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 ending September 30, 1999
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
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MULTEX.COM, INC.
-----------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 7375 22-3253344
- ----------------------- ---------------------------- ---------------------
(State of Incorporation) (Primary Standard Industrial I.R.S. Employer
Classification Code) Identification Number)
33 MAIDEN LANE, 5TH FLOOR
NEW YORK, NEW YORK 10038
(212) 859-9800
-----------------------------------------------------------
(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 November 5, 1999, there were 26,807,481 shares of the registrant's common
stock outstanding.
INDEX TO FORM 10-Q
FOR
MULTEX.COM, INC. AND SUBSIDIARIES
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION....................................................................................3
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited):........................................3
Condensed Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998............3
Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 1999 and 1998....................................................................4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30,
1999 and 1998.................................................................................5
Notes to Condensed Consolidated Financial Statements September 30, 1999.........................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 9
PART II. OTHER INFORMATION......................................................................................28
ITEM 1. LEGAL PROCEEDINGS..............................................................................28
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......................................................28
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................................................28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................28
ITEM 5. OTHER INFORMATION..............................................................................28
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K................................................................28
ITEM 7. SIGNATURES.....................................................................................29
2
PART I. FINANCIAL INFORMATION
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS SEPTEMBER 30, DECEMBER 31,
------------- -------------
1999 1998
---- ----
(unaudited) (see Note 1)
Current assets
Cash and cash equivalents $ 4,802 $ 4,156
Marketable securities 46,175 20,015
Accounts receivable, net 6,888 3,668
Other current assets 3,649 684
-------- --------
Total current assets 61,514 28,523
Property and equipment, net 6,994 4,470
Other 1,616 190
-------- --------
Total assets $ 70,124 $ 33,183
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 8,471 $ 1,230
Accrued expenses 3,109 1,600
Current portion of long term debt 157 157
Current portion of capital lease obligations 242 202
Deferred revenues 4,767 3,376
-------- --------
Total current liabilities 16,746 6,565
Long term liabilities:
Long term debt 144 236
Capital lease obligations 262 167
Deferred rent 922 419
Other 38 59
-------- --------
Total long term liabilities 1,366 881
Redeemable preferred stock, authorized 2,000,000 shares:
Series A redeemable preferred stock; $.01 par value,
$2,500,000 aggregate liquidation preference:
Issued and outstanding- 25,000 shares at December 31, 1998 - 3,460
Series B redeemable preferred stock; $.01 par value,
$5,500,000 aggregate liquidation preference:
Issued and outstanding- 36,666 shares at December 31, 1998 - 7,294
Series C redeemable preferred stock; $.01 par value,
$15,000,000 aggregate liquidation preference:
Issued and outstanding- 100,000 shares at December 31, 1998 - 18,065
Series D redeemable preferred stock; $.01 par value,
$10,000,000 aggregate liquidation preference:
Issued and outstanding- 55,556 shares at December 31, 1998 - 11,102
Series E redeemable preferred stock; $.01 par value,
$20,000,000 aggregate liquidation preference:
Issued and outstanding- 80,000 shares at December 31, 1998 - 19,939
Stockholders' equity (deficit):
Preferred Stock- $.01 par value:
Authorized- 5,000,000 shares; none issued and outstanding
at September 30, 1999 and December 31, 1998 - -
Common stock $.01 par value
Authorized - 50,000,000 shares: issued and outstanding-
26,759,541 shares at September 30, 1999 and 8,043,338
at December 31, 1998 268 80
Additional paid-in-capital 104,745 2,039
Accumulated deficit (51,826) (34,766)
Deferred compensation (1,100) (1,460)
Accumulated other comprehensive loss (75) (16)
-------- --------
Total stockholders' equity (deficit) 52,012 (34,123)
-------- --------
Total liabilities and stockholders' equity (deficit) $ 70,124 $ 33,183
======== ========
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,
------------------- -----------------
1999 1998 1999 1998
-------- ------- ------- --------
Revenues $ 10,929 $ 5,569 $ 27,279 $15,349
Cost of revenues 2,671 1,221 6,878 3,567
-------- ------- -------- -------
Gross profit 8,258 4,348 20,401 11,782
Operating expenses:
Sales and marketing 6,619 2,083 15,626 5,174
Research and development 2,039 728 4,272 2,168
General and administrative 4,776 3,115 12,869 8,838
-------- ------- -------- -------
Total operating expenses 13,434 5,926 32,767 16,180
-------- ------- -------- -------
Loss from operations (5,176) (1,578) (12,366) (4,398)
Other income (expense):
Gain on sale of equipment -- -- -- 125
Offering expenses -- -- -- (841)
Merger related expenses (5,606) -- (5,606) --
Interest expenses (31) (36) (96) (434)
Interest and investment income 716 73 1,752 290
-------- ------- -------- -------
Loss from continuing operations before income taxes (10,097) (1,541) (16,316) (5,258)
Income taxes (234) (7) (716) (17)
-------- ------- -------- -------
Loss from continuing operations (10,331) (1,548) (17,032) (5,275)
Discontinued operations:
Income (loss) from discontinued operations -- (255) 318 (854)
Gain on sale of discontinued operations -- -- 225 --
-------- ------- -------- -------
Net loss (10,331) (1,803) (16,489) (6,129)
Redeemable preferred stock dividends -- (665) (1,188) (1,975)
-------- ------- -------- -------
Net loss available to common shareholders $(10,331) $(2,468) $(17,677) $(8,104)
========= ======== ======== =======
Earnings (loss) per share:
Continuing operations, net of redeemable preferred
stock dividends $(0.39) $(0.29) $(0.86) $(0.97)
Discontinued operations -- (0.03) 0.03 (0.11)
-------- ------- -------- -------
Loss per share available to common shareholders $(0.39) $(0.32) $(0.83) $(1.08)
======== ======= ======== =======
Number of shares used in computed basic and diluted 26,690 7,792 21,237 7,510
loss per share
======== ======= ======== =======
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,
-----------------------------------
1999 1998
--------- ----------
Operating activities
Net loss $(16,489) $(6,129)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of deferred compensation 360 318
Gain on sale of equipment -- (125)
Depreciation and amortization 2,385 1,327
Amortization of issuance costs 13 35
Deferred rent 503 (4)
Issuance of common stock -- 18
Bad debt expense 564 114
Accumulated deficit adjustment (Note 1) (571) 326
Changes in operating assets and
liabilities:
Accounts receivable (3,784) (1,095)
Other current assets (2,965) (144)
Other assets (1,426) 178
Accounts payable 6,537 653
Accrued expenses 1,509 88
Deferred revenues 1,391 1,667
Other liabilities (21) 58
--------- ----------
Net cash used in operating activities (11,994) (2,715)
Investing activities
Purchase of marketable securities (42,267) (1,269)
Proceeds from sale of marketable securities 16,050 8,932
Proceeds from sale of equipment -- 201
Purchase of property and equipment (3,925) (1,230)
--------- ----------
Net cash (used in) provided by investing activities (30,142) 6,634
Financing activities
Proceeds from issuances of stock, net of offering costs 43,021 550
Repayments of long-term debt (92) (2,401)
Proceeds from long-term debt -- 1,250
Repayments of capital leases (145) --
Other liabilities -- (313)
--------- ----------
Net cash provided by (used in) financing activities 42,784 (914)
Effect of exchange rate changes on cash and cash equivalents (2) (8)
--------- ----------
Increase in cash and cash equivalents 646 2,997
Cash and cash equivalents, beginning of period 4,156 3,343
--------- ----------
Cash and cash equivalents, end of period $ 4,802 $ 6,340
========= ==========
Supplemental disclosures of cash flow information
Noncash investing and financing activity:
Acquisition of fixed assets through capital leases $ 280 $ --
========= ==========
Accrued purchases of fixed assets $ 704 $ 48
========= ==========
Sale of stock and issuance of options in connection with
acquisition of certain assets of Multex Data Group, Inc. $ -- $ 345
========= ==========
Interest paid $ 83 $ 389
========= ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
NOTE 1 -- BASIS OF PRESENTATION
Multex.com, Inc. ("Multex.com") and its wholly owned subsidiaries
(collectively referred to as the "Company") is a leading provider of online
investment research and information services designed to meet the needs of
individual and institutional investors, including investment banks, brokerage
firms and corporations.
The accompanying condensed consolidated financial statements have been
restated to reflect the September 23, 1999 acquisition of Market Guide Inc.
("Market Guide") which was accounted for as a pooling of interests. The pooling
of interests method of accounting requires the restatement of all periods as if
the Company and Market Guide had always been combined.
The condensed consolidated balance sheet at September 30, 1999 combines the
balance sheets of Multex.com and Market Guide as of September 30, 1999 and
August 31, 1999, respectively. The condensed consolidated balance sheet at
December 31, 1998 combines the balance sheets of Multex.com and Market Guide as
of December 31, 1998 and February 28, 1999, respectively. The condensed
consolidated statements of operations for the three and nine month periods ended
September 30, 1999 combines the statements of operations of Multex.com for the
three and nine month periods ended September 30, 1999 and the statements of
operations of Market Guide for the three and nine month periods ended August 31,
1999, respectively. The condensed consolidated statements of operations for the
three and nine month periods ended September 30, 1998 combines the statements of
operations of Multex.com for the three and nine month periods ended September
30, 1998 and the statements of operations of Market Guide for the three and nine
month periods ended August 31, 1998, respectively.
The condensed consolidated statements of operations for the nine months
ended September 30, 1999 and 1998 include the results of operations of Market
Guide for the three months ended February 28, 1999 and 1998, respectively. The
results of operations of Market Guide for the three months ended February 28,
1999 and 1998, were also included in the consolidated statements of operations
for the years ended December 31, 1998 and 1997, respectively. As a result,
accumulated deficit as of September 30, 1999 and 1998 has been adjusted to
reflect the effect of including results of operations of Market Guide for
the three months ended February 28, 1999 and 1998 in both periods.
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 accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1999 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1999.
The balance sheet at December 31, 1998 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.
For further information, refer to the consolidated financial statements and
footnotes thereto for the year ended December 31, 1998 included in the Company's
Registration Statement on Form S-1, Market Guide's annual report on Form 10-K
for the year ended February 28, 1999 and the Company's Registration Statement on
Form-4.
NOTE 2 -- STOCKHOLDERS' EQUITY
During March 1999, the Company completed an initial public offering of
3,450,000 shares of its common stock, of which 3,283,500 shares were issued and
sold by the Company, which yielded gross proceeds of approximately $45,969,000.
As a result, all outstanding shares of redeemable preferred stock were
automatically converted in to 14,861,112 shares of the Company's common stock.
In connection with the initial public offering, the Company incurred costs of
approximately $4,322,000.
6
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
SEPTEMBER 30, 1999
The Company issued 562,900 shares of its common stock in connection with
the exercise of stock options during the nine months ended September 30, 1999
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,
------------------ -----------------
1999 1998 1999 1998
-------- ------- -------- -------
Numerator:
Net loss from continuing operations $(10,331) $(1,548) $(17,032) $(5,275)
Discontinued operations -- (255) 543 (854)
Redeemable preferred stock dividends -- 665 1,188 1,975
-------- ------- -------- -------
Numerator for basic and diluted net loss per share -
net loss available for common stockholders $(10,331) $(2,468) $(17,677) $(8,104)
======== ======= ======== =======
Denominator:
Denominator for basic and dilutive net loss per
share - weighted average shares 26,690 7,792 21,237 7,510
-------- ------- -------- -------
Basic and diluted net loss per share $ (0.39) $ (0.32) $ (0.83) $ (1.08)
======== ======= ======== =======
NOTE 4 - COMPREHENSIVE LOSS
Total comprehensive loss (in thousands) was $10,403 and $17,736 for the
three and nine months ended September 30, 1999, respectively, and $2,471 and
$8,112 for the three and nine months ended September 30, 1998, respectively.
NOTE 5 - 1999 EMPLOYEE STOCK PURCHASE PLAN
Effective January 1999, in connection with the 1999 Employee Stock Purchase
Plan (the "Stock Purchase Plan"), the Company reserved 750,000 shares of its
common stock. The Stock Purchase Plan allows eligible employees of the Company
to purchase shares of common stock at a purchase price equal to eighty-five
percent of the fair market value of the Company's common stock, as defined. In
no event, however, may any participant purchase more than 1,500 shares, nor may
all participants in the aggregate purchase more than 187,500 shares, on any one
semi-annual purchase date.
NOTE 6 - 1999 STOCK OPTION PLAN
Effective January 1999, the Company adopted the 1999 Stock Option Plan (
the "1999 Stock Plan"), which is intended to serve as the successor plan to the
Company's 1993 Stock Incentive Plan (the "1993 Stock Plan"). In March 1999,
outstanding stock options under the 1993 Stock Plan were incorporated into the
1999 Stock Plan, and no further options will be granted under the 1993 Stock
Plan.
7
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
SEPTEMBER 30, 1999
NOTE 7 - ACQUISITION
Pursuant to an Agreement and Plan of Merger and Reorganization, dated as of
June 23, 1999, between Multex.com, Inc. and Market Guide Inc., effective
September 23, 1999, Market Guide became a wholly owned subsidiary of Multex.com,
Inc. Under the terms of the agreement, each Market Guide shareholder received
one share of the Company's common stock for each outstanding share of Market
Guide stock. The Company issued approximately 4.9 million shares of its common
stock and assumed options to purchase approximately 680,000 shares. In
connection with the Market Guide merger, the Company incurred approximately $5.6
million of merger related expenses.
NOTE 8 - SUMMARY RECONCILIATION TABLE
Unaudited combined and separate results of Multex.com and Market Guide
during the periods preceding the merger were as follows (in thousands) :
For the Three Months Ended For the Three Months Ended
September 30, 1999 (Multex.com) & August 31, September 30, 1998 (Multex.com) & August 31,
1999 (Market Guide) 1998 (Market Guide)
-------------------------------------------- ----------------------------------------------
Multex. Market Multex. Market
com Guide Combined Com Guide Combined
------- ------- -------- ------- ------ --------
Revenues $ 8,093 $ 2,836 $ 10,929 $ 3,492 $2,077 $ 5,569
Net income (loss)
available to common
shareholders $(6,956) $(3,375) $(10,331) $(2,575) $ 107 $(2,468)
For the Nine Months Ended For the Nine Months Ended
September 30, 1999 (Multex.com) & August 31, September 30, 1998 (Multex.com) & August 31,
1999 (Market Guide) 1998 (Market Guide)
-------------------------------------------- ----------------------------------------------
Multex. Market Multex. Market
com Guide Combined com Guide Combined
------- ------- -------- ------- ------ --------
Revenues $ 19,235 $ 8,044 $ 27,279 $ 9,321 $6,028 $15,349
Net income (loss)
available to common
shareholders $(15,073) $(2,604) $(17,677) $(8,192) $ 88 $(8,104)
8
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 1993 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. THE COMPANY'S ACTUAL RESULTS AND 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" AND ELSEWHERE IN THIS QUARTERLY REPORT.
OVERVIEW
Multex.com is a leading provider of online investment research and
information services designed to meet the needs of individual and institutional
investors, including investment banks, brokerage firms and corporations. Our
product offerings are organized into three main groupings.
Business to Business,
Business to Consumer, and
Content
The Business to Business group has two primary product offerings:
MultexNET and Multex Research-On-Demand. 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. 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.
The Business to Consumer group has two primary product offerings,
MultexEXPRESS and Multex Investor. MultexEXPRESS, which is 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 Investor
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.
The Content group consists of the data licensing group which includes Market
Guide fundamental data and Multex Earnings Estimates. Market Guide specializes
in the compilation, integration, display and delivery of a database of
descriptive and analytic information on over 12,000 publicly traded domestic and
foreign corporations. The Company distributes its services through more than 120
on-line vendors and independent finance oriented Web sites.
Revenues from subscriptions to MultexNET and MultexEXPRESS are recognized
in equal installments over the term of the subscription. Similarly, revenues
from licenses to Market Guide products are recognized in equal installments over
the term of the license. 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 from all product lines 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.
9
On March 17, 1999, we completed our initial public offering of 3,450,000
shares of Common Stock, of which 3,283,500 shares were issued and sold by the
Company, at a price of $14.00 per share. We received net proceeds of
approximately $41.6 million from the initial public offering. We have invested
the funds in short term, interest bearing investment grade obligations pending
their use.
We continue to expand our operations and have grown (inclusive of Market
Guide personnel) from approximately 250 employees at December 31, 1998 to
approximately 300 employees at September 30, 1999. We expect to add additional
personnel both in the United States and abroad as our operations expand. We
currently expect to significantly increase our operating expenses both on an
absolute basis and as a percentage of revenues in order to expand our sales and
marketing operations, to continue to expand internationally and to continuously
upgrade and enhance our services and technologies. As a result of these and
other factors, there can be no assurance that we will not incur significant
losses on a quarterly and annual basis for the foreseeable future.
We have incurred significant losses since our inception, and as of
September 30, 1999 had an accumulated deficit of $51.8 million. In addition, we
have recorded cumulative deferred compensation of $1.9 million, which represents
the difference between the exercise price of stock options for shares of common
stock granted to some of our employees and the fair market value of our common
stock at the date of grant. Of the total deferred compensation amount, $465,000
was amortized prior to December 31, 1998 and $360,000 was amortized during the
nine months ended September 30, 1999. The remaining deferred compensation
amount will be amortized over the remaining vesting periods of the related
options. We believe that period-to-period comparisons of our operating results
are not necessarily meaningful and that the results for any period should not be
relied upon as an indication of future performance.
Historically, a few of our subscribers and distributors have accounted for
a substantial majority of our revenues. For the nine months ended September 30,
1999, Merrill Lynch accounted for 10.3% of our consolidated revenues. The loss
of Merrill Lynch, or any of our other subscribers or distributors, could have a
material and adverse effect on our business, results of operations and financial
condition.
RECENT DEVELOPMENTS
Market Guide Acquisition
On September 23, 1999, Multex.com acquired Market Guide Inc., a leading
provider of financial information on the Internet. This acquisition was
accounted for as a pooling of interests, which requires the restatement of all
relevant periods as if Multex.com and Market Guide had always been combined.
Accordingly, the discussions reflect the combined results of operations of
Multex.com and Market Guide.
Market Guide is an industry-leading Internet provider of value-added
financial content for both individual investors and institutional investors,
covering over 12,000 publicly traded companies. The Company is in the process of
making its investment research and earnings estimates available through Market
Guide's Web site (www.marketguide.com), as well as through its over 120 leading
Internet distribution partners, which include leading brands such as America
Online, Ameritrade, Bridge Information Systems, CBS MarketWatch, Charles Schwab
& Co., CNNfn, E*Trade, FactSet Research Systems, Reuters, The Motley Fool, The
Street.com, Wall Street Journal Interactive, Waterhouse Securities and Yahoo!.
The acquisition enables Multex.com to leverage Market Guide's extensive
Internet distribution network, unique financial content and brand. In addition,
the acquisition will allow Multex.com to substantially increase the quantity and
scope of its proprietary financial content and analysis, strengthening the
Company's position as a leading online investment research network for
individual and institutional investors. Multex.com expects to integrate Market
Guide's proprietary financial databases into all its Internet research services,
including MultexNET, MultexEXPRESS, Multex Research-on-Demand and Multex
Investor.
10
RESULTS OF OPERATIONS
Revenues
Multex.com's revenues consist of subscription fees for MultexNET and
MultexEXPRESS, sales of investment research on a pay-per-view basis through
Multex Research-On-Demand, sales of sponsorships, advertising and investment
research through the Multex Investor and the Market Guide web sites, and over
120 license agreements of the Market Guide financial database. We also provide
professional services to select MultexEXPRESS clients, including software
development, customization and integration services. These services are
typically billed to clients on a time and material basis. On occasion, as a
service to our clients, we have acquired equipment for resale.
Revenues increased 96% to $10.9 million in the three months ended September
30, 1999 from $5.6 million in the equivalent period in 1998. Revenues increased
78% to $27.3 million in the nine months ended September 30, 1999 from $15.3
million in the equivalent period in 1998. The increase in revenues in this
period was due to an increase in demand for all of our products and from
revenues generated by the Multex Investor and Market Guide web sites.
Cost of Revenues
Cost of revenues consists of fees payable to distributors of MultexNET and
Multex Research-On-Demand, royalties payable to the authors of investment
research offered through Multex Research-On-Demand, Multex Investor and the
Market Guide web site, fees payable to web sites for making the Multex Investor
available to their users, web site development costs of MultexEXPRESS customers,
telecommunications costs, salaries for the Market Guide research analysts, and,
on occasion, the cost of equipment purchased and resold to our clients.
Cost of revenues increased 119% to $2.7 million in the three months ended
September 30, 1999 from $1.2 million in the equivalent period in 1998. As a
percentage of revenues, cost of revenues increased to 24.4% in the three months
ended September 30, 1999 from 21.9% in the equivalent period in 1998. Cost of
revenues increased 93% to $6.9 million in the nine months ended September 30,
1999 from $3.6 million in the equivalent period in 1998. As a percentage of
revenues, cost of revenues increased to 25.2% in the nine months ended September
30, 1999 from 23.2% in the equivalent period in 1998. The increase in cost of
revenues in dollar terms in the nine months ended September 30, 1999 was
primarily due to the increased demand for all of our products and from fees
payable as a result of revenues generated by the Multex Investor and the Market
Guide web site. The gross margin for the three and the nine months ended
September 30, 1999 was less than that achieved for the equivalent period in 1998
due to lower margins being achieved on the distribution of certain of our
services, specifically the distribution of MultexNET through Reuters.
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 218% to
$6.6 million in the three months ended September 30, 1999 from $2.1 million in
the equivalent period in 1998. As a percentage of revenues, sales and marketing
expenses increased to 60.6% in the three months ended September 30, 1999 from
37.4% in the equivalent period in 1998. Sales and marketing expenses increased
202% to $15.6 million in the nine months ended September 30, 1999 from $5.2
million in the equivalent period in 1998. As a percentage of revenues, sales
and marketing expenses increased to 57.3% in the nine months ended September 30,
1999 from 33.7% in the equivalent period in 1998. The increase in sales and
marketing expenses in dollar terms in both the three and nine months ended
September 30, 1999 was due to an expansion of our sales force, both domestically
and internationally, increased marketing activities, including the complete
redesign of our marketing materials, and in particular, significant expenditures
to increase the brand awareness of Multex Investor. We expect sales and
marketing expenses to increase significantly in dollar terms for the remainder
of this fiscal year as we continue to expand Multex Investor, increase brand
awareness, hire additional sales and marketing personnel, and expand
internationally.
Research and Development. Research and development expenses consist
primarily of salaries and benefits. Research and development expenses increased
to $2.0 million in the three months ended September 30, 1999 from $728,000 in
the equivalent period in 1998, representing an increase of 180%. As a
percentage of revenues, research
11
and development expenses increased to 18.7% in the three months ended September
30, 1999 from 13.1% in the equivalent period in 1998. Research and development
expenses increased to $4.3 million in the nine months ended September 30, 1999
from $2.2 million in the equivalent period in 1998, representing an increase of
97%. As a percentage of revenues, research and development expenses increased to
15.7% in the nine months ended September 30, 1999 from 14.1% in the equivalent
period in 1998. The increase in research and development expenses in dollar
terms in both the three and nine months ended September 30, 1999 was primarily
due to an increase in the number of developers employed and costs related to the
development of Market Guide's new Business Information Database to be released
in the fourth quarter of 2000. We believe that continued investment in product
development is critical to attaining our strategic objectives and, as a result,
expect research and development expenses to increase significantly in dollar
terms in future periods.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation of assets. General and administrative expenses
increased 53.3% to $4.8 million in the three months ended September 30, 1999
from $3.1 million in the equivalent period in 1998. As a percentage of
revenues, general and administrative expenses decreased to 43.7% in the three
months ended September 30, 1999 from 55.9% in the equivalent period in 1998.
General and administrative expenses increased 45.6% to $12.9 million in the nine
months ended September 30, 1999 from $8.8 million in the equivalent period in
1998. As a percentage of revenues, general and administrative expenses
decreased to 47.2% in the nine months ended September 30, 1999 from 57.6% in the
equivalent period in 1998. The increase in general and administrative expenses
in dollar terms in both the three and nine months ended September 30, 1999 was
primarily due to increased personnel, professional service fees and facility
expenses necessary to support our domestic and international growth. We expect
that general and administrative expenses will increase 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
As described above, we have invested heavily in establishing a brand name
for our services, expanding internationally, continuing to develop new services
and maintaining our technological advantage, and increasing the number of our
employees as we seek to increase our market share. For the foregoing reasons,
loss from operations increased 228% to $5.2 million in the three months ended
September 30, 1999 from $1.6 million in the equivalent period in 1998. As a
percentage of revenues, loss from operations was 47.4% in the three months ended
September 30, 1999 and 28.3% in the equivalent period in 1998. For the same
foregoing reasons, loss from operations increased 181% to $12.4 million in the
nine months ended September 30, 1999 from $4.4 million in the equivalent period
in 1998. As a percentage of revenues, loss from operations was 45.3% in the
nine months ended September 30, 1999 and 28.7% in the equivalent period in 1998.
Interest Income (Expense) and Other Income
Net interest income was $685,000 in the three months ended September 30,
1999 as compared to net interest income of $37,000 in the equivalent period in
1998. Net interest income was $1.7 million in the nine months ended September
30, 1999 as compared to net interest expense of $144,000 in the equivalent
period in 1998. The changes in net interest income/expense are attributable to
the changes in cash available for investing and fluctuations in borrowings. In
the nine months ended September 30, 1998, a gain on the sale of leased equipment
of $125,000 was realized. There was no comparable transaction in the equivalent
period in 1999.
In the nine months ended September 30, 1998, the Company recognized
$841,000 in expenses related to the postponement of its initial public offering.
There was no comparable transaction in the equivalent period in 1999.
In connection with the September 23, 1999 acquisition of Market Guide, the
Company recorded approximately $5.6 million in expenses related to fees for
investment bankers, outside counsel, accountants, proxy solicitors, document
preparation and other costs directly related to consummating the acquisition.
There was no comparable transaction in the equivalent period in 1998.
Net Loss from Continuing Operations
The Company recorded a net loss from continuing operations (including
redeemable preferred stock dividends) of $10.3 million and $2.2 million for the
three months ended September 30, 1999 and 1998, respectively,
12
or a net loss per share of $0.39 and $0.29, respectively. The Company recorded a
net loss from continuing operations (including redeemable preferred stock
dividends) of $18.2 million and $7.3 million for the nine months ended September
30, 1999 and 1998, respectively, or a loss per share of $0.86 and $0.97,
respectively. The increase in the net loss was primarily due to our investing
heavily in establishing a brand name for our services, expanding
internationally, continuing to develop new services and maintaining our
technological advantage, increasing the number of our employees as we seek to
increase our market share, and $5.6 million in merger related expenses from the
Market Guide acquisition.
Discontinued Operations
Discontinued operations reflect the January 1999 sale of Market Guide's
CreditRisk Monitor business. Loss from discontinued operations totaled $255,000
for the three months ended September 30, 1998 compared to the absence of any
discontinued operating activities in the three months ended September 30, 1999.
For the nine months ended September 30, 1999, income from discontinued
operations totaled $543,000 compared to a loss of $854,000 in the equivalent
period in 1998.
Net Loss available to Common Shareholders
Net loss available to common shareholders totaled $10.3 million and $2.5
million for the three months ended September 30, 1999 and 1998, respectively, or
a loss per share of $0.39 and $0.32, respectively. The Company recorded a net
loss available to common shareholders of $17.7 million and $8.1 million for the
nine months ended September 30, 1999 and 1998, respectively, or a loss per share
of $0.83 and $1.08, respectively. The increase in the net loss was primarily
due to our investing heavily in establishing a brand name for our services,
expanding internationally, continuing to develop new services and maintaining
our technological advantage, increasing the number of our employees as we seek
to increase our market share, and $5.6 million in merger related expenses from
the Market Guide acquisition.
The Company computed a pro forma loss per share excluding expenses related
to the Market Guide acquisition that assumes that (i) all shares of common stock
outstanding at September 30, 1999 and 1998 were outstanding from January 1, 1999
and 1998, respectively; (ii) that all stock options outstanding at September 30,
1999 and 1998 were exercised on January 1, 1999 and 1998, respectively; and
(iii) assumes the conversion of all redeemable preferred stock into 14.9 million
shares of the Company's common stock at January 1, 1998. This pro forma loss
was $0.15 and $0.07 per share for the three months ended September 30, 1999 and
1998, respectively, and $0.36 and $0.25 per share for the nine months ended
September 30, 1999 and 1998. The pro forma loss per share calculation was based
upon 30.5 million shares outstanding for the three and nine months ended
September 30, 1999 and 24.9 million shares outstanding for the three and nine
months ended September 30, 1998.
INCOME TAXES
At December 31, 1998, we had net operating loss carryforwards of
approximately $26.2 million and research and development credits of
approximately $700,000 for income tax purposes that expire in 2009 through 2013.
The utilization of these loss carryforwards and credits are subject to annual
limitations pursuant to Section 382 of the Internal Revenue Code of 1986.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through the sale of equity
securities as we have not generated cash flow from operations since our
inception. Through September 30, 1999, we have received an aggregate of $94.3
million in net proceeds from the sale of five series of convertible preferred
stock and our initial public offering. At September 30, 1999, we had $51.0
million of cash, cash equivalents, and marketable securities. Our principal
commitments consist of obligations under operating leases.
Net cash used in operating activities was $12.0 million in the nine months
ended September 30, 1999, and $2.7 million in the equivalent period in 1998. The
principal use of cash for all periods was to fund our losses from operations.
Net cash used in investing activities was $30.1 million in the nine months
ended September 30, 1999, as compared to net cash provided by investing
activities of $6.6 million in the equivalent period in 1998. Cash used
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in investing activities was primarily related to purchases of marketable
securities and equipment and cash generated by investing activities was
primarily related to the sale of marketable securities.
Net cash provided by financing activities was $42.8 million in the nine
months ended September 30, 1999, and net cash used by financing activities was
$914,000 for the equivalent period in 1998. Net cash provided by and used by
financing activities primarily consisted of net proceeds from the sale of equity
securities in 1999 and borrowings under bank lines of credit, which were offset
in part by repayments of bank debt and lease obligations in 1998.
Although we have no material commitments for capital expenditures, we
anticipate that we will experience a substantial increase in our capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel, including the implementation of an
off-site backup computer system and various capital expenditures associated with
expanding our facilities. We currently anticipate that we will continue to
experience significant growth in our operating expenses for the foreseeable
future and that our operating expenses will be a material use of our cash
resources. 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.
IMPACT OF THE YEAR 2000
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness. We have begun to assess the Year 2000 readiness of our
information technology systems, including the hardware and software that enable
us to provide and deliver our MultexNET, MultexEXPRESS, Multex Research-On-
Demand, Multex Investor services, Market Guide products, and our non-information
technology systems. Our assessment plan consists of the following:
. quality assurance testing of our internally developed proprietary
software incorporated in our MultexNET, MultexEXPRESS, Multex Research-
On-Demand, Multex Investor services and Market Guide products;
. contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of our MultexNET, MultexEXPRESS, Multex Research-On-Demand,
Multex Investor services and Market Guide products;
. contacting providers of material non-information technology systems;
. assessment of repair or replacement requirements;
. repair or replacement;
. implementation; and
. creation of contingency plans in the event of Year 2000 failures.
We have performed a comprehensive Year 2000 simulation on our software
incorporated in our MultexNET, MultexEXPRESS, Multex Research-On-Demand, Multex
Investor and Market Guide products during the first half of 1999 to test system
readiness. Based on the results of this simulation, we intend to revise the
code of our software for our product offerings as necessary to improve our Year
2000 compliance. We have been informed by many of our vendors of material
hardware and software components of our information technology systems that the
products used by us are currently Year 2000 compliant. We will require vendors
of our other material hardware and software components of our information
technology systems to provide assurances of their Year 2000 compliance. We are
currently assessing the materiality of our non-information technology systems
and will seek assurances of Year 2000 compliance from providers of material non-
information technology systems. Until this
14
testing is complete and these vendors and providers are contacted and have
responded, we will not be able to completely evaluate whether our information
technology systems or non-information technology systems will need to be revised
or replaced.
Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. At this time, we do not possess the information necessary to
estimate the potential costs of revisions to our software relating to MultexNET,
MultexEXPRESS, Multex Research-On-Demand, Multex Investor and Market Guide
products should revisions be required or the replacement of third-party
software, hardware or services that are determined not to be Year 2000
compliant. Although we do not anticipate that these expenses will be material,
these expenses, if higher than anticipated, could have a material and adverse
effect on our business, results of operations and financial condition.
Risks. We are not currently aware of any significant Year 2000 compliance
problems relating to our software for our product offerings or our information
technology or non-information technology systems that would have a material and
adverse effect on our business, results of operations and financial condition,
without taking into account our efforts to avoid or fix these problems. There
can be no assurance that we will not discover Year 2000 compliance problems in
our software for our product offerings that will require substantial revisions
or replacements. In addition, there can be no assurance that third-party
software, hardware or services incorporated into our material information
technology and non-information technology systems will not need to be revised or
replaced, which could be time-consuming and expensive. Our inability to fix our
software for our product offerings or to fix or replace third-party software,
hardware or services on a timely basis could result in lost revenues, increased
operating costs and other business interruptions, any of which could have a
material and adverse effect on our business, results of operations and financial
condition. Moreover, the failure to adequately address Year 2000 compliance
issues in our software relating to MultexNET, MultexEXPRESS, Multex Research-On-
Demand, Multex Investor and Market Guide products, and our information
technology and non-information technology systems could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these entities
to be Year 2000 compliant could result in a systemic failure beyond our control,
including, for example, a prolonged Internet, telecommunications or electrical
failure, which could also prevent us from delivering our MultexNET,
MultexEXPRESS, Multex Research-On-Demand, Multex Investor services and Market
Guide products, decrease the use of the Internet or prevent users from accessing
our MultexNET, MultexEXPRESS, Multex Research-On-Demand, Multex Investor
services and Market Guide products, any of which would have a material and
adverse effect on our business, results of operations and financial condition.
Contingency Plan. As discussed above, we are engaged in an ongoing Year
2000 assessment and have not developed any contingency plans. The results of
our Year 2000 simulation testing and the responses received from third-party
vendors and service providers will be taken into account in determining the need
for and nature and extent of any contingency plans.
Our inability to correct a significant Year 2000 problem, if one develops,
could result in an interruption in, or a failure of, certain of our normal
business activities or operations. In addition, a significant Year 2000 problem
concerning our database or the research reports and other information provided
to us by our research and information providers could cause our customers to
seek alternate providers of investment research or cause an unmanageable burden
on our customer service and technical support capabilities. Any material Year
2000 problem could require us to incur significant unanticipated expenses to
remedy and could divert our management's time and attention, either of which
could have a material and adverse effect on our business, results of operation
and financial condition.
15
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Risks Related to the Multex.com / Market Guide Merger
Expected benefits of the Multex.com and Market Guide merger may not be achieved
Achieving the benefits of the merger depends on the timely, efficient and
successful execution of a number of events. Key events include:
. integrating the operations and personnel of the two companies;
. offering the existing services of each company to the other company's
customers; and
. developing new services that utilize the assets of both companies.
We will need to overcome significant issues, however, in order to realize
any benefits or synergies from the merger. The successful execution of these
events will involve considerable risk and may not be successful.
Operations and personnel. Market Guide is a provider and publisher of
value-added financial data and other information on publicly traded companies.
Multex.com is a provider of on-line investment research and information services
to individual and institutional investors, and has limited experience in Market
Guide's business. Furthermore, Market Guide's principal offices are located in
Lake Success, New York, while Multex.com's principal offices are located in New
York, New York. There are currently no plans to relocate either of these
principal offices. In order for the merger to be successful, we must
successfully integrate Market Guide's operations and personnel with Multex.com's
operations and personnel. The failure of Multex.com to complete the integration
successfully could result in the loss of key personnel and customers.
Products and Services. Each company initially intends to offer its
respective products and services to the customers of the other company. There
can be no assurance that either company's customers will have any interest in
the other company's products and services. The failure of such cross-marketing
efforts would diminish the synergies expected to be realized by this merger.
In addition, Multex.com intends to develop new services that combine the
assets of both the Multex.com and Market Guide businesses. To date, the
companies have not thoroughly investigated the obstacles, technological, market-
driven or otherwise, in developing and marketing these new products and services
in a timely and efficient way. There can be no assurance that Multex.com will be
able to overcome the obstacles in developing new products and services, or that
there will be a market for the new products or services developed by Multex.com
after the merger.
In general, we cannot offer any assurances that we can successfully
integrate or realize the anticipated benefits of the merger. Our failure to do
so could have a material adverse effect on the combined company's business,
financial condition and operating results or could result in loss of key
personnel. In addition, the attention and effort devoted to the integration of
the two companies will significantly divert management's attention from other
important issues, and could seriously harm the combined company.
The merger could adversely affect combined financial results
If the benefits of the merger do not exceed the costs associated with the
merger, including any dilution to Multex.com's stockholders resulting from the
issuance of shares in connection with the merger, Multex.com's financial
results, including earnings per share, could be adversely affected.
Specifically, Multex.com incurred direct transaction costs of approximately $5.6
million in connection with the merger.
The market price of Multex.com common stock may decline as a result of the
merger
The market price of Multex.com common stock may decline as a result of the
merger if:
. the integration of Multex.com and Market Guide is unsuccessful;
16
. Multex.com does not achieve the perceived benefits of the merger as
rapidly or to the extent anticipated by financial or industry analysts; or
. the effect of the merger on Multex.com's financial results is not
consistent with the expectations of financial or industry analysts.
Multex.com must manage the integration of acquired companies successfully
in order to achieve desired results
As a part of its business strategy, Multex.com expects to enter into
additional business combinations and acquisitions. Acquisition transactions are
accompanied by a number of risks, including:
. the difficulty of assimilating the operations and personnel of the
acquired companies;
. the potential disruption of its ongoing business and distraction of
management;
. the difficulty of incorporating acquired technology and rights into its
products and services;
. unanticipated expenses related to technology integration;
. the maintenance of uniform standards, controls, procedures and policies;
. the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
. potential unknown liabilities associated with acquired businesses.
Risks Related to the Company
Because we have a limited operating history, there is limited information upon
which you can evaluate Multex.com's business
Although Multex.com commenced operations in April 1993, all of our current
services (except for those offered through Market Guide) were launched since
June 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 and 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 the client base for the Market Guide
products. However, as an early stage company in the new and rapidly evolving
market for the distribution of investment research and other information over
the Internet, we face numerous risks and uncertainties. Some of these risks
relate to our ability to:
. anticipate and adapt to the changing Internet market;
. attract more subscribers;
. continue to collect investment research and other financial information
from our research and information providers;
. implement our sales and marketing initiatives, both domestically and
internationally;
. attract, retain and motivate qualified personnel;
. respond to actions taken by our competitors;
17
. continue to build an infrastructure to effectively manage our growth and
handle any future increased usage; and
. 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 has a history of losses and expect future losses
Since our incorporation, we have not been profitable on an annual or
quarterly basis. We incurred net losses of $7.6 million, $10.3 million and $10.9
million for the years ended December 31, 1996, 1997 and 1998 and a net loss of
$17.7 million for the nine months ended September 30, 1999. We expect operating
losses and negative cash flows to continue for the foreseeable future as we
continue to incur significant operating expenses and make capital investments in
our business. We may not ever generate sufficient revenues to achieve
profitability. Even if we do achieve profitability, we may not sustain or
increase profitability on a quarterly or annual basis in the future. At
September 30, 1999, we had an accumulated deficit of $51.8 million. We have
financed our operations to date primarily through the sale of equity securities.
Fluctuations in Multex.com's operating results may negatively impact our stock
price
Our revenues, margins and operating results have fluctuated significantly
in the past and are expected to continue to fluctuate significantly in the
future due to a variety of factors, many of which are outside of our control.
These factors include:
. demand for our services;
. the size and timing of both new and renewal subscriptions;
. the number, timing and significance of new services introduced by both
us and our competitors;
. our ability to develop, market and introduce new and enhanced services
on a timely basis;
. the level of service and price competition;
. changes in operating expenses;
. changes in the mix of services offered;
. changes in our sales incentive strategy;
. sharp declines in the volume of securities transactions or the prices of
securities generally; and
. general economic factors.
Our cost of revenues consists principally of distribution fees and
royalties which fluctuate depending upon the demand for our services, and fixed
telecommunications costs. In addition, a substantial portion of our operating
expenses is related to personnel costs, marketing programs and overhead, which
cannot be adjusted quickly and are therefore relatively fixed in the short term.
Our operating expense levels are based, in significant part, on our expectations
of future revenues on a quarterly basis. If actual revenues on a quarterly basis
are below management's expectations, or if our expenses precede increased
revenues, both gross margins and results of operations would be materially and
adversely affected because a relatively small amount of our costs and expenses
varies with our revenues in the short term.
Due to all of the foregoing factors and the other risks discussed in our
prospectus, you should not rely on period-to-period comparisons of our results
of operations as an indication of future performance. It is possible that in
some future periods our results of operations may be below the expectations of
public market analysts and investors. In this event, the market price of our
common stock is likely to fall.
18
We are dependent on research and information providers and our business
would be materially and adversely affected if we lost one or more significant
research or information providers.
The loss of a major research or information provider would harm Multex.com's
business
We are dependent upon the continued provision of high-quality investment
research reports from investment banks, brokerage firms and third-party research
providers. Some of these arrangements are not embodied in written contracts and
many of these arrangements can be terminated by the provider on short notice. At
present, approximately 60% of our over 500 information providers permit us to
offer the research for sale after a specified embargo period, generally seven to
15 days. The remaining information providers do not permit these sales. Many of
our providers of research reports and other information compete with one another
and, to some extent, with us for subscribers. None of these information
providers have arrangements to provide research or information exclusively to
us. The loss of one or more significant information providers would decrease the
research and other information which we can offer our users and would have a
material and adverse effect on our business, results of operations and financial
condition.
Royalty payments and distribution 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.
Because some of Multex.com's competitors are parties to exclusive distribution
agreements, we may not be able to get content from important research providers
A number of leading investment banks, brokerage firms and third-party
research providers are parties to exclusive distribution arrangements with our
competitors, including First Call Corporation and The Investext Group, both of
which are subsidiaries of Thomson Financial Services, Inc., a leading worldwide
provider of financial information services. Consequently, we cannot provide our
users with the investment research and other information provided by these
investment banks, brokerage firms and third-party research providers, which may
put us at a competitive disadvantage. In the event that additional investment
banks, brokerage firms and third-party research providers enter into exclusive
distribution arrangements or that we are hindered in our ability to offer our
own services due to the lack of content from these investment banks, brokerage
firms and third-party research providers, our business, results of operations
and financial condition would be materially and adversely affected.
The inadvertent distribution of research reports could result in a claim for
damages against Multex.com or harm our reputation
Our proprietary software technology enables us to distribute a particular
research report or other financial information only to those users who have been
authorized or entitled to access the report by the information provider. In
particular, approximately 40% of our information providers currently supply us
with research reports and other financial information that is made available to
Multex.com only for distribution to those customers that have been specifically
identified, authorized or entitled 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.
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.
19
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.
Our future results of operations will depend, in substantial part, on our
ability to increase the market acceptance of our services. The future viability
of MultexNET will depend upon, among other factors, our ability to expand our
direct and indirect sales and marketing channels, to attract and retain high-
quality information providers and to deliver our services across multiple
delivery platforms. The future viability of MultexEXPRESS will depend upon,
among other factors, the continued desire of investment banks, brokerage firms
and other information providers to distribute proprietary investment research
and corporate documents over the Internet or through private networks to their
employees and customers. The future viability of Multex Research-On-Demand will
depend upon, among other factors, the acceptance of the Internet as a medium for
the distribution and sale of investment research, as well as on our ability to
build a direct and indirect sales force to sell our services, to attract and
retain high-quality information providers, and to develop and increase our base
of users. The future viability of Multex Investor will depend upon, among other
factors, the acceptance of the Internet as a medium for the distribution and
sale of investment research to individual investors, and our ability to attract
and retain advertisers and sponsors, new members and additional distribution
partners. In addition, in order to download research reports and other
information from Multex Investor, users are required to first download the Adobe
Acrobat reader, which may be difficult for some users to accomplish. If we are
unable to increase the number of users of MultexNET, MultexEXPRESS, Multex
Research-On-Demand, Multex Investor and Market Guide Services, or to attract and
retain information providers, our business, results of operations and financial
condition would be materially and adversely affected.
Multex.com is dependent on strategic distribution relationships and our business
would be materially and adversely affected if we were to lose one of our
strategic distributors
We have distribution arrangements for our services with a number of third-
party distributors, including America Online, Inc., Bloomberg L.P., Bridge
Information Systems, Inc., Dow Jones & Co. Inc. and Reuters Limited, all of
which are currently generating revenues for us. We are dependent on our
strategic relationships for the marketing and distribution of investment
research reports and other information. Our future results of operations will be
affected by the extent to which customers of these third-party distributors
choose to subscribe to our various services. We cannot assure you that the
customers of these third-party distributors will continue to subscribe to our
services or that these third-party distributors will continue to actively market
our services. If we are unable to retain and increase the utilization of our
services by these customers, our business, results of operations and financial
condition would be materially and adversely affected.
We cannot assure you that we will be successful in entering into additional
strategic relationships, or that any additional relationships, if entered into,
will be on terms favorable to us. Our receipt of revenues from our strategic
relationships is directly affected by the levels of effort of these
distributors. We cannot assure you that our strategic distributors will devote
the resources necessary to successfully market our services. Each of these
distributors offers services, either of their own or from our competitors, which
are in one or more respects competitive with our service offerings. In addition,
our strategic distributors have the right to terminate their agreements with us
under various specified circumstances, in some circumstances on short notice.
Furthermore, we cannot assure you that we will be able to renew these agreements
when they expire on acceptable terms, if at all. If we are unable to maintain
our existing strategic relationships or to enter into new strategic
relationships, 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 Multex.com
is not successful in establishing brand awareness for Multex Investor
The future success of the Multex Investor will depend, in part, on our
ability to increase its brand awareness. In order to build our brand awareness
we must succeed in our marketing efforts, provide high-quality services and
increase traffic to the Multex Investor. We intend to increase our marketing
budget substantially as part of our brand-building efforts. Our ability to
increase advertising and sponsorship revenue from the Multex Investor will
depend in part on our ability to increase the number of users of our Web sites.
If our marketing efforts are
20
unsuccessful or if we cannot increase our brand awareness, our business,
financial condition and results of operations would be materially and adversely
affected.
Multex.com's business could be materially and adversely affected by increased
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 because our market poses no substantial barriers to entry.
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.
Other companies provide and distribute investment research
We face direct and indirect competition for both providers of investment
research and other reports, and for subscribers, with the following types of
companies:
. large and well-established distributors of financial information,
including Thomson Financial Services, through its subsidiaries First
Call and Investext, and Institutional Brokers Estimate System, a
subsidiary of Primark Corp.;
. companies that provide investment research, including investment banks
and brokerage firms, many of whom have their own Web sites;
. other providers of either free or subscription research services on the
Internet;
. services provided by some of our strategic distributors which are
competitive in one or more respects with our service offerings;
. numerous prospective competitors, including Standard & Poor's, Moody's
and Zacks Investment Research, that offer investment research-based
services;
. various written publications, including traditional media, investment
newsletters, personal financial magazines and industry research
appearing in financial periodicals; and
. services provided by in-house management information services personnel
and independent systems integrators.
Various public sources provide extensive company information for free
We also face competition due to the fact that extensive company-specific
information, as well as general investment research relating to particular
industries, may be obtained, frequently without charge, from various public
sources, including:
. annual reports and other filings with the Securities and Exchange
Commission;
. Standard & Poor's company-specific reports; and
. Value Line investment research reports.
These reports are all available from public libraries and from the
companies about which these reports relate.
We believe that our ability to compete successfully will depend upon many
factors, many of which are outside of our control. These factors include our
ability to sustain our relationships with leading providers of investment
research, the timing and market acceptance of new services and enhancements to
existing services developed by us and our competitors, ease of use, performance,
price, reliability, customer service and support, and sales and marketing
efforts. Our competitors vary in size and in the scope and breadth of services
offered.
21
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may enable them to respond more quickly to new or
emerging technologies and changes in investor requirements, or to devote greater
resources to the development, promotion and sale of their services than we can.
Our competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
potential employees, subscribers, strategic partners and information providers.
Our competitors may develop services that are equal or superior to the services
offered by us or that achieve greater market acceptance than our services do. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to improve
their ability to address the needs of our existing and prospective customers. As
a result, it is 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 has a high level of customer concentration and our business could be
materially and adversely affected if we were to lose a major subscriber or
distributor
Historically, a few of our subscribers and distributors have accounted for
a substantial majority of our revenues. Specifically, 17% of our revenues in the
year ended December 31, 1998 were generated by Bloomberg, Reuters, Merrill Lynch
& Co. and Gruntal & Co. In addition, approximately 500,000 of the 600,000 end-
users of MultexEXPRESS are generated from one MultexEXPRESS installation. The
loss of any major subscriber or distributor, or any reduction or delay in
subscriptions by any subscriber or distributor, or our failure to successfully
market our services to new subscribers or distributors could have a material and
adverse effect on 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. At September 30, 1999,
we had approximately 300 employees, as compared to approximately 250 employees
at December 31, 1998 and 180 employees at December 31, 1997. We expect that the
number of our employees will continue to increase for the foreseeable future.
This rapid growth has placed, and our anticipated future growth will continue to
place, a significant strain on our managerial, operational and financial
resources. As a result, we will need to continue to improve our operational and
financial systems and managerial controls and procedures. In addition, our
future success will also depend on our ability to expand, train and manage our
workforce, in particular our sales and marketing organization, both domestically
and internationally. We will also have to maintain close coordination among our
technical, accounting, finance, marketing, sales and editorial personnel. If we
are unable to accomplish any of these objectives, our business, results of
operations and financial condition could be materially and adversely affected.
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
22
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.
Our future success will also depend on our continuing ability to attract, retain
and motivate highly qualified technical, sales and marketing, customer support,
financial and accounting, and managerial personnel. Competition for this
personnel, in particular information technology professionals, is intense, and
we cannot assure you that we will be able to retain our key personnel or that we
will be able to attract, assimilate or retain other highly qualified personnel
in the future. 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.
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. We cannot assure you that we will be
able to successfully market, sell and deliver our services in these markets. In
some markets, including Hong Kong, we intend to rely on the sales and marketing
efforts of independent representatives. The failure of our independent
representatives to successfully solicit information providers or market our
services 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.
If Multex.com cannot keep pace with the evolving standards of the industry and
demands of customers, we may be unable to enhance our existing services or
introduce new services
The market in which we operate is characterized by rapidly changing
technology, evolving industry standards, frequent new service announcements,
introductions and enhancements, and evolving customer demands. These market
characteristics are exacerbated by the emerging nature of the Internet and the
electronic distribution of investment research. Accordingly, our future success
will depend on our ability to adapt to rapidly changing technologies and
industry standards, and our ability to continually improve the performance,
features and reliability of our services in response to both evolving customer
demands and competitive service offerings. Our inability to successfully adapt
to these changes in a timely manner could have a material and adverse effect on
our business, results of operations and financial condition. Furthermore, we
cannot assure you that we will not experience difficulties that could delay or
prevent the successful design, development, testing, introduction or marketing
of new services, or that any enhancements to existing services will adequately
meet the requirements of our current and prospective customers and achieve any
degree of significant market acceptance. If we are unable, for technological or
other reasons, to develop and introduce new services or enhancements to existing
services in a timely manner or in response to changing market conditions or
customer requirements, or if our services or enhancements contain defects or do
not achieve a significant degree of market acceptance, our business, results of
operations and financial condition would be materially and adversely affected.
23
Because Multex.com's business is dependent upon one computer system, we are
particularly susceptible to problems caused by system failures, security
breaches or other damage to our system
Our electronic distribution of investment research utilizes proprietary
technology which resides principally on one computer system. The continued and
uninterrupted performance of our computer system is critical to our success. Any
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 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 computer system, 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 computer system which could disrupt the distribution
of research and other reports. 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 computer system
against damage from computer viruses, fire, power loss, telecommunications
failures, vandalism and other malicious acts, and similar unexpected adverse
events. In addition, a failure of our telecommunications 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.
If Multex.com fails to adequately protect its intellectual property rights or
faces a claim of intellectual property infringement by a third-party, it could
lose its intellectual property rights or be liable for significant damages
Our future success will depend, in substantial part, on our intellectual
property rights. We seek to protect our intellectual property rights, but these
actions may be inadequate to protect the rights covered by our patents, patent
applications, trademarks or other proprietary rights or to prevent others from
claiming violations of their proprietary rights. Our intellectual proprietary
rights may not be viable or of value in the future since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is uncertain and still evolving.
Furthermore, we cannot assure you that third parties will not claim that we
have infringed their patents or other proprietary rights. From time to time we
have been, and we expect to continue to be, subject to claims by third parties
in the ordinary course of our business, including claims of alleged infringement
of the trademarks and other proprietary rights of third parties. Although there
has not been any litigation relating to these claims to date, these claims and
any resultant litigation, should they occur, could subject us to significant
liability for damages and could result in the invalidation of our proprietary
rights. In addition, even if we prevail, this litigation could be time-consuming
and expensive to defend, and could result in the diversion of our time and
attention, any of which could materially and adversely affect our business,
results of operations and financial condition. Any claims or litigation from
third parties may also result in limitations on our ability to use the
trademarks and other intellectual property subject to these claims or litigation
unless we enter into agreements with the third parties responsible for these
claims or litigation which may be unavailable on commercially reasonable terms.
Generally, we enter into confidentiality agreements with our employees,
consultants and strategic partners, and generally control access to and
distribution of our proprietary information. Despite our efforts to protect our
proprietary information from unauthorized use or disclosure, parties may attempt
to disclose, obtain or use our proprietary information which, if successful,
could have a material and adverse effect on our business, results of operation
and financial condition. The steps we have taken may not prevent
misappropriation of our proprietary information.
24
Problems relating to the "Year 2000 Issue" could adversely affect Multex.com's
business
We performed a comprehensive Year 2000 simulation on our software during
the first half of 1999. We have also contacted our third-party vendors,
licensors and providers of software, hardware and services regarding their Year
2000 readiness. The results of testing showed that all of our internal software
and databases will perform correctly through Year 2000. Due to the highly
dynamic nature of our business, however, we will continue the testing process
through Year 2000 and we will continue to confirm that third-party vendors,
licensors and providers are Year 2000 ready. Our inability to correct a
significant Year 2000 problem, if one exists, could result in an interruption
in, or a failure of, certain of our normal business activities and operations.
In addition, a significant Year 2000 problem concerning our database or the
research reports and other information provided to us by our information
providers could cause our users to consider seeking alternate providers of
investment research or cause an unmanageable burden on our customer service and
technical support capabilities. Any significant Year 2000 problem could require
us to incur significant unanticipated expenses to remedy these problems and
could divert management's time and attention, either of which could have a
material and adverse effect on our business, results of operation and financial
condition.
Risks Related to the Internet Industry
If Internet usage does not continue to grow, the business of Multex.com may not
be successful
The Internet is relatively new and is rapidly evolving. The business of
Multex.com would be materially and adversely affected if Internet usage does not
continue to grow. Internet usage may be inhibited for a number of reasons,
including:
. the Internet infrastructure may not be able to support the demands
placed on it or its performance and reliability may decline as usage
grows;
. security and authentication concerns with respect to transmission over
the Internet of confidential information, including credit card numbers,
and attempts by unauthorized computer users to penetrate our network
security; and
. privacy concerns, including those related to the placement by Web sites
of information on a user's hard drive without the user's knowledge or
consent in order to gather user information.
Our markets are characterized by rapidly changing technologies, evolving
industry standards, frequent new product and service introductions, and changing
customer demands. To be successful, we must adapt to our rapidly changing
markets by continually enhancing our existing services and adding new services
to address our customers' changing demands. We could incur substantial costs if
we need to modify our services or infrastructure in order to adapt to these
changes. Our business, results of operation and financial condition would be
materially and adversely affected if we incurred significant costs without
generating additional revenues or if we cannot rapidly adapt to these changes.
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. To the extent that the Internet continues
to experience increased numbers of users, frequency of use or increased
bandwidth requirements of users, 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
25
Internet as a viable commercial medium will be developed or maintained.
Moreover, critical issues concerning the commercial use of the Internet,
including security, cost, ease of use and access, intellectual property
ownership and other legal liability issues, remain unresolved and could
materially and adversely affect both the growth of Internet usage generally and
our business, results of operations and financial condition in particular.
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. It may take years to determine
whether and how existing laws, including those governing intellectual property,
privacy, libel and taxation, apply to the Internet generally and the electronic
distribution of investment research in particular. 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 effect on our business, results of operations and financial
condition. In addition, because the growing popularity and use of the Internet
has burdened the existing telecommunications infrastructure and many areas with
high Internet usage have begun to experience interruptions in phone service,
some local telephone carriers have petitioned governmental agencies to regulate
Internet service providers and online service providers in a manner similar to
long distance telephone carriers and to impose access fees on Internet service
providers and online service providers. If any of these petitions or the relief
that they seek is granted, the costs of communicating on the Internet could
increase substantially, potentially adversely affecting the growth in the use of
the Internet. Further, 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.
Risks Related to our Shares of Common Stock
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:
. public announcements concerning us or our competitors, or the Internet
industry;
. fluctuations in operating results;
. a downturn in the financial services industry generally or the market
for securities trading in particular;
26
. introductions of new products or services by us or our competitors;
. changes in analysts' earnings estimates; and
. 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.
Our executive officers, directors and 5% or greater stockholders significantly
influence all matters requiring a stockholder vote
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.
A third party could be prevented from acquiring your shares of stock at a
premium to the market price because of our anti-takeover provisions
Various provisions of our certificate of incorporation, bylaws and Delaware
law could make it more difficult for a third party to acquire us, even if doing
so might be beneficial to you and our other stockholders.
The future sale of shares of our common stock may negatively affect our stock
price
If our stockholders sell substantial amounts of our common stock, including
shares issuable upon the exercise of outstanding options and a warrant in the
public market, the market price of our common stock could fall. These sales also
might make it more difficult for us to sell equity securities in the future at a
time and price that we deem appropriate.
27
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Changes in Securities:
NONE
(b) Use of Proceeds
On March 22, 1999, the Company completed the initial public offering
of 3,450,000 shares of Common Stock, of which 3,283,500 were issued and sold by
the Company (the "Offering"). Net proceeds to the Company from the Offering
were approximately $41.6 million. During the nine months ended September 30,
1999, the Company used $41.0 million of the proceeds from the Offering to
purchase marketable securities and cash equivalents.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In February 1999, in a Written Consent in Lieu of a Special Meeting of the
Stockholders of the Company, a majority of the holders of the then outstanding
shares of Common Stock of the Company (which majority included the majority of
the holders of the Preferred Stock of the Company, voting on an as converted
basis) approved the Amendment of the Restated Certificate of Incorporation of
the Company, and the Amended and Restated By-laws of the Company.
On September 22, 1999, at a special meeting of the stockholders of
Multex.com, Inc., the requisite majority of the stockholders approved (i) the
issuance of approximately 4.85 million shares of Multex.com common stock
pursuant to a merger agreement by and among Multex.com, Market Guide and
Merengue Acquisition Corp., a wholly owned subsidiary of Multex.com, (ii)
increasing Multex.com's board of directors from a maximum of seven directors to
a maximum of eleven directors, and (iii) increasing the number of common shares
reserved under the Multex.com 1999 Stock Option Plan by an additional 2.5
million shares.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) The following exhibits are filed as part of this report:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Multex.com during the
three months ended September 30, 1999.
28
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 12, 1999 /s/ Isaak Karaev
-----------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: November 12, 1999 /s/ Philip Scheps
-----------------------
Name: Philip Scheps
Title: VP Finance
29