Edgar Filing: THESTREET, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

Commission File Number 000-25779

THESTREET, INC.

(Exact name of Registrant as specified in its charter)


Delaware		06-1515824

(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

14 Wall Street

New York, New York 10005

(Address of principal executive offices, including zip code)

(212) 321-5000

(Registrant’s telephone number, including area code)

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 (§232.405 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 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 o	Non-accelerated filer o	Smaller reporting company x

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

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


		(Number of Shares Outstanding
(Title of Class)		as of August 1, 2012)

Common Stock, par value $0.01 per share		32,863,532

TheStreet, Inc.
Form 10-Q

As of and for the Three and Six Months Ended June 30, 2012


Part I - FINANCIAL INFORMATION		1
Item 1.	Interim Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II - OTHER INFORMATION		23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
SIGNATURES		27

Part I – FINANCIAL INFORMATION


Item 1.	Interim Condensed Consolidated Financial Statements.

THESTREET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2012			December 31, 2011

	(unaudited)			(audited)
ASSETS
Current Assets:
Cash and cash equivalents (Note 2)	$	20,535,644		$	44,865,191
Marketable securities (Note 2)		20,182,450			20,895,238
Accounts receivable, net of allowance for doubtful accounts of $140,027 as of June 30, 2012 and $158,870 as of December 31, 2011		4,732,132			6,225,424
Other receivables, net		824,280			356,219
Prepaid expenses and other current assets		1,791,938			1,421,955
Restricted cash		660,370			660,370

Total current assets		48,726,814			74,424,397

Property and equipment, net of accumulated depreciation and amortization of $15,036,740 as of June 30, 2012 and $13,466,365 as of December 31, 2011		6,666,870			8,494,648
Marketable securities (Note 2)		26,644,072			7,894,365
Other assets		125,312			172,055
Goodwill		24,057,616			24,057,616
Other intangibles, net of accumulated amortization of $5,852,290 as of June 30, 2012 and $5,529,730 as of December 31, 2011		4,509,575			5,370,135
Restricted cash (Note 2)		1,000,000			1,000,000

Total assets	$	111,730,259		$	121,413,216


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	2,403,355		$	2,305,589
Accrued expenses		5,489,694			7,970,802
Deferred revenue		18,306,929			17,625,666
Other current liabilities		537,723			509,214

Total current liabilities		26,737,701			28,411,271
Deferred tax liability		288,000			288,000
Other liabilities		3,922,943			4,569,497

Total liabilities		30,948,644			33,268,768


Stockholders’ Equity
Preferred stock; $0.01 par value; 10,000,000 shares authorized; 5,500 issued and outstanding as of June 30, 2012 and December 31, 2011; the aggregate liquidation preference totals $55,000,000 as of June 30, 2012 and December 31, 2011		55			55
Common stock; $0.01 par value; 100,000,000 shares authorized; 39,441,933 shares issued and 32,755,904 shares outstanding as of June 30, 2012, and 38,461,595 shares issued and 32,131,188 shares outstanding as of December 31, 2011		394,419			384,616
Additional paid-in capital		269,809,193			270,230,246
Accumulated other comprehensive income		(293,820	)		(394,600	)
Treasury stock at cost; 6,686,029 shares as of June 30, 2012 and 6,330,407 shares as of December 31, 2011		(11,750,434	)		(11,010,149	)
Accumulated deficit		(177,377,798	)		(171,065,720	)

Total stockholders’ equity		80,781,615			88,144,448

Total liabilities and stockholders’ equity	$	111,730,259		$	121,413,216

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

THESTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Three Months Ended June 30,						For the Six Months Ended June 30,

	2012			2011			2012			2011

	(unaudited)						(unaudited)
Net revenue:
Subscription services	$	8,849,822		$	10,074,931		$	18,039,803		$	19,684,432
Media		3,631,334			4,953,857			7,257,180			9,465,237

Total net revenue		12,481,156			15,028,788			25,296,983			29,149,669


Operating expense:
Cost of services		5,699,899			6,802,481			12,135,061			13,761,529
Sales and marketing		3,268,859			4,110,501			7,359,108			8,481,274
General and administrative		3,277,171			4,400,438			7,099,692			8,409,104
Depreciation and amortization		1,158,190			1,545,192			2,445,452			3,166,041
Restructuring and other charges		1,280,195			—			2,993,693			—
Gain on disposition of assets		(220,000	)		—			(220,000	)		—

Total operating expense		14,464,314			16,858,612			31,813,006			33,817,948

Operating loss		(1,983,158	)		(1,829,824	)		(6,516,023	)		(4,668,279	)
Net interest income		107,858			176,748			203,945			374,775

Loss from continuing operations before income taxes		(1,875,300	)		(1,653,076	)		(6,312,078	)		(4,293,504	)
Provision for income taxes		—			—			—			—

Loss from continuing operations		(1,875,300	)		(1,653,076	)		(6,312,078	)		(4,293,504	)
Discontinued operations:
Loss from discontinued operations		—			136			—			1,752

Net loss		(1,875,300	)		(1,653,212	)		(6,312,078	)		(4,295,256	)
Preferred stock cash dividends		96,424			96,424			192,848			192,848

Net loss attributable to common stockholders	$	(1,971,724	)	$	(1,749,636	)	$	(6,504,926	)	$	(4,488,104	)


Basic and diluted net loss per share
Loss from continuing operations	$	(0.06	)	$	(0.05	)	$	(0.19	)	$	(0.13	)
Loss from discontinued operations		—			(0.00	)		—			(0.00	)

Net loss		(0.06	)		(0.05	)		(0.19	)		(0.13	)
Preferred stock cash dividends		(0.00	)		(0.00	)		(0.01	)		(0.01	)

Net loss attributable to common stockholders	$	(0.06	)	$	(0.05	)	$	(0.20	)	$	(0.14	)


Weighted average basic and diluted shares outstanding		32,752,651			31,923,813			32,547,596			31,902,326

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

THESTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	For the Three Months Ended June 30,						For the Six Months Ended June 30,

	2012			2011			2012			2011

Net loss	$	(1,875,300	)	$	(1,653,212	)	$	(6,312,078	)	$	(4,295,256	)
Unrealized gain (loss) on marketable securities		46,866			(82,227	)		100,780			(215,895	)

Comprehensive loss	$	(1,828,434	)	$	(1,735,439	)	$	(6,211,298	)	$	(4,511,151	)

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

THESTREET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Six Months Ended June 30,

	2012			2011

	(unaudited)
Cash Flows from Operating Activities:
Net loss	$	(6,312,078	)	$	(4,295,256	)
Loss from discontinued operations		—			1,752

Loss from continuing operations		(6,312,078	)		(4,293,504	)
Adjustments to reconcile loss from continuing operations to net cash (used in) provided by operating activities:
Stock-based compensation expense		1,066,804			1,429,963
Provision for doubtful accounts		76,382			80,690
Depreciation and amortization		2,445,452			3,166,041
Restructuring and other charges		1,396,695			—
Deferred rent		(159,979	)		671,474
Noncash barter activity		109,510			—
Gain on disposition of assets		(220,000	)		—
Changes in operating assets and liabilities:
Accounts receivable		1,416,910			518,124
Other receivables, net		(468,061	)		40,997
Prepaid expenses and other current assets		(715,217	)		(218,065	)
Other assets		32,961			15,000
Accounts payable		97,766			(466,223	)
Accrued expenses		(2,534,003	)		(2,183,027	)
Deferred revenue		280,976			3,275,530
Other current liabilities		27,221			(16,172	)

Net cash (used in) provided by continuing operations		(3,458,661	)		2,020,828
Net cash used in discontinued operations		—			(3,577	)

Net cash (used in) provided by operating activities		(3,458,661	)		2,017,251


Cash Flows from Investing Activities:
Purchase of marketable securities		(41,151,130	)		(16,466,052	)
Sale and maturity of marketable securities		23,214,991			28,452,354
Capital expenditures		(714,193	)		(1,012,748	)
Proceeds from the disposition of assets		220,000			—
Sale of Promotions.com		—			265,000

Net cash (used in) provided by investing activities		(18,430,332	)		11,238,554


Cash Flows from Financing Activities:
Cash dividends paid on common stock		(1,642,421	)		(1,729,303	)
Cash dividends paid on preferred stock		(192,848	)		(192,848	)
Proceeds from the sale of common stock		135,000			—
Purchase of treasury stock		(740,285	)		(321,533	)

Net cash used in financing activities		(2,440,554	)		(2,243,684	)

Net (decrease) increase in cash and cash equivalents		(24,329,547	)		11,012,121
Cash and cash equivalents, beginning of period		44,865,191			20,089,660

Cash and cash equivalents, end of period	$	20,535,644		$	31,101,781


Supplemental disclosures of cash flow information:
Cash payments made for interest	$	—		$	—

Cash payments made for income taxes	$	—		$	—

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

TheStreet, Inc.

Notes to Condensed Consolidated Financial Statements
(unaudited)

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Business

TheStreet, Inc., together with its wholly owned subsidiaries (“TheStreet”, “we”, “us” or the “Company”), is a leading digital financial media company whose collection of digital services provides users, subscribers and advertisers with a variety of content and tools through a range of online, social media, tablet and mobile channels. Our mission is to provide actionable ideas from the world of investing, finance and business in order to break down information barriers, level the playing field and help all individuals and organizations grow their wealth. With a robust suite of digital services, TheStreet offers the tools and insights needed to make informed decisions about earning, investing, saving and spending money.

Since its inception in 1996, TheStreet believes it has distinguished itself from other financial media companies with its journalistic excellence, unbiased approach and interactive multimedia coverage of the financial markets, economy, industry trends, investment and financial planning.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and for quarterly reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements require the use of management estimates and include the accounts of the Company as required by GAAP. Operating results for the six month period ended June 30, 2012 is not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (“SEC”) on March 7, 2012 (“2011 Form 10-K”).

During 2011 and the three months ended March 31, 2012, the Company accrued quarterly expenses related to its full year cash incentive compensation on a straight-line basis based on the Company’s estimate of expected full year cash incentive compensation. Beginning with the three months ended June 30, 2012, the Company accrued expenses based upon achievement of periodic performance objectives and full year expectations.

The Company has evaluated subsequent events for recognition or disclosure.

Recent Accounting Pronouncements

In May 2011, the FASB issued FASB ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 provides new guidance for fair value measurements intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The amended guidance provides a consistent definition of fair value to ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The amended guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. The amended guidance is effective for interim and annual periods beginning after December 15, 2011. Early adoption was not permitted. The Company conformed to the new presentation required in ASU 2011-04 beginning with Form 10-Q for the three months ended March 31, 2012.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011 and is to be applied retrospectively. The FASB has deferred the requirement to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income. Companies are required to either present amounts reclassified out of other comprehensive income on the face of the financial statements or disclose those amounts in the notes to the financial statements. During the deferral period, there is no requirement to separately present or disclose the reclassification adjustments into net income. The effective date of this deferral will be consistent with the effective date of the ASU 2011-05. The Company adopted ASU 2011-05 in the first quarter of 2012 and disclosed comprehensive income in its unaudited consolidated statement of comprehensive income and note that this guidance affects financial statement presentation only and has no impact on the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Testing for Goodwill Impairment (“ASU 2011-08”). ASU 2011-08 permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 31, 2011. Early adoption was permitted. The implementation of ASU 2011-08 did not have a material impact on the Company’s consolidated financial statements.

2. CASH AND CASH EQUIVALENTS, MARKETABLE SECURITIES AND RESTRICTED CASH

The Company’s cash and cash equivalents primarily consist of money market funds and checking accounts totaling $20.5 million. Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, corporate floating rate notes, and two municipal auction rate securities (“ARS”) issued by the District of Columbia with a par value of approximately $1.9 million. The ARS pay interest in accordance with their terms at each respective auction date, typically every 35 days, and mature in the year 2038. As of June 30, 2012, the total fair value of these marketable securities was approximately $46.8 million and the total cost basis of was approximately $47.1 million. The maximum maturity for any investment is three years. 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 the securities are reported at fair value. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income and excluded from net loss. Additionally, the Company has a total of approximately $1.7 million of cash that serves as collateral for an outstanding letter of

credit, and which cash is therefore restricted. The letter of credit serves as a security deposit for the Company’s office space in New York City. As the lease agreement allows for a reduction in the amount of the security deposit as of November 2012, a portion of the restricted cash has been classified as a current asset.


	June 30, 2012		December 31, 2011

Cash and cash equivalents	$	20,535,644	$	44,865,191
Current and noncurrent marketable securities		46,826,522		28,789,603
Current and noncurrent restricted cash		1,660,370		1,660,370

Total cash and cash equivalents, current and noncurrent marketable securities and current and noncurrent restricted cash	$	69,022,536	$	75,315,164

3. FAIR VALUE MEASUREMENTS

The Company measures the fair value of its financial instruments in accordance with 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 June 30, 2012 are classified based on the valuation technique level in the table below:


	Total		Level 1		Level 2		Level 3

Description:
Cash and cash equivalents (1)	$	20,535,644	$	20,535,644	$	—	$	—
Marketable securities (2)		46,826,522		45,316,522		—		1,510,000

Total at fair value	$	67,362,166	$	65,852,166	$	—	$	1,510,000


(1)	Cash and cash equivalents, totaling approximately $20.5 million, consists primarily of money market funds and checking accounts for which we determine fair value through quoted market prices.

(2)	Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds and 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 having a fair value totaling approximately $1.5 million as of June 30, 2012. 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, whereas other-than-temporary impairment charges are recorded in our consolidated statement of operations. As of June 30, 2012, the Company determined there was a decline in the fair value of its ARS investments of approximately $0.3 million from its cost basis, which was deemed temporary and was included within accumulated other comprehensive 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.

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

Balance at January 1, 2012	$	1,410,000
Increase in fair value of investment		100,000

Balance at June 30, 2012	$	1,510,000

4. STOCK-BASED COMPENSATION

For a detailed description of past equity-based compensation activity, please refer to the Company’s 2011 Form 10-K. There have been no significant changes in the Company’s equity-based compensation accounting policies and assumptions from those that were disclosed in the 2011 Form 10-K.

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. The weighted-average grant date fair value per share of employee stock options granted during the six months ended June 30, 2012 and 2011 was $0.48 and $1.07, 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.


	For the Six Months Ended June 30,

	2012		2011

Expected option lives		3.5 years		3.5 years
Expected volatility		51.75%		55.98%
Risk-free interest rate		0.58%		1.54%
Expected dividend yield		5.47%		3.51%

As of June 30, 2012, there remained 844,432 shares available for future awards under the Company’s 2007 Performance Incentive Plan (the “2007 Plan”). In connection with awards under both the 2007 Plan and awards issued outside of the Plan, the Company recorded approximately $0.5 million and $1.1 million of non-cash stock-based compensation for the three and six month periods ended June 30, 2012, respectively, as compared to approximately $0.7 million and $1.4 million for the three and six month periods ended June 30,

2011, respectively. As of June 30, 2012, there was approximately $3.7 million of unrecognized stock-based compensation expense remaining to be recognized over a weighted-average period of 2.3 years.

A summary of the activity of the Company’s 1998 Stock Incentive Plan (the “1998 Plan”), the 2007 Plan, and awards issued outside of the Plan pertaining to stock option grants 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, 2011		1,008,544		$	4.63
Options granted		1,953,500		$	1.83
Options cancelled		(50,005	)	$	3.22
Options expired		(1,666	)	$	2.75

Awards outstanding, March 31, 2012		2,910,373		$	2.77
Options granted		255,874		$	1.73
Options cancelled		(216,505	)	$	2.22
Options expired		(132,495	)	$	8.76

Awards outstanding, June 30, 2012		2,817,247		$	2.44	$	—		5.39

Awards vested and expected to vest at June 30, 2012		2,420,712		$	2.53	$	—		5.26


Awards exercisable at June 30, 2012		425,694		$	5.32	$	—		1.53

A summary of the activity of the 1998 Plan and 2007 Plan pertaining to grants of restricted stock units 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, 2011		2,448,376		$	—
Restricted stock units granted		199,998		$	—
Restricted stock units settled by delivery of common stock upon vesting		(883,256	)	$	—
Restricted stock units cancelled		(307,337	)	$	—

Awards outstanding, March 31, 2012		1,457,781		$	—
Restricted stock units granted		43,246		$	—
Restricted stock units settled by delivery of common stock upon vesting		(22,082	)	$	—
Restricted stock units cancelled		(116,001	)	$	—

Awards outstanding, June 30, 2012		1,362,944		$	—	$	2,044		1.81

Awards vested and expected to vest at June 30, 2012		1,224,007		$	—	$	1,836		1.68


Awards exercisable at June 30, 2012		—		$	—	$	—		—

A summary of the status of the Company’s unvested share-based payment awards as of June 30, 2012 and changes in the six-month period then ended, is as follows:


Unvested Awards	Number of Shares			Weighted Average Grant Date Fair Value

Shares underlying awards unvested at December 31, 2011		3,095,801		$	2.39
Shares underlying options granted		2,209,374		$	0.48
Shares underlying restricted stock units granted		243,244		$	1.77
Shares underlying options vested		(198,736	)	$	0.93
Shares underlying restricted stock units vested		(905,338	)	$	2.80
Shares underlying options cancelled		(266,510	)	$	0.69
Shares underlying restricted stock units cancelled		(423,338	)	$	2.56

Shares underlying awards unvested at June 30, 2012		3,754,497		$	1.31

For the six months ended June 30, 2012 and 2011, the total fair value of share-based awards vested was approximately $2.0 million and $1.4 million, respectively. For the six months ended June 30, 2012 and 2011, the total intrinsic value of options exercised was $0 and $0, respectively (no options were exercised in either period). For the six months ended June 30, 2012 and 2011, 2,209,374 and 540,250 stock options, respectively, and 243,244 and 1,200,341 restricted stock units, respectively, were granted to employees of the Company. Additionally, for the six months ended June 30, 2012 and 2011, zero and zero stock options, respectively, were exercised, and 905,338 and 395,470 shares were issued under restricted stock unit grants, respectively, yielding cash proceeds of approximately $0 and $0, respectively, to the Company.

5. STOCKHOLDERS’ EQUITY

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 (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. However, the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a single class, is necessary for the Company to repurchase its stock (except for the purchase or redemption from employees, directors and consultants pursuant to agreements providing us with repurchase rights upon termination of their service with us), unless after such purchase we have unrestricted cash (net of all indebtedness for borrowed money, purchase money obligations, promissory notes or bonds) equal to at least two times the product obtained by multiplying the number of shares of Series B Preferred Stock outstanding at the time such dividend is paid by the liquidation preference. During the six-month periods ended June 30, 2012 and 2011, 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 approximately $7.3 million. 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 employees, and the issuance of shares of Common Stock in settlement of vested 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 June 30, 2012, the Company had withheld an aggregate of 1,021,005 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 December 2008 and 104,215 of which were received in September 2009, and 3,338 shares as partial settlement of

the working capital adjustment from the acquisition of Kikucall, Inc., which were received in March 2011. These shares have been recorded as treasury stock.

Dividends

On June 29, 2012, the Company paid its quarterly cash dividend of $0.025 per share on its Common Stock and its Series B Preferred Stock on a converted common share basis, to stockholders of record at the close of business on June 15, 2012. These dividends totaled approximately $0.9 million. When combined with the quarterly cash dividend paid on March 31, 2012, year-to-date dividend payments totaled approximately $1.8 million. The Company’s Board of Directors has suspended the payment of a dividend for the third quarter of 2012 but will continue thereafter to review the dividend payment each quarter. There can be no assurance that the Company will pay this cash dividend in the future.

6. LEGAL PROCEEDINGS

As previously disclosed, we conducted a review of the accounting in our former Promotions.com subsidiary, which subsidiary we sold in December 2009. As a result of this review, in February 2010 we filed a Form 10-K/A for the year ended December 31, 2008 and a Form 10-Q/A for the quarter ended March 31, 2009, respectively, to restate and correct certain previously-reported financial information as well as filed 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. We are 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 with respect to the Company, if any, cannot be predicted at this time.

In December 2010, the Company was named as one of several defendants in a lawsuit captioned EIT Holdings LLC v. WebMD, LLC et al., (U.S.D.C., D. Del.), on the same day that plaintiff filed a substantially identical suit against a different group of defendants in a lawsuit captioned EIT Holdings LLC v. Yelp!, Inc. et al., (U.S.D.C., N. D. Cal.). In February 2011, by agreement of plaintiff and the Company, the Company was dismissed from the Delaware action without prejudice and named as a defendant in the California action. In May 2011, the action against the Company and all defendants other than Yelp! Inc. (“Yelp!”) were dismissed for misjoinder and plaintiff filed separate cases against the dismissed defendants; the action against the Company is captioned EIT Holdings LLC v. TheStreet.com, Inc., (U.S.D.C., N. D. Cal.). The complaints allege that defendants infringe U.S. Patent No. 5,828,837 (the “Patent”), putatively owned by plaintiff, related to a certain method of displaying information to an Internet-accessible device. In January 2012, the court in the case against Yelp! granted Yelp!’s motion for summary judgment, finding the Patent to be invalid. In the event such judgment becomes final and nonappealable, plaintiff could not obtain an award of relief against any other party, including the Company, with respect to claims related to the Patent. The Company intends to vigorously defend itself and believes it has meritorious defenses. Due to the early stage of this matter and the inherent uncertainties of litigation, the ultimate outcome of this matter is uncertain.

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.

7. NET LOSS PER SHARE OF COMMON STOCK

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss 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 three months ended June 30, 2012 and 2011, approximately 5.4 million and 5.1 million unvested restricted stock units, vested and unvested 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 because the Company recorded a net loss. For the six months ended June 30, 2012 and 2011, approximately 4.6 million and 4.8 million unvested restricted stock units, vested and unvested 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 because the Company recorded a net loss.

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,

	2012			2011			2012			2011

Basic and diluted net loss per share:
Numerator:
Loss from continuing operations	$	(1,875,300	)	$	(1,653,076	)	$	(6,312,078	)	$	(4,293,504	)
Loss from discontinued operations		—			(136	)		—			(1,752	)
Preferred stock cash dividends		(96,424	)		(96,424	)		(192,848	)		(192,848	)

Numerator for basic and diluted earnings per share -
Net loss available to common stockholders	$	(1,971,724	)	$	(1,749,636	)	$	(6,504,926	)	$	(4,488,104	)


Denominator:
Weighted average basic and diluted shares outstanding		32,752,651			31,923,813			32,547,596			31,902,326


Basic and diluted net loss per share:
Loss from continuing operations	$	(0.06	)	$	(0.05	)	$	(0.19	)	$	(0.13	)
Loss from discontinued operations		—			(0.00	)		—			(0.00	)
Preferred stock cash dividends		(0.00	)		(0.00	)		(0.01	)		(0.01	)

Net loss available to common stockholders	$	(0.06	)	$	(0.05	)	$	(0.20	)	$	(0.14	)

8. 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, 2011, the Company had approximately $143 million of federal and state net operating loss carryforwards, which are available through 2031. Based on operating results for the six months ended June 30, 2012 and six month projections, management expects to generate a tax loss in 2012 and no tax benefit has been recorded. The Company has a full valuation allowance against its deferred tax assets as management concluded that it was more likely than not that the Company would not realize the benefit of its deferred tax assets by generating sufficient taxable income in future years. The Company 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.

In accordance with Section 382 of the Internal Revenue Code, the ability to utilize the Company’s net operating loss carryforwards could be limited in the event of a change in ownership and as such a portion of the existing net operating loss carryforwards may be subject to limitation. Such an ownership change would create an annual limitation on the usage of the Company’s net operating loss carryforward. The ultimate realization of net operating loss carryforwards is dependent upon the generation of future taxable income during the periods following an ownership change. As such, a portion of the existing net operating loss carryforwards may be subject to limitation. During the year ended December 31, 2009, the Company acquired approximately $3 million of net operating loss carryforwards 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.

9. BUSINESS CONCENTRATIONS AND CREDIT RISK

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. The Company maintains all of its cash and cash equivalents and restricted cash in six domestic financial institutions. The Company performs periodic evaluations of the relative credit standing of these institutions. As of June 30, 2012, the Company’s cash and cash equivalents and restricted cash primarily consisted of money market funds and checking accounts.

For the three and six months ended June 30, 2012 and 2011, no individual client accounted for 10% or more of consolidated revenue. As of June 30, 2012, no individual client accounted for more than 10% of our gross accounts receivable balance. As of December 31, 2011, one individual client accounted for more than 10% of our gross accounts receivable balance.

The Company’s customers are primarily concentrated in the United States and we carry accounts receivable balances. 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.

10. 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, 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 of approximately $3.5 million during the year ended December 31, 2009 (the “2009 Restructuring”).

The following table displays the activity of the 2009 Restructuring reserve account during the six months ended June 30, 2012 and 2011:


	For the Six Months Ended June 30,

	2012		2011

Beginning balance	$	674,365	$	844,761
Payments		64,635		56,764

Ending balance	$	609,730	$	787,997

In December 2011, the Company announced a management transition under which the Company’s chief executive officer would step down from his position by March 31, 2012. Additionally, in December 2011, a senior vice president separated from the Company. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $1.8 million during the year ended December 31, 2011 (the “2011 Restructuring”).

The following table displays the activity of the 2011 Restructuring reserve account during the six months ended June 30, 2012:


Beginning balance	$	1,178,647
Payments		1,072,549

Ending balance	$	106,098

During the six months ended June 30, 2012, the Company implemented a targeted reduction in force and committed to terminate use of certain vendor services and assets reflecting previously capitalized costs. The actions were taken after a review of the Company’s cost structure with the goal of better aligning the cost structure with the Company’s revenue base. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $3.0 million (the “2012 Restructuring”).

The following table displays the activity of the 2012 Restructuring reserve account during the six months ended June 30, 2012:


	Workforce reduction			Asset write-off			Termination of vendor services			Total

Restructuring charge Q1 2012	$	796,927		$	627,802		$	288,769		$	1,713,498
Noncash deductions		—			(627,802	)		(220,178	)		(847,980	)
Payments		(27,367	)		—			—			(27,367	)

Balance 3/31/12		769,560			—			68,591			838,151
Restructuring charge Q2 2012		897,322			326,500			56,373			1,280,195
Noncash deductions		(222,215	)		(326,500	)		—			(548,715	)
Payments		(694,454	)		—			(29,396	)		(723,850	)

Balance 6/30/12	$	750,213		$	—		$	95,568		$	845,781

11. 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, which are limited to certain professional fees, have been segregated from continuing operations and reported as a separate line item in the accompanying condensed consolidated statements of operations and cash flows. There were no cash flows from discontinued operations from investing or financing activities for the periods presented.

12. OTHER LIABILITIES

Other liabilities consist of the following:


	June 30, 2012		December 31, 2011

Deferred rent	$	3,116,211	$	3,277,478
Deferred revenue		677,565		1,077,852
Other liabilities		129,167		214,167

Total other liabilities	$	3,922,943	$	4,569,497


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Special Note Regarding Forward-Looking Statements – all statements contained in this quarterly report on Form 10-Q (the “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, including, without limitation, the Company’s annual report on Form 10-K for the year ended December 31, 2011 (“2011 Form 10-K”). 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 objectives 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. The forward-looking statements speak only as of the date of the filing of this Report; we have no obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise.

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

Overview

We report revenue in two categories: subscription services and media. Subscription services, previously referred to as premium services, revenue is comprised of subscriptions, licenses and fees for access to securities investment information and rate services. Media, previously referred to as marketing services, revenue is comprised of fees charged for the placement of advertising and sponsorships within our services, as well as licensing fees paid by third parties to obtain the right to display the Company’s awards logos on their Web sites and marketing materials in relation to certain award designations.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed 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 condensed consolidated financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying condensed consolidated financial statements include, but are not limited to, the following:


•	incentive cash compensation,
•	useful lives of intangible assets,
•	useful lives of fixed assets,
•	the carrying value of goodwill, intangible assets and marketable securities,
•	allowances for doubtful accounts and deferred tax assets,
•	accrued expense estimates,
•	reserves for estimated tax liabilities, and
•	certain estimates and assumptions used in the calculation of the fair value of equity compensation issued to employees.

A summary of our critical accounting policies and estimates can be found in our 2011 Form 10-K.

Results of Operations

Comparison of Three Months Ended June 30, 2012 and June 30, 2011

Revenue


	For the Three Months Ended June 30,

	2012		Percent of Total Revenue			2011		Percent of Total Revenue			Percent Change

Revenue:
Subscription services	$	8,849,822		71	%	$	10,074,931		67	%		-12	%
Media		3,631,334		29	%		4,953,857		33	%		-27	%

Total revenue	$	12,481,156		100	%	$	15,028,788		100	%		-17	%

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

Subscription services revenue for the three months ended June 30, 2012 decreased by 12% when compared to the three months ended June 30, 2011. This decrease is primarily the result of a 17% decrease in the weighted-average number of subscriptions during the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, partially offset by a 7% increase in the average revenue recognized per subscription during the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The decrease in the weighted-average number of subscriptions during the period is primarily the result of reduced acquisitions of new subscribers to our products. The increase in the average revenue recognized per subscription during the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 is primarily the result of the mix of products sold and higher product pricing.

Media. Media revenue is comprised of fees charged for the placement of advertising and sponsorships within our services, as well as licensing fees paid by third parties to obtain the right to display the Company’s awards logos on their Web sites and marketing materials in relation to certain award designations.

Media revenue for the three months ended June 30, 2012 decreased by 27% when compared to the three months ended June 30, 2011. The decrease in media revenue was primarily the result of reduced demand from repeat advertisers as well as new advertisers.

Operating Expense


	For the Three Months Ended June 30,

	2012			Percent of Total Revenue			2011		Percent of Total Revenue			Percent Change

Operating expense:
Cost of services	$	5,699,899			46	%	$	6,802,481		45	%		-16	%
Sales and marketing		3,268,859			26	%		4,110,501		27	%		-20	%
General and administrative		3,277,171			26	%		4,400,438		29	%		-26	%
Depreciation and amortization		1,158,190			9	%		1,545,192		10	%		-25	%
Restructuring and other charges		1,280,195			10	%		—		—			N/A
Gain on disposition of assets		(220,000	)		-2	%		—		—			N/A

Total operating expense	$	14,464,314					$	16,858,612					-14	%

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

Cost of services expense decreased by approximately $1.1 million, or 16%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 30% decrease in average headcount, combined with lower costs related to computer services and supplies, the aggregate of which decreased by approximately $1.4 million. These cost decreases were partially offset by increased costs related to the use of nonemployee content providers, as the company has shifted its strategy more towards a contributor/freelance model with fewer full time editorial staff, combined with higher costs related to revenue share payments made to certain distribution partners, the aggregate of which increased by approximately $0.3 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 46% in the three months ended June 30, 2012, from 45% in the prior year period, as our cost cutting initiatives did not completely offset the decline in revenue.

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

Sales and marketing expense decreased by approximately $0.8 million, or 20%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 17% decrease in average headcount. Sales and marketing expense includes approximately $0.1 million of barter expense in each of the three month periods ended June 30, 2012 and 2011. Sales and marketing expense as a percentage of revenue decreased to 26% in the three months ended June 30, 2012, from 27% in the prior year period resulting from our cost cutting initiatives.

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 decreased by approximately $1.1 million, or 26%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 17% decrease in average headcount, combined with lower professional fees and training costs, the aggregate sum of which decreased by approximately $0.9 million. General and administrative expense as a percentage of revenue decreased to 26% in the three months ended June 30, 2012, from 29% in the prior year period resulting from our cost cutting initiatives.

Depreciation and amortization. Depreciation and amortization expense decreased by approximately $0.4 million, or 25%, over the periods. The decrease is largely attributable to revisions to the estimated useful life of certain capitalized Web site development. Depreciation and amortization expense as a percentage of revenue decreased to 9% in the three months ended June 30, 2012, from 10% in the prior year period.

Restructuring and other charges. In March 2012, the Company began a targeted reduction in force and committed to terminate use of certain vendor services and assets reflecting previously capitalized costs. The actions were taken after a review of the Company’s cost structure with the goal of better aligning the cost structure with the Company’s revenue base. These restructuring efforts have continued during the second quarter of 2012. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $1.3 million during the three months ended June 30, 2012.

Gain on disposition of assets. In May 2012, the Company sold certain assets resulting in a gain of approximately $0.2 million.

Net Interest Income


	For the Three Months Ended June 30,				Percent Change

	2012		2011

Net interest income	$	107,858	$	176,748		-39	%

The decrease in net interest income is primarily the result of lower interest rates on bank deposits combined with reduced cash balances.

Net Loss

Net loss for the three months ended June 30, 2012 totaled approximately $1.9 million, or $0.06 per basic and diluted share, compared to net loss totaling approximately $1.7 million, or $0.05 per basic and diluted share, for the three months ended June 30, 2011.

Comparison of Six Months Ended June 30, 2012 and June 30, 2011

Revenue


	For the Six Months Ended June 30,

	2012		Percent of Total Revenue			2011		Percent of Total Revenue			Percent Change

Revenue:
Subscription services	$	18,039,803		71	%	$	19,684,432		68	%		-8	%
Media		7,257,180		29	%		9,465,237		32	%		-23	%

Total revenue	$	25,296,983		100	%	$	29,149,669		100	%		-13	%

Subscription services. Subscription services revenue for the six months ended June 30, 2012 decreased by 8% when compared to the six months ended June 30, 2011. This decrease is primarily the result of a 13% decrease in the weighted-average number of subscriptions during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, partially offset by a 7% increase in the average revenue recognized per subscription during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The decrease in the weighted-average number of subscriptions during the period is primarily the result of reduced acquisitions of new subscribers to our products. The increase in the average revenue recognized per subscription during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 is primarily the result of the mix of products sold and higher product pricing.

Media. Media revenue for the six months ended June 30, 2012 decreased by 23% when compared to the six months ended June 30, 2011. The decrease in media revenue was primarily the result of reduced demand from repeat advertisers as well as new advertisers.

Operating Expense


	For the Six Months Ended June 30,

	2012			Percent of Total Revenue			2011		Percent of Total Revenue			Percent Change

Operating expense:
Cost of services	$	12,135,061			48	%	$	13,761,529		47	%		-12	%
Sales and marketing		7,359,108			29	%		8,481,274		29	%		-13	%
General and administrative		7,099,692			28	%		8,409,104		29	%		-16	%
Depreciation and amortization		2,445,452			10	%		3,166,041		11	%		-23	%
Restructuring and other charges		2,993,693			12	%		—		—			N/A
Gain on disposition of assets		(220,000	)		-1	%		—		—			N/A

Total operating expense	$	31,813,006					$	33,817,948					-6	%

Cost of services. Cost of services expense decreased by approximately $1.6 million, or 12%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 19% decrease in average headcount, combined with lower costs related to computer services and supplies, the aggregate of which decreased by approximately $1.8 million. These cost decreases were partially offset by increased costs related to the use of nonemployee content providers, as the company has shifted its strategy more towards a contributor/freelance model with fewer full time editorial staff, combined with higher costs related to revenue share payments made to certain distribution partners, the aggregate of which increased by approximately $0.2 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% in the six months ended June 30, 2012, from 47% in the prior year period, as our cost cutting initiatives did not completely offset the decline in revenue.

Sales and marketing. Sales and marketing expense decreased by approximately $1.1 million, or 13%, over the periods. The decrease was primarily the result of reduced compensation expense due to an 8% decrease in average headcount, combined with reductions in credit card processing fees and public relations costs, the aggregate of which decreased by approximately $1.1 million. These cost decreases were partially offset by increased advertising and promotion related expense approximating $0.1 million. Sales and marketing expense includes approximately $0.1 million of barter expense in each of the six month periods ended June 30, 2012 and 2011. Although the dollar amount of sales and marketing expense decreased over the periods, sales and marketing expense as a percentage of revenue approximated 29% in the six months ended June 30, 2012, the same as in the prior year period, as our cost cutting initiatives were offset by the decline in revenue.

General and administrative. General and administrative expense decreased by approximately $1.3 million, or 16%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 12% decrease in average headcount, combined with lower professional, training, consulting and insurance costs, the aggregate sum of which decreased by approximately $1.3 million. These cost decreases were partially offset by increased recruiting fees approximating $0.2 million. General and administrative expense as a percentage of revenue decreased to 28% in the six months ended June 30, 2012, from 29% in the prior year period resulting from our cost cutting initiatives.

Depreciation and amortization. Depreciation and amortization expense decreased by approximately $0.7 million, or 23%, over the periods. The decrease is largely attributable to revisions to the estimated useful lives of certain capitalized Web site development. Depreciation and amortization expense as a percentage of revenue decreased to 10% in the six months ended June 30, 2012 from 11% in the prior year period.

structure with the Company’s revenue base. These restructuring efforts have continued during the second quarter of 2012. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $3.0 million during the six months ended June 30, 2012.

Gain on disposition of assets. In May 2012, the Company sold certain assets resulting in a gain of approximately $0.2 million.

Net Interest Income


	For the Six Months Ended June 30,				Percent Change

	2012		2011

Net interest income	$	203,945	$	374,775		-46	%

The decrease in net interest income is primarily the result of lower interest rates on bank deposits combined with reduced cash balances.

Net Loss

Net loss for the six months ended June 30, 2012 totaled $6.3 million, or $0.19 per basic and diluted share, compared to net loss totaling $4.3 million, or $0.13 per basic and diluted share, for the six months ended June 30, 2011.

Liquidity and Capital Resources

We generally have invested in money market funds and other short-term, investment grade instruments that are highly liquid and of high quality, with the intent that such funds are available for sale for operating purposes. As of June 30, 2012, our cash, cash equivalents, marketable securities, and restricted cash amounted to approximately $69.0 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 $46.8 million of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, and corporate floating rate notes, with a maximum maturity of three years. Marketable securities also include two auction rate securities issued by the District of Columbia with a fair value of approximately $1.5 million that mature in the year 2038. Our total cash-related position is as follows:


	June 30, 2012		December 31, 2011

Cash and cash equivalents	$	20,535,644	$	44,865,191
Current and noncurrent marketable securities		46,826,522		28,789,603
Current and noncurrent restricted cash		1,660,370		1,660,370

Total cash and cash equivalents, current and noncurrent marketable securities and current and noncurrent restricted cash	$	69,022,536	$	75,315,164

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 six domestic financial institutions and we perform periodic evaluations of the relative credit standing of these institutions.

Cash generated from operations was not sufficient to cover our expenses during the six-month period ended June 30, 2012. Net cash used in operating activities for the six-month period ended June 30, 2012 totaled approximately $3.5 million, as compared to net cash provided by operating activities totaling approximately $2.0

million for the six-month period ended June 30, 2011. The increase in net cash used in operating activities is primarily related to the following:


	•	a decrease in the growth of deferred revenue resulting from reduced subscription sales; and
	•	an increase in the net loss from continuing operations.

These increases in net cash used in operating activities were partially offset by improved collections on outstanding accounts receivable during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011.

Net cash used in investing activities of approximately $18.4 million for the six-month period ended June 30, 2012 was primarily the result of approximately $17.9 million of the net purchases of marketable securities combined with approximately $0.7 million of capital expenditures, partially offset by the proceeds from the disposition of assets of approximately $0.2 million.

Net cash used in financing activities of approximately $2.4 million for the six-month period ended June 30, 2012 primarily consisted of cash dividends paid and the purchase of treasury stock by retaining shares issuable upon the vesting of restricted stock units in connection with minimum tax withholding requirements, partially offset by cash received from the sale of the Company’s Common Stock.

We have a total of approximately $1.7 million of cash that serves as collateral for an outstanding letter of credit, and which cash is therefore restricted. The letter of credit serves as a security deposit for our office space in New York City. As the lease agreement allows for a reduction in the amount of the security deposit as of November 2012, a portion of the restricted cash has been classified as a current asset.

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 $2.2 million through June 30, 2013, primarily related to operating leases. Additionally, our Board of Directors declared a quarterly cash dividend in the amount of $0.025 per share of Common Stock and preferred stock (on a common share equivalent basis) during each of the first two quarters of 2012, which resulted in cash expenditures of approximately $1.8 million. Our Board of Directors has suspended the dividend payment for the third quarter of 2012 but will continue thereafter to review the dividend payment each quarter. There can be no assurance that we will pay this cash dividend in the future.

As of December 31, 2011, we had approximately $143 million of federal and state net operating loss carryforwards. Based on operating results for the six months ended June 30, 2012 and six-month projections, management expects to generate a tax loss in 2012 and no tax benefit has been recorded. We maintain a full valuation allowance against our deferred tax assets as management concluded that it was more likely than not that we would not realize the benefit of our deferred tax assets by generating sufficient taxable income in future years. We expect to continue to provide a full valuation allowance until, or unless, we can sustain a level of profitability that demonstrates our ability to utilize these assets.

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 (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. However, the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a single class, is necessary in order for us to be able to repurchase our Common Stock (except for the purchase or redemption from employees, directors and consultants pursuant to agreements providing us with repurchase rights upon termination of their service with us), unless after such purchase we have unrestricted cash (net of all indebtedness for borrowed money, purchase money obligations, promissory notes or bonds) equal to at least two times the product obtained by multiplying the number of shares of Series B Preferred Stock outstanding at the time such dividend is paid by the liquidation preference. During the six months ended June 30, 2012 we did not purchase any shares of Common Stock under the Program. Since inception of the Program, we have purchased a total of 5,453,416 shares of Common Stock at an aggregate cost of approximately $7.3 million. In addition, pursuant to the terms of the Company’s 1998 Stock Incentive Plan and our 2007 Performance Incentive Plan, and certain procedures adopted by the Compensation Committee of our Board of Directors, in connection with the exercise of stock options by certain of our employees, and the issuance of shares of Common Stock in settlement of vested restricted stock units, we may withhold shares in lieu of payment of the exercise price and/or the minimum amount of applicable withholding taxes then due. Through June 30, 2012, we have withheld an aggregate of 1,021,005 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, and 3,338 shares as partial settlement of a working capital adjustment related to our acquisition of Kikucall, Inc., which shares we received in March 2011. These shares have been recorded as treasury stock.


Item 3.	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 six domestic financial institutions, 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 4.	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In addition, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that during the period covered by this report, that there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.

PART II - OTHER INFORMATION


Item 1.	Legal Proceedings.

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 1A.	Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the information set forth in Part 1, Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2011, which we filed with the SEC on March 7, 2012.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

On March 7, 2012, in connection with the hiring of Elisabeth DeMarse as the Company’s Chief Executive Officer, the Company sold Ms. DeMarse a total of 75,000 shares of the Company’s Common Stock, for an aggregate purchase price of $135,000, representing a per share price equal to the closing price of the Company’s Common Stock as reported by Nasdaq on the date of sale. The securities so sold were not registered and were issued in reliance upon an exemption from registration requirements. Proceeds from the sale will be used for general corporate purposes.

The following table presents information related to repurchases of its Common Stock made by the Company during the three months ended June 30, 2012.


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 *

April 1 – 30, 2012		—	$	—		—	$	2,678,878
May 1 – 31, 2012		—	$	—		—	$	2,678,878
June 1 – 30, 2012		—	$	—		—	$	2,678,878

Total		—	$	—		—	$	2,678,878


Item 3.	Defaults Upon Senior Securities.

Not applicable.

Item 4.	Mine Safety Disclosures

Not applicable.

Item 5.	Other Information.

Not applicable.


Item 6.	Exhibits.

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:


Exhibit Number		Description


*3.1		Restated Certificate of Incorporation of the Company, incorporated by reference to the Exhibits to the Company’s Annual Report on Form 10-K filed March 14, 2011.
*3.2		Certificate of Amendment dated May 31, 2011 to Restated Certificate of Incorporation, incorporated by reference to the Exhibit to the Company’s Current Report on Form 8-K filed June 2, 2011.
*3.3		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		Letter agreement dated as of June 26, 2012 between the Company and Gregory Barton.
31.1		Rule 13a-14(a) Certification of CEO.
31.2		Rule 13a-14(a) Certification of CFO.
32.1		Section 1350 Certification of CEO.
32.2		Section 1350 Certification of CFO.
**101.INS		XBRL Instance Document
**101.SCH		XBRL Taxonomy Extension Schema Document
**101.CAL		XBRL Taxonomy Extension Calculation Document
**101.DEF		XBRL Taxonomy Extension Definitions Document
**101.LAB		XBRL Taxonomy Extension Labels Document
**101.PRE		XBRL Taxonomy Extension Presentation Document


*		Incorporated by reference
**		Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections

SIGNATURES

Pursuant to the requirements 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, INC.

Date: August 3, 2012	By:	/s/ Elisabeth DeMarse

		Name:	Elisabeth DeMarse
		Title:	Chief Executive Officer (principal executive officer)

Date: August 3, 2012	By:	/s/ Thomas Etergino

		Name:	Thomas Etergino
		Title:	Chief Financial Officer (principal financial officer)

EXHIBIT INDEX

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:


Exhibit Number		Description


*3.1		Restated Certificate of Incorporation of the Company, incorporated by reference to the Exhibits to the Company’s Annual Report on Form 10-K filed March 14, 2011.
*3.2		Certificate of Amendment dated May 31, 2011 to Restated Certificate of Incorporation, incorporated by reference to the Exhibit to the Company’s Current Report on Form 8-K filed June 2, 2011.
*3.3		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		Letter agreement dated as of June 26, 2012 between the Company and Gregory Barton.
31.1		Rule 13a-14(a) Certification of CEO.
31.2		Rule 13a-14(a) Certification of CFO.
32.1		Section 1350 Certification of CEO.
32.2		Section 1350 Certification of CFO.
**101.INS		XBRL Instance Document
**101.SCH		XBRL Taxonomy Extension Schema Document


**101.CAL		XBRL Taxonomy Extension Calculation Document
**101.DEF		XBRL Taxonomy Extension Definitions Document
**101.LAB		XBRL Taxonomy Extension Labels Document
**101.PRE		XBRL Taxonomy Extension Presentation Document


*		Incorporated by reference
**		Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections