UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-K




ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934


FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2009


COMMISSION
FILE NUMBER 0-25779





THESTREET.COM,
INC.


(Exact
name of Registrant as specified in its charter)





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





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




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





Name
      of Each Exchange on WhichTitle
      of Each Class
                  
                  the
      Securities are RegisteredCommon
      Stock, par value $0.01 per share
                  
                  Nasdaq
      Global Market




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




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o  No x




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 o No x




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. Yes x   No
o




Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant as required to submit and post such files).  Yes x   No
o


Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) 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. o




Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.


Large
      accelerated filer o
            Accelerated
      filer x
            Non-accelerated
      filer o
            Smaller
      reporting company o




Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No x




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, 2009 as reported
by Nasdaq, was approximately $54 million.




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




Number
      of Shares OutstandingTitle
      of Each Class
                    
                    at
      March 10, 2010Common
      Stock, $0.01 par value
                    
                    31,548,827




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 27, 2010, to be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year covered by this
Report.













THESTREET.COM,
INC.


2009
ANNUAL REPORT ON FORM 10-K




TABLE
OF CONTENTS




PagePART
      IItem
      1.
                  Business
                  1Item
      1A.
                  Risk
      Factors
                  7Item
      1B.
                  Unresolved
      Staff Comments
                  16Item
      2.
                  Properties
                  16Item
      3.
                  Legal
      Proceedings
                  16Item
      4.
                  [Reserved]PART
      IIItem
      5.
                  Market
      For Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                  18Item
      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
                  41Item
      8.
                  Financial
      Statements and Supplementary Data
                  41Item
      9.
                  Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                  41Item
      9A.
                  Controls
      and Procedures
                  42Item
      9B.
                  Other
      Information
                  44PART
      IIIItem
      10.
                  Directors,
      Executive Officers and Corporate Governance
                  44Item
      11.
                  Executive
      Compensation
                  45Item
      12.
                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                  45Item
      13.
                  Certain
      Relationships and Related Transactions, and Director
      Independence
                  46Item
      14.
                  Principal
      Accounting Fees and Services
                  46PART
      IVItem
      15.
                  Exhibits,
      Financial Statement Schedules
                  47SIGNATURES
                  51


ii


THESTREET.COM,
INC.


2009
ANNUAL REPORT ON FORM 10-K




PART
I




Item
1. Business.





Special
Note Regarding Forward-Looking Statements – all statements contained in this
Report that are not descriptions of historical facts are 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 statements are
inherently subject to risks and uncertainties, and actual results could differ
materially from those reflected in the forward-looking statements 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 Report, and in other
documents we file with the Securities and Exchange Commission from time to
time.  Certain 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.  All statements
relating to our plans, strategies and objective are deemed forward-looking
statements.  Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.  We have no obligation to
update these forward-looking statements, whether as a result of new information,
future developments or otherwise.





Overview





TheStreet.com,
Inc. together with its wholly owned subsidiaries (“we”, “us” or the “Company”),
is a leading digital financial media company.  We provide our readers and
advertisers with a variety of subscription-based and advertising-supported
content and tools through a range of online platforms, including web sites,
mobile devices, email services, widgets, blogs, podcasts and online video
channels.  Our goal is to be the primary independent source of reliable and
actionable investing ideas, news and analysis, financial data and analytical
tools for a growing audience of self-directed investors, as well as to assist
advertisers desiring to connect with our passionate, affluent
audience.





We pioneered online publishing of
business and investment information through our creation of TheStreet, which launched in
1996 as a paid subscription financial news and commentary web site.  Today,
TheStreet is our
flagship advertising-supported property, a leading site in its category and a
major source of subscribers to a variety of our premium subscription
products.  Our subscription products – which include a paid web site, RealMoney, and several paid
email products, including Actions Alerts PLUS, Breakout Stocks and ETF Action – are designed to
address the needs of investors with various areas of interest and increasing
levels of financial sophistication.  The majority of our subscription
revenue derives from annual subscriptions, although some products also are
offered on a monthly subscription basis.





We
believe we are one of the first companies to successfully create a large scale,
consumer-focused, digital premium services content business.  We believe we
have been able to successfully build our premium services business because we
have established a track record for almost 15 years of providing high quality,
independent investing ideas that have produced financial value for our
readers.  We believe our track record provides us with a competitive
advantage and we will seek to enhance the value of our leading brand and our
ability to monetize that value.  Steps we intend to take in this regard
include the following:  first, we will focus on creating additional
subscription products, at various price points, to more precisely target the
needs of investors willing to pay for high quality, actionable investing ideas,
analysis, data and tools.  Second, we will continue to refine our marketing
strategy, seeking to identify cost-effective promotional opportunities with a
variety of third-party media providers, improving our efficiency in promoting
our offerings in our own expanding collection of properties and expanding direct
sales efforts by a growing internal sales force.  Third, we will seek
continually to ensure and enhance the quality and competitiveness of our
products and to make them available on the widest choice of digital
platforms.


1





In
addition to our consumer-focused subscription products, our premium services
business also includes information services revenue from our RateWatch business,
which maintains a constantly-updated database of financial rate and fee data
collected from more than 70,000 financial institutions (at the branch level),
including certificate of deposit, money market account, savings account,
checking account, home mortgage, home equity loan, credit card and auto loan
rates.  This information is sold to banks and financial institutions on an
annual subscription basis, in the form of standard and custom reports that
outline the competitive landscape for our clients, and also serves as the
foundation for the data available on BankingMyWay, a free
advertising-supported web site that enables consumers to search for the most
competitive local and national rates from the RateWatch data.  Our premium
services revenue also includes revenue generated from syndication and licensing
of certain of our content, including data from TheStreet.com Ratings
(“Ratings”), which tracks the risk-adjusted performance of more than 16,000
mutual funds and exchange-traded funds (ETFs) and more than 5,000 stocks. 
We intend to expand our licensing arrangements to make certain of our
proprietary content available in channels we do not presently serve. 
Premium services contributed 63% of our total revenue in 2009, as compared to
58% in 2008 and 59% in 2007.





Our
advertising-supported properties, which include TheStreet, Stockpickr, MainStreet and BankingMyWay, attract one of
the largest and most affluent audiences of any digital publisher in our content
vertical.  We believe our flagship site, TheStreet, with its enviable
track record as a leading and distinctive digital voice in the financial
category since the early days of the consumer Internet, is regarded as a
must-buy for our core online brokerage advertisers, and a highly effective means
for other financial services companies and non-endemic advertisers to
communicate with our active, affluent audience.  We believe we are able to
command pricing for our advertising inventory that is strong relative to most
web sites.  We sell banner, tile and sponsorship advertising exclusively
through our experienced internal sales force and also generate revenue from
contextual and search-based advertising provided by third party technology
providers.





We
generate advertising revenue from our content through the sale of the following
types of advertising placements:




·
            banner,
      tile, contextual, performance-based and interactive advertisement and
      sponsorship placements in our advertising-supported web sites, as well as
      on select paid subscription sites;




·
            advertisement
      placements in our free email newsletters and stand-alone emails sent on
      behalf of our advertisers to our registered users;
  and




·
            advertisements
      in TheStreet TV,
      TheStreet Mobile, RSS feeds, blogs and in our
    podcasts.





We also
generated interactive marketing services revenue from our former Promotions.com
subsidiary, which we acquired in August 2007 and sold in December 2009. 
Promotions.com implemented online and mobile interactive promotions – including
sweepstakes, instant win games and customer loyalty programs – for some of the
world’s largest brands.  Including Promotions.com, advertising and
marketing services contributed 37% of our total revenue in 2009, as compared to
42% in 2008 and 41% in 2007.


2





We will
seek to increase the traffic to our network of web sites both by expanding the
range of content we offer (which may include repurposing content from one site
to address the needs of another site) and by expanding our relationships with
third parties having larger audiences.  We believe our expertise at
monetizing our content offerings through a variety of sources, and the value we
have built in our brand over the past 15 years as a leading voice in our content
vertical – as well as our independence from any larger media organization –
enables us to successfully partner with a variety of high-traffic web sites and
portals, providing expertise in our content category under arrangements that
provide benefits to both our partners and ourselves.





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, telemarketing and
establishing content syndication and subscription distribution relationships
with leading companies.  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.  We also are
expanding marketing efforts into other media, including radio.




We
use content syndication and subscription distribution arrangements to capitalize
on the cost efficiencies of online delivery and create additional value from
content we already have produced for our own properties.  By syndicating
our content to other leading web sites to host on their own sites, we expose our
brands and top-quality writing to millions of potential users.  In one type
of syndication arrangement, we provide leading web sites, including Yahoo!
Finance, MSN Money and CNN Money, with article headlines that our partners
display on their stock quote result pages, providing links back to our
site.  This type of arrangement exposes new audiences to our brands and
content and generates additional traffic to our sites, creating the opportunity
for us to increase our advertising revenue and subscription sales.





We are
intensely focused on generating additional visitors and visits to our sites
through search engine optimization efforts, in order to increase the visibility
of our content on search engines such as Google Search and Microsoft’s Bing, and
through efforts to increase our presence on a variety of social media platforms,
such as Facebook and Twitter.  In addition, we are focused on increasing
the engagement our visitors have with our sites, measured by page views and by
time spent on site, and continuously seek to improve the experience our sites
offer.





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.




In
addition, we obtain exposure through other media outlets who cite our writers
and our stories or who invite our writers to appear on segments.  In 2009,
we were mentioned or featured in numerous reports by major news outlets,
including The Wall Street
Journal, Bloomberg, and The New York Times; and some
of our writers appeared on various television and radio stations, including
CNBC, CNN, NBC, ABC, MSNBC and Fox Business News.


3




Competition




Our
services face intense competition from other providers of business, personal
finance, investing and ratings content, including:




·
            online
      services or web sites focused on business, personal finance, or investing,
      such as The Wall Street
      Journal Online, CNN Money,
      MarketWatch.com, Bloomberg.com and CNBC.com, as well as
      financial portals such as Yahoo! Finance, AOL Money & Finance and MSN
      Money;




·
            publishers
      and distributors of traditional media focused on business, personal
      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 and the Fox Business
Channel;




·
            investment
      newsletter publishers; and




·
            established
      ratings services, such as Standard & Poor’s, Morningstar, Lipper and
      A.M. Best, with respect to our Ratings products, and rate database
      providers such as Informa, with respect to our RateWatch
      products.




Many of
these competitors have significantly greater scale and resources than we
do.  Additionally, advances in technology have reduced the cost of
production and online distribution of written, audio and video content, which
has resulted in the proliferation of small, often self-published providers of
free content, such as bloggers.




According
to comScore, Inc., an independent web measurement company ("comScore"), based
upon average monthly numbers for the three months ending January
31, 2010, our network of sites had the following ranking among the top 15 sites,
as measured by total unique visitors among the 134 listed competitors in the
Business/Finance – News/Research category:  our sites were ninth in terms
of average daily visitors; tenth in terms of total pages viewed, total minutes
spent on site and total visits; eighth in terms of average minutes per visit and
average visits per visitor; and twelfth in terms of total unique
visitors.




While we
believe that comScore significantly undercounts our site traffic as measured by
our own servers, we believe that advertisers and agencies often look to
independent measurement data such as that provided by comScore in order to gain
a sense of the performance of various sites, in relation to their peer category,
when determining where to allocate advertising dollars.  We believe that
advertisers and agencies also look to demographic data provided by independent
parties such as Nielsen @Plan, which routinely ranks our network of
sites as having one of the highest concentrations of affluent, self-directed
investors among measured sites.




We
compete with these other content providers 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
experience we and our competitors offer our users and the effectiveness of our
sales and marketing efforts.


4




Infrastructure,
Operations and Technology




Our main
technological infrastructure consists of proprietary content management,
subscription management, Ratings models, and e-commerce systems, which are
hosted primarily at a facility of Equinix, Inc. in New Jersey.  Our
operations are dependent in part on our ability, and that of our various hosting
facilities, 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.




Our
content management system is based on proprietary software and allows our
stories, videos and data to be prepared for distribution online to a large
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 and 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.




Our
e-commerce system is based on proprietary software and 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.




Our
former Promotions.com business, which we sold in December 2009, employed a
proprietary platform for running all aspects of online sweepstakes, contests,
games of chance or other interactive promotions and provided shared and
dedicated hosting services for individual client applications.




Intellectual
Property




To
protect our rights to intellectual property, we rely on a combination of
trademarks, copyrights, trade secret protection, confidentiality agreements and
other contractual arrangements with our employees, affiliates, customers and
other business partners.  We have registered certain of our trademarks in
the United States and we have pending U.S. applications for other
trademarks.  Additionally, we police Internet message boards and other web
sites for copyrighted content of ours that has been republished without our
permission and we will aggressively pursue both the poster, the site hosting the
content and any Internet service provider in order to protect our
copyright.  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 technology 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.


5





Customers;
Seasonality





In 2009,
no customer accounted for 10% or more of our revenue.  There does not tend
to be significant seasonality to our premium services business. Advertising
spending by our customers generally tends to be higher in the fourth calendar
quarter as compared to other quarters, and the first and third calendar quarters
often are lower than the other quarters.





Working
Capital





Our
current assets at December 31, 2009 consisted primarily of cash, cash
equivalents, accounts receivable and marketable securities.  We do not hold
inventory.  Our current liabilities at December 31, 2009 consisted
primarily of deferred revenue, accrued expenses and accounts payable.  At
December 31, 2009, our current assets were approximately $73.8 million, 2.66
times greater than our current liabilities. With respect to most of our annual
subscription products, we offer the ability to receive a refund during the first
30 days but none thereafter.  We do not as a general matter offer any other
refunds for any premium services products or offer refunds for advertising that
has run.





Geography





During
2009, 2008 and 2007, all of our long-lived assets were located in the United
States.  Substantially all of our revenue in 2009, 2008 and 2007 was
generated from customers in the United States.





Employees





As of
December 31, 2009, the Company had 274 employees.  The Company has
never had a work stoppage and none of its employees are 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.  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 we expect 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 decrease the demand for our
services or otherwise have a material adverse effect on our future operating
performance and business.




Available
Information




We were
founded in 1996 as a limited liability company, and reorganized as a C
corporation in 1998.  We consummated our initial public offering in 1999
and we file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (“SEC”).  Our
flagship web site is located at http://www.thestreet.com.  We make
available free of charge, on or through our web site, our 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 our web site is not part of this Report or any other
report filed with the SEC.


6




You may
read and copy any materials we file with the SEC at the SEC’s Public Reference
Room at 100 F Street, NW, Washington, D.C. 20549.  You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.  The SEC maintains an Internet site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.





Item
1A. Risk Factors.




Note
–  investing in our Common Stock involves a high degree of risk.  You
should carefully consider the following risk factors, as well as the other
information in this Report, before deciding whether to invest in our Common
Stock.  Our business, prospects, financial condition or operating results
could be materially adversely affected by any of these risks, as well as other
risks not currently known to us or that we currently consider immaterial.
 The trading price of our Common Stock could decline as a result of any of
these risks, and you could lose part or all of your investment in our Common
Stock.  When deciding whether to invest in our Common Stock, you should
also refer to the other information in this Report, including our consolidated
financial statements and related notes and the information contained in Part II,
Item 7 of this Report entitled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”  You should carefully
consider the following material risks we face.  If any of the following
risks occur, our business, results of operations or financial condition could be
materially adversely affected. Please also refer to the Special Note Regarding
Forward-Looking Statements appearing in Part I, Item 1 of this
Report.




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;




·
            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, general economic conditions, demand for
      advertising on the Internet generally and actions by our
      competitors;




·
            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
      or lost revenue associated with system downtime affecting the Internet
      generally or our web sites in particular;
and




·
            general
      economic and market conditions.




We had a
large net loss in fiscal year 2009 and have incurred net losses for most years
of our history.  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.


7





Key
Writers, Particularly James J. Cramer, are Essential Sources of
Revenue





Some of
our products, particularly our newsletters, reflect the talents, efforts,
personalities and reputations of their respective writers.  As a result,
the services of these key writers, particularly our co-founder and Chairman of
the Board James J. Cramer, form an essential element of our subscription
revenue.  In addition, Mr. Cramer’s popularity and visibility have provided
public awareness of our services and introduced our content to new
audiences.  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 or contributor agreements with certain of them,
including Mr. Cramer.  Mr. Cramer has a three-year employment
agreement, which will expire on December 31, 2010.  We can give no
assurances that we will be able to retain key writers, including Mr. Cramer, 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 network of web sites and newsletters.  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
ability to compete in the marketplace 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. 
There can be no assurances that these arrangements with key employees will
provide adequate protections to us or will not result in management changes that
would have material adverse impact on us.  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.




We
May Have Difficulty Maintaining or Increasing Our Advertising Revenue, a
Significant Portion of Which Is Concentrated Among Our Top Advertisers and
Subject to Industry and Other Factors





Our
ability to maintain or increase our advertising revenue depends on a variety of
factors.  Such factors include:  general market conditions; seasonal
fluctuations in financial news consumption and overall online usage; our ability
to maintain or increase our unique visitors, page view inventory and user
engagement; our ability to attract audiences possessing demographic
characteristics most desired by our advertisers; and our ability to win
advertisers from other web sites, television, newspapers, magazines, newsletters
or other new media.  Advertising revenue could decline if the relationships
we have with portals and other high-traffic web sites is adversely
affected.  In addition, our advertising revenue may decline as a result of
pricing pressures on Internet advertising rates due to industry developments,
changes in consumer interest in the financial media and other factors in and
outside of our control, including in particular as a result of the ongoing
economic downturn.  In addition, any advertising revenue that is
performance-based may be adversely impacted by the foregoing and other
factors.  If our advertising revenue significantly decreases, our business,
results of operations and financial condition could be materially adversely
affected.


8




In 2009,
our top five advertisers accounted for approximately 36% of our total
advertising revenue, an increase from 26% for 2008.  Furthermore, although
we have advertisers from outside the financial services industry, such as
travel, automotive and technology, a large proportion of our top advertisers are
concentrated in financial services, particularly in the online brokerage
business.  Recent consolidation of financial institutions, budgetary cuts
by our advertisers in response to adverse macro-economic conditions and other
factors could cause us to lose a number of our top advertisers, which could have
a material adverse affect on our business, results of operations and financial
condition.  As is typical in the advertising industry, our advertising
contracts have short notice cancellation provisions.




Investment
of Our Cash Carries Risks





Financial
instruments that subject us to concentrations of credit risk consist primarily
of cash, cash equivalents, debt securities available for sale and restricted
cash.  We maintain all of our cash, cash equivalents, marketable securities
and restricted cash in five financial institutions, although substantially all
of the balance is within one institution.  We perform periodic evaluations
of the relative credit standing of the five institutions. No assurances can
be made that the third-party institutions will retain acceptable credit ratings
or investment practices.  Investment decisions of third parties and market
conditions may adversely affect our cash balances and financial
condition.





We
Have Recorded Impairments of Goodwill and Intangible Assets and There Can be No
Assurances that We Will Not Have to Record Additional Impairments in the
Future





In 2009
and 2008, we recorded impairments of goodwill and intangible assets that totaled
$22.6 million and $2.3 million, respectively.  The recorded impairments
were the primarily the result of a reduction in our revenue, cash flows and
enterprise value.  In addition, we reduced the carrying value of a
long-term investment, in the amount of $1.5 million.  We may have to record
additional impairments in the future which may materially adversely affect our
results of operations and financial condition.




We
Face Intense Competition




Our
services face intense competition from other providers of business, personal
finance, investing and ratings content, including:




·
            online
      services or web sites focused on business, personal finance, or investing,
      such as The Wall Street
      Journal Online, CNN Money,
      MarketWatch.com, Bloomberg.com and CNBC.com, as well as
      financial portals such as Yahoo! Finance, AOL Money & Finance and MSN
      Money;




·
            publishers
      and distributors of traditional media focused on business, personal
      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 and the Fox Business
Channel;




·
            investment
      newsletter publishers; and




·
            established
      ratings services, such as Standard & Poor’s, Morningstar, Lipper and
      A.M. Best, with respect to our Ratings products, and rate database
      providers such as Informa, with respect to our RateWatch
      products.


9




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.





Risks
Associated with Our Strategic Acquisitions Could Adversely Affect
Our Business





We have
completed several acquisitions within the last three years, and we expect to
make additional acquisitions and strategic investments in the future. 
Acquisitions involve numerous risks, including difficulties in the assimilation
of the operations and services of the acquired companies as well as the
diversion of management's attention from other business concerns.  In
addition, there may be expenses incurred in connection with the acquisition and
subsequent assimilation of operations and services and the potential loss of key
employees of the acquired company.  There can be no assurance that our
acquisitions will be successfully integrated into our operations.  In
addition, there can be no assurance that we will complete any future
acquisitions or that acquisitions will contribute favorably to our operations
and financial condition.





Although
due diligence and detailed analysis were conducted before these acquisitions,
there can be no assurance that these can fully expose all hidden problems that
the acquired company may have.  In addition, our valuations and analyses
are based on numerous assumptions, and there can be no assurance that those
assumptions will be proven correct or appropriate.  Relevant facts and
circumstances of our analyses could have changed over time, and new facts and
circumstances may come to light as to render the previous assumptions and the
valuations and analyses based thereon incorrect.  Further, we may not
necessarily be able to successfully integrate the acquired companies, may not be
able to derive any synergy from the acquisitions and may not realize the
benefits intended in such acquisitions.





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 providers 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
third-party data-center hosts with both physical and procedural security systems
and have put in place certain other disaster recovery measures, including
offsite storage of backup data, but these disaster recovery measures currently
are not comprehensive and there is no guarantee that our Internet access and
other data operations will be uninterrupted, error-free or secure.  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.


10




Our
Ratings models, purchased from Weiss Ratings, were written in legacy
technologies that do not have robust backup or recovery provisions.  The
ongoing production of valid ratings data is based upon the successful continued
migration of these legacy systems to more robust and current systems.  The
hardware platforms upon which these applications run have been migrated to more
modern equipment within our multi-redundant hosting facilities; however, many of
the core application code remains in production.  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! Finance, MSN Money and CNN Money, which index our
headlines and/or 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 have to pay significant fees, or be unable, 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 to Our Paid Services and Users to Our Advertising-Supported
Services




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 or use our services.


11




Failure
to Maintain Our Reputation for Trustworthiness May Harm Our
Business




Our brand
is based upon the integrity of our editorial content.  We are proud of the
trust and reputation for quality we have developed in our 15 years and seek to
renew and deepen that trust continually.  We require all of our writers,
whether employees or outside contributors, to adhere to strict standards of
integrity, including standards that are designed to prevent any actual or
potential conflict of interest, and to comply with all applicable laws,
including securities laws. 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.  In addition, in the
event the reputation of any of our directors, officers or key contributors was
harmed for any other reason, we could suffer as result of our association with
the individual, and also could suffer if the quantity or value of future
services we received from the individual was diminished.  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 media companies 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.  While we maintain
insurance to provide coverage with respect to many such claims, 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.  We have registered certain of our
trademarks in the United States and we have pending U.S. applications for other
trademarks.  Additionally, we police Internet message boards and other web
sites for copyrighted content of ours that has been republished without our
permission and we will aggressively pursue both the poster, the site hosting the
content and any Internet service provider in order to protect our
copyright.  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 technology infringes any patent or other
proprietary right.




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. Failure
to adequately protect our intellectual property could harm our brand, devalue
our proprietary content and affect our ability to compete effectively.  In
addition, 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, whether on our own or by virtue of our use
of certain third-party technology.  We cannot assure you that the steps we
have taken 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.


12




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 include, among other things, the
offering of stand-alone services providing stock recommendations and analysis to
subscribers.  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.




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.




Regulation of Sweepstakes and
Promotions.  Prior to our sale of our Promotions.com subsidiary in
December 2009, our activities included and from time to time may include,
conducting online sweepstakes and contests for clients.  We used best
efforts to comply with all sweepstakes, contest and bonding requirements as
specified under various state laws.  In the event, however, that we were
later determined to have violated any applicable law or regulation, we could
suffer 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 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.


13




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 and may in such
event suffer a material adverse effect to business, results of operations and
financial condition.




Control
by Principal Stockholders, Officers and Directors Could Adversely Affect Our
Stockholders, and the Terms of Our Series B Preferred Stock Include Significant
Control Rights




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.




In
November 2007, we issued to and sold to TCV VI, L.P. and TCV Member Fund, L.P.,
for an aggregate purchase price of approximately $55 million, a total of 5,500
shares of our Series B preferred stock, par value $0.01 per share (“Series B
Preferred Stock”), which are convertible into an aggregate of 3,856,942 shares
of our Common Stock, at a conversion price of $14.26 per share and warrants to
purchase 1,157,083 shares of Common Stock at an exercise price of $15.69 per
share.  The holders of the Series B Preferred Stock have the right to vote
on any matter submitted to a vote of the stockholders of the Company and are
entitled to vote that number of votes equal to the aggregate number of shares of
Common Stock issuable upon the conversion of such holders’ shares of Series B
Preferred Stock.  In addition, so long as 2,200 shares of Series B
Preferred Stock remain outstanding, the holders of a majority of such shares
will have the right to appoint one person to our board of
directors.


14




So long
as 30% of the shares of the currently-outstanding Series B Preferred Stock
remain outstanding, the affirmative vote of the holders of a majority of such
shares will be necessary to take any of the following actions: (i) authorize,
create or issue any class or classes of our capital stock ranking senior to, or
on a parity with (as to dividends or upon a liquidation event) the Series B
Preferred Stock or any securities exercisable or exchangeable for, or
convertible into, any now or hereafter authorized capital stock ranking senior
to, or on a parity with (as to dividends or upon a liquidation event) the Series
B Preferred Stock (including, without limitation, the issuance of any shares of
Series B Preferred Stock (other than shares of Series B Preferred Stock issued
as a stock dividend or in a stock split); (ii) any increase or decrease in the
authorized number of shares of Series B Preferred Stock; (iii) any amendment,
waiver, alteration or repeal of our certificate of incorporation or bylaws in a
way thatadversely affects the rights,
preferences or privileges of the Series B Preferred Stock; (iv) the payment of
any dividends (other than dividends paid in our capital stock or any of our
subsidiaries) in excess of $0.10 per share per annum on the Common Stock unless
after the payment of such dividends we have unrestricted cash (net of allindebtedness for borrowed money, purchase
money obligations, promissory notes or bonds) in an amount equal to at least two
times the product obtained by multiplying the number of shares of Series B
Preferred Stock outstanding at the time such dividend is paid by the liquidation
preference; and (v) the purchase or redemption of: (A) any Common Stock (except
for the purchase or redemption from employee, directors and consultants pursuant
to agreements providing us with repurchase rights upon termination of their
service with us) unless after such purchase or redemption we have unrestricted
cash (net of all indebtedness for borrowed money, purchase money obligations,
promissory notes or bonds) equal to at least two times the product obtained by
multiplying the number of shares ofSeries B Preferred Stock outstanding at the
time such dividend is paid by the liquidation preference; or (B) any class or
series of now or hereafter of our authorized stock that ranks junior to (upon a
liquidation event) the Series BPreferred Stock.




As a
result of the foregoing, the requisite holders of the Series B Preferred Stock
may be able to block theproposed
approval of any of the above actions, which blockage may prevent us from
achieving strategic or other goals dependent on such actions, including without
limitation additional capital raising, certain dividend increases, and the
redemption of outstanding Common Stock.  All of the foregoing rights may
limit our ability to take certain actions deemed in the interests of all of our
stockholders but as to which the holders of the Series B Preferred Stock have
control rights.





Our
Staggered Board and Certain Other Provisions in Our Certificate of
Incorporation, By-Laws or Delaware Law 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 – including without limitation the fact that we
have a staggered board, with only approximately one-third of our directors
standing for re-election each year – could make it more difficult for a
third-party to acquire the Company, even if doing so would be beneficial to our
stockholders.




Our
Revenue Could Be Adversely Affected if the Securities Markets
Decline





Our
results of operations, particularly related to subscription revenue, are
affected by certain economic factors, including the performance of the
securities markets.  While we believe investors are seeking more
information related to the financial markets from trusted sources, the existence
of adverse or stagnant securities markets conditions and lack of investor
confidence could result in investors decreasing their interest in
investor-related publications, which could adversely affect the subscription
revenue we derive from our subscription based web sites and
newsletters.


15


The
Utilization of Tax Operating Loss Carryforwards Depends Upon Future
Income





We have
net operating loss carryforwards of approximately $133 million as of December
31, 2009, available to offset future taxable income through 2025. Our ability to
fully utilize these net operating loss carryforwards is dependent upon the
generation of future taxable income before the expiration of the carryforward
period attributable to these net operating losses.





We
Had Material Weaknesses in Internal Controls at December 31, 2008 and December
31, 2009





We
determined that we had material weaknesses in our internal control over
financial reporting as of December 31, 2008 and as of December 31, 2009. 
While we have taken certain steps to remediate such material weaknesses, there
can be no assurance that a material weakness will not arise in the future. As a
result, current and potential stockholders could lose confidence in our
financial reporting, which would harm our business and the trading price of our
Common Stock.





Item
1B. Unresolved Staff Comments.





Not
applicable.





Item
2. Properties.





We do not
own any real property and we lease all of our facilities. Our principal
administrative, sales, marketing, 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, New York.  We
also remain responsible for a sublease of approximately 6,500 square feet of
office space in an office building at 29 West 38th Street
in New York, New York, which we intend to sublet.  Our West Coast bureau is
located in approximately 265 square feet of office space in Santa Monica,
California.  Regional locations of certain of our operations include: 
TheStreet.com Ratings, which occupies 5,220 square feet of office space in
Jupiter, Florida, as well as approximately 2,500 square feet of office space in
Boston, Massachusetts; and Bankers Financial Products Corporation (d/b/a
RateWatch) and BankingMyWay.com LLC, which together occupy approximately 15,000
square feet of office space in Fort Atkinson, Wisconsin.





Our main
technological infrastructure consists of proprietary content-management,
subscription management, Ratings models, and e-commerce systems, which are
hosted primarily at a facility of Equinix, Inc. in New Jersey. We have certain
backup systems at a facility in Nebraska and RateWatch systems in
Wisconsin.





Item
3. Legal Proceedings.





In
December 2001, the Company was named as a defendant in a securities class action
filed in the 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, currently the Chairman of the Board of the Company, 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. (now part of Bank of America
Corporation).  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 district court (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 (the “Securities Act”), Section 10(b) of the Securities Exchange Act of
1934, and other related provisions. The complaints seek unspecified damages,
attorney and expert fees, and other unspecified litigation
costs.


16





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 district court ruled on the motions.  The district 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, some of 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 partial 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.  In June 2004,
an agreement of partial settlement was submitted to the court for preliminary
approval. The court granted the preliminary approval motion on February 15,
2005, subject to certain modifications.  On August 31, 2005, the court
issued a preliminary order further approving the modifications to the settlement
and certifying the settlement classes.  The court also appointed the notice
administrator for the settlement and ordered that notice of the settlement be
distributed to all settlement class members by January 15, 2006.  The
settlement fairness hearing occurred on April 24, 2006, and the court reserved
decision at that time.





While the
partial settlement was pending approval, the plaintiffs continued to litigate
against the underwriter defendants. The district 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 April 6,
2007, the Second Circuit denied plaintiffs’ petition for rehearing.  In
light of the Second Circuit opinion, counsel to the issuers informed the
district court that the settlement with the plaintiffs could not be approved
because the defined settlement class, like the litigation class, could not be
certified.  The settlement was terminated pursuant to a Stipulation and
Order dated June 25, 2007.





On
August 14, 2007, plaintiffs filed their second consolidated amended class action
complaints against the focus cases and, on September 27, 2007, again moved for
class certification.  On November 12, 2007, certain of the defendants in
the focus cases moved to dismiss plaintiffs’ second amended consolidated class
action complaints.  On March 26, 2008, the district court denied the
motions to dismiss except as to Section 11 claims raised by those plaintiffs who
sold their securities for a price in excess of the initial offering price and
those who purchased outside of the previously certified class period. 
Briefing on the class certification motion was completed in May 2008.  That
motion was withdrawn without prejudice on October 10, 2008.  On April 2,
2009, a stipulation and agreement of settlement among the plaintiffs, issuer
defendants and underwriter defendants was submitted to the Court for preliminary
approval.  The settlement was approved on October 5, 2009.  Under the
settlement, the Company’s obligation of approximately $339,000 would be paid by
the issuers’ insurance companies.  The settlement has been
appealed.  There can be no assurance that the approval of the
settlement will not be reversed on appeal and that the settlement will be
implemented in its current form, or at all.  Due to the inherent
uncertainties of litigation, the ultimate outcome of the matter is
uncertain.


17




In October 2009, the Company was named as one of several defendants in
a lawsuit captioned Online News Link LLC v. Apple Inc. et al., Civ. No.
2:09-CV-0312-DF (U.S.D.C., E.D. Tex.).  The complaint alleges that
defendants infringe U.S. Patent No. 7,508,789, putatively owned
by plaintiff, related to a certain method of displaying digital data via
hyperlinks.  The Company has filed an answer denying liability on a
variety of theories.  Due to the early stage of this matter and the
inherent uncertainties of litigation, the ultimate outcome of this matter is
uncertain.




As
previously disclosed, the Company conducted a review of the accounting in its
former Promotions.com subsidiary, which subsidiary was sold in December
2009.  As a result of this review, the Company recently filed a Form 10-K/A
for the year ended December 31, 2008, a Form 10-Q/A for the quarter ended March
31, 2009 and Forms 10-Q for the quarters ended June 30, 2009 and September
30, 2009, respectively.  The SEC commenced an investigation in March 2010
into the facts surrounding our restatement of previously issued financial
statements and related matters.  The Company is cooperating fully with the
SEC.  The investigation could result in the SEC seeking various penalties
and relief including, without limitation, civil injunctive relief and/or civil
monetary penalties or administrative relief.  The nature of the relief or
remedies the SEC may seek, if any, cannot be predicted at this
time.


The
Company is party to other legal proceedings arising in the ordinary course of
business or otherwise, none of which other proceedings is deemed
material.




Item 4.
            Reserved.





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 Global 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 Global
Market.




Low
                  
                  
                  High2008First
      quarter
                  
                  $
                  7.80
                  
                  
                  $
                  15.58Second
      quarter
                  
                  $
                  6.51
                  
                  
                  $
                  9.48Third
      quarter
                  
                  $
                  5.64
                  
                  
                  $
                  7.32Fourth
      quarter
                  
                  $
                  2.70
                  
                  
                  $
                  5.692009First
      quarter
                  
                  $
                  1.70
                  
                  
                  $
                  3.49Second
      quarter
                  
                  $
                  1.85
                  
                  
                  $
                  2.47Third
      quarter
                  
                  $
                  1.94
                  
                  
                  $
                  2.90Fourth
      quarter
                  
                  $
                  2.12
                  
                  
                  $
                  3.08





On March
10, 2010, the last reported sale price for our Common Stock was $3.70 per
share.





Set forth
below is a graph comparing the cumulative total stockholder return on the
Company’s Common Stock from December 31, 2004 through December 31, 2009 with the
cumulative total return on the Nasdaq Composite Index and the Research Data
Group (RDG) Internet Composite Index.  The RDG Internet Composite
Index is included as the Company believes that this index adequately represents
its industry.  The performance graph is based upon closing prices on
December 31st of each
year other than 2006, which is based on the closing price on December 29, 2006,
the last trading day before December 31, 2006.  The comparison assumes
$100 was invested on December 31, 2004 in the Company’s Common Stock and in each
of the foregoing indices and assumes reinvestment of dividends.  The
closing price of our Common Stock on December 31, 2004 was
$4.08.


18











December 31,2004
                  
                  
                  2005
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2009TheStreet.com
                  
                  
                  100.00
                  
                  
                  
                  176.72
                  
                  
                  
                  220.40
                  
                  
                  
                  396.92
                  
                  
                  
                  73.75
                  
                  
                  
                  63.83NASDAQ
      Composite
                  
                  
                  100.00
                  
                  
                  
                  101.33
                  
                  
                  
                  114.01
                  
                  
                  
                  123.71
                  
                  
                  
                  73.11
                  
                  
                  
                  105.61RDG
      Internet Composite
                  
                  
                  100.00
                  
                  
                  
                  105.16
                  
                  
                  
                  96.24
                  
                  
                  
                  129.33
                  
                  
                  
                  60.58
                  
                  
                  
                  119.79





Holders




The
number of holders of record of our Common Stock on March 10, 2010 was 258, 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




During
the year ended December 31, 2009 and during the year ended December 31, 2008,
the Company paid four quarterly cash dividends of $0.025 per share on its Common
Stock and its Series B Preferred Stock on a converted common share
basis.  For the year ended December 31, 2009, dividends paid totaled
approximately $3.6 million, as compared to approximately $3.5 million for the
year ended December 31, 2008.  The Company’s Board of Directors
reviews the dividend payment each quarter and there can be no assurance that we
will continue to pay this cash dividend in the future.


19




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,
2009.





Period
                  
                  (a)
                    Total
                    Number
                    of Shares
                    (or Units)
                    Purchased
                  
                  
                  (b)
                    Average
                    Price
                    Paid per
                    Share (or
                    Unit)
                  
                  
                  (c)
                    Total Number
                    of
                    Shares (or
                    Units)
                    Purchased as
                    Part of Publicly
                    Announced
                    Plans
                    or Programs
                  
                  
                  (d)
                    Maximum Number
                    (or Approximate
                    Dollar Value) of
                    Shares (or Units)
                    that
                    May Yet Be
                    Purchased Under
                    the
                    Plans or Programs*October
      1 - 31, 2009
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  2,678,878November
      1 - 30, 2009
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  2,678,878December
      1 - 31, 2009
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  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 and is subject to certain
      limitations.  See “Risk Factors — Control by principal
      stockholders, officers and directors could adversely affect our
      stockholders, and the terms of our Series B preferred stock include
      significant control rights.”




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, 2009, 2008 and 2007, and the balance sheet data as of December 31,
2009 and 2008, 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, 2006 and 2005 and the balance
sheet data as of December 31, 2007, 2006 and 2005 have been derived from our
audited consolidated financial statements, which are not included
herein.


20





For the Year Ended December 31,2009
                                                                                        
                                                                                        
                                                                                        2008
                                                                                        
                                                                                        
                                                                                        2007
                                                                                        
                                                                                        
                                                                                        2006
                                                                                        
                                                                                        
                                                                                        2005(In thousands, except per share data)Statement
      of Operations Data:Revenue:Premium
      services
                                                                                        
                                                                                        $
                                                                                        37,989
                                                                                        
                                                                                        
                                                                                        $
                                                                                        41,186
                                                                                        
                                                                                        
                                                                                        $
                                                                                        38,421
                                                                                        
                                                                                        
                                                                                        $
                                                                                        35,442
                                                                                        
                                                                                        
                                                                                        $
                                                                                        24,221Marketing
      services
                                                                                        
                                                                                        
                                                                                        22,251
                                                                                        
                                                                                        
                                                                                        
                                                                                        29,662
                                                                                        
                                                                                        
                                                                                        
                                                                                        26,160
                                                                                        
                                                                                        
                                                                                        
                                                                                        15,447
                                                                                        
                                                                                        
                                                                                        
                                                                                        9,523Total
      revenue
                                                                                        
                                                                                        
                                                                                        60,240
                                                                                        
                                                                                        
                                                                                        
                                                                                        70,848
                                                                                        
                                                                                        
                                                                                        
                                                                                        64,581
                                                                                        
                                                                                        
                                                                                        
                                                                                        50,889
                                                                                        
                                                                                        
                                                                                        
                                                                                        33,744Operating
      expense:Cost
      of services
                                                                                        
                                                                                        
                                                                                        29,100
                                                                                        
                                                                                        
                                                                                        
                                                                                        31,985
                                                                                        
                                                                                        
                                                                                        
                                                                                        25,491
                                                                                        
                                                                                        
                                                                                        
                                                                                        18,450
                                                                                        
                                                                                        
                                                                                        
                                                                                        12,727Sales
      and marketing
                                                                                        
                                                                                        
                                                                                        12,078
                                                                                        
                                                                                        
                                                                                        
                                                                                        14,263
                                                                                        
                                                                                        
                                                                                        
                                                                                        12,209
                                                                                        
                                                                                        
                                                                                        
                                                                                        9,616
                                                                                        
                                                                                        
                                                                                        
                                                                                        7,264General
      and administrative
                                                                                        
                                                                                        
                                                                                        18,916
                                                                                        
                                                                                        
                                                                                        
                                                                                        17,521
                                                                                        
                                                                                        
                                                                                        
                                                                                        12,215
                                                                                        
                                                                                        
                                                                                        
                                                                                        10,674
                                                                                        
                                                                                        
                                                                                        
                                                                                        8,177Goodwill
      and intangible asset impairment
                                                                                        
                                                                                        
                                                                                        24,137
                                                                                        
                                                                                        
                                                                                        
                                                                                        2,326
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Depreciation
      and amortization
                                                                                        
                                                                                        
                                                                                        4,985
                                                                                        
                                                                                        
                                                                                        
                                                                                        5,894
                                                                                        
                                                                                        
                                                                                        
                                                                                        2,528
                                                                                        
                                                                                        
                                                                                        
                                                                                        1,089
                                                                                        
                                                                                        
                                                                                        
                                                                                        674Restructuring
      and other charges
                                                                                        
                                                                                        
                                                                                        3,461
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Loss
      on disposition of assets
                                                                                        
                                                                                        
                                                                                        530
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Total
      operating expense
                                                                                        
                                                                                        
                                                                                        93,207
                                                                                        
                                                                                        
                                                                                        
                                                                                        71,989
                                                                                        
                                                                                        
                                                                                        
                                                                                        52,443
                                                                                        
                                                                                        
                                                                                        
                                                                                        39,829
                                                                                        
                                                                                        
                                                                                        
                                                                                        28,842Operating
      (loss) income
                                                                                        
                                                                                        
                                                                                        (32,967
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (1,141
                                                                                        )
                                                                                        
                                                                                        
                                                                                        12,138
                                                                                        
                                                                                        
                                                                                        
                                                                                        11,060
                                                                                        
                                                                                        
                                                                                        
                                                                                        4,902Net
      interest income
                                                                                        
                                                                                        
                                                                                        950
                                                                                        
                                                                                        
                                                                                        
                                                                                        1,574
                                                                                        
                                                                                        
                                                                                        
                                                                                        2,476
                                                                                        
                                                                                        
                                                                                        
                                                                                        2,037
                                                                                        
                                                                                        
                                                                                        
                                                                                        853Gain
      on sales of marketable securities
                                                                                        
                                                                                        
                                                                                        295
                                                                                        
                                                                                        
                                                                                        
                                                                                        121
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Other
      income
                                                                                        
                                                                                        
                                                                                        154
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —(Loss)
      income from continuing operations before income taxes
                                                                                        
                                                                                        
                                                                                        (31,568
                                                                                        )
                                                                                        
                                                                                        
                                                                                        554
                                                                                        
                                                                                        
                                                                                        
                                                                                        14,614
                                                                                        
                                                                                        
                                                                                        
                                                                                        13,097
                                                                                        
                                                                                        
                                                                                        
                                                                                        5,755(Provision)
      benefit for income taxes
                                                                                        
                                                                                        
                                                                                        (15,846
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (2
                                                                                        )
                                                                                        
                                                                                        
                                                                                        15,694
                                                                                        
                                                                                        
                                                                                        
                                                                                        (261
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (5
                                                                                        )(Loss)
      income from continuing operations
                                                                                        
                                                                                        
                                                                                        (47,414
                                                                                        )
                                                                                        
                                                                                        
                                                                                        552
                                                                                        
                                                                                        
                                                                                        
                                                                                        30,308
                                                                                        
                                                                                        
                                                                                        
                                                                                        12,836
                                                                                        
                                                                                        
                                                                                        
                                                                                        5,750Discontinued
      operations: (*)Loss
      from discontinued operations
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        (3,075
                                                                                        )(Loss)
      income on disposal of discontinued operations
                                                                                        
                                                                                        
                                                                                        (15
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (8
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (13
                                                                                        )
                                                                                        
                                                                                        
                                                                                        32
                                                                                        
                                                                                        
                                                                                        
                                                                                        (2,429
                                                                                        )(Loss)
      income from discontinued operations
                                                                                        
                                                                                        
                                                                                        (15
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (8
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (13
                                                                                        )
                                                                                        
                                                                                        
                                                                                        32
                                                                                        
                                                                                        
                                                                                        
                                                                                        (5,504
                                                                                        )Net
      (loss) income
                                                                                        
                                                                                        
                                                                                        (47,429
                                                                                        )
                                                                                        
                                                                                        
                                                                                        544
                                                                                        
                                                                                        
                                                                                        
                                                                                        30,295
                                                                                        
                                                                                        
                                                                                        
                                                                                        12,868
                                                                                        
                                                                                        
                                                                                        
                                                                                        246Preferred
      stock deemed dividends
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        1,803
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Preferred
      stock cash dividends
                                                                                        
                                                                                        
                                                                                        386
                                                                                        
                                                                                        
                                                                                        
                                                                                        386
                                                                                        
                                                                                        
                                                                                        
                                                                                        96
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Preferred
      stock dividends
                                                                                        
                                                                                        
                                                                                        386
                                                                                        
                                                                                        
                                                                                        
                                                                                        386
                                                                                        
                                                                                        
                                                                                        
                                                                                        1,899
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Net
      (loss) income attributable to common stockholders
                                                                                        
                                                                                        $
                                                                                        (47,815
                                                                                        )
                                                                                        
                                                                                        $
                                                                                        158
                                                                                        
                                                                                        
                                                                                        $
                                                                                        28,396
                                                                                        
                                                                                        
                                                                                        $
                                                                                        12,868
                                                                                        
                                                                                        
                                                                                        $
                                                                                        246Cash
      dividends paid on common shares
                                                                                        
                                                                                        $
                                                                                        3,201
                                                                                        
                                                                                        
                                                                                        $
                                                                                        3,093
                                                                                        
                                                                                        
                                                                                        $
                                                                                        2,932
                                                                                        
                                                                                        
                                                                                        $
                                                                                        2,737
                                                                                        
                                                                                        
                                                                                        $
                                                                                        —Basic
      net (loss) income per share:(Loss)
      income from continuing operations
                                                                                        
                                                                                        $
                                                                                        (1.55
                                                                                        )
                                                                                        
                                                                                        $
                                                                                        0.02
                                                                                        
                                                                                        
                                                                                        $
                                                                                        1.05
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.48
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.23Loss
      from discontinued operations
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        (0.12
                                                                                        )(Loss)
      income on disposal of discontinued operations
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        0.00
                                                                                        
                                                                                        
                                                                                        
                                                                                        (0.10
                                                                                        )(Loss)
      income from discontinued operations
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        0.00
                                                                                        
                                                                                        
                                                                                        
                                                                                        (0.22
                                                                                        )Net
      (loss) income
                                                                                        
                                                                                        
                                                                                        (1.55
                                                                                        )
                                                                                        
                                                                                        
                                                                                        0.02
                                                                                        
                                                                                        
                                                                                        
                                                                                        1.05
                                                                                        
                                                                                        
                                                                                        
                                                                                        0.48
                                                                                        
                                                                                        
                                                                                        
                                                                                        0.01Preferred
      stock dividends
                                                                                        
                                                                                        
                                                                                        (0.01
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.01
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.07
                                                                                        )
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Net
      (loss) income attributable to common stockholders
                                                                                        
                                                                                        $
                                                                                        (1.56
                                                                                        )
                                                                                        
                                                                                        $
                                                                                        0.01
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.98
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.48
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.01Diluted
      net (loss) income per share:(Loss)
      income from continuing operations
                                                                                        
                                                                                        $
                                                                                        (1.55
                                                                                        )
                                                                                        
                                                                                        $
                                                                                        0.02
                                                                                        
                                                                                        
                                                                                        $
                                                                                        1.03
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.47
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.22Loss
      from discontinued operations
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        (0.12
                                                                                        )(Loss)
      income from disposal of discontinued operations
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        0.00
                                                                                        
                                                                                        
                                                                                        
                                                                                        (0.09
                                                                                        )(Loss)
      income from discontinued operations
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.00
                                                                                        )
                                                                                        
                                                                                        
                                                                                        0.00
                                                                                        
                                                                                        
                                                                                        
                                                                                        (0.21
                                                                                        )Net
      (loss) income
                                                                                        
                                                                                        
                                                                                        (1.55
                                                                                        )
                                                                                        
                                                                                        
                                                                                        0.02
                                                                                        
                                                                                        
                                                                                        
                                                                                        1.03
                                                                                        
                                                                                        
                                                                                        
                                                                                        0.47
                                                                                        
                                                                                        
                                                                                        
                                                                                        0.01Preferred
      stock dividends
                                                                                        
                                                                                        
                                                                                        (0.01
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.01
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (0.06
                                                                                        )
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Net
      (loss) income attributable to common stockholders
                                                                                        
                                                                                        $
                                                                                        (1.56
                                                                                        )
                                                                                        
                                                                                        $
                                                                                        0.01
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.97
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.47
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.01Weighted
      average basic shares outstanding
                                                                                        
                                                                                        
                                                                                        30,586
                                                                                        
                                                                                        
                                                                                        
                                                                                        30,427
                                                                                        
                                                                                        
                                                                                        
                                                                                        28,830
                                                                                        
                                                                                        
                                                                                        
                                                                                        27,014
                                                                                        
                                                                                        
                                                                                        
                                                                                        24,953Weighted
      average diluted shares outstanding
                                                                                        
                                                                                        
                                                                                        30,586
                                                                                        
                                                                                        
                                                                                        
                                                                                        30,835
                                                                                        
                                                                                        
                                                                                        
                                                                                        29,388
                                                                                        
                                                                                        
                                                                                        
                                                                                        27,546
                                                                                        
                                                                                        
                                                                                        
                                                                                        26,165


21




December 31,2009
                
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005(In thousands)Balance
      Sheet Data:Cash,
      cash equivalents, restricted cash, short and long term marketable
      securities
                
                $
                82,573
                
                
                $
                76,379
                
                
                $
                79,748
                
                
                $
                46,555
                
                
                $
                34,014Working
      capital
                
                
                46,063
                
                
                
                69,211
                
                
                
                72,437
                
                
                
                33,797
                
                
                
                22,059Total
      assets
                
                
                133,714
                
                
                
                171,687
                
                
                
                176,515
                
                
                
                64,570
                
                
                
                43,105Long-term
      obligations, less current maturities
                
                
                1,231
                
                
                
                80
                
                
                
                90
                
                
                
                —
                
                
                
                22Total
      stockholders’ equity
                
                
                104,762
                
                
                
                151,615
                
                
                
                151,706
                
                
                
                44,191
                
                
                
                27,441





(*)
            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.





Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.




Please refer to
the Special Note Regarding Forward-Looking Statements appearing in Part I, Item
1 of this Report.




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





Overview





TheStreet.com,
Inc. together with its wholly owned subsidiaries (“we”, “us” or the “Company”),
is a leading digital financial media company.  We provide our readers and
advertisers with a variety of subscription-based and advertising-supported
content and tools through a range of online platforms, including web sites,
mobile devices, email services, widgets, blogs, podcasts and online video
channels.  Our goal is to be the primary independent source of
reliable and actionable investing ideas, news and analysis, financial data and
analytical tools for a growing audience of self-directed investors, as well as
to assist advertisers desiring to connect with our passionate, affluent
audience.





We pioneered online publishing of
business and investment information through our creation of TheStreet, which launched in
1996 as a paid subscription financial news and commentary web
site.  Today, TheStreet is our flagship
advertising-supported property, a leading site in its category and a major
source of subscribers to a variety of our premium subscription
products.  Our subscription products – which include a paid web site,
RealMoney, and several
paid email products, including Actions Alerts PLUS, Breakout Stocks and ETF Action – are designed to
address the needs of investors with various areas of interest and increasing
levels of financial sophistication.  The majority of our subscription
revenue derives from annual subscriptions, although some products also are
offered on a monthly subscription basis.


22


In
addition to our consumer-focused subscription products, our premium services
business also includes information services revenue from our RateWatch business,
which maintains a constantly-updated database of financial rate and fee data
collected from more than 70,000 financial institutions (at the branch level),
including certificate of deposit, money market account, savings account,
checking account, home mortgage, home equity loan, credit card and auto loan
rates.  This information is sold to banks and financial institutions
on an annual subscription basis, in the form of standard and custom reports that
outline the competitive landscape for our clients, and also serves as the
foundation for the data available on BankingMyWay, a free
advertising-supported web site that enables consumers to search for the most
competitive local and national rates from the RateWatch data.  Our
premium services revenue also includes revenue generated from syndication and
licensing of certain of our content, including data from TheStreet.com Ratings
(“Ratings”), which tracks the risk-adjusted performance of more than 16,000
mutual funds and exchange-traded funds (ETFs) and more than 5,000
stocks.  We intend to expand our licensing arrangements to make
certain of our proprietary content available in channels we do not presently
serve.  Premium services contributed 63% of our total revenue in 2009,
as compared to 58% in 2008 and 59% in 2007.





Our
advertising-supported properties, which include TheStreet, Stockpickr, MainStreet and BankingMyWay, attract one of
the largest and most affluent audiences of any digital publisher in our content
vertical.  We believe our flagship site, TheStreet, with its enviable
track record as a leading digital and distinctive voice in the financial
category since the early days of the consumer Internet, is regarded as a
must-buy for our core online brokerage advertisers, and a highly effective means
for other financial services companies and non-endemic advertisers to
communicate with our active, affluent audience.  We believe we are
able to command pricing for our advertising inventory that is strong relative to
most web sites.  We sell banner, tile and sponsorship advertising
exclusively through our experienced internal sales force and also generate
revenue from contextual and search-based advertising provided by third party
technology providers.





We
generate advertising revenue from our content through the sale of the following
types of advertising placements:




·
            banner,
      tile, contextual, performance-based and interactive advertisement and
      sponsorship placements in our advertising-supported web sites, as well as
      on select paid subscription sites;




·
            advertisement
      placements in our free email newsletters and stand-alone emails sent on
      behalf of our advertisers to our registered users;
  and




·
            advertisements
      in TheStreet TV,
      TheStreet Mobile, RSS feeds, blogs and in our
    podcasts.





We also
generated interactive marketing services revenue from our former Promotions.com
subsidiary, which we acquired in August 2007 and sold in December
2009.  Promotions.com implemented online and mobile interactive
promotions – including sweepstakes, instant win games and customer loyalty
programs – for some of the world’s largest brands.  Including
Promotions.com, advertising and marketing services contributed 37% of our total
revenue in 2009, as compared to 42% in 2008 and 41% in 2007.





Critical
Accounting Estimates




General





The
Company’s discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”).  The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period.  Actual results could differ from
those estimates.  Estimates and assumptions are reviewed periodically
and the effects of revisions are reflected in the consolidated financial
statements in the period they are deemed to be necessary.  Significant
estimates made in the accompanying consolidated financial statements include,
but are not limited to, the following:


23


Revenue
Recognition





We
generate our revenue primarily from premium and marketing services.





Premium
services include subscription fees paid by customers for access to particular
services for the term of the subscription as well as syndication and licensing
revenue.  Subscriptions are generally charged to customers’ credit
cards or are directly billed to corporate subscribers.  These are
generally billed in advance on a monthly or annual basis.  We
calculate net subscription revenue by deducting from gross revenue an estimate
of potential refunds from cancelled subscriptions as well as chargebacks of
disputed credit card charges.  Net subscription revenue is recognized
ratably over the subscription periods.  Deferred revenue relates to
subscription fees for which amounts have been collected but for which revenue
has not been recognized.





Subscription
revenue is subject to estimation and variability due to the fact that, in the
normal course of business, subscribers may for various reasons contact us or
their credit card companies to request a refund or other adjustment for a
previously purchased subscription.  With respect to most of our annual
subscription products, we offer the ability to receive a refund during the first
30 days but none thereafter.  Accordingly, we maintain a provision for
estimated future revenue reductions resulting from expected refunds and
chargebacks related to subscriptions for which revenue was recognized in a prior
period.  The calculation of this provision is based upon historical
trends and is reevaluated each quarter.  The provision was not
material for the three years ended December 31, 2009.





Marketing
services include advertising revenue, which is derived from the sale of Internet
sponsorship arrangements and from the delivery of banner, tile, contextual,
performance-based and interactive advertisement and sponsorship placements in
our advertising-supported web sites, and is recognized as the advertising
is displayed, provided that collection of the resulting receivable is reasonably
assured.  Although infrequent, our obligations could include
guarantees of a minimum number of times that users of our 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.





Marketing
services also include revenue associated with our former subsidiary,
Promotions.com, which we sold in December 2009 – See Note 3 in Notes to
Consolidated Financial Statements (Acquisitions and
Divestitures).  Promotions.com generated revenue from web site design,
promotion management and hosting services.  We typically entered into
arrangements on a fixed fee basis for these services.  Revenue
generated from web site design services were recognized upon acceptance from the
customer or on a straight-line basis over the hosting period if we performed web
site design services and hosted the software.  Revenue from promotions
management services was recognized straight-line over the promotion period as
the promotion was designed to only operate on Promotions.com proprietary
platform.  Hosting services were recognized straight-line over the
hosting period.





Revenue
for contracts with multiple elements is allocated based on the element’s fair
value.  Fair value is determined based on the prices charged when each
element is sold separately.  Elements qualify for separation when the
services have value on a stand-alone basis and fair value of the undelivered
elements exits.  Determining fair value and identifying separate
elements requires judgment; generally, fair value is not readily identifiable as
we do not sell those elements individually at consistent
pricing.


24


Capitalized
Software and Web Site Development Costs




We
expense all costs incurred in the preliminary project stage for software
developed for internal use and capitalize all external direct costs of materials
and services consumed in developing or obtaining internal-use computer software
in accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other(“ASC 350”).   In addition, for employees who are directly
associated with and who devote time to internal-use computer software projects,
to the extent of the time spent directly on the project, we capitalize payroll
and payroll-related costs of such employees incurred once the development has
reached the applications development stage.  For the years ended
December 31, 2009, 2008 and 2007, we capitalized software development costs
totaling $0.5 million, $0.6 million, and $0.3 million,
respectively.  All costs incurred for upgrades, maintenance and
enhancements that do not result in additional functionality are
expensed.




We also
account for our web site development costs under ASC 350, which 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
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.  Amortization of capitalized costs will not commence until
the project is completed and placed into service.  For the years ended
December 31, 2009, 2008 and 2007, we capitalized web site development costs
totaling $0.3 million, $2.1 million and $2.8 million, respectively.





Capitalized
software and web site development costs are amortized using the straight-line
method over the estimated useful life of the software or web
site.  Total amortization expense was $1.2 million, $0.9 million and
$0.0 million, for the years ended December 31, 2009, 2008 and 2007,
respectively.




Property
and Equipment




Property
and equipment are stated at cost, net of accumulated depreciation and
amortization.  Property and equipment are depreciated on a
straight-line basis over the estimated useful lives of the
assets.  The estimated useful life of computer equipment, computer
software and telephone equipment is three years; of furniture and fixtures is
five years; and of capitalized software and web site development costs is
variable based upon the applicable project.  During the year ended
December 31, 2009, completed capitalized software and web site development
projects were deemed to have a five year useful life.  Leasehold
improvements are amortized on a straight-line basis over the shorter of the
respective lease term or the estimated useful life of the asset.  If
the useful lives of the assets differ materially from the estimates contained
herein, additional costs could be incurred, which could have an adverse impact
on our expenses.




Goodwill
and Other Intangible Assets





Goodwill
represents the excess of purchase price and related acquisition costs over the
value assigned to the net tangible and identifiable intangible assets of
businesses acquired.  Under the provisions of ASC 350, goodwill is
required to be tested for impairment on an annual basis and between annual tests
whenever indications of impairment exist.  Impairment exists when the
carrying amount of goodwill exceeds its implied fair value, resulting in an
impairment charge for this excess.  Goodwill is tested for impairment
annually, or more often when certain events or circumstances indicate impairment
may exist.


25


We
evaluate goodwill for impairment using a two-step impairment test approach at
the Company level.  In the first step, the fair value of the Company
is compared to its book value, including goodwill.  If the fair value
of the Company is less than the book value, a second step is performed that
compares the implied fair value of the Company's goodwill to the book value of
the goodwill.  The fair value for the goodwill is determined based on
the difference between the fair values of the Company and the net fair values of
identifiable assets and liabilities.  If the fair value of the
goodwill is less than the book value, the difference is recognized as
impairment.  We test for goodwill impairment at the enterprise level
as the Company is considered to operate as a single reporting unit.




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





In the
first quarter of 2009, we performed an interim impairment test of our goodwill
and  intangible assets due to certain impairment indicators, including
a continued decline in both advertising and subscription revenue resulting from
the challenging economic environment and a reduction in our enterprise
value.  As a result of this test, we recorded an impairment charge of
$22.6 million, as follows:





·
            The
      total Company fair value was estimated using a combination of a discounted
      cash flow model (present value of future cash flows) and our business
      enterprise value based upon the fair value of our outstanding common and
      preferred shares.  The fair value of our goodwill is the
      residual fair value after allocating the Company’s total fair value to its
      other assets, net of liabilities.  This analysis resulted in an
      impairment of our goodwill approximating $19.8 million.  The
      review also revealed an additional impairment to our intangible assets
      related to certain customer relationships and noncompete agreements
      approximating $2.8 million.  See Note 3 to Consolidated
      Financial Statements (Acquisitions and Divestitures) for further
      information related to the individual impairments
  recorded.




Based
upon an annual impairment test performed as of September 30, 2009, no additional
impairment was indicated.  In addition, as a result of the disposition
of our former Promotions.com subsidiary and acquisition of Kikucall, Inc. (see
Note 3 to Consolidated Financial Statements (Acquisitions and Divestitures)) in
December 2009, we concluded that these events warranted an additional impairment
test which resulted in no additional impairment as the Company’s fair value
exceeded its book value by approximately 21%.




Based
upon an annual impairment test as of September 30, 2008, we recorded an
impairment charge totaling $0.5 million representing the value remaining from
the trade name of Smartportfolio, which we had acquired in December 2000, as the
last product carrying the Smartportfolio name was
discontinued.  Additionally, we experienced a decline in anticipated
revenue associated with our Promotions.com client relationships and noncompete
agreements.  Using an income approach based upon estimated future cash
flows, we determined that the carrying value of the client relationships and
noncompete agreements exceeded its fair value at December 31, 2008, and
therefore we recorded an impairment charge of $1.8 million.




Based
upon an annual impairment test performed as of October 31, 2007, no impairment
was indicated.





Investments





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


26


Financial
instruments that subject us to concentrations of credit risk consist primarily
of cash, cash equivalents and restricted cash.  We maintain all of our
cash, cash equivalents and restricted cash in four domestic financial
institutions, although substantially all of the balance is within one
institution.  We perform periodic evaluations of the relative credit
standing of the four institutions.





Our
marketable securities consist of approximately $18.4 million of corporate
floating rate notes, which mature at various times within the next 31
months.





We also
hold investments in two municipal auction rate securities (“ARS”) issued by the
District of Columbia with a par value of $1.9 million.   The ARS
pay interest in accordance with their terms at each respective auction date,
typically every 35 days, and mature in the year 2038.





We hold
an investment in Debtfolio, Inc., doing business as Geezeo, a web-based personal
finance site.  The investment is currently valued at $0.5 million for
a 13.5% ownership stake on a fully diluted basis.  In the first
quarter of 2009, the carrying value of our investment was written down to
fair value based upon an estimate of the market value of our equity in light of
Debtfolio’s efforts to raise capital at the time from
third-parties.  The impairment charge approximated $1.5
million.  See Note 6 to Consolidated Financial Statements (Fair Value
Measurements).





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





Credit
Risks of Customers and Business Concentrations





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




For the
years ended December 31, 2009, 2008 and 2007, no individual client accounted for
10% or more of consolidated revenue.  As of December 31, 2009, two
clients accounted for more than 10% each of our gross accounts receivable
balance.  As of December 31, 2008 and 2007, no client accounted for
10% or more of our gross accounts receivable balance.





Stock-Based
Compensation





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





Stock-based
compensation expense recognized for the years ended December 31, 2009, 2008 and
2007 was approximately $2.7 million, $3.5 million and $2.1 million,
respectively.  As of December 31, 2009, there was approximately $5.1
million of unrecognized stock-based compensation expense remaining to be
recognized over a weighted-average period of 3.31 years.


27


We
estimate the fair value of share-based payment awards on the date of
grant.  The value of stock options granted to employees and directors
is estimated using an option-pricing model.  The value of each
restricted stock unit under the 1998 Plan is equal to the closing price per
share of our Common Stock on the trading day immediately prior to the date of
grant.  The value of each restricted stock unit under the 2007 Plan is
equal to the closing price per share of our Common Stock on the date of
grant.  The value of the portion of the award that is ultimately
expected to vest is recognized as expense over the requisite service
periods.





Stock-based
compensation expense recognized in our consolidated statements of operations for
the years ended December 31, 2009, 2008 and 2007 includes compensation expense
for all share-based payment awards based upon the estimated grant date fair
value.  We recognize compensation expense for share-based payment
awards on a straight-line basis over the requisite service period of the
award.  As stock-based compensation expense recognized in the years
ended December 31, 2009, 2008 and 2007 is based upon awards ultimately expected
to vest, it has been reduced for estimated forfeitures.  We estimate
forfeitures at the time of grant which are revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.





We
estimate the value of employee stock options on the date of grant using the
Black-Scholes option-pricing model.  This determination is affected by
our stock price as well as assumptions regarding expected volatility, risk-free
interest rate, and expected dividends.  The amount of equity-based
compensation expense recorded each period is net of estimated
forfeitures.  No employee stock options were granted during the year
ended December 31, 2009.  The weighted-average fair value of employee
stock options granted during the year ended December 31, 2008 was $3.27, 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, we used a historical analysis of the volatility of our
share price for the preceding three and one half years, which is equal to the
expected option lives.  The expected option lives, which represent the
period of time that options granted are expected to be outstanding, were
estimated based upon the “simplified” method for “plain-vanilla”
options.  The risk-free interest rate assumption is based upon
observed interest rates appropriate for the term of our employee stock
options.  The dividend yield assumption is based on the history and
expectation of future dividend payouts.





Expected
      option lives
                    
                    3.5
      yearsExpected
      volatility
                    
                    
                    48.20%Risk-free
      interest rate
                    
                    
                    2.32%Expected
      dividends
                    
                    
                    0.96%





The
impact of stock-based compensation expense has been significant to reported
results of operations and per share amounts (see Note 1 to Consolidated
Financial Statements (Organization, Nature of Business and Summary of Operations
and Significant Accounting Policies)).  Because option-pricing models
require the use of subjective assumptions, changes in these assumptions can
materially affect the fair value of the options.  For each 1% increase
in the risk-free interest rate used in the Black-Scholes option-pricing model,
the resulting estimated impact to our total operating expense for the year ended
December 31, 2009 would have increased by approximately $15,000.  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, 2009 would have increased by
approximately $84,000.  Because options are expensed over up to three
years from the date of grant, the foregoing estimated increases include
potential expense for options granted during the prior years. In
calculating the amount of each variable that is included in the Black-Scholes
options-pricing model (i.e., option exercise price, stock price, option term,
risk free interest rate, annual dividend rate, and volatility), the weighted
average of such variable for all grants issued in a given year was
used.


28




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





Income
Taxes





We
account for our income taxes in accordance with ASC 740-10, Income Taxes(“ASC
740-10”).  Under ASC 740-10, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their tax bases.  ASC 740-10 also requires that deferred tax assets be
reduced by a valuation allowance if it is more likely than not that some or all
of the deferred tax assets will not be realized based on all available positive
and negative evidence.





ASC
740-10 also prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return.  For those benefits to be recognized,
a tax position must be more likely than not to be sustained upon examination by
taxing authorities.  Differences between tax positions taken or expected to
be taken in a tax return and the benefit recognized and measured pursuant to the
interpretation are referred to as “unrecognized benefits.”  A liability is
recognized for an unrecognized tax benefit because it represents an enterprise’s
potential future obligation to the taxing authority for a tax position that was
not recognized as a result of applying the provisions of ASC
740-10.  As of December 31, 2009 and 2008, no liability for
unrecognized tax benefits was required to be recorded.





Deferred
tax assets pertaining to windfall tax benefits on exercise of share awards and
the corresponding credit to additional paid-in capital are recorded if the
related tax deduction reduces tax payable.  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
us.





Legal
Contingencies





In
December 2001, we were named as a defendant in a securities class action filed
in the 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 our former officers and
directors, James J. Cramer, currently the Chairman of the Board of the Company,
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. (now part of Bank of America
Corporation).  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 district court (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 (the “Securities Act”), Section 10(b)
of the Securities Exchange Act of 1934, and other related provisions. The
complaints seek unspecified damages, attorney and expert fees, and other
unspecified litigation costs.


29


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 district court ruled on the
motions.  The district court granted our motion to dismiss the claims
against the Company under Rule 10b-5, due to the insufficiency of the
allegations against us.  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 us. In addition, some of 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 partial 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 our Board of
Directors conditionally approved the proposed settlement.  In June
2004, an agreement of partial settlement was submitted to the court for
preliminary approval.  The court granted the preliminary approval
motion on February 15, 2005, subject to certain modifications.  On
August 31, 2005, the court issued a preliminary order further approving the
modifications to the settlement and certifying the settlement
classes.  The court also appointed the notice administrator for the
settlement and ordered that notice of the settlement be distributed to all
settlement class members by January 15, 2006.  The settlement fairness
hearing occurred on April 24, 2006, and the court reserved decision at that
time.





While the
partial settlement was pending approval, the plaintiffs continued to litigate
against the underwriter defendants.  The district court directed that
the litigation proceed within a number of “focus cases” rather than in all of
the 310 cases that have been consolidated.  Our 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 April 6, 2007, the Second Circuit denied plaintiffs’
petition for rehearing.  In light of the Second Circuit opinion,
counsel to the issuers informed the district court that the settlement with the
plaintiffs could not be approved because the defined settlement class, like the
litigation class, could not be certified.  The settlement was
terminated pursuant to a Stipulation and Order dated June 25, 2007.





On
August 14, 2007, plaintiffs filed their second consolidated amended class action
complaints against the focus cases and, on September 27, 2007, again moved for
class certification.  On November 12, 2007, certain of the defendants
in the focus cases moved to dismiss plaintiffs’ second amended consolidated
class action complaints.  On March 26, 2008, the district court denied
the motions to dismiss except as to Section 11 claims raised by those plaintiffs
who sold their securities for a price in excess of the initial offering price
and those who purchased outside of the previously certified class
period.  Briefing on the class certification motion was completed in
May 2008.  That motion was withdrawn without prejudice on October 10,
2008.  On April 2, 2009, a stipulation and agreement of settlement
among the plaintiffs, issuer defendants and underwriter defendants was submitted
to the Court for preliminary approval.  The settlement was approved on
October 5, 2009.  Under the settlement, our obligation of
approximately $339,000 would be paid by the issuers’ insurance
companies.  The settlement has been appealed.  There can be
no assurance that the approval of the settlement will not be reversed on appeal
and that the settlement will be implemented in its current form, or at
all.  Due to the inherent uncertainties of litigation, the ultimate
outcome of the matter is uncertain.


30


In
October 2009, we were named as one of several defendants in a lawsuit captioned
Online News Link LLC v. Apple Inc. et al., Civ. No. 2:09-CV-0312-DF (U.S.D.C.,
E.D. Tex.).  The complaint alleges that defendants infringe U.S.
Patent No. 7,508,789, putatively owned plaintiff, related to a certain method of
displaying digital data via hyperlinks.  We have filed an answer
denying liability on a variety of theories.  Due to the early stage of
this matter and the inherent uncertainties of litigation, the ultimate outcome
of this matter is uncertain.


As
previously disclosed, the Company conducted a review of the accounting in its
former Promotions.com subsidiary, which subsidiary was sold in December
2009.  As a result of this review, the Company recently filed a Form 10-K/A
for the year ended December 31, 2008, a Form 10-Q/A for the quarter ended March
31, 2009 and Forms 10-Q for the quarters ended June 30, 2009 and September
30, 2009, respectively.  The SEC commenced an investigation in March 2010
into the facts surrounding our restatement of previously issued financial
statements and related matters.  The Company is cooperating fully with the
SEC.  The investigation could result in the SEC seeking various penalties
and relief including, without limitation, civil injunctive relief and/or civil
monetary penalties or administrative relief.  The nature of the relief or
remedies the SEC may seek, if any, cannot be predicted at this
time.




We are
party to other legal proceedings arising in the ordinary course of business or
otherwise, none of which other proceedings is deemed material.





Results
of Operations





Comparison
of Fiscal Years Ended December 31, 2009 and 2008





Net
Revenue





For the Year Ended December 31,
                                          
                                          
                                          Percent2009
                                          
                                          
                                          (*)
                                          
                                          
                                          2008
                                          
                                          
                                          (*)
                                          
                                          
                                          ChangeRevenue:Premium
      services
                                          
                                          $
                                          37,988,579
                                          
                                          
                                          
                                          63
                                          %
                                          
                                          $
                                          41,185,988
                                          
                                          
                                          
                                          58
                                          %
                                          
                                          
                                          -8
                                          %Marketing
      services
                                          
                                          
                                          22,251,432
                                          
                                          
                                          
                                          37
                                          %
                                          
                                          
                                          29,662,045
                                          
                                          
                                          
                                          42
                                          %
                                          
                                          
                                          -25
                                          %Total
      revenue
                                          
                                          $
                                          60,240,011
                                          
                                          
                                          
                                          100
                                          %
                                          
                                          $
                                          70,848,033
                                          
                                          
                                          
                                          100
                                          %
                                          
                                          
                                          -15
                                          %





(*)
Percent of total revenue





Premium services.Premium services
revenue is comprised of subscriptions, licenses and fees for access to our
investment information and rate services.  Revenue is recognized
ratably over the contract period.





Premium
services revenue for the year ended December 31, 2009 decreased by 8% when
compared to the year ended December 31, 2008.  The decrease is
primarily attributable to a 10% decrease in revenue from our equity investment
information products and a 24% decrease in revenue from our Ratings
products, offset in part by an 8% increase in revenue from our RateWatch
products.





The
decline in revenue from our equity investment information products is primarily
the result of a decline in the weighted-average number of subscribers during the
year ended December 31, 2009 as compared to the year ended December 31, 2008 as
new and renewal subscriptions did not keep pace with nonrenewals on
average.  Our renewal rates declined slightly during fiscal 2009 as
compared to the prior year period and our ability to attract new subscribers was
negatively impacted, in our opinion, by the continued period of uncertainty in
the stock market during 2009.  We believe that a period of prolonged
decline in the stock market reduces the size of the potential market for
subscribers as more investors turn away from the stock market in their search
for investment growth and preservation of principal.  We noted that
the major stock market indexes bottomed during the first quarter of 2009, and
while our equity investment information services bookings showed year-over-year
declines in each the first two quarters of 2009, those bookings showed low
double digit increases in each of the last two quarters of
2009.


31


The
decline in revenue from our Ratings products was primarily related to the end of
the global research settlement previously arranged by the office of the New York
State Attorney General with several major Wall Street brokerage firms which
required them to provide their clients with independent investment
analysis.  The settlement period ended in July 2009 and thus
contributed only seven months of revenue during the year ended December 31,
2009, as compared to twelve months of revenue during the prior
year.  Settlement revenue for the year ended December 31, 2009
approximated $1.3 million as compared to approximately $2.2 million for the year
ended December 31, 2008.





Marketing services. Marketing
services revenue is comprised of fees charged for the placement of advertising
and sponsorships within our properties and for interactive marketing work
performed by our former Promotions.com subsidiary, which was sold in December
2009.





For the Year EndedDecember 31,
                    
                    
                    Percent2009
                    
                    
                    2008
                    
                    
                    ChangeMarketing
      services:Advertising
                    
                    $
                    17,637,343
                    
                    
                    $
                    23,126,532
                    
                    
                    
                    -24
                    %Interactive
      marketing services (Promotions.com)
                    
                    
                    4,614,089
                    
                    
                    
                    6,535,513
                    
                    
                    
                    -29
                    %Total
                    
                    $
                    22,251,432
                    
                    
                    $
                    29,662,045
                    
                    
                    
                    -25
                    %





Marketing
services revenue for the year ended December 31, 2009, decreased by 25% when
compared to the year ended December 31, 2008, attributable to a 29% decrease in
interactive marketing services revenue and a 24% decrease in advertising
revenue.  Interactive marketing services revenue is generated by the
operation of our Promotions.com subsidiary, which we sold in December
2009.  We believe that our marketing services businesses were impacted
by a poor macro-economic environment, which caused our clients to reduce their
overall marketing spending during 2009 as compared to the prior
year.





Operating
Expense





For the Year Ended December 31,
                            
                            
                            Percent2009
                            
                            
                            
                            (*)
                            
                            
                            2008
                            
                            
                            
                            (*)
                            
                            
                            ChangeOperating
      expense:Cost
      of services
                            
                            $
                            29,100,204
                            
                            
                            
                            48.3
                            %
                            
                            $
                            31,984,778
                            
                            
                            
                            45.1
                            %
                            
                            
                            -9
                            %Sales
      and marketing
                            
                            
                            12,077,546
                            
                            
                            
                            20.0
                            %
                            
                            
                            14,263,199
                            
                            
                            
                            20.1
                            %
                            
                            
                            -15
                            %General
      and administrative
                            
                            
                            18,916,456
                            
                            
                            
                            31.4
                            %
                            
                            
                            17,521,238
                            
                            
                            
                            24.7
                            %
                            
                            
                            8
                            %Goodwill
      and intangible asset impairment
                            
                            
                            24,137,069
                            
                            
                            
                            40.1
                            %
                            
                            
                            2,325,481
                            
                            
                            
                            3.3
                            %
                            
                            
                            938
                            %Depreciation
      and amortization
                            
                            
                            4,985,297
                            
                            
                            
                            8.3
                            %
                            
                            
                            5,894,186
                            
                            
                            
                            8.3
                            %
                            
                            
                            -15
                            %Restructuring
      and other charges
                            
                            
                            3,460,914
                            
                            
                            
                            5.7
                            %
                            
                            
                            -
                            
                            
                            
                            N/A
                            
                            
                            
                            N/ALoss
      on disposition of assets
                            
                            
                            529,708
                            
                            
                            
                            0.9
                            %
                            
                            
                            -
                            
                            
                            
                            N/A
                            
                            
                            
                            N/ATotal
      operating expense
                            
                            $
                            93,207,194
                            
                            
                            
                            
                            
                            
                            $
                            71,988,882
                            
                            
                            
                            
                            
                            
                            
                            29
                            %





(*)
Percent of total revenue




Cost of services. Cost of
services expense includes compensation, benefits and outside contributor costs
related to the creation of our content, licensed data and the technology
required to publish our content.


32


Cost of
services expense decreased by approximately $2.9 million, or 9%, over the
periods.  The decrease was largely the result of lower compensation
and related costs totaling approximately $1.9 million resulting from lower
salary and temporary help expense approximating $3.3 million due to a reduction
of approximately 17% in the average headcount in this expense category,
partially offset by higher levels of incentive compensation accruals and noncash
compensation totaling approximately $1.4 million.  The year over year
savings were also the result of reduced costs in hosting and internet fees,
fulfillment, recruiting, data and employee travel and entertainment
expenses, the sum of which totaled approximately $0.9 million. Although the
dollar amount of cost of services expense decreased over the periods, cost of
services expense as a percentage of revenue increased to 48.3% for the year
ended December 31, 2009, as compared to 45.1% the year ended December 31, 2008,
as our cost cutting initiatives did not completely offset the decline in
revenue.





Sales and marketing. Sales
and marketing expense consists primarily of advertising and promotion,
promotional materials, credit card processing fees, and compensation expense for
the direct sales force, marketing services, and customer service
departments.





Sales and
marketing expense decreased by approximately $2.2 million, or 15%, over the
periods.  The decrease was largely the result of reduced advertising
and promotion expenditures approximating $1.8 million, together with lower
compensation and related costs totaling approximately $0.3 million resulting
primarily from reduced commission payments, noncash stock compensation expenses
and salaries due to lower sales and a reduction of approximately 3% in the
average headcount in this expense category.  Additional savings were
the result of lower public relations costs, and employee travel
and entertainment expenses, the sum of which approximated $0.2
million.  These savings were partially offset by increased consulting
fees totaling approximately $0.3 million. As a percentage of revenue, sales and
marketing expense decreased to 20.0% in the year ended December 31, 2009, from
20.1% in the prior year.





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





General
and administrative expense increased by approximately $1.4 million, or 8%, over
the periods.  The increase was primarily the result of one-time costs
related to a review of the recording of certain revenue in a non-core business,
Promotions.com, and professional fees associated with the sale of
Promotions.com and the acquisition of Kikucall, Inc., the sum of which totaled
approximately $2.8 million, together with increased consulting fees totaling
approximately $0.5 million.  These increased costs were partially
offset by lower professional fees, occupancy costs, bad debt expense, insurance,
employee travel and entertainment expenses, and recruiting fees, the sum of
which totaled approximately $1.7 million.  Additional savings
approximating $0.1 million were achieved through reduced compensation and
related costs resulting primarily from lower noncash compensation and salary
expense related to a reduction of approximately 11% in the average headcount
within this expense category, partially offset by increased levels of incentive
compensation. As a percentage of revenue, general and administrative expense
increased to 31.4% in the year ended December 31, 2009, from 24.7% in the prior
year.





Depreciation and
amortization. Depreciation and amortization expense decreased by
approximately $0.9 million, or 15%, over the periods.  The decrease is
largely attributable to reduced amortization expense resulting from the
impairment charges recorded during the three months ended March 31,
2009.  Although the dollar amount of depreciation and amortization
expense decreased over the periods, depreciation and amortization expense as a
percentage of revenue remained flat at 8.3% in light of the decline in our
revenue.


33


Goodwill and intangible asset
impairment. In the first quarter of 2009, we performed an interim
impairment test of its goodwill, intangible assets and a long-term investment
due to certain impairment indicators, including a continued decline in both
advertising and subscription revenue resulting from the challenging economic
environment and a reduction in the Company’s enterprise value.  As a
result of this test, the Company recorded an impairment charge of $24.1 million,
as follows:





·
            The
      total Company fair value was estimated using a combination of a discounted
      cash flow model (present value of future cash flows) and our business
      enterprise value based upon the fair value of our outstanding common and
      preferred shares.  The fair value of our goodwill is the
      residual fair value after allocating the Company’s total fair value to its
      other assets, net of liabilities.  This analysis resulted in an
      impairment of our goodwill approximating $19.8 million.  The
      review also revealed an additional impairment to our intangible assets
      related to certain customer relationships and noncompete agreements
      approximating $2.8 million.





·
            The
      carrying value of our long-term investment was written down to fair value
      based upon the most current estimate of the market value of our equity
      stake in Debtfolio, Inc., which was determined based on current equity
      raising efforts by Debtfolio, Inc. with third-parties.  The
      impairment approximated $1.5
million.





Restructuring and other
charges.  In March 2009, we announced and implemented a
reorganization plan, including an approximate 8% reduction in our workforce, to
align our resources with our strategic business
objectives.  Additionally, effective March 21, 2009, our then Chief
Executive Officer tendered his resignation, and effective May 8, 2009, our then
Chief Financial Officer tendered his resignation, and in December 2009, we sold
our Promotions.com subsidiary and entered into negotiations to sublease certain
office space maintained by Promotions.com.  As a result of these
activities, we incurred restructuring and other charges from continuing
operations approximating $3.5 million during the year ended December 31,
2009.  Included in this charge were severance and other payroll
related expenses, totaling approximately $1.9 million, $0.8 million related to
the sublease of office space previously occupied by our former Promotions.com
subsidiary, $0.6 million of professional fees, and $0.2 million related to the
write-off of certain assets.




Loss on disposal of assets.




Net
Interest Income





For the Year Ended
                      December 31,
                    
                    
                    Percent2009
                    
                    
                    2008
                    
                    
                    ChangeNet
      interest income
                    
                    $
                    949,727
                    
                    
                    $
                    1,573,752
                    
                    
                    
                    -40
                    %





Net
interest income decreased to $0.9 million in the year ended December 31, 2009,
as compared to $1.6 million in the prior year.  The decrease in net
interest income is primarily the result of lower interest rates we could obtain
in the year ended December 31, 2009 as compared to the prior year.





Gain
on Sales of Marketable Securities




For the Year Ended
                    December 31,
                  
                  
                  Percent2009
                  
                  
                  2008
                  
                  
                  ChangeGain
      on sales of marketable securities
                  
                  $
                  295,430
                  
                  
                  $
                  120,937
                  
                  
                  
                  144
                  %





During
the year ended December 31, 2009, we sold several of our corporate floating rate
notes prior to their maturity date realizing gains on each sale, which gains
totaled $0.3 million.  In November 2008, we sold a U.S. Treasury Bill
that bore interest at the rate of 1.78% per annum and had a maturity date of
August 27, 2009, realizing a $0.1 million gain on the sale.


34


Provision
for Income Taxes





For the Year Ended
                    December 31,2009
                  
                  
                  2008Provision
      for income taxes
                  
                  $
                  15,845,964
                  
                  
                  $
                  2,040





We
account for our income taxes in accordance with ASC 740-10.  Under ASC
740-10, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their tax
bases.  ASC 740-10 also requires that deferred tax assets be reduced
by a valuation allowance if it is more likely than not that some or all of the
deferred tax assets will not be realized based on all available positive and
negative evidence.





As of
December 31, 2009 and 2008, respectively, we had approximately $133 million and
$125 million of federal and state net operating loss carryforwards
(“NOLs”).  We had recognized a deferred tax asset for a portion of
such NOLs in the amount of $16.1 million as of December 31, 2008, which
reflected the maintenance of a valuation allowance against the majority of the
gross deferred tax asset at that date.  During the three months ended
March 31, 2009, we recorded a valuation allowance against these deferred tax
assets as management concluded that it was more likely than not that we would
not realize the benefit of this portion of our deferred tax assets by generating
sufficient taxable income in future years. The decision to record this valuation
allowance was based on management evaluating all positive and negative
evidence.  The significant negative evidence includes a projected loss for
the current year, a cumulative pre-tax loss for the three years ended December
31, 2009, the inability to carryback the net operating losses, limited future
reversals of existing temporary differences and the limited availability of tax
planning strategies.  We expect to continue to provide a full
valuation allowance until, or unless, we can sustain a level of profitability
that demonstrates our ability to utilize these assets.





In
accordance with Section 382 of the Internal Revenue Code, our NOLs may be
limited in the event of a change in ownership.  The ultimate
realization of NOLs is dependent upon the generation of future taxable income
during the periods following an ownership change.  As such, a portion
of the existing NOLs may be subject to limitation.





Net
(Loss) Income





Net loss
for the year ended December 31, 2009 totaled $47.4 million, or $(1.55) per basic
and diluted share, compared to net income totaling $0.5 million, or $0.02 per
basic and diluted share, for the year ended December 31, 2008.





Comparison
of Fiscal Years Ended December 31, 2008 and 2007





Net
Revenue




For the Year Ended December 31,
                                    
                                    
                                    Percent2008
                                    
                                    
                                    (*)
                                    
                                    
                                    2007
                                    
                                    
                                    (*)
                                    
                                    
                                    ChangeRevenue:Premium
      services
                                    
                                    $
                                    41,185,988
                                    
                                    
                                    
                                    58
                                    %
                                    
                                    $
                                    38,421,393
                                    
                                    
                                    
                                    59
                                    %
                                    
                                    
                                    7
                                    %Marketing
      services
                                    
                                    
                                    29,662,045
                                    
                                    
                                    
                                    42
                                    %
                                    
                                    
                                    26,160,144
                                    
                                    
                                    
                                    41
                                    %
                                    
                                    
                                    13
                                    %Total
      revenue
                                    
                                    $
                                    70,848,033
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    $
                                    64,581,537
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    
                                    10
                                    %





(*)
Percent of total revenue


35


Premium services.





Premium
services revenue for the year ended December 31, 2008 increased by 7% when
compared to the year ended December 31, 2007.  The increase was
primarily the result of an increase in revenue from the operations of our
RateWatch business, which was acquired on November 2, 2007 and thus did not
contribute revenue during the full period of fiscal 2007, as well as a 23%
increase in revenue from our Ratings products, offset in part by an 11% decrease
in revenue from our equity investment information products.  The
decline in revenue from our equity investment information products is primarily
the result of a decline in the weighted-average number of subscribers during the
year ended December 31, 2008 as compared to the year ended December 31, 2007, as
new and renewal subscriptions did not keep pace with nonrenewals on
average.  While renewal rates remained steady during fiscal 2008 as
compared to the prior year period, our ability to attract new subscribers was
negatively impacted, in our opinion, by the prolonged decline in the stock
market during 2008.  We believe that a period of prolonged decline in
the stock market reduces the size of the potential market for subscribers as
more investors turn away from the stock market in their search for investment
growth and preservation of principal.





Marketing
services.





For the Year EndedDecember 31,
                    
                    
                    Percent2008
                    
                    
                    2007
                    
                    
                    ChangeAdvertising
                    
                    $
                    23,126,532
                    
                    
                    $
                    21,985,441
                    
                    
                    
                    5
                    %Interactive
      marketing services (Promotions.com)
                    
                    
                    6,535,513
                    
                    
                    
                    4,174,703
                    
                    
                    
                    57
                    %Total
                    
                    $
                    29,662,045
                    
                    
                    $
                    26,160,144
                    
                    
                    
                    13
                    %





Marketing
services revenue for the year ended December 31, 2008 increased by 13% when
compared to the year ended December 31, 2008, attributable to a 57% increase in
interactive marketing services revenue and a 5% increase in advertising
revenue.  Interactive marketing services revenue is generated by the
operation of our Promotions.com subsidiary, which was acquired on August 2,
2007.  The increase in interactive marketing services revenue was
primarily the result of have such revenue for the full year of 2008, but only a
portion of the prior year period.  The increase in advertising revenue
was primarily attributable to higher traffic on our web properties.





Operating
Expense





For the Year Ended December 31,
                                                
                                                
                                                Percent2008
                                                
                                                
                                                (*)
                                                
                                                
                                                2007
                                                
                                                
                                                (*)
                                                
                                                
                                                ChangeOperating
      expense:Cost
      of services
                                                
                                                $
                                                31,984,778
                                                
                                                
                                                
                                                45.1
                                                %
                                                
                                                $
                                                25,490,864
                                                
                                                
                                                
                                                39.5
                                                %
                                                
                                                
                                                25
                                                %Sales
      and marketing
                                                
                                                
                                                14,263,199
                                                
                                                
                                                
                                                20.1
                                                %
                                                
                                                
                                                12,208,648
                                                
                                                
                                                
                                                18.9
                                                %
                                                
                                                
                                                17
                                                %General
      and administrative
                                                
                                                
                                                17,521,238
                                                
                                                
                                                
                                                24.7
                                                %
                                                
                                                
                                                12,215,797
                                                
                                                
                                                
                                                18.9
                                                %
                                                
                                                
                                                43
                                                %Goodwill
      and intangible asset impairment
                                                
                                                
                                                2,325,481
                                                
                                                
                                                
                                                3.3
                                                %
                                                
                                                
                                                —
                                                
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                N/ADepreciation
      and amortization
                                                
                                                
                                                5,894,186
                                                
                                                
                                                
                                                8.3
                                                %
                                                
                                                
                                                2,528,042
                                                
                                                
                                                
                                                3.9
                                                %
                                                
                                                
                                                133
                                                %Total
      operating expense
                                                
                                                $
                                                71,988,882
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                52,443,351
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                37
                                                %





(*)
Percent of total revenue


36


Cost of services. Cost of
services expense increased by approximately $6.5 million, or 25%, over the
periods.  The increase in cost of services over the periods was
largely the result of increased compensation costs totaling approximately $4.5
million.  The increased compensation costs were primarily attributable
to incremental costs associated with the operations of Promotions.com and
Bankers Financial Products since the dates of their acquisitions, as well as
compensation expense associated with BankingMyWay and MainStreet, which were
launched in the quarters ended December 31, 2007 and March 31, 2008,
respectively.We also
experienced increased costs related to hosting, data, fulfillment and
consulting, the sum of which increased by approximately $2.0 million over the
periods, partially offset by reduced printing cost, which decreased by
approximately $0.1 million over the periods.  As a percentage of
revenue, cost of services expense was 45.1% for the year ended December 31,
2008, as compared to 39.5% for the prior year.





Sales and
marketing.  Sales and marketing expense increased by
approximately $2.1 million, or 17%, over the periods.  The increase in
sales and marketing expense was largely the result of increased compensation and
online marketing costs, which increased by approximately $2.5 million year over
year.  This increase included an investment in a larger ad sales team
to deliver advertising revenue growth across an expanding network of web sites,
as well as an increase in our search engine marketing and online marketing spend
to support the launch of BankingMyWay and MainStreet.  The
increased expense also reflects incremental costs associated with the operations
of Promotions.com and Bankers Financial Products since the dates of their
acquisitions.  These increased costs were partially offset by
decreases related to consulting, ad serving and credit card processing, the sum
of which decreased by approximately $0.5 million over the periods.  As
a percentage of revenue, sales and marketing expense was 20.1% for the year
ended December 31, 2008, as compared to 18.9% for the year ended December 31,
2007.





General and
administrative.  General and administrative expense increased
by approximately $5.3 million, or 43%, over the periods.  The increase
in general and administrative expense over the periods was partially the result
of higher compensation costs totaling approximately $2.7 million, including an
increase in noncash compensation costs of approximately $0.6
million.  In addition, the increase in general and administrative
expense was the result of increased costs related to occupancy of approximately
$1.1 million, an increase to our bad debt reserve in the amount of approximately
$0.5 million, a non-recurring charge for professional fees approximating $0.3
million, as well as increases to costs associated with management and analysis
tools for our growing network of web sites and consulting fees, the sum of which
increased by approximately $0.1 million over the periods.  As a
percentage of revenue, general and administrative expense was 24.7% in the year
ended December 31, 2008, as compared to 18.9% in the year ended December 31,
2007.





Goodwill and intangible asset
impairment.  For the year ended December 31, 2008, goodwill and
intangible asset impairment totaled $2.3 million.  No impairment
expense was recorded for the year ended December 31, 2007.  As a
result of reduced revenue and cash flows, we determined that the value of
intangible assets related to the Promotions.com customer relationships and
noncompete agreements were impaired and we recorded an impairment charge
approximating $1.8 million during the fourth quarter of
2008.  Additionally, due to the discontinuance of the use of the
Smartportfolio trade name during the fourth quarter of 2007, the remaining value
approximating $0.5 million was deemed to be impaired.


37




Depreciation and
amortization.  Depreciation and amortization expense increased
by approximately $3.4 million, or 133%, over the periods.  The
increase in depreciation and amortization expense was largely attributable to
the amortization of intangible assets related to the Promotions.com, Bankers
Financial Products and Stockpickr acquisitions, resulting in approximately $1.7
million of additional amortization cost over the periods, depreciation of
capitalized costs associated with the redesign of TheStreet and development of
the MainStreet web
sites, and higher depreciation costs due to increased capital
expenditures.  As a percentage of revenue, depreciation and
amortization expense was 8.3% in the year ended December 31, 2008, as compared
to 3.9% in the year ended December 31, 2007.





Net
Interest Income


For
      the Year EndedDecember
      31,
                      
                      
                      Percent2008
                      
                      
                      2007
                      
                      
                      ChangeNet
      interest income
                      
                      $
                      1,573,752
                      
                      
                      $
                      2,476,266
                      
                      
                      
                      -36
                      %





Net
interest income decreased to $1.6 million in the year ended December 31, 2008,
as compared to $2.5 million in the prior year.  The decrease in net
interest income was primarily the result of reduced interest rates as a result
of our decision to invest our cash balances directly in U.S. Treasury Bills, or
indirectly in U.S. Treasury backed securities with a focus on asset protection
rather than yield maximization.  The lower yield in the period was
partially offset by a higher average cash balance.





Gain
on Sales of Marketable Securities


For
      the Year EndedDecember
      31,
                      
                      
                      Percent2008
                      
                      
                      2007
                      
                      
                      ChangeGain
      on sales of marketable securities
                      
                      $
                      120,937
                      
                      
                      $
                      -
                      
                      
                      
                      N/A





For the
year ended December 31, 2008, gain on sales of marketable securities was $0.1
million.  No gain was recorded for the year ended December 31,
2007.  In November 2008, the Company sold a U.S. Treasury Bill that
bore interest at the rate of 1.78% per annum and had a maturity date of August
27, 2009, realizing a gain on the sale.





Net
Income





Net
income for the year, ended December 31, 2008 totaled $0.5 million, or $0.02 per
basic and diluted share, compared to $30.2 million, or $1.05 per basic and $1.03
per diluted share, for the year ended December 31, 2007.  The decrease
over the periods was in part the result of a $15.7 million reduction to the
Company’s deferred tax asset valuation allowance, which was recorded as a
benefit to the income tax provision in the prior year period.





Liquidity
and Capital Resources





We have
generally invested in money market funds and other short-term, investment grade
instruments that are highly liquid and of high-quality, with the intent that
such funds are available for sale for operating purposes. As of December 31,
2009, our cash, cash equivalents, marketable securities, and restricted cash
amounted to $82.6 million, representing 62% of total assets.  Our cash
and cash equivalents primarily consisted of money market funds and checking
accounts.  Our marketable securities consisted of approximately $18.4
million of corporate floating rate notes, which mature at various times within
the next 31 months, and two auction rate securities issued by the District of
Columbia with a par value of $1.9 million.  Our total cash-related
position is as follows:


38





December 31,
                    2009
                  
                  
                  December 31,
                    2008Cash
      and cash equivalents
                  
                  $
                  60,542,494
                  
                  
                  $
                  72,441,294Current
      and noncurrent marketable securities
                  
                  
                  20,328,087
                  
                  
                  
                  1,658,178Current
      and noncurrent restricted cash
                  
                  
                  1,702,079
                  
                  
                  
                  2,279,030Total
      cash and cash equivalents, current and noncurrent marketable securities
      and current and noncurrent restricted cash
                  
                  $
                  82,572,660
                  
                  
                  $
                  76,378,502





Financial
instruments that subject us to concentrations of credit risk consist primarily
of cash, cash equivalents and restricted cash.  We maintain all of our
cash, cash equivalents and restricted cash in four domestic financial
institutions, although substantially all of the balance is within one
institution.  We periodically obtain current Dun and Bradstreet
reports in order to evaluate the relative credit standing of the four
institutions.





Cash
generated from operations was sufficient to cover our expenses during the year
ended December 31, 2009.  Net cash provided by operating activities
totaled $14.2 million and $8.3 million for the years ended December 31, 2009 and
2008, respectively.  The increase in net cash provided by operating
activities is primarily related to the following:





·
            an increase in accrued expenses
      in the year ended December 31, 2009, primarily related to our incentive
      compensation and restructuring accruals, as compared to a decrease in
      accrued expenses in the year ended December 31, 2008 primarily related to
      incentive compensation;


·
            an increase in accounts payable
      in the year ended December 31, 2009, as compared to the year ended
      December 31, 2008, primarily related to the timing of invoice
      payments;


·
            a decrease in receivables in the
      year ended December 31, 2009, as compared to the year ended December 31,
      2008, primarily related to improved collection efforts and decreased
      revenue; and


·
            an increase in deferred
      revenue in the year
      ended December 31, 2009, as compared to a decrease during the year ended
      December 31, 2008.





These
increases in net cash provided by operating activities were partially offset by
a decrease in income from continuing operations, partially offset by increased
noncash expenses.





Net cash
used in investing activities of $22.8 million for the year ended December 31,
2009 was primarily the result of the net purchase of marketable securities,
business combinations, net of cash received and capital
expenditures.





Net cash
used in financing activities of $3.3 million for the year ended December 31,
2009 primarily consisted of cash dividends paid and the purchase of treasury
stock, partially offset by a decrease in restricted cash.





We have a
total of $1.7 million of cash invested in certificates of deposit that serve as
collateral for outstanding letters of credit, and which cash is therefore
restricted.  The letters of credit serve as security deposits for our
office space in New York City.


39





We
believe that our current cash and cash equivalents will be sufficient to meet
our anticipated cash needs for at least the next 12 months.  We are
committed to cash expenditures in an aggregate amount of approximately $3.8
million through December 31, 2010, in respect of the contractual obligations set
forth below under “Commitments and Contingencies.”  Additionally, our
board of directors declared four quarterly cash dividends in the amount of
$0.025 per share of Common Stock and preferred stock (on a common share
equivalent basis) during year ended December 31, 2009, which resulted in cash
expenditures of approximately $3.6 million.  Our board of directors
reviews the dividend payment each quarter and there can be no assurance that we
will continue to pay this cash dividend in the future.





As of
December 31, 2009 and 2008, respectively, we had approximately $133 million and
$125 million of federal and state net operating loss carryforwards
(“NOLs”).  We had recognized a deferred tax asset for a portion of
such NOLs in the amount of $16.1 million as of December 31,
2008.  During the three months ended March 31, 2009, we recorded a
valuation allowance against these deferred tax assets as management concluded
that it was more likely than not that we would not realize the benefit of this
portion of our deferred tax assets by generating sufficient taxable income in
future years. The decision to record this valuation allowance was based on
management evaluating all positive and negative evidence.  The significant
negative evidence included a loss for the current year, a cumulative pre-tax
loss for the three years ended December 31, 2009, the inability to carryback the
net operating losses, limited future reversals of existing temporary differences
and the limited availability of tax planning strategies.  We expect to
continue to provide a full valuation allowance until, or unless, it can sustain
a level of profitability that demonstrates its ability to utilize these
assets.





In
accordance with Section 382 of the Internal Revenue Code, our NOLs may be
limited in the event of a change in ownership.  The ultimate
realization of NOLs is dependent upon the generation of future taxable income
during the periods following an ownership change.  As such, a portion
of the existing NOLs may be subject to limitation.





Treasury
Stock





In
December 2000, our board of directors authorized the repurchase of up to $10
million worth of our Common Stock, from time to time, in private purchases or in
the open market.  In February 2004, our board of directors approved
the resumption of the stock repurchase program under new price and volume
parameters, leaving unchanged the maximum amount available for repurchase under
the program.  However, the affirmative vote of the holders of a
majority of the outstanding shares of Series B Preferred Stock, voting
separately as a single class, is necessary for us to repurchase our
stock.  During the years ended December 31, 2009 and 2008, we did not
purchase any shares of Common Stock under the program.  Since
inception of the program, we have purchased a total of 5,453,416 shares of
Common Stock at an aggregate cost of $7,321,122, for an average price of $1.34
per share.  In addition, pursuant to the terms of the 1998 Plan and
2007 Plan, and certain procedures adopted by the Compensation Committee of our
board of directors, in connection with the exercise of stock options by certain
of our executive officers, and the issuance of restricted stock units, we may
withhold shares in lieu of payment of the exercise price and/or the minimum
amount of applicable withholding taxes then due.  Through December 31,
2009, we had withheld an aggregate of 420,048 shares which have been recorded as
treasury stock.  In addition, we received an aggregate of 208,270
shares as partial settlement of the working capital and debt adjustment from the
acquisition of Corsis Technology Group II LLC, 104,055 of which were received in
October 2008 and 104,215 of which were received in September
2009.  These shares have been recorded as treasury
stock.


40




Commitments
and Contingencies





We are
committed under operating leases, principally for office space, which expire at
various dates through December 31, 2020.  Certain leases contain
escalation clauses relating to increases in property taxes and maintenance
costs.  Rent and equipment rental expenses were $2.4 million, $2.6
million and $1.9 million for the years ended December 31, 2009, 2008 and 2007,
respectively.  Additionally, we have employment or contributor
agreements with certain of our employees and outside contributors, whose future
minimum payments are dependent on the future fulfillment of their services
thereunder.  As of December 31, 2009, total future minimum cash
payments are as follows:





Payments
      Due by YearAfterContractual
      obligations:
                              
                              Total
                              
                              
                              2010
                              
                              
                              2011
                              
                              
                              2012
                              
                              
                              2013
                              
                              
                              2014
                              
                              
                              2014Operating
      leases
                              
                              $
                              20,729,230
                              
                              
                              $
                              1,612,187
                              
                              
                              $
                              2,197,482
                              
                              
                              $
                              2,092,126
                              
                              
                              $
                              2,084,866
                              
                              
                              $
                              1,878,937
                              
                              
                              $
                              10,863,632Employment
      agreements
                              
                              
                              1,763,833
                              
                              
                              
                              1,763,833
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Outside
      contributors
                              
                              
                              507,000
                              
                              
                              
                              457,000
                              
                              
                              
                              50,000
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Total
      contractual cash obligations
                              
                              $
                              23,000,063
                              
                              
                              $
                              3,833,020
                              
                              
                              $
                              2,247,482
                              
                              
                              $
                              2,092,126
                              
                              
                              $
                              2,084,866
                              
                              
                              $
                              1,878,937
                              
                              
                              $
                              10,863,632




Future
minimum cash payments for the year ended December 31, 2010 related to operating
leases has been reduced by approximately $0.7 million related to a free rent
allowance contained in the Third Amendment of Lease dated December 31, 2008,
relating to the Company's corporate office.








Item
7A. Quantitative and Qualitative Disclosures About Market
Risk.





We
believe that our market risk exposures are immaterial as we do 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.




We
maintain all of our cash, cash equivalents and restricted cash in four domestic
financial institutions, although substantially all of the balance is within one
institution, and we perform periodic evaluations of the relative credit standing
of these institutions.  However, no assurances can be given that the
third party institutions will retain acceptable credit ratings or investment
practices.





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.




None.


41




Item 9A. Controls and Procedures.


(A)
              Evaluation
      of Disclosure Controls and
Procedures
 
 We
carried out, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Accounting Officer (the person
performing the functions of a principal financial officer), an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934) as of December 31, 2009.  Based on that evaluation, our Chief
Executive Officer and Chief Accounting Officer concluded that, as of December
31, 2009, our disclosure controls and procedures were not effective due to the
material weaknesses in our internal control over financial reporting, as
discussed in detail below.
 
 Notwithstanding
the material weaknesses described below, we believe that, as a result of the
processes completed to prepare this Report, the consolidated financial
statements contained in this Report fairly present, in all material respects,
the financial position, results of operations and cash flows of the Company for
the periods presented.
 
 
 (B)
              Management’s
      Annual 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.  Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, our Chief Executive Officer and Chief Accounting Officer and
effected by our 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 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.
   42
 
 Internal
control over financial reporting has inherent limitations.  Internal
control over financial reporting is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures.  Internal control over financial reporting also can be
circumvented by collusion or improper management override.  Because of such
limitations, there is a risk that material misstatements will not be prevented
or detected on a timely basis by internal control over financial
reporting.  However, these inherent limitations are known features of the
financial reporting process.  Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
 
 Management,
under the supervision of our Chief Executive Officer and Chief Accounting
Officer,  performed an assessment of the effectiveness of our internal
control over financial reporting as of December 31, 2009 based upon criteria in
Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”).
  A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis. As a result of
management’s evaluation of our internal control over financial reporting,
management identified the following material weaknesses in our internal control
over financial reporting:
 
 Inadequate and ineffective controls
over the recognition of revenue at our former Promotions.com subsidiary
(“Promotions.com”), which we sold in December 2009.  We lacked
adequate supervisory and review controls over accounting for promotional
services for transactions with certain third parties (including parties in which
certain executives of the Promotions.com subsidiary had an interest), in which
we contracted both to provide property and services to, and receive property and
services from, such parties.  Aspects of certain of these transactions
were determined by us to have lacked economic substance and proper
authorization.  In addition, we determined that we did not have in
place adequate systems and documentation to properly record revenue on certain
promotional contracts with milestones or estimate percentage of completion. We
also did not have adequate review controls over the accounting for certain
transactions as we determined  that while we had recorded revenue, upon
delivery, for the value of certain software products that Promotions.com
developed and delivered in connection with promotions with respect to which
Promotions.com also provided hosting services, the value of such software
instead should have been recognized over the hosting period for the applicable
promotions, as the software did not have independent utility outside of its use
during the applicable promotions.  This material weakness resulted in
material errors in revenue, accounts receivable and deferred revenue that were
corrected when we restated our 2008 consolidated financial statements.  In
addition, this material weakness resulted in errors in revenue, accounts
receivable and deferred revenue in our 2009 consolidated financial statements
that were corrected prior to the issuance of our 2009 consolidated
financial statements.
  43
  Inadequate and ineffective controls
over complex and non-recurring transactions.  We did not have
sufficient personnel with an appropriate level of technical accounting
knowledge, experience and training, to perform appropriate monitoring and review
controls over complex and non-recurring transactions. This material weakness
contributed to the material weakness discussed above and also resulted in errors
in stock-based compensation and accounting for the disposition of assets that
were corrected prior to the issuance of our consolidated financial
statements.
   
 Our
independent registered public accounting firm, KPMG LLP, has issued an audit
report on the effectiveness of our internal control over financial reporting as
of December 31, 2009. Their report appears on page F-3.
 
 
 (C)
              Remediation
      Plan for Material Weaknesses in Internal Control Over Financial
      Reporting
 
 With
respect to the material weaknesses in internal control over financial reporting
at December 31, 2009, we are currently enhancing our control environment and
control activities intended to address the material weaknesses in our internal
control over financial reporting and to remedy the ineffectiveness of our
disclosure controls and procedures. Since year end,
we have hired a new Controller with the requisite experience, technical
skills and knowledge to assist in accounting for complex and non-recurring
transactions (we were without a Controller at December 31, 2009 as our prior
Controller had left in November 2009).  We also have retained an
internal control and compliance consultant subsequent to December 31, 2009, in
order to assist us with improving the functioning and testing of our internal
control over financial reporting.  Lastly, while we sold the Promotions.com
subsidiary in December 2009, we will continue to maintain such
new processes and controls implemented as described below in order to
address the recognition of revenue for similar or like transactions in other
parts of our business that may arise.
 
 (D)
              Changes
      in Internal Controls Over Financial Reporting in Our Last Fiscal
      Quarter
 
 The
changes described below in the Company's internal control over financial
reporting that occurred during the fourth quarter have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.  We have implemented the following new processes and controls in
order to remediate the material weaknesses described above with regards to
inadequate and ineffective controls over the recognition of revenue at our
former Promotions.com subsidiary. In the fourth quarter of 2009 we implemented a
new process for recording Promotions.com revenue transactions, new procedures
for the review, tracking and processing of Promotions.com contracts as well as
the assignment of new finance personnel responsible for the accounting for these
transactions.  We also retained theservices of an experienced
outside accounting consultant to assist the Company with the review of
Promotions.com’s contracts and applicable revenue recognition
standards.
 Item
9B. Other Information.





None.





PART
III




Item 10. Directors, Executive Officers and Corporate
Governance.




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 27, 2010, to be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this
Report.


44




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 27, 2010, 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, 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 27, 2010, 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




Under the
terms of the Company’s 1998 Stock Incentive Plan, as amended (the “1998 Plan”),
8,900,000 shares of Common Stock of the Company were reserved for awards of
incentive stock options, nonqualified stock options, restricted stock, deferred
stock (also referred to as restricted stock units, or RSUs), or any combination
thereof. At the Company’s annual stockholders’ meeting in May 2007, stockholders
of the Company approved TheStreet.com, Inc. 2007 Performance Incentive Plan (the
“2007 Plan”). Under the terms of the 2007 Plan, 1,250,000 shares of Common Stock
of the Company were reserved for awards of incentive stock options, nonqualified
stock options, stock appreciation rights (SARs), restricted stock, restricted
stock units (RSUs) or other stock-based awards. The plan also authorized cash
performance awards. Additionally, under the terms of the 2007 Plan, unused
shares authorized for award under the 1998 Plan are available for issuance under
the 2007 Plan. No further awards will be made under the 1998 Plan. At the
Company’s annual stockholders’ meeting in May 2008, stockholders of the Company
approved an amendment to the 2007 Plan to increase the number of shares of
Common Stock available for awards by 1,000,000, to a total of 2,250,000. Awards
may be granted to such directors, employees and consultants of the Company as
the Compensation Committee of the Board of Directors shall select in its
discretion. Only employees of the Company are eligible to receive incentive
stock options. Awards generally vest over a three- to five-year period and stock
options generally have terms of five years. The following table sets forth
certain information, as of December 31, 2009, concerning shares of Common Stock
authorized for issuance under that equity compensation plan of the
Company.




Number of securities
                            to be
                            issued upon exercise
                            of outstanding
                            options
                          
                          Weighted-average
                            exercise price of
      outstanding options
                          
                          Number of securities
                            remaining available for
                            future issuance under
                            equity compensation plans
                            (excluding securities
                            reflected in column (a))(a)
                          
                          (b)
                          
                          (c)Equity
      compensation plans approved by security holders
                          
                          
                          2,670,220
                          
                          $
                          2.21
                          
                          
                          964,614
                          *





*
            Aggregate
      number of shares available for grant under the 2007 Plan, which grants may
      be in the form of incentive stock options, nonqualified stock options,
      stock appreciation rights (SARs), restricted stock, restricted stock units
      (RSUs) or other stock-based awards 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.  The
      2007 Plan also authorizes cash performance
  awards.





45


Item
13. Certain Relationships and Related Transactions, and Director
Independence.





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 27, 2010, 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 27, 2010, to be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this
Report.


46




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 Securities and Exchange
Commission:





ExhibitNumber
                  
                  Description*3.1
                  
                  Amended
      and Restated Certificate of Incorporation of the Company, incorporated by
      reference to the Exhibits to the Company’s Registration Statement on Form
      S-1 filed February 23, 1999.*3.2
                  
                  Amended
      and Restated Bylaws of the Company, incorporated by reference to the
      Exhibits to the Company’s Annual Report on Form 10-K filed March 30,
      2000.*4.1
                  
                  Amended
      and Restated Registration Rights Agreement dated December 21, 1998, by and
      among the Company and the stockholders named therein, incorporated by
      reference to the Exhibits to the Company’s Registration Statement on Form
      S-1 filed February 23, 1999.*4.2
                  
                  Certificate
      of Designation of the Company’s Series A Junior Participating Preferred
      Stock, incorporated by reference to the Exhibits to the Company’s
      Registration Statement on Form S-1 filed February 23,
  1999.*4.3
                  
                  Certificate
      of Designation of the Company’s Series B Preferred Stock, as filed with
      the Secretary of State of the State of Delaware on November 15, 2007,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed November 20, 2007.*4.4
                  
                  Option
      to Purchase Common Stock dated November 1, 2007, incorporated by reference
      to the Company’s Current Report on Form 8-K filed November 6,
      2007.*4.5
                  
                  Investor
      Rights Agreement dated November 15, 2007 by and among the Company, TCV VI,
      L.P. and TCV Member Fund, L.P., incorporated by reference to the Exhibits
      to the Company’s Current Report on Form 8-K filed November 20,
      2007.*4.6
                  
                  Warrant
      dated November 15, 2007 issued by the Company to TCV VI, L.P.,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed November 20, 2007.*4.7
                  
                  Warrant
      dated November 15, 2007 issued by the Company to TCV Member Fund, L.P.,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed November 20, 2007.*4.8
                  
                  Specimen
      certificate for the Company’s shares of Common Stock, incorporated by
      reference to the Exhibits to Amendment 3 to the Company’s Registration
      Statement on Form S-1 filed April 19, 1999.+*10.1
                  
                  Amended
      and Restated 1998 Stock Incentive Plan, dated May 29, 2002, incorporated
      by reference to the Exhibits to the Company’s Quarterly Report on Form
      10-Q filed August 14,
2002.




47





+*10.2
              
              Form
      of Stock Option Grant Agreement under the 1998 Stock Incentive Plan,
      incorporated by reference to the Exhibits to the Company’s Annual Report
      on Form 10-K filed March 16, 2005.+*10.3
              
              Form
      of Restricted Stock Unit Grant Agreement under the 1998 Stock Incentive
      Plan, incorporated by reference to the Exhibits to the Company’s Annual
      Report on Form 10-K filed March 16, 2006.+*10.4
              
              2007
      Performance Incentive Plan, incorporated by reference to Appendix A to the
      Company’s 2007 Definitive Proxy Statement on Schedule 14A filed April 23,
      2007.+*10.5
              
              Form
      of Stock Option Grant Agreement under the Company’s 2007 Performance
      Incentive Plan, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed August 9, 2007.+*10.6
              
              Form
      of Restricted Stock Unit Grant Agreement under the Company’s 2007
      Performance Incentive Plan, incorporated by reference to the Exhibits to
      the Company’s Quarterly Report on Form 10-Q filed August 9,
      2007.+*10.7
              
              Form
      of Cash Performance Award Agreement under the Company’s 2007 Performance
      Incentive Plan, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed August 9, 2007.+*10.8
              
              Employment
      Agreement dated April 9, 2008 between James Cramer and the Company,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed April 9, 2008.+*10.9
              
              Amendment
      to Employment Agreement dated July 30, 2008 between James Cramer and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Current Report on Form 8-K filed July 30, 2008.+*10.10
              
              Employment
      Agreement, dated September 13, 2007, by and between Thomas J. Clarke, Jr.
      and the Company, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q filed November 9,
      2007.+*10.11
              
              Letter
      Agreement dated October 24, 2008, by and between Thomas J. Clarke, Jr. and
      the Company amending the Employment Agreement dated September 13, 2007,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q filed November 7, 2008.+*10.12
              
              Employment
      Agreement dated June 30, 2008, by and between Eric Ashman and the Company,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed June 30, 2008.+*10.13
              
              Employment
      Agreement dated March 26, 2007, by and between Steven Elkes and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed May 10, 2007.+*10.14
              
              Employment
      Agreement dated August 23, 2007, by and between David Morrow and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed November 9, 2007.+*10.15
              
              Employment
      Agreement dated May 15, 2008, by and between Teresa Santos and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Current Report on Form 8-K filed May 15, 2008.*10.16
              
              Membership
      Interest Purchase Agreement dated August 2, 2007 by and among TP Newco
      LLC, David Barnett, Gregg Alwine and Gregg Alwine as Agent, incorporated
      by reference to the Exhibits to the Company’s Current Report on Form 8-K
      filed August 8, 2007.*10.17
              
              Stock
      Purchase Agreement dated November 1, 2007 by and among BFPC Newco LLC,
      Larry Starkweather, Kyle Selberg, Rachelle Zorn, Robert Quinn and Larry
      Starkweather as Agent, incorporated by reference to the Exhibits to the
      Company’s Current Report on Form 8-K filed November 6,
    2007.




48





*10.18
              
              Securities
      Purchase Agreement dated November 15, 2007 by and among the Company, TCV
      VI, L.P. and TCV Member Fund, L.P., incorporated by reference to the
      Exhibits to the Company’s Current Report on Form 8-K filed November 20,
      2007.*10.19
              
              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 the
      Company, as Tenant, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q filed August 16,
    1999.*10.20
              
              Amendment
      of Lease dated October 31, 2001, between 14 Wall Street Holdings 1, LLC
      (as successor to W12/14 Wall Acquisition Associates LLC), as Landlord, and
      the Company, as Tenant, incorporated by reference to the Exhibits to the
      Company’s Annual Report on Form 10-K filed March 16,
  2005.*10.21
              
              Second
      Amendment of Lease dated March 21, 2007, between 14 Wall Street Holdings
      1, LLC as Landlord, and the Company, as Tenant, incorporated by reference
      to the Exhibits to the Company’s Annual Report on Form 10-K filed March
      12, 2008.*10.22
              
              Third
      Amendment of Lease dated December 31, 2008, between CRP/Capstone 14W
      Property Owner, L.L.C. as Landlord, and the Company, as Tenant,
      incorporated by reference to the Exhibits to the Company’s Annual Report
      on Form 10-K filed March 13, 2009.+*10.23
              
              Amendment
      to Employment Agreement dated December 23, 2008 by and between James J.
      Cramer and the Company, incorporated by reference to the Exhibits to the
      Company’s Annual Report on Form 10-K/A filed February 8,
    2010.+*10.24
              
              Separation
      Agreement and Mutual Release between the Company and Thomas J. Clarke, Jr.
      dated March 13, 2009, incorporated by reference to the Exhibits to the
      Company’s Current Report on Form 8-K filed March 13,
  2009.+*10.25
              
              Term
      Sheet between the Company and Daryl Otte dated as of May 15, 2009,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.26
              
              Agreement
      for Grant of Restricted Stock Units Under 2007 Performance Incentive Plan
      dated as of June 9, 2009 between the Company and Daryl Otte, incorporated
      by reference to the Exhibits to the Company’s Quarterly Report on Form
      10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.27
              
              Change
      of Control and Severance Agreement dated as of June 9, 2009 between the
      Company and Daryl Otte, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30,
      2009, filed February 8, 2010.+*10.28
              
              Term
      Sheet between the Company and Gregory Barton dated as of June 2, 2009,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.29
              
              Notice
      of Waiver dated April 2, 2009 by James J. Cramer under Employment
      Agreement between the Company and James J. Cramer, incorporated by
      reference to the Exhibits to the Company’s Quarterly Report on Form 10-Q
      for the Quarter Ended June 30, 2009, filed February 8,
    2010.+*10.30
              
              Letter
      agreement dated April 30, 2009 between the Company and Richard Broitman,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.31
              
              Letter
      agreement dated May 8, 2009 between the Company and Eric Ashman,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+10.32
              
              Letter
      agreement dated as of March 13, 2009 between the Company and
      Daryl Otte.+*10.33
              
              Letter
      agreement dated June 10, 2009 between the Company and Teresa Santos,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.




49





+*10.34
                  
                  Form
      of Agreement of Restricted Stock Units Under the Company’s 2007
      Performance Incentive Plan, incorporated by reference to the Exhibits to
      the Company’s Quarterly Report on Form 10-Q for the Quarter Ended
      September 30, 2009, filed February 8, 2010.+*10.35
                  
                  Form
      of Agreement of Grant of Cash Performance Award Under the Company’s 2007
      Performance Incentive Plan, incorporated by reference to the Exhibits to
      the Company’s Quarterly Report on Form 10-Q for the Quarter Ended
      September 30, 2009, filed February 8, 2010.+*10.36
                  
                  Agreement
      of Grant of Restricted Stock Units dated July 14, 2009 between Gregory
      Barton and the Company, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q for the Quarter Ended September
      30, 2009, filed February 8, 2010.+*10.37
                  
                  Severance
      Agreement dated July 14, 2009 between Gregory Barton and the Company,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended September 30, 2009, filed
      February 8, 2010.+10.38
                  
                  Form
      of Indemnification Agreement for directors and executive officers of the
      Company.+10.39
                  
                  Amendment
      to 2007 Performance Incentive Plan, adopted by the Company November 20,
      2009.+10.40
                  
                  Amendment
      to Employment Agreement dated October 27, 2009 by and between James J.
      Cramer and the Company.*14.1
                  
                  Code
      of Business Conduct and Ethics, incorporated by reference to the Exhibits
      to the Company’s Current Report on Form 8-K filed January 31,
      2005.21.1
                  
                  Subsidiaries
      of the Company23.1
                  
                  Consent
      of KPMG LLP.23.2
                  
                  Consent
      of Marcum LLP.31.1
                  
                  Rule
      13a-14(a) Certification of CEO.31.2
                  
                  Rule
      13a-14(a) Certification of CAO.32.1
                  
                  Section
      1350 Certification of CEO.32.2
                  
                  Section
      1350 Certification of
CAO.





*
            Incorporated
      by reference


+
            Indicates
      management contract or compensatory plan or
  arrangement


50


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 30, 2010
                By:
                /s/
      Daryl OtteDaryl
      OtteChief
      Executive Officer




Pursuant
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/
      Daryl Otte
                      
                      Chief
      Executive Officer
                      
                      March
      30, 2010(Daryl
      Otte)/s/
      Richard Broitman
                      
                      Chief
      Accounting Officer
                      
                      March
      30, 2010(Richard
      Broitman)/s/
      James J. Cramer
                      
                      Chairman
      of the Board
                      
                      March
      30, 2010(James
      J. Cramer)/s/
      Ronni Ballowe
                      
                      Director
                      
                      March
      30, 2010(Ronni
      Ballowe)/s/
      William R. Gruver
                      
                      Director
                      
                      March
      30, 2010(William
      R. Gruver)/s/
      Derek Irwin
                      
                      Director
                      
                      March
      30, 2010(Derek
      Irwin)/s/
      Christopher Marshall
                      
                      Director
                      
                      March
      30, 2010(Christopher
      Marshall)/s/
      Martin Peretz
                      
                      Director
                      
                      March
      30, 2010(Martin
      Peretz)


51


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, 2009 and 2008
                  
                  F-5Consolidated
      Statements of Operations for the Years Ended December 31, 2009, 2008 and
      2007
                  
                  F-6Consolidated
      Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the
      Years Ended December 31, 2009, 2008 and 2007
                  
                  F-7Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and
      2007
                  
                  F-8Notes
      to Consolidated Financial Statements
                  
                  F-9Schedule
      II—Valuation and Qualifying Accounts for the Years Ended December 31,
      2009, 2008 and 2007
                  
                  F-40


F-1


Report
of Independent Registered Public Accounting Firm
  The Board
of Directors and Stockholders
  TheStreet.com,
Inc.:
  We have
audited the accompanying consolidated balance sheet of TheStreet.com, Inc. and
subsidiaries (the Company) as of December 31, 2009, and the related
consolidated statements of operations, stockholders’ equity and comprehensive
loss, and cash flows for the year then ended.  In connection with our audit
of the consolidated financial statements, we also have audited financial
statement schedule II for the year ended December 31, 2009. These consolidated
financial statements and the financial statement schedule are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of TheStreet.com, Inc. and
subsidiaries as of December 31, 2009, and the results of their operations
and their cash flows for the year then ended, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
  We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), TheStreet.com Inc.’s internal control over
financial reporting as of December 31, 2009, based on criteria established
in Internal Control –
Integrated Frameworkissued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO), and our report dated March 30, 2010
expressed an adverse opinion on the effectiveness of the Company’s internal
control over financial reporting.
   /s/
KPMG LLP
 New York,
New York
 March 30,
2010
  F-2
  Report
of Independent Registered Public Accounting Firm
 
  The Board
of Directors and Stockholders
  TheStreet.com,
Inc.:
  We have
audited TheStreet.com, Inc.'s (the Company) internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). 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,
included in the accompanying Management’s Annual Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included 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 generally accepted accounting principles. 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
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 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 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.
  A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. Material
weaknesses related to inadequate and ineffective controls over the recognition
of revenue at the Company’s former Promotions.com subsidiary and over
complex and non-recurring transactions have been identified and included in
management’s assessment. We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of TheStreet.com, Inc. and subsidiaries as of
December 31, 2009, and the related consolidated statements of operations,
stockholders’ equity and comprehensive loss, and cash flows for the year then
ended.  These material weaknesses were considered in determining the
nature, timing, and extent of audit tests applied in our audit of the 2009
consolidated financial statements, and this report does not affect our report
dated March 30, 2010, which expressed an unqualified opinion on those
consolidated financial statements.
  In our
opinion, because of the effect of the aforementioned material weaknesses on the
achievement of the objectives of the control criteria, TheStreet.com, Inc. has
not maintained effective internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
    New York,
New York
 March 30,
2010
 F-3
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Audit Committee of the
 Board of
Directors and Shareholders
 TheStreet.com,
Inc.
 
 We have
audited the accompanying consolidated balance sheet of TheStreet.com, Inc. (the
“Company”) as of December 31, 2008, and the related consolidated statements of
operations, changes in stockholders’ equity and cash flows for each of the
years in the two-year period ended December 31, 2008.  Our audits
also included the financial statement schedule as of and for the years listed in
the index at Item 15.  These financial statements and financial
statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and
financial statement 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 also
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 financial statements referred to above present fairly, in all
material respects, the financial position of TheStreet.com, Inc., as of December
31, 2008, and the results of its operations and its cash flows for each of the
years in the two-year period ended December 31, 2008 in conformity with
United States generally accepted accounting principles.  Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole presents fairly,
in all material respects, the information set forth therein.
 
 
 /s/Marcum
LLP
 
 (Formerly
Marcum &Kliegman LLP)
 New York, New York
 March
      10, 2009, except for the effects of the restatement as discussed in Note
      16to
      the consolidated financial statements (not presented herein) appearing
      under Item 8 of the Company’s 2008 Annual Report on Form 10-K/A (Amendment
      No. 1), as to which the date is February 3,
  2010.


F-4




THESTREET.COM, INC.


CONSOLIDATED BALANCE SHEETS


December
      31,2009
                            
                            
                            2008assetsCurrent
      Assets:Cash
      and cash equivalents
                            
                            $
                            60,542,494
                            
                            
                            $
                            72,441,294Restricted
      cash
                            
                            
                            —
                            
                            
                            
                            516,951Accounts
      receivable, net of allowance for doubtful accounts of $276,668 as of
      December 31, 2009 and $531,092 as of December 31, 2008
                            
                            
                            5,963,209
                            
                            
                            
                            11,167,297Marketable
      securities
                            
                            
                            2,812,400
                            
                            
                            
                            —Other
      receivables
                            
                            
                            2,774,898
                            
                            
                            
                            647,596Deferred
      taxes
                            
                            
                            —
                            
                            
                            
                            2,546,743Prepaid
      expenses and other current assets
                            
                            
                            1,691,038
                            
                            
                            
                            1,884,247Total
      current assets
                            
                            
                            73,784,039
                            
                            
                            
                            89,204,128Property
      and equipment, net of accumulated depreciation and amortization of
      $13,263,460 as of December 31, 2009 and $11,250,569 as of December 31,
      2008
                            
                            
                            7,493,020
                            
                            
                            
                            9,672,779Marketable
      securities
                            
                            
                            17,515,687
                            
                            
                            
                            1,658,178Long
      term investment
                            
                            
                            555,000
                            
                            
                            
                            2,042,970Other
      assets
                            
                            
                            167,477
                            
                            
                            
                            122,197Goodwill
                            
                            
                            24,286,616
                            
                            
                            
                            40,024,076Other
      intangibles, net
                            
                            
                            8,210,105
                            
                            
                            
                            13,630,900Deferred
      taxes
                            
                            
                            —
                            
                            
                            
                            13,570,047Restricted
      cash
                            
                            
                            1,702,079
                            
                            
                            
                            1,762,079Total
      assets
                            
                            $
                            133,714,023
                            
                            
                            $
                            171,687,354liabilities
      and stockholders’ equityCurrent
      Liabilities:Accounts
      payable
                            
                            $
                            2,164,809
                            
                            
                            $
                            280,469Accrued
      expenses
                            
                            
                            7,894,136
                            
                            
                            
                            2,784,902Deferred
      revenue
                            
                            
                            17,306,737
                            
                            
                            
                            16,495,712Other
      current liabilities
                            
                            
                            132,682
                            
                            
                            
                            205,838Liabilities
      of discontinued operations
                            
                            
                            223,165
                            
                            
                            
                            225,925Total
      current liabilities
                            
                            
                            27,721,529
                            
                            
                            
                            19,992,846Other
      liabilities
                            
                            
                            1,230,591
                            
                            
                            
                            79,896Total
      liabilities
                            
                            
                            28,952,120
                            
                            
                            
                            20,072,742Stockholders’
      EquityPreferred
      stock; $0.01 par value; 10,000,000 shares authorized; 5,500 issued and
      outstanding as of December 31, 2009 and December 31, 2008; the aggregate
      liquidation preference as of December 31, 2009 and December 31, 2008
      totals $55,000,000
                            
                            
                            55
                            
                            
                            
                            55Common
      stock; $0.01 par value; 100,000,000 shares authorized; 37,246,362 shares
      issued and 31,164,628 shares outstanding as of December 31, 2009, and
      36,262,546 shares issued and 30,378,894 shares outstanding as of December
      31, 2008
                            
                            
                            372,464
                            
                            
                            
                            362,625Additional
      paid-in capital
                            
                            
                            271,715,956
                            
                            
                            
                            271,271,574Accumulated
      other comprehensive income (loss)
                            
                            
                            344,372
                            
                            
                            
                            (290,000
                            )Treasury
      stock at cost; 6,081,734 shares as of December 31, 2009 and 5,883,652
      shares as of December 31, 2008
                            
                            
                            (10,411,952
                            )
                            
                            
                            (9,900,284
                            )Accumulated
      deficit
                            
                            
                            (157,258,992
                            )
                            
                            
                            (109,829,358
                            )Total
      stockholders’ equity
                            
                            
                            104,761,903
                            
                            
                            
                            151,614,612Total
      liabilities and stockholders’ equity
                            
                            $
                            133,714,023
                            
                            
                            $
                            171,687,354





The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements


F-5





THESTREET.COM,
INC.


CONSOLIDATED STATEMENTS OF OPERATIONS




For
      the Years Ended December 31,2009
                                      
                                      
                                      2008
                                      
                                      
                                      2007Net
      revenue:Premium
      services
                                      
                                      $
                                      37,988,579
                                      
                                      
                                      $
                                      41,185,988
                                      
                                      
                                      $
                                      38,421,393Marketing
      services
                                      
                                      
                                      22,251,432
                                      
                                      
                                      
                                      29,662,045
                                      
                                      
                                      
                                      26,160,144Total
      net revenue
                                      
                                      
                                      60,240,011
                                      
                                      
                                      
                                      70,848,033
                                      
                                      
                                      
                                      64,581,537Operating
      expense:Cost
      of services
                                      
                                      
                                      29,100,204
                                      
                                      
                                      
                                      31,984,778
                                      
                                      
                                      
                                      25,490,864Sales
      and marketing
                                      
                                      
                                      12,077,546
                                      
                                      
                                      
                                      14,263,199
                                      
                                      
                                      
                                      12,208,648General
      and administrative
                                      
                                      
                                      18,916,456
                                      
                                      
                                      
                                      17,521,238
                                      
                                      
                                      
                                      12,215,797Depreciation
      and amortization
                                      
                                      
                                      4,985,297
                                      
                                      
                                      
                                      5,894,186
                                      
                                      
                                      
                                      2,528,042Asset
      impairments
                                      
                                      
                                      24,137,069
                                      
                                      
                                      
                                      2,325,481
                                      
                                      
                                      
                                      —Restructuring
      and other charges
                                      
                                      
                                      3,460,914
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Loss
      of disposition of assets
                                      
                                      
                                      529,708
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Total
      operating expense
                                      
                                      
                                      93,207,194
                                      
                                      
                                      
                                      71,988,882
                                      
                                      
                                      
                                      52,443,351Operating
      (loss) income
                                      
                                      
                                      (32,967,183
                                      )
                                      
                                      
                                      (1,140,849
                                      )
                                      
                                      
                                      12,138,186Net
      interest income
                                      
                                      
                                      949,727
                                      
                                      
                                      
                                      1,573,752
                                      
                                      
                                      
                                      2,476,266Gain
      on sales of marketable securities
                                      
                                      
                                      295,430
                                      
                                      
                                      
                                      120,937
                                      
                                      
                                      
                                      —Other
      income
                                      
                                      
                                      153,677
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —(Loss)
      income from continuing operations before income taxes
                                      
                                      
                                      (31,568,349
                                      )
                                      
                                      
                                      553,840
                                      
                                      
                                      
                                      14,614,452(Provision)
      benefit for income taxes
                                      
                                      
                                      (15,845,964
                                      )
                                      
                                      
                                      (2,040
                                      )
                                      
                                      
                                      15,693,339(Loss)
      income from continuing operations
                                      
                                      
                                      (47,414,313
                                      )
                                      
                                      
                                      551,800
                                      
                                      
                                      
                                      30,307,791Discontinued
      operations:Loss
      from discontinued operations
                                      
                                      
                                      (15,321
                                      )
                                      
                                      
                                      (8,012
                                      )
                                      
                                      
                                      (12,829
                                      )Net
      (loss) income
                                      
                                      
                                      (47,429,634
                                      )
                                      
                                      
                                      543,788
                                      
                                      
                                      
                                      30,294,962Preferred
      stock deemed dividend
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      1,802,733Preferred
      stock cash dividend
                                      
                                      
                                      385,696
                                      
                                      
                                      
                                      385,696
                                      
                                      
                                      
                                      96,424Preferred
      stock dividends
                                      
                                      
                                      385,696
                                      
                                      
                                      
                                      385,696
                                      
                                      
                                      
                                      1,899,157Net
      (loss) income attributable to common stockholders
                                      
                                      $
                                      (47,815,330
                                      )
                                      
                                      $
                                      158,092
                                      
                                      
                                      $
                                      28,395,805Basic
      net (loss) income per share:(Loss)
      income from continuing operations
                                      
                                      $
                                      (1.55
                                      )
                                      
                                      $
                                      0.02
                                      
                                      
                                      $
                                      1.05Loss
      from discontinued operations
                                      
                                      
                                      (0.00
                                      )
                                      
                                      
                                      (0.00
                                      )
                                      
                                      
                                      (0.00
                                      )Net
      (loss) income
                                      
                                      
                                      (1.55
                                      )
                                      
                                      
                                      0.02
                                      
                                      
                                      
                                      1.05Preferred
      stock dividends
                                      
                                      
                                      (0.01
                                      )
                                      
                                      
                                      (0.01
                                      )
                                      
                                      
                                      (0.07
                                      )Net
      (loss) income attributable to common stockholders
                                      
                                      $
                                      (1.56
                                      )
                                      
                                      $
                                      0.01
                                      
                                      
                                      $
                                      0.98Diluted
      net (loss) income per share:(Loss)
      income from continuing operations
                                      
                                      $
                                      (1.55
                                      )
                                      
                                      $
                                      0.02
                                      
                                      
                                      $
                                      1.03Loss
      from discontinued operations
                                      
                                      
                                      (0.00
                                      )
                                      
                                      
                                      (0.00
                                      )
                                      
                                      
                                      (0.00
                                      )Net
      (loss) income
                                      
                                      
                                      (1.55
                                      )
                                      
                                      
                                      0.02
                                      
                                      
                                      
                                      1.03Preferred
      stock dividends
                                      
                                      
                                      (0.01
                                      )
                                      
                                      
                                      (0.01
                                      )
                                      
                                      
                                      (0.06
                                      )Net
      (loss) income attributable to common stockholders
                                      
                                      $
                                      (1.56
                                      )
                                      
                                      $
                                      0.01
                                      
                                      
                                      $
                                      0.97Weighted
      average basic shares outstanding
                                      
                                      
                                      30,586,460
                                      
                                      
                                      
                                      30,427,421
                                      
                                      
                                      
                                      28,830,366Weighted
      average diluted shares outstanding
                                      
                                      
                                      30,586,460
                                      
                                      
                                      
                                      30,835,131
                                      
                                      
                                      
                                      29,387,727





The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements


F-6


THESTREET.COM,
INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)


FOR
THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007




Common
      Stock
                            
                            
                            Series
      B Preferred Stock
                            
                            
                            
                            
                            
                            Accumulated
                              Other
                            
                            
                            Treasury
      Stock
                            
                            
                            
                            
                            
                            TotalShares
                            
                            
                            Par
                              Value
                            
                            
                            Shares
                            
                            
                            Par
                              Value
                            
                            
                            Additional
                              Paid in
      Capital
                            
                            
                            Comprehensive
                              Income
                            
                            
                            Shares
                            
                            
                            Cost
                            
                            
                            Accumulated
                              Deficit
                            
                            
                            Stockholders'
                              EquityBalance
      at December 31, 2006
                            
                            
                            33,606,835
                            
                            
                            $
                            336,068
                            
                            
                            
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            193,556,899
                            
                            
                            $
                            -
                            
                            
                            
                            (5,752,000
                            )
                            
                            $
                            (9,033,471
                            )
                            
                            $
                            (140,668,108
                            )
                            
                            $
                            44,191,388Exercise
      and issuance of equity grants
                            
                            
                            739,424
                            
                            
                            
                            7,394
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,010,029
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,017,423Issuance
      of common stock for acquisitions
                            
                            
                            1,659,878
                            
                            
                            
                            16,599
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            20,258,848
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            20,275,447Issuance
      of preferred stock
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            5,500
                            
                            
                            
                            55
                            
                            
                            
                            54,839,028
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            54,839,083Stock-based
      consideration for services
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,115,599
                            
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,115,599Common
      stock cash dividends
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (2,931,671
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (2,931,671
                            )Preferred
      stock cash dividends
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (96,424
                            )
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (96,424
                            )Net
      income
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            30,294,962
                            
                            
                            
                            30,294,962Balance
      at December 31, 2007
                            
                            
                            36,006,137
                            
                            
                            
                            360,061
                            
                            
                            
                            5,500
                            
                            
                            
                            55
                            
                            
                            
                            270,752,308
                            
                            
                            
                            -
                            
                            
                            
                            (5,752,000
                            )
                            
                            
                            (9,033,471
                            )
                            
                            
                            (110,373,146
                            )
                            
                            
                            151,705,807Unrealized
      loss on marketable securities
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (290,000
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (290,000
                            )Exercise
      and issuance of equity grants
                            
                            
                            256,409
                            
                            
                            
                            2,564
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            586,310
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            588,874Costs
      associated with issuance of preferred stock
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (125,000
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (125,000
                            )Stock
      repurchase
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (131,652
                            )
                            
                            
                            (866,813
                            )
                            
                            
                            -
                            
                            
                            
                            (866,813
                            )Stock-based
      consideration for services
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,537,085
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,537,085Common
      stock cash dividends
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3,093,433
                            )
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3,093,433
                            )Preferred
      stock cash dividends
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (385,696
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (385,696
                            )Net
      income
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            543,788
                            
                            
                            
                            543,788Balance
      at December 31, 2008
                            
                            
                            36,262,546
                            
                            
                            
                            362,625
                            
                            
                            
                            5,500
                            
                            
                            
                            55
                            
                            
                            
                            271,271,574
                            
                            
                            
                            (290,000
                            )
                            
                            
                            (5,883,652
                            )
                            
                            
                            (9,900,284
                            )
                            
                            
                            (109,829,358
                            )
                            
                            
                            151,614,612Unrealized
      gain on marketable securities
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            634,372
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            634,372Exercise
      and issuance of equity grants
                            
                            
                            335,915
                            
                            
                            
                            3,360
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3,360
                            )
                            
                            
                            -
                            
                            
                            
                            (93,867
                            )
                            
                            
                            (230,287
                            )
                            
                            
                            -
                            
                            
                            
                            (230,287
                            )Issuance
      of common stock for acquisition
                            
                            
                            647,901
                            
                            
                            
                            6,479
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,418,903
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,425,382Stock
      repurchase
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (104,215
                            )
                            
                            
                            (281,381
                            )
                            
                            
                            -
                            
                            
                            
                            (281,381
                            )Stock-based
      consideration for services
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,615,484
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,615,484Common
      stock cash dividends
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3,200,949
                            )
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3,200,949
                            )Preferred
      stock cash dividends
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (385,696
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (385,696
                            )Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (47,429,634
                            )
                            
                            
                            (47,429,634
                            )Balance
      at December 31, 2009
                            
                            
                            37,246,362
                            
                            
                            $
                            372,464
                            
                            
                            
                            5,500
                            
                            
                            $
                            55
                            
                            
                            $
                            271,715,956
                            
                            
                            $
                            344,372
                            
                            
                            
                            (6,081,734
                            )
                            
                            $
                            (10,411,952
                            )
                            
                            $
                            (157,258,992
                            )
                            
                            $
                            104,761,903




The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements


F-7


THESTREET.COM,
INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


For
      the Years Ended December 31,2009
                                                          
                                                          
                                                          2008
                                                          
                                                          
                                                          2007Cash
      Flows from Operating Activities:Net
      (loss) income
                                                          
                                                          $
                                                          (47,429,634
                                                          )
                                                          
                                                          $
                                                          543,788
                                                          
                                                          
                                                          $
                                                          30,294,962Loss
      from discontinued operations
                                                          
                                                          
                                                          15,321
                                                          
                                                          
                                                          
                                                          8,012
                                                          
                                                          
                                                          
                                                          12,829(Loss)
      income from continuing operations
                                                          
                                                          
                                                          (47,414,313
                                                          )
                                                          
                                                          
                                                          551,800
                                                          
                                                          
                                                          
                                                          30,307,791Adjustments
      to reconcile income from continuing operations to net cash provided by
      operating activities:Stock-based
      compensation expense
                                                          
                                                          
                                                          2,739,566
                                                          
                                                          
                                                          
                                                          3,537,085
                                                          
                                                          
                                                          
                                                          2,115,599Provision
      for doubtful accounts
                                                          
                                                          
                                                          408,425
                                                          
                                                          
                                                          
                                                          692,406
                                                          
                                                          
                                                          
                                                          175,000Depreciation
      and amortization
                                                          
                                                          
                                                          4,985,297
                                                          
                                                          
                                                          
                                                          5,894,186
                                                          
                                                          
                                                          
                                                          2,528,042Deferred
      taxes
                                                          
                                                          
                                                          16,116,790
                                                          
                                                          
                                                          
                                                          (116,790
                                                          )
                                                          
                                                          
                                                          (16,000,000
                                                          )Impairment
      charges
                                                          
                                                          
                                                          24,137,069
                                                          
                                                          
                                                          
                                                          2,325,481
                                                          
                                                          
                                                          
                                                          —Restructuring
      and other charges
                                                          
                                                          
                                                          451,695
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Deferred
      rent
                                                          
                                                          
                                                          1,233,700
                                                          
                                                          
                                                          
                                                          195,665
                                                          
                                                          
                                                          
                                                          119,317Loss
      on disposition of assets
                                                          
                                                          
                                                          529,708
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Loss
      on disposal of equipment
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          17,117
                                                          
                                                          
                                                          
                                                          —Changes
      in operating assets and liabilities:Accounts
      receivable
                                                          
                                                          
                                                          2,386,497
                                                          
                                                          
                                                          
                                                          (644,981
                                                          )
                                                          
                                                          
                                                          (3,205,493
                                                          )Other
      receivables
                                                          
                                                          
                                                          (275,665
                                                          )
                                                          
                                                          
                                                          579,548
                                                          
                                                          
                                                          
                                                          (350,638
                                                          )Prepaid
      expenses and other current assets
                                                          
                                                          
                                                          (5,316
                                                          )
                                                          
                                                          
                                                          (193,389
                                                          )
                                                          
                                                          
                                                          (143,765
                                                          )Other
      assets
                                                          
                                                          
                                                          18,616
                                                          
                                                          
                                                          
                                                          143,896
                                                          
                                                          
                                                          
                                                          (52,965
                                                          )Accounts
      payable
                                                          
                                                          
                                                          1,865,890
                                                          
                                                          
                                                          
                                                          (1,908,790
                                                          )
                                                          
                                                          
                                                          134,663Accrued
      expenses
                                                          
                                                          
                                                          4,722,270
                                                          
                                                          
                                                          
                                                          (2,125,309
                                                          )
                                                          
                                                          
                                                          (1,601,575
                                                          )Deferred
      revenue
                                                          
                                                          
                                                          2,143,804
                                                          
                                                          
                                                          
                                                          (581,009
                                                          )
                                                          
                                                          
                                                          (570,073
                                                          )Other
      current liabilities
                                                          
                                                          
                                                          194,847
                                                          
                                                          
                                                          
                                                          (8,816
                                                          )
                                                          
                                                          
                                                          31,373Other
      liabilities
                                                          
                                                          
                                                          (11,206
                                                          )
                                                          
                                                          
                                                          (66,196
                                                          )
                                                          
                                                          
                                                          (46,280
                                                          )Net
      cash provided by continuing operations
                                                          
                                                          
                                                          14,227,674
                                                          
                                                          
                                                          
                                                          8,291,904
                                                          
                                                          
                                                          
                                                          13,440,996Net
      cash used in discontinued operations
                                                          
                                                          
                                                          (18,081
                                                          )
                                                          
                                                          
                                                          (14,329
                                                          )
                                                          
                                                          
                                                          (3,012
                                                          )Net
      cash provided by operating activities
                                                          
                                                          
                                                          14,209,593
                                                          
                                                          
                                                          
                                                          8,277,575
                                                          
                                                          
                                                          
                                                          13,437,984Cash
      Flows from Investing Activities:Long-term
      investment
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (2,042,970
                                                          )
                                                          
                                                          
                                                          —Purchase
      of marketable securities
                                                          
                                                          
                                                          (29,204,799
                                                          )
                                                          
                                                          
                                                          (39,945
                                                          )
                                                          
                                                          
                                                          (1,908,233
                                                          )Sale
      of marketable securities
                                                          
                                                          
                                                          11,169,263
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Purchase
      of Bankers Financial Products Corporation.
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (94,184
                                                          )
                                                          
                                                          
                                                          (16,811,966
                                                          )Purchase
      of Corsis Technology Group II LLC
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (28,270
                                                          )
                                                          
                                                          
                                                          (11,890,071
                                                          )Purchase
      of Stockpickr LLC
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (6,209
                                                          )
                                                          
                                                          
                                                          (1,572,106
                                                          )Purchase
      of Weiss Ratings, Inc.
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          124,663Purchase
      of Kikucall, Inc.
                                                          
                                                          
                                                          (3,816,521
                                                          )
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Sale
      of Promotions.com
                                                          
                                                          
                                                          1,000,000
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Capital
      expenditures
                                                          
                                                          
                                                          (1,956,355
                                                          )
                                                          
                                                          
                                                          (5,234,806
                                                          )
                                                          
                                                          
                                                          (4,979,247
                                                          )Proceeds
      from the sale of fixed assets
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          28,153
                                                          
                                                          
                                                          
                                                          —Net
      cash used in investing activities
                                                          
                                                          
                                                          (22,808,412
                                                          )
                                                          
                                                          
                                                          (7,418,231
                                                          )
                                                          
                                                          
                                                          (37,036,960
                                                          )Cash
      Flows from Financing Activities:Proceeds
      from the exercise of stock options
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          588,874
                                                          
                                                          
                                                          
                                                          3,017,423Net
      proceeds from the sale of preferred stock
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          54,839,083Costs
      associated with the sale of preferred stock
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (125,000
                                                          )
                                                          
                                                          
                                                          —Cash
      dividends paid on common stock
                                                          
                                                          
                                                          (3,200,949
                                                          )
                                                          
                                                          
                                                          (3,093,433
                                                          )
                                                          
                                                          
                                                          (2,931,671
                                                          )Cash
      dividends paid on preferred stock
                                                          
                                                          
                                                          (385,696
                                                          )
                                                          
                                                          
                                                          (482,120
                                                          )
                                                          
                                                          
                                                          (96,424
                                                          )Repayment
      of note payable
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (22,146
                                                          )Restricted
      cash
                                                          
                                                          
                                                          516,951
                                                          
                                                          
                                                          
                                                          (1,702,079
                                                          )
                                                          
                                                          
                                                          —Purchase
      of treasury stock
                                                          
                                                          
                                                          (230,287
                                                          )
                                                          
                                                          
                                                          (866,813
                                                          )
                                                          
                                                          
                                                          —Net
      cash (used in) provided by financing activities
                                                          
                                                          
                                                          (3,299,981
                                                          )
                                                          
                                                          
                                                          (5,680,571
                                                          )
                                                          
                                                          
                                                          54,806,265Net
      (decrease) increase in cash and cash equivalents
                                                          
                                                          
                                                          (11,898,800
                                                          )
                                                          
                                                          
                                                          (4,821,227
                                                          )
                                                          
                                                          
                                                          31,207,289Cash
      and cash equivalents, beginning of period
                                                          
                                                          
                                                          72,441,294
                                                          
                                                          
                                                          
                                                          77,262,521
                                                          
                                                          
                                                          
                                                          46,055,232Cash
      and cash equivalents, end of period
                                                          
                                                          $
                                                          60,542,494
                                                          
                                                          
                                                          $
                                                          72,441,294
                                                          
                                                          
                                                          $
                                                          77,262,521Supplemental
      disclosures of cash flow information:Cash
      payments made for interest
                                                          
                                                          $
                                                          9,803
                                                          
                                                          
                                                          $
                                                          36,813
                                                          
                                                          
                                                          $
                                                          41,146Cash
      payments made for income taxes
                                                          
                                                          $
                                                          85,000
                                                          
                                                          
                                                          $
                                                          348,240
                                                          
                                                          
                                                          $
                                                          242,771Noncash
      investing and financing activities:Stock
      issued for business combinations
                                                          
                                                          $
                                                          1,425,382
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          20,275,447Notes
      received for sale of Promotions.com
                                                          
                                                          $
                                                          2,127,184
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          —Treasury
      shares received in settlement of Promotions.com working capital and
      debt adjustment
                                                          
                                                          $
                                                          281,381
                                                          
                                                          
                                                          $
                                                          541,084
                                                          
                                                          
                                                          $
                                                          —





The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements


F-8




THESTREET.COM,
INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009




(1)
Organization, Nature of Business and Summary of Operations and Significant
Accounting Policies





Organization
and Nature of Business





TheStreet.com,
Inc. together with its wholly owned subsidiaries (“we”, “us” or the “Company”),
is a leading digital financial media company.  We provide our readers and
advertisers with a variety of subscription-based and advertising-supported
content and tools through a range of online platforms, including web sites,
mobile devices, email services, widgets, blogs, podcasts and online video
channels.  Our goal is to be the primary independent source of
reliable and actionable investing ideas, news and analysis, financial data and
analytical tools for a growing audience of self-directed investors, as well as
to assist advertisers desiring to connect with our audience.





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 to Consolidated Financial Statements (Discontinued
Operations). Since that time the Company has only had one reportable operating
segment.





Substantially
all of the Company’s revenue in 2009, 2008 and 2007 was generated from customers
in the United States.  During 2009, 2008 and 2007, all of the
Company’s long-lived assets were located in the United States.





Use
of Estimates





The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles (“GAAP”) requires management to make estimates and
assumptions. Significant estimates include the allowance for doubtful accounts
receivable, valuation allowance of deferred taxes, the useful lives of
long-lived assets, the valuation of goodwill and intangible assets, the carrying
value of marketable securities and the Company’s long term investment, as well
as accrued expense estimates, including income tax liabilities and certain
estimates and assumptions used in the calculation of the fair value of equity
compensation issued to employees, 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 have been prepared in accordance with GAAP and
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 premium and marketing
services.


F-9





Premium
services include subscription fees paid by customers for access to particular
services for the term of the subscription as well as syndication and licensing
revenue.  Subscriptions are generally charged to customers’ credit
cards or are directly billed to corporate subscribers.  These are
generally billed in advance on a monthly or annual basis.  The Company
calculates net subscription revenue by deducting from gross revenue an estimate
of potential refunds from cancelled subscriptions as well as chargebacks of
disputed credit card charges.  Net subscription revenue is recognized
ratably over the subscription periods.  Deferred revenue relates to
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.  With respect to most of our annual
subscription products, we offer the ability to receive a refund during the first
30 days but none thereafter.  Accordingly, we maintain a provision for
estimated future revenue reductions resulting from expected refunds and
chargebacks related to subscriptions for which revenue was recognized in a prior
period.  The calculation of this provision is based upon historical
trends and is reevaluated each quarter.   The provision was not
material for the three years ended December 31, 2009.





Marketing
services include advertising revenue, which is derived from the sale of Internet
sponsorship arrangements and from the delivery of banner, tile, contextual,
performance-based and interactive advertisement and sponsorship placements in
our advertising-supported web sites, and is recognized as the advertising is
displayed, provided that 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.





Marketing
services also include revenue associated with  the Company’s former
subsidiary, Promotions.com, which the Company sold in December 2009 – see Note 3
(Acquisitions and Divestitures) for further
discussion.  Promotions.com generated revenue from Web site design,
promotion management and hosting services.  The Company typically
entered into arrangements on a fixed fee basis for these
services.  Revenue generated from web site design services were
recognized upon acceptance from the customer or on a straight-line basis over
the hosting period if the Company performed web site design services and hosted
the software.  Revenue from promotions management services was
recognized straight-line over the promotion period as the promotion was designed
to only operate on Promotions.com proprietary platform.  Hosting
services were recognized straight-line over the hosting period.





Revenue
for contracts with multiple elements is allocated based on the element’s fair
value.  Fair value is determined based on the prices charged when each
element is sold separately.  Elements qualify for separation when the
services have value on a stand-alone basis and fair value of the undelivered
elements exits.   Determining fair value and identifying separate
elements requires judgment, generally fair value is not readily identifiable as
the Company does not sell those elements individually at consistent
pricing.





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 $1.7 million of cash invested in
certificates of deposit that serve as collateral for outstanding letters of
credit, and which cash is therefore restricted.  The letters of credit
serve as security deposits for the Company’s office space in New York
City.  The office leases do not expire within the next 12 months, and
the restricted cash is therefore classified as a noncurrent
asset.


F-10





Property
and Equipment





Property
and equipment are stated at cost, net of accumulated depreciation and
amortization.  Property and equipment are depreciated on a
straight-line basis over the estimated useful lives of the
assets.  The estimated useful life of computer equipment, computer
software and telephone equipment is three years; of furniture and fixtures is
five years; and of capitalized software and web site development costs is
variable based upon the applicable project.  During the year ended
December 31, 2009, completed capitalized software and web site development
projects were deemed to have a five year useful
life.   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 Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other(“ASC 350”).  In addition, for
employees who are directly associated with and who devote time to internal-use
computer software projects, to the extent of the time spent directly on the
project, 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, 2009, 2008 and 2007, the
Company capitalized software development costs totaling $0.5 million, $0.6
million and $0.3 million, respectively. All costs incurred for upgrades,
maintenance and enhancements that do not result in additional functionality are
expensed.





The
Company also accounts for its web site development costs under ASC 350, which 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 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.  Amortization of capitalized costs will not commence until
the project is completed and placed into service.  For the years ended
December 31, 2009, 2008 and 2007, the Company capitalized web site development
costs totaling $0.3 million, $2.1 million and $2.8 million,
respectively.





Capitalized
software and web site development costs are amortized using the straight-line
method over the estimated useful life of the software or web
site.  Total amortization expense was $1.2 million, $0.9 million and
$0.0 million, for the years ended December 31, 2009, 2008 and 2007,
respectively.


F-11


Goodwill
and Other Intangible Assets





Goodwill
represents the excess of purchase price and related acquisition costs over the
value assigned to the net tangible and identifiable intangible assets of
businesses acquired.  Under the provisions of ASC 350, goodwill is
required to be tested for impairment on an annual basis and between annual tests
whenever indications of impairment exist.  Impairment exists when the
carrying amount of goodwill exceeds its implied fair value, resulting in an
impairment charge for this excess.  Goodwill is tested for impairment
annually, or more often when certain events or circumstances indicate impairment
may exist.





The
Company evaluates goodwill for impairment using a two-step impairment test
approach at the Company level.  In the first step, the fair value of
the Company is compared to its book value, including goodwill.  If the
fair value of the Company is less than the book value, a second step is
performed that compares the implied fair value of the Company's goodwill to the
book value of the goodwill.  The fair value for the goodwill is
determined based on the difference between the fair values of the Company and
the net fair values of identifiable assets and liabilities.  If the
fair value of the goodwill is less than the book value, the difference is
recognized as impairment.  We test for goodwill impairment at the
enterprise level as the Company is considered to operate as a single reporting
unit.





The
Company evaluates the remaining useful lives of intangible assets each year to
determine whether events or circumstances continue to support the useful
life.  There have been no changes in useful lives of intangible assets
for each period presented.





In the
first quarter of 2009, the Company performed an interim impairment test of its
goodwill, intangible assets and a long-term investment due to certain impairment
indicators, including a continued decline in both advertising and subscription
revenue resulting from the challenging economic environment and a reduction in
the Company’s enterprise value.  As a result of this test, the Company
recorded an impairment charge of $22.6 million, as follows:





·
            The
      total Company fair value was estimated using a combination of a discounted
      cash flow model (present value of future cash flows) and the Company’s
      business enterprise value based upon the fair value of its outstanding
      common and preferred shares.  The fair value of the Company’s
      goodwill is the residual fair value after allocating the Company’s total
      fair value to its other assets, net of liabilities.  This
      analysis resulted in an impairment of the Company’s goodwill approximating
      $19.8 million.  The review also revealed an additional
      impairment to the Company’s intangible assets related to certain customer
      relationships and noncompete agreements approximating $2.8
      million.  See Note 3 (Acquisitions and Divestitures) for further
      information related to the individual impairments
  recorded.





Based
upon an annual impairment test performed as of September 30, 2009, no additional
impairment was indicated.  In addition, as a result of the disposition
of the Company’s Promotions.com subsidiary and acquisition of Kikucall, Inc.
(see Note 3 (Acquisitions and Divestitures)) in December 2009, the Company
concluded that these events warranted an additional impairment test which
resulted in no additional impairment.





Based
upon an annual impairment test as of September 30, 2008, the Company recorded an
impairment charge totaling $0.5 million representing the value remaining from
the trade name of Smartportfolio, which it had acquired in December 2000, as the
last product carrying the Smartportfolio name was
discontinued.  Additionally, the Company experienced a decline in
anticipated revenue during the year ended December 31, 2008 associated with
its Promotions.com client relationships and noncompete
agreements.  Using an income approach based upon estimated future cash
flows, the Company determined that the carrying value of the client
relationships and noncompete agreements exceeded its fair value at December 31,
2008 and therefore recorded an impairment charge of $1.8
million.  Based upon annual impairment test performed as of October
31, 2007, no impairment was indicated.


F-12





Long-Lived
Assets





The
Company evaluates long-lived assets, including amortizable identifiable
intangible assets, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Upon such
an occurrence, recoverability of assets to be held and used is measured by
comparing the carrying amount of an asset to forecasted undiscounted net cash
flows expected to be generated by the asset.  If the carrying amount
of the asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset.  For long-lived assets held for sale, assets
are written down to fair value, less cost to sell.  Fair value is
determined based on discounted cash flows, appraised values or management's
estimates, depending upon the nature of the assets.  Management does
not believe that there is any impairment of long-lived assets at December 31,
2009.





Income
Taxes





The
Company accounts for its income taxes in accordance with ASC 740-10, Income Taxes(“ASC
740-10”).  Under ASC 740-10, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their tax bases.  ASC 740-10 also requires that deferred tax assets be
reduced by a valuation allowance if it is more likely than not that some or all
of the deferred tax assets will not be realized based on all available positive
and negative evidence.




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.





To
account for uncertainties in income tax positions, the Company prescribes a
recognition threshold and a measurement attribute for the financial statement
recognition and measurement of tax positions taken or expected to be taken in a
tax return.  For those benefits to be recognized, a tax position must be
more likely than not to be sustained upon examination by taxing
authorities.  Differences between tax positions taken or expected to be
taken in a tax return and the benefit recognized and measured pursuant to the
interpretation are referred to as “unrecognized benefits.”  A liability is
recognized for an unrecognized tax benefit because it represents an enterprise’s
potential future obligation to the taxing authority for a tax position that was
not recognized.  As of December 31, 2009 and 2008, no liability for
unrecognized tax benefits was required to be recorded.





The
Company calculates interest costs related to unrecognized tax benefits and
classifies such costs within “Net interest income” in the consolidated
statements of operations. Penalties would be recognized as a component of
“General and administrative” expenses.  There is no interest expense or
penalty related to tax uncertainties reported in the consolidated statements of
operations.





The
Company files income tax returns in the United States (federal) and in various
state and local jurisdictions.  In most instances, the Company is no longer
subject to federal, state and local income tax examinations by tax authorities
for years prior to 2006, and is not currently under examination by any federal,
state or local jurisdiction.  It is not anticipated that unrecognized tax
benefits will significantly change in the next twelve months.


F-13





Fair
Value of Financial Instruments





The
carrying amounts of cash and cash equivalents, restricted cash, accounts and
other receivables, accounts payable, accrued expenses and deferred revenue
approximate fair value due to the short-term maturities of these
instruments.





Business
Concentrations and Credit Risk





Financial
instruments that subject the Company to concentrations of credit risk consist
primarily of cash, cash equivalents and restricted cash. The Company maintains
all of its cash, cash equivalents and restricted cash in four domestic financial
institutions, although substantially all of the balance is within one
institution.  The Company performs periodic evaluations of the
relative credit standing of the four institutions.  As of December 31,
2009, the Company’s cash and cash equivalents primarily consisted of money
market funds and checking accounts.





For the
years ending December 31, 2009, 2008 and 2007, no individual client accounted
for 10% or more of consolidated revenue. As of December 31, 2009, two clients
accounted for more than 10% each of our gross accounts receivable balance. As of
December 31, 2008 and 2007, no client accounted for 10% or more of our
gross accounts receivable balance.





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.





Other
Comprehensive Income (Loss)





Comprehensive
income (loss) is a measure of income which includes both net income (loss) and
other comprehensive income or loss.  Other comprehensive income or
loss results from items deferred from recognition into the statement of
operations.  Accumulated other comprehensive loss is separately
presented on the Company's consolidated balance sheet as part of stockholders’
equity.





Net
Income (Loss) Per Share of Common Stock





Basic net
(loss) income per share is computed using the weighted average number of common
shares outstanding during the period.  Diluted net (loss) income per
share is computed using the weighted average number of common shares and, if
dilutive, potential common shares outstanding during the
period.  Potential common shares consist of restricted stock units
(using the treasury stock method), the incremental common shares issuable upon
the exercise of stock options (using the treasury stock method), and the
conversion of the Company’s convertible preferred stock and warrants (using the
if-converted method).  For the years ended December 31, 2009 and 2008,
approximately 3.4 million and 2.6 million options and warrants to purchase
Common Stock, respectively, were excluded from the calculation, as their effect
would be anti-dilutive because the exercise prices were greater than the average
market price of the Common Stock during the respective periods and with respect
to the year ended December 31, 2009, because the Company recorded a net
loss.





Advertising
Costs





Advertising
costs are expensed as incurred.  For the years ended December 31,
2009, 2008 and 2007, advertising costs were $1.7 million, $3.3 million and $2.0
million, respectively.


F-14





Stock-Based
Compensation





Stock-based
compensation expense recognized for the years ended December 31, 2009, 2008 and
2007 were $2.7 million, $3.5 million and $2.1 million,
respectively.  As of December 31, 2009, there was approximately $5.1
million of unrecognized stock-based compensation expense remaining to be
recognized over a weighted-average period of 3.31 years.





The
Company estimates 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
under the 1998 Plan 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 each restricted stock unit under the 2007 Plan is
equal to the closing price per share of the Company’s Common Stock on the date
of grant. The value of the portion of the award that is ultimately expected to
vest is recognized as expense over the requisite service periods.





Stock-based
compensation expense recognized in the Company’s consolidated statements of
operations for the years ended December 31, 2009, 2008 and 2007 includes
compensation expense for all share-based payment awards based upon the estimated
grant date fair value.  The Company recognizes compensation expense
for share-based payment awards on a straight-line basis over the requisite
service period of the award.  As stock-based compensation expense
recognized in the years ended December 31, 2009, 2008 and 2007 is based upon
awards ultimately expected to vest, it has been reduced for estimated
forfeitures.  The Company estimates forfeitures at the time of grant
which are revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates.





The
Company estimates the value of 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.  No
employee stock options were granted during the year ended December 31,
2009.  The weighted-average fair value of employee stock options
granted during the years ended December 31, 2008 and 2007 was $3.27 and $4.15,
respectively, using the Black-Scholes model with the weighted-average
assumptions presented below.  Because option-pricing models require
the use of subjective assumptions, changes in these assumptions can materially
affect the fair value of the options.  The assumptions presented 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 period equal to the expected option
lives.  The expected option lives, which represent the period of time
that options granted are expected to be outstanding, were estimated based upon
the “simplified” method for “plain-vanilla” options.  The risk-free
interest rate assumption was based upon observed interest rates appropriate for
the term of the Company’s employee stock options.  The dividend yield
assumption was based on the history and expectation of future dividend payouts.
The periodic expense is determined based on the valuation of the options, and at
that time an estimated forfeiture rate is used to reduce the expense recorded.
The Company’s estimate of pre-vesting forfeitures is primarily based on the
Company’s historical experience and is adjusted to reflect actual forfeitures as
the options vest.





For the Years Ended December 31,2008
                  
                  
                  2007Expected
      option lives
                  
                  3.5
      years
                  
                  
                  3.5
      yearsExpected
      volatility
                  
                  
                  48.20
                  %
                  
                  
                  46.56
                  %Risk-free
      interest rate
                  
                  
                  2.32
                  %
                  
                  
                  4.62
                  %Expected
      dividends
                  
                  
                  0.96
                  %
                  
                  
                  0.94
                  %


F-15


The
Company utilizes the alternative transition method for calculating the tax
effects of stock-based compensation.  Under the alternative transition
method the Company established the beginning balance of the additional paid-in
capital pool (“APIC pool”) related to the tax effects of employee stock-based
compensation and then determines the subsequent impact on the APIC pool and cash
flows of the tax effects of employee stock-based compensation awards that are
outstanding.





Performance
Incentive Plan





In 2007,
the Company adopted its 2007 Performance Incentive Plan, whereby executive
officers, directors, employees and consultants may be eligible to receive cash
or equity-based performance awards based on set performance
criteria.





In 2009,
2008 and 2007, the Compensation Committee granted short-term cash performance
awards, payable to certain officers upon the Company’s achievement of specified
performance goals for such year.  In 2008 and 2007, but not 2009, the
Compensation Committee also granted long-term cash performance awards payable to
certain executive officers upon the Company’s achievement of specified
performance goals for such year.  The target short-term and long-term
cash bonus opportunities for officers reflected a percentage of the officer’s
base salary.





The
short-term cash incentives were based upon achievement of a revenue target and,
depending upon the year, a net income target or an Adjusted EBITDA
target.  Potential payout with respect to each measure was zero if a
threshold percentage of the target was not achieved and a sliding scale
thereafter, subject to a cap, starting at a figure less than 100% if the
threshold was achieved but the target was not met and ending at a figure above
100% if the target was exceeded.  Short-term incentives of $2.0
million were deemed earned with respect to the year ended December 31, 2009; no
short-term incentive payments were declared for the years ended December 31,
2008 or 2007.





The
long-term cash incentive in 2007 and 2008 was based on a comparison of the
Company’s Enterprise Multiple as compared to a peer group, on a sliding scale
calculated within a range whose target was benchmarked at the Company’s
performance against the peer group.  Potential payout was zero if a
threshold percentage of the target was not achieved and a sliding scale
thereafter, subject to a cap, starting at a figure less than 100% if the
threshold was achieved but the target was not met and ending at a figure above
100% if the target was exceeded. The amount of long-term cash incentive
earned was determined following the end of the applicable year and converted
into phantom shares of the Company whereby the value of the grant in shares was
recorded as a liability until paid.  The value of the liability was
adjusted each reporting period to equal the market value of the underlying
shares until vested.  The account was credited with dividend
equivalents, which were converted into additional phantom shares.  On
December 31 of the first three years following the year of grant, provided the
officer was still employed by the Company, one-third of the phantom shares
vested, and the value was distributed to the officer in cash.





As of
December 31, 2009 and 2008, $0.0 million and $0.2 million, respectively, in
awards were earned pursuant to the long-term cash incentive awards, based upon
the closing market value of the Company’s stock on that
date.


F-16


Common
Stock Purchase Warrants





The
Company accounts for the issuance of Common Stock purchase warrants issued in
connection with capital financing transactions in accordance with the provisions
of ASC 815, Derivatives and
Hedging (“ASC 815”).  The Company classifies as equity any
contracts that (i) require physical settlement or net-share settlement or (ii)
gives the Company a choice of net-cash settlement or settlement in its own
shares (physical settlement or net-share settlement).  The Company
classifies as assets or liabilities any contracts that (i) require net-cash
settlement (including a requirement to net-cash settle the contract if an event
occurs and if that event is outside the control of the Company) or (ii) gives
the counterparty a choice of net-cash settlement or settlement in shares
(physical settlement or net-share settlement).





The
Company assessed the classification of its derivative financial instruments as
of December 31, 2007, which consist of Common Stock purchase warrants, and
determined that such derivatives met the criteria for equity
classification.  No additional Common Stock purchase warrants have
been issued since that date nor has there been any change to the
classification.





Convertible
Instruments





The
Company evaluates and accounts for conversion options embedded in its
convertible instruments in accordance with ASC 815.





ASC 815
generally provides three criteria that, if met, require companies to bifurcate
conversion options from their host instruments and account for them as
free-standing derivative financial instruments.  These three criteria
include circumstances in which (a) the economic characteristics and risks of the
embedded derivative instrument are not clearly and closely related to the
economic characteristics and risks of the host contract, (b) the hybrid
instrument that embodies both the embedded derivative instrument and the host
contract is not remeasured at fair value under otherwise applicable generally
accepted accounting principles with changes in fair value reported in earnings
as they occur and (c) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative
instrument.  ASC 815 also provides an exception to this rule when the
host instrument is deemed to be conventional.





The
Company accounts for convertible instruments (when it has determined that the
embedded conversion options should not be bifurcated from their host
instruments) in accordance with ASC 815.  Accordingly, the Company
records, when necessary, discounts to convertible notes for the intrinsic value
of conversion options embedded in debt instruments based upon the differences
between the fair value of the underlying Common Stock at the commitment date of
the note transaction and the effective conversion price embedded in the
note.  Debt discounts under these arrangements are amortized over the
term of the related debt to their earliest date of redemption.  The
Company also records when necessary deemed dividends for the intrinsic value of
conversion options embedded in preferred shares based upon the differences
between the fair value of the underlying Common Stock at the commitment date of
the note transaction and the effective conversion price embedded in the
note.





The
Company evaluated the conversion option embedded in the Series B Convertible
Preferred Stock that it issued during the year ended December 31, 2007 and
determined that such conversion option does not meet the criteria requiring
bifurcation of these instruments.  The characteristics of the Common
Stock that is issuable upon a holder’s exercise of the conversion option
embedded in the Series B Convertible Preferred Stock are deemed to be clearly
related to the characteristics of the preferred shares.  Additionally,
the Company’s conversion options, if free standing, would not be considered
derivatives.


F-17


Preferred
Stock





The
Company applies the guidance in ASC 480, Distinguishing Liabilities from
Equity, (“ASC 480”) when determining the classification and measurement
of its convertible preferred shares.  Preferred shares subject to
mandatory redemption (if any) are classified as liability instruments and are
measured at fair value.  Accordingly the Company classifies
conditionally redeemable preferred shares (if any), which includes preferred
shares that feature redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company’s control, as temporary equity.  At all
other times, the Company classifies its preferred shares as a component of
stockholders’ equity.





The
Company’s Series B Convertible Preferred Stock do not feature any redemption
rights within the holders’ control or conditional redemption features not solely
within the Company’s control as of December 31, 2009.  Accordingly,
the Series B Convertible Preferred Stock is presented as a component of
stockholders’ equity.





Subsequent
Events





The
Company has evaluated subsequent events for recognition or
disclosure.





New
Accounting Pronouncements





Effective
January 1, 2009, the Company adopted ASC 805-10 (formerly Statement of Financial
Accounting Standards (“SFAS”) No. 141 (Revised 2007)), Business Combinations (“ASC
805-10”).  ASC 805-10 requires the acquiring entity in a business
combination to recognize the full fair value of assets acquired and liabilities
assumed in the transaction, establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed, requires
expensing of most transaction costs, and requires the acquirer to disclose to
investors and other users all of the information needed to evaluate and
understand the nature and financial effect of the business
combination.  The effect of this pronouncement did not have a material
impact on the Company’s consolidated financial statements.  However,
the effect of this pronouncement may be material in the future dependent upon
each specific acquisition that might occur in future periods.





Effective
January 1, 2009, the Company adopted ASC 815-40 (formerly EITF 07-5), Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock,(“ASC
815-40”).  ASC 815-40 provides framework for determining whether an
instrument is indexed to an entity’s own stock.  The adoption of ASC
815-40 did not have a material impact on the Company’s consolidated financial
statements.





Effective
January 1, 2009 the Company adopted ASC 810-10 (formerly SFAS No. 160), Noncontrolling Interests in
Consolidated Financial Statements — An Amendment of ARB No. 51
(“ASC 810-10”).  Upon adoption of ASC 810-10, the Company is required
to report any noncontrolling interests as a separate component of stockholders’
equity.  The Company is required to present any net income allocable
to noncontrolling interests and net income attributable to the stockholders of
the Company separately in its consolidated statement of
operations.  The effect of this pronouncement did not have a material
impact on the Company’s consolidated financial statements.  However,
the effect of this pronouncement may be material in the future dependent upon
each specific acquisition that might occur in future periods.





In April
2009, the Company adopted ASC 825-10 (“ASC 825-10”).  ASC 825-10
requires disclosures about the fair value of financial instruments for interim
periods of publicly traded companies as well as in annual financial
statements.  ASC 825-10 also amends ASC 270-10 (formerly APB Opinion
No. 28), Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods.  The Company elected early
adoption of ASC 825-10 for the quarter ended March 31, 2009.  The
implementation of ASC 825-10 did not have a material effect on the Company’s
consolidated financial statements.


F-18


In April
2009, the Company adopted ASC 820-10 (“ASC 820-10”).  ASC 820-10
provides additional guidance for estimating fair value when the volume and level
of activity for the asset or liability have significantly
decreased.  ASC 820-10 also includes guidance on identifying
circumstances that indicate a transaction is not orderly.  ASC 820-10
is effective for interim and annual reporting periods ending after June 15,
2009, applied prospectively.  The Company elected early adoption of
ASC 820-10 for the quarter ended March 31, 2009.  The implementation
of ASC 820-10 did not have a material effect on the Company’s consolidated
financial statements.





In May
2009, the Company adopted ASC 855-10 (formerly SFAS No. 165), Subsequent Events.  This
standard establishes the accounting and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued.  It requires the disclosure of the date through
which an entity has evaluated subsequent events and the basis for that date.
 The implementation of this standard did not have a material impact on the
Company’s consolidated financial statements.  See Note 1
(Organization, Nature of Business and Summary of Operations and Significant
Accounting Policies) for this new disclosure.





In
June 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-16
(formerly SFAS No. 166, Accounting for Transfers of
Financial Assets - An amendment of FASB Statement No.
140).  ASU 2009-16 removes the concept of a qualifying
special-purpose entity (QSPE) from ASC 860-10 and removes the exception
from applying ASC 810-10.  This statement also clarifies the
requirements for isolation and limitations on portions of financial assets that
are eligible for sale accounting.  This statement is effective for
fiscal years beginning after November 15, 2009.  Earlier application
is prohibited.  ASU 2009-16 is not expected to have a material impact
on the Company’s consolidated financial statements.





In
June 2009, the FASB issued ASU 2009-17 (formerly SFAS No. 167,
Amendments to FASB
Interpretation No. 46R).  ASU 2009-17 amends ASC 810-10 to
require an analysis to determine whether a variable interest gives the entity a
controlling financial interest in a variable interest entity.  This
statement requires an ongoing reassessment and eliminates the quantitative
approach previously required for determining whether an entity is the primary
beneficiary.  This statement is effective for fiscal years beginning
after November 15, 2009.  Earlier application is
prohibited.  ASU 2009-17 is not expected to have a material impact on
the Company’s consolidated financial statements.





In June
2009, the Company adopted ASC 105-10 (formerly SFAS No. 168), The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles—a
replacement of FASB Statement No. 162(“ASC 105-10”). The
Codification became the source of authoritative GAAP recognized by the FASB to
be applied by nongovernmental entities.  Rules and interpretive
releases of the Securities and Exchange Commission (“SEC”) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants.  On the effective date of ASC 105-10, the Codification
superseded all then-existing non-SEC accounting and reporting
standards.  All other nongrandfathered non-SEC accounting literature
not included in the Codification became nonauthoritative.  ASC 105-10
was effective for financial statements issued for interim and annual periods
ending after September 15, 2009.  The implementation of ASC
105-10 did not have a material effect on the Company’s consolidated financial
statements.


F-19





In April
2009, the Company adopted ASC 320-10 (formerly FSP FAS 115-2) and ASC 958-320
(formerly FAS 124-2), Recognition and Presentation of
Other-Than-Temporary Impairments (“ASC 320-10” and “ASC 958-320”), which
amends ASC 320-10 (formerly SFAS No. 115), Accounting for Certain Investments
in Debt and Equity Securities and ASC 958-320 (formerly SFAS
No. 124), Accounting for
Certain Investments Held by Not-for-Profit Organizations. This standard
establishes a different other-than-temporary impairment indicator for debt
securities than previously prescribed.  If it is more likely than not
that an impaired security will be sold before the recovery of its cost basis,
either due to the investor’s intent to sell or because it will be required to
sell the security, the entire impairment is recognized in
earnings.  Otherwise, only the portion of the impaired debt security
related to estimated credit losses is recognized in earnings, while the
remainder of the impairment is recorded in other comprehensive income and
recognized over the remaining life of the debt security.  In addition,
the standard expands the presentation and disclosure requirements for
other-than-temporary-impairments for both debt and equity securities. ASC 320-10
and ASC 958-320 were adopted for the period ended June 30,
2009.  ASC 320-10 and ASC 958-320 did not have a material impact on
the Company’s consolidated financial statements.  See Note 6 (Fair
Value Measurements) for further information.





In
October 2009, the FASB issued ASU 2009-13 (an update to ASC 605-25), Revenue Recognition:
Multiple-Element Arrangements (“ASU 2009-13”) which is effective for
annual periods ending after June 15, 2010; however, early adoption is
permitted.  In arrangements with multiple deliverables, ASU 2009-13
permits entities to use management’s best estimate of selling price to value
individual deliverables when those deliverables have never been sold separately
or when third-party evidence is not available.  In addition, any
discounts provided in multiple-element arrangements will be allocated on the
basis of the relative selling price of each deliverable.  The Company
is currently evaluating the impact of adopting the provisions of ASU
2009-13.





(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.





For the
years ended December 31, 2009, 2008 and 2007, there was no net revenue from
discontinued operations.  Loss from discontinued operations was
immaterial during the same periods.





The fair market values of the
liabilities of the discontinued operation as of December 31, 2009 and 2008 were
$0.2 million and $0.2 million, respectively, and consist of accrued
expenses.





The
following table displays the activity and balances of the provisions related to
discontinued operations:


F-20





Initial
                    
                    
                    Year
      2005
                    
                    
                    Year
      2006
                    
                    
                    Year
      2007
                    
                    
                    Year
      2008
                    
                    
                    Year
      2009
                    
                    
                    BalanceCharge
                    
                    
                    Activity
                    
                    
                    Activity
                    
                    
                    Activity
                    
                    
                    Activity
                    
                    
                    Activity
                    
                    
                    12/31/2009Net
      asset write-off
                    
                    $
                    666,546
                    
                    
                    $
                    (666,546
                    )
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Severance
      payments
                    
                    
                    1,134,323
                    
                    
                    
                    (905,566
                    )
                    
                    
                    (6,332
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    222,425Extinguishment
      of lease and other obligations
                    
                    
                    582,483
                    
                    
                    
                    (531,310
                    )
                    
                    
                    (51,173
                    )
                    
                    
                    9,817
                    
                    
                    
                    (6,317
                    )
                    
                    
                    (2,760
                    )
                    
                    
                    740$
                    2,383,352
                    
                    
                    $
                    (2,103,422
                    )
                    
                    $
                    (57,505
                    )
                    
                    $
                    9,817
                    
                    
                    $
                    (6,317
                    )
                    
                    $
                    (2,760
                    )
                    
                    $
                    223,165




(3) Acquisitions and
Divestures




Stockpickr




On
January 3, 2007, the Company formed a joint venture with A.R. Partners, a New
York-based media holding company, to operate a Web site called Stockpickr - "The
Stock Idea Network."  Stockpickr, located at www.stockpickr.com,
allows its members to compare their portfolios to others in the network, scan
portfolios for investment ideas and open a dialogue with like-minded investors
in a secure environment.  A.R. Partners owned 50.1% and TheStreet.com
49.9% of the venture.  On April 25, 2007, the Company announced the
acquisition of the remaining 50.1% stake in Stockpickr that it did not already
own.The
Company paid consideration of $1.5 million in cash and issued 329,567
unregistered shares of the Company’s Common Stock, having a value on the closing
date of approximately $3.5 million.




Based
upon the Company’s evaluation, the Company recorded $500,000 of intangible
assets relating to the software models acquired which is being amortized over
its estimated useful life of five years, and $4.6 million of
goodwill.





Corsis Technology Group II
LLC (renamed Promotions.com LLC)




On August
2, 2007, the Company acquired, through a newly-created subsidiary, 100% of the
membership interests of Corsis Technology Group II LLC, a leading provider of
custom solutions for advertisers, marketers and content
publishers.  The acquisition of Corsis also included the
Promotions.com business, which is a full-service online promotions agency that
implements interactive promotions campaigns for some of the largest brands in
the world.  The purchase price of the acquisition was approximately $20.7
million, consisting of approximately $12.5 million in cash and the issuance of
694,230 unregistered shares of the Company’s Common Stock, having a value on the
closing date of approximately $8.2 million.





Since the
acquisition, the Company experienced a decline in anticipated revenue associated
with its Promotions.com subsidiary.  Accordingly, the Company reduced
its future revenue expectations and estimated future cash flows for that
business.  Using an income approach based upon the estimated present
value of future cash flows, the Company determined that the carrying value of
the client relationships and noncompete agreements exceeded its fair value at
December 31, 2008 and recorded an impairment charge of $1.8
million.





In the
first quarter of 2009, the Company performed an interim impairment test of its
intangible assets due to certain impairment indicators, including a continued
decline in both advertising and subscription revenue resulting from the
challenging economic environment and a reduction in the Company’s enterprise
value.  As a result of this test, the Company determined that the
carrying value of the Promotions.com customer relationships exceeded its fair
value at March 31, 2009 and recorded an impairment charge of $0.5
million.


F-21


On
December 18, 2009, the Company sold all of its membership interest in its
Promotions.com LLC subsidiary, for an aggregate price of approximately $3.1
million (the “Sale Price”).  The purchaser (the “Purchaser”) is a
company owned by the managers of the Promotions.com business, who prior to the
closing were employees of the Company.  In connection with the sale,
the Company received a payment of $1.0 million in cash and notes in an aggregate
principal amount of approximately $2.1 million.  The notes are payable
in six equal monthly installments commencing April 1, 2010.  The
Company was granted a security interest in the securities and assets of the
Promotions.com business until the notes are fully paid, and one of the notes
(with a principal amount of $0.3 million) is guaranteed by the principals of the
Purchaser.  In the event that, prior to December 18, 2011, there is a
change in control of the Purchaser or all or substantially all of the assets of
the Promotions.com business are sold, among other events, for consideration (as
defined therein) in excess of the Sale Price, the Company will be entitled to
receive an additional payment from the Purchaser, equal to 50% of such excess if
the event occurs on or before December 18, 2010 and 25% of such excess if the
event occurs after December 18, 2010 and prior to December 18, 2011. Loss on
disposition of assets totaled $0.5 million.




Bankers Financial Products
Corporation





On
November 2, 2007, the Company acquired, through a newly created subsidiary, 100%
of the common stock of Bankers Financial Products Corporation
(“BFPC”), BFPC, using its trade name RateWatch, offers rate information for
certificates of deposit, money market accounts, savings accounts, checking
accounts, home mortgages, home equity loans, credit cards and auto loans to
financial institutions, including banks, credit unions, Internet banks and
mortgage companies.  The information is obtained from more than 70,000
financial institutions (at the branch level) through surveys, phone calls, data
feeds, and online Internet searches.  The acquisition also includes
BankingMyWay.com (“BMW”), a wholly-owned subsidiary of
BFPC.   BMW is an online search engine that leverages the data
set of RateWatch, allowing customers to perform searches of the rate information
by zip code, city or state.  BMW derives its revenue from advertising
contracts with its financial institution clients and other advertisers. 
The purchase price of the acquisition was approximately $25.4 million,
consisting of approximately $16.9 million in cash (net of $3.9 million in debt
repayment) and 636,081 unregistered shares of the Company’s Common Stock, having
a value on the payment date of approximately $8.0 million.  79,510
shares of Common Stock were issued to the sellers and 556,571 common shares were
placed in escrow pursuant to the terms of an escrow
agreement.  159,020 of the escrowed shares were used to secure
indemnity obligations until the earlier of two years from the closing date or
the date of the last distribution from the escrow fund.  The remaining
397,551 shares placed in escrow represent deferred stock to be released to the
sellers under terms of the escrow agreement on each of the first, second and
third anniversaries of the acquisition. The first two installments were released
in March 2010. In addition, the principal stockholder of BFPC received an
option to purchase up to 175,600 shares of Common Stock priced at $12.577,
vesting ratably over three years, and valued at $0.5 million.




Based
upon the Company’s evaluation, the Company recorded $8.5 million of intangible
assets related to the customer relationships, $2.0 million related to a
noncompete agreement, $0.7 million related to the trade name, $0.5 million
related to software and $0.1 million related to the client data
base.  The intangible assets will be amortized over their estimated
useful lives of ten years (customer relationships) and five years (noncompete
agreement, software and client data base).  The trade name was deemed
to have an indefinite life.





In the
first quarter of 2009, the Company performed an interim impairment test of its
intangible assets due to certain impairment indicators, including a continued
decline in both advertising and subscription revenue resulting from the
challenging economic environment and a reduction in the Company’s enterprise
value.  As a result of this test, the Company determined that the
carrying value of the BFPC customer relationships and noncompete agreement
exceeded its fair value at March 31, 2009 and recorded an impairment charge of
$2.1 million.


F-22


Kikucall, Inc. - Related
Party Transaction





On
December 16, 2009 (the “Closing Date”), the Company, through a wholly-owned
acquisition subsidiary, acquired all of the outstanding securities of Kikucall,
Inc., a subscription marketing services company (the “Acquisition”), for an
aggregate purchase price of approximately $5.2 million, subject to adjustment as
provided therein.  In connection with the Acquisition, the Company
paid approximately $3.8 million in cash and issued to the target company’s
stockholders 647,901 unregistered shares of the Company’s Common Stock,
having a value on the payment date of approximately $1.4 million, a portion of
which was placed in escrow pursuant to the terms of an escrow agreement entered
into in connection with the Acquisition.  Half of the amount in escrow
(less any indemnification reserve amounts then outstanding and less any amounts
paid out previously with respect to indemnification claims) will be released on
the first anniversary of the Closing Date, with the balance (less such
aforementioned amounts) to be released on the second anniversary of the Closing
Date; provided that all property in the escrow account (less such aforementioned
amounts) will be released upon the occurrence of a change of control, as defined
therein, of the Company  Additionally, the Company paid $0.1 million
to an employee of Kikucall in exchange for a noncompete agreement, which
will be amortized as compensation over the three year service period, and
assumed other net liabilities approximating $0.1 million.





Two of
the Company’s directors, Daryl Otte (who is also our Chief Executive Officer)
and Martin Peretz, were directors of the acquired company, and, both directly
and indirectly through investment vehicles, were stockholders and creditors of
the acquired company.  As a result of the Acquisition, the following
amounts were received, respectively, on the Closing Date by (i) Mr. Otte, (ii)
Dr. Peretz, (iii) investment vehicles in which Mr. Otte and Dr. Peretz had a
direct or indirect interest and (iv) other investment vehicles in which Dr.
Peretz had a direct or indirect interest, or by Dr. Peretz’s children:  (i)
approximately $190,000 cash and 34,524 shares of Stock, having an aggregate
value of approximately $265,000 on the Closing Date; (ii) approximately $155,000
cash and 20,023 shares of Stock, having an aggregate value of approximately
$200,000 on the Closing Date; (iii) approximately $520,000 cash and 120,127
shares of Stock, having an aggregate value of approximately $785,000 on the
Closing Date; and (iv) approximately $680,000 cash and 68,526 shares of Stock,
having an aggregate value of approximately $830,000 on the Closing Date. 
In connection with the Acquisition, Mr. Otte and Dr. Peretz each executed a
letter agreeing to donate to charity an amount that approximated the respective
gain such donor recognized as a result of the Acquisition related to his
shareholdings in the acquired company with such donation to be no later than 14
and 6 months, respectively, from the date of the acquisition.  The
negotiation of the Acquisition was overseen by the Company’s Audit Committee,
comprised solely of independent directors, on behalf of the Company and the
Acquisition was unanimously approved by the Audit Committee and the Company’s
board of directors.





The
Acquisition provides the Company with the expertise and software programs to
expand its subscription marketing efforts to increase its subscription
revenue.





The
results of operations of Kikucall, which are immaterial to the Company’s
consolidated full-year results, 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:Accounts
      receivable
                  
                  $
                  18,539Other
      current assets
                  
                  
                  100,003Other
      assets
                  
                  
                  93,667Goodwill
                  
                  
                  4,745,617Other
      intangibles
                  
                  
                  538,000Total
      assets acquired
                  
                  
                  5,495,826Liabilities
      assumed:Accounts
      payable and accrued expenses
                  
                  
                  253,923Total
      consideration
                  
                  $
                  5,241,903


F-23


Based on
the Company’s evaluation, the Company recorded $0.5 million of intangible assets
related to software which will be amortized over its estimated useful life of
fiveyears.  The goodwill is not deductible for tax
purposes.





Unaudited
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. The unaudited pro forma consolidated financial information for the
years ended December 31, 2009 and 2008 are as follows:





For the Year Ended December 31,2009
                  
                  
                  2008Total
      net revenue
                  
                  $
                  60,963,012
                  
                  
                  $
                  71,992,091Net
      loss
                  
                  $
                  (47,661,651
                  )
                  
                  $
                  (782,885
                  )Basic
      net loss per share
                  
                  $
                  (1.53
                  )
                  
                  $
                  (0.03
                  )Diluted
      net loss per share
                  
                  $
                  (1.53
                  )
                  
                  $
                  (0.02
                  )Weighted
      average basic shares outstanding
                  
                  
                  31,234,361
                  
                  
                  
                  31,075,322Weighted
      average diluted shares outstanding
                  
                  
                  31,234,361
                  
                  
                  
                  31,483,032




F-24


(4)
Net (Loss) Income Per Share





Basic net
(loss) income per share is computed using the weighted average number of common
shares outstanding during the period.  Diluted net (loss) income per
share is computed using the weighted average number of common shares and, if
dilutive, potential common shares outstanding during the
period.  Potential common shares consist of restricted stock units
(using the treasury stock method), the incremental common shares issuable upon
the exercise of stock options (using the treasury stock method), and the
conversion of the Company’s convertible preferred stock and warrants (using the
if-converted method).  For the years ended December 31, 2009 and 2008,
approximately 3.4 million and 2.6 million options and warrants to purchase
Common Stock, respectively, were excluded from the calculation, as their effect
would be anti-dilutive because the exercise prices were greater than the average
market price of the Common Stock during the respective periods and with respect
to the year ended December 31, 2009, because the Company recorded a net
loss.





The
following table reconciles the numerator and denominator for the
calculation.





For the Years Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Basic
      net (loss) income per shareNumerator:(Loss)
      income from continuing operations
                  
                  $
                  (47,414,313
                  )
                  
                  $
                  551,800
                  
                  
                  $
                  30,307,791Loss
      from discontinued operations
                  
                  
                  (15,321
                  )
                  
                  
                  (8,012
                  )
                  
                  
                  (12,829
                  )Preferred
      stock deemed dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,802,733
                  )Preferred
      stock cash dividends
                  
                  
                  (385,696
                  )
                  
                  
                  (385,696
                  )
                  
                  
                  (96,424
                  )Numerator
      for basic earnings per share – Net (loss) income attributable to common
      stockholders
                  
                  $
                  (47,815,330
                  )
                  
                  $
                  158,092
                  
                  
                  $
                  28,395,805Denominator:Weighted
      average basic shares outstanding
                  
                  
                  30,586,460
                  
                  
                  
                  30,427,421
                  
                  
                  
                  28,830,366Net
      (loss) income per basic share:(Loss)
      income from continuing operations
                  
                  $
                  (1.55
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  1.05Loss
      from discontinued operations
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )Preferred
      stock deemed dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (0.07
                  )Preferred
      stock cash dividends
                  
                  
                  (0.01
                  )
                  
                  
                  (0.01
                  )
                  
                  
                  (0.00
                  )Net
      (loss) income attributable to common stockholders
                  
                  $
                  (1.56
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  0.98Diluted
      net (loss) income per share:
                    Numerator:(Loss)
      income from continuing operations
                  
                  $
                  (47,414,313
                  )
                  
                  $
                  551,800
                  
                  
                  $
                  30,307,791Loss
      from discontinued operations
                  
                  
                  (15,321
                  )
                  
                  
                  (8,012
                  )
                  
                  
                  (12,829
                  )Preferred
      stock deemed dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,802,733
                  )Preferred
      stock cash dividends
                  
                  
                  (385,696
                  )
                  
                  
                  (385,696
                  )
                  
                  
                  (96,424
                  )Numerator
      for diluted earnings per share - Net (loss) income attributable to common
      stockholders
                  
                  $
                  (47,815,330
                  )
                  
                  $
                  158,092
                  
                  
                  $
                  28,395,805Denominator:Weighted
      average basic shares outstanding
                  
                  
                  30,586,460
                  
                  
                  
                  30,427,421
                  
                  
                  
                  28,830,366Weighted
      average effect of dilutive securities:Employee
      stock options and restricted stock units
                  
                  
                  —
                  
                  
                  
                  407,710
                  
                  
                  
                  557,361Weighted
      average diluted shares outstanding
                  
                  
                  30,586,460
                  
                  
                  
                  30,835,131
                  
                  
                  
                  29,387,727Net
      (loss) income per diluted share:(Loss)
      income from continuing operations
                  
                  $
                  (1.55
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  1.03Loss
      from discontinued operations
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )Preferred
      stock deemed dividend
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (0.06
                  )Preferred
      stock cash dividend
                  
                  
                  (0.01
                  )
                  
                  
                  (0.01
                  )
                  
                  
                  (0.00
                  )Net
      (loss) income attributable to common stockholders
                  
                  $
                  (1.56
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  0.97


F-25


(5)
Marketable Securities





The
Company holds investments in corporate floating rate notes totaling
approximately $18.4 million, which mature at various times within the next 31
months, and in two municipal auction rate securities (“ARS”) issued by the
District of Columbia with a par value of $1.9 million.  The ARS pay
interest in accordance with their terms at each respective auction date,
typically every 35 days, and mature in the year 2038.  The Company
accounts for its marketable securities in accordance with the provisions of ASC
320-10.  The Company classifies these securities as available for sale
and are reported at fair value.  Unrealized gains and losses are
recorded as a component of comprehensive income and excluded from net (loss)
income. See Note 16 (Comprehensive (Loss) Income).





(6)
Fair Value Measurements





Effective
January 1, 2008, the Company adopted ASC 820-10, which refines the definition of
fair value, provides a framework for measuring fair value and expands
disclosures about fair value measurements.  ASC 820-10 defines fair
value as the price that would be received to sell an asset or paid to transfer a
liability (an exit price) in an orderly transaction between market participants
at the reporting date.  The statement establishes consistency and
comparability by providing a fair value hierarchy that prioritizes the inputs to
valuation techniques into three broad levels, which are described
below:





•
            Level
      1: Inputs are quoted market prices in active markets for identical
      assets or liabilities (these are observable market
  inputs).





•
            Level
      2: Inputs are inputs other than quoted prices included within Level 1
      that are observable for the asset or liability (includes quoted market
      prices for similar assets or identical or similar assets in markets in
      which there are few transactions, prices that are not current or vary
      substantially).





•
            Level
      3: Inputs are unobservable inputs that reflect the entity’s own
      assumptions in pricing the asset or liability (used when little or no
      market data is available).





Financial
assets and liabilities included in our financial statements and measured at fair
value as of December 31, 2009 are classified based on the valuation
technique level in the table below:





Description:
                
                Total
                
                
                Level 1
                
                
                Level 2
                
                
                Level 3Cash
      and cash equivalents (1)
                
                $
                60,542,494
                
                
                $
                60,542,494
                
                
                $
                —
                
                
                $
                —Marketable
      securities (2)
                
                
                20,328,087
                
                
                
                18,558,087
                
                
                
                —
                
                
                
                1,770,000Long
      term investment (3)
                
                
                555,000
                
                
                
                —
                
                
                
                —
                
                
                
                555,000Total
      at fair value
                
                $
                81,425,581
                
                
                $
                79,100,581
                
                
                $
                —
                
                
                $
                2,325,000




(1)
            Cash
      and cash equivalents, totaling $60,542,494, consists primarily of money
      market funds and checking accounts for which we determine fair value
      through quoted market prices.




F-26


(2)
            Marketable
      securities consist of corporate floating rate notes for which we determine
      fair value through quoted market prices.  Marketable securities
      also consist of two municipal ARS issued by the District of Columbia.
      Historically, the fair value of ARS investments approximated par value due
      to the frequent resets through the auction process.  Due to
      events in credit markets, the auction events, which historically have
      provided liquidity for these securities, have been
      unsuccessful.  The result of a failed auction is that these ARS
      holdings will continue to pay interest in accordance with their terms at
      each respective auction date; however, liquidity of the securities will be
      limited until there is a successful auction, the issuer redeems the
      securities, the securities mature or until such time as other markets for
      these ARS holdings develop.  For each of our ARS, we evaluate
      the risks related to the structure, collateral and liquidity of the
      investment, and forecast the probability of issuer default, auction
      failure and a successful auction at par, or a redemption at par, for each
      future auction period.  Temporary impairment charges are
      recorded in accumulated other comprehensive income (loss), whereas
      other-than-temporary impairment charges are recorded in our consolidated
      statement of operations.  As of December 31, 2009, the Company
      determined there was a decline in the fair value of its ARS investments of
      $105,000, which was deemed temporary and was included within accumulated
      other comprehensive income (loss).  The Company used a
      discounted cash flow model to determine the estimated fair value of its
      investment in ARS.  The assumptions used in preparing the
      discounted cash flow model include estimates for interest rate, timing and
      amount of cash flows and expected holding period of
  ARS.





(3)
            Long
      term investment consists of an investment in Debtfolio, Inc., doing
      business as Geezeo, a web-based personal finance site.  The
      investment totaled $1.9 million for an 18.5% ownership
      stake.  Additionally, the Company incurred approximately $0.2
      million of legal fees in connection with this investment. The Company
      retained the option to purchase the company based on an equity value of
      $12 million at any point prior to April 23, 2009, but did not exercise the
      option.  During the first quarter of 2009, the carrying value of
      the Company’s investment was written down to fair value based upon an
      estimate of the market value of the Company’s equity in light of
      Debtfolio’s efforts to raise capital at the time.  The
      impairment charge approximated $1.5 million.  There have been no
      additional events during the nine months ended December 31, 2009 that
      would indicate any additional impairment, as Debtfolio has recently raised
      additional capital based upon the same fair market
  value.





The
following table provides a reconciliation of the beginning and ending balance
for the Company’s marketable securities measured at fair value using significant
unobservable inputs (Level 3):





Marketable
                        Securities
                      
                      
                      Long Term
                        InvestmentBalance
      at January 1, 2009
                      
                      $
                      1,658,178
                      
                      
                      $
                      2,042,970Transfers
      to Level 1
                      
                      
                      (48,178
                      )
                      
                      
                      —Increase
      in fair value of investment
                      
                      
                      185,000
                      
                      
                      
                      —Redemption
      of Auction Rate Security
                      
                      
                      (25,000
                      )
                      
                      
                      —Impairment
      charge
                      
                      
                      —
                      
                      
                      
                      (1,487,970
                      )Balance
      at December 31, 2009
                      
                      $
                      1,770,000
                      
                      
                      $
                      555,000





(7)
Property and Equipment





Property
and equipment as of December 31, 2009 and 2008 consists of the
following:





December 31,2009
                    
                    
                    2008Computer
      equipment
                    
                    $
                    16,499,509
                    
                    
                    $
                    16,268,874Furniture
      and fixtures
                    
                    
                    1,354,932
                    
                    
                    
                    1,522,888Leasehold
      improvements
                    
                    
                    2,902,039
                    
                    
                    
                    3,131,58620,756,480
                    
                    
                    
                    20,923,348Less
      accumulated depreciation and amortization
                    
                    
                    13,263,460
                    
                    
                    
                    11,250,569Property
      and equipment, net
                    
                    $
                    7,493,020
                    
                    
                    $
                    9,672,779


F-27


Included
in computer equipment are capitalized software and web site development costs of
$6.1 million and $5.9 million at December 31, 2009 and 2008,
respectively.  A summary of the activity of capitalized software and
web site development costs is as follows:





Balance
      December 31, 2008
                  
                  $
                  5,947,990Additions
                  
                  
                  774,747Deletions
                  
                  
                  (600,735
                  )Balance
      December 31, 2009
                  
                  $
                  6,122,002





Depreciation
and amortization expense for the above noted property and equipment aggregated
$3.2 million, $3.1 million and $1.4 million for the years ended December 31,
2009, 2008 and 2007, respectively.  The Company does not include
depreciation and amortization expense in cost of services.





(8)
Goodwill and Other Intangible Assets





The
Company’s goodwill and other intangible assets and related accumulated
amortization as of December 31, 2009 and 2008 consist of the
following:




December 31,2009
                  
                  
                  2008Total
      goodwill not subject to amortization
                  
                  $
                  24,286,616
                  
                  
                  $
                  40,024,076Other
      intangible assets not subject to amortization:Trade
      name
                  
                  $
                  720,000
                  
                  
                  $
                  1,020,000Total
      other intangible assets not subject to amortization
                  
                  
                  720,000
                  
                  
                  
                  1,020,000Other
      intangible assets subject to amortization:Customer
      relationships
                  
                  
                  6,862,136
                  
                  
                  
                  10,234,176Syndication
      agreement
                  
                  
                  870,000
                  
                  
                  
                  870,000Software
      models
                  
                  
                  2,070,000
                  
                  
                  
                  2,192,000Noncompete
      agreements
                  
                  
                  1,536,678
                  
                  
                  
                  2,813,256Products
      database
                  
                  
                  137,000
                  
                  
                  
                  137,000Total
      other intangible assets subject to amortization
                  
                  
                  11,475,814
                  
                  
                  
                  16,246,432Less
      accumulated amortization
                  
                  
                  (3,985,709
                  )
                  
                  
                  (3,635,532
                  )Net
      other intangible assets subject to amortization
                  
                  
                  7,490,105
                  
                  
                  
                  12,610,900Total
      other intangible assets
                  
                  $
                  8,210,105
                  
                  
                  $
                  13,630,900





In the
first quarter of 2009, the Company performed an interim impairment test of its
goodwill, intangible assets and a long-term investment due to certain impairment
indicators, including a continued decline in both advertising and subscription
revenue resulting from the challenging economic environment and a reduction in
the Company’s enterprise value.  The total Company fair value was
estimated using a combination of a discounted cash flow model (present value of
future cash flows) and the Company’s business enterprise value based upon the
fair value of its outstanding common and preferred shares.  The fair
value of the Company’s goodwill is the residual fair value after allocating the
Company’s total fair value to its other assets, net of
liabilities.  This analysis resulted in an impairment of the Company’s
goodwill approximating $19.8 million.  The review also revealed an
additional impairment to the Company’s intangible assets related to certain
customer relationships and noncompete agreements approximating $2.8
million.


F-28




Amortization
expense totaled $1.8 million, $2.8 million and $1.1 million for the years ended
December 31, 2009, 2008 and 2007, respectively. The estimated amortization
expense for the next five years is as follows:





For
      the Years
                          EndedDecember
      31,
                        
                        Amount2010
                        
                        $
                        1,434,9492011
                        
                        
                        1,371,6872012
                        
                        
                        1,151,5692013
                        
                        
                        793,8142014
                        
                        
                        793,814Thereafter
                        
                        
                        1,944,272Total
                        
                        $
                        7,490,105





(9)
Accrued Expenses




Accrued
expenses as of December 31, 2009 and 2008 consist of the following:




December
      31,2009
                        
                        
                        2008Payroll
      and related costs
                        
                        $
                        3,731,342
                        
                        
                        $
                        547,395Restructuring
      and other charges (see Note 15)
                        
                        
                        1,230,056
                        
                        
                        
                        —Professional
      fees
                        
                        
                        1,092,214
                        
                        
                        
                        478,857Third
      party content and data costs
                        
                        
                        289,226
                        
                        
                        
                        232,272Other
      liabilities
                        
                        
                        1,551,298
                        
                        
                        
                        1,526,378Total
      accrued expenses
                        
                        $
                        7,894,136
                        
                        
                        $
                        2,784,902





(10)
Income Taxes





The
Company accounts for its income taxes in accordance with ASC
740-10.  Under ASC 740-10, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their tax bases.  ASC 740-10 also requires that deferred tax assets be
reduced by a valuation allowance if it is more likely than not that some or all
of the deferred tax assets will not be realized based on all available positive
and negative evidence.





As of
December 31, 2009 and 2008, respectively, the Company had approximately $133
million and $125 million of federal and state net operating loss carryforwards
(“NOLs”). The Company had recognized a deferred tax asset for a portion of such
NOLs in the amount of $16.1 million as of December 31, 2008.  During
the three months ended March 31, 2009, the Company recorded a valuation
allowance against these deferred tax assets as management concluded that it was
more likely than not that the Company would not realize the benefit of this
portion of its deferred tax assets by generating sufficient taxable income in
future years. The decision to record this valuation allowance was based on
management evaluating all positive and negative evidence.  The
significant negative evidence includes a loss for the current year, a cumulative
pre-tax loss for the three years ended December 31, 2009, the inability to
carryback the net operating losses, limited future reversals of existing
temporary differences and the limited availability of tax planning
strategies.


F-29


The
Company has not recognized a deferred tax asset for the NOLs at December 31,
2009 and expects to continue to provide a full valuation allowance until, or
unless, it can sustain a level of profitability that demonstrates its ability to
utilize these assets.  The federal losses are available to offset future
taxable income through 2029 and expire from 2019 through 2029.  Since
the Company does business in various states and each state has its own rules
with respect to the number of years losses may be carried forward, the state
NOL's expire from 2010 through 2029.  The NOLs as of December 31, 2009
and 2008 include approximately $17 million and $20 million, respectively related
to windfall tax benefits for which a benefit would be recorded to additional
paid in capital when realized. The Company also had a capital loss carryforward
of approximately $3.6 million as of December 31, 2008, $3.2 million of which
expired during 2009.  Under the Worker, Homeownership, and Business
Assistance Act of 2009 (the 2009 Act), the Company will elect to carry back the
2009 federal NOL generated.  The 2009 Act suspends the 90 percent
limitation on the use of alternative tax NOLs and allows for a five-year NOL
carryback period.  The Company recorded a $0.3 million income tax benefit
for the refund of 2007 and 2008 alternative minimum tax paid under the 2009
Act.





In
accordance with Section 382 of the Internal Revenue code, the usage of the
Company’s NOLs 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 period when those temporary differences become
deductible. Based upon a study that analyzed the Company’s stock ownership
activity from inception to December 31, 2008, a change of ownership was deemed
to have occurred in August 2000. This change of ownership created an annual
limitation on the usage of the Company’s losses which are available through
2025.  During the year ended December 31, 2009, the Company acquired
approximately $3 million of NOLs when it acquired the stock of Kikucall,
Inc.  In accordance with Section 382 of the Internal Revenue code, the
usage of the Kikucall, Inc. net operating loss carryforward could be
limited.





As a C
Corporation, the Company is subject to federal and state and local corporate
income taxes.  The components of the provision (benefit) for income
taxes reflected on the consolidated statements of operations from continuing
operations are set forth below:





For
      the years ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007(in
      thousands)Current
      taxes:U.S.
      federal
                  
                  $
                  (217
                  )
                  
                  $
                  (82
                  )
                  
                  $
                  307State
      and local
                  
                  
                  (16
                  )
                  
                  
                  201
                  
                  
                  
                  0Total
      current tax expense (benefit)
                  
                  $
                  (233
                  )
                  
                  $
                  119
                  
                  
                  $
                  307Deferred
      taxes:U.S.
      federal
                  
                  $
                  13,699
                  
                  
                  $
                  (99
                  )
                  
                  $
                  (13,600
                  )State
      and local
                  
                  
                  2,418
                  
                  
                  
                  (18
                  )
                  
                  
                  (2,400
                  )Total
      deferred tax expense (benefit)
                  
                  $
                  16,117
                  
                  
                  $
                  (117
                  )
                  
                  $
                  (16,000
                  )Total
      tax expense (benefit)
                  
                  $
                  15,884
                  
                  
                  $
                  2
                  
                  
                  $
                  (15,693
                  )





A
reconciliation of the statutory U.S. federal income tax rate to the Company's
effective income tax rate of 34% is set forth below:


F-30





For
      the years ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007U.S.
      statutory federal income tax rate
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %State
      income taxes, net of federal tax benefit
                  
                  
                  3.5
                  
                  
                  
                  22.4
                  
                  
                  
                  6.0Effect
      of permanent differences
                  
                  
                  (9.7
                  )
                  
                  
                  8.0
                  
                  
                  
                  1.5Change
      to valuation allowance
                  
                  
                  (76.7
                  )
                  
                  
                  (62.0
                  )
                  
                  
                  (144.3
                  )Other
                  
                  
                  (1.4
                  )
                  
                  
                  (2.0
                  )
                  
                  
                  0.7Effective
      income tax rate
                  
                  
                  (50.3
                  )%
                  
                  
                  0.4
                  %
                  
                  
                  (102.1
                  )%





Deferred
income taxes reflect the net tax effects of temporary difference between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when such
differences are expected to reverse.  Significant components of the
Company's net deferred tax assets and liabilities are set forth
below:





As
      of December 31,2009
                      
                      
                      2008(in
      thousands)Deferred
      tax assets:Operating
      loss carryforward
                      
                      $
                      52,996
                      
                      
                      $
                      50,123Windfall
      tax benefit carryforward
                      
                      
                      (6,923
                      )
                      
                      
                      (8,186
                      )Capital
      loss carryforward
                      
                      
                      -
                      
                      
                      
                      1,422Goodwill
                      
                      
                      2,477
                      
                      
                      
                      -Intangible
      assets
                      
                      
                      251
                      
                      
                      
                      -Alternative
      minimum tax
                      
                      
                      -
                      
                      
                      
                      217Accrued
      expenses
                      
                      
                      1,518
                      
                      
                      
                      2,314Depreciation
                      
                      
                      -
                      
                      
                      
                      40Other
                      
                      
                      594
                      
                      
                      
                      -Total
      deferred tax assets
                      
                      
                      50,913
                      
                      
                      
                      45,930Deferred
      tax liabilities:Depreciation
                      
                      
                      (1,062
                      )
                      
                      
                      -Intangible
      assets
                      
                      
                      -
                      
                      
                      
                      (2,274
                      )Goodwill
                      
                      
                      -
                      
                      
                      
                      (1,617
                      )Total
      deferred tax liabilities
                      
                      
                      (1,062
                      )
                      
                      
                      (3,891
                      )Less:
      valuation allowance
                      
                      
                      (49,851
                      )
                      
                      
                      (25,922
                      )Net
      deferred tax assets
                      
                      $
                      -
                      
                      
                      $
                      16,117





The
implementation of ASC 740-10 did not result in any current adjustment or any
cumulative effect, and therefore, no adjustment was recorded to retained
earnings upon adoption.  For the years ended December 31, 2009, 2008
and 2007, the Company performed a tax analysis in accordance with ASC
740-10.  Based upon such analysis the Company was not required to
accrue any liabilities pursuant to ASC 740-10 for the years ended December 31,
2009, 2008 and 2007, respectively.


F-31





(11)
Stockholders’ Equity




Preferred
Stock




Securities Purchase
Agreement




On
November 15, 2007, the Company entered into a Securities Purchase Agreement (the
“Purchase Agreement”) with TCV VI, L.P., a Delaware limited partnership, and TCV
Member Fund, L.P., a Delaware limited partnership (collectively, the
“Purchasers”).




Pursuant
to the Purchase Agreement, the Company sold the Purchasers an aggregate of 5,500
shares of its newly-created Series B convertible preferred stock, par value
$0.01 per share (“Series B Preferred Stock”), that are immediately convertible
into an aggregate of 3,856,942 shares of its Common Stock at a conversion price
of $14.26 per share, and warrants (the “Warrants”) to purchase an aggregate of
1,157,083 shares of Common Stock for $15.69 per share. The consideration paid
for the Series B Preferred Stock and the Warrants was $55 million. As of
December 31, 2009, no Series B Preferred Stock has been
converted.  Neither the Series B Preferred Stock nor the Warrants have
been registered and the Company has not registered the shares of Common Stock
issuable upon the conversion of the Series B Preferred Stock or upon the
exercise of the Warrants.




Investor Rights
Agreement




On
November 15, 2007, the Company also entered into an Investor Rights Agreement
with the Purchasers (the “Investor Rights Agreement”) pursuant to which, among
other things, the Company agreed to grant the Purchasers certain registration
rights including the right to require the Company to file a registration
statement within 30 days to register the Common Stock issuable upon conversion
of the Series B Preferred Stock and upon exercise of the Warrants and to use its
reasonable best efforts to cause the registration to be declared effective
within 90 days after the date the registration is filed.  To date, no
such request has been made.




Certificate of
Designation




Pursuant
to a Certificate of Designation for the Series B Preferred Stock (the
“Certificate of Designation”) filed by the Company with the Secretary of State
of the State of Delaware on November 15, 2007:


(i)
the Series B Preferred Stock has a purchase price per share equal to $10,000
(the “Original Issue Price”); (ii) in the event of any Liquidation Event (as
defined in the Certificate of Designation), the holders of shares of Series B
Preferred Stock are entitled to receive, prior to any distribution to the
holders of the Common Stock, an amount per share equal to the Original Issue
Price, plus any declared and unpaid dividends; (iii) the holders of the Series B
Preferred Stock have the right to vote on any matter submitted to a vote of the
stockholders of the Company and are entitled to vote that number of votes equal
to the aggregate number of shares of Common Stock issuable upon the conversion
of such holders’ shares of Series B Preferred Stock; (iv) for so long as 40% of
the shares of Series B Preferred Stock remain outstanding, the holders of a
majority of such shares will have the right to elect one person to the Company’s
board of directors; (v) the Series B Preferred Stock automatically converts into
an aggregate of 3,856,942 shares of Common Stock in the event that the Common
Stock trades on a trading market at or above a closing price equal to $28.52 per
share for 90 consecutive trading days and any demand registration previously
requested by the holders of the Series B Preferred Stock has become effective;
and (vi) so long as 30% of the shares of the currently-outstanding Series B
Preferred Stock remain outstanding, the affirmative vote of the holders of a
majority of such shares will be necessary to take any of the following actions:
(a) authorize, create or issue any class or classes of our capital stock ranking
senior to, or on a parity with (as to dividends or upon a liquidation event) the
Series B Preferred Stock orany securities exercisable
or exchangeable for, or convertible into, any now or hereafter authorized
capital stock ranking senior to, or on a parity with (as to dividends or upon a
liquidation event) the Series B Preferred Stock (including, without limitation,
the issuance of any shares of Series B Preferred Stock (other than shares of
Series B Preferred Stock issued as a stock dividend or in a stock split); (b)
any increase or decrease in the authorized number of shares of Series B
Preferred Stock; (c) any amendment, waiver, alteration or repeal of our
certificate of incorporation or bylaws in a way that adversely affects the
rights, preferences or privileges of the Series B Preferred Stock; (d) the
payment of any dividends (other than dividends paid in our capital stock or any
of our subsidiaries) in excess of $0.10 per share per annum on the Common Stock
unless after the payment of such dividends we have unrestricted cash (net of all
indebtedness for borrowed money, purchase money obligations, promissory notes or
bonds) in an amount equal to at least two times the product obtained by
multiplying the number of shares of Series B Preferred Stock outstanding at the
time such dividend is paid by the liquidation preference; and (e) the purchase
or redemption of: (1) any Common Stock (except for the purchase or redemption
from employee, directors and consultants pursuant to agreements providing us
with repurchase rights upon termination of their service with us) unless after
suchpurchase or
redemption we have unrestricted cash (net of all indebtedness for borrowed
money, purchase money obligations, promissory notes or bonds) equal to at least
two times the product obtained by multiplying the number of shares of Series B
Preferred Stock outstanding at the time such dividend is paid by the liquidation
preference; or (2) any class or series of now or hereafter of our authorized
stock that ranks junior to (upon a liquidation event) the Series B Preferred
Stock.


F-32





Warrants





As
discussed above, the Warrants entitle the Purchasers to purchase an aggregate of
1,157,083 shares of Common Stock for $15.69 per share. The Warrants expire on
the fifth anniversary of the date they were first issued, or earlier in certain
circumstances.  As of December 31, 2009, no Warrants have been
exercised.





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.  However, the
affirmative vote of the holders of a majority of the outstanding shares of
Series B Preferred Stock, voting separately as a single class, is necessary for
the Company to repurchase its stock.  During the years ended December
31, 2009 and 2008, 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, for an average price of $1.34 per share.  In addition,
pursuant to the terms of the Company’s 1998 Plan and 2007 Plan, and certain
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, and the issuance of restricted stock units, the Company may
withhold shares in lieu of payment of the exercise price and/or the minimum
amount of applicable withholding taxes then due.  Through December 31,
2009, the Company had withheld an aggregate of 420,048 shares which have been
recorded as treasury stock.  In addition, the Company received an
aggregate of 208,270 shares as partial settlement of the working capital and
debt adjustment from the acquisition of Corsis Technology Group II LLC, 104,055
of which were received in October 2008 and 104,215 of which were received in
September 2009.  These shares have been recorded as treasury
stock.





Dividends





During
the year ended December 31, 2009, the Company paid four quarterly cash dividends
of $0.025 per share on its Common Stock and its Series B Preferred Stock on a
converted common share basis.  For the year ended December 31, 2009,
dividends paid totaled approximately $3.6 million, as compared to approximately
$3.5 million for the year ended December 31, 2008.  The Company’s
Board of Directors reviews the dividend payment each quarter and there can be no
assurance that we will continue to pay this cash dividend in the
future.


F-33





Stock
Options





Under the
terms of the Company’s 1998 Stock Incentive Plan, as amended (the “1998 Plan”),
8,900,000 shares of Common Stock of the Company were reserved for awards of
incentive stock options, nonqualified stock options, restricted stock, deferred
stock (also referred to as restricted stock units, or RSUs), or any combination
thereof.  At the Company’s annual stockholders’ meeting in May 2007,
stockholders of the Company approved TheStreet.com, Inc. 2007 Performance
Incentive Plan (the “2007 Plan”).  Under the terms of the 2007 Plan,
1,250,000 shares of Common Stock of the Company were reserved for awards of
incentive stock options, nonqualified stock options, stock appreciation rights
(SARs), restricted stock, restricted stock units (RSUs) or other stock-based
awards. The plan also authorized cash performance
awards.  Additionally, under the terms of the 2007 Plan, unused shares
authorized for award under the 1998 Plan are available for issuance under the
2007 Plan.   No further awards will be made under the 1998
Plan.  At the Company’s annual stockholders’ meeting in May 2008,
stockholders of the Company approved an amendment to the 2007 Plan to increase
the number of shares of Common Stock available for awards by 1,000,000, to a
total of 2,250,000.  Awards may be granted to such directors,
employees and consultants of the Company as the Compensation Committee of the
Board of Directors shall select in its discretion.  Only employees of
the Company are eligible to receive grants of incentive stock
options.  Awards generally vest over a three- to five-year period and
stock options generally have terms of five years. As of December 31, 2009, there
remained 964,614 shares available for future awards under the 2007
Plan.  Stock-based compensation expense for the years ended December
31, 2009, 2008 and 2007 was $2.7 million, $3.5 million and $2.1 million,
respectively.





A stock
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 (or, if provided in the award, the fair
market value of a share in cash) 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 respect to such RSU.  The Company records cash
dividends for RSUs to be paid in the future at an amount equal to the rate paid
on a share of Common Stock for each then-outstanding RSU granted.  The
accumulated dividend equivalents related to outstanding grants vest on the
applicable vesting date for the RSU with respect to which such dividend
equivalents were credited, and are 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 1998 and 2007 Plans is as follows:




Shares
                  Underlying
                  Awards
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Aggregate
                  Intrinsic
                  Value
                  ($000)
                
                
                Weighted
                  Average
                  Remaining
                  Contractual Life
                  (In Years)Awards
      outstanding, December 31, 2008
                
                
                2,617,782
                
                
                $
                6.37Restricted
      stock units granted
                
                
                1,952,109
                
                
                $
                0.00Restricted
      stock units issued
                
                
                (335,915
                )
                
                $
                0.00Options
      cancelled
                
                
                (1,321,480
                )
                
                $
                8.15Restricted
      stock units cancelled
                
                
                (242,276
                )
                
                $
                0.00Awards
      outstanding, December 31, 2009
                
                
                2,670,220
                
                
                $
                2.21
                
                
                $
                4,695
                
                
                
                3.12Awards
      vested and expected to vest at December 31, 2009
                
                
                2,398,930
                
                
                $
                2.43
                
                
                $
                4,069
                
                
                
                2.99Options
      exercisable at December 31, 2009
                
                
                499,474
                
                
                $
                7.97
                
                
                $
                0
                
                
                
                1.53Restricted
      stock units exercisable at December 31, 2009
                
                
                0
                
                
                $
                0.00
                
                
                $
                0
                
                
                
                3.52


F-34




The
following table summarizes information about options outstanding at December 31,
2009:





OptionsOutstanding
                    
                    
                    Options
                    
                    
                    
                    
                    
                    WeightedWeighted
                    
                    
                    Outstanding
                    
                    
                    
                    
                    
                    AverageAverage
                    
                    
                    Weighted
                    
                    
                    
                    
                    
                    ExerciseRemaining
                    
                    
                    Average
                    
                    
                    
                    
                    
                    Price
      ofRange
      of
                    
                    Options
                    
                    
                    Contractual
                    
                    
                    Exercise
                    
                    
                    Options
                    
                    
                    OptionsExercise
      Price
                    
                    Outstanding
                    
                    
                    Life
                    
                    
                    Price
                    
                    
                    Exercisable
                    
                    
                    Exercisable$  3.62
      - $  4.08
                    
                    
                    146,335
                    
                    
                    
                    0.9
                    
                    
                    $
                    3.99
                    
                    
                    
                    123,001
                    
                    
                    $
                    4.05$  7.15
      - $10.53
                    
                    
                    395,962
                    
                    
                    
                    2.2
                    
                    
                    $
                    8.51
                    
                    
                    
                    270,875
                    
                    
                    $
                    8.42$10.90
      - $13.00
                    
                    
                    171,733
                    
                    
                    
                    2.6
                    
                    
                    $
                    11.39
                    
                    
                    
                    105,598
                    
                    
                    $
                    11.39Total
                    
                    
                    714,030
                    
                    
                    
                    2.0
                    
                    
                    $
                    8.28
                    
                    
                    
                    499,474
                    
                    
                    $
                    7.97





A summary
of the status of the Company’s unvested share-based payment awards as of
December 31, 2009 and changes in the year then ended is as follows:





Unvested Awards
                        
                        Awards
                        
                        
                        Weighted
                          Average
                          Grant Date
                          Fair ValueShares
      underlying awards unvested at January 1, 2009
                        
                        
                        1,609,990
                        
                        
                        $
                        5.70Shares
      underlying restricted stock units granted
                        
                        
                        1,952,109
                        
                        
                        $
                        2.50Shares
      underlying options vested
                        
                        
                        (393,499
                        )
                        
                        $
                        3.53Shares
      underlying restricted stock units issued
                        
                        
                        (335,915
                        )
                        
                        $
                        6.73Shares
      underlying unvested options cancelled
                        
                        
                        (419,663
                        )
                        
                        $
                        3.77Shares
      underlying unvested restricted stock units cancelled
                        
                        
                        (242,276
                        )
                        
                        $
                        4.60Shares
      underlying awards unvested at December 31, 2009
                        
                        
                        2,170,746
                        
                        
                        $
                        3.37





The
weighted-average fair value of employee stock options granted during the years
ended December 31, 2008 and 2007 was $3.27 and $4.15,
respectively.  There were no employee stock options granted during the
year ended December 31, 2009.  For the years ended December 31, 2009,
2008 and 2007, the total fair value of share-based awards vested was $4,324,791,
$1,460,310 and $1,448,986, respectively.  For the years ended December
31, 2008 and 2007, the total intrinsic value of options exercised was $1,152,566
and $4,906,279, respectively.  There were no employee stock options
exercised during the year ended December 31, 2009.  As of December 31,
2009, there was approximately $5.1 million of unrecognized stock-based
compensation expense remaining to be recognized over a weighted-average period
of 3.31 years.


F-35





(12)
Commitments and Contingencies





Operating
Leases and Employment Agreements





The
Company is committed under operating leases, principally for office space, which
expire at various dates through December 31, 2020.  Certain leases
contain escalation clauses relating to increases in property taxes and
maintenance costs.  Rent and equipment rental expenses were $2.4
million, $2.6 million and $1.9 million for the years ended December 31, 2009,
2008 and 2007, respectively.  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, 2009, total future minimum cash
payments are as follows:





Payments
      Due by YearAfterContractual
      obligations:
                              
                              Total
                              
                              
                              2010
                              
                              
                              2011
                              
                              
                              2012
                              
                              
                              2013
                              
                              
                              2014
                              
                              
                              2014Operating
      leases
                              
                              $
                              20,729,230
                              
                              
                              $
                              1,612,187
                              
                              
                              $
                              2,197,482
                              
                              
                              $
                              2,092,126
                              
                              
                              $
                              2,084,866
                              
                              
                              $
                              1,878,937
                              
                              
                              $
                              10,863,632Employment
      agreements
                              
                              
                              1,763,833
                              
                              
                              
                              1,763,833
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Outside
      contributors
                              
                              
                              507,000
                              
                              
                              
                              457,000
                              
                              
                              
                              50,000
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Total
      contractual cash obligations
                              
                              $
                              23,000,063
                              
                              
                              $
                              3,833,020
                              
                              
                              $
                              2,247,482
                              
                              
                              $
                              2,092,126
                              
                              
                              $
                              2,084,866
                              
                              
                              $
                              1,878,937
                              
                              
                              $
                              10,863,632





Future
minimum cash payments for the year ended December 31, 2010 related to operating
leases has been reduced by approximately $0.7 million related to a free rent
allowance contained in the Third Amendment of Lease dated December 31, 2008
relating to the Company’s corporate office.





Legal
Proceedings





In
December 2001, the Company was named as a defendant in a securities class action
filed in the 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, currently the Chairman of the Board of the Company, 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. (now part of Bank of America
Corporation).  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 district court (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
(the “Securities Act”), Section 10(b) of the Securities 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 district court ruled on the motions. The district 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,
some of 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.


F-36





In June
2003, a proposed collective partial 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. In June 2004, an
agreement of partial settlement was submitted to the court for preliminary
approval. The court granted the preliminary approval motion on February 15,
2005, subject to certain modifications. On August 31, 2005, the court issued a
preliminary order further approving the modifications to the settlement and
certifying the settlement classes. The court also appointed the notice
administrator for the settlement and ordered that notice of the settlement be
distributed to all settlement class members by January 15, 2006. The settlement
fairness hearing occurred on April 24, 2006, and the court reserved decision at
that time.





While the
partial settlement was pending approval, the plaintiffs continued to litigate
against the underwriter defendants. The district 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 April 6, 2007, the Second
Circuit denied plaintiffs’ petition for rehearing. In light of the Second
Circuit opinion, counsel to the issuers informed the district court that the
settlement with the plaintiffs could not be approved because the defined
settlement class, like the litigation class, could not be certified. The
settlement was terminated pursuant to a Stipulation and Order dated June 25,
2007.





On
August 14, 2007, plaintiffs filed their second consolidated amended class action
complaints against the focus cases and, on September 27, 2007, again moved for
class certification. On November 12, 2007, certain of the defendants in the
focus cases moved to dismiss plaintiffs’ second amended consolidated class
action complaints. On March 26, 2008, the district court denied the motions to
dismiss except as to Section 11 claims raised by those plaintiffs who sold their
securities for a price in excess of the initial offering price and those who
purchased outside of the previously certified class period. Briefing on the
class certification motion was completed in May 2008. That motion was withdrawn
without prejudice on October 10, 2008.  On April 2, 2009, a
stipulation and agreement of settlement among the plaintiffs, issuer defendants
and underwriter defendants was submitted to the Court for preliminary
approval.    The settlement was approved on October 5,
2009.  Under the settlement, the Company’s obligation of approximately
$339,000 would be paid by the issuers’ insurance companies.  The
settlement has been appealed.  There can be no assurance that the
approval of the settlement will not be reversed on appeal and that the
settlement will be implemented in its current form, or at all.  Due to
the inherent uncertainties of litigation, the ultimate outcome of the matter is
uncertain.





In
October 2009, the Company was named as one of several defendants in a lawsuit
captioned Online News Link LLC v. Apple Inc. et al., Civ. No. 2:09-CV-0312-DF
(U.S.D.C., E.D. Tex.).  The complaint alleges that defendants infringe
U.S. Patent No. 7,508,789, putatively owned by plaintiff, related to a certain
method of displaying digital data via hyperlinks.  The Company has
filed an answer denying liability on a variety of theories.  Due to
the early stage of this matter and the inherent uncertainties of litigation, the
ultimate outcome of this matter is uncertain.


As
previously disclosed, the Company conducted a review of the accounting in its
former Promotions.com subsidiary, which subsidiary was sold in December
2009.  As a result of this review, the Company recently filed a Form 10-K/A
for the year ended December 31, 2008, a Form 10-Q/A for the quarter ended March
31, 2009 and Forms 10-Q for the quarters ended June 30, 2009 and September
30, 2009, respectively.  The SEC commenced an investigation in March 2010
into the facts surrounding our restatement of previously issued financial
statements and related matters.  The Company is cooperating fully with the
SEC.  The investigation could result in the SEC seeking various penalties
and relief including, without limitation, civil injunctive relief and/or civil
monetary penalties or administrative relief.  The nature of the relief or
remedies the SEC may seek, if any, cannot be predicted at this
time.




The
Company is party to other legal proceedings arising in the ordinary course of
business or otherwise, none of which other proceedings is deemed
material.


F-37


(13)
Long Term Investment





During
2008, the Company made an investment in Debtfolio, Inc., doing business as
Geezeo, a web-based personal finance site.  The investment totaled
$1.9 million for an 18.5% ownership stake.  Additionally, the Company
incurred approximately $0.2 million of legal fees in connection with this
investment. The Company retained the option to purchase the company based on an
equity value of $12 million at any point prior to April 23, 2009, but did not
exercise the option.  During the first quarter of 2009, the carrying
value of the Company’s investment was written down to fair value based upon an
estimate of the market value of the Company’s equity in light of
Debtfolio’s efforts to raise capital at the time.  The impairment
charge approximated $1.5 million.  There have been no additional
events through December 31, 2009 that would indicate any additional impairment,
as Debtfolio has recently raised additional capital based upon the same fair
market value.





(14)
Impairment Charge





In the
first quarter of 2009, the Company performed an interim impairment test of its
goodwill, intangible assets and a long-term investment due to certain impairment
indicators, including a continued decline in both advertising and subscription
revenue resulting from the challenging economic environment and a reduction in
the Company’s enterprise value.  As a result of this test, the Company
recorded an impairment charge of $24.1 million, as follows:





·
            The
      total Company fair value was estimated using a combination of a discounted
      cash flow model (present value of future cash flows) and the Company’s
      business enterprise value based upon the fair value of its outstanding
      common and preferred shares.  The fair value of the Company’s
      goodwill is the residual fair value after allocating the Company’s total
      fair value to its other assets, net of liabilities.  This
      analysis resulted in an impairment of the Company’s goodwill approximating
      $19.8 million.  The review also revealed an additional
      impairment to the Company’s intangible assets related to certain customer
      relationships and noncompete agreements approximating $2.8
      million.





·
            The
      carrying value of the Company’s long term investment was written down to
      fair value based upon the most current estimate of the market value of the
      Company’s equity stake in Debtfolio, Inc.  The impairment
      approximated $1.5 million. (See Note 13 (Long-Term
      Investment)).





(15)
Restructuring and Other Charges





In March
2009, the Company announced and implemented a reorganization plan, including an
approximate 8% reduction in the Company’s workforce, to align the Company’s
resources with its strategic business objectives. Additionally, effective March
21, 2009, the Company’s then Chief Executive Officer tendered his resignation,
and effective May 8, 2009, the Company’s then Chief Financial Officer tendered
his resignation, and in December 2009, the Company sold its Promotions.com
subsidiary and entered into negotiations to sublease certain office space
maintained by Promotions.com. As a result of these activities, the Company
incurred restructuring and other charges from continuing operations
approximating $3.5 million during the year ended December 31, 2009. Included in
this charge were severance and other payroll related expenses, totaling
approximately $1.9 million, $0.8 million related to the sublease of office space
previously occupied by our former Promotions.com subsidiary, $0.6 million of
professional fees, and $0.2 million related to the write-off of certain
assets.





Total
cash outlay for the restructuring and other charge will approximate $3.0
million, of which approximately $1.2 million is included in accrued expenses on
the Company’s consolidated balance sheet as of December 31,
2009.


F-38





The
following table displays the activity of the restructuring and other charges
reserve account from the initial charges during the first quarter 2009 through
December 31, 2009:





Initial
                    Charge
                  
                  
                  Additions
                  
                  
                  Payments
                  
                  
                  Noncash
                    Deductions
                  
                  
                  Balance
                    12/31/09Workforce
      reduction
                  
                  $
                  1,741,752
                  
                  
                  $
                  726,385
                  
                  
                  $
                  (1,779,163
                  )
                  
                  $
                  (208,918
                  )
                  
                  $
                  480,056Lease
      termination
                  
                  
                  -
                  
                  
                  
                  750,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  750,000Asset
      write-off
                  
                  
                  242,777
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (242,777
                  )
                  
                  
                  -$
                  1,984,529
                  
                  
                  $
                  1,476,385
                  
                  
                  $
                  (1,779,163
                  )
                  
                  $
                  (451,695
                  )
                  
                  $
                  1,230,056





(16)
Comprehensive (Loss) Income





Comprehensive
(loss) income consists of the following:





For the Year Ended December 31,2009
                                                
                                                
                                                2008
                                                
                                                
                                                2007Net
      (loss) income
                                                
                                                $
                                                (47,429,634
                                                )
                                                
                                                $
                                                543,788
                                                
                                                
                                                $
                                                30,294,962Recovery
      of temporary impairment of ARS
                                                
                                                
                                                185,000
                                                
                                                
                                                
                                                (290,000
                                                )
                                                
                                                
                                                -Unrealized
      gain on marketable securities
                                                
                                                
                                                744,802
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Reclass
      from AOCI to earnings due to sale
                                                
                                                
                                                (295,430
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Comprehensive
      (loss) income
                                                
                                                $
                                                (46,795,262
                                                )
                                                
                                                $
                                                253,788
                                                
                                                
                                                $
                                                30,294,962





(17)
Employee Benefit Plan





The
Company maintains a noncontributory savings plan in accordance with Section
401(k) of the Internal Revenue Code. The 401(k) plan covers all eligible
employees and provides an employer match of 50% of employee contributions, up to
a maximum of 4% of each employee’s total compensation.  The Company’s
matching contribution totaled $0.4 million, $0.4 million and $0.3 million for
the years ended December 31, 2009, 2008 and 2007, respectively.





(18)
Selected Quarterly Financial Data (Unaudited)





For
      the Year Ended December 31, 2009First Quarter
                                
                                
                                Second Quarter
                                
                                
                                Third Quarter
                                
                                
                                Fourth Quarter(In
      thousands, except per share data)Total
      revenue
                                
                                $
                                13,500
                                
                                
                                $
                                14,992
                                
                                
                                $
                                15,236
                                
                                
                                $
                                16,512Total
      operating expense
                                
                                
                                43,357
                                
                                
                                
                                15,263
                                
                                
                                
                                16,752
                                
                                
                                
                                17,836(Loss)
      income from continuing operations before income taxes
                                
                                
                                (29,472
                                )
                                
                                
                                350
                                
                                
                                
                                (1,295
                                )
                                
                                
                                (1,151
                                )Provision
      for income tax
                                
                                
                                (16,227
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                381(Loss)
      income from continuing operations
                                
                                
                                (45,699
                                )
                                
                                
                                350
                                
                                
                                
                                (1,295
                                )
                                
                                
                                (770
                                )Income
      (loss) from discontinued operations
                                
                                
                                1
                                
                                
                                
                                (10
                                )
                                
                                
                                (2
                                )
                                
                                
                                (4
                                )Net
      (loss) income
                                
                                
                                (45,698
                                )
                                
                                
                                340
                                
                                
                                
                                (1,297
                                )
                                
                                
                                (775
                                )Preferred
      stock dividends
                                
                                
                                96
                                
                                
                                
                                96
                                
                                
                                
                                96
                                
                                
                                
                                96Net
      (loss) income attributable to common stockholders
                                
                                $
                                (45,794
                                )
                                
                                $
                                244
                                
                                
                                $
                                (1,393
                                )
                                
                                $
                                (871
                                )Basic
      net (loss) income per share:(Loss)
      income from continuing operations
                                
                                $
                                (1.50
                                )
                                
                                $
                                0.01
                                
                                
                                $
                                (0.05
                                )
                                
                                $
                                (0.03
                                )Income
      (loss) from discontinued operations
                                
                                
                                0.00
                                
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      (loss) income
                                
                                
                                (1.50
                                )
                                
                                
                                0.01
                                
                                
                                
                                (0.05
                                )
                                
                                
                                (0.03
                                )Preferred
      stock dividends
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      (loss) income attributable to common stockholders
                                
                                $
                                (1.50
                                )
                                
                                $
                                0.01
                                
                                
                                $
                                (0.05
                                )
                                
                                $
                                (0.03
                                )Diluted
      net income (loss) per share:(Loss)
      income from continuing operations
                                
                                $
                                (1.50
                                )
                                
                                $
                                0.01
                                
                                
                                $
                                (0.05
                                )
                                
                                $
                                (0.03
                                )Income
      (loss) from discontinued operations
                                
                                
                                0.00
                                
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      (loss) income
                                
                                
                                (1.50
                                )
                                
                                
                                0.01
                                
                                
                                
                                (0.05
                                )
                                
                                
                                (0.03
                                )Preferred
      stock dividends
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      income (loss) attributable to common stockholders
                                
                                $
                                (1.50
                                )
                                
                                $
                                0.01
                                
                                
                                $
                                (0.05
                                )
                                
                                $
                                (0.03
                                )




F-39




For the Year Ended December 31, 2008First Quarter
                                
                                
                                Second Quarter
                                
                                
                                Third Quarter
                                
                                
                                Fourth Quarter(In thousands, except per share data)Total
      revenue
                                
                                $
                                17,992
                                
                                
                                $
                                18,404
                                
                                
                                $
                                17,049
                                
                                
                                $
                                17,403Total
      operating expense
                                
                                
                                16,994
                                
                                
                                
                                17,615
                                
                                
                                
                                17,981
                                
                                
                                
                                19,399Income
      (loss) from continuing operations before income taxes
                                
                                
                                1,684
                                
                                
                                
                                1,190
                                
                                
                                
                                (587
                                )
                                
                                
                                (1,733
                                )(Provision)
      benefit for income tax
                                
                                
                                (146
                                )
                                
                                
                                (126
                                )
                                
                                
                                (106
                                )
                                
                                
                                376Income
      (loss) from continuing operations
                                
                                
                                1,538
                                
                                
                                
                                1,064
                                
                                
                                
                                (693
                                )
                                
                                
                                (1,357
                                )Loss
      from discontinued operations
                                
                                
                                (3
                                )
                                
                                
                                (2
                                )
                                
                                
                                (3
                                )
                                
                                
                                (—
                                )Net
      income (loss)
                                
                                
                                1,535
                                
                                
                                
                                1,062
                                
                                
                                
                                (696
                                )
                                
                                
                                (1,357
                                )Preferred
      stock dividends
                                
                                
                                96
                                
                                
                                
                                96
                                
                                
                                
                                96
                                
                                
                                
                                96Net
      income (loss) attributable to common stockholders
                                
                                $
                                1,439
                                
                                
                                $
                                966
                                
                                
                                $
                                (792
                                )
                                
                                $
                                (1,453
                                )Basic
      net income (loss) per share:Income
      (loss) from continuing operations
                                
                                $
                                0.05
                                
                                
                                $
                                0.03
                                
                                
                                $
                                (0.03
                                )
                                
                                $
                                (0.05
                                )Loss
      from discontinued operations
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      income (loss)
                                
                                
                                0.05
                                
                                
                                
                                0.03
                                
                                
                                
                                (0.03
                                )
                                
                                
                                (0.05
                                )Preferred
      stock dividends
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      income (loss) attributable to common stockholders
                                
                                $
                                0.05
                                
                                
                                $
                                0.03
                                
                                
                                $
                                (0.03
                                )
                                
                                $
                                (0.05
                                )Diluted
      net income (loss) per share:Income
      (loss) from continuing operations
                                
                                $
                                0.04
                                
                                
                                $
                                0.03
                                
                                
                                $
                                (0.03
                                )
                                
                                $
                                (0.05
                                )Loss
      from discontinued operations
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      income (loss)
                                
                                
                                0.04
                                
                                
                                
                                0.03
                                
                                
                                
                                (0.03
                                )
                                
                                
                                (0.05
                                )Preferred
      stock dividends
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (0.00
                                )
                                
                                
                                (0.00
                                )Net
      income (loss) attributable to common stockholders
                                
                                $
                                0.04
                                
                                
                                $
                                0.03
                                
                                
                                $
                                (0.03
                                )
                                
                                $
                                (0.05
                                )





SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS


For
the Years Ended December 31, 2009, 2008 and 2007




Allowance for Doubtful
                        Accounts
                      
                      Balance
                        at
                        Beginning
                        of Period
                      
                      
                      Provisions
                        Charged to
                        Expense
                      
                      
                      Write-offs
                      
                      
                      Balance at
                        End
                        of PeriodFor
      the year ended December 31, 2009
                      
                      $
                      531,092
                      
                      
                      $
                      408,425
                      
                      
                      $
                      662,849
                      
                      
                      $
                      276,668For
      the year ended December 31, 2008
                      
                      $
                      242,807
                      
                      
                      $
                      692,405
                      
                      
                      $
                      404,120
                      
                      
                      $
                      531,092For
      the year ended December 31, 2007
                      
                      $
                      216,077
                      
                      
                      $
                      175,000
                      
                      
                      $
                      148,270
                      
                      
                      $
                      242,807


F-40


EXHIBIT
INDEX





ExhibitNumber
              
              Description*3.1
              
              Amended
      and Restated Certificate of Incorporation of the Company, incorporated by
      reference to the Exhibits to the Company’s Registration Statement on Form
      S-1 filed February 23, 1999.*3.2
              
              Amended
      and Restated Bylaws of the Company, incorporated by reference to the
      Exhibits to the Company’s Annual Report on Form 10-K filed March 30,
      2000.*4.1
              
              Amended
      and Restated Registration Rights Agreement dated December 21, 1998, by and
      among the Company and the stockholders named therein, incorporated by
      reference to the Exhibits to the Company’s Registration Statement on Form
      S-1 filed February 23, 1999.*4.2
              
              Certificate
      of Designation of the Company’s Series A Junior Participating Preferred
      Stock, incorporated by reference to the Exhibits to the Company’s
      Registration Statement on Form S-1 filed February 23,
  1999.*4.3
              
              Certificate
      of Designation of the Company’s Series B Preferred Stock, as filed with
      the Secretary of State of the State of Delaware on November 15, 2007,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed November 20, 2007.*4.4
              
              Option
      to Purchase Common Stock dated November 1, 2007, incorporated by reference
      to the Company’s Current Report on Form 8-K filed November 6,
      2007.*4.5
              
              Investor
      Rights Agreement dated November 15, 2007 by and among the Company, TCV VI,
      L.P. and TCV Member Fund, L.P., incorporated by reference to the Exhibits
      to the Company’s Current Report on Form 8-K filed November 20,
      2007.*4.6
              
              Warrant
      dated November 15, 2007 issued by the Company to TCV VI, L.P.,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed November 20, 2007.*4.7
              
              Warrant
      dated November 15, 2007 issued by the Company to TCV Member Fund, L.P.,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed November 20, 2007.*4.8
              
              Specimen
      certificate for the Company’s shares of Common Stock, incorporated by
      reference to the Exhibits to Amendment 3 to the Company’s Registration
      Statement on Form S-1 filed April 19, 1999.+*10.1
              
              Amended
      and Restated 1998 Stock Incentive Plan, dated May 29, 2002, incorporated
      by reference to the Exhibits to the Company’s Quarterly Report on Form
      10-Q filed August 14, 2002.+*10.2
              
              Form
      of Stock Option Grant Agreement under the 1998 Stock Incentive Plan,
      incorporated by reference to the Exhibits to the Company’s Annual Report
      on Form 10-K filed March 16, 2005.+*10.3
              
              Form
      of Restricted Stock Unit Grant Agreement under the 1998 Stock Incentive
      Plan, incorporated by reference to the Exhibits to the Company’s Annual
      Report on Form 10-K filed March 16, 2006.+*10.4
              
              2007
      Performance Incentive Plan, incorporated by reference to Appendix A to the
      Company’s 2007 Definitive Proxy Statement on Schedule 14A filed April 23,
      2007.+*10.5
              
              Form
      of Stock Option Grant Agreement under the Company’s 2007 Performance
      Incentive Plan, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed August 9, 2007.+*10.6
              
              Form
      of Restricted Stock Unit Grant Agreement under the Company’s 2007
      Performance Incentive Plan, incorporated by reference to the Exhibits to
      the Company’s Quarterly Report on Form 10-Q filed August 9,
      2007.








+*10.7
              
              Form
      of Cash Performance Award Agreement under the Company’s 2007 Performance
      Incentive Plan, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed August 9, 2007.+*10.8
              
              Employment
      Agreement dated April 9, 2008 between James Cramer and the Company,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed April 9, 2008.+*10.9
              
              Amendment
      to Employment Agreement dated July 30, 2008 between James Cramer and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Current Report on Form 8-K filed July 30, 2008.+*10.10
              
              Employment
      Agreement, dated September 13, 2007, by and between Thomas J. Clarke, Jr.
      and the Company, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q filed November 9,
      2007.+*10.11
              
              Letter
      Agreement dated October 24, 2008, by and between Thomas J. Clarke, Jr. and
      the Company amending the Employment Agreement dated September 13, 2007,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q filed November 7, 2008.+*10.12
              
              Employment
      Agreement dated June 30, 2008, by and between Eric Ashman and the Company,
      incorporated by reference to the Exhibits to the Company’s Current Report
      on Form 8-K filed June 30, 2008.+*10.13
              
              Employment
      Agreement dated March 26, 2007, by and between Steven Elkes and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed May 10, 2007.+*10.14
              
              Employment
      Agreement dated August 23, 2007, by and between David Morrow and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Quarterly Report on Form 10-Q filed November 9, 2007.+*10.15
              
              Employment
      Agreement dated May 15, 2008, by and between Teresa Santos and the
      Company, incorporated by reference to the Exhibits to the Company’s
      Current Report on Form 8-K filed May 15, 2008.*10.16
              
              Membership
      Interest Purchase Agreement dated August 2, 2007 by and among TP Newco
      LLC, David Barnett, Gregg Alwine and Gregg Alwine as Agent, incorporated
      by reference to the Exhibits to the Company’s Current Report on Form 8-K
      filed August 8, 2007.*10.17
              
              Stock
      Purchase Agreement dated November 1, 2007 by and among BFPC Newco LLC,
      Larry Starkweather, Kyle Selberg, Rachelle Zorn, Robert Quinn and Larry
      Starkweather as Agent, incorporated by reference to the Exhibits to the
      Company’s Current Report on Form 8-K filed November 6,
    2007.*10.18
              
              Securities
      Purchase Agreement dated November 15, 2007 by and among the Company, TCV
      VI, L.P. and TCV Member Fund, L.P., incorporated by reference to the
      Exhibits to the Company’s Current Report on Form 8-K filed November 20,
      2007.*10.19
              
              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 the
      Company, as Tenant, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q filed August 16,
    1999.*10.20
              
              Amendment
      of Lease dated October 31, 2001, between 14 Wall Street Holdings 1, LLC
      (as successor to W12/14 Wall Acquisition Associates LLC), as Landlord, and
      the Company, as Tenant, incorporated by reference to the Exhibits to the
      Company’s Annual Report on Form 10-K filed March 16,
  2005.*10.21
              
              Second
      Amendment of Lease dated March 21, 2007, between 14 Wall Street Holdings
      1, LLC as Landlord, and the Company, as Tenant, incorporated by reference
      to the Exhibits to the Company’s Annual Report on Form 10-K filed March
      12, 2008.








*10.22
              
              Third
      Amendment of Lease dated December 31, 2008, between CRP/Capstone 14W
      Property Owner, L.L.C. as Landlord, and the Company, as Tenant,
      incorporated by reference to the Exhibits to the Company’s Annual Report
      on Form 10-K filed March 13, 2009.+*10.23
              
              Amendment
      to Employment Agreement dated December 23, 2008 by and between James J.
      Cramer and the Company, incorporated by reference to the Exhibits to the
      Company’s Annual Report on Form 10-K/A filed February 8,
    2010.+*10.24
              
              Separation
      Agreement and Mutual Release between the Company and Thomas J. Clarke, Jr.
      dated March 13, 2009, incorporated by reference to the Exhibits to the
      Company’s Current Report on Form 8-K filed March 13,
  2009.+*10.25
              
              Term
      Sheet between the Company and Daryl Otte dated as of May 15, 2009,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.26
              
              Agreement
      for Grant of Restricted Stock Units Under 2007 Performance Incentive Plan
      dated as of June 9, 2009 between the Company and Daryl Otte, incorporated
      by reference to the Exhibits to the Company’s Quarterly Report on Form
      10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.27
              
              Change
      of Control and Severance Agreement dated as of June 9, 2009 between the
      Company and Daryl Otte, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30,
      2009, filed February 8, 2010.+*10.28
              
              Term
      Sheet between the Company and Gregory Barton dated as of June 2, 2009,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.29
              
              Notice
      of Waiver dated April 2, 2009 by James J. Cramer under Employment
      Agreement between the Company and James J. Cramer, incorporated by
      reference to the Exhibits to the Company’s Quarterly Report on Form 10-Q
      for the Quarter Ended June 30, 2009, filed February 8,
    2010.+*10.30
              
              Letter
      agreement dated April 30, 2009 between the Company and Richard Broitman,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.31
              
              Letter
      agreement dated May 8, 2009 between the Company and Eric Ashman,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+10.32
              
              Letter
      agreement dated as of March 13, 2009 between the Company and
      Daryl Otte.+*10.33
              
              Letter
      agreement dated June 10, 2009 between the Company and Teresa Santos,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2009, filed February 8,
      2010.+*10.34
              
              Form
      of Agreement of Restricted Stock Units Under the Company’s 2007
      Performance Incentive Plan, incorporated by reference to the Exhibits to
      the Company’s Quarterly Report on Form 10-Q for the Quarter Ended
      September 30, 2009, filed February 8, 2010.+*10.35
              
              Form
      of Agreement of Grant of Cash Performance Award Under the Company’s 2007
      Performance Incentive Plan, incorporated by reference to the Exhibits to
      the Company’s Quarterly Report on Form 10-Q for the Quarter Ended
      September 30, 2009, filed February 8, 2010.+*10.36
              
              Agreement
      of Grant of Restricted Stock Units dated July 14, 2009 between Gregory
      Barton and the Company, incorporated by reference to the Exhibits to the
      Company’s Quarterly Report on Form 10-Q for the Quarter Ended September
      30, 2009, filed February 8,
2010.








+*10.37
                  
                  Severance
      Agreement dated July 14, 2009 between Gregory Barton and the Company,
      incorporated by reference to the Exhibits to the Company’s Quarterly
      Report on Form 10-Q for the Quarter Ended September 30, 2009, filed
      February 8, 2010.+10.38
                  
                  Form
      of Indemnification Agreement for directors and executive officers of the
      Company.+10.39
                  
                  Amendment
      to 2007 Performance Incentive Plan, adopted by the Company November 20,
      2009.+10.40
                  
                  Amendment
      to Employment Agreement dated October 27, 2009 by and between James J.
      Cramer and the Company.*14.1
                  
                  Code
      of Business Conduct and Ethics, incorporated by reference to the Exhibits
      to the Company’s Current Report on Form 8-K filed January 31,
      2005.21.1
                  
                  Subsidiaries
      of the Company23.1
                  
                  Consent
      of KPMG LLP.23.2
                  
                  Consent
      of Marcum LLP.31.1
                  
                  Rule
      13a-14(a) Certification of CEO.31.2
                  
                  Rule
      13a-14(a) Certification of CAO.32.1
                  
                  Section
      1350 Certification of CEO.32.2
                  
                  Section
      1350 Certification of
CAO.







*
            Incorporated
      by reference


+
            Indicates
      management contract or compensatory plan or
  arrangement