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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED JUNE 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 000-25943
JMXI, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 11-3374729
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2 HUNTINGTON QUADRANGLE; SUITE 3S2
MELVILLE, NEW YORK 11747
(Address of principal executive offices) (Zip Code)
(516) 734-2000
(Registrant's telephone number, including area code)
JUPITER MEDIA METRIX, INC.
21 ASTOR PLACE, 6TH FLOOR
NEW YORK, NEW YORK 10003
(Former name, former address and former fiscal year,
if changed since last report)
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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of August 15, 2002, there were 36,015,489 shares of the registrant's
common stock, $.01 par value, outstanding.
JMXI, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) ........................ 3
Consolidated Balance Sheets -- June 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations -- Three and Six Months Ended
June 30, 2002 and 2001 ......................................... 4
Consolidated Statement of Stockholders' Equity -- Six Months Ended
June 30, 2002 .................................................. 5
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 2002 and 2001 ......................................... 6
Notes to Consolidated Financial Statements ........................ 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 13
Item 3. Quantitative and Qualitative Disclosures of Market Risk .............. 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings .................................................... 21
Item 2. Changes in Securities and Use of Proceeds ............................ 21
Item 3. Defaults Upon Senior Securities ...................................... 21
Item 4. Submission of Matters to a Vote of Security Holders .................. 22
Item 5. Other Information .................................................... 22
Item 6. Exhibits and Reports on Form 8-K ..................................... 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JMXI, INC. AND SUBSIDIARIES
(FORMERLY JUPITER MEDIA METRIX, INC.)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31,
2002 2001
--------- -----------
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 19,835 $ 14,920
Marketable securities ............................... -- 1,003
Accounts receivable, less allowance for doubtful
accounts of $1,657 in 2002 and $3,038 in 2001 ..... 3,843 18,492
Prepaid expenses and other current assets ........... 3,085 2,777
--------- ---------
Total current assets .................................. 26,763 37,192
Property and equipment at cost, net ................... 2,188 24,773
Goodwill .............................................. -- 51,042
Other intangibles, net ................................ -- 5,109
Restricted cash and other assets ...................... 2,719 7,730
--------- ---------
Total assets .......................................... $ 31,670 $ 125,846
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ............ $ 9,261 $ 28,969
Due to related parties .............................. 376 1,364
Advance billings to clients ......................... 4,880 14,770
--------- ---------
Total current liabilities ............................. 14,517 45,103
Long-term restructuring liabilities and other ......... 10,803 23,085
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value -- shares authorized:
10,000,000 in 2002 and 2001, none issued
and outstanding .................................... -- --
Common stock, $.01 par value -- shares authorized:
150,000,000 in 2002 and 2001; shares issued and
outstanding:
35,890,489 in 2002 and 35,869,051 in 2001 ........ 359 359
Additional paid-in capital .......................... 683,173 684,623
Accumulated other comprehensive income .............. 215 132
Accumulated deficit ................................. (673,751) (620,624)
Deferred compensation ............................... (3,646) (6,832)
--------- ---------
Total stockholders' equity ............................ 6,350 57,658
--------- ---------
Total liabilities and stockholders' equity ............ $ 31,670 $ 125,846
========= =========
See accompanying notes.
3
JMXI, INC. AND SUBSIDIARIES
(FORMERLY JUPITER MEDIA METRIX, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Continuing operations:
Revenues:
Research services .......................... $ 3,834 $ 12,063 $ 8,529 $ 26,359
Events and other ........................... -- 989 163 1,976
---------- ---------- ---------- ----------
Total revenues ............................... 3,834 13,052 8,692 28,335
Cost of revenues ............................. 1,417 7,360 3,853 15,260
---------- ---------- ---------- ----------
Gross profit ................................. 2,417 5,692 4,839 13,075
Operating expenses:
Research and development ................... 1,072 1,349 2,214 2,906
Sales and marketing ........................ 1,151 4,532 2,828 11,512
General and administrative ................. 9,504 4,678 12,375 9,699
Amortization of deferred compensation and
other stock-based compensation ........... -- 36 -- 72
Amortization and impairment of intangibles . 8,417 2,120 8,418 4,287
Restructuring and other charges (reversal) . 10,106 2,345 (10,106) 7,507
---------- ---------- ---------- ----------
Total operating expenses ..................... 10,038 15,060 15,729 35,983
---------- ---------- ---------- ----------
Loss from continuing operations
before items listed below .................. (7,621) (9,368) (10,890) (22,908)
Loss on sale of subsidiaries ................. -- -- -- (296)
Loss on write-off of investments ............. -- (5,477) -- (5,477)
Interest and other income (expense), net ..... (241) 625 (490) 1,721
---------- ---------- ---------- ----------
Loss from continuing operations .............. (7,862) (14,220) (11,380) (26,960)
---------- ---------- ---------- ----------
Discontinued operations:
Income (loss) from operations of
discontinued operations, net of $15,000
settlement of patent litigation in
May 2002 ................................. 9,730 (33,936) 746 (75,360)
Loss on disposal of Measurement Business ... (6,593) -- (6,593) --
---------- ---------- ---------- ----------
Income (loss) from discontinued operations ... 3,137 (33,936) (5,847) (75,360)
---------- ---------- ---------- ----------
Income (loss) before cumulative effect of
change in accounting principle ............. (4,725) (48,156) (17,227) (102,320)
Cumulative effect of change in accounting
principle .................................. -- -- (35,900) --
---------- ---------- ---------- ----------
Net loss ..................................... $ (4,725) $ (48,156) $ (53,127) $ (102,320)
========== ========== ========== ==========
Basic and diluted net income (loss) per share:
Loss from continuing operations ............ $ (0.22) $ (0.40) $ (0.32) $ (0.76)
Income (loss) from discontinued operations . 0.09 (0.96) (0.16) (2.13)
---------- ---------- ---------- ----------
Loss before cumulative effect of
change in accounting principle ........... (0.13) (1.36) (0.48) (2.89)
Cumulative effect of change in accounting
principle ................................ -- -- (1.00) --
---------- ---------- ---------- ----------
Net income loss ............................ $ (0.13) $ (1.36) $ (1.48) $ (2.89)
========== ========== ========== ==========
Shares used in the calculation of basic and
diluted net income (loss) per share .......... 35,878 35,468 35,876 35,399
========== ========== ========== ==========
See accompanying notes.
4
JMXI, INC. AND SUBSIDIARIES
(FORMERLY JUPITER MEDIA METRIX, INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2002
(UNAUDITED)
(IN THOUSANDS)
Accumulated
Common Stock Additional Other Total
---------------- Paid-in Comprehensive Accumulated Deferred Stockholders'
Shares Amount Capital Income Deficit Compensation Equity
------ ------ ---------- ------------- ----------- ------------ -------------
Consolidated Balance, December 31, 2001 35,869 $ 359 $ 684,623 $ 132 $(620,624) $ (6,832) $ 57,658
Comprehensive loss: ...................
Net loss ............................ -- -- -- -- (53,127) -- (53,127)
Unrealized income on marketable
securities ......................... -- -- -- 9 -- -- 9
Foreign currency translation ........ -- -- -- 74 -- -- 74
--------
Total comprehensive loss .............. -- -- -- -- -- -- (53,044)
Exercise of options ................... 21 -- 7 -- -- -- 7
Amortization of deferred compensation . -- -- -- -- -- 1,729 1,729
Reversal of deferred compensation of
options forfeited ................... -- -- (1,457) -- -- 1,457 --
------ ------ --------- --------- --------- --------- --------
Consolidated Balance, June 30, 2002 ... 35,890 $ 359 $ 683,173 $ 215 $(673,751) $ (3,646) $ 6,350
====== ====== ========= ========= ========= ========= ========
See accompanying notes.
5
JMXI, INC. AND SUBSIDIARIES
(FORMERLY JUPITER MEDIA METRIX, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
2002 2001
---------- ----------
OPERATING ACTIVITIES
Net loss .............................................. $ (53,127) $ (102,320)
Adjustments to reconcile net loss to net cash used
in operating activities:
Restructuring and other charges ..................... (11,579) 17,293
Loss on disposal of measurement business and sale
of subsidiaries ................................... 6,593 664
Loss on write-off of investments .................... -- 5,477
Cumulative effect of change in accounting principle . 35,900 --
Loss on disposal of fixed assets .................... 862 --
Realized loss on sale of marketable securities ...... 9 --
Provision for bad debts ............................. 492 1,395
Depreciation and amortization and impairment
writedown of property and equipment ............... 10,824 4,967
Amortization of deferred compensation and other
stock-based compensation .......................... 1,729 3,158
Amortization and impairment of intangibles .......... 8,708 54,883
Minority interests .................................. -- (2,828)
Deferred rent ....................................... 253 130
Changes in operating assets and liabilities
Receivables ........................................ 9,982 4,312
Prepaid expenses and other current assets .......... (407) 734
Other assets ....................................... -- 935
Accounts payable and accrued liabilities ........... (9,232) (11,053)
Advance billings to clients ........................ (6,042) (13,711)
Due to related parties ............................. (988) (476)
---------- ----------
Net cash used in operating activities ................. (6,023) (36,440)
---------- ----------
INVESTING ACTIVITIES
Sale of marketable securities ......................... 1,002 15,400
Net cash received from disposal of Measurement Business 10,465 --
Additions to property and equipment ................... (519) (9,118)
Acquisition earn-out payment .......................... -- (4,918)
Security deposits ..................................... (92) --
---------- ----------
Net cash provided by investing activities ............. 10,856 1,364
---------- ----------
FINANCING ACTIVITIES
Repayment of notes payable ............................ -- (580)
Proceeds from exercise of stock options ............... 7 342
Contributions from minority interests ................. -- 2,397
---------- ----------
Net cash provided by financing activities ............. 7 2,159
---------- ----------
Effect of exchange rate changes on cash ............... 75 (354)
---------- ----------
Net increase (decrease) in cash and cash equivalents .. 4,915 (33,271)
Cash and cash equivalents at beginning of period ...... 14,920 74,133
---------- ----------
Cash and cash equivalents at end of period ............ $ 19,835 $ 40,862
========== ==========
SUPPLEMENTAL INFORMATION
Interest paid ......................................... $ 10 $ 14
========== ==========
See accompanying notes.
6
JMXI, INC. AND SUBSIDIARIES
(FORMERLY JUPITER MEDIA METRIX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for JMXI,
Inc. (the "Company"), formerly Jupiter Media Metrix, Inc., 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 accounting principles generally accepted in the United States 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 and six-month
periods ended June 30, 2002 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2002.
The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, as filed with the Securities and Exchange Commission.
The auditor's report on the foregoing consolidated financial statements of
the Company for the fiscal year ended December 31, 2001 states that because of
operating losses and a working capital deficiency, there is substantial doubt
about our ability to continue as a going concern. A "going concern" opinion
indicates that the financial statements have been prepared assuming we will
continue as a going concern and do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
Certain balances in prior year have been reclassified to conform to the
current year presentation.
B. DISCONTINUED OPERATIONS
During the six months ended June 30, 2002, the Company disposed of its
Media Metrix, AdRelevance and LiveMetrix units, which composed its measurement
division. The disposal of these units represent discontinued operations and,
accordingly, the accompanying financial statements have been restated to reflect
the measurement division's operations as discontinued.
Effective April 30, 2002, the Company discontinued offering its LiveMetrix
product and terminated the exclusive reseller agreement with LiveTechnology
Holdings, Inc. ("LiveTech") and license to the underlying technology. In
exchange for a payment of $275,000 and the transfer of certain equipment to
LiveTech, the Company terminated the remaining cash license of approximately
$1.8 million owed to LiveTech and cancelled options held by LiveTech to purchase
1,750,000 shares of common stock.
On April 7, 2002, the Company sold substantially all of the assets of
AdRelevance, its advertising measurement unit, to NetRatings, Inc.
("NetRatings") for approximately $8.2 million, of which $340,000 was held in
escrow at June 30, 2002.
7
The Company's audience measurement business unit, Media Metrix, was sold
in two separate transactions. On May 7, 2002, the Company entered into an Asset
Purchase Agreement with NetRatings pursuant to which NetRatings acquired certain
assets of its European operations for $2.0 million. In connection with the sale
of certain of its European Internet audience measurement assets, the Company
also agreed to purchase the equity interests held by its two remaining partners
in its European joint venture for a total of $560,000. On June 6, 2002, the
assets of the Company's North American audience measurement unit was sold to
comScore Networks, Inc. for a total purchase price of approximately $1.5
million.
In connection with the disposal of the measurement business discussed
above, the Company recorded a loss of $6,593,000 which is recorded as loss on
disposal of measurement business in the accompanying statement of operations.
Revenues for the measurement division were $2,447,000 and $12,114,000 for
the three months ended June 30, 2002 and 2001, respectively, and $8,344,000 and
$26,394,000 for the six months ended June 30, 2002 and 2001, respectively.
C. RESTRUCTURING AND OTHER CHARGES (REVERSAL)
During the year ended December 31, 2001, the Company announced and
implemented a series of restructuring plans which resulted in a charge of
approximately $51.3 million. The Company's goal was to significantly reduce
operating expenses by realigning resources around its core product initiatives,
and by reducing sales and marketing, product development, administrative and
technology expenses. The restructuring charge included $8.2 million related to
severance and other employee costs associated with the elimination of
approximately 480 positions across a number of business functions, job
categories and regions. Costs associated with the employee terminations included
severance pay, medical and other benefits. The restructuring charge also
included $37.7 million for facilities that were consolidated or closed,
including offices in New York, Atlanta, Los Altos, Berkeley, San Francisco and
London. This amount includes a portion of the remaining contractual obligations
under facility leases from the date of closure to the end of the lease term, as
well as a write-down of leasehold improvements in connection with the closure or
consolidation of such facilities. The Company continued to record monthly rent
expense on these facilities as an operating expense until the facilities were
closed. In addition, the Company recorded approximately $869,000 of
restructuring charges related to the discontinuation of certain international
operations, panel shutdown costs and cancellation of a note receivable.
The Company also recorded approximately $2.7 million in other charges
related to the cancellation of scheduled conferences by its Events business
unit, primarily consisting of cancellation fees charged by facility providers
and other vendors, and wrote down approximately $1.9 million of abandoned
equipment during the year ended December 31, 2001.
During the six months ended June 30, 2002, the Company recorded a reversal
to restructuring charges of $11.6 million, of which $1.5 million related to the
discontinued operations, primarily due to the settlement of its lease commitment
at 21 Astor Place (see Note D).
Of the total $51.3 million of restructuring and other charges recorded,
$9.9 million was paid, and $12.9 million of property, plant and equipment and
other current assets were written-off, which left an accrual of $28.5 million at
December 31, 2001, of which $20.3 million was related to severance and lease
payments and is included in long-term liabilities. Of the $28.5 million accrual
remaining at December 31, 2001, $9.3 million was paid and $11.6 million was
reversed during the six months ended June 30, 2002, leaving an accrual of $7.6
million at June 30, 2002. $3.5 million is expected to be paid out during the
remainder of 2002, $800,000 in 2003, $700,000 in 2004, $700,000 in 2005,
$400,000 in 2006 and the remaining $1.5 million from 2007 to 2011.
8
D. LEASE TERMINATION
On May 3, 2002, the Company entered into a lease termination agreement
with its landlord for leased space at 21 Astor Place, New York, New York.
Pursuant to the terms hereof, the Company relinquished a $4.5 million letter of
credit to secure the lease and had prepaid the rent through August 15, 2002 of
approximately $1.1 million. This termination agreement resulted in a reversal of
approximately $9.8 million of a restructuring accrual recorded during 2001. This
portion of the restructuring reversal is included in restructuring and other
charges (reversal) in the accompanying statement of operations.
E. LITIGATION SETTLEMENT
On May 7, 2002, the Company entered into a Settlement Agreement and
Intellectual Property Agreement with NetRatings pursuant to which the Company
agreed to discontinue the pending patent infringement lawsuit against NetRatings
and to transfer to NetRatings our patents for computer use tracking in exchange
for the payment of $15.0 million. In addition, as part of the settlement,
NetRatings granted the Company a non-exclusive, assignable license to use the
computer use tracking patents transferred to NetRatings in its domestic Internet
audience measurement business until June 30, 2005. The license fee payable to
NetRatings was $125,000 per month for the period July 1 through September 30,
2002, and $375,000 for the fourth quarter 2002. In connection with the sale of
the Media Metrix business (see Note B), the Company gave notice that it intended
to terminate the license. The $15 million patent settlement is included in
income (loss) from operations of discontinued operations in the accompanying
statement of operations.
F. ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets". These statements established financial
accounting and reporting standards for acquired goodwill and other intangible
assets. Specifically, the standards address how acquired intangible assets
should be accounted for both at the time of acquisition and after they have been
recognized in the financial statements. The provisions of SFAS No. 141 apply to
all business combinations initiated after June 30, 2001. In accordance with SFAS
No. 142, intangible assets, including purchased goodwill, must be evaluated for
impairment. Those intangible assets that will continue to be classified as
goodwill or as other intangibles with indefinite lives are no longer amortized.
Finite lived intangibles will continued to be amortized over their estimated
useful lives. SFAS No. 142 prescribes a two-phase process for impairment testing
of goodwill: (i) the determination of impairment, based upon the fair value of a
reporting unit as compared to its carrying value, and (ii) if there is an
impairment, this step measures the amount of impairment loss by comparing the
implied fair value of goodwill with the carrying amount of that goodwill. The
Company completed its phase one impairment analysis during the first quarter of
2002, which indicated that the carrying value was greater than the fair value
and that an impairment existed. The Company also completed the second phase of
the testing during the first quarter of 2002 using the market approach to
determine the fair value which resulted in an impairment charge of $34.9
million. In addition, the Company completed its testing of intangible assets
using discounted cash flows and recorded an impairment on a trademark of $1.0
million. The impairment charges have been reported as the cumulative effect of a
change in accounting principle, as of January 1, 2002, in the accompanying
consolidated statements of operations. Of the total impairment charges of $35.9
million, $9.0 million relates to the AdRelevance reporting unit, $26.9 million
to the Jupiter research and events units.
In addition, during the second quarter of 2002, the Company wrote off an
additional $8.4 million related to goodwill as a result of a reduction in the
value of the Jupiter research and Jupiter events
9
business. This additional impairment is classified as amortization and
impairment of intangibles in the accompanying statement of operations.
Property and equipment was also written down by $7.3 million to reflect
its reduction in value.
In accordance with SFAS 142, the effect of this change is reflected
prospectively. The following table reflects consolidated results of operations
adjusted as though the adoption of SFAS No. 141 and 142 occurred as of January
1, 2001 (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Loss before cumulative
effective of accounting change:
As reported ..................... $ (4,725) $ (48,156) $ (17,227) $ (102,320)
Goodwill and indefinite-lived
intangibles amortization ....... -- 27,429 -- 54,883
---------- ---------- ---------- ----------
As adjusted .................... $ (4,725) $ (20,727) $ (17,227) $ (47,437)
========== ========== ========== ==========
Basic and diluted loss per common
share before cumulative effect
of accounting change:
As reported .................... $ (0.13) $ (1.36) $ (0.48) $ (2.89)
========== ========== ========== ==========
As adjusted .................... $ (0.13) $ (.58) $ (0.48) $ (1.34)
========== ========== ========== ==========
G. SEGMENT INFORMATION
During the six months ended June 30, 2002, the Company operated in three
business segments. Its business units included Measurement, which offered
clients a broad range of products and services that measure audience,
advertising commerce and new media usage on the Internet and other digital
media; Jupiter Research, which provided business-to-business and
business-to-consumer clients with strategic analysis and insights, including
industry trends, forecasts and best practices, all backed by proprietary data;
and Events, a provider of conferences focusing on the global digital economy. As
discussed above, the Company disposed of its measurement business during the six
months ended June 30, 2002 (see Note B). Accordingly, the segment information
presented below has been restated for the discontinued operations.
The following tables present information about JMXI's continuing operating
segments for the three and six months ended June 30, 2002 and 2001 (in
thousands):
SIX MONTHS ENDED JUNE 30, 2002
JUPITER
TOTAL RESEARCH EVENTS
---------- ---------- ----------
Revenues ........................ $ 8,692 $ 8,529 $ 163
Cost of revenues ................ 3,853 3,381 472
---------- ---------- ----------
Gross Profit .................... 4,839 $ 5,148 $ (309)
========== ==========
Non-allocated expenses, net ..... (15,729)
----------
Loss from continuing operations $ (11,380)
==========
10
SIX MONTHS ENDED JUNE 30, 2001
JUPITER EVENTS
TOTAL RESEARCH AND OTHER
---------- ---------- ----------
Revenues ...................... $ 28,335 $ 26,359 $ 1,976
Cost of revenues .............. 15,260 8,704 6,556
---------- ---------- ----------
Gross Profit .................. 13,075 $ 17,655 $ (4,580)
========== ==========
Non-allocated expenses, net ... (40,035)
----------
Loss from continuing operations $ (26,960)
==========
THREE MONTHS ENDED JUNE 30, 2002
JUPITER
TOTAL RESEARCH EVENTS
---------- ---------- ----------
Revenues ...................... $ 3,834 $ 3,834 $ --
Cost of revenues .............. 1,417 1,409 8
---------- ---------- ----------
Gross Profit .................. 2,417 $ 2,425 $ (8)
========== ==========
Non-allocated expenses, net ... (10,038)
----------
Loss from continuing operations $ (7,862)
==========
THREE MONTHS ENDED JUNE 30, 2001
JUPITER EVENTS
TOTAL RESEARCH AND OTHER
---------- ---------- ----------
Revenues ...................... $ 13,052 $ 12,063 $ 989
Cost of revenues .............. 7,360 4,232 3,128
---------- ---------- ----------
Gross Profit .................. 5,692 $ 7,831 $ (2,139)
========== ==========
Non-allocated expenses, net ... (19,912)
----------
Loss from continuing operations $ (14,220)
==========
H. SUBSEQUENT EVENTS
On July 31, 2002, the Company's stockholders approved and adopted a
proposed plan of dissolution and liquidation of the Company which the Company's
board of directors had approved and adopted on June 25, 2002. The board, in its
sole and absolute discretion, may abandon the plan at any time prior to the
filing of a certificate of dissolution with the State of Delaware.
On July 31, 2002, the Company sold substantially all of the assets of its
remaining operating business, Jupiter Research and Jupiter Events, to INT Media
Group, Inc., including its customer contracts and intellectual property, and
assigned certain related liabilities.
On July 3, 2002, the Company announced the receipt of a Nasdaq Staff
Determination on June 27, 2002 that the Company has not maintained compliance
with the minimum bid price requirement for continued listing set forth in
Marketplace Rule 4450(a)(5), and that its common stock is, therefore, subject to
delisting from the Nasdaq National Market. Due to the discontinuation of its
operating businesses, the Company determined not to appeal the delisting
determination and was subsequently delisted from the Nasdaq National Market on
August 7, 2002.
On July 30, 2002, the Company was sued in the Superior Court of
California, County of Santa Clara by NetRatings, Inc. alleging the Company
violated provisions of a non-competition clause entered into in connection with
the sale by the Company to NetRatings of its European business and otherwise
11
breached contractual obligations owed by the Company to NetRatings with respect
to the licensing of certain intellectual property. comScore Networks has agreed
to indemnify the Company with respect to the intellectual property claim. The
Company believes the lawsuit is meritless and intends to vigorously defend the
actions.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations with the unaudited financial statements and the notes to
the unaudited financial statements included elsewhere in this Quarterly Report
on Form 10-Q. This discussion contains forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, based on our
current expectations, assumptions, estimates and projections. These
forward-looking statements involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as more fully described in the "Risk
Factors" section and elsewhere in this Quarterly Report on Form 10-Q, and in
other reports and documents filed from time to time with the Securities and
Exchange Commission. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
OVERVIEW
As of July 31, 2002, JMXI, Inc., formerly known as Jupiter Media Metrix,
Inc., effectively ceased all business operations. For the first six months of
2002, we were a provider of innovative and comprehensive research and
measurement products and services that analyzed the impact of the Internet and
new technologies on commerce and marketing and our services included Media
Metrix, Jupiter Research and Jupiter Events.
In April 2002, we sold substantially all of the assets of our advertising
measurement division, AdRelevance, to NetRatings, Inc. for a purchase price of
$8.2 million. Effective April 30, 2002, we also discontinued offering our
LiveMetrix product and terminated our exclusive reseller agreement with
LiveTechnology Holdings, Inc. ("LiveTech") and license to the underlying
technology. In exchange for the payment of $275,000 and the transfer of certain
equipment to LiveTech, we terminated the remaining cash license fee of
approximately $1.8 million owed to LiveTech and cancelled options held by
LiveTech to purchase 1,750,000 shares of our common stock.
On May 3, 2002, we entered into a lease termination agreement with our
landlord for leased space at 21 Astor Place, New York, New York. Pursuant to the
terms thereof, we relinquished a $4.5 million letter of credit to secure the
lease, prepaid rent through August 15, 2002 of approximately $1.1 million and
vacated the premises on August 15, 2002.
On May 7, 2002 we entered into a Settlement Agreement and Intellectual
Property Agreement with NetRatings, Inc. pursuant to which we agreed to
discontinue our pending patent infringement lawsuit against NetRatings and to
transfer to NetRatings our patents for computer use tracking in exchange for the
payment of $15.0 million. In addition, as part of the settlement, NetRatings
granted us a non-exclusive, assignable license to use the computer use tracking
patents transferred to NetRatings in its domestic Internet audience measurement
business until June 30, 2005. The license fee payable to NetRatings was to be
$125,000 per month for the period July 1 through September 30, 2002, and
$375,000 for the fourth quarter 2002. In connection with the sale of our Media
Metrix business described below, we gave notice that we intended to terminate
the license. In a separate transaction on May 7, 2002, we entered into an Asset
Purchase Agreement with NetRatings pursuant to which NetRatings acquired certain
assets of our European operations for $2.0 million. In connection with the
foregoing sale of certain of our European Internet audience measurement assets,
we also agreed to purchase the equity interests held by its two remaining
partners in its European joint venture for a total of $560,000.
13
On June 6, 2002, we sold substantially all of the assets of our North
American audience measurement division, Media Metrix, to comScore Networks, Inc.
for a purchase price of approximately $1.5 million.
On June 25, 2002, our board of directors approved and adopted our proposed
plan of dissolution and liquidation. The plan was subsequently approved by our
stockholders on July 31, 2002. The board, in its sole and absolute discretion,
may abandon the plan at any time prior to the filing of a certificate of
dissolution with the State of Delaware. Since the adoption of the plan, the
board and management have effectively terminated our operations. Following
approval of the plan by our stockholders, our activities have become limited to
winding up our affairs, taking such action as may be necessary to preserve the
value of our assets and distributing our assets. We will seek to distribute or
liquidate all of our assets in such manner and upon such terms as the board of
directors determines to be in the best interests of our stockholders. Although
our board of directors believes the liquidation program disclosed in our proxy
statement dated July 9, 2002 is achievable, there is currently no firm timetable
for the distribution of proceeds to our stockholders because of contingencies
inherent in winding up our business. There can be no assurance that we will have
sufficient cash available following the wind down of our business to pay any
cash to our shareholders.
On July 31, 2002, we sold substantially all of the assets of our remaining
operating business, Jupiter Research and Jupiter Events, to INT Media Group,
Inc. for a total purchase price of approximately $250,000, including our
customer contracts and intellectual property, and assigned certain related
liabilities.
As discussed in Note B to the financial statements, the accompanying
statements of operations has been restated to reflect the disposal of the
measurement business.
Our revenues from continuing operations consisted of research services and
events and other revenues. On July 31, 2002. our research and events businesses
were discontinued. Our research offerings, which consisted of the products and
services from our Jupiter Research unit, were a combination of proprietary
written analysis, supporting data and access to our research analysts. We
recognized revenues for our Jupiter Research products and services over the term
of the related contract as services were provided. Revenues from these services
were recognized upon the sale of the study or completion of the project. Our
Jupiter Events revenues consisted of revenues from (i) individual attendees,
(ii) sponsors, which displayed their logo in our conference program and/or host
a reception, and (iii) exhibitors, which received a booth to promote their
companies. Other revenues were derived primarily from the sale of Web
sponsorships, which were discontinued during the year ended December 31, 2001.
Revenues attributable to our conferences and other services were recognized upon
the completion of the event and over the term of the Web sponsorship.
Our revenues from discontinued operations consisted of measurement
products and services. Our measurement offerings, which consisted of the
products and services from the Media Metrix, AdRelevance and LiveMetrix units,
included both syndicated measurement products and customized measurement
products. We recognized revenues for the syndicated measurement products and
services over the term of the related contract as services are provided.
Revenues for customized measurement products and services were recognized in the
period in which the product or service was delivered.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements and related public financial
information are based on the application of accounting principles generally
accepted in the United States ("GAAP"). The preparation of financial statements
under GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities as of the
14
date of the financial statements, and the reported amounts of revenue and
expenses during the periods. We believe our use of estimates and underlying
accounting assumptions adhere to GAAP and are consistently and conservatively
applied. Estimates have been made by management in several areas, including, but
not limited to, accounts receivable allowances, valuation of long-lived and
intangible assets and restructuring reserves. We have based our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances and review valuations based on estimates for
reasonableness and conservatism on a consistent basis. Actual results may differ
materially from these estimates under different assumptions or conditions.
Other than that discussed below, no other changes in accounting policies
took place in the six months ended June 30, 2002.
As discussed in Note F to the financial statements, we adopted FASB
Statement 142, "Goodwill and Other Intangible Assets", as of January 1, 2002 and
have performed the required impairment tests of goodwill and indefinite lived
intangible assets and have recognized an impairment loss of $35.9 million
resulting from the cumulative effect of the change in accounting principle
during the six months ended June 30, 2002.
RESULTS OF OPERATIONS FOR CONTINUING OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
Revenues. Revenues decreased to $3.8 million for the three months ended
June 30, 2002 from $13.1 million for the three months ended June 30, 2001. The
decrease in revenues from continuing operations was primarily due to a
significant decrease in the number of customers and a substantial decline in the
amount of, and price for, our products and services purchased by our customers.
Cost of Revenues. Cost of revenues consists primarily of costs associated
with our research analysts, event costs and production costs. Production costs
include printing, report distribution costs and personnel costs. Gross profit
was $2.4 million for the three months ended June 30, 2002. Gross profit was $5.7
million for the three months ended June 30, 2001. The decrease for the three
months ended June 30, 2002 over the prior period was due to a substantial
decrease in research revenues with a higher decrease in cost of revenues due to
restructuring initiatives.
Restructuring and Other Charges (Reversal). During the three months ended
June 30, 2002, we recorded a reversal to restructuring charges of approximately
$11.6 million, of which $1.5 million related to the discontinued operations,
primarily due to the settlement on our lease commitment at 21 Astor Place.
During the three months ended June 30, 2001, we incurred $3.5 million in
restructuring and other charges, of which $1.1 million related to discontinued
operations, in connection with our corporate restructuring and reduction in work
force during the period. Such restructuring charges included costs and
liabilities associated with employee terminations, lease cancellations and
commitments, a write-down of leasehold improvements, cancellation charges in
connection with our cancellation of scheduled events and the discontinuation of
certain international operations.
Loss from Continuing Operations. Loss from operations was $7.9 million for
the three months ended June 30, 2002. Loss from operations was $14.2 million for
the three months ended June 30, 2001. We recognized a smaller loss from
operations in the three months ended June 30, 2002 due primarily to the reversal
of a previous restructuring charge due to the settlement of the 21 Astor Place
lease, decreases in other operating expenses due to the reduction in operations
offset by the goodwill impairment writedown.
15
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
Revenues. Revenues decreased to $8.7 million for the six months ended June
30, 2002 from $28.3 million for the six months ended June 30, 2001. The decrease
in revenues from continuing operations was primarily due to a significant
decrease in the number of customers and a substantial decline in the amount of,
and prices for, products and services purchased by our customers.
Cost of Revenues. Gross profit was $4.8 million for the six months ended
June 30, 2002. Gross profit was $13.1 million for the six months ended June 30,
2001. The increase in gross profit as a percentage of revenues for the six
months ended June 30, 2002 over the prior period was due to a substantial
decrease in research revenues with a higher decrease in the cost of revenues due
to restructuring initiatives.
Restructuring and Other Charges (Reversal). During the six months ended
June 30, 2002, we recorded a reversal to restructuring and other charges of
approximately $11.6 million, of which $1.5 million related to the discontinued
operations. During the six months ended June 30, 2001, we incurred $17.3 million
in restructuring and other charges, of which $9.8 million related to
discontinued operations, in connection with our corporate restructuring and
reduction in workforce during the period. Such restructuring charges included
costs and liabilities associated with employee terminations, lease cancellations
and commitments, including a write-down of leasehold improvements associated
therewith, cancellation charges in connection with our cancellation of scheduled
events, and the discontinuation of certain international operations.
Loss from Continuing Operations. Loss from continuing operations was
approximately $11.4 million for the six months ended June 30, 2002. Our loss
from operations was $27.0 million for the six months ended June 30, 2001. We
recognized a smaller loss from operations in the six months ended June 30, 2002
due primarily to the reversal of a previous restructuring charge related to the
settlement of the 21 Astor Place lease and decreases in other operating expenses
due to the reduction in operations, offset by the goodwill impairment writedown.
Cumulative effect of change in accounting principle. In connection with
our adoption of FASB Statement 142, "Goodwill and Other Intangible Assets", as
of January 1, 2002 and the performance of the required impairment tests of
goodwill and indefinite lived intangible assets, we recognized an impairment
loss of $35.9 million resulting from the cumulative effect of the change in
accounting principle during the six months ended June 30, 2002.
DISCONTINUED OPERATIONS
During the six months ended June 30, 2002, we disposed of our Media
Metrix, AdRelevance and LiveMetrix units which composed our measurement
division. The disposal of these units represent discontinued operations and
accordingly, our financial statements have been restated to reflect the
measurement division's operations as discontinued.
In connection with the disposal of our measurement business, we recorded a
loss of $6.6 million which is recorded as loss on disposal of measurement
business in our statement of operations.
Revenues for the measurement division were approximately $2.4 million and
$12.1 million for the three months ended June 30, 2002 and 2001, respectively
and $8.3 million and $26.4 million for the six months ended June 30, 2002 and
2001, respectively.
16
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, we had approximately $19.8 million of cash and cash
equivalents. In addition, at June 30, 2002, we held approximately $1.5 million
of cash in accounts collateralizing letters of credit issued in lieu of security
deposits under our real estate leases. Because we have effectively discontinued
our operations, we do not anticipate that operating expenses will be a material
use of our cash resources. Our activities have become limited to winding up our
affairs, taking such action as may be necessary to preserve the value of our
assets and distributing our assets. We will seek to distribute or liquidate all
of our assets in such manner and upon such terms as the board of directors
determines to be in the best interests of our stockholders. Although our board
of directors believes the liquidation program disclosed in our proxy statement
dated July 9, 2002 is achievable, there is currently no firm timetable for the
distribution of proceeds to our stockholders because of contingencies inherent
in winding up our business.
Since our inception, we have financed our operations primarily through an
initial investment and loan by NPD, the private placement of equity securities,
Jupiter Communications' and RelevantKnowledge's cash on hand at the time of the
respective mergers, cash from operations and the proceeds of public offerings
and cash from the disposition of assets.
Net cash used in operating activities was $6.0 million for the six months
ended June 30, 2002, compared to $36.4 million for the six months ended June 30,
2001. The variance for the six months ended June 30, 2002 compared to the six
months ended June 30, 2001 was primarily due to a lower net loss for the quarter
due to the restructuring activities initiated in 2001 as well as the reduction
in operations discussed above.
Net cash provided by investing activities was $10.9 million for the six
months ended June 30, 2002, compared to $1.4 million for the six months ended
June 30, 2001. Cash provided by investing activities for the six months ended
June 30, 2002 was due primarily to net proceeds received from the sale of the
measurement business. Cash provided by investing activities for the six months
ended June 30, 2001 was due primarily to proceeds received from the sale of
marketable securities offset by acquisition earn-out payments and property and
equipment additions.
Net cash provided by financing activities was $7,000 for the six months
ended June 30, 2002 compared to $2.2 million for the six months ended June 30,
2001. Cash provided by financing activities for the six months ended June 30,
2002 was due to the proceeds received from the exercise of stock options. Cash
provided by financing activities for the six months ended June 30, 2001 was due
primarily to contributions received from minority interests of $2.4 million and
to the proceeds received from the exercise of stock options of $342,000, offset
by the repayment of long term debt of $580,000.
During the year ended December 31, 2001, JMXI recorded restructuring and
other charges of $51.3 million. Of the total $51.3 million of restructuring and
other charges recorded, $9.9 million was paid, and $12.9 million of property,
plant and equipment and other current assets were written-off, which left an
accrual of $28.5 million at December 31, 2001, of which $20.3 million was
related to severance and lease payments and is included in long-term
liabilities. Of the $28.5 million accrual remaining at December 31, 2001, $9.3
million was paid and $11.6 million was reversed during the six months ended June
30, 2002, leaving an accrual of $7.6 million at June 30, 2002. $3.5 million is
expected to be paid out during the remainder of 2002, $800,000 in 2003, $700,000
in 2004, $700,000 in 2005, $400,000 in 2006 and the remaining $1.5 million from
2007 to 2011.
We lease office space in the United States and other countries. At June
30, 2002, our future minimum lease payments under non-cancelable operating
leases with initial or remaining lease terms in
17
excess of one year are $2.2 million for the remainder of 2002, $4.3 million for
2003, $4.0 million for 2004, $3.5 million for 2005, $2.8 million for 2006 and
$10.2 million thereafter. Future minimum lease payments have not been reduced by
future minimum sublease rentals of $13.0 million under operating leases. Rent
expense approximated $7,000,000, $3,000,000 and $861,000 for the years ended
December 31, 2001, 2000 and 1999, respectively. We are currently negotiating
with our landlords to restructure our lease commitments, however, we cannot
assure you that our efforts will be successful.
We have incurred significant net losses from operations since our
inception. As of June 30, 2002, we had an accumulated deficit of approximately
$673.8 million.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The carrying values of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments.
We have historically had very low exposure to changes in foreign currency
exchange rates, therefore we have not used derivative financial instruments to
manage foreign currency fluctuation risk. We no longer conduct business
internationally.
RISK FACTORS
OUR AUDITORS HAVE ISSUED A "GOING CONCERN" AUDIT OPINION.
The auditor's report on our consolidated financial statements for the
fiscal year ended December 31, 2001 states that because of operating losses and
a working capital deficiency, there is substantial doubt about our ability to
continue as a going concern. A "going concern" opinion indicates that the
financial statements have been prepared assuming we will continue as a going
concern and do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
WE MAY BE UNABLE TO NEGOTIATE SETTLEMENTS WITH RESPECT TO OUR REMAINING
LIABILITIES.
We are currently in the process of negotiating settlements with respect to
our remaining obligations and liabilities which include without limitation
building and facilities leases and tax obligations. If we are unable to
successfully negotiate termination of these obligations, we will have fewer or
no cash proceeds to distribute to our stockholders.
WE MAY BE FORCED TO SEEK BANKRUPTCY PROTECTION IN ORDER TO MAXIMIZE SHAREHOLDER
VALUE.
Although the plan of liquidation and dissolution has been approved by our
stockholders, our board of directors intends to continue exploring alternatives
to maximize shareholder value. One of our possible alternatives include seeking
bankruptcy protection. At this time, the board of directors does not know which
alternatives might be considered, or what impact any alternative might have on
stockholder value.
AFTER OUR WIND-DOWN THERE MAY BE NO ADDITIONAL CASH TO DISTRIBUTE TO OUR
STOCKHOLDERS AND IF THERE IS ADDITIONAL CASH TO DISTRIBUTE, THE TIMING OF ANY
SUCH FUTURE DISTRIBUTION IS UNCERTAIN.
Although our board of directors believes the liquidation program disclosed
in our proxy statement dated July 9, 2002 is achievable, there is currently no
firm timetable for the distribution of proceeds to our stockholders because of
contingencies inherent in winding up our business. We are currently unable to
predict the precise nature, amount or timing of any future distribution to
stockholders. The actual nature, amount and timing of all distributions will be
determined by our board of directors, in its sole discretion, and will depend in
part upon our ability to resolve our remaining contingencies.
Uncertainties as to the precise net value of our non-cash assets and the
ultimate amount of our liabilities make it impractical to predict the aggregate
net value ultimately distributable to stockholders. Claims, liabilities and
expenses from winding down our affairs will continue to be incurred. These
expenses will reduce the amount of cash available for ultimate distribution to
stockholders. However, no assurances can be given that available cash and
amounts received on the sale of assets will be adequate to
19
provide for our obligations, liabilities, expenses and claims and to make cash
distributions to stockholders. If such available cash and amounts received from
the sale of assets are not adequate to provide for our obligations, liabilities,
expenses and claims, we may not be able to distribute meaningful cash, or any
cash, to our stockholders.
STOCKHOLDERS MAY BE LIABLE TO CREDITORS OF THE COMPANY FOR UP TO AMOUNTS
RECEIVED FROM THE COMPANY IF THE COMPANY'S RESERVES ARE INADEQUATE.
Our board of directors and our stockholders have approved our plan of
liquidation and dissolution. Our board of directors, in their discretion, may
file a Certificate of Dissolution with the State of Delaware dissolving us.
Pursuant to the Delaware General Corporation Law, we will continue to exist for
three years after the dissolution becomes effective or for such longer period as
the Delaware Court of Chancery shall direct, for the purpose of prosecuting and
defending suits against us and enabling us to gradually to close our business,
to dispose of our property, to discharge our liabilities and to distribute to
our stockholders any remaining assets. Under the Delaware General Corporation
Law, in the event we fail to create an adequate contingency reserve for payment
of our expenses and liabilities during this three-year period, each stockholder
could be held liable for payment to our creditors for such stockholder's pro
rata share of amounts owed to creditors in excess of the contingency reserve.
The liability of any stockholder would be limited, however, to the amounts
previously received by such stockholder from us (and from any liquidating trust
or trusts). Accordingly, in such event a stockholder could be required to return
all distributions previously made to such stockholder. In such event, a
stockholder could receive nothing from us under the Plan of Liquidation and
Dissolution. Moreover, in the event a stockholder has paid taxes on amounts
previously received, a repayment of all or a portion of such amount could result
in a stockholder incurring a net tax cost if the stockholder's repayment of an
amount previously distributed does not cause a commensurate reduction in taxes
payable. In the event of our dissolution, there can be no assurance that the
contingency reserve maintained by us will be adequate to cover any expenses and
liabilities.
SUCCESS OF OUR ORDERLY WIND DOWN OF OPERATIONS DEPENDS ON QUALIFIED PERSONNEL TO
EXECUTE IT.
The success of our wind down depends in large part upon our ability to
retain the services of qualified personnel to handle the sale of our remaining
assets and settlement of remaining liabilities. Although we have retained a very
limited number of qualified employees for this purpose, the retention of
qualified personnel is particularly difficult under our current circumstances.
OUR STOCK TRANSFER BOOKS WILL BE CLOSED UPON THE FILING OF OUR CERTIFICATE OF
DISSOLUTION WITH THE STATE OF DELAWARE, AFTER WHICH ANY TRADES WILL NOT BE
RECORDED BY US.
We will close our stock transfer books and discontinue recording transfers
of our common stock on the date we file our Certificate of Dissolution with the
Delaware Secretary of State, also known as the final record date. Thereafter,
certificates representing the common stock will not be assignable or
transferable on our books except by will, intestate succession or operation of
law. The proportionate interests of all of our stockholders will become fixed on
the basis of their respective stock holdings at the close of business on the
final record date, and any distributions made by us will be made solely to the
stockholders of record at the close of business on the final record date, except
as may be necessary to reflect subsequent transfers recorded on our books as a
result of any assignments by will, intestate succession or operation of law. For
any other trades after the final record date, the seller and purchaser of the
common stock will need to negotiate and rely on due-bill contractual obligations
between themselves with respect to the allocation of stockholder proceeds
arising from ownership of the shares.
20
OUR STOCK WAS DELISTED FROM THE NASDAQ STOCK MARKET ON AUGUST 7, 2002 AND IS
SIGNIFICANTLY LESS LIQUID THAN BEFORE.
Our common stock was delisted from trading on the Nasdaq Stock Market on
August 7, 2002 due to our inability to meet the minimum requirements for
continued listing on the Nasdaq Stock Market. As a result of the delisting, the
ability of our stockholders to buy and sell our shares has been materially
impaired, and is limited primarily to over-the-counter quotation services, such
as Pink Sheets, that handle high-risk ventures and are not regulated by the
Securities and Exchange Commission.
WE WILL CONTINUE TO INCUR THE EXPENSE OF COMPLYING WITH PUBLIC COMPANY REPORTING
REQUIREMENTS.
We have an obligation to continue to comply with the applicable reporting
requirements of the Securities Exchange Act of 1934, as amended, even though
compliance with such reporting requirements is economically burdensome. In order
to curtail expenses, after filing our Certificate of Dissolution we will seek
relief from the Securities and Exchange Commission from the reporting
requirements under the Exchange Act. Until such relief is granted we will
continue to make obligatory Exchange Act filings. We anticipate that even if
such relief is granted in the future, we will continue to file current reports
on Form 8-K to disclose material events relating to our liquidation and
dissolution along with any other reports that the Securities and Exchange
Commission may require.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 7, 2002 we entered into a Settlement Agreement and Intellectual
Property Agreement with NetRatings, Inc. pursuant to which we agreed to
discontinue our pending patent infringement lawsuit against NetRatings and to
transfer to NetRatings our patents for computer use tracking (United States
Patent Nos. 6,115,680 and 5,675,510) in exchange for the payment of $15.0
million. In addition as part of the settlement, NetRatings granted us a
non-exclusive, assignable license to use the computer use tracking patents
transferred to NetRatings in our domestic Internet audience measurement business
until June 30, 2005. The license fee payable to NetRatings was to be $125,000
per month for the period July 1 through September 30, 2002, and $375,000 for the
fourth quarter 2002. In connection with the sale of the Media Metrix business,
we gave notice that we intended to terminate the license.
On July 30, 2002, we were sued in the Superior Court of California, County
of Santa Clara by NetRatings, Inc. alleging we violated provisions of a
non-competition clause entered into in connection with the sale by us to
NetRatings of our European business and otherwise breached contractual
obligations owed by us to NetRatings with respect to the licensing of certain
intellectual property. comScore Networks has agreed to indemnify us with respect
to the intellectual property claim. We believe the lawsuit is meritless and
intend to vigorously defend the actions.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
21
ITEM 4. SUBMISSIONS 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
Number Description
------ -----------
99.1 Certification of Robert Becker, Chief Executive
Officer and Principal Financial Officer of JMXI,
Inc., pursuant to 18 U.S.C. Section 1350, dated
August 19, 2002.
(b) Reports on Form 8-K
We filed a Current Report on Form 8-K with the Securities and Exchange
Commission on April 24, 2002 with respect to the sale of substantially all of
the assets of our advertising measurement division, AdRelevance.
We filed a Current Report on Form 8-K with the Securities and Exchange
Commission on June 19, 2002 with respect to the sale of substantially all of the
assets of our audience measurement division, Media Metrix.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JUPITER MEDIA METRIX, INC.
By: /s/Robert Becker
--------------------------------------
Name: Robert Becker
Title: Chief Executive Officer and
Principal Financial Officer
Date: August 19, 2002
23
EXHIBIT INDEX
Number Description
------ -----------
99.1 Certification of Robert Becker, Chief Executive Officer and
Principal Financial Officer of JMXI, Inc., pursuant to 18
U.S.C. Section 1350, dated August 19, 2002.
24