SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1997 Transition report under Section 14
of 15(d) of the Securities Exchange Act of 1934 For the transition period from
to_____
Commission file number: 1-10932
INDIVIDUAL INVESTOR GROUP, INC.
(Name of Small Business Issuer in its Charter)
Delaware 13-3487784
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No)
1633 Broadway, 38th Floor, New York, NY 10019
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (212) 843-2777
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year $15,450,150
As of March 6, 1998, the aggregate market value of the Registrant's Common Stock
(based on the average bid and asked quotations of the Common Stock on that date
on NASDAQ) held by non-affiliates of the Registrant, was approximately
$31,233,496.
As of March 6, 1998, 7,211,319 shares of the Common Stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format Yes No x
DOCUMENTS INCORPORATED BY REFERENCE The information required in Part III by
items 9, 10, 11 and 12 is incorporated by reference to the Registrant's proxy
statement in connection with the Annual Meeting of Stockholders to be held June
17, 1998, which will be filed by the Registrant within 120 days after the close
of its fiscal year.
EXHIBIT INDEX - Page 33
Page 1 of 41 Pages
PART I
ITEM 1. BUSINESS
FINANCIAL INFORMATION SERVICES
Individual Investor Group, Inc. and its subsidiaries (the "Company") are
primarily engaged in providing financial information services. The Company's
information services operating subsidiaries are focused on providing research
and analysis of investment information to individuals and investment
professionals through a variety of publications and an online service. The
Company publishes and markets Individual Investor magazine, Ticker(sm) magazine,
Individual Investor Online (www.iionline.com), Individual Investor's Special
Situations Report, and the recently launched INDI 500(sm) index.
Individual Investor Magazine
The Company's flagship publication, Individual Investor, is a consumer-oriented
monthly investment magazine that offers commentary and opinion on investment
ideas. Individual Investor seeks differentiation among personal finance
magazines through its focus on identifying and recommending investment
opportunities on the basis of in-house research that uses proprietary analysis.
Individual Investor's editorial focus is based on analysis of investment
opportunities in public companies and mutual funds believed to have the
potential to achieve returns higher than those of the general market. In
addition to investment ideas, the publication seeks to provide the investor with
tools and knowledge to help with investment decisions.
Individual Investor is printed on a glossy, coated paper stock and has a basic
annual subscription rate of $22.95 ($2.95 newsstand price). Individual Investor
had a total paid subscriber and newsstand circulation of approximately 500,000
in March 1998, compared with total circulation of approximately 425,000 in March
1997. Individual Investor's revenue from advertising, circulation, list rental
and other sources aggregated $12,457,928, which is 81% of the Company's total
revenues for the year ended December 31, 1997.
Ticker Magazine
In October 1996 the Company began publishing Ticker magazine, a monthly trade
publication distributed without charge to a controlled circulation of 75,000
brokers, financial advisers and financial industry managers. In February 1998
the Company increased the circulation to 90,000, and concurrently implemented a
proportionate increase in advertising rates, which went into effect that month.
Ticker focuses on providing investment professionals with information to help
increase their business, manage their accounts more effectively, and improve
results for their clients. Ticker publishes articles on stocks, bonds, and
mutual funds, and it features interviews with selected analysts and research
specialists. Focus groups conducted in 1997 by Strategic Focus, Inc., consisting
of brokers and financial planners, indicated that, "In its first year of
publication, Ticker has established itself at the top end among controlled
circulation investment magazines." Ticker, now distributed primarily on a
monthly basis, mailed 10 issues in 1997. Ticker's revenue from advertising, list
rental and other sources totaled $1,275,062 for 1997, which is 8% of the
Company's total revenues for the year ended December 31, 1997.
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Individual Investor Online
The Company's web site for Internet users, www.iionline.com, provides investment
information and analysis for individual investors. Drawing on the
research-driven editorial focus of the Company's publications, www.iionline.com
provides users with research, analytical tools, and financial information, which
enables interaction between the Company's community of readers and analysts. As
of March 6, 1998, www.iionline.com had approximately 74,000 registered users and
was generating approximately one million page views per month. The web site
generated $210,020 in revenues, primarily from advertising, during the last four
months of the year, which is 1.4% of the Company's total revenues for the year
ended December 31, 1997.
The Company's strategy is to increase page views significantly by offering
certain of its proprietary content to other heavily trafficked online services
including Yahoo!, AOL's Digital City New York, and Quote.Com. Those sites boast
traffic that ranges up to 65 million page views per day. These content-sharing
arrangements are accomplished at little or no cost by using existing content
(e.g., "Stock of the Day," "Industry Analysis," and "Magic 25 Week in Review").
In exchange for providing proprietary content to those heavily trafficked sites,
they provide hyperlinks to www.iionline.com. If the arrangements are successful
in generating traffic to the Company's site, the Company anticipates revenue
from banner and sponsorship advertising to increase. The Company believes it may
also be able to generate revenue in the future by imposing a subscription charge
for online users who are not subscribers to the Company's magazines. The Company
also intends to license its content to other parties for a fee.
INDI 500
The Company has developed the INDI 500 index of small-cap stocks, which is
listed on the American Stock Exchange ("AMEX") under the ticker symbol NDI. The
index is comprised of companies selected primarily based upon earnings growth
and will be adjusted quarterly. Companies considered for inclusion must have a
market capitalization between $100 million and $2 billion, show earnings growth
in excess of 50% in their most recent quarter, and have at least $.05 per share
in their most recent quarterly earnings and positive revenue comparisons. The
Company has retained Lipper Analytical Services to help publicize and
disseminate the INDI 500 in order to achieve regular publication of the index
value in key financial media.
The Company intends to offer licensed use of the INDI 500 as the basis for
trusts and other derivative products which can be offered by one or more
independent issuers. The Company will seek to earn revenues from fees based on
the dollars invested in any such product. Although the Company has received
indications of interest, the Company cannot yet forecast the rate at which such
fees will be set or the revenues to be generated from this product line.
Individual Investor's Special Situations Report Newsletter
The Company also publishes Individual Investor's Special Situations Report
("SSR"), a monthly 12-page report that is mailed first class to subscribers.
Each issue of SSR features one new stock investment recommendation, including a
detailed research report that discusses the featured company's operating
history, future plans, management, and specific financial projections. In
addition, each issue
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reports on recent company developments of previously recommended stocks and
gives buy, hold, or sell recommendations on those stocks. SSR was developed by
the Company and launched in December 1989. The basic annual subscription price
is $165. As of March 1998, SSR had approximately 5,000 paid subscribers,
compared with 11,100 in March 1997. SSR's revenue from circulation and list
rental aggregated $919,189, which is 6% of the Company's total revenues for the
year ended December 31, 1997. In addition to the Company's distribution of SSR
via first class mail, the Company is considering the possibility of distributing
SSR through the Internet.
Circulation and Marketing
Circulation revenue from subscriptions for all publications accounted for
approximately 26% of the revenues of the Company for the year ended December 31,
1997 as compared to 43% for 1996. Circulation revenues for 1997 were $3,953,285
as compared to $5,611,099 in 1996. The Company obtains subscriptions for
Individual Investor through leading subscription agencies, such as American
Family Publishers and CAP Systems (airline frequent-flyer promotions). The
Company also solicits subscriptions for Individual Investor through direct-mail
marketing promotions, television, radio, and the Internet.
Individual Investor is distributed for sale on newsstands ("single-copy sales")
throughout the United States by an independent distributor. Single-copy sales
accounted for approximately 5% of the of the Company's revenues for the years
ended December 31, 1997 and 1996. Single copy revenues for 1997 were $750,321 as
compared to $712,105 in 1996. The average monthly paid single-copy sales
increased from 38,027 in 1996 to 46,459 in 1997. The Company has and is
continuing to expand Individual Investor's newsstand presence and nationwide
sales distribution. Effective July 1998 the Company is changing its distributor
to International Circulation Distributors, a subsidiary of The Hearst
Corporation.
Ticker is a controlled-circulation magazine distributed to brokers, financial
advisors and financial- industry professionals, whose names are obtained from
lists acquired by the Company, who must respond that they want to continue
receiving the publication in order to stay on the circulation list.
SSR is sold by subscription only. The Company uses targeted direct mail
solicitation to promote SSR and concentrates on cross-marketing this
higher-priced publication to the larger Individual Investor subscriber base.
The Company markets its online service through the content-sharing arrangements
described above as well as through print advertisements in its publications.
Advertising
Advertising revenues accounted for 62% of the Company's total revenue for
the year ended December 31, 1997 as compared to 42% for 1996. Advertising
revenues for 1997 were $9,578,573 as compared to $5,488,157 in 1996.
Advertising revenue is derived primarily from Individual Investor and
Ticker magazines. Advertising sales efforts are performed by the Company's
employees and by outside sales representatives located throughout the
United States. In addition, the Company's web site, www.iionline.com, began
to generate revenue in the last four months of 1997. The Company uses an
independent sales agent, Doubleclick Inc., to sell and deliver banner and
sponsorship advertising on www.iionline.com.
Advertising is sold primarily to three types of advertisers: (1)
financial-services companies, including brokerage firms, mutual funds, and
companies that provide investment-oriented products; (2) consumer advertisers,
including marketers of automobiles, computer products, clothing, and
accessories; and (3) public companies interested in attracting the publications'
readers as investors. Increased visibility and circulation of Individual
Investor have provided much of the growth in advertising revenue.
On the basis of independent subscriber studies, the Company believes that the
subscribers of Individual Investor and Ticker are financially sophisticated
individuals with substantial net worth, several years of investing experience,
and significant investment portfolios. The Company believes that those
demographics are a valuable tool in marketing advertising space in Individual
Investor and Ticker and on www.iionline.com.
The Company intends to increase advertising revenue by targeting national
consumer advertisers in such industries as automobiles, technology products, and
insurance. The Company believes that the growing circulation of Individual
Investor, the increased circulation base for Ticker, and the development of
www.iionline.com, as well as increased product awareness, will continue to
attract more attention to the magazines as an advertising medium. If the Company
can continue to increase the circulation base of Individual Investor, the
Company believes that it will be able to continue to increase its advertising
rates. In addition, if the number of page views on www.iionline.com increase,
the Company expects advertising revenues in this medium to grow.
List Rental Revenue
The Company earned 7% of its revenue from list rentals for the year ended
December 31, 1997, compared with 9% in 1996. List rental revenues for 1997 were
$1,039,833 as compared to $1,235,980 in 1996.The Company utilizes the services
of Rickard List Marketing, an independent list-management agent, to promote the
rental of the Company's subscriber lists.
Competition
The Company competes against other publications for both subscribers and
advertisers in the financial and consumer categories. The circulation of the
Company's publications and its revenue from circulation are smaller than the
circulation and revenue of most of its competitors. Some of the publications
that compete in Individual Investor's marketplace, are Money, Smart Money,
Kiplingers and Worth. In addition the magazine competes against publications
with a broader editorial focus, including The Wall Street Journal, Forbes,
Business Week, and Fortune. Ticker competes for advertising and readership with
other publications that target brokers, financial advisers and financial
industry managers. Those publications include Registered Representative,
Institutional Investor, Research and On Wall Street. The Company competes with
various online services including The Street.com, Yahoo! Finance, Microsoft
Investor, Motley Fool, as well as those sponsored by other publishers including
Money and Smart Money. The Company also competes with other online services,
research reports, newsletters, and other publications and services offered by
financial investment houses and publishers.
5
Production and Operations
All preliminary research and analysis is done by in-house research and editorial
staff. After the editorial content of the Company's publications is determined,
the articles are assigned to either in-house writers and researchers or
freelance writers. The financial tables included in Individual Investor are
provided by various vendors. The Company selects independent printers based on
their production quality and competitive costs and service. The Company uses
in-house software and hardware in the composition and layout of its
publications.
The Company uses an outside fulfillment service to manage its subscriber files.
The service includes receiving subscription orders and payments, sending renewal
and invoice notices to subscribers, and generating the subscribers' labels and
circulation information reports each month.
INVESTMENT MANAGEMENT SERVICES
The Company is also engaged in the investment management services business.
WisdomTree
A wholly-owned subsidiary of the Company, WisdomTree Capital Management, Inc.
("WTCM"), serves as general partner of (and investor in) a domestic private
investment fund known as WisdomTree Associates, L.P. ("WTA"). The Partnership
commenced operations on July 19, 1993. During 1996 WTCM, with the consent of a
majority of the limited partners, resolved to continue the partnership through
December 31, 1998. The Company, through WTCM and its wholly-owned subsidiary,
WisdomTree Administration, Inc. ("WTAI"), provides investment management
services to this fund, and to an offshore private investment fund, known as
WisdomTree Offshore, LTD ("WTOL"), which commenced operations in January 1996.
The funds specialize in investing in securities of relatively small, less
well-known public companies. The primary strategy in selecting these securities
is to focus on rapid growth in revenues and earnings which are expected to
result in above average increased share prices.
WTCM is entitled to receive a special allocation equal to 20% of the net income,
if any, of the funds (not including income earned on its own investment),
subject to certain limitations, calculated at year end, which is December 31st
for WTA and June 30th for WTOL. The total special allocations received from WTA
and WTOL in 1997 were $948,086, as compared to $225,405 in 1996.
WTAI receives a management fee equal to 1/4 of 1% of the net asset value of WTA,
calculated as of the last business day of each quarter, and a management fee
equal to 1/8 of 1% of the net asset value of WTOL, calculated monthly.
Management fees for the year ended December 31, 1997 totaled $442,320, as
compared to $668,801 in 1996.
Total equity under management by the Company as of December 31, 1997 for both
funds totaled approximately $47 million as of December 31, 1997 as compared to
approximately $66 million in 1996. The Company is currently assessing the
suitability of this business within the context of its strategic plans and will
consider the desirability of continuing, discontinuing or selling the business
during 1998.
6
I.I. Strategic Consultants, Inc.
Another wholly-owned subsidiary of the Company, I.I. Strategic Consultants, Inc.
(IIS), provides portfolio consultant services to Reich & Tang, a sponsor and
distributor of unit investment trusts, two of which have been marketed under the
Company's proprietary America's Fastest Growing Companies ("AFGC") service mark.
This operation is being phased out in connection with the Company's strategic
emphasis on information services and will be terminated in July 1998.
EMPLOYEES
As of March 6, 1998, the Company employed 78 persons on a full-time basis: 4
executive officers, 14 salespersons and marketers for advertising, 24
researchers, writers and editors, 7 art and production employees, 4 employees
who oversee circulation, 4 employees in the investment management fund business,
8 employees in on-line services and 13 administrative, accounting and support
personnel. In addition, the Company utilizes varying numbers of freelance
writers and interns. The Company also uses the services of outside advertising
sales representatives and a newsstand distribution consultant.
INTELLECTUAL PROPERTY
The Company believes that trademarks and service marks are important to its
business and actively pursues strategies to protect and strengthen its current
marks for use in connection with its products and for future products. The
Company is somewhat dependent on the use of certain marks in its operations,
particularly the names of its two magazines: Individual Investor and Ticker.
The Company has a perpetual license for use of the trademark INDIVIDUAL
INVESTOR. To perfect its interests in this mark the Company filed suit during
1997 against The American Association of Individual Investors, which is the
licensor, and a third party, which the Company believed infringed the mark. The
litigation was resolved favorably with an agreement by the third party not to
further infringe the mark. Nonetheless, the Company has begun negotiations with
the licenser to secure assignment of the trademark. There is no assurance the
Company will be successful in this negotiation. In any event, the Company will
continue to monitor and seek enforcement against any perceived infringement of
the mark.
An application to register the trademark TICKER was filed in November 1996 in
connection with the launch of this publication. Action on this pending trademark
application has been deferred by the Patent and Trademark Office pending the
issuance of two other pending applications, one for Global Ticker and one for
Snapshot Personal Ticker. The Company believes that these marks are not
confusingly similar and will pursue registration of this mark.
The Company also has registered the trademarks MAGIC 25 and AMERICA'S FASTEST
GROWING COMPANIES. The Company uses these marks regularly in its publications
and has licensed the latter in connection with certain other business
activities.
During 1997, the Company also undertook the development of intellectual property
rights with respect to several new marks which the Company intends to use in
connection with planned and/or potential business activities or, alternatively,
to sell to third parties.
7
In connection with the Company's launch of the INDI 500 index of small cap
stocks, the Company has made several applications to register an INDI family of
marks. The first, for INDI alone, will be published for opposition in March 1998
and the second, for INDI 500, will be published sometime shortly thereafter. If
no one successfully opposes these marks, trademark registrations will be issued.
ITEM 2. PROPERTIES
The Company leases 28,000 square feet of office space for its corporate office
at 1633 Broadway in New York, New York. The lease runs through March 30, 1999
and provides for an aggregate annual rent of $544,000 plus escalation costs. The
Company anticipates that it will relocate its corporate office at the end of
this lease at a significantly higher rental rate. The Company is currently
commencing its search for alternative space and believes that it will find
suitable space of comparable size but will incur expenses in connection with its
move and for capital improvements for its new space.
The Company also leases 10,000 square feet at its previous location, also in New
York City, which has been sublet as of February 1996 to a third party. The lease
for its former office space expires March 1, 2005, and provides for an aggregate
annual rent over the term of the sublease ranging from $160,000 to $210,000 plus
escalation costs. The sublease also expires on March 1, 2005, and provides for
aggregate annual rental receipts ranging from $160,000 to $205,000 over the term
of the sublease plus escalation costs.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time is involved in ordinary and routine litigation
incidental to its business. In the opinion of management, there is no pending
legal proceeding that would have a material adverse effect on the consolidated
financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
On December 9, 1996 the Company's Common Stock commenced trading on The Nasdaq
National Market, which is the principal trading market for the Company's Common
Stock, under the symbol INDI. The Company's Common Stock had been quoted on the
Nasdaq SmallCap Market and the Boston Stock Exchange since the Company's initial
public offering on December 4, 1991, under the symbol INDI.
8
The table below sets forth for the periods indicated the high and low bid price
quotations on the Nasdaq National Market, and The Nasdaq Small Cap Market for
the Company's Common Stock.
1997: Low ($) High ($)
First Quarter 6 9 1/2
Second Quarter 5 3/8 8 5/8
Third Quarter 6 3/4 8 1/4
Fourth Quarter 5 7/8 7 7/8
1996:
First Quarter 5 3/8 7
Second Quarter 5 7/8 13 1/2
Third Quarter 6 3/4 10 1/4
Fourth Quarter 6 3/4 8 1/2
These amounts represent quotations between d ealers in securities, do not
include retail markups, markdowns or commissions and may not necessarily
represent actual transactions. On March 6, 1998, the last sale price for the
Company's Common Stock, as reported by Nasdaq, was $ 6.375.
Holders
On March 6, 1998, there were 63 holders of record of the Company's Common Stock.
The Company believes that there are in excess of 2,100 beneficial owners of the
Company's Common Stock.
Dividends
To date, the Company has not paid any dividends on its Common Stock. The payment
of dividends, if any, in the future is within the discretion of the Board of
Directors and will depend upon the Company's earnings, its capital requirements
and financial condition, and other relevant factors. The Company does not intend
to declare any dividends in the foreseeable future, but instead intends to
retain any capital for use in the business.
Sales of Unregistered Securities
- -------------- --------------------- ----------- ----------------------------- -------------- -----------------------
Consideration received and Exemption If option, warrant or
Date of sale Title of security Number description of underwriting from convertible security,
Sold or other discounts to registration terms of exercise or
market price afforded to claimed conversion
purchasers
- ---------------- --------------------- ----------- ----------------------------- -------------- ----------------------------
- ---------------- --------------------- ----------- ----------------------------- -------------- ----------------------------
12/31/97 Common Stock 489,795 $3,000,000 Section 4(2) -
- ---------------- --------------------- ----------- ----------------------------- -------------- ----------------------------
- ---------------- --------------------- ----------- ----------------------------- -------------- ----------------------------
10/97 -12/97 Options to purchase 172,600 options granted - no Section 4(2) vesting over a period of
common stock consideration received by three years from date of
granted to Company until exercise grant, subject to certain
employees, conditions of continued
directors and service; exercisable for a
consultants period lasting ten years
from date of grant at
exercise prices of $6.125
to $7.875
- ---------------- --------------------- ----------- ----------------------------- -------------- ----------------------------
9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
When used in this Form 10-KSB and in future filings by the
Company with the Securities and Exchange Commission, the words or
phrases "will likely result," "management expects," or "the Company
expects," "will continue," "is anticipated," "estimated" or similar
expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. Readers are cautioned not to place undue reliance on any such
forward-looking statements, each of which speak only as of the date
made. Such statements are subject to certain risks and uncertainties,
some of which are described below, that could cause actual results to
differ materially from historical earnings and those presently
anticipated or projected. The Company has no obligation to publicly
release the result of any revisions which may be made to any forward-
looking statements to reflect anticipated events or circumstances
occurring after the date of such statements.
Year Ended December 31, 1997 as Compared to the Year Ended December
31, 1996
Operating Losses
The Company's operating loss increased by $1,662,941, or 49%, to
$5,029,631 for the year ended December 31, 1997, as compared to
$3,366,690 in 1996. This increase in operating loss relates primarily
to additional expenses in excess of revenue gains that have been
incurred on Ticker and with respect to the launch and development of
the online service www.iionline.com. Ticker incurred a negative
contribution (before deducting general and administrative expenses) of
approximately $0.8 million and the online service incurred a negative
contribution (also before deducting general and administrative
expenses) of approximately $0.5 million. The Company has made these
investments because the Company believes in the potential value of
these two products. In addition, during 1997 SSR's profit contribution
declined by approximately $0.5 million, to $0.4 million, because of
reduced subscription revenues while Individual Investor's profit
contribution increased by approximately $0.3 million, to $0.4 million
(each before deducting general and administrative expenses). General
and administrative and depreciation expenses increased by $0.5
million.
Revenues
Total revenues increased 18%, to $15,450,150 for the year ended
December 31, 1997, as compared to $13,044,111 for the year ended
December 31, 1996.
Advertising revenues increased 75%, to $9,578,573 for the year
ended December 31, 1997, as compared to $5,488,157 in 1996. Individual
Investor's advertising revenues increased 58%, to $8,151,599 in 1997,
as compared to $5,147,785 in 1996. This increase is primarily due to
increased advertising rates per page. As a result of the increase in
paid circulation of Individual Investor, effective November 1997 and
November 1996 the Company increased its advertising rates by
approximately 18% and 40%, respectively. Total advertising pages for
Individual Investor declined by approximately 2% in 1997. Although
financial advertising pages declined 7%, partially as a result of the
above rate increase, the category of higher margin consumer
advertising pages increased 32% in 1997. Ticker advertising
10
revenues increased to $1,221,955 for 1997 primarily due to ten issues
published in 1997 compared to two in 1996.Also conibuting somewhat to
the increase in advertising revene has been the Company's website,
www.iionline.com,which generated $210,020 during th lastfour months of
the year.
Circulation revenues decreased 30%, to $3,953,285 for the year
ended December 31, 1997, as compared to $5,611,099 in 1996. Individual
Investor had total circulation of approximately 500,000 in March 1998,
comprised of paid subscribers and newsstand distribution, as compared
to total circulation of approximately 425,000 in March 1997.
Nevertheless, subscription revenues for Individual Investor decreased
32%, to 2,406,436, while newsstand revenues for the magazine increased
by 5%, to $750,321. The decrease in subscription revenues is a direct
result of the reduction of direct mail and television campaigns in
favor of other sources for subscribers (such as the use of
subscription agencies and airline frequent flyer promotions) that
provide for continuing numbers of new subscribers with lower marketing
expenses but little or no subscription revenue. The Company believes
that Individual Investor subscription revenues will stabilize at
current levels. Subscription revenues for the Company's newsletter,
Special Situations Report, decreased 41%, to 796,528, as a result of a
decrease in subscribers. As of March 1998, Special Situations Report
had approximately 5,000 paid subscribers as compared to 11,100 in
March 1997. This decrease is a direct result of the reduction of
television campaign promotions. It is anticipated that subscription
revenues for Special Situations Report will continue to decline in the
near term, although based on current marketing plans the Company
believes that subscriber levels have stabilized. The Company does not
currently impose a separate charge for use of its online service.
List rental and other revenues decreased 5%, to $1,367,883 for
the year ended December 31, 1997 as compared to $1,437,786 in 1996.
List rental revenue decreased to $1,039,833 for the year ended
December 31, 1997 as compared to $1,235,980 in 1996. The decrease in
list rental revenue is attributable to reduced demand. Other revenues,
which primarily include the sale of reprints from Individual Investor
and Ticker magazines and revenues from an affinity credit card
agreement, increased to $328,050 in 1997 as compared to $201,806 in
1996.
Investment management services revenues were $1,448,644 for the
year ended December 31, 1997, as compared to $937,406 in 1996.
Revenues from investment management services are a combination of
management fees, being 1 to 1-1/2 percent of assets under management,
and a special profit allocation, being 20% of defined performance
(with $58,238 additional revenues being contributed as a result of the
Company's portfolio consulting activities). Total equity managed by
the Company decreased to approximately $47 million as of December 31,
1997 as compared to $66 million as of December 31, 1996. As a direct
result management fees earned by the Company decreased to $442,320 for
1997 as compared to $668,001 in 1996. This decrease in assets under
management in 1997 will mean lower management fees in 1998 as compared
to 1997. The performance of the managed funds was negative during
the year, as compared to positive performance by the Nasdaq Small Cap
market and the Russell 2000. The funds also experienced significant
volatility during 1997. The value of the funds decreased dramatically
in the first quarter of 1997, recovered that loss during the third
quarter and then saw a decline again by year end. The Company received
special profit allocations on the funds' performance of $948,086 for
1997 as compared to $225,405 in 1996. This was primarily due to the
increase in the value of additional investor contributions that were
received prior to the positive third quarter performance. As a result
of the declining fund performance over the last two years the assets
under management continue to decrease. If the negative performance
trend continues, the Company's management fees and potential special
profit allocation will be adversely affected, and further
11
withdrawals
of assets from the funds can be anticipated. Net withdrawals in excess
of contributions from the funds were approximately $13 million for
1997. In the first quarter of 1998 investors in the funds made net
withdrawals of approximately $4.4 million. The Company recognizes that
volatility in the performance of the Company's investment management
services business segment is to be anticipated. There can be no
assurance as to the funds' performance in 1998 or that each of the
managed fund's asset bases will be maintained at current levels by the
investors participating in such funds. The term of the domestic fund
expires at the end of 1998 and the continuance thereafter is
contingent upon the consent of the limited partners. However, the
Company is currently assessing the suitability of this business within
the context of its strategic plans and will consider the desirability
of continuing, discontinuing or selling the business in 1998.
Net depreciation in fund totaled $898,235 for the year ended
December 31, 1997 as compared to net depreciation of $430,337 in
1996. Net depreciation in fund directly relates to the realized and
unrealized earnings of the amount invested by the Company in the
domestic fund's portfolio which, because of the nature of the
investments as described above, will vary significantly from period to
period and may result in losses as well as income. No assurance can be
given that the Company will record income from its investments in
future periods. As discussed below, unless the Company obtains
additional financing from external sources, the Company will need to
withdraw all or a substantial portion of its investment, which totaled
$4,037,432 at December 31, 1997, in the second or third quarter of
1998.
Operating Expenses
Total operating expenses increased 25%, to $20,479,781 for the
year ended December 31, 1997 as compared to $16,410,801 in 1996.
Editorial, production and distribution expenses increased 45%, to
$9,672,297 for the year ended December 31,1997 as compared to
$6,683,047 in 1996. Individual Investor production costs increased by
$782,999, primarily due to approximately 1.7 million additional copies
printed in 1997, which reflects the increase in its subscription and
newsstand sales. Individual Investor distribution costs increased due
to approximately 1.4 million more copies mailed and a slight increase
in postage costs. Individual Investor editorial costs increased by
$531,158 due to increased personnel costs and other expenses including
manuscript preparation, art and design costs. Ticker incurred
additional production and distribution costs of $547,048 because
Ticker mailed only two issues in 1996, compared to 10 issues for the
year ended December 31,1997. Ticker editorial costs also increased by
$443,788 due to the full year of staff and related expenses in 1997.
The expenses incurred for establishing the Company's website,
iionline.com, totaled $1,030,091 for the year ended December 31, 1997
compared to $356,839 in 1996. The Company anticipates doubling its
direct expenses relating to online services in 1998 as it continues to
increase its investment in this business.
Promotion and selling expenses increased 11%, to $6,241,793 for
the year ended December 31, 1997 from $5,643,447 in 1996. Advertising
salaries and commissions have increased 57% as a result of higher
advertising revenues and additional sales personnel that have been
added. Subscription promotion costs decreased 9% as a result of a
decrease in direct mail and television campaigns in 1997.
12
General and administrative expenses increased 9%, to $4,222,386
for the year ended December 31, 1997 as compared to $3,885,348 in
1996. General and administrative salaries, payroll taxes, employee
benefits, and other related staffing costs increased to $1,900,434 for
the year ended December 31, 1997 as compared to $1,466,474 in 1996, an
increase of 30%. These added costs related to increases in
compensation and personnel to support the Company's growth, as well as
enhanced employee benefits. Also, as result of hiring additional
personnel, office postage, supplies and related expenses have
increased. Bad debt expense has decreased by 42%, to $120,606 for the
year ended December 31, 1997 as compared to $208,088 in 1996, relating
to improved collection procedures.
Depreciation and amortization expense increased 73%, to $343,305
in 1997 from $198,959 in 1996. The increase in 1997 is primarily
attributable to depreciation of office furniture and computer
equipment purchased to accommodate the increase in personnel during
the year.
Interest income decreased to $69,296 in 1997 from $177,238 in
1996. This decrease is primarily due to the reduced levels of cash and
cash equivalents available for investment by the Company during 1997.
The Company reported a net loss in 1997 and 1996 of $4,960,335
and $3,189,452, respectively. No income taxes were provided in 1997 or
1996 due to the net loss. The loss per common and equivalent share for
1997 and 1996 was $.77 and $.51, respectively.
Liquidity and Capital Resources
As of December 31, 1997, the Company had working capital of
$3,510,983, including cash and cash equivalents totaling $3,533,622.
In addition, the total value of the Company's investment in the
domestic private investment fund was $4,037,432, which is available,
subject to market fluctuations and liquidity, to provide working
capital to fund the Company's operations. As of March 16, 1998 the
value of this investment declined to approximately $3.5 million.
During 1997 the Company received $6,000,760 in proceeds from issuance
of common stock, including $3,250,000 from an affiliate of the
Company's Chairman, $2,000,000 from unrelated parties and the
remainder from exercises of stock options. During 1997 the Company
also withdrew $900,000 from its investment in the domestic fund. These
inflows helped to fund the Company's net cash used in operating
activities of $4,743,284 during 1997.
The Company incurred an operating loss of $5,029,631 for the year
ended December 31, 1997. This loss was attributable to a number of
factors, including the development of two new products. Ticker
incurred net expenses over revenues of approximately $0.8 million
(before deducting general and administrative expenses) and the
Company's investment in its online service incurred net expenses over
revenues of approximately $0.8 million (also before deducting general
and administrative expenses). In addition, during 1997 the Company
fell short on its goals for advertising pages sold (and the Company,
accordingly, did not meet its goals for advertising revenues), largely
resulting from the effect of rate increases implemented of
approximately 18% and 40% during November 1997 and November 1996,
respectively.
The Company's current level of revenues are not sufficient to
cover its expenses. Under its current business plan, during 1998 the
Company does not intend to significantly reduce its expenses, expects
to continue to invest in its existing products and anticipates losses
to continue in 1998.
13
Therefore,profitability will be achieved in future periods only if the
Company can substantially increase its revenues while controlling
increases in expenses. Provided the Company has the financial
resources,the company intends to increase its investment in its
online service since it believes that this line of business
offers the greatest opportunity for substantially generating
revenues over the longer term.
Management expects advertising revenues to continue to grow based
upon a number of factors. First, the Company expects to derive the
benefit of a full year of increased advertising rates for Individual
Investor. Second, the Company believes that it can attract more
advertising pages from higher margin consumer advertisers with the
hiring of new key sales personnel. Third, the Company expects to
realize the benefits of increased awareness of Ticker in the
marketplace and the effect of the new rate increase for Ticker
implemented in February 1998. Lastly, the Company expects to realize
higher revenues from a full year of operations of www.iionline.com, as
well as generate additional revenues from this growing medium. The
Company also believes that overall circulation revenues have
stabilized.
No assurance can be given that advertising revenues for
Individual Investor and Ticker will increase because higher
advertising rates may not be accepted by advertisers, advertising
pages may decline, and the advertising mix may change. Although the
Company has recently added key advertising sales personnel and
anticipates hiring a new publisher in the near future, no assurance
can be given that these changes will result in advertising revenue
increases. The Company also believes that a stock market correction or
"bear" market would affect its ability to sell advertising to the
financial advertiser categories. In addition, although the Company has
developed a specific marketing strategy for www.iionline.com, as
described above, no assurance can be given that this strategy will be
successful.
Based on the Company's business plan, the Company believes that
its working capital and its investment in the fund will be sufficient
to fund its operations and capital requirements through 1998, although
there can be no assurance that the assumptions in its business plan
will be realized. As of December 31, 1997, the total value of the
Company's investment in the domestic private investment fund was
$4,037,432, which has declined to approximately $3.5 million as of
March 16, 1998. This investment is available, subject to market
fluctuations and liquidity, to provide working capital to fund the
Company's operations. Unless the Company can obtain commitments for
additional capital by April 30, 1998, the Company will need to take
steps to withdraw all or at least most of its investment by the middle
of 1998 for working capital. Thereafter, if revenues have not been
significantly increased above current levels, the Company will need to
raise additional capital in order to sustain operations or else
consider the discontinuance or sale of parts of its current
operations. The Company has not yet determined the costs that it will
incur in connection with its anticipated relocation to new space in
early 1999, although it can be expected to be substantial. No
assurance can be given as to the availability of additional financing
or, if available, the terms upon which it may be obtained. Any such
additional financing may result in dilution of an investor's equity
investment in the Company. Failure to obtain additional financing on
favorable terms could have a substantial adverse effect on the
Company's future ability to conduct operations. There can be no
assurance that additional losses will not be incurred in the future,
or that the Company will be able to operate profitably in the future.
In August 1997 the Company retained the investment banking firm
of Bear, Stearns & Co. Inc. ("Bear Stearns") to assist the Company in
exploring strategic initiatives to enhance shareholder value, the
process for which is continuing. With the assistance of Bear Stearns,
the Company has focused on various alternatives including identifying,
evaluating, and approaching potential strategic partners seeking
investment positions in the Company's information services business.
Year 2000
14
The Company has evaluated the potential impact of the situation
commonly referred to as the "Year 2000 Issue" ("Y2K"). Y2K concerns
the inability of information systems, primarily computer software
programs, to properly recognize and process date sensitive information
relating to the year 2000 and beyond. Many of the world's computer
systems currently record years in a two-digit format. Such computer
systems will be unable to properly interpret dates beyond the year
1999, which could lead to business disruptions in the U.S and
internationally. The potential costs and uncertainties associated with
Y2K will depend on a number of factors, including software, hardware
and the nature of the industry in which a company operates.
To ensure that the Company's computer systems are Y2K compliant,
the Company has been reviewing each of its systems and programs over
the past year. The Company is also working with all of its major
external vendors and suppliers to assess their compliance efforts and
the Company's exposure to them. Any entities which the Company
interacts with electronically, such as its outside subscription
fulfillment service, customers, creditors and banks, can have an
effect on its abilities to address this issue.
As a result of researching the Company's hardware and software,
and discussing Y2K with the Company's external vendors and suppliers,
it has been determined that, based upon available information,
additional costs associated with Y2K should not have a material effect
on the Company's operating results or financial condition.
15
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Reports ..................................... 17-18
Consolidated Balance Sheet as of December 31, 1997 ..................19
Consolidated Statements of Operations for the Years
Ended December 31,1997 and 1996 ................................20
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1997 and 1996 ...............................21
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997 and 1996 .............................. 22
Notes to Consolidated Financial Statements ..........................23-31
16
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Individual Investor Group, Inc.
We have audited the accompanying consolidated balance sheet
of Individual Investor Group, Inc. and subsidiaries (the
"Company") as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity,
and cash flows for each of the two years in the period then
ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits. We did not audit the financial statements of
WisdomTree Associates, L.P. (the "Partnership"), the
Company's investment in which is accounted for by use of the
equity method. The Company's equity of $4,037,432 in the
Partnership's net assets at December 31, 1997, and its
special profit allocation of $888,168 and $75,108, and net
depreciation in fund of $898,235 and $430,337 for the years
ended December 31, 1997 and 1996, respectively, are included
in the accompanying financial statements. The financial
statements of the Partnership were audited by other auditors
whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for the
Partnership, is based solely on the report of such other
auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the
report of the other auditors provide a reasonable basis for
our opinion.
In our opinion, based on our audits and the report of the
other auditors, such consolidated financial statements
present fairly, in all material respects, the financial
position of Individual Investor Group, Inc. and subsidiaries
as of December 31, 1997, and the results of their operations
and their cash flows for each of the two years in the period
then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
March 17, 1998
Report of Independent Auditors
The Partners of
WisdomTree Associates, L.P.
We have audited the statement of financial
condition, including the condensed schedule of investments,
of WisdomTree Associates, L.P. (a Limited Partnership) (the
"Partnership"), as of December 31, 1997 and the related
statements of operations, changes in partners' capital and
cash flows for each of the two years in the period then
ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of WisdomTree Associates, L.P. at December 31, 1997
and the results of its operations and its cash flows for each
of the two years in the period then ended in conformity with
generally accepted accounting principles.
Ernst & Young LLP
New York, N.Y.
February 27, 1998
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1997
ASSETS
Current assets:
Cash and cash equivalents $3,533,622
Accounts receivable (net of allowances of $533,693) 2,993,299
Prepaid expenses and other current assets 224,801
---------------
Total current assets 6,751,722
Investment in fund (Note 2) 4,037,432
Deferred subscription expense 426,826
Property and equipment - net (Note 3) 556,070
Other assets 384,917
===============
Total assets $12,156,967
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,093,987
Accrued expenses (Note 4) 803,502
Deferred revenue 343,250
---------------
Total current liabilities 3,240,739
Deferred subscription revenue 2,661,129
---------------
Total liabilities 5,901,868
---------------
Commitments and contingencies (Note 5)
Stockholders' Equity: (Note 8)
Preferred stock, $.01 par value, authorized 2,000,000 shares -
Common stock, $.01 par value; authorized
18,000,000 shares; issued and outstanding 7,146,071 71,461
Additional paid-in capital 19,514,363
Accumulated deficit (13,330,725)
---------------
Total stockholders' equity 6,255,099
---------------
===============
Total liabilities and stockholders' equity $12,156,967
===============
See Notes to Consolidated Financial Statements
19
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------------------------------
1997 1996
--------------------- ----------
Revenues
Financial Information Services:
Advertising $9,578,573 $5,488,157
Circulation 3,953,285 5,611,099
List rental and other 1,367,883 1,437,786
--------------------- ---------------------
Total financial information services revenues 14,899,741 12,537,042
Investment management services (Note 2) 1,448,644 937,406
Net depreciation in fund (Note 2) (898,235) (430,337)
--------------------- ---------------------
Total revenues 15,450,150 13,044,111
--------------------- ---------------------
Operating expenses:
Editorial, production and distribution 9,672,297 6,683,047
Promotion and selling 6,241,793 5,643,447
General and administrative 4,222,386 3,885,348
Depreciation and amortization 343,305 198,959
--------------------- ---------------------
Total operating expenses 20,479,781 16,410,801
--------------------- ---------------------
--------------------- ---------------------
Operating loss (5,029,631) (3,366,690)
--------------------- ---------------------
Interest income 69,296 177,238
===================== =====================
Net loss ($4,960,335) ($3,189,452)
===================== =====================
Loss per weighted average common share ($0.77) ($0.51)
Weighted average number of common
shares outstanding during the period 6,466,168 6,198,260
See Notes to Consolidated Financial Statements
20
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Note 8)
Unrealized /
Common Sto Additional (Realized) Gain
Shares Par Paid-in Accumulated Treasury Son Marketable
Issued Value Capital Deficit Shares Amount Securities Total
Balance, January 1, 1996 6,335,181 $63,353 $15,586,315 ($5,180,938) 31,822 - - $10,468,730
Exercise of options - net 88,760 887 388,174 - - - - 389,061
Repurchase and retirement of common s (250,000) (2,500) (2,450,846) - 250,000 - - (2,453,346)
Retirement of treasury stock (31,822) (319) - - (281,822) - - (319)
Net unrealized gain on marketable sec - - - - - - 22,433 22,433
Net loss - - - (3,189,452) - - - (3,189,452)
Balance, December 31, 1996 6,142,119 61,421 13,523,643 (8,370,390) - - 22,433 5,237,107
Exercise of options - net 153,983 1,540 749,220 - - - - 750,760
Issuance of Common Stock 849,969 8,500 5,241,500 - - - - 5,250,000
Net realized gain on marketable secur - - - - - - (22,433) (22,433)
Net loss - - - (4,960,335) - - - (4,960,335)
Balance, December 31, 1997 7,146,071 $71,461 $19,514,363 ($13,330,725) - - - $6,255,099
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1997 1996
Cash flows from operating activities:
Net loss ($4,960,335) ($3,189,453)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 343,305 198,959
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (412,027) (1,091,637)
Prepaid expenses and other assets (80,055) (135,840)
Deferred subscription expense 530,588 339,192
Increase (decrease) in:
Accounts payable and accrued expenses 159,598 214,436
Deferred revenue 343,250 -
Deferred subscription revenue (667,608) (45,519)
Net cash used in operating activities (4,743,284) (3,709,862)
Cash flows from investing activities:
Purchase of property and equipment (178,372) (513,619)
Net depreciation in fair value of investment in f 10,067 355,229
Withdrawals from fund, net 900,000 1,200,000
Net cash provided by investing activities 731,695 1,041,610
Cash flows from financing activities:
Proceeds from exercise of stock options 750,760 389,061
Proceeds from issuance of Common Stock (note 8) 5,250,000 -
Common Stock Repurchased (note 9) - (2,453,346)
Net cash provided by (used in) financing ac 6,000,760 (2,064,285)
Net increase (decrease) in cash and cash equivale 1,989,171 (4,732,536)
Cash and cash equivalents, beginning of period 1,544,451 6,276,987
Cash and cash equivalents, end of period $3,533,622 $1,544,451
See Notes to Consolidated Financial Statements
2
INDIVIDUAL INVESTOR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Individual Investor Group, Inc. and subsidiaries (the
"Company") is a financial information services company that
publishes and markets Individual Investor, a personal finance and
investment magazine, Ticker, a magazine for investment
professionals, Individual Investor's Special Situations Report, a
financial investment newsletter, and Individual Investor Online a
website located at www.iionline.com. The Company contracts with
unaffiliated suppliers for paper, printing, binding, subscription
fulfillment, newsstand distribution and list management. In
addition, the Company provides investment management services to
two private investment funds and is a portfolio consultant to a
sponsor of unit investment trusts.
Principles of Consolidation - The consolidated financial
statements include the accounts of Individual Investor Group,
Inc. and its subsidiaries: Individual Investor Holdings, Inc.,
WisdomTree Capital Management, Inc., WisdomTree Administration,
Inc., WisdomTree Capital Advisors, LLC, I.I Interactive, Inc. and
I.I. Strategic Consultants, Inc. Investment in fund (note 2) is
accounted for under the equity method since the Company exercises
significant influence over the operating and financial affairs of
the fund.
Revenue Recognition - Advertising and circulation revenues
are recognized, net of agency commissions and estimated returns
and allowances, when publications are issued. Deferred
subscription revenue, net of agency commissions, is recorded when
subscription orders are received. Investment management services
and online income are recognized as earned. List rental income is
recognized, net of commission, when a list is provided.
Deferred Subscription Expense - The Company defers direct
response advertising costs incurred to elicit subscription sales
from customers who could be shown to have responded specifically
to the advertising and that resulted in probable future economic
benefits. Such deferred costs, which consist primarily of direct
mail and television campaign costs, are amortized over the
estimated period of future benefit, ranging from 12 to 21 months.
Property and Equipment - Property and equipment are recorded
at cost. Depreciation of property and equipment is calculated on
the straight-line method over the estimated useful lives of the
respective assets, ranging from three to seven years. Leasehold
improvements are amortized over the lesser of the useful life of
the asset or the term of the lease.
Income Taxes - Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible
temporary differences, and operating loss carryforwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not
that some portion or all of the deferred tax assets may not be
realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of
enactment.
23
Financial Instruments - For financial instruments including
cash, accounts receivable and payable and accruals, the carrying
amount approximated fair value because of their short maturity.
As of December 31, 1997 cash equivalents consist of investments
in a government fund that invests in securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentality's, which have average maturities of 30 days.
Stock-Based Compensation - In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation" the Company continues to apply the
measurement and recognition provisions of Accounting Principal
Board Opinion No. 25 and related interpretations in accounting
for issuance of employee stock options.
Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and
expenses reported in the financial statements. Significant
accounting estimates used include estimates for sales returns and
allowances, segment information and proforma disclosures
regarding the fair value of stock options granted in 1997 and
1996. Actual results could differ from those estimates.
Earnings Per Share - The Company adopted SFAS No. 128,
"Earnings Per Share" which became effective for the Company's
consolidated financial statements beginning in the fourth quarter
of 1997. SFAS No. 128 eliminates the disclosure of primary
earnings per share which includes the dilutive effect of stock
options, warrants, and other convertible securities ("Common
Stock Equivalents") and instead requires reporting of "basic"
earnings per share, which excludes Common Stock Equivalents.
Additionally, SFAS No. 128 changes the methodology and criteria
for calculating and reporting fully diluted earnings per share.
The loss per common share for both 1997 and 1996 is computed
based on the weighted average number of common shares
outstanding. The exercise of stock options and warrants were not
assumed in the computation of loss per common share, as the
effect would have been antidilutive. The adoption of this new
accounting standard did not have a material effect on the
reported loss per share of the Company.
Disclosure of Information about Capital Structure.In
February 1997,the Financial Accounting Standards Board issued
SFAS No. 129, "Disclosure of Information about Capital
Structure". SFAS No. 129 requires an entity to describe the
pertinent rights and privileges of its various securities
outstanding. The adoption of SFAS No. 129 did not have a
significant impact on the consolidated financial statements of
the Company.
Reporting Comprehensive Income. In September 1997, the
Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive
Income", which becomes effective for the Company's 1998
consolidated financial statements. SFAS No. 130 requires the
disclosure of comprehensive income, defined as the change in
equity of a business enterprise from transactions and other
events and circumstances from nonowner sources, in the Company's
consolidated financial statements. In the opinion of the
Company's management, the adoption of this new accounting
standard will not have a material effect on the consolidated
financial statements of the Company.
24
Disclosure about Segments of an Enterprise and Related
Information. In September 1997, the Financial Accounting
Standards Board issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", which becomes
effective for the Company's 1998 consolidated financial
statements. SFAS No. 131 requires that a public business
enterprise report certain financial and descriptive information
about its reportable operating segments. In the opinion of the
Company's management, the adoption of this new accounting
standard will not have a material effect on the consolidated
financial statements of the Company.
2. INVESTMENT MANAGEMENT SERVICES
The Company, through a wholly-owned subsidiary, WisdomTree
Capital Management, Inc. ("WTCM"), serves as General Partner of
(and investor in) a private investment fund, whereby it provides
investment management services and makes investment decisions for
the fund. The value of the Company's investment in the fund
decreased to $4,037,432 as of December 31, 1997, compared to
$4,947,500 in 1996. This decrease resulted from net losses on the
Company's investment in the fund of $898,235, withdrawals of
$900,000 by the Company, offset by a $888,168 special profit
allocation.
The fund's investments are valued at market at each
reporting date, with unrealized gains and losses reported in net
income. Accordingly, the Company's investment in the fund (and
equity in net income or loss of fund) is subject to fluctuations
in value due to fund performance and prevailing stock market
conditions. The Company recorded net depreciation in the fund of
$898,235 and $430,337 in 1997 and 1996 respectively. Selected
financial information for the fund at December 31, 1997 and 1996
and for the years then ended is as follows:
1997 1996
Assets (at fair value) $ 71,245,441 $ 72,169,447
Liabilities .......... 32,104,302 13,131,639
Partners' capital .... 39,141,139 59,037,808
Net loss ............. ($ 5,941,559) ($ 3,562,507)
The Company, through WTCM and another wholly-owned
subsidiary, WisdomTree Administration, Inc., provides investment
management services to the domestic fund referred to above, and
to an offshore private investment fund. The Company has no
investment in the offshore fund. The Company is entitled to
receive a management fee equal to 1/4 of 1% of the net asset
value of the domestic fund, calculated as of the last business
day of each quarter, and a management fee equal to 1/8 of 1% of
the net asset value of the offshore fund, calculated monthly.
Total management fees for the years ended December 31, 1997 and
1996 totaled $442,320 and $668,001, respectively.
WTCM is also entitled to receive a special profit allocation
equal to 20% of the excess of the net income, if any, allocated
to each investor (not including income earned on its own
investment) in the funds for the fiscal year, over any loss
carryforwards with respect to the investor. The special profit
allocations are calculated at year end, which is December 31st
for the
25
domestic fund and June 30th for the offshore fund. The special
profit allocations for 1997 and 1996 were $948,086 and $225,405,
respectively. Such amounts have been reflected as investment
management services revenues and are included in the investment
in fund balance at December 31, 1997, in the accompanying balance
sheet.
Total equity under management by the Company as of December
31, 1997 and 1996 for both the funds totaled approximately $47
million and $66 million, respectively.
PROPERTY AND EQUIPMENT
Equipment ............................................. $ 821,389
Furniture and fixtures ................................ 226,169
Leasehold improvements ................................ 164,119
-----------
1,211,677
Less:accumulated depreciation and amortization ..... (655,607)
$ 556,070
-----------
-----------
ACCRUED EXPENSES
Accrued employee compensation ......................... $ 349,251
Deferred rent credits ................................. 128,269
Accrued distribution expenses ......................... 113,954
Accrued professional fees ............................. 106,060
Other ................................................. 105,968
-----------
$ 803,502
-----------
-----------
5. COMMITMENTS AND CONTINGENCIES
Litigation - The Company is involved in ordinary and routine
litigation incidental to its business. In the opinion of
management, there are no legal proceedings that would have a
material adverse affect on the consolidated financial statements
of the Company.
Employment Agreements - The Company has an employment
agreement with an officer, the terms of which expire in July
1999, and an employment agreement with an employee, the terms of
which expire in June 1998. These agreements provide for minimum
salary levels, adjusted annually as determined by the Board of
Directors. These agreements provide for an aggregate commitment
for future salaries of approximately $401,063.
Profit Sharing Plan - The Company has a profit sharing plan
(the "Plan"), subject to Section 401(k) of the Internal Revenue
Code. All employees who complete at least two months of service
and have attained the age of 21 are eligible to participate. The
Company can make discretionary contributions to the Plan but none
were made in 1997 and 1996.
26
Lease Agreements - The Company leases office space in New
York City under an operating lease which expires March 30, 1999.
The Company also subleases its former office space in New York
City under an operating lease which expires March 1, 2005. Rent
expense for the years ended December 31, 1997 and 1996 was
$519,675 and $544,915, respectively. The leases and sublease
provide for escalation of lease payments as well as real estate
tax increases.
Future minimum lease payments and related sublease rentals
receivable with respect to non-cancelable operating leases are as
follows:
Year FutureMinium RentsReceivable
RentalPayment UnderSublease
- ---------- ---------- -----------
1998 738,296 160,000
1999 331,926 165,000
2000 188,050 177,500
2001 192,550 190,000
2002 205,383 195,000
Thereafter 463,733 426,667
---------- ----------
Total $2,164,529 $1,314,167
---------- ----------
---------- ----------
6.INCOME TAXES
The Company has available net operating loss carryforwards
("NOL's") totaling approximately $11,900,000. Based upon a change
of ownership which transpired in December 1991 the utilization of
$2,100,000 of pre-change NOL's are limited in accordance with
Section 382 of the Internal Revenue Code, which affects the
amount and timing of when the NOL's can be offset against taxable
income.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
at December 31, 1997 and 1996 are presented below:
1997 1996
Deferred tax assets
Net operating loss carryforwards $ 5,354,000 $ 4,470,000
Other .......................... 291,000 171,000
Total .......................... 5,645,000 4,641,000
Deferred tax liabilities:
Book in excess of tax basis
of investment in fun ........ (563,000) (1,598,000
----------- ----------
5,082,000 3,043,000
Less: valuation allowance ......... 5,082,000 3,043,000
Net deferred tax asset ............ $ -- $ --
----------- -----------
27
The provision for income taxes for the years ended December
31, 1997 and 1996 is different than the amount computed using the
applicable statutory Federal income tax rate with the difference
summarized below:
1997 1996
Hypothetical income tax benefit
at the US Federal statutory rate .... ($1,736,100) ($1,116,300)
State and local income taxe benefit,
less US Federal income tax benefit .. (514,400) (382,700)
Net operating loss benefit notrecognized 2,250,500 1,499,000
----------- -----------
$ -- $ --
----------- -----------
----------- -----------
7. STOCK OPTIONS
The Company has three Stock Option Plans - 1991, 1993 and
1996. In addition, in November 1996 the Board of Directors
adopted the 1996 Management Incentive Plan under which 500,000
stock options are available for future grants. Under these four
plans, the Company can issue a maximum of 2,200,000 stock options
and other stock-based awards, most of which vest ratably over a
three to five-year period, commencing one year from the date of
grant. The options are exercisable for a period of up to 10
years from the date of grant at an exercise price which is not
less than the fair market value at the date of grant.
1997 1996
Weighted AVG. Weighted AVG.
Options Exercise Price Options Exercise Price
Options Outstanding at 1,134,601 $6.06 634,700 $4.36
January 1
Granted 530,600 $6.54 642,100 $7.49
Exercised (107,167) $4.96 (44,260) $4.28
Canceled (84,983) $6.24 (97,939) $5.17
============ ===========
Balance, December 31 1,473,051 $6.29 1,134,601 $6.06
============ ===========
Range of exercise prices $3.00-$11.88 $3.00-$11.88
Options available for grant 592,406 1,015,839
Total common shares reserved
for future issuance's 2,065,457 2,150,440
Options exercisable at 391,686 $4.67 316,808 $3.87
December 31
28
In addition, the Company had options outstanding that were
granted outside of the aforementioned plans. All options were
granted at fair market value at the date of grant and expire at
various dates through December 18, 2006.
1997 1996
Weighted Avg Weighted Avg
Options ......Exercise Pr...... Options......Exercise Price
Options Outstanding atJanuary 1 1,776,163 $5.30 1,730,663 $5.23
Granted ...................... -- -- 130,000 $5.63
Exercised ..................... (69,000) $4.71 (44,500) $4.29
Canceled ...................... (146,667) $5.90 (40,000) $4.44
Balance, December 31 .......... 1,560,496 $5.27 1,776,163 $5.30
Range of exercise prices
at December 31 ................ $0.24-$7.50 $0.24-$7.50
Options exercisable at
December 31 ................... 1,143,414 $4.84 835,080 $4.61
The following table summarizes information about stock options at December 31, 1997
Number Weighted-Average Number
Range of Exercise Outstanding Remaining Contractual Weighted-Average Exercisable Weighted-Average
Prices at 12/31/97 Life Exercise Price at 12/31/97 Exercise Pric
$ 0.24 - 5.95 1,932,014 7 years $ 4.88 1,414,718 $ 4.59
$ 6.00 - 7.95 957,533 8.5 $ 7.08 89,049 $ 6.57
$ 8.00 - 11.88 144,000 9.5 $ 8.89 31,333 $ 9.11
================= ===============
$ 0.24 - 11.88 3,033,547 $ 5.76 1,535,100 $ 4.80
================= ===============
Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if
the Company had accounted for its employee stock options granted
under the fair value method of SFAS No. 123. The fair value for
these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996, respectively: risk-free interest
rates of 6.3%; volatility factors of the expected market price of
the Company's Common Stock of 55% and 51%; weighted-average fair
value of options granted $3.56 and $3.89, and a weighted-average
expected life of the options of 5 years.
29
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options'
vesting period. The Company's pro forma information follows:
1997 1996
As Reported Proforma As Reported Proforma
Net loss $(4,960,335) $(6,080,809) $(3,189,452) $(4,053,894)
Loss per weighted
average common share $(0.77) $(0.94 ) $(0.51) $(0.65)
The effects of applying SFAS No. 123 in this proforma
disclosure are not indicative of future amounts. Additional stock
option awards in future years are anticipated.
8. STOCKHOLDERS' EQUITY
Issuances of Common Stock - On May 1, 1997 the Company
entered into Stock Purchase Agreements with two parties unrelated
to the Company providing in the aggregate for the private sale of
328,678 shares of Common Stock for a total purchase price of
$2,000,000. These shares were sold pursuant to an exemption from
registration under the Securities Act of 1933. On June 30, 1997
and December 30, 1997 the Company entered into Stock Purchase
Agreements with Wise Partners, L.P. ("WP"), providing for the
sale of 31,496, and 489,795 shares of Common Stock respectively,
for an aggregate purchase price of $3,250,000. The Company
granted registration rights in respect of the shares issued to
WP, which is a limited partnership of
which the CEO of the Company, Jonathan L. Steinberg, is the
General Partner, and Saul Steinberg (father of Jonathan
Steinberg), is a limited partner.
Repurchase of Common Stock - The Company repurchased 250,000
shares of Common Stock on the open market, at a total cost of
$2,453,346, in the second quarter of 1996. The Company has
retired these shares and 31,822 of Common Stock previously held
as treasury shares. The cost of repurchased shares in excess of
the par value of the Common Stock ($.01 per share) has been
charged to additional paid-in capital.
9. SEGMENT INFORMATION
The Company operates principally in two areas: financial
information services and investment management services.
Financial information operations involve the publishing and
marketing of Individual Investor magazine, Ticker magazine,
Individual Investor Online (www.iionline.com) and Individual
Investor's Special Situations Report newsletter. Revenues from
publishing are derived from advertising, circulation, list rental
and online sponsorship revenues. Investment management services
revenues are derived from management of a private domestic
investment fund and an offshore investment fund whereby the
Company receives a management fee and a special profit allocation
(note 2). Net appreciation (depreciation) in fund is recorded in
operating revenues to reflect such earnings and losses as part of
the Company's core operations and, accordingly, is included in
the investment management segment information.
30
Operating loss represents the difference between operating
revenues less operating expenses, including corporate expenses,
which are allocated to operations of the segments. For purposes
of this presentation, operating expenses were allocated to
segments based on management's estimates of usage determined by
personnel costs and activities.
Identifiable assets by segment are those assets used in the
Company's operations in each business segment. Corporate assets
are considered to be cash and cash equivalents.
1997 1996
Revenues:
Financial Information Services $14,899,741 $12,537,042
Investment Management ........ 550,409 507,069
$15,450,150 $13,044,111
Operating loss:
Financial Information Services ($4,879,868) ($2,865,507)
Investment Management ........ (149,763) (501,183)
($5,029,631) $(3,366,690)
Identifiable assets:
Financial Information Services $4,412,232 $4,443,920
Investment Management ........ 4,211,113 5,315,364
Corporate .................... 3,533,622 1,544,451
$12,156,967 $11,303,735
10. FOURTH QUARTER TRANSACTIONS
In the fourth quarter of 1997 and 1996, the Company recorded
investment management service revenues from the domestic fund of
$888,168 and $75,108, respectively, related to a special profit
allocation of the net income from the fund, which is calculated
at year end (note 2). On December 30, 1997 the Company sold
489,795 shares of Common Stock for $3,000,000 to a related party
(see note 8).
31
ITEM 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 9 as to directors is
incorporated by reference to the information captioned "Election
of Directors" included in the Company's definitive proxy
statement in connection with the meeting of shareholders to be
held on June 17, 1998.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 is incorporated by
reference to the information captioned "Election of Directors -
Executive Compensation" included in the Company's definitive
proxy statement in connection with the meeting of shareholders to
be held on June 17, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item 11 is incorporated by
reference to the information captioned "Voting Securities"
included in the Company's definitive proxy statement in
connection with the meeting of shareholders to be held on June
17, 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 is incorporated by
reference to the information captioned "Election of Directors -
Related Transactions" included in the Company's definitive proxy
statement in connection with the meeting of the shareholders to
be held on June 17, 1998.
32
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description Method of Filing
No.
3.1 Amended and Restated Incorporated by reference
Certificate of to Exhibit 3.1 to the
Incorporation of Registrant Registrant's Registration
Statement on Form S-18
(File No. 33-43551-NY) (the
"Form S-18")
3.2 Bylaws of Registrant Incorporated by reference
to Exhibit 3.2 to the Form
S-18
4.1 Specimen Certificate for Incorporated by reference
Common Stock of Registrant to Exhibit 4.1 to the Form
S-18
10.1 Indemnification Agreement, Incorporated by reference
dated August 19, 1991, to Exhibit 10.1 to the Form
between Registrant and Scot S-18
A. Rosenblum
10.2 Indemnification Agreement, Incorporated by reference
dated August 19, 1991, to Exhibit 10.2 to the Form
between Registrant and S-18
Bruce L. Sokoloff
10.3 Indemnification Agreement, Incorporated by reference
dated August 19, 1991, to Exhibit 10.3 to the Form
between Registrant and S-18
Jonathan L. Steinberg
10.4 Indemnification Agreement, Incorporated by reference
dated August 19, 1991, to Exhibit 10.4 to the Form
between Registrant and S-18
Jonathan M. Tisch
10.5 Form of 1991 Stock Option Incorporated by reference
Plan of Registrant to Exhibit 10.13 to the
Form S-18
10.6 Stock Purchase Agreement, Incorporated by reference
dated August 7, 1991, among to Exhibit 10.29 to the
Registrant, Jonathan M. Form S-18
Tisch, and Jonathan L.
Steinberg
10.7 Units Purchase Agreement Incorporated by reference
between Registrant and to Exhibit 10.32 to the
Reliance Insurance Company Form S-18
10.8 Trademark License Agreement Incorporated by reference
dated June 19, 1992 between to Exhibit 10.25 to the
Registrant and the American Form 10-KSB for the year
Association of Individual ended December 31, 1992
Investors, Inc. ("1992 Form 10-KSB)"
33
10.9 Office Lease, Dated January Incorporated by reference
10, 1994, between 333 7th to Exhibit 10.22 to the
Ave. Realty Co. and the Form 10-KSB for the year
Registrant ended December 31, 1993
("1993 Form 10-KSB")
10.10 Stock purchase agreement, Incorporated by reference
dated December 1, 1993, to Exhibit 10.23 to the
between Bernard Schwartz 1993 Form 10-KSB
and the Registrant
10.11 Consulting agreement, dated Incorporated by reference
September 24, 1993, with to Exhibit 10.26 to the
form of Stock Option 1993 Form 10-KSB
Agreement
10.12 Stock Option Agreement, Incorporated by reference
dated April 7, 1994, to Exhibit 10.27 to the
between Registrant and Form 10-QSB for the quarter
Jonathan L. Steinberg ended June 30, 1994 ("1994
Form 10-QSB")
10.13 Employment Agreement, dated Incorporated by reference
July 27, 1994, between to Exhibit 10.28 to the
Registrant and Robert H. 1994 Form 10-QSB
Schmidt
10.14 Indemnification Agreement, Incorporated by reference
dated July 27, 1994, to Exhibit 10.30 to the
between Registrant and 1994 Form 10-QSB
Robert H. Schmidt
10.15 Consulting Agreement, dated Incorporated by reference
February 3, 1995, with form to Exhibit 10.32 to the
of stock option agreement 1994 Form 10-KSB
10.16 Stock Option Agreement, Incorporated by reference
dated June 21, 1995, to Exhibit 10.33 to the
between Registrant and 1994 Form 10-KSB
Bruce
Sokoloff
10.17 Form of Partnership Incorporated by reference
Agreement for WisdomTree to Exhibit 10.37 to the
Associates, L.P. 1994 Form 10-KSB
10.18 WisdomTree Capital Incorporated by reference
Advisors, LLC Agreement to Exhibit 10.38 to the
dated November 1, 1995 1994 Form 10-KSB
34
10.19 Agreement between Incorporated by reference
WisdomTree Offshore L.T.D, to Exhibit 10.39 to the
and WisdomTree Capital 1994 Form 10-KSB
Management, Inc. and
WisdomTree Capital
Advisors, LLC dated
December 1, 1995
10.20 Office sublease, dated Incorporated by reference
December 8, 1995, between to Exhibit 10.41 to the
Porter Novelli, Inc. and 1995 Form 10-KSB
the Registrant
10.21 Office sublease, dated Incorporated by reference
January 1996 to Exhibit 10.42 to the
between VCH Publishers, 1995 Form 10-KSB
Inc. and the
Registrant
10.22 Form of 1996 Performance Incorporated by reference
Equity Plan to Exhibit 10.43 to the
1995 Form 10-KSB
10.23 Form of 1996 Management Incorporated by reference
Incentive Plan to Exhibit 4.10 to the
Registrant's Registration
Statement on Form S-8 (File
No. 333-17697)
10.24 Form of 1993 Stock Option Incorporated by reference
Plan of Registrant to Exhibit
4.2 to the Registrant's
Registration Statement on
Form S-8 (File No. 33
72266)
10.25 Stock Purchase Agreement, Incorporated by reference
dated May 1, 1997, for to Exhibit
164,339 shares of the 10.1 to the Form 10-QSB for
Company's Common Stock the quarter ended June 30,
1997
10.26 Stock Purchase Agreement, Incorporated by reference
dated May 1, 1997, for to Exhibit
164,339 shares of the 10.2 to the Form 10-QSB for
Company's Common Stock the quarter ended June 30,
1997
10.27 Stock Purchase Agreement, Incorporated by reference
dated June 30, 1997 between to Exhibit
Registrant and Wise 10.3 to the Form 10-QSB for
Partners L.P the quarter ended June 30,
1997
10.28 Form of Stock Option Incorporated by reference
agreement, dated May 9, to Exhibit
1997 between Registrant and 10.4 to the Form 10-QSB for
each of Jonathan Steinberg, the quarter ended June 30,
Robert Schmidt, Scot 1997
Rosenblum, and Michael
Kaplan
35
10.29 Stock Purchase Agreement, Incorporated by reference
dated December 31, 1997 to Exhibit 10.6 of the
between Registrant and Wise Schedule 13D filed on
Partners L.P. behalf of Jonathan L.
Steinberg on January 13,
1998
11 Computation of Loss Per Filed herewith,
Share sequentially numbered page
38
21.1 Subsidiaries of the Filed herewith,
Registrant sequentially numbered page
39
23.1 Consent of Independent Filed herewith,
Auditors-Deloitte & Touche sequentially numbered page
LLP 40
23.2 Consent of Independent Filed herewith,
Auditors-Ernst & Young LLP sequentially numbered page
41
27 Financial Data Schedule
36
In accordance with Section 13 or 15(d) of the Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INDIVIDUAL INVESTOR GROUP, INC.
Date: March 30, 1998
By: /s/ Jonathan L. Steinberg
Jonathan L. Steinberg
Chief Executive Officer
In accordance with the Exchange Act, 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/ Jonathan L. Steinberg Chief Executive March 30, 1998
Jonathan L. Steinberg Officer and Director
/s/ Robert H. Schmidt President and Director March 30, 1998
Robert H. Schmidt
/s/ Scot A. Rosenblum Chief Financial March 30, 1998
Scot A. Rosenblum Officer, Executive
Vice President and
Director
/s/ Henry G. Clark March 30, 1998
Henry G. Clark
Controller (Principal
Accounting Officer)
/s/ Bruce L. Sokoloff March 30, 1998
Bruce L. Sokoloff
Director
/s/ Peter M. Ziemba Dir March 30, 1998
Peter M. Ziemba
37
EXHIBIT 11
Computation of Loss Per Share
Year Ended December 31, 1997 . Basic Diluted
Net loss ..................... $(4,960,335) $(5,074, 265
Weighted average common shares 6,466,168 6,466,168)
outstanding
Loss per common share ........ (0.77) (0.77)
Year Ended December 31, 1996
Net loss ..................... $(3,189,452) $(3,189,452)
Weighted average common shares 6,198,260 6,198,260
outstanding
Loss per common share ........ $ (0.51) $ (0.51)
38
EXHIBIT 21.1
SUBSIDIARIES
OF
INDIVIDUAL INVESTOR GROUP, INC.
Subsidiary State of Organization
Individual Investor Holdings, Inc. Delaware
WisdomTree Capital Management, Inc. New York
I.I. Strategic Consultants, Inc. Delaware
WisdomTree Administration, Inc. Delaware
I.I. Interactive, Inc. Delaware
Advanced Marketing Ventures, Inc. (inactive) Delaware
WisdomTree Capital Advisors, LLC New York
39
40
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders
of Individual Investor Group, Inc.
We consent to the incorporation by reference in Registration
Statement No. 33-74846 on Form S-3 and Registration
Statements Nos. 33-72266, 33-85910 and 333-17697on Form S-8
of Individual Investor Group, Inc. and subsidiaries of our
report dated March 17,1998, appearing in the Annual Report
on Form 10-KSB of Individual Investor Group, Inc. and
subsidiaries for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
New York, New York
March 27, 1998
Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-74846 and Forms S-8 No. 33-72266, 33-85910 and 333-17697)
pertaining to Individual Investor Group, Inc. of our report dated Feburary
27, 1998, with respect to the financial statements of Wisdomtree
Associates, L.P. included in the Annual Report (Form 10-KSB) of Individual
Investor Group, Inc. for the year ended December 31, 1997.
Ernst & Young LLP
New York, New York
March 26, 1998
41