UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

COMMISSION FILE NUMBER 0-25779



THESTREET.COM, INC.(Exact name of Registrant as specified in its charter)



|                                                                                     |  |                                              
|------------------------------------------------------------------------------------ |  | ---------------------------------------------
|Delaware(State or other jurisdiction ofincorporation or organization)                |  | 06-1515824(I.R.S. EmployerIdentification No.)
|14 Wall Street, 15th FloorNew York, New York(Address of principal executive offices) |  | 10005(Zip code)                              

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



Securities registered pursuant to Section 12(b) of the Act:None.

Securities registered pursuant to Section 12(g) of the Act:

|                                        |  |                                                            
|--------------------------------------- |  | -----------------------------------------------------------
|Title of Each Class                     |  | Name of Each Exchange on Whichthe Securities are Registered
|Common Stock, par value $0.01 per share |  |                                                            



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes£NoS

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes£NoS

Indicate by a 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. YesSNo£

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 the 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.£

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of
  the Exchange Act.

Large accelerated filer£Accelerated filerSNon-accelerated filer£

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes£NoS

The
  aggregate market value of the Registrants common stock held by non-affiliates
  of the Registrant (assuming, for the sole purpose of this calculation, that
  all directors and executive officers of the Registrant are affiliates),
  based upon the closing price of the Registrants common stock on June 30,
  2006 as reported by Nasdaq, was approximately $252.4 million.

Indicate the number of shares outstanding of each of the Registrants classes of common stock, as of the latest practicable date.

|                              |  |                                              
|----------------------------- |  | ---------------------------------------------
|Title of Each Class           |  | Number of Shares Outstandingat March 12, 2007
|Common Stock, $0.01 par value |  |                                              

Documents Incorporated By Reference

Part III of this Form 10-K incorporates by reference certain information from the Registrants Definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 24, 2007, to be filed
  with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.





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THESTREET.COM, INC.2006 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PagePART IItem 1.
    
    Business
    
    
    
    1Item 1A.
    
    Risk Factors
    
    
    
    10Item 1B.
    
    Unresolved Staff Comments
    
    
    
    16Item 2.
    
    Properties
    
    
    
    17Item 3.
    
    Legal Proceedings
    
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    
    18PART IIItem 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    
    19Item 6.
    
    Selected Financial Data
    
    
    
    20Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    
    22Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    
    38Item 8.
    
    Financial Statements and Supplementary Data
    
    
    
    38Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    
    38Item 9A.
    
    Controls and Procedures
    
    
    
    39Item 9B.
    
    Other Information
    
    
    
    40PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    
    41Item 11.
    
    Executive Compensation
    
    
    
    41Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    
    41Item 13.
    
    Certain Relationships and Related Transactions
    
    
    
    42Item 14.
    
    Principal Accounting Fees and Services
    
    
    
    42PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    
    42SIGNATURES
    
    
    
    44ii

THESTREET.COM, INC.2006 ANNUAL REPORT ON FORM 10-K
PART I
Item 1. Business.
Overview
TheStreet.com, Inc., together with its wholly owned subsidiaries (collectively, the Company, our, we, or us), is a leading multimedia provider of business, investment and ratings content. We
  distribute our content to customers through proprietary properties, including Web sites, email services, print publications and audio and video programming. We also syndicate content for distribution by
  other media companies. Our goal is to provide services that empower a wide audience of investors, from those new to the world of investing to active retail and professional investors, by delivering a broad
  array of content they can rely upon to make sound, informed financial decisions.
We pioneered the electronic publishing of business and investment information on the Internet through our creation of TheStreet.com, which we launched in 1996 as a paid subscription news and
  commentary Web site. We operated Independent Research Group LLC (IRG Research), a registered broker-dealer providing proprietary equity research and brokerage services to institutional clients,
  from late 2002 until we discontinued its operations in the second quarter of 2005. In August 2006, we acquired the assets of Weiss Ratings, Inc., which we have rebranded TheStreet.com Ratings (Ratings).
  Through Ratings, we now provide independent ratings and evaluations of stocks, mutual funds, exchange traded funds (ETFs) and financial institutions, including insurers, healthcare providers, banks and
  savings and loans.
We offer a variety of both free and paid subscription services to retail and professional investors. Our services are produced by approximately 50 in-house reporters and editors and 70 contributing
  financial analysts, traders and money managers.
In 2006, we received the following awards and distinctions:

    
    
    
    2006 Media Industry Newsletters Best E-mail Newsletter Award Winner for TheStreet.com Options Alerts
    
    
    
    Society of America Business Editors and Writers Award Winner of Best in Business for TheStreet.com column: The Five Dumbest Things on Wall Street This Week
    
    
    
    2006 Gerald Loeb Award for Distinguished Business and Financial Journalism, Finalist for News Services and Online Content category
    
    
    
    Media Industry Newsletter, Editorial Excellence and Special Online Coverage, honorable mention
    
    
    
    2007 Codie Awards finalist for Best Online News Service for www.thestreet.com the Companys free, flagship Web site
    
    
    
    2007 Codie Awards finalist for Best Financial Blog for Jim Cramers Daily Booyahs!
    
    
    
    2006 Media Industry Newsletter Best of the Web Awards, Finalist for Editor of a Website (David Morrow, the Companys Editor-in-Chief)TheStreet.com Services
Consumer Services
We offer a variety of services targeting retail consumers. Our flagship service, TheStreet.com, is a free, advertising-supported Web site that provides financial news reporting and commentary for
  investors of all experience levels. Additionally, we currently offer proprietary, paid subscription services to retail consumers, with list prices for annual subscriptions ranging from $150 to $1,000. The variety
  of services is intended to appeal to different segments of the investing public, including fledgling investors,
1

consumers interested in personal finance guidance, long-term and short-term active investors, day and swing traders and fundamental and technical traders.
Free Services
We earn revenue from our free retail consumer services through the sale of advertising and sponsorship placements. See Advertising Sales. Our roster of free retail consumer services includes the
  following:
TheStreet.com
Our flagship site, TheStreet.com, was originally launched in 1996 as a paid subscription news and commentary Web site and re-launched in 2000 as a free, advertising-supported site. TheStreet.com
  provides high-quality financial commentary, analysis and news with financial coverage to individual investors of all experience levels and professional investors. Updated throughout the trading day,TheStreet.coms stories put readers on the trading floor with some of the leading commentators and journalists in the business. Mentions of a particular company in a story contain embedded links to the
  following pages: a tools and quotes page, Cramers Take, a page with links to all stories on the company by James Cramer, and a Ratings page (see below). TheStreet.com provides investigative
  journalism, commentary on market trends, specific stock and mutual fund analysis, and has recently expanded its personal finance and lifestyle sections.
TheStreet.com TV
TheStreet.com TV is a free online video network providing a daily menu of original business news and short form feature programs. The programs are filmed in the Companys studio at its principal
  offices at 14 Wall Street and on location including weekly reporting from The NASDAQ Stock Market. TheStreet.com TV offers continuous programming each day to keep investors informed of important
  changes in daily market conditions as well as information regarding personal finance and other topics that are important to investors. TheStreet.com TV currently produces 10 to 20 new programs each
  weekday and employs a full-time executive producer, two full-time correspondents, and its own production staff. Aside from business news updates delivered during the trading day, TheStreet.com TV offers
  feature programs that include Sixty Second Savings, a minute-long segment on how to save money; and Wall Street Confidential, a daily mid-day analysis of the issues and trends affecting that days
  trading. TheStreet.com TV is available on both the flagship Web site and the RealMoney Web site.
Email Newsletters
We offer several free newsletters, including daily and weekly market bulletins, recaps from TheStreet.com TV and more. These newsletters are available by email to customers who register as members
  of our Web sites.
Podcasts
TheStreet.coms first podcast, The Real Story, debuted September 1, 2006. A free, 20-minute podcast hosted by veteran journalist Aaron Task, The Real Story covers the top stories of the trading
  day, often featuring market experts as guests to provide additional analysis of the days events. The Real Story is available for download on the TheStreet.com and RealMoney Web sites and through
  Apple, Inc.s iTunes store.
TheStreet.com Ratings
Our ratings business, TheStreet.com Ratings, tracks the risk adjusted performance of more than 16,000 mutual funds and more than 6,000 stocks. In addition, Ratings uses proprietary quantitative
  computer models to evaluate the financial strength of more than 13,000 financial institutions, including life, health and annuity insurers, property and casualty insurers, HMOs, Blue Cross Blue Shield plans,
  banks and savings and loans. The stock, ETF and mutual fund ratings have been incorporated into our
2

free Web site, TheStreet.com, and links to a companys Ratings page can be found in all published stories. Additionally, the Ratings portion of the site contains lists of top rated stocks in five sectors, and
  offers stock, ETF and mutual fund screeners. See BusinessTheStreet.com ServicesConsumer ServicesPaid Subscription Services for a description of Ratings subscription services.
Paid Subscription Services
In addition to the free services described above, we also offer a variety of paid subscription services, including the following:
RealMoney
The foundation of our consumer line of paid subscription services is RealMoney, a Web site publication launched in 2000. RealMoney provides real-time investing ideas, trading strategies, technical
  analysis and expert market commentary from more than 45 journalists and money managers covering many industries. Mentions of a particular company in a story contain embedded links to the following
  pages: a tools and quotes page, Cramers Take, a page with links to all stories on the company by James Cramer, and TheStreet.com Ratings page. RealMoneytargets active market participants and self-
  directed investors, and has a large following among investment professionals who rely on the sites intra-day market commentary to help them make informed investment decisions. RealMoney features in-
  depth research for long-term investors and intra-day Web logs for short-term traders. RealMoney is designed as a general resource for investors, often the first paid subscription service a new user purchases,
  and it acts as a feeder to our other paid subscription services, many of which contain more targeted content.
RealMoney Silver
RealMoney Silver was launched in 2006, using content from the former professional service RealMoney Pro Advisor (launched in 2003) which was repackaged and edited to serve a consumer audience.RealMoney Silver is the Companys first bundled offering of paid subscription services, consisting of several existing services offered by TheStreet.com.
RealMoney Silver consists of three sections: Street Picks, which includes Action Alerts PLUS, Stocks Under $10, and TheStreet.com Value Investor; RealMoney Investing and Trading Ideas, which
  consists of commentary from RealMoney and Doug Kass, a contributor to Street Insight, the Companys professional service, and Earnings Calls, a summary of earnings calls that appears regularly onStreet Insight.
Subscribers to RealMoney Silver receive access to the RealMoney Web site, which displays the services in one convenient place. In addition, RealMoney Silver subscribers receive all the alerts and
  model portfolios that are part of the Action Alerts PLUS, TheStreet.com Stocks Under $10, and TheStreet.com Value Investor services.
Action Alerts PLUS
Action Alerts PLUS is a paid subscription service launched in 2001 providing active, self-directed investors with an intimate view of the stock picks and portfolio management strategies of well-known
  former hedge fund manager James J. Cramer. This paid subscription service provides exclusive access to specific, action-oriented investment ideas. Action Alerts PLUS targets investors looking for advice on
  when and how best to invest in the stock market.
The Action Alerts PLUS portfolio contains the actual portfolio of individual stocks held by Mr. Cramers charitable trust, allowing users to track the performance of trades made in Mr. Cramers
  charitable trust portfolio. Before he executes a trade in the trust, an email is sent to subscribers detailing the trade and the rationale behind it. Subscribers can use Mr. Cramers charitable trust portfolio as a
  model for their own investments or as a starting point to identify stocks that match their own investing styles.
3

In addition to the email alerts, subscribers receive an end-of-week wrap-up in which Mr. Cramer rates the portfolio stocks according to where he believes they are headed. The online portfolio contains
  overall performance information, initial stock purchase prices, trade dates and performance to date. Furthermore, users are able to access the archive of alerts enabling them to monitor how trading
  strategies and tactics have evolved over time. See Risk FactorsA Significant Portion of Our Subscription Revenue is Generated by James J. Cramer and Other Key Writers.
TheStreet.com Stocks Under $10
TheStreet.com Stocks Under $10 was launched in 2004. The Stocks Under $10 investment teamFrank Curzio and his assistant Larsen Kusick, both research analysts at TheStreet.comuse proprietary
  screening methodologies, based on fundamental analysis, management quality and technical analysis, to identify opportunities among the universe of stocks priced under $10. Stocks Under $10 features
  stocks of companies that are relatively unknown among Wall Street analysts, have strong and/or improving fundamentals and present a compelling story that may serve as a catalyst for growth.
Subscribers are sent email alerts identifying the recommended stocks before the team executes the simulated stock trade for its own model portfolio. In addition to the email alerts, subscribers receive a
  weekly summary in which the portfolio stocks are rated according to where the team believes they are headed. The service also includes online access to the model portfolio with overall performance
  information, initial stock purchase prices, trade dates and performance to date. Users are able to access the archive of alerts so they can monitor how the trading strategies and tactics have evolved over
  time.
TheStreet.com Breakout Stocks
TheStreet.com Breakout Stocks was launched in 2006. Breakout Stocks is managed by Michael Comeau, a research analyst at TheStreet.com. Mr. Comeau uses proprietary screening methodologies,
  including analyses of the companys fundamentals and management quality, to identify companies that appear likely to have sharp, sustained increases in their share prices.
Subscribers receive email alerts identifying the recommended stocks before Mr. Comeau executes the simulated trade for the Breakout Stocks model portfolio. In addition to the email alerts,
  subscribers receive a weekly summary in which the portfolio stocks are rated, based on whether Mr. Comeau recommends buying shares in them now or waiting until a more attractive price emerges. The
  service also includes online access to the model portfolio with overall performance information, initial stock purchase prices, trade dates and current performance.
TheStreet.com Options Alerts
TheStreet.com Options Alerts is an email newsletter service launched in 2005 that contains a model portfolio of specific option investment choices. The service is written by Steven Smith, a columnist forRealMoneyand a former seat-holding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE).
Subscribers to Options Alerts receive three to four emails each week that detail the options trades Mr. Smith is examining. The service is different from many other newsletter services in that
  subscribers receive a weekly summary at the beginning of the week. Instead of being a history of what has happened that week, the Options Alerts summary details the options trades that Mr. Smith will
  examine during the next five trading days. TheStreet.com Options Alerts was named the Best Email Newsletter Service in 2006 by the Media Industry Newsletter (MIN).
The Telecom Connection
The
  Telecom Connection is a weekly email newsletter launched in 2002 that provides
  critical research and in-depth analysis of individual companies and macroeconomic
  trends in the telecommunications industry. It is currently written by RealMoney
  columnist Bob Faulkner, who has logged 18 years as an investment professional,
  and is aimed at both active telecom investors and industry executives.
4

Two out of the four email reports distributed per month update users on Mr. Faulkners model telecom stock portfolio. In these issues, Mr. Faulkner shares his stock picking techniques and the
  strategies behind them. The third email contains in-depth analysis of a particular industry and/or a particular technology within the telecom industry, and provides users with investing ideas based on
  companies that operate in the industry or use the technology in question. The fourth issue focuses on macro trends in the telecom industry. Each issue also contains a Q&A section. In addition, subscribers
  have access to a Web page that displays Mr. Faulkners model portfolio of recommended telecom stocks and their performance to date. Special email alerts are sent between issues when Mr. Faulkner sees
  the need to update subscribers on key events that affect model portfolio holdings or when there is an important development in the telecom industry.
TheStreet.com Top Stocks
TheStreet.com Top Stocks is a daily email newsletter launched in 2006 that contains stock charting analysis and trading education from RealMoney columnist Helene Meisler, a proponent of the rigorous
  stock trading methodology known as technical analysis. Ms. Meisler uses sophisticated charting and other technical analysis tools to identify stocks that she believes provide the best opportunities for short-
  term profits.
TheStreet.com Value Investor
TheStreet.com Value Investor is a weekly email newsletter launched in 2002 that offers long-term investors stock picks across all industries, focusing on undervalued companies that the author believes
  are positioned to beat the S&P 500 over a one to three-year period. The service is written by David Peltier, a research analyst currently at TheStreet.com and formerly with Individual Investor magazine. Mr.
  Peltier uses a valuation method that combines traditional fundamental analysis with industry insights and technical analysis to find recommended entry prices. With each issue, Mr. Peltier discusses his
  strategies for identifying value stocks and provides a detailed review of selected stocks from the model portfolio of value stocks. While The Value Investor is a long-term investing newsletter, Mr. Peltier also
  notifies subscribers when he believes a short-term opportunity or risk has arisen. Subscribers also have access to all archived newsletters.
The Daily Swing Trade
The Daily Swing Trade is an email newsletter launched in 2002 that contains stock analysis and trading education from RealMoney columnist Alan Farley, a proponent of the stock trading methodology
  known as swing trading and the author of a best-selling book on the subject. Swing traders use technical analysis of market patterns and cycles to time their entry and exit points for particular stocks. Using
  his proprietary methodology, Mr. Farley identifies stocks that he believes provide the best opportunities for profits in the short-term, ranging from a few days to several weeks, and provides technical charts
  and analysis. The service also includes an online directory that enables subscribers to check stock positions on past charts. Each issue contains a Q&A section in which Mr. Farley answers technical and
  strategic questions from subscribers about his approach and his views on the market.
The Dividend Stock Advisor
The Dividend Stock Advisor is a bi-weekly email newsletter launched in 2003 that provides advice on establishing and maintaining a well-balanced, long-term, income-producing portfolio. The service
  was launched in response to subscriber requests for guidance in devising secure financial plans and is managed by David Peltier.
Subscribers
  have access to material focused on personal finance issues such as tax planning,
  insurance, alternative methods of saving and mutual fund strategies and tactics.
  The newsletter also contains insight on significant news events and how individual
  companies are either increasing or reducing their dividend flows. The Dividend
  Stock Advisor also features a model portfolio of 15 to 20 dividend- yielding
  stocks that Mr. Peltier believes are well positioned for all types of market
  conditions
5

and meet the services strict financial criteria. Users also receive alerts of certain changes in tax laws that affect dividends and advice on how to leverage these changes to their advantage. Each issue includes
  a Q&A section.
TheStreet.com Ratings
In addition to the free ratings available from each companys ratings page on TheStreet.com Web site, Ratings also offers subscriptions to each industrys ratings in book form. These are published on a
  quarterly basis. The primary subscribers for these books are public libraries. Ratings also licenses its ratings and research to a number of large investment banking and brokerage firms that distribute
  independent research to their retail customers as part of the Global Analyst Research Settlement among the firms, the SEC, the New York State Attorney Generals Office and the NASD.
Consumer Services Sales and Marketing
We pursue a variety of sales and marketing initiatives to sell subscriptions to our premium services, increase traffic to our sites, license our content, expose our brands, and build our customer databases.
  These initiatives include promoting our services using online and email marketing, establishing content syndication and subscription distribution relationships with leading companies, and engaging in an
  ongoing public awareness campaign. See Risk FactorsDifficulties Associated With Our Brand Development May Harm Our Ability to Attract Subscribers.
Online and Email Marketing
We
  engage in extensive online and email marketing to increase the number of subscribers
  to our premium services, increase traffic to our Web sites and grow our customer
  databases. Our in-house online marketing and creative design teams create a
  variety of marketing campaigns, which are then implemented by our technical
  and operations team and by third party service providers. We also have a reporting
  and analysis group that analyzes traffic and subscription data to determine
  the effectiveness of the campaigns. In 2006, these programs consisted primarily
  of promotional advertising campaigns on search engines, online media networks,
  financial portals and niche Web sites, and email marketing campaigns.
Content Syndication and Subscription Distribution
We use content syndication and subscription distribution arrangements to capitalize on the cost efficiencies of online delivery and create additional value from content we have already produced for our
  own publication. By syndicating our content for other leading Web sites to host on their own sites, we expose our brands and top-quality writing to millions of potential users. We also syndicate our content
  to other leading Web sites that index our headlines on their stock quote result pages, which generates additional traffic to our sites. This results in additional page views and offers the opportunity for
  increased advertising revenue and subscription sales. In 2006, we expanded our content syndication relationships with several companies, including Yahoo!, MSN, AOL and Google, to include video fromTheStreet.com TV, allowing us to create awareness for our brand, attract additional users to our site and obtain advertising revenue. Finally, we license content from TheStreet.com Ratings, which provides
  ratings and research on over 6,000 publicly traded companies, to a number of large investment banking and brokerage firms that distribute independent research to their retail customers as part of the
  Global Analyst Research Settlement.
We also use subscription distribution arrangements with online financial services firms and other companies. These agreements allow their customers to receive discounts on certain of our premium
  subscription services or to access our free and premium content, thereby exposing our brands and content to new audiences. See Risk FactorsFailure to Establish and Maintain Strategic Relationships With
  Other Companies Could Decrease Our Subscriber and Reader Base.
6

Public Awareness
We seek to raise our visibility and enhance the brand recognition of our services. In March 2005, the CNBC cable television network introduced Mad Money, a stock market commentary program
  hosted by James J. Cramer, markets commentator for TheStreet.com, as well as our co-founder, director and largest shareholder. According to CNBC, the total viewership for the three nightly Monday
  through Friday telecasts of Mad Money has averaged 388,000 viewers per night in 2006. In addition, Mr. Cramer writes a monthly column for New York magazine, a weekly magazine with weekly
  readership of approximately 1.6 million. The broad reach of our brand promotion through these endeavors has exposed our services to new audiences, helping to increase traffic and subscription
  opportunities. See Risk FactorsFailure to Establish and Maintain Successful Strategic Relationships with Other Companies Could Decrease our Subscriber and Reader Base.
In 2006, our writers and our stories were mentioned or featured in numerous reports by major news outlets, including The Wall Street Journal, Bloomberg, The New York Times, The New York Post,
  Reuters, Dow Jones Newswires, Investors Business Daily, The Washington Post, The San Francisco Chronicle, Seattle Times, Newsday,theAssociated Press and the Detroit Free Press.Additionally, some of
  our writers appear on television and radio, including CNBC, CNN, NBC, CBS, and MSNBC. Furthermore, maintaining relationships with such companies as Microsoft, Yahoo!, AOL and Google to
  distribute our content helps increase visibility of our brand and our individual contributors.
Professional Services
We currently offer one subscription service designed to help professional market investors whose job depends on investing performance. Subscribers to this service include financial planners, financial
  advisors, financial consultants, money managers, hedge fund managers and retail stockbrokers.
Street Insight
Street Insight is an online subscription service launched in 2002 that targets investment professionals seeking both macro and micro information on the intra-day movements of the financial markets.
  Contributors to the service include well-established hedge fund and money managers, professional traders, analysts and market strategists.
Street Insight provides proprietary features designed for professional investors, including:

    
    
    
    A number of intra-day blogs produced by highly regarded and well known hedge fund managers that provide: (1) insight into daily market movements, (2) individual trades and/or investments that
      are being considered or made, and (3) news, analysis and portfolio strategies.
    
    
    
    Pre and post coverage and analysis of corporate conference and earnings calls by specialists in the industry or company in question.Subscribers include retail brokers and buy-side portfolio managers.
Professional Services Sales and Marketing
We pursue a variety of marketing and sales initiatives for our professional offering, including the use of a direct sales force that markets our professional service by focusing on developing relationships
  with buy-side institutions, both at the level of the individual end-user and the corporate executive suite. We also market and sell our service directly to stockbrokers, financial advisors and investment
  counselors.
Additionally, we market our professional content by publishing it as special promotional features on our consumer Web sites and by cross-promoting it to subscribers of our consumer services who have
  indicated to us in their customer information or in surveys that they are investment professionals or are interested in professional content.
7

Advertising Sales
In 2006, our network generated an average of approximately 73 million page views per month, with 4.4 million unique users per month. We monetize this traffic through the sale of the following types
  of advertising placements:

    
    
    
    Advertisement and sponsorship placements in our advertising-supported Web site, TheStreet.com, our paid subscription site, RealMoney, and in certain of our other sites;
    
    
    
    Advertisement placements in our free email newsletters;
    
    
    
    Sponsorship of stand-alone emails to our registered users;
    
    
    
    Advertisements in TheStreet.com TV, our video offering; and
    
    
    
    Advertisements in our audio podcasts;Advertising sales experienced significant growth in 2006, which we believe is attributable to several factors. First, as a result of the attractiveness of our expanded content offerings and our success in
  implementing marketing relationships with other high-traffic Web sites, we experienced strong increases in page views and unique visitors to our network of Web sites. The growth in page views increased
  the amount of advertising inventory we had available to sell to advertisers, while the growth in our unique audience attracted new advertisers to the site, and allowed us to expand our relationships with a
  number of our existing advertisers. Additionally, we believe that the continued shift of advertising spending from traditional media to online advertising has led generally to increased spending by our
  advertisers. See Risk FactorsWe May Have Difficulty Selling Our Advertising Inventory, a Significant Portion of Which Is Concentrated Among Our Top Advertisers.
We believe that the quality of our audience presents a desirable reader demographic for advertisers in the financial services, technology, automotive, travel, pharmaceutical and retail industries.
  According to a Winter 2006/2007 @Plan survey conducted by Nielsen/NetRatings, a well-known third-party marketing research firm, 19% of our readers have an average household income of $150,000 or
  above and 16% have an investment portfolio worth at least $250,000. Additionally, according to the same study, our readers are three times more likely than the average Internet user to have an investment
  portfolio valued over $1,000,000 and are more than eight times more likely to trade stocks online.
Radio
During 2006, we produced a one-hour financial radio program entitled RealMoney with Jim Cramer. The program was aired on CBS Radio stations in the New York, Los Angeles, Chicago, Detroit,
  Pittsburgh, Houston, Baltimore and Portland markets, and syndicated nationally to both CBS and other radio stations by Westwood One, Inc. In December 2006, we ceased production of the program in
  order to facilitate host Jim Cramers reallocation of his time to focus on TheStreet.coms video and multimedia initiatives, including participating more frequently in TheStreet.com TV. Previously aired radio
  programs remain available on an archived basis on our Web site.
Competition
We face competition for customers, advertisers, employees and contributors from financial news and information sources, and from many other types of companies. Our chief competitors include:

    
    
    
    online services or Web sites focused on business, finance, or investing, such as The Wall Street Journal Online (www.wsj.com), Forbes.com, SmartMoney.com, MarketWatch.com, The Motley Fool and
      CNBC.com, as well as financial portals such as Yahoo! Finance and Google Finance;
    
    
    
    publishers and distributors of traditional media focused on business, finance and investing, including print and radio, such as The Wall Street Journal and financial talk radio programs, and business
      television networks such as CNBC;
    
    
    
    investment newsletter publishers, such as Phillips Publishing and Agora Publishing; and
    
    
    
    established ratings services, such as Standard & Poors, Morningstar, Inc. and Lipper.8

Additionally, advances in technology have reduced the cost of production and online distribution of print, audio and video content, which has resulted in the proliferation of small, often self-published
  providers of free content, such as bloggers. Our ability to compete depends on many factors, including the quality, originality, timeliness, insightfulness and trustworthiness of our content, the success of our
  recommendations and research, our ability to introduce products and services that keep pace with new investing trends, the ease of use of our services and the effectiveness of our sales and marketing
  efforts.
Infrastructure, Operations & Technology
The Companys main technological infrastructure consists of proprietary content-management, subscription management and eCommerce systems, which are hosted primarily at a facility of Savvis
  Communications Corporation (Savvis) in Jersey City, New Jersey. The systems that provide the content of our newly acquired ratings business are currently located in Florida. Our operations are
  dependent in part on our ability and that of Savvis to protect our systems against damage from fire, earthquakes, power loss, telecommunications failure, break-ins, computer viruses, hacker attacks, terrorist
  attacks and other events beyond our control. See Risk FactorsSystem Failure May Result in Reduced Traffic, Reduced Revenue and Harm to Our Reputation.
The content-management system allows our stories, videos and market journals to be prepared for publication to a large distribution audience. The system enables us to distribute and syndicate our
  content economically and efficiently to multiple destinations in a variety of technical formats.
Our subscription management system is based on proprietary software. This system allows us to communicate automatically with readers during their free-trial and subscription periods. The system is
  capable of yielding a wide variety of customized subscription offers to potential subscribers, using various communication methods and platforms.
The eCommerce platform controls user access to a wide array of service offerings. The system automatically controls all aspects of online daily credit card billing, based upon user selected billing terms.
  All financial revenue recognition reports are automatically generated, providing detailed reporting on all account subscriptions. This generally allows a user to sign up and pay for an online service for his or
  her selected subscription term (annual or monthly) without any manual staff intervention at the Company.
Our Ratings business is based on a set of proprietary statistical models that use key financial metrics and indicators to rate stocks, mutual funds, ETFs, banks, insurance and other financial institutions.
  The data and output from these models are managed and stored within a content management system and updated daily based on changes in markets. The system is capable of search-based syndication of
  customized ratings data that can be distributed in a variety of technical formats.
Intellectual Property
To protect our rights to intellectual property, we rely on a combination of trademark, copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with our
  employees, affiliates, customers, and other business partners. We have registered several trademarks in the United States and we have pending U.S. applications for other trademarks. Additionally, we
  aggressively police Internet message boards and other Web sites for copyrighted content that has been republished without our permission and aggressively pursue both the poster and any Internet service
  provider or other forum provider. To protect our intellectual property rights as well as protect against infringement claims in our relationships with business partners, we generally look to incorporate
  contractual provisions protecting our intellectual property and seeking indemnification for any third party infringement claims. Some of our services incorporate licensed third-party technology. In these
  license agreements, the licensors have generally agreed to defend, indemnify and hold us harmless with respect to any claim by a third party that the licensed software infringes any patent or other
  proprietary right. We cannot provide assurance that the foregoing provisions will be adequate to protect us from infringement claims. Any infringement claims, even if not meritorious, could result in the
  expenditure of significant financial and managerial resources on our part, which could materially adversely affect our business, results of operations and financial condition. See Risk FactorsWe May Not
  Adequately
9

Protect Our Own Intellectual Property and May Incur Costs to Defend Against, or Face Liability for, Intellectual Property Infringement Claims of Others.
Employees
As of December 31, 2006, the Company had 181 employees, of whom 70 worked in editorial, 34 in sales and marketing, 25 in technology, 21 in finance and administration and 31 employees of its
  wholly-owned subsidiary, TheStreet.com Ratings, Inc., including 19 research and analysis representatives, 11 sales and marketing and one general administrative representative. The Company has never had a
  work stoppage and none of its employees is represented under collective bargaining agreements. The Company considers its relations with its employees to be good.
Government Regulation
We are subject to government regulation in connection with securities laws and regulations applicable to all publicly owned companies, as well as laws and regulations applicable to businesses generally.
  Since 2001, the Companys activities have evolved to include the offering of stand-alone services providing impersonal investment advice such as stock and investment strategy recommendations to
  subscribers, in contrast to providing such advice as part of a larger online financial publication of more general and regular circulation. As a result, in 2002 TheStreet.com, Inc. registered with the SEC as an
  investment advisor under the Investment Advisers Act of 1940 (the Advisers Act) and is now subject to the Advisers Act and the rules and regulations thereunder, which impose, among other things,
  various recordkeeping, reporting and disclosure requirements. See Risk FactorsGovernment Regulation and Legal Uncertainties.
We are also increasingly subject to government regulation and legislation specifically targeting Internet companies, such as privacy regulations adopted at the local, state, national and international
  levels and taxes levied at the state level. Due to the increasing popularity and use of the Internet, enforcement of existing laws, such as consumer protection regulations, in connection with Web-based
  activities has become more aggressive, and it is expected that new laws and regulations will continue to be enacted at the local, state, national and international levels. Such new legislation, alone or
  combined with increasingly aggressive enforcement of existing laws, could inhibit the growth in use of the Internet and decrease the acceptance of the Internet as a communications and commercial medium,
  which could in turn decrease the demand for our services or otherwise have a material adverse effect on our future operating performance and business. See Risk FactorsWe Face Government Regulation
  and Legal Uncertainties.
Available Information
The Companys flagship Web site is located at http://www.thestreet.com. The Company makes available free of charge, on or through its Web site, its annual, quarterly and current reports, and any
  amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the SEC. Information contained on the Companys Web site is not part of this report or any other
  report filed with the SEC.
Item 1A. Risk Factors.
You should carefully consider the following material risks facing the Company. If any of the following risks occur, the Companys business, results of operations or financial condition could be
  materially adversely affected.
Our Quarterly Financial Results May Fluctuate and our Future Revenue Is Difficult to Forecast
Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control, including:

    
    
    
    the level of interest and investment in the stock market by both individual and institutional investors;10


    
    
    
    the willingness of investors to pay for content distributed over the Internet, where a large quantity of content is available for free;
    
    
    
    demand for advertising on our Web sites, which is affected by advertising budget cycles of our customers and the demand for advertising on the Internet generally;
    
    
    
    subscription price reductions attributable to decreased demand or increased competition;
    
    
    
    new products or services introduced by our competitors;
    
    
    
    content distribution fees or other costs;
    
    
    
    costs associated with system downtime affecting the Internet generally or our Web sites in particular; and
    
    
    
    general economic and market conditions.Although we generated net income for the full year of 2006, you should not rely on the results for those periods as an indication of future performance. We may not be cash flow positive or generate
  net income in future periods. We forecast our current and future expense levels based on expected revenue and our operating plans. Because of the above factors, as well as other material risks we face, as
  described elsewhere in this report, our operating results may be below the expectations of public market analysts and investors in some future quarters. In such an event, the price of our common stock is
  likely to decline.
A Significant Portion of Our Subscription Revenue is Generated by James J. Cramer and Other Key Writers
We strive to differentiate our services from those provided by other financial and investing products available in the marketplace, having introduced, in recent years, publications containing a broad
  variety of features from a multitude of contributors, as well as more narrowly targeted, trading-oriented newsletters, some of which are the work of an individual writer. While we believe that the success of
  our publications is dependent in part upon our brands, some of these publications, particularly the newsletters, nonetheless reflect the talents, efforts, personalities and reputations of their respective writers.
  As a result, the services of these key writers, particularly Company co-founder James J. Cramer, form an essential element of our subscription revenue. Accordingly, we seek to compensate and provide
  incentives for these key writers through competitive salaries, stock ownership and bonus plans, and have entered into employment agreements with several of them, including Mr. Cramer, who in August
  2005 entered into a new employment agreement with us for a term expiring on December 31, 2007. However, we can make no assurances that these programs will enable us to retain key writers or, should
  we lose the services of one or more of our key writers to death, disability, loss of reputation or other reason, to attract new writers acceptable to readers of our publications. The loss of services of one or
  more of our key writers could have a material adverse effect on our business, results of operations and financial condition.
The Loss of the Services of Other Key Employees Could Affect Our Business
Our continued success also depends upon the retention of other key employees, including executives to operate our business, technology personnel to run our publishing, commerce, communications,
  video and other systems, and salespersons to sell our advertising inventory. Several, but not all, of our key employees are bound by employment or non-competition agreements. In addition, we may incur
  increased costs to continue to compensate our key executives, as well as other employees, through competitive salaries, stock ownership and bonus plans. Nevertheless, we can make no assurances that these
  programs will allow us to retain key employees or hire new employees. The loss of one or more of our key employees, or our inability to attract experienced and qualified replacements, could materially
  adversely affect our business, results of operations and financial condition.
11

We May Have Difficulty Increasing Our Advertising Revenue, a Significant Portion of Which Is Concentrated Among Our Top Advertisers
Our ability to increase our advertising revenue depends on a variety of factors, including general market conditions, seasonal fluctuations in financial news consumption and overall online usage, our
  ability to increase our unique visitors and page view inventory, our ability to attract advertisers to advertise on our video offerings at a higher CPM rate than traditional text base advertising fees and our
  ability to win our share of advertisers total advertising budgets from other Web sites, television, radio and print media. While we have recently experienced increases in our online advertising revenue, there
  can be no assurance that such increases will continue. If our advertising revenue decreases because of the foregoing, our business, results of operations and financial condition could be materially adversely
  affected.
In 2006, our top five advertisers accounted for approximately 34% of our total advertising revenue, an increase from 33% for 2005. Furthermore, although we have had success attracting advertisers
  from outside the financial services industry, such as advertisers of automotive and luxury goods, a large proportion of our top advertisers are concentrated in financial services, particularly in the online
  brokerage business. If these industries were to weaken significantly or to consolidate, or if other factors caused us to lose a number of our top advertisers, our business, results of operations and financial
  condition could be materially adversely affected. As is typical in the advertising industry, our advertising contracts have short notice cancellation provisions.
We Face Intense Competition
Our services face intense competition from other providers of business, investing and ratings content, including:

    
    
    
    online services or Web sites focused on business, finance, or investing, such as The Wall Street Journal Online (www.wsj.com), Forbes.com, SmartMoney.com, MarketWatch.com, The Motley Fool and
      CNBC.com, as well as financial portals such as Yahoo! Finance and Google Finance;
    
    
    
    publishers and distributors of traditional media focused on business, finance or investing, including print and radio, such as The Wall Street Journal and financial talk radio programs, and business
      television networks such as CNBC;
    
    
    
    investment newsletter publishers, such as Phillips Publishing and Agora Publishing; and
    
    
    
    established ratings services, such as Standard & Poors, Morningstar, Inc. and Lipper.Additionally, advances in technology have reduced the cost of production and online distribution of print, audio and video content, which has resulted in the proliferation of small, often self-published
  providers of free content, such as bloggers. We compete with these other publications and services for customers, including subscribers, readers and viewers of our video content, for advertising revenue, and
  for employees and contributors to our services. Our ability to compete successfully depends on many factors, including the quality, originality, timeliness, insightfulness and trustworthiness of our content
  and that of our competitors, the success of our recommendations and research, our ability to introduce products and services that keep pace with new investing trends, the ease of use of services developed
  either by us or our competitors and the effectiveness of our sales and marketing efforts.
Many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we have. Increased
  competition could result in price reductions, reduced margins or loss of market share, any of which could materially adversely affect our business, results of operations and financial condition. Accordingly,
  we cannot guarantee that we will be able to compete effectively with our current or future competitors or that this competition will not significantly harm our business.
We Face Risks Associated with the Growth and Diversification of Our Business
Our business has grown and diversified in recent years and now includes a variety of professional and consumer subscription services as well as quantitative ratings information and video offerings. We
  intend to continue to expand and diversify our business, both organically and possibly through
12

acquisitions of other companies. Such expansion and diversification may require significant time and resource commitments from our senior management, which will limit the amount of time these
  individuals will have available to devote to our existing operations, and ultimately may not result in the creation of successful new business lines. Growth in diversity and complexity may also impact our
  evolving business in ways we have not anticipated. The efficiency of our operations will depend on our ability to successfully manage the increasing complexity of the commerce, publishing, financial
  reporting, and other systems we depend on. Acquisitions could require the incurrence of debt and contingent liabilities and the issuance of new equity or debt securities. Any failure or any inability to
  effectively manage and integrate our growth and diversification could have a material adverse effect on our business, financial condition and results of operations.
System Failure or Interruption May Result in Reduced Traffic, Reduced Revenue and Harm to Our Reputation
Our ability to provide timely, updated information depends on the efficient and uninterrupted operation of our computer and communications hardware and software systems. Similarly, our ability to
  track, measure and report the delivery of advertisements on our Web sites depends on the efficient and uninterrupted operation of a third-party system. Our operations depend in part on the protection of
  our data systems and those of our third party provider against damage from human error, natural disasters, fire, power loss, water damage, telecommunications failure, computer viruses, terrorist acts,
  vandalism, sabotage, and other adverse events. Although we utilize the services of a third party data-center host with both physical and procedural security systems and have put in place certain other
  disaster recovery measures, including offsite storage of backup data, there is no guarantee that our Internet access and other data operations will be uninterrupted, error-free or secure. Additionally, the
  systems that provide the content of our newly acquired ratings business are currently located in Florida, which is vulnerable to the impact of hurricanes and other severe tropical storms. Any system failure,
  including network, software or hardware failure, that causes an interruption in our service or a decrease in responsiveness of our Web sites could result in reduced traffic, reduced revenue and harm to our
  reputation, brand and relations with our advertisers and strategic partners. Our insurance policies may not adequately compensate us for such losses. In such event, our business, results of operations and
  financial condition could be materially adversely affected.
Our Ratings models, purchased from Weiss Ratings, are written in legacy technologies and do not have robust backup or recovery provisions. The ongoing production of valid ratings data is based upon
  the successful maintenance and management of these legacy systems. If these systems fail or become unstable, we may not be able to produce valid ratings data for our customers. We are in the process of
  migrating the ratings legacy technology and applications to more modern and sustainable technology platforms. Migration of such complex applications is time consuming, resource intensive and can pose
  considerable risk.
Difficulties in New Product Development Could Harm Our Business
In the past few years, we have introduced several new products and services, and expect to continue to do so. However, we may experience difficulties that could delay or prevent us from introducing
  new products and services in the future, or cause our costs to be higher than anticipated, which could materially adversely affect our business, results of operations and financial condition.
Failure to Establish and Maintain Successful Strategic Relationships with Other Companies Could Decrease our Subscriber and Reader Base
We rely in part on establishing and maintaining successful strategic relationships with other companies to attract and retain a portion of our current subscriber and reader base and to enhance public
  awareness of our brands. In particular, our relationships with Yahoo!, which indexes our headlines and hosts our content including our video offerings, and CNBC, which telecasts James Cramers Mad
  Money television program, have been important components of our effort to enhance public awareness of our brands. There is intense competition for relationships with these firms and for content
  placement on their Web sites and for distribution of our audio and video content, and we may
13

have to pay significant fees to establish additional relationships with large, high-traffic partners or maintain existing relationships in the future. From time to time, we enter into agreements with advertisers
  that require us to exclusively feature these parties in sections of our Web sites. Existing and future exclusivity arrangements may prevent us from entering into other advertising or sponsorship arrangements
  or other strategic relationships. If we do not successfully establish and maintain our strategic relationships on commercially reasonable terms or if these relationships do not attract significant revenue, our
  business, results of operations and financial condition could be materially adversely affected.
Difficulties Associated With Our Brand Development May Harm Our Ability to Attract Subscribers
We believe that maintaining and growing awareness about our services is an important aspect of our efforts to continue to attract users. Our new services do not have widely recognized brands, and we
  will need to increase awareness of these brands among potential users. Our efforts to build brand awareness may not be cost effective or successful in reaching potential users, and some potential users may
  not be receptive to our marketing efforts or advertising campaigns. Accordingly, we can make no assurances that such efforts will be successful in raising awareness of our brands or in persuading potential
  users to subscribe to our services.
Failure to Maintain Our Reputation for Trustworthiness May Harm Our Business
It is very important that we maintain our reputation as a trustworthy organization. The occurrence of events such as our misreporting a news story, the non-disclosure of a stock ownership position by
  one or more of our writers, or the manipulation of a security by one or more of our outside contributors, or any other breach of our compliance policies, could harm our reputation for trustworthiness and
  reduce readership. These events could materially adversely affect our business, results of operations and financial condition.
We May Face Liability for, or Incur Costs to Defend, Information Published in Our Services
We may be subject to claims for defamation, libel, copyright or trademark infringement, fraud or negligence, or based on other theories of liability, in each case relating to the articles, commentary,
  investment recommendations, ratings, or other information we publish in our services. These types of claims have been brought, sometimes successfully, against online services as well as other print
  publications in the past. We could also be subject to claims based upon the content that is accessible from our Web sites through links to other Web sites. Our insurance may not adequately protect us
  against these claims.
We May Not Adequately Protect Our Own Intellectual Property and May Incur Costs to Defend Against, or Face Liability for, Intellectual Property Infringement Claims of Others
To protect our rights to our intellectual property, we rely on a combination of trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with
  our employees, affiliates, customers, strategic partners and others. Additionally, we aggressively police Internet message boards and other Web sites for copyrighted content that has been republished
  without our permission. The protective steps we have taken may be inadequate to deter misappropriation of our proprietary information. We may be unable to detect the unauthorized use of, or take
  appropriate steps to enforce, our intellectual property rights. We have registered several trademarks in the United States and also have pending U.S. applications for other trademarks. Failure to adequately
  protect our intellectual property could harm our brand, devalue our proprietary content and affect our ability to compete effectively. In addition, although we believe that our proprietary rights do not
  infringe on the intellectual property rights of others, other parties may assert infringement claims against us or claim that we have violated a patent or infringed a copyright, trademark or other proprietary
  right belonging to them. We incorporate licensed third-party technology in some of our services. In these license agreements, the licensors have generally agreed to defend, indemnify and hold us harmless
  with respect to any claim by a third party that the licensed software infringes any patent or
14

other proprietary right. We cannot assure you that these provisions will be adequate to protect us from infringement claims. Protecting our intellectual property rights, or defending against infringement
  claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources on our part, which could materially adversely affect our business, results of operations and
  financial condition.
We Face Government Regulation and Legal Uncertainties
Internet Communications, Commerce and Privacy Regulation. The growth and development of the market for Internet commerce and communications has prompted both federal and state laws and
  regulations concerning the collection and use of personally identifiable information (including consumer credit and financial information under the Gramm-Leach-Bliley Act), consumer protection, the
  content of online publications, the taxation of online transactions and the transmission of unsolicited commercial email, popularly known as spam. More laws and regulations are under consideration by
  various governments, agencies and industry self-regulatory groups. Although our compliance with applicable federal and state laws, regulations and industry guidelines has not had a material adverse effect
  on us, new laws and regulations may be introduced and modifications to existing laws may be enacted that require us to make changes to our business practices. Although we believe that our practices are in
  compliance with applicable laws, regulations and policies, if we were required to defend our practices against investigations of state or federal agencies or if our practices were deemed to be violative of
  applicable laws, regulations or policies, we could be penalized and our activities enjoined. Any of the foregoing could increase the cost of conducting online activities, decrease demand for our services,
  lessen our ability to effectively market our services, or otherwise materially adversely affect our business, financial condition and results of operations.
Securities Industry Regulation. Our activities have evolved to include, among other things, the offering of stand-alone services providing stock recommendations and analysis to subscribers, in contrast to
  providing such information as part of a larger online financial publication of more general and regular circulation. As a result, we registered in 2002 with the SEC as an investment advisor under the
  Investment Advisers Act of 1940. The securities industry in the United States is subject to extensive regulation under both federal and state laws. A failure to comply with regulations applicable to securities
  industry participants could materially and adversely affect our business, results of operations and financial condition.
Investment advisors such as TheStreet.com are subject to SEC regulations covering all aspects of the operation of their business, including, among others:

    
    
    
    advertising,
    
    
    
    record-keeping,
    
    
    
    conduct of directors, officers and employees, and
    
    
    
    supervision of advisory activities.Violations of the regulations governing the actions of investment advisors may result in the imposition of censures or fines, the issuance of cease-and-desist orders, and the suspension or expulsion of a
  firm, our officers, or our employees from the securities business.
Our ability to comply with all applicable securities laws and rules is largely dependent on our establishment and maintenance of appropriate compliance systems (including proper supervisory
  procedures and books and records requirements), as well as our ability to attract and retain qualified compliance personnel.
Because we operate in an industry subject to extensive regulation, new regulation, changes in existing regulation, or changes in the interpretation or enforcement of existing laws and rules could have a
  material adverse effect on our business, results of operations and financial condition.
Foreign Regulation. Although we do not actively seek customers and have no property outside the United States, regulatory entities of foreign governments could seek to exercise jurisdiction over our
  activities. If we were required to defend our practices against investigations of foreign regulatory agencies or if our practices were deemed to be violative of the laws, regulations or policies of such
15

jurisdictions, we could be penalized and our activities enjoined. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.
Any Failure of Our Internal Security Measures or Breach of Our Privacy Protections Could Cause Us to Lose Users and Subject Us to Liability
Users who subscribe to our paid subscription services are required to furnish certain personal information (including name, mailing address, phone number, email address and credit card information),
  which we use to administer our services. We also require users of some of our free services and features to provide us with some personal information during the membership registration process.
  Additionally, we rely on security and authentication technology licensed from third parties to perform real-time credit card authorization and verification, and at times rely on third parties, including
  technology consulting firms, to help protect our infrastructure from security threats. We may have to continue to expend capital and other resources on the hardware and software infrastructure that
  provides security for our processing, storage and transmission of personal information.
In this regard, our users depend on us to keep their personal information safe and private and not to disclose it to third parties or permit our security to be breached. However, advances in computer
  capabilities, new discoveries in the field of cryptography or other events or developments, including improper acts by third parties, may result in a compromise or breach of the security measures we use to
  protect the personal information of our users. If a party were to compromise or breach our information security measures or those of our agents, such party could misappropriate the personal information of
  our users, cause interruptions in our operations, expose us to significant liabilities and reporting obligations, damage our reputation and discourage potential users from registering to use our Web sites or
  other services, any of which could have a material adverse effect on our business, results of operations and financial condition.
We utilize various third parties to assist with various aspects of our business. Some of these partnerships require the exchange of user information. This is required because some features of our Web
  sites may be hosted by these third parties. While we take significant measures to guarantee the security of our customer data and require such third parties to comply with our privacy and security policies as
  well as be contractually bound to defend, indemnify and hold us harmless with respect to any claim by a third party related to any breach of relevant privacy laws, we are still at risk if any of these third
  party systems are breached or compromised.
Control by Principal Stockholders, Officers and Directors Could Adversely Affect Our Stockholders
Our officers, directors and greater-than-five-percent stockholders (and their affiliates), acting together, may have the ability to control our management and affairs, and substantially all matters
  submitted to stockholders for approval (including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets). Some of these persons acting
  individually or together, even in the absence of control, may be able to exert a significant degree of influence over such matters. The interests of persons having this concentration of ownership may not
  always coincide with our interests or the interests of other stockholders. This concentration of ownership, for example, may have the effect of delaying, deferring or preventing a change in control of the
  Company, impeding a merger, consolidation, takeover or other business combination involving the Company or discouraging a potential acquirer from making a tender offer or otherwise attempting to
  obtain control of the Company, which in turn could materially adversely affect the market price of the common stock.
Anti-Takeover Provisions Could Prevent or Delay a Change of Control
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law could make it more difficult for a third party to acquire the Company, even if
  doing so would be beneficial to our stockholders.
Item 1B. Unresolved Staff Comments.
Not applicable.
16

Item 2. Properties.
Our principal administrative, sales, marketing, technology and editorial facilities currently reside in a facility encompassing approximately 35,000 square feet of office space on one floor in an office
  building at 14 Wall Street in New York City, New York. Our West Coast bureau is located in approximately 1,870 square feet of office space in San Francisco, California. The Companys newly formed,
  wholly-owned subsidiary, TheStreet.com Ratings, Inc., occupies 5,220 square feet of office space in Jupiter, Florida, and 850 square feet of office space in Boston, Massachusetts. Our communications and
  network infrastructure is hosted at a Savvis facility in Jersey City, New Jersey.
Item 3. Legal Proceedings.
In December 2001, the Company was named as a defendant in a securities class action filed in United States District Court for the Southern District of New York related to its initial public offering
  (IPO) in May 1999. The lawsuit also named as individual defendants certain of its former officers and directors, James J. Cramer, a current director, and certain of the underwriters of the IPO, including
  The Goldman Sachs Group, Inc., Hambrecht & Quist LLC (now part of JP Morgan Chase & Co.), Thomas Weisel Partners LLC, Robertson Stephens Inc. (an investment banking subsidiary of BankBoston
  Corp., later FleetBoston Corp., which ceased operations in 2002), and Merrill Lynch Pierce Fenner & Smith, Inc. Approximately 300 other issuers and their underwriters have had similar suits filed against
  them, all of which are included in a single coordinated proceeding in the Southern District of New York (the IPO Litigations). The complaints allege that the prospectus and the registration statement for
  the IPO failed to disclose that the underwriters allegedly solicited and received excessive commissions from investors and that some investors in the IPO allegedly agreed with the underwriters to buy
  additional shares in the aftermarket in order to inflate the price of the Companys stock. An amended complaint was filed April 19, 2002. The Company and the officers and directors were named in the
  suits pursuant to Section 11 of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934, and other related provisions. The complaints seek unspecified damages, attorney and expert fees, and
  other unspecified litigation costs.
On July 1, 2002, the underwriter defendants in the consolidated actions moved to dismiss all of the IPO Litigations, including the action involving the Company. On July 15, 2002, the Company, along
  with other non-underwriter defendants in the coordinated cases, also moved to dismiss the litigation. On February 19, 2003, the Court ruled on the motions. The Court granted the Companys motion to
  dismiss the claims against it under Rule 10b-5, due to the insufficiency of the allegations against the Company. The motions to dismiss the claims under Section 11 of the Securities Act were denied as to
  virtually all of the defendants in the consolidated cases, including the Company. In addition, the individual defendants in the IPO Litigations, including Mr. Cramer, signed a tolling agreement and were
  dismissed from the action without prejudice on October 9, 2002.
In June 2003, a proposed collective settlement of this litigation was structured between the plaintiffs, the issuer defendants in the consolidated actions, the issuer officers and directors named as
  defendants, and the issuers insurance companies. On or about June 25, 2003, a committee of the Companys Board of Directors conditionally approved the proposed settlement. The settlement agreements
  collectively provide as follows:
The Company and the other issuer defendants will assign their interests in claims against the underwriters for excess compensation in connection with their IPOs to the plaintiffs, and agree not to assert
  certain other claims against the underwriters, such as underpricing, indemnification and antitrust claims, except in certain defined circumstances. A number of issuers assigned claims have been asserted
  already; these were dismissed by the Court on February 24, 2006. The dismissal is currently on appeal to the Second Circuit Court of Appeals. The Company and the other issuer defendants will also
  cooperate with the plaintiffs to provide the plaintiffs with informal discovery as the litigation continues as to the underwriter defendants. Further, the plaintiffs will receive an undertaking from the insurers
  of the Company and the other issuer defendants guaranteeing that the plaintiff class will recover, in the aggregate, $1 billion from their various suits against the underwriters (including the claims assigned
  by the issuer defendants). The Companys per capita portion of the maximum amount payable to the plaintiffs under the settlement, assuming the entire $1 billion is payable, would be approximately $3-4
17

million. The plaintiffs actual recoveries from the underwriter defendants (through settlements or damages assessed as a result of litigation) will be applied against the guarantee; and to the extent that the
  underwriter defendants settle all of the cases for at least $1 billion, no payment will be required under the issuer defendants settlement. In exchange for the consideration described above, the plaintiffs will
  release the non-bankrupt issuer defendants from all claims against them (the bankrupt issuers will receive a covenant not to sue) and their individual defendants. Under the terms of the settlement
  agreements, all costs and expenses of the settlement (including legal expenses after June 1, 2003) will be borne by the insurance carriers of the Company and the other issuer defendants using each issuer
  defendants existing insurance coverage, with deductibles waived.
While the settlement process has been proceeding, the plaintiffs have continued to litigate against the underwriter defendants. The Court directed that the litigation proceed within a number of focus
  cases rather than in all of the 310 cases that have been consolidated. The Companys case is not one of these focus cases. On October 13, 2004, the district court certified the focus cases as class actions. The
  underwriter defendants appealed that ruling, and on December 5, 2006, the Court of Appeals for the Second Circuit reversed the district courts class certification decision. On January 5, 2007, the plaintiffs
  filed a petition for rehearing with the Court of Appeals. Because the Companys settlement with the plaintiffs involves the certification of the case as a class action as part of the approval process, the impact
  of this ruling on the Companys settlement is unclear.
If the court determines that the settlement is fair to the class members, and that the settlement classes can be certified, the settlement will be approved. If the settlement is approved, the Company is
  not aware of any material limitations to the payment by its insurance carriers of the costs and expenses of the settlement to the plaintiffs. The Companys insurance coverage is sufficient, its carriers are
  solvent, and the Company is not aware of any uncertainties as to the legal sufficiency of an insurance claim with respect to any recovery by plaintiffs. Accordingly, the Company does not expect that the
  settlement, should it be approved, will involve any payment by the Company. However, there can be no assurance that this proposed settlement will be approved and implemented in its current form, or at
  all.
If the settlement is not approved, the Company intends to defend the action vigorously. In the event the settlement does not receive final court approval and the Company or any of its individual
  defendants is reinstated as a defendant in the lawsuit, any unfavorable outcome of this litigation could have an adverse impact on the Companys business, financial condition, results of operations, and cash
  flows.
In the ordinary course of our business, we are from time to time subject to various other legal proceedings. We do not believe that any such other legal proceedings, individually or in the aggregate, will
  have a material adverse effect on our business, financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
18

PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our Common Stock has been quoted on the Nasdaq National Market under the symbol TSCM since our initial public offering on May 11, 1999. The following table sets forth, for the periods indicated, the high and
  low closing sales prices per share of the Common Stock as reported on the Nasdaq National Market.
Low
    
    High2005First quarter
    
    
    $
    
    4.05
    
    
    
    $
    
    4.69Second quarter
    
    
    $
    
    2.85
    
    
    
    $
    
    4.33Third quarter
    
    
    $
    
    3.45
    
    
    
    $
    
    4.38Fourth quarter
    
    
    $
    
    3.96
    
    
    
    $
    
    7.902006First quarter
    
    
    $
    
    6.59
    
    
    
    $
    
    8.42Second quarter
    
    
    $
    
    7.26
    
    
    
    $
    
    12.82Third quarter
    
    
    $
    
    9.35
    
    
    
    $
    
    13.06Fourth quarter
    
    
    $
    
    8.32
    
    
    
    $
    
    12.37On March 12, 2007, the last reported sale price for our Common Stock was $11.49 per share.
Holders
The number of holders of record of our Common Stock on March 12, 2007 was 268, which does not include beneficial owners of our Common Stock whose shares are held in the names of various dealers, clearing
  agencies, banks, brokers and other fiduciaries.
Dividends
On December 29, 2006, the Company paid its fourth quarterly cash dividend of $0.025 per share on its Common Stock, to shareholders of record at the close of business on December 12, 2006. This dividend totaled
  approximately $0.7 million. For the year ended December 31, 2006, dividends paid totaled approximately $2.7 million. The Company intends, although there can be no assurance, to pay regular quarterly cash dividends in
  the future.
Issuer Purchases of Equity Securities
The following table presents information related to repurchases of its Common Stock made by the Company during the three months ended December 31, 2006.
Period
    
    (a)TotalNumberof Shares(or Units)Purchased
    
    (b)AveragePricePaid perShare(or Unit)
    
    (c)Total Number ofShares (or Units)Purchased asPart of PubliclyAnnounced Plansor Programs
    
    (d)Maximum Number(or ApproximateDollar Value) ofShares (or Units) thatMay Yet BePurchased Under thePlans or Programs*October 131, 2006
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    2,678,878November 130, 2006
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    2,678,878December 131, 2006
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    2,678,878Total
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    2,678,878
*
    
    
    
    In December 2000, the Companys Board of Directors authorized the repurchase of up to $10 million worth of the Companys Common Stock, from time to time, in private purchases or in the open market. In February
      2004, the Companys Board approved the resumption of this program under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the program. The program does
      not have a specified expiration date.19

Item 6. Selected Financial Data.
The following selected financial data is qualified by reference to, and should be read in conjunction with, our audited consolidated financial statements and the notes to those statements and Managements
  Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere herein. The selected statement of operations data presented below for the years ended December 31, 2006, 2005 and 2004,
  and the balance sheet data as of December 31, 2006 and 2005, are derived from our audited consolidated financial statements included elsewhere herein. The selected statement of operations data presented below for the
  years ended December 31, 2003 and 2002 and the balance sheet data as of December 31, 2004, 2003 and 2002 have been derived from our audited consolidated financial statements, which are not included herein.
For the Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands, except per share data)Statement of Operations Data:Net revenue:Subscription
    
    
    $
    
    33,515
    
    
    
    $
    
    23,070
    
    
    
    $
    
    22,417
    
    
    
    $
    
    18,503
    
    
    
    $
    
    14,909Advertising
    
    
    
    15,447
    
    
    
    
    9,523
    
    
    
    
    7,066
    
    
    
    
    5,602
    
    
    
    
    4,372Other
    
    
    
    1,927
    
    
    
    
    1,151
    
    
    
    
    1,267
    
    
    
    
    1,189
    
    
    
    
    1,566Total net revenue
    
    
    
    50,889
    
    
    
    
    33,744
    
    
    
    
    30,750
    
    
    
    
    25,294
    
    
    
    
    20,847Operating expense:Cost of services
    
    
    
    18,450
    
    
    
    
    12,727
    
    
    
    
    11,843
    
    
    
    
    11,421
    
    
    
    
    11,702Sales and marketing
    
    
    
    9,616
    
    
    
    
    7,264
    
    
    
    
    8,019
    
    
    
    
    6,263
    
    
    
    
    6,319General and administrative
    
    
    
    10,674
    
    
    
    
    8,177
    
    
    
    
    7,082
    
    
    
    
    6,549
    
    
    
    
    7,469Depreciation and amortization
    
    
    
    1,089
    
    
    
    
    674
    
    
    
    
    656
    
    
    
    
    2,176
    
    
    
    
    4,031One-time lease termination costs
    
    
    
    
    
    
    
    393
    
    
    
    
    Noncash compensation
    
    
    
    
    
    
    
    
    
    321
    
    
    
    
    998Restructuring gain
    
    
    
    
    
    
    
    
    
    
    
    (77
    )Asset (recovery) impairment
    
    
    
    
    
    
    
    (500
    )
    
    
    
    
    Total operating expense
    
    
    
    39,829
    
    
    
    
    28,842
    
    
    
    
    27,493
    
    
    
    
    26,730
    
    
    
    
    30,442Operating income (loss)
    
    
    
    11,060
    
    
    
    
    4,902
    
    
    
    
    3,257
    
    
    
    
    (1,436
    )
    
    
    
    
    (9,595
    )Net interest income
    
    
    
    2,037
    
    
    
    
    853
    
    
    
    
    362
    
    
    
    
    361
    
    
    
    
    645Gain on sale of investment
    
    
    
    
    
    
    
    
    
    
    
    185Income (loss) from continuing operations before income taxes
    
    
    
    13,097
    
    
    
    
    5,755
    
    
    
    
    3,619
    
    
    
    
    (1,075
    )
    
    
    
    
    (8,765
    )Provision for income taxes
    
    
    
    261
    
    
    
    
    5
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    
    12,836
    
    
    
    
    5,750
    
    
    
    
    3,619
    
    
    
    
    (1,075
    )
    
    
    
    
    (8,765
    )Discontinued operations: (*)Loss from discontinued operations
    
    
    
    
    
    (3,075
    )
    
    
    
    
    (5,808
    )
    
    
    
    
    (2,964
    )
    
    
    
    
    (131
    )Income (loss) on disposal of discontinued operations
    
    
    
    32
    
    
    
    
    (2,429
    )
    
    
    
    
    
    
    
    
    210Income (loss) from discontinued operations
    
    
    
    32
    
    
    
    
    (5,504
    )
    
    
    
    
    (5,808
    )
    
    
    
    
    (2,964
    )
    
    
    
    
    79Net income (loss)
    
    
    $
    
    12,868
    
    
    
    $
    
    246
    
    
    
    $
    
    (2,189
    )
    
    
    
    $
    
    (4,039
    )
    
    
    
    $
    
    (8,686
    )Basic net income (loss) per share:Income (loss) from continuing operations
    
    
    $
    
    0.48
    
    
    
    $
    
    0.23
    
    
    
    $
    
    0.15
    
    
    
    $
    
    (0.05
    )
    
    
    
    $
    
    (0.37
    )Loss from discontinued operations
    
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.24
    )
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.01
    )Income (loss) from disposal of discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.10
    )
    
    
    
    
    
    
    
    
    0.01Income (loss) from discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.22
    )
    
    
    
    
    (0.24
    )
    
    
    
    
    (0.12
    )
    
    
    
    
    0.00Net income (loss)
    
    
    $
    
    0.48
    
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.09
    )
    
    
    
    $
    
    (0.17
    )
    
    
    
    $
    
    (0.37
    )Diluted net income (loss) per share:Income (loss) from continuing operations
    
    
    $
    
    0.47
    
    
    
    $
    
    0.22
    
    
    
    $
    
    0.14
    
    
    
    $
    
    (0.04
    )
    
    
    
    $
    
    (0.35
    )Loss from discontinued operations
    
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.22
    )
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.01
    )Income (loss) from disposal of discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.09
    )
    
    
    
    
    
    
    
    
    0.01Income (loss) from discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.21
    )
    
    
    
    
    (0.22
    )
    
    
    
    
    (0.12
    )
    
    
    
    
    0.00Net income (loss)
    
    
    $
    
    0.47
    
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.08
    )
    
    
    
    $
    
    (0.16
    )
    
    
    
    $
    
    (0.35
    )Weighted average basic shares outstanding
    
    
    
    27,014
    
    
    
    
    24,953
    
    
    
    
    24,529
    
    
    
    
    23,864
    
    
    
    
    23,559Weighted average diluted shares outstanding
    
    
    
    27,546
    
    
    
    
    26,165
    
    
    
    
    26,068
    
    
    
    
    25,819
    
    
    
    
    24,56120

December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands)Balance Sheet Data:Cash, cash equivalents, restricted cash and short term investments
    
    
    $
    
    46,555
    
    
    
    $
    
    34,014
    
    
    
    $
    
    32,084
    
    
    
    $
    
    28,471
    
    
    
    $
    
    29,049Working capital
    
    
    
    33,797
    
    
    
    
    22,059
    
    
    
    
    19,052
    
    
    
    
    18,984
    
    
    
    
    19,635Total assets
    
    
    
    64,570
    
    
    
    
    43,105
    
    
    
    
    40,077
    
    
    
    
    37,197
    
    
    
    
    39,428Long-term obligations, less current maturities
    
    
    
    
    
    22
    
    
    
    
    258
    
    
    
    
    277
    
    
    
    
    311Total stockholders equity
    
    
    
    44,191
    
    
    
    
    27,441
    
    
    
    
    25,383
    
    
    
    
    25,987
    
    
    
    
    29,109
(*)
    
    
    
    In November 2000, the Companys Board of Directors decided to discontinue the Companys U.K. operations. The liquidation was completed in October 2002. The income on disposal of discontinued operations for
      the year ended December 31, 2002 reflected above primarily represent adjustments to the Companys original estimate related to costs to be incurred in completing the liquidation process. Additionally, in June 2005,
      the Company committed to a plan to discontinue the operations of its wholly owned subsidiary, Independent Research Group LLC, which operated the Companys securities research and brokerage segment.
      Accordingly, the operating results relating to this segment have been segregated from continuing operations and reported as discontinued operations on a separate line item on the consolidated statements of operations.21

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Statements contained in this annual report on Form 10-K relating to plans, strategies, objectives, economic performance and trends and other statements that are not descriptions of historical facts may be forward-
  looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).
  Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, the
  factors set forth under the heading Risk Factors and elsewhere in this annual report, and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking
  statements may be identified by terms such as may, will, should, could, expects, plans, intends, anticipates, believes, estimates, predicts, forecasts, potential, or continue or similar terms or
  the negative of these terms. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or
  achievements. The Company has no obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction with the Companys audited consolidated financial statements and notes thereto.
Non-GAAP Financial Measures
To supplement the Companys financial statements presented in accordance with generally accepted accounting principles ("GAAP"), TheStreet.com uses non-GAAP measures of certain components of financial
  performance, including EBITDA, and Adjusted income. EBITDA is adjusted from results based on GAAP to exclude interest, taxes, depreciation and amortization. Adjusted income is adjusted from results based on
  GAAP to exclude stock compensation expense. These non-GAAP measures are provided to enhance investors overall understanding of the Companys current financial performance and its prospects for the future.
  Specifically, the Company believes these non-GAAP EBITDA results provide useful information to both management and investors by excluding certain income and expenses that may not be indicative of its core
  operating results. Further, as recorded, our historical results prior to October 1, 2005 excluded the impact of stock compensation expense. Management believes that stock compensation expenses are not reflective of our
  day-to-day operational results and that the investment community may find it helpful when reviewing our performance to evaluate the impact of the excluded items separately. These measures should be considered in
  addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this Form 10-K have been reconciled to the nearest
  GAAP measure.
Overview
History
TheStreet.com, Inc. (collectively, with its wholly-owned subsidiaries, the Company) was organized in June 1996 as a Delaware limited liability company and converted to a Delaware C-corporation in May 1998.
  We create business, investment and ratings content, which we distribute to customers through proprietary properties, including Web sites, email services, print publications and audio and video programming. We also
  syndicate content for distribution by other media companies. We receive revenue from subscriptions, advertising and sponsorship sales, as well as syndication.
We operated Independent Research Group LLC (IRG Research), a registered broker-dealer providing proprietary equity research and brokerage services to institutional clients, from late 2002 until we discontinued
  its operations in the second quarter of 2005. See Note 2 in Notes to Consolidated Financial Statements.
In August 2006, we acquired the assets of Weiss Ratings, Inc. (Ratings), which provides independent ratings and evaluations of mutual funds, stocks and financial institutions, including insurers, healthcare
  providers, banks and savings and loans. We have rebranded the business as TheStreet.com Ratings, and integrated its content into our free online offerings.
22

Current State of the Company
The Companys total net revenue for the year ended December 31, 2006 increased approximately 51%, to approximately $50.9 million, as compared to approximately $33.7 million for the year ended December 31,
  2005. The Companys net income from continuing operations for the year ended December 31, 2006 increased approximately 123% to approximately $12.8 million, as compared to approximately $5.8 million for the year
  ended December 31, 2005.
Subscription Revenue. Subscription revenue, the largest component of net revenue, totaled approximately $33.5 million for the year ended December 31, 2006, an increase of approximately 45% when compared to
  approximately $23.1 million for the year ended December 31, 2005. We believe this growth in our subscription revenue is due largely to our success in (i) increasing overall traffic to our Web sites by signing new
  agreements and expanding existing relationships with large, high-traffic portal and search engine companies, (ii) promoting our brands, products and services through television and (until December 2006) radio programs
  hosted by contributor James J. Cramer, and (iii) generating interest in our paid subscription services with expanded content offerings, including video and podcasts, personal finance and investor education content and
  lifestyle-oriented content. We believe that strong trading volume and stock market performance during much of the previous 12 months resulted in increased numbers of investors seeking the type of investment
  information we offer, contributing to our strong increase in subscription revenue when compared to the prior year period. Finally, we added new subscribers as a result of our acquisition of the assets of Ratings during
  August, which contributed to the growth in our subscription revenue as compared to the prior year period.
Advertising Revenue. Advertising revenue increased by approximately 62% for the year ended December 31, 2006, to approximately $15.4 million, as compared to approximately $9.5 million for the year ended
  December 31, 2005. This increase is attributable to several factors. First, the attractiveness of our expanded personal finance, lifestyle and video content offerings and our success in implementing marketing relationships
  with other high-traffic Web sites resulted in year-over-year growth of 46% in the average number of unique visitors per month to the Companys Web sites, from 3.0 million in 2005 to 4.4 million in 2006, and in an 80%
  increase in the number of page views generated by the Companys Web sites, from 490 million in 2005 to 880 million in 2006. The growth in page views increased the amount of advertising inventory we had available to
  sell to advertisers, while the growth in our unique audience attracted new advertisers to the site, and allowed us to expand our relationships with a number of our existing advertisers. Our growth also appealed to a growing
  number of non-financial advertisers, who comprised 27% of total advertising revenue in 2006, as compared to 20% in 2005. Additionally, we believe that the continued shift of advertising spending from traditional media
  to online advertising has led generally to increased spending by the Companys advertisers and to an increase in the number of advertisers choosing to place their advertisements in the Companys publications.
We plan to continue to add content (including video, audio, blogs, and non-financial content) to our free, flagship Web site in an effort to increase page views and attract more non-endemic advertisers, and expand
  our advertising sales staff to take advantage of the current positive trends in the online advertising market. We anticipate that due to these trends, the proportion of our total revenue that comes from advertising is likely to
  increase in 2007.
Expenses. With respect to overall expenses over the periods, total compensation, revenue sharing costs, fees paid to non-employee content providers and marketing expenditures increased, while legal fees decreased
  when compared to the year ended December 31, 2005. As a result, total operating expenses increased by approximately 38%, to approximately $39.8 million for the recent year, as compared to approximately $28.8 million
  for the prior year.
In the year ended December 31, 2006, the Company expended approximately $2.4 million on its marketing programs, as compared to $1.9 million in the year ended December 31, 2005. The programs consist of
  promotional advertising campaigns on search engines, online media networks, financial portals and smaller niche Web sites, subscription marketing and distribution arrangements and email marketing campaigns. The
  programs are designed to generate free-trial subscriptions to our products and drive traffic to our Web sites, expose our brands and build our customer databases. In an effort to continue attracting new subscribers and
  increasing traffic, during 2007, we plan to expand our marketing relationships with certain of our existing partners and to pursue additional arrangements with new marketing partners. Accordingly, we expect our
  marketing expenditures for 2007 to increase from 2006 levels. Because many of the Companys online
23

advertising contracts generally have the short terms and early cancellation provisions typical of the industry, the Company is able to adjust its expenditures on a weekly or monthly basis, depending on the return-on-
  investment of the campaigns.
The Company believes that its current cash and cash equivalents will be sufficient to meet its anticipated cash needs for at least the next 12 months. See Liquidity and Capital Resources.
Recent Events
On January 3, 2007, the Company announced that it formed a joint venture with A.R. Media, a New York based media holding company, to create a new service called Stockpickr. TheStreet.com owns 49.9% of the
  joint venture.
Stockpickr, located at www.stockpickr.com, applies social networking technologies with stock investment idea generation. The Web site allows its members to create portfolios, compare their portfolios with others in
  the network, scan portfolios for investment ideas and open a dialogue with like-minded investors in a secure environment.
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. The preparation of these financial statements requires management to make estimates and assumptions, specifically for the allowance for doubtful accounts receivable, the useful lives of fixed assets,
  the valuation of goodwill and intangible assets, as well as accrued expense estimates 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.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Revenue Recognition
The Company generates its revenue primarily from subscriptions and advertising.
Subscription revenue represents fees paid by customers for access to particular services for the term of the subscription. Subscriptions are generally charged to customers credit cards or are charged directly to
  companies that subscribe to the service. These are generally billed in advance on a monthly or annual basis. The Company calculates net subscription revenue by deducting anticipated refunds from cancelled subscriptions
  and chargebacks of disputed credit card charges from gross revenue. 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.
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. 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.
Advertising revenue is derived from the sale of Internet sponsorship arrangements and from the delivery of banner and email advertisements on the Companys Web sites, and is recognized ratably over the period the
  advertising is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is reasonably assured. Although infrequent, Company obligations could include guarantees of a
  minimum number of times that users of the Companys Web sites click-through to the advertisers Web site, or take additional specified action, such as opening an account. In such cases, revenue is recognized as the
  guaranteed click-throughs or other relevant delivery criteria are fulfilled.
24

Advertising revenue is subject to estimation and variability due to our policy of recognizing revenue only for arrangements with customers in which, among other things, management believes that collectibility of
  amounts due is reasonably assured. Accordingly, we estimate and record a provision for doubtful accounts for estimated losses resulting from the inability of our advertising customers to make required payments. This
  provision is recorded as a bad debt expense. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including the current credit-worthiness of each customer.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets (three years for
  computer equipment, including capitalized software and Web site development costs, and five years for furniture and fixtures). Leasehold improvements are amortized on a straight-line basis over the shorter of the
  respective lease term or the estimated useful life of the asset. If the useful lives of the assets differ materially from the estimates contained herein, additional costs could be incurred, which could have an adverse impact on
  the Companys expenses.
Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires companies
  to stop amortizing goodwill and certain other intangible assets with indefinite useful lives. Instead, goodwill and other intangible assets deemed to have an indefinite useful life will be subject to an annual review for
  impairment. Separable intangible assets that are not deemed to have indefinite useful lives will continue to be amortized over their useful lives (but with no maximum life).
Upon the adoption of SFAS No. 142 in the first quarter of 2002, the Company stopped the amortization of goodwill and certain other intangible assets with indefinite useful lives, and completed the required
  transitional fair value impairment test on its goodwill and certain other intangible assets, the results of which had no impact on the Companys financial statements. The Companys goodwill is tested for impairment
  between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Based upon annual impairment tests as of September 30,
  2006, 2005 and 2004, no impairment was indicated for the Companys goodwill and intangible assets with indefinite lives.
Business Concentrations and Credit Risk
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. The Company maintains all of its cash, cash
  equivalents and restricted cash in four financial institutions and performs periodic evaluations of the relative credit standing of these institutions. The Companys customers are primarily concentrated in the United States.
  The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and
  other information. To date, actual losses have been within managements expectations.
Stock-Based Compensation
As of October 1, 2005, the Company elected early adoption of Statement of Financial Accounting Standards (SFAS) No. 123(R), Share Based Payment: An Amendment of FASB Statements 123 and 95. This
  statement requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based upon estimated fair values. Prior to adoption of SFAS No. 123(R), the Company
  accounted for stock-based compensation expense on a pro forma basis in accordance with Accounting Principles Board No. 25, Accounting for Stock Issued to Employees (APB 25). In March 2005, the Securities and
  Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS No. 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS No. 123(R).
The Company adopted SFAS No. 123(R) using the modified prospective transition method. The accompanying consolidated statements of operations reflects the impact of SFAS No. 123(R) for the year ended
  December 31, 2006 and for the three months ended December 31, 2005. In accordance with the modified
25

prospective transition method, prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). Stock-based compensation expense recognized under SFAS No. 123(R) for the year ended
  December 31, 2006 and the three months ended December 31, 2005 was $1,753,429 and $332,175, respectively.
Upon adoption of SFAS No. 123(R), the Company continued its practice of estimating the value of employee stock options on the date of grant using the Black-Scholes option-pricing model. This determination is
  affected by the Companys stock price as well as assumptions regarding expected volatility, risk-free interest rate, and expected dividends. The weighted-average estimated value of employee stock options granted during
  the year ended December 31, 2006 was $3.50, using the Black-Scholes model with the following weighted-average assumptions. The assumptions presented in the table below represent the weighted-average value of the
  applicable assumption used to value stock options at their grant date. In determining the volatility assumption, the Company used a historical analysis of the volatility of the Companys share price for the preceding two
  years, based on managements assessment that recent historical volatility is representative of future stock price trends. 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 is based upon observed interest rates appropriate for the term of the Companys employee
  stock options. The dividend yield assumption is based on the history and expectation of future dividend payouts.
Year EndedDecember 31, 2006Expected option lives
    
    3.5 yearsExpected volatility
    
    
    
    44.84
    %Risk-free interest rate
    
    
    
    4.76
    %Expected dividends
    
    
    
    1.08
    %The impact of stock-based compensation expense has been significant to reported and pro forma results of operations and per share amounts (see Note 1 in Notes to Consolidated Financial Statements). The fair value
  of each option grant has been estimated on the date of the grant using the Black-Scholes option pricing model and includes several assumptions, including the risk-free interest rate and the expected volatility of the
  Companys common stock price. 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 the Companys total operating expense for the year ended December 31, 2006 would increase by approximately $34,000.
  For each 10% increase in the expected volatility used in the Black-Scholes option-pricing model, the resulting estimated impact to the Companys total operating expense for the year ended December 31, 2006 would
  increase by approximately $189,000. Because options are expensed over up to four years from the date of grant, the foregoing estimated increases include potential expense for options granted during the years ended
  December 31, 2006, 2005, 2004, 2003 and 2002. 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), we used the weighted average of such variable for all grants issued in a given year.
As stock-based compensation expense recognized in the Consolidated Statements of Operations is based on awards that are ultimately expected to vest, it has been reduced for expected forfeitures. SFAS No. 123(R)
  requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.
If factors change and the Company employs different assumptions in the application of SFAS No. 123(R) in future periods, the compensation expense that the Company records under SFAS No. 123(R) may differ
  significantly from what it has recorded in the current period.
Income Taxes
The Company accounts for its income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences
  attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
26

taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in the period that the tax
  change occurs. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized.
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. The Company
  has elected the With-andwithout approach regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year. Under this approach, the windfall tax
  benefits would be recognized in additional paid-in capital only if an incremental tax benefit is realized after considering all other tax benefits presently available to the Company.
Legal Contingencies
In December 2001, the Company was named as a defendant in a securities class action filed in United States District Court for the Southern District of New York related to its initial public offering (IPO) in May
  1999. The lawsuit also named as individual defendants certain of its former officers and directors, James J. Cramer, a current director, and certain of the underwriters of the IPO, including The Goldman Sachs Group, Inc.,
  Hambrecht & Quist LLC (now part of JP Morgan Chase & Co.), Thomas Weisel Partners LLC, Robertson Stephens Inc. (an investment banking subsidiary of BankBoston Corp., later FleetBoston Corp., which ceased
  operations in 2002), and Merrill Lynch Pierce Fenner & Smith, Inc. Approximately 300 other issuers and their underwriters have had similar suits filed against them, all of which are included in a single coordinated
  proceeding in the Southern District of New York (the IPO Litigations). The complaints allege that the prospectus and the registration statement for the IPO failed to disclose that the underwriters allegedly solicited and
  received excessive commissions from investors and that some investors in the IPO allegedly agreed with the underwriters to buy additional shares in the aftermarket in order to inflate the price of the Companys stock.
  An amended complaint was filed April 19, 2002. The Company and the officers and directors were named in the suits pursuant to Section 11 of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934, and
  other related provisions. The complaints seek unspecified damages, attorney and expert fees, and other unspecified litigation costs.
On July 1, 2002, the underwriter defendants in the consolidated actions moved to dismiss all of the IPO Litigations, including the action involving the Company. On July 15, 2002, the Company, along with other non-
  underwriter defendants in the coordinated cases, also moved to dismiss the litigation. On February 19, 2003, the Court ruled on the motions. The Court granted the Companys motion to dismiss the claims against it under
  Rule 10b-5, due to the insufficiency of the allegations against the Company. The motions to dismiss the claims under Section 11 of the Securities Act were denied as to virtually all of the defendants in the consolidated
  cases, including the Company. In addition, the individual defendants in the IPO Litigations, including Mr. Cramer, signed a tolling agreement and were dismissed from the action without prejudice on October 9, 2002.
In June 2003, a proposed collective settlement of this litigation was structured between the plaintiffs, the issuer defendants in the consolidated actions, the issuer officers and directors named as defendants, and the
  issuers insurance companies. On or about June 25, 2003, a committee of the Companys Board of Directors conditionally approved the proposed settlement. The settlement agreements collectively provide as follows:
The Company and the other issuer defendants will assign their interests in claims against the underwriters for excess compensation in connection with their IPOs to the plaintiffs, and agree not to assert certain other
  claims against the underwriters, such as underpricing, indemnification and antitrust claims, except in certain defined circumstances. A number of issuers assigned claims have been asserted already; these were dismissed
  by the Court on February 24, 2006. The dismissal is currently on appeal to the Second Circuit Court of Appeals. The Company and the other issuer defendants will also cooperate with the plaintiffs to provide the plaintiffs
  with informal discovery as the litigation continues as to the underwriter defendants. Further, the plaintiffs will receive an undertaking from the insurers of the Company and the other issuer defendants guaranteeing that the
  plaintiff class will recover, in the aggregate, $1 billion from their various suits against the underwriters (including the claims assigned by the issuer defendants). The Companys per capita portion of the maximum amount
  payable to the plaintiffs under the settlement, assuming the entire $1 billion is payable, would be approximately $3-4 million. The plaintiffs actual recoveries from the underwriter defendants (through settlements or
  damages assessed as a result of litigation) will be applied against the guarantee; and to
27

the extent that the underwriter defendants settle all of the cases for at least $1 billion, no payment will be required under the issuer defendants settlement. In exchange for the consideration described above, the plaintiffs
  will release the non-bankrupt issuer defendants from all claims against them (the bankrupt issuers will receive a covenant not to sue) and their individual defendants. Under the terms of the settlement agreements, all costs
  and expenses of the settlement (including legal expenses after June 1, 2003) will be borne by the insurance carriers of the Company and the other issuer defendants using each issuer defendants existing insurance
  coverage, with deductibles waived.
While the settlement process has been proceeding, the plaintiffs have continued to litigate against the underwriter defendants. The Court directed that the litigation proceed within a number of focus cases rather
  than in all of the 310 cases that have been consolidated. The Companys case is not one of these focus cases. On October 13, 2004, the district court certified the focus cases as class actions. The underwriter defendants
  appealed that ruling, and on December 5, 2006, the Court of Appeals for the Second Circuit reversed the district courts class certification decision. On January 5, 2007, the plaintiffs filed a petition for rehearing with the
  Court of Appeals. Because the Companys settlement with the plaintiffs involves the certification of the case as a class action as part of the approval process, the impact of this ruling on the Companys settlement is
  unclear.
If the court determines that the settlement is fair to the class members, and that the settlement classes can be certified, the settlement will be approved. If the settlement is approved, the Company is not aware of any
  material limitations to the payment by its insurance carriers of the costs and expenses of the settlement to the plaintiffs. The Companys insurance coverage is sufficient, its carriers are solvent, and the Company is not
  aware of any uncertainties as to the legal sufficiency of an insurance claim with respect to any recovery by plaintiffs. Accordingly, the Company does not expect that the settlement, should it be approved, will involve any
  payment by the Company. However, there can be no assurance that this proposed settlement will be approved and implemented in its current form, or at all.
If the settlement is not approved, the Company intends to defend the action vigorously. In the event the settlement does not receive final court approval and the Company or any of its individual defendants is
  reinstated as a defendant in the lawsuit, any unfavorable outcome of this litigation could have an adverse impact on the Companys business, financial condition, results of operations, and cash flows.
Results of Operations
Through June 2005 the Company operated its business in two segments, electronic publishing and securities research and brokerage. During that period, certain functions necessary to operate the Companys securities
  research and brokerage segment, including administrative, financial, legal and technology functions, were handled by the Companys electronic publishing operationscurrently the sole operating segment. Expenses related
  to the performance of these functions were allocated to the discontinued segment based upon a services agreement. Through April 2005, costs were allocated pro rata, based upon the average number of personnel
  employed by IRG Research each month as a percentage of the average of the total number of personnel employed each month by the Company as a whole. During May and June 2005, shared costs were allocated based on
  the Companys annual budget. Management of the Company believes these allocation methods to have been reasonable. In June 2005, the operations of the Companys securities research and brokerage segment were
  discontinued, and no further allocations have been made. Costs allocated to the discontinued segment totaled $1,251,083 and $2,304,656 for the years ended December 31, 2005 and 2004, respectively.
Comparison of Fiscal Years Ended December 31, 2006 and 2005
Net Revenue
For the Year EndedDecember 31,
    
    Change2006
    
    2005
    
    Amount
    
    PercentNet revenue:Subscription
    
    
    $
    
    33,514,590
    
    
    
    $
    
    23,070,259
    
    
    
    $
    
    10,444,331
    
    
    
    
    45
    %Advertising
    
    
    
    15,447,378
    
    
    
    
    9,522,835
    
    
    
    
    5,924,543
    
    
    
    
    62
    %Other
    
    
    
    1,926,867
    
    
    
    
    1,150,980
    
    
    
    
    775,887
    
    
    
    
    67
    %Total net revenue
    
    
    $
    
    50,888,835
    
    
    
    $
    
    33,744,074
    
    
    
    $
    
    17,144,761
    
    
    
    
    51
    %28

Subscription. Subscription revenue is derived from annual and monthly subscriptions, and is recognized ratably over the subscription period. We believe the growth in subscription revenue is due largely to our success
  in (i) increasing overall traffic to our Web sites by signing new agreements and expanding existing relationships with large, high-traffic portal and search engine companies, (ii) promoting our brands, products and services
  through television and (until December 2006) radio programs hosted by contributor James J. Cramer, and (iii) generating interest in our paid subscription services with expanded content offerings, including video and
  podcasts, personal finance and investor education content and lifestyle-oriented content. We also believe that strong trading volume and stock market performance during much of the previous 12 months resulted in
  increased numbers of investors seeking the type of investment information that the Company offers. Additionally, subscription revenue for the year ended December 31, 2006 includes the operations of TheStreet.com
  Ratings since the Ratings acquisition on August 7, 2006.
For the year ended December 31, 2006, approximately 65% of the Companys net subscription revenue was derived from annual subscriptions, as compared to approximately 68% for the year ended December 31, 2005.
  The Company calculates net subscription revenue by deducting anticipated refunds from cancelled subscriptions and chargebacks of disputed credit card charges from gross revenue. Refunds and chargebacks totaled less than
  1% of gross subscription revenue during each of the years ended December 31, 2006 and 2005.
Advertising. Advertising revenue is derived from Internet sponsorship arrangements, and from the delivery of banner and email advertisements on the Companys Web sites.
The increase in advertising revenue is attributable primarily to the attractiveness of our expanded personal finance, lifestyle and video content offerings and our success in implementing marketing relationships with
  other high-traffic Web sites. These factors resulted in a 46% increase in the average number of monthly unique visitors to the Companys Web sites and in an 80% increase the number of page views generated by the
  Companys Web sites, when compared to the year ended December 31, 2005. The growth in page views increased the amount of advertising inventory we had available to sell to advertisers, while the growth in our unique
  audience attracted new advertisers to the site, and allowed us to expand our relationship with a number of our existing advertisers.
The number of advertisers for the year ended December 31, 2006 was 148 as compared to 115 for the year ended December 31, 2005. The Companys top five advertisers accounted for approximately 34% of its total
  advertising revenue for the year ended December 31, 2006, as compared to approximately 33% for the year ended December 31, 2005. For the year ended December 31, 2006, one advertiser accounted for more than 10%
  (approximately 14%) of total advertising revenue. For the year ended December 31, 2005, no advertiser accounted for 10% of total advertising revenue.
Other. Other revenue consists primarily of syndication revenue and revenue related to the Companys nationally syndicated daily radio program, RealMoney with Jim Cramer prior to its discontinuation in December
  2006.
The increase in other revenue is primarily the result of revenue received from the syndication of independent research from Ratings by certain of the investment banks involved in the global analyst research
  settlement, partially offset by a decrease in revenue related to the Companys nationally syndicated daily radio program. The net effect of the foregoing accounted for $755,394 of the $775,887 total increase.
Operating Expense
For the Year EndedDecember 31,
    
    Change2006
    
    2005
    
    Amount
    
    PercentOperating Expense:Cost of services
    
    
    $
    
    18,450,110
    
    
    
    $
    
    12,727,057
    
    
    
    $
    
    5,723,053
    
    
    
    
    45
    %Sales and marketing
    
    
    
    9,616,491
    
    
    
    
    7,264,114
    
    
    
    
    2,352,377
    
    
    
    
    32
    %General and administrative
    
    
    
    10,673,705
    
    
    
    
    8,176,442
    
    
    
    
    2,497,263
    
    
    
    
    31
    %Depreciation and amortization
    
    
    
    1,088,679
    
    
    
    
    673,967
    
    
    
    
    414,712
    
    
    
    
    62
    %Total operating expense
    
    
    $
    
    39,828,985
    
    
    
    $
    
    28,841,580
    
    
    
    $
    
    10,987,405
    
    
    
    
    38
    %29

Operating expenses from continuing operations reported above for year ended December 31, 2005 do not include expenses that, prior to the third quarter in 2005, were allocated to the Companys securities research
  and brokerage segment. Such expenses are reported below under discontinued operations. While some of the expenses that were previously allocated to the securities research and brokerage segment have been eliminated
  or reduced as a result of the discontinuation of operations of IRG Research, which occurred in June 2005, the remaining portion of these expenses will continue to be incurred by the Company in its continuing operations.
Cost of services. Cost of services expense includes compensation and benefits for the Companys editorial, technology and ratings analyst staffs, as well as fees paid to non-employee content providers, expenses for
  contract programmers and developers, communication lines and other technology costs.
The increase in cost of services expense during the period was primarily the result of higher compensation and related costs (including an increase in the average headcount, higher incentive compensation related to
  improved operating performance and non-cash compensation related to the expensing of awards under the Companys stock incentive plan), combined with higher revenue sharing costs resulting from increased
  subscription revenue, increased fees paid to non-employee content providers, and increases in costs associated with data, hosting, computer maintenance and consulting. The net effect of the foregoing accounted for
  $5,480,664 of the total $5,723,053 increase. The increased expense also reflects both the allocation in the year ended December 31, 2005 of cost of services expenses totaling $507,262 to the Companys securities research
  and brokerage segment prior to its discontinuation in June 2005 as well as incremental costs associated with the operations of TheStreet.com Ratings since the Ratings acquisition on August 7, 2006.
Sales and marketing. Sales and marketing expense consists primarily of advertising and promotion, promotional materials, content distribution fees, and compensation expense for the direct sales force and customer
  service departments.
The increase in sales and marketing expense is primarily the result of higher compensation and related costs (including increased advertising commission payments resulting from increased advertising revenue, non-
  cash compensation related to the expensing of awards under the Companys stock incentive plan, an increase in the average headcount and higher incentive compensation related to improved operating performance),
  combined with increased advertising and promotion costs, advertisement serving expenses, credit card fees resulting from higher subscription revenue and deferred revenue balance, and consulting fees. The net effect of
  the foregoing accounted for $2,127,171 of the $2,352,377 increase. The increased expense also reflects both the allocation in the year ended December 31, 2005 of sales and marketing expenses totaling $11,009 to the
  Companys securities research and brokerage segment prior to its discontinuation in June 2005 as well as incremental costs associated with the operations of TheStreet.com Ratings since the Ratings acquisition on August
  7, 2006.
General and administrative. General and administrative expense consists primarily of compensation for general management, finance and administrative personnel, occupancy costs, professional fees, equipment rental
  and other office expenses.
The increase in general and administrative expense is primarily the result of higher compensation and related costs (including higher salary expense due to an increase in the average headcount, increased incentive
  compensation related to improved operating performance and non-cash compensation related to the expensing of awards under the Companys stock incentive plan), combined with higher accounting and recruiting fees
  and rent expense, partially offset by reduced legal and consulting fees due to the absence of the costs relating to the Companys consideration of strategic alternatives incurred during the year ended December 31, 2005.
  The net effect of the foregoing accounted for $1,930,899 of the $2,497,263 increase. The increased expense also reflects both the allocation in the year ended December 31, 2005 of general and administrative expenses
  totaling $667,185 to the Companys securities research and brokerage segment prior to its discontinuation in June 2005 as well as incremental costs associated with the operations of TheStreet.com Ratings since the
  Ratings acquisition on August 7, 2006.
Depreciation and amortization. The increase in depreciation and amortization expense primarily reflects intangible asset amortization related to the Ratings acquisition totaling $206,833, combined with increased
  depreciation expense related to increased capital expenditures. The increased expense also reflects both the allocation in the year ended December 31, 2005 of depreciation and amortization expenses totaling $62,250 to
  the Companys securities research and brokerage segment prior to its discontinuation in June 2005 as well as
30

incremental costs associated with the operations of TheStreet.com Ratings since the Ratings acquisition on August 7, 2006.
Net Interest Income
For the Year EndedDecember 31,
    
    Change2006
    
    2005
    
    Amount
    
    PercentNet interest income
    
    
    $
    
    2,037,496
    
    
    
    $
    
    852,676
    
    
    
    $
    
    1,184,820
    
    
    
    
    139
    %The increase in net interest income is primarily the result of increased cash balances combined with higher interest rates.
Discontinued Operations
For the Year EndedDecember 31,
    
    Change2006
    
    2005
    
    Amount
    
    PercentLoss from discontinued operations
    
    
    $
    
    
    
    
    
    $
    
    (3,075,402
    )
    
    
    
    $
    
    3,075,402
    
    
    
    
    100
    %Income (loss) on disposal of discontinued operations
    
    
    
    32,321
    
    
    
    
    (2,428,746
    )
    
    
    
    
    2,461,067
    
    
    
    
    N/AIncome (loss) from discontinued operations
    
    
    $
    
    32,321
    
    
    
    $
    
    (5,504,148
    )
    
    
    
    $
    
    5,536,469
    
    
    
    
    N/AIn June 2005, the Company committed to a plan to discontinue the operations of the Companys securities research and brokerage segment. Accordingly, the operating results relating to this segment have been
  segregated from continuing operations and reported as a separate line item on the consolidated statements of operations.
For the year ended December 31, 2006, income on disposal of discontinued operations represents an adjustment to previously estimated shutdown costs. For the year ended December 31, 2005, loss on disposal of
  discontinued operations includes actual losses from the date the Company committed to a plan to discontinue the segment, plus a provision for additional future costs to be incurred to complete the discontinuance process.
  The Company believes that any remaining costs associated with these discontinued operations have been adequately provided for by this provision.
The fair market values of the remaining assets and liabilities of the discontinued operation are as follows:
December 31,2006
    
    December 31,2005Current assets.
    
    
    $
    
    
    
    
    
    $
    
    3,200Current liabilities
    
    
    $
    
    222,425
    
    
    
    $
    
    279,930As of December 31, 2006, current liabilities of discontinued operations consists of accrued shutdown costs.
Net Income
Net income for the year ended December 31, 2006 totaled $12,868,447, or $0.48 and $0.47 per basic and diluted share, respectively, compared to $246,002, or $0.01 per basic and diluted share for the year ended
  December 31, 2005. Income from continuing operations for the year ended December 31, 2006 totaled $12,836,126, or $0.48 and $0.47 per basic and diluted share, respectively, compared to $5,750,150, or $0.23 and
  $0.22 per basic and diluted share, respectively, for the year ended December 31, 2005.
Non-GAAP adjusted income for the year ended December 31, 2006 totaled $14,621,876, or $0.54 and $0.53 per basic and diluted share, respectively, compared to $578,177, or $0.02 per basic and diluted share for
  the year ended December 31, 2005. Non-GAAP adjusted income from continuing operations for the year ended December 31, 2006 totaled $14,589,555, or $0.54 and $0.53 per basic and diluted share, respectively,
  compared to $6,082,325, or $0.24 and $0.23 per basic and diluted share, respectively, for the year ended December 31, 2005. Non-GAAP adjusted income is calculated as follows:
31

For the Year EndedDecember 31,2006
    
    2005Net income
    
    
    $
    
    12,868,447
    
    
    
    $
    
    246,002Add stock compensation expense
    
    
    
    1,753,429
    
    
    
    
    332,175Non-GAAP adjusted income
    
    
    $
    
    14,621,876
    
    
    
    $
    
    578,177Non-GAAP adjusted basic net income per share
    
    
    $
    
    0.54
    
    
    
    $
    
    0.02Non-GAAP adjusted diluted net income per share
    
    
    $
    
    0.53
    
    
    
    $
    
    0.02Weighted average basic shares outstanding
    
    
    
    27,014,047
    
    
    
    
    24,953,463Weighted average diluted shares outstanding
    
    
    
    27,546,137
    
    
    
    
    26,164,880For the Year EndedDecember 31,2006
    
    2005Income from continuing operations
    
    
    $
    
    12,836,126
    
    
    
    $
    
    5,750,150Add stock compensation expense
    
    
    
    1,753,429
    
    
    
    
    332,175Non-GAAP adjusted income from continuing operations
    
    
    $
    
    14,589,555
    
    
    
    $
    
    6,082,325Non-GAAP adjusted basic net income per share
    
    
    $
    
    0.54
    
    
    
    $
    
    0.24Non-GAAP adjusted diluted net income per share
    
    
    $
    
    0.53
    
    
    
    $
    
    0.23Weighted average basic shares outstanding
    
    
    
    27,014,047
    
    
    
    
    24,953,463Weighted average diluted shares outstanding
    
    
    
    27,546,137
    
    
    
    
    26,164,880Earnings before interest, taxes, depreciation and amortization (EBITDA) for the year ended December 31, 2006, totaled $12,342,350 compared to EBITDA of $393,355 for the year ended December 31, 2005.
  EBITDA from continuing operations in 2006 totaled $12,310,029 as compared to EBITDA of $5,679,363 for 2005. EBITDA is calculated as follows:
For the Year EndedDecember 31,2006
    
    2005Net income
    
    
    $
    
    12,868,447
    
    
    
    $
    
    246,002Less net interest income
    
    
    
    (2,037,496
    )
    
    
    
    
    (872,685
    )Add taxes
    
    
    
    422,720
    
    
    
    
    124,105Add depreciation and amortization
    
    
    
    1,088,679
    
    
    
    
    895,933EBITDA
    
    
    $
    
    12,342,350
    
    
    
    $
    
    393,355For the Year EndedDecember 31,2006
    
    2005Income from continuing operations
    
    
    $
    
    12,836,126
    
    
    
    $
    
    5,750,150Less net interest income
    
    
    
    (2,037,496
    )
    
    
    
    
    (852,676
    )Add taxes
    
    
    
    422,720
    
    
    
    
    107,922Add depreciation and amortization
    
    
    
    1,088,679
    
    
    
    
    673,967EBITDA from continuing operations
    
    
    $
    
    12,310,029
    
    
    
    $
    
    5,679,36332

Comparison of Fiscal Years Ended December 31, 2005 and 2004
Net Revenue
For the Year EndedDecember 31,
    
    Change2005
    
    2004
    
    Amount
    
    PercentNet revenue:Subscription
    
    
    $
    
    23,070,259
    
    
    
    $
    
    22,416,934
    
    
    
    $
    
    653,325
    
    
    
    
    3
    %Advertising
    
    
    
    9,522,835
    
    
    
    
    7,066,300
    
    
    
    
    2,456,535
    
    
    
    
    35
    %Other
    
    
    
    1,150,980
    
    
    
    
    1,266,537
    
    
    
    
    (115,557
    )
    
    
    
    
    (9
    %)Total net revenue
    
    
    $
    
    33,744,074
    
    
    
    $
    
    30,749,771
    
    
    
    $
    
    2,994,303
    
    
    
    
    10
    %Subscription. The increase in subscription revenue is primarily the result of a 2% increase in the average number of paid subscriptions to the Companys products during the year ended December 31, 2005 as
  compared to the year ended December 31, 2004. During the first half of 2005, subscriber totals decreased when compared to the same period of 2004. This trend was reversed during the second half of 2005 and December
  31, 2005 subscriber totals increased by 22% when compared to June 30, 2005. This resulted in a full year increase in subscription revenue totaling $653,325, or 3%. Since subscription revenue is recognized ratably over
  the subscription period, the increased subscriptions during the second half of 2005 resulted in increased deferred revenue when compared to year end 2004. For the year ended December 31, 2005, approximately 68% of
  the Companys net subscription revenue was derived from annual subscriptions, as compared to approximately 66% for the year ended December 31, 2004.
The Company calculates net subscription revenue by deducting anticipated refunds from cancelled subscriptions and chargebacks from disputed credit card charges from gross revenue. Refunds and chargebacks
  totaled less than 1% of gross subscription revenue during each of the years ended December 31, 2005 and 2004.
Advertising. The increase in advertising revenue is primarily the result of strong growth in the number of unique visitors to the Companys Web sites and the addition of content to the Companys free, flagship Web
  site, both of which helped to increase the number of page views generated by the Companys Web sites. The continued strength of the online advertising market also contributed to the increase. These factors in turn led to
  an increase in the number of advertisers choosing to place their advertisements in the Companys publications, and allowed the Company to charge higher advertising rates. During the year ended December 31, 2005,
  the Company achieved a 16% increase in revenue per 1,000 revenue generating page views, as well as a 26% increase in revenue generating page views, when compared to the year ended December 31, 2004. The number
  of advertisers for the year ended December 31, 2005, was 115, as compared to 91 for the year ended December 31, 2004.
The Companys top five advertisers accounted for approximately 33% of its total advertising revenue for the year ended December 31, 2005, as compared to approximately 43% for the year ended December 31,
  2004. For the year ended December 31, 2005, no advertiser accounted for 10% of total advertising revenue. For the year ended December 31, 2004, one advertiser accounted for approximately 12.5% of total advertising
  revenue.
Other. The decrease in other revenue is primarily the result of the absence of conference related revenue in the year ended December 31, 2005 combined with a reduction in syndication revenue. The net effect of the
  foregoing accounted for $137,527 of the $115,557 decrease.
Operating Expense
For the Year EndedDecember 31,
    
    Change2005
    
    2004
    
    Amount
    
    PercentOperating Expense:Cost of services
    
    
    $
    
    12,727,057
    
    
    
    $
    
    11,843,304
    
    
    
    $
    
    883,753
    
    
    
    
    7
    %Sales and marketing
    
    
    
    7,264,114
    
    
    
    
    8,018,461
    
    
    
    
    (754,347
    )
    
    
    
    
    (9
    %)General and administrative
    
    
    
    8,176,442
    
    
    
    
    7,081,891
    
    
    
    
    1,094,551
    
    
    
    
    15
    %Depreciation and amortization
    
    
    
    673,967
    
    
    
    
    655,747
    
    
    
    
    18,220
    
    
    
    
    3
    %One-time lease termination costs
    
    
    
    
    
    392,851
    
    
    
    
    (392,851
    )
    
    
    
    
    (100
    %)Asset recovery
    
    
    
    
    
    (500,000
    )
    
    
    
    
    500,000
    
    
    
    
    100
    %Total operating expense
    
    
    $
    
    28,841,580
    
    
    
    $
    
    27,492,254
    
    
    
    $
    
    1,349,326
    
    
    
    
    5
    %33

Operating expenses from continuing operations reported above for the year ended December 31, 2005 and 2004 do not include expenses that, prior to the third quarter in 2005, were allocated to the Companys
  securities research and brokerage segment. Such expenses are reported below under discontinued operations. While some of the expenses that were previously allocated to the securities research and brokerage segment
  have been eliminated or reduced as a result of the discontinuation of operations of IRG Research, which occurred in June 2005, the remaining portion of these expenses will continue to be incurred by the Company in its
  continuing operations.
Cost of services. The increase in cost of services expense is primarily the result of higher revenue sharing agreements and fees paid to outside contributors, partially offset by lower consulting fees. The net effect of
  the foregoing accounted for $692,570 of the $883,753 increase. The increased expense also reflects the allocation in the year ended December 31, 2005 of cost of services expenses totaling $507,262, compared to
  $830,397 for year ended December 31, 2004, to the Companys discontinued securities research and brokerage segment.
Sales and marketing. The decrease in sales and marketing expense is primarily the result of reduced online advertising expenditures (resulting from a reduction in spending on the Companys online marketing
  program), combined with reduced content distribution fees, partially offset by increased compensation and related costs, and consulting and promotions fees. The net effect of the foregoing accounted for $852,354 of the
  $754,347 decrease. The decreased expense is also partially offset by the allocation in the year ended December 31, 2005 of sales and marketing expenses totaling $11,009, compared to $19,637 for the year ended
  December 31, 2004, to the Companys discontinued securities research and brokerage segment.
General and administrative. The increase in general and administrative expense reflects the allocation of expenses totaling $667,185 and $1,318,598 during the years ended December 31, 2005 and 2004, respectively,
  to the Companys discontinued securities research and brokerage segment, combined with an increase in other expenses totaling $443,138 over the years. The increase was primarily the result of higher legal and consulting
  fees due to activities related to the consideration of possible strategic alternatives, noncash compensation resulting from the early adoption of FAS No. 123(R), and rent and commercial rent taxes, partially offset by
  reduced compensation and related costs, (mainly incentive compensation) and insurance fees. The net effect of the foregoing accounted for $831,885 of the $1,094,551 total increase.
Depreciation and amortization. The increase in depreciation and amortization expense reflects the allocation of expense totaling $62,250 and $128,678 during the years ended December 31, 2005 and 2004,
  respectively, to the Companys discontinued securities research and brokerage segment, partially offset by fully depreciated assets and reduced depreciation expense resulting from reduced capital expenditures.
One-time lease termination costs. During the three months ended September 30, 2004, the Company recognized a one-time lease termination charge totaling $392,851 related to the subleasing of its office space at
  Two Rector Street in New York City, New York. The space had been provided to the Companys discontinued subsidiary, IRG Research under the services agreement between the two companies. In September 2004,
  when the new office space leased by IRG Research at 44 Wall Street in New York City, New York became available for occupancy, the Company subleased the Two Rector Street space to a new subtenant.
Asset recovery. In December 1999, the Company purchased a 19.99% interest in BusinessNet Online Information Ltd. (BusinessNet), which launched an online business publication serving the Israeli market. In
  December 2001, the Company concluded that its investment in BusinessNet was not realizable. As a result, the Company determined that this asset was fully impaired, and recorded an impairment charge in the amount of
  the full value ($4,054,354) of the investment and loans. In October 2004, the Company entered into agreements with Haaretz Daily Newspaper Ltd. (Haaretz), the majority shareholder of BusinessNet, pursuant to
  which the Company agreed to sell its interest in BusinessNet and assign its rights and obligations to Haaretz in consideration of a cash payment of $500,000 and indemnification against any and all claims arising out of its
  investment in BusinessNet. The transaction closed in December 2004.
Net Interest Income
For the Year EndedDecember 31,
    
    Change2005
    
    2004
    
    Amount
    
    PercentNet interest income
    
    
    $
    
    852,676
    
    
    
    $
    
    362,211
    
    
    
    $
    
    490,465
    
    
    
    
    135
    %34

The increase in net interest income is primarily the result of higher interest rates.
Discontinued Operations
For the Year EndedDecember 31,
    
    Change2005
    
    2004
    
    Amount
    
    PercentLoss from discontinued operations
    
    
    $
    
    (3,075,402
    )
    
    
    
    $
    
    (5,808,286
    )
    
    
    
    $
    
    2,732,884
    
    
    
    
    47
    %Loss on disposal of discontinued operations
    
    
    
    (2,428,746
    )
    
    
    
    
    
    
    (2,428,746
    )
    
    
    
    
    N/ALoss from discontinued operations
    
    
    $
    
    (5,504,148
    )
    
    
    
    $
    
    (5,808,286
    )
    
    
    
    $
    
    304,138
    
    
    
    
    5
    %In June 2005, the Company committed to a plan to discontinue the operations of the Companys securities research and brokerage segment. Accordingly, the operating results relating to this segment have been
  segregated from continuing operations and reported as a separate line item on the consolidated statements of operations.
For the year ended December 31, 2005, loss on disposal of discontinued operations includes actual losses from the date the Company committed to a plan to discontinue the segment, plus a provision for additional
  future costs to be incurred to complete the discontinuance process. The Company believes that any remaining costs associated with these discontinued operations have been adequately provided for by this provision.
As of December 31, 2005, current assets of discontinued operations total $3,200, which relates to a security deposit on previously occupied office space, and current liabilities of discontinued operations total
  $279,930, which consists primarily of accrued shutdown costs.
Net Income
Net income for the year ended December 31, 2005 totaled $246,002, or $0.01 per basic and diluted share, compared to a net loss totaling $2,188,558, or a net loss of $0.09 and $0.08 per basic and diluted share,
  respectively, for the year ended December 31, 2004. Income from continuing operations for the year ended December 31, 2005 totaled $5,750,150, or $0.23 and $0.22 per basic and diluted share, respectively, compared to
  $3,619,728, or $0.15 and $0.14 per basic and diluted share, respectively, for the year ended December 31, 2004.
Non-GAAP adjusted income for the year ended December 31, 2005 totaled $578,177, or $0.02 per basic and diluted share, compared to a net loss totaling $2,188,558, or a net loss of $0.09 and $0.08 per basic and
  diluted share, respectively, for the year ended December 31, 2004. Non-GAAP adjusted income from continuing operations for the year ended December 31, 2005 totaled $6,082,325, or $0.24 and $0.23 per basic and
  diluted share, respectively, compared to $3,619,728, or $0.15 and $0.14 per basic and diluted share, respectively, for the year ended December 31, 2004. Non-GAAP adjusted income is calculated as follows:
For the Year EndedDecember 31,2005
    
    2004Net income
    
    
    $
    
    246,002
    
    
    
    $
    
    (2,188,558
    )Add stock compensation expense
    
    
    
    332,175
    
    
    Non-GAAP adjusted income
    
    
    $
    
    578,177
    
    
    
    $
    
    (2,188,558
    )Non-GAAP adjusted basic net income per share
    
    
    $
    
    0.02
    
    
    
    $
    
    (0.09
    )Non-GAAP adjusted diluted income per share
    
    
    $
    
    0.02
    
    
    
    $
    
    (0.08
    )Weighted average basic shares outstanding
    
    
    
    24,953,463
    
    
    
    
    24,529,026Weighted average diluted shares outstanding
    
    
    
    26,164,880
    
    
    
    
    26,067,98135

For the Year EndedDecember 31,2005
    
    2004Income from continuing operations
    
    
    $
    
    5,750,150
    
    
    
    $
    
    3,619,728Add stock compensation expense
    
    
    
    332,175
    
    
    Non-GAAP adjusted income from continuing operations
    
    
    $
    
    6,082,325
    
    
    
    $
    
    3,619,728Non-GAAP adjusted basic net income per share
    
    
    $
    
    0.24
    
    
    
    $
    
    0.15Non-GAAP adjusted diluted income per share
    
    
    $
    
    0.23
    
    
    
    $
    
    0.14Weighted average basic shares outstanding
    
    
    
    24,953,463
    
    
    
    
    24,529,026Weighted average diluted shares outstanding
    
    
    
    26,164,880
    
    
    
    
    26,067,981Earnings before interest, taxes, depreciation and amortization (EBITDA) for the year ended December 31, 2005, totaled $393,355 compared to EBITDA net loss totaling $1,638,842 for the year ended December 31,
  2004. EBITDA from continuing operations in 2005 totaled $5,679,363 as compared to EBITDA of $3,998,753 for 2004. EBITDA is calculated as follows:
For the Year EndedDecember 31,2005
    
    2004Net income
    
    
    $
    
    246,002
    
    
    
    $
    
    (2,188,558
    )Less net interest income
    
    
    
    (872,685
    )
    
    
    
    
    (379,166
    )Add taxes
    
    
    
    124,105
    
    
    
    
    123,403Add depreciation and amortization
    
    
    
    895,933
    
    
    
    
    805,479EBITDA
    
    
    $
    
    393,355
    
    
    
    $
    
    (1,638,842
    )For the Year EndedDecember 31,2005
    
    2004Income from continuing operations
    
    
    $
    
    5,750,150
    
    
    
    $
    
    3,619,728Less net interest income
    
    
    
    (852,676
    )
    
    
    
    
    (362,211
    )Add taxes
    
    
    
    107,922
    
    
    
    
    95,489Add depreciation and amortization
    
    
    
    673,967
    
    
    
    
    655,747EBITDA from continuing operations
    
    
    $
    
    5,679,363
    
    
    
    $
    
    4,008,753Liquidity and Capital Resources
The Company invests 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 can easily be made available for operating
  purposes. As of December 31, 2006, the Companys cash and cash equivalents and noncurrent restricted cash amounted to $46,555,232, representing 72% of total assets.
Cash generated from operations was sufficient to cover expenses during the year ended December 31, 2006. Net cash provided by operating activities totaled $15,519,063 for the year ended December 31, 2006, as
  compared to net cash provided by operating activities totaling $1,244,411 for the year ended December 31, 2005. The increase in net cash provided by operating activities is primarily related to the following:

    
    
    
    improved operating results;
    
    
    
    increased noncash expenditures; and
    
    
    
    lower incentive compensation payments during the year ended December 31, 2006 related to the 2005 fiscal year, as compared to payments made during the year ended December 31, 2005 related to the 2004 fiscal
      year.These increases were partially offset by the following:

    
    
    
    higher levels of receivables due to increased advertising revenue during the year ended December 31, 2006, as compared to the year ended December 31, 2005; and36


    
    
    
    a slow down in the overall growth of deferred revenue in the year ended December 31, 2006, net of the amount acquired in the Ratings acquisition on August 7, 2006, as compared to the year ended December 31,
      2005.Net cash provided by operating activities of $15,519,063 for the year ended December 31, 2006 was primarily the result of the Companys net income combined with noncash expenses, an increase in accrued
  expenses (primarily related to increased incentive compensation) and increased deferred revenue (resulting from increased subscription sales). This was partially offset by an increase in accounts receivable (primarily the
  result of increased billings caused by higher advertising revenue). The net effect of the foregoing accounted for $16,040,475 of the $15,519,063 net cash provided by operating activities.
Net cash used in investing activities of $4,503,720 for the year ended December 31, 2006 was the result of the Ratings acquisition on August 7, 2006, combined with capital expenditures, partially offset by the sale of
  a short-term investment. Capital expenditures generally consisted of purchases of computer software and hardware, and telephone equipment.
Net cash provided by financing activities of $2,625,350 for the year ended December 31, 2006 consisted of the proceeds from the exercise of stock options and a decrease in restricted cash, partially offset by cash
  dividends paid, the purchase of treasury stock and a decrease in note payable.
The Company has a total of $500,000 of cash invested in a certificate of deposit that serves as collateral for an outstanding letter of credit, and is therefore restricted. The letter of credit serves as a security deposit for
  the Companys principal office space in New York City. The office lease expires in November 2009, and the restricted cash is therefore classified as a noncurrent asset.
The Company believes that its current cash and cash equivalents will be sufficient to meet its anticipated cash needs for at least the next 12 months. The Company is committed to cash expenditures in an aggregate
  amount of approximately $4.4 million through December 31, 2007, in respect of the contractual obligations set forth below under Commitments and Contingencies. Additionally, the Companys Board of Directors
  declared four quarterly cash dividends in the amount of $0.025 per share of common stock during the year ended December 31, 2006, which resulted in a cash expenditure of approximately $2.7 million. The Company
  intends, although there can be no assurance, to pay regular quarterly cash dividends in the future.
The Company recognized a deferred tax asset of approximately $53 million and $59 million as of December 31, 2006 and 2005, respectively, primarily relating to net operating loss carryforwards of approximately
  $132 million and $140 million as of December 31, 2006 and 2005, respectively, available to offset future taxable income through 2025. In accordance with Section 382 of the Internal Revenue code, the usage of the
  Companys net operating loss carryforwards could be limited in the event of a change in ownership. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
  periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. At present, the Company does not have a
  sufficient history of income to conclude that it is more likely than not that the Company will be able to realize all of its tax benefits in the near future and therefore a valuation allowance was established in the full value of
  the deferred tax asset.
A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance net of appropriate reserves. Should the Company continue to be
  profitable in future periods with supportable trends, the valuation allowance will be reversed accordingly.
Treasury Stock
As discussed in Note 11 to Notes to Consolidated Financial Statements, in December 2000 the Companys Board of Directors authorized the repurchase of up to $10 million worth of the Companys common stock,
  from time to time, in private purchases or in the open market. In February 2004, the Companys Board of Directors approved the resumption of the stock repurchase program under new price and volume parameters,
  leaving unchanged the maximum amount available for repurchase under the program. During the year ended December 31, 2006, the Company did not purchase any shares of common stock under the program. Since
  inception of the program, the Company has purchased a total of 5,453,416 shares of common stock at an aggregate cost of $7,321,122. In addition, pursuant to the terms of the Companys 1998 Stock Incentive Plan, as
  amended (the Plan) and certain additional stock option exercise procedures adopted by the Compensation Committee of the
37

Board of Directors, in connection with the exercise of stock options by certain of the Companys executive officers in November 2005 and February 2006, the Company withheld 231,602 and 66,982 shares, respectively,
  issuable upon the exercise of stock options, in lieu of payment of the exercise price and the minimum amount of applicable withholding taxes then due. These shares have been recorded as treasury stock.
Commitments and Contingencies
The Company is committed under operating leases, principally for office space, furniture and fixtures, and equipment. Certain leases are subject to rent reviews and require payment of expenses under escalation
  clauses. Rent and equipment rental expenses were $1,717,158, $1,575,462 and $1,430,509 for the years ended December 31, 2006, 2005 and 2004, respectively. The increase in rent and equipment rental expenses was
  primarily due to additional rent expense resulting from the Ratings acquisition on August 7, 2006, the timing and amount of retroactive operating expense escalation charges, and the allocation to the Companys
  discontinued securities research and brokerage segment of expenses totaling $64,410 and $119,932 in the years ended December 31, 2005 and 2004, respectively. No such allocation was made in the year ended
  December 31, 2006. Additionally, the Company has employment agreements with certain of its employees and outside contributors, whose future minimum payments are dependent on the future fulfillment of their services
  thereunder. As of December 31, 2006, total future minimum cash payments are as follows:
Payments Due by YearContractual obligations:
    
    Total
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    After2011Operating leases
    
    
    $
    
    3,097,722
    
    
    
    $
    
    1,287,758
    
    
    
    $
    
    997,464
    
    
    
    $
    
    812,500
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    Employment agreements
    
    
    
    2,872,544
    
    
    
    
    2,424,875
    
    
    
    
    447,669
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outside contributors
    
    
    
    316,217
    
    
    
    
    316,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Note payable
    
    
    
    22,146
    
    
    
    
    22,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    $
    
    6,308,629
    
    
    
    $
    
    4,050,996
    
    
    
    $
    
    1,445,133
    
    
    
    $
    
    812,500
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    Additional agreements were signed subsequent to December 31, 2006 with one employee and one outside contributor that guarantee payments of $208,333, $508,334 and $93,333 in the years ended December 31,
  2007, 2008 and 2009, respectively, and are dependent on the future fulfillment of the services thereunder. An additional operating lease agreement was also signed that guarantees payments of $156,816, $209,088 and
  $191,664 in the years ended December 31, 2007, 2008 and 2009, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company believes that its market risk exposures are immaterial as the Company does not have instruments for trading purposes, and reasonable possible near-term changes in market rates or prices will not result
  in material near-term losses in earnings, material changes in fair values or cash flows for all instruments.
Item 8. Financial Statements and Supplementary Data.
The Companys consolidated financial statements required by this item are included in Item 15 of this report.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
On June 21, 2005, the Audit Committee of the Board of Directors of TheStreet.com, Inc. (TheStreet.com; or the Company) engaged Marcum & Kliegman LLP (M&K) to serve as the Companys independent
  registered public accounting firm beginning with the year ended December 31, 2005. The Audit Committee dismissed Ernst & Young LLP (E&Y), the Companys independent registered public accounting firm since 2002.
E&Ys reports on TheStreet.coms consolidated financial statements for the years ended December 31, 2003 and 2004 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as
  to uncertainty, audit scope or accounting principles.
During TheStreet.coms years ended December 31, 2003 and 2004 and through June 21, 2005, there were no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure, or
38

auditing scope or procedure which, if not resolved to E&Ys satisfaction, would have caused E&Y to make reference to the subject matter in its reports on TheStreet.coms consolidated financial statements for such years; and there
  were no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K.
TheStreet.com provided E&Y with a copy of the foregoing disclosures at the time of the filing of the Companys Current Report on Form 8-K reporting the change in accountants. A copy of E&Ys letter, dated June 21,
  2005, to the Securities and Exchange Commission stating that E&Y was in agreement with statements concerning E&Y contained in such disclosures, is incorporated by reference herein as Exhibit 16.1 to the Companys
  Current Report on Form 8-K filed with the SEC on June 21, 2005.
Since January 1, 2003 and through June 21, 2005, the Company did not consult with M&K regarding: (i) the application of accounting principles to any transaction, either completed or proposed; or the type of audit
  opinion that might be rendered on the Companys financial statements, and neither a written report was provided to the Company nor oral advice was provided that M&K concluded was an important factor considered by
  the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the
  related instructions thereto) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Item 9A. Controls and Procedures.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact
  that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
  assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that
  judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more
  people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
  succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of
  changes in conditions or deterioration in the degree of compliance with policies or procedures.
The Company carried out, under the supervision and with the participation of the Companys management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the
  design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the annual period covered by this report. Based upon
  that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2006, the design and operation of these disclosure controls and procedures were effective. During the annual
  period covered by this report, there have been no changes in the Companys internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal
  control over financial reporting.
Management Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of
  December 31, 2006. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the
  Companys principal executive and principal financial officers and effected by the Companys board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
  reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures
  that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are
  recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance
  with authorizations of management and directors of the Company; and (3) provide
39

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls
  may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management performed an assessment of the effectiveness of the Companys internal control over financial reporting as of December 31, 2006 based upon criteria in Internal ControlIntegrated Framework issued by
  the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management believes that the Companys internal control over financial reporting was effective as of
  December 31, 2006 based on those criteria issued by COSO.
The Companys independent registered public accounting firm, Marcum & Kliegman LLP, has issued an audit report on managements assessment of the effectiveness of the Companys internal control over financial
  reporting as of December 31, 2006. Their report appears on page F-2.
Item 9B. Other Information.
None.
40

PART III
Item 10. Directors and Executive Officers of the Registrant.
Other than the information provided below, the information required by this Item is incorporated herein by reference to the Companys definitive Proxy Statement for its Annual Meeting of
  Stockholders to be held on May 24, 2007, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all of its directors, officers and employees, as well as outside contributors to its publications. This code is publicly
  available on the Companys Web site at http://www.thestreet.com/ir/codeofconduct. Any substantive amendments to the code and any grant of waiver from a provision of the code requiring disclosure under
  applicable SEC or Nasdaq rules will be disclosed in a report on Form 8-K.
Audit Committee Financial Expert
The Board of Directors of the Company has determined that Daryl Otte, the Chairman of the Audit Committee, is an audit committee financial expert as defined under Item 401(h) of Regulation S-
  K, and that he is independent as defined under applicable Nasdaq listing standards and as required under Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended.
Item 11. Executive Compensation.
The information required by this Item is incorporated herein by reference to the Companys definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 24, 2007, to be filed
  with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Other than the information provided below, information required by this Item is incorporated herein by reference to the Companys definitive Proxy Statement for its Annual Meeting of Stockholders
  to be held on May 24, 2007, to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.
Equity Compensation Plan Information
The Company has only one equity compensation plan, TheStreet.com 1998 Stock Incentive Plan, as amended and restated, which was approved most recently by the Companys stockholders at its
  annual meeting on May 29, 2002. The following table sets forth certain information, as of December 31, 2006, concerning shares of common stock authorized for issuance under that equity compensation plan
  of the Company.
Number ofsecurities to beissued uponexercise ofoutstanding options
    
    Weighted-averageexercise price ofoutstanding options
    
    Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securities reflectedin column (a))(a)
    
    (b)
    
    (c)Equity compensation plans approved by security holders
    
    
    
    2,206,089
    
    
    
    $
    
    5.40
    
    
    
    
    510,493*

*
    
    
    
    Aggregate number of shares available for grant under TheStreet.com 1998 Stock Incentive Plan, which grants may be in the form of stock options, restricted stock or deferred stock in the discretion of the
      Board of Directors, with respect to non-employee director grants, or the Compensation Committee, with respect to all other grants.41

Item 13. Certain Relationships and Related Transactions.
The information required by this Item is incorporated herein by reference to the Companys definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 24, 2007, to be filed
  with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.
Item 14. Principal Accounting Fees and Services.
The information required by this Item is incorporated herein by reference to the Companys definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 24, 2007, to be filed
  with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
    
    1.
    
    Consolidated Financial Statements:See TheStreet.com, Inc. Index to Consolidated Financial Statements on page F-1.2.
    
    Consolidated Financial Statement Schedules:See TheStreet.com, Inc. Index to Consolidated Financial Statements on page F-1.3.
    
    Exhibits:The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission:
ExhibitNumber
    
    Description*3.1
    
    Amended and Restated Certificate of Incorporation**3.2
    
    Amended and Restated Bylaws*4.1
    
    Amended and Restated Registration Rights Agreement, dated as of December 21, 1998,
      among TheStreet.com and the stockholders named therein*4.2
    
    TheStreet.com Rights Agreement4.3
    
    Amendment No. 1, dated as of August 7, 2000, to Rights Agreement4.4
    
    Specimen Certificate for TheStreet.coms common stock ̈10.1
    
    Amended and Restated 1998 Stock Incentive Plan, dated as of May 29, 20022 ̈ ̈10.2
    
    Form of Stock Option Grant Agreement under the 1998 Stock Incentive Plan2à10.3
    
    Form of Restricted Stock Unit Grant Agreement under the 1998 Stock Incentive Plan210.4
    
    Annual Incentive Plan210.5
    
    Compensation of Directors2+10.6
    
    Employment Agreement, dated August 1, 2005, between James Cramer andTheStreet.com, Inc.2à10.7
    
    Employment Agreement, dated January 1, 2006, between Thomas J. Clarke, Jr. and
      TheStreet.com, Inc.2++10.8
    
    Employment Agreement, dated March 1, 2003, between James Lonergan and TheStreet.com,
      Inc.2o10.9
    
    Letter Agreement, dated April 29, 2005, between James Lonergan and TheStreet.com, Inc.2à10.10
    
    Letter Agreement, dated March 14, 2006, between James Lonergan and TheStreet.com, Inc.210.11
    
    Letter Agreement, dated March 1, 2007, between James Lonergan and TheStreet.com, Inc.2£10.12
    
    Employment Agreement, dated July 5, 2006, between Eric Ashman and TheStreet.com, Inc.2oo10.13
    
    Letter Agreement, dated October 31, 2000, between Lisa A. Mogensen and TheStreet.com,
      Inc.242

ExhibitNumber
    
    Descriptionà10.14
    
    Amendment, dated February 3, 2006, to Letter Agreement, dated October 31, 2000, between
      Lisa A. Mogensen and TheStreet.com, Inc.210.15
    
    Agreement of Lease, dated July 22, 1999, between 14 Wall Street Holdings 1 LLC (as
      successor to W12/14 Wall Acquisition Associates LLC), as Landlord, and TheStreet.com,
      Inc., as Tenant ̈ ̈10.16
    
    Amendment of Lease, dated as of October 31, 2001, between 14 Wall Street Holdings 1 LLC
      (as successor to W12/14 Wall Acquisition Associates LLC), as Landlord, and TheStreet.com,
      Inc., as Tenantàà14
    
    Code of Business Conduct and Ethics23.1
    
    Consent of Marcum & Kliegman LLP23.2
    
    Consent of Ernst & Young LLP31.1
    
    Rule 13a-14(a) Certification of CEO31.2
    
    Rule 13a-14(a) Certification of CFO32.1
    
    Section 1350 Certification of CEO32.2
    
    Section 1350 Certification of CFO
*
    
    Incorporated by reference to Exhibits to the Companys Registration Statement on Form S-1 filed February 23, 1999 (File No. 333-72799).**
    
    Incorporated by reference to Exhibits to the Companys 1999 Annual Report on Form 10-K filed March 30, 2000.
    
    Incorporated by reference to Exhibits to the Companys 2000 Annual Report on Form 10-K filed April 2, 2001.
    
    Incorporated by reference to Exhibits to Amendment 3 to the Companys Registration Statement on Form S-1 filed April 19, 1999. ̈
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed August 14, 2002. ̈ ̈
    
    Incorporated by reference to Exhibits to the Companys 2004 Annual Report on Form 10-K filed March 16, 2005.+
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated August 1, 2005.++
    
    Incorporated by reference to Exhibits to the Companys 2002 Annual Report on Form 10-K filed March 31, 2003.o
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated April 29, 2005.oo
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed May 10, 2005.
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed August 16, 1999.à
    
    Incorporated by reference to Exhibits to the Companys 2005 Annual Report on Form 10-K filed March 16, 2006.àà
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated January 25, 2005.£
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed August 9, 2006.£
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated July 5, 2006.2
    
    Indicates compensatory plan or arrangement.43

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.
THESTREET.COM, INC.Dated: March 16, 2007
    
    By:
    
    /s/ THOMASJ. CLARKE, JR.______________________________________________
Thomas J. Clarke, Jr.Chief Executive Officer and Chairman of the BoardPursuant to the requirements of the Securities 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
    
    Date/s/
        THOMASJ. CLARKE,
        JR.________________________________
        (THOMASJ. CLARKE
        , JR.)
    
    Chief
        Executive Officer and
        Chairman of the Board
    
    March 16, 2007/s/
        ERICASHMAN________________________________
        (ERICASHMAN)
    
    Chief
        Financial Officer
    
    March 16, 2007/s/
        RICHARDBROITMAN________________________________
        (RICHARDBROITMAN)
    
    Controller
    
    March 16, 2007/s/
        JAMESJ. CRAMER________________________________
        (JAMESJ. CRAMER)
    
    Director
    
    March 16, 2007/s/
        JEFFREYCUNNINGHAM________________________________
        (JEFFREYCUNNINGHAM)
    
    Director
    
    March 16, 2007/s/
        WILLIAMR. GRUVER________________________________
        (WILLIAMR. GRUVER)
    
    Director
    
    March 16, 2007/s/
        DARYLOTTE________________________________
        (DARYLOTTE)
    
    Director
    
    March 16, 2007/s/
        MARTINPERETZ________________________________
        (MARTINPERETZ)
    
    Director
    
    March 16, 2007/s/
        JEFFREYA. SONNENFELD________________________________
        (JEFFREYA. SONNENFELD)
    
    Director
    
    March 16, 200744

THESTREET.COM, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item 15(a)
PageReports of Independent Registered Public Accounting Firms
    
    
    
    F-2Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    
    F-5Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004
    
    
    
    F-6Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2006, 2005 and 2004
    
    
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004
    
    
    
    F-8Notes to Consolidated Financial Statements
    
    
    
    F-9Schedule IIValuation and Qualifying Accounts for the Years Ended December 31, 2006, 2005 and 2004
    
    
    
    F-28F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUTING FIRM
To the Audit Committee ofThe Board of Directors and Stockholders ofTHESTREET.COM, INC.
We have audited managements assessment, included in the accompanying Managements Report on Internal Controls over Financial Reporting that TheStreet.com, Inc. (the Company) maintained
  effective internal control over financial reporting as of December 31, 2006 based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
  the Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
  financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our
  audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
  financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary
  in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
  external purposes in accordance with accounting principles generally accepted in the United States of America. A companys internal control over financial reporting includes those policies and procedures
  that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
  transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and
  expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
  detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation to future periods are subject to the risk that
  controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the
  criteria established in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all
  material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal ControlIntegrated Frameworkissued by the Committee of
  Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2006 and 2005 and the
  related consolidated statements of operations, stockholders equity, and cash flows for each of the two years in the period ended December 31, 2006 of the Company and our report dated February 16, 2007
  expressed an unqualified opinion on those financial statements.
/s/ Marcum & Kliegman LLPNew York, New YorkFebruary 16, 2007
F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUTING FIRM
To the Audit Committee ofThe Board of Directors and Stockholders ofTHESTREET.COM, INC.
We have audited the accompanying consolidated balance sheets of TheStreet.com, Inc. (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of operations,
  stockholders equity and cash flows for each of the two years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These
  financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of TheStreet.com, Inc. at December 31, 2006 and 2005,
  and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United
  States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the financial statements taken as a whole, presents fairly in all material respects the
  information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting
  as of December 31, 2006, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report, dated
  February 16, 2006, expressed an unqualified opinion on managements assessment of the effectiveness of the Companys internal control over financial reporting and an unqualified opinion on the
  effectiveness of the Companys internal control over financial reporting.
/s/ Marcum & Kliegman LLPNew York, New YorkFebruary 16, 2007
F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and StockholdersTHESTREET.COM, INC.
We have audited the accompanying consolidated statements of operations, stockholders equity, and cash flows of TheStreet.com, Inc. (the Company) for the year ended December 31, 2004. Our
  audit also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to
  express an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of its operations and its cash flows for the year ended December 31, 2004 in
  conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the financial statements taken as a whole,
  presents fairly in all material respects the information set forth therein.
ERNST&YOUNGLLP
New York, New YorkMarch 11, 2005, except for Note 2, as to which thedate is March 13, 2006
F-4

THESTREET.COM, INC.CONSOLIDATED BALANCE SHEETS
December 31,2006
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    
    $
    
    46,055,232
    
    
    
    $
    
    32,414,539Restricted cash
    
    
    
    
    
    300,000Short-term investments
    
    
    
    
    
    500,000Accounts receivable, net of allowance for doubtful accounts of $216,077 as of December 31, 2006 and $131,840 as of December 31, 2005
    
    
    
    6,314,553
    
    
    
    
    3,195,178Other receivables
    
    
    
    368,496
    
    
    
    
    185,856Prepaid expenses and other current assets
    
    
    
    1,436,618
    
    
    
    
    1,101,570Current assets of discontinued operations
    
    
    
    
    
    3,200Total current assets
    
    
    
    54,174,899
    
    
    
    
    37,700,343Property and equipment, net of accumulated depreciation and amortization of $14,420,638 as of December 31, 2006 and $13,494,175 as of December 31, 2005
    
    
    
    3,018,132
    
    
    
    
    1,987,207Other assets
    
    
    
    178,396
    
    
    
    
    133,623Goodwill
    
    
    
    4,509,666
    
    
    
    
    1,990,312Other intangibles, net
    
    
    
    2,188,500
    
    
    
    
    493,333Restricted cash
    
    
    
    500,000
    
    
    
    
    800,000Total assets
    
    
    $
    
    64,569,593
    
    
    
    $
    
    43,104,818LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    
    $
    
    1,165,705
    
    
    
    $
    
    1,135,318Accrued expenses
    
    
    
    6,179,091
    
    
    
    
    4,142,233Deferred revenue
    
    
    
    12,705,038
    
    
    
    
    9,928,254Current portion of note payable
    
    
    
    22,146
    
    
    
    
    102,931Other current liabilities
    
    
    
    83,800
    
    
    
    
    52,775Current liabilities of discontinued operations
    
    
    
    222,425
    
    
    
    
    279,930Total current liabilities
    
    
    
    20,378,205
    
    
    
    
    15,641,441Note payable
    
    
    
    
    
    22,146Total liabilities
    
    
    
    20,378,205
    
    
    
    
    15,663,587Stockholders EquityPreferred stock; $0.01 par value; 10,000,000 shares authorized; none issued and outstanding
    
    
    
    Common stock; $0.01 par value; 100,000,000 shares authorized; 33,606,835 shares issued and 27,854,835 shares outstanding at December 31, 2006, and 31,220,123
      shares issued and 25,535,105 shares outstanding at December 31, 2005
    
    
    
    336,068
    
    
    
    
    312,201Additional paid-in capital
    
    
    
    193,556,899
    
    
    
    
    189,167,895Treasury stock at cost; 5,752,000 shares at December 31, 2006 and 5,685,018 shares at December 31, 2005
    
    
    
    (9,033,471
    )
    
    
    
    
    (8,502,310
    )Accumulated deficit
    
    
    
    (140,668,108
    )
    
    
    
    
    (153,536,555
    )Total stockholders equity
    
    
    
    44,191,388
    
    
    
    
    27,441,231Total liabilities and stockholders equity
    
    
    $
    
    64,569,593
    
    
    
    $
    
    43,104,818The accompanying Notes to Consolidated Financial Statementsare an integral part of these financial statements
F-5

THESTREET.COM, INC.CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31,2006
    
    2005
    
    2004Net revenue:Subscription
    
    
    $
    
    33,514,590
    
    
    
    $
    
    23,070,259
    
    
    
    $
    
    22,416,934Advertising
    
    
    
    15,447,378
    
    
    
    
    9,522,835
    
    
    
    
    7,066,300Other
    
    
    
    1,926,867
    
    
    
    
    1,150,980
    
    
    
    
    1,266,537Total net revenue
    
    
    
    50,888,835
    
    
    
    
    33,744,074
    
    
    
    
    30,749,771Operating expense:Cost of services
    
    
    
    18,450,110
    
    
    
    
    12,727,057
    
    
    
    
    11,843,304Sales and marketing
    
    
    
    9,616,491
    
    
    
    
    7,264,114
    
    
    
    
    8,018,461General and administrative
    
    
    
    10,673,705
    
    
    
    
    8,176,442
    
    
    
    
    7,081,891Depreciation and amortization
    
    
    
    1,088,679
    
    
    
    
    673,967
    
    
    
    
    655,747One-time lease termination costs
    
    
    
    
    
    
    
    392,851Asset recovery
    
    
    
    
    
    
    
    (500,000
    )Total operating expense
    
    
    
    39,828,985
    
    
    
    
    28,841,580
    
    
    
    
    27,492,254Operating income
    
    
    
    11,059,850
    
    
    
    
    4,902,494
    
    
    
    
    3,257,517Net interest income
    
    
    
    2,037,496
    
    
    
    
    852,676
    
    
    
    
    362,211Income from continuing operations before income taxes
    
    
    
    13,097,346
    
    
    
    
    5,755,170
    
    
    
    
    3,619,728Provision for income taxes
    
    
    
    261,220
    
    
    
    
    5,020
    
    
    Income from continuing operations
    
    
    
    12,836,126
    
    
    
    
    5,750,150
    
    
    
    
    3,619,728Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    (3,075,402
    )
    
    
    
    
    (5,808,286
    )Income (loss) on disposal of discontinued operations
    
    
    
    32,321
    
    
    
    
    (2,428,746
    )
    
    
    Income (loss) from discontinued operations
    
    
    
    32,321
    
    
    
    
    (5,504,148
    )
    
    
    
    
    (5,808,286
    )Net income (loss)
    
    
    $
    
    12,868,447
    
    
    
    $
    
    246,002
    
    
    
    $
    
    (2,188,558
    )Basic net income (loss) per share:Income from continuing operations
    
    
    $
    
    0.48
    
    
    
    $
    
    0.23
    
    
    
    $
    
    0.15Loss from discontinued operations
    
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.24
    )Income (loss) on disposal of discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.10
    )
    
    
    Income (loss) from discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.22
    )
    
    
    
    
    (0.24
    )Net income (loss)
    
    
    $
    
    0.48
    
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.09
    )Diluted net income (loss) per share:Income from continuing operations
    
    
    $
    
    0.47
    
    
    
    $
    
    0.22
    
    
    
    $
    
    0.14Loss from discontinued operations
    
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.22
    )Income (loss) on disposal of discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.09
    )
    
    
    Income (loss) from discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.21
    )
    
    
    
    
    (0.22
    )Net income (loss)
    
    
    $
    
    0.47
    
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.08
    )Weighted average basic shares outstanding
    
    
    
    27,014,047
    
    
    
    
    24,953,463
    
    
    
    
    24,529,026Weighted average diluted shares outstanding
    
    
    
    27,546,137
    
    
    
    
    26,164,880
    
    
    
    
    26,067,981The accompanying Notes to Consolidated Financial Statementsare an integral part of these financial statements
F-6

THESTREET.COM, INC.STATEMENTS OF STOCKHOLDERS EQUITYFOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
Common Stock
    
    AdditionalPaid-inCapital
    
    Treasury Stock
    
    AccumulatedDeficit
    
    TotalStockholdersEquityShares
    
    Par Value
    
    Shares
    
    CostBalance at December 31, 2003
    
    
    
    29,463,299
    
    
    
    $
    
    294,633
    
    
    
    $
    
    184,502,124
    
    
    
    
    (5,422,100
    )
    
    
    
    $
    
    (7,215,410
    )
    
    
    
    $
    
    (151,593,999
    )
    
    
    
    $
    
    25,987,348Exercise of options
    
    
    
    689,845
    
    
    
    
    6,898
    
    
    
    
    1,683,215
    
    
    
    
    
    
    
    
    
    
    1,690,113Stock repurchase
    
    
    
    
    
    
    
    
    
    (31,316
    )
    
    
    
    
    (105,712
    )
    
    
    
    
    
    
    (105,712
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,188,558
    )
    
    
    
    
    (2,188,558
    )Balance at December 31, 2004
    
    
    
    30,153,144
    
    
    
    
    301,531
    
    
    
    
    186,185,339
    
    
    
    
    (5,453,416
    )
    
    
    
    
    (7,321,122
    )
    
    
    
    
    (153,782,557
    )
    
    
    
    
    25,383,191Exercise of options
    
    
    
    1,066,979
    
    
    
    
    10,670
    
    
    
    
    2,650,381
    
    
    
    
    
    
    
    
    
    
    2,661,051Stock-based compensation expense related to employee stock options
    
    
    
    
    
    
    
    332,175
    
    
    
    
    
    
    
    
    
    
    332,175Stock repurchase
    
    
    
    
    
    
    
    
    
    (231,602
    )
    
    
    
    
    (1,181,188
    )
    
    
    
    
    
    
    (1,181,188
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    246,002
    
    
    
    
    246,002Balance at December 31, 2005
    
    
    
    31,220,123
    
    
    
    
    312,201
    
    
    
    
    189,167,895
    
    
    
    
    (5,685,018
    )
    
    
    
    
    (8,502,310
    )
    
    
    
    
    (153,536,555
    )
    
    
    
    
    27,441,231Exercise of options
    
    
    
    2,386,712
    
    
    
    
    23,867
    
    
    
    
    5,372,125
    
    
    
    
    
    
    
    
    
    
    5,395,992Stock-based compensation expense related to employee stock options
    
    
    
    
    
    
    
    1,753,429
    
    
    
    
    
    
    
    
    
    
    1,753,429Stock repurchase
    
    
    
    
    
    
    
    
    
    (66,982
    )
    
    
    
    
    (531,161
    )
    
    
    
    
    
    
    (531,161
    )Dividend paid to stockholders
    
    
    
    
    
    
    
    (2,736,550
    )
    
    
    
    
    
    
    
    
    
    
    (2,736,550
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,868,447
    
    
    
    
    12,868,447Balance at December 31, 2006
    
    
    
    33,606,835
    
    
    
    $
    
    336,068
    
    
    
    $
    
    193,556,899
    
    
    
    
    (5,752,000
    )
    
    
    
    $
    
    (9,033,471
    )
    
    
    
    $
    
    (140,668,108
    )
    
    
    
    $
    
    44,191,388The accompanying Notes to Consolidated Financial Statementsare an integral part of these financial statements
F-7

THESTREET.COM, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,2006
    
    2005
    
    2004Cash Flows from Operating Activities:Net income (loss)
    
    
    $
    
    12,868,447
    
    
    
    $
    
    246,002
    
    
    
    $
    
    (2,188,558
    )(Income) loss from discontinued operations
    
    
    
    (32,321
    )
    
    
    
    
    5,504,148
    
    
    
    
    5,808,286Income from continuing operations
    
    
    
    12,836,126
    
    
    
    
    5,750,150
    
    
    
    
    3,619,728Adjustments to reconcile income from continuing operations to net cash provided by operating activities:Stock-based compensation expense
    
    
    
    1,753,429
    
    
    
    
    332,175
    
    
    Provision for doubtful accounts
    
    
    
    84,500
    
    
    
    
    47,000
    
    
    
    
    8,000Depreciation and amortization
    
    
    
    1,088,679
    
    
    
    
    673,967
    
    
    
    
    655,747Noncash one-time lease termination costs
    
    
    
    
    
    
    
    308,660Deferred rent
    
    
    
    89,370
    
    
    
    
    63,136
    
    
    
    
    125,111Changes in operating assets and liabilities:Accounts receivable
    
    
    
    (3,203,875
    )
    
    
    
    
    (1,745,060
    )
    
    
    
    
    84,723Other receivables
    
    
    
    (182,640
    )
    
    
    
    
    (99,657
    )
    
    
    
    
    103,200Receivables from related parties
    
    
    
    
    
    
    
    214,788Prepaid expenses and other current assets
    
    
    
    (335,048
    )
    
    
    
    
    (232,764
    )
    
    
    
    
    177,660Other assets
    
    
    
    (15,836
    )
    
    
    
    
    (100
    )
    
    
    
    
    171,520Accounts payable
    
    
    
    30,387
    
    
    
    
    371,048
    
    
    
    
    30,000Accrued expenses
    
    
    
    2,036,858
    
    
    
    
    (506,258
    )
    
    
    
    
    1,955,242Deferred revenue
    
    
    
    1,323,067
    
    
    
    
    2,617,497
    
    
    
    
    471,586Other current liabilities
    
    
    
    36,030
    
    
    
    
    (66,962
    )
    
    
    
    
    (47,077
    )Other liabilities
    
    
    
    
    
    
    
    (91,650
    )Net cash provided by continuing operations
    
    
    
    15,541,047
    
    
    
    
    7,204,172
    
    
    
    
    7,787,238Net cash used in discontinued operations
    
    
    
    (21,984
    )
    
    
    
    
    (5,959,761
    )
    
    
    
    
    (5,158,130
    )Net cash provided by operating activities
    
    
    
    15,519,063
    
    
    
    
    1,244,411
    
    
    
    
    2,629,108Cash Flows from Investing Activities:Purchase of short-term investments
    
    
    
    
    
    (500,000
    )
    
    
    
    
    (6,000,000
    )Sale of short-term investments
    
    
    
    500,000
    
    
    
    
    
    
    10,010,904Purchase of Weiss Ratings, Inc.
    
    
    
    (3,316,048
    )
    
    
    
    
    Capital expenditures
    
    
    
    (1,687,672
    )
    
    
    
    
    (697,778
    )
    
    
    
    
    (510,620
    )Net cash (used in) provided by investing activities
    
    
    
    (4,503,720
    )
    
    
    
    
    (1,197,778
    )
    
    
    
    
    3,500,284Cash Flows from Financing Activities:Proceeds from the exercise of stock options
    
    
    
    5,395,992
    
    
    
    
    2,661,051
    
    
    
    
    1,690,113Cash dividends paid
    
    
    
    (2,736,550
    )
    
    
    
    
    Repayment of note payable
    
    
    
    (102,931
    )
    
    
    
    
    (96,192
    )
    
    
    
    
    (89,895
    )Restricted cash
    
    
    
    600,000
    
    
    
    
    1,205,000
    
    
    
    
    (105,000
    )Purchase of treasury stock
    
    
    
    (531,161
    )
    
    
    
    
    (1,181,188
    )
    
    
    
    
    (105,712
    )Net cash provided by financing activities
    
    
    
    2,625,350
    
    
    
    
    2,588,671
    
    
    
    
    1,389,506Net increase in cash and cash equivalents
    
    
    
    13,640,693
    
    
    
    
    2,635,304
    
    
    
    
    7,518,898Cash and cash equivalents, beginning of period
    
    
    
    32,414,539
    
    
    
    
    29,779,235
    
    
    
    
    22,260,337Cash and cash equivalents, end of period
    
    
    $
    
    46,055,232
    
    
    
    $
    
    32,414,539
    
    
    
    $
    
    29,779,235Supplemental disclosures of cash flow information:Cash payments made for interest
    
    
    $
    
    27,360
    
    
    
    $
    
    24,043
    
    
    
    $
    
    24,875Cash payments made for income taxes
    
    
    $
    
    411,851
    
    
    
    $
    
    126,891
    
    
    
    $
    
    116,343The accompanying Notes to Consolidated Financial Statementsare an integral part of these financial statements
F-8

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
(1)
    
    
    
    Organization, Nature of Business and Summary of Operations and Significant Accounting PoliciesOrganization and Nature of Business
TheStreet.com, Inc., together with its wholly-owned subsidiaries (collectively, the Company), is a leading multimedia creator of business, investment and ratings content. The Company distributes its
  content through proprietary properties, including web sites, email services, print publications and audio and video programming. The Company also syndicates its content for distribution by other media
  companies. The Company receives revenue from subscriptions, advertising and sponsorship sales, as well as syndication.
In June 2005, the Company committed to a plan to discontinue the operations of its wholly owned subsidiary, Independent Research Group LLC, which operated the Companys securities research and
  brokerage segment. Accordingly, the operating results relating to this segment have been segregated from continuing operations and reported as a separate line item on the consolidated statements of
  operations. See Note 2 in Notes to Consolidated Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Significant estimates include the
  allowance for doubtful accounts receivable, the useful lives of fixed assets, the valuation of goodwill and intangible assets, as well as accrued expense estimates 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.
Consolidation
The consolidated financial statements include the accounts of TheStreet.com, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
The Company generates its revenue primarily from subscriptions and advertising.
Subscription revenue represents fees paid by customers for access to particular services for the term of the subscription. Subscriptions are generally charged to customers credit cards or are charged
  directly to companies that subscribe to the service. These are generally billed in advance on a monthly or annual basis. The Company calculates net subscription revenue by deducting anticipated refunds
  from cancelled subscriptions and chargebacks of disputed credit card charges from gross revenue. 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.
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. 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.
Advertising revenue is derived from the sale of Internet sponsorship arrangements and from the delivery of banner and email advertisements on the Companys Web sites, and is recognized ratably
  over the period the advertising is displayed, provided that no significant Company obligations remain
F-9

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
and collection of the resulting receivable is reasonably assured. Although infrequent, Company obligations could include guarantees of a minimum number of times that users of the Companys Web sites
  click-through to the advertisers Web site, or take additional specified action, such as opening an account. In such cases, revenue is recognized as the guaranteed click-throughs or other relevant delivery
  criteria are fulfilled.
Advertising revenue is subject to estimation and variability due to our policy of recognizing revenue only for arrangements with customers in which, among other things, management believes that
  collectibility of amounts due is reasonably assured. Accordingly, we estimate and record a provision for doubtful accounts for estimated losses resulting from the inability of our advertising customers to
  make required payments. This provision is recorded as a bad debt expense. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including the current
  credit-worthiness of each customer.
Cash, Cash Equivalents and Restricted Cash
The Company considers all short-term investment grade securities with original maturities of three months or less from the date of purchase to be cash equivalents. The Company has a total of $500,000
  of cash that is invested in a certificate of deposit that serves as collateral for an outstanding letter of credit, and is therefore classified as restricted cash at December 31, 2006. The letter of credit serves as a
  security deposit for the Companys principal administrative, sales, marketing, technology and editorial office space located in New York City, New York. The Company does not anticipate that the cash will
  become unrestricted until the completion of its lease obligation, which occurs in November 2009. The restricted cash is therefore classified as a noncurrent asset on the Companys Consolidated Balance
  Sheet at December 31, 2006.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the
  assets (three years for computer equipment, including capitalized software and Web site development costs, and five years for furniture and fixtures). Leasehold improvements are amortized on a straight-
  line basis over the shorter of the respective lease term or the estimated useful life of the asset. If the useful lives of the assets differ materially from the estimates contained herein, additional costs could be
  incurred, which could have an adverse impact on the Companys expenses.
Capitalized Software and Web Site Development Costs
The Company expenses all costs incurred in the preliminary project stage for software developed for internal use and capitalizes all external direct costs of materials and services consumed in
  developing or obtaining internal-use computer software in accordance with Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.
  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, the Company capitalizes
  payroll and payroll-related costs of such employees incurred once the development has reached the applications development stage. For the years ended December 31, 2006, 2005 and 2004, the Company
  capitalized $37,963, $19,605 and $130,742, respectively. All costs incurred for upgrades, maintenance and enhancements that do not result in additional functionality are expensed.
In December 1999, the Company adopted Emerging Issues Task Force Abstract (EITF) Issue number 00-2, Accounting for Web Site Development Costs. EITF 00-2 provides guidance on the
  accounting for the costs of development of company Web sites, dividing the Web site development costs into five stages: (1) the planning stage, during which the business and/or project plan is formulated
  and
F-10

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
functionalities, necessary hardware and technology are determined, (2) the Web site application and infrastructure development stage, which involves acquiring or developing hardware and software to
  operate the Web site, (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 Web site, 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 Web site are incurred. The costs incurred in the Web site application and infrastructure stage, the graphics development stage and the content development stage are capitalized; all other costs
  are expensed as incurred. For the years ended December 31, 2006, 2005 and 2004, the Company did not capitalize any Web site development costs.
Capitalized software and Web site development costs are amortized using the straight-line method over the estimated three year useful life of the software or Web site. Total amortization expense was
  $84,849, $134,991 and $136,480, for the years ended December 31, 2006, 2005 and 2004, respectively.
Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142
  requires companies to stop amortizing goodwill and certain other intangible assets with indefinite useful lives. Instead, goodwill and other intangible assets deemed to have an indefinite useful life will be
  subject to an annual review for impairment. Separable intangible assets that are not deemed to have indefinite useful lives will continue to be amortized over their estimated useful lives.
Upon the adoption of SFAS No. 142 in the first quarter of 2002, the Company stopped the amortization of goodwill and certain other intangible assets with indefinite useful lives, and completed the
  required transitional fair value impairment test on its goodwill and certain other intangible assets, the results of which had no impact on the Companys financial statements. The Companys goodwill is
  tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Based upon annual
  impairment tests as of September 30, 2006, 2005 and 2004, no impairment was indicated for the Companys goodwill and intangible assets with indefinite lives.
Long-Lived Assets
The Company adopted SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. Long-lived assets held for use are subject to an impairment assessment if the carrying value is
  no longer recoverable based upon the undiscounted cash flows of the assets. The amount of the impairment is the difference between the carrying amount and the fair value of the asset. Management does
  not believe that there is any impairment of long-lived assets at December 31, 2006.
Income Taxes
The Company accounts for its income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax
  consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted
  tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates
  is recognized in the period that the tax change occurs. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax
  asset will not be realized.
F-11

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
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.
  The Company has elected the With-andwithout approach regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year. Under this
  approach, the windfall tax benefits would be recognized in additional paid-in capital only if an incremental tax benefit is realized after considering all other tax benefits presently available to the Company.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable, accrued expenses, deferred revenue and note payable approximate fair value due to
  the short-term maturities of these instruments.
Business Concentrations and Credit Risk
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. The Company maintains all of its
  cash, cash equivalents and restricted cash in four financial institutions and performs periodic evaluations of the relative credit standing of these institutions. The Companys customers are primarily
  concentrated in the United States. The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful accounts based upon factors
  surrounding the credit risk of customers, historical trends and other information. To date, actual losses have been within managements expectations.
Net Income or Loss Per Share of Common Stock
The Company presents both basic and diluted income or loss per share from continuing operations and discontinued operations and from loss on disposal of discontinued operations in the
  accompanying consolidated statements of operations. The Company computes net income or loss per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share.
  Under the provisions of SFAS No. 128, basic net income or loss per common share (Basic EPS) is computed by dividing net income or loss by the weighted average number of common shares
  outstanding. Diluted net income or loss per common share (Diluted EPS) is computed by dividing net income or loss by the weighted average number of common shares and dilutive common share
  equivalents then outstanding.
Advertising Costs
Advertising costs are expensed as incurred. For the years ended December 31, 2006, 2005, and 2004, advertising costs were $1,254,360, $988,683, and $2,315,626, respectively.
Stock-Based Compensation
As of October 1, 2005, the Company elected early adoption of Statement of Financial Accounting Standards (SFAS) No. 123(R), Share Based Payment: An Amendment of FASB Statements 123
  and 95. This statement requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based upon estimated fair values. SFAS No. 123(R) supersedes
  the Companys previous accounting under Accounting Principles Board No. 25, Accounting for Stock Issued to Employees (APB 25). In March 2005, the Securities and Exchange Commission issued
  Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS No. 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS No. 123(R).
F-12

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
The Company adopted SFAS No. 123(R) using the modified prospective transition method. The accompanying consolidated statements of operations for the year ended December 31, 2006 reflect
  the impact of SFAS No. 123(R). The consolidated statements of operations for the year ended December 31, 2005 only reflects the impact of SFAS No. 123(R) for the period October 1, 2005 to December
  31, 2005. In accordance with the modified prospective transition method, prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). Stock-based compensation
  expense recognized under SFAS No. 123(R) for the years ended December 31, 2006 and 2005 were $1,753,429 and $332,175, respectively. As of December 31, 2006, there was approximately $2.8 million of
  unrecognized stock-based compensation expense remaining to be recognized over a weighted-average period of 2.11 years.
SFAS No. 123(R) requires companies to 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 an
  option-pricing model. The value of each restricted stock unit, which the Company issued for the first time during the three-month period ended March 31, 2006, is equal to the closing price per share of the
  Companys common stock on the trading day immediately prior to 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. Prior to the adoption of SFAS No. 123(R), the Company accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB 25 as
  allowed under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Under the intrinsic value method, no stock-based compensation expense had been
  recognized, as the exercise price of the Companys stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant.
Stock-based compensation expense recognized in the Companys Consolidated Statements of Operations for the year ended December 31, 2006 includes compensation expense for all share-based
  payment awards granted prior to, but not yet vested as of January 1, 2006, based upon the grant date fair value estimated in accordance with the pro forma provision of SFAS No. 123, and compensation
  expense for the share-based payment awards granted subsequent to January 1, 2006, based upon the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). The Company
  recognizes compensation expense for share-based payment awards on a straight-line basis over the requisite service period of the award. As stock-based compensation expense recognized in the year ended
  December 31, 2006 is based upon awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if
  necessary, in subsequent periods if actual forfeitures differ from those estimates.
Upon adoption of SFAS No. 123(R), the Company continued its practice of estimating the value of employee stock options on the date of grant using the Black-Scholes option-pricing model. This
  determination is affected by the Companys stock price as well as assumptions regarding expected volatility, risk-free interest rate, and expected dividends. The weighted-average estimated value of
  employee stock options granted during the year ended December 31, 2006 was $3.50, using the Black-Scholes model with the following weighted-average assumptions. 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 options at their grant date. In determining the volatility assumption, the Company used a historical analysis of the volatility of the Companys share price for the
  preceding two years, based on managements assessment that recent historical volatility is representative of future stock price trends. 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 is based upon observed interest rates
  appropriate for the term of the Companys employee stock options. The dividend yield assumption is based on the history and expectation of future dividend payouts.
F-13

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
Expected option lives
    
    3.5 yearsExpected volatility
    
    
    
    44.84
    %Risk-free interest rate
    
    
    
    4.76
    %Expected dividends
    
    
    
    1.08
    %On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 123(R)-3 Transition Election Related to Accounting for Tax Effects of Share-Based
  Payment Awards. The Company has elected to adopt the alternative transition method provided in the FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS
  No. 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-
  based compensation, and to determine the subsequent impact on the APIC pool and cash flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS
  123(R).
Had compensation for the Companys outstanding share-based payment awards granted to employees and directors been determined consistent with the provisions of SFAS No. 123, the effect on the
  Companys net income or loss and basic and diluted net income or loss per share for the years ended December 31, 2005 and 2004 would have been as follows:
For the Year EndedDecember 31,2005
    
    2004Net income (loss), as reported
    
    
    $
    
    246,002
    
    
    
    $
    
    (2,188,558
    )Add: noncash compensation, as reported
    
    
    
    332,175
    
    
    Less: noncash compensation, pro forma
    
    
    
    (1,333,082
    )
    
    
    
    
    (2,112,360
    )Net loss, pro forma
    
    
    $
    
    (754,905
    )
    
    
    
    $
    
    (4,300,918
    )Basic net income (loss) per share, as reported
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.09
    )Basic net loss per share, pro forma
    
    
    $
    
    (0.03
    )
    
    
    
    $
    
    (0.18
    )Diluted net income (loss) per share, as reported
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.08
    )Diluted net loss per share, pro forma
    
    
    $
    
    (0.03
    )
    
    
    
    $
    
    (0.16
    )New Accounting Pronouncements
In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard 155Accounting for Certain Hybrid Financial Instruments (SFAS 155),
  which eliminates the exemption from applying SFAS 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. SFAS 155
  also allows the election of fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement event. Adoption is effective for all financial
  instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. Early adoption is permitted. The adoption of SFAS 155 is not expected to have a material
  effect on the Companys consolidated financial position, results of operations or cash flows.
In March 2006, the FASB issued Statement of Financial Accounting Standard 156Accounting for Servicing of Financial Assets (SFAS 156), which requires all separately recognized servicing assets
  and servicing liabilities be initially measured at fair value. SFAS 156 permits, but does not require, the subsequent measurement of servicing assets and servicing liabilities at fair value. Adoption is required
  as of the beginning of the first fiscal year that begins after September 15, 2006. Early adoption is permitted. The adoption of SFAS 156 is not expected to have a material effect on the Companys
  consolidated financial position, results of operations or cash flows.
F-14

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting
  and reporting for uncertainties in income tax law. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax
  positions taken or expected to be taken in income tax returns. This Interpretation shall be effective for fiscal years beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of an
  enterprises fiscal year, provided the enterprise has not yet issued financial statements, including financial statements for any interim period for that fiscal year. The cumulative effects, if any, of applying this
  Interpretation will be recorded as an adjustment to retained earnings as of the beginning of the period of adoption. The Company has commenced the process of evaluating the expected effect of FIN 48 on
  its financial statements and is not currently in a position to determine such effects.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value and expands
  disclosure of fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value
  measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the potential impact, if any, of the
  adoption of SFAS No. 157 will have on our results of operations, financial condition and cash flows.
In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin 108, Considering the Effects on Prior Year Misstatements when Quantifying Misstatements in
  Current Year Financial Statements, (SAB 108). SAB 108 requires registrants to quantify errors using both the income statement method (i.e. iron curtain method) and the rollover method and requires
  adjustment if either method indicates a material error. If a correction in the current year relating to prior year errors is material to the current year, then the prior year financial information needs to be
  corrected. A correction to the prior year results that are not material to those years, would not require a restatement process where prior financials would be amended. SAB 108 is effective for fiscal years
  ending after November 15, 2006. The Company does not anticipate that SAB 108 will have a material effect on its financial position, results of operations or cash flows.
(2) Discontinued Operations
In June 2005, the Company committed to a plan to discontinue the operations of the Companys securities research and brokerage segment. Accordingly, the operating results relating to this segment
  have been segregated from continuing operations and reported as a separate line item in the accompanying Consolidated Statements of Operations. The Company has reclassified the accompanying
  Consolidated Statements of Operations and Statements of Cash Flows for the year ended December 31, 2004 to conform to the presentation as of and for the years ended December 31, 2006 and 2005.
For the years ended December 31, 2006, 2005 and 2004, net revenue and net loss from discontinued operations were as follows:
For the Year EndedDecember 31,2006
    
    2005
    
    2004Net revenue
    
    
    $
    
    
    
    
    
    $
    
    2,565,081
    
    
    
    $
    
    4,473,201Loss from discontinued operations
    
    
    $
    
    
    
    
    
    $
    
    (3,075,402
    )
    
    
    
    $
    
    (5,808,286
    )Income (loss) on disposal of discontinued operations
    
    
    
    32,321
    
    
    
    
    (2,428,746
    )
    
    
    Income (loss) from discontinued operations
    
    
    $
    
    32,321
    
    
    
    $
    
    (5,504,148
    )
    
    
    
    $
    
    (5,808,286
    )F-15

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
For the year ended December 31, 2005, loss on disposal of discontinued operations includes actual losses from the date the Company committed to a plan to discontinue the operations of the segment,
  plus a provision for additional future costs to be incurred to complete the discontinuance process. For the year ended December 31, 2006, income on disposal of discontinued operations represents
  adjustments to previously estimated shutdown costs.
The fair market values of the remaining assets and liabilities of the discontinued operation as of December 31, 2006 and 2005 are as follows:
December 31,2006
    
    2005Current assets.
    
    
    $
    
    
    
    
    
    $
    
    3,200Current liabilities
    
    
    $
    
    222,425
    
    
    
    $
    
    279,930As of December 31, 2006, current liabilities of discontinued operations consists of accrued shutdown costs.
The following table displays the activity and balances of the provisions related to discontinued operations:
InitialCharge
    
    Year 2005Activity
    
    Balance12/31/2005
    
    Year 2006 Activity
    
    Balance12/31/2006Deductions
    
    AdjustmentsNet asset write-off
    
    
    $
    
    666,546
    
    
    
    $
    
    (666,546
    )
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    Severance payments
    
    
    
    1,134,323
    
    
    
    
    (905,566
    )
    
    
    
    
    228,757
    
    
    
    
    (6,332
    )
    
    
    
    
    
    
    222,425Extinguishment of lease and other obligations
    
    
    
    582,483
    
    
    
    
    (531,310
    )
    
    
    
    
    51,173
    
    
    
    
    (15,103
    )
    
    
    
    
    (36,070
    )
    
    
    $
    
    2,383,352
    
    
    
    $
    
    (2,103,422
    )
    
    
    
    $
    
    279,930
    
    
    
    $
    
    (21,435
    )
    
    
    
    $
    
    (36,070
    )
    
    
    
    $
    
    222,425(3) Acquisition
On August 7, 2006, the Company, through its newly formed, wholly-owned subsidiary, TheStreet.com Ratings, Inc., acquired substantially all of the assets and certain liabilities of Weiss Ratings, Inc.
  (Ratings), a wholly owned subsidiary of Weiss Group, Inc. that provides independent ratings and evaluations of mutual funds, exchange-traded funds, stocks and financial institutions, including insurers,
  healthcare providers, banks and savings and loans. The Company paid cash consideration of $3.2 million, equal to the total purchase price of $4.7 million less the estimated value of assumed deferred
  revenue liabilities totaling approximately $1.5 million. The cash consideration, which was subject to adjustment based upon a final accounting of the deferred revenue liabilities assumed, was reduced by
  approximately $37,000 in January 2007. Additionally, the Company has capitalized legal fees in connection with the acquisition totaling approximately $150,000.
The results of operations have been included in the accompanying consolidated financial statements from the date of acquisition. Based on the Companys evaluation, the allocation of the purchase
  price for the acquisition was as follows:
Assets acquired:Property and equipment
    
    
    $
    
    348,411Intangible assets (amortizable over 35 years)
    
    
    
    1,902,000Goodwill
    
    
    
    2,519,354Total assets acquired
    
    
    
    4,769,765Liabilities assumed:Deferred revenue
    
    
    
    1,453,717Total liabilities assumed
    
    
    
    1,453,717Total cash consideration (including legal fees)
    
    
    $
    
    3,316,048F-16

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
In accordance with the requirements of Statement of Financial Accounting Standards No. 141 (SFAS No. 141), Business Combinations, the Company recognized certain intangible assets acquired,
  primarily a syndication agreement, software models and a covenant not to compete. In accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, the syndication agreement
  of $870,000, software models of $562,000 and covenant not to compete of $470,000 will be amortized over their estimated useful lives ranging from three to five years. The goodwill recorded as a result of
  the acquisition is deductible for Federal, New York State and New York City income tax purposes over a period of 15 years. The estimated amortization expense for the next five years is as follows:
For the Year Ended December 31,
    
    Amount2007
    
    
    $
    
    496,4002008
    
    
    $
    
    496,4002009
    
    
    $
    
    375,5672010
    
    
    $
    
    206,4002011
    
    
    $
    
    120,400Unaudited pro forma consolidated financial information is presented below as if the acquisition had occurred as of the first day of the earliest period presented. The results have been adjusted to
  account for the amortization of acquired intangible assets. The pro forma information presented below does not purport to present what actual results would have been if the acquisition had occurred at the
  beginning of such periods, nor does the information project results for any future period. The unaudited pro forma consolidated financial information should be read in conjunction with the historical
  financial information of the Company included in this report, as well as the historical financial information included in other reports and documents filed with the SEC. The unaudited pro forma
  consolidated financial information for annual periods ended December 31 is as follows:
For the Year EndedDecember 31,2006
    
    2005
    
    2004Total net revenue
    
    
    $
    
    54,141,375
    
    
    
    $
    
    38,765,530
    
    
    
    $
    
    34,950,184Net income (loss)
    
    
    $
    
    11,966,590
    
    
    
    $
    
    (1,241,584
    )
    
    
    
    $
    
    (4,356,017
    )Basic net income (loss) per share
    
    
    $
    
    0.44
    
    
    
    $
    
    (0.05
    )
    
    
    
    $
    
    (0.18
    )Diluted net income (loss) per share
    
    
    $
    
    0.43
    
    
    
    $
    
    (0.05
    )
    
    
    
    $
    
    (0.17
    )Weighted average basic shares outstanding
    
    
    
    27,014,047
    
    
    
    
    24,953,463
    
    
    
    
    24,529,026Weighted average diluted shares outstanding
    
    
    
    27,546,137
    
    
    
    
    26,164,880
    
    
    
    
    26,067,981(4) One-Time Lease Termination Costs
In September 2004, the Company recognized a lease termination charge totaling $392,851 related to the subleasing of its office space at Two Rector Street in New York City, New York. The space had
  been provided to the Companys discontinued subsidiary, IRG Research, under the services agreement between the two companies. When the new office space leased by IRG Research at 44 Wall Street in
  New York City, New York became available for occupancy, the Company subleased the Two Rector Street space to a new subtenant. In accordance with SFAS No. 146, Accounting for Costs Associated
  with Exit or Disposal Activities, the charge represents the net present value of the difference between the obligations remaining under the original lease as of the date that IRG Research vacated the
  premises and the sublease payments to be received over the 45 months remaining on the lease. The Company classified such deferred rent liability net of an approximate $267,700 balance remaining at that
  point in time from a previously recorded deferred rent asset, among other liabilities in the accompanying Consolidated Balance Sheets ($34,550 current liability and $98,655 non-current asset as of
  December 31, 2006 and $39,555 current liability and $68,302 non-current asset as of December 31, 2005). Such amounts are being amortized over the life of the lease.
F-17

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
(5) Net Income (Loss) Per Share
As discussed in Note 1 to Notes to Consolidated Financial Statements, net loss per share is calculated in accordance with SFAS No. 128. The following table reconciles the numerator and denominator
  for the calculation.
For the Year Ended December 31,2006
    
    2005
    
    2004Numerator:Income from continuing operations
    
    
    $
    
    12,836,126
    
    
    
    $
    
    5,750,150
    
    
    
    $
    
    3,619,728Loss from discontinued operations
    
    
    
    
    
    (3,075,402
    )
    
    
    
    
    (5,808,286
    )Gain (loss) on disposal of discontinued operations
    
    
    
    32,321
    
    
    
    
    (2,428,746
    )
    
    
    Net income (loss) available to common stockholders
    
    
    $
    
    12,868,447
    
    
    
    $
    
    246,002
    
    
    
    $
    
    (2,188,558
    )Denominator:Weighted average basic shares outstanding
    
    
    
    27,014,047
    
    
    
    
    24,953,463
    
    
    
    
    24,529,026Weighted average diluted shares outstanding
    
    
    
    27,546,137
    
    
    
    
    26,164,880
    
    
    
    
    26,067,981Net income (loss) per share-basic:Continuing operations
    
    
    $
    
    0.48
    
    
    
    $
    
    0.23
    
    
    
    $
    
    0.15Discontinued operations
    
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.24
    )Disposal of discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.10
    )
    
    
    Net income (loss) per share
    
    
    $
    
    0.48
    
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.09
    )Net income (loss) per share-diluted:Continuing operations
    
    
    $
    
    0.47
    
    
    
    $
    
    0.22
    
    
    
    $
    
    0.14Discontinued operations
    
    
    
    
    
    (0.12
    )
    
    
    
    
    (0.22
    )Disposal of discontinued operations
    
    
    
    0.00
    
    
    
    
    (0.09
    )
    
    
    Net income (loss) per share
    
    
    $
    
    0.47
    
    
    
    $
    
    0.01
    
    
    
    $
    
    (0.08
    )(6) Property and Equipment
Property and equipment as of December 31, 2006 and 2005 consists of the following:
December 31,2006
    
    2005Computer equipment
    
    
    $
    
    13,605,255
    
    
    
    $
    
    11,849,790Furniture and fixtures
    
    
    
    1,266,232
    
    
    
    
    992,588Leasehold improvements
    
    
    
    2,567,283
    
    
    
    
    2,639,00417,438,770
    
    
    
    
    15,481,382Less accumulated depreciation and amortization
    
    
    
    14,420,638
    
    
    
    
    13,494,175Property and equipment, net
    
    
    $
    
    3,018,132
    
    
    
    $
    
    1,987,207Included in computer equipment are capitalized software and Web site development costs of $1,239,024 and $1,201,061 at December 31, 2006 and 2005, respectively.
Depreciation and amortization expense for the above noted property and equipment aggregated $1,005,158, $868,098 and $906,154 for the years ended December 31, 2006, 2005, and 2004, respectively.
(7) Accrued Expenses
Accrued expenses as of December 31, 2006 and 2005 consists of the following:
F-18

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
December 31,2006
    
    2005Bonuses
    
    
    $
    
    2,795,650
    
    
    
    $
    
    1,273,723Other
    
    
    
    929,012
    
    
    
    
    494,944Payroll and related costs
    
    
    
    742,320
    
    
    
    
    610,914Professional fees
    
    
    
    570,845
    
    
    
    
    850,857Third party content and data costs
    
    
    
    310,874
    
    
    
    
    248,441Advertising fees
    
    
    
    261,457
    
    
    
    
    145,916Distribution fees
    
    
    
    197,751
    
    
    
    
    97,622Consulting fees
    
    
    
    135,957
    
    
    
    
    88,559Tax related costs
    
    
    
    127,432
    
    
    
    
    252,337Statistical services fees
    
    
    
    107,793
    
    
    
    
    78,920Total accrued expenses
    
    
    $
    
    6,179,091
    
    
    
    $
    
    4,142,233(8) Note Payable
In connection with the termination of the Companys lease obligation for 50% of its principal office space in October 2001, the Company was required to dispose of the furniture associated with that
  portion of the space. As this furniture was leased, the Company required the consent of the leasing company to sell the furniture. Pursuant to a restructuring arrangement with the leasing company, dated
  October 19, 2001, the furniture was permitted to be sold, and the lease amount corresponding to that portion of the furniture was converted to a note in the amount of $486,259, bearing interest at a rate of
  6.79% per annum, payable through March 2007. The monthly payment of principal plus interest totals $9,022. (See Note 12 in Notes to Consolidated Financial Statements)
(9) Goodwill and Other Intangible Assets
The Companys goodwill and other intangible assets and related accumulated amortization as of December 31, 2006 and 2005 consists of the following:
December 31,2006
    
    2005Goodwill and other intangible assets not subject to amortization:SmartPortfolio.com, Inc. goodwill
    
    
    $
    
    1,990,312
    
    
    
    $
    
    1,990,312TheStreet.com Ratings, Inc. goodwill
    
    
    
    2,519,354
    
    
    $
    
    4,509,666
    
    
    
    $
    
    1,990,312SmartPortfolio.com, Inc. trade name
    
    
    $
    
    493,333
    
    
    
    $
    
    493,333Other intangible assets subject to amortization:SmartPortfolio.com, Inc. customer list
    
    
    
    1,250,000
    
    
    
    
    1,250,000SmartPortfolio.com, Inc. technology
    
    
    
    730,000
    
    
    
    
    730,000TheStreet.com Ratings, Inc. syndication agreement
    
    
    
    870,000
    
    
    TheStreet.com Ratings, Inc. software models
    
    
    
    562,000
    
    
    TheStreet.com Ratings, Inc. noncompete
    
    
    
    470,000
    
    
    3,882,000
    
    
    
    
    1,980,000Less accumulated amortization
    
    
    
    (2,186,833
    )
    
    
    
    
    (1,980,000
    )Total other intangible assets subject to amortization
    
    
    
    1,695,167
    
    
    Total other intangible assets
    
    
    $
    
    2,188,500
    
    
    
    $
    
    493,333F-19

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
Amortization expense totaled $206,833 for the year ended December 31, 2006. There was no amortization expense recorded for the years ended December 31, 2005 and 2004. The estimated
  amortization expense for the next five years is as follows:
For the Year Ended December 31,
    
    Amount2007
    
    
    $
    
    496,4002008
    
    
    $
    
    496,4002009
    
    
    $
    
    375,5672010
    
    
    $
    
    206,4002011
    
    
    $
    
    120,400(10) Income Taxes
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
  purposes.
The Company recognized a deferred tax asset of approximately $53 million and $59 million as of December 31, 2006 and 2005, respectively, primarily relating to net operating loss carryforwards of
  approximately $132 million and $140 million as of December 31, 2006 and 2005, respectively, available to offset future taxable income through 2025. The net operating loss carryforward as of December 31,
  2006 includes approximately $6 million related to windfall tax benefits for which a benefit would be recorded in additional paid in capital when realized. The Company also has a capital loss carryforward of
  approximately $4 million as of December 31, 2006 and 2005, respectively, available to offset future capital gains through 2009.
In accordance with Section 382 of the Internal Revenue code, the usage of the Companys net operating loss carryforward could be limited in the event of a change in ownership. The ultimate
  realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected
  future taxable income and tax planning strategies in making this assessment. At present, the Company does not have a sufficient history of income to conclude that it is more likely than not that the
  Company will be able to realize all of its tax benefits in the near future and therefore a valuation allowance was established in the full value of the deferred tax asset.
A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance net of appropriate reserves. Should the Company
  continue to be profitable in future periods with supportable trends, the valuation allowance will be reversed accordingly.
The current years Federal and State income tax provision consists substantially of alternative minimum taxes as a result of the utilization of prior year net operating loss carryforwards. The principal
  reasons for the variation between income taxes at the statutory federal rate and that shown in the statement of operations for the years ended December 31, 2006, 2005 and 2004 were as follows:
For the year endedDecember 31,2006
    
    2005
    
    2004Statutory federal income tax rate
    
    
    
    34
    %
    
    
    
    
    34
    %
    
    
    
    
    34
    %State income taxes, net of federal tax benefit
    
    
    
    6
    %
    
    
    
    
    6
    %
    
    
    
    
    6
    %Effect of permanent differences
    
    
    
    (17
    %)
    
    
    
    
    17
    %
    
    
    
    
    (10
    %)Windfall tax benefit not deducted
    
    
    
    19
    %
    
    
    
    
    Increase to valuation allowance
    
    
    
    
    
    (55
    %)
    
    
    
    
    (30
    %)Utilization of operating loss carryforward
    
    
    
    (40
    %)
    
    
    
    
    Net tax rate
    
    
    
    2
    %
    
    
    
    
    2
    %
    
    
    
    
    0
    %F-20

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
Temporary differences between the financial statement and tax basis of assets and liabilities may give rise to deferred tax assets and deferred tax liabilities. The composition of deferred taxes is
  primarily as follows:
For the year endedDecember 31,2006
    
    2005Deferred tax assets:Operating loss carryforward
    
    
    $
    
    53,000,000
    
    
    
    $
    
    56,000,000Windfall tax benefits carryforward
    
    
    
    (3,000,000
    )
    
    
    Capital loss carryforward
    
    
    
    1,000,000
    
    
    
    
    1,000,000Depreciation and amortization
    
    
    
    1,000,000
    
    
    
    
    1,000,000Accrued expenses
    
    
    
    1,000,000
    
    
    
    
    1,000,000Less: valuation allowance
    
    
    
    (53,000,000
    )
    
    
    
    
    (59,000,000
    )Net tax assets
    
    
    $
    
    
    
    
    
    $
    
    (11) Equity Investments
Treasury Stock
In December 2000 the Companys Board of Directors authorized the repurchase of up to $10 million worth of the Companys common stock, from time to time, in private purchases or in the open
  market. In February 2004, the Companys Board of Directors approved the resumption of the stock repurchase program under new price and volume parameters, leaving unchanged the maximum amount
  available for repurchase under the program. During the year ended December 31, 2006, the Company did not purchase any shares of common stock under the program. Since inception of the program, the
  Company has purchased a total of 5,453,416 shares of common stock at an aggregate cost of $7,321,122. In addition, pursuant to the terms of the Companys 1998 Stock Incentive Plan, as amended (the
  Plan) and certain additional stock option exercise procedures adopted by the Compensation Committee of the Board of Directors, in connection with the exercise of stock options by certain of the
  Companys executive officers in November 2005 and February 2006, the Company withheld 231,602 and 66,982 shares, respectively, issuable upon the exercise of stock options, in lieu of payment of the
  exercise price and the minimum amount of applicable withholding taxes then due. These shares have been recorded as treasury stock.
Stock Options
Under the terms of the Companys 1998 Stock Incentive Plan, as amended (the Plan), 8,900,000 shares of common stock of the Company have been reserved for awards of incentive stock options,
  nonqualified stock options (incentive and nonqualified stock options are collectively referred to as Options), restricted stock, deferred stock (also referred to as restricted stock units, or RSUs), or any
  combination thereof. Awards may be granted to such directors, employees and consultants of the Company as the Compensation Committee of the Board of Directors shall in its discretion select. Only
  employees of the Company are eligible to receive grants of incentive stock options. Awards generally vest over a three-year period and have terms of five years. As of December 31, 2006, there remained
  510,493 shares available for future awards under the Plan.
An Option represents the right, once the Option has vested and become exercisable, to purchase a share of the Companys common stock at a particular exercise price set at the time of the grant. An
  RSU represents the right to receive one share of the Companys common stock on the applicable vesting date for such RSU. Until the stock certificate for a share of common stock represented by an RSU
  is delivered, the holder of an RSU does not have any of the rights of a stockholder with respect to the common stock. However, the grant of an RSU includes the grant of dividend equivalents with
F-21

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
respect to such RSU. The Company will maintain a bookkeeping account to which it will credit, whenever cash dividends are paid on the common stock, an amount equal to the amount of the dividend paid
  on a share of common stock for each then-outstanding RSU granted. The accumulated dividend equivalents will vest on the applicable vesting date for the RSU with respect to which such dividend
  equivalents were credited, and will be paid in cash at the time a stock certificate evidencing the shares represented by such vested RSU is delivered.
A summary of the activity of the Stock Option Plan is as follows:
SharesUnderlyingAwards
    
    WeightedAverageExercisePrice
    
    AggregateIntrinsicValue($000)
    
    WeightedAverageRemainingContractual Life(In Years)Awards outstanding, December 31, 2003
    
    
    
    5,138,609
    
    
    
    $
    
    4.29Options granted
    
    
    
    1,408,000
    
    
    
    $
    
    4.10Options exercised
    
    
    
    (689,412
    )
    
    
    
    $
    
    2.45Options cancelled
    
    
    
    (864,542
    )
    
    
    
    $
    
    13.27Awards outstanding, December 31, 2004
    
    
    
    4,992,655
    
    
    
    $
    
    2.93Options granted
    
    
    
    1,203,000
    
    
    
    $
    
    4.08Options exercised
    
    
    
    (1,066,979
    )
    
    
    
    $
    
    2.49Options cancelled
    
    
    
    (1,159,527
    )
    
    
    
    $
    
    4.55Awards outstanding, December 31, 2005
    
    
    
    3,969,149
    
    
    
    $
    
    2.93Options granted
    
    
    
    644,500
    
    
    
    $
    
    9.76Restricted stock units granted
    
    
    
    129,500
    
    
    
    $
    
    0.00Options exercised
    
    
    
    (2,386,712
    )
    
    
    
    $
    
    2.26Options cancelled
    
    
    
    (131,848
    )
    
    
    
    $
    
    4.39Restricted stock units cancelled
    
    
    
    (18,500
    )
    
    
    
    $
    
    0.00Awards outstanding, December 31, 2006
    
    
    
    2,206,089
    
    
    
    $
    
    5.40
    
    
    
    $
    
    8,571
    
    
    
    
    2.85Awards vested and expected to vest atDecember 31, 2006
    
    
    
    2,081,714
    
    
    
    $
    
    5.31
    
    
    
    $
    
    7,466
    
    
    
    
    1.71Options exercisable at December 31, 2006
    
    
    
    836,769
    
    
    
    $
    
    3.79
    
    
    
    $
    
    4,280
    
    
    
    
    1.97Restricted stock units exercisable atDecember 31, 2006
    
    
    
    0
    
    
    
    $
    
    0.00
    
    
    
    $
    
    0
    
    
    
    
    1.79The following table summarizes information about options outstanding at December 31, 2006:
Range ofExercise Price
    
    OptionsOutstanding
    
    OptionsOutstandingWeightedAverageRemainingContractualLife
    
    OptionsOutstandingWeightedAverageExercisePrice
    
    OptionsExercisable
    
    WeightedAverageExercisePrice ofOptionsExercisable$ 1.66$ 2.05
    
    
    
    5,250
    
    
    
    
    0.5
    
    
    
    $
    
    2.03
    
    
    
    
    5,250
    
    
    
    $
    
    2.03$ 2.93$ 4.08
    
    
    
    1,416,839
    
    
    
    
    2.3
    
    
    
    $
    
    3.90
    
    
    
    
    799,019
    
    
    
    $
    
    3.76$ 4.69$ 4.71
    
    
    
    37,500
    
    
    
    
    1.8
    
    
    
    $
    
    4.70
    
    
    
    
    32,500
    
    
    
    $
    
    4.70$ 7.63$10.90
    
    
    
    460,500
    
    
    
    
    4.3
    
    
    
    $
    
    8.83
    
    
    
    
    
    $
    
    $11.60$12.78
    
    
    
    175,000
    
    
    
    
    4.5
    
    
    
    $
    
    12.27
    
    
    
    
    
    $
    
    2,095,089
    
    
    
    
    2.9
    
    
    
    $
    
    5.69
    
    
    
    
    836,769
    
    
    
    $
    
    3.79F-22

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
A summary of the status of the Companys unvested share-based payment awards as of December 31, 2006 and changes in the year then ended is as follows:
Unvested Awards
    
    Awards
    
    WeightedAverageGrant DateFair ValueShares underlying awards unvested at January 1, 2006
    
    
    
    1,424,176
    
    
    
    $
    
    2.02Shares underlying options granted
    
    
    
    644,500
    
    
    
    $
    
    3.50Shares underlying restricted stock units granted
    
    
    
    129,500
    
    
    
    $
    
    7.95Shares underlying options vested
    
    
    
    (678,509
    )
    
    
    
    $
    
    2.01Shares underlying unvested options cancelled
    
    
    
    (131,847
    )
    
    
    
    $
    
    2.08Shares underlying unvested restricted stock units cancelled
    
    
    
    (18,500
    )
    
    
    
    $
    
    7.97Shares underlying awards unvested at December 31, 2006
    
    
    
    1,369,320
    
    
    
    $
    
    3.20For the year ended December 31, 2006, the total fair value of share-based awards vested was $1,365,896.
(12) Commitments and Contingencies
Operating Leases and Employment Agreements
The Company is committed under operating leases, principally for office space, furniture and fixtures, and equipment. Certain leases are subject to rent reviews and require payment of expenses under
  escalation clauses. Rent and equipment rental expenses were $1,717,158, $1,575,462 and $1,430,509 for the years ended December 31, 2006, 2005 and 2004, respectively. The increase in rent and equipment
  rental expenses was primarily due to additional rent expense resulting from the Ratings acquisition on August 7, 2006, the timing and amount of retroactive operating expense escalation charges, and the
  allocation to the Companys discontinued securities research and brokerage segment of expenses totaling $63,181 and $119,932 in the years ended December 31, 2005 and 2004, respectively. No such
  allocation was made in the year ended December 31, 2006. Additionally, the Company has employment agreements with certain of its employees and outside contributors, whose future minimum payments
  are dependent on the future fulfillment of their services thereunder. As of December 31, 2006, total future minimum cash payments are as follows:
Payments Due by YearContractual obligations:
    
    Total
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    After2011Operating leases
    
    
    $
    
    3,097,722
    
    
    
    $
    
    1,287,758
    
    
    
    $
    
    997,464
    
    
    
    $
    
    812,500
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    Employment agreements
    
    
    
    2,872,544
    
    
    
    
    2,424,875
    
    
    
    
    447,669
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outside contributors
    
    
    
    316,217
    
    
    
    
    316,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Note payable
    
    
    
    22,146
    
    
    
    
    22,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    $
    
    6,308,629
    
    
    
    $
    
    4,050,996
    
    
    
    $
    
    1,445,133
    
    
    
    $
    
    812,500
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    
    
    $
    
    Additional agreements were signed subsequent to December 31, 2006 with one employee and one outside contributor that guarantee payments of $208,333, $508,334 and $93,333 in the years ended
  December 31, 2007, 2008 and 2009, respectively, and are dependent on the future fulfillment of the services thereunder. An additional operating lease agreement was also signed that guarantees payments of
  $156,816, $209,088 and $191,664 in the years ended December 31, 2007, 2008 and 2009, respectively.
Concentration of Credit Risk
The Companys top five advertisers accounted for approximately 34%, 33% and 43% of its total advertising revenue for the years ended December 31, 2006, 2005 and 2004, respectively. For the years
  ended December 31, 2006 and 2004, one advertiser accounted for more than 10% (approximately 14% and 12.5%, respectively) of total advertising revenue. For the year ended December 31, 2005, no
  advertiser accounted for more than 10% of total advertising revenue.
F-23

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
Legal Proceedings
In December 2001, the Company was named as a defendant in a securities class action filed in United States District Court for the Southern District of New York related to its initial public offering
  (IPO) in May 1999. The lawsuit also named as individual defendants certain of its former officers and directors, James J. Cramer, a current director, and certain of the underwriters of the IPO, including
  The Goldman Sachs Group, Inc., Hambrecht & Quist LLC (now part of JP Morgan Chase & Co.), Thomas Weisel Partners LLC, Robertson Stephens Inc. (an investment banking subsidiary of BankBoston
  Corp., later FleetBoston Corp., which ceased operations in 2002), and Merrill Lynch Pierce Fenner & Smith, Inc. Approximately 300 other issuers and their underwriters have had similar suits filed against
  them, all of which are included in a single coordinated proceeding in the Southern District of New York (the IPO Litigations). The complaints allege that the prospectus and the registration statement for
  the IPO failed to disclose that the underwriters allegedly solicited and received excessive commissions from investors and that some investors in the IPO allegedly agreed with the underwriters to buy
  additional shares in the aftermarket in order to inflate the price of the Companys stock. An amended complaint was filed April 19, 2002. The Company and the officers and directors were named in the
  suits pursuant to Section 11 of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934, and other related provisions. The complaints seek unspecified damages, attorney and expert fees, and
  other unspecified litigation costs.
On July 1, 2002, the underwriter defendants in the consolidated actions moved to dismiss all of the IPO Litigations, including the action involving the Company. On July 15, 2002, the Company, along
  with other non-underwriter defendants in the coordinated cases, also moved to dismiss the litigation. On February 19, 2003, the Court ruled on the motions. The Court granted the Companys motion to
  dismiss the claims against it under Rule 10b-5, due to the insufficiency of the allegations against the Company. The motions to dismiss the claims under Section 11 of the Securities Act were denied as to
  virtually all of the defendants in the consolidated cases, including the Company. In addition, the individual defendants in the IPO Litigations, including Mr. Cramer, signed a tolling agreement and were
  dismissed from the action without prejudice on October 9, 2002.
In June 2003, a proposed collective settlement of this litigation was structured between the plaintiffs, the issuer defendants in the consolidated actions, the issuer officers and directors named as
  defendants, and the issuers insurance companies. On or about June 25, 2003, a committee of the Companys Board of Directors conditionally approved the proposed settlement. The settlement agreements
  collectively provide as follows:
The Company and the other issuer defendants will assign their interests in claims against the underwriters for excess compensation in connection with their IPOs to the plaintiffs, and agree not to assert
  certain other claims against the underwriters, such as underpricing, indemnification and antitrust claims, except in certain defined circumstances. A number of issuers assigned claims have been asserted
  already; these were dismissed by the Court on February 24, 2006. The dismissal is currently on appeal to the Second Circuit Court of Appeals. The Company and the other issuer defendants will also
  cooperate with the plaintiffs to provide the plaintiffs with informal discovery as the litigation continues as to the underwriter defendants. Further, the plaintiffs will receive an undertaking from the insurers
  of the Company and the other issuer defendants guaranteeing that the plaintiff class will recover, in the aggregate, $1 billion from their various suits against the underwriters (including the claims assigned
  by the issuer defendants). The Companys per capita portion of the maximum amount payable to the plaintiffs under the settlement, assuming the entire $1 billion is payable, would be approximately
  $34 million. The plaintiffs actual recoveries from the underwriter defendants (through settlements or damages assessed as a result of litigation) will be applied against the guarantee; and to the extent that
  the underwriter defendants settle all of the cases for at least $1 billion, no payment will be required under the issuer defendants settlement. In exchange for the consideration described above, the plaintiffs
  will release the non-bankrupt issuer defendants from all claims against them (the bankrupt
F-24

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
issuers will receive a covenant not to sue) and their individual defendants. Under the terms of the settlement agreements, all costs and expenses of the settlement (including legal expenses after June 1, 2003)
  will be borne by the insurance carriers of the Company and the other issuer defendants using each issuer defendants existing insurance coverage, with deductibles waived.
While the settlement process has been proceeding, the plaintiffs have continued to litigate against the underwriter defendants. The Court directed that the litigation proceed within a number of focus
  cases rather than in all of the 310 cases that have been consolidated. The Companys case is not one of these focus cases. On October 13, 2004, the district court certified the focus cases as class actions. The
  underwriter defendants appealed that ruling, and on December 5, 2006, the Court of Appeals for the Second Circuit reversed the district courts class certification decision. On January 5, 2007, the plaintiffs
  filed a petition for rehearing with the Court of Appeals. Because the Companys settlement with the plaintiffs involves the certification of the case as a class action as part of the approval process, the impact
  of this ruling on the Companys settlement is unclear.
If the court determines that the settlement is fair to the class members, and that the settlement classes can be certified, the settlement will be approved. If the settlement is approved, the Company is
  not aware of any material limitations to the payment by its insurance carriers of the costs and expenses of the settlement to the plaintiffs. The Companys insurance coverage is sufficient, its carriers are
  solvent, and the Company is not aware of any uncertainties as to the legal sufficiency of an insurance claim with respect to any recovery by plaintiffs. Accordingly, the Company does not expect that the
  settlement, should it be approved, will involve any payment by the Company. However, there can be no assurance that this proposed settlement will be approved and implemented in its current form, or at
  all.
If the settlement is not approved, the Company intends to defend the action vigorously. In the event the settlement does not receive final court approval and the Company or any of its individual
  defendants is reinstated as a defendant in the lawsuit, any unfavorable outcome of this litigation could have an adverse impact on the Companys business, financial condition, results of operations, and cash
  flows.
(13) Employee Benefit Plan
Effective
  January 1, 1997, the Company adopted a noncontributory savings plan with a salary
  reduction arrangement in accordance with Section 401(k) of the Internal Revenue
  Code. The 401(k) plan covers all eligible employees and, through June 30, 2006,
  was funded solely by employee contributions. Effective July 1, 2006, the Company
  modified the 401(k) plan to provide an employer match of 50% of employee contributions,
  up to a maximum of 4% of each employees total compensation.
(14) Long-term Investments, at Cost
In December 1999, the Company purchased a 19.99% interest for $2,250,000 in BusinessNet Online Information Ltd. (BusinessNet), which launched an online business publication serving the Israeli
  market. Subsequently, the Company provided $1,804,354 in convertible bridge loan funding. In December 2001, the Company concluded that its original investment and subsequent bridge loans to
  BusinessNet were not realizable. As a result, the Company determined that this asset was fully impaired, and recorded an impairment charge in the amount of the full value ($4,054,354) of the investment
  and loans. In October 2004, the Company entered into agreements with Haaretz Daily Newspaper Ltd. (Haaretz), the majority shareholder of BusinessNet, pursuant to which the Company agreed to sell
  its interest in BusinessNet and assign its rights and obligations under the bridge loans to Haaretz in consideration of a cash payment of $500,000 and indemnification against any and all claims arising out of
  its investment in BusinessNet. The transaction closed in December 2004 and the Company recorded this recovery in the fourth quarter of 2004.
F-25

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
(15) Business Segment Information
Effective January 1, 2003, the Companys operations were classified into two business segments, media and financial services. Effective July 1, 2003, these segments were renamed electronic
  publishing and securities research and brokerage to better reflect the Companys operating activities. The Companys electronic publishing segment provides investment commentary, analysis and news
  to both retail and professional customers. The Companys now discontinued securities research and brokerage segment generated independent proprietary equity research for use by institutional clients, and
  as a broker-dealer, was able to accept payment for its product through trading commissions, a standard payment method in the professional markets. Commission revenue was recorded on a trade date basis.
  Beginning with the first quarter of 2003, these segments were evaluated separately by key management in assessing performance and allocating resources.
To use administrative and other overhead resources efficiently, certain functions necessary to operate the Companys discontinued securities research and brokerage segment, including administrative,
  financial, legal and technology functions, were handled by the Companys electronic publishing segmentcurrently the sole operating segment. Expenses related to the performance of these functions were
  allocated to the discontinued segment based upon a services agreement. Through April 2005, costs were allocated pro rata, based upon the average number of personnel employed by IRG Research each
  month as a percentage of the average of the total number of personnel employed each month by the Company as a whole. During May and June 2005, shared costs were allocated based upon the
  Companys annual budget. Management of the Company believes these allocation methods to have been reasonable. In June 2005, the operations of the Companys securities research and brokerage
  segment were discontinued, and no further allocations have been made. Costs allocated to the securities research and brokerage segment totaled $1,251,083 and $2,304,656, for the years ended December 31,
  2005 and 2004, respectively.
F-26

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
(16) Selected Quarterly Financial Data (Unaudited)
For the Year Ended December 31, 2006First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth Quarter(In thousands, except per share data)Total net revenue
    
    
    $
    
    11,147
    
    
    
    $
    
    12,396
    
    
    
    $
    
    12,950
    
    
    
    $
    
    14,396Total operating expense
    
    
    
    8,853
    
    
    
    
    9,638
    
    
    
    
    10,375
    
    
    
    
    10,963Income from continuing operations before income taxes
    
    
    
    2,634
    
    
    
    
    3,277
    
    
    
    
    3,159
    
    
    
    
    4,027Provision for income tax
    
    
    
    52
    
    
    
    
    67
    
    
    
    
    63
    
    
    
    
    79Income from continuing operations
    
    
    
    2,582
    
    
    
    
    3,210
    
    
    
    
    3,096
    
    
    
    
    3,948(Loss) income from discontinued operations
    
    
    
    
    
    
    
    (Loss) income on disposal of discontinued operations
    
    
    
    (6
    )
    
    
    
    
    18
    
    
    
    
    
    
    20(Loss) income from discontinued operations
    
    
    
    (6
    )
    
    
    
    
    18
    
    
    
    
    
    
    20Net income
    
    
    
    2,576
    
    
    
    
    3,228
    
    
    
    
    3,096
    
    
    
    
    3,968Basic net income (loss) per share:Income from continuing operations
    
    
    
    0.10
    
    
    
    
    0.12
    
    
    
    
    0.11
    
    
    
    
    0.14(Loss) income from discontinued operations
    
    
    
    
    
    
    
    (Loss) income on disposal of discontinued operations
    
    
    
    (0.00
    )
    
    
    
    
    0.00
    
    
    
    
    
    
    0.00Net income
    
    
    
    0.10
    
    
    
    
    0.12
    
    
    
    
    0.11
    
    
    
    
    0.14Diluted net income (loss) per share:Income from continuing operations
    
    
    
    0.09
    
    
    
    
    0.12
    
    
    
    
    0.11
    
    
    
    
    0.14(Loss) income from discontinued operations
    
    
    
    
    
    
    
    (Loss) income on disposal of discontinued operations
    
    
    
    (0.00
    )
    
    
    
    
    0.00
    
    
    
    
    
    
    0.00Net income
    
    
    
    0.09
    
    
    
    
    0.12
    
    
    
    
    0.11
    
    
    
    
    0.14F-27

THESTREET.COM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006
For the Year Ended December 31, 2005First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth Quarter(In thousands, except per share data)Total net revenue
    
    
    $
    
    7,805
    
    
    
    $
    
    7,751
    
    
    
    $
    
    8,196
    
    
    
    $
    
    9,992Total operating expense
    
    
    
    6,978
    
    
    
    
    6,279
    
    
    
    
    7,049
    
    
    
    
    8,536Income from continuing operations before income taxes
    
    
    
    981
    
    
    
    
    1,652
    
    
    
    
    1,376
    
    
    
    
    1,746Provision for income tax
    
    
    
    
    
    
    
    
    
    5Income from continuing operations
    
    
    
    981
    
    
    
    
    1,652
    
    
    
    
    1,376
    
    
    
    
    1,741(Loss) income from discontinued operations
    
    
    
    (1,835
    )
    
    
    
    
    (1,539
    )
    
    
    
    
    278
    
    
    
    
    21(Loss) income on disposal of discontinued operations
    
    
    
    
    
    (2,383
    )
    
    
    
    
    (50
    )
    
    
    
    
    4(Loss) income from discontinued operations
    
    
    
    (1,835
    )
    
    
    
    
    (3,922
    )
    
    
    
    
    228
    
    
    
    
    25Net (loss) income
    
    
    
    (854
    )
    
    
    
    
    (2,270
    )
    
    
    
    
    1,604
    
    
    
    
    1,766Basic net income (loss) per share:Income from continuing operations
    
    
    
    0.04
    
    
    
    
    0.07
    
    
    
    
    0.05
    
    
    
    
    0.07(Loss) income from discontinued operations
    
    
    
    (0.07
    )
    
    
    
    
    (0.06
    )
    
    
    
    
    0.01
    
    
    
    
    0.00(Loss) income on disposal of discontinued operations
    
    
    
    
    
    (0.10
    )
    
    
    
    
    (0.00
    )
    
    
    
    
    0.00Net (loss) income
    
    
    
    (0.03
    )
    
    
    
    
    (0.09
    )
    
    
    
    
    0.06
    
    
    
    
    0.07Diluted net income (loss) per share:Income from continuing operations
    
    
    
    0.04
    
    
    
    
    0.06
    
    
    
    
    0.05
    
    
    
    
    0.07(Loss) income from discontinued operations
    
    
    
    (0.07
    )
    
    
    
    
    (0.06
    )
    
    
    
    
    0.01
    
    
    
    
    0.00(Loss) income on disposal of discontinued operations
    
    
    
    
    
    (0.09
    )
    
    
    
    
    (0.00
    )
    
    
    
    
    0.00Net (loss) income
    
    
    
    (0.03
    )
    
    
    
    
    (0.09
    )
    
    
    
    
    0.06
    
    
    
    
    0.07F-28

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2006, 2005 and 2004
Allowance for Doubtful Accounts
    
    BalanceatBeginningof Period
    
    ProvisionsCharged to(Recovery from)Expense
    
    Write-offs
    
    Balance at Endof PeriodFor the year ended December 31, 2006
    
    
    $
    
    131,840
    
    
    
    $
    
    84,500
    
    
    
    $
    
    263
    
    
    
    $
    
    216,077For the year ended December 31, 2005
    
    
    $
    
    107,794
    
    
    
    $
    
    47,000
    
    
    
    $
    
    22,954
    
    
    
    $
    
    131,840For the year ended December 31, 2004
    
    
    $
    
    129,096
    
    
    
    $
    
    8,000
    
    
    
    $
    
    29,302
    
    
    
    $
    
    107,794F-28

EXHIBIT INDEX
ExhibitNumber
    
    Description*3.1
    
    Amended and Restated Certificate of Incorporation**3.2
    
    Amended and Restated Bylaws*4.1
    
    Amended and Restated Registration Rights Agreement, dated as of December 21, 1998,
      among TheStreet.com and the stockholders named therein*4.2
    
    TheStreet.com Rights Agreement4.3
    
    Amendment No. 1, dated as of August 7, 2000, to Rights Agreement4.4
    
    Specimen Certificate for TheStreet.coms common stock ̈10.1
    
    Amended and Restated 1998 Stock Incentive Plan, dated as of May 29, 20022 ̈ ̈10.2
    
    Form of Stock Option Grant Agreement under the 1998 Stock Incentive Plan2à10.3
    
    Form of Restricted Stock Unit Grant Agreement under the 1998 Stock Incentive Plan210.4
    
    Annual Incentive Plan210.5
    
    Compensation of Directors2+10.6
    
    Employment Agreement, dated August 1, 2005, between James Cramer and TheStreet.com,
      Inc.2à10.7
    
    Employment Agreement, dated January 1, 2006, between Thomas J. Clarke, Jr. and
      TheStreet.com, Inc.2++10.8
    
    Employment Agreement, dated March 1, 2003, between James Lonergan and TheStreet.com,
      Inc.2o10.9
    
    Letter Agreement, dated April 29, 2005, between James Lonergan and TheStreet.com, Inc.2à10.10
    
    Letter Agreement, dated March 14, 2006, between James Lonergan and TheStreet.com, Inc.210.11
    
    Letter Agreement, dated March 1, 2007, between James Lonergan and TheStreet.com, Inc.2£10.12
    
    Employment Agreement, dated July 5, 2006, between Eric Ashman and TheStreet.com, Inc.2oo10.13
    
    Letter Agreement, dated October 31, 2000, between Lisa A. Mogensen and TheStreet.com,
      Inc.2à10.14
    
    Amendment, dated February 3, 2006, to Letter Agreement, dated October 31, 2000, between
      Lisa A. Mogensen and TheStreet.com, Inc.210.15
    
    Agreement of Lease, dated July 22, 1999, between 14 Wall Street Holdings 1 LLC (as
      successor to W12/14 Wall Acquisition Associates LLC), as Landlord, and TheStreet.com,
      Inc., as Tenant ̈ ̈10.16
    
    Amendment of Lease, dated as of October 31, 2001, between 14 Wall Street Holdings 1 LLC
      (as successor to W12/14 Wall Acquisition Associates LLC), as Landlord, and TheStreet.com,
      Inc., as Tenantàà14
    
    Code of Business Conduct and Ethics23.1
    
    Consent of Marcum & Kliegman LLP23.2
    
    Consent of Ernst & Young LLP31.1
    
    Rule 13a-14(a) Certification of CEO31.2
    
    Rule 13a-14(a) Certification of CFO32.1
    
    Section 1350 Certification of CEO32.2
    
    Section 1350 Certification of CFO
*
    
    Incorporated by reference to Exhibits to the Companys Registration Statement on Form S-1 filed February 23, 1999 (File No. 333-72799).**
    
    Incorporated by reference to Exhibits to the Companys 1999 Annual Report on Form 10-K filed March 30, 2000.
    
    Incorporated by reference to Exhibits to the Companys 2000 Annual Report on Form 10-K filed April 2, 2001.
    
    Incorporated by reference to Exhibits to Amendment 3 to the Companys Registration Statement on Form S-1 filed April 19, 1999.

 ̈
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed August 14, 2002. ̈ ̈
    
    Incorporated by reference to Exhibits to the Companys 2004 Annual Report on Form 10-K filed March 16, 2005.+
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated August 1, 2005.++
    
    Incorporated by reference to Exhibits to the Companys 2002 Annual Report on Form 10-K filed March 31, 2003.o
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated April 29, 2005.oo
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed May 10, 2005.
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed August 16, 1999.à
    
    Incorporated by reference to Exhibits to the Companys 2005 Annual Report on Form 10-K filed March 16, 2006.àà
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated January 25, 2005.£
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q filed August 9, 2006.£
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated July 5, 2006.2
    
    Indicates compensatory plan or arrangement.