databases for publicly disclosed transactions to license similar assets between service businesses, with a
focus on companies that operate in industries similar to RateWatch. Based upon the analysis, we concluded that the book value
of the indefinite lived trade name was not impaired as of the October 1, 2016 valuation date as the fair value exceeded its book
value by approximately 29%. Based
upon the annual impairment test performed in 2015, the Company concluded that the book value of its indefinite lived trade name
was not impaired as the fair value exceeded its book value by approximately 129%. In
testing for impairment of the Company’s Additionally,
the Company evaluates the remaining useful lives of intangible assets each year to determine whether events or circumstances continue
to support their useful life. There have been no changes in useful lives of intangible assets for each period presented. Long-Lived
Assets The
Company evaluates long-lived assets, including amortizable identifiable intangible assets, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability
of assets is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is
recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Management
does not believe that there was any impairment of long-lived assets as of December 31, 2016 and 2015. Income
Taxes The
Company accounts for its income taxes in accordance with ASC 740-10, Income Taxes ASC
740-10 also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must
be more likely than not to be sustained upon examination by taxing authorities. Differences between tax positions taken
or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to
as “unrecognized benefits.” A liability is recognized for an unrecognized tax benefit because it represents
an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result
of applying the provisions of ASC 740-10. As of December 31, 2016 and 2015, no liability for unrecognized tax benefits was required
to be recorded. Interest costs related to unrecognized tax benefits would be classified within “Net interest expense”
in the consolidated statements of operations. Penalties would be recognized as a component of “General and administrative”
expense. There is no interest expense or penalty related to tax uncertainties reported in the consolidated statements of
operations for the years ended December 31, 2016 or 2015. Deferred
tax assets pertaining to windfall tax benefits on the exercise of share awards and the corresponding credit to additional paid-in
capital are recorded if the related tax deduction reduces tax payable. The Company has elected the “with-and-without
approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable
in the current year. Under this approach, the windfall tax benefits would be recognized in additional paid-in capital only
if an incremental tax benefit is realized after considering all other tax benefits presently available to the Company. The
Company files income tax returns in the United States (federal), and in various state and local jurisdictions, as well as in the
United Kingdom and India. In most instances, the Company is no longer subject to federal, state and local income tax examinations
by tax authorities for years prior to 2013, and is not currently under examination by any federal, state or local jurisdiction.
It is not anticipated that unrecognized tax benefits will significantly change in the next twelve months. Fair
Value of Financial Instruments The
carrying amounts of accounts and other receivables, accounts payable, accrued expenses and deferred revenue approximate fair value
due to the short-term maturities of these instruments. Business
Concentrations and Credit Risk Financial
instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted
cash. The Company maintains all of its cash, cash equivalents and restricted cash in seven financial institutions, and performs
periodic evaluations of the relative credit standing of these institutions. As of December 31, 2016, the Company’s cash,
cash equivalents and restricted cash primarily consisted of checking accounts and money market funds. For
the years ended December 31, 2016 and 2015, no single customer accounted for 10% or more of consolidated revenue. As of December
31, 2016 and 2015, no single customer accounted for more than 10% of our gross accounts receivable balance. The
Company’s customers are primarily concentrated in the United States and Europe, and we carry accounts receivable balances.
The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of customers, historical trends and other information. To date, actual
losses have been within management’s expectations. Other
Comprehensive Loss Comprehensive
loss is a measure which includes both net loss and other comprehensive loss. Other comprehensive loss results from
items deferred from recognition into the statement of operations. Accumulated other comprehensive loss is separately
presented on the consolidated statement of comprehensive loss and on both the Company's consolidated balance sheet and as part
of the consolidated statement of stockholders’ equity. Other comprehensive loss consists of unrealized gains and losses
on marketable securities classified as available for sale as well as foreign currency translation adjustments from subsidiaries
where the local currency is the functional currency. Foreign
Currency The
functional currency of the Company’s international subsidiaries is the local currency. The financial statements of these
subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities, historical rates
of exchange for equity, and monthly average rates of exchange for the period for revenue and expense. Translation gains (losses)
are recorded in accumulated other comprehensive loss as a component of stockholders’ equity. Gains and losses resulting
from currency transactions are included in earnings. Net
Loss Per Share of Common Stock Basic
net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss
per share is computed using the weighted average number of common shares and potential common shares outstanding during the period,
so long as the inclusion of potential common shares does not result in a lower net loss per share. Potential common shares consist
of restricted stock units (using the treasury stock method), the incremental common shares issuable upon the exercise of stock
options (using the treasury stock method), and the conversion of the Company’s convertible preferred stock (using the if-converted
method). For the years ended December 31, 2016 and 2015, approximately 708 thousand and 3.1 million, respectively, of unvested
restricted stock units, vested and unvested options to purchase Common Stock, were excluded from the calculation, as their effect
would result in a lower net loss per share. Advertising
Costs Advertising
costs are expensed as incurred. For the years ended December 31, 2016 and 2015, advertising expense totaled approximately $2.5
million and $2.6 million, respectively. Stock-Based
Compensation The
Company accounts for stock-based compensation in accordance with ASC 718-10, Share Based Payment Transactions Stock-based
compensation expense recognized for the years ended December 31, 2016 and 2015 was approximately $1.6 million (inclusive if $105
thousand of noncash compensation expense charged to restructuring and other charges) and $1.6 million, respectively. As of December
31, 2016, there was approximately $1.9 million of unrecognized stock-based compensation expense remaining to be recognized over
a weighted-average period of 1.8 years. Stock-based
compensation expense recognized in the Company’s consolidated statements of operations for the years ended December 31,
2016 and 2015 includes compensation expense for all share-based payment awards based upon the estimated grant date fair value.
The Company recognizes compensation expense for share-based payment awards on a straight-line basis over the requisite service
period of the award. As stock-based compensation expense recognized in the years ended December 31, 2016 and 2015 is based upon
awards ultimately expected to vest, it has been reduced for estimated forfeitures. The Company estimates forfeitures at the time
of grant which are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The
Company estimates the value of stock option awards on the date of grant using the Black-Scholes option-pricing model. This determination
is affected by the Company’s stock price as well as assumptions regarding expected volatility, risk-free interest rate,
and expected dividends. Because option-pricing models require the use of subjective assumptions, changes in these assumptions
can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted-average
value of the applicable assumption used to value stock option awards at their grant date. In determining the volatility assumption,
the Company used a historical analysis of the volatility of the Company’s share price for the preceding period equal to
the expected option lives. The expected option lives, which represent the period of time that options granted are expected to
be outstanding, were estimated based upon the “simplified” method for “plain-vanilla” options. The risk-free
interest rate assumption was based upon observed interest rates appropriate for the term of the Company’s stock option awards.
The dividend yield assumption was based on the history and expectation of future dividend payouts. The value of the portion of
the award that is ultimately expected to vest is recognized as expense over the requisite service periods. The Company’s
estimate of pre-vesting forfeitures is primarily based on historical experience and is adjusted to reflect actual forfeitures
as the options vest. The weighted-average grant date fair value per share of stock option awards granted during the years ended
December 31, 2016 and 2015 was $0.37 and $0.39, respectively, using the Black-Scholes model with the following weighted-average
assumptions:
For
the Years Ended December
2016 2015
Expected option lives 4.5 years 3.0 years
Expected
volatility 34.87 % 35.45 %
Risk-free interest
rate 1.12 % 0.97 %
Expected dividends 0.00 % 4.59 % The
value of each restricted stock unit awarded is equal to the closing price per share of the Company’s Common Stock on the
date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite
service periods. The weighted-average grant date fair value per share of restricted stock units granted during the years ended
December 31, 2016 and 2015 was $1.30 and $2.19, respectively. The
Company utilizes the alternative transition method for calculating the tax effects of stock-based compensation. Under the alternative
transition method the Company established the beginning balance of the additional paid-in capital pool (“APIC pool”)
related to the tax effects of employee stock-based compensation and then determined the subsequent impact on the APIC pool and
cash flows of the tax effects of employee stock-based compensation awards that are outstanding. 2007
Performance Incentive Plan In
2007, the Company adopted the 2007 Plan, whereby executive officers, directors, employees and consultants may be eligible to receive
cash or equity-based performance awards based on set performance criteria. In
2016 and 2015, the Compensation Committee granted short-term cash performance awards, payable to certain officers, upon the Company’s
achievement of specified performance goals for such year as defined by the Compensation Committee. The target short-term cash
bonus opportunities for officers reflected a percentage of the officer’s base salary. Potential payout was zero if a threshold
percentage of the target was not achieved and a sliding scale thereafter, subject to a cap, starting at a figure less than 100%
if the threshold was achieved but the target was not met and ending at a figure above 100% if the target was exceeded. Short-term
incentives of approximately $486 thousand and $670 thousand were deemed earned with respect to the years ended December 31, 2016
and 2015, respectively. Preferred
Stock The
Company applies the guidance in ASC 480, Distinguishing Liabilities from Equity The
Company’s Series B Convertible Preferred Stock does not feature any redemption rights within the holders’ control
or conditional redemption features not solely within the Company’s control as of December 31, 2016. Accordingly, the Series
B Convertible Preferred Stock is presented as a component of stockholders’ equity. Subsequent
Events The
Company has evaluated subsequent events for recognition or disclosure. New
Accounting Pronouncements Accounting
Pronouncements Adopted In
January 2015, the FASB issued ASU No. 2015-01, Income Statement — Extraordinary and Unusual Items (Subtopic 225-20):
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items Recently
Issued Accounting Standards In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which supersedes nearly all existing
revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services
are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those
goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and
estimates may be required within the revenue recognition process than are required under existing GAAP. On July 9, 2015, the FASB
voted to defer the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that
date. Early adoption of ASU 2014-09 is permitted but not before the original effective date (annual periods beginning after
December 15, 2016). When effective, ASU 2014-09 prescribes either of the following transition methods: (i) a full retrospective
approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical
expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date
of adoption (which includes additional footnote disclosures). Based upon our revenue streams of subscription and advertising,
we do not believe that adoption of ASU 2014-09 will have a significant impact on our consolidated financial statements. In
November 2015, the FASB issued ASU No. 2015-17 (Topic 740), “Balance Sheet Classification of Deferred Taxes” (“ASU
2015-17”). ASU 2015-17 requires deferred tax liabilities and assets to be classified as noncurrent in the Consolidated Balance
Sheet. The standard will be effective for financial statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. Early adoption is permitted for financial statements that have not been previously
issued. The ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. The impact of our pending adoption of this standard is not expected to have a material impact on our consolidated balance
sheet. In
February 2016, the FASB issued ASU No. 2016-02, Leases In
March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting In
June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments In
August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and
Cash Payments In
January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles — Goodwill and Other Simplifying the
Test for goodwill Impairment |
