Business Context and Reporting Period
Company: Individual Investor Group, Inc. (Note: The filing identifies the registrant as Individual Investor Group, Inc., not Wisdomtree, Inc., though WisdomTree Capital Management is a subsidiary involved in discontinued operations).
Reporting Period: Fiscal year ended December 31, 1999.
Business Overview: A financial media company operating two primary segments: Online Services (individualinvestor.com, InsiderTrader.com) and Print Publications (Individual Investor magazine, Ticker magazine, Special Situations Report newsletter). The company also manages the INDI SmallCap 500 index and discontinued its investment management services business in 1998.
Key Financial Metrics (Year Ended Dec 31, 1999)
| Metric | 1999 | 1998 |
|---|---|---|
| Total Revenue | $17,505,409 | $15,348,179 |
| Operating Loss | $(8,502,353) | $(8,034,713) |
| Net Loss | $(4,192,703) | $(8,591,870) |
| Investment & Other Income | $4,309,650 | $224,213 |
| Cash & Cash Equivalents | $6,437,542 | $4,752,587 |
| Working Capital | $5,163,130 | $5,805,339 |
| Stockholders' Equity | $7,662,937 | $5,448,757 |
Revenue Breakdown: Print Publications accounted for 87% ($15.2M) of revenue, while Online Services accounted for 13% ($2.3M).
Debt: The filing does not disclose long-term debt. Current liabilities totaled $5.2M, primarily accounts payable and deferred revenue.
Material Changes vs. Prior Period
- Net Loss Reduction: Net loss decreased 51% to $4.2M from $8.6M in 1998. This improvement was driven almost entirely by a surge in investment income rather than operational profitability.
- Investment Gains: Investment and other income jumped to $4.3M (from $0.2M in 1998) due to realized gains of $4.1M on the sale of investments in Wit Capital Group, Inc. ($2.8M gain) and Kirlin Holding Corp. ($0.9M gain).
- Revenue Growth: Total revenue increased 14%. Online Services revenue grew 103% to $2.3M, while Print Publications revenue grew 7% to $15.2M.
- Operating Expenses: Total operating expenses increased 11% to $26.0M, driven by higher marketing, promotion, and corporate advertising expenses ($726K in 1999 vs. none in 1998).
- Segment Performance: Both segments remained operationally unprofitable before corporate overhead. Online Services operating contribution improved to a loss of $1.7M (from $2.1M), and Print Publications improved to a loss of $0.25M (from $0.7M).
Guidance, Outlook, and Risks
- Outlook: Management anticipates quarterly losses to continue through 2000. Profitability is expected only if the company realizes additional capital gains on investments or substantially increases revenues while controlling expenses.
- Liquidity & Financing: The company entered a Letter of Intent to sell $5.6M of Series B Convertible Preferred Stock. Management believes current working capital ($5.2M) plus anticipated proceeds will fund operations through 2000. Additional capital will be required thereafter.
- Strategic Initiatives: Plans to launch 3-4 new websites in 2000 (SHORTInterest.com, BioStock.com, Ticker.com) and expand the INDI SmallCap 500 index licensing (State Street Bank filed an application for an ETF based on the index).
- Risks:
- Dependence on Investment Gains: Operating revenues do not cover expenses; future profitability relies on non-recurring investment sales.
- Financing Risk: Failure to secure the $5.6M preferred stock financing or future capital could materially adversely affect operations.
- Competition: Intense competition from larger financial media companies with greater resources (e.g., TheStreet.com, Yahoo! Finance, Time Warner).
- Legal Proceedings: Pending litigation regarding redemption delays in a discontinued fund (potential $470K damages) and a dismissed shareholder derivative suit regarding option repricing.
Investor Verification Checklist
- Financing Status: Verify if the $5.6M Series B Convertible Preferred Stock deal closed as anticipated in April 2000.
- Investment Portfolio: Confirm the valuation and liquidity of the remaining $2.6M investment in VentureHighway.com, which has no public market.
- Operational Cash Flow: Review subsequent filings to determine if the company achieved operational profitability without relying on investment sales.
- Legal Resolution: Check the status of the litigation involving WisdomTree Associates, L.P. regarding the $470,000 alleged damages.
- Index Licensing: Verify if the State Street Bank ETF based on the INDI SmallCap 500 index received regulatory approval and generated licensing revenue.