UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended: December 31, 2000
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or
____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____to _____
Commission file number: 1-10932
INDIVIDUAL INVESTOR GROUP, INC.
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(Exact name of registrant as specified in its Charter)
Delaware 13-3487784
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
125 Broad Street, 14th Floor, New York, New York 10004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 742-2277
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The Registrant hereby amends the following items, financial statements, exhibits
or other portions of its Annual Report on Form 10K for the fiscal year ended
December 31, 2000 as set forth in the pages attached hereto:
Item 8. Financial statements and supplementary data
Exhibit 23.1 Independent auditors' consent
Item 8 is being amended to correct four typographical errors: (a) on the
Consolidated Statements of Operations, revenues for print publications for the
year 2000 is corrected to read $16,590,782 (instead of $6,590,782), with total
revenues for 2000 remaining $19,778,804 as reported and (b) on the Consolidated
Statements of Stockholders Equity, (i) the December 31, 2000 balance for
warrants is corrected to read $872,052 (instead of $872,0520), (ii) on the
conversion of preferred to common stock line, the par value column is corrected
to read (21) (i.e., to add brackets to the reported number) and (iii) on
footnote (a), the reclassification adjustment for 1999 is corrected to read
(4,144,396) (i.e., to add brackets to the reported number).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Operations for the Years Ended December 31, 2000,
1999, and 1998
Consolidated Statements of Stockholders' Equity for the Years Ended December
31, 2000, 1999, and 1998
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000,
1999, and 1998
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Individual Investor Group, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Individual
Investor Group, Inc. and its subsidiaries (the "Company") as of December 31,
2000 and 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years ended December
31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Individual Investor Group, Inc. and
its subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
New York, New York
March 27, 2001
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------------
ASSETS 2000 1999
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Current assets:
Cash and cash equivalents $ 4,694,476 $ 6,437,542
Accounts receivable (net of allowances of
$552,609 in 2000 and $419,048 in 1999) 1,754,200 3,019,710
Investment in discontinued operations (Note 4) 49,302 49,302
Prepaid expenses and other current assets 1,036,996 864,851
----------- ------------
Total current assets 7,534,974 10,371,405
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Investments(Notes 1 and 2) 2,678,546 2,638,356
Deferred subscription expense 337,245 383,624
Property and equipment - net (Note 5) 1,479,105 1,653,659
Security deposits 375,580 374,527
Other assets 300,810 836,396
----------- ------------
Total assets $12,706,260 $16,257,967
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,534,027 $ 3,024,395
Accrued expenses (Note 6) 462,800 716,670
Deferred advertising revenue 1,987,067 1,467,210
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Total current liabilities 4,983,894 5,208,275
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Deferred advertising revenue 532,653 938,164
Deferred subscription revenue 2,607,407 2,448,591
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Total liabilities 8,123,954 8,595,030
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Commitments and contingencies (Note 7)
Stockholders' Equity: (Note 10)
Preferred stock, $.01 par value, authorized
2,000,000 shares, 7,880 issued and outstanding
in 2000 and 10,000 issued and outstanding in 1999 79 100
Common stock, $.01 par value; authorized 40,000,000
shares, 8,972,886, issued and outstanding in 2000;
10,353,901 issued and outstanding in 1999 89,729 103,539
Additional paid-in capital 33,576,719 33,421,542
Warrants 872,052 742,079
Deferred compensation (29,490) (272,038)
Accumulated deficit (29,926,783) (26,332,285)
----------- ------------
Total stockholders' equity 4,582,306 7,662,937
----------- ------------
Total liabilities and stockholders' equity $12,706,260 $16,257,967
=========== ============
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2000 1999 1998
------------- ------------ -------------
Revenues:
Online Services $ 3,188,022 $ 2,308,186 $ 1,136,032
Print Publications 16,590,782 15,362,615 14,334,074
------------- ------------ -------------
Total revenues 19,778,804 17,670,801 15,470,106
------------- ------------ -------------
Operating expenses:
Editorial, production
and distribution 12,683,600 11,797,411 11,429,496
Promotion and selling 8,683,141 7,834,513 6,789,974
General and administrative 5,494,521 5,291,648 4,964,069
Corporate advertising - 725,867 -
Depreciation and amortization 557,802 523,715 321,280
------------- ------------ -------------
Total operating expenses 27,419,064 26,173,154 23,504,819
------------- ------------ -------------
Gain on sale of assets 6,702,219 - -
------------- ------------ -------------
Impairment of investment (2,638,356) - -
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Operating loss from continuing
operations (3,576,397) (8,502,353) (8,034,713)
Investment and other income
(Note 2) 170,608 4,309,650 224,213
------------- ------------ -------------
Net loss from continuing operations (3,405,789) (4,192,703) (7,810,500)
------------- ------------ -------------
Discontinued operations (Note 3)
(Loss) income from discontinued
operations - - (189,629)
(Loss) on disposal of discontinued
operations - - (591,741)
------------- ------------ -------------
(Loss) income from discontinued
operation - - - (781,370)
------------- ------------ -------------
Net loss $(3,405,789) $(4,192,703) $ (8,591,870)
============= ============ =============
Basic and dilutive (loss) income per
common share:
Continuing operations ($0.34) ($0.47) ($0.99)
Discontinued operations - - (0.10)
------------- ------------ -------------
($0.34) ($0.47) ($1.09)
Net loss per share ============= ============ =============
Average number of common shares used
in computing basic and dilutive
(loss) income per common share 10,439,887 9,336,679 7,876,509
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Additional
Shares Par Shares Par Paid-in Deferred
Issued Value Issued Value Capital Warrants Compensation
Balance, December 31, 1997 - - 7,146,071 $ 71,461 $ 19,514,363 - -
Exercise of options - net - - 84,938 850 397,303 - -
Stock option and warrant transactions - - - - - $453,868 -
Issuance of preferred stock 10,000 $100 - - 1,999,900 - -
Issuance of common stock - - 1,259,842 12,598 4,987,402 - -
Net loss - - - - - - -
Change in accumulated other comprehensive
income-(loss) - - - - - - -
Comprehensive loss - - - - - - -
__________________________________________________________________________________________________________________________________
Balance, December 31, 1998 10,000 100 8,490,851 84,909 26,898,968 453,868 -
Exercise of options - net - - 676,247 6,762 2,283,628 - -
Stock option and warrant transactions - - - - - 288,211 ($274,206)
Issuances of common stock for services rendered - - 39,372 394 115,920 - -
Amortization of deferred compensation - - - - - - 2,168
Issuance of common stock - Telescan - - 779,130 7,791 2,992,209 - -
Issuance of common stock - Telescan license fee - - 368,301 3,683 1,130,817 - -
Net loss - - - - - - -
Preferred stock dividends - - - - - - -
Change in accumulated other comprehensive
income-(loss) - - - - - - -
Comprehensive loss - - - - - - -
__________________________________________________________________________________________________________________________________
Balance, December 31, 1999 10,000 100 10,353,901 103,539 33,421,542 742,079 (272,038)
Exercise of options - net - - 87,118 871 110,745 - -
Stock option and warrant transactions - - - - - 129,973 127,068
Conversion of preferred to common stock (2,120) (21) 200,000 2,000 (1,979) - -
Amortization of deferred compensation - - - - - - 263,137
Issuance of common stock - - 113,000 1,130 188,902 - (147,657)
Net loss - -
- - - - - -
Preferred stock dividends - -
Repurchase common stock - - (1,781,133) (17,811) (142,491)
Comprehensive loss - - - - - - - -
__________________________________________________________________________________________________________________________________
Balance, December 31, 2000 7,880 $79 8,972,886 $ 89,729 $ 33,576,719 $872,052 $(29,490)
==================================================================================================================================
Accumulated
Other
Accumulated Comprehensive Comprehensive
Deficit Income (Loss) Loss Total
Balance, December 31, 1997 $(13,330,725) - - $ 6,255,099
Exercise of options - net - - - 398,153
Stock option and warrant transactions - - - 453,868
Issuance of preferred stock - - - 2,000,000
Issuance of common stock - - - 5,000,000
Net loss (8,591,870) - $(8,591,870) (8,591,870)
Change in accumulated other comprehensive
income-(loss) ($66,493) (66,493)(a) (66,493)
========= -----------
Comprehensive loss - - $(8,658,363) -
____________________________________________________________________________________________________________
Balance, December 31, 1998 (21,922,595) (66,493) - 5,448,757
Exercise of options - net - - - 2,290,390
Stock option and warrant transactions - - - 14,005
Issuances of common stock for services rendered - - - 116,314
Amortization of deferred compensation - - - 2,168
Issuance of common stock - Telescan - - - 3,000,000
Issuance of common stock - Telescan license fee - - - 1,134,500
Net loss (4,192,703) - $4,192,703) (4,192,703)
Preferred stock dividends (216,987) - - (216,987)
Change in accumulated other comprehensive - 66,493 66,493 (a) 66,493
income-(loss)
Comprehensive loss - $(4,126,210) -
____________________________________________________________________________________________________________
Balance, December 31, 1999 (26,332,285) - - 7,662,937
Exercise of options - net - - - 111,616
Stock option and warrant transactions - - - 257,041
Conversion of preferred to common stock - - - -
Amortization of deferred compensation - 263,137
Issuance of common stock - 42,375
Net loss (3,405,789) - $(3,405,789) (3,405,789)
Preferred stock dividends (188,709) - - (188,709)
Repurchase common stock -
(160,302)
Comprehensive loss -------------
- - $(3,405,789) -
=============
____________________________________________________________________________________________________________
Balance, December 31, 2000 $(29,926,783) - - $ 4,582,306
============================================================================================================
(a) Disclosure of change in accumulated other comprehensive income (loss):
1998 1999
---- ----
Unrealized holding (loss) gain arising during period $959 $4,210,889
Less: Reclassification adjustment for gain
recognized in net loss (67,459) (4,144,396)
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($66,493) $66,493
========= ===========
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
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2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net loss $ (3,405,789) $ (4,192,703) $ (8,591,870)
Less:
(Loss) income from discontinued operations - - (781,370)
------------- -------------- --------------
Loss from continuing operations (3,405,789) (4,192,703) (7,810,500)
Reconciliation of net loss to net cash used in
operating activities:
Gain on sale of assets (6,702,219) - -
Impairment of investment 2,638,356 - -
Depreciation and amortization 557,802 523,715 321,280
Stock option and warrant transactions 295,888 350,877 159,909
Loss on sale of equipment - - 2,671
Gain on sale of investments - (4,144,396) (67,452)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 626,858 (663,584) 637,173
Prepaid expenses and other current assets (275,302) (214,150) (14,980)
Security deposits (1,053) 95,100 (334,710)
Other assets 343,078 50,779 (39,817)
Deferred subscription expense 46,379 192,613 (149,411)
Increase (decrease) in:
Accounts payable and accrued expenses (543,703) 1,029,413 (185,837)
Deferred advertising revenue (2,075,403) (371,079) (205,153)
Deferred subscription revenue 158,816 202,169 (414,707)
------------- -------------- --------------
Net cash used in operating activities (8,336,292) (7,141,246) (8,101,534)
------------- -------------- --------------
Cash flows from investing activities:
Purchase of property and equipment (393,850) (1,568,403) (353,713)
Proceeds from sale of equipment - - 3,652
Net proceeds from sale of assets 6,585,819 - -
Proceeds from sale of investments - 5,841,196 223,556
Purchase of investments - (753,076) -
Purchase of InsiderTrader.com - - (75,000)
Net cash provided by discontinued operations - 233,081 2,123,851
------------- -------------- --------------
Net cash provided by investing activities 6,191,969 3,752,798 1,922,346
------------- -------------- --------------
Cash flows from financing activities:
Proceeds from exercise of stock options 111,616 2,290,390 398,153
Receivables financing 638,652 - -
Purchase of Common stock (160,302) - -
Proceeds from issuance of preferred stock (Note 9) - - 2,000,000
Proceeds from issuance of common stock (Note 9) - 3,000,000 5,000,000
Preferred stock dividends (188,709) (216,987) -
------------- -------------- --------------
Net cash provided by financing activities 401,257 5,073,403 7,398,153
------------- -------------- --------------
Net increase in cash and cash equivalents (1,743,066) 1,684,955 1,218,965
Cash and cash equivalents, beginning of period 6,437,542 4,752,587 3,533,622
------------- -------------- --------------
Cash and cash equivalents, end of period $ 4,694,476 $ 6,437,542 $ 4,752,587
============= ============== ==============
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Individual Investor Group, Inc. and its subsidiaries (collectively, the
"Company") are primarily engaged in providing financial information services.
The Company's operating subsidiaries are focused on providing research and
analysis of investment information to individuals and investment professionals
through two business segments: Print Publications and Online Services. The
Company's Print Publications segment publishes and markets Individual Investor,
a personal finance and investment magazine and Individual Investor's Special
Situations Report, a financial investment newsletter. Between approximately
October 1996 and September 2000, the Company's Print Publications segment also
included Ticker, a magazine for investment professionals. The Company's Online
Services segment includes individualinvestor.com (www.individualinvestor.com).
Between approximately November 1998 and September 2000, the Company's Online
Services segment also included InsiderTrader.com (www.InsiderTrader.com). In
September 2000, the Company sold InsiderTrader.com and Ticker magazine to two
different parties in two unrelated transactions (see Note 3). The Company
contracts with unaffiliated suppliers for paper, printing, binding, subscription
fulfillment, newsstand distribution and list management. See Note 13 for
additional information regarding the Company's business segments and operations.
The Company's current levels of revenues are not sufficient to cover
its expenses. It is the Company's intention to control its operating expenses
while continuing to invest in its existing products and, as noted above, the
Company recently has implemented changes intended to substantially reduce
certain operating and general and administrative expenses. The Company
anticipates quarterly losses to continue into 2001. Profitability may be
achieved in future periods only if the Company can substantially increase its
revenues and/or realize capital gains on investments or the sale of certain
assets while controlling increases in expenses. There can be no assurance that
revenues will be substantially increased, that additional capital gains will be
realized on investments (instead, capital losses in fact may be realized) or
that certain assets will be sold, or that expenses can be adequately decreased
to enable the Company to attain profitability.
The Company believes that its working capital and, if additional
resources were necessary, the value it believes it could realize from the sale
of assets and/or securities of the Company, should be sufficient to fund its
operations and capital requirements through 2001. The Company is continuing its
exploration of strategic alternatives, including exploring sources of additional
financing and/or sale of assets. There can be no assurance, however, that this
process will result in the Company entering into any additional transactions or
enhancing shareholder value. In the event that the Company is unable to attain
profitability prior to exhausting its existing resources, the Company would need
to obtain additional financing or sell certain of its assets in order to sustain
operations. Although the Company believes it could obtain additional financing
or sell assets if necessary to sustain operations, no assurance can be given
that the Company in fact would be able to obtain additional financing or sell
additional assets, or as to the terms upon which the Company could do so. Any
additional financing could result in substantial dilution of an investor's
equity investment in the Company.
Principles of Consolidation - The consolidated financial statements
include the accounts of Individual Investor Group, Inc. and its subsidiaries:
Individual Investor Holdings, Inc., WisdomTree Capital Management, Inc.,
WisdomTree Administration, Inc., WisdomTree Capital Advisors, LLC, I.I.
Interactive, Inc. I.I. Strategic Consultants, Inc. and Advanced Marketing
Ventures, Inc.
Revenue Recognition - Print Publications advertising and circulation
revenues are recognized, net of agency commissions and estimated returns and
allowances, when publications are issued. Online Services advertising revenues,
primarily derived from the sale of banner advertisements and sponsorships on the
Company's web sites, is recognized ratably in the period the advertising is
displayed. Deferred subscription revenue, net of agency commissions, is recorded
when subscription orders are received. List rental income is recognized, net of
agency commissions, when a list is provided. Revenues from
equity-for-advertising transactions are recognized during the period in which
the advertisements are run.
The Company, during the third quarter ended September 30, 2000, adopted
the accounting treatment of EITF 99-19, Reporting Revenue Gross as a Principal
versus Net as an Agent with respect to revenues recognized from list rentals.
This change required an increase to Online Services revenues for year ended
December 31, 1999 and 1998 of approximately $4,000 and $0, respectively, with an
equal increase to promotion and selling expenses and an increase to Print
Publications revenues for the year ended December 31, 1999 and 1998 of
approximately $162,000 and $122,000, respectively, with an equal increase to
promotion and selling expenses. This change had no impact on reported net loss
for the years ended December 31, 1999 and 1998.
Deferred Subscription Expense - The Company defers direct response
advertising costs incurred to elicit subscription sales from customers who could
be shown to have responded specifically to the advertising and that resulted in
probable future economic benefits. Such deferred costs, which consist primarily
of direct mail campaign costs, are amortized over the estimated period of future
benefit, ranging from 12 to 22 months.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation of property and equipment is calculated on the straight-line method
over the estimated useful lives of the respective assets, ranging from three to
five years. Leasehold improvements are amortized over the lesser of the useful
life of the asset or the term of the lease.
Income Taxes - Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
may not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Financial Instruments - For financial instruments including cash and
cash equivalents, accounts receivable, accounts payable and accrued expenses,
the carrying amount approximated fair value because of their short maturity.
Cash equivalents consist of investments in a government fund that invests in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, which have average maturities of 30 days.
Investments - Investment represents equity positions in
VentureHighway.com Inc., Pricing Dynamics, Inc. (previously ReverseAuction.com,
Inc.) and Tradeworx, Inc. There is currently no public market for these
securities, and each investment is recorded at its historical cost unless there
is an other than temporary decline in its value. In the event that the Company
concludes that there is an other than a temporary decline in the recorded value
of an investment, the investment will be written down to estimated fair market
value.
Stock-Based Compensation - In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," the Company continues to apply the measurement and recognition
provisions of Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for issuance of employee stock options. The
Company's general policy is to grant options with an exercise price not less
than the fair market value of the Company's stock on the date of grant.
Accordingly, no compensation expense has been recognized in the Company's
statement of operations for fixed stock option grants awarded to employees.
Transactions with non-employees in which goods or services are received by the
Company for the issuance of stock options or other equity instruments are
accounted for based on fair value, which is based on the value of the equity
instruments or the consideration received, whichever is more reliably measured.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities reported in the financial statements. Significant accounting
estimates used include estimates for sales returns and allowances, loss on
discontinued operations, pro forma disclosures regarding the fair value of stock
options granted in 2000, 1999, and 1998 and estimated fair market value of
investment securities for which no public market exists. Actual results could
differ materially from those estimates.
Recent Accounting Pronouncement -Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities," is effective for fiscal years beginning after June 15,
2000. SFAS 133, as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. Under SFAS 133, certain contracts
that were not formally considered derivatives may now meet the definition of a
derivative. The Company will adopt SFAS 133 effective January 1, 2001.
Management does not expect the adoption of SFAS 133 to have a significant impact
on the financial position, results of operations, or cash flows of the Company.
2. INVESTMENTS
Gains on Sale of Investments
Net realized gains on the sales of investments totaled approximately
$4.1 million for the year ended December 31, 1999. There were no comparable
gains in the years ended December 31, 2000 and 1998, respectively.
On June 2, 1999, the Company and Kirlin Holding Corp. ("Kirlin")
entered into a Securities Purchase Agreement pursuant to which the Company
acquired 600,000 shares of common stock of Kirlin for $750,000 (the share amount
has been restated to reflect two 2-for-1 stock splits effected July 30, 1999 and
March 1, 2000, respectively). Kirlin contributed all the proceeds of this sale
to the capital of its subsidiary, VentureHighway.com Inc. ("VentureHighway").
The shares were subsequently sold during August 1999 for net cash proceeds of
approximately $1.7 million, producing a net realized gain of approximately $0.9
million.
In 1997, the Company acquired 250,000 shares of Wit Capital Group, Inc.
Series A Preferred Stock in an equity-for-advertising transaction valued at
$250,000. The shares were converted into 175,000 shares of Class C Common Stock
due to a 7-for-10 reverse split of Class C Common Stock and the completion of
Wit Capital's initial public offering on June 4, 1999. The shares were sold
during December 1999 for net cash proceeds of approximately $3.1 million,
producing a net realized gain of approximately $2.8 million.
Other Investments
On May 4, 2000, the Company and Tradeworx, Inc. ("Tradeworx") entered
into an agreement pursuant to which the Company acquired 1,045,000 newly issued
shares of common stock of Tradeworx, representing at the time a 7% stake (with
warrants to acquire up to 10.5%), on a fully diluted basis, of Tradeworx. The
purchase price was paid for in the form of a credit for Tradeworx to use to
purchase advertising in the Company's magazines and websites during the 24
months ending August 1, 2002. The investment and the deferred advertising
revenues were recorded at the fair market value at the date of the transaction
of approximately $1.1 million. The Company was informed that in January 2001,
Tradeworx completed a capital raise pursuant to which Tradeworx raised $3.0
million cash, selling 1,181,102 shares at a price of $2.54 per share (a 134%
premium to the value at which the shares are recorded on the Company's books).
Tradeworx is in the business of developing proprietary software and
other financial analytical tools that provide online investment analysis and
investment decision support platforms for retail and institutional investors and
brokerage firms. There currently is no public market for Tradeworx securities
and there is no assurance that the Company will realize any value (and the
Company in fact may realize a loss) with respect to its investment in Tradeworx.
On February 23, 2000, the Company and Pricing Dynamics entered into an
agreement pursuant to which the Company acquired 1,166,667 newly-issued shares
of common stock of Pricing Dynamics, representing at the time a 3.3% stake (on a
fully-diluted basis) of Pricing Dynamics (constituting 7.4% of the
then-outstanding shares). The purchase price was paid in the form of a credit
for Pricing Dynamics to use to purchase advertising in the Company's magazines
and web sites during the 21 months ending December 31, 2001. The investment and
the deferred advertising revenues were recorded at the fair market value at the
date of the transaction of approximately $1.5 million.
Pricing Dynamics provides e-commerce tools and dynamic pricing software
for the business-to- business, business-to-consumer and consumer-to-consumer
markets. There currently is no public market for Pricing Dynamics securities and
there is no assurance that the Company will realize any value (and the Company
may in fact realize a loss) with respect to its investment in Pricing Dynamics.
On June 2, 1999, the Company, Kirlin and VentureHighway (at the time a
wholly-owned subsidiary of Kirlin), entered into an agreement pursuant to which
the Company acquired 3,308,688 newly issued shares (adjusted to reflect
subsequent stock splits) of common stock of VentureHighway, representing 19.9%
of the then-outstanding shares of common stock (the other 80.1% of which
immediately after the transaction were held by Kirlin). The purchase price was
paid in the form of a credit for VentureHighway to use to purchase advertising
in the Company's magazines and web sites during the 30 months ending December
31, 2001. The investment and the deferred advertising revenues were recorded at
the fair market value at the date of the transaction of approximately $2.6
million. In December 1999, VentureHighway raised $7.65 million cash, selling
4,284,000 shares at a price of approximately $1.79 per share (adjusted to
reflect a subsequent stock split).
VentureHighway owns and operated VentureHighway.com, a branded web site
designed to serve as an interactive portal for the matching of companies seeking
funding with qualified investors seeking to fund such companies, and the
facilitation of private placements and public offerings of securities of
companies. In April 2000, VentureHighway acquired Princeton Securities, Inc., a
retail-oriented broker-dealer based in Princeton, New Jersey. In December 2000,
VentureHighway suspended the operations of its web site while it is exploring
strategic alternatives. During the fourth quarter 2000, the Company became aware
of an other than temporary decline in the value of its Venture Highway
investment and adjusted the carrying value to estimated fair market value.
Accordingly, the Company has taken a charge to operating earnings of
approximately $2.6 million.
3. SALE OF ASSETS
In August 2000, the Company agreed to sell two Internet domain names
for cash consideration of $1.0 million. In connection with the sale, the Company
also issued a warrant to purchase 250,000 shares of the Company's Common Stock
at an exercise price of $2.00 per share and relinquished the right to have its
Common Stock trade under the ticker symbol "INDI" on the Nasdaq National Market
(the Company began trading under the ticker symbol "IIGP" in October 2000). The
fair market value of the issued warrant was approximately $257,000 (see Note
10).
In September 2000, the Company sold certain assets related to the
business of InsiderTrader.com for cash consideration of approximately $500,000
and the assumption of certain liabilities.
In September 2000, the Company sold certain assets related to Ticker
magazine for cash consideration of approximately $6.0 million, less an
adjustment for certain current assets and liabilities and the assumption of
certain liabilities.
Realized gain on the sale of assets for the year ended December 31,
2000, represented by these three separate transactions was approximately $6.7
million.
4. DISCONTINUED OPERATIONS
On April 30, 1998, the Company's Board of Directors decided to
discontinue the Company's investment management services business. As a result,
the operating results relating to investment management services have been
segregated from continuing operations and reported as a separate line item on
the consolidated statements of operations.
The investment management services business was principally conducted
by a wholly-owned subsidiary of the Company, WisdomTree Capital Management, Inc.
("WTCM"). WTCM serves as general partner of (and is an investor in) a domestic
private investment fund. The Company is also a limited partner in the fund. As a
result of the Board's decision to discontinue the investment management services
business, WTCM is continuing to dissolve the domestic investment fund,
liquidating its investments and distributing the net assets to all investors as
promptly as possible.
The Company, through WTCM and another wholly-owned subsidiary, also
provided investment management services to an offshore private investment fund.
On May 21, 1998 the sole voting shareholder of the offshore fund, in
consultation with WTCM, resolved to wind up the fund and appointed a liquidator
to distribute the assets of the fund to its investors in accordance with Cayman
Islands law. Substantially all of the fund assets were distributed in cash to
its investors by December 31, 1998. The Company has no investment in the
offshore fund.
Revenues and investment gains and losses associated with the investment
management services in 1998 through April 30, 1998 were approximately
($140,000). The result for such operations in 1998 through April 30, 1998 was a
net loss of approximately $190,000.
On April 30, 1998, the Company recorded a provision of approximately
$446,000 to accrue for its share of net operating losses of the domestic
investment fund and related costs that are expected to occur until the fund
liquidates its investments. From May 1, 1998 to December 31, 1998, additional
net operating losses and related costs totaled approximately $145,000.
Additional losses were incurred as a result of changes in the market value of
the fund's investments. The Company believes that any remaining net operating
losses and related costs associated with these discontinued operations have been
adequately provided for by provisions established in 1998.
At December 31, 2000, the domestic investment fund had net assets of
approximately $534,000. The Company's net investment in discontinued operations
of $49,302 at December 31, 2000 and 1999, represents its share of the net assets
of the domestic investment fund, less any costs associated with discontinuing
the investment management services.
5. PROPERTY AND EQUIPMENT
December 31,
2000 1999
---- ----
Equipment $1,769,307 $1,432,511
Furniture and fixtures 621,195 612,857
Leasehold improvements 917,050 897,999
----------- -----------
3,307,552 2,943,367
Less: accumulated depreciation
and amortization (1,828,447) (1,289,708)
----------- -----------
$1,479,105 $1,653,659
=========== ===========
6. ACCRUED EXPENSES
December 31,
2000 1999
---- ----
Accrued commissions and
employee compensation $175,697 $340,129
Deferred rent credits 28,288 46,923
Accrued newsstand promotion expenses 97,481 147,842
Accrued professional fees 111,001 127,271
Other 50,333 54,505
----------- -----------
$462,800 $716,670
=========== ===========
7. COMMITMENTS AND CONTINGENCIES
Litigation -The Company from time to time is involved in ordinary and
routine litigation incidental to its business; the Company currently believes
that there is no such pending legal proceeding that would have a material
adverse effect on the consolidated financial statements of the Company.
Profit Sharing Plan - The Company has a profit sharing plan (the
"Plan"), subject to Section 401(k) of the Internal Revenue Code. All employees
who complete at least two months of service and have attained the age of 21 are
eligible to participate. The Company can make discretionary contributions to the
Plan, but none were made in 2000, 1999, and 1998.
Employment Agreements - The Company has an employment agreement with an
officer that contains a provision regarding a potential severance payment in an
amount that would not currently be material to the Company.
Lease Agreements - The Company leases office space in New York City
under an operating lease that expires on March 31, 2004. The Company also
subleases its former office space in New York City under an operating lease that
expires March 1, 2005. Additionally, the Company leases office space in San
Francisco and Chicago for use by advertising sale representatives located
therein. Rent expense for the years ended December 31, 2000, 1999 and 1998 was
approximately $1.2 million $1.0 million and $0.6 million. The New York City
leases and sublease provide for escalation of lease payments as well as real
estate tax increases. Future minimum lease payments and related sublease rentals
receivable with respect to non-cancelable operating leases are as follows:
Future Minimum Rents Receivable
Year Rental Payments Under Sublease
---- ------------------------------------
2001 $1,201,000 $190,000
2002 1,203,000 195,000
2003 1,209,000 200,000
2004 465,000 205,000
2005 36,000 22,000
Thereafter 0 0
---------- --------
Total $4,115,000 $812,000
========== ========
The Company has an outstanding letter of credit totaling $332,500
related to the security deposit for the Company's New York City corporate office
space. In March 2001, the Company was in discussions concerning an agreement to
sublet approximately 17,000 square feet of its New York City corporate office
space, for the period May 1, 2001 through March 31, 2004, at a rental amount in
excess of its current cost. There can be no assurance, however, that a
definitive sublease agreement upon such terms will be executed or that the
Company otherwise will be able to sublet a portion of its New York City
corporate office space.
8. INCOME TAXES
The Company has available net operating loss carryforwards ("NOL")
totaling approximately $23.2 million. Based upon a change of ownership, which
transpired in December 1991, the utilization of approximately $2.1 million of
pre-change NOL are limited in accordance with Section 382 of the Internal
Revenue Code, which affects the amount and timing of when the NOL can be offset
against taxable income. The Company also has an unrealized tax loss of
approximately $2.6 million related to the impairment of its investment in
VentureHighway.com (see Note 2). The tax effects of temporary differences from
discontinuing and continuing operations that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 2000, 1999 and 1998,
respectively, are presented below:
2000 1999 1998
---- ---- ----
Deferred tax assets:
Net operating loss carryforwards $10,426,000 $10,360,000 $8,078,000
Unrealized tax loss 1,187,000 - -
Tax in excess of book basis
of investment in fund 71,000 77,000 996,000
Other 498,000 260,000 296,000
----------- ----------- ----------
Total 12,182,000 10,697,000 9,370,000
Deferred tax liabilities: - - -
----------- ----------- ----------
12,182,000 10,697,000 9,370,000
Less: valuation allowance 12,182,000 10,697,000 9,370,000
----------- ------------ ----------
Net deferred tax asset $ - $ - $ -
============ ============ ==========
The provision for income taxes from continuing operations for the years
ended December 31, 2000, 1999 and 1998, respectively, is different than the
amount computed using the applicable statutory Federal income tax rate with the
difference summarized below:
2000 1999 1998
---- ---- ----
Hypothetical income tax benefit
at the US Federal statutory rate $(1,192,000) $(1,467,400) $2,733,700)
State and local income taxes benefit,
less US Federal income tax benefit (341,000) (434,800) (809,900)
Permanent differences 48,000 - -
Unrealized tax loss 1,187,000 - -
Net operating loss benefit not
recognized 298,000 1,902,200 3,543,600
------------ ----------- -----------
$ - $ - $ -
============= ============ ===========
9. STOCK OPTIONS
The Company has five stock option plans: the 1991 Stock Option Plan,
the 1993 Stock Option Plan, the 1996 Performance Equity Plan, the 1996
Management Incentive Plan and the 2000 Performance Equity Plan (collectively,
the "Plans"). Under the Plans, the Company can issue a maximum of 3,200,000
shares of Common Stock pursuant to stock options and other stock-based awards.
Options issued pursuant to the Plans may be exercisable for a period of up to 10
years from the date of the grant. Options granted pursuant to the 1991 Stock
Option Plan must be at an exercise price which is not less than the fair market
value at the date of grant; options granted pursuant to the other Plans may
have, but to date have not had, exercise prices less than the fair market value
at the date of grant. The 2000 Performance Equity Plan, which provides for the
issuance of up to 1,000,000 shares of Common Stock pursuant to stock options and
other stock-based awards, was adopted by the Company's board of directors in
February 2000 subject to stockholder approval and was approved by the Company's
stockholders in June 2000.
In addition to the Plans, the Company has options outstanding that were
granted outside of the Plans. These options were granted at fair market value at
the date of grant and expire at various dates through December 14, 2009.
On November 19, 1998, the Company's Board of Directors approved an
option exchange program which allowed employees to exchange their existing
options (vested and unvested) with a per share exercise price greater than
$1.25, on a one-for-one basis for new options with a per share exercise price of
$1.25, which was above the fair market value of the Company's Common Stock on
November 19, 1998, or, alternatively, in the Company's discretion, to amend the
employee's existing options to reduce the exercise price to $1.25 per share. The
existing options of employees who chose to participate in the program were
cancelled or amended. The new options have the same vesting periods as the
exchanged options, except that, other than in limited circumstances, the new
options were not exercisable prior to May 19, 1999. A total of 1,479,801 options
with a weighted average exercise price of $5.34 were exchanged for new options
or amended as a result of this program. In accordance with generally accepted
accounting principles, the Company did not record compensation expense as a
result of the exchange.
On December 23, 1998, the Company's Board of Directors approved an
option exchange program which allowed non-employee directors to exchange their
existing options (vested and unvested) with a per share exercise price greater
than $2.00, on a one-for-one basis for new options with a per share exercise
price of $2.00, which was equal to the fair market value of the Company's Common
Stock on December 23, 1998. The existing options so exchanged were cancelled.
The new options have the same vesting periods as the exchanged options, except
that the new options were not exercisable prior to June 23, 1999. A total of
140,000 options with a weighted average exercise price of $5.98 were exchanged
for new options as a result of this program.
Activity in the Plans noted above is summarized in the following table.
2000 1999 1998
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------------------------------------------------------------------------
Options outstanding,
January 1 1,359,601 $2.57 1,663,585 $2.44 1,473,051 $6.29
Granted 905,909 $2.93 305,405 $3.79 1,646,301 $2.06
Exercised (112,618) $0.99 (489,856) $3.00 (33,438) $4.72
Canceled (861,849) $2.67 (119,533) $2.07 (1,422,329) $5.93
---------- -------- ----------- -------- ----------- --------
Balance, December 31 1,291,043 $2.90 1,359,601 $2.57 1,663,585 $2.44
========== ======== =========== ======== =========== ========
Options exercisable under the Plans at December 31, 2000, 1999 and
1998, respectively, were 568,527, 578,637, and 396,285, respectively, at
weighted average exercise prices of $3.32, $2.83, and $4.99, respectively. At
December 31, 2000, 1999 and 1998, respectively, options available for grant
under the Plans were 1,138,502, 182,562, and 368,434, respectively, while total
shares of Common Stock reserved for future issuances under the Plans were
2,429,545, 1,542,163, and 2,032,019, respectively.
Options granted outside of the Plans are as follows:
2000 1999 1998
--------------------------------------------------------------------------
Options outstanding,
January 1 2,495,900 $2.63 1,961,913 $2.59 1,560,496 $5.27
Granted - - 803,750 $3.17 1,422,500 $1.46
Exercised - - (225,763) $4.15 (51,500) $4.74
Canceled (837,750) $2.42 (44,000) $2.89 (969,583) $5.12
---------- -------- ----------- -------- ----------- --------
Balance, December 31 1,658,150 $2.73 2,495,900 $2.63 1,961,913 $2.59
========== ======== =========== ======== =========== ========
Options granted outside the Plans that were exercisable at December 31,
2000, 1999 and 1998, respectively, were 1,465,566, 1,291,775, and 639,413,
respectively, at weighted average exercise prices of $2.72, $2.71, and $4.94,
respectively.
The following table summarizes information about total stock options
outstanding at December 31, 2000:
Options Outstanding Options Exercisable
------------------------------------------------------------------------- ------------------------------------
Number Weighted-Average Number
Range of Exercise Outstanding at Remaining Weighted-Average Exercisable at Weighted-Average
Prices 12/31/2000 Contractual Life Exercise Price 12/31/2000 Exercise Price
------ ---------- ---------------- -------------- ---------- --------------
$0.4375- $1.250 1,211,600 5.69 $1.12 903,350 $1.24
$1.375 - $3.375 762,500 5.91 $2.45 494,750 $2.25
$3.4375- $8.125 975,093 4.71 $5.19 635,993 $5.71
---------- ---------
2,949,193 5.42 $2.81 2,034,093 $2.88
========== ==========
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options granted under the fair value method of
SFAS No. 123. The fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions for 2000, 1999, and 1998, respectively: risk-free
interest rates of 6.5%, 5.8%, and 4.7%, respectively; volatility factors of the
expected market price of the Company's Common Stock of 87%, 132%, and 99%,
respectively; weighted-average fair value of options granted of $2.41, $2.97,
and $1.10, respectively; and a weighted-average expected life of the options of
5 years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
2000 1999 1998
---- ---- ----
Net loss from continuing operations:
As reported ($3,405,789) ($4,192,703) ($7,810,500)
Pro forma ($3,870,259) ($5,675,620) ($8,937,005)
Loss from continuing operations per
weighted average common share:
As reported ($0.34) ($0.47) ($0.99)
Pro forma ($0.39) ($0.63) ($1.13)
The impact of the estimated fair value of the options has no effect on
the reported loss or income from discontinued operations. The effects of
applying SFAS No. 123 in this pro forma disclosure are not indicative of future
amounts because additional stock option awards in future years are anticipated.
On July 19, 2000, the Stock Option Committee, pursuant to the Company's
2000 Performance Equity Plan, awarded 150,000 shares of authorized but unissued
Common Stock in the aggregate to certain employees subject to the terms of a
restricted stock agreement. 25,500 of such shares have been issued and earned by
various employees and earnings for the year ended December 31, 2000 have been
charged approximately $42,000 with respect to these shares. An additional 87,500
of such shares have been granted and issued to employees at a compensation value
of approximately $148,000, which amount is being amortized ratably over the
employment period required to earn such shares. The remaining 37,000 of such
shares were forfeited and are available for reissuance.
10. STOCKHOLDERS' EQUITY
Repurchase of Common Stock - The Company on December 15, 2000 acquired
1,781,133 shares of its Common Stock from Wise Partners, L.P. ("Wise") and
retired the shares. As a result, the Company's outstanding shares of common
stock have been reduced approximately 13%, to approximately 9.0 million shares
at December 31, 2000 from approximately 10.4 million shares at December 31,
1999. The Company acquired the shares for a purchase price of $0.09 per share,
which was significantly below the closing price of the Common Stock on December
15, 2000 of $0.40625 per share. Wise informed the Company that although Wise
believed the sales price to be far below the appropriate value for the stake, it
was selling the position in order to incur a tax loss during the year to offset
taxable gains recorded by the partnership and its partners. Jonathan Steinberg,
the Company's Chief Executive Officer, is the general partner of Wise and his
father is the limited partner.
Issuance of Preferred Stock - On December 2, 1998, the Company issued a
total of 10,000 shares of Series A Preferred Stock ("Series A Preferred Stock")
to two parties unrelated to the Company pursuant to Stock Purchase Agreements,
for an aggregate purchase price of $2.0 million. The Series A Preferred Stock
has a par value of $.01 per share and a stated value of $200 per share. The
Series A Preferred Stock is convertible into the Company's Common Stock at a
conversion price of $2.12 per share, subject to adjustment for stock splits,
recapitalizations, and the like. Any unconverted shares will be subject to
mandatory conversion into the Company's Common Stock on December 31, 2003. The
Series A Preferred Stock will be entitled to receive a cumulative ten percent
(10%) per annum cash dividend, payable annually on December 31 of each year,
commencing December 31, 1999, or, if earlier, upon conversion of the shares of
Series A Preferred Stock. The Series A Preferred Stock shall have a liquidation
preference of $200 per share plus any accrued and unpaid dividends. Shares of
Common Stock into which the Series A Preferred Stock may be converted were
registered for resale in October 1999. On September 21, 2000, 2,120 shares
Series A Preferred Stock were converted at the conversion price of $2.12 per
share into 200,000 shares of Common Stock. At December 31, 2000, 7,880 shares of
Series A Preferred Stock remained outstanding.
Issuances of Common Stock - On September 29, 1999, the Company entered
into a Stock Purchase Agreement with Telescan, providing for the sale of 779,130
shares of Common Stock for an aggregate purchase price of $3.0 million, which
was based upon one hundred and twenty-five percent (125%) of the average of the
closing prices of the Common Stock, as reported by Nasdaq, for the seven
business days prior to the date of the closing. Additionally, the Company and
Telescan entered into an agreement pursuant to which the Company obtained a
three-year license to use several of Telescan's propriety technology and
investment tools on the Company's web sites. The Company paid the $1,134,500
license fee by issuing 368,301 shares of Common Stock to Telescan, which was
based upon the average of the closing prices of the Company's Common Stock, as
reported by Nasdaq, for the seven business days prior to the date of the
closing.
On June 26, 1998, the Company entered into a Stock Purchase Agreement
with Wise providing for the sale of 1,259,842 shares of Common Stock for an
aggregate purchase price of $5.0 million, which was based on the closing "ask"
price of the Common Stock on June 25, 1998. The Company repurchased these shares
as part of the total 1,781,133 shares repurchased on December 15, 2000 described
above.
Each of the above sales of Common Stock of the Company was sold
pursuant to an exemption from registration under the Securities Act of 1933 (the
"Securities Act").
In 1999, the Company issued a total of 39,372 shares of Common Stock to
consultants pursuant to the Plans and recorded expenses totaling $109,251 in
connection therewith. No such awards were made in 2000 or 1998.
Warrants - In 1998, in connection with consulting and recruiting
services provided, the Company issued warrants to purchase up to 362,500 shares
of Common Stock at exercise prices ranging from $1.1875 to $2.15625. The
warrants were valued at $337,113 using the Black-Scholes options pricing model.
Of the warrants issued in 1998, 300,000 may be exercised at any time until
December 15, 2003 and 62,500 were cancelled during 2000.
In 1999, in connection with consulting and recruiting services
provided, the Company issued warrants to purchase up to 138,750 shares of Common
Stock at exercise prices ranging from $2.6255 to $3.40625. The warrants were
valued at $288,211 using the Black-Scholes options pricing model. During 2000,
43,750 of the warrants issued in 1999 expired unexercised and 50,000 of the
warrants issued in 1999 were cancelled. The remaining warrants issued in 1999
may be exercised at any time until November 28, 2004 with respect to 15,000
shares, and at any time until September 12, 2009 with respect to vested shares
under a 30,000-share warrant, 10,000 of which shares vested on September 13,
2000 and 10,000 of which shares vest on each of September 13, 2001 and September
13, 2002 provided that the holder is continuing to render service to the Company
on the respective vesting date and other terms and conditions.
In 2000, in connection with the sale by the Company of two Internet
domains for cash consideration of $1.0 million, the Company issued a warrant to
purchase 250,000 shares of the Company's Common Stock at an exercise price of
$2.00 per share (see Note 3). This warrant may be exercised at any time until
August 10, 2003.
11. ACCOUNTS RECEIVABLE FINANCING
In August 2000, the Company entered into a securitization facility with
an unrelated financial services company. Under the terms of the facility, the
Company may transfer an undivided ownership interest in certain trade accounts
receivable to the financial services company. The Company receives cash from the
third party based on a formula of a percentage of the face value of the eligible
transferred receivables, less certain fees. The maximum amount of transferred
receivables that may be outstanding under this facility is $2.0 million. The
Company pays a variable interest rate (prime plus 1.5%) during the period from
when a receivable is transferred until the time the third party collects and
remits the balance of the receivable. During 2000, this interest rate averaged
approximately 11%. The Company retains the credit risk for any receivable that
is transferred and with respect to which the customer subsequently defaults on
payment. The Company had no credit losses under this facility during 2000. The
Company recorded interest expense of approximately $0.1 million related to this
facility during 2000. The amount of transferred receivables at December 31, 2000
was approximately $0.6 million. The securitization facility ends June 30, 2002,
subject to earlier termination in accordance with the contract.
12. LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing the net
earnings, after deducting dividends on cumulative convertible preferred stock,
by the weighted average number of shares of Common Stock outstanding during the
period. Diluted (loss) income per share is computed using the weighted average
number of outstanding shares of Common Stock and common equivalent shares during
the period. Common equivalent shares consist of the incremental shares of Common
Stock issuable upon the exercise of stock options, warrants and other securities
convertible into shares of Common Stock. The loss per common share for 2000,
1999, and 1998 is computed based on the weighted average number of shares of
Common Stock outstanding during the respective period. The exercise of stock
options, warrants and other securities convertible into shares of Common Stock
were not assumed in the computation of dilutive loss per common share, as the
effect would have been antidilutive.
The computation of net loss applicable to common shareholders is as
follows:
2000 1999 1998
---- ---- ----
Net loss from continuing operations ($3,405,789) ($4,192,703) ($7,810,500)
Preferred stock dividends (188,709) (216,987) -
------------ ------------ ------------
Net loss from continuing operations applicable
to common shareholders (3,594,498) (4,409,690) (7,810,500)
Loss from discontinued operations - - (781,370)
------------ ------------ -----------
Net loss applicable to common shareholders ($3,594,498) ($4,409,690) ($8,591,870)
============ ============ ============
13. SEGMENT INFORMATION
The Company's business segments are focused on providing research and
analysis of investment information to individuals and investment professionals
through two operating segments: Print Publications and Online Services. The
Company's Print Publications segment publishes and markets Individual Investor,
a personal finance and investment magazine and Individual Investor's Special
Situations Report, a financial investment newsletter. Between approximately
October 1996 and September 2000, the Company's Print Publications segment also
included Ticker, a magazine for investment professionals. The Company's Online
Services segment includes individualinvestor.com (www.individualinvestor.com).
Between approximately November 1998 and September 2000, the Company's Online
Services segment also included InsiderTrader.com (www.InsiderTrader.com). In
September 2000, the Company sold InsiderTrader.com and Ticker magazine to two
different parties in two unrelated transactions (see Note 3). Substantially all
of the Company's operations are within the United States.
The table below presents summarized operating data for the Company's
two business segments, consistent with the way such data is utilized by Company
management in evaluating operating results. Any inter-segment revenues included
in segment data are not material. The accounting policies utilized in the table
below are the same as those described in Note 1 of the Notes to Consolidated
Financial Statements. Operating contribution represents the difference between
operating revenues less operating expenses (before general and administrative
("G&A") expense, corporate advertising, and depreciation and amortization).
Identifiable assets by segment are those assets used in the Company's operations
in each business segment. Corporate assets are considered to be cash and cash
equivalents, investment in discontinued operations, investments and certain
other non-operating assets.
2000 1999 1998
---- ---- ----
Revenues:
Online Services $ 3,188,022 $ 2,308,186 $ 1,136,032
Print Publications 16,590,782 15,362,615 14,334,074
------------ ------------- -------------
$19,778,804 $ 17,670,801 $15,470,106
============ ============= =============
Operating contribution (before G&A, corporate
advertising and depreciation and amortization):
Online Services ($1,678,479) ($1,714,259) ($2,056,633)
Print Publications 90,541 (246,864) (692,731)
------------ ------------- -------------
(1,587,937) (1,961,123) (2,749,364)
Gain from sale of assets 6,702,219 - -
Impairment of investment (2,638,356) - -
G&A, corporate advertising and depreciation and
amortization expense (6,052,323) (6,541,230) (5,285,349)
Investment and other income 170,608 4,309,650 224,213
------------ ------------- -------------
Net loss from continuing operations ($3,405,789) ($4,192,703) ($7,810,500)
============ ============= =============
Identifiable assets (a):
Online Services $ 1,219,312 $ 1,949,481 $ 401,887
Print Publications 2,980,509 4,237,452 3,189,296
Corporate assets 8,506,439 10,071,034 6,953,745
------------ ------------- -------------
$12,706,260 $16,257,967 $10,544,928
============ ============= =============
(a) Total expenditures for long-lived assets for the years ended December 31,
2000, 1999 and 1998, respectively, were as follows: Online Services,
$64,870, $434,805 and $51,092, respectively; Print Publications, $259,479,
$823,023 and $235,809, respectively; and Corporate, $69,503, $310,575 and
$401,522, respectively.
14. SUPPLEMENTARY INFORMATION - SELECTED QUARTERLY DATA (Unaudited)
2000 Quarters
1st 2nd 3rd 4th
--- --- --- ---
Revenues $6,212,650 $5,232,291 $5,223,413 $3,110,450
Operating expenses 7,877,532 7,160,754 6,994,034 5,386,744
Gain on sale of assets - - 6,702,219 -
Impairment of investment - - - (2,638,356)
------------ ------------ ----------- ------------
Operating (loss) income (1,664,882) (1,928,463) 4,931,598 (4,914,650)
Investment and other income 68,299 58,518 24,640 19,151
------------ ------------ ----------- ------------
Net (loss) income ($1,596,583) ($1,869,945) $4,956,238 ($4,895,499)
------------ ------------ ----------- ------------
Basic(loss)income per common share: ($0.16) ($0.19) $0.47 ($0.47)
------------ ------------ ----------- ------------
Average number of common shares used in
computing basic (loss) income per
common share 10,363,991 10,392,173 10,413,519 10,485,781
Dilutive (loss) income per common share ($0.16) ($0.19) $0.44 ($0.47)
------------ ------------ ----------- ------------
Average number of common shares used in
computing dilutive (loss) income per
common share 10,363,991 10,392,173 11,182,167 10,485,781
1999 Quarters
1st 2nd 3rd 4th
--- --- --- ---
Revenues $4,038,776 $ 3,740,343 $ 4,495,331 $ 5,396,351
Operating expenses 5,913,475 6,056,896 6,670,502 7,532,281
------------ ------------- ------------- ------------
Operating loss (1,874,699) (2,316,553) (2,175,171) (2,135,930)
Investment and other income 556,567 39,827 798,352 2,914,904
------------ ------------- ------------- ------------
Net (loss) income ($1,318,132) ($2,276,726) ($1,376,819) $778,974
------------ ------------- ------------- ------------
Basic (loss) income per common share: ($0.15) ($0.25) ($0.15) $0.05
------------ ------------- ------------- ------------
Average number of common shares used in
computing basic (loss)
income per common share 8,786,599 9,016,759 9,188,724 10,339,200
Dilutive (loss) income per common share ($0.15) ($0.25) ($0.15) $0.05
------------ ------------- ------------- ------------
Average number of common shares used in
computing dilutive (loss) income per
common share 8,786,599 9,016,759 9,188,724 11,282,596
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INDIVIDUAL INVESTOR GROUP, INC.
Date: April 4, 2001
By: /s/ Jonathan L. Steinberg
Jonathan L. Steinberg
Chief Executive Officer
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
Individual Investor Group, Inc.
We consent to the incorporation by reference in Registration Statements Nos.
33-74846 and 333-89933 on Form S-3 and Registration Statements Nos. 33-72266,
33-85910, 333-17697 and 333-89939 on Form S-8 of Individual Investor Group, Inc.
and subsidiaries of our report dated March 27, 2001, appearing in this Annual
Report on Form 10-K/A of Individual Investor Group, Inc. and subsidiaries for
the year ended December 31, 2000.
DELOITTE & TOUCHE LLP
New York, New York
April 4, 2001