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U.S. 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 SEPTEMBER 30, 2001
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: 0-24559
MULTEX.COM, INC.
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(Exact name of registrant as specified in its charter)
22-3253344
DELAWARE ----------------------
------------------------ (I.R.S. Employer
(State of Incorporation) Identification Number)
100 WILLIAM STREET, 7TH FLOOR
NEW YORK, NEW YORK 10038
(212) 607-2400
--------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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 |_|
As of November 7, 2001, there were 32,406,350 shares of the registrant's common
stock outstanding.
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QUARTERLY REPORT ON FORM 10-Q
MULTEX.COM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION .............................................. 3
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited): ...... 3
Condensed Consolidated Balance Sheets as of
September 30, 2001 and December 31, 2000 ...................... 3
Condensed Consolidated Statements of Operations
for the three months and nine months ended
September 30, 2001 and 2000 ................................... 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2001 and 2000 ......... 5
Notes to Condensed Consolidated Financial Statements
September 30, 2001 ............................................ 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ........................... 10
PART II. OTHER INFORMATION ................................................. 22
ITEM 1. LEGAL PROCEEDINGS ............................................. 22
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ..................... 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................... 22
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
ITEM 7. SIGNATURES .................................................... 23
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2001 2000
--------- ---------
ASSETS (unaudited) (audited)
--------- ---------
Current assets:
Cash and cash equivalents $ 40,937 $ 20,237
Marketable securities 1,030 25,493
Accounts receivable, net 18,210 27,497
Other current assets 6,624 6,542
--------- ---------
Total current assets 66,801 79,769
Property and equipment, net 38,336 37,909
Goodwill, net 6,235 33,704
Intangibles, net 16,289 17,649
Other 8,949 5,490
--------- ---------
Total assets $ 136,610 $ 174,521
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,077 $ 4,805
Accrued expenses 5,941 9,742
Current portion of capital lease obligations 69 110
Deferred revenues 9,323 10,533
--------- ---------
Total current liabilities 17,410 25,190
Long term liabilities:
Capital lease obligations 27 84
Deferred rent 3,196 3,119
Other 3 3
--------- ---------
Total long term liabilities 3,226 3,206
Stockholders' equity:
Preferred stock - $.01 par value:
Authorized - 5,000,000 shares;
none issued and outstanding -- --
Common stock - $.01 par value:
Authorized - 200,000,000 shares;
issued and outstanding 32,405,000 shares
at September 30, 2001 and 31,741,000 at
December 31, 2000 324 317
Additional paid-in capital 225,699 216,683
Accumulated deficit (99,740) (61,336)
Deferred equity consideration (10,208) (9,671)
Accumulated other comprehensive (loss) income (101) 132
--------- ---------
Total stockholders' equity 115,974 146,125
--------- ---------
Total liabilities and stockholders' equity $ 136,610 $ 174,521
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Gross revenues $ 21,314 $ 22,823 $ 74,340 $ 58,073
Performance-based warrants (821) -- (1,896) --
------------ ------------ ------------ ------------
Net revenues 20,493 22,823 72,444 58,073
Cost of revenues 6,371 4,162 19,271 12,066
------------ ------------ ------------ ------------
Gross profit 14,122 18,661 53,173 46,007
Operating expenses:
Sales and marketing 6,018 6,568 20,472 18,725
Research and development 1,599 2,773 6,166 7,795
General and administrative 7,307 6,740 24,264 16,871
Depreciation & amortization 4,658 3,261 13,322 7,765
Impairment & restructuring
charges 1,746 -- 27,387 --
------------ ------------ ------------ ------------
Total operating expenses 21,328 19,342 91,611 51,156
Loss from operations (7,206) (681) (38,438) (5,149)
Other income (expense):
Interest income 434 916 1,512 2,252
Interest expense (25) (33) (43) (56)
Equity in loss from
unconsolidated business (781) (781)
Other (26) -- (199) --
------------ ------------ ------------ ------------
Income (loss) before income taxes (7,604) 202 (37,949) (2,953)
Income tax expense (benefit) 75 (8) 455 87
------------ ------------ ------------ ------------
Net income (loss) $ (7,679) $ 210 $ (38,404) $ (3,040)
============ ============ ============ ============
Basic and diluted net income
(loss) per share $ (0.24) $ 0.01 $ (1.20) $ (0.10)
============ ============ ============ ============
Number of shares used in:
Basic income (loss) per share 32,326 31,173 32,052 29,780
============ ============ ============ ============
Diluted income (loss) per share 32,326 34,369 32,052 29,780
============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000
----------- -----------
OPERATING ACTIVITIES
Net loss $(38,404) $ (3,040)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Amortization of equity consideration 3,144 1,886
Depreciation and amortization 8,051 4,477
Amortization of goodwill and intangibles 3,618 1,819
Performance-based warrant charges 1,896 --
Bad debt expense 1,612 709
Equity in loss from unconsolidated business 31 --
Interest income on marketable securities (309) --
Impairment & restructuring charges 26,610 --
Changes in operating assets and liabilities:
Accounts receivable 7,675 (7,866)
Other current assets (435) (1,227)
Other assets 1,380 (613)
Accounts payable (2,984) (3,114)
Accrued expenses (4,008) 1,140
Deferred revenue (1,210) 1,592
Deferred rent 77 554
Other liabilities -- (20)
-------- --------
Net cash provided by (used in) operating
activities 6,744 (3,703)
INVESTING ACTIVITIES
Purchase of marketable securities (35,016) (17,565)
Proceeds from sale of marketable securities 59,486 26,359
Acquisition of Sage Online and BuzzCompany,
net of cash acquired -- (6,851)
Purchase of property and equipment (12,831) (17,466)
-------- --------
Net cash provided by (used in)
investing activities 11,639 (15,523)
FINANCING ACTIVITIES
Proceeds from issuances of stock 2,346 55,278
Repayment of long-term debt and capital leases (98) (172)
-------- --------
Net cash provided by financing activities 2,248 55,106
Effect of exchange rate changes on cash 69 (68)
-------- --------
Increase in cash and cash equivalents 20,700 35,812
Cash and cash equivalents, beginning of year 20,237 6,089
-------- --------
Cash and cash equivalents, end of period $ 40,937 $ 41,901
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Noncash investing and financing activity:
Accrued purchases of fixed assets $ 256 $ 2,255
============ =======
Issuance of restricted stock $ 3,869 $ --
============ =======
Stock issued for acquisition of Sage Online $ -- $11,037
============ =======
Stock issued for acquisition of BuzzCompany $ -- $22,801
============ =======
Stock issued for acquisition of software $ -- $ 5,400
============ =======
Stock issued for exercise of warrants $ -- $ 3
============ =======
Issuance of stock to unconsolidated business $ 1,236 $ --
============ =======
Net change in unrealized gain on marketable securities $ (302) $ 156
============ =======
Fair market value of warrants issued $ 1,896 $ 9,809
============ =======
Taxes paid $ 126 $ 4
============ =======
Interest paid $ 43 $ 56
============ =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
NOTE 1 -- BASIS OF PRESENTATION
Multex.com, Inc. (the "Company" or "Multex.com") is a global provider of
investment information and technology solutions to the financial services
industry, including brokerage firms, professional money management firms, hedge
funds, venture capital firms, mutual funds, investment banks, corporations, and
individual investors. Headquartered in New York, the Company also has offices in
London, San Francisco, Edinburgh and Hong Kong.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three and nine month periods ended
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. The disclosure of segment
information was not required as the Company operates in only one business
segment.
The balance sheet at December 31, 2000 has been derived from audited
financial statements but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
The interim financial information contained herein should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 2000 included in the Company's Annual Report on Form
10-K.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill (and intangible assets deemed
to have indefinite lives) will no longer be amortized but will be subject to
annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of FAS No. 142 is expected to result in an increase
in net income of approximately $700,000 ($0.02 per share) per year. During 2002,
the Company will perform the first of the required impairment tests of goodwill
and indefinite lived intangible assets as of January 1, 2002 and has not yet
determined what the effect of these tests will be on the earnings and financial
position of the Company.
On August 1, 2001, the Financial Accounting Standards Board, (FASB) issued
SFAS No. 144, "Accounting For Impairment of Long Lived Assets". The Company is
required to adopt this pronouncement beginning January 1, 2002. SFAS No. 144
prescribes the accounting for long-lived assets (excluding goodwill) to be
disposed of by sale. SFAS No. 144 retains the requirement of SFAS No. 121 to
measure long-lived asset classified as held for sale at the lower of its
carrying value or fair market value less the cost to sell. Therefore,
discontinued operations are no longer measured on a net realizable basis, and
future operating results are no longer recognized before they occur. The impact
of adopting SFAS No. 144 is not expected to be significant.
7
NOTE 2 -- STOCKHOLDERS' EQUITY
During the three months ended September 30, 2001, the Company issued
approximately 30,000 shares of its common stock in connection with the exercise
of stock options to employees and approximately 47,000 shares of its common
stock in connection with vested restricted stock. The Company also issued
approximately 274,000 shares to TheMarkets.com, Inc. in exchange for a 6.25%
equity ownership interest.
During the three months ended June 30, 2001, the Company issued
approximately 144,000 shares of its common stock in connection with the exercise
of stock options to employees and the employee stock purchase plan.
During the three months ended March 31, 2001, the Company issued
approximately 174,000 shares of its common stock to employees in connection with
the exercise of stock options.
NOTE 3 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated (in thousands, except per share
data):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2001 2000 2001 2000
------- ------- -------- -------
Numerator:
Numerator for basic and
diluted net income (loss) per share
- net income (loss) available for
common stockholders $(7,679) $ 210 $(38,404) $(3,040)
======= ======= ======== =======
Denominator:
Denominator for basic net income
(loss) per share - weighted
average shares 32,326 31,173 32,052 29,780
Assumed conversion of outstanding
stock options -- 3,196 -- --
------- ------- -------- -------
Denominator for diluted net
income (loss) per share
- weighted average shares 32,326 34,369 32,052 29,780
------- ------- -------- -------
Basic and diluted net income (loss)
per share $ (0.24) $ 0.01 $ (1.20) $ (0.10)
======= ======= ======= =======
NOTE 4 -- COMPREHENSIVE INCOME (LOSS)
Total comprehensive loss was $7.7 million and total comprehensive income
was $250,000 for the three months ended September 31, 2001 and September 30,
2000, respectively. Total comprehensive loss was $38.6 million and $3.0 million
for the nine months ended September 30, 2001 and September 30, 2000,
respectively.
NOTE 5 -- IMPAIRMENT OF LONG-LIVED ASSETS
During the quarter ended June 30, 2001, the Company recorded an impairment
charge of $25.6 million related to two of its acquisitions. There were two
components to this special charge.
The first component reflects the Company's decision to exit the Sage
business, resulting in a $15.3 million special charge. The majority of this
charge relates to the write-down of net intangible assets (primarily goodwill)
associated with the Sage acquisition.
The second component relates to exiting the Buzz software product line.
Management performed an evaluation of the Buzz intangible assets, as described
in Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets" and concluded from the results of this evaluation that an
impairment of intangible assets had occurred. An impairment charge of $10.3
million (primarily goodwill) was required because estimated fair value was less
than the carrying value of the assets.
8
NOTE 6 -- RESTRUCTURING CHARGE
To reduce costs and streamline operations, the Company took a $1.7 million
restructuring charge in the third quarter related to a 15% workforce reduction
resulting in the termination of approximately 100 employees, the cancellation of
all marketing contracts associated with the Sage Online business, and the
prospective termination of one of its operating leases in New York City.
The Company incurred approximately $770,000 in involuntary termination
benefits that were paid and charged to the restructuring account resulting from
the termination of approximately 100 employees in the third quarter. The
terminated employees represented all product and operating groups, with the
majority of the reductions coming from the Sage Online (26 employees),
Development (15 employees), Operations (13 employees), Buzz (11 employees), and
Sales (10 employees) operating units.
The Company incurred approximately $350,000 in costs related to the
termination of all marketing contracts associated with Sage. As of the end of
the third quarter, the Company no longer has any marketing obligations related
to its Sage business.
The Company is in the process of terminating one of its operating leases in
New York City, but has not yet exited the location. Management anticipates
exiting the space within the next six months and has accrued approximately
$80,000 for expenses related to the lease termination. The restructuring charge
also includes approximately $540,000 related to the write down of leasehold
improvements at this location.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. STATEMENTS CONTAINED HEREIN THAT
ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES", "ANTICIPATES",
"PLANS", "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS AND THE TIMING OF
CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS THAT MAY AFFECT FUTURE RESULTS."
OVERVIEW
Multex.com is a global provider of investment information and technology
solutions for the financial services industry, including brokerage firms,
professional money management firms, hedge funds, venture capital firms, mutual
funds, investment banks, corporations and individual investors. We offer four
main products, as follows:
o MultexNET, launched in June 1996, provides access to real-time, commingled
equity and fixed income research, global estimates and company fundamental
information to buyside investors, sellside institutions, public and private
corporations and libraries of professional service firms;
o MultexEXPRESS, launched in January 1997, offers development, hosting and
real-time distribution of research and other investment information on
customized web sites to buyside investments firms, sellside institutions
and other financial services companies;
o Multex Investor, launched in November 1998, is the Company's financial
destination web site that provides financial data and access to free
research in return for permission-based leads to brokerage firms and
pay-per-view research on an embargoed basis; and
o Market Guide, acquired in September 1999, provides investment information
products to financial institutions and web sites, institutional investors,
corporations and professional vendors.
MultexNET is offered either on a one- to three-year subscription basis or on a
transactional basis through Multex OnDemand. The product allows entitled
institutional investors, corporations, financial institutions and advisors to
access full-text investment research reports on a real-time basis from
investment banks, brokerage firms and other third-party research providers over
the Internet or through other distribution channels.
MultexEXPRESS is also provided pursuant to one- to three-year subscriptions,
generating revenue from professional services, hosting, and license fees.
MultexEXPRESS enables financial institutions to distribute their proprietary
financial research, as well as other corporate documents, over the Internet,
through intranets and other private networks.
Multex Investor provides individual investors who register as members access to
a range of financial reports and services online from a majority of the
contributors to MultexNET. These reports are available either free of charge, or
for a fee determined by the research provider. Multex Investor generates
revenues from transactions, email and banner advertising, and contractual,
lead-generating sponsorships. Sponsors on Multex Investor include full-service
brokerage firms and other financial institutions interested in attracting
individual investors to their products, services and brands.
Market Guide acquires, integrates, condenses and publishes accurate, timely and
objective financial, descriptive and other information on publicly-traded
companies. Market Guide generates revenue primarily by licensing its database in
single or multi-year contracts.
10
Revenue from MultexNET subscriptions is recognized in equal installments over
the term of the subscription. Revenue from transactions on MultexNET and Multex
Investor are recognized upon sale. Some of the transactional users of MultexNET
pay a flat annual fee for the service, which entitles them to receive research
and other reports at a discounted rate. Revenues from these users are recognized
in equal installments over the term of the subscription. Revenue from
professional service fees related to MultexEXPRESS is recognized upon completion
of relevant service, whereas the hosting and license fees are recognized over
the term of the agreement. Revenue from sponsorships on Multex Investor is
recognized in equal installments over the term of the sponsorship. Market Guide
license fees are recognized over the term of the agreement.
The majority of costs associated with revenues from MultexNET, MultexEXPRESS,
Multex Investor and Market Guide are expensed as and when incurred.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 2001 COMPARED TO QUARTER ENDED SEPTEMBER 30, 2000
The September 11, 2001 attacks on the World Trade Center took an immediate toll
on Multex.com and many of its customers. As a result of the attacks, parts of
lower Manhattan were inaccessible for varying periods of time, thus impairing
access to the Company's three New York City offices, each of which is located in
lower Manhattan.
Revenues
Multex.com's gross revenues consist of subscription fees for MultexNET, sales of
investment research on a pay-per-view basis through Multex OnDemand,
subscription, development, hosting and license fees for MultexEXPRESS, license
and redistribution fees for the Market Guide database, and sales of
sponsorships, advertising and investment research through the Multex Investor
web site. We also provide professional services to select MultexEXPRESS clients,
including software development, customization and integration services.
Gross revenues decreased 6.6% to $21.3 million for the quarter ended September
30, 2001 from $22.8 million for the quarter ended September 30, 2000. The
decrease in revenues reflects lower revenues in all product lines except for
Market Guide, which reflected the inclusion of the Barra Global Estimates
business acquired in December 2000. Gross revenues in the third quarter of 2001
totaled $21.3 million, compared with $23.5 million in the second quarter of
2001, representing a decrease of 9.4%.
On a quarter over quarter basis (September 2001 compared to September 2000),
MultexEXPRESS revenue was adversely impacted by the terrorist attacks on the
World Trade Center on September 11, 2001. Specifically, MultexEXPRESS suffered
the largest portion of the revenue decline, totaling approximately $1.4 million.
Approximately $1.2 million of the revenue decrease resulted from one-time
professional development fees being postponed in the third quarter. Management
expects to recognize these fees in subsequent quarters. Additionally,
approximately $200,000 of recurring revenue was lost in the third quarter as a
result of the attacks. Management believes that the Company will be reimbursed
for some portion of the lost recurring revenue under its business interruption
insurance policy. On a sequential basis, the September 2001 quarter declined
significantly from the June 2001 quarter reflecting the delayed and lost revenue
resulting from the September 11, 2001 attacks on the World Trade Center.
MultexNET sales were also negatively impacted by the September 11th attacks.
Management estimates that approximately $400,000 in MultexNet and OnDemand sales
were lost because of the attacks. As a direct result of the financial markets
being closed for four business days, the Company experienced a significant
decline in OnDemand report purchases in the month of September. Management also
believes some portion of this lost revenue will be reimbursed under the
Company's business interruption insurance policy. When compared on a sequential
basis, the third quarter showed a decline versus the second quarter, reflecting
a decline in revenues from the OnDemand product line. This was primarily
attributable to the September 11th attacks.
Multex Investor continued to experience sharp revenue declines on both a quarter
over quarter and sequential basis,
11
each of which reflects the global slowdown in the financial markets coupled with
the attacks on the World Trade Center on September 11, 2001. Management
estimates that approximately $200,000 in revenues were postponed or lost in the
quarter as a results of the World Trade Center attacks. Additionally,
advertising, sponsorships and transactions all continued to be adversely
impacted by the downturn in the financial markets and from significant
curtailments of corporate advertising budgets.
On a quarter over quarter basis, Market Guide benefited from the inclusion of
the Multex Global Estimates (formerly Barra Global Estimates) business, which
was acquired in December 2000, and from modest increases in vendor revenues. On
a sequential basis, the Market Guide business appears to have stabilized,
reflecting fewer bankruptcies and cancellations.
All of the Company's product lines were affected by the attacks on September 11,
2001 and by continued weakness in the global financial markets.
PERFORMANCE-BASED WARRANT CHARGES. In the third quarter ended September 30,
2001, the Company recorded performance-related charges totaling $820,000
associated with warrants issued to Merrill Lynch & Co., Inc. The Company has
classified this non-cash expense as contra-revenue. The performance-based
warrant charges will continue to be recorded by the Company in each period that
warrants are earned.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of MultexNET
and Multex OnDemand, royalties payable to the authors of investment research and
content offered through Multex OnDemand, and the Multex Investor and Market
Guide web sites, internal and external development costs incurred for
MultexEXPRESS customers, research department costs related to the collection and
processing of financial data and global earnings estimates, and data
communications costs.
Cost of revenues increased 53.1% to $6.4 million in the quarter ended September
30, 2001 from $4.2 million for the quarter ended September 30, 2000. As a
percentage of gross revenues, cost of revenues increased to 29.9% for the
quarter ended September 30, 2001 from 18.2% for the quarter ended September 30,
2000. The increase in cost of revenues was primarily due to increased royalty
payments to third party contributors resulting from additional report sales
through the Multex OnDemand platform, the inclusion of data collection costs
related to the Global Estimates business, higher telecommunication costs
resulting from the new data center, and costs associated with customization work
related to development and enhancements of Express sites.
Operating Expenses
SALES AND MARKETING. Sales and marketing expenses consist primarily of salaries,
commissions, advertising, public relations, tradeshow expenses and costs of
marketing materials. Sales and marketing expenses decreased 8.4% to $6.0 million
in the quarter ended September 30, 2001 from $6.6 million for the quarter ended
September 30, 2000. As a percentage of gross revenues, sales and marketing
expenses decreased to 28.2% for the quarter ended September 30, 2001 from 28.8%
for the quarter ended September 30, 2000. The decrease in sales and marketing
expenses was due to a decrease in the amount of new business booked (resulting
in decreased commissions) and a reduction in advertising and marketing expenses.
The Company has reduced its marketing expenditures with the majority of its
marketing dollars in the current quarter spent on generating qualified leads to
the Multex Investor platform.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses decreased 42.3% to $1.6
million for the quarter ended September 30, 2001 from $2.8 million for the
quarter ended September 30, 2000. As a percentage of gross revenues, research
and development expenses decreased to 7.5% for the quarter ended September 30,
2001 from 12.2% for the quarter ended September 30, 2000. The decrease in
research and development expenses in dollar terms was primarily attributable to
an increase in the number of internally developed software projects being
capitalized in accordance with SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE as well as a decline in the
number of developers on staff.
12
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and
consultants, facility expenses, overhead, and office supplies and expenses.
General and administrative expenses increased 8.4% to $7.3 million for the
quarter ended September 30, 2001 from $6.7 million for the quarter ended
September 30, 2000. As a percentage of gross revenues, general and
administrative expenses increased to 34.3% for the quarter ended September 30,
2001 from 29.5% for the quarter ended September 30, 2000. Growth in general and
administrative expenses reflects an increase in the number of employees and
offices worldwide, higher bad debt reserves, and increased professional fees
related to development, legal and tax services. Additionally, the third quarter
ended September 2001 included recognition of operating expenses related to the
BARRA Global Estimates business. The BARRA Global estimates acquisition was
consummated subsequent to September 30, 2000.
Management expects general and administrative expenses to decrease in aggregate
dollars for the remainder of this year as the cost savings from the cost
reduction measures taken in the second and third quarters, that resulted in an
impairment charge recorded in the second quarter and a restructuring charge
(described below) recorded in the third quarter, materialize. The majority of
these cost savings will be attributable to the 15% reduction in personnel and
the benefit costs associated with these employees, the elimination of operating
losses associated with Sage, a reduction in facilities charges from the planned
termination of the lease for one of the Company's New York offices, and
continued expense reductions as the Company strives to align its cost structure
with projected revenues.
DEPRECIATION & AMORTIZATION. Depreciation and amortization expenses consist
primarily of depreciation related to fixed assets, computer equipment and
software, and leasehold improvements, and amortization related to recently
acquired companies and the ongoing cost of warrants issued to Merrill Lynch &
Co., Inc. Depreciation and amortization for the quarter ended September 30, 2001
increased 42.8% to $4.7 million, compared to $3.3 million for the quarter ended
September 30, 2000. As a percentage of gross revenues, depreciation and
amortization expenses increased to 21.9% for the quarter ended September 30,
2001 from 14.3% for the quarter ended September 30, 2000. The increase reflects
amortization related to the BARRA Global estimates business acquired in December
2000 and increased depreciation expenses attributable to additional computer
purchases.
RESTRUCTURING CHARGE. In the third quarter ended September 30, 2001, the Company
recorded a restructuring charge of $1.7 million. This charge consisted of
severance payments to approximately 100 terminated employees, the cancellation
of all marketing contracts associated with the Sage Online business, and the
anticipated termination of one of the Company's operating leases on office space
in New York City. These cost reductions reflect management's commitment to align
the Company's expense base with projected revenues.
Loss from Operations
Loss from operations totaled $7.2 million for the quarter ended September 30,
2001 compared to a loss from operations of $681,000 for the quarter ended
September 30, 2000. Loss from operations reflects approximately $2 million in
postponed or delayed revenue resulting from the September 11, 2001 attacks on
the World Trade Center, the global slowdown in the financial marketplace, higher
cost of revenue and operating expenses, and the restructuring charge of
approximately $1.7 million.
Interest Income (Expense)
Net interest income decreased 53.7% to $409,000 for the quarter ended September
30, 2001 from $883,000 for the quarter ended September 30, 2000. The decrease in
net interest income is primarily attributable to a decline in interest rates and
a lower cash balance.
Equity in Loss from Unconsolidated Business
Equity in loss of unconsolidated business reflects a $781,000 loss the Company
recognized from its equity investment in TheMarkets.com. This investment was
completed in the quarter ended September 30, 2001.
13
Income Taxes
Income tax expense totaled $75,000 for the quarter ended September 30, 2001
compared to a tax benefit of $8,000 for the quarter ended September 30, 2000.
At December 31, 2000, Multex had net operating loss carryforwards of
approximately $50.0 million and research and development credits of
approximately $1.5 million for income tax purposes that expire in 2009 through
2020. The utilization with regard to timing and amount of the Company's net
operating loss carryfowards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code.
Net loss
The Company recorded a net loss of $7.7 million, or a net loss per share of
$0.24, for the quarter ended September 30, 2001 compared to net income of
$210,000, or a net earnings per share of $0.01, for the quarter ended September
30, 2000. The net loss reflects the postponed and lost revenue resulting from
the September 11, 2001 attacks on the World Trade Center, the global slowdown in
the financial marketplace, higher cost of revenue and operating expenses,
restructuring charges, lower interest income, and the equity loss from an
unconsolidated business.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000
Revenues
Gross revenues increased 28.0% to $74.3 million for the nine months ended
September 30, 2001 from $58.1 million for the nine months ended September 30,
2000. The increase in revenues reflects growth in MultexEXPRESS, MultexNET and
Market Guide, partially offset by a reduction in revenue related to Multex
Investor. MultexEXPRESS revenue benefited from an increase in the number of
Express sites in operation, additional customization work and an early
termination charge associated with one customer who decided to exit the retail
marketplace in the first quarter of 2001. MultexNET sales benefited from an
increased number of users accessing the MultexNET service and an increase in the
number of reports purchased through the OnDemand product. Multex Investor
experienced a revenue decline reflecting the downturn in the financial markets
partially offset by cancellation fees related to two sponsors exiting the retail
marketplace in the first quarter of 2001. Advertising, sponsorships and
transactions on Multex Investor were all adversely impacted by the global
slowdown in the financial markets and from dramatic curtailments of corporate
advertising budgets. Market Guide benefitted from the inclusion of the Multex
Global Estimates (formerly Barra Global Estimates) business that was acquired in
December 2000 and from modest increases in vendor revenues partially offset by
several smaller internet distributors canceling their contracts and/or declaring
bankruptcy in 2001.
For the nine month period ended September 30, 2001, the Company incurred charges
associated with performance-related warrants issued to Merrill Lynch & Co., Inc.
totaling $1.9 million. The Company has classified this non-cash expense as a
contra-revenue account. The performance-based warrant charges will continue to
be recorded by the Company in each period that warrants are earned.
Cost of Revenues
Cost of revenues increased 59.7% to $19.3 million during the nine months ended
September 30, 2001 from $12.1 million for the nine months ended September 30,
2000. As a percentage of gross revenues, cost of revenues increased to 25.9% for
the nine months ended September 30, 2001 from 20.8% for the nine months ended
September 30, 2000. The increase in cost of revenues in dollar terms was
primarily due to increased royalty payments to third party contributors
resulting from additional report sales through the Multex OnDemand platform, the
inclusion of data collection costs related to the Global Estimates business, and
costs associated with increased customization work related to development and
enhancements of Express sites.
14
Operating Expenses
SALES AND MARKETING. Sales and marketing expenses increased 9.3% to $20.5
million during the nine months ended September 30, 2001 from $18.7 million for
the nine months ended September 30, 2000. As a percentage of gross revenues,
sales and marketing expenses decreased to 27.5% for the nine months ended
September 30, 2001 from 32.2% for the nine months ended September 30, 2000. The
increase in sales and marketing expenses was due to an increase in sales
personnel partially offset by a reduction in advertising and marketing expenses.
The Company has reduced its marketing expenditures with the majority of its
marketing dollars spent on generating qualified leads to the Multex Investor
platform.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses decreased 20.9% to $6.2
million during the nine months ended September 30, 2001 from $7.8 million for
the nine months ended September 30, 2000. As a percentage of gross revenues,
research and development expenses decreased to 8.3% for the nine months ended
September 30, 2001 from 13.4% for the nine months ended September 30, 2000. The
decrease in research and development expenses in dollar terms was primarily due
to an increase in the number of internally developed software projects being
capitalized.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and
consultants, facility expenses, overhead, and office supplies and expenses.
General and administrative expenses increased 43.8% to $24.3 million during the
nine months ended September 30, 2001 from $16.9 million for the nine months
ended September 30, 2000. As a percentage of gross revenues, general and
administrative expenses increased to 32.6% for the nine months ended September
30, 2001 from 29.1% for the nine months ended September 30, 2000. Growth in
general and administrative expenses reflects an increase in the number of
employees and offices worldwide, higher bad debt reserves, and increased
professional fees related to development, legal and tax services. Additionally,
the nine months ended September 2001 included full recognition of expenses
related to the BARRA Global Estimates business acquired in December 2000.
DEPRECIATION & AMORTIZATION. Depreciation and amortization expenses consist
primarily of depreciation related to fixed assets, computer equipment &
software, and leasehold improvements, and amortization related to recently
acquired companies and the ongoing cost of warrants issued to Merrill Lynch &
Co., Inc. Depreciation and amortization for the nine months ended September 30,
2001 increased 71.6% to $13.3 million, compared to $7.8 million for the nine
months ended September 30, 2000. As a percentage of gross revenues, depreciation
and amortization expenses increased to 17.9% for the nine months ended September
30, 2001 from 13.4% for the nine months ended September 30, 2000. The increase
reflects amortization related to the BARRA Global estimates business acquired in
December 2000 and increased depreciation expenses attributable to additional
computer purchases.
IMPAIRMENT & RESTRUCTURING CHARGE. For the nine month period ended September 30,
2001, the Company recorded an impairment and restructuring charge of $27.4
million reflecting the decision to exit the Sage business and the Buzz product
line as well as severance payments to terminated employees and the anticipated
termination of one of the Company's operating leases on office space. The
majority of the charge, approximately $25.4 million, reflects the write down of
goodwill related to both Sage and Buzz in the second quarter.
Loss from Operations
Loss from operations totaled $38.4 million for the nine months ended September
30, 2001 compared to a loss from operations of $5.1 million for the nine months
ended September 30, 2000. Loss from operations reflects the global slowdown in
the financial marketplace, the impairment and restructuring charge related to
exiting the Sage business and Buzz product line, higher operating expenses and
postponed and lost business due to the attacks on September 11, 2001.
Interest Income (Expense)
Net interest income decreased 33.1% to $1.5 million during the nine months ended
September 30, 2001 from $2.2 million for the nine months ended September 30,
2000. The decrease in net interest income is primarily attributable to lower
cash balances and a decline in interest rates.
15
Equity in Loss from Unconsolidated Business
Equity in loss of unconsolidated business reflects a $781,000 loss the Company
recognized from its equity investment in TheMarkets.com. This investment was
completed in the third quarter ended September 30, 2001.
Other
Other expense includes a $173,000 loss the Company recognized on the disposition
of the Company's equity investment in Financial Data Concepts in the second
quarter of 2001.
Income Taxes
Income tax expense increased to $455,000 for the nine months ended September 30,
2001 from $87,000 for the nine months ended September 30, 2000.
At December 31, 2000, Multex.com had net operating loss carryforwards of
approximately $50.0 million and research and development credits of
approximately $1.5 million for income tax purposes that expire in 2009 through
2020. The utilization with regard to timing and amount of the Company's net
operating loss carryfowards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code.
Net loss
The Company recorded a net loss of $38.4 million, or a net loss per share of
$1.20, for the nine months ended September 30, 2001 compared to a net loss of
$3.0 million, or a net loss per share of $0.10, for the nine months ended
September 30, 2000. The net loss reflects the global slowdown in the financial
marketplace, the impairment and restructuring charges, higher operating expenses
and postponed business due to the attacks on September 11, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, we had $42.0 million of cash, cash equivalents and
marketable securities. Our principal commitments consist of obligations under
operating leases.
Net cash provided by operating activities was $6.7 million in the nine months
ended September 30, 2001, and net cash used in operating activities was $3.7
million in the equivalent period in 2000. The increase in cash provided by
operating activities reflects higher non-cash charges (including depreciation
and amortization), the impairment charge (non-cash), and improved accounts
receivable balances, partially offset by a reduction in accrued expenses and
accounts payables.
Net cash provided by investing activities was $11.6 million in the nine months
ended September 30, 2001, and net cash used in investing activities was $15.5
million in the equivalent period in 2000. The improvement in cash provided by
investing activities was primarily related to marketable securities
transactions, a reduction in purchases of property and equipment, and the
acquisitions of Sage Online and Buzz in the first half of 2000, for which there
were no comparable transactions in 2001.
Net cash provided by financing activities was $2.2 million in the nine months
ended September 30, 2001, and $55.1 million for the equivalent period in 2000.
The sharp decline in cash provided by financing activities was due to the
private placements of stock issued to Merrill Lynch in the first quarter of 2000
and the Munder Net Net fund in the third quarter of 2000. There was no
comparable transaction during the nine month period ended September 30, 2001.
We believe that our existing cash, cash equivalents and marketable securities,
will be sufficient to meet our anticipated cash needs for working capital and
capital expenditures at least for the next twelve months.
16
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
MULTEX.COM'S RECOVERY FROM THE SEPTEMBER 11TH TERRORIST ATTACKS MAY NOT PROCEED
AS EXPECTED
Multex.com has been allocating significant resources to its recovery efforts in
the aftermath of the September 11th terrorist attacks. However, it is possible
that our recovery may be further delayed or may never be fully completed. Our
primary data center is not yet fully functional, and the possibility exists that
further delays or other problems may arise with respect to our data centers.
Furthermore, we may not be able to fully overcome the decrease in employee
morale and a sense of safety that now comes from working in lower Manhattan. As
a result, we may experience significant employee attrition and be required to
allocate more resources to recruiting replacement employees. We may incur
significant additional expenses as a result of increased security requirements,
loss of personnel, and other related costs. In addition, Multex.com's customers
are in the midst of efforts to recover from the attacks. Those efforts may or
may not be successful, or may happen more slowly than anticipated. Some of our
customers may never entirely recover. All of these factors have the potential to
materially and adversely affect our business and results of operations.
MULTEX.COM'S BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY THE CURRENT
(OR ANY FUTURE) DOWNTURN IN THE FINANCIAL SERVICES INDUSTRY
We are dependent upon the continued demand for the distribution of
investment research and other information over the Internet, which makes our
business susceptible to downturns in the financial services industry. Our
current results of operations reflect, in part, the effects of the current
slowdown in our markets. The September 11th terrorist attacks damaged many of
our customers located in and around the World Trade Center, which, together with
the broader effects of the terrorist attacks, compounded the effects of an
already slow global economy. In addition, U.S. financial institutions are
continuing to consolidate, increasing the leverage of our information providers
to negotiate prices and decreasing the overall potential market for some of our
services. Weakness in the financial services industry has adversely impacted our
subscription renewal rates and may continue to do so. These effects may continue
and may worsen if our customers and clients do not recover or if additional
events adverse to the global economy or the financial services industry occur.
MULTEX.COM'S BUSINESS WOULD BE MATERIALLY AND ADVERSELY AFFECTED IF THE MARKET
FOR ONLINE INVESTMENT RESEARCH DOES NOT CONTINUE TO GROW
In order to be successful, we must increase our revenues from subscription
fees for MULTEXNET, from development, hosting, license, and subscription fees
for MULTEXEXPRESS, generate additional sales of investment research on a
pay-per-view basis through MULTEX ONDEMAND, attract more users to and generate
more leads for our sponsors from MULTEX INVESTOR, and increase the total license
fees generated from the MARKET GUIDE database. Our results of operations with
respect to MULTEX INVESTOR reflect the adverse effects of lack of growth (and
even contraction) in our markets. We continue to face risks in accomplishing
these objectives, among others, relating to our ability to:
o anticipate and adapt to the changing Internet market;
o attract and retain more subscribers, research and data contributors, and
technology and business partners;
o implement our sales, marketing, and branding strategies, both domestically
and internationally;
o attract, retain and motivate qualified personnel;
o respond to actions taken by our competitors;
o continue to build an infrastructure to effectively manage our business and
handle any future changes in usage; and
o integrate acquired businesses, technologies, products and services.
If we are unsuccessful in addressing these risks or in executing our
business strategy going forward, our business, results of operations, and
financial condition would be materially and adversely affected.
17
THE MARKETS FOR OUR PRODUCTS AND SERVICES CHANGE RAPIDLY
The market for the distribution of investment research and other
information over the Internet is rapidly evolving, and demand and market
acceptance for these services continue to be subject to a high level of
uncertainty. The market relating to retail investing has deteriorated
considerably in the last year, and all of our markets continue to face
considerable uncertainty. It is difficult to predict with any assurance the
growth rate, if any, and the ultimate size, of our markets. We cannot assure you
that the markets for our services will recover, will continue to develop, or
that our services will ever achieve broad market acceptance. If our customers
are not able to recover from the effects of the continued downturn in the global
economy and the September 11th terrorist attacks; if the market for our services
weakens further, develops more slowly than expected once recovery begins, or
becomes saturated with competitors; if our services do not achieve broad market
acceptance; or if pricing becomes subject to further competitive pressures, our
business, results of operations and financial condition would be materially and
adversely affected.
MULTEX.COM'S BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY PRESSURES OF
COMPETITION
The market for the distribution of investment research and other
information over the Internet is intensely competitive. We currently face strong
competition in many of our markets. Increased competition could result in price
reductions, reduced gross margins and loss of market share, any of which could
have a material and adverse effect on our business, results of operations and
financial condition. We currently face direct and indirect competition, for
contributors of investment research and other reports and for subscribers, from
large and well-established distributors of financial information, such as
Thomson Financial Services. Some of our competitors enjoy exclusive distribution
arrangements with major financial institutions. We also compete with, among
others:
o companies that provide investment research, including investment banks and
brokerage firms, many of whom have their own Web sites;
o other providers of either free or subscription research services on the
Internet;
o services provided by some of our strategic distributors, which are
competitive in one or more respects with our service offerings;
o prospective competitors that offer investment research-based services;
o various written publications, including traditional media, investment
newsletters, personal financial magazines and industry research appearing in
financial periodicals;
o services provided by in-house management information services personnel and
independent systems integrators;
o providers of annual reports and other filings with the Securities and
Exchange Commission;
o Standard & Poor's company-specific reports; and
o Value Line investment research reports.
Whether or not successful, competition with these entities or information
sources, may materially and adversely affect our business, results of
operations, and financial condition. It is also possible that new competitors
may emerge and rapidly acquire significant market share.
THE LOSS OF ANY OF MULTEX.COM'S KEY PERSONNEL COULD HAVE A MATERIAL AND ADVERSE
EFFECT
Our future success will depend, in substantial part, on the continued
service of our senior management team, none of whom has entered into an
employment agreement with us other than a non-competition/non-disclosure
agreement. The loss of the services of one or more of our key personnel could
have a material and adverse effect on our business, results of operations and
financial condition. We have from time to time in the past experienced, and we
expect to continue to experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications.
DOING BUSINESS INTERNATIONALLY SUBJECTS US TO ADDITIONAL REGULATORY
REQUIREMENTS, TAX LIABILITIES AND OTHER RISKS
There are risks inherent in doing business in international markets,
including unexpected changes in regulatory requirements, potentially adverse tax
consequences, export restrictions and controls, tariffs and other trade
18
barriers, difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates, and seasonal reductions in
business activity during the summer months in Europe and various other parts of
the world, any of which could have a material and adverse effect on the success
of our international operations and, consequently, on our business, results of
operations and financial condition. Furthermore, we cannot assure you that
governmental regulatory agencies in one or more foreign countries will not
determine that the services provided by us constitute the provision of
investment advice, which could result in our having to register in these
countries as an investment advisor or in our having to cease selling our
services in these countries, either of which could have a material and adverse
effect on our business, results of operations and financial condition.
BECAUSE MULTEX.COM'S BUSINESS IS DEPENDENT UPON NETWORK AND COMPUTER SYSTEMS
LOCATED IN ONE AREA, WE ARE SUSCEPTIBLE TO PROBLEMS CAUSED BY NATURAL DISASTERS,
POWER FAILURES, SYSTEM FAILURES, SECURITY BREACHES OR OTHER DAMAGE TO OUR SYSTEM
Our electronic distribution of investment research utilizes proprietary
technology that resides principally in New York City. The continued and
uninterrupted performance of our network and computer systems is critical to our
success. We experienced significant outages as a result of the September 11th
terrorist attacks. The terrorist attacks resulted in the loss of our primary
data center and we continue to devote resources to restoring it. There can be no
assurance that such solutions can be implemented in a timely and cost-effective
manner, or at all. Any further disaster, power outage or system failure that
causes interruptions in our ability to provide our services to our customers,
including failures that affect our ability to collect research from our
information providers or provide electronic investment research to our users,
could further reduce customer satisfaction and, if sustained or repeated, would
reduce the attractiveness of our services. An increase in the volume of research
reports handled by our systems, or in the rate of requests for this research,
could strain the capacity of our software or hardware, which could lead to
slower response times or system failures. Furthermore, we face the risk of a
security breach of our systems that could disrupt the distribution of research
and other reports and information. Our business, results of operations and
financial condition could be materially and adversely affected if any of these
problems occur or recur.
Our operations are dependent on our ability to protect our network and
computer systems against damage from computer viruses, fire, power loss, data
communications failures, vandalism and other malicious acts, and similar
unexpected adverse events, such as the September 11th terrorist attacks. We are
now devoting significant resources to recovering from the damage from the
September 11th disaster and protecting our infrastructure against any such
disaster in the future. In addition, the failure of our communications providers
to provide the data communications capacity in the time frame required by us, as
occurred, for example, in the aftermath of the September 11th attacks, could
again cause interruptions in the delivery of our services.
THE MARKET PRICE OF OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS
The stock market has, from time to time, experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile, including fluctuations that are often
unrelated to the operating performance of the affected companies. Broad market
fluctuations of this type have adversely affected, and may continue to adversely
affect the market price of our common stock. The market price of our common
stock has been, and could continue to be, subject to significant fluctuations
due to a variety of factors, including:
o public announcements concerning us or our competitors, or the Internet
industry;
o fluctuations in operating results;
o downturns in the financial services industry generally or the market for
securities trading in particular;
o introductions of new products or services by us or our competitors;
o future sales of shares of our common stock by major shareholders; further,
sales of shares issuable upon the exercise of outstanding options and
warrants in the public market may be significant factors;
o changes in analysts' earnings estimates; and
o announcements of technological innovations.
19
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. We
are currently the object of several securities class action litigations, which
could result in substantial costs and a diversion of our management's attention
and resources and could have a material adverse effect on our business, results
of operation and financial condition. We may be subject to further suits in the
future.
OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER STOCKHOLDERS SIGNIFICANTLY
INFLUENCE ALL MATTERS REQUIRING A STOCKHOLDER VOTE
Our executive officers, directors and existing stockholders who each own
greater than 5% of the outstanding common stock and their affiliates, in the
aggregate, beneficially own approximately 50% of our outstanding common stock.
As a result, our executive officers, directors and 5% or greater stockholders
will be able to significantly influence the outcome of all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control.
DISTRIBUTION AND OTHER FEES TO RESEARCH PROVIDERS AND STRATEGIC PARTNERS
INCREASE MULTEX.COM'S COSTS
Royalties and distribution fees payable to our information providers and
strategic partners to obtain distribution rights to research reports included in
MULTEX ONDEMAND constitute a significant portion of our cost of revenues. We
face from time to time considerable competitive pressure to increase these
royalties. Such increases have materially affected our results of operations as
described herein. If we are required to further increase the royalties or fees
payable to these information providers or strategic partners, these increased
payments could have additional material and adverse effects on our business,
results of operations and financial condition.
THE INADVERTENT DISTRIBUTION OF RESEARCH REPORTS COULD RESULT IN A CLAIM FOR
DAMAGES AGAINST MULTEX.COM OR HARM OUR REPUTATION
Under certain of our contracts we are required to restrict distribution of
financial information to those users who have been authorized or entitled to
access the report by the information provider. We might inadvertently distribute
a particular report to a user who is not so authorized or entitled, which could
subject us to a claim for damages by the information provider or which could
harm our reputation in the marketplace, either of which could have a material
and adverse effect on our business, results of operations and financial
condition.
WE MAY BE SUBJECT TO LEGAL CLAIMS IN CONNECTION WITH THE CONTENT WE PUBLISH AND
DISTRIBUTE ON THE INTERNET
As a publisher and distributor of online content, we face potential direct and
indirect liability for claims of defamation, negligence, copyright, patent or
trademark infringement, violation of the securities laws and other claims based
upon the reports and data that we publish. For example, by distributing a
negative investment research report, we may find ourselves subject to defamation
claims, regardless of the merits of such claims. Computer failures or human
error may also result in incorrect data being published and distributed widely.
In these and other circumstances, we might be required to engage in protracted
and expensive litigation, which could have the effect of diverting management's
attention and require us to expend significant financial resources. Our general
liability insurance may not cover any of these claims or may not be adequate to
protect us against all liability that may be imposed. Any claims or resulting
litigation could have a material and adverse effect on our business, results of
operations and financial condition.
IF THE INTERNET INFRASTRUCTURE IS NOT ADEQUATELY MAINTAINED, WE MAY BE UNABLE TO
PROVIDE INVESTMENT RESEARCH AND INFORMATION SERVICES IN A TIMELY MANNER
Our future success will depend, in substantial part, upon the maintenance
of the Internet infrastructure, including a reliable network backbone with the
necessary speed, data capacity and security, and the timely development of
enabling products for providing reliable and timely Internet access and
services. Our temporary loss of Internet data communications due to the
September 11th terrorist attacks illustrates this risk. There can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it or that the
20
performance or reliability of the Internet will not be adversely affected. The
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure or otherwise, and these outages or
delays could adversely affect the web sites of our contributors, subscribers or
distributors.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. Legislation and/or regulation
could dampen the growth in the use of the Internet generally and decrease the
acceptance of the Internet as a communications and commercial medium, which
could have a material and adverse effect on our business, results of operations
and financial condition. In addition, due to the global nature of the Internet,
it is possible that, although transmissions relating to our services originate
mainly in the State of New York, governments of other states, the United States
or foreign countries might attempt to regulate our services or levy sales or
other taxes on our activities. We cannot assure you that violations of local or
other laws will not be alleged or charged by local, state, federal or foreign
governments, that we might not unintentionally violate these laws or that these
laws will not be modified, or new laws enacted, in the future. Any of these
developments could have a material and adverse effect on our business, results
of operations and financial condition.
21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K: NONE
22
ITEM 7. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MULTEX.COM, INC.
(Registrant)
Date: November 14, 2001 /s/ Isaak Karaev
-------------------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: November 14, 2001 /s/ John J. McGovern
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Name: John J. McGovern
Title: Chief Financial Officer
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