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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[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
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-26540
NEWSEDGE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 04-3016142
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
80 Blanchard Road, Burlington, Massachusetts 01803
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (781) 229-3000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Title of Class
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of March 20, 2001, was approximately $10,447,868 million (based
upon the closing bid price of the Registrant's Common Stock on March 20, 2001,
of $1.44 per share).
The number of shares outstanding of the Registrant's $.01 par value Common
Shares as of March 20, 2001 was 18,621,403.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December
31, 2000. Portions of such proxy statement are incorporated by reference into
Part III of this report.
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PART I
Item 1. Business
NewsEdge Corporation (Nasdaq: NEWZ) is a global provider of syndicated
content services and electronic publishing technologies for business. Our
customers include both content creators, such as information publishers, and
the operators of the world's most active Web sites. We offer technology and
services for customers to create, manage and deploy content for millions of
end-users through Intranets, Web sites, portals, Extranets and distribution
channels. Our services seek to make organizations more efficient. Our goal is
to help organizations create Web sites that:
. attract specialized audiences;
. foster high-frequency usage;
. achieve Web site "stickiness"; and
. ultimately cultivate commerce.
Through our NewsEdge Refinery, which combines our patented technology and
human editorial review to deliver highly targeted news on more than 2,000
business topics from more than 2,000 sources, we serve thousands of sites and
companies with highly targeted content solutions, including industry-specific
topics, wireless services, turn-key permission marketing and publishing tools,
outsourced editorial capabilities and sub second live news feeds and
applications.
We serve two major target markets:
. employees of larger organizations and information intensive businesses
who use news to be smarter and more competitive; and
. visitors to organization Web sites, where news and information can help
make sites more compelling, thereby increasing habituation and fostering
longer site visits.
We target markets for syndicated news solutions through the sale of our
Information Products and Content Solutions. Information Products encompass the
range of our products, which include NewsEdge Live(TM), NewsEdge Insight(TM)
and NewsEdge Workgroups(TM), sold to large organizations for use by their
employees. Our Information Products deliver news and information to large
numbers of users within organizations through corporate Intranets or local
area networks (LAN). As of December 31, 2000, we have over 1,400 Information
Products customers. These organizations included 81 of Business Week's 100
largest global companies (based upon market capitalization).
In May of 2000, we accelerated our move into the content solutions business
marketplace in order to further capitalize on our media sources
personalization strategy and international sales and support infrastructure.
Through our Content Solutions we provide syndicated content services to
operators of Intranets, Web sites, portals, Extranets and distribution
channels. Our Content Solutions include syndicated content "Content Resources"
as well as tools for Web site operators to add content to their sites,
including "Editor Resources" and "User "Resources".
In February 2000, we agreed to sell our Individual.com, Inc. subsidiary,
which operated our Single-Worker News Service business, in order to better
focus our business on our Information Products and Content Solutions.
NewsEdge is headquartered in Burlington, Massachusetts, with sales offices
and distributors throughout North America, Europe, Japan and the Middle East.
NewsEdge was formed as Desktop Data, Inc. in 1988, acquired Investment
Software Systems, Inc. from ADP Financial Services, Inc. in January 1998, and
upon the closing of the February 1998 merger with Individual, Inc. changed its
name to NewsEdge Corporation.
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Industry Background and Target Market
In record numbers, businesspeople are turning to the Internet for the news
they need to be competitive and effective in their jobs. As a result of this
demand, there are over 2.5 million business-oriented Web sites today, all
competing for attention in varied, cluttered markets. This number is expected
to at least triple in the next three years. According to Delphi Group, Web-
based content demand will reach $13 billion by 2003. In addition, according to
Outsell Research, the B2B portion of the current information content market is
currently $140 billion. The Gartner Group expects the B2B eCommerce market
will grow to $4 trillion by 2003. Because of the current demand and expected
growth in this marketplace, we believe that companies today, more than ever,
share a need for quality, targeted content and related publishing services to
serve the information needs of both their employees and visitors to their
business Web sites.
We target this growing market in two ways:
. through our Information Products, we serve the needs of employees of
larger organizations and information intensive businesses who use news
to be smarter and more competitive; and
. through our Content Solutions, we provide news and information to
organizations' Web sites who seek to help improve the look and
usefulness of these sites, attract visitors, increase habituation, and
foster longer site visits.
The NewsEdge Solution
Our goal is to deliver news and current information in a personalized, easy-
to-use format that solves the twin problems of information overload and
information overlook. As businesspeople and companies become familiar with
Internet information, they seek to gain more value from their time.
Enterprises continue to seek efficient ways to leverage the large investments
in computer networks, Internet connectivity and information access that they
have made in recent years. Our Information Products serve the needs of large
and/or information intensive organizations requiring the delivery of
authoritative, timely and relevant news and information services that can help
make their employees smarter.
At the same, many companies and other organizations are building Web sites,
portals and Extranets for use by their external constituents, including
customers, investors and suppliers. Our Content Solutions offerings enable a
deeper and broader market to benefit from our capabilities. We created content
and infrastructure capabilities by decoupling the user interface from our
Information Products. The components we created enabled NewsEdge to deliver
content resources (news and information feeds) and the tools required to place
them (editor resources) onto externally facing Web sites. As a result, in
addition to serving the information needs of enterprise employees, we can now
provide services for Intranets, Web sites, corporate portals and Extranets run
by operators that are not traditionally Information Products customers. We
believe regularly updated content from NewsEdge helps our clients:
. build compelling Web sites;
. increase the number of visitors to their Web sites;
. increase the number of clicks on their Web sites;
. increase habituation;
. encourage faster longer site visits; and
. make their Web sites more valuable.
Delivery of Services
All of our interactive news service offerings are available through common
Internet browsers. Customers have the choice of accessing their news service
by installing dedicated NewsEdge servers inside their firewalls on their own
LAN or accessing their news service by connecting to similar servers
maintained at our locations via private connections or the Internet.
3
Some of our services have direct Internet links from stories of interest to
certain partner information services for reference information such as company
descriptions, summary financial statistics, SEC filings, stock quotations and
charts and in many cases direct connections to the Web sites of companies
mentioned in the story.
Competitive Advantage
We believe our competitive advantage stems from the NewsEdge Refinery, our
editorial and review staff and our contractual relationships with news and
information providers. We leverage these components across our business,
providing all our end-users with various levels of customized, filtered news,
including our NewsEdge Review Topics(TM), a briefing of 2,000 business topics
transmitted daily to end users.
The NewsEdge Refinery
The NewsEdge Refinery filters news stories from more than 1,000 global news
sources, eliminating redundancies while prioritizing and summarizing only the
relevant stories into targeted topics, including NewsEdge Review Topics. As
stories are received into the Refinery from various content providers around
the world in their native format, an automated software editor program is used
to consistently format, tag and code the stories to allow for enhanced
indexing throughout the remainder of the process. The stories are then fed
from the software editor through refined filtering software to eliminate
obvious redundancies and categorize the remaining stories into a first draft
of the 2,000 Review Topics we maintain. A staff of professional editors and
reviewers then work with the results generated from the filtering software to
further eliminate redundancies incapable of detection through the filtering
software, while continuing to enhance the summarization and prioritization of
the stories contained within the final delivered Review Topics. Finally, a
proprietary software application distributes the resulting Review Topics to
various servers for ultimate consumption by the end user of any topical news
service offered by NewsEdge.
Updated stories released throughout the day are delivered to these same
servers to either be distributed to customers in real-time, as intra-day topic
feeds, through once a day briefings or a combination of real time and briefs.
These updates provide users with the ability to monitor and to be alerted to
breaking news of personalized interest all day long. The portion of the
Refinery that delivers continuous news operates twenty-four hours a day, seven
days a week, every day of the year.
NewsEdge Review Topics, Editors and Reviewers
Using the automated capabilities of the Refinery plus an experienced
professional editorial staff, NewsEdge produces Review Topics. Each night, a
staff of more than two dozen business and industry experts personally reviews
the news that has been electronically filtered, categorized, ranked and
assembled from more than 1,000 global news sources into approximately 2,000
business topics and over 30,000 companies. The reviewers pick the top new
stories, discarding duplicates and stories covered on previous days, and then
prioritize the stories into a briefing for each of the 2,000 business topics.
In the early morning hours of every business day, the Review Topics are
transmitted to servers at NewsEdge and customer sites.
The knowledge sets that define the Review Topics have been honed by an
aggregate of more than 200 person-years of experience in news selection and
review. In addition, the editors consult with customers on paid knowledge
management assignments to help our customers' users make better use of our
services. Additionally, customers can choose to work with our editorial team
to create custom topics. These custom topics may be focused on a particular
client's business, geography or stories about the company or market sector.
News and Information Providers
We have contracted with over 100 global content providers to make available
through our services, news and information from over 2,000 sources. News and
information sources currently available on NewsEdge include:
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. newswires from AFX News Limited, The Associated Press, Bridge, Dow
Jones, Knight-Ridder/Tribune Information Services and Nihon Shimbun
America;
. text of stories in The Financial Post (Toronto), The Financial Times
(London), The New York Times, London Daily Telegraph/Telegraph Group and
The Wall Street Journal; and
. for select services, the business sections of over 100 North American
newspapers, over 30 major metropolitan business journals, periodicals
such as Business Week, Forbes, Fortune, InfoWorld, MacWeek and PCWeek,
newsletters such as those distributed by American Banker and Phillips
Business Information Services, Inc. and international wire services and
publications such as Agence France Presse, Deutsche Press-Agentur GmbH,
Het Financieele Dagblad B.V. and the Economist.
Of the thousands of sources available for use with select NewsEdge services,
approximately 500 global sources are used to create the Review Topics.
Customers may purchase access to individual sources or packages of sources
including individual newswires and select Review Topics. Access to individual
news sources and select Review Topics may be controlled by the customer at the
individual user level.
Certain of our news source offerings are written and distributed in their
native languages such as English, Dutch, German and French.
Contracts with information providers generally require us to remit royalties
to information providers on a revenue shared basis or, related to our sale of
their content on a per customer or per user basis. We have negotiated fixed
fee arrangements with certain news providers and are pursuing additional
arrangements of this type with other information providers.
NewsEdge Service Offerings
Information Products
Our Information Products consist of content resources and a NewsEdge built
user-interface which is optimized for displaying content. These services are
delivered to clients either as a hosted service (NewsEdge hosts the servers)
or with the servers at the client site. Our Information Products are divided
into three categories.
. NewsEdge Live(TM) provides and processes an up-to-the-second news
broadcast for immediate scrolling news views and user alerting.
. NewsEdge Insight(TM), offered in both a Web interface and a Lotus Notes
environment, combines the monitoring of real-time news with briefings
from NewsEdge Review topics. NewsEdge released both a Lotus Notes
version and a Web version in the second half of 1999.
. NewsEdge Workgroups(TM) is a browser-based service, with e-mail
components, delivering news and information to smaller companies and
departments of larger organizations. Like our other Information
Products, NewsEdge Workgroups is sold to client organizations as a
subscription, but it also carries advertising as another revenue source
to NewsEdge and as a way to defray costs to clients.
In connection with the NewsEdge Live and NewsEdge Insight service offerings,
we have created a telecommunications service known as the NewsEdge
Network(TM), which provides a high availability frame-relay network that
synchronizes the delivery of news stories to certain customer-based servers
from our headquarters. NewsEdge Network has sufficient bandwidth to deliver
news stories with minimal delay. One of the primary advantages of this
enhanced service offering is the automatic monitoring of stories received by
the customer's systems and automatic retransmission of any missed stories
which may have resulted from a business interruption at the customer's site.
In addition to the news service offerings, we build news processing software
for servers to be located at both customer sites and NewsEdge hosted
facilities. NewsEdge Server(TM) version 5.0 was released to customers in
October 1999.
5
Content Solutions
Our Content Solutions deliver unbundled content and related tools to imbed
that content into client Intranets, Websites, Corporate Portals and Extranets.
Components of our Content Solutions include:
. Content Resources including eTopics and iTopics, collectively known as
Topics. Topics are content outputs of the NewsEdge Refinery specifically
optimized for use on client's externally facing Web sites and portals.
Topics contain news and information specifically licensed from
information providers to be made available on the public Internet.
. Editor Resources including tools for Web site operators to select
content and easily post that selected content onto their Web sites and
Portals.
. End-user Resources including permission e-mail delivery of selected
content.
Business Strategy
Our business model focuses on providing high quality service to our
customers. Our management believes that the personal attention of our sales
and support professionals is an essential ingredient in servicing the demands
and varied news requirements of the largest and most sophisticated news users
in the world. We will continue to develop the steady, predictable, accountable
characteristics that give organizations confidence in NewsEdge as their
business partner. Management's goal is to have the business achieve
sustainable growth and profitability, while gaining market share.
Business Detail
We sell services directly to corporations, financial institutions, non-
profit organizations and government agencies via our own sales organization
that included over 100 employees at the end of 2000. We maintain sales offices
and distributors in North America, Europe, Japan and the Middle East to be
close to our customers and to provide regional field engineering support.
To further increase the value of our services to customers, we offer
knowledge management services to assist customers in defining their business
information needs and then structuring their NewsEdge news service to achieve
the highest level of satisfaction.
At the end of 2000, we counted more than 1,400 enterprises as customers.
During 2000, we initiated our focus on our Content Solutions strategy. Content
Solutions represented $14 million in annual contract value at the end of 2000,
compared to just $4.2 million in 1999. As more and more companies require
content for their Web sites and portals, management believes that the
percentage of business coming from Content Solutions will continue to
increase.
News Operations and Support
The NewsEdge Refinery is staffed around the clock every day of the year.
This staff includes operators, technicians and systems engineers who monitor,
maintain and repair NewsEdge capabilities and contact news providers and
telecommunication vendors when services need attention. The goal is
continuous, real-time news services for customers.
We provide several layers of customer support. While every customer has a
dedicated account executive and account manager, our multi-tiered customer
support organization also provides additional help for system administrators
with questions and problems that are more technical in nature. We not only
provides specialist help via a 1-800 telephone support line, but also have
field engineers available for travel to customer locations for situations that
require on-site support. Finally, in special circumstances, high-attention
teams are assembled for customer problems that are particularly complex.
6
Development
NewsEdge recognizes that the continued enhancement of our services and the
extension of our content offerings are critical to obtaining new customers and
maintaining and growing sales from existing customers. Since our inception, we
have made substantial investments in research and development, issuing
frequent new releases of our various product offerings. NewsEdge software has
been developed by our internal development and quality assurance staff.
Product upgrades are included as part of the annual subscription fees paid by
customers. Development efforts have also been focused on:
. supporting additional desktop operating platforms and Intranet
configurations;
. expanding the scalability of the NewsEdge server;
. managing the increasing number of news sources;
. increasing storage for news history, advancing the ease of programmatic
access through support for ActiveX, Java and HTML components; and
. providing enhanced precision and functionality for user searches and
profiles.
Our development expenses were $9.8 million, $8.5 million and $10.7 million
in 2000, 1999 and 1998, respectively.
The NewsEdge server is developed in modules according to the primary
NewsEdge functions:
. a news collection and alerting module;
. a news database module for storing and retrieving the full text of the
news stories;
. a network module adaptable to the network protocols installed at
customer sites; and
. a module which allows customer administrators to configure newswire
access and monitor NewsEdge activity.
We believe our decision to manage our own software development internally
creates a competitive advantage for us by improving speed and flexibility in
meeting market and technology changes.
An important goal of our development staff is the continuing enhancement of
the NewsEdge Refinery, particularly its coding and tagging capabilities and
its ability to manage the increasing number of newswires we offer. Our
marketing personnel identify newswires to be added to the NewsEdge offerings
based on customer feedback and in turn negotiate contracts with news
providers. The newswires are then integrated with NewsEdge services by
development and support personnel. We are currently seeking to expand our
content offerings with additional industry-specific information in order to
increase sales to customers in new vertical markets and, with the availability
of additional international news sources, increase the availability of global,
24-hours-a-day news coverage for our customers.
Sales and Marketing
We employ over 100 sales and sales management professionals who are skilled
at helping organizations derive value from our services. Salespeople, who are
located in offices in major cities, call directly on knowledge managers,
information technology professionals as well as other senior management of
customer and target companies. In addition, we also operate a telesales group,
based in our Burlington, MA headquarters, which sells to smaller
organizations.
Competition
The business information services industry is intensely competitive and is
characterized by rapid technological change and entry into the field by
extremely large and well-capitalized companies.
7
NewsEdge competes or may compete directly or indirectly with the following
categories of companies:
. large, well-established news and information providers such as Dow
Jones, Lexis/Nexis, Pearson and Thomson;
. content syndicators and aggregators such as iSyndicate, WAVO, Yellowbrix
and Screamingmedia;
. market data services companies such as ADP, Bloomberg and Bridge;
. traditional print media companies that are increasingly searching for
opportunities for on-line provision of news, including through the
establishment of Web sites on the Internet;
. large providers of LAN-based software systems such as Lotus/IBM and
Microsoft, which could, in the future, ally with competing news and
information providers; and
. to a lesser degree, consumer-oriented, advertising-subsidized Web-based
services and Internet access providers.
Many of the market participants named above have substantially greater
financial, technical and marketing resources than we do.
We believe that our services are differentiated from the news and system
services offered by large news and systems providers because of our ability to
deliver news from many different, competing providers. These services are
delivered on an enterprise-wide basis directly to LAN-connected personal
computers, and customized to meet the needs of each individual user at a
relatively low cost per user. Although they may compete with us in some
respects, we attempt to establish cooperative, mutually beneficial
relationships with large information or systems providers, many of whom are
information providers enjoying significant revenue streams from distribution
through our services, customers, or current and potential joint marketing
partners.
Intellectual Property
We rely upon a combination of copyright, patent, trademark and trade secret
laws and license agreements to establish and protect proprietary rights in our
technology. Our software is licensed to customers on a non-exclusive basis
pursuant to license agreements containing provisions prohibiting unauthorized
use, copying and transfer of the licensed program. The source code for our
software is protected both as a trade secret and as an unpublished copyrighted
work. We hold a patent relating to certain technology for our NewsEdge
Refinery, which expires in 2014. Despite these precautions, it may be possible
for a third party to copy or otherwise obtain and use our software or
technology without authorization or to develop similar technology
independently. In addition, effective copyright, patent and trade secret
protection may be unavailable or limited in certain foreign countries.
Because the software development industry is characterized by rapid
technological change, we believe that factors such as the technological and
creative skills of our personnel, new software developments, frequent software
enhancements, name recognition and reliable maintenance are more important to
establishing and maintaining a technology leadership position than the various
legal protections of our technology.
We believe that our software, trademarks, patents and other proprietary
rights do not infringe the proprietary rights of third parties. Third parties
may, however, assert infringement claims with respect to our current or future
software technology or services. Any such claims, with or without merit, could
be time-consuming, result in costly litigation, cause software release delays
or might require us to enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to us.
Employees
As of December 31, 2001, we had 309 full-time employees within our
continuing operations, consisting of 105 employees in sales and marketing, 117
employees in editorial and news operations (the costs of which are
8
included in cost of revenues) and customer support, 55 employees in
development and 32 employees in general administration. NewsEdge employees are
not represented by any collective bargaining organization. We have never
experienced a work stoppage and consider our relations with employees to be
good.
Item 2. Properties
Our corporate headquarters are located in Burlington, Massachusetts. As of
December 31, 2000, we leased approximately 40,000 square feet under a lease
expiring in May 2003. We also lease additional facilities and offices for
sales and customer service and support in New York, New Jersey, Washington
D.C., Illinois, California, Toronto, Canada, London, England, Geneva,
Switzerland, The Netherlands, and Tokyo, Japan. We believe that our existing
facilities and offices, along with additional alternative space available to
us, are adequate to meet our requirements for the foreseeable future.
Item 3. Legal Proceedings
We are not currently a party to any legal proceedings, the adverse outcome
of which, individually or in the aggregate, would have a material adverse
effect on our results of operations or financial position. From time to time,
we may be involved in litigation relating to claims arising out of our
operations in the normal course of business.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
We effected our initial public offering of common stock on August 11, 1995
at a price to the public of $15.00 per share. As of March 20, 2001, there were
approximately 174 holders of record of our common stock. Our common stock is
listed for quotation on the Nasdaq National Market under the symbol "NEWZ."
Based on the Nasdaq National Market daily closing price, the high and low
bid prices of shares of our common stock for each quarter for the past two
years are shown below. The quotations represent interdealer quotations,
without adjustments for retail markups, markdowns, or commissions, and may not
necessarily represent actual transactions.
Nasdaq National Market Daily Closing Price:
-------------------------------------------
Quarter Ended High Low
------------- ---------------------- ---------------------
March 31, 1999................ 14.25 8.00
June 30, 1999................. 11.50 6.63
September 30, 1999............ 9.50 6.50
December 31, 1999............. 12.88 8.31
March 31, 2000................ 12.25 4.00
June 30, 2000................. 4.38 1.38
September 30, 2000............ 3.00 1.88
December 31, 2000............. 2.25 .63
We have not paid any cash dividends on our common stock and currently intend
to retain any future earnings for use in our business. Accordingly, we do not
anticipate that any cash dividends will be declared or paid on the common
stock in the foreseeable future.
On July 26, 2000, we issued a warrant for 30,000 shares of our common stock
at an exercise price of $7.00 per share to one of our business partners as
part of an agreement for services. The warrant was issued pursuant
9
to an exemption from registration under Section 4(2) of the Securities Act. At
the time of grant, the fair market value of the our common stock was $2.25.
The warrant is immediately exercisable and should expire on July 26, 2003. As
of December 31, 2000, the estimated fair value of the warrant was $0.
Item 6. Selected Consolidated Financial Data
Year Ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands)
Statement of Operations
Data:
Total revenues.............. $ 70,913 $ 74,247 $ 73,180 $ 71,669 $ 58,969
-------- -------- -------- -------- --------
Cost of revenues............ 28,826 29,838 29,830 27,785 21,158
Customer support expenses... 5,270 4,903 5,383 4,832 2,901
Development expenses........ 9,753 8,541 10,673 10,666 7,888
Sales and marketing
expenses................... 32,399 30,761 28,611 26,741 20,881
General and administrative
expenses................... 5,936 2,812 4,024 5,018 6,128
Mergers, dispositions and
other charges.............. (453) -- 11,094 5,084 39,422
-------- -------- -------- -------- --------
Total costs and
expenses................ 81,731 76,855 89,615 80,126 98,378
-------- -------- -------- -------- --------
Loss from continuing
operations................. (10,818) (2,608) (16,435) (8,457) (39,409)
Interest income and other,
net....................... 1,042 1,541 2,308 2,983 1,672
-------- -------- -------- -------- --------
Loss from continuing
operations before provision
for income taxes........... (9,776) (1,067) (14,127) (5,474) (37,737)
Provision for income taxes.. 188 83 166 1,297 614
-------- -------- -------- -------- --------
Loss from continuing
operations................. (9,964) (1,150) (14,293) (6,771) (38,351)
Accretion of dividends on
preferred stock........... -- -- -- -- (463)
-------- -------- -------- -------- --------
Loss from continuing
operations to common
stockholders............... (9,964) (1,150) (14,293) (6,771) (38,814)
-------- -------- -------- -------- --------
Loss from discontinued
operations................. (1,859) (15,843) (2,935) (9,090) (7,505)
Net gain on disposal of
Individual.com, Inc........ 8,314 -- -- -- --
-------- -------- -------- -------- --------
Income (loss) from
discontinued operations.... 6,455 (15,843) (2,935) (9,090) (7,505)
-------- -------- -------- -------- --------
Net loss.................... $ (3,509) $(16,993) $(17,228) $(15,861) $(46,319)
======== ======== ======== ======== ========
Basic and diluted net loss
per common share:(1)
Continuing operations...... $ (0.55) $ (0.07) $ (0.83) $ (0.41) $ (2.61)
Discontinued operations.... 0.36 (0.91) (0.17) (0.54) (0.51)
-------- -------- -------- -------- --------
Total basic and diluted
net loss per share...... $ (0.19) $ (0.98) $ (1.00) $ (0.95) $ (3.12)
======== ======== ======== ======== ========
As of December 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Balance Sheet Data:
Cash and cash
equivalents............... $ 18,724 $ 20,278 $ 37,808 $ 35,175 $ 10,735
Working capital
(deficit)................. (4,381) (4,329) 10,294 29,530 35,303
Total assets............... 49,244 53,206 69,154 92,246 97,644
Total stockholders'
equity.................... 4,711 6,711 19,249 38,445 51,531
- --------
(1) Calculated on the basis described in Note 4 of Notes to Consolidated
Financial Statements.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Except for the historical information contained herein, this Report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding, among other items, (i) NewsEdge's growth strategies;
(ii) anticipated trends in our business; (iii) our ability to expand our
service offerings; and (iv) our ability to satisfy working capital
requirements. NewsEdge makes these forward-looking statements under the
provision of The "Safe Harbor" Section of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based largely on our
expectations and are subject to a number of risks and uncertainties, certain
of which are beyond our control. Actual results could differ materially from
these forward-looking statements as a result of a number of factors including,
but not limited to, those factors described in "Certain Factors Affecting
Future Operating Results" contained herein.
Introduction and Overview
The market for content solutions and electronic publishing technologies is
pursued by us through the sale of our Information Products and Content
Solutions service offerings via our Enterprise business, which uses both a
direct and telesales selling effort. Our Enterprise revenues consist primarily
of subscription fees related to the Enterprise service offerings.
Additionally, Enterprise revenues include royalty revenues generated from
content sales billed directly by third party information providers to
customers, revenue generated from professional consulting services and revenue
generated from installations and related computer hardware sales.
In addition to the Enterprise segment, we also report a segment of "other"
revenue, which consists of services we phased out during 1999. Our "other"
revenues consist primarily of subscription fees generated from sales of
services.
Subscription agreements across all product segments are generally for an
initial term of twelve months, payable in advance, and are automatically
renewable for successive one-year periods unless the customer delivers notice
of termination prior to the expiration date of the then current agreement.
Subscription revenues associated with these agreements are recognized ratably
over the subscription term, beginning upon installation of the service.
Accordingly, a substantial portion of our revenue is recorded as deferred
revenue.
Certain newswires offered by us for use within our services are purchased by
the customer directly from the news provider and payments are made directly
from our customer to the provider. For some of these newswires, we receive
royalty revenue based on payments made by the customer to the news provider.
We recognize the royalty revenue when we receive payment from the news
provider. For other newswires that are resold by us to our customers, we bill
the customer for the newswire directly and then pay a royalty to the news
provider. Such royalty expenses are included in our cost of revenues.
Individual.com, Inc. operated our single-worker news service business unit,
which derived its revenues from targeted advertising and electronic commerce.
On February 18, 2000, we entered into a purchase and sale agreement with
Office.com, Inc., a subsidiary of WinStar Communications, Inc., which provided
for the sale of all the issued and outstanding capital stock of Individual.com
to Office.com. An initial purchase and sale of 4.0 million of the shares
occurred on February 18, 2000. The purchase and sale of the remaining 1.0
million shares, or 20% of Individual.com, occurred on August 1, 2000. Under
the terms of the amended stock purchase agreement, we received installment
payments of $2.5 million in February 2000, $2.5 million in May 2000, $3.0
million in September 2000 and $1.0 million in December 2000, and were due to
receive a final payment of $1.0 million on February 28, 2001 which has not yet
been made. Management is currently in the process of negotiating payment terms
with Office.com in connection with the final $1 million payment and believes
this receivable is collectible in full. In the third quarter of 2000, we
recorded the remaining $2.0 million gain on the sale transaction based on the
sale of the remaining 20% of Individual.com, Inc. For the twelve months ended
December 31, 2000 we have recorded a net gain on the sale of Individual.com
totaling $8.3 million. We also made payments to retain the Individual.com
workforce, which along with other transaction fees, have been included as a
reduction in the gain on the sale.
11
On December 7, 1999, we entered into a purchase and sale agreement with
RoweCom, Inc., whereby RoweCom would purchase all of our outstanding shares of
common stock for approximately $227 million. The acquisition was subject to
the approval of the stockholders of both companies. On March 6, 2000, the
agreement was mutually terminated by both parties. We incurred costs of $2.0
million, comprised of legal, retention and acquisition related expenses
charged to operations for the twelve-month period ended December 31, 2000.
In early May 2000, we announced a strategic expansion of our traditional
business focus. In order to capitalize on our media sources, personalization
strategy, and international sales and support infrastructure, we have moved
into the content solutions business marketplace by offering Content Solutions,
our competitive content solution applications for business Web sites and
enterprise intranets. We believe that syndicated content offerings, in
addition to providing infrastructure and solution applications to our clients,
will allow us to drive traffic and commerce on our client's Web sites. We
incurred $2.1 million of non-recurring expenses charged to operations during
the twelve months ended December 31, 2000, which relate to our transition to
the new strategic direction. These costs comprise primarily asset write-offs
and reserves.
Results of Operations
The following table sets forth certain consolidated financial data as a
percentage of total revenues:
Percentage of
Total Revenues
Year Ended
December 31,
--------------------
2000 1999 1998
----- ----- -----
Enterprise.......................................... 100.0% 98.2% 92.1%
Other............................................... -- 1.8 7.9
----- ----- -----
Total revenues.................................... 100.0 100.0 100.0
Cost of revenues.................................... 40.6 40.2 40.8
Customer support expenses........................... 7.4 6.6 7.4
Development expenses................................ 13.8 11.5 14.6
Sales and marketing expenses........................ 45.7 41.4 39.1
General and administrative expenses................. 8.4 3.8 5.5
Mergers, dispositions and other expenses............ (0.6) -- 15.1
----- ----- -----
Total costs and expenses.......................... 115.3 103.5 122.5
----- ----- -----
Loss from continuing operations................... (15.3) (3.5) (22.5)
Interest income and other, net...................... 1.5 2.1 3.2
----- ----- -----
Loss from continuing operations before provision
for income taxes................................. (13.8) (1.4) (19.3)
Provision for income taxes.......................... 0.3 0.1 0.2
----- ----- -----
Net loss from continuing operations............... (14.1) (1.5) (19.5)
Loss from discontinued operations of Individual.com
Inc., net of taxes................................. (2.6) (21.3) (4.0)
Net gain on disposal of Individual.com, Inc......... 11.7 -- --
----- ----- -----
Net income (loss) from discontinued operations.... 9.1 (21.3) (4.0)
----- ----- -----
Net loss.......................................... (5.0)% (22.8)% (23.5)%
===== ===== =====
Year Ended December 31, 2000, as Compared to the Year Ended December 31, 1999
Revenues
Total revenues for the year ended December 31, 2000 decreased 4.5% to $70.9
million compared to $74.2 million for the same period in 1999. The decrease is
due to declines in revenues from both our Enterprise product line and other
terminated lines.
12
Enterprise revenue for the year ended December 31, 2000 decreased 2.8% to
$70.9 million as compared to $72.9 million in 1999. The decrease reflects a
reduction in new orders rates at the end of the fourth quarter of 1999 caused
by the distraction of our sales force during the then pending RoweCom merger
transaction and the highly competitive environment affecting our Enterprise
business. The continued implementation and growth of our Content Solutions
strategy yielded growth in Content Solutions revenue of $8.7 million in 2000
compared to $3.3 million in 1999. This partially offset the decline in
traditional Enterprise revenue of $62.2 million in 2000 compared to $69.6
million in 1999.
Other revenues consist of revenues from product lines we have terminated.
Other revenues were $1.3 million in 1999. No amounts were recorded during the
comparable 2000 period as we have completely terminated these product lines.
On a sequential basis during the four quarters of 2000, total revenues
improved quarterly from $17.3 million, to $17.7 million, to $17.9 million and
to $18.0 million.
Cost of revenues
Cost of revenues consists primarily of royalties paid to information
providers, payroll and related expenses for the editorial and news operations
staff, as well as data transmission and computer related costs for the support
and delivery of our services. Cost of revenues for the year ended December 31,
2000 decreased 3.4% or $1.0 million to $28.8 million as compared to $29.8
million for the same period in 1999. The decrease was primarily due to a $1.3
million decrease in expenses from terminated product lines offset by new
fixed-price contracts with information providers during 2000. Cost of revenues
as a percentage of total revenues for the year ended December 31, 2000
increased to 40.6% from 40.2%, for the same period in 1999. The percentage
increase in cost of revenues was due primarily to new fixed-price contracts
with information providers.
On a sequential basis during the four quarters of 2000, the gross margin as
a percentage of revenue increased from 56.3% during the first quarter to 61.7%
during the fourth quarter, reflecting the continued impact of a larger
percentage of our sales coming from our higher margin Content Solutions
business as well as reduced data transmission expense arising from a favorable
contract re-negotiation in the second half of 2000.
Customer support expenses
Customer support expenses consist primarily of costs associated with
technical support from our installed base of customers. Customer support
expenses for the year ended December 31, 2000 increased 7.4% to $5.3 million
as compared to $4.9 million for the same period in 1999. As a percentage of
total revenues, customer support expenses for the year ended December 31, 2000
increased to 7.4% from 6.6% for the same period in 1999. The increase was
primarily due to headcount and related payroll expenses in the customer
support area.
Development expenses
Development expenses consist primarily of costs associated with the design,
programming, and testing of our software and services. Development expenses
for the year ended December 31, 2000 increased $1.2 million, or 14.2%, to $9.8
million as compared to $8.5 million for the same period in 1999. The increase
was primarily due to $600,000 of expenses, which represent a write-off of a
software asset, related to our new strategic direction, and the remainder of
the increase was due to investment in new product development related to our
new strategy. Excluding nonrecurring charges, development expenses for the
year ended December 31, 2000 were 12.9% of total revenues as compared to 11.5%
for the same period in 1999.
Sales and marketing expenses
Sales and marketing expenses consist primarily of compensation costs,
including sales commissions and bonuses, travel expenses, trade shows and
other marketing programs. Sales and marketing expenses for the year
13
ended December 31, 2000 increased $1.6 million, or 5.3%, to $32.4 million as
compared to $30.8 million for the same period in 1999. The increase resulted
primarily from $1.0 million of expenses we incurred related to the
nonrecurring charges for transitioning to our new strategic direction, which
included $400,000 for a reserve for bad debts. The remaining $600,000 of the
increase in sales and marketing expenses was primarily due to increased
investments and spending in domestic and international sales force and sales
management headcount, related payroll expenses, events and direct mail
campaigns. Excluding nonrecurring charges, sales and marketing expenses for
the year ended December 31, 2000 were 44.3% of total revenues as compared to
41.4% for the same period in 1999.
General and administrative expenses
General and administrative expenses consist primarily of expenses for
finance, office operations, administration and general management activities,
including legal, accounting and other professional fees. General and
administrative expenses for the year ended December 31, 2000 increased $3.1
million to $5.9 million as compared to $2.8 million for the same period in
1999. The increase in expenses was primarily a result of costs related to the
terminated merger agreement with RoweCom, which amounted to $2.0 million.
The remainder of the increase was primarily due to approximately $500,000 of
expenses we incurred related to the nonrecurring charge for transitioning to
our new strategic direction. Excluding nonrecurring charges, general and
administrative expenses for the year ended December 31, 2000 were 4.9% of
total revenues as compared to 3.8% for the same period in 1999. The increase
was primarily due to increased expenses in investor relation activities,
consulting, seasonal temporary help, and additional coverage for Directors and
Officers liability coverage.
Merger, disposition and other charges
Merger, disposition and other related expenses for the year ended December
31, 2000 consist of the reversal of acquisition-related reserves we no longer
deemed necessary. There were no merger, disposition and other related expenses
during the same period in 1999.
Interest income (expense), net
Interest income (expense), net for the year ended December 31, 2000,
decreased to $1.0 million from $1.5 million in 1999, due to lower cash and
investment balances.
Provision for income taxes
The provision for income taxes for the year ended December 31, 2000
increased to $188,000 from $83,000 in 1999. Components of the provisions
include state taxes due in states that do not have net operating loss carry-
forwards available, foreign tax liabilities and the alternative minimum tax
due under the Internal Revenue Code. We have not recorded a deferred tax
benefit in the periods presented for the potential future benefit of its tax
loss carry-forwards as we have concluded that it is not likely such deferred
tax asset would be realized.
Discontinued operations
In February 2000, our Board of directors decided to sell our equity interest
in Individual.com, due to the lack of growth in revenue, increase in expenses
and ongoing funding. We reported the historical operating results of our
Individual.com business segment as discontinued operations. Revenues from
discontinued operations were $297,000 in 2000 (for January 1, 2000 to the
February 18, 2000 disposal date) compared to $4.1 million in 1999. Expenses
from discontinued operations were $2.2 million in 2000 (for January 1, 2000 to
the February 18, 2000 sale date to Office.com) compared to $19.9 million in
1999. See Note 3 in the accompanying Notes to Consolidated Financial
Statements.
14
Net Loss
The net loss for the twelve-month period ended December 31, 2000 was $3.5
million, or $0.19 per share, which compares to a net loss of $17.0 million, or
$0.98 per share, during the same period in 1999. The twelve-month ended
December 31, 2000 results reflect the favorable impact of the $8.3 million net
gain on the sale of our equity interest in Individual.com, Inc., offset by
$1.9 million of operating loss from discontinued operations for the period
prior to the sale. The net loss from continuing operations for the twelve
month period ended December 31, 2000 increased to $10.0 million, or $0.55 per
share, compared to $1.2 million, or $0.07 per share for the same period in
1999. The increase resulted primarily from two nonrecurring charges taken in
the first nine months of 2000 totaling $4.1 million, of which $2.0 million was
related to retention payments, transaction costs, and expenses incurred as
part of the termination of the RoweCom, Inc. merger. An additional $2.1
million charge relates to asset write-offs and expenses associated with costs
incurred in our transition to our new strategy. Excluding all the year-to-date
non-recurring charges, net loss from continuing operations for the twelve
months ended December 31, 2000 was $5.9 million, which compares to a net loss
of $1.2 million for the same period in 1999. The increase in the net loss was
due to declines in revenue and interest income in addition to increased
expenses primarily within sales and marketing and development.
On a sequential basis during the quarters of 2000, our net income from our
fourth quarter continuing operations of $109,000 improved from third quarter
$889,000 net loss, second quarter $1.8 million net loss (excluding one-time
items) and our first quarter $3.7 million net loss (excluding one-time items).
This improving quarterly performance throughout the year reflects operating
benefits from our higher margin Content Solutions business, as well as cost
reductions implemented after the sale of the Individual.com, business during
the first quarter of 2000.
Year Ended December 31, 1999, as Compared to the Year Ended December 31, 1998
Revenues
Total revenues for the year ended December 31, 1999 increased 1.5% to $74.2
million compared to $73.2 million for the same period in 1998. This increase
was due to growth in revenues from our Enterprise product line offset by a
decline in other revenues. Other revenues consist of revenues from product
lines being terminated or de-emphasized.
Enterprise revenue for the year ended December 31, 1999 increased 8.2% to
$72.9 million as compared to $67.4 million in 1998. The increase in Enterprise
revenue was due primarily to an increase in subscription revenues from new
customers and the retention and growth of revenues from existing customers.
Other revenues decreased 77.3% to $1.3 million as compared to $5.8 million
in 1998. The decrease in other revenues was due primarily to the spin off of
the Clarinet business unit effective March 31, 1998 and the continued overall
reduced sales effort directed at business lines that we have terminated or de-
emphasized.
Cost of revenues
Cost of revenues consists primarily of royalties paid to information
providers, payroll and related expenses for the editorial and news operations
staff, as well as data transmission and computer related costs for the support
and delivery of our services. While cost of revenues for both periods remained
flat at $29.8 million, a $1.8 million decline from terminated product lines
was offset by a similar dollar increase within Enterprise, commensurate with
increased revenue. Cost of revenues as a percentage of total revenues for the
year ended December 31, 1999 decreased to 40.2% from 40.8%, for the same
period in 1998. The percentage decrease in cost of revenues was due primarily
to an initiative we started in 1999 to negotiate reduced royalty costs with
several third-party information providers.
Customer support expenses
Customer support expenses consist primarily of costs associated with
technical support of our installed base of customers. Customer support
expenses for the year ended December 31, 1999 decreased 8.9% to $4.9 million
15
as compared to $5.4 million for the same period in 1998. This $500,000
decrease was attributable to the terminated product lines business and was
primarily due to reductions in headcount and related payroll expenses. As a
percentage of total revenues, customer support expenses for the year ended
December 31, 1999 decreased to 6.6% from 7.4% for the same period in 1998.
Development expenses
Development expenses consist primarily of costs associated with the design,
programming, and testing of our software and services. Development expenses
for the year ended December 31, 1999 decreased $2.2 million, or 20.0%, to $8.5
million as compared to $10.7 million for the same period in 1998. The decrease
was primarily due to $800,000 saved from the terminated product lines and
approximately $900,000 from a decrease in Enterprise business development
efforts in 1999 versus 1998. As a percentage of total revenues, development
expenses for the year ended December 31, 1999 decreased to 11.5% from 14.6%
for the same period in 1998.
Sales and marketing expenses
Sales and marketing expenses consist primarily of compensation costs,
including sales commissions and bonuses, travel expenses, trade shows and
other marketing programs. Sales and marketing expenses for the year ended
December 31, 1999 increased $2.2 million, or 7.5%, to $30.8 million as
compared to $28.6 million for the same period in 1998. The $2.2 million
increase resulted primarily from higher sales force and sales management
headcount and related payroll expenses. As a percentage of total revenues,
sales and marketing expenses for the year ended December 31, 1999 increased to
41.4% from 39.1% for the same period in 1998.
General and administrative expenses
General and administrative expenses consist primarily of expenses for
finance, office operations, administration and general management activities,
including legal, accounting and other professional fees. General and
administrative expenses for the year ended December 31, 1999 decreased $1.2
million, or 30.2%, to $2.8 million as compared to $4.0 million for the same
period in 1998. The $1.2 million decrease in expenses was due primarily to a
$500,000 in savings associated with the terminated product lines as well as
reductions in headcount and related payroll expenses. As a percentage of total
revenues, general and administrative expenses for the year ended December 31,
1999 decreased to 3.8% from 5.5% for the same period in 1998.
Merger, disposition and other charges
Merger, disposition and other charges consist primarily of the nonrecurring
costs related to our business combinations and dispositions. For the year
ended December 31, 1998, these costs, totaling $11.1 million, related
primarily to costs associated with the Merger with Individual.com, Inc., the
purchase of ISS, the spin off of the Clarinet business unit, the severance and
benefits for terminated employees and the cost of terminating and settling
certain contractual obligations of the combined companies.
Interest income (expense), net
Interest income (expense), net for the year ended December 31, 1999,
decreased to $1.5 million from $2.3 million in 1998, due to a reduction in
interest income associated with lower cash and investment balances.
Provision for income taxes
The provision for income taxes for the year ended December 31, 1999
decreased to $83,000 from $166,000 in 1998. Components of the provisions
include state taxes due in states that do not have net operating loss carry-
forwards available, foreign tax liabilities and the alternative minimum tax
due under the Internal Revenue Code. We have not recorded a deferred tax
benefit in the periods presented for the potential future benefit of its tax
loss carry-forwards as we have concluded that it is not likely such deferred
tax asset would be realized.
16
Discontinued operations
We have reported the historical operating results of our Individual.com
business segment as discontinued operations. Revenues from discontinued
operations were $4.1 million in 1999 and $6.4 million in 1998. Revenues
decreased as a result of the decision by new management to convert from a mix
of subscription fees and advertising revenue model to a advertising revenue
only model. Expenses from discontinued operations were $19.9 million in 1999
and $9.3 million in 1998. The increase in expenses represented a significant
accelerated investment to evaluate the viability and market value of the
Individual.com business. Due to the lack of growth in revenue, increase in
expenses and ongoing funding, our Board of Directors decided to sell its
ownership interest in Individual.com in February 2000.
Liquidity and Capital Resources
Our cash, cash equivalents and investments totaled $18.7 million at December
31, 2000, as compared to $20.3 million at December 31, 1999, a decrease of
$1.6 million.
Our operations used $8.0 million, $19.0 million, and $8.5 million of cash in
the years ended December 31, 2000, 1999 and 1998, respectively. The use of
cash in operations during 2000 primarily resulted from net losses of $3.5
million and a gain of $8.3 million on the disposal of Individual.com, Inc.
These amounts were partially offset by depreciation of $4.2 million. The use
of cash in operations during 1999 and 1998 primarily resulted from our
operating losses.
Our investing activities provided $4.1 million in the year ended December
31, 2000 and used $473,000 and $404,000 in the years ended December 31, 1999
and 1998, respectively. Cash from investing activities was derived primarily
from proceeds of $8.4 million related to the sale of Individual.com, partially
offset by $3.8 million of capital expenditures. The net use of cash in 1999
resulted primarily from $4.1 million of capital expenditures partially offset
by $3.8 million in proceeds resulting from the decrease in short-term
investment balances caused by the reinvestment of cash from maturing
investments into new investments with an original maturity date of less than
three months (i.e. cash equivalents). In 1998, the net use of cash included a
$3.9 million contingent purchase price payment made to founders of a former
subsidiary of Individual, $3.8 million in capital expenditures and $1.5
million related to our acquisition of ISS. These expenditures were partially
offset by $8.9 million in proceeds from decreases in the short-term investment
balances caused by the reinvestment of cash from maturing investments into new
investments with an original maturity of less than three months (i.e. cash
equivalents).
Our financing activities provided $2.1 million, $2.1 million, and $798,000
in the years ended December 31, 2000, 1999 and 1998, respectively. In 2000,
cash from financing activities was derived primarily from $1.8 million in net
proceeds from a private placement of securities (see Note 7), employee stock
option exercises and purchases under the employee stock purchase plan,
partially offset by capital lease payments. In 2000, we did not re-acquire any
shares of our own stock in the open market. In 1999, cash from financing
activities was derived primarily from employee stock option exercises
(including tax benefits) and purchases under the employee stock purchase plan.
We used $700,000 of our proceeds received from employee stock purchases to re-
acquire 87,000 shares of our own stock in the open market. In 1998, cash from
financing activities were derived primarily from employee stock option
exercises and purchases under the employee stock purchase plan. We used $2.1
million of our $4.0 million in proceeds received from employee stock purchases
to re-acquire 345,000 shares of our own stock in the open market.
In addition to the December 31, 2000 year ending cash balance of $18.7
million, we expected to receive in February 2001 the final $1.0 million of the
$10.0 million sale proceeds from the Individual.com divestiture pursuant to
the terms of the purchase and sale agreement with Office.com. Office.com has
not yet made this final payment, which is guaranteed by WinStar New Media
Company, Inc., an affiliate of Office.com. Management is currently in the
process of negotiating payment terms with Office.com in connection with the
final $1 million payment and believes this receivable is collectible in full.
17
On August 4, 2000, the Company consummated a sale of 868,234 shares of its
common stock for an aggregate purchase price of $1,845,000. The purchase price
was reduced by fees paid in connection with the private placement in the
amount of $77,000. The sale was accomplished by a private placement of the
Common Stock to primarily officers, directors and affiliates of the Company.
In connection with the private placement, the Company also issued warrants to
purchase approximately 492,000 shares of Common Stock with an exercise price
of $4.00 per share.
We continue to investigate the possibility of investments in or acquisitions
of complementary businesses, services or technologies, although we have not
entered into any commitments or negotiations with respect to any such
transactions.
We believe our current cash and cash equivalents, investment balances and
funds anticipated to be generated from operations will be sufficient to
satisfy working capital and capital expenditure requirements for at least the
next twelve months.
Certain Factors Affecting Future Operating Results
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below before deciding to invest in
shares of our common stock. The trading price of our common stock could
decline due to any of these risks, in which case you could lose all or part of
your investment. In assessing these risks, you should also refer to the other
information in this and our other public filings, including our financial
statements and the related notes.
We may not be able to manage our growth or hire and retain additional
personnel, which could affect our operating results.
We have experienced growth in our content solutions and electronic
publishing technology revenues and expansion of our operations, which have
placed significant demands on our management, development, sales and customer
support staff. Continued growth will require us to hire and retain more
development, selling and customer support personnel. We have at times
experienced difficulty in recruiting and retaining qualified personnel.
Recruiting and retaining qualified personnel is an intensely competitive and
time-consuming process. We may not be able to attract and retain the necessary
personnel to accomplish our growth strategies. Continued difficulties with the
recruiting and retention of personnel could adversely affect our ability to
satisfy customer demand in a timely fashion or to satisfactorily support our
customers and operations, which could in turn, materially adversely affect our
business, operating results and financial condition.
Our quarterly financial results may be volatile and could cause our stock
price to fluctuate.
Our quarterly operating results may fluctuate significantly in the future
depending on factors such as:
. demand for our services;
. changes in service mix;
. the size, timing and renewal of contracts with corporate customers,
value added resellers, and channel partners and content providers;
. the effects of new service announcements by us or our competitors;
. the performance of our technology;
. our ability to develop, market and introduce new and enhanced versions
of our services on a timely basis; and
. the level of product and price competition.
18
A substantial portion of our costs of revenue, consisting principally of
fees payable to information providers, communications costs and personnel
expenses, is relatively fixed in nature. Our operating expense levels are
based, in significant part, on their expectations of future revenue. If
quarterly revenues are below management's expectations, results of operations
would be adversely affected because a relatively small amount of our costs and
expenses will vary with our revenues.
If we are unable to continue to expand our sales and marketing efforts the
expansion of our business will be impeded.
Our ability to increase revenues will depend upon our ability to expand our
sales force, increase sales to new customers, penetrate into our existing
customer base, and successfully continue to implement our plans to provide
digital content solutions to business web-sites and electronic publishing
technology to publishers. In addition, as of December 31, 2000, we had an
accumulated deficit of approximately $124 million. The time required for us to
reach profitability is highly uncertain and we may not be able to achieve
profitability on a sustained basis, if at all. As a result, it is possible
that in some future quarter our operating results will be below the
expectations of public market analysts and investors. In such event, the price
of our common stock would likely be materially adversely affected. Although we
experienced growth in revenues in recent years, we may not sustain revenue
growth in the future or be profitable on a quarterly or annual basis.
Our Content Solutions operating history is limited and may not meet
expectations.
Because we commenced our strategic expansion into our Content Solutions line
of business in May 2000, we have limited financial and operating data and a
limited operating history relevant to this businesses. Accordingly, it is
difficult to evaluate the prospects of these businesses. Our business models
are unproven, which creates a risk that its performance will not meet the
expectations of investors and that the value of our common stock will decline.
Our strategy is dependent on continued growth in use of the Internet for the
delivery of information.
We distribute certain services across multiple delivery platforms, including
the Internet, private networks based on Lotus Notes and other groupware
products and electronic mail. Because we recently expanded our strategic focus
to target operators of commercial Web sites and publishers, demand for our
services will depend in large part on continued growth in the use of the
Internet. There are critical issues concerning the commercial use of the
Internet that remain unresolved. As a result, communication or commerce over
the Internet may not continue to develop at historical rates and extensive
content may not continue to be provided over the Internet. The Internet may
not prove to be a viable commercial marketplace for a number of reasons,
including:
. potentially inadequate development of the necessary infrastructure;
. timely development and commercialization of performance improvements;
and
. delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity.
If the necessary infrastructure or complementary services necessary to make
the Internet a viable commercial marketplace are not developed, or if the
Internet does not become a viable commercial marketplace, our business,
results of operations, and financial condition could be materially adversely
affected.
Legal uncertainties and governmental regulation of the Internet could inhibit
growth of the Internet and E-Commerce and adversely affect our business.
Many legal questions relating to the Internet remain unsettled and these
areas of uncertainty may be resolved in ways that damage our business. It may
take years to determine whether and how existing laws governing
19
matters such as intellectual property, privacy, libel and taxation apply to
the Internet. In addition, new laws and regulations that address issues such
as user privacy, commerce, advertising and the characteristics of and quality
of products or services are becoming more prevalent. As use of the Internet
and the prevalence of e-Commerce grow, there may be calls for further
regulation such as more stringent consumer protection laws. Regulators also
continue to evaluate the best telecommunications policy regarding the
transmission of Internet traffic. In addition, our distribution arrangements
and customer contracts could subject us to the laws of foreign jurisdictions,
which may have unpredictable adverse affects on our business. These
possibilities could affect us adversely in a number of ways:
. new regulation could make the Internet less attractive to users,
resulting in slower growth in its use and acceptance than we expect;
. complying with new regulations could result in additional costs, which
could reduce our margins, or could leave us at risk of potentially
costly legal action; and
. we may be affected indirectly by legislation that fundamentally alters
the practicality or cost-effectiveness of utilizing the Internet,
including the cost of transmitting over various forms of network
architecture, such as telephone networks or cable systems, or the
imposition of various forms of taxation on Internet-related activities.
We face intense competition that could impede our ability to grow and achieve
profitability.
The business information services industry is intensely competitive and is
characterized by rapid technological change and entry into the field by
extremely large and well-capitalized companies.
We compete or may compete directly or indirectly with the following
categories of companies:
. large, well-established news and information providers such as Dow
Jones, Lexis/Nexis, Pearson, and Thomson;
. Content providers such as ScreamingMedia.com, Inc., iSyndicate,
Yellowbrix and WAVO:
. market data services companies such as ADP, Bloomberg and Bridge;
. traditional print media companies that are increasingly searching for
opportunities for on-line provision of news, including through the
establishment of web sites on the Internet;
. large providers of LAN-based software systems such as Lotus/IBM and
Microsoft, which could, in the future, ally with competing news and
information providers;
. companies that create and sell software that enables their customers to
aggregate and distribute digital content and/or to integrate digital
content from external sources into their web platforms; and
. to a lesser degree, consumer-oriented, advertising-subsidized web-based
services and Internet access providers.
Many of the market participants named above have substantially greater
financial, technical and marketing resources than we do.
Increased competition, on the basis of price, delivery systems or otherwise,
may require us to implement price reductions or increase our spending on
marketing or software development, which could have a material adverse effect
on our business and results of operations.
20
Acquisitions pose significant risks and we may not be able to integrate
acquisitions in a timely and cost efficient manner.
Management may from time to time consider acquisitions of assets or
businesses that it believes may enable us to obtain complementary skills and
capabilities, offer new services, expand our customer base or obtain other
competitive advantages. Such acquisitions involve potential risks, including:
. difficulties in assimilating the acquired company's operations,
technology, services and personnel;
. difficulty in completing and integrating acquired in-process technology;
. the diversion of management's resources;
. uncertainties associated with operating in new markets and working with
new employees and customers; and
. the potential loss of the acquired company's key employees.
We are dependent on cooperative marketing arrangements with some of our
competitors.
We have entered into certain cooperative marketing agreements and informal
arrangements with software vendors, web site sponsors and operators of online
services, including Microsoft, Netscape, Yahoo! and Dow Jones. These companies
presently market services that compete directly with our services. If our
relationships with these companies were terminated, curtailed, or otherwise
modified, we may not be able to replicate these marketing activities alone or
with others. If these companies were to develop and market their own business
information services or those of our competitors, our business and results of
operations and financial condition may be materially and adversely affected.
Losing major news providers may leave us with insufficient breadth of content
to retain and attract customers.
A significant percentage of our customers subscribe to services provided by
one or more of Press Association Inc., a subsidiary of The Associated Press,
Dow Jones, The Financial Times and Thompson. Our agreements with news
providers are generally for terms of one to three years, with automatic
renewal unless notice of termination is provided before the end of the term by
either party. These agreements may also be terminated by the provider if we
fail to fulfill our obligations under the agreement. Many of these news and
information providers compete with one another and, to some extent, with us.
Termination of one or more significant news provider agreements would decrease
the news and information which we can offer our customers and could have a
material adverse effect on our business, results of operations and financial
condition. Also, an increase in the fees paid to our information providers
would have an adverse effect on our gross margins and results of operations.
We are dependent on certain news transmission sources and application service
providers the loss of which could have a material adverse affect on our
business.
Our news and information for certain of the NewsEdge services is transmitted
using one or more of four methods: leased telephone lines, satellites, FM
radio transmission or the Internet. None of these methods of news and
information transmission is within our control, and the loss or significant
disruption of any of them could have a material adverse effect on our
business. Many newswire providers have established their own broadcast
communications networks using one or more of these four vehicles. In these
cases, our role is to arrange communications between the news provider and the
NewsEdge customer's server. For sources which do not have their own broadcast
communications capability, news and information is delivered to our news
consolidation facility, where it is reformatted for broadcast to NewsEdge
servers and retransmitted to customers through one of three methods:
. utilizing our arrangement with Cidera, Inc., a common carrier
communications vendor;
21
. utilizing our arrangement with eLogic Corporation, which develops and
licenses certain software for our use and acts as an application service
provider in connection with the delivery of our Content Solutions
service; or
. utilizing our own NewsEdge Network, a proprietary entitlement and
delivery system launched in the fall of 1998 that takes advantage of
both leased line and Internet delivery.
Our agreement with Cidera expires on December 31, 2002. This agreement can
be terminated earlier in the event of a material breach by us of the
agreement. Our arrangement with eLogic is set out in a binding term sheet, has
an initial term that expires in January 2002 and is renewable by us for
additional one year periods. If either of our agreements with Cidera or eLogic
were terminated on short notice, or if Cidera or eLogic were to encounter
technical or financial difficulties adversely affecting their ability to
continue to perform under their agreements or otherwise, our business could be
materially and adversely affected. We believe that if Cidera or eLogic were
unable to fulfill their obligations, other sources of retransmission would be
available to us including the NewsEdge Network, although the transition from
Cidera or eLogic to those sources could result in delays or interruptions of
service that could have a material adverse affect on our business, results of
operations and financial condition. WAVO, our previous common carrier
communications vendor which assigned its obligations to Cidera, did experience
technical difficulties in May 1998 due to the disablement of the PanAmSat
Galaxy IV satellite. This disablement caused an interruption in the delivery
of news services to between one-third and one-half of our customers. The
interruption was resolved in approximately ten days and did not have a
material impact on our financial results. If our computer or
telecommunications systems fail or prove inadequate there could be a material
adverse affect on our business.
If our computer or telecommunications systems fail or prove inadequate there
could be a material adverse affect on our business.
Our operations are dependent on our ability to maintain our computer and
telecommunications systems in effective working order. These systems and
operations are vulnerable to damage or interruption from human error, natural
disasters, telecommunications failures, break-ins, sabotage, computer viruses,
intentional acts of vandalism and similar events. Although we have limited
back-up capability, this measure does not eliminate the significant risk to
our operations from a natural disaster or system failure at our principal
site. In addition, any failure or delay in the timely transmission or receipt
of news feeds and computer downloads from our information providers, due to
system failure of the information providers, the public network or otherwise,
could disrupt our operations. Our insurance policies may not adequately
compensate us for any losses that we may incur because of any failures in our
system or interruptions in delivery of content. Our business, results of
operations and financial condition could be materially adversely affected by
any event, damage or failure that interrupts or delays our operations.
The termination of our relationship with eLogic Corporation could have a
material adverse affect on our business.
eLogic Corporation develops and licenses certain software which enables us
to deliver our Content Solutions to our customers. eLogic also acts as an
application service provider in connection with the delivery of our Content
Solutions service. Our arrangement with eLogic is set out in a binding term
sheet, has an initial term that expires in January 2002 and is renewable by us
for additional one year periods. Should eLogic terminate our license to its
software or cease its role as an application service provider for our benefit,
our business, results of operations and financial condition could be
materially adversely affected.
We must keep pace with rapid technological change or business will be
adversely affected.
We may be unable to develop our technology quickly enough to support demand
or changes in technology.
The business information services, software and communications industries
are subject to rapid technological change, which may render existing services
obsolete or require significant unanticipated
22
investments in research and development. Our future success will depend, in
part, upon our ability to enhance our service offerings and keep pace with
technological developments. Our future success will depend on our ability to
enhance existing services, to develop new services that address the needs of
our customers and to respond to technological advances and emerging industry
standards and practices, on a timely basis. Services as complex as those
offered by us entail significant technical risks, often encounter development
delays and may result in service failures when first introduced or as new
versions are released. Any such delays in development or failures that occur
after commercial introduction of new or enhanced services may result in loss
of or delay in market acceptance, which could have a material adverse effect
upon our business, results of operations and financial condition.
Failure to protect our proprietary rights and intellectual property could
dramatically affect our ability to operate.
We are heavily dependent upon proprietary technology. In addition, we rely
on a combination of trade secret, copyright, patent and trademark laws and
non-disclosure agreements to protect our proprietary rights in our software
and technology. These measures may not be adequate to protect our proprietary
technology. In addition, our competitors may independently develop
technologies that are substantially equivalent or superior to our technologies
or services. We licensed proprietary filtering software, which is used as the
filtering engine within our news Refinery, from each of Sovereign Hill
Software, Inc. and Cornell Research Foundation, Inc. Under the terms of the
license agreement with Sovereign Hill, we have a non-exclusive, worldwide
license to use Sovereign Hill's InQuery retrieval system software until we
terminate the license agreement. Sovereign Hill may also terminate the license
agreement if we have materially breached the agreement and such breach remains
uncured for 90 days after written notice. Under the terms of the license
agreement with Cornell, we had exclusive worldwide rights until February 1999
to design, develop, market, and sell systems and services based on its SMART
software for the retrieval and dissemination of data from recent and
continually changing data sources. Provided that we do not default on the
Cornell license agreement, we will retain a continuing worldwide, non-
exclusive, perpetual royalty-free right to use the SMART software. We also own
and will continue to own, all enhancements to the SMART software that we have
developed. Cornell may, however, have licensed the SMART software to a third
party, including one of our competitors or may do so in the future. In
addition, Cornell University may terminate the license agreement if we have
materially breached the agreement and such breach remains uncured for 60 days
after written notice of such breach has been given. If our rights to the
InQuery retrieval system software or the SMART technology were to terminate,
we may not be able to develop or acquire replacement solutions, on a timely
basis or at all, and on favorable terms to us. Consequently, any termination
of our license agreements with either Sovereign Hill or Cornell would have a
material adverse effect on our business, results of operations, and financial
condition.
Potential litigation of third party claims concerning the infringement of
proprietary right could prove costly and time consuming.
There has been substantial litigation in the information services industry
involving intellectual property rights. Although we believe that we are not
infringing the intellectual property rights of others, if such claims were
asserted, they may have a material adverse effect on our business, results of
operations, and financial condition. In addition, inasmuch as we license the
informational content that is included in its services from third parties, our
exposure to copyright infringement actions may increase because we must rely
upon third parties for information as to the origin and ownership of our
licensed content. Although we generally obtain representations as to the
origins and ownership of our licensed informational content and generally
obtain indemnification to cover any breach of any such representations, such
representations may not be accurate and indemnification may not adequate
compensation for any breach of such representations. In the future, litigation
may be necessary to enforce and protect our trade secrets, copyrights and
other intellectual property rights. We may also be subject to litigation to
defend against claimed infringement of the rights of others or to determine
the scope and validity of the intellectual property rights of others. Any such
litigation would be costly and divert management's attention, either of which
would have a material adverse effect on our business, results of operations,
and financial condition. Adverse determinations in such litigation could
result in the loss of our proprietary rights, subject us
23
to significant liabilities, require us to seek licenses from third parties,
and prevent us from selling our services, any one of which could have a
material adverse effect on our business, results of operations, and financial
condition.
If we distribute content to unauthorized recipients, we may have to pay
damages to our content providers.
We may be subject to claims for defamation, libel, copyright or trademark
infringement or based on other theories relating to the information it
publishes through its services. These types of claims have been brought,
sometimes successfully, against online services as well as print publications
in the past. Our insurance may not adequately protect it against these claims.
In addition, NewsEdge's proprietary software technologies enable us to deliver
content received from participating content providers only to customers who
have been authorized to access that content. We might inadvertently distribute
content to a customer who is not authorized to receive it, which could subject
it to a claim for damages from the information provider or harm to its
reputation in the market place.
If we are unable to maintain our reputation and expand our name recognition,
we may have difficulty attracting new business and retaining current customers
and employees, and our business may suffer.
We believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and retaining customers and employees.
We also believe that the importance of reputation and name recognition is
increasing and will continue to increase due to the growing number of
providers of Internet services. If our reputation is damaged or if potential
customers are not familiar with us, we may be unable to attract new, or retain
existing, customers and employees. Promotion and enhancement of our name will
depend largely on its success in continuing to provide effective services. If
customers do not perceive our services to be effective or of high quality, our
brand name and reputation will suffer.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board, ("FASB"), issued
SFAS, No. 133, Accounting for Derivative Instruments and Hedging Activities.
This statement establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. SFAS No. 133, as amended by SFAS No. 137 and 138, is
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. SFAS No. 133, as amended is not expected to have a material impact on
our consolidated financial statements.
The Securities and Exchange Commission released Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition in Financial Statements, on December 3,
1999. This SAB provides additional guidance on the accounting for revenue
recognition, including both broad conceptual discussions as well as certain
industry-specific guidance. The guidance is effective in the fourth quarter
2000. The adoption of SAB 101 did not have a material impact on our results of
operations.
In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation--an Interpretation of Accounting
Principles Board ("APB") Opinion No. 25. The interpretation clarifies the
application of APB Opinion No. 25 in certain situations, as defined. The
interpretation is effective July 1, 2000, but covers certain events occurring
during the period after December 15, 1998, but before the effective date. The
adoption of this interpretation did not have any effect on the accompanying
financial statements.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our market risk disclosures involves forward-
looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates and foreign currency exchange rates. As
of December 31, 2000, we did not use derivative financial instruments for
speculative, hedging or trading purposes.
24
Interest Rate Risk
We maintain a short-term investment portfolio consisting of U.S. treasury
notes, U.S. Government agencies and corporate bonds. These held-to-maturity
securities are subject to interest rate risk and will fall in value if market
interest rates increase. We have the ability to hold its fixed income
investments until maturity, and therefore would not expect our operating
results or cash flows to be affected to any significant degree by the effect
of a sudden change in market interest rates on our securities portfolio.
Foreign Currency Exchange Risk
As a global concern, we face exposure to adverse movements in foreign
currency exchange rates. These exposures may change over time as business
practices evolve and could have a material adverse impact on our financial
results. Historically, our primary exposures have been related to nondollar-
denominated operating expenses in Canada. The majority of our sales are
denominated in U.S. dollars. We have not determined what impact, if any, the
introduction of the Euro will have on our foreign exchange exposure. We are
prepared to hedge against fluctuations in the Euro if this exposure becomes
material. As of December 31, 2000, the assets and liabilities related to
nondollar-denominated currencies was not material.
25
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NewsEdge Corporation:
We have audited the accompanying consolidated balance sheets of NewsEdge
Corporation (a Delaware corporation) and subsidiaries 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 in the period 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. 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, based on our audit, the financial statements referred to
above present fairly, in all material respects, the financial position of
NewsEdge Corporation and subsidiaries as of December 31, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
Boston, Massachusetts
January 31, 2001
26
NEWSEDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
--------------------
2000 1999
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 18,320 $ 20,278
Restricted cash (Note 2)............................... 404 --
Accounts receivable, net of allowance for doubtful
accounts of $706 and $306 at 2000 and 1999,
respectively.......................................... 16,645 16,632
Due from Office.com (Note 3)........................... 1,000 --
Prepaid expenses and other current assets.............. 3,748 5,132
--------- ---------
Total current assets................................. 40,117 42,042
--------- ---------
PROPERTY AND EQUIPMENT, AT COST:
Computer equipment..................................... 23,525 21,739
Furniture and fixtures................................. 1,157 1,067
Leasehold improvements................................. 1,994 1,018
Equipment under capital leases......................... 586 586
--------- ---------
27,262 24,410
Accumulated depreciation and amortization.............. (18,480) (15,012)
--------- ---------
8,782 9,398
--------- ---------
OTHER ASSETS............................................. 345 1,766
--------- ---------
$ 49,244 $ 53,206
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 5,761 $ 2,869
Accrued expenses....................................... 12,900 15,144
Deferred revenue, current portion...................... 25,837 28,055
Current portion of long-term obligations............... -- 303
--------- ---------
Total current liabilities............................ 44,498 46,371
--------- ---------
DEFERRED REVENUE, LESS CURRENT PORTION................... 35 124
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value--
Authorized--35,000 shares; Issued--19,034 shares at
2000 and 18,057 shares at 1999 Outstanding--18,602
shares at 2000 and 17,625 shares at 1999.............. 190 181
Additional paid-in capital............................... 131,682 130,136
Cumulative translation adjustment........................ (104) (58)
Accumulated deficit...................................... (124,331) (120,822)
Treasury stock, at cost; 432 shares...................... (2,726) (2,726)
--------- ---------
Total stockholders' equity........................... 4,711 6,711
--------- ---------
$ 49,244 $ 53,206
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
27
NEWSEDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
REVENUES......................................... $ 70,913 $ 74,247 $ 73,180
COSTS AND EXPENSES:
Cost of revenues............................... 28,826 29,838 29,830
Customer support expenses...................... 5,270 4,903 5,383
Development expenses........................... 9,753 8,541 10,673
Sales and marketing expenses................... 32,399 30,761 28,611
General and administrative expenses............ 5,936 2,812 4,024
Mergers, dispositions and other charges........ (453) -- 11,094
-------- -------- --------
Total costs and expenses................... 81,731 76,855 89,615
-------- -------- --------
Loss from continuing operations................ (10,818) (2,608) (16,435)
INTEREST INCOME AND OTHER, NET................... 1,042 1,541 2,308
-------- -------- --------
Loss from continuing operations before
provision for income taxes.................... (9,776) (1,067) (14,127)
PROVISION FOR INCOME TAXES....................... 188 83 166
-------- -------- --------
Net loss from continuing operations.......... (9,964) (1,150) (14,293)
DISCONTINUED OPERATIONS (NOTE 3):
Loss from discontinued operations, net......... (1,859) (15,843) (2,935)
Net gain on disposal of Individual.com, Inc.... 8,314 -- --
-------- -------- --------
Income (loss) from discontinued operations..... 6,455 (15,843) (2,935)
-------- -------- --------
Net loss..................................... $ (3,509) $(16,993) $(17,228)
======== ======== ========
EARNINGS (LOSS) PER SHARE (NOTE 4):
Basic and diluted net earnings (loss) per
common share:
Continuing operations........................ $ (0.55) $ (0.07) $ (0.83)
Discontinued operations...................... 0.36 (0.91) (0.17)
-------- -------- --------
Total basic and diluted loss per share..... $ (0.19) $ (0.98) $ (1.00)
======== ======== ========
Weighted average common shares outstanding
basic and diluted............................. 18,058 17,362 17,194
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
28
NEWSEDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
Common Stock Treasury Stock
--------------- Additonal Cumulative ----------------- Total
Number of Par Paid-In Translation Accumulated Number of Stockholders' Comprehensive
Shares Value Capital Adjustment Deficit Shares Cost Equity Loss
--------- ----- --------- ----------- ----------- --------- ------- ------------- -------------
Balance at December
31, 1997.............. 16,900 169 124,853 23 (86,600) -- -- 38,445
Stock issued related
to options, warrants
and ESPP including tax
benefits.............. 622 6 3,955 -- -- -- -- 3,961
Purchase of treasury
stock................. -- -- -- -- -- 345 (2,051) (2,051)
Contingent purchase
price payment......... -- -- (3,918) -- -- -- -- (3,918)
Cummulative
translation
adjustment............ -- -- -- 40 -- -- -- 40 $ 40
Net loss.............. -- -- -- -- (17,228) -- -- (17,228) (17,228)
Comprehensive net loss
for the year ended
December 31, 1998..... $(17,188)
------ ---- -------- ----- --------- --- ------- ------- ========
Balance at December
31, 1998.............. 17,522 175 124,890 63 (103,828) 345 (2,051) 19,249
Stock issued related
to options, warrants
and ESPP including tax
benefits.............. 535 6 5,245 -- -- -- -- 5,251
Purchase of treasury
stock................. -- -- -- -- -- 87 (675) (675)
Cummulative
translation
adjustment............ -- -- -- (121) -- -- -- (121) $ (121)
Net loss.............. -- -- -- -- (16,994) -- -- (16,994) (16,994)
Comprehensive net loss
for the year ended
December 31, 1999..... $(17,115)
------ ---- -------- ----- --------- --- ------- ------- ========
Balance at December
31, 1999.............. 18,057 $181 $130,135 $ (58) $(120,822) 432 $(2,726) $ 6,710
Stock issued related
to options, warrants
and ESPP,............. 109 0 673 -- -- 673
Issuance of common
stock in private
placement, net of
issuance costs of
$77................... 868 9 1,759 -- -- 1,768
Reduction in value of
stock warrants issued
to vendors............ -- -- (885) -- -- -- -- (885)
Cummulative
translation
adjustment............ -- -- -- (46) -- -- -- (46) $ (46)
Net loss.............. -- -- -- -- (3,509) -- -- (3,509) (3,509)
--------
Comprehensive net loss
for the year ended
December 31, 2000..... -- $ (3,555)
------ ---- -------- ----- --------- --- ------- ------- ========
Balance at December
31, 2000.............. 19,034 $190 $131,682 $(104) $(124,331) 432 $(2,726) $ 4,711
====== ==== ======== ===== ========= === ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
29
NEWSEDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
---------------------------
2000 1999 1998
------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $(3,509) $(16,993) $(17,228)
Adjustments to reconcile net loss to net cash
used in operating activities--
Depreciation and amortization.................. 4,207 4,109 5,707
Gain on disposal of Individual.com, Inc. ...... (8,314) -- --
Gain on disposal of property and equipment..... -- -- (139)
Changes in assets and liabilities--
Accounts receivable........................... (790) (3,521) 4,423
Prepaid expenses and deposits................. 1,384 (95) 639
Accounts payable.............................. 3,480 4 (2,724)
Accrued expenses.............................. (2,244) (2,714) 4,862
Deferred revenue.............................. (2,237) 218 (4,021)
------- -------- --------
Net cash used in operating activities....... (8,023) (18,992) (8,481)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposal of Individual.com,
Inc............................................ 8,415 -- --
Purchases of property and equipment............. (3,845) (4,061) (3,812)
Restricted Cash................................. (404)
Increase in other assets........................ (104) (194) (32)
Decrease in investments, net.................... -- 3,782 8,902
Contingent purchase price payment............... -- -- (3,918)
Cash paid for acquisition....................... -- -- (1,544)
------- -------- --------
Net cash provided by (used in) investing
activities................................. 4,062 (473) (404)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement, net of issuance
costs.......................................... 1,768 -- --
Proceeds from issuances related to stock plans.. 673 3,655 3,961
Principal payments under capital leases......... (303) (588) (401)
Decrease in long-term obligations............... (89) (336) (711)
Purchase of treasury stock...................... -- (675) (2,051)
------- -------- --------
Net cash provided by financing activities... 2,049 2,056 798
EFFECT OF EXCHANGE RATE CHANGES ON CASH........... (46) (121) 41
------- -------- --------
DECREASE IN CASH AND CASH EQUIVALENTS............. (1,958) (17,530) (8,046)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...... 20,278 37,808 45,854
------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR............ $18,320 $ 20,278 $ 37,808
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 9 $ 67 $ 148
======= ======== ========
Cash paid for income taxes...................... $ 77 $ 79 $ 191
======= ======== ========
NONCASH INVESTING, AND FINANCING ACTIVITIES:
Receivable related to Individual.com............ $ 1,000 $ -- $ --
======= ======== ========
Issuance of stock warrants to vendors........... $ -- $ 1,597 $ --
======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
30
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
(1) NATURE OF BUSINESS
NewsEdge Corporation ("the Company" or "NewsEdge") is a leading provider of
Content Solutions and electronic publishing technologies for business Web
sites and enterprise Intranets. The Company's mission is to make news and
information valuable for business. NewsEdge services provide access to value-
added news over the Internet or customer intranets. The Company aggregates and
adds value to news and information from over 2,000 sources published by over
one hundred global content providers. This information is customized and
filtered so that users can readily find the most important, relevant stories
from the overwhelming volume of daily news that is available.
NewsEdge Corporation is headquartered in Burlington, Massachusetts, with
sales offices and distributors throughout North America, South America,
Europe, Asia and the Middle East.
On December 7, 1999, the Company entered into a purchase and sale agreement
with RoweCom, Inc. ("RoweCom"), whereby RoweCom would purchase all of the
outstanding shares of common stock of the Company for approximately $227
million. The acquisition was subject to the approval of the stockholders of
both companies. On March 6, 2000, the agreement was mutually terminated. The
Company incurred costs of $2.0 million, comprised of legal, employee retention
and acquisition-related expenses charged to operations during year ended
December 31, 2000.
In March 2000, the Board of Directors approved, and in early May 2000, the
Company announced a strategic expansion of its traditional business focus. In
order to capitalize on its media sources, personalization strategy, and
international sales and support infrastructure, the Company has moved into the
content solutions business marketplace by offering competitive content
solution applications for business Web sites and enterprise Intranets. The
Company incurred $2.1 million of non-recurring expenses charged to operations
during the twelve months ended December 31, 2000 related to the transition to
the new strategic direction. These costs were comprised primarily of asset
write-offs and expenses associated with costs incurred related to the
Company's new strategy.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.
(b) Cash and Cash Equivalents
Cash and cash equivalents, which have original maturities of less than three
months, consist of the following:
December 31,
---------------
2000 1999
------- -------
(in thousands)
Cash..................................................... $ 2,106 $ 2,221
Money market accounts.................................... 1,030 1,375
U.S. government agencies obligations..................... 15,184 16,682
------- -------
$18,320 $20,278
======= =======
31
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
At December 31, 2000, the Company had restricted cash of $404,000, which was
required under the Company's letter of credit agreements.
(c) Management 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 and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Depreciation and Amortization
The Company provides for depreciation and amortization using the straight-
line method by charges to operations in amounts that allocate the cost of
assets over their estimated useful lives of three to seven years, except for
leasehold improvements, which are depreciated over the shorter of the lease
term or life of the asset. Depreciation expense was approximately $4,207,000
in 2000, $3,053,000 in 1999 and $3,174,000 in 1998.
(e) Research and Development and Software Development Costs
Research and development costs are charged to operations as incurred.
Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for the
Costs of Computer Software To Be Sold, Leased or Otherwise Marketed, requires
the capitalization of certain computer software development costs incurred
after technological feasibility is established. The Company has not
capitalized software development costs to date, as the costs incurred after
technological feasibility of a software product has been established have not
been significant.
(f) Revenue Recognition
The majority of the Company's services are sold on a subscription basis.
Subscription revenues are recognized ratably over the term of the agreement,
generally 12 months, beginning upon installation. The unearned portion of
revenue is shown as deferred revenue in the accompanying consolidated balance
sheets. Royalty revenues are recognized as they are earned under agreements
with certain information providers. Advertising revenue is recognized ratably
based on contractual terms, which are typically over the advertising period or
as advertisements are delivered. Revenues generated from hardware sales or
professional consulting services are recognized at the time of shipment or
when services are rendered.
(g) Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement requires the Company to recognize
deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial statement carrying
amounts and the tax base of assets and liabilities and net operating loss
carryforwards available for tax reporting purposes, using the applicable tax
rates for the years in which the differences are expected to reverse. A
valuation allowance is recorded on deferred tax assets unless realization is
more likely than not.
32
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
(h) Foreign Currency Translation
Revenues and expenses are translated using an average of exchange rates in
effect during the year. The majority of asset and liability accounts of
foreign consolidating entities are translated using the year-end exchange
rates. Cumulative translation adjustments related to the Company's operations
in the United Kingdom, Japan and Switzerland are reflected separately as a
component of stockholders' equity in the accompanying consolidated balance
sheets. Gains or losses from foreign currency transactions are charged to
operations as incurred. There were no significant gains or losses from foreign
currency transactions during any year presented.
(i) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. The Company has no significant off-balance-sheet risk or
credit risk concentrations, such as foreign exchange contracts, options
contracts or other foreign hedging arrangements. The Company maintains the
majority of its cash, cash equivalent and investment balances with one
financial institution and its accounts receivable balances are primarily
domestic.
(j) Comprehensive Income (Loss)
SFAS No. 130, Reporting Comprehensive Income, requires disclosure of all
components of comprehensive income on an annual and interim basis.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. For all years presented, the only
difference between net loss and comprehensive net loss relates to the
cumulative translation adjustment.
(k) Reclassifications
Certain prior-year amounts have been reclassified to conform with the
current year's presentation.
(l) Long-Lived Assets
SFAS No. 121, Accounting for Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of requires that long-lived assets be evaluated for impairment.
Any write-downs are to be treated as permanent reductions in the carrying
amount of the assets. The Company's evaluation considers the future
undiscounted cashflows and nonfinancial data such as changes in the operating
environment and business strategy, competitive information, market trends, and
operating performance. During the year ended December 31, 2000, the Company
wrote the value of an asset in the amount of $600,000. The Company does not
believe that any impairment currently exists related to its long-lived assets
as of December 31, 2000.
(m) Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, requires the
measurement of the fair value of employee and director stock options or
warrants to be included in the consolidated statement of operations or
disclosed in the notes to consolidated financial statements. The Company has
determined that it will continue to account for stock-based compensation for
employees and directors under the Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and elect the disclosure-
only alternative under SFAS No. 123. The Company accounts for options and
warrants granted to nonemployees using the fair-value method
33
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
prescribed by SFAS No. 123 and Emerging Issues Task Force, (EITF) No. 96-18,
Accounting for Equity Instruments that are Issued to other than Employees for
Acquiring, or in Conjunction with Selling, Goods, or Services.
(n) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB")issued SFAS,
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. SFAS No. 133, as amended by SFAS No. 137 and 138, is
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. SFAS No. 133, as amended is not expected to have a material impact on
the Company's consolidated financial statements.
The Securities and Exchange Commission released Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition in Financial Statements, on December 3,
1999. This SAB provides additional guidance on the accounting for revenue
recognition, including both broad conceptual discussions as well as certain
industry-specific guidance. The guidance is effective in the fourth quarter
2000. The adoption of SAB 101 did not have a material impact on the Company's
results of operations.
In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation--an Interpretation of Accounting
Principles Board ("APB") Opinion No. 25. The interpretation clarifies the
application of APB Opinion No. 25 in certain situations, as defined. The
interpretation is effective July 1, 2000, but covers certain events occurring
during the period after December 15, 1998, but before the effective date. The
adoption of this interpretation did not have any effect on the accompanying
financial statements.
(3) DISCONTINUED OPERATIONS
On February 18, 2000, the Company entered into a purchase and sale agreement
to sell its ownership interest in its wholly owned subsidiary, Individual.com,
Inc. Upon the initial closing, the Company sold 80% of its ownership interest
in Individual.com, Inc. for a purchase price of $8.0 million payable in
installments receivable through December 2000, of which the Company received
$2.5 million in February 2000 and $2.5 million in May 2000. The purchase and
sale of the remaining 20% of Individual.com, Inc., was completed on August 1,
2000, under the terms of an amended agreement, pursuant to which the Company
received payments of $3.0 million in September 2000 and $1.0 million on
December 26, 2000 and is due to receive a final payment of $1.0 million on
February 28, 2001.
The Company recorded a net gain on the sale of Individual.com, Inc. totaling
approximately $8,314,000. The Company also made payments to retain the
Individual.com workforce, which have been included as a reduction in the gain
on the sale.
Revenues from the Individual.com, Inc. business were approximately $297,000
in 2000, $4,120,000 in 1999 and $6,352,000 in 1998.
34
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
The Company has presented the operating results of Individual.com, Inc. as
discontinued operations for all periods presented. The Company has not
restated the consolidated balance sheet for the net assets of Individual.com.
The components of the net assets of discontinued operations of Individual.com,
Inc. as of December 31, 1999 are as follows.
Amount
--------------
(in thousands)
Accounts receivable, net................................... $1,265
Equipment, net............................................. 938
Accounts payable........................................... (83)
Accrued expenses........................................... (784)
Deferred revenue........................................... (101)
------
$1,235
======
(4) BASIC AND DILUTED NET LOSS PER COMMON SHARE
In accordance with SFAS No. 128, Earnings per Share, basic and diluted net
loss per common share is calculated by dividing the net loss by the weighted
average number of common shares outstanding for all periods presented.
The following potential common stock financial instruments are excluded from
the calculation of dilutive earnings per share because their inclusion would
be antidilutive to net loss per share.
Years Ended
December 31,
-----------------
2000 1999 1998
----- ----- -----
(in thousands)
Options to purchase common stock........................ 4,350 4,432 3,506
Warrants to purchase common stock....................... 857 335 1,164
----- ----- -----
5,207 4,767 4,670
===== ===== =====
(5) INCOME TAXES
The provision for income taxes for each of the years in the period ended
December 31, 2000 consists of the following:
2000 1999 1998
---- ---- ----
(in thousands)
Current--
Federal.................................................. $ $-- $--
State.................................................... 188 83 76
International............................................ -- 90
---- ---- ----
188 83 166
Deferred--
Federal.................................................. -- --
State.................................................... -- --
---- ---- ----
-- --
---- ---- ----
Total.................................................. $188 $ 83 $166
==== ==== ====
35
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
A reconciliation of the federal statutory rate to the Company's effective
tax rate for each of the three years in the period ended December 31, 2000 is
as follows:
2000 1999 1998
----- ----- -----
Income tax provision at
federal statutory rate..... (34.0)% (34.0)% (34.0)%
Increase (decrease) in tax
resulting from--
State tax provision, net
of federal benefit....... 5.4 0.5 0.4
Change in valuation
allowance................ 34.0 34.0 38.9
Other..................... -- (4.3)
----- ----- -----
Effective tax rate...... 5.4% 0.5% 1.0%
===== ===== =====
The components of deferred income taxes are as follows:
December 31,
------------------
2000 1999
-------- --------
(in thousands)
Net operating loss carryforwards.................... $ 28,785 $ 28,609
Financial reserves not yet deductible............... 1,791 4,183
Research and development and alternative minimum tax
credit carryforwards............................... 1,683 1,382
Deferred revenue.................................... -- 663
Depreciation........................................ (449) (870)
Valuation allowance................................. (31,810) (33,967)
-------- --------
$ -- $ --
======== ========
As of December 31, 2000, the Company had net operating loss carryforwards
(NOLs) of approximately $78 million and other credit carryforwards related to
research and development and alternative minimum tax, totaling approximately
$1.7 million available to offset future taxable income, if any. These
carryforwards expire through 2020 and are subject to review and possible
adjustment by the Internal Revenue Service. Additionally, the Company's
historical mergers raise additional doubt as to the realizability of the
deferred tax assets, as the acquired companies have considerable NOLs. As a
result, management believes that it is more likely than not that the net
deferred tax asset will not be realized.
(6) MERGERS AND DISPOSITIONS
Merger, disposition and other charges totaled ($453,000) and $11,094,000 in
2000 and 1998, respectively. In 2000, these costs related to the reversal of
acquisition-related reserves no longer deemed necessary by the Company. In
1998, these costs related primarily to costs associated with the merger with
Individual, Inc., the purchase of ISS, the termination of the ClariNet
business unit, the severance and benefits for terminated employees and the
cost of terminating and settling certain contractual obligations of the
combined companies. Accrued but unpaid amounts associated with the above-
mentioned merger costs totaled $0 at December 31, 2000 and $450,000 at
December 31, 1999.
36
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
A description of the Company's acquisitions and dispositions is as follows:
(a) Freeloader, Inc.
In 1996, the Company acquired FreeLoader, Inc. ("FreeLoader") in a
combination accounted for as a purchase. As of May 31, 1997, the Company
ceased operations of FreeLoader. The Company guaranteed the value of certain
shares issued to the two founders in the transaction. In February 1998, the
two founders of Freeloader exercised their value guarantee, resulting in a
payment by the Company of $3,918,000. The Company has no future contingency
payments due related to this acquisition.
(b) ClariNet Communications Corp.
In June 1997, the Company purchased the stock of ClariNet Communications
Corp. ("ClariNet"). ClariNet published a global electronic newspaper on the
Internet called ClariNews, which was distributed through internet service
providers and to corporations, educational institutions and individual
subscribers. Effective March 31, 1998, the Company sold the Clarinet business
unit to its management and received 750,000 shares of Series A Preferred Stock
in the newly formed corporation, NaviLinks, Inc. The investment was accounted
for using the equity method of accounting. The carrying value of the
investment as of December 31, 2000 and 1999 is zero.
(d) ISS
On January 6, 1998, the Company acquired the assets, customers, and
personnel of ISS, a former business unit of ADP Financial Services, Inc., for
approximately $1,500,000 in cash. The acquisition has been recorded using the
purchase method of accounting.
(e) Individual, Inc.
On February 24, 1998, the Company completed its merger with Individual, Inc.
Under the terms of the merger agreement, each share of Individual, Inc. common
stock was exchanged for 0.5 shares of the Company's common stock.
Approximately 8,230,000 shares of the Company's common stock were issued in
exchange for all of the outstanding common stock of Individual. Approximately
2,873,000 shares were reserved for issuance upon exercise of outstanding
Individual stock options and warrants assumed by the Company in the merger.
The transaction was accounted for as a pooling of interests.
In accordance with APB No. 16, the following pro forma financial data are
presented for the Company and Individual:
Three Months ended
March 31, 1998
(unaudited)
------------------
(in thousands)
NewsEdge Corporation:
Revenues............................................. $11,787
Net income (loss).................................... (8,487)
Individual, Inc.:
Revenues............................................. $ 7,962
Net loss............................................. (5,362)
37
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
(7) STOCKHOLDERS' EQUITY
(a) Preferred Stock
On June 26, 1995, the Company's stockholders authorized 1,000,000 shares of
undesignated preferred stock. At December 31, 2000, no shares of preferred
stock were issued or outstanding.
(b) Stock Repurchase Program
In September 1998, the Board of Directors authorized a program to repurchase
up to 1,500,000 shares of the Company's common stock in the open market. As of
December 31, 2000 and 1999, 432,000 shares had been repurchased at a cost of
approximately $2,726,000. The Company purchased no stock in the open market
during 2000.
(c) Private Placement
On August 4, 2000, the Company consummated a sale of 868,234 shares of its
common stock for an aggregate purchase price of $1,845,000. The purchase price
was reduced by fees paid in connection with the private placement in the
amount of $77,000. The sale was accomplished by a private placement of the
Common Stock to primarily officers, directors and affiliates of the Company.
In connection with the private placement, the Company also issued warrants to
purchase approximately 492,000 shares of Common Stock with an exercise price
of $4.00 per share.
(8) WARRANTS
In connection with the acquisition of Individual, Inc., the Company
exchanged warrants to purchase 963,516 shares of common stock at a weighted
average exercise price of $16.28 per share. These warrants had 10-year terms
and were issued principally to employees of Individual in 1989 and 1991. As of
December 31, 2000, options to purchase a total of 85,188 shares of common
stock, with a weighted average exercise price of $19.12 per share remained
outstanding.
On November 6, 1998, the Board of Directors approved the issuance of
warrants to purchase 200,000 shares of common stock at an exercise price of
$8.50 per share to a vendor as part of an agreement for services. Vesting
occurs monthly over a three-year period beginning on January 1, 1999. These
warrants expire on November 6, 2003, but may be subject to earlier expiration.
Upon a change in control of the Company, the unvested warrants would be fully
vested, provided the vendor does not terminate its service agreement with the
Company. If the vendor terminates its service agreement upon a change in
control of the Company, all vested and unvested warrants held by the vendor
would expire. The estimated fair value of these warrants totaled $592,000 at
the time of the grant, using the Black-Scholes option pricing model and the
assumptions described in Note 9(g). In accordance with EITF 96-18, the fair
value of these warrants must be marked to-market over the vesting period. The
Company for the years ended December 31, 2000 and 1999 has charged to cost of
revenues $100,000 and $308,000, respectively. These amounts are also included
in additional paid in capital in the accompanying consolidated statement of
stockholders' equity. As of December 31, 2000, the residual value related to
the unvested portion of these warrants is zero.
In November 1999, the Board of Directors of the Company approved the
issuance of warrants to purchase 50,000 shares of common stock at an exercise
price of $7.125 per share to an investment advisor. The warrant is fully
vested and is exercisable over a two-year period. The estimated fair value of
the warrants totaled $303,000 and has been recorded as a charge to general and
administrative expenses in 1999.
38
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
In September 2000, the Board of Directors of the Company approved the
issuance of warrants to purchase 30,000 shares of common stock at an exercise
price $7.00 per share to a business partner. The warrant is fully vested and
is exercisable over a three-year period. As of December 31, 2000 the estimated
fair value of the warrants was $0.
(9) STOCK PLANS
(a) 1989 Stock Option Plan
The Company has a stock option plan (the 1989 Plan) pursuant to which
622,222 shares of common stock are reserved for issuance. The 1989 Plan is
administered by the Board of Directors and provides for the granting of
incentive stock options, nonqualified stock options, stock awards and direct
stock purchases. During 1995, the Board of Directors terminated the 1989 Plan,
such that no further options may be granted under the 1989 Plan.
(b) 1995 Stock Plan
On June 26, 1995, the Company's stockholders approved the 1995 Stock Plan
(the 1995 Plan). The 1995 Plan is administered by the Board of Directors and
provides for stock awards, direct purchases and the grant of options to
purchase shares of the Company's common stock. A maximum of 5,662,600 shares
may be issued under this plan. Options granted under the 1995 Plan expire 10
years from the date of grant. As of December 31, 2000 there were 2,599,946
shares available under this plan.
(c) 1995 NonEmployee Director Stock Option Plan
On June 26, 1995, the Company's stockholders also approved the 1995
NonEmployee Director Stock Option Plan (the 1995 Director Plan), for which
100,000 shares of the Company's common stock have been reserved. The purpose
of the 1995 Director Plan is to attract and retain qualified persons who are
not also officers or employees of the Company (the Eligible Directors) to
serve as directors of the Company. Under the 1995 Director Plan, any eligible
Director shall automatically be granted an option to purchase 20,000 shares of
common stock on the effective date of election at an option price equal to the
fair market value on the date of grant and an option to purchase 2,500 shares
of the common stock on the date of each successive annual meeting of the
stockholders, if such director has attended at least 75% of the meetings of
the Board of Directors during the past fiscal year. Options granted under this
plan expire 10 years from the date of grant. As of December 31, 2000 there
were no shares available under this plan.
(d) 2000 NonOfficer and NonDirector Stock Plan
On June 15, 2000, the Company's stockholders approved the 2000 NonOfficer
and NonDirector Stock Plan (the 2000 Plan). A maximum of 962,400 shares may be
issued under this plan. The purpose of the 2000 Plan is to encourage key
employees who are not officers or directors of the Company by providing
opportunities to participate in the ownership of the Company and its future
growth. Options granted under the 2000 Plan expire 10 years from the date of
grant. As of December 31, 2000 there were 121,844 shares available under this
plan.
39
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
(e) Stock Option Plan Activity
The following schedule summarizes all stock option activity for the three
years ended December 31, 2000 (shares in thousands):
2000 1999 1998
---------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
Outstanding, beginning
of year................ 3,863 $9.12 3,506 $8.56 2,859 $7.63
Granted............... 2,241 2.42 1,605 9.62 1,955 9.37
Exercised............. (73) 7.45 (479) 6.93 (574) 6.48
Terminated............ (1,681) 8.24 (769) 9.04 (734) 8.42
------ ----- ----- ----- ----- -----
Outstanding, end of
year................... 4,350 $6.05 3,863 $9.12 3,506 $8.56
====== ===== ===== ===== ===== =====
Exercisable, end of
year................... 2,474 1,757 1,323
====== ===== =====
Weighted average fair
value of options
granted during the
year................... $ 1.90 $5.30 $5.20
====== ===== =====
The following table summarizes information about stock options outstanding
at December 31, 2000 (shares in thousands):
Options Outstanding Options Exercisable
---------------------------------- -----------------------
Number Weighted
Outstanding Average Weighted Number Weighted
Exercise as of Remaining Average Exercisable at Average
Price/Range December 31, Contractual Exercise December 31, Exercise
of Exercise Prices 2000 Life (Years) Price 2000 Price
- ------------------ ------------ ------------ -------- -------------- --------
$ 0.02--$ 2.16 193 8.93 $ 1.84 38 $ 1.26
2.25-- 2.25 1,539 9.28 2.25 652 2.25
2.31-- 6.97 977 6.98 5.86 729 6.59
7.25-- 10.50 894 7.55 8.95 623 8.99
10.67-- 34.00 747 7.78 11.73 432 11.74
----- ---- ------ ----- ------
4,350 8.14 $ 6.05 2,474 $ 6.87
===== ==== ====== ===== ======
(f) 1995 Employee Stock Purchase Plan
On June 26, 1995, the Company's stockholders approved the 1995 Employee
Stock Purchase Plan (the 1995 Purchase Plan). This plan permits eligible
employees to purchase up to 500 shares of the Company's common stock at 85% of
the fair market value of the stock on the first or last date of each
semiannual plan period, whichever is lower. The 1995 Purchase Plan covers
substantially all employees, subject to certain limitations. An eligible
employee may elect to have up to 10% of his or her total compensation, as
defined, withheld and applied toward the purchase of shares in such a plan
period (not to exceed the $25,000 annual IRS limit). At December 31, 2000,
352,602 shares of common stock were reserved for purchases under the 1995
Purchase Plan. During 2000, 1999 and 1998, 35,927, 56,719 and 23,408 shares of
common stock, respectively, were purchased under the 1995 Purchase Plan.
40
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
(g) Fair Value of Stock Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, requires the
measurement of the fair value of stock options granted to employees to be
included in the statement of operations or disclosed in the notes to financial
statements. The Company has determined that it will continue to account for
stock-based compensation for employees under Accounting Principles Board
Opinion No. 25 and elect the disclosure-only alternative under SFAS No. 123.
The Company has computed the pro forma disclosures required under SFAS No. 123
for options granted in 2000, 1999 and 1998 using the Black-Scholes option
pricing model prescribed by SFAS No. 123. The weighted average assumptions
used are as follows:
2000 1999 1998
----------- ----------- -----------
Risk-free interest rate............... 5.17%-6.69% 4.60%-6.38% 4.19%-5.95%
Expected dividend yield............... None None None
Expected lives........................ 5 years 5 years 2-5 years
Expected volatility................... 141% 70% 63%
Had compensation cost for the Company's stock plans been determined
consistent with SFAS No. 123, the Company's net loss to common stockholders
and basic and diluted net loss per common share would have resulted in the
following pro forma amounts:
2000 1999 1998
------- -------- --------
(in thousands, except per
share data)
Net loss to common stockholders--
As reported.......................... $(3,509) $(16,993) $(17,228)
Pro forma............................ (6,789) (22,229) (22,326)
Basic and diluted net loss per common
share--
As reported.......................... $ (0.19) $ (0.98) $ (1.00)
======= ======== ========
Pro forma............................ $ (0.38) $ (1.28) $ (1.30)
======= ======== ========
(10) 401K PLAN
The Company maintains a 401(k) retirement savings plan (the "Plan"). All
employees of the Company are eligible to participate in the Plan after
completing at least three consecutive months of service with the Company as
defined in the plan agreement. The Plan provides that each participant may
make voluntary contributions up to 15% of their eligible compensation, limited
to the maximum amount allowable by the IRS. The Company may elect to make
discretionary matching contributions and/or profit sharing contributions. For
the plan years ended December 31, 2000, 1999 and 1998, the employer matching
contribution was 20% of the first 6% of the participant contributions. No
profit sharing contributions have been made to the Plan since inception.
Participants are fully vested in the current value of their employee
contributions and all earnings on such contributions. Participants become
vested in employer contributions and earnings thereon after completion of one
year of service. Accordingly, $198,000, $232,000 and $185,000 of expense, is
included in the accompanying consolidated statements of operations for the
years ended December 31, 2000, 1999 and 1998, respectively.
41
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
(11) COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company conducts its operations in facilities under operating leases
expiring through 2005. The Company's future minimum lease payments, as of
December 31, 2000 are approximately as follows:
Amount
--------------
(in thousands)
For the years ending December
31,
2001........................ $1,724
2002........................ 1,773
2003........................ 1,239
2004........................ 899
2005........................ 223
------
$5,858
======
Rent expense charged to operations was approximately $2,701,000 in 2000,
$2,718,000 in 1999 and $2,633,000 in 1998.
(12) LONG-TERM OBLIGATIONS
At December 31, 2000, the Company had no long-term debt obligations.
(13) ACCRUED EXPENSES
Accrued expenses in the accompanying consolidated balance sheets consist of
the following:
December 31,
---------------
2000 1999
------- -------
(in thousands)
Payroll and payroll-
related.................... $ 2,169 $ 2,988
Royalties................... 5,049 3,703
Other....................... 5,682 8,453
------- -------
$12,900 $15,144
======= =======
(14) SEGMENT REPORTING
On December 31, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This pronouncement
established standards for public companies relating to the reporting of
financial and descriptive information about their operating segments in
financial statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by management in deciding how to allocate resources and in
assessing performance of the business.
The Company evaluates its continuing operations in two product segments:
Enterprise and Other.
42
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
The Company pursues the market for content solutions and electronic
publishing technologies through one primary line of business: the Enterprise
business. The Enterprise business uses direct selling and telesales efforts
and targets large organizations, publisher and individual websites. The
Enterprise content solutions deliver news and information to large numbers of
users within organizations through their corporate intranet or local area
networks and to destination websites as a content service for visitors of
those sites.
In addition to the Enterprise business, the Company also reports a segment
of Other, which consists of services which were phased out by the Company
during 1999.
Segment data excludes information pertaining to the discontinued operations
of Individual.com, Inc. (see Note 3).
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance of its segments based on revenues and segment profitability.
Segment profitability is defined by the Company as profit or loss from
continuing operations before income taxes, interest and merger, dispositions
and other charges. Non-cash expenses included in the segment profitability
measure have been detailed separately in the table below. The Company does not
evaluate the assets of each operating segment separately, as the majority of
such assets are commingled and transferable among the different segments.
Year Ended December 31,
--------------------------
2000 1999 1998
-------- ------- -------
(in thousands)
Revenues:
Enterprise................................. $ 70,913 $72,931 $67,374
Other...................................... -- 1,316 5,807
-------- ------- -------
Total revenues........................... $ 70,913 $74,247 $73,181
======== ======= =======
Loss from continuing operations before
mergers, dispositions and other charges,
interest and income taxes:
Enterprise................................. $(11,271) $(2,203) $(5,195)
Other...................................... -- (405) (146)
-------- ------- -------
$(11,271) $(2,608) $(5,341)
======== ======= =======
Non-cash expenses by segment:
Enterprise................................. $ 4,207 $ 3,283 $ 2,731
Other...................................... -- 78 514
43
NEWSEDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 2000
(15) VALUATION AND QUALIFYING ACCOUNTS
A summary of the valuation and qualifying accounts of the Company related to
reserve for doubtful accounts and accrued merger, dispositions and other
charges for each of the three years in the period ended December 31, 2000 is
as follows:
Reserve for
Doubtful
Accounts Other
----------- -------
(in thousands)
Reserve Balance at December 31, 1997.................. $ 507 $ --
Additions to reserves............................... -- 11,094
Reductions in reserves.............................. (201) (8,809)
----- -------
Reserve Balance at December 31, 1998.................. 306 2,285
Additions to reserves............................... -- --
Reductions in reserves.............................. -- (1,832)
----- -------
Reserve Balance at December 31, 1999.................. 306 453
Additions to reserves............................... 400 --
Reductions in reserves.............................. -- (453)
----- -------
Reserve Balance at December 31, 2000.................. 706 $ --
(16) SELECTED QUARTERLY FINANCIAL DATA:
Q1 2000 Q2 2000 Q3 2000 Q4 2000
------- ------- ------- -------
Total Revenue.......................... $17,329 $17,672 $17,868 $18,044
Gross Profit........................... $ 9,763 $10,067 $11,132 $11,125
Income (Loss)--Continuing Operations... $(7,132) $(2,054) $ (889) $ 109
Income--Discontinued Operations........ $ 3,635 $ 773 $ 2,017 $ 30
------- ------- ------- -------
Net Income(Loss)....................... $(3,497) $(1,281) $ 1,128 $ 139
Income (Loss) Per Share--Continuing
Operations............................ $ (0.40) $ (0.12) $ (0.05) $ 0.01
Income Per Share--Discontinued
Operations............................ $ 0.20 $ 0.04 $ 0.11 $ 0.00
------- ------- ------- -------
Net Income (Loss) Per Share............ $ (0.20) $ (0.08) $ 0.06 $ 0.01
Q1 1999 Q2 1999 Q3 1999 Q4 1999
------- ------- ------- -------
Total Revenue.......................... $18,360 $18,441 $18,749 $18,697
Gross Profit........................... $10,640 $10,825 $11,362 $11,580
Income (Loss)--Continuing Operations... $(1,257) $ (639) $ 314 $ 431
Loss--Discontinued Operations.......... $(1,928) $(1,972) $(4,056) $(7,885)
------- ------- ------- -------
Net Loss............................... $(3,185) $(2,611) $(3,742) $(7,454)
Income (Loss) Per Share--Continuing
Operations............................ $ (0.07) $ (0.04) $ 0.02 $ 0.02
Loss Per Share--Discontinued
Operations............................ $ (0.11) $ (0.11) $ (0.24) $ (0.45)
------- ------- ------- -------
Net (Loss) Per Share................... $ (0.18) $ (0.15) $ (0.22) $ (0.43)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
44
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors
The information concerning directors of NewsEdge required under this item is
incorporated herein by reference to NewsEdge's definitive proxy statement
pursuant to Regulation 14A, to be filed with the Commission not later than 120
days after the close of our fiscal year ended December 31, 2000.
Executive Officers
The information concerning officers of NewsEdge required under this item is
incorporated herein by reference to NewsEdge's definitive proxy statement
pursuant to Regulation 14A, to be filed with the Commission not later than 120
days after the close of our fiscal year ended December 31, 2000.
Item 11. Executive Compensation and Other Information
The information required under this item is incorporated herein by reference
to NewsEdge's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of
NewsEdge's fiscal year ended December 31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by reference
to NewsEdge's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of
NewsEdge's fiscal year ended December 31, 2000.
Item 13. Certain Relationships and Related Transactions.
The information required under this item is incorporated herein by reference
to NewsEdge's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission within 120 days after the close of NewsEdge's fiscal
year ended December 31, 2000.
45
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) List of documents filed as part of this report
(1) Financial Statements
Financial Statements (Listed Under Part II, Item 8 and included
herein by reference).
(2) Financial Statement Schedules
Schedules to the Financial Statements have been omitted because the
information required to be set forth therein is not applicable or is
shown in the accompanying Financial Statements or notes thereto.
(3) Exhibits
Exhibit
Number Description of Document
------- -----------------------
2.1 Agreement and Plan of Merger and Reorganization by and among NewsEdge,
and Individual, Inc. dated as of November 2, 1997 (attached as Annex A
to the Prospectus/Joint Proxy Statement contained in NewsEdge's
Registration Statement on Form S-4, No. 333-44887)
2.2 Stock Purchase Agreement dated February 18, 2000 by and among
NewsEdge, Office.com Inc. and Individual.com, Inc. (filed as Exhibit
10.1 to NewsEdge's Current Report on Form 8-K dated March 6, 2000 and
incorporated therein by reference)
2.3 Amendment No. 1 dated August 1, 2000 to Stock Purchase Agreement dated
February 18, 2000 by and among NewsEdge, Office.com Inc. and
Individual.com, Inc. (filed as Exhibit 2.1 to NewsEdge's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000 and
incorporated herein by reference)
3.1 Amended and Restated Certificate of Incorporation of NewsEdge (filed
as Exhibit 3.1 to NewsEdge's Annual Report on Form 10-K for the year-
ended December 31, 1997 and incorporated herein by reference)
3.2 Amended and Restated By-laws of NewsEdge (filed as Exhibit 3.4 to
NewsEdge's Registration Statement on Form S-1, No. 33-94054 and
incorporated herein by reference)
4.1 Specimen certificate representing the Common Stock (filed as Exhibit
4.1 to NewsEdge's Annual Report on Form 10-K for the year-ended
December 31, 1997 and incorporated herein by reference)
10.1 1995 Stock Plan, as amended (filed as Exhibit 10.1 to NewsEdge's
Registration Statement on Form S-4, No. 333-44887 and incorporated
herein by reference)
10.2 1995 Non-Employee Director Stock Option Plan, as amended (filed as
Annex A to NewsEdge's Proxy Statement filed on April 29, 1996 and
incorporated herein by reference)
10.3 1989 Stock Plan (filed as Exhibit 10.3 to NewsEdge's Registration
Statement on Form S-1, No. 33-94054 and incorporated herein by
reference)
10.4 1995 Employee Stock Purchase Plan, as amended (filed as Exhibit 10.4
to NewsEdge's Registration Statement on Form S-4, No. 333-44887 and
incorporated herein by reference)
10.5 Amended and Restated 1989 Stock Option Plan (filed as Exhibit 99.1 to
NewsEdge's Registration Statement on Form S-8, No. 333-46863)
10.6 1995 Incentive Stock Option Plan (filed as Exhibit 99.2 to NewsEdge's
Registration Statement on Form S-8, No. 333-46863)
10.7 1996 Non-Employee Director Stock Option Plan (filed as Exhibit 99.3 to
NewsEdge's Registration Statement on Form S-8, No. 333-46863)
46
Exhibit
Number Description of Document
------- -----------------------
10.8 1996 Stock Option Plan (filed as Exhibit 99.4 to NewsEdge's
Registration Statement on Form S-8, No. 333-46863)
10.9 1996 Amended and Restated Stock Plan (filed as Exhibit 99.5 to
NewsEdge's Registration Statement on Form S-8, No. 333-46863)
10.10 Amended and Restated Registration Agreement dated as of October 20,
1992 by and among NewsEdge and certain stockholders named herein
(filed as Exhibit 10.5 to NewsEdge's Registration Statement on Form S-
1, No. 33-94054 and incorporated herein by reference)
10.11 Lease for 80 Blanchard Road (filed as Exhibit 10.1 to NewsEdge's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference)
10.12 Data Transmission Agreement between NewsEdge and Mainstream Data, Inc.
dated as of November 24, 1993, as amended (filed as Exhibit 10.9 to
NewsEdge's Registration Statement on Form S-1, No. 33-94054 and
incorporated herein by reference)
10.13 Software Development and Marketing Agreement between NewsEdge and
Reuters America Inc. dated as of November 1, 1993, as amended (filed
as Exhibit 10.10 to NewsEdge's Registration Statement on Form S-1, No.
33-94054 and incorporated herein by reference)
10.14 Letter Agreement between NewsEdge and Teknekron Software Systems, Inc.
dated as of June 13, 1994 (filed as Exhibit 10.11 to NewsEdge's
Registration Statement on Form S-1, No. 33-94054 and incorporated
herein by reference)
10.15 Database License, Development and Delivery Agreement between NewsEdge
and NBC Desktop, Inc. dated as of October 17, 1994 (filed as Exhibit
10.12 to NewsEdge's Registration Statement on Form S-1, No. 33-94054
and incorporated herein by reference)
+10.16 Employment Agreement dated as of February 24, 1998 between Michael E.
Kolowich and NewsEdge (filed as Exhibit 10.16 to NewsEdge's Annual
Report on Form 10-K for the year-ended December 31, 1997 and
incorporated herein by reference)
10.17 Form of Common Stock Purchase Warrant (filed as Exhibit 10.4 to
Individual, Inc.'s Registration Statement on Form S-1, No. 333-00792,
and incorporated herein by reference)
10.18 Second Amended and Restated Investors' Rights Agreement dated as of
October 3, 1995 (filed as Exhibit 10.13 to Individual, Inc.'s
Registration Statement on Form S-1, No. 333-00792, and incorporated
herein by reference)
10.19 Licensing Agreement with Cornell Research Foundation, Inc. dated as of
March 22, 1989 (filed as Exhibit 10.14 to Individual, Inc.'s
Registration Statement on Form S-1, No. 333-00792, and incorporated
herein by reference)
10.20 Letter Agreement dated as of July 2, 1992 between Individual, Inc. and
Fleet Bank of Massachusetts, N.A. (filed as Exhibit 10.15 to
Individual, Inc.'s Registration Statement on Form S-1, No. 333-00792,
and incorporated herein by reference)
10.21 Letter Agreement dated as of September 22, 1994 between Individual,
Inc. and Fleet Bank of Massachusetts, N.A. (filed as Exhibit 10.16 to
Individual, Inc.'s Registration Statement on Form S-1, No. 333-00792,
and incorporated herein by reference)
10.22 Consent and Loan Modification Agreement dated as of November 29, 1995
between Individual, Inc. and Fleet Bank of Massachusetts, N.A. (filed
as Exhibit 10.17 to Individual, Inc.'s Registration Statement on Form
S-1, No. 333-00792, and incorporated herein by reference)
10.23 Second Loan Modification Agreement dated as of December 29, 1995
between Individual, Inc. and Fleet Bank of Massachusetts, N.A. (filed
as Exhibit 10.18 to Individual, Inc.'s Registration Statement on Form
S-1, No. 333-00792, and incorporated herein by reference)
47
Exhibit
Number Description of Document
------- -----------------------
10.24 Lease dated as of August 25, 1994 between Individual, Inc. and
Trustees of New England Executive Park Trust, 40 Spaulding Investment
Company, Inc. (filed as Exhibit 10.19 to the Individual Inc.
Registration Statement on Form S-1, No. 333-00792, and incorporated
herein by reference)
10.25 Third Loan Modification Agreement dated as of December 31, 1996
between Individual, Inc. and Fleet National Bank (filed as Exhibit
10.24 to Individual, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996)
+10.26 Agreement dated as of March 31, 1999 between NewsEdge Corporation and
Edward R. Siegfried (filed as Exhibit 10.26 to NewsEdge's Annual
Report on Form 10-K/A for the year-ended December 31, 2001 and
incorporated herein by reference)
+10.27 Severance Agreement and Release dated as of March 14, 2000 between
Donald L. McLagan and NewsEdge Corporation (filed as Exhibit 10.27 to
NewsEdge's Annual Report on Form 10-K/A for the year-ended December
31, 2001 and incorporated herein by reference)
10.28 2000 Non-Officer and Non-Director Stock Plan (filed as Annex B to
NewsEdge's Proxy Statement filed pursuant to Section 14(A) of the
Securities and Exchange Act of 1934 on May 22, 2000 and incorporated
herein by reference)
10.29 Form of Common Stock Warrant, dated August 4, 2000, issued by the
Company to certain investors and schedule of warrant holders (filed as
Exhibit 4.1, 10.1 to NewsEdge's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000 and incorporated herein by reference)
10.30 Form of Common Stock Purchase Agreement, dated August 4, 2000, between
the Company and certain investors and schedule of investors (filed as
Exhibit 10.2 to NewsEdge's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000 and incorporated herein by reference)
*10.31 NewsEdge-eLogic Enterprise Business Partnership Term Sheet dated
January 19, 2000, as amended on March 23, 2000
*21.1 Subsidiaries of NewsEdge.
*23.1 Consent of Arthur Andersen LLP
*24.0 Power of Attorney (included on page 49)
- --------
* Filed herewith.
+ Indicates a management contract or a compensatory plan, contract or
arrangement
(b) Reports on Form 8-K.
None
(c) The exhibits required by this Item are listed under Item 14(a).
48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
Newsedge Corporation
(Registrant)
Date: March 30, 2001
/s/ Clifford Pollan
_____________________________________
Clifford Pollan
Chairman, President and Chief
Executive Officer
We, the undersigned officers and directors of NewsEdge Corporation, hereby
severally constitute and appoint Clifford Pollan and Ronald Benanto, and each
of them singly, our true and lawful attorneys, with full power to them and
each of them singly, to sign for us in our names in the capacities to do all
things in our names and on our behalf in such capacities to enable NewsEdge
Corporation to comply with the provisions of the Securities Exchange Act of
1934, as amended, and all requirements of the Securities Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title(s) Date
--------- -------- ----
/s/ Clifford Pollan President, Chief Executive March 30, 2001
______________________________________ Officer and Director
Clifford Pollan (Principal Executive
Officer)
/s/ Ronald Benanto Vice President--Finance March 30, 2001
______________________________________ and Operations, Treasurer
Ronald Benanto and Assistant Secretary
(Principal Financial and
Accounting Officer)
/s/ Michael E. Kolowich Director March 30, 2001
______________________________________
Michael E. Kolowich
/s/ Basil Regan Director March 30, 2001
______________________________________
Basil Regan
/s/ Peter Woodward Director March 30, 2001
______________________________________
Peter Woodward
/s/ Murat H. Davidson, Jr. Director March 30, 2001
______________________________________
Murat H. Davidson, Jr.
/s/ Rory J. Cowan Chairman and Director March 30, 2001
______________________________________
Rory J. Cowan
/s/ William A. Devereaux Director March 30, 2001
______________________________________
William A. Devereaux
/s/ James D. Daniell Director March 30, 2001
______________________________________
James D. Daniell
49