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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, 2000
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.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-3253344
- --------------------------------------- -------------------------------------
(State of Incorporation) I.R.S. Employer
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)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of September 30, 2000 there were 31,619,022 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, 2000 and December 31, 1999.................3
Condensed Consolidated Statements of Operations for the three months and nine months ended
September 30, 2000 and 1999..........................................................................4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2000
and 1999.............................................................................................5
Notes to Condensed Consolidated Financial Statements September 30, 2000..............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............10
PART II. OTHER INFORMATION......................................................................................23
ITEM 1. LEGAL PROCEEDINGS...................................................................................23
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...........................................................23
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.....................................................................23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................23
ITEM 5. OTHER INFORMATION...................................................................................23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................................................23
ITEM 7. SIGNATURES..........................................................................................24
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
(UNAUDITED) (SEE NOTE 1)
ASSETS
Current assets
Cash and cash equivalents $ 41,901 $ 6,089
Marketable securities 24,390 33,028
Accounts receivable, net 18,112 10,954
Other current assets 4,420 3,193
--------- ---------
Total current assets 88,823 53,264
Property and equipment, net 31,506 10,862
Goodwill 38,870 --
Other 2,087 1,474
--------- ---------
Total assets $ 161,286 $ 65,600
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,192 $ 5,051
Accrued expenses 5,918 4,778
Current portion of capital lease obligations 143 225
Deferred revenues 7,283 5,691
--------- ---------
Total current liabilities 17,536 15,745
Long term liabilities:
Capital lease obligations 102 192
Deferred rent 2,985 2,431
Other 10 31
--------- ---------
Total long term liabilities 3,097 2,654
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-
31,619,022 shares at September 30, 2000 and 27,179,717 at
December 31, 1999 316 272
Additional paid-in-capital 213,846 109,564
Accumulated deficit (63,180) (60,141)
Deferred equity consideration (10,354) (2,431)
Accumulated other comprehensive income (loss) 25 (63)
--------- ---------
Total stockholders' equity 140,653 47,201
--------- ---------
Total liabilities and stockholders' equity $ 161,286 $ 65,600
========= =========
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,
2000 1999 2000 1999
---- ---- ---- ----
Revenues $ 22,823 $ 10,929 $ 58,073 $ 27,376
Cost of revenues 4,162 2,671 12,066 6,970
-------- -------- -------- --------
Gross profit 18,661 8,258 46,007 20,406
Operating expenses:
Sales and marketing 6,568 6,619 18,725 15,562
Research and development 2,773 2,039 7,795 4,226
General and administrative 10,001 4,776 24,636 12,600
-------- -------- -------- --------
Total operating expenses 19,342 13,434 51,156 32,388
Loss from operations (681) (5,176) (5,149) (11,982)
Other income (expense)
Interest income 916 716 2,252 1,753
Interest expense (33) (31) (56) (94)
Acquisition expenses -- (5,606) -- (5,606)
-------- -------- -------- --------
Income (loss) from continuing operations before
income taxes 202 (10,097) (2,953) (15,929)
Income tax expense (benefit) (8) 234 87 906
-------- -------- -------- --------
Income (loss) from continuing operations 210 (10,331) (3,040) (16,835)
Discontinued operations:
Gain from discontinued operations -- -- -- 331
-------- -------- -------- --------
Net income (loss) 210 (10,331) (3,040) (16,504)
Redeemable preferred stock dividends -- -- -- (1,188)
-------- -------- -------- --------
Net income (loss) available to common stockholders $ 210 $(10,331) $ (3,040) $(17,692)
======== ======== ======== ========
Basic and diluted earnings (loss) per share:
Continuing operations, net of preferred
stock dividends $ 0.01 $ (0.39) $ (0.10) $ (0.85)
Discontinued operations -- -- -- 0.02
-------- -------- -------- --------
Net income (loss) available to common stockholders $ 0.01 $ (0.39) $ (0.10) $ (0.83)
======== ======== ======== ========
Number of shares used in:
Basic income (loss) per share 31,173 26,690 29,780 21,237
======== ======== ======== ========
Diluted income (loss) per share 34,369 -- 32,876 --
======== ======== ======== ========
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,
2000 1999
---- ----
OPERATING ACTIVITIES
Net loss from continuing operations $ (3,040) $(16,835)
Adjustments to reconcile net loss from continuing operations
to net cash used in operating activities:
Amortization of equity consideration 1,886 360
Depreciation and amortization 4,477 2,600
Amortization of goodwill 1,819 --
Amortization of issuance costs -- 13
Bad debt expense 709 564
Accumulated deficit adjustment -- (364)
Changes in operating assets and liabilities:
Accounts receivable (7,866) (4,020)
Other current assets (1,227) (2,445)
Other assets (613) (619)
Accounts payable (3,114) 5,547
Accrued expenses 1,140 2,296
Deferred revenue 1,592 1,722
Deferred rent 554 409
Other liabilities (20) (20)
-------- --------
Net cash used in operating activities from continuing operations (3,703) (10,792)
Investing activities
Purchase of marketable securities (17,565) (42,267)
Proceeds from sale of marketable securities 26,359 16,050
Acquisition of Sage Online and BuzzCompany, net of cash acquired (6,851) --
Purchase of property and equipment (17,466) (4,873)
-------- --------
Net cash used in investing activities (15,523) (31,090)
Financing activities
Proceeds from issuances of stock 55,278 43,460
Repayment of long-term debt and capital leases (172) (324)
-------- --------
Net cash provided by financing activities 55,106 43,136
Discontinued activities
Income from discontinued operations including gain on sale,
net of taxes -- 106
Adjustments to reconcile income from discontinued operations
to net cash provided by discontinued operations:
Gain on sale of discontinued operations, net of taxes -- 225
-------- --------
Net cash provided by discontinued operations -- 331
Effect of exchange rate changes on cash (68) (2)
-------- --------
Increase in cash and cash equivalents 35,812 1,583
Cash and cash equivalents, beginning of year 6,089 3,219
-------- --------
Cash and cash equivalents, end of period $ 41,901 $ 4,802
======== ========
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 (CONTINUED)
(UNAUDITED; IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Noncash investing and financing activity:
Acquisition of fixed assets through capital leases $ -- $280
======= ====
Accrued purchases of fixed assets $ 2,255 $329
======= ====
Unrealized gain on marketable securities $ 156 $ --
======= ====
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 $ --
======= ====
Fair market value of warrants issued $ 9,809 $ --
======= ====
Taxes paid $ 4 $ --
======= ====
Interest paid $ 56 $ 66
======= ====
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 1 -- BASIS OF PRESENTATION
Multex.com, Inc. ("Multex.com") and its wholly owned subsidiaries
(collectively referred to as the "Company") provide information and commerce
enabling technology and infrastructure, application services, Web hosting and
online community services to brokerage firms, investment banks, corporations and
institutional and individual investors.
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 months
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000. The disclosure of segment
information was not required as the Company operates in only one business
segment.
The balance sheet at December 31, 1999 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, 1999 included in the Company's annual report on Form
10-K.
As a result of significantly improved subscriber retention rates, which
establish the rates of recoverability of commission expense, Multex.com changed
its method of accounting for commission expense in the second quarter of 2000.
The Company previously accounted for commission expenses as they were paid. The
Company now amortizes commission expenses over the life of the subscription or
contract period. This change was adopted prospectively in the second quarter of
2000 and improved income by $818,000, or $0.02 per share, in the third
quarter of 2000 and reduced the net loss by $1.7 million, or $0.06 per share in
the nine-month period ended September 30, 2000.
NOTE 2 -- STOCKHOLDERS' EQUITY
During the three months ended March 31, 2000, the Company issued
151,776 shares of its common stock in connection with the exercise of stock
options to employees. During the three months ended June 30, 2000, the Company
issued 178,382 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 September 30, 2000, the Company issued 230,819 shares of its
common stock in connection with the exercise of stock options to employees.
7
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,
---------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Numerator:
Net income (loss) from continuing operations $ 210 $(10,331) $ (3,040) $(16,835)
Discontinued operations -- -- -- 331
Redeemable preferred stock dividends -- -- -- (1,188)
-------- -------- -------- --------
Numerator for basic and diluted net income
(loss) per share -- net income (loss)
available for common stockholders $ 210 $(10,331) $ (3,040) $(17,692)
======== ======== ======== ========
Denominator:
Denominator for basic net income (loss)
per share -- weighted average shares 31,173 26,690 29,780 21,237
Assumed conversion of outstanding stock
options 3,196 -- 3,096 --
-------- -------- -------- --------
Denominator for diluted net income (loss)
per share -- weighted average shares 34,369 26,690 32,876 21,237
-------- -------- -------- --------
Basic and diluted net income (loss) per share $ 0.01 $ (0.39) $ (0.10) $ (0.83)
======== ======== ======== ========
NOTE 4 - COMPREHENSIVE LOSS
Total comprehensive income (loss) (in thousands) was $250 and ($10,345)
for the three months ended September 30, 2000 and September 30, 1999,
respectively. Total comprehensive (loss) (in thousands) was ($2,952) and
($16,506) for the nine months ended September 30, 2000 and September 30, 1999,
respectively.
NOTE 5 - ACQUISITIONS
On March 20, 2000 the Company entered into an agreement to acquire all
of the outstanding shares of Sage Online, Inc. In connection with the Sage
agreement, the Company issued 354,183 shares of common stock, with a fair market
value of $31.16, and paid $6 million in cash. The acquisition has been accounted
for by the purchase method of accounting and accordingly, the excess of the
purchase price over the fair market value of the net assets acquired has been
allocated to goodwill in the amount of $17,021,595. The purchase price
allocation is preliminary and subject to adjustment based upon further analysis
of the fair value of the assets acquired. Goodwill is being amortized over a
life of 10 years
On May 10, 2000 the Company entered into an agreement to acquire all of
the outstanding shares of BuzzCompany, Inc. In connection with the BuzzCompany
agreement, the Company issued 1,058,043 shares of common stock, with a fair
market value of $21.55 per share. The acquisition has been accounted for by the
purchase method of accounting and accordingly, the excess of the purchase price
over the fair market value of the net assets acquired has been allocated to
goodwill in the amount of $23,352,820. The purchase price allocation is
preliminary and subject to adjustment based upon further analysis of the fair
value of the assets acquired. Goodwill is being amortized over a life of 10
years
The following unaudited pro forma summary presents information as if
BuzzCompany had been acquired as of the beginning of the periods ended September
30, 1999 and 2000, respectively. The pro forma information does not necessarily
reflect the actual results that would have occurred nor is it necessarily
indicative of future results of operations of the combined companies.
The table sets forth the pro forma data (in thousands, except per share
data):
8
THREE MONTHS ENDED SEPTEMBER 30, 2000 THREE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------- ------------------------------------------------
(1)PRO FORMA (1)PRO FORMA
MULTEX BUZZ ADJUSTMENT COMBINED MULTEX BUZZ ADJUSTMENT COMBINED
------ ---- ---------- -------- ------ ---- ---------- --------
Revenue $ 22,823 $ - $ - $ 22,823 $ 10,929 $ 735 $ - $ 11,664
Net income 210 - - 210 (10,331) (36) (575) (10,942)
EPS $ 0.01 - - $ 0.01 $ (0.39) - - $ (0.39)
NINE MONTHS ENDED SEPTEMBER 30, 2000 NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------- -----------------------------------------------
(1)PRO FORMA (1)PRO FORMA
MULTEX BUZZ ADJUSTMENT COMBINED MULTEX BUZZ ADJUSTMENT COMBINED
------ ---- ---------- -------- ------ ---- ---------- --------
Revenue $ 57,537 $ 1,697 $ -- $ 59,234 $ 27,376 $ 1,929 $ -- $ 29,305
Net income (2,743) (1,750) (1,150) (5,643) (17,692) 10 (1,725) (19,407)
EPS $ (0.09) -- -- $ (0.18) $ (0.83) -- -- $ (0.87)
(1) Goodwill for BuzzCompany will be amortized over a period of 10
years, the expected period of benefit. The pro forma adjustment reflects three
and nine months of amortization expense for the periods ended September 30, 2000
and September 30, 1999, respectively, assuming the transaction occurred as of
the beginning of the periods presented.
NOTE 6 - PRIVATE PLACEMENT
On July 31, 2000, Munder NetNet Fund invested $30 million in the
Company in exchange for 1.0 million shares of unregistered common stock.
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
The Company provides information and commerce-enabling technology and
infrastructure, application services, Web hosting and online community services
to brokerage firms, investment banks, corporations and institutional and
individual investors. We offer six main products and services, as follows:
o MultexNET, which was launched in June 1996;
o MultexEXPRESS, which was launched in January 1997;
o Multex Research-On-Demand, which was launched in April 1997;
o Multex Investor, which was launched in November 1998;
o Market Guide database, which was acquired in September 1999; and
o BuzzPower software, which was acquired in May 2000.
MultexNET, typically offered as a one- to three-year subscription, allows
entitled institutional investors 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, also provided pursuant to one- to three-year
subscriptions, 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 Research-On-Demand gives
corporations, financial institutions and advisors, and institutional investors
the ability to access research reports on a pay-per-view basis from a majority
of the contributors to MultexNET, over the Internet or through other
distribution channels. Multex Investor, www.multexinvestor.com, gives individual
investors who register as members access to a range of financial reports and
services, including research reports on a pay-per-view basis, over the Internet
from a majority of the contributors to MultexNET. Multex Investor also includes
banner advertising and sponsorship advertising throughout the site. Sponsors to
Multex Investor include full-service brokerage firms and other financial
institutions interested in attracting individual investors to their products,
services and brands. Market Guide's financial and descriptive information on
over 12,000 publicly traded companies is licensed on over 140 web sites as well
as its own web site, www.marketguide.com. Revenue from Market Guide information
is primarily derived from license and redistribution agreements and advertising.
BuzzPower software is a software development platform that provides
message-based forums, surveys and other collaborative tools designed to enhance
member interaction and improve site stickiness.
Revenues from subscriptions to MultexNET and MultexEXPRESS are
recognized ratably in equal installments over the term of the subscription.
Revenues from Multex Research-On-Demand and pay-per-view transactions on Multex
Investor are recognized upon sale. Revenues from sponsorships to Multex Investor
are recognized in equal installments over the term of the sponsorship. Some of
the users of Multex Research-On-Demand 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. All costs associated with revenues
10
from MultexNET, MultexEXPRESS, Multex Research-On-Demand and Multex Investor are
expensed as and when incurred. We pay distribution fees to our distributors and,
with respect to Multex Research-On-Demand and pay-per-view transactions on
Multex Investor, royalties to the investment banks, brokerage firms or
third-party research providers that authored the research.
11
Results of Operations
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999
Revenues
Multex.com's revenues consist of subscription fees for MultexNET; subscription,
development and hosting fees for MultexEXPRESS; sales of investment research on
a pay-per-view basis through Multex Research-On-Demand; license and
redistribution fees for the Market Guide database; and sales of sponsorships,
advertising and investment research through the Multex Investor and Market Guide
Web sites. We also license software and provide professional services to select
clients, including software development, customization and integration services.
Revenues increased 109% to $22.8 million for the quarter ended September 30,
2000 from $10.9 million for the quarter ended September 30, 1999. The increase
in revenues was attributable to a number of factors: a significant increase in
the number of institutions and individuals using our pay-per-view service,
greater acceptance of Multex Research-On-Demand, an increase in the number of
institutions utilizing MultexEXPRESS to distribute their proprietary research to
their employees and customers, an increase in the number of vendors distributing
the Market Guide database, increased advertising and sponsorship revenues from
the Multex Investor and Market Guide Web sites, and the inclusion of BuzzPower
software sales, commencing in June 2000.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of MultexNet
and Multex Research-On-Demand, royalties payable to the authors of investment
research and content offered through Multex Research-On-Demand, Multex Investor
and marketguide.com, external development costs incurred for MultexEXPRESS
customers, research department costs related to the collection and processing of
financial data and earnings estimates, and data communications costs.
Cost of revenues increased 55.8% to $4.2 million in the quarter ended September
30, 2000 from $2.7 million for the quarter ended September 30, 1999. As a
percentage of revenues, cost of revenues decreased to 18.2% for the quarter
ended September 30, 2000 from 24.4% for the quarter ended September 30, 1999.
The increase in cost of revenues in dollar terms was primarily due to royalty
and distribution fee payments as a result of increased sales of Multex
Research-On-Demand, increased data collection costs related to the maintenance
and expansion of the Market Guide database, increased royalty payments to
content providers resulting from increased web site traffic, increased
third-party Web site development costs reflecting an increased number of
MultexEXPRESS installations, and additional data communications charges
resulting from increased installations of MultexEXPRESS and sales of
subscriptions for MultexNET.
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 remained virtually unchanged
at $6.6 million for the quarters ended September 30, 2000 and September 30,
1999. As a percentage of revenues, sales and marketing expenses decreased to
28.8% for the quarter ended September 30, 2000 from 60.6% for the quarter ended
September 30, 1999. The decrease in sales and marketing expenses was due to a
reduction in advertising and marketing expenses in the quarter and an $818,000
benefit to income in the current quarter as a result of an adjustment to the
accounting for sales commission expense due to a change in facts and
circumstances, partially offset by an increase in the number of sales
professionals.
Research and Development. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses increased 36.0% to $2.8
million for the quarter ended September 30, 2000 from $2.0 million for the
quarter ended September 30, 1999. As a percentage of revenues, research and
development expenses decreased to 12.2% for the quarter ended September 30, 2000
from 18.7% for the quarter ended September 30, 1999. The increase in research
and development expenses in dollar terms was primarily due to
12
an increase in the number of developers employed by us, salary increases and
costs related to creating and developing new products and enhancements to the
Company's products and services. We believe that continued investment in product
development is critical to attaining our strategic objectives.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation of assets and amortization of deferred expenses
and goodwill. General and administrative expenses increased 109% to $10.0
million for the quarter ended September 30, 2000 from $4.8 million for the
quarter ended September 30, 1999. As a percentage of revenues, general and
administrative expenses increased to 43.8% for the quarter ended September 30,
2000 from 43.7% for the quarter ended September 30, 1999. The increase in
general and administrative expenses in dollar terms in each period was primarily
due to increased personnel, professional service fees and facility expenses
necessary to support our domestic and international growth, including costs
associated with our Lake Success, San Francisco and London offices, additional
overhead associated with the Sage and Buzz acquisitions, the creation of our new
data center in New York, as well as the inclusion of $560,000 in expenses
related to amortization of warrants and $1.0 million in amortization of goodwill
related to the acquisitions of Sage and BuzzCompany. We expect that general and
administrative expenses will increase in dollar terms in future periods as we
hire additional personnel and incur additional costs related to the growth of
our business and our operations as a public company.
Loss from Operations
Loss from operations decreased 86.8% to $681,000 for the quarter ended September
30, 2000 from $5.2 million for the quarter ended September 30, 1999. As a
percentage of revenues, loss from operations decreased to 3.0% for the quarter
ended September 30, 2000 compared to 47.4% for the quarter ended September 30,
1999. The reduction in loss was attributable to increased revenues and tighter
expense control measures.
Interest Income (Expense)
Net interest income increased 28.9% to $883,000 for the quarter ended September
30, 2000 from $685,000 for the quarter ended September 30, 1999. The increase in
net interest income is primarily attributable to an increase in cash available
for investing.
Acquisition Expenses
The Company did not incur any acquisition expenses for the quarter ended
September 30, 2000 compared to $5.6 million for the quarter ended September 30,
1999. The acquisition expenses were attributable to the September 1999
acquisition of Market Guide Inc.
Income Taxes
Income tax benefit totalled $8,000 for the quarter ended September 30, 2000
compared to income tax expenses of $234,000 for the quarter ended September 30,
1999. The majority of the tax expense in the quarter ended September 30, 1999
was attributable to Market Guide's operations prior to the September 1999
acquisition.
Net income (loss) available to common stockholders
The Company recorded net income available to common stockholders of $210,000, or
net income per share of $0.01, for the quarter ended September 30, 2000 compared
to a net loss available to common stockholders of $10.3 million, or a loss per
share of $0.39, for the three months ended September 30, 1999. The improvement
in net income was due to increased sales in all of the Company's businesses
coupled with tighter cost control measures implemented in the first quarter.
13
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Revenues
Multex.com's revenues consist of subscription fees for MultexNET, subscription,
development and hosting fees for MultexEXPRESS, sales of investment research on
a pay-per-view basis through Multex Research-On-Demand, license and
redistribution fees for the Market Guide database, and sales of sponsorships,
advertising and investment research through the Multex Investor and Market Guide
Web sites. We also license software and provide professional services to select
clients, including software development, customization and integration services.
Revenues increased 112% to $58.1 million for the nine months ended September 30,
2000 from $27.4 million for the nine months ended September 30, 1999. The
increase in revenues was attributable to a number of factors: a significant
increase in the number of institutions and individuals using our pay-per-view
service, greater acceptance of Multex Research-On-Demand, an increase in the
number of institutions utilizing MultexEXPRESS to distribute their proprietary
research to their employees and customers, an increase in the number of vendors
distributing the Market Guide database, increased advertising and sponsorship
revenues from the Multex Investor and Market Guide Web sites, and the inclusion
of BuzzPower software sales.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of MultexNet
and Multex Research-On-Demand, royalties payable to the authors of investment
research and content offered through Multex Research-On-Demand, Multex Investor
and marketguide.com, external development costs incurred for MultexEXPRESS
customers, research department costs related to the collection and processing of
financial data and earnings estimates, and data communications costs.
Cost of revenues increased 73.1% to $12.1 million for the nine months ended
September 30, 2000 from $7.0 million for the nine months ended September 30,
1999. As a percentage of revenues, cost of revenues decreased to 20.8% for the
nine months ended September 30, 2000 from 25.5% for the nine months ended
September 30, 1999. The increase in cost of revenues in dollar terms was
primarily due to royalty and distribution fee payments as a result of increased
sales of Multex Research-On-Demand, increased data collection costs related to
the maintenance and expansion of the Market Guide database, increased royalty
payments to content providers resulting from increased web site traffic,
increased third-party Web site development costs reflecting an increased number
of MultexEXPRESS installations, and additional data communications charges
resulting from increased installations of MultexEXPRESS and sales of
subscriptions for MultexNET.
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 increased 20.3% to $18.7
million for the nine months ended September 30, 2000 from $15.6 million for the
nine months ended September 30, 1999. As a percentage of revenues, sales and
marketing expenses decreased to 32.2% for the nine months ended September 30,
2000 from 56.8% for the nine months ended September 30, 1999. The increase in
sales and marketing expenses was due to an expansion of our sales force both
domestically and internationally and increased marketing activities partially
offset by a $1.7 million benefit to income in the nine month period as a result
of an adjustment to the accounting for sales commission expense due to a change
in facts and circumstances.
Research and Development. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses increased 84.5% to $7.8
million for the nine months ended September 30, 2000 from $4.2 million for the
nine months ended September 30, 1999. As a percentage of revenues, research and
development expenses decreased to 13.4% for the nine months ended September 30,
2000 from 15.4% for the nine
14
months ended September 30, 1999. The increase in research and development
expenses in dollar terms was primarily due to an increase in the number of
developers employed by us, salary increases and costs related to creating and
developing new products and enhancements to the Market Guide database. We
believe that continued investment in product development is critical to
attaining our strategic objectives.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation of assets and amortization of deferred expenses
and goodwill. General and administrative expenses increased 95.5% to $24.6
million for the nine months ended September 30, 2000 from $12.6 million for the
nine months ended September 30, 1999. As a percentage of revenues, general and
administrative expenses decreased to 42.4% for the nine months ended September
30, 2000 from 46.0% for the nine months ended September 30, 1999. The increase
in general and administrative expenses in dollar terms in each period was
primarily due to increased personnel, professional service fees and facility
expenses necessary to support our domestic and international growth, including
costs associated with our Lake Success, San Francisco and London offices,
additional overhead associated with the Sage and Buzz acquisitions and the
creation of our new data center in New York, as well as the inclusion of $1.5
million in expenses related to amortization of warrants and $1.8 million in
amortization of goodwill related to the acquisitions of Sage and BuzzCompany. We
expect that general and administrative expenses will increase in dollar terms in
future periods as we hire additional personnel and incur additional costs
related to the growth of our business.
Loss from Operations
Loss from operations decreased 57.0% to $5.1 million for the nine months ended
September 30, 2000 from $12.0 million for the nine months ended September 30,
1999. As a percentage of revenues, loss from operations decreased to 8.9% for
the nine months ended September 30, 2000 compared to 43.8% for the nine months
ended September 30, 1999.
Interest Income (Expense)
Net interest income increased 32.4% to $2.2 million for the nine months ended
September 30, 2000 from $1.7 million for the nine months ended September 30,
1999. The increase in net interest income is primarily attributable to an
increase in cash available for investing.
Acquisition Expenses
The Company did not incur any acquisition expenses for the nine months ended
September 30, 2000 compared to $5.6 million for the nine months ended September
30, 1999. The acquisition expenses were attributable to the September 1999
acquisition of Market Guide Inc.
Income Taxes
Income tax expense decreased 90.4% to $87,000 for the nine months ended
September 30, 2000 from $906,000 for the nine months ended September 30, 1999.
The majority of the tax expense in the nine months ended September 30, 1999 was
attributable to Market Guide's operations prior to the September 1999
acquisition.
Loss from continuing operations
The Company recorded a loss from continuing operations of $3.0 million and $16.8
million for the nine months ended September 30, 2000 and September 30, 1999,
respectively. The decrease in the loss was due to increased sales in all of the
Company's businesses coupled with tighter cost control measures implemented in
the current fiscal year and a reduction in income taxes.
Discontinued operations
Discontinued operations reflects the January 1999 sale of Market Guide's
CreditRisk Monitor business. Gain from
15
discontinued operations totaled $331,000 for the nine months ended September 30,
1999, compared to the absence of any discontinued operating activities for the
nine months ended September 30, 2000.
Net loss available to common stockholders
Net loss available to common stockholders totaled $3.0 million and $17.7 million
for the nine months ended September 30, 2000 and September 30, 1999,
respectively or a loss per share of $0.10 and $0.83, respectively. The decrease
in the net loss was due to increased sales in all of the Company's businesses
coupled with tighter cost control measures implemented in the current fiscal
year, increased interest income, a reduction in income taxes and the elimination
of the redeemable preferred stock dividends at the date of the initial public
offering.
Liquidity and Capital Resources
Through September 30, 2000, we have received an aggregate of $145.9 million in
net proceeds from the sale of common stock and convertible preferred stock. At
September 30, 2000, we had $66.3 million of cash, cash equivalents and
marketable securities. Our principal commitments consist of obligations under
operating leases.
Net cash used in operating activities from continuing operations was $3.7
million in the nine months ended September 30, 2000, and $10.8 million in the
equivalent period in 1999. The principal use of cash for all periods was to fund
our operations and the increase in accounts receivable balance as a result of
the increase in sales.
Net cash used in investing activities was $15.5 million in the nine months ended
September 30, 2000, and $31.1 million in the equivalent period in 1999. Cash
used in investing activities was primarily related to purchases of marketable
securities, the acquisition of Sage Online and the acquisition of property and
equipment.
Net cash provided by financing activities was $55.1 million in the nine months
ended September 30, 2000, and $43.1 million for the equivalent period in 1999.
Net cash provided by financing activities primarily consisted of net proceeds
from the sale of common stock to Merrill Lynch and the Munder NetNet Fund, as
well as proceeds from the exercise of employee stock options.
Net cash provided by discontinued activities totalled $331,000 in the nine
months ended September 30, 1999. There was no comparable transaction in the nine
months ended September 30, 2000.
Although we have no material commitments for capital expenditures, we anticipate
that we will experience a substantial increase consistent with our anticipated
growth in operations, infrastructure and personnel, including the implementation
of our new data center and various capital expenditures associated with
expanding our facilities. 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.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
WE HAVE LIMITED OPERATING HISTORY IN CERTAIN OF OUR LINES OF BUSINESS AND THE
MARKETS FOR OUR PRODUCTS AND SERVICES ARE RAPIDLY CHANGING
Multex.com commenced operations in April 1993, but all of our current
services were launched after May 1996. Accordingly, we have a limited operating
history upon which you can evaluate our business. In order to be successful, we
must increase our revenues from subscription fees for MultexNET, from
development, hosting and subscription fees for MultexEXPRESS, generate
additional sales of investment research on a pay-per-view basis through Multex
Research-On-Demand, attract more users to Multex Investor and increase license
fees from the Market Guide database. We must also integrate and increase
revenues from our newly acquired subsidiaries, Sage Online and BuzzCompany.com.
We face risks, among others, relating to our ability to:
16
o anticipate and adapt to the changing Internet market;
o attract 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 growth
and handle any future increased usage; and
o integrate acquired businesses, technologies, products, and services.
If we are unsuccessful in addressing these risks or in executing our business
strategy, our business, results of operations, and financial condition would be
materially and adversely affected.
MULTEX.COM'S BUSINESS WOULD BE MATERIALLY AND ADVERSELY AFFECTED IF THE EMERGING
MARKET FOR ONLINE INVESTMENT RESEARCH DOES NOT CONTINUE TO GROW
The market for the distribution of investment research and other
information over the Internet has only recently begun to develop, is rapidly
evolving, and is characterized by an increasing number of market entrants who
have introduced or developed electronic investment research distribution
services by facsimile and over public and private networks, online services and
the Internet. As is typical of a rapidly evolving market, demand and market
acceptance for new services are subject to a high level of uncertainty.
Because the market for our services is new and rapidly evolving, it is
difficult to predict with any assurance the growth rate, if any, and the
ultimate size of this market. We cannot assure you that the market for our
services will develop or that our services will ever achieve market acceptance.
If the market fails to develop, develops more slowly than expected, or becomes
saturated with competitors, if our services do not achieve market acceptance, or
if pricing becomes subject to significant 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 expect competition to
continue to increase. Competition also may increase as a result of industry
consolidation. Increased competition could result in price reductions, reduced
gross margins and loss of market share, any of which would have a material and
adverse effect on our business, results of operations and financial condition.
We currently face direct and indirect competition for both providers of
investment research and other reports, and for subscribers, including with large
and well-established distributors of financial information, such as Thomson
Financial Services (through its subsidiaries First Call and Investext) and
I|B|E|S, a subsidiary of Primark Corp. Some of our competitors enjoy exclusive
distribution arrangements with major financial institutions. We also compete
with:
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 numerous prospective competitors, including Standard & Poor's, Moody's,
and Zacks Investment Research, 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 annual reports and other filings with the Securities and Exchange
Commission;
17
o Standard & Poor's company-specific reports; and
o Value Line investment research reports.
If we fail to successfully compete with any of these entities or
information sources, our business, results of operations, and financial
condition may be materially adversely affected. It is also possible that new
competitors may emerge and rapidly acquire significant market share. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, which could materially and adversely affect our business,
results of operations and financial condition.
MULTEX.COM'S BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY A 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, making our business
susceptible to a downturn in the financial services industry. For example, a
decrease in the number of analysts that prepare investment research reports or
in the capital dedicated to the dissemination of this research could result in a
decrease in the number of research reports and other financial information
available for distribution and a concomitant decrease in demand by our
subscribers for these reports and other information. In addition, U.S. financial
institutions are continuing to consolidate, increasing the leverage of our
information providers to negotiate price and decreasing the overall potential
market for some of our services. These factors, as well as other changes
occurring in the financial services industry, could have a material and adverse
effect on our business, results of operations and financial condition.
RAPID GROWTH IN MULTEX.COM'S FUTURE OPERATIONS COULD STRAIN OUR MANAGERIAL,
OPERATIONAL AND FINANCIAL RESOURCES
We have experienced rapid growth in our operations. This rapid growth
has placed, and our anticipated future growth will continue to place, a
significant strain on our managerial, operational and financial resources, that
if not properly managed, could materially adversely affect our business, results
of operations, and financial condition.
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, including Mr. Isaak Karaev, our Chairman and
Chief Executive Officer, and key technical and sales personnel, none of whom has
entered into an employment agreement with us other than a
non-competition/non-disclosure agreement. We maintain a key person life
insurance policy in the amount of $2.0 million on the life of Mr. Karaev. 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.
AS PART OF OUR BUSINESS STRATEGY, WE HAVE ENTERED INTO AND MAY ENTER INTO OR
SEEK TO ENTER INTO BUSINESS COMBINATIONS AND ACQUISITIONS WHICH MAY BE DIFFICULT
TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR DIVERT
MANAGEMENT ATTENTION
We acquired Sage Online, Inc. in March 2000 and BuzzCompany.com Inc. in
May 2000. As a part of our business strategy, we may enter into additional
business combinations and acquisitions. Acquisitions are typically accompanied
by a number of risks, including:
o the difficulty of integrating the operations and personnel of the
acquired companies;
o the maintenance of acceptable standards, controls, procedures and
policies;
o the potential disruption of our ongoing business and distraction of
management;
18
o the impairment of relationships with employees and customers as a
result of any integration of new management personnel;
o the difficulty of incorporation of acquired technology and rights into
our products and services;
o the failure to achieve the expected benefits of the combination or
acquisition;
o expenses related to the acquisition;
o potential unknown liabilities associated with acquired businesses; and
o unanticipated expenses related to acquired technology and its
integration into existing technology.
If we are not successful in completing acquisitions that we may pursue
in the future, we would be required to reevaluate our growth strategy and we may
have incurred substantial expenses and devoted significant management time and
resources in seeking to complete proposed acquisitions that will not generate
benefits for us. In addition, with future acquisitions, we could use substantial
portions of our available cash as all or a portion of the purchase price. We
could also issue additional securities as consideration for these acquisitions,
which could cause our stockholders to suffer significant dilution. Our
acquisitions of Sage Online and BuzzCompany and any future acquisitions may not
generate any additional revenue and may pose other risks to us.
MULTEX.COM'S INTERNATIONAL OPERATIONS ARE NEW AND MAY NOT BE SUCCESSFUL. WE
HAVE ONLY LIMITED BUSINESS EXPERIENCE OUTSIDE OF THE UNITED STATES
We have only recently commenced operations in a number of international
markets and a key component of our strategy is to continue to expand our
international operations. To date, we have only limited experience in developing
and obtaining research and other financial information relating to companies
whose securities are traded on foreign markets and in marketing, selling and
distributing our services internationally. The failure to gain the necessary
experience, hire appropriate personnel, and enter into key business
relationships in these markets could have a material and adverse effect on our
business, results of operations and financial condition.
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
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 which resides principally in New York City. The continued and
uninterrupted performance of our network and computer systems is critical to our
success. Any disaster, power outage or system failure that causes interruptions
in our ability to provide our
19
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 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.
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. In addition, a failure of our communications
providers to provide the data communications capacity in the time frame required
by us for any reason could cause interruptions in the delivery of our services.
Despite precautions we have taken, unanticipated problems affecting our systems
have from time to time in the past caused, and in the future could cause, delays
and interruptions in the delivery of our services. Although we carry general
liability insurance, our insurance may not cover any claims by dissatisfied
providers or subscribers or may not be adequate to indemnify us for any
liability that may be imposed in the event that a claim were brought against us.
Our business, results of operations and financial condition could be materially
and adversely affected by any system failure, security breach or other damage
that interrupts or delays our operations.
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 may adversely affect the market price of our common
stock. The market price of our common stock could 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 a downturn 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 changes in analysts' earnings estimates; and
o announcements of technological innovations.
In the past, companies that have experienced volatility in the market
price of their stock have been the object of securities class action litigation.
If we were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources
and have a material adverse effect on our business, results of operation and
financial condition.
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 Research-On-Demand constitute a significant portion of our
cost of revenues. If we are required to increase the royalties or fees payable
to these information providers or strategic partners, these increased payments
could have a material and adverse effect 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
20
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.
OUR BUSINESS WILL SUFFER IF WE DO NOT EXPAND OUR DIRECT AND INDIRECT SALES
ORGANIZATIONS AND OUR CUSTOMER SERVICE AND SUPPORT OPERATIONS
Our products and services require a sophisticated sales effort targeted
at a limited number of key people within a prospective customer's organization.
This sales effort requires the efforts of trained sales personnel. We need to
continue to expand our marketing and sales organization in order to increase
market awareness of our services to a greater number of organizations and
generate increased revenue. Competition for these individuals is intense, and we
might not be able to hire the kind and number of sales personnel we need. In
addition, we believe that our future success is dependent upon our ability to
establish successful relationships with a variety of partners. If we are unable
to expand our direct and indirect sales operations, we may not be able to
increase market awareness or sales of our services, which may prevent us from
achieving and maintaining profitability.
Hiring personnel is very competitive in our industry because there is a
limited number of people available with the necessary skills and understanding
of our market. Once we hire them, they require extensive training in our
Internet content delivery services. If we are unable to expand our customer
service and support organization and train them as rapidly as necessary, we may
not be able to increase sales of our products and services, which would
seriously harm our business.
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, including high-speed modems, for providing
reliability and timely Internet access and services. We cannot assure you that
the Internet infrastructure will continue to be able to support the demands
placed on it or that the performance or reliability of the Internet will not be
adversely affected. Furthermore, 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. In addition, the Internet
could lose its viability as a form of media due to delays in the development or
adoption of new standards and protocols that can handle increased levels of
activity. We cannot assure you that the infrastructure and complementary
products and services necessary to maintain the Internet as a viable commercial
medium will be developed or maintained.
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 these claims. Computer
failures may also result in incorrect data being published and distributed
widely. In these and other instances, we may 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 necessarily 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.
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 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
21
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 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.
22
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Private Placement of Securities.
On July 31, 2000, Munder NetNet Fund invested $30 million in the
Company in exchange for 1.0 million shares of unregistered common
stock. This issuance was exempt from registration under Section 4(2)
of the Securities Act of 1933, as amended.
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:
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
July 24, 2000: Current Report on Form 8-K/A, amending the
Company's Form 8-K filed May 24, 2000, to incorporate certain
financial statements and pro forma information relating to the
Company's acquisition of BuzzCompany.com Inc.
23
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 13, 2000 /s/ Isaak Karaev
---------------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: November 13, 2000 /s/ John J. McGovern
----------------------------------------
Name: John J. McGovern
Title: Chief Financial Officer
24