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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to ____________
Commission file number: 333-76331
Jupitermedia Corporation
(Exact name of Registrant as specified in its charter)
Delaware 06-1542480
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
23 Old Kings Highway South
Darien, Connecticut 06820
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(203) 662-2800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of outstanding shares the Registrant's common stock, par value $.01
per share, as of August 11, 2003 was 25,688,820.
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Jupitermedia Corporation
Index
Page
----
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 2002 and
June 30, 2003 3
Consolidated Statements of Operations - For the Three
Months and Six Months Ended June 30, 2002 and 2003 4
Consolidated Statements of Cash Flows - For the Six
Months Ended June 30, 2002 and 2003 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 20
PART II. Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 24
2
JUPITERMEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND JUNE 30, 2003
(in thousands, except share and per share amounts)
December 31, June 30,
2002 2003
---------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 25,451 $ 12,519
Accounts receivable, net of allowances of $1,056
and $865, respectively 7,521 6,018
Unbilled accounts receivable 1,999 971
Prepaid expenses and other 794 1,744
---------- ----------
Total current assets 35,765 21,252
Property and equipment, net of accumulated depreciation
of $7,656 and $8,336, respectively 1,924 1,583
Intangible assets, net 1,473 5,778
Goodwill 8,377 19,574
Investments and other assets 1,768 1,792
---------- ----------
Total assets $ 49,307 $ 49,979
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,386 $ 1,712
Accrued payroll and related expenses 2,014 2,051
Accrued expenses and other 3,823 3,237
Deferred revenues 7,230 8,043
---------- ----------
Total current liabilities 14,453 15,043
Long-term liabilities -- 436
---------- ----------
Total liabilities 14,453 15,479
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value, 4,000,000 shares
authorized, no shares issued -- --
Common stock, $.01 par value, 75,000,000 shares
authorized, 25,342,017 and 25,641,379 shares
issued at December 31, 2002 and June 30, 2003,
respectively 253 256
Additional paid-in capital 175,487 176,583
Accumulated deficit (140,809) (142,250)
Treasury stock, 65,000 shares at cost (106) (106)
Accumulated other comprehensive income 29 17
---------- ----------
Total stockholders' equity 34,854 34,500
---------- ----------
Total liabilities and stockholders' equity $ 49,307 $ 49,979
========== ==========
See notes to consolidated financial statements
3
JUPITERMEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2003
(unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2002 2003 2002 2003
-------- -------- -------- --------
Revenues $ 9,886 $ 10,220 $ 18,562 $ 18,465
Cost of revenues 3,890 4,508 7,424 9,180
-------- -------- -------- --------
Gross profit 5,996 5,712 11,138 9,285
-------- -------- -------- --------
Operating expenses:
Advertising, promotion and selling 3,614 3,539 6,979 6,261
General and administrative 1,618 1,785 3,361 3,378
Depreciation 588 338 1,245 701
Amortization 195 256 367 496
-------- -------- -------- --------
Total operating expenses 6,015 5,918 11,952 10,836
-------- -------- -------- --------
Operating loss (19) (206) (814) (1,551)
Gain (loss) on investments and other, net (95) 54 (204) (1)
Interest income 98 62 202 151
-------- -------- -------- --------
Loss before income taxes, minority interests and
equity loss from venture fund investments (16) (90) (816) (1,401)
Provision for income taxes 13 -- 19 --
Minority interests (2) 6 (1) 10
Equity loss from venture fund investments (151) (27) (377) (50)
-------- -------- -------- --------
Net loss $ (182) $ (111) $ (1,213) $ (1,441)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.01) $ (0.00) $ (0.05) $ (0.06)
======== ======== ======== ========
Weighted average number of common shares
outstanding 25,333 25,301 25,333 25,292
======== ======== ======== ========
See notes to consolidated financial statements.
4
JUPITERMEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2003
(unaudited)
(in thousands)
Six Months Ended
June 30,
------------------------
2002 2003
---------- ----------
Cash flows from operating activities:
Net loss $ (1,213) $ (1,441)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Depreciation and amortization 1,612 1,197
Barter transactions, net (649) (456)
Provision for losses on accounts receivable 88 52
Minority interests 1 (10)
Equity loss from venture fund investments 377 50
Loss on investments and other, net 204 1
Changes in current assets and liabilities (net of
businesses acquired):
Accounts receivable 1,124 1,667
Unbilled accounts receivable -- 1,068
Prepaid expenses and other 384 (594)
Accounts payable and accrued expenses (620) (698)
Deferred revenues (12) (347)
---------- ----------
Net cash provided by operating activities 1,296 489
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (131) (147)
Acquisitions of businesses and other (769) (13,431)
Proceeds from sales of assets and other 263 54
---------- ----------
Net cash used in investing activities (637) (13,524)
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options -- 103
---------- ----------
Net cash provided by financing activities -- 103
---------- ----------
Net increase (decrease) in cash and cash equivalents 659 (12,932)
Cash and cash equivalents, beginning of period 25,100 25,451
---------- ----------
Cash and cash equivalents, end of period $ 25,759 $ 12,519
========== ==========
Supplemental disclosures of cash flow:
Cash paid for income taxes $ 25 $ --
========== ==========
See notes to consolidated financial statements.
5
JUPITERMEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(unaudited)
1. THE COMPANY
Jupitermedia is a provider of global real-time news, information, research
and media resources for information technology ("IT"), Internet industry and
graphics professionals. Jupitermedia includes the internet.com, EarthWeb.com and
ArtToday.com networks of over 165 Web sites and nearly 200 e-mail newsletters
that generate nearly 230 million page views monthly. Our network is organized
into 16 subject areas, or vertical content channels. These vertical content
channels serve our Internet users, which include IT, Internet industry and
graphics professionals. Jupitermedia also includes Jupiter Research, an
international research advisory organization specializing in business and
technology market research in 18 business areas and 11 vertical markets. In
addition, Jupiter Events produces offline conferences and trade shows focused on
IT and business-specific topics.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared from the books and records of Jupitermedia in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. The consolidated statement of operations for the
three months and six months ended June 30, 2003 is not necessarily indicative of
the results to be expected for the full year. These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in Jupitermedia's Annual Report
on Form 10-K for the year ended December 31, 2002. In the opinion of management,
all adjustments, consisting only of a normal and recurring nature, considered
necessary for a fair presentation of the results for the interim periods
presented have been reflected in such consolidated financial statements.
The consolidated financial statements include the accounts of Jupitermedia
and its majority-owned and wholly-owned subsidiaries. All intercompany
transactions have been eliminated.
3. STOCK BASED COMPENSATION
Jupitermedia grants stock options with an exercise price equal to the fair
value of the shares at the date of grant. Jupitermedia accounts for stock option
grants in accordance with Accounting Principles Board Opinion ("APB") 25,
"Accounting for Stock Issued to Employees", and accordingly, recognizes no
compensation expense for such grants. If Jupitermedia determined compensation
cost for its stock options based on the fair value at the date of grant under
the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation", its pro forma net loss and loss per
share would be as follows (in thousands, except per share amounts):
6
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2003 2002 2003
---------- ---------- ---------- ----------
Net loss $ (182) $ (111) $ (1,213) $ (1,441)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards (145) (128) (148) (151)
---------- ---------- ---------- ----------
Pro forma net loss $ (327) $ (239) $ (1,361) $ (1,592)
========== ========== ========== ==========
Basic and diluted loss per share
As reported $ (0.01) $ (0.00) $ (0.05) $ (0.06)
========== ========== ========== ==========
Pro forma $ (0.01) $ (0.01) $ (0.05) $ (0.06)
========== ========== ========== ==========
Those pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be granted in future years.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 148, "Accounting for Stock-Based Compensation Transition and
Disclosure, and Amendment of SFAS No. 123," to provide alternative methods for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation as required by SFAS No. 123. SFAS No. 148
also amends the disclosure provisions of SFAS No. 123 and Accounting Principles
Board ("APB") Opinion No. 28, "Interim Financial Reporting," to require
disclosure in the summary of significant accounting policies of the effect of
stock-based compensation on reported net income and earnings per share in annual
and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123
to require companies to account for employee stock options using the fair value
method, the disclosure provisions of SFAS No. 148 are applicable to all
companies with stock-based employee compensation, regardless of whether they
account for that compensation using the fair value method of SFAS No. 123 or the
intrinsic value method of APB No. 25. Since Jupitermedia accounts for our
stock-based compensation under APB No. 25, and has no current plans on switching
to SFAS No. 123, the impact of SFAS No. 148 will be limited to the annual and
interim reporting of the effects on net income (loss) and earnings (loss) per
share as if Jupitermedia accounted for stock-based compensation under SFAS No.
123 as set forth in Note 3.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. The provisions of SFAS No. 150
are effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 will not have an
impact on Jupitermedia's financial statements.
5. INTANGIBLE ASSETS AND GOODWILL
Intangible assets and goodwill includes the preliminary allocation of the
purchase price relating to the acquisition of ArtToday, Inc., which took place
on June 30, 2003. These amounts are subject to change pending the final purchase
price allocation. See Note 7 for additional disclosure information.
7
AMORTIZED INTANGIBLE ASSETS
The following table sets forth the intangible assets that are subject to
amortization, including the related accumulated amortization (in thousands):
DECEMBER 31, 2002
-------------------------------------------
ACCUMULATED NET CARRYING
COST AMORTIZATION VALUE
---- ------------ -----
Trademarks $1,921 $(829) $1,092
Image library - - -
Customer lists - - -
Web site development costs 1,246 (866) 380
Non-compete agreement - - -
Other 139 (138) 1
------ ------- ------
Total $3,306 $(1,833) $1,473
====== ======= ======
JUNE 30, 2003
-------------------------------------------
ACCUMULATED NET CARRYING
COST AMORTIZATION VALUE
---- ------------ -----
Trademarks $2,183 $(1,154) $1,029
Image library 2,500 - 2,500
Customer lists 325 - 325
Web site development costs 1,770 (1,031) 739
Non-compete agreement 283 - 283
Other 146 (144) 2
------ ------- ------
Total $7,207 $(2,329) $4,878
====== ======= ======
Intangibles that are subject to amortization are amortized on a
straight-line basis over three years, except for customer lists that are
amortized over seven years, certain web site development costs that are
amortized over five years and the image library that is amortized over fifteen
years. Estimated amortization expense for intangible assets subject to
amortization is as follows (in thousands):
YEAR ENDING DECEMBER 31,
------------------------
2003 $680
2004 945
2005 644
2006 381
2007 312
Thereafter 1,916
------
$4,878
======
UNAMORTIZED INTANGIBLE ASSETS
DECEMBER 31, JUNE 30,
2002 2003
---- ----
Domain names $ - $900
---- ----
Total $ - $900
==== ====
8
GOODWILL
The changes in the carrying amount of goodwill for the six months ended
June 30, 2003, are as follows:
Online Media Research Events Total
------------ -------- ------ -----
Balance as of December 31, 2002 $ 5,254 $ 3,074 $ 49 $ 8,377
Goodwill acquired during period 11,404 -- -- 11,404
Purchase accounting adjustments -- (207) -- (207)
------- ------- ------ -------
Balance as of June 30, 2003 $16,658 $ 2,867 $ 49 $19,574
======= ======= ====== =======
Purchase accounting adjustments pertain to adjustments made to the fair
value of certain assets purchased in conjunction with the acquisition of Jupiter
Research. Jupiter Research was acquired in the third quarter of 2002.
6. COMPUTATION OF NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted net loss per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Common equivalent shares
consist of the incremental common shares issuable upon the exercise of stock
options. Common equivalent shares are excluded from the calculation if their
effect is anti-dilutive.
Computations of basic and diluted net loss per share for the three and six
months ended June 30, 2002 and 2003 are as follows (in thousands, except per
share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2002 2003 2002 2003
------- ------- ------- -------
Numerator: Net loss $ (182) $ (111) $(1,213) $(1,441)
Denominator: Basic and diluted
weighted average number of
common shares outstanding 25,333 25,301 25,333 25,292
------- ------- ------- -------
Basic and diluted net loss per share $ (0.01) $ (0.00) $ (0.05) $ (0.06)
======= ======= ======= =======
Due to the net losses for the three months and six months ended June 30,
2002 and 2003, outstanding options to purchase 5,482,218 and 7,321,155 shares of
common stock, respectively, were excluded from the calculation of diluted
earnings per share for those periods, as the result would have been
anti-dilutive.
7. ACQUISITION
On June 30, 2003 (the "Closing Date"), Jupitermedia acquired (the
"Acquisition") all of the stock of ArtToday, Inc. ("ArtToday"), an Arizona
corporation, pursuant to a stock purchase agreement, dated as of June 24, 2003,
by and between Jupitermedia and International Microcomputer Software, Inc.
The consideration paid in the Acquisition (which was determined as a result
of arms'-length negotiations) consisted of cash in the amount of $13,000,000 and
250,000 restricted shares of Jupitermedia's common stock. The purchase price
is subject to adjustment after the Closing Date based on the adjusted net assets
of ArtToday as of the Closing Date. Furthermore, additional cash earnout
payments may be made based on net revenues derived from ArtToday for the six
consecutive months following the Closing Date (the "First Earnout
9
Period"), the six consecutive months following the First Earnout Period (the
"Second Earnout Period"), and the twelve consecutive months following the Second
Earnout Period.
The total purchase price has been allocated to the assets and liabilities
based on estimates of their respective fair values. Based on preliminary
estimates, the aggregate purchase price was allocated as $11.2 million to
goodwill, $4.5 million to intangible assets, $698,000 to assets other than
goodwill and intangible assets and $2.5 million to assumed liabilities. The
intangible assets subject to amortization are being amortized on a straight-line
basis over periods ranging from three to fifteen years. The purchase accounting
for the acquisition will be finalized at a later date not to exceed one year
from the acquisition date.
The unaudited pro forma information below presents results of operations as
if the Acquisition had occurred as of January 1, 2002. The unaudited pro forma
information is not necessarily indicative of the results of operations of the
combined companies had these events occurred at the beginning of the period
presented nor is it indicative of future results (in thousands, except per share
amounts):
Three Months Ended June 30, Six Months Ended June 30,
2002 2003 2002 2003
------- ------- ------- -------
Revenues $11,026 $11,835 $20,784 $21,494
======= ======= ======= =======
Net income (loss) $ (198) $ 3 $(1,104) $(1,183)
======= ======= ======= =======
Basic and diluted income (loss) per share $ (0.01) $ 0.00 $ (0.04) $ (0.05)
======= ======= ======= =======
8. SEGMENT INFORMATION
Jupitermedia has three reportable segments: Online Media, Research and
Events. The Online Media segment derives its revenues primarily from the sale of
advertising on Jupitermedia's internet.com and EarthWeb.com Networks. Research
represents the Jupiter Research division. Jupiter Research, which was acquired
in the third quarter of 2002, provides advisory reports in business and
technology market research in 18 business areas and 11 vertical markets. The
Events segment includes offline conferences and trade shows that generate
revenues from attendee registrations, exhibition space and from advertiser and
vendor sponsorships. Jupitermedia evaluates segment performance based on income
or loss from operations. Other includes corporate overhead, depreciation,
amortization and venture fund related activities.
10
Summary information by segment for the three months and six months ended
June 30, 2002 and 2003 is as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2003 2002 2003
------- ------- ------- -------
Revenues:
Online Media $ 7,617 $ 6,034 $14,962 $10,679
Research - 2,157 - 4,433
Events 1,945 1,876 2,951 3,053
Other 324 153 649 300
------- ------- ------- -------
$ 9,886 $10,220 $18,562 $18,465
------- ------- ------- -------
Cost of revenues and operating expenses:
Online Media $ 5,668 $ 4,058 $11,958 $ 8,150
Research - 2,277 - 4,864
Events 1,838 2,230 3,018 3,543
Other 2,399 1,861 4,400 3,459
------- ------- ------- -------
$ 9,905 $10,426 $19,376 $20,016
------- ------- ------- -------
Operating income (loss):
Online Media $ 1,949 $ 1,976 $ 3,004 $ 2,529
Research - (120) - (431)
Events 107 (354) (67) (490)
Other (2,075) (1,708) (3,751) (3,159)
------- ------- ------- -------
$ (19) $ (206) $ (814) $(1,551)
======= ======= ======= =======
9. COMMITMENTS AND CONTINGENCIES
Messrs. Alan M. Meckler and Christopher S. Cardell, who are stockholders,
executive officers and directors of Jupitermedia, were stockholders, executive
officers and directors of Mecklermedia Corporation prior to its acquisition by
Penton Media in November 1998. In addition, Messrs. Gilbert F. Bach and Michael
J. Davies, who are directors of Jupitermedia, were directors of Mecklermedia
Corporation prior to its acquisition by Penton Media. A complaint seeking class
action status was filed in Delaware Chancery Court on June 16, 1999 by a former
stockholder of Mecklermedia Corporation alleging that Messrs. Meckler, Cardell,
Bach and Davies, as well as the other directors of Mecklermedia Corporation,
breached their fiduciary duties of care, candor and loyalty in connection with
the approval of the sale of Mecklermedia Corporation to Penton Media at the
price paid by Penton Media and the related sale of 80.1% of the Internet
business of Mecklermedia Corporation to Mr. Meckler at the price paid by Mr.
Meckler. Among other things, this plaintiff has alleged that the price paid by
Penton Media for the purchase of Mecklermedia Corporation, and the price paid by
Mr. Meckler for an 80.1% stake in the Internet business of Mecklermedia
Corporation, were inadequate. This former stockholder of Mecklermedia
Corporation has asserted claims for unspecified damages. The plaintiff also
named Jupitermedia Corporation as a defendant seeking that a constructive trust
be established consisting of any benefits derived by the defendants in respect
of the allegations set forth in the complaint.
On or about November 7, 2000, defendants were served with an amended
complaint, which named three additional plaintiffs.
On or about October 9, 2001, with leave of the Delaware Chancery court,
plaintiffs filed a Second Amended Class Action Complaint ("SAC"). The SAC adds
allegations concerning defendants' alleged failure to disclose certain facts
concerning Mr. Meckler's role in the transactions, his role in negotiations with
a third party, and the valuation of the assets at issue. Defendants filed a
motion to dismiss the SAC on April 1, 2002. On November 6, 2002, the Court
issued an opinion denying the defendants' motion to dismiss the SAC. On December
13, 2002, all of the defendants, including Jupitermedia, served an answer to the
SAC generally
11
denying the allegations therein, denying that the directors of Mecklermedia
breached any fiduciary duties, and asserting certain affirmative defenses. All
of the defendants intend to continue to vigorously defend themselves.
10. SUBSEQUENT EVENT
On July 11, 2003, Jupitermedia acquired the assets (the "Asset
Acquisition") of DevX.com from DevX.com, Incorporated, a Delaware corporation
("DevX"), pursuant to an asset purchase agreement , dated July 11, 2003, between
DevX and Jupitermedia.
The consideration paid in the Asset Acquisition (which was determined as a
result of arms'-length negotiations) consisted of cash in the amount of
$2,250,000 and 200,000 restricted shares of Jupitermedia's common stock plus the
assumption of certain liabilities including accounts payable and obligations to
fulfill contractual commitments.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and the accompanying notes, which appear elsewhere in this
filing. Statements in this Form 10-Q, which are not historical facts, are
"forward-looking statements" that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the forward-looking
statements. The potential risks and uncertainties address a variety of subjects
including, for example: the competitive environment in which Jupitermedia
competes; the unpredictability of Jupitermedia's future revenues, expenses, cash
flows and stock price; Jupitermedia's ability to integrate acquired businesses,
products and personnel into its existing businesses; Jupitermedia's
international and venture investments; any material change in Jupitermedia's
intellectual property rights; and continued growth and acceptance of information
technology and the Internet. For a more detailed discussion of such risks and
uncertainties, refer to Jupitermedia's reports filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 and the Securities
Exchange Act of 1934. The forward-looking statements included herein are made as
of the date of this Form 10-Q, and we are under no obligation to update the
forward-looking statements after the date hereof.
OVERVIEW
Jupitermedia is a provider of global real-time news, information, research
and media resources for information technology ("IT"), Internet industry and
graphics professionals. We provide our community of users with the following
resources:
o real-time IT and Internet industry news o information about emerging
o business and technology market research products and technologies
o IT and business-specific conferences and o tutorials, training and
trade shows skills development
o image and software downloads o discussion forums
o buyer's guides and products reviews o expert advice
SEGMENTS
Jupitermedia operates in three business segments (for additional
information - see also Note 8 of the Notes to Unaudited Consolidated Financial
Statements contained in Item 1 hereof):
o Online media
o Research
o Events
ONLINE MEDIA
Our online media business includes our internet.com, EarthWeb.com and
ArtToday.com networks of over 165 Web sites and nearly 200 e-mail newsletters
that generate nearly 230 million page views monthly. Our network is organized
into 16 vertical content categories, or channels that serve our users.
We generate our online media business revenues from :
Advertising. We sell advertising on our Web sites, e-mail newsletters,
online discussion forums and moderated e-mail discussion lists. Advertising
revenue is recognized ratably in the period in which the advertising is
displayed, provided that no significant company obligations remain and
collection of the resulting receivable is probable. Company obligations
typically include guarantees of a minimum number of advertising impressions, or
times that an advertisement is viewed by users of our Web sites and related
media properties.
13
Paid Subscription Services. Paid subscription services relate to customer
subscriptions to our paid e-mail newsletters and services,
SearchEngineWatch.com, TheCounter.com, WinDrivers.com, WallStreetResearchNet.com
and AlertIPO.com, which are sold through our network and through affiliate
relationships. Revenue from subscriptions is recognized ratably over the
subscription period. Deferred revenues relate to the portion of collected
subscription fees that has not yet been recognized as revenue. Effective with
the June 30, 2003 acquisition of ArtToday, Inc., paid subscription services also
include our ArtToday.com network of paid online subscriptions for photographs,
clipart, Web graphics, animations and fonts.
E-commerce Agreements and Offerings. We have entered into a number of
e-commerce agreements, which generally include either a fixed fee for
advertising, a bounty for new customer accounts or revenue sharing of 10% to 50%
of the sales made by the e-commerce vendor as a result of links from our
network, or in some cases combinations of advertising, bounties and revenue
sharing. E-commerce agreements typically are a minimum of three months in
duration. Revenues from these agreements are recognized in the month in which
they are earned.
Permission Based Opt-in E-Mail List Rentals. We currently offer for rental
our permission based opt-in e-mail list names relating to over 230 IT and
Internet-specific topics. Members of our community of users volunteer, or
"opt-in," to be included on these lists to receive e-mail product offerings and
information relevant to their interests. Subscribers to these permission based
opt-in e-mail lists receive e-mail announcements of special offers relating to
each topic subscribed. Revenue from permission based opt-in list rentals is
recognized at the time of the use by the renter.
Licensing Agreements. We license our editorial content and brands to third
parties for fixed fees and royalties based on the licensee's revenues generated
by the licensed content. We license selected portions of our editorial content
to print publishers. We license one-time rights to reprint individual articles,
online or in print, to third parties through licensing of reprints and copyright
permission requests. We also provide access to limited versions of our editorial
content to others at no charge, to promote our brands and generate traffic. Such
amounts are recognized as revenue in the month earned.
Webinars. Jupiter Webinars are objective, educational online forums that
provide focused research findings and analysis from Jupiter Research, as well as
other highly respected analysts, journalists and industry experts. These live
multimedia presentations provide actionable, unbiased information, as well as
the opportunity to interact with the analysts through live question and answer
segments. Jupiter Webinars are free to qualified professionals. We generate
revenue from advertiser sponsorships. Revenues are recognized in the period in
which the Webinar occurs.
Online Press Release Distribution Services. Through InternetNewsBureau.com,
we provide paid e-mail based press release distribution services. These press
releases are e-mailed to over 10,000 registered journalists. Revenue from this
service is recorded on a per use basis and recognized at the time of
distribution.
RESEARCH
Our Jupiter Research division provides market insight, data and objective
analysis for both end-user and vendor companies. Jupiter Research covers a
variety of sectors and industries to provide clients with information to
understand changes in the market. Jupiter Research provides objective insight
and analysis, backed by proprietary data in the form of forecasts, consumer
surveys and executive surveys. Jupiter Research analysts bring to clients domain
expertise, a crucial element to put into context both specific data and changing
events.
Jupiter Research consists of three main product lines: Syndicated Research,
Custom Research and Consulting, and A la Carte solutions.
Syndicated Research. Syndicated research delivers data and analysis via
written research reports and also analyst inquiry. Reports include forecasts and
survey data to understand consumers' behaviors and
14
preferences, as well as how executives are investing in particular technologies
and platforms. Analyst inquiry allows companies to look into a given subject
one-on-one, to test ideas and to add objective insight for specific industries
and online circumstances. Syndicated research is typically sold on a
subscription basis and revenues are deferred and then recognized over the term
of the related contract as services are provided.
Custom Research and Consulting. Our Custom Research and Consulting product
meets project-specific research needs. Strategic consulting projects utilize a
variety of research methodologies to provide proprietary recommendations; allow
clients to test specific hypotheses regarding how new technologies, competitive
forces and alternative go-to-market strategies affect their market position; and
expand on Jupiter Research's knowledge and data, often focusing on markets or
issues not directly covered in existing products. Types of custom research
projects include market opportunity assessments, leading practice analyses,
business evaluations, new business model assessments, multi-client studies and
site benchmarking. Revenues related to our Custom Research and Consulting
products are recognized over the period the service is provided.
A la Carte Solutions. Jupiter Research analysts provide additional services
to clients via our Web Site Review product and our speaker program. Revenues
from our A la Carte products are recorded at the time of sale.
Our Jupiter Research division also includes Jupiter Direct. Jupiter Direct
is an online outlet where customers can purchase copies of research reports and
briefings. Revenue from Jupiter Direct is recognized at the time of sale.
EVENTS
Our Jupiter Events division produces offline conferences and trade shows
focused on IT and business-specific topics that are of interest to our community
of users. Conferences and trade shows generate revenue from attendee
registrations, exhibition space and from advertiser and vendor sponsorships.
Revenue for conferences and trade shows is recognized in the period in which the
conference and trade show is held. Deferred revenues relate to the portion of
collected conference registration fees as well as exhibition space, advertiser
and vendor sponsorships that have been contracted prior to the commencement of
the conferences and trade shows.
VENTURE FUND INVESTMENTS
We are the portfolio manager of internet.com Venture Fund I LLC, a $5.0
million venture fund formed in March 1999, internet.com Venture Fund II LLC, a
$15.0 million venture fund formed in September 1999, and internet.com Venture
Partners III LLC, a $75.0 million venture fund formed in January 2000, all of
which invest in early-stage content-based Internet properties that are not
competitive with Jupitermedia. We earn management fees for the day-to-day
operation and general management of the funds. We are also entitled to 20% of
the realized gains on investments made by these funds. In February 2003, the
operating agreement of internet.com Venture Fund II LLC was amended to provide
for the dissolution of the fund and distribution of the fund assets by December
31, 2003. In October 2002, the operating agreement of internet.com Venture
Partners III was amended to reduce the fund's committed capital from $75.0
million to $22.5 million and to provide for the dissolution of the fund and the
distribution of the fund assets by December 31, 2003. We no longer have any
outstanding capital commitments related to these three venture funds. We
invested $700,000 in the initial fund, $1.8 million in the second fund and $3.1
million in the third fund, all of which are now fully invested. The remaining
$4.3 million of capital raised and funded in the initial fund, $13.2 million
raised and funded in the second fund and $19.4 million raised and funded in the
third fund were sourced from third party investors.
15
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 AND 2003
Revenues. Revenues were $9.9 million for the three months ended June 30,
2002 and $10.2 million for the three months ended June 30, 2003, representing an
increase of 3%. This change was primarily due to an increase in research
revenues of $2.2 million resulting from the acquisition of Jupiter Research.
Jupiter Research was acquired in the third quarter of 2002. This increase was
partially offset by a reduction in advertising revenues, including a reduction
in barter revenue of $903,000.
Cost of revenues. Cost of revenues primarily consists of expenses
associated with editorial, research, communications infrastructure, Web site
hosting and conferences and trade shows. Cost of revenues was $3.9 million for
the three months ended June 30, 2002 and $4.5 million for the three months ended
June 30, 2003, representing an increase of 16%. This change was primarily due to
an increase of $874,000 in salaries due to an increase in the number of
employees resulting from the acquisition of Jupiter Research. As a percentage of
revenues, cost of revenues was 39% for the three months ended June 30, 2002 and
44% for the three months ended June 30, 2003.
Advertising, promotion and selling. Advertising, promotion and selling
expenses primarily consist of costs related to sales and marketing staff, sales
commissions and promotion costs. Advertising, promotion and selling expenses
were $3.6 million for the three months ended June 30, 2002 and $3.5 million for
the three months ended June 30, 2003, representing a 2% decrease. This change
was primarily due to a reduction in barter advertising of $814,000 offset by an
increase in salaries, benefits and other related costs paid to advertising and
research sales personnel of $637,000 due to an increase in the number of
employees resulting from the acquisition of Jupiter Research. As a percentage of
revenues, advertising, promotion and selling expenses were 37% for the three
months ended June 30, 2002 and 35% for the three months ended June 30, 2003.
General and administrative. General and administrative expenses primarily
consist of salaries, professional fees, facilities costs and provisions for
losses on accounts receivable. General and administrative expenses were $1.6
million for the three months ended June 30, 2002 and $1.8 million for the three
months ended June 30, 2003, representing a 10% increase. This change was
primarily due to an increase in bad debt expense of $238,000. As a percentage of
revenues, general and administrative expenses were 16% for the three months
ended June 30, 2002 and 17% for the three months ended June 30, 2003.
Depreciation. Depreciation of property and equipment was $588,000 for the
three months ended June 30, 2002 and $338,000 for the three months ended June
30, 2003, representing a 43% decrease. This decline was a result of reduced
capital expenditures. As a percentage of revenues, depreciation of property and
equipment was 6% for the three months ended June 30, 2002 and 3% for the three
months ended June 30, 2003.
Amortization. Amortization of intangibles was $195,000 for the three months
ended June 30, 2002 and $256,000 for the three months ended June 30, 2003,
representing a 31% increase. This increase was due to additional trademark
purchases. As a percentage of revenues, amortization of intangibles was 2% for
the three months ended June 30, 2002 and 3% for the three months ended June 30,
2003.
Gain (loss) on investments and other, net. During the three months ended
June 30, 2002, Jupitermedia determined that declines in value for certain of its
investments in internet.com venture fund portfolio companies were other than
temporary. Jupitermedia recognized losses totaling $95,000 related to investment
impairment, net of a gain on the sales of assets. During the three months ended
June 30, 2003, Jupitermedia recorded a net gain from the sale of one of its
businesses of $54,000.
Interest income. Interest income was $98,000 for the three months ended
June 30, 2002 and $62,000 for the three months ended June 30, 2003. This change
was due to a decline in interest rates and a reduction in cash.
16
Provision for income taxes. Jupitermedia recorded a provision for income
taxes of $13,000 for the three months ended June 30, 2002 based upon estimated
foreign tax rates and did not record a provision for foreign income taxes for
the three months ended June 30, 2003.
Minority interests. Minority interests represent the minority stockholders'
proportionate share of profits or losses of Jupitermedia's majority-owned
consolidated international subsidiaries.
Equity loss from venture fund investments. Equity loss represents
Jupitermedia's net equity interests in the investments in internet.com venture
funds. Equity loss was $151,000 for the three months ended June 30, 2002 and
$27,000 for the three months ended June 30, 2003, representing an 82% decrease.
This change was primarily due to a reduction in the writedowns of portfolio
investments by the internet.com venture funds.
SIX MONTHS ENDED JUNE 30, 2002 AND 2003
Revenues. Revenues were $18.6 million for the six months ended June 30,
2002 and $18.5 million for the six months ended June 30, 2003, representing a
decrease of 1%. This change was primarily due to a reduction in advertising
revenues of $1.4 million and a reduction in barter revenue of $1.9 million. This
decrease was partially offset by an increase in research revenues of $4.4
million resulting from the acquisition of Jupiter Research. Jupiter Research was
acquired in the third quarter of 2002.
Cost of revenues. Cost of revenues primarily consists of expenses
associated with editorial, research, communications infrastructure, Web site
hosting and conferences and trade shows. Cost of revenues was $7.4 million for
the six months ended June 30, 2002 and $9.2 million for the six months ended
June 30, 2003, representing an increase of 24%. This change was primarily due to
an increase of $1.6 million in salaries due to an increase in the number of
employees resulting from the acquisition of Jupiter Research. As a percentage of
revenues, cost of revenues was 40% for the six months ended June 30, 2002 and
50% for the six months ended June 30, 2003.
Advertising, promotion and selling. Advertising, promotion and selling
expenses primarily consist of costs related to sales and marketing staff, sales
commissions and promotion costs. Advertising, promotion and selling expenses
were $7.0 million for the six months ended June 30, 2002 and $6.3 million for
the six months ended June 30, 2003, representing a 10% decrease. This change was
primarily due to a reduction in barter advertising of $1.7 million offset by an
increase in salaries, benefits and other related costs paid to the advertising
and research sales personnel of $950,000 due to an increase in the number of
employees resulting from the acquisition of Jupiter Research. As a percentage of
revenues, advertising, promotion and selling expenses were 38% for the six
months ended June 30, 2002 and 34% for the six months ended June 30, 2003.
General and administrative. General and administrative expenses primarily
consist of salaries, professional fees, facilities costs and provisions for
losses on accounts receivable. General and administrative expenses were $3.4
million for the six months ended June 30, 2002 and $3.4 million for the six
months ended June 30, 2003, representing an increase of less than 1%. As a
percentage of revenues, general and administrative expenses were 18% for the six
months ended June 30, 2002 and June 30, 2003.
Depreciation. Depreciation of property and equipment was $1.2 million for
the six months ended June 30, 2002 and $701,000 for the six months ended June
30, 2003, representing a 44% decrease. This decline was a result of reduced
capital expenditures. As a percentage of revenues, depreciation of property and
equipment was 7% for the six months ended June 30, 2002 and 4% for the six
months ended June 30, 2003.
Amortization. Amortization of intangibles was $367,000 for the six months
ended June 30, 2002 and $496,000 for the six months ended June 30, 2003,
representing a 35% increase. This increase was due to additional trademark
purchases. As a percentage of revenues, amortization of intangibles was 2% for
the six months ended June 30, 2002 and 3% for the six months ended June 30,
2003.
Gain (loss) on investments and other, net. Jupitermedia determined that the
declines in value for certain of its investments in internet.com venture fund
portfolio companies were other than temporary. During the six
17
months ended June 30, 2002, Jupitermedia recognized losses of $204,000 related
to investment impairment, net of a gain on the sales of assets. During the six
months ended June 30, 2003, Jupitermedia recorded a net loss on the sale of
assets of $1,000.
Interest income. Interest income was $202,000 for the six months ended June
30, 2002 and $151,000 for the six months ended June 30, 2003. This change was
due to a decline in interest rates and a reduction in cash.
Provision for income taxes. Jupitermedia recorded a provision for income
taxes of $19,000 for the six months ended June 30, 2002 related to foreign
income taxes that were recorded based upon estimated foreign tax rates and did
not record a provision for foreign income taxes for the six months ended June
30, 2003.
Minority interests. Minority interests represent the minority stockholders'
proportionate share of losses of Jupitermedia's majority-owned consolidated
international subsidiaries.
Equity loss from venture fund investments. Equity loss represents net
equity interests in the investments in internet.com venture funds. Equity loss
was $377,000 for the six months ended June 30, 2002 and $50,000 for the six
months ended June 30, 2003. This change was primarily due to a reduction in the
writedowns of portfolio investments by the internet.com venture funds.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded operations primarily with cash from our
initial and follow-on public offerings of common stock. On June 25, 1999, we
completed our initial public offering of 3,400,000 shares of our common stock at
$14.00 per share. Net proceeds to Jupitermedia aggregated approximately $43.0
million. On February 1, 2000, we completed our follow-on public offering of
3,750,000 shares of common stock priced at $60.00 per share, of which 1,750,000
shares were sold by Jupitermedia and 2,000,000 shares were sold by Penton Media,
Inc. Net proceeds received by Jupitermedia from the follow-on offering were
approximately $98.3 million. Jupitermedia did not receive any of the proceeds
from the sale of shares by Penton Media, Inc.
As of June 30, 2003, Jupitermedia had total current assets of $21.3 million
and total current liabilities of $15.0 million, or working capital of
approximately $6.3 million.
Net cash provided by operating activities was $1.3 million for the six
months ended June 30, 2002 and $489,000 for the six months ended June 30, 2003.
Net cash provided by operating activities for the period ended June 30, 2002 was
primarily a result of our net losses adjusted for depreciation and amortization
and barter transactions as well as a decrease in accounts receivable and prepaid
expenses offset by decreases in accounts payable and accrued expenses. Net cash
provided by operating activities for the six months ended June 30, 2003 was
primarily a result of our net losses adjusted for depreciation and amortization
and barter transactions as well as decreases in accounts receivable and unbilled
accounts receivable offset by decreases in accounts payable and accrued expenses
and an increase in prepaid expenses.
Net cash used in investing activities was $637,000 for the six months ended
June 30, 2002 and $13.5 million for the six months ended June 30, 2003. Net cash
used in investing activities was primarily a result of acquisitions of
businesses, including ArtToday, Inc. in 2003, and capital expenditures. Capital
expenditures were $131,000 for the six months ended June 30, 2002 and $147,000
for the six months ended June 30, 2003.
Net cash provided by financing activities was $0 for the six months ended
June 30, 2002 and $103,000 for the six months ended June 30, 2003 and was from
proceeds received from the exercise of stock options.
In October 2001, Jupitermedia announced that its Board of Directors had
authorized the expenditure of up to $1.0 million to repurchase the Company's
outstanding common stock. Any purchases under Jupitermedia's stock repurchase
program may be made, from time-to-time, in the open market, through block trades
or otherwise, at the discretion of Company management. Depending on market
conditions and other factors, these purchases may be commenced or suspended at
any time or from time-to-time without prior notice. In
18
September 2002, Jupitermedia announced that it purchased 65,000 shares of
Jupitermedia common stock at $1.60 per share as part of its stock repurchase
program.
Jupitermedia believes the combination of cash on hand and operating cash
flow will provide sufficient liquidity for the next twelve months. However, if
there were to be a further downturn in the general economy, particularly related
to technology advertising, there would be a corresponding negative impact on
Jupitermedia's liquidity. In addition, any future acquisitions that require cash
may affect liquidity.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 148, "Accounting for Stock-Based Compensation Transition and
Disclosure, and Amendment of SFAS No. 123," to provide alternative methods for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation as required by SFAS No. 123. SFAS No. 148
also amends the disclosure provisions of SFAS No. 123 and Accounting Principles
Board ("APB") Opinion No. 28, "Interim Financial Reporting," to require
disclosure in the summary of significant accounting policies of the effect of
stock-based compensation on reported net income and earnings per share in annual
and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123
to require companies to account for employee stock options using the fair value
method, the disclosure provisions of SFAS No. 148 are applicable to all
companies with stock-based employee compensation, regardless of whether they
account for that compensation using the fair value method of SFAS No. 123 or the
intrinsic value method of APB No. 25. Since Jupitermedia accounts for our
stock-based compensation under APB No. 25, and has no current plans on switching
to SFAS No. 123, the impact of SFAS No. 148 will be limited to the annual and
interim reporting of the effects on net income (loss) and earnings (loss) per
share as if Jupitermedia accounted for stock-based compensation under SFAS No.
123 as set forth in Note 3.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. The provisions of SFAS No. 150
are effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 will not have an
impact on Jupitermedia's financial statements.
CRITICAL ACCOUNTING POLICIES
There have been no changes to our critical accounting policies from those
included in our most recent Form 10-K for the year ended December 31, 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We have no derivative financial instruments or derivative commodity
instruments. We invest our excess cash in debt instruments of the U.S.
Government and its agencies. Interest rates for our investments were
approximately 1.20% at June 30, 2002 and 0.75% at June 30, 2003 and generally
move with market rates.
We invest in equity instruments of privately held, online media and
technology companies for business and strategic purposes. These investments are
included in Investments and other assets and are accounted for under the cost
method, as we do not have the ability to exert significant influence over the
investee or their operations. For these non-quoted investments, our policy is to
regularly review the assumptions underlying the operating performance and cash
flow forecasts in assessing the carrying values. We identify and record
impairment losses on long-lived assets when events and circumstances indicate
that such assets might be impaired.
Our transactions are generally conducted, and our accounts are denominated,
in United States dollars. Accordingly, we are not exposed to significant foreign
currency risk.
19
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Jupitermedia management,
including the Chief Executive Officer and Chief Financial Officer, have
conducted an evaluation of the effectiveness of disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of the end of the period covered by this
report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures are
effective in ensuring that all material information required to be filed in this
quarterly report has been made known to them in a timely fashion.
CHANGES IN INTERNAL CONTROLS. There have been no significant changes in our
internal controls or in factors that could significantly affect internal
controls subsequent to the date the Chief Executive Officer and Chief Financial
Officer completed their evaluation.
20
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Messrs. Alan M. Meckler and Christopher S. Cardell, who are
stockholders, executive officers and directors of
Jupitermedia, were stockholders, executive officers and
directors of Mecklermedia Corporation prior to its
acquisition by Penton Media in November 1998. In addition,
Messrs. Gilbert F. Bach and Michael J. Davies, who are
directors of Jupitermedia, were directors of Mecklermedia
Corporation prior to its acquisition by Penton Media. A
complaint seeking class action status was filed in Delaware
Chancery Court on June 16, 1999 by a former stockholder of
Mecklermedia Corporation alleging that Messrs. Meckler,
Cardell, Bach and Davies, as well as the other directors of
Mecklermedia Corporation, breached their fiduciary duties of
care, candor and loyalty in connection with the approval of
the sale of Mecklermedia Corporation to Penton Media at the
price paid by Penton Media and the related sale of 80.1% of
the Internet business of Mecklermedia Corporation to Mr.
Meckler at the price paid by Mr. Meckler. Among other
things, this plaintiff has alleged that the price paid by
Penton Media for the purchase of Mecklermedia Corporation,
and the price paid by Mr. Meckler for an 80.1% stake in the
Internet business of Mecklermedia Corporation, were
inadequate. This former stockholder of Mecklermedia
Corporation has asserted claims for unspecified damages. The
plaintiff also named Jupitermedia Corporation as a defendant
seeking that a constructive trust be established consisting
of any benefits derived by the defendants in respect of the
allegations set forth in the complaint.
On or about November 7, 2000, defendants were served with an
amended complaint, which named three additional plaintiffs.
On or about October 9, 2001, with leave of the Delaware
Chancery court, plaintiffs filed a Second Amended Class
Action Complaint ("SAC"). The SAC adds allegations
concerning defendants' alleged failure to disclose certain
facts concerning Mr. Meckler's role in the transactions, his
role in negotiations with a third party, and the valuation
of the assets at issue. Defendants filed a motion to dismiss
the SAC on April 1, 2002. On November 6, 2002, the Court
issued an opinion denying the defendants' motion to dismiss
the SAC. On December 13, 2002, all of the defendants,
including Jupitermedia, served an answer to the SAC
generally denying the allegations therein, denying that the
directors of Mecklermedia breached any fiduciary duties, and
asserting certain affirmative defenses. All of the
defendants intend to continue to vigorously defend
themselves.
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
21
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Jupitermedia's annual meeting of stockholders was held on
June 9, 2003.
The following nominees were elected as directors, each to
hold office until their successor is elected and qualified,
by the vote set forth below:
NOMINEE FOR AGAINST
------- --- -------
Alan M. Meckler 24,367,157 198,886
Christopher S. Cardell 24,367,157 198,886
Gilbert F. Bach 24,367,157 198,886
Michael J. Davies 24,367,157 198,886
John R. Patrick 24,367,157 198,886
William A. Shutzer 24,367,157 198,886
The proposal to approve the appointment of Deloitte & Touche
LLP, independent accountants, to act as independent auditors
for Jupitermedia Corporation for the fiscal year ending
December 31, 2003 was approved by the vote set forth below:
FOR AGAINST ABSTAIN
--- ------- -------
24,521,397 41,130 2,976
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this
Report on Form 10-Q. Where so indicated by footnote,
exhibits, which were previously filed, are incorporated by
reference. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated
parenthetically except for in those situations where the
exhibit number was the same as set forth below.
Exhibit Number Description
-------------- -------------------------------------------
11 Statement Regarding Computation of Per
Share Earnings (Loss) (included in notes to
consolidated financial statements)
31.1 Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On June 12, 2003, Jupitermedia filed a Form 8-K announcing
that on June 11, 2003, a Statement of Changes of Beneficial
Ownership on Form 4 was filed pursuant to Section
22
16 of the Securities Exchange Act of 1934, as amended, by
each of Alan M. Meckler, Christopher S. Cardell and
Christopher J. Baudouin (respectively, the Chief Executive
Officer, President and Chief Financial Officer of the
Registrant and collectively, the "Reporting Persons"). Each
of these Statements of Changes in Beneficial Ownership (the
"6/11 Filings") was filed to report a grant of options by
the Registrant to the Reporting Persons in the amounts
indicated on such Reporting Person's respective 6/11 Filing.
However, each of the 6/11 Filings inadvertently reported
that the price of the derivative security, as set forth in
column 8 of Table II of the 6/11 Filings, for the options
granted to the Reporting Person named therein was $3.55 per
share, in the case of Mr. Meckler, and $3.23 per share in
the case of Messrs Cardell and Baudouin. In fact, all such
options were granted at no cost to the Reporting Persons and
column 8 of Table II of each of the 6/11 Filings should have
been left blank. The 6/11 Filings have been amended
accordingly and an amended Statement of Changes in
Beneficial Ownership on Form 4 for each of the Reporting
Persons has been filed to correct this inaccuracy.
On June 25, 2003, Jupitermedia filed a Form 8-K disclosing a
press release issued on June 25, 2003 announcing the signed
definitive agreement to acquire all of the stock of
ArtToday, Inc.
On July 1, 2003, Jupitermedia filed a Form 8-K announcing
the acquisition of all the stock of ArtToday, Inc., pursuant
to a stock purchase agreement dated June 24, 2003, between
International Microcomputer Software, Inc. and Jupitermedia,
had closed.
On July 16, 2003, Jupitermedia filed a Form 8-K announcing
that it had acquired the assets of DevX.com from DevX.com,
Inc., pursuant to an asset purchase agreement dated July 11,
2003, between DevX.com, Inc. and Jupitermedia.
On August 6, 2003, Jupitermedia filed a Form 8-K announcing
its financial results for the quarter ended June 30, 2003.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 2003 JUPITERMEDIA CORPORATION
/s/ Christopher S. Cardell
-------------------------------
Christopher S. Cardell
Director, President and Chief Operating Officer
/s/ Christopher J. Baudouin
-------------------------------
Christopher J. Baudouin
Senior Vice President and Chief Financial Officer
24