10-Q 1 y65797qe10vq.txt JMXI, INC. 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 SEPTEMBER 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________ COMMISSION FILE NUMBER 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.) 900 WEST SHORE ROAD PORT WASHINGTON, NEW YORK 11050 (Address of principal executive offices) (Zip Code) (516) 625-4656 (Registrant's telephone number, including area code) JMXI, INC. 2 HUNTINGTON QUADRANGLE; SUITE 3S2 MELVILLE, NEW YORK 11747 (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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of November 7, 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 -- September 30, 2002 and December 31, 2001 .. 3 Consolidated Statements of Operations -- Three and Nine Months Ended September 30, 2002 and 2001 ........................................... 4 Consolidated Statement of Stockholders' Equity -- Nine Months Ended September 30, 2002 .................................................... 5 Consolidated Statements of Cash Flows -- Nine Months Ended September 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 .................................................... 11 Item 3. Quantitative and Qualitative Disclosures of Market Risk ..................... 16 Item 4. Controls and Procedures ..................................................... 18 PART II OTHER INFORMATION Item 1. Legal Proceedings ........................................................... 18 Item 2. Changes in Securities and Use of Proceeds ................................... 19 Item 3. Defaults Upon Senior Securities ............................................. 19 Item 4. Submission of Matters to a Vote of Security Holders ......................... 19 Item 5. Other Information ........................................................... 19 Item 6. Exhibits and Reports on Form 8-K ............................................ 19 Signatures ........................................................................... 21

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)

See accompanying notes. 3 JMXI, INC. AND SUBSIDIARIES (FORMERLY JUPITER MEDIA METRIX, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)

See accompanying notes. 4 JMXI, INC. AND SUBSIDIARIES (FORMERLY JUPITER MEDIA METRIX, INC.) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) (IN THOUSANDS)

See accompanying notes. 5 JMXI, INC. AND SUBSIDIARIES (FORMERLY JUPITER MEDIA METRIX, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

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 nine-month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. The 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 nine months ended September 30, 2002, the Company disposed of Media Metrix, AdRelevance and LiveMetrix, which composed its measurement division, as well as its Jupiter Research unit and Events unit. The disposal of these units represent discontinued operations and, accordingly, the accompanying financial statements have been restated to reflect the measurement, research and events divisions' 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 fee 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 September 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. On June 21, 2002, the Company sold its research and events business units to INT Media Group, Inc. now known as Jupitermedia Corporation for $250,000 in cash. On July 31, 2002, the stockholders of the Company approved the sale to Jupitermedia and the sale was consummated. In connection with the disposal of the businesses discussed above, the Company recorded a loss of $6.3 million, which is recorded as income (loss) on disposal of businesses in the accompanying statement of operations. Revenues for the Company's measurement division were $9.6 million for the three months ended September 30, 2001, and $8.3 million and $36.0 million for the nine months ended September 30, 2002 and 2001, respectively. Revenues for the Company's research and events division were $452,000 and $9.0 million for the three months ended September 30, 2002 and 2001, respectively, and $9.1 million and $35.4 million for the nine months ended September 30, 2002 and 2001, respectively. On July 31, 2002, the stockholders of the Company approved the Company's Plan of Liquidation and Dissolution. As of July 31, 2002, the Company ceased all activities other than activities incidental to the wind-up and liquidation of the Company; however, the Company has not filed a Certificate of Dissolution with the Secretary of State of the State of Delaware, and, accordingly, has not yet adopted the liquidation basis of accounting. 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 nine months ended September 30, 2002, the Company recorded a reversal to restructuring charges of $13.7 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, $11.3 million was paid, and $13.7 million was reversed during the nine months ended September 8 30, 2002, leaving an accrual of $3.5 million at September 30, 2002. The Company expects to pay out the remainder during the next twelve months. The reversal of $13.7 million is primarily related to the settlement of its lease commitment at 21 Astor Place (see Note D). 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 thereof, the Company relinquished a $4.5 million letter of credit to secure the lease and had prepaid 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. 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 events businesses. 9 Property and equipment was also written down by $8.5 million to reflect its reductions 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):

* The as reported amounts for 2001 include the $320.0 million impairment recorded in the third quarter of 2001. G. SUBSEQUENT EVENTS On October 8, 2002, the Company was served notice of a suit filed in the United States District Court for the Western District of Washington in Seattle by two former employees of the Company alleging the Company violated Washington State and Federal securities laws in connection with the purchase by the Company of AdRelevance, Inc. and otherwise breached contractual and other obligations allegedly owed by the Company to such employees with respect to their receipt of shares and options to purchase shares of the Company's common stock. The Company believes the lawsuit is without merit and intends to vigorously defend the action. On October 25, 2002 the Company entered into an Agreement and a Surrender Agreement, as amended as of October 31, 2002, with its landlord for leased space at 2 Huntington Quadrangle, Melville, New York. Pursuant to the terms thereof, the Company deposited approximately $690,000 in escrow and has paid rent through November 30, 2002 in exchange for which its landlord has agreed to terminate the lease and relinquish a $120,000 letter of credit to secure the lease, contingent upon such landlord's ability to relet the premise on or prior to November 30, 2002. In the event the premises is not relet by such date, the escrow will be returned to the Company, and the agreement and surrender agreement shall terminate. 10 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 seven 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 the 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. 11 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. As we have not filed a Certificate of Dissolution with the Secretary of State of the State of Delaware, we have not yet adopted the liquidation basis of accounting. 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., now known as Jupitermedia Corporation, 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 statement of operations have been restated to reflect the disposal of the measurement, research and events businesses. As of July 31, 2002, all of our businesses were discontinued, and we ceased all operating activities other than limited activities incidental to our wind-up. Our revenues from discontinued operations consisted of measurement, research and events 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. 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 events offerings, 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. 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 12 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 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 nine months ended September 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 nine months ended September 30, 2002. RESULTS OF OPERATIONS FOR CONTINUING OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2001 Loss from Continuing Operations. Loss from operations was $289,000 for the three months ended September 30, 2002. Loss from operations was $523,000 for the three months ended September 30, 2001. We recognized a smaller loss from operations in the three months ended September 30, 2002 due primarily to decreases in operating expenses due to the cessation of all operating activities other than limited activities incidental to our wind-up. Operating expenses in connection with our limited activities incidental to our wind-up are comprised of general and administrative expenses of $234,000 for the three months ended September 30, 2002. NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2001 Loss from Continuing Operations. Loss from continuing operations was approximately $640,000 for the nine months ended September 30, 2002. Our loss from operations was $2.7 million for the nine months ended September 30, 2001. We recognized a smaller loss from operations in the nine months ended September 30, 2002 due primarily to decreases in interest expense and operating expenses due to the cessation of all operating activities other than limited activities incidental to our wind-up. Operating expenses are comprised of general and administrative expenses of $469,000 for the nine months ended September 30, 2002. 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 nine months ended September 30, 2002. 13 DISCONTINUED OPERATIONS During the nine months ended September 30, 2002, we disposed of our Media Metrix, AdRelevance and LiveMetrix units which composed our measurement division as well as our Jupiter Research unit and our Events unit. The disposal of these units represent discontinued operations and accordingly, our financial statements have been restated to reflect such divisions' operations as discontinued. In connection with the disposal of our measurement business, we recorded a loss of $1.8 million, and in connection with the disposal of our research and events businesses, we recorded a loss of $4.5 million, which are recorded as loss on disposal of businesses in our statement of operations of $6.3 million. Revenues for our measurement division were $9.6 million for the three months ended September 30, 2001, and $8.3 million and $36.0 million for the nine months ended September 30, 2002 and 2001, respectively. Revenues for our research and events division were $452,000 and $9.0 million for the three months ended September 30, 2002 and 2001, respectively, and $9.1 million and $35.4 million for the nine months ended September 30, 2002 and 2001, respectively. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2002, we had approximately $14.6 million of cash and cash equivalents. In addition, at September 30, 2002, we held approximately $1.3 million of cash in accounts collateralizing letters of credit issued in lieu of security deposits under our real estate leases. Because we have ceased all operating activities other than limited activities incidental to our wind-up, 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 have incurred and will continue to incur legal expenses in connection current and future litigation, including the legal proceedings set forth in Part II, Item 1, Legal Proceedings. 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. Net cash used in operating activities was $11.8 million for the nine months ended September 30, 2002, compared to $52.1 million for the nine months ended September 30, 2001. The variance for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 was primarily due to a lower net loss for 2002 due to the restructuring activities initiated in 2001, as well as the cessation of operations discussed above. Net cash provided by (used in) investing activities was $11.4 million for the nine months ended September 30, 2002, compared to ($1.9) million for the nine months ended September 30, 2001. Cash provided by investing activities for the nine months ended September 30, 2002 was due primarily to net proceeds received from the sale of the measurement business. Cash used in investing activities for the nine months ended September 30, 2001 was due primarily to proceeds received from the sale of marketable securities offset by acquisition earn-out payments, property and equipment additions and the purchase of a license to proprietary technology. Net cash provided by financing activities was $8,000 for the nine months ended September 30, 2002 compared to $2.8 million for the nine months ended September 30, 2001. Cash provided by 14 financing activities for the nine months ended September 30, 2002 was due to the proceeds received from the exercise of stock options and warrants. Cash provided by financing activities for the nine months ended September 30, 2001 was due primarily to contributions received from minority interests of $3.2 million and to the proceeds received from the exercise of stock options of $346,000, offset by the repayment of long term debt of $773,000. 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, $11.3 million was paid, and $13.7 million was reversed during the nine months ended September 30, 2002, leaving an accrual of $3.5 million at September 30, 2002. The Company expects to pay out the remainder during the next twelve months. We lease office space in the United States and other countries. At September 30, 2002, our future minimum lease payments under non-cancelable operating leases with initial or remaining lease terms in excess of one year are $1.1 million for the remainder of 2002, $4.2 million for 2003, $3.9 million for 2004, $3.4 million for 2005, $2.7 million for 2006 and $16.7 million thereafter. Future minimum lease payments have not been reduced by future minimum sublease rentals of $8.7 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 have incurred significant net losses from operations since our inception. As of September 30, 2002, we had an accumulated deficit of approximately $667.7 million. 15 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 16 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. 17 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. ITEM 4. CONTROLS AND PROCEDURES QUARTERLY EVALUATION OF THE COMPANY'S DISCLOSURE CONTROLS AND INTERNAL CONTROLS. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company's management including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, there were no significant changes in the Company's internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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 without merit and intend to vigorously defend the actions. On October 8, 2002, we were served notice of a suit filed in the United States District Court for the Western District of Washington in Seattle by two former employees alleging we violated Washington State and Federal securities laws in connection with our purchase of AdRelevance, Inc. and otherwise breached contractual and other obligations allegedly owed to such employees with respect to their receipt of shares and options to 18 purchase shares of our common stock. 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. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS A Special Meeting of our stockholders was held on July 31, 2002. The purpose of the meeting was to consider and vote on the following proposals: 1. to approve the sale by us to INT Media Group, Inc. of substantially all of the assets of our Jupiter research and events businesses, including our customer contracts and intellectual property, as well as the assignment of certain related liabilities pursuant to an Asset Purchase Agreement dated June 20, 2002, among us, our wholly owned subsidiary, Jupiter Communications, Inc., and INT Media Group, Inc. 2. to approve and adopt our Plan of Liquidation and Dissolution. 3. to approve and adopt an amendment to our Amended and Restated Certificate of Incorporation to change our name to JMXI, Inc. and to decrease the minimum number of directors required to serve on the board of directors from six persons to one person. The results of the voting on each of the proposals set forth above is as follows: 1. Proposal No. 1 was approved with 18,594,182 shares cast in favor of the proposal, 68,418 shares cast against the proposal and 7,402 abstentions; 2. Proposal No. 2 was approved with 18,586,779 shares cast in favor of the proposal, 80,721 shares cast against the proposal and 2,502 abstentions; 3. Proposal No. 3 was approved with 18,588,898 shares cast in favor of the proposal, 76,647 shares cast against the proposal and 4,457 abstentions. ITEM 5. OTHER INFORMATION Sarbanes-Oxley Act Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, our Chief Executive Officer and Principal Financial Officer has provided certain certifications to the Securities and Exchange Commission. These certifications accompany this report when filed with the Commission but are not set forth herein. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 19

(b) Reports on Form 8-K We filed a Current Report on Form 8-K with the Securities and Exchange Commission on July 2, 2002 with respect to the sale of substantially all of the assets of our Jupiter research and events divisions and the adoption by our Board of Directors of our plan of dissolution and liquidation. We filed a Current Report on Form 8-K with the Securities and Exchange Commission on July 3, 2002 with respect to our request for a hearing before the Nasdaq Listing Qualifications Panel in connection with the delisting of our common stock from the Nasdaq National Market. We filed a Current Report on Form 8-K with the Securities and Exchange Commission on August 9, 2002 with respect to the approval by our shareholders of the sale of substantially all of the assets of our Jupiter research and events divisions and our plan of dissolution and liquidation and the withdrawal of our challenge to the delisting of our common stock from the Nasdaq National Market. 20 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: November 19, 2002 21 JMXI, INC. CERTIFICATIONS FOR FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2002 I, Robert Becker, certify that: 1. I have reviewed this quarterly report on Form 10-Q of JMXI, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 /s/ Robert Becker ----------------------------------- Robert Becker Chief Executive Officer and Principal Financial Officer 22 EXHIBIT INDEX

JUPITER MEDIA METRIX INC 10-Q