<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 2000
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 7375 22-3253344
- ------------------------- ----------------------------- ----------------------
(State of Incorporation) (Primary Standard Industrial I.R.S. Employer
Classification Code) 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 March 31, 2000, there were 29,151,778 shares of the registrant's common
stock outstanding.
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
MULTEX.COM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION....................................................................................3
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited):........................................3
Condensed Consolidated Balance Sheets as of March 31, 2000 and December
31, 1999........................................................................................3
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999...................................................................4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999...................................................................5
Notes to Condensed Consolidated Financial Statements March 31, 2000.............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................................................................. 9
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 REPORT ON FORM 8-K................................................................18
ITEM 7. SIGNATURES.....................................................................................19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
--------- ------------
2000 1999
---- ----
(unaudited) (see Note 1)
----------- ------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 4,310 $ 6,089
Marketable securities 42,900 33,028
Accounts receivable, net 12,250 10,954
Other current assets 2,006 3,193
--------- ---------
Total current assets 61,466 53,264
Property and equipment, net 20,638 10,862
Goodwill 16,987 --
Other 1,897 1,474
--------- ---------
Total assets $ 100,988 $ 65,600
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,762 $ 5,051
Accrued expenses 4,543 4,778
Current portion of capital lease obligations 198 225
Deferred revenues 6,337 5,691
--------- ---------
Total current liabilities 13,840 15,745
Long term liabilities:
Capital lease obligations 159 192
Deferred rent 2,662 2,431
Other 24 31
--------- ---------
Total long term liabilities 2,845 2,654
Stockholders' equity:
Preferred stock- $.01 par value:
Authorized- 5,000,000 shares; none issued and outstanding -- --
Common stock $.01 par value
Authorized - 50,000,000 shares: issued and outstanding-
29,151,778 shares at March 31, 2000 and 27,179,717 at
December 31, 1999 292 272
Additional paid-in-capital 157,992 109,564
Accumulated deficit (62,218) (60,141)
Deferred equity consideration (11,720) (2,431)
Accumulated other comprehensive loss (43) (63)
--------- ---------
Total stockholders' equity 84,303 47,201
--------- ---------
Total liabilities and stockholders' equity $ 100,988 $ 65,600
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues $ 16,083 $ 7,606
Cost of revenues 3,968 2,006
-------- --------
Gross profit 12,115 5,600
Operating expenses:
Sales and marketing 6,240 4,031
Research and development 2,255 1,065
General and administrative 6,347 3,737
-------- --------
Total operating expenses 14,842 8,833
Loss from operations (2,727) (3,233)
Other income (expense)
Interest income 710 299
Interest expense (13) (36)
-------- --------
Loss from continuing operations before
income taxes (2,030) (2,970)
Income tax expense (47) (446)
-------- --------
Loss from continuing operations (2,077) (3,416)
Discontinued operations:
Gain from discontinued operations -- 331
-------- --------
Net loss (2,077) (3,085)
Redeemable preferred stock dividends -- (1,188)
-------- --------
Net loss available to common stockholders $ (2,077) $ (4,273)
======== ========
Basic and diluted earnings (loss) per share:
Continuing operations, net of preferred
stock dividends $ (0.07) $ (0.45)
Discontinued operations -- 0.03
-------- --------
Loss per share available to common stockholders $ (0.07) $ (0.42)
======== ========
Number of shares used in computed basic and
diluted loss per share 28,297 10,227
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Operating activities
<S> <C> <C>
Net loss from continuing operations $ (2,077) $ (3,416)
Adjustments to reconcile net loss from continuing operations
to net cash used in operating activities:
Amortization of equity consideration 520 120
Depreciation and amortization 1,218 855
Amortization of goodwill 34 --
Amortization of issuance costs -- 13
Bad debt expense 193 123
Accumulated deficit adjustment -- (364)
Changes in operating assets and liabilities:
Accounts receivable (1,489) (2,335)
Other current assets 1,187 (905)
Other assets (423) 769
Accounts payable (2,752) 815
Accrued expenses (235) 1,006
Deferred revenue 646 1,604
Deferred rent 231 419
Other liabilities (7) (7)
-------- --------
Net cash used in operating activities from continuing operations (2,954) (1,303)
Investing activities
Purchase of marketable securities (23,385) (41,026)
Proceeds from sale of marketable securities 13,528 --
Acquisition of Sage Online (6,000) --
Purchase of property and equipment (5,131) (747)
-------- --------
Net cash used in investing activities (20,988) (41,773)
Financing activities
Proceeds from issuances of stock 22,218 42,829
Proceeds from equipment line of credit -- 393
Repayment of long-term debt and capital leases (60) (760)
-------- --------
Net cash provided by financing activities 22,158 42,462
Discontinued activities
Income from discontinued operations including gain on sale,
net of taxes -- 106
Adjustments to reconcile income from discontinued operations
to net cash provided by discontinued operations:
Gain on sale of discontinued operations, net of taxes -- 225
-------- --------
Net cash provided by discontinued operations -- 331
Effect of exchange rate changes on cash 5 6
-------- --------
Increase in cash and cash equivalents (1,779) (277)
Cash and cash equivalents, beginning of year 6,089 3,219
-------- --------
Cash and cash equivalents, end of year $ 4,310 $ 2,942
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
MULTEX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited; in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Supplemental disclosures of cash flow information
Noncash investing and financing activity:
<S> <C> <C>
Acquisition of fixed assets through capital leases $ -- $ 280
=========== =====
Accrued purchases of fixed assets $ 463 $ 190
=========== =====
Unrealized gain on marketable securities $ 15 $--
=========== =====
Stock issued for acquisition of Sage Online $ 11,021 $--
=========== =====
Stock issued for acquisition of software $ 5,400 $--
=========== =====
Stock issued for exercise of warrants $ 3 $--
=========== =====
Fair market value of warrants issued $ 9,809 $--
=========== =====
Taxes paid $ 2 $--
=========== =====
Interest paid $ 10 $ 24
=========== =====
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 1 -- BASIS OF PRESENTATION
Multex.com, Inc. ("Multex.com"), including its wholly owned
subsidiaries (collectively referred to as the "Company"), is a leading financial
e-marketplace connecting buyers and sellers of financial services. The Company
provides information and commerce-enabling technology and infrastructure,
application services, Web hosting and online community services to brokerage
firms, investment banks, corporations and institutional and individual
investors.
The accompanying condensed consolidated statement of operations for the
three-month period ended March 31, 1999 has been restated to reflect the
September 23, 1999 acquisition of Market Guide Inc. ("Market Guide"), which was
accounted for as a pooling of interests. The pooling of interests method of
accounting requires the restatement of all periods as if the Company and Market
Guide had always been combined. The condensed consolidated statement of
operations for the three-month period ended March 31, 1999 combines the
statement of operations of Multex.com for the three-month period ended March 31,
1999 and the estimated statement of operations of Market Guide for the
three-month period ended March 31, 1999.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from audited
financial statements but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
For further information, refer to the consolidated financial statements
and footnotes thereto for the year ended December 31, 1999 included in the
Company's annual report on Form 10-K.
NOTE 2 -- STOCKHOLDERS' EQUITY
On January 31, 2000, pursuant to an agreement with Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into on December 21, 1999, the Company issued
1,000,000 shares of its common stock at a purchase price of $21.60 per share,
which approximated fair market value. In connection with the agreement, the
Company also issued a warrant to purchase 750,000 shares of its common stock at
$50 per share. The warrant is immediately exercisable. The Company valued the
warrant, using the Black-Scholes valuation model, at $9,809,000. The fair value
of the warrant is being amortized over the five-year life of the agreement.
In connection with the above-referenced Merrill Lynch agreement, on
February 1, 2000 the Company acquired certain software from Merrill Lynch in
exchange for $500,000 and 200,000 shares of the Company's common stock based on
the fair value at the date of issuance.
On February 4, 2000, the Company issued 266,102 shares of its common
stock in connection with the exercise of a warrant.
During the three months ended March 31, 2000, the Company issued
151,776 shares of its common stock in connection with the exercise of stock
options to employees.
7
<PAGE>
MULTEX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
MARCH 31, 2000
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):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
------------- --------------
Numerator:
<S> <C> <C>
Net loss from continuing operations $ (2,077) $ (3,416)
Discontinued operations -- 331
Redeemable preferred stock dividends -- (1,188)
----------- -----------
Numerator for basic and diluted net loss per
share - net loss available for common
stockholders $ (2,077) $ (4,273)
=========== ===========
Denominator:
Denominator for basic and dilutive net loss per
share - weighted average shares 28,297 10,227
----------- -----------
Basic and diluted net loss per share $ (0.07) $ (0.42)
=========== ===========
</TABLE>
NOTE 4 - COMPREHENSIVE LOSS
Total comprehensive loss (in thousands) was $2,057 and $3,079 for the
three months ended March 31, 2000 and March 31, 1999, respectively.
NOTE 5 - ACQUISITION
On March 20, 2000 the Company entered into an agreement (the "Sage
Agreement") to acquire all of the outstanding shares of Sage Online, Inc. In
connection with the Sage Agreement, the Company issued 354,183 shares of common
stock, with a fair market value of $31.16 per share, and paid $6 million in
cash. The acquisition has been accounted for by the purchase method of
accounting and accordingly, the excess of the purchase price over the fair
market value of the net assets acquired has been allocated to goodwill in the
amount of $17,021,595. Upon further analysis, the Company may allocate some
portion of the goodwill to identifiable tangible assets if appropriate. Goodwill
is being amortized over a life of 15 years.
NOTE 6 - SUBSEQUENT EVENT
On May 10, 2000, the Company, through a newly-formed wholly-owned
subsidiary, acquired BuzzCompany.com, Inc., an Internet software developer, in
exchange for 1,058,000 shares of the Company's common stock, the assumption of
certain stock options and approximately $500,000 in cash.
8
<PAGE>
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 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE
HARBOR" FOR CERTAIN FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS, INCLUDING BUT
NOT LIMITED TO THOSE SET FORTH UNDER "RISK FACTORS THAT MAY AFFECT FUTURE
RESULTS" AND ELSEWHERE IN THIS QUARTERLY REPORT, COULD CAUSE THE COMPANY'S
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS MADE IN THIS REPORT AND IN ORAL
STATEMENTS MADE BY AUTHORIZED OFFICERS OF THE COMPANY.
OVERVIEW
Multex.com is a leading financial e-marketplace connecting buyers and
sellers of financial services. The Company provides information and
commerce-enabling technology and infrastructure, application services, Web
hosting and online community services to brokerage firms, investment banks,
corporations and institutional and individual investors. We offer five main
services as follows:
o MultexNET, which was launched in June 1996;
o MultexEXPRESS, which was launched in January 1997;
o Multex Research-On-Demand, which was launched in April 1997;
o Multex Investor, which was launched in November 1998; and
o Market Guide database, which was acquired in September 1999.
MultexNET, typically offered as a one- to three-year subscription,
allows entitled institutional investors to access full-text investment research
reports on a real-time basis from investment banks, brokerage firms and other
third-party research providers over the Internet or through other distribution
channels. MultexEXPRESS, also provided pursuant to one- to three-year
subscriptions, enables financial institutions to distribute their proprietary
financial research, as well as other corporate documents, over the Internet,
through intranets and other private networks. Multex Research-On-Demand gives
corporations, financial institutions and advisors, and institutional investors
the ability to access research reports on a pay-per-view basis from a majority
of the contributors to MultexNET, over the Internet or through other
distribution channels. Multex Investor, www.multexinvestor.com, gives individual
investors who register as members access to a range of financial reports and
services, including research reports on a pay-per-view basis, over the Internet
from a majority of the contributors to MultexNET. Multex Investor also includes
banner advertising and sponsorship advertising throughout the site. Sponsors to
Multex Investor include full-service brokerage firms and other financial
institutions interested in attracting individual investors to their products,
services and brands. Market Guide information is licensed on over 140 web sites
as well as its own web site, www.marketguide.com. Revenue from Market Guide
information is primarily derived from license and redistribution agreements and
advertising.
Revenues from subscriptions to MultexNET and MultexEXPRESS are
recognized in equal installments over the term of the subscription. Revenues
from Multex Research-On-Demand and pay-per-view transactions on Multex Investor
are recognized upon sale. Revenues from sponsorships to Multex Investor are
recognized in equal installments over the term of the sponsorship. Some of the
users of Multex Research-On-Demand pay a flat annual fee for the service, which
entitles them to receive research and other reports at a discounted rate.
Revenues from these users are recognized in equal installments over the term of
the subscription. All costs associated with revenues from MultexNET,
MultexEXPRESS, Multex Research-On-Demand and Multex Investor are expensed as and
when incurred. We pay distribution fees to our distributors and, with respect to
Multex Research-On-Demand and pay-per-view transactions on Multex Investor,
royalties to the investment banks, brokerage firms or third-party research
providers that authored the research.
9
<PAGE>
Recent Developments
Merrill Lynch Transaction
On December 21, 1999, Multex.com announced a multi-year partnership
with Merrill Lynch to co-develop global research and information Web sites for
clients of Merrill Lynch's institutional e-commerce portal. The companies will
jointly develop the next-generation platform for real-time delivery of Merrill
Lynch investment strategy and securities research for its institutional clients.
Sage Transaction
On March 20, 2000, Multex.com acquired Sage Online, Inc. Sage Online is
a leading provider of live events and interactive community for personal
finance, including mutual fund and equity content, chat rooms, forums and
message boards. Prior to its acquisition by Multex.com, Sage Online was a
privately held company.
BuzzCompany.com Transaction
On May 10, 2000, Multex.com acquired BuzzCompany.com, Inc.
BuzzCompany.com is a leading provider of e-community Internet products and
services, and performs web development services for a variety of financial
services companies. Prior to its acquisition by Multex.com, BuzzCompany.com was
a privately held company.
Results of Operations
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
Revenues
Multex.com's revenues consist of subscription fees for MultexNET,
subscription, development and hosting fees for MultexEXPRESS, sales of
investment research on a pay-per-view basis through Multex Research-On-Demand,
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. On occasion, as a service to our clients, we have acquired
equipment for resale.
Revenues increased 111% to $16.1 million for the quarter ended March
31, 2000 from $7.6 million for the quarter ended March 31, 1999. The increase in
revenues was attributable to a number of factors: a significant increase in the
number of institutions and individuals using our pay-per-view service, greater
acceptance of Multex Research-On-Demand, an increase in the number of
installations utilizing MultexEXPRESS to distribute their proprietary research
to their employees and customers, an increase in the number of vendors
distributing the Market Guide database, and increased advertising and
sponsorship revenues from the Multex Investor and Market Guide Web sites.
Cost of Revenues
Cost of revenues consist primarily of fees payable to distributors of
MultexNet and Multex Research-On-Demand, royalties payable to the authors of
investment research and content offered through Multex Research-On-Demand,
Multex Investor and marketguide.com, external development costs incurred for
MultexEXPRESS customers, research department costs related to the collection and
processing of financial data and earnings estimates, purchases of equipment for
resale and data communications costs.
Cost of revenues increased 97.8% to $4.0 million in the quarter ended
March 31, 2000 from $2.0 million for the quarter ended March 31, 1999. As a
percentage of revenues, cost of revenues decreased to 24.7% for the quarter
ended March 31, 2000 from 26.4% for the quarter ended March 31, 1999. The
increase in cost of revenues in dollar terms was primarily due to royalty and
distribution fee payments as a result of increased sales of Multex
Research-On-Demand, increased data collection costs related to the maintenance
and expansion of the Market Guide database, increased royalty payments to
content providers resulting from increased web site traffic, increased
third-party Web site development costs reflecting an increased number of
MultexEXPRESS installations, and
10
<PAGE>
additional data communications charges resulting from increased installations of
MultexEXPRESS and sales of subscriptions for MultexNET.
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 54.8% to
$6.2 million for the quarter ended March 31, 2000 from $4.0 million for the
quarter ended March 31, 1999. As a percentage of revenues, sales and marketing
expenses decreased to 38.8% for the quarter ended March 31, 2000 from 53.0% for
the quarter ended March 31, 1999. The increase in sales and marketing expenses
was due to an expansion of our sales force both domestically and internationally
and increased marketing activities.
Research and Development. Research and development expenses consist
primarily of salaries and benefits. Research and development expenses increased
112% to $2.3 million for the quarter ended March 31, 2000 from $1.1 million for
the quarter ended March 31, 1999. As a percentage of revenues, research and
development expenses remained flat at 14.0% for the quarters ended March 31,
1999 and 2000. The increase in research and development expenses in dollar terms
was primarily due to an increase in the number of developers employed by us,
salary increases and costs related to creating and developing new products and
enhancements to the Market Guide database. We believe that continued investment
in product development is critical to attaining our strategic objectives and, as
a result, we expect research and development expenses to increase in dollar
terms in future periods.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation of assets and amortization of deferred expenses
and goodwill. General and administrative expenses increased 69.8% to $6.3
million for the quarter ended March 31, 2000 from $3.7 million for the quarter
ended March 31, 1999. As a percentage of revenues, general and administrative
expenses decreased to 39.5% for the quarter ended March 31, 2000 from 49.1% for
the quarter ended March 31, 1999. The increase in general and administrative
expenses in dollar terms in each period was primarily due to increased
personnel, professional service fees and facility expenses necessary to support
our domestic and international growth, including costs associated with our Lake
Success, San Francisco and London offices, as well as the inclusion of $400,000
in expenses related to amortization of warrants and $34,000 in amortization of
goodwill related to the acquisition of Sage. We expect that general and
administrative expenses will increase in dollar terms in future periods as we
hire additional personnel and incur additional costs related to the growth of
our business and our operations as a public company.
Loss from Operations
Loss from operations decreased 15.7% to $2.7 million for the quarter
ended March 31, 2000 from $3.2 million for the quarter ended March 31, 1999. As
a percentage of revenues, loss from operations decreased to 17.0% for the
quarter ended March 31, 2000 compared to 42.5% for the quarter ended March 31,
1999.
Interest Income (Expense) and Other Income
Net interest income increased 165% to $697,000 for the quarter ended
March 31, 2000 from $263,000 for the quarter ended March 31, 1999. The increase
in net interest income is primarily attributable to the increase in cash
available for investing.
Income Taxes
Income tax expense decreased 89.5% to $47,000 for the quarter ended
March 31, 2000 from $446,000 for the quarter ended March 31, 1999. The majority
of the tax expense in the quarter ended March 31, 1999 was attributable to
Market Guide's operations prior to the September 1999 acquisition.
Loss from continuing operations
The Company recorded a net loss from continuing operations (including
redeemable preferred stock dividends) of $2.1 million and $4.6 million for the
three months ended March 31, 2000 and March 31, 1999, respectively, or a net
loss per share of $0.07 and $0.45, respectively. The decrease in the net loss
was due to
11
<PAGE>
increased sales in all of the Company's businesses coupled with tighter cost
control measures implemented in the current quarter, increased interest income,
a reduction in income taxes and the elimination of the redeemable preferred
stock dividends at the date of the initial public offering.
Discontinued operations
Discontinued operations reflects the January 1999 sale of Market
Guide's CreditRisk Monitor business. Gain from discontinued operations totaled
$331,000 for the quarter ended March 31, 1999 compared to the absence of any
discontinued operating activities for the quarter ended March 31, 2000.
Net loss available to common stockholders
Net loss available to common stockholders totaled $2.1 million and $4.3
million for the three months ended March 31, 2000 and March 31, 1999,
respectively or a loss per share of $0.07 and $0.42, respectively. The decrease
in the net loss was due to increased sales in all of the Company's businesses
coupled with tighter cost control measures implemented in the current quarter,
increased interest income, a reduction in income taxes and the elimination of
the redeemable preferred stock dividends at the date of the initial public
offering.
Liquidity and Capital Resources
We have financed our operations primarily through the sale of equity
securities, as we have not generated cash flow from operations since our
inception. Through March 31, 2000, we have received an aggregate of $115.9
million in net proceeds from the sale of common stock and convertible preferred
stock. At March 31, 2000, we had $47.2 million of cash, cash equivalents and
marketable securities. Our principal commitments consist of obligations under
operating leases.
Net cash used in operating activities from continuing operations was
$3.0 million in the quarter ended March 31, 2000, and $1.3 million in the
equivalent period in 1999. The principal use of cash for all periods was to fund
our losses from operations.
Net cash used in investing activities was $21.0 million in the quarter
ended March 31, 2000, and $41.8 million in the equivalent period in 1999. Cash
used in investing activities was primarily related to purchases of marketable
securities, the acquisition of Sage Online and the acquisition of property and
equipment.
Net cash provided by financing activities was $22.2 million in the
quarter ended March 31, 2000, and $42.5 million for the equivalent period in
1999. Net cash provided by financing activities primarily consisted of net
proceeds from the sale of common stock to Merrill Lynch and proceeds from the
exercise of employee stock options.
Net cash provided by discontinued activities totaled $331,000 in the
quarter ended March 31, 1999. There was no comparable transaction in the quarter
ended March 31, 2000.
Although we have no material commitments for capital expenditures, we
anticipate that we will experience a substantial increase in our capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel, including the implementation of an
off-site backup computer system and various capital expenditures associated with
expanding our facilities. We currently anticipate that we will continue to
experience significant growth in our operating expenses for the foreseeable
future and that our operating expenses will be a material use of our cash
resources. We believe that our existing cash, cash equivalents and marketable
securities, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures at least for the next twelve months.
12
<PAGE>
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
We have limited operating history in certain of our lines of business and the
markets for our products and services are rapidly changing
Multex.com commenced operations in April 1993, but all of our current
services were launched after May 1996. Accordingly, we have a limited operating
history upon which you can evaluate our business. In order to be successful, we
must increase our revenues from subscription fees for MultexNET, from
development, hosting and subscription fees for MultexEXPRESS, generate
additional sales of investment research on a pay-per-view basis through Multex
Research-On-Demand, attract more users to Multex Investor and increase license
fees from the Market Guide database. We must also integrate and increase
revenues from our newly acquired subsidiaries, Sage Online and BuzzCompany.com.
We face risks, among others, relating to our ability to:
o anticipate and adapt to the changing Internet market;
o attract 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.
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 Research-On-Demand constitute a significant portion of our
cost of revenues. If we are required to increase the royalties or fees payable
to these information providers or strategic partners, these increased payments
could have a material and adverse effect on our business, results of operations
and financial condition.
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.
Multex.com's business would be materially and adversely affected if the emerging
market for online investment research does not continue to grow
The market for the distribution of investment research and other
information over the Internet has only recently begun to develop, is rapidly
evolving, and is characterized by an increasing number of market entrants who
have introduced or developed electronic investment research distribution
services by facsimile and over public and private networks, online services and
the Internet. As is typical of a rapidly evolving market, demand and market
acceptance for new services are subject to a high level of uncertainty.
Because the market for our services is new and rapidly evolving, it is
difficult to predict with any assurance the growth rate, if any, and the
ultimate size of this market. We cannot assure you that the market for our
services will develop or that our services will ever achieve market acceptance.
If the market fails to develop, develops more slowly than expected, or becomes
saturated with competitors, if our services do not achieve market acceptance, or
if pricing becomes subject to significant competitive pressures, our business,
results of operations and financial condition would be materially and adversely
affected.
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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. We expect competition to
continue to increase. Competition also may increase as a result of industry
consolidation. Increased competition could result in price reductions, reduced
gross margins and loss of market share, any of which would have a material and
adverse effect on our business, results of operations and financial condition.
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 (through its subsidiaries First Call and Investext) and
I|B|E|S, a subsidiary of Primark Corp. 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 any of 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. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, which could materially and adversely affect our business,
results of operations and financial condition.
Multex.com's business could be materially and adversely affected by a downturn
in the financial services industry
We are dependent upon the continued demand for the distribution of
investment research and other information over the Internet, making our business
susceptible to a downturn in the financial services industry. For example, a
decrease in the number of analysts that prepare investment research reports or
in the capital dedicated to the dissemination of this research could result in a
decrease in the number of research reports and other financial information
available for distribution and a concomitant decrease in demand by our
subscribers for these reports and other information. In addition, U.S. financial
institutions are continuing to consolidate, increasing the leverage of our
information providers to negotiate price and decreasing the overall potential
market for some of our services. These factors, as well as other changes
occurring in the financial services industry, could have a material and adverse
effect on our business, results of operations and financial condition.
Rapid growth in Multex.com's future operations could strain our managerial,
operational and financial resources
We have experienced rapid growth in our operations. At March 31, 2000,
we had a total of approximately 400 employees, as compared to 336 employees at
December 31, 1999 and 246 employees at December 31, 1998. 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 and
Chief Executive Officer, and key technical and sales personnel, none
14
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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
We have only recently commenced operations in a number of international
markets and a key component of our strategy is to continue to expand our
international operations. To date, we have only limited experience in developing
and obtaining research and other financial information relating to companies
whose securities are traded on foreign markets and in marketing, selling and
distributing our services internationally. The failure to gain the necessary
experience, hire appropriate personnel, and enter into key business
relationships in these markets could have a material and adverse effect on our
business, results of operations and financial condition.
Doing business internationally subjects us to additional regulatory
requirements, tax liabilities and other risks
There are risks inherent in doing business in international markets,
including unexpected changes in regulatory requirements, potentially adverse tax
consequences, export restrictions and controls, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates, and seasonal reductions in
business activity during the summer months in Europe and various other parts of
the world, any of which could have a material and adverse effect on the success
of our international operations and, consequently, on our business, results of
operations and financial condition. Furthermore, we cannot assure you that
governmental regulatory agencies in one or more foreign countries will not
determine that the services provided by us constitute the provision of
investment advice, which could result in our having to register in these
countries as an investment advisor or in our having to cease selling our
services in these countries, either of which could have a material and adverse
effect on our business, results of operations and financial condition.
Because Multex.com's business is dependent upon network and computer systems
located in one area, we are susceptible to problems caused by natural disasters,
power failures, system failures, security breaches or other damage to our system
Our electronic distribution of investment research utilizes proprietary
technology that resides principally in New York City. The continued and
uninterrupted performance of our network and computer systems is critical to our
success. Any disaster, power outage or system failure that causes interruptions
in our ability to provide our services to our customers, including failures that
affect our ability to collect research from our information providers or provide
electronic investment research to our users, could reduce customer satisfaction
and, if sustained or repeated, would reduce the attractiveness of our services.
An increase in the volume of research reports handled by our systems, or in the
rate of requests for this research, could strain the capacity of our software or
hardware, which could lead to slower response times or system failures.
Furthermore, we face the risk of a security breach of our systems that could
disrupt the distribution of research and other reports and information. Our
business, results of operations and financial condition could be materially and
adversely affected if any of these problems occur.
Our operations are dependent on our ability to protect our network and
computer systems against damage from computer viruses, fire, power loss, data
communications failures, vandalism and other malicious acts, and similar
unexpected adverse events. In addition, a failure of our communications
providers to provide the data communications capacity in the time frame required
by us for any reason could cause interruptions in the delivery of our services.
Despite precautions we have taken, unanticipated problems affecting our systems
have from time to time in the past caused, and in the future could cause, delays
and interruptions in the delivery of our services. Although we carry general
liability insurance, our insurance may not cover any claims by dissatisfied
providers or subscribers or may not be adequate to indemnify us for any
liability that may be imposed in the event that a claim were brought against us.
Our business, results of operations and financial condition could be materially
and adversely affected by any system failure, security breach or other damage
that interrupts or delays our operations.
15
<PAGE>
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 25% 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.
A third party could be prevented from acquiring your shares of stock at a
premium to the market price because of our anti-takeover provisions
Various provisions of our certificate of incorporation, bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so might be beneficial to you and our other stockholders. See
"Description of Capital Stock of Multex.com."
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.
Risks Related 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, including high-speed modems, for providing
reliability 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
16
<PAGE>
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 be subject to legal claims in connection with the content we publish and
distribute on the Internet
As a publisher and distributor of online content, we face potential
direct and indirect liability for claims of defamation, negligence, copyright,
patent or trademark infringement, violation of the securities laws and other
claims based upon the reports and data that we publish. For example, by
distributing a negative investment research report, we may find ourselves
subject to defamation claims, regardless of the merits of these claims. Computer
failures may also result in incorrect data being published and distributed
widely. In these and other instances, we may be required to engage in protracted
and expensive litigation, which could have the effect of diverting management's
attention and require us to expend significant financial resources. Our general
liability insurance may not necessarily cover any of these claims or may not be
adequate to protect us against all liability that may be imposed. Any claims or
resulting litigation could have a material and adverse effect on our business,
results of operations and financial condition.
We may become subject to burdensome government regulation and legal
uncertainties
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. Legislation could dampen the
growth in the use of the Internet generally and decrease the acceptance of the
Internet as a communications and commercial medium, which could have a material
and adverse effect on our business, results of operations and financial
condition. In addition, due to the global nature of the Internet, it is possible
that, although transmissions relating to our services originate 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.
17
<PAGE>
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) The following exhibits are filed as part of this report:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Multex.com during the
three months ended March 31, 2000.
18
<PAGE>
ITEM 7. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
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, 2000 /s/ Isaak Karaev
--------------------------------------
Name: Isaak Karaev
Title: Chief Executive Officer
Date: May 15, 2000 /s/ John J. McGovern
--------------------------------------
Name: John J. McGovern
Title: Chief Financial Officer
19
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