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TMCNet:  THESTREET, INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

[February 28, 2014]

THESTREET, INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Edgar Glimpses Via Acquire Media NewsEdge) Please refer to the Special Note Regarding Forward-Looking Statements appearing in Part I, Item 1 of this Report.

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

Overview TheStreet, Inc., together with its wholly owned subsidiaries ("TheStreet", "we", "us" or the "Company"), is a leading digital media company focused on the financial and mergers and acquisitions environment. The Company's collection of digital services provides users, subscribers and advertisers with a variety of content and tools through a range of online, social media, tablet and mobile channels. Our mission is to provide investors and advisors with actionable ideas from the world of investing, finance and business and dealmakers with sophisticated analysis of the mergers and acquisitions environment in order to break down information barriers, level the playing field and help all individuals and organizations grow their wealth. With a robust suite of digital services, TheStreet offers the tools and insights needed to make informed decisions about earning, investing, saving and spending money. Since its inception in 1996, TheStreet believes it has distinguished itself from other digital media companies with its journalistic excellence, unbiased approach and interactive multimedia coverage of the financial markets, economy, industry trends, investment and financial planning.


Subscription Services Subscription services is comprised of subscriptions, licenses and fees for access to securities investment information, stock market commentary, rate services and transactional information pertaining to the mergers and acquisitions environment.

We believe we were one of the first companies to successfully create a large scale, consumer-focused, digital subscription services content business. We believe we have been able to successfully build our subscription services business because we have established a track record for over 17 years of providing high quality, independent investing ideas that have produced financial value for our readers. We believe our track record provides us with a competitive advantage and we will seek to enhance the value of our leading brand and our ability to monetize that value.

In addition to our consumer-focused subscription products, which include RealMoney, RealMoney Pro, Options Profits, Actions Alerts PLUS, Breakout Stocks, and Stocks Under $10, our subscription services business also includes information and transactional services revenue from RateWatch and The Deal.

RateWatch maintains a constantly-updated database of financial rate and fee data collected from more than 95,000 financial institutions (at the branch level), including certificate of deposit, money market account, savings account, checking account, home mortgage, home equity loan, credit card and auto loan rates. This information is licensed to financial institutions and government agencies on a subscription basis, in the form of standard and custom reports that outline the competitive landscape for our clients. The data collected by RateWatch also serves as the foundation for the information available on BankingMyWay, an advertising-supported Website that enables consumers to search for the most competitive local and national rates.

23 In September 2012, the Company acquired The Deal and transformed its business into a digital subscription platform that delivers sophisticated coverage of the mergers and acquisitions environment, primarily through The Deal Pipeline, a leading provider of transactional information services. In April 2013, the Company acquired The DealFlow Report, The Life Settlements Report and the PrivateRaise database from DealFlow Media, Inc to further its product offerings to institutional investors. These newsletters and database, and the employees providing their content, have been incorporated into The Deal.

Our subscription services revenue also includes revenue generated from syndication and licensing of data from TheStreet Ratings ("Ratings"), which tracks the risk-adjusted performance of more than 20,000 mutual funds and exchange-traded funds (ETFs) and more than 4,000 stocks. Subscription services contributed 80% of our total revenue in 2013, as compared to 73% in 2012 and 67% in 2011.

Media Media is comprised of fees charged for the placement of advertising and sponsorships within TheStreet and its affiliated properties, our subscription and institutional services, and other miscellaneous revenue.

Our advertising-supported properties, which include TheStreet, MainStreet, Stockpickr and Real Money, attract one of the largest and most affluent audiences of any digital publisher in our content vertical. TheStreet, with its enviable track record as a leading and distinctive digital voice in the financial category, is regarded as a must-buy for most of our core online brokerage advertisers and a highly effective means for other financial services companies and non-endemic advertisers to communicate with our engaged, affluent audience. Our direct sales team sells the full capabilities of TheStreet and its affiliated properties via sponsorships, custom programs, video, mobile, newsletters, audience targeting, native advertising, social amplification and distribution as well as programmatic direct and real time bidding.

Our media revenue also includes revenue generated from syndication and licensing of data as well as other miscellaneous, non-subscription related sources. Media contributed 20% of our total revenue in 2013, as compared to 27% in 2012 and 33% in 2011.

Results of Operations Comparison of Fiscal Years Ended December 31, 2013 and 2012 Revenue For the Year Ended December 31, Percent Percent of Total of Total Percent 2013 Revenue 2012 Revenue Change Revenue:Subscription services $ 43,549,359 80 % $ 37,149,143 73 % 17 % Media 10,901,052 20 % 13,571,660 27 % -20 % Total revenue $ 54,450,411 100 % $ 50,720,803 100 % 7 % 24 Subscription services. Subscription services revenue is comprised of subscriptions, licenses and fees for access to securities investment information, stock market commentary, rate services and transactional information pertaining to the mergers and acquisitions environment. Revenue is recognized ratably over the contract period.

Subscription services revenue for the year ended December 31, 2013 increased by approximately $6.4 million, or 17%, when compared to the year ended December 31, 2012. The increase was the result of approximately $7.1 million of additional revenue related to the operations of The Deal and DealFlow. Excluding The Deal and DealFlow, revenue for the year ended December 31, 2013 decreased by approximately $715 thousand, or 2%, when compared to the year ended December 31, 2012. The decrease was primarily related to a 4% decrease in the average revenue recognized per subscription, partially offset by a 2% increase in the weighted-average number of subscriptions. The decrease in the average revenue recognized per subscription during the period was primarily the result of the mix of products sold and the introduction during the current year of several subscription products at lower prices. While we have been able to reduce our subscriber attrition rate, the number of new subscribers was not sufficient to offset the reduction in the average revenue recognized per subscription.

Media. Media revenue is comprised of fees charged for the placement of advertising and sponsorships within TheStreet and its affiliated properties, our subscription and institutional services, and other miscellaneous revenue.

Media revenue for the year ended December 31, 2013 decreased by approximately $2.7 million, or 20%, when compared to the year ended December 31, 2012. The increase in media revenue associated with The Deal and DealFlow totaled approximately $470 thousand during the year ended December 31, 2013 as compared to the prior year period. Excluding The Deal and DealFlow, revenue for the year ended December 31, 2013 decreased by approximately $3.1 million, or 25%, when compared to the year ended December 31, 2012. The decrease in media revenue was primarily the result of reduced demand from non-repeat advertisers. Media revenue includes approximately $94 thousand of barter revenue in the year ended December 31, 2013. There was no barter revenue in the prior year period.

Operating Expense For the Year Ended December 31, Percent Percent of Total of Total Percent 2013 Revenue 2012 Revenue Change Operating expense: Cost of services $ 27,431,566 50 % $ 24,886,142 49 % -10 % Sales and marketing 14,453,465 27 % 13,395,328 26 % -8 % General and administrative 12,218,964 22 % 13,637,895 27 % 10 % Depreciation and amortization 3,768,536 7 % 5,512,299 11 % 32 % Restructuring and other charges 385,610 1 % 6,589,792 13 % 94 % Loss (gain) on disposition of assets 187,434 0 % (232,989 ) 0 % N/A Total operating expense $ 58,445,575 $ 63,788,467 8 % Cost of services. Cost of services expense includes compensation, benefits, outside contributor costs related to the creation of our content, licensed data and the technology required to publish our content.

25 Cost of services expense increased by approximately $2.5 million, or 10%, over the periods. The increase was primarily the result of costs associated with the operations of The Deal and DealFlow combined with higher fees paid to outside contributors and revenue share payments made to certain distribution partners, the aggregate of which increased by approximately $4.4 million. These cost increases were partially offset by lower compensation expense due to a 7% decrease in average headcount (excluding the impact of increased headcount of The Deal and DealFlow), as well as reduced expenses relating to computer services and supplies, data used on the Company's Websites, hosting, internet fees, and increased reimbursed expenses relating to a third party services agreement, the aggregate of which decreased by approximately $1.7 million.Sales and marketing. Sales and marketing expense consists primarily of compensation expense for the direct sales force, marketing services, and customer service departments, advertising and promotion expenses and credit card processing fees.

Sales and marketing expense increased by approximately $1.1 million, or 8%, over the periods. The increase was the result of costs associated with the operations of The Deal and DealFlow, which increased by approximately $2.7 million. These costs were partially offset by reduced compensation expense due to an 18% decrease in average headcount (excluding the impact of increased headcount of The Deal and DealFlow) combined with lower advertising and promotion, public relations, consulting, and serving costs for third-party advertisers, the aggregate of which decreased by approximately $1.5 million. Sales and marketing expense includes $94 thousand of barter expense in the year ended December 31, 2013 and $183 thousand in the prior year period.

General and administrative. General and administrative expense consists primarily of compensation for general management, finance, technology, legal and administrative personnel, occupancy costs, professional fees, insurance and other office expenses.

General and administrative expense decreased by approximately $1.4 million, or 10%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 17% decrease in average headcount, combined with lower third-party data and recruiting costs, the aggregate of which decreased by approximately $1.5 million.

Depreciation and amortization. Depreciation and amortization expense decreased by approximately $1.7 million, or 32%, over the periods. The decrease was primarily the result of an overall reduced level of capital expenditures over the past few years combined with increased amortization during the year ended December 31, 2012 resulting from reductions to the estimated useful life of certain capitalized Website development projects. These reductions were partially offset by increased depreciation and amortization expense relatedto The Deal and DealFlow.

Restructuring and other charges. During the year ended December 31, 2013, the Company recognized restructuring and other charges totaling approximately $386 thousand primarily related to noncash stock-based compensation costs in connection with the accelerated vesting of certain restricted stock units for a terminated employee. During the year ended December 31, 2012, the Company implemented a targeted reduction in force. Additionally, in accessing the ongoing needs of the organization, the Company elected to discontinue using certain software as a service, consulting and data providers, and elected to write-off certain previously capitalized software development projects. The actions were taken after a review of the Company's cost structure with the goal of better aligning the cost structure with the Company's revenue base. These restructuring efforts resulted in restructuring and other charges from continuing operations of approximately $3.4 million during the year ended December 31, 2012. Additionally, as a result of the Company's acquisition of The Deal, the Company discontinued the use of The Deal's office space and implemented a reduction in force to eliminate redundant positions, 26 resulting in restructuring and other charges from continuing operations of approximately $3.5 million during the year ended December 31, 2012. These activities were offset by a reduction to previously estimated restructuring and other charges resulting in a net credit of approximately $289 thousand.

Loss (gain) on disposition of assets. During the year ended December 31, 2013, the Company sold certain non-strategic assets resulting in a loss of approximately $187 thousand. During the year ended December 31, 2012, the Company sold certain non-strategic assets resulting in a gain of approximately $233 thousand.

Net Interest Income For the Year Ended December 31, Percent 2013 2012 Change Net interest income $ 209,463 $ 352,713 -41 % The decrease in net interest income was primarily the result of reduced average marketable security, cash and restricted cash balances during the year ended December 31, 2013 as compared to the prior year period, lower interest rates, and interest expense related to the net present value calculation of certain restructuring costs that were recorded during 2012.

Net Loss Net loss for the year ended December 31, 2013 totaled $3.8 million, or $0.11 per basic and diluted share, compared to net loss totaling $12.7 million, or $0.38 per basic and diluted share, for the year ended December 31, 2012. The decrease in the net loss was primarily the result of restructuring and other charges recorded during the year ended December 31, 2012 that approximated $6.6 million.

Comparison of Fiscal Years Ended December 31, 2012 and 2011 Revenue For the Year Ended December 31, Percent Percent of Total of Total Percent 2012 Revenue 2011 Revenue Change Revenue:Subscription services $ 37,149,143 73 % $ 38,901,289 67 % -5 % Media 13,571,660 27 % 18,858,711 33 % -28 % Total revenue $ 50,720,803 100 % $ 57,760,000 100 % -12 % Subscription services. Subscription services revenue for the year ended December 31, 2012 decreased by 5% when compared to the year ended December 31, 2011. This decrease was primarily the result of a 15% decrease in the weighted-average number of subscriptions during the year ended December 31, 2012 as compared to the year ended December 31, 2011, partially offset by a 6% increase in the average revenue recognized per subscription during the year ended December 31, 2012 as compared to the year ended December 31, 2011, combined with approximately $2.9 million of revenue related to the operations of The Deal since its acquisition in September 2012. The decrease in the weighted average number of subscriptions was primarily impacted by the trailing twelve month trends of 1) churn of our existing subscriber base and 2) our ability to acquire new subscribers. While our average monthly churn rates for the trailing twelve months ended December 31, 2012, as compared to the same period in 27 the prior year, has remained relatively stable, we were unable to acquire a sufficient number of new subscribers in 2012 to offset the losses due to churn.

The increase in the average revenue recognized per subscription during the period is primarily the result of the mix of products sold and higher product pricing.

Media. Media revenue for the year ended December 31, 2012 decreased by 28% when compared to the year ended December 31, 2011. The decrease in media revenue was primarily the result of reduced demand from repeat advertisers, the movement of Internet usage from desktop to tablets and mobile devices, where advertising rates are lower, and our inability to attract a sufficient amount of advertising revenue from new advertisers in 2012 to offset the losses. There was no barter revenue in the year ended December 31, 2012 as compared to approximately $410 thousand in the year ended December 31, 2011.

Operating Expense For the Year Ended December 31, Percent Percent of Total of Total Percent 2012 Revenue 2011 Revenue Change Operating expense: Cost of services $ 24,886,142 49 % $ 26,499,085 46 % -6 % Sales and marketing 13,395,328 26 % 16,681,562 29 % -20 % General and administrative 13,637,895 27 % 15,810,994 27 % -14 % Depreciation and amortization 5,512,299 11 % 5,757,365 10 % -4 % Restructuring and other charges 6,589,792 13 % 1,825,799 3 % 261 % Gain on disposition of assets (232,989 ) 0 % - N/A N/A Total operating expense $ 63,788,467 $ 66,574,805 -4 % Cost of services. Cost of services expense decreased by approximately $1.6 million, or 6%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 25% decrease in average headcount (excluding the impact of acquired headcount of The Deal), combined with lower costs related to computer services and supplies and data used on the Company's Websites, the aggregate of which decreased by approximately $4.4 million. These cost decreases were partially offset by costs associated with the operations of The Deal since its acquisition, increased costs related to revenue share payments made to certain distribution partners, as well as the use of nonemployee content providers as the Company has shifted its strategy more towards a contributor/freelance model with fewer full time editorial staff, the aggregate of which increased by approximately $2.8 million. Although the dollar amount of cost of services expense decreased over the periods, cost of services expense as a percentage of revenue increased to 49% in the year ended December 31, 2012, from 46% in the prior year period, as our cost cutting initiatives did not completely keep pace with the decline in revenue.

Sales and marketing. Sales and marketing expense decreased by approximately $3.3 million, or 20%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 22% decrease in average headcount (excluding the impact of headcount of The Deal), combined with reductions in advertising and promotion related spending, travel and entertainment costs, credit card processing fees, public relations costs and recruiting fees, the aggregate of which decreased by approximately $4.6 million. These cost decreases were partially offset by costs associated with the operations of The Deal since its acquisition as well as increased advertisement serving costs, the aggregate of which increased by approximately $1.3 million. Sales and marketing expense includes approximately $183 thousand and $303 thousand of barter expense in the years ended December 31, 2012 and 2011, respectively. Sales and 28 marketing expense as a percentage of revenue decreased to 26% in the year ended December 31, 2012, from 29% in the prior year period resulting from our cost cutting initiatives.

General and administrative. General and administrative expense decreased by approximately $2.2 million, or 14%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 15% decrease in average headcount (excluding the impact of headcount of The Deal), combined with lower professional fees (inclusive of those relating to a review of certain accounting matters in our former Promotions.com subsidiary), occupancy, training and insurance costs, the aggregate sum of which decreased by approximately $2.7 million. These cost decreases were partially offset by costs related to the Company's acquisition and subsequent operation of The Deal since its acquisition combined with increased recruiting fees, the aggregate of which increased by approximately $709 thousand. General and administrative expense as a percentage of revenue approximated 27% in the year ended December 31, 2012, the same as in the prior year period, as our cost cutting initiatives were in line with the decline in revenue.

Depreciation and amortization. Depreciation and amortization expense decreased by approximately $245 thousand, or 4%, over the periods. Depreciation and amortization expense as a percentage of revenue approximated 11% in the year ended December 31, 2012, as compared to 10% in the prior year period.

Restructuring and other charges. During the year ended December 31, 2012, the Company implemented a targeted reduction in force. Additionally, in accessing the ongoing needs of the organization, the Company elected to discontinue using certain software as a service, consulting and data providers, and elected to write-off certain previously capitalized software development projects. The actions were taken after a review of the Company's cost structure with the goal of better aligning the cost structure with the Company's revenue base. These restructuring efforts resulted in restructuring and other charges from continuing operations of approximately $3.4 million during the year ended December 31, 2012. Additionally, as a result of the Company's acquisition of The Deal, the Company discontinued the use of The Deal's office space and implemented a reduction in force to eliminate redundant positions, resulting in restructuring and other charges from continuing operations of approximately $3.5 million during the year ended December 31, 2012. These activities were offset by a reduction to previously estimated restructuring and other charges resulting in a net credit of approximately $289 thousand.

Gain on disposition of assets. During the year ended December 31, 2012, the Company sold certain non-strategic assets resulting in a gain of approximately $233 thousand.

Net Interest Income For the Year Ended December 31, Percent 2012 2011 Change Net interest income $ 352,713 $ 667,822 -47 % The decrease in net interest income was primarily the result of lower interest rates on bank deposits combined with reduced cash balances.

Net Loss Net loss for the year ended December 31, 2012 totaled approximately $12.7 million, or $0.38 per basic and diluted share, compared to net loss totaling $8.2 million, or $0.26 per basic and diluted share, for the year ended December 31, 2011. The increase in the net loss was largely the result of restructuring 29 and other charges recorded during the year ended December 31, 2012 that approximated $6.6 million combined with reduced revenue, partially offset by expense cost cutting measures. Net loss for the year ended December 31, 2012 also included a net loss of approximately $753 thousand related to the operations of The Deal since its acquisition. Excluding noncash charges related to depreciation, and amortization of acquired intangible assets, net loss for The Deal would have approximated $438 thousand.

Critical Accounting Estimates General The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, the following: Revenue Recognition We generate our revenue primarily from subscription services and media.

Subscription services is comprised of subscriptions, licenses and fees for access to securities investment information, stock market commentary, rate services and transactional information pertaining to the mergers and acquisitions environment. Subscriptions are generally charged to customers' credit cards or are directly billed to corporate subscribers. These are generally billed in advance on a monthly or annual basis. We calculate net subscription revenue by deducting from gross revenue an estimate of potential refunds from cancelled subscriptions as well as chargebacks of disputed credit card charges. Net subscription revenue is recognized ratably over the subscription periods. Deferred revenue relates to subscription fees for which amounts have been collected but for which revenue has not been recognized because services have not yet been provided.

Subscription revenue is subject to estimation and variability due to the fact that, in the normal course of business, subscribers may for various reasons contact us or their credit card companies to request a refund or other adjustment for a previously purchased subscription. With respect to many of our annual newsletter subscription products, we offer the ability to receive a refund during the first 30 days but none thereafter. Accordingly, we maintain a provision for estimated future revenue reductions resulting from expected refunds and chargebacks related to subscriptions for which revenue was recognized in a prior period. The calculation of this provision is based upon historical trends and is reevaluated each quarter. The provision was not material for any of the three years ended December 31, 2013.

Media revenue includes advertising revenue, which is derived from the sale of Internet sponsorship arrangements and from the delivery of banner, tile, contextual, performance-based and interactive advertisement and sponsorship placements in our advertising-supported Websites, and is recognized as the advertising is displayed, provided that collection of the resulting receivable is reasonably assured.

30 Capitalized Software and Website Development Costs We expense all costs incurred in the preliminary project stage for software developed for internal use and capitalize all external direct costs of materials and services consumed in developing or obtaining internal-use computer software in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles - Goodwill and Other ("ASC 350"). In addition, for employees who are directly associated with and who devote time to internal-use computer software projects, to the extent of the time spent directly on the project, we capitalize payroll and payroll-related costs of such employees incurred once the development has reached the applications development stage. For the years ended December 31, 2013, 2012 and 2011, we capitalized software development costs totaling approximately $289 thousand, $401 thousand and $885 thousand, respectively. All costs incurred for upgrades, maintenance and enhancements that do not result in additional functionality are expensed.

We also account for our Website development costs under ASC 350, which provides guidance on the accounting for the costs of development of company Websites, dividing the Website development costs into five stages: (1) the planning stage, during which the business and/or project plan is formulated and functionalities, necessary hardware and technology are determined, (2) the Website application and infrastructure development stage, which involves acquiring or developing hardware and software to operate the Website, (3) the graphics development stage, during which the initial graphics and layout of each page are designed and coded, (4) the content development stage, during which the information to be presented on the Website, which may be either textual or graphical in nature, is developed, and (5) the operating stage, during which training, administration, maintenance and other costs to operate the existing Website are incurred. The costs incurred in the Website application and infrastructure stage, the graphics development stage and the content development stage are capitalized; all other costs are expensed as incurred. Amortization of capitalized costs will not commence until the project is completed and placed into service. For the years ended December 31, 2013, 2012 and 2011, we capitalized Website development costs totaling approximately $443 thousand, $100 thousand and $369 thousand, respectively.

Capitalized software and Website development costs are amortized using the straight-line method over the estimated useful life of the software or Website.

During the year ended December 31, 2013, completed capitalized software and Website development projects were deemed to primarily have a three-year useful life. Total amortization expense was approximately $743 thousand, $1.5 million and $2.2 million, for the years ended December 31, 2013, 2012 and 2011, respectively.

Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Under the provisions of ASC 350, goodwill and other intangible assets with indefinite lives are required to be tested for impairment on an annual basis and between annual tests whenever circumstances arise that indicate a possible impairment might exist. Impairment exists when the carrying amount of goodwill and other intangible assets with indefinite lives exceed their implied fair value, resulting in an impairment charge for this excess.

We evaluate goodwill and other intangible assets with indefinite lives for impairment using a two-step impairment test approach at the Company level, as the Company is considered to operate as a single reporting unit. The first step compares the fair value of the Company with its book value, including goodwill.

As outlined in ASC 350, if the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the impairment 31 test is unnecessary. As we concluded that our goodwill was not impaired as of the valuation date, step two was not performed.

We perform annual impairment tests of goodwill and other intangible assets with indefinite lives as of September 30 each year and between annual tests whenever circumstances arise that indicate a possible impairment might exist. In conducting our annual 2013 impairment test through our independent appraisal firm, we used the market approach for the valuation of our common stock and the income approach for our preferred shares. We also performed an income approach by using the discounted cash flow ("DCF") method to confirm the reasonableness of the results of the common stock market approach. Based on these approaches, we determined the Company's business enterprise value (common equity plus preferred equity) to be $117.6 million as of the Valuation Date. We calculated the common equity value using the midpoint of the Company's high and low common stock prices on the Valuation Date, as shown in the following figure: AVERAGE STOCK PRICE Low stock price $ 2.05 High stock price $ 2.09 Average stock price $ 2.07 We multiplied the average stock price of $2.07 by the 33,902,028 common shares outstanding, indicating a common equity value of $70.2 million on a non-controlling basis. In order to determine the value of the common equity on a controlling basis, a control premium was applied. We searched the FactSet MergerStat/BVR Control Premium Study for all transactions involving U.S.

companies during the past 12 months, and for transactions involving U.S.

companies with the same SIC code as the Company over various time periods. The data indicated a wide range of control premiums ranging from 13 percent to 44 percent for deals that have taken place in the last three years, and we conservatively selected 10 percent as an appropriate control premium. Applying a control premium of 10 percent resulted in a value of the common equity on a controlling basis of $77.2 million.

In addition to Common Stock, we have preferred stock with a liquidation value of $55.0 million. With the assistance of our third party valuation firm, we used the income approach to compute the fair value of the Preferred Stock to be $40.4 million which we added to the fair value of the Common Stock. The resulting enterprise value of $117.6 million represents the value of the Company on a controlling basis. This value was greater than the carrying value of $78.1 million, indicating our goodwill was not impaired as of the September 30, 2013 valuation date.

The fair value of our outstanding preferred shares requires significant judgments, including the estimation of the amount of time until a liquidation event occurs as well as an appropriate cash flow discount rate. Further, in assigning a fair value to our preferred stock, we also considered that the preferred shareholders are entitled to receive a $55 million liquidation preference upon liquidation or dissolution of the Company or upon any change of control event (as defined in the Certificate of Designation of Series B Preferred Stock). Additionally, the holders of the preferred shares are entitled to receive dividends and to vote as a single class together with the holders of the Common Stock on an as-converted basis and provided certain preferred share ownership levels are maintained, are entitled to representation on our board of directors and may unilaterally block issuance of certain classes of capital stock, the purchase or redemption of certain classes of capital stock, including Common Stock (with certain exceptions) and any increases in the per-share amount of dividends payable to the holders of the Common Stock.

Determining the fair value of goodwill or other intangible assets with indefinite lives involves the use of significant estimates and assumptions.

These estimates and assumptions include revenue growth 32 rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and appropriate market comparables. We base our fair value estimates on assumptions believed to be reasonable. However, as these estimates and assumptions are unpredictable and inherently uncertain, actual future results may differ from these estimates.

As of December 31, 2012, we performed an interim impairment test of our goodwill due to certain potential impairment indicators, including the loss of certain key personnel. The fair value of our goodwill was estimated using a market approach, based upon actual prices of our Common Stock excluding any control premium, and the estimated fair value of our outstanding preferred shares. As a result of this December 31, 2012 impairment test, we concluded that goodwill was not impaired.

A decrease in the price of our Common Stock, or changes in the estimated value of our preferred shares, could materially affect the determination of the fair value and could result in an impairment charge to reduce the carrying value of goodwill, which could be material to our financial position and results of operations.

Additionally, we evaluate the remaining useful lives of intangible assets each year to determine whether events or circumstances continue to support their useful life. There have been no changes in useful lives of intangible assets for each period presented.

Long-Lived Assets We evaluate long-lived assets, including amortizable identifiable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Investments We believe that conservative investment policies are appropriate and we are not motivated to strive for aggressive spreads above Treasury rates. Preservation of capital is of foremost concern, and by restricting investments to investment grade securities of relatively short maturities, we believe that our capital will be largely protected from severe economic conditions or drastic shifts in interest rates. A high degree of diversification adds further controls over capital risk.

Financial instruments that subject us to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. We maintain all of our cash, cash equivalents and restricted cash in four domestic financial institutions and we perform periodic evaluations of the relative credit standing of these institutions. As of December 31, 2013, our cash, cash equivalents and restricted cash primarily consisted of money market funds and checking accounts.

Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, corporate floating rate notes and two municipal auction rate securities ("ARS") issued by the District of Columbia with a par value of approximately $1.9 million. With the exception of the ARS, the maximum maturity for any investment is three years. The ARS mature in the year 2038. We account for our marketable securities in accordance with the provisions of ASC 320-10. We classify these securities as available for sale and the securities are reported at fair value. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income and excluded from net loss.

As of December 33 31, 2013, the total fair value of these marketable securities was approximately $13.1 million and the total cost basis was approximately $13.3 million.

During 2008, we made an investment in Debtfolio, Inc., doing business as Geezeo, an online financial management solutions provider for banks and credit unions.

The investment totaled approximately $1.9 million for an 18.5% ownership stake.

Additionally, we incurred approximately $0.2 million of legal fees in connection with this investment. During the first quarter of 2009, the carrying value of our investment was written down to fair value based upon an estimate of the market value of our equity in light of Debtfolio's efforts to raise capital at the time from third parties. The impairment charge approximated $1.5 million. We performed an additional impairment test as of December 31, 2009 and no additional impairment in value was noted. During the three months ended June 30, 2010, we determined it was necessary to record a second impairment charge, writing the value of the investment to zero. This was deemed necessary by management based upon its consideration of Debtfolio, Inc.'s continued negative cash flow from operations, current financial position and lack of current liquidity. In October 2011, Debtfolio, Inc. repurchased our ownership stake in exchange for a subordinated promissory note in the aggregate principal amount of approximately $0.6 million payable on October 31, 2014. As of December 31, 2013 and 2012, we maintain a full valuation allowance against our subordinated promissory note due to the uncertainty of eventual collection.

See Note 6 to Consolidated Financial Statements (Fair Value Measurements) for additional information about the investment of our cash.

Stock-Based Compensation We account for stock-based compensation under ASC 718-10, Share Based Payment Transactions ("ASC 718-10"). This requires that the cost resulting from all share-based payment transactions be recognized in the financial statementsbased upon estimated fair values.

Stock-based compensation expense recognized for the years ended December 31, 2013, 2012 and 2011 was approximately $2.1 million, $2.4 million and $3.4 million, respectively. As of December 31, 2013, there was approximately $4.1 million of unrecognized stock-based compensation expense remaining to be recognized over a weighted-average period of 3.4 years.

We estimate the fair value of share-based payment awards on the date of grant.

The value of stock options granted to employees and directors is estimated using the Black-Scholes option-pricing model. The value of each restricted stock unit under our 2007 Performance Incentive Plan (the "2007 Plan") is equal to the closing price per share of our Common Stock on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods.

Stock-based compensation expense recognized in our consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 includes compensation expense for all share-based payment awards based upon the estimated grant date fair value. We recognize compensation expense for share-based payment awards on a straight-line basis over the requisite service period of the award.

As stock-based compensation expense recognized in the years ended December 31, 2013, 2012 and 2011 is based upon awards ultimately expected to vest, it has been reduced for estimated forfeitures. We estimate forfeitures at the time of grant which are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

We estimate the value of stock option awards on the date of grant using the Black-Scholes option-pricing model. This determination is affected by our stock price as well as assumptions regarding 34 expected volatility, risk-free interest rate, and expected dividends. The weighted-average grant date fair value per share of stock option awards granted during the years ended December 31, 2013, 2012 and 2011 was $0.63, $0.48 and $0.89, respectively, using the Black-Scholes model with the weighted-average assumptions presented below. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted-average value of the applicable assumption used to value stock option awards at their grant date. In determining the volatility assumption, we used a historical analysis of the volatility of our share price for the preceding period equal to the expected option lives. The expected option lives, which represent the period of time that options granted are expected to be outstanding, were estimated based upon the "simplified" method for "plain-vanilla" options. The risk-free interest rate assumption was based upon observed interest rates appropriate for the term of our stock option awards. The dividend yield assumption was based on the history and expectation of future dividend payouts. Our estimate of pre-vesting forfeitures is primarily based on our historical experience and is adjusted to reflect actual forfeitures asthe options vest.

For the Year Ended December 31, 2013 2012 2011 Expected option lives 3.7 years 3.5 years 3.5 years Expected volatility 40.11 % 50.67 % 54.86 % Risk-free interest rate 0.85 % 0.56 % 1.20 % Expected dividends 0.00 % 4.27 % 3.93 % The impact of stock-based compensation expense has been significant to reported results of operations and per share amounts. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. For each 1% increase in the risk-free interest rate used in the Black-Scholes option-pricing model, the resulting estimated impact to our total operating expense for the year ended December 31, 2013 would have caused an increase of approximately $19,000. For each 10% increase in the expected volatility used in the Black-Scholes option-pricing model, the resulting estimated impact to our total operating expense for the year ended December 31, 2013 would have caused an increase of approximately $113,000. Because options are expensed over three to five years from the date of grant, the foregoing estimated increases include potential expense for options granted during prior years. In calculating the amount of each variable that is included in the Black-Scholes options-pricing model (i.e., option exercise price, stock price, option term, risk free interest rate, annual dividend rate and volatility), the weighted average of such variable for all grants issued in a given year was used.

If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period.

Income Taxes We account for our income taxes in accordance with ASC 740-10, Income Taxes ("ASC 740-10"). Under ASC 740-10, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. ASC 740-10 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized based on all available positive and negative evidence. As of December 31, 2013 and 2012, we maintain a full valuation allowance against our deferred tax assets due to our prior history of pre-tax losses and uncertainty about the timing of and ability to generate taxable income in the future and our assessment that the realization of the deferred tax assets did not meet the "more likely than not" criterion 35 under ASC 740-10. We expect to continue to maintain a full valuation allowance until, or unless, we can sustain a level of profitability that demonstrates our ability to utilize these assets.

ASC 740-10 also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits." A liability is recognized for an unrecognized tax benefit because it represents an enterprise's potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10. As of December 31, 2013 and 2012, no liability for unrecognized tax benefits was required to be recorded.

Deferred tax assets pertaining to windfall tax benefits on exercise of share awards and the corresponding credit to additional paid-in capital are recorded if the related tax deduction reduces tax payable. We have elected the "with-and-without approach" regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year. Under this approach, the windfall tax benefits would be recognized in additional paid-in capital only if an incremental tax benefit is realized after considering all other tax benefits presently available to us.

Contingencies Accounting for contingencies, including those matters described in the Commitments and Contingencies section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, is highly subjective and requires the use of judgments and estimates in assessing their magnitude and likely outcome. In many cases, the outcomes of such matters will be determined by third parties, including governmental or judicial bodies. The provisions made in the consolidated financial statements, as well as the related disclosures, represent management's best estimate of the then current status of such matters and their potential outcome based on a review of the facts and in consultation with outside legal counsel where deemed appropriate. We would record a material loss contingency in its consolidated financial statements if the loss is both probable of occurring and reasonably estimated. We regularly review contingencies and as new information becomes available may, in the future, adjust its associated liabilities.

Credit Risk of Customers and Business Concentrations Our customers are primarily concentrated in the United States and we carry accounts receivable balances. We perform ongoing credit evaluations, generally do not require collateral, and establish an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. To date, actual losses have been within management's expectations.

For the years ended December 31, 2013, 2012 and 2011, no individual client accounted for 10% or more of consolidated revenue. As of December 31, 2013 and 2012, one client accounted for more than 10% of our gross accounts receivable balance in each period.

Liquidity and Capital Resources Our current assets at December 31, 2013 consisted primarily of cash and cash equivalents, marketable securities, and accounts receivable. We do not hold inventory. Our current liabilities at December 31, 2013 consisted primarily of deferred revenue, accrued expenses and accounts payable. At December 31, 2013, our current assets were approximately $61.0 million, 2.0 times greater thanour 36 current liabilities. With respect to many of our annual newsletter subscription products, we offer the ability to receive a refund during the first 30 days but none thereafter. We do not as a general matter offer refunds for advertising that has run.

We generally have invested in money market funds and other short-term, investment grade instruments that are highly liquid and of high quality, with the intent that such funds are available for sale for acquisition and operating purposes. As of December 31, 2013, our cash, cash equivalents, marketable securities and restricted cash amounted to approximately $59.8 million, representing 55% of total assets. Our cash, cash equivalents and restricted cash primarily consisted of money market funds and checking accounts. Our marketable securities consisted of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds and corporate floating rate notes, with a maximum maturity of three years, and two auction rate securities issued by the District of Columbia with a fair value of approximately $1.6 million that mature in the year 2038. Our total cash-related position is as follows: December 31, December 31, 2013 2012 Cash and cash equivalents $ 45,443,759 $ 23,845,360Current and noncurrent marketable securities 13,097,735 35,394,318 Current and noncurrent restricted cash 1,301,000 1,301,000 Total cash and cash equivalents, current and noncurrent marketable securities and current and noncurrent restricted cash $ 59,842,494 $ 60,540,678 Financial instruments that subject us to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. We maintain all of our cash, cash equivalents and restricted cash in four domestic financial institutions, and we perform periodic evaluations of the relative credit standing of these institutions.

Net cash provided by operating activities totaled approximately $2.5 million the year ended December 31, 2013, as compared to net cash used in operating activities totaling approximately $6.2 million for the year ended December 31, 2012. The improvement in net cash provided by operating activities was primarily related to a decrease in the net loss from operations. Also contributing to the improvement was an increase in deferred revenue resulting from improved subscription sales and a decrease in other receivables, partially offset by reduced noncash expenses and a decrease in accounts payable primarily related to the timing of invoice payments. Excluding cash payments related to the Company's restructuring and other charges totaling approximately $1.5 million during the year ended December 31, 2013, net cash provided by operating activities totaled approximately $4.0 million.

Net cash provided by investing activities of approximately $19.4 million for the year ended December 31, 2013 was primarily the result of approximately $22.2 million of the net maturities of marketable securities, partially offset by approximately $1.8 million related to the acquisition of certain assets from DealFlow and approximately $1.1 million of capital expenditures.

Net cash used in financing activities of approximately $316 thousand for the year ended December 31, 2013 primarily consisted of purchase of treasury stock by retaining shares issuable upon the vesting of restricted stock units in connection with minimum tax withholding requirements, partially offset by cash received from the exercise of stock options.

37 We have a total of approximately $1.3 million of cash that serves as collateral for outstanding letters of credit, which cash is classified as restricted. The letters of credit serve as security deposits for office space in New York City.

We believe that our current cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months. We are committed to cash expenditures in an aggregate amount of approximately $4.7 million through December 31, 2014, in respect of the contractual obligations set forth below under "Commitments and Contingencies." Additionally, Company has reinstated its payment of a $0.025 quarterly dividend beginning with the first quarter of 2014.

As of December 31, 2013 we had approximately $156 million of federal and state net operating loss carryforwards. We maintain a full valuation allowance against our deferred tax assets as management concluded that it was more likely than not that we would not realize the benefit of our deferred tax assets by generating sufficient taxable income in future years. We expect to continue to maintain a full valuation allowance until, or unless, we can sustain a level of profitability that demonstrates our ability to utilize these assets.

In accordance with Section 382 of the Internal Revenue Code, the ability to utilize our net operating loss carryforwards could be limited in the event of a change in ownership and as such a portion of the existing net operating loss carryforwards may be subject to limitation.

Treasury Stock In December 2000, our Board of Directors authorized the repurchase of up to $10 million of our Common Stock, from time to time, in private purchases or in the open market. In February 2004, our Board of Directors approved the resumption of the stock repurchase program (the "Program") under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. However, the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a single class, is necessary in order for us to repurchase our Common Stock (except for the purchase or redemption from employees, directors and consultants pursuant to agreements providing us with repurchase rights upon termination of their service with us), unless after such purchase we have unrestricted cash (net of all indebtedness for borrowed money, purchase money obligations, promissory notes or bonds) equal to at least two times the product obtained by multiplying the number of shares of Series B Preferred Stock outstanding at the time such dividend is paid by the liquidation preference. During the years ended December 31, 2013 and 2012, we did not purchase any shares of Common Stock under the Program. Since inception of the Program, we have purchased a total of 5,453,416 shares of Common Stock at an aggregate cost of approximately $7.3 million. In addition, pursuant to the terms of our 2007 Performance Incentive Plan (the "2007 Plan"), and certain procedures adopted by the Compensation Committee of our Board of Directors, in connection with the exercise of stock options by certain of our employees, and the issuance of shares of Common Stock in settlement of vested restricted stock units, we may withhold shares in lieu of payment of the exercise price and/or the minimum amount of applicable withholding taxes then due. Through December 31, 2013, we had withheld an aggregate of 1,348,883 shares which have been recorded as treasury stock. In addition, we received an aggregate of 208,270 shares as partial settlement of the working capital and debt adjustment from the acquisition of Corsis Technology Group II LLC, and 3,338 shares as partial settlement of the working capital adjustment from the acquisition of Kikucall, Inc. These shares havebeen recorded as treasury stock.

Commitments and Contingencies We are committed to cash expenditures in an aggregate amount of approximately $4.7 million through December 31, 2014, primarily related to operating leases for office space, which expire at various 38 dates through August 31, 2021. Certain leases contain escalation clauses relating to increases in property taxes and maintenance costs. Rent and equipment rental expenses were approximately $1.5 million, $1.5 million and $1.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Additionally, we have agreements with certain of our outside contributors, whose future minimum payments are dependent on the future fulfillment of their services thereunder. As of December 31, 2013, total future minimum cash payments are as follows: Payments Due by Year After Contractual obligations: Total 2014 2015 2016 2017 2018 2018 Operating leases $ 16,708,304 $ 1,872,688 $ 1,819,238 $ 1,967,230 $ 2,557,338 $ 2,622,557 $ 5,869,253 Employment agreement 10,000,000 2,500,000 2,500,000 2,500,000 2,500,000 - - Outside contributors 391,667 350,000 41,667 - - - - Total contractual cash obligations $ 27,099,971 $ 4,722,688 $ 4,360,905 $ 4,467,230 $ 5,057,338 $ 2,622,557 $ 5,869,253 Future minimum cash payments for the year ended December 31, 2014 related to operating leases have been reduced by approximately $733 thousand related to payments to be received related to the sublease of office space.

See Note 12 (Commitments and Contingencies) in Notes to Consolidated Financial Statements for a discussion of contingencies.

New Accounting Pronouncements See Note 1 in Notes to Consolidated Financial Statements for new accounting pronouncements impacting the Company.

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