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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO ____________________
COMMISSION FILE NUMBER: 0-24559
MULTEX.COM, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-3253344
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(State of Incorporation) (I.R.S. Employer
Identification Number)
100 WILLIAM STREET, 7TH FLOOR
NEW YORK, NEW YORK 10038
(212) 607-2400
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
As of August 7, 2001, there were 32,374,032 shares of the registrant's common
stock outstanding.
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QUARTERLY REPORT ON FORM 10-Q
MULTEX.COM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION................................................ 3
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited):.... 3
Condensed Consolidated Balance Sheets as of
June 30, 2001 and December 31, 2000......................... 3
Condensed Consolidated Statements of Operations
for the three months and six months ended
June 30, 2001 and 2000...................................... 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2001 and 2000............. 5
Notes to Condensed Consolidated Financial Statements
June 30, 2001............................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 9
PART II. OTHER INFORMATION.................................................. 20
ITEM 1. LEGAL PROCEEDINGS.......................................... 20
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................. 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................ 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 20
ITEM 5. OTHER INFORMATION.......................................... 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... 20
ITEM 7. SIGNATURES................................................. 21
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
2001 2000
--------- ---------
ASSETS (unaudited) (audited)
--------- ---------
Current assets:
Cash and cash equivalents $ 37,734 $ 20,237
Marketable securities 6,732 25,493
Accounts receivable, net 20,825 27,497
Other current assets 6,967 6,542
--------- ---------
Total current assets 72,258 79,769
Property and equipment, net 37,937 37,909
Goodwill, net 6,476 33,704
Intangibles, net 16,822 17,649
Other 8,004 5,490
--------- ---------
Total assets $ 141,497 $ 174,521
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,309 $ 4,805
Accrued expenses 5,060 9,742
Current portion of capital lease obligations 78 110
Deferred revenues 10,116 10,533
--------- ---------
Total current liabilities 17,563 25,190
Long term liabilities:
Capital lease obligations 46 84
Deferred rent 3,250 3,119
Other 3 3
--------- ---------
Total long term liabilities 3,299 3,206
Stockholders' equity:
Preferred stock - $.01 par value:
Authorized - 5,000,000 shares;
none issued and outstanding -- --
Common stock - $.01 par value:
Authorized - 200,000,000 shares;
issued and outstanding 32,060,000 shares
at June 30, 2001 and 31,741,000 at
December 31, 2000 321 317
Additional paid-in capital 223,856 216,683
Accumulated deficit (92,061) (61,336)
Deferred equity consideration (11,389) (9,671)
Accumulated other comprehensive income (loss) (92) 132
--------- ---------
Total stockholders' equity 120,635 146,125
--------- ---------
Total liabilities and stockholders' equity $ 141,497 $ 174,521
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2001 2000 2001 2000
-------- -------- -------- --------
Gross revenues $ 23,522 $ 19,167 $ 53,026 $ 35,250
Performance-based warrants (1,075) -- (1,075) --
-------- -------- -------- --------
Net revenues 22,447 19,167 51,951 35,250
Cost of revenues 7,187 3,936 12,900 7,904
-------- -------- -------- --------
Gross profit 15,260 15,231 39,051 27,346
Operating expenses:
Sales and marketing 7,738 5,917 14,454 12,157
Research and development 1,961 2,767 4,567 5,022
General and administrative 13,691 8,288 25,621 14,635
Impairment charge 25,641 -- 25,641 --
-------- -------- -------- --------
Total operating expenses 49,031 16,972 70,283 31,814
Loss from operations (33,771) (1,741) (31,232) (4,468)
Other income (expense):
Interest income 497 626 1,078 1,336
Interest expense (3) (10) (18) (23)
Other (173) -- (173) --
-------- -------- -------- --------
Loss before income taxes (33,450) (1,125) (30,345) (3,155)
Income tax expense 290 48 380 95
-------- -------- -------- --------
Net loss $(33,740) $ (1,173) $(30,725) $ (3,250)
======== ======== ======== ========
Basic and diluted net loss
per share $ (1.05) $ (0.04) $ (0.96) $ (0.11)
======== ======== ======== ========
Number of shares used in basic
and diluted loss per share 31,994 29,842 31,905 29,076
======== ======== ======== ========
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)
SIX MONTHS ENDED
JUNE 30, JUNE 30,
2001 2000
-------- --------
Operating activities
Net loss from operations $(30,725) $ (3,250)
Adjustments to reconcile net loss from
operations to net cash provided by (used in)
operating activities:
Amortization of equity consideration 2,071 1,203
Depreciation and amortization 4,859 2,804
Amortization of goodwill and intangibles 2,714 805
Performance-based warrant charges 1,075 --
Bad debt expense 1,346 430
Impairment charges 25,641 --
Changes in operating assets and liabilities:
Accounts receivable 5,326 (7,589)
Other current assets (425) (829)
Other assets 1,392 (624)
Accounts payable (2,756) (3,386)
Accrued expenses (4,876) 668
Deferred revenue (417) 2,266
Deferred rent 131 339
Other liabilities -- (14)
-------- --------
Net cash provided by (used in) operating
activities from operations 5,356 (7,177)
INVESTING ACTIVITIES
Purchase of marketable securities (24,569) (19,197)
Proceeds from sale of marketable securities 43,050 26,262
Acquisition of Sage Online and BuzzCompany,
net of cash acquired -- (6,724)
Purchase of property and equipment (8,639) (11,811)
-------- --------
Net cash provided by (used in) investing activities 9,842 (11,470)
FINANCING ACTIVITIES
Proceeds from issuances of stock 2,313 23,368
Repayment of long-term debt and capital leases (70) (117)
-------- --------
Net cash provided by financing activities 2,243 23,251
Effect of exchange rate changes on cash 56 (10)
-------- --------
Increase in cash and cash equivalents 17,497 4,594
Cash and cash equivalents, beginning of year 20,237 6,089
-------- --------
Cash and cash equivalents, end of period $ 37,734 $ 10,683
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30, 2001 JUNE 30, 2000
------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION NONCASH INVESTING AND
FINANCING ACTIVITY:
Accrued purchases of fixed assets $ 260 $ 838
============= =============
Unrealized (loss) gain on marketable securities $ (280) $ 59
============= =============
Issuance of restricted stock $ 4,005 $ --
============= =============
Stock issued for acquisition of Sage Online $ -- $ 11,037
============= =============
Stock issued for acquisition of BuzzCompany $ -- $ 22,801
============= =============
Stock issued for acquisition of software $ -- $ 5,400
============= =============
Stock issued for exercise of warrants $ -- $ 3
============= =============
Fair market value of warrants issued $ 1,075 $ 9,809
============= =============
Taxes paid $ 101 $ 2
============= =============
Interest paid $ 18 $ 20
============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2001
NOTE 1 -- BASIS OF PRESENTATION
Multex.com, Inc. (the "Company" or "Multex.com") is a global provider of
investment information and technology solutions to the financial services
industry, including brokerage firms, professional money management firms, hedge
funds, venture capital firms, mutual funds, investment banks, corporations, and
individual investors. Headquartered in New York, the Company also has offices in
London, San Francisco, Edinburgh and Hong Kong.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three and six month periods ended
June 30, 2001 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2001. The disclosure of segment information was
not required as the Company operates in only one business segment.
The balance sheet at December 31, 2000 has been derived from audited
financial statements but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
The interim financial information contained herein should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 2000 included in the Company's Annual Report on Form
10-K.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill (and intangible assets deemed
to have indefinite lives) will no longer be amortized but will be subject to
annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statement is expected to result in an
increase in net income of approximately $700,000 ($0.02 per share) per year.
During 2002, the Company will perform the first of the required impairment tests
of goodwill and indefinite lived intangible assets as of January 1, 2002 and has
not yet determined what the effect of these tests will be on the earnings and
financial position of the Company.
NOTE 2 -- STOCKHOLDERS' EQUITY
During the three months ended June 30, 2001, the Company issued 144,000
shares of its common stock in connection with the exercise of stock options to
employees and the employee stock purchase plan.
During the three months ended March 31, 2001, the Company issued 174,000
shares of its common stock to employees in connection with the exercise of stock
options and granted rights to receive an additional 301,000 shares to employees
in connection with its restricted stock program. The restricted stock rights
vest in four equal semi-annual installments beginning July 31, 2001, with stock
issuance occurring on each vesting date.
7
NOTE 3 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated (in thousands, except per share
data):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
2001 2000 2001 2000
-------------- --------------- --------------- --------------
Numerator:
Numerator for basic and diluted net loss per
share - net loss available for common
stockholders $ (33,740) $ (1,173) $ (30,725) $ (3,250)
============== =============== =============== ==============
Denominator:
Denominator for basic and diluted net loss per
share - weighted average shares 31,994 29,842 31,905 29,076
-------------- --------------- --------------- --------------
Basic and diluted net loss per share $ (1.05) $ (0.04) $ (0.96) $ (0.11)
============== =============== =============== ==============
NOTE 4 -- COMPREHENSIVE INCOME (LOSS)
Total comprehensive loss was $33.7 million and $1.1 million for the three
months ended June 30, 2001 and June 30, 2000, respectively. Total comprehensive
loss was $30.9 million and $3.2 million for the six months ended June 30, 2001
and June 30, 2000, respectively.
NOTE 5 -- IMPAIRMENT OF LONG-LIVED ASSETS
During the quarter ended June 30, 2001, the Company recorded an impairment
charge of $25.6 million related to two of its acquisitions. There were two
components to this special charge.
The first component reflects the Company's decision to exit the Sage
business, resulting in a $15.3 million (comprised of goodwill) special charge.
The majority of this charge relates to the write-down of net intangible assets
associated with the Sage acquisition.
The second component relates to exiting the Buzz software product line.
Management performed an evaluation of the Buzz intangible assets, as described
in Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets" and concluded from the results of this evaluation that an
impairment of intangible assets had occurred. An impairment charge of $10.3
million (comprised of goodwill) was required because estimated fair value was
less than the carrying value of the assets.
NOTE 6 -- SUBSEQUENT EVENTS
In July 2001, the Company instituted a 15% workforce reduction resulting in
estimated annualized cost savings of approximately $6.0 million. The Company
anticipates recording a third quarter restructuring charge of approximately $1.0
million for expenses relating to severance and other costs associated with
exiting the Sage business.
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 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. STATEMENTS CONTAINED HEREIN THAT
ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES", "ANTICIPATES",
"PLANS", "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS AND THE TIMING OF
CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS THAT MAY AFFECT FUTURE RESULTS."
OVERVIEW
Multex.com is a global provider of investment information and technology
solutions for the financial services industry, including brokerage firms,
professional money management firms, hedge funds, venture capital firms, mutual
funds, investment banks, corporations and individual investors. We offer four
main products, as follows:
o MultexNET, launched in June 1996, provides access to real-time, commingled
equity and fixed income research, global estimates and company fundamental
information to buyside investors, sellside institutions, public and private
corporations and libraries of professional service firms;
o MultexEXPRESS, launched in January 1997, offers development, hosting and
real-time distribution of research and other investment information on
customized web sites to buyside investments firms, sellside institutions
and other financial services companies;
o Multex Investor, launched in November 1998, is the Company's financial
destination web site that provides financial data and access to free
research in return for permission-based leads to brokerage firms and
pay-per-view research on an embargoed basis; and
o Market Guide, acquired in September 1999, provides investment information
products to financial institutions and web sites, institutional investors,
corporations and professional vendors.
MultexNET is offered either on a one- to three-year subscription basis or on a
transactional basis through Multex OnDemand. The product allows entitled
institutional investors, corporations, financial institutions and advisors to
access full-text investment research reports on a real-time basis from
investment banks, brokerage firms and other third-party research providers over
the Internet or through other distribution channels.
MultexEXPRESS is also provided pursuant to one- to three-year subscriptions,
generating revenue from professional services, hosting, and license fees.
MultexEXPRESS enables financial institutions to distribute their proprietary
financial research, as well as other corporate documents, over the Internet,
through intranets and other private networks.
Multex Investor provides individual investors who register as members access to
a range of financial reports and services online from a majority of the
contributors to MultexNET. These reports are available either free of charge, or
for a fee determined by the research provider. Multex Investor generates
revenues from transactions, email and banner advertising, and contractual,
lead-generating sponsorships. Sponsors on Multex Investor include full-service
brokerage firms and other financial institutions interested in attracting
individual investors to their products, services and brands.
Market Guide acquires, integrates, condenses and publishes accurate, timely and
objective financial, descriptive and other information on publicly-traded
companies. Market Guide generates revenue primarily by licensing its database in
single or multi-year contracts.
9
Revenue from MultexNET subscriptions is recognized in equal installments over
the term of the subscription. Revenue from transactions on MultexNET and Multex
Investor are recognized upon sale. Some of the transactional users of MultexNET
pay a flat annual fee for the service, which entitles them to receive research
and other reports at a discounted rate. Revenues from these users are recognized
in equal installments over the term of the subscription. Revenue from
professional service fees related to Multex EXPRESS is recognized upon
completion of relevant service, whereas the hosting and license fees are
recognized over the term of the agreement. Revenue from sponsorships on Multex
Investor is recognized in equal installments over the term of the sponsorship.
Market Guide license fees are recognized over the term of the agreement.
The majority of costs associated with revenues from MultexNET, MultexEXPRESS,
Multex Investor and Market Guide are expensed as and when incurred.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2001 COMPARED TO QUARTER ENDED JUNE 30, 2000
Revenues
Multex.com's gross revenues consist of subscription fees for MultexNET, sales of
investment research on a pay-per-view basis through Multex OnDemand,
subscription, development, hosting and license fees for MultexEXPRESS, license
and redistribution fees for the Market Guide database, and sales of
sponsorships, advertising and investment research through the Multex Investor
web site. We also provide professional services to select MultexEXPRESS clients,
including software development, customization and integration services.
Gross revenues increased 22.7% to $23.5 million for the quarter ended June 30,
2001 from $19.2 million for the quarter ended June 30, 2000. The increase in
revenues reflects growth in MultexExpress, MultexNET and Market Guide, partially
offset by a reduction in revenue related to Multex Investor. Gross revenues in
the second quarter of 2001 totaled $23.5 million, compared with $29.5 million in
the first quarter of 2001, representing a decrease of 20.3%.
On a quarter over quarter basis (June 2001 compared to June 2000), MultexEXPRESS
revenue benefited from an increase in the number of Express sites in operation
and additional customization work. On a sequential basis, the June 2001 quarter
declined significantly from the March 2001 quarter reflecting the absence of any
termination charges in the second quarter, a reduction in development work for
one of the Company's largest customers, and delays in new and expanded business
resulting from continuing weakness in the global financial markets.
MultexNET sales benefited from an increased number of users accessing the
MultexNET service and an increase in the number of reports purchased through the
OnDemand product on a quarter over quarter basis. When compared on a sequential
basis, the second quarter showed a slight decline versus the first quarter,
reflecting a decline in revenues from the OnDemand product line. This was
primarily attributable to a decline in investment banking activities resulting
from the global slowdown in the financial markets.
Multex Investor experienced sharp revenue declines on both a quarter over
quarter and sequential basis, each of which reflects the downturn in the
financial markets. Advertising, sponsorships and transactions were all adversely
impacted by the global slowdown in the financial markets and from dramatic
curtailments of corporate advertising budgets.
On a quarter over quarter basis, Market Guide benefited from the inclusion of
the Multex Global Estimates (formerly Barra Global Estimates) business, which
was acquired in December 2000, and from modest increases in vendor revenues. On
a sequential basis, the Market Guide business was negatively impacted by
continued bankruptcies and cancellations as many of its customers are dependent
on the financial markets and advertising, both of which have experienced sharp
declines.
All of the Company's product lines were effected by continued weakness in
10
the global financial markets resulting in a slowdown in new business, reductions
in customer spending, postponement of customer decisions, and increases in
bankruptcy filings.
PERFORMANCE-BASED WARRANT CHARGES. In the second quarter ended June 30, 2001,
the Company recorded performance-related charges associated with warrants issued
to Merrill Lynch & Co., Inc. totaling $1.1 million. The Company has classified
this non-cash expense as contra-revenue. The performance-based warrant charges
will continue to be recorded by the Company in each period that warrants are
earned.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of MultexNET
and Multex OnDemand, royalties payable to the authors of investment research and
content offered through Multex OnDemand, and the Multex Investor and Market
Guide web sites, internal and external development costs incurred for
MultexEXPRESS customers, research department costs related to the collection and
processing of financial data and global earnings estimates, and data
communications costs.
Cost of revenues increased 82.6% to $7.2 million in the quarter ended June 30,
2001 from $3.9 million for the quarter ended June 30, 2000. As a percentage of
gross revenues, cost of revenues increased to 30.6% for the quarter ended June
30, 2001 from 20.5% for the quarter ended June 30, 2000. The increase in cost of
revenues was primarily due to increased royalty payments to third party
contributors resulting from additional report sales through the Multex OnDemand
platform, the inclusion of data collection costs related to the Global Estimates
business, higher telecommunication costs resulting from data center
redundancies, and costs associated with increased customization work related to
development and enhancements of Express sites.
Operating Expenses
SALES AND MARKETING. Sales and marketing expenses consist primarily of salaries,
commissions, advertising, public relations, tradeshow expenses and costs of
marketing materials. Sales and marketing expenses increased 30.8% to $7.7
million in the quarter ended June 30, 2001 from $5.9 million for the quarter
ended June 30, 2000. As a percentage of gross revenues, sales and marketing
expenses increased to 32.9% for the quarter ended June 30, 2001 from 30.9% for
the quarter ended June 30, 2000. The increase in sales and marketing expenses
was due to an increase in sales personnel and was partially offset by a
reduction in advertising and marketing expenses. The Company has reduced its
marketing expenditures with the majority of its marketing dollars in the current
quarter spent on generating qualified leads to the Multex Investor platform.
Management anticipates marketing expenses to decline over the next two quarters
as the Company reviews its online marketing and carriage fee contracts.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses decreased 29.1% to $2.0
million for the quarter ended June 30, 2001 from $2.8 million for the quarter
ended June 30, 2000. As a percentage of gross revenues, research and development
expenses decreased to 8.3% for the quarter ended June 30, 2001 from 14.4% for
the quarter ended June 30, 2000. The decrease in research and development
expenses in dollar terms was primarily attributable to an increase in the number
of internally developed software projects being capitalized in accordance with
SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED
FOR INTERNAL USE.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation and amortization of equipment, software and
leasehold improvements, and amortization of identifiable intangible assets and
goodwill. General and administrative expenses increased 65.2% to $13.7 million
for the quarter ended June 30, 2001 from $8.3 million for the quarter ended June
30, 2000. As a percentage of gross revenues, general and administrative expenses
increased to 58.2% for the quarter ended June 30, 2001 from 43.2% for the
quarter ended June 30, 2000. Growth in general and administrative expenses
reflects an increase in the number of employees and offices worldwide, higher
bad debt reserves, and increased professional fees related to development, legal
and tax services. Additionally, the second quarter ended June 2001 included
recognition of operating expenses related to Buzz and the BARRA Global Estimates
business. The Buzz and BARRA Global estimates acquisitions were consummated
subsequent to March 2000.
11
Management expects general and administrative expenses to decrease in aggregate
dollars for the remainder of this year as the cost savings from the impairment
charge, recorded in the second quarter, and anticipated restructuring charge, to
be recorded in the third quarter, materialize. The majority of these cost
savings will be attributable to a 15% reduction in personnel and the benefit
costs associated with these employees, the elimination of operating losses
associated with Sage, and a reduction in amortization charges associated with
prior period acquisitions.
IMPAIRMENT CHARGE. In the second quarter ended June 30, 2001, the Company
recorded an impairment charge of $25.6 million reflecting the decision to exit
the Sage business and the Buzz product line. Management also anticipates
recording a restructuring charge in the third quarter related to severance costs
associated with a fifteen percent payroll reduction and other expenses related
to exiting the Sage business and Buzz product line. The Company expects the full
impact of these charges to take effect in the fourth quarter of 2001 and to
realize annual cost savings of approximately $10.0 million from the 15%
personnel reduction, lower employee benefits costs, reduced amortization
charges, lower marketing carriage fees, and the absence of other costs related
to Sage and the Buzz product line.
Loss from Operations
Loss from operations totaled $33.8 million for the quarter ended June 30, 2001
compared to a loss from operations of $1.7 million for the quarter ended June
30, 2000. Loss from operations reflects the global slowdown in the financial
marketplace, the impairment charge related to exiting the Sage business and Buzz
product line, and higher operating expenses.
Interest Income (Expense)
Net interest income decreased 19.8% to $494,000 for the quarter ended June 30,
2001 from $616,000 for the quarter ended June 30, 2000. The decrease in net
interest income is primarily attributable to a decline in interest rates.
Other
Other expense relates to a $173,000 loss the Company recognized on the
disposition of the Company's equity investment in Financial Data Concepts in the
second quarter of this year.
Income Taxes
Income taxes increased to $290,000 for the quarter ended June 30, 2001 from
$48,000 for the quarter ended June 30, 2000 reflecting estimated taxable income
for 2001 associated with employee stock option deductions and profitable foreign
operations for which the Company's net operating loss carryforwards are not
available.
At December 31, 2000, Multex had net operating loss carryforwards of
approximately $50.0 million and research and development credits of
approximately $1.5 million for income tax purposes that expire in 2009 through
2020. The utilization with regard to timing and amount of the Company's net
operating loss carryfowards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code.
Net loss
The Company recorded a net loss of $33.7 million, or a net loss per share of
$1.05, for the quarter ended June 30, 2001 compared to a net loss of $1.2
million, or a net loss per share of $0.04, for the quarter ended June 30, 2000.
The net loss reflects the global slowdown in the financial marketplace, the
impairment charge related to exiting the Sage business and Buzz product line,
and higher operating expenses.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
12
Revenues
Gross revenues increased 50.4% to $53.0 million for the six months ended June
30, 2001 from $35.3 million for the six months ended June 30, 2000. The increase
in revenues reflects growth in MultexExpress, MultexNET and Market Guide,
partially offset by a reduction in revenue related to Multex Investor.
MultexEXPRESS revenue benefited from an increase in the number of Express sites
in operation, additional customization work and an early termination charge
associated with one customer who decided to exit the retail marketplace in the
first quarter of 2001. MultexNET sales benefited from an increased number of
users accessing the MultexNET service and an increase in the number of reports
purchased through the OnDemand product. Multex Investor experienced a revenue
decline reflecting the downturn in the financial markets partially offset by
cancellation fees related to two sponsors exiting the retail marketplace in the
first quarter of 2001. Advertising, sponsorships and transactions were all
adversely impacted by the global slowdown in the financial markets and from
dramatic curtailments of corporate advertising budgets. Market Guide benefitted
from the inclusion of the Multex Global Estimates (formerly Barra Global
Estimates) business that was acquired in December 2000 and from modest increases
in vendor revenues partially offset by several smaller internet distributors
canceling their contracts and/or declaring bankruptcy in the first half of 2001.
For the six month period ended June 30, 2001, the Company incurred
performance-related charges associated with warrants issued to Merrill Lynch &
Co., Inc. totaling $1.1 million. The Company has classified this non-cash
expense as a contra-revenue account. The performance-based warrant charges will
continue to be recorded by the Company in each period that warrants are earned.
Cost of Revenues
Cost of revenues increased 63.2% to $12.9 million during the six months ended
June 30, 2001 from $7.9 million for six months ended June 30, 2000. As a
percentage of gross revenues, cost of revenues increased to 24.3% for the six
months ended June 30, 2001 from 22.4% for the six months ended June 30, 2000.
The increase in cost of revenues in dollar terms was primarily due to increased
royalty payments to third party contributors resulting from additional report
sales through the Multex OnDemand platform, the inclusion of data collection
costs related to the Global Estimates business, and costs associated with
increased customization work related to development and enhancements of Express
sites.
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 18.9% to $14.5
million during the six months ended June 30, 2001 from $12.2 million for the six
months ended June 30, 2000. As a percentage of gross revenues, sales and
marketing expenses decreased to 27.3% for the six months ended June 30, 2001
from 34.5% for the six months ended June 30, 2000. The increase in sales and
marketing expenses was due to an increase in sales personnel partially offset by
a reduction in advertising and marketing expenses. The Company has reduced its
marketing expenditures with the majority of its marketing dollars spent on
generating qualified leads to the Multex Investor platform.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses decreased 9.1% to $4.6
million during the six months ended June 30, 2001 from $5.0 million for the six
months ended June 30, 2000. As a percentage of gross revenues, research and
development expenses decreased to 8.6% for the six months ended June 30, 2001
from 14.3% for the six months ended June 30, 2000. The decrease in research and
development expenses in dollar terms was primarily due to an increase in the
number of internally developed software projects being capitalized.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation and amortization of equipment, software and
leasehold improvements, and amortization of identifiable intangible assets and
goodwill. General and administrative expenses increased 75.1% to $25.6 million
during the six months ended June 30, 2001 from $14.6 million for the six months
ended June 30, 2000. As a percentage of gross revenues, general and
administrative expenses increased to
13
48.3% for the six months ended June 30, 2001 from 41.5% for the six months ended
June 30, 2000. Growth in general and administrative expenses reflects an
increase in the number of employees and offices worldwide, higher bad debt
reserves, and increased professional fees related to development, legal and tax
services. Additionally, the six months ended June 2001 included full recognition
of expenses related to Sage, Buzz and the BARRA Global Estimates business.
IMPAIRMENT CHARGE. For the six month period ended June 30, 2001, the Company
recorded an impairment charge of $25.6 million reflecting the decision to exit
the Sage business and the Buzz product line. Management also anticipates
recording a restructuring charge in the third quarter related to severance costs
associated with a fifteen percent payroll reduction and other expenses related
to exiting the Sage business and Buzz product line. The Company expects the full
impact of these charges to take effect in the fourth quarter of 2001 and to
realize annual cost savings of approximately $10.0 million from the 15%
personnel reduction, lower employee benefits costs, reduced amortization
charges, lower marketing carriage fees, and the absence of other costs related
to Sage and the Buzz product line.
Loss from Operations
Loss from operations totaled $31.2 million for the six months ended June 30,
2001 compared to a loss from operations of $4.5 million for the six months ended
June 30, 2000. Loss from operations reflects the global slowdown in the
financial marketplace, the impairment charge related to exiting the Sage
business and Buzz product line, and higher operating expenses.
Interest Income (Expense)
Net interest income decreased 19.3% to $1.1 million during the six months ended
June 30, 2001 from $1.3 million for the six months ended June 30, 2000. The
decrease in net interest income is primarily attributable to a decline in
interest rates.
Other
Other expense relates to a $173,000 loss the Company recognized on the
disposition of the Company's equity investment in Financial Data Concepts in the
second quarter of this year.
Income Taxes
Income taxes increased to $380,000 for the six months ended June 30, 2001 from
$95,000 for the six months ended June 30, 2000.
At December 31, 2000, Multex.com had net operating loss carryforwards of
approximately $50.0 million and research and development credits of
approximately $1.5 million for income tax purposes that expire in 2009 through
2020. The utilization with regard to timing and amount of the Company's net
operating loss carryfowards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code.
Net loss
The Company recorded a net loss of $30.7 million, or a net loss per share of
$0.96, for the six months ended June 30, 2001 compared to a net loss of $3.3
million, or a net loss per share of $0.11, for the six months ended June 30,
2000. The net loss reflects the global slowdown in the financial marketplace,
the impairment charge related to exiting the Sage business and Buzz product
line, and higher operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, we had $44.5 million of cash, cash equivalents and marketable
securities. Our principal commitments consist of obligations under operating
leases.
14
Net cash provided by operating activities was $5.4 million in the six months
ended June 30, 2001, and net cash used in operating activities was $7.2 million
in the equivalent period in 2000. The increase in cash provided by operating
activities reflects higher non-cash charges (including depreciation and
amortization), the impairment charge (non-cash), and improved accounts
receivable balances, partially offset by a reduction in accrued expenses and
accounts payables.
Net cash provided by investing activities was $9.8 million in the six months
ended June 30, 2001, and net cash used in investing activities was $11.5 million
in the equivalent period in 2000. The improvement in cash provided by investing
activities was primarily related to marketable securities transactions, a
reduction in purchases of property and equipment, and the acquisitions of Sage
Online and Buzz in the first half of 2000, for which there were no comparable
transactions in 2001.
Net cash provided by financing activities was $2.2 million in the six months
ended June 30, 2001, and $23.3 million for the equivalent period in 2000. The
sharp decline in cash provided by financing activities was due to the private
placement of stock issued to Merrill Lynch in the first quarter of 2000. There
was no comparable transaction during the six month period ended June 30, 2001.
We believe that our existing cash, cash equivalents and marketable securities,
will be sufficient to meet our anticipated cash needs for working capital and
capital expenditures at least for the next twelve months.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
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. In addition, U.S.
financial institutions are continuing to consolidate, increasing the leverage of
our information providers to negotiate prices and decreasing the overall
potential market for some of our services. Weakness in the financial services
industry could also adversely impact our subscription renewal rates. 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.
MULTEX.COM'S BUSINESS WOULD BE MATERIALLY AND ADVERSELY AFFECTED IF THE MARKET
FOR ONLINE INVESTMENT RESEARCH DOES NOT CONTINUE TO GROW
In order to be successful, we must increase our revenues from subscription
fees for MULTEXNET, from development, hosting and subscription fees for
MULTEXEXPRESS, generate additional sales of investment research on a
pay-per-view basis through MULTEX OnDemand, attract more users to and generate
more leads for our sponsors from MULTEX INVESTOR and increase the total license
fees generated from the MARKET GUIDE database. We face risks in accomplishing
these objectives, among others, relating to our ability to:
o anticipate and adapt to the changing Internet market;
o attract and retain more subscribers, research and data contributors, and
technology and business partners;
o implement our sales, marketing, and branding strategies, both domestically
and internationally;
o attract, retain and motivate qualified personnel;
o respond to actions taken by our competitors;
o continue to build an infrastructure to effectively manage our growth and
handle any future increased usage; and
o integrate acquired businesses, technologies, products and services.
If we are unsuccessful in addressing these risks or in executing our
business strategy, our business, results of operations, and financial condition
would be materially and adversely affected.
15
THE MARKETS FOR OUR PRODUCTS AND SERVICES ARE RAPIDLY CHANGING
The market for the distribution of investment research and other
information over the Internet is rapidly evolving, and demand and market
acceptance for these services continue to be subject to a high level of
uncertainty.
Because the market for our services is still relatively 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 continue to develop or that our services will ever achieve
broad market acceptance. If the market for our services weakens, develops more
slowly than expected, or becomes saturated with competitors; if our services do
not achieve broad market acceptance; or if pricing becomes subject to
significant competitive pressures, our business, results of operations and
financial condition would be materially and adversely affected.
MULTEX.COM'S BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY PRESSURES OF
COMPETITION
The market for the distribution of investment research and other
information over the Internet is intensely competitive. Increased competition
could result in price reductions, reduced gross margins and loss of market
share, any of which could have a material and adverse effect on our business,
results of operations and financial condition. We currently face direct and
indirect competition, for contributors of investment research and other reports
and for subscribers, from large and well-established distributors of financial
information, such as Thomson Financial Services. Some of our competitors enjoy
exclusive distribution arrangements with major financial institutions. We also
compete with:
o companies that provide investment research, including investment banks and
brokerage firms, many of whom have their own Web sites;
o other providers of either free or subscription research services on the
Internet;
o services provided by some of our strategic distributors, which are
competitive in one or more respects with our service offerings;
o numerous prospective competitors, including Standard & Poor's, Moody's, and
Zacks Investment Research, that offer investment research-based services;
o various written publications, including traditional media, investment
newsletters, personal financial magazines and industry research appearing
in financial periodicals;
o services provided by in-house management information services personnel and
independent systems integrators;
o providers of annual reports and other filings with the Securities and
Exchange Commission;
o Standard & Poor's company-specific reports; and
o Value Line investment research reports.
If we fail to successfully compete with these entities or information
sources, our business, results of operations, and financial condition may be
materially adversely affected. It is also possible that new competitors may
emerge and rapidly acquire significant market share.
RAPID GROWTH IN MULTEX.COM'S FUTURE OPERATIONS COULD STRAIN OUR MANAGERIAL,
OPERATIONAL AND FINANCIAL RESOURCES
We have experienced rapid growth in our operations. This rapid growth has
placed, and our anticipated future growth will continue to place, a significant
strain on our managerial, operational and financial resources, that if not
properly managed, could materially adversely affect our business, results of
operations, and financial condition.
THE LOSS OF ANY OF MULTEX.COM'S KEY PERSONNEL COULD HAVE A MATERIAL AND ADVERSE
EFFECT
Our future success will depend, in substantial part, on the continued
service of our senior management, including Mr. Isaak Karaev, our Chairman,
President 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-
16
disclosure agreement. We maintain a key person life insurance policy in the
amount of $2.0 million on the life of Mr. Karaev. The loss of the services of
one or more of our key personnel could have a material and adverse effect on our
business, results of operations and financial condition. We have from time to
time in the past experienced, and we expect to continue to experience in the
future, difficulty in hiring and retaining highly skilled employees with
appropriate qualifications.
MULTEX.COM'S INTERNATIONAL OPERATIONS ARE NEW AND MAY NOT BE SUCCESSFUL. WE HAVE
ONLY LIMITED BUSINESS EXPERIENCE OUTSIDE OF THE UNITED STATES
A key component of our strategy is to continue to expand our international
operations. To date, we have only limited experience in developing and obtaining
research and other financial information relating to companies whose securities
are traded on foreign markets and in marketing, selling and distributing our
services internationally. The failure to gain the necessary experience, hire
appropriate personnel, and enter into key business relationships in these
markets could have a material and adverse effect on our business, results of
operations and financial condition.
DOING BUSINESS INTERNATIONALLY SUBJECTS US TO ADDITIONAL REGULATORY
REQUIREMENTS, TAX LIABILITIES AND OTHER RISKS
There are risks inherent in doing business in international markets,
including unexpected changes in regulatory requirements, potentially adverse tax
consequences, export restrictions and controls, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates, and seasonal reductions in
business activity during the summer months in Europe and various other parts of
the world, any of which could have a material and adverse effect on the success
of our international operations and, consequently, on our business, results of
operations and financial condition. Furthermore, we cannot assure you that
governmental regulatory agencies in one or more foreign countries will not
determine that the services provided by us constitute the provision of
investment advice, which could result in our having to register in these
countries as an investment advisor or in our having to cease selling our
services in these countries, either of which could have a material and adverse
effect on our business, results of operations and financial condition.
BECAUSE MULTEX.COM'S BUSINESS IS DEPENDENT UPON NETWORK AND COMPUTER SYSTEMS
LOCATED IN ONE AREA, WE ARE SUSCEPTIBLE TO PROBLEMS CAUSED BY NATURAL DISASTERS,
POWER FAILURES, SYSTEM FAILURES, SECURITY BREACHES OR OTHER DAMAGE TO OUR SYSTEM
Our electronic distribution of investment research utilizes proprietary
technology that resides principally in New York City. The continued and
uninterrupted performance of our network and computer systems is critical to our
success. Any disaster, power outage or system failure that causes interruptions
in our ability to provide our services to our customers, including failures that
affect our ability to collect research from our information providers or provide
electronic investment research to our users, could reduce customer satisfaction
and, if sustained or repeated, would reduce the attractiveness of our services.
An increase in the volume of research reports handled by our systems, or in the
rate of requests for this research, could strain the capacity of our software or
hardware, which could lead to slower response times or system failures.
Furthermore, we face the risk of a security breach of our systems that could
disrupt the distribution of research and other reports and information. Our
business, results of operations and financial condition could be materially and
adversely affected if any of these problems occur.
Our operations are dependent on our ability to protect our network and
computer systems against damage from computer viruses, fire, power loss, data
communications failures, vandalism and other malicious acts, and similar
unexpected adverse events. In addition, a failure of our communications
providers to provide the data communications capacity in the time frame required
by us for any reason could cause interruptions in the delivery of our services.
Despite precautions we have taken, unanticipated problems affecting our systems
have from time to time in the past caused, and in the future could cause, delays
and interruptions in the delivery of our services. Although we carry general
liability insurance, our insurance may not cover any claims by dissatisfied
customers or subscribers or may not be adequate to indemnify us for any
liability that may be imposed in the event that claims were brought against us.
17
THE MARKET PRICE OF OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS
The stock market has, from time to time, experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile, including fluctuations that are often
unrelated to the operating performance of the affected companies. Broad market
fluctuations of this type may adversely affect the market price of our common
stock. The market price of our common stock could be subject to significant
fluctuations due to a variety of factors, including:
o public announcements concerning us or our competitors, or the Internet
industry;
o fluctuations in operating results;
o a downturn in the financial services industry generally or the market for
securities trading in particular;
o introductions of new products or services by us or our competitors;
o changes in analysts' earnings estimates; and
o announcements of technological innovations.
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources
and have a material adverse effect on our business, results of operation and
financial condition.
OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER STOCKHOLDERS SIGNIFICANTLY
INFLUENCE ALL MATTERS REQUIRING A STOCKHOLDER VOTE
Our executive officers, directors and existing stockholders who each own
greater than 5% of the outstanding common stock and their affiliates, in the
aggregate, beneficially own approximately 50% of our outstanding common stock.
As a result, our executive officers, directors and 5% or greater stockholders
will be able to significantly influence the outcome of all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control.
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 warrants 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.
DISTRIBUTION AND OTHER FEES TO RESEARCH PROVIDERS AND STRATEGIC PARTNERS
INCREASE MULTEX.COM'S COSTS
Royalties and distribution fees payable to our information providers and
strategic partners to obtain distribution rights to research reports included in
MULTEX ONDEMAND constitute a significant portion of our cost of revenues. If we
are required to increase the royalties or fees payable to these information
providers or strategic partners, these increased payments could have a material
and adverse effect on our business, results of operations and financial
condition.
THE INADVERTENT DISTRIBUTION OF RESEARCH REPORTS COULD RESULT IN A CLAIM FOR
DAMAGES AGAINST MULTEX.COM OR HARM OUR REPUTATION
Under certain of our contracts we are required to restrict distribution of
financial information to those users who have been authorized or entitled to
access the report by the information provider. We might inadvertently distribute
a particular report to a user who is not so authorized or entitled, which could
subject us to a claim for 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.
18
WE MAY BE SUBJECT TO LEGAL CLAIMS IN CONNECTION WITH THE CONTENT WE PUBLISH AND
DISTRIBUTE ON THE INTERNET
As a publisher and distributor of online content, we face potential direct
and indirect liability for claims of defamation, negligence, copyright, patent
or trademark infringement, violation of the securities laws and other claims
based upon the reports and data that we publish. For example, by distributing a
negative investment research report, we may find ourselves subject to defamation
claims, regardless of the merits of such claims. Computer failures or human
error may also result in incorrect data being published and distributed widely.
In these and other circumstances, we might be required to engage in protracted
and expensive litigation, which could have the effect of diverting management's
attention and require us to expend significant financial resources. Our general
liability insurance may not cover any of these claims or may not be adequate to
protect us against all liability that may be imposed. Any claims or resulting
litigation could have a material and adverse effect on our business, results of
operations and financial condition.
IF THE INTERNET INFRASTRUCTURE IS NOT ADEQUATELY MAINTAINED, WE MAY BE UNABLE TO
PROVIDE INVESTMENT RESEARCH AND INFORMATION SERVICES IN A TIMELY MANNER
Our future success will depend, in substantial part, upon the maintenance
of the Internet infrastructure, including a reliable network backbone with the
necessary speed, data capacity and security, and the timely development of
enabling products for providing reliable and timely Internet access and
services. We cannot assure you that the Internet infrastructure will continue to
be able to support the demands placed on it or that the performance or
reliability of the Internet will not be adversely affected. Furthermore, the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure or otherwise, and these outages or
delays could adversely affect the web sites of our contributors, subscribers or
distributors. In addition, the Internet could lose its viability as a form of
media due to delays in the development or adoption of new standards and
protocols that can handle increased levels of activity. We cannot assure you
that the infrastructure and complementary products and services necessary to
maintain the Internet as a viable commercial medium will be developed or
maintained.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. Legislation could dampen the
growth in the use of the Internet generally and decrease the acceptance of the
Internet as a communications and commercial medium, which could have a material
and adverse effect on our business, results of operations and financial
condition. In addition, due to the global nature of the Internet, it is possible
that, although transmissions relating to our services originate mainly in the
State of New York, governments of other states, the United States or foreign
countries might attempt to regulate our services or levy sales or other taxes on
our activities. We cannot assure you that violations of local or other laws will
not be alleged or charged by local, state, federal or foreign governments, that
we might not unintentionally violate these laws or that these laws will not be
modified, or new laws enacted, in the future. Any of these developments could
have a material and adverse effect on our business, results of operations and
financial condition.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On and after May 8, 2001, three securities class action lawsuits were filed
against the Company, certain of our current and former officers and directors,
and a number of investment banks, including some of the underwriters of our
initial public offering. The lawsuits were filed in the United States District
Court for the Southern District of New York. The lawsuits assert claims against
us pursuant to Sections 11 and 15 of the Securities Act of 1933, and pursuant to
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule
10b-5 promulgated thereunder. Plaintiffs allege that the underwriter defendants
agreed to allocate stock in our initial public offering to certain investors in
exchange for excessive and undisclosed commissions and agreements by those
investors to make additional purchases of stock in the aftermarket at
pre-determined prices. Plaintiffs allege that the prospectus for our initial
public offering was false and misleading in violation of the securities laws
because it did not disclose these arrangements. We and our current and former
officers and directors intend to vigorously defend the actions. We expect that
the lawsuits will be consolidated and that plaintiffs will file a consolidated
complaint. We intend to file a motion to dismiss that complaint. We are aware
that approximately 110 other companies have been named in nearly identical
lawsuits.
While the outcome of the claims against us cannot be predicted with
certainty, management does not believe that the outcome of these legal matters
will have a material adverse effect on our results of operations or financial
condition.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K: NONE
20
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: August 14, 2001 /s/ Isaak Karaev
---------------------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: August 14, 2001 /s/ John J. McGovern
---------------------------------------------
Name: John J. McGovern
Title: Chief Financial Officer
21