Exhibit 99.2
BuzzCompany.com Inc.
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors......................................... F-1
Balance Sheet.......................................................... F-2
Statement of Operations................................................ F-3
Statement of Changes in Stockholders' Equity........................... F-4
Statement of Cash Flows................................................ F-5
Notes to Financial Statements.......................................... F-6
Report of Independent Auditors
To the Board of Directors and Stockholders
BuzzCompany.com Inc.
We have audited the accompanying balance sheet of BuzzCompany.com Inc. as of
December 31, 1999 and the related statements of operations, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BuzzCompany.com Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
Ernst & Young LLP
July 12, 2000
New York, N.Y.
F-1
BuzzCompany.com Inc.
Balance Sheet
December 31, 1999
Assets
Current assets:
Cash and cash equivalents $ 252,888
Accounts receivable, net of allowance for doubtful
accounts of $60,700 840,799
Prepaid expenses 22,269
Due from stockholder 6,000
-------------
Total current assets 1,121,956
Property and equipment, net of accumulated depreciation 373,513
Computer software development costs, net of
accumulated amortization of $18,198 60,133
Other assets 268,297
-------------
Total assets $ 1,823,899
=============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 213,154
Accrued expenses 67,654
Current portion of long term debt 102,835
Current portion of capital lease obligation 62,683
Deferred rent 6,356
Dividends payable 45,000
-------------
Total current liabilities 497,682
Commitments and contingencies
Stockholders' equity:
Common stock ($0.01 par value, 25,000,000 shares
authorized; 11,051,000 shares issued and outstanding) 110,510
Additional paid-in capital 1,557,938
Accumulated deficit (342,231)
-------------
Total stockholders' equity 1,326,217
-------------
Total liabilities and stockholders' equity $1,823,899
=============
See accompanying notes.
F-2
BuzzCompany.com Inc.
Statement of Operations
Year ended December 31, 1999
Revenues $ 2,881,119
Cost of revenues 1,513,021
--------------
Gross profit 1,368,098
Operating expenses:
Sales and marketing expenses 526,251
Research and development 74,423
General and administrative expenses 1,264,769
--------------
Total operating expenses 1,865,443
Operating loss (497,345)
Other income (expense):
Interest income 15,972
Interest expense (7,315)
--------------
Total other income 8,657
--------------
Net loss $ (488,688)
==============
See accompanying notes.
F-3
BuzzCompany.com Inc.
Statement of Changes in Stockholders' Equity
Year ended December 31, 1999
Common Stock
----------------------------------------- Additional Retained
Issued and Paid-in Earnings
Outstanding Amount Capital (Deficit) Total
----------------------------------------------------------------------------------------
Balance, December 31, 1998 7,800,000 $ 78,000 $ - $ 191,457 $ 269,457
Sale of common stock,
net of issuance costs of
$14,752 2,441,000 24,410 1,465,838 - 1,490,248
Issuance of stock for services 700,000 7,000 - - 7,000
Issuance of warrant to an
investor - - 5,000 - 5,000
Issuance of options to
consultants - - 87,100 - 87,100
Exercise of stock options 110,000 1,100 - - 1,100
Dividends - - - (45,000) (45,000)
Net loss - - - (488,688) (488,688)
----------------------------------------------------------------------------------------
Balance, December 31, 1999 11,051,000 $110,510 $1,557,938 $(342,231) $1,326,217
========================================================================================
See accompanying notes.
F-4
BuzzCompany.com Inc.
Statement of Cash Flows
Year ended December 31, 1999
Cash flows from operating activities
Net loss $ (488,688)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 59,338
Bad debt expense 60,700
Non cash stock option based compensation expense 87,100
Stock based compensation expense 7,000
Changes in operating assets and liabilities:
Accounts receivable (601,706)
Prepaid expenses (20,499)
Other assets (257,803)
Accounts payable 144,178
Accrued expenses (5,467)
Deferred rent (11,646)
-----------------
Net cash used in operating activities (1,027,493)
-----------------
Cash flows from investing activities
Purchase of property and equipment (251,996)
Capitalization of computer software development costs (78,331)
-----------------
Net cash used in investing activities (330,327)
-----------------
Cash flows from financing activities
Proceeds from long term debt 78,750
Principal payments on long term debt (17,244)
Proceeds from capital lease obligation 63,389
Principal payments on capital lease obligation (7,171)
Proceeds from issuance of common stock, net of issuance costs 1,485,348
Proceeds from issuance of stock warrant 5,000
-----------------
Net cash provided by financing activities 1,608,072
-----------------
Net increase in cash and cash equivalents 250,252
Cash and cash equivalents, beginning 2,636
-----------------
Cash and cash equivalents, ending $ 252,888
=================
Supplemental disclosure of cash flow information
Noncash investing and financing activity:
Accrued purchases of fixed assets $ 34,699
=================
Dividend payable $ 45,000
=================
Amounts due from shareholder in exchange for common stock $ 6,000
=================
Interest paid $ 7,315
=================
Income taxes paid $ 1,189
=================
See accompanying notes.
F-5
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
1. Nature of Operations
BuzzCompany.com Inc. (the "Company"), develops and markets Internet software
and provides Internet computer consulting services throughout the world.
The Company was previously doing business as IntraActive Software Corporation
("ISC") until its merger into BuzzCompany.com Inc. (a newly formed company
under common control) in October 1999. ISC was incorporated in New Jersey in May
1996 and BuzzCompany.com, Inc. was incorporated in Delaware in September 1999.
The merger has been treated as a reorganization as the entities were under
common control. Therefore, the accompanying financial statements are presented
as if the companies were combined for the full year.
On May 10, 2000, the stockholders' entered into an agreement to merge the
Company with Multex.com, Inc. ("Multex"). Pursuant to the Agreement and Plan
of Merger, Multex acquired 100% of the Company in exchange for $500,000 in cash
and 1,058,000 shares of Multex common stock.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with maturities of
90 days or less.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed on the
straight-line method over the estimated useful lives of the related assets which
range from 3 to 7 years.
Major renewals and betterments are capitalized. Maintenance and repairs are
expensed as incurred. When properties are retired or otherwise disposed of,
related costs and accumulated depreciation are removed from the accounts.
Software Development Costs
The Company capitalizes internally generated software development costs in
compliance with SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed." Capitalization of computer development
costs begins upon the
F-6
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
establishment of technological feasibility for the product. As of December 31,
1999, $78,331 of software development costs had been capitalized.
Amortization
Amortization is calculated using the straight-line method. Computer software
development costs are being amortized over one year.
Revenue Recognition
Revenues for the year ended December 31, 1999 are primarily derived from
internet computer consulting services. Revenue from these services are
recognized over the period in which the services are performed.
Other revenues are derived from software sales in accordance with Statement of
Position ("SOP") 97-2, "Software Revenue Recognition."
Revenues from software sales consist of the following:
License Fees--Fees from licenses are recognized as revenue upon contract
execution provided delivery has occurred, the fee is fixed or determinable and
collectibility is probable.
Support Agreements--The Company provides technical support and maintenance of
its products. Revenues are recognized ratably over the life of the support
agreement.
Advertising
The Company expenses the costs of advertising as incurred. Advertising expense
for the year ended December 31, 1999 was approximately $270,000.
F-7
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Software Research and Development Costs
Research and development costs are charged to operations when incurred and are
included in operating expenses.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, accounts payable, and long term debt,
approximates their fair values.
Stock-Based Compensation
The Company measures compensation expense related to the grant of stock options
and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, under which compensation
expense, if any, is generally based on the difference between the exercise price
of an option, or the amount paid for the award and the market price or fair
value of the underlying common stock at the date of the award. Stock-based
compensation arrangements involving nonemployees are accounted for under SFAS
No. 123, Accounting for Stock-Based Compensation, under which such arrangements
are accounted for based on the fair value of the option or award. As required by
SFAS No. 123, the Company discloses pro forma net loss information reflecting
the effect of applying SFAS No. 123 fair value measurement to employee
arrangements.
F-8
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
3. Property and Equipment
Property and equipment is summarized as follows:
December 31,
1999
------------
Computers and equipment $ 246,205
Purchased computer software 4,256
Office furniture and fixtures 59,044
Property under capitalized lease 71,915
Leasehold improvements 53,463
------------
434,883
Less accumulated depreciation (61,370)
------------
$ 373,513
============
Depreciation expense charged to operations amounted to $41,140 for the year
ended December 31, 1999.
4. Debt
The Company has a line of credit at a bank in the amount of $100,000 with
interest at 1% over the bank's prime rate. The line is secured by accounts
receivable and specified equipment. The outstanding balance under the line was
$77,500 at December 31, 1999. The Company paid the balance in full in May, 2000.
The Company obtained an equipment loan on May 15, 1998 in the amount of $50,000.
The loan is payable in 36 equal monthly installments of $1,596 and bears
interest at 9.25%. The amount due on the loan as of December 31, 1999 was
$25,335. The loan is collateralized by the assets of the Company and guaranteed
by a stockholder. The Company repaid the loan in full in May, 2000.
F-9
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
5. Commitments and Contingencies
Operating Lease
The Company conducted its operations in a leased facility under a noncancellable
operating lease expiring on March 31, 2000. The lease required payment for real
estate taxes, maintenance and other occupancy expenses and was subject to annual
increases based on changes in The Consumer Price Index and was guaranteed by the
majority stockholder of the Company.
On January 7, 2000, the Company entered into a sublease for new operating
facilities. Monthly rent will be $32,884 through June 1, 2003 and $34,450
thereafter through December 30, 2006. The lease calls for additional rent paid
as a proportionate share of increases in real estate taxes and operating
expenses and a $250,000 security deposit which was paid in December 1999.
The future minimum lease payments under noncancellable operating leases with
terms in excess of one year as of December 31, 1999 are as follows:
2000 $ 357,000
2001 364,000
2002 395,000
2003 404,000
2004 413,000
Thereafter 827,000
----------
$2,760,000
==========
Rent expense for the year ended December 31, 1999 as $77,935.
Capital Leases
On December 21, 1999, the Company entered into a sales-leaseback arrangement.
Under the arrangement, the Company sold computer equipment and office furniture
and leased it back for a period of three years. In accordance with SFAS 28,
Sale-Leaseback Transactions, the leaseback is in substance a financing
arrangement since the lessee has retained continuing use of all of the assets
and therefore is being accounted as a capital lease in accordance with SFAS 13,
Accounting for Leases. This financing lease was paid in full in May 2000.
F-10
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
5. Commitments and Contingencies (continued)
In addition, the Company leases equipment which is accounted for as a
capitalized lease.
The following is a summary of property held under capital leases:
Equipment $71,915
Less accumulated depreciation 3,703
--------------
$68,212
==============
The following is a schedule of future lease payments under the capitalized lease
together with the present value of the net minimum lease payments as of December
31, 1999.
Year ended December 31:
2000 78,368
Less amount representing interest 15,685
--------------
Present value of net minimum capital
lease payments $62,683
==============
The interest rates are 12.4% and 16.76%.
6. Concentration of Credit Risk
At December 31, 1999, the Company held all cash and cash equivalents in one
bank.
The Company derives all of its revenues from customers located within the United
States. For the year ended December 31, 1999, two customers individually
generated sales in excess of 10% of the Company's sales. Total sales for these
two customers was $746,643 and $650,405 or 26% and 23%, respectively. The
percentage of accounts receivable for these two customers was 18% and 47% at
December 31, 1999.
F-11
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
7. Stock Options
On October 15, 1999, the Company amended its 1998 stock option plan and thereby
established the 1999 stock Option Plan ("the Plan") and has authorized the grant
of options to employees, directors, and consultants for up to 2,000,000 shares
of the Company's common stock. All options issued and outstanding under the 1998
stock option plan have been transferred into the new plan as though they had
always been issued under the new plan. For the year ended December 31, 1999
Options to purchase 705,850 shares of the Company's common stock were granted
under the plan.
Pro forma information regarding net loss is required by SFAS 123, and has been
determined as if the Company had accounted for its employee stock options under
the fair value method of that Statement.
The fair value of the options was estimated at the date of grant using a minimum
value method with the following assumptions: average risk-free interest rate
ranging from 5.25% to 6.48%, dividend yield of 0% and average life of 5 years.
Option valuation models require the input of highly subjective assumptions.
Because changes in the input of subjective assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
The effect of applying SFAS 123's fair value method to the Company's options
results in a pro forma net loss of $492,771 for the year ended December 31,
1999.
The weighted average fair value of options granted for the year ended December
31, 1999 was $0.06.
F-12
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
7. Stock Options (continued)
The following transactions occurred with respect to the Company's Plan during
1999:
Weighted
Number of Average
Options Exercise
Price
--------------------------
Outstanding December 31, 1998 145,000 $ 0.01
Granted 705,850 0.22
Exercised - -
Canceled 532,000 0.10
--------------------------
Outstanding December 31, 1999 318,850 $ 0.32
==========================
The following table summaries information concerning outstanding options at
December 31, 1999:
Options Outstanding Options Exercisable
- -------------------------------------------------------- ---------------------------
Weighted
Weighted Average Number of Weighted
Average Remaining Stock Average
Exercise Price Number Exercise Contractual Options Exercise
Range Outstanding Price Life Exercisable Price
- -------------------------------------------------------------------------------------
$ 0.01 164,500 $0.01 8.73 69,219 $0.01
$ 0.10 38,000 0.10 9.46 - -
$ 0.77 - $ 1.00 116,350 0.84 9.87 - -
----------- -----------
318,850 $0.32 9.52 69,219 $0.01
=========== ===========
The options outstanding primarily vest 25% after the first year of service and
25% over the remaining four years and expire ten years after the date of grant
or 90 days following termination of employment with the Company.
The Company issued two options, not under the Plan, to purchase a total of
110,000 shares of the Company's common stock to consultants in October 1999, and
recorded compensation expense for the year ended December 31, 1999 of $87,100.
These options vested immediately on the date of grant and were exercised by the
consultants in December 1999.
F-13
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
8. Stockholders' Equity
On August 12, 1999, the Company entered into a Securities Purchase Agreement
whereby the Company sold 1,941,000 shares of its $0.01 par value common stock
for $1,500,000. Issuance costs related to the Securities Purchase Agreement for
the year ended December 31, 1999 was $14,752. These securities have not been
registered under the Securities Act of 1933.
Pursuant to the Certificate of Ownership and Merger of ISC into BuzzCompany.com
Inc. dated October 3, 1999, each share of common stock of ISC was converted into
ten issued and outstanding shares of common stock, $0.01 par value, of
BuzzCompany.com Inc.
All amounts included in the financial statements give effect to the conversion
of each share of ISC into ten shares of BuzzCompany.com, Inc. as a result of the
merger of ISC into BuzzCompany.com Inc.
Warrant Purchase Agreement
On August 20, 1999, the Company issued a warrant to purchase 100,000 shares of
common stock at $0.77 per share for $5,000 to an investor. The warrant is
exercisable for two years and was issued at its fair market value.
9. Income Taxes
InterActive Software Corporation (ISC), with the consent of its stockholders,
had elected through July 12, 1999 to be taxed as an S Corporation pursuant to
the Internal Revenue Code.
As such, ISC was not subject to federal and certain state income taxes because
the shareholders had included ISC's taxable income or loss in their individual
income tax returns.
On July 12, 1999 ISC revoked its S corporation status and elected instead to be
taxed as a corporation for federal income tax purposes. Since ISC was not
subject to federal and state income taxes for the period 1/1/99 - 7/12/99, no
income tax provision was recorded.
Effective July 13, 1999 ISC became taxed as a corporation, and thus became
subject to federal, state and local income taxes. Further, on October 5, 1999,
ISC merged with BuzzCompany.com Inc., a newly formed Delaware corporation.
Because the combined group of ISC and BuzzCompany.com Inc. had a net operating
loss for the period July 13, 1999 through December 31, 1999, no current tax
provision has been recorded.
F-14
BuzzCompany.com Inc.
Notes to Financial Statements (continued)
9. Income Taxes (continued)
Deferred income taxes represent the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
consist of the following:
1999
-----------
Deferred tax liabilities:
Accrual to cash adjustment $ 45,000
Depreciation 7,000
-----------
Total deferred tax liabilities 52,000
Deferred tax assets:
Amortization 5,000
Bad debt 24,000
Other 4,000
Net operating loss 246,000
-----------
Total deferred tax assets 279,000
Valuation allowance for deferred
tax assets 227,000
-----------
Net deferred tax asset recognized in
the balance sheet $ -
===========
At December 31, 1999 the Company had net operating loss carryfowards of
approximately $600,000 for U.S. federal income tax purposes. These losses will
expire in 2019. Additionally, net deferred tax assets of approximately $227,000
have been fully offset by a valuation allowance, due to the uncertainty of
realizing such benefit.
F-15