U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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 November 7, 2002, there were 32,408,276 shares of the registrant's common
stock outstanding.
1
QUARTERLY REPORT ON FORM 10-Q
MULTEX.COM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION....................................................................................3
ITEM 1. FINANCIAL STATEMENTS (Unaudited):...............................................................3
Condensed Consolidated Balance Sheets as of September 30, 2002 and
December 31, 2001...............................................................................3
Condensed Consolidated Statements of Operations for the three months
and nine months ended September 30, 2002 and 2001...............................................4
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2002 and 2001.....................................................................5
Notes to Condensed Consolidated Financial Statements ...........................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........9
ITEM 4. CONTROLS AND PROCEDURES........................................................................19
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.....................................................................................20
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
September 30, December 31,
2002 2001
ASSETS (unaudited) (audited)
----------- ---------
Current assets:
Cash and cash equivalents $ 39,850 $ 40,771
Marketable securities 6,931 1,027
Accounts receivable, net 17,280 18,268
Other current assets 5,638 4,208
-------------------------------------
Total current assets 69,699 64,274
Property and equipment, net 33,653 38,236
Goodwill, net 6,572 6,100
Intangibles, net 14,774 15,795
Investments 4,290 4,236
Other 6,015 6,245
-------------------------------------
Total assets $ 135,003 $ 134,886
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,772 $ 2,341
Accrued expenses 6,643 5,970
Deferred revenues 12,200 9,058
-------------------------------------
Total current liabilities 20,615 17,369
Long term liabilities:
Deferred rent 3,544 3,251
Deferred revenues 2,201 -
-------------------------------------
Total long term liabilities 5,745 3,251
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 32,832,000 shares
at September 30, 2002 and 32,525,000 at December 31, 2001 328 325
Additional paid-in capital 225,069 227,108
Accumulated deficit (109,937) (104,071)
Deferred equity consideration (5,744) (8,920)
Accumulated other comprehensive income (loss) 1,004 (176)
-------------------------------------
110,720 114,266
Less cost of treasury stock: 530,000 shares at September 30, 2002 and
none at December 31, 2001 (2,077) -
-------------------------------------
Total stockholders' equity 108,643 114,266
-------------------------------------
Total liabilities and stockholders' equity $ 135,003 $ 134,886
=====================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
--------------------------------- ------------------------------------
Gross revenues $23,261 $21,314 $68,632 $ 74,340
Performance-based warrants - (821) - (1,896)
--------------------------------- ------------------------------------
Net revenues 23,261 20,493 68,632 72,444
Cost of revenues 5,938 6,371 17,708 19,271
--------------------------------- ------------------------------------
Gross profit 17,323 14,122 50,924 53,173
Operating expenses:
Sales and marketing 5,802 6,018 16,833 20,472
Research and development 1,684 1,599 4,708 6,166
General and administrative 6,837 7,307 21,230 24,264
Depreciation and amortization 4,783 4,658 14,117 13,322
Impairment and restructuring charges - 1,746 - 27,387
--------------------------------- ------------------------------------
Total operating expenses 19,106 21,328 56,888 91,611
Loss from operations (1,783) (7,206) (5,964) (38,438)
Other income (expense):
Interest income 270 434 775 1,512
Interest expense (1) (25) (29) (43)
Equity in loss from unconsolidated business (131) (781) (503) (781)
Other (79) (26) 125 (199)
--------------------------------- ------------------------------------
Loss before income taxes (1,724) (7,604) (5,596) (37,949)
Income tax expense 90 75 270 455
--------------------------------- ------------------------------------
Net loss $(1,814) $ (7,679) $(5,866) $(38,404)
================================= ====================================
Basic and diluted net loss per share $ (0.06) $ (0.24) $ (0.18) $ (1.20)
================================= ====================================
Number of shares used in:
Basic and diluted loss per share 32,228 32,326 32,453 32,052
================================= ====================================
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 September 30,
30, 2002 2001
------------------------------------
OPERATING ACTIVITIES
Net loss $(5,866) $ (38,404)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of equity consideration 3,097 3,144
Depreciation and amortization of property and equipment 10,127 8,051
Amortization of goodwill and intangibles 2,267 3,618
Amortization of premium on marketable securities 118 -
Loss on disposal of assets 214 -
Deferred rent 293 77
Equity in unconsolidated business (54) 31
Performance based warrant charges - 1,896
Gain on sale of marketable securities - (309)
Bad debt expense 977 1,612
Impairment and restructuring charges - 26,610
Noncash revenue (440) -
Changes in operating assets and liabilities:
Accounts receivable 127 7,675
Other current assets (1,430) (435)
Other assets (587) 1,380
Accounts payable (599) (2,984)
Accrued expenses 673 (4,008)
Deferred revenues 1,382 (1,210)
------------------------------------
Net cash provided by operating activities 10,299 6,744
INVESTING ACTIVITIES
Purchases of marketable securities (6,143) (35,016)
Proceeds from sale or maturities of marketable securities - 59,486
Proceeds from sale of equipment. 260 -
Purchases of property and equipment (5,537) (12,831)
------------------------------------
Net cash (used) provided by in investing activities (11,420) 11,639
FINANCING ACTIVITIES
Proceeds from issuances of common stock, net 367 2,346
Repayment of capital leases - (98)
------------------------------------
Net cash provided by financing activities 367 2,248
Effect of exchange rate changes on cash (167) 69
------------------------------------
Increase (decrease) in cash and cash equivalents (921) 20,700
Cash and cash equivalents, beginning of period 40,771 20,237
------------------------------------
Cash and cash equivalents, end of period $39,850 $ 40,937
====================================
SUPPLEMENTAL DISCLOSURES OF FINANCIAL INFORMATION
NONCASH INVESTING AND FINANCING ACTIVITY:
Surrender of common stock and warrants $ 4,401 $ -
====================================
Accrued purchase of fixed assets $ 24 $ 256
====================================
Net change in unrealized loss on marketable securities $ (121) $ (302)
====================================
Issuance of stock to unconsolidated business $ - $ 1,236
====================================
Issuance of restricted stock, net $ - $ 3,869
====================================
Fair market value of warrants issued $ - $ 1,896
====================================
Taxes paid $ 206 $ 126
====================================
Interest paid $ 29 $ 18
====================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2002
NOTE 1 -- THE COMPANY AND BASIS OF PRESENTATION
Multex.com, Inc. (the "Company" or "Multex") 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. Headquartered in New York, the Company also has offices in
Lake Success (New York), San Francisco, London, Edinburgh and Hong Kong.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States and in accordance with the instructions to Form 10-Q and Article
10 of Regulation S-X for interim financial information. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2002
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. The disclosure of segment information was not required
as the Company operates in only one business segment.
The condensed consolidated balance sheet at December 31, 2001 has been
derived from audited financial statements but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States 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, 2001 included in the Company's Annual Report on Form
10-K.
In order to conform to the current period presentation, certain
reclassifications were made to the 2001 financial statements.
NOTE 2 -- USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company's significant estimates include the useful lives and valuations of
fixed assets and certain intangible assets, the accounts receivable allowance
for doubtful accounts and the income tax valuation allowance.
NOTE 3 -- STOCKHOLDERS' EQUITY
During the three months ended September 30, 2002, the Company issued
approximately 113,000 shares of its common stock in connection with the exercise
of stock options and issued approximately 41,000 shares of its common stock in
connection with grants of restricted stock. Total net proceeds received were
approximately $133,000.
6
During the three months ended June 30, 2002, the Company issued
approximately 11,000 shares of its common stock in connection with the exercise
of stock options and issued approximately 104,000 shares of its common stock in
connection with the Company's employee stock purchase plan. Total proceeds
received were approximately $408,000.
In June 2002, the Company received 530,000 shares of its common stock from
Merrill Lynch in accordance with an amendment to its existing agreement. The
Company recorded the stock as treasury stock totaling approximately $2,077,000.
During the three months ended March 31, 2002, the Company issued
approximately 5,000 shares of its common stock in connection with the exercise
of stock options to employees and approximately 41,000 shares of its common
stock in connection with grants of restricted stock.
NOTE 4 -- 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,
--------------- ---------------- ---------------- ---------------
2002 2001 2002 2001
--------------- ---------------- ---------------- ---------------
Numerator:
Numerator for basic and diluted loss per share
- net loss available for common stockholders $ (1,814) $ (7,679) $ (5,866) $(38,404)
=============== ================ ================ ===============
Denominator:
Denominator for basic net loss per share -
weighted average shares 32,228 32,326 32,453 32,052
Basic and diluted net loss per share $ (0.06) $ (0.24) $ (0.18) $ (1.20)
=============== ================ ================ ===============
NOTE 5 -- COMPREHENSIVE LOSS
Total comprehensive loss was $1.6 million and $7.7 million for the three
months ended September 30, 2002 and September 30, 2001, respectively. Total
comprehensive loss was $4.7 million and $38.6 million for the nine months ended
September 30, 2002 and September 30, 2001, respectively. The difference between
net loss and comprehensive net loss is primarily attributable to foreign
currency translation adjustments related to the Company's foreign subsidiaries.
NOTE 6 -- ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets
("FAS 142"), 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 Statement. Other intangible assets will continue to be
amortized over their useful lives.
The Company adopted the FAS 142 rules of accounting for goodwill and other
intangible assets in the first quarter of 2002. Application of the
non-amortization provisions of FAS No. 142 decreased amortization expense in the
third quarter of 2002 by approximately $170,000 compared to the third quarter of
2001 and is expected to result in an annual decrease in amortization expense of
approximately $680,000 ($0.02 per share) for the year 2002 compared to the year
2001.
7
The following pro forma information is presented to reflect net loss and
net loss per share to exclude amortization of goodwill for the three and nine
month periods ended September 30, 2001, as if FAS 142 was implemented effective
January 1, 2001 (in thousands, except per share data):
Three Months Nine Months
Ended Ended
September 30, 2001 September 30, 2001
-------------------- ---------------------
Net loss:
Reported net loss $ (7,679) $(38,404)
Goodwill amortization 170 510
-------------------- ---------------------
Adjusted net loss $ (7,509) $(37,894)
==================== =====================
Net loss per share:
Reported net loss per share $ (0.24) $ (1.20)
Goodwill amortization .01 .02
-------------------- ---------------------
Adjusted net loss per share $ (0.23) $ (1.18)
==================== =====================
NOTE 7 -- MERRILL LYNCH
On June 20, 2002, the Company amended its agreement with Merrill Lynch.
Pursuant to the amendment, in exchange for the elimination of certain cash
license fees to be received by the Company through December 2004, Merrill Lynch
surrendered 530,000 of the Company's common stock and warrants to purchase an
aggregate of 1,250,000 shares of the Company's common stock. The Company valued
the common stock at $2,077,000, which represents the number of shares exchanged,
multiplied by the average closing sale price over the period commencing three
days prior to, and ending three days after, the date of the amendment, but
excluding the date of the transaction. The surrendered shares have been recorded
as treasury stock. The warrants surrendered by Merrill Lynch were valued at
$2,325,000 using the Black Scholes valuation model and recorded as a reduction
in additional paid-in capital. The value of the securities received will be
amortized to revenue on a straight-line basis over the remaining life of the
contract. For the three months ended September 30, 2002, the Company recorded
$440,000 in revenue relating to the surrender of securities.
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, Inc. 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 Multex Net, launched in June 1996, provides access to real-time, commingled
equity and fixed income research, global earnings and revenue estimates and
company fundamental information to buyside investors, sellside
institutions, public and private corporations and libraries of professional
service firms;
o Multex Express, launched in January 1997, offers the 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 and
pay-per-view research on an embargoed basis;
o Multex Fundamentals (formerly known as Market Guide), acquired in September
1999, provides investment information products to financial institutions
and Web sites, institutional investors, corporations and professional
vendors.
Multex Net is offered on a one- to three-year subscription or on a transactional
basis. 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.
Multex Express is offered pursuant to one to three year subscriptions,
generating revenue from professional services, license fees, hosting and
maintenance fees. Multex Express 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 Multex. These reports are available either free of charge, or
for a fee determined by Multex and the research provider. Multex Investor
generates revenues from sales transactions, email and banner advertising, and
contractual, lead-generating sponsorships.
Multex Fundamentals acquires, integrates, condenses and publishes accurate,
timely and objective financial, descriptive and other information on public
corporations. Multex Fundamentals generates revenue primarily by licensing its
database in single or multi-year contracts.
9
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 2002 COMPARED TO QUARTER ENDED SEPTEMBER 30, 2001
Revenues
Multex's revenues consist of subscription fees for Multex Net, sales of
investment research on a pay-per-view basis through Multex On-Demand,
subscription, development, hosting and license fees for Multex Express, license
and redistribution fees for the Multex Fundamentals database, and sales of
sponsorships, advertising and investment research through the Multex Investor
Web site. We also provide professional services to select Multex Express
clients, including software development, customization and integration services.
Gross revenues increased 9% to $23.3 million for the quarter ended September 30,
2002 from $21.3 million for the quarter ended September 30, 2001. The increase
in revenues reflects increases in Multex Express and Multex Net revenues,
partially offset by a decrease in Multex Fundamentals and Multex Investor
revenues. All of the Company's product lines continue to be affected by weakness
in the global financial markets.
Multex Express revenues increased 20% to $9.3 million for the quarter ended
September 30, 2002 from $7.8 million for the quarter ended September 30, 2001.
The increase in revenue was primarily attributable to additional hosting and
development fees received from new customers for the quarter ended September 30,
2002 and a decline in revenues for the quarter ended September 30, 2001 due to
the September 11th attacks. On a sequential basis, Multex Express revenues
increased 2% compared to the second quarter of 2002.
Multex Net revenues increased 26% to $7.6 million for the quarter ended
September 30, 2002 from $6.0 million for the quarter ended September 30, 2001.
The increase in revenues was primarily attributable to increases in Multex Net
subscriptions resulting from continued growth of the subscription based service
and continued acceptance of new enhancements added such as NetSreenPro, Earnings
Estimates and Street Events, an increase in MultexIR revenues, which was
launched in October 2001, and an increase in Multex On-Demand revenues. The
increase in Multex On-Demand revenue was due to new enterprise-wide agreements
starting in 2002. In addition, Multex Net revenues for the quarter ended
September 30, 2001 were negatively impacted by the September 11th attacks. On a
sequential basis, Multex Net revenues increased 13% compared to the second
quarter of 2002.
Multex Investor revenues declined 23% to $1.8 million for the quarter ended
September 30, 2002 from $2.3 million for the quarter ended September 30, 2001.
This decline reflects lower advertising and sponsorship revenues, offset in part
by an increase in pay-per-view revenues resulting from a distribution agreement
with a major Internet services company. On a sequential basis, Multex Investor
revenues decreased 28% compared to the second quarter of 2002.
Multex Fundamentals revenues decreased 13% to $4.6 million for the quarter ended
September 30, 2002 from $5.3 million for the quarter ended September 30, 2001.
Multex Fundamentals revenues were negatively impacted by a decline in the number
of distributors carrying the Multex Fundamentals database. On a sequential
basis, Multex Fundamentals revenues increased 1% compared to the second quarter
of 2002.
For the quarter ended September 30, 2002, the Company did not record any
performance-based warrant charges against revenue. The Company recorded
performance-based warrant charges of $821,000 in the quarter ended September 30,
2001. Such performance-based warrant charges were recorded in the period that
certain warrants were actually earned by Merrill Lynch. The Merrill Lynch
amendment in June 2002 eliminated the Company's obligation to issue
performance-based warrants. As a result, the Company will no longer recognize
future warrant charges against revenue.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of Multex Net
and Multex On-Demand, royalties payable to the authors of investment research
and content offered through Multex On-Demand, and the Multex Investor web site,
internal and external development costs incurred for Multex Express customers,
research department costs related to the collection and processing of financial
data and earnings estimates, and data communications costs.
10
Cost of revenues decreased 7% to $5.9 million for the quarter ended September
30, 2002 from $6.4 million for the quarter ended September 30, 2001. As a
percentage of gross revenues, cost of revenues decreased to 25.5% for the
quarter ended September 30, 2002 from 29.9% for the quarter ended September 30,
2001. The decrease in cost of revenues was primarily due to a decrease in data
communication and data feed costs , offset in part by an increase in royalty
expenses resulting from an increase in Multex On-Demand revenues.
Operating Expenses
SALES AND MARKETING. Sales and marketing expenses consist primarily of salaries,
commissions, advertising, public relations, tradeshow expenses and costs of
marketing materials. Sales and marketing expenses decreased 4% to $5.8 million
for the quarter ended September 30, 2002 from $6.0 million for the quarter ended
September 30, 2001. As a percentage of gross revenues, sales and marketing
expenses decreased to 24.9% for the quarter ended September 30, 2002 from 28.2%
for the quarter ended September 30, 2001. The decrease in sales and marketing
expenses was primarily due to lower advertising and marketing expenditures and a
decrease in compensation expenses.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses increased 5% to $1.7
million for the quarter ended September 30, 2002 from $1.6 million for the
quarter ended September 30, 2001. As a percentage of gross revenues, research
and development expenses decreased to 7.2% for the quarter ended September 30,
2002 from 7.5% for the quarter ended September 30, 2001.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and
consultants, facility expenses, overhead, and office supplies and expenses.
General and administrative expenses decreased 6% to $6.8 million for the quarter
ended September 30, 2002 from $7.3 million for the quarter ended September 30,
2001. As a percentage of gross revenues, general and administrative expenses
decreased to 29.4% for the quarter ended September 30, 2002 from 34.3% for the
quarter ended September 30, 2001. The decrease in general and administrative
expenses was primarily due to a decrease in compensation costs, professional
fees and office expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses consist
primarily of depreciation related to fixed assets, computer equipment and
software, and leasehold improvements, and amortization related to identifiable
intangible assets and the cost of warrants issued to Merrill Lynch & Co., Inc.
Depreciation and amortization for the quarter ended September 30, 2002 increased
3% to $4.8 million, compared to $4.7 million for the quarter ended September 30,
2001. As a percentage of gross revenues, depreciation and amortization expenses
decreased to 20.6% for the quarter ended September 30, 2002 from 21.9% for the
quarter ended September 30, 2001. The increase in aggregate dollars, reflects
higher depreciation and amortization expenses associated with increased fixed
assets and leasehold improvement balances in 2002 compared to 2001, partially
offset by lower amortization expenses as a result of the application of
non-amortization provisions under FAS 142 effective January 1, 2002.
RESTRUCTURING CHARGE. In the third quarter ended September 30, 2001, the Company
recorded a restructuring charge of $1.7 million. This charge consisted of
severance payments, the cancellation of marketing contracts associated with a
discontinued business, and the termination of one of the Company's operating
leases. There was no comparable charge in the quarter ended September 30, 2002.
Loss from Operations
Loss from operations totaled $1.8 million for the quarter ended September 30,
2002 compared to $7.2 million for the quarter ended September 30, 2001. The
decline in loss from operations reflects an increase in gross profit, a
reduction in operating costs, and a nonrecurring restructuring charge of $1.7
million recorded in September 2001.
Interest Income (Expense)
Net interest income decreased 34% to $269,000 for the quarter ended September
30, 2002 from $409,000 for the quarter ended September 30, 2001. The decrease in
net interest income is primarily attributable to a decline in interest rates.
11
Equity in Loss from Unconsolidated Business
Equity in loss of unconsolidated business reflects a $131,000 loss the Company
recognized from its equity investment in TheMarkets.com LLC, compared to
$781,000 loss it recognized in the quarter ended September 30, 2001.
Other
Other expense of $79,000 for the quarter ended September 30, 2002 primarily
relates to a loss on sale of furniture and fixtures.
Income Taxes
Income tax expense totaled $90,000 for the third quarter ended September 30,
2002 compared to income taxes of $75,000 for the quarter ended September 30,
2001.
At December 31, 2001, Multex had net operating loss carryforwards of
approximately $63.2 million and research and development credits of
approximately $2.3 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 carryforwards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code. Substantially
all of the Company's deferred tax assets have been offset by a valuation
allowance.
Net loss
The Company recorded a net loss of $1.8 million, or a net loss per share of
$0.06, for the third quarter ended September 30, 2002 compared to a net loss of
$7.7 million, or a net loss per share of $0.24, for the quarter ended September
30, 2001.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2001
Revenues
Multex's revenues consist of subscription fees for Multex Net, sales of
investment research on a pay-per-view basis through Multex On-Demand,
subscriptions, development, hosting and license fees for Multex Express, license
and redistribution fees for the Multex Fundamentals database, and sales of
sponsorships, advertising and investment research through the Multex Investor
Web site. We also provide professional services to select Multex Express
clients, including software development, customization and integration services.
Gross revenues decreased 8% to $68.6 million for the nine months ended September
30, 2002 from $74.3 million for the nine months ended September 30, 2001. Gross
revenues for the nine months reflect lower sales in all of the Company's product
lines except for Multex Net. For the nine months ended September 30, 2002, all
of the Company's product lines were affected by the continued weakness in the
global financial markets.
Multex Express revenues decreased 4% to $27.1 million for the nine months ended
September 30, 2002 from $28.2 million for the nine months ended September 30,
2001. The decrease in revenue is primarily a result of reduced technology
spending by many of the Company's customers.
Multex Net revenues increased 6% to $20.5 million for the nine months ended
September 30, 2002 from $19.4 million for the nine months ended September 30,
2001. The increase in Multex Net sales was primarily attributable to an increase
in Multex Net subscription revenue, continued acceptance of new enhancements
added to the Multex Net product lines such as NetScreen Pro, Earnings Estimates
and Street Events, and the introduction of MultexIR in October 2001. Partially
offsetting the increase was a decline in Multex On-Demand report sales
reflecting a decline in investment banking activity.
Multex Investor revenues decreased 30% to $7.1 million for the nine months ended
September 30, 2002 from $10.1 million for the nine months ended September 30,
2001. The decrease is primarily due to a decline in advertising and sponsorship
revenues, offset in part by an increase in pay-per-view revenues.
Multex Fundamentals revenues decreased 17% to $13.9 million for the nine months
ended September 30, 2002 from $16.7 million for the nine months ended September
30, 2001. Multex Fundamentals revenues were negatively impacted by a decline in
the number of re-distributors carrying the Multex Fundamentals database.
12
For the nine months ended September 30, 2002, the Company did not record any
performance-based warrant charges, compared to $1.9 million for the nine months
ended September 30, 2001.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of Multex Net
and Multex On-Demand, royalties payable to the authors of investment research
and content offered through various Multex web sites, internal and external
development costs incurred for Multex Express customers, research department
costs related to the collection and processing of financial data and global
earnings estimates, and data communications costs.
Cost of revenues decreased 8% to $17.7 million for the nine months ended
September 30, 2002 from $19.3 million for the nine months ended September 30,
2001. As a percentage of gross revenues, cost of revenues decreased to 25.8% for
the nine months ended September 30, 2002 from 25.9% for the nine months ended
September 30, 2001. The decrease in cost of revenues was primarily due to a
decrease in external development costs incurred for Multex Express customers, a
decrease in data communication costs, and a decrease in royalty and distribution
fees resulting from a decrease in Multex On-Demand revenues. These decreases
were offset in part by an increase in data collection costs .
Operating Expenses
SALES AND MARKETING. Sales and marketing expenses consist primarily of salaries,
commissions, advertising, public relations, tradeshow expenses and costs of
marketing materials. Sales and marketing expenses decreased 18% to $16.8 million
for the nine months ended September 30, 2002 from $20.5 million for the nine
months ended September 30, 2001. As a percentage of gross revenues, sales and
marketing expenses decreased to 24.5% for the nine months ended September 30,
2002 from 27.5% for the nine months ended September 30, 2001. The decrease in
sales and marketing expenses was primarily due to lower advertising and
marketing expenses, a decrease in compensation costs and a decrease in travel
and entertainment costs.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses decreased 24% to $4.7
million for the nine months ended September 30, 2002 from $6.2 million for the
nine months ended September 30, 2001. As a percentage of gross revenues,
research and development expenses decreased to 6.9% for the nine months ended
September 30, 2002 from 8.3% for the nine months ended September 30, 2001. The
decrease in research and development expenses was primarily attributable to a
decrease in compensation costs as a result of a decrease in the number of
developers on staff.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and
consultants, facility expenses, overhead, and office supplies and expenses.
General and administrative expenses decreased 13% to $21.2 million for the nine
months ended September 30, 2002 from $24.3 million for the nine months ended
September 30, 2001. As a percentage of gross revenues, general and
administrative expenses decreased to 30.9% for the nine months ended September
30, 2002 from 32.6% for the nine months ended September 30, 2001. The decrease
in general and administrative expenses reflects lower compensation costs,
professional fees, office expenses, and bad debt expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses consist
primarily of depreciation related to fixed assets, computer equipment and
software, and leasehold improvements, and amortization related to identifiable
intangible assets and the cost of warrants issued to Merrill Lynch & Co., Inc.
Depreciation and amortization for the nine months ended September 30, 2002
increased 6% to $14.1 million, compared to $13.3 million for the nine months
ended September 30, 2001. As a percentage of gross revenues, depreciation and
amortization expenses increased to 20.6% for the nine months ended September 30,
2002 from 17.9% for the nine months ended September 30, 2001. The increase
reflects higher depreciation and amortization expenses associated with increased
fixed assets and leasehold improvement balances in 2002 compared to 2001,
partially offset by lower amortization expenses as a result of the application
of non-amortization provisions under FAS 142 effective January 1, 2002.
IMPAIRMENT AND RESTRUCTURING CHARGES. For the nine months ended September 30,
2001, the Company recorded an impairment charge of $25.7 million reflecting the
decision to exit the Sage business and the Buzz product line and also recorded a
restructuring charge of $1.7 million related to severance payments to
approximately 100 terminated employees, the cancellation of all marketing
contracts associated with the Sage Online business, and the termination of one
of the Company's operating leases on office space in New York City. There were
no comparable charges for the nine months ended September 30, 2002.
13
Loss from Operations
Loss from operations totaled $6.0 million for the nine months ended September
30, 2002 compared to $38.4 million for the nine months ended September 30, 2001.
The decline in loss from operations primarily reflects a nonrecurring
restructuring and impairment charge recorded in 2001, and a reduction in
operating expenses, offset in part by a decrease in gross profit.
Interest Income (Expense)
Net interest income decreased 49.2% to $ 746,000 for the nine months ended
September 30, 2002 from $1.5 million for the nine months ended September 30,
2001. The decrease in net interest income is primarily attributable to a decline
in interest rates.
Equity in Loss from Unconsolidated Business
For the nine months ended September 30, 2002, equity in loss of unconsolidated
business from the equity investment in TheMarkets.com totaled $503,000 compared
to a loss of $781,000 for the nine months ended September 30, 2001.
Other
Other income of $125,000 for the nine months ended September 30, 2002 includes
proceeds from an insurance settlement, offset in part by a loss on sale of
equipment. Other expense of $199,000 for the nine months ended September 30,
2001 includes a $173,000 loss the Company recognized on the disposition of an
equity investment.
Income Taxes
Income tax expense totaled $270,000 for the nine months ended September 30, 2002
compared to income taxes of $455,000 for the nine months ended September 30,
2001.
At December 31, 2001, Multex had net operating loss carryforwards of
approximately $63.2 million and research and development credits of
approximately $2.3 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 carryforwards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code. Substantially
all of the Company's deferred tax assets have been offset by a valuation
allowance.
Net loss
The Company recorded a net loss of $5.9 million, or a net loss per share of
$0.18, for the nine months ended September 30, 2002 compared to a net loss of
$38.4 million, or a net loss per share of $1.20, for the nine months ended
September 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, cash, cash equivalents and marketable securities balance
was $46.8 million compared to $41.8 million at December 31, 2001.
Net cash provided by operating activities was $10.3 million for the nine months
ended September 30, 2002. This amount primarily consisted of the Company's net
loss of $5.9 million, reduced by noncash expenses of $17.0 million primarily
relating to depreciation and amortization, increases in deferred revenues and
accrued expenses of $2.1 million and a decrease in accounts receivable of $0.1
million, offset in part by an increase in other current assets and other assets
of $2.0 million, decreases in accounts payable of $0.6 million, and noncash
revenue of $0.4 million.
Net cash used by investing activities was $ 11.4 million for the nine months
ended September 30, 2002. This amount includes purchases of marketable
securities of $6.2 million, purchases of property and equipment of $5.5 million
reduced by proceeds from sale of equipment of $ 0.3 million.
14
Net cash provided by financing activities was $0.4 million for the nine months
ended September 30, 2002. This amount was from net proceeds from issuance of the
Company's stock. Our principal commitments consist of obligations outstanding
under lease agreements for offices. Future calendar year payments for these
leases are as follows: $5.2 million (2003), $5.3 million (2004), $5.2 million
(2005), $3.7 million (2006), $3.3 million (2007), and $8.7 million in aggregate,
thereafter. Future payments for the period October 2002 through December 2002
are approximately $1.2 million. In addition, under certain circumstances we may
be required to provide additional funding for an investment that we account for
under the equity method.
We believe that our existing cash, cash equivalents and marketable securities
balances will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next twelve months.
CRITICAL ACCOUNTING POLICIES
We consider accounting policies related to impairment of goodwill and intangible
assets and allowances for doubtful accounts to be critical due to the estimation
process involved.
At September 30, 2002, goodwill and intangible assets totaled $21.3 million.
With regard to these assets, events that would cause us to conduct an impairment
assessment include significant losses of customers, operating results of
acquired businesses that continually failed to meet management's performance
expectations, and diminished utility of acquired technology. In assessing the
fair market value of goodwill and intangibles, we must make assumptions
regarding estimated future cash flows. If, after conducting such assessment,
indications of impairment are present in long-lived assets, the estimated future
undiscounted cash flows associated with the corresponding assets would be
compared to its carrying amounts to determine if a change in useful life or a
write-down to fair value is necessary. If these estimates or related assumptions
change, we may be required to record impairment charges for these assets.
The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
MULTEX'S BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY THE CURRENT (OR
ANY FUTURE) DOWNTURN IN THE FINANCIAL SERVICES INDUSTRY
We are dependent upon the continued demand for the distribution of investment
research and other information over the Internet, which makes our business
susceptible to downturns in the financial services industry. Our current results
of operations reflect, in part, the effects of the current slowdown in our
markets. In addition, U.S. financial institutions are continuing to consolidate,
increasing the leverage of our information providers to negotiate prices and
decreasing the overall potential market for some of our services. Weakness in
the financial services industry has adversely impacted our subscription renewal
rates and may continue to do so. These effects may continue and may worsen if
our customers and clients do not recover or if additional events adverse to the
global economy or the financial services industry occur.
THE MARKETS FOR OUR PRODUCTS AND SERVICES CHANGE RAPIDLY
The market for the distribution of investment research and other information
over the Internet changes rapidly, and demand and market acceptance for these
services continues to be subject to a high level of uncertainty. The market
relating to retail investing has deteriorated considerably over the past 24
months, and all of our markets continue to face considerable uncertainty. It is
difficult to predict with any assurance the growth rate, if any, and the
ultimate size, of our markets. We cannot assure you that the markets for our
services will recover, will continue to develop, or that our services will ever
achieve broad market acceptance. If our customers are not able to recover from
the effects of the continued downturn in the global economy; if the market for
our services weakens further, develops more slowly than expected once recovery
begins, or becomes saturated with competitors; if our services do not achieve
broad market acceptance; or if pricing becomes subject to further competitive
pressures, our business, results of operations and financial condition would be
materially and adversely affected.
15
CUSTOMER CONCENTRATION
Historically, a significant portion of the Company's revenues in any particular
period has been attributable to a small number of customers. The composition of
the Company's largest customers has varied from year to year. Sales to the
Company's three largest customers accounted for approximately 20.4%, 21.5% and
22.1% of the Company's revenues during fiscal 1999, 2000 and 2001, respectively.
Moreover, sales by the Company to Merrill Lynch & Co. accounted for
approximately 10.2%, 13.5% and 11.1% of revenues in fiscal 1999, 2000 and 2001,
respectively. The loss of any significant customer, including Merrill Lynch &
Co., could have a material adverse affect on the Company's business, financial
condition and results of operations.
MULTEX'S BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY PRESSURES OF
COMPETITION
The market for the distribution of investment research and other information
over the Internet is intensely competitive. We currently face strong competition
in many of our markets. Increased competition could result in price reductions,
reduced gross margins and loss of market share, any of which could have a
material and adverse effect on our business, results of operations and financial
condition. We currently face direct and indirect competition for contributors of
investment research and other reports, and for subscribers, from large and
well-established distributors of financial information, such as Thomson
Financial Services. Some of our competitors enjoy exclusive distribution
arrangements with major financial institutions. We also compete with, among
others:
o companies that provide investment research, including investment banks and
brokerage firms, many of whom have their own Web sites;
o other providers of either free or subscription research and data services
on the Internet;
o services provided by some of our strategic distributors that are
competitive in one or more respects with our service offerings;
o prospective competitors that offer investment research-based services;
o various written publications, including traditional media, investment
newsletters, personal financial magazines and industry research appearing
in financial periodicals;
o services provided by in-house management information services personnel and
independent systems integrators; and
o providers of reports filed under the Securities Exchange Act of 1934 and
other filings with the Securities and Exchange Commission;
Whether or not our competitors are successful, competition with these entities
or information sources may materially and adversely affect our business, results
of operations, and financial condition. It is also possible that new competitors
may emerge and rapidly acquire significant market share.
THE LOSS OF ANY OF MULTEX'S KEY PERSONNEL COULD HAVE A MATERIAL AND ADVERSE
EFFECT
Our future success will depend, in substantial part, on the continued service of
our senior management team, none of whom has entered into an employment
agreement with us other than a non-competition/non-disclosure agreement. The
loss of the services of one or more of our key personnel could have a material
and adverse effect on our business, results of operations and financial
condition. We have from time to time in the past experienced, and we expect to
continue to experience in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications.
DOING BUSINESS INTERNATIONALLY SUBJECTS US TO ADDITIONAL REGULATORY
REQUIREMENTS, TAX LIABILITIES AND OTHER RISKS
There are risks inherent in doing business in international markets, including
unexpected changes in regulatory requirements, potentially adverse tax
consequences, export restrictions and controls, tariffs and other trade
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.
16
BECAUSE MULTEX'S BUSINESS IS DEPENDENT UPON NETWORK AND COMPUTER SYSTEMS LOCATED
IN ONE AREA, WE ARE SUSCEPTIBLE TO PROBLEMS CAUSED BY NATURAL DISASTERS,
TERRORIST ATTACKS, 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. There can be no assurance that such solutions can be implemented in a
timely and cost-effective manner, or at all. Any natural disaster, attack, 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 or recur.
Our operations are dependent on our ability to protect our network and computer
systems against damage from computer viruses, fire, power loss, data
communications failures, vandalism and other malicious acts, and similar
unexpected adverse events, such as the September 11, 2001 terrorist attacks. In
addition, the failure of our communications providers to provide the data
communications capacity in the time frame required by us could cause
interruptions in the delivery of our services.
THE MARKET PRICE OF OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS
The stock market has, from time to time, experienced extreme price and volume
fluctuations. The market prices of the securities of Internet-related companies
have been especially volatile, including fluctuations that are often unrelated
to the operating performance of the affected companies. Broad market
fluctuations of this type have adversely affected, and may continue to adversely
affect the market price of our common stock. The market price of our common
stock has been, and could continue to be, subject to significant fluctuations
due to a variety of factors, including:
o public announcements concerning us or our competitors, or the Internet
generally;
o fluctuations in operating results;
o downturns in the financial services industry generally or the market for
securities trading in particular;
o introductions of new products or services by us or our competitors;
o future sales of shares of our common stock by major shareholders;
o future sales of shares issuable upon the exercise of outstanding options
and warrants in the public market;
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 target of securities class action litigation. We are
currently involved in securities class action litigation that could result in
substantial costs and a diversion of our management's attention and resources
and could have a material adverse effect on our business, results of operation
and financial condition. We may be subject to further suits in the future.
OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER STOCKHOLDERS SIGNIFICANTLY
INFLUENCE ALL MATTERS REQUIRING A STOCKHOLDER VOTE
Our executive officers, directors and existing stockholders who each own greater
than 5% of the outstanding common stock and their affiliates, in the aggregate,
beneficially own approximately 55% 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.
17
DISTRIBUTION AND OTHER FEES TO RESEARCH PROVIDERS AND STRATEGIC PARTNERS
INCREASE MULTEX'S COSTS
Royalties and distribution fees payable to our information providers and
strategic partners to obtain distribution rights to research reports included in
Multex On-Demand constitute a significant portion of our cost of revenues. We
face from time to time considerable competitive pressure to increase these
royalties. If we are required to further increase the royalties or fees payable
to these information providers or strategic partners, these increased payments
could have additional material and adverse effects on our business, results of
operations and financial condition.
THE INADVERTENT DISTRIBUTION OF RESEARCH REPORTS COULD RESULT IN A CLAIM FOR
DAMAGES AGAINST MULTEX OR HARM OUR REPUTATION
Under certain of our contracts we are required to restrict distribution of
financial information to those users who have been authorized or entitled to
access the report by the information provider. We might inadvertently distribute
a particular report to a user who is not so authorized or entitled, which could
subject us to a claim for damages by the information provider or which could
harm our reputation in the marketplace, either of which could have a material
and adverse effect on our business, results of operations and financial
condition.
WE MAY BE SUBJECT TO LEGAL CLAIMS IN CONNECTION WITH THE CONTENT WE PUBLISH AND
DISTRIBUTE ON THE INTERNET
As a publisher and distributor of online content, we face potential direct and
indirect liability for claims of defamation, negligence, copyright, patent or
trademark infringement, violation of the securities laws and other claims based
upon the reports and data that we publish. For example, by distributing a
negative investment research report, we may find ourselves subject to defamation
claims, regardless of the merits of such claims. Computer failures or human
error may also result in incorrect data being published and distributed widely.
In these and other circumstances, we might be required to engage in protracted
and expensive litigation, which could have the effect of diverting management's
attention and require us to expend significant financial resources. Our general
liability insurance may not cover all 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. There can be no assurance 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. The Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure or otherwise, and these outages or delays could
adversely affect the web sites of our contributors, subscribers or distributors.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES
The laws governing the Internet remain largely unsettled, even in areas where
there has been legislative action. Legislation and/or regulation could dampen
the growth in the use of the Internet generally and decrease the acceptance of
the Internet as a communications and commercial medium, which could have a
material and adverse effect on our business, results of operations and financial
condition. In addition, due to the global nature of the Internet, it is possible
that, although transmissions relating to our services originate mainly in the
State of New York, governments of other states, the United States or foreign
countries might attempt to regulate our services or levy sales or other taxes on
our activities. We cannot assure you that violations of local or other laws will
not be alleged or charged by local, state, federal or foreign governments, that
we might not unintentionally violate these laws or that these laws will not be
modified, or new laws enacted, in the future. Any of these developments could
have a material and adverse effect on our business, results of operations and
financial condition.
18
ITEM 4. CONTROLS AND PROCEDURES
As of September 30, 2002, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of September 30, 2002. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to September 30,
2002.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 99.1: Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Exhibit 99.2: Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K: NONE
ITEM 7. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MULTEX.COM, INC.
(Registrant)
Date: November 14, 2002 /s/ Isaak Karaev
----------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: November 14, 2002 /s/ Jeffrey S. Geisenheimer
----------------------------------
Name: Jeffrey S. Geisenheimer
Title: Chief Financial Officer
20
CERTIFICATION
I, Isaak Karaev, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Multex.com, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Isaak Karaev
--------------------------------------------
Isaak Karaev
Chief Executive Officer
21
CERTIFICATION
I, Jeffrey S. Geisenheimer, certify that:
2. I have reviewed this quarterly report on Form 10-Q of Multex.com, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Jeffrey S. Geisenheimer
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Jeffrey S. Geisenheimer
Chief Financial Officer
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