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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 MARCH 31, 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 May 10, 2002, there were 32,669,143 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: FINANCIAL STATEMENTS (Unaudited):..............................3
Condensed Consolidated Balance Sheets as of
March 31, 2002 and December 31, 2001...........................3
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2002 and 2001............4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2002 and 2001.............5
Notes to Condensed Consolidated Financial Statements
March 31, 2002.................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................8
PART II. OTHER INFORMATION...................................................17
ITEM 1. LEGAL PROCEEDINGS.............................................17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.....................17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........17
ITEM 5. OTHER INFORMATION.............................................17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................17
ITEM 7. SIGNATURES....................................................18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, DECEMBER 31,
2002 2001
---------- ----------
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $ 35,597 $ 40,771
Marketable securities 6,157 1,027
Accounts receivable, net 18,954 18,268
Other current assets 5,236 4,208
---------- ----------
Total current assets 65,944 64,274
Property and equipment, net 37,264 38,236
Goodwill, net 5,966 6,100
Intangibles, net 15,185 15,795
Investments 4,236 4,236
Other 5,957 6,245
---------- ----------
Total assets $ 134,552 $ 134,886
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,993 $ 2,341
Accrued expenses 6,072 5,970
Deferred revenues 8,693 9,058
---------- ----------
Total current liabilities 18,758 17,369
Long term liabilities:
Deferred rent 3,040 3,251
---------- ----------
Total long term liabilities 3,040 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 and outstanding 32,560,000 shares
at March 31, 2002 and 32,525,000 at
December 31, 2001 326 325
Additional paid-in capital 226,934 227,108
Accumulated deficit (106,102) (104,071)
Deferred equity consideration (7,850) (8,920)
Accumulated other comprehensive (loss) income (554) (176)
---------- ----------
Total stockholders' equity 112,754 114,266
---------- ----------
Total liabilities and stockholders' equity $ 134,552 $ 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
MARCH 31, MARCH 31,
2002 2001
-------- --------
Gross revenues $ 22,568 $ 29,504
Performance-based warrants -- --
-------- --------
Net revenues 22,568 29,504
Cost of revenues 5,827 5,713
-------- --------
Gross profit 16,741 23,791
Operating expenses:
Sales and marketing 5,532 6,716
Research and development 1,486 2,606
General and administrative 7,193 8,178
Depreciation and amortization 4,536 3,752
-------- --------
Total operating expenses 18,747 21,252
Income (loss) from operations (2,006) 2,539
Other income (expense):
Interest income 264 581
Interest expense (13) (15)
Equity in loss from unconsolidated business (186) --
-------- --------
Income (loss) before income taxes (1,941) 3,105
Income tax expense 90 90
-------- --------
Net income (loss) $ (2,031) $ 3,015
======== ========
Basic and diluted net income (loss) per share $ (0.06) $ 0.09
======== ========
Number of shares used in:
Basic income (loss) per share 32,553 31,831
======== ========
Diluted income (loss) per share 32,553 34,291
======== ========
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)
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2002 2001
-------- --------
OPERATING ACTIVITIES
Net (loss) income ..................................... $ (2,031) $ 3,015
Adjustments to reconcile net income (loss) from
continuing operations to net cash provided by
operating activities:
Amortization of equity consideration .............. 1,070 997
Depreciation and amortization of property
and equipment ................................... 3,224 1,854
Amortization of goodwill and intangibles .......... 748 1,357
Deferred rent ..................................... (211) 196
Bad debt expense .................................. 387 385
Changes in operating assets and liabilities:
Accounts receivable ............................. (1,099) 2,426
Other current assets ............................ (1,028) 326
Other assets .................................... 16 22
Accounts payable ................................ 744 (2,768)
Accrued expenses ................................ 102 (4,334)
Deferred revenues ............................... (365) (1,441)
-------- --------
Net cash provided by operating activities ............. 1,557 2,035
INVESTING ACTIVITIES
Purchases of marketable securities .................... (5,149) (11,014)
Proceeds from sale or maturities of
marketable securities ............................... -- 29,687
Purchases of property and equipment ................... (1,463) (3,492)
-------- --------
Net cash provided by (used) in investing activities ... (6,612) 15,181
FINANCING ACTIVITIES
Proceeds from issuances of stock ..................... 3 911
Repayment of long-term debt and capital leases ........ -- (35)
-------- --------
Net cash provided by financing activities ............ 3 876
Effect of exchange rate changes on cash ............... (122) 49
-------- --------
Increase (decrease) in cash and cash equivalents ...... (5,174) 18,141
Cash and cash equivalents, beginning of period ........ 40,771 20,237
-------- --------
Cash and cash equivalents, end of period .............. $ 35,597 $ 38,378
======== ========
SUPPLEMENTAL DISCLOSURES OF FINANCIAL INFORMATION
NONCASH INVESTING AND FINANCING ACTIVITY:
Accrued purchase of fixed assets $ 764 $ 1,138
======== ========
Unrealized loss on marketable securities $ (19) $ (268)
======== ========
Issuance of restricted stock, net $ (176) $ 3,897
======== ========
Taxes paid $ 77 $ 46
======== ========
Interest paid $ 2 $ 15
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2002
NOTE 1 -- THE COMPANY AND 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
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-month period ended March 31, 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.
6
NOTE 3 -- STOCKHOLDERS' EQUITY
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
MARCH 31,
--------------------
2002 2001
-------- -------
Numerator:
Numerator for basic and diluted net income (loss)
per share - net income (loss) available for
common stockholders $ (2,031) $ 3,015
======== =======
Denominator:
Denominator for basic net income (loss)
per share - weighted average shares 32,553 31,831
Assumed conversion of outstanding stock options
and warrants -- 2,460
-------- -------
Denominator for diluted net income (loss)
per share - weighted average shares 32,553 34,291
-------- -------
Basic and diluted net income (loss) per share $ (0.06) $ 0.09
======== =======
NOTE 5 -- COMPREHENSIVE INCOME (LOSS)
Total comprehensive loss was $2.4 million and total comprehensive income
was $2.8 million for the three months ended March 31, 2002 and March 31, 2001,
respectively.
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
first quarter of 2002 by approximately $170,000 compared to the first 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. During the second quarter of 2002 the Company will perform the required
impairment tests of goodwill and other intangible assets. The Company has not
yet determined what the effect of these tests will be on its earnings and
financial position.
7
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 MultexNET, 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 MultexEXPRESS, 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 Market Guide database, acquired in September 1999, provides investment
information products to financial institutions and Web sites, institutional
investors, corporations and professional vendors.
MultexNET is offered either as 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.
MultexEXPRESS is also offered pursuant to one to three year subscriptions,
generating revenue from professional service 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 sales transactions, email and banner advertising, and contractual,
lead-generating sponsorships. Sponsors to Multex Investor include full-service
brokerage firms and other financial institutions interested in attracting
individual investors to their products, services and brands.
Market Guide acquires, integrates, condenses and publishes accurate, timely and
objective financial, descriptive and other information on public corporations.
Market Guide generates revenue primarily by licensing its database in single or
multi-year contracts.
8
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001
Revenues
Multex'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 decreased 23.5% to $22.6 million for the quarter ended March 31,
2002 from $29.5 million for the quarter ended March 31, 2001. All of the
Company's product lines were negatively affected by the continued weakness in
the global financial markets. On a sequential basis, revenues increased by
approximately $300,000 compared to the fourth quarter of 2001.
MultexEXPRESS revenue decreased 24% to $8.7 million for the quarter ended March
31, 2002 from $11.4 million for the quarter ended March 31, 2001. The decrease
in revenue is primarily a result of reduced technology spending by many of the
Company's customers. On a sequential basis, MultexExpress revenues increased 5%
compared to the fourth quarter of 2001.
MultexNET sales decreased 9% to $6.2 million for the quarter ended March 31,
2002 from $6.8 million for the quarter ended March 31, 2001. The decrease in
MultexNET sales was primarily attributable to a decline in Multex OnDemand
report sales, partially offset by an increase in new MultexNET subscriptions.
The decrease in OnDemand revenue was due to a decline in investment banking
activity and general uncertainty in the global financial markets. The increase
in MultexNET subscription revenues reflected the introduction of MultexIR in
October 2001 and continued acceptance of new enhancements added to the MultexNET
product lines such as NetScreen Pro, Earnings Estimates and Street Fusion. On a
sequential basis, MultexNET revenues increased 6% compared to the fourth quarter
of 2001.
Multex Investor revenues declined 43% to $2.9 million for the quarter ended
March 31, 2002 from $4.9 million for the quarter ended March 31, 2001. This
decline reflects lower advertising and sponsorship revenues, offset in part by
an increase in pay-per-view revenues. On a sequential basis, Multex Investor
revenues decreased 3% compared to the fourth quarter of 2001.
Market Guide revenues decreased 23% to $4.8 million for the quarter ended March
31, 2002 from $6.3 million for the quarter ended March 31, 2001. The decrease in
revenues was primarily due to an increase in customer bankruptcies and customer
defaults.
For the quarters ended March 31, 2002 and March 31, 2001 the Company did not
record any performance-based warrant charges with Merrill Lynch. These charges
will be recorded in the periods in which the 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, 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 2.0% to $5.8 million for the quarter ended March 31,
2002 from $5.7 million for the quarter ended March 31, 2001. As a percentage of
gross revenues, cost of revenues increased to 25.8% for the quarter ended March
31, 2002 from 19.4% for the quarter ended March 31, 2001. The increase in cost
of revenues was primarily due to the addition of new data feeds used in the
Company's products. On a sequential basis, cost of revenues declined 1%,
reflecting lower telecommunication charges and compensation expenses.
9
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 17.6% to $5.5
million for the quarter ended March 31, 2002 from $6.7 million for the quarter
ended March 31, 2001. As a percentage of gross revenues, sales and marketing
expenses increased to 24.5% for the quarter ended March 31, 2002 from 22.8% for
the quarter ended March 31, 2001. The decrease in sales and marketing expenses
was primarily due to lower advertising and marketing expenditures and lower
commissions resulting from a decrease in sales.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses decreased 43.0% to $1.5
million for the quarter ended March 31, 2002 from $2.6 million for the quarter
ended March 31, 2001. As a percentage of gross revenues, research and
development expenses decreased to 6.6% for the quarter ended March 31, 2002 from
8.8% for the quarter ended March 31, 2001. The decrease in research and
development expenses in dollar terms was primarily attributable to a decline in
the number of developers on staff and an increase in the number of capitalized
internally developed software projects.
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 12.0% to $7.2 million for the
quarter ended March 31, 2002 from $8.2 million for the quarter ended March 31,
2001. As a percentage of gross revenues, general and administrative expenses
increased to 31.9% for the quarter ended March 31, 2002 from 27.7% for the
quarter ended March 31, 2001. The decrease, in aggregate dollars, in general and
administrative expenses reflects lower 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 recently
acquired companies and the cost of warrants issued to Merrill Lynch & Co., Inc.
Depreciation and amortization for the quarter ended March 31, 2002 increased
20.9% to $4.5 million, compared to $3.8 million for the quarter ended March 31,
2001. This increase was due to an increase in capitalized software costs, and
additional computer purchases and leasehold improvements in 2001, offset in part
by a decrease in amortization of goodwill.
Income (loss) from Operations
Loss from operations totaled $2.0 million for the quarter ended March 31, 2002,
compared to income from operations of $2.5 million for the quarter ended March
31, 2001. Loss from operations reflects a decline in revenues, an increase in
cost of revenues, depreciation and amortization, offset in part by a decrease in
sales and marketing, research and development and general and administrative
expenses.
Interest Income (Expense)
Net interest income decreased 56.4% to $247,000 for the quarter ended March 31,
2002 from $566,000 for the quarter ended March 31, 2001. The decrease in net
interest income is primarily attributable to a decline in interest rates and a
lower cash balance.
Equity in Loss from Unconsolidated Business
Equity in loss of unconsolidated business reflects a $186,000 loss the Company
recognized from its equity investment in TheMarkets.com LLC. This investment was
completed in the quarter ended September 30, 2001. There were no comparable
transactions in the first quarter ended March 31, 2001.
Income Taxes
Income tax expense totaled $90,000 for the first quarter ended March 31, 2002
and for the quarter ended March 31, 2001. Income tax expense consists of state
and local franchise taxes.
10
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.
Net income (loss)
The Company recorded a net loss of $2.0 million, or a net loss per share of
$0.06, for the first quarter ended March 31, 2002 compared to net income of $3.0
million, or earnings per share of $0.09, for the quarter ended March 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, and also at December 31, 2001, we had $41.8 million of cash,
cash equivalents and marketable securities.
Net cash provided by operating activities was $1.6 million for the three months
ended March 31, 2002. This amount primarily consisted of the Company's net loss
of $2.0 million, reduced by noncash expenses of $5.2 million, increases in
accounts payable and accrued expenses of $.9 million, offset in part by
increases in accounts receivable and other current assets of $2.1 million, and
decreases in deferred revenues and other liabilities of $0.4 million.
Net cash used by investing activities was $6.6 million for the three months
ended March 31, 2002. This amount includes purchases of marketable securities of
$5.1 million and purchases of property and equipment of $1.5 million.
Our principal commitments consist of obligations outstanding under lease
agreements for offices. 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 to be critical due to the estimation process involved.
At March 31, 2002, goodwill and intangible assets totaled $21.1 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.
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. The September 11, 2001 terrorist attacks affected many of our customers
located in and around the World Trade Center, which, together with the
11
broader effects of the terrorist attacks, compounded the effects of an already
slow global economy. 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.
MULTEX'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, and from development, hosting, license, and subscription fees for
MULTEXEXPRESS. We must generate additional sales of investment research on a
pay-per-view basis through MULTENET 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. Our recent results of operations
with respect to MULTEX INVESTOR reflect the adverse effects of lack of growth
(and even contraction) in certain of our markets. In order to accomplish our
objectives, we must:
o anticipate and adapt to the changing Internet and financial markets;
o attract and retain more subscribers, research and data contributors, and
technology and business partners;
o successfully execute 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 business and
handle any future changes in usage; and
o integrate acquired businesses, technologies, assets, products and services.
If we are unsuccessful in addressing these risks or in executing our business
strategy going forward, our business, results of operations, and financial
condition would be materially and adversely affected.
THE MARKETS FOR OUR PRODUCTS AND SERVICES CHANGE RAPIDLY
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. The market
relating to retail investing has deteriorated considerably in the 18 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.
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.
12
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;
o providers of reports filed under the Securities Exchange Act of 1934 and
other filings with the Securities and Exchange Commission;
o Standard & Poor's company-specific reports; and o Value Line investment
research reports.
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.
13
MULTEX'S RECOVERY FROM THE SEPTEMBER 11TH TERRORIST ATTACKS
MAY NOT PROCEED AS EXPECTED
Multex has allocated significant resources to its recovery efforts resulting
from the aftermath of the September 11, 2001 terrorist attacks. We may continue
to incur significant additional expenses as a result of increased security
requirements and other related costs. In addition, many of Multex's customers
are still in the midst of efforts to recover from the attacks. Those efforts may
or may not be successful, or may happen more slowly than anticipated.
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. We
continue to devote resources towards our recovery from the September 11, 2001
disaster and protecting our infrastructure against any similar disaster in the
future. In addition, the failure of our communications providers to provide the
data communications capacity in the time frame required by us, as occurred, for
example, in the aftermath of the September 11th attacks, could again 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.
14
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.
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 ONDEMAND constitute a significant portion of our cost of revenues. We
face from time to time considerable competitive pressure to increase these
royalties. Such increases have materially affected our results of operations as
described herein. 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. Our temporary loss of Internet data communications due to the
September 11th terrorist attacks illustrates this risk. 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.
15
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.
16
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
On April 23, 2002, Maurice Miller was appointed to the Multex
Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K: NONE
17
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: May 14, 2002 /s/ ISAAK KARAEV
-----------------------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: May 14, 2002 /s/ JEFFREY S. GEISENHEIMER
-----------------------------------------------
Name: Jeffrey S. Geisenheimer
Title: Chief Financial Officer
18