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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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number: 0-24559
MULTEX.COM, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-3253344
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(State of Incorporation) (I.R.S. Employer
Identification Number)
100 WILLIAM STREET, 7th FLOOR
NEW YORK, NEW YORK 10038
(212) 607-2400
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of May 10, 2001, there were 32,003,347 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
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PART I. FINANCIAL INFORMATION....................................................................................3
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited):........................................3
Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000................3
Condensed Consolidated Statements of Operations for the three months ended March 31,
2001 and 2000...................................................................................4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31,
2001 and 2000...................................................................................5
Notes to Condensed Consolidated Financial Statements March 31, 2001.............................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........8
PART II. OTHER INFORMATION......................................................................................18
ITEM 1. LEGAL PROCEEDINGS..............................................................................18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......................................................18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................18
ITEM 5. OTHER INFORMATION..............................................................................18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................................................18
ITEM 7. SIGNATURES.....................................................................................19
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
2001 2000
ASSETS (unaudited) (audited)
---------- ---------
Current assets:
Cash and cash equivalents $ 38,378 $ 20,237
Marketable securities 6,552 25,493
Accounts receivable, net 24,686 27,497
Other current assets 6,216 6,542
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Total current assets 75,832 79,769
Property and equipment, net 40,748 37,909
Goodwill, net 32,827 33,704
Intangibles, net 17,204 17,649
Other 5,468 5,490
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Total assets $172,079 $174,521
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,175 $ 4,805
Accrued expenses 5,506 9,742
Current portion of capital lease obligations 94 110
Deferred revenues 9,092 10,533
-------- --------
Total current liabilities 17,867 25,190
Long term liabilities:
Capital lease obligations 65 84
Deferred rent 3,315 3,119
Other 3 3
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Total long term liabilities 3,383 3,206
Stockholders' equity:
Preferred stock - $.01 par value:
Authorized - 5,000,000 shares; none issued and outstanding - -
Common stock - $.01 par value:
Authorized - 200,000,000 shares; issued and outstanding 31,915,000 shares
at March 31, 2001 and 31,741,000 at December 31, 2000 319 317
Additional paid-in capital 221,489 216,683
Accumulated deficit (58,321) (61,336)
Deferred equity consideration (12,571) (9,671)
Accumulated other comprehensive income (loss) (87) 132
-------- --------
Total stockholders' equity 150,829 146,125
-------- --------
Total liabilities and stockholders' equity $172,079 $ 174,521
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-------- --------
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, 2001 March 31, 2000
-------------- --------------
Revenues $29,504 $16,083
Cost of revenues 5,713 3,968
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Gross profit 23,791 12,115
Operating expenses:
Sales and marketing 6,716 6,240
Research and development 2,606 2,255
General and administrative 11,930 6,347
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Total operating expenses 21,252 14,842
Income (loss) from operations 2,539 (2,727)
Other income (expense)
Interest income 581 710
Interest expense (15) (13)
------- -------
Income (loss) before income taxes 3,105 (2,030)
Income tax expense 90 47
------- -------
Net income (loss) $ 3,015 $ 2,077)
------- -------
------- -------
Basic and diluted net income (loss) per share $ 0.09 $ (0.07)
------- -------
------- -------
Weighted average shares outstanding - Basic 31,831 28,297
------- -------
------- -------
Weighted average shares outstanding - Diluted 34,291 28,297
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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, 2001 March 31, 2000
-------------- --------------
Operating activities
Net income (loss) from operations $ 3,015 $ (2,077)
Adjustments to reconcile net loss from operations
to net cash used in operating activities:
Amortization of equity consideration 997 520
Depreciation and amortization 1,854 1,218
Amortization of goodwill 1,357 34
Bad debt expense 385 193
Changes in operating assets and liabilities:
Accounts receivable 2,426 (1,489)
Other current assets 326 1,187
Other assets 22 (423)
Accounts payable (2,768) (2,752)
Accrued expenses (4,334) (235)
Deferred revenue (1,441) 646
Deferred rent 196 231
Other liabilities - (7)
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Net cash provided by (used in) operating activities from operations 2,035 (2,954)
Investing activities
Purchase of marketable securities (11,014) (23,385)
Proceeds from sale of marketable securities 29,687 13,528
Acquisition of Sage Online - (6,000)
Purchase of property and equipment (3,492) (5,131)
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Net cash provided by (used in) investing activities 15,181 (20,988)
Financing activities
Proceeds from issuances of stock 911 22,218
Repayment of long-term debt and capital leases (35) (60)
-------- --------
Net cash provided by financing activities 876 22,158
Effect of exchange rate changes on cash 49 5
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Increase (decrease) in cash and cash equivalents 18,141 (1,779)
Cash and cash equivalents, beginning of year 20,237 6,089
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Cash and cash equivalents, end of period $ 38,378 $ 4,310
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Supplemental disclosures of cash flow information
Noncash investing and financing activity:
Accrued purchases of fixed assets $ 1,138 $ 463
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-------- --------
Unrealized (loss) gain on marketable securities $ (268) $ 15
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Issuance of restricted stock $ 3,897 $ -
-------- --------
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Stock issued for acquisition of software $ - $ 5,400
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Stock issued for exercise of warrants $ - $ 3
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-------- --------
Fair market value of warrants issued $ - $ 9,809
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Taxes paid $ 46 $ 2
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Interest paid $ 15 $ 10
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2001
NOTE 1 -- BASIS OF PRESENTATION
Multex.com, Inc. (the "Company" or "Multex.com") is a global provider
of investment information and technology solutions to the financial services
industry, including brokerage firms, professional money management firms, hedge
funds, venture capital firms, mutual funds, investment banks, corporations, and
individual investors. Headquartered in New York, the Company also has offices in
London, San Francisco, Edinburgh and Hong Kong.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. The disclosure of segment
information was not required as the Company operates in only one business
segment.
The balance sheet at December 31, 2000 has been derived from audited
financial statements but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
The interim financial information contained herein should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 2000 included in the Company's annual report on Form
10-K.
NOTE 2 -- STOCKHOLDERS' EQUITY
During the three months ended March 31, 2001, the Company issued
174,000 shares of its common stock to employees in connection with the exercise
of stock options and granted rights to receive an additional 301,000 shares to
employees in connection with its restricted stock program. The restricted stock
rights vest in four equal semi-annual installments beginning July 1, 2001, with
stock issuance occurring on each vesting date.
6
NOTE 3 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated (in thousands, except per share
data):
Three Months Ended
March 31,
-----------------------
2001 2000
---- ----
Numerator:
Numerator for basic and diluted net income
(loss) per share - net income (loss) $ 3,015 $ (2,077)
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------- --------
Denominator:
Denominator for basic net income (loss) per
share - weighted average shares 31,831 28,297
Assumed conversion of outstanding stock options 2,452 -
Assumed conversion of outstanding warrants 8 -
------- --------
Denominator for diluted net income (loss) per
share - weighted average shares 34,291 28,297
------- --------
Basic and diluted net income (loss) per share $ 0.09 $ (0.07)
------- --------
------- --------
NOTE 4 -- COMPREHENSIVE INCOME (LOSS)
Total comprehensive income (loss) was $2,796,000 and ($2,057,000) for
the three months ended March 31, 2001 and March 31, 2000, respectively.
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 is a global provider of investment information and technology
solutions for the financial services industry, including brokerage firms,
professional money management firms, hedge funds, venture capital firms, mutual
funds, investment banks, corporations and individual investors. We offer four
main products, as follows:
o MultexNET, launched in June 1996, provides access to real-time, commingled
equity and fixed income research, global estimates and company fundamental
information to buyside investors, sellside institutions, public and private
corporations and libraries of professional service firms;
o MultexEXPRESS, launched in January 1997, offers development, hosting and
real-time distribution of research and other investment information on
customized web sites to buyside investments firms, sellside institutions
and other financial services companies;
o Multex Investor, launched in November 1998, is the Company's financial
destination web site that provides financial data and access to free
research in return for permission-based leads to brokerage firms and
pay-per-view research on an embargoed basis; and
o Market Guide, acquired in September 1999, provides investment information
products to financial institutions and web sites, institutional investors,
corporations and professional vendors.
MultexNET is offered either on a one- to three-year subscription basis or on a
transactional basis through Multex OnDemand. The product allows entitled
institutional investors, corporations, financial institutions and advisors to
access full-text investment research reports on a real-time basis from
investment banks, brokerage firms and other third-party research providers over
the Internet or through other distribution channels.
MultexEXPRESS is also provided pursuant to one- to three-year subscriptions,
generating revenue from professional services, hosting, and license fees.
MultexEXPRESS enables financial institutions to distribute their proprietary
financial research, as well as other corporate documents, over the Internet,
through intranets and other private networks.
Multex Investor provides individual investors who register as members access to
a range of financial reports and services online from a majority of the
contributors to MultexNET. These reports are available either free of charge, or
for a fee determined by the research provider. Multex Investor generates
revenues from transactions, email and banner advertising, and contractual,
lead-generating sponsorships. Sponsors on Multex Investor include full-service
brokerage firms and other financial institutions interested in attracting
individual investors to their products, services and brands.
Market Guide acquires, integrates, condenses and publishes accurate, timely and
objective financial, descriptive and other information on publicly-traded
companies. Market Guide generates revenue primarily by licensing its database in
single or multi-year contracts.
8
Revenue from MultexNET subscriptions is recognized in equal installments over
the term of the subscription. Revenue from transactions on MultexNET and Multex
Investor are recognized upon sale. Some of the transactional users of MultexNET
pay a flat annual fee for the service, which entitles them to receive research
and other reports at a discounted rate. Revenues from these users are recognized
in equal installments over the term of the subscription. Revenue from
professional service fees related to Multex EXPRESS is recognized upon
completion of relevant service, whereas the hosting and license fees are
recognized over the term of the agreement. Revenue from sponsorships on Multex
Investor is recognized in equal installments over the term of the sponsorship.
Market Guide license fees are recognized over the term of the agreement.
The majority of costs associated with revenues from MultexNET, MultexEXPRESS,
Multex Investor and Market Guide are expensed as and when incurred.
9
Results of Operations
Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000
Revenues
Multex.com's 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
and Market Guide web sites. We also provide professional services to select
MultexEXPRESS clients, including software development, customization and
integration services.
Revenues increased 83.4% to $29.5 million for the quarter ended March 31, 2001
from $16.1 million for the quarter ended March 31, 2000. The increase in
revenues reflects growth in all four product groups. MultexEXPRESS revenue
benefited from an increase in the number of Express sites in operation,
additional customization work, and an early termination charge associated with
one customer who decided to exit the retail marketplace. MultexNET sales
benefited from an increased number of users accessing the MultexNET service and
an increase in the number of reports purchased through the OnDemand product.
Multex Investor benefited from fees associated with the Multex Investor Europe
partnership (jointly owned with Reuters), the inclusion of Sage revenues
(acquired in March 2000), an increase in advertising revenue and early
cancellation fees related to two sponsors exiting the retail marketplace. Market
Guide displayed strong growth from the inclusion of the Multex Global Estimates
(formerly Barra Global Estimates) business which was acquired in December 2000,
and an increase in the number of vendors distributing the Market Guide database,
partially offset by several smaller internet distributors canceling their
contracts and/or declaring bankruptcy.
Cost of Revenues
Cost of revenues consists primarily of fees payable to distributors of MultexNET
and Multex OnDemand, royalties payable to the authors of investment research and
content offered through Multex OnDemand, and the Multex Investor and Market
Guide web sites, internal and external development costs incurred for
MultexEXPRESS customers, research department costs related to the collection and
processing of financial data and global earnings estimates, and data
communications costs.
Cost of revenues increased 44.0% to $5.7 million in the quarter ended March 31,
2001 from $4.0 million for the quarter ended March 31, 2000. As a percentage of
revenues, cost of revenues decreased to 19.4% for the quarter ended March 31,
2001 from 24.7% for the quarter ended March 31, 2000. The increase in cost of
revenues in dollar terms was primarily due to increased royalty payments to
third party contributors resulting from additional report sales through the
Multex OnDemand platform, the inclusion of data collection costs related to the
Global Estimates business, and costs associated with increased customization
work related to development and enhancements of Express sites.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of salaries,
commissions, advertising, public relations, tradeshow expenses and costs of
marketing materials. Sales and marketing expenses increased 7.6% to $6.7 million
in the quarter ended March 31, 2001 from $6.2 million for the quarter ended
March 31, 2000. As a percentage of revenues, sales and marketing expenses
decreased to 22.8% for the quarter ended March 31, 2001 from 38.8% for the
quarter ended March 31, 2000. The increase in sales and marketing expenses was
due to an increase in head count offset by a sharp reduction in advertising and
marketing expenses. The Company has controlled its marketing expenditures with
the majority of marketing dollars spent on generating qualified leads to the
Multex Investor platform.
Research and Development. Research and development expenses consist primarily of
salaries and benefits. Research and development expenses increased 15.6% to $2.6
million for the quarter ended March 31, 2001 from
10
$2.3 million for the quarter ended March 31, 2000. As a percentage of revenues,
research and development expenses decreased to 8.8% for the quarter ended March
31, 2001 from 14.0% for the quarter ended March 31, 2000. The increase in
research and development expenses in dollar terms was primarily due to an
increase in the number of employees working on new products and enhancements
such as the next generation of MultexNET and the continued integration of Buzz
and Sage into the Multex product offerings.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation and amortization of equipment, software and
leasehold improvements, and amortization of identifiable intangible assets and
goodwill. General and administrative expenses increased 88.0% to $11.9 million
for the quarter ended March 31, 2001 from $6.3 million for the quarter ended
March 31, 2000. As a percentage of revenues, general and administrative expenses
increased to 40.4% for the quarter ended March 31, 2001 from 39.5% for the
quarter ended March 31, 2000. Growth in general and administrative expenses
reflects an increase in the number of employees and offices worldwide.
Additionally, the first quarter ended March 2001 included full recognition of
expenses related to Sage, Buzz and the BARRA Global Estimates business. As
mentioned in prior filings, these three companies were acquired in fiscal year
2000 with only a small portion of Sage's expenses reflected in the March 2000
financials. The Buzz and BARRA Global estimates acquisitions were consummated
subsequent to March 2000.
Income (loss) from Operations
Income from operations totaled $2.5 million for the quarter ended March 31, 2001
compared to a loss from operations of $2.7 million for the quarter ended March
31, 2000. Income from operations reflects revenue growth in all the Company's
product lines and declining expenses as a percentage of revenue.
Interest Income (Expense)
Net interest income decreased 18.8% to $566,000 for the quarter ended March 31,
2001 from $697,000 for the quarter ended March 31, 2000. The decrease in net
interest income is primarily attributable to a lower average cash balance
coupled with a decline in interest rates.
Income Taxes
Income taxes increased 91.5% to $90,000 for the quarter ended March 31, 2001
from $47,000 for the quarter ended March 31, 2000. The Company's effective tax
rate was less than 3% for the quarter and reflects the recording of franchise
taxes.
At December 31, 2000, Multex.com had net operating loss carryforwards of
approximately $50.0 million and research and development credits of
approximately $1.5 million for income tax purposes that expire in 2009 through
2020. The utilization with regard to timing and amount of the Company's net
operating loss carryfowards may be limited due to changes in the Company's
ownership pursuant to Section 382 of the Internal Revenue Code.
Net income (loss)
The Company recorded net income of $3.0 million, or net income per share of
$0.09, for the quarter ended March 31, 2001 compared to a net loss of $2.1
million, or a loss per share of $0.07, for the three months ended March 31,
2000. The improvement in net income was due to growth in all the product lines
and tighter cost control measures.
11
Liquidity and Capital Resources
At March 31, 2001, we had $44.9 million of cash, cash equivalents and marketable
securities. Our principal commitments consist of obligations under operating
leases.
Net cash provided by operating activities from continuing operations was $2.0
million in the first quarter ended March 31, 2001, and net cash used in
operating activities was $3.0 million in the equivalent period in 2000. The
increase in cash provided by operating activities reflects the Company's swing
to profitability, higher non-cash charges (including depreciation and
amortization) and improved accounts receivable balances, partially offset by a
reduction in accrued expenses related to incentive compensation payments accrued
in 2000 and paid in the March 2001 quarter.
Net cash provided by investing activities was $15.2 million in the first quarter
ended March 31, 2001, and net cash used in investing activities was $21.0
million in the equivalent period in 2000. The improvement in cash provided by
investing activities was primarily related to marketable securities
transactions, a reduction in purchases of property and equipment, and the
acquisition of Sage Online in March 2000.
Net cash provided by financing activities was $876,000 in the first quarter
ended March 31, 2001, and $22.2 million for the equivalent period in 2000. The
sharp decline in cash provided by financing activities was due to the private
placement of stock issued to Merrill Lynch in the March 2000 quarter. There was
no comparable transaction in the March 2001 quarter.
We believe that our existing cash, cash equivalents and marketable securities,
will be sufficient to meet our anticipated cash needs for working capital and
capital expenditures at least for the next twelve months.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Multex.com's business could be materially and adversely affected by a downturn
in the financial services industry
We are dependent upon the continued demand for the distribution of
investment research and other information over the Internet, making our business
susceptible to a downturn in the financial services industry. In addition, U.S.
financial institutions are continuing to consolidate, increasing the leverage of
our information providers to negotiate price and decreasing the overall
potential market for some of our services. Weakness in the financial services
industry could also adversely impact our subscription renewal rates. These
factors, as well as other changes occurring in the financial services industry,
could have a material and adverse effect on our business, results of operations
and financial condition.
Multex.com's business would be materially and adversely affected if the market
for online investment research does not continue to grow
In order to be successful, we must increase our revenues from
subscription fees for MultexNET, from development, hosting and subscription fees
for MultexEXPRESS, generate additional sales of investment research on a
pay-per-view basis through Multex OnDemand, attract more users to and generate
more leads for our sponsors from Multex Investor and increase the total license
fees generated from the Market Guide database. We must also integrate and
increase revenues from our recently acquired subsidiaries, Sage Online,
BuzzCompany.com, and the BARRA Global Estimates division. We face risks in
accomplishing these objectives, among others, relating to our ability to:
o anticipate and adapt to the changing Internet market;
12
o attract and retain more subscribers, research and data contributors, and
technology and business partners;
o implement our sales, marketing, and branding strategies, both domestically
and internationally;
o attract, retain and motivate qualified personnel;
o respond to actions taken by our competitors;
o continue to build an infrastructure to effectively manage our growth and
handle any future increased usage; and
o integrate acquired businesses, technologies, products, and services.
If we are unsuccessful in addressing these risks or in executing our
business strategy, our business, results of operations, and financial condition
would be materially and adversely affected.
The markets for our products and services are rapidly changing
The market for the distribution of investment research and other
information over the Internet is rapidly evolving and demand and market
acceptance for these services continue to be subject to a high level of
uncertainty.
Because the market for our services is still relatively new and rapidly
evolving, it is difficult to predict with any assurance the growth rate, if any,
and the ultimate size, of this market. We cannot assure you that the market for
our services will continue to develop or that our services will ever achieve
broad market acceptance. If the market for our services weakens, develops more
slowly than expected, or becomes saturated with competitors, if our services do
not achieve broad market acceptance, or if pricing becomes subject to
significant competitive pressures, our business, results of operations and
financial condition would be materially and adversely affected.
Multex.com's business could be materially and adversely affected by pressures of
competition
The market for the distribution of investment research and other
information over the Internet is intensely competitive. Increased competition
could result in price reductions, reduced gross margins and loss of market
share, any of which could have a material and adverse effect on our business,
results of operations and financial condition. We currently face direct and
indirect competition for both providers of investment research and other
reports, and for subscribers, including with large and well-established
distributors of financial information, such as Thomson Financial Services.
Some of our competitors enjoy exclusive distribution arrangements with major
financial institutions. We also compete with:
o companies that provide investment research, including investment banks and
brokerage firms, many of whom have their own Web sites;
o other providers of either free or subscription research services on the
Internet;
o services provided by some of our strategic distributors which are
competitive in one or more respects with our service offerings;
o numerous prospective competitors, including Standard & Poor's, Moody's, and
Zacks Investment Research, that offer investment research-based services;
o various written publications, including traditional media, investment
newsletters, personal financial magazines and industry research appearing
in financial periodicals;
o services provided by in-house management information services personnel and
independent systems integrators;
o annual reports and other filings with the Securities and Exchange
Commission;
o Standard & Poor's company-specific reports; and
o Value Line investment research reports.
If we fail to successfully compete with these entities or information
sources, our business, results of operations, and financial condition may be
materially adversely affected. It is also possible that new competitors may
emerge and rapidly acquire significant market share.
13
Rapid growth in Multex.com's future operations could strain our managerial,
operational and financial resources
We have experienced rapid growth in our operations. This rapid growth
has placed, and our anticipated future growth will continue to place, a
significant strain on our managerial, operational and financial resources, that
if not properly managed, could materially adversely affect our business, results
of operations, and financial condition.
The loss of any of Multex.com's key personnel could have a material and adverse
effect
Our future success will depend, in substantial part, on the continued
service of our senior management, including Mr. Isaak Karaev, our Chairman,
President and Chief Executive Officer, and key technical and sales personnel,
none of whom has entered into an employment agreement with us other than a
non-competition/non-disclosure agreement. We maintain a key person life
insurance policy in the amount of $2.0 million on the life of Mr. Karaev. The
loss of the services of one or more of our key personnel could have a material
and adverse effect on our business, results of operations and financial
condition. We have from time to time in the past experienced, and we expect to
continue to experience in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications.
Multex.com's international operations are new and may not be successful. We have
only limited business experience outside of the United States
A key component of our strategy is to continue to expand our
international operations. To date, we have only limited experience in developing
and obtaining research and other financial information relating to companies
whose securities are traded on foreign markets and in marketing, selling and
distributing our services internationally. The failure to gain the necessary
experience, hire appropriate personnel, and enter into key business
relationships in these markets could have a material and adverse effect on our
business, results of operations and financial condition.
Doing business internationally subjects us to additional regulatory
requirements, tax liabilities and other risks
There are risks inherent in doing business in international markets,
including unexpected changes in regulatory requirements, potentially adverse tax
consequences, export restrictions and controls, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates, and seasonal reductions in
business activity during the summer months in Europe and various other parts of
the world, any of which could have a material and adverse effect on the success
of our international operations and, consequently, on our business, results of
operations and financial condition. Furthermore, we cannot assure you that
governmental regulatory agencies in one or more foreign countries will not
determine that the services provided by us constitute the provision of
investment advice, which could result in our having to register in these
countries as an investment advisor or in our having to cease selling our
services in these countries, either of which could have a material and adverse
effect on our business, results of operations and financial condition.
Because Multex.com's business is dependent upon network and computer systems
located in one area, we are susceptible to problems caused by natural disasters,
power failures, system failures, security breaches or other damage to our system
Our electronic distribution of investment research utilizes proprietary
technology that resides principally in New York City. The continued and
uninterrupted performance of our network and computer systems is critical to our
success. Any disaster, power outage or system failure that causes interruptions
in our ability to provide our services to our customers, including failures that
affect our ability to collect research from our information providers or provide
electronic investment research to our users, could reduce customer satisfaction
and, if sustained or repeated, would reduce the attractiveness of our services.
An increase in the volume of research reports handled by
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our systems, or in the rate of requests for this research, could strain the
capacity of our software or hardware, which could lead to slower response times
or system failures. Furthermore, we face the risk of a security breach of our
systems that could disrupt the distribution of research and other reports and
information. Our business, results of operations and financial condition could
be materially and adversely affected if any of these problems occur.
Our operations are dependent on our ability to protect our network and
computer systems against damage from computer viruses, fire, power loss, data
communications failures, vandalism and other malicious acts, and similar
unexpected adverse events. In addition, a failure of our communications
providers to provide the data communications capacity in the time frame required
by us for any reason could cause interruptions in the delivery of our services.
Despite precautions we have taken, unanticipated problems affecting our systems
have from time to time in the past caused, and in the future could cause, delays
and interruptions in the delivery of our services. Although we carry general
liability insurance, our insurance may not cover any claims by dissatisfied
customers or subscribers or may not be adequate to indemnify us for any
liability that may be imposed in the event that claims were brought against us.
The market price of our shares may experience extreme price and volume
fluctuations
The stock market has, from time to time, experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile, including fluctuations that are often
unrelated to the operating performance of the affected companies. Broad market
fluctuations of this type may adversely affect the market price of our common
stock. The market price of our common stock could be subject to significant
fluctuations due to a variety of factors, including:
o public announcements concerning us or our competitors, or the Internet
industry;
o fluctuations in operating results;
o a downturn in the financial services industry generally or the market for
securities trading in particular;
o introductions of new products or services by us or our competitors;
o changes in analysts' earnings estimates; and
o announcements of technological innovations.
In the past, companies that have experienced volatility in the market
price of their stock have been the object of securities class action litigation.
If we were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources
and have a material adverse effect on our business, results of operation and
financial condition.
Our executive officers, directors and 5% or greater stockholders significantly
influence all matters requiring a stockholder vote
Our executive officers, directors and existing stockholders who each
own greater than 5% of the outstanding common stock and their affiliates, in the
aggregate, beneficially own approximately 50% of our outstanding common stock.
As a result, our executive officers, directors and 5% or greater stockholders
will be able to significantly influence the outcome of all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control.
The future sale of shares of our common stock may negatively affect our stock
price
If our stockholders sell substantial amounts of our common stock,
including shares issuable upon the exercise of outstanding options and warrants
in the public market, the market price of our common stock could fall. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and price that we deem appropriate.
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Distribution and other fees to research providers and strategic partners
increase Multex.com's costs
Royalties and distribution fees payable to our information providers
and strategic partners to obtain distribution rights to research reports
included in Multex OnDemand constitute a significant portion of our cost of
revenues. If we are required to increase the royalties or fees payable to these
information providers or strategic partners, these increased payments could have
a material and adverse effect on our business, results of operations and
financial condition.
The inadvertent distribution of research reports could result in a claim for
damages against Multex.com or harm our reputation
Under certain of our contracts we are required to restrict distribution
of financial information to those users who have been authorized or entitled to
access the report by the information provider. We might inadvertently distribute
a particular report to a user who is not so authorized or entitled, which could
subject us to a claim for damages by the information provider or which could
harm our reputation in the marketplace, either of which could have a material
and adverse effect on our business, results of operations and financial
condition.
We may be subject to legal claims in connection with the content we publish and
distribute on the Internet
As a publisher and distributor of online content, we face potential
direct and indirect liability for claims of defamation, negligence, copyright,
patent or trademark infringement, violation of the securities laws and other
claims based upon the reports and data that we publish. For example, by
distributing a negative investment research report, we may find ourselves
subject to defamation claims, regardless of the merits of such claims. Computer
failures or human error may also result in incorrect data being published and
distributed widely. In these and other circumstances, we might be required to
engage in protracted and expensive litigation, which could have the effect of
diverting management's attention and require us to expend significant financial
resources. Our general liability insurance may not cover any of these claims or
may not be adequate to protect us against all liability that may be imposed.
Any claims or resulting litigation could have a material and adverse effect on
our business, results of operations and financial condition.
Risks Unique to the Internet Industry
If the Internet infrastructure is not adequately maintained, we may be unable to
provide investment research and information services in a timely manner
Our future success will depend, in substantial part, upon the
maintenance of the Internet infrastructure, including a reliable network
backbone with the necessary speed, data capacity and security, and the timely
development of enabling products for providing reliable and timely Internet
access and services. We cannot assure you that the Internet infrastructure will
continue to be able to support the demands placed on it or that the performance
or reliability of the Internet will not be adversely affected. Furthermore, the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure or otherwise, and these outages or
delays could adversely affect the web sites of our contributors, subscribers or
distributors. In addition, the Internet could lose its viability as a form of
media due to delays in the development or adoption of new standards and
protocols that can handle increased levels of activity. We cannot assure you
that the infrastructure and complementary products and services necessary to
maintain the Internet as a viable commercial medium will be developed or
maintained.
We may become subject to burdensome government regulation and legal
uncertainties
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. Legislation could dampen the
growth in the use of the Internet generally and decrease the acceptance of the
Internet as a communications and commercial medium, which could have a material
and adverse effect on our business, results of operations and financial
condition. In addition, due to the global nature of the
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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.
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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: NONE
(b) Reports on Form 8-K: NONE
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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 15, 2001 /s/ Isaak Karaev
--------------------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: May 15, 2001 /s/ John J. McGovern
-------------------------------------------
Name: John J. McGovern
Title: Chief Financial Officer
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