Rule 424(b)(3)
Registration Statement
No. 333-35870
PROSPECTUS
1,999,995 SHARES
OMEGA RESEARCH, INC.
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of up to 1,999,995 shares of common stock, par value $0.01 per
share, of Omega Research, Inc. ("Omega Research"), which may be offered from
time to time by shareholders of Omega Research or by donees, transferees or
other successors in interest that receive shares of Omega Research as a gift or
other non-sale related transfer. We will receive no part of the proceeds of such
sales. All of the shares of Omega Research common stock described above were
issued by us in consideration of our acquisition of all of the outstanding
common stock of Window on WallStreet Inc. ("Window on WallStreet"), a Texas
corporation. See "SELLING SHAREHOLDERS" for further information. The 1,999,995
shares were issued pursuant to an exemption from the registration requirements
of the Securities Act of 1933, as amended.
These shares may be offered by shareholders of Omega Research from time
to time in one or more transactions as described under "PLAN OF DISTRIBUTION."
To the extent required, the number of shares to be sold, the name of any selling
shareholder(s), the purchase price, the name of any agent or broker-dealer and
any applicable commissions, discounts or other items constituting compensation
to such agent or broker-dealer with respect to a particular offering will be set
forth in a supplement or supplements to this prospectus. The aggregate proceeds
to any selling shareholder(s) from the sale of the shares offered from time to
time will be the purchase price of the shares sold less commissions, discounts
and other compensation, if any, paid by such selling shareholder(s) to any agent
or broker-dealer. The price at which any of the shares may be sold, and the
commissions, if any paid, in connection with any sale, are unknown and may vary
from transaction to transaction. We will pay all expenses incident to the
offering and sale of the shares to the public other than any commissions and
discounts of underwriters, dealers or agents and any transfer taxes. See
"SELLING SHAREHOLDERS" and "PLAN OF DISTRIBUTION."
Omega Research's common stock is listed on The Nasdaq National Market
under the symbol "OMGA." On May 11, 2000, the last sale price of Omega
Research's common stock was $2.5312 per share.
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THIS OFFERING INVOLVES A DEGREE OF RISK.
FOR MORE INFORMATION, SEE "RISK FACTORS" ON PAGE 5.
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The Securities and Exchange Commission may take the view that, under
certain circumstances, Omega Research's shareholders and any broker-dealers or
agents that participate with such shareholders in the distribution of these
registered shares may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933. Commissions, discounts or concessions received by any
such broker-dealer or agent may be deemed to be underwriting commissions under
the Securities Act of 1933.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is May 12, 2000.
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TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION.................................3
THE COMPANY.........................................................4
RISK FACTORS........................................................5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..................12
USE OF PROCEEDS....................................................13
SELLING SHAREHOLDERS...............................................13
PLAN OF DISTRIBUTION...............................................14
LEGAL MATTERS......................................................15
EXPERTS ..........................................................16
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WHERE YOU CAN FIND MORE INFORMATION
Omega Research files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Omega Research files at the SEC's
public reference rooms at the following locations:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
New York Regional Office
7 World Trade Center
Suite 1300
New York, New York 10048
Chicago Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Omega Research's SEC filings are also available to the
public from commercial document retrieval services and at the Website maintained
by the SEC at "http://www.sec.gov." Reports, proxy statements and other
information pertaining to Omega Research are also available for inspection at
the offices of The Nasdaq Stock Market, which is located at 1735 K Street, N.W.,
Washington, D.C. 20006.
Omega Research has filed a registration statement to register with the
SEC the Omega Research common stock listed in this prospectus. This prospectus
is part of that registration statement. As allowed by SEC rules, this prospectus
does not contain all of the information you can find in the registration
statement or the exhibits to the registration statement.
Some of the important business and financial information that you may
want to consider is not included in this prospectus, but rather is "incorporated
by reference" to documents that have been filed by Omega Research with the SEC.
The information incorporated by reference is considered part of this prospectus,
except for any information superceded by information contained directly in this
prospectus or in later filed documents incorporated by reference in this
prospectus. The information that is incorporated by reference consists of:
o Omega Research's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, as filed on March 22, 2000;
o Omega Research's Current Reports on Form 8-K filed on November
8, 1999 (as amended on January 7, 2000), November 10, 1999 and
January 28, 2000 (as amended on April 28, 2000);
o The description of Omega Research's common stock contained in
its Registration Statement on Form S-1 filed on July 25, 1997;
and
o All documents filed by Omega Research under the Securities
Exchange Act of 1934 (e.g., Forms 10-Q and 8-K) after the date
of this prospectus and prior to the termination of this
offering.
If there is any contrary information in a previously filed document
that is incorporated by reference, then you should rely on the information in
this prospectus. You should rely only on the information contained or
incorporated by reference in this prospectus. We have not authorized anyone to
provide you with information that is different from that which is contained or
incorporated by reference in this prospectus. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of this prospectus.
If you are a shareholder, you can obtain any of the documents
incorporated by reference through Omega Research or the SEC. Documents
incorporated by reference are available from Omega Research without charge,
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excluding all exhibits. You may obtain documents incorporated by reference in
this prospectus by requesting them in writing to the following address or by
telephone:
Omega Research, Inc.
Attention: Investor Relations
8700 West Flagler Street
Miami, Florida 33174
(305) 485-7000
THE COMPANY
Omega Research, a Florida corporation, was incorporated in 1982 to
develop, market and sell investment analysis and trading strategy testing and
automation (collectively, "trading strategy") software tools to individual and
professional investors and traders (collectively, "traders"). Our current
products and services provide traders with the ability to develop, historically
test and computer automate trading strategies and to access streaming real-time
charts, quotes and news via the Internet.
We are in the process of changing our business model. We have taken
steps, one of which is the proposed merger with onlinetradinginc.com
("OnlineTrading.com"), to transform from a trading strategy client software
company to one that includes an online brokerage firm -- a company which intends
to provide to active traders a trading platform that incorporates and seamlessly
integrates powerful trading strategy tools, historical and streaming real-time
market data and news, and high-speed access directly to an electronic order
execution system. Our historical business model has consisted of sales of client
software products, payment for which is committed to in full by the customer at
the time of sale. Under the new business model, we will seek to derive recurring
revenues from customers by offering monthly subscription services for trading
strategy tools integrated with streaming real-time market data and news for
which a monthly fee is payable, and by offering through OnlineTrading.com
(subject to completion of the merger) online brokerage services for which
commissions are payable. We believe that we will be able to leverage our
historical success in selling trading strategy tools to build a subscriber base
of active traders that will, assuming completion of the merger, use the online
brokerage services of OnlineTrading.com or, at a minimum, our trading strategy
subscription services.
We have been, and remain, a leading provider of real-time trading
strategy client software for the Microsoft Windows operating system. In February
1999, we released our current generation of premium software products, branded
"2000I," which included upgrade versions of our then-existing products and new
products. As of February 22, 1999, our client software product line has
consisted of TRADESTATION 2000I, OPTIONSTATION 2000I, RADARSCREEN 2000I, OMEGA
RESEARCH PROSUITE 2000I and SUPERCHARTS 4.
Approximately five months ago, we began to implement the change in our
business model. On October 26, 1999, we acquired Window on WallStreet, a leading
provider of Internet-based streaming real-time market data (FINANCIAL DATA CAST
NETWORK, or "FDCN") and a developer of client software and online trading
strategy tools, in a merger transaction in which the Window On WallStreet
shareholders received 1,999,995 newly-issued shares of Omega Research common
stock.
On November 8, 1999, we announced that we would focus on serving active
online traders through the design, marketing and implementation of an
Internet-based trading strategy platform that is to be named TRADESTATION.COM.
TRADESTATION.COM, expected to be launched later this year, will include premium
trading strategy tools of TRADESTATION seamlessly integrated with the FDCN'S
streaming real-time market quotes and news.
On January 19, 2000, we signed a definitive, 100% share-exchange merger
agreement with OnlineTrading.com. OnlineTrading.com provides electronic order
execution technology that directly accesses electronic communications networks
("ECN's"), exchanges and market makers in order to provide OnlineTrading.com's
customers with high-speed and efficient order execution that avoids traditional
market maker participation and brokerage order-flow arrangements. The prime
objective of the pending merger with OnlineTrading.com is to offer to active
traders online brokerage services that are integrated with TRADESTATION.COM,
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thereby creating a trading platform that incorporates and seamlessly integrates
powerful trading strategy tools, historical and streaming real-time market data
and news, and a high-speed electronic order execution system.
Pursuant to an Agreement and Plan of Merger and Reorganization, as
amended, a recently-formed holding company named OnlineTrading.com Group, Inc.
("OnlineTrading.com Group") will own 100% of the issued and outstanding capital
stock of Omega Research and OnlineTrading.com. Upon completion of the merger, as
a result of share exchanges between OnlineTrading.com Group and each of Omega
Research and OnlineTrading.com, and the listing of OnlineTrading.com Group
shares, OnlineTrading.com Group will be the sole publicly-traded company in the
group, with its outstanding shares of common stock listed on The Nasdaq National
Market. OnlineTrading.com Group, based upon the exchange ratio set forth in the
merger agreement, would initially be owned between 62% and approximately 57% (on
a fully diluted basis) by Omega Research's shareholders and between 38% and
approximately 43% (on a fully diluted basis) by OnlineTrading.com's
shareholders. The precise percentages will be determined by the formulae set
forth in the merger agreement. The initial eight-member board of directors of
OnlineTrading.com Group would consist of five directors (two of whom would be
independent directors) designated by Omega Research, and three directors (one of
whom would be an independent director) designated by OnlineTrading.com. Closing
of the merger is conditioned upon and subject to the effectiveness of a
registration statement on Form S-4, the approval of the shareholders of each of
Omega Research and OnlineTrading.com, and the satisfaction of other conditions
precedent.
On January 25, 2000, we launched WINDOWONWALLSTREET.COM, our first
Internet subscription service. WINDOWONWALLSTREET.COM offers streaming real-time
charts, quotes and news powered by some of our award-winning trading tools. We
believe that the subscriber base being built with WINDOWONWALLSTREET.COM will
contain many potential OnlineTrading.com brokerage clients.
On February 29, 2000, we announced that in light of the apparent
successful launch of WINDOWONWALLSTREET.COM, we were accelerating our transition
to our new business model by focusing our marketing efforts and resources on
WINDOWONWALLSTREET.COM (as opposed to our client software). Marketing of client
software products is expected to be discontinued in May 2000, although
availability and customer support of our client software products are expected
to continue for the foreseeable future.
The word "Company," as used in this prospectus, refers collectively to
OnlineTrading.com Group as the anticipated publicly-traded holding company,
Omega Research as its wholly-owned subsidiary responsible for the development
and operation of the trading strategy tools/real-time market data services
business, and OnlineTrading.com as its wholly-owned subsidiary responsible for
brokerage services. Those subsidiaries are intended to be operated as separate,
independent companies. The anticipated brokerage services to be provided through
OnlineTrading.com are subject to the closing of the merger, of which no
assurance can be given.
Omega Research's principal executive offices are located at 8700 West
Flagler Street, Miami, Florida 33174, and its telephone number is (305)
485-7000.
RISK FACTORS
The following risk factors should be considered in conjunction with the
other information included and incorporated by reference in this prospectus
before purchasing our common stock.
FAILURE TO COMPLETE THE MERGER WITH ONLINETRADING.COM COULD NEGATIVELY IMPACT
OUR STOCK PRICES AND FUTURE BUSINESS AND OPERATIONS
If the merger with OnlineTrading.com is not completed, we may be
subject to a number of material negative events, including the following:
o we may be required to pay OnlineTrading.com a termination fee
of $5 million under certain circumstances;
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o the stock option we granted to OnlineTrading.com may become
exercisable under certain circumstances;and
o costs related to the merger, such as legal, accounting and
financial advisor fees, must be paid even if the merger is not
completed.
In addition, our customers, suppliers and potential strategic partners
may, in response to the announcement of the merger, delay or defer decisions
concerning us. Any delay or deferral in those decisions by such customers,
suppliers or potential strategic partners could have a material adverse effect
on our business, regardless of whether or not the merger is ultimately
completed. Similarly, our current and prospective employees may experience
uncertainty about their future roles after the merger until our strategies are
completely announced or executed. This may adversely affect our ability to
attract and retain key management, sales, marketing and technical personnel.
Further, if the merger is terminated and our board of directors
determines to seek another merger or business combination, there can be no
assurance that we will be able to find a partner willing to pay or accept (as
the case may be) an equivalent or better price than that which would be paid or
accepted in the merger. In addition, while the merger agreement is in effect,
subject to certain limited exceptions, we are prohibited from soliciting,
initiating, encouraging or entering into certain extraordinary transactions,
such as a merger, sale of assets or other business combination, with any other
party. Furthermore, if the merger agreement is terminated and OnlineTrading.com
is entitled to exercise and does exercise its option to purchase our common
stock, we may not be able to account for future transactions as a
pooling-of-interests.
CHANGE OF BUSINESS MODEL
We are, through our recent Window On WallStreet acquisition and the
pending merger with Online Trading.com, in the process of changing our business
model from being a trading strategy client software company to being part of,
and controlling, a company (i.e., OnlineTrading.com Group) that provides an
Internet platform of trading strategy tools and streaming real-time market data
and news, and trade execution through a high-speed electronic order execution
system. We have limited experience in the real-time market data industry (all of
such experience has been acquired by Window On WallStreet, and Window On
WallStreet had only one year of experience operating a real-time data service at
the time it was acquired by us). We have no experience in the brokerage services
industry, and the Company will be relying completely upon the experience of
OnlineTrading.com. OnlineTrading.com itself has only been providing brokerage
services for approximately four years, and primarily to institutional investors
(as opposed to the individual active traders the Company seeks to attract). The
lack of experience in key components of the new business model, even after
considering the experience of Window On WallStreet and OnlineTrading.com, is
substantial, and may result in delays, mistakes and liabilities unlikely to
happen to a company that has more experience. Such delays, mistakes and
liabilities, if and to the extent they occur, are likely to have material
adverse effects upon the Company's business, financial condition, results of
operations and prospects.
If customer acceptance of the Company's Internet-based trading strategy
tools, real-time market data services or online brokerage services does not meet
our expectations (due to technical difficulties or errors in the products or
services, unfavorable critical reviews, failure to market effectively, the
introduction by others of more-accepted products and services, or other
reasons), its business, financial condition, results of operations and prospects
will be materially adversely affected. All software, including Internet-based
software, contains errors, particularly new, highly-complex, innovative products
or services. Accordingly, there is a substantial risk that the Company's
Internet-based trading strategy tools, real-time market data services and online
brokerage services in development will contain numerous technical errors, some
of which may be significant and deeply, negatively impact customer acceptance of
such products and services.
The decision to change our business model also means that we must
develop and depend upon a different operational infrastructure than the one
which supported a client software business, and substantially modify our
approaches to product development and sales and marketing. Our infrastructure
must be changed to support three separate kinds of businesses (development of
trading strategy tools, organization and delivery of streaming real-time data
and news, and online brokerage services) that need to be seamlessly integrated.
This will require substantial changes in information technology and databases,
mechanisms and methods of delivery of products and services, administrative
functions, and use of personnel resources. Product development must change its
focus to a large
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extent from client software to Internet and web site-related technology, and
sales and marketing must change its focus from high-priced client software sales
to brokerage services (commission revenues), the advertising of which is
intensely regulated by governmental and quasi-governmental authorities, and
Internet-based, lower-priced, monthly subscriptions for trading strategy tools
integrated with streaming real-time data and news (monthly subscription
revenues). The Company has virtually no prior experience in marketing these
services, as we have never (until the Window On WallStreet acquisition) been in
those businesses, and Window On WallStreet and OnlineTrading.com have engaged in
little or no media advertising of their respective services. There are
substantial risks that we will fail, to some degree, to sufficiently rebuild our
infrastructure and integrate the three key components of the new business model
(trading tools/real-time data/online brokerage services), and/or to re-focus
product development and sales and marketing on the new business model. Such
failures, if and to the extent they occur, are likely to have material adverse
effects upon our business, financial condition, results of operations and
prospects.
Our transition to the new business model has placed, and will continue
to place, a significant strain on our management and operations. Our future
operating results will depend, in part, on our ability to continue to broaden
our senior and middle management groups and administrative infrastructure, and
our ability to attract, hire, and retain skilled employees, particularly in
product development, marketing and sales, web site design and information
technology.
Because the new business model is one with no historical record for the
Company, and, to our knowledge, one with no historical record for any other
company, our attempts to anticipate revenues and costs, to prepare budgets which
organize the implementation of our transition to the new business model, and to
make decisions regarding obtaining third-party financing that may be required,
will generally be based upon theoretical assumptions. Future events and results
may differ drastically from those planned or anticipated, which, if negative,
would result in a material adverse effect on our business, financial condition,
results of operations and prospects.
The substantial risks discussed above are magnified by the rapid pace
at which we are attempting to complete the transition to the new business model.
We are assuming that the merger will close no later than June (even though there
is risk that the merger will close later or not at all) and that the new
business model will be fully launched in a relatively short period of time after
closing of the merger. If that occurs, we will have changed our business
entirely in a period of approximately eight months. The rapid pace obviously
increases the likelihood of occurrence of the possible mistakes and failures
discussed above, and increases the risks of the likelihood of resulting material
adverse effects that will damage our business, financial condition, results of
operations and prospects.
FAILURE TO CLOSE THE MERGER
Our new business model is dependent upon closing of the merger with
OnlineTrading.com. If the merger does not occur, our choices would be to modify
our new business model to exclude online brokerage services, to seek to develop
arrangements to integrate our trading strategy tools/streaming real-time data
platform with third-party online brokers, to search for a different online
broker with which to merge or create a joint venture relationship, or to create
our own online brokerage service. We do not believe that excluding online
brokerage services from our new business model or developing integration
arrangements with third-party online brokers are favorable alternatives. We
believe that integrated online brokerage services are critical in meeting the
current and evolving needs of the active trader, and that the potential success
of the new business model is dramatically reduced if it includes only trading
strategy tools and streaming real-time data without integration of that platform
with electronic order execution services owned and provided by the same company.
Further, we believe that, in the new business model, brokerage commissions are
likely to become the largest source of revenues for the Company. Finding a new
online broker partner may or may not be feasible, and in all cases would cause a
huge delay in our transition to the new business model. Our development of our
own online brokerage services would likely cause an even longer delay, as well
as contain the additional risk of our entering a heavily government-regulated
business in which we have no prior experience. The merger is subject to
conditions precedent which, if not fulfilled or waived (if waivable), would
result in failure to complete the merger. Those conditions precedent include,
but are not limited to, another company making a superior proposal to merge with
us or OnlineTrading.com which our or their (as applicable) board of directors
believes it is duty-bound to accept, satisfying all broker-dealer regulatory
requirements relating to the merger, approval by our and their shareholders, the
effectiveness of the registration statement on Form S-4 filed by
OnlineTrading.com Group, and the listing of OnlineTrading.com Group shares on
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The Nasdaq National Market. Failure of the merger to occur as and when planned,
or at all, would likely have a material adverse effect on our business,
financial condition, results of operations and prospects.
Assuming the merger with OnlineTrading.com does occur, the success of
the new business model will be dependent, in part, upon the two companies being
able to rapidly integrate with one another from technological, operational and
marketing aspects. The two companies are currently working on the completion of
OnlineTrading.com's proprietary order routing and execution technology, the
integration of that technology with TRADESTATION.COM (which itself is currently
under development) in order to be able to access electronic order execution from
the TRADESTATION.COM platform, and the required operational, information
technology and marketing integrations. Given the rapid pace and the number of
items currently in development, there are substantial risks that the completion
of those tasks and expected integrations will not occur as or when planned, will
contain significant errors or problems, or will not be completed at a time
and/or in a manner that results in commercial viability. To the extent such
errors, problems or failures occur, they are likely to have a material adverse
effect on our business, financial condition, results of operations and
prospects.
LIQUIDITY CONCERNS
We are experiencing a period of net losses. As of April 10, 2000, we
had less than $4.3 million in cash, cash equivalents and marketable securities
to address our current and anticipated losses and our other cash requirements as
we transition to the new business model. As we implement the transition to the
new business model and thereafter, we may need to raise additional funds in
order to fund any operating losses, support more rapid expansion, develop new or
enhanced services and products, implement sufficient marketing campaigns,
respond to competitive pressures, acquire necessary or complementary businesses
or technologies, and take advantage of unanticipated opportunities. We have also
recently substantially increased our rental obligations under real property,
facilities and equipment leases. The Company's future liquidity and capital
requirements will depend upon numerous factors, including the period of time it
takes to execute the transition to the new business model, and customer
acceptance thereof, costs and timing of expansion of research and development
and marketing efforts, the success and timing of such efforts, the success of
our existing and new product and service offerings, and competing technological
and market developments. Funds may be raised through debt financing and/or the
issuance of equity securities (there being no assurance that any such type of
financing on terms satisfactory to us will occur). Any equity financing or debt
financing which requires issuance of equity securities or warrants to the lender
would reduce the percentage ownership of the shareholders of the Company. You
also may, if issuance of equities occurs, experience additional dilution in net
book value per share, or the issued equities may have rights, preferences or
privileges senior to yours.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
Our quarterly revenues and operating results have fluctuated
significantly in the past and will likely fluctuate in the future. These
fluctuations may be expected to be even greater during 2000, and thereafter, due
to the unpredictability inherent in the change to the new business model the
merger with OnlineTrading.com will effectuate. Causes of such significant
fluctuations may include, but are not limited to:
o the timing, completion (if any) and costs of: the merger; our
development and launch of TRADESTATION.COM and other trading
strategy platforms; development and launch of
OnlineTrading.com's proprietary electronic order routing and
execution technology; the integration and launch of
TRADESTATION.COM as a platform for OnlineTrading.com's
electronic order routing and execution technology; and
creation of the Company's infrastructure, including
information technology and databases, mechanisms and methods
of delivery of products and services, administrative
functions, product development and sales and marketing;
o cash flow problems that may occur;
o the transition in our business model from deriving revenues on
expensive client software sales at the time of the sale to
deriving revenues on lower-priced subscription services on a
monthly basis;
o OnlineTrading.com's shift from high net-worth individual and
institutional clients to active traders;
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o our actual returns and bad debt exceeding or being smaller
than our reserves (which are estimates) for returns and bad
debt;
o costs and payment obligations associated with debt and/or
equity financings, if any;
o the level of product/service and price competition;
o continuous changes in sales incentive or marketing strategies
(which have undergone significant change recently and are
expected to continue to evolve);
o changes in demand for our products and services;
o costs that may occur with respect to regulatory compliance or
other regulatory issues;
o changes in operating expenses;
o adverse results in lawsuits that may be filed in the future;
o attempts to enter additional related new markets or expand
into additional related businesses and the cost, timing and
success thereof;
o the incurrence of significant costs in one quarter related to
revenues anticipated to be realized in a subsequent quarter;
and
o general economic and market factors, including changes in the
securities and financial markets.
COMPETITION
The markets for (i) online brokerage services, (ii) client software and
Internet-based trading tools and (iii) real-time market data services are
intensely competitive and rapidly evolving, and there appears to be substantial
consolidation of those three products and services occurring in the industry.
The new business model embraces this evolution and consolidation. However, we
believe that due to the current and anticipated rapid growth of the market for
integrated trading tools, real-time market data and online brokerage services,
competition, as well as consolidation, will substantially increase and intensify
in the future. We believe our ability to compete will depend upon many factors
both within and outside our control. These include: the timing and market
acceptance of new products and services and enhancements developed by us and our
competitors; our ability to integrate the respective businesses in an orderly,
efficient and otherwise successful manner; the operation and support of
efficient, materially error-free Internet-based systems; product and service
functionality; data availability; ease of use; pricing; reliability; customer
service and support; and sales and marketing efforts.
POTENTIAL LIABILITY TO CUSTOMERS
Our products and services and planned products and services are and
will be used by traders in the financial markets, and, as a result, an investor
or trader might claim that investment or trading losses or lost profits resulted
from use of a flawed version of one of our trading tools or inaccurate
assumptions made by the trading tools regarding data, or inaccurate data. This
risk is heightened by our decision to provide real-time financial market
information to our customers, which routinely contain errors and omissions, but
which are nevertheless relied upon by customers in making investment and trading
decisions using our trading tools. This risk will, assuming completion of the
merger with OnlineTrading.com, again be substantially heightened by the
Company's planned offering of online brokerage services seamlessly integrated
with real-time trading strategy tools. Contributing to these possible
occurrences are risks that the electronic communications and other systems upon
which these products and services rely, and will continue to rely, may operate
too slowly or fail. Major failures of this kind will affect all customers who
are online simultaneously. Many aspects of the securities brokerage business,
including online trading services, involve substantial risks of liability. In
recent years there has been an increasing incidence of litigation involving the
securities brokerage industry, including class action and other suits that
generally seek substantial damages, including in some cases punitive damages.
Any such litigation could have a material adverse effect on the Company's
business, financial condition, results of operations and prospects.
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In addition, there can be no assurance that the Company's Year 2000
compliance efforts, or compliance modifications, have not and will not adversely
affect products and services in ways we have not anticipated, or that customers
will not assert that we have or had an obligation to provide Year 2000 solutions
for older versions of existing products or services or for discontinued products
or services, any of which occurrences could result in claims by customers. Any
such litigation could result in substantial damages and significant costs in
terms of the deployment of financial and managerial resources.
RETURNS AND BAD DEBT
Historically, our net revenues from licensing fees for sales of client
software have been determined by estimating reserves for returns and bad debt
quarterly based upon historical experience and other relevant factors. There can
be no assurance, in particular given the possible effects of our announcements
of our change in business model, that actual returns and bad debt will not
exceed estimated reserves for returns and bad debt.
RISKS ASSOCIATED WITH RELIANCE ON THE INTERNET
The new business model means that our future growth will depend upon
our continuing to adopt the Internet as our primary medium for commerce and
communication, including the delivery of browser-based trading tools,
high-quality streaming real-time market data, online electronic order routing
and execution systems, and comprehensive web sites that include discussion
forums, electronic discussion groups, educational content, marketing materials
and customer support. There can be no assurance that we will successfully
develop and implement such Internet capabilities, or effectively adjust our
marketing and customer support approaches. Further, we will be relying
increasingly on our web sites and related systems, and the Internet generally,
to maximize the use and cost-efficiency of our products and services, to accept
orders and payments, to track and account for orders and payments and fulfill
reporting obligations under regulatory laws and marketing agreements with third
parties, to register attendees for events, to market our products and services,
and to provide technical information and assistance to our customers. In
addition to the risk that we may not adequately transition our business to the
Internet, there is the risk that, over time, the Internet may not prove to be a
viable commercial marketplace because of a failure to continue to develop the
necessary infrastructure, such as reliable network backbones and adequate band-
widths, or the failure to develop complementary products and services, such as
high-speed modems. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth.
SYSTEMS FAILURE
Assuming completion of the merger with OnlineTrading.com, the Company
will be receiving and processing trade orders through Internet-based trading
platforms and online order execution systems. Thus, we will depend heavily on
the integrity of the electronic systems supporting this type of trading,
including the trading strategy tools containing buy and sell alerts that
initiate trading decisions or order placement. Heavy stress placed on these
systems during peak trading times could cause these systems to operate too
slowly or fail. Additionally, the integrity of these systems is increasingly
being attacked by persons sometimes referred to as "hackers" who intentionally
introduce viruses or other defects to cause damage, inaccuracies or complete
failure. If these systems or any other systems in the trading process slow down
significantly or fail even for a short time, our brokerage customers would
suffer delays in trading, potentially causing substantial losses and possibly
subjecting us to claims for such losses or to litigation claiming fraud or
negligence. In addition, a hardware or software failure, power or
telecommunications interruption or natural disaster could cause a systems
failure. Any systems failure that interrupts our operations could have a
material adverse effect on our business, financial condition, results of
operations and prospects.
RISKS ASSOCIATED WITH FLUCTUATIONS IN THE SECURITIES AND FINANCIAL MARKETS
Our current and planned products and services are and will be marketed
to customers who invest or trade in the securities and financial markets. To the
extent that interest in investing or trading decreases due to volatility in the
securities or financial markets, tax law changes, recession, depression, or
otherwise, our business, financial condition, results of operations and
prospects could be materially adversely affected. It is possible, if not likely,
that
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increased losses by customers that occur as a result of any such recession,
depression or other negative event will increase the quantity and size of legal
claims made against us.
OPERATION IN A HIGHLY-REGULATED INDUSTRY AND COMPLIANCE FAILURES
The securities industry is subject to extensive regulation covering all
aspects of the securities business. Regulatory authorities are currently
focusing intensely on the online trading industry, particularly the segment that
seeks the accounts of active traders by offering well-integrated, sophisticated
trading platforms and order execution. The various government authorities and
industry self-regulatory organizations that supervise and regulate and will
supervise and regulate the Company (assuming the merger is completed) generally
have broad enforcement powers to censure, fine, issue cease-and-desist orders or
suspend, enjoin or expel us or any of our officers or employees who violate
applicable laws or regulations. Additionally, new rules relating to active
traders may be enacted which severely limit the operations and potential success
of our new business model. Our ability to comply with all applicable laws and
rules is largely dependent on our maintenance of compliance and reporting
systems, as well as our ability to attract and retain qualified compliance and
other personnel. We could be subject to disciplinary or other regulatory or
legal actions in the future due to noncompliance. In addition, it is possible
that any past noncompliance of OnlineTrading.com could subject the Company to
future civil lawsuits or regulatory actions, the outcome of which could have a
material adverse effect on our financial condition and operating results.
DEPENDENCE UPON OUTSIDE DATA SOURCES
Our business is dependent upon our ability to enter into contracts with
private business information compilers in order to provide market data and news
to our customers. We obtain such information pursuant to non-exclusive licenses
from private information compilers, some of which are our current or potential
competitors. The private sector contracts typically provide for royalties based
on usage or minimums. We have licenses from certain data suppliers to provide
market data information that those suppliers also market in competition with us.
We must also comply with rules and regulations of the exchanges that are the
sources of market data information. Failure to comply could result in our
becoming a prohibited recipient of market data from exchanges the rules or
regulations of which were violated. While we are not aware of any material data
supplier contracts that are in jeopardy of being terminated or not renewed,
there can be no assurance that we will be able to renew our current contracts
with data sources, maintain comparable price levels for information, or
negotiate additional contracts with data sources as necessary to maintain
existing products and services or introduce new products and services. There is
no assurance comparable alternative sources of information could be obtained
should existing contracts be terminated or not renewed. Termination of our
relationship with one or more information suppliers could have a material
adverse effect on our financial condition and results of operations.
DEPENDENCE ON KEY EMPLOYEES
Our success depends to a very significant extent on the continued
availability and performance of a number of senior management, engineering and
sales and marketing personnel. The loss of one or more of these key employees,
including William R. Cruz or Ralph L. Cruz, our Co-Chairmen and Co-Chief
Executive Officers, or certain of our key technology personnel, could have a
material adverse effect on us.
DEPENDENCE ON RELATIONSHIP WITH BRIDGE TELERATE
We are party to a Software License, Maintenance and Development
Agreement with Telerate, Inc. (a Bridge Information Systems, Inc. subsidiary)
relating to TRADESTATION. The agreement provides a substantial, high-margin,
minimum royalty stream in 2000 and 2001, the loss of which would materially
adversely affect our revenues and earnings (or size of our losses) and could
cause cash flow problems in those years. While the agreement is non-cancelable,
there can be no assurance that our anticipated royalties and other anticipated
benefits from our relations with Telerate, Inc. will be realized.
NET CAPITAL REQUIREMENTS
The SEC, the NASD and various other regulatory agencies have stringent
rules with respect to the maintenance of specific levels of net capital by
securities broker-dealers. Net capital is the net worth of a broker or dealer
(assets minus liabilities), less deductions for certain types of assets as well
as other charges. If a firm fails to
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maintain the required net capital it may be subject to suspension or revocation
of registration by the SEC and suspension or expulsion by the NASD, and it could
ultimately lead to the firm's liquidation. If such net capital rules are changed
or expanded, or if there is an unusually large charge against net capital,
operations that require the use of capital would be limited. Also, the Company's
ability to withdraw capital from OnlineTrading.com, its brokerage subsidiary
(after the merger), will be restricted under SEC rules, which in turn could
materially impact the Company's available working capital and materially impact
or limit the Company's ability to repay debt as and when due, redeem or purchase
shares of Company's outstanding stock, if required, and pay dividends in the
future. A large operating loss or charge against net capital could adversely
affect the Company's ability to expand or even maintain its then present levels
of business, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
INTERNET BUSINESS RISKS RELATING TO CUSTOMER PRIVACY AND SECURITY AND INCREASING
REGULATION
A significant risk for our existing and planned Internet operations is
that customers may refuse to transact business over the Internet, particularly
business, such as ours, that involves the handling of significant amounts of
customers' funds (assuming completion of the merger), due to privacy or security
concerns. We currently incorporate and plan to incorporate security measures
into our privacy policies. However, a major breach of customer privacy or
security could have serious consequences for our Internet-based operations. Use
of the Internet, particularly for commercial transactions, may not continue to
increase as rapidly as it has during the past few years as a result of privacy
or security concerns, or for other reasons. If this occurs, the growth of our
Internet-based operations would be materially hindered. If Internet activity
becomes heavily regulated in these respects, that could also have significant
negative consequences for the growth of our current and planned Internet-based
operations.
RISK OF INTELLECTUAL PROPERTY LITIGATION
There has been substantial litigation in the software industry
involving intellectual property rights. Although we do not believe that we are
or will be infringing upon the intellectual property rights of others, there can
be no assurance that infringement claims, if asserted, would not have a material
adverse effect on our business, financial condition and results of operations,
or result in our being unable to use intellectual property which is integral to
one or more of our products or services. The risk of infringement claims is
heightened with respect to the new business model technology in development
because any new business model technology, as opposed to our historical client
software technology, will not have stood any "test of time."
INTELLECTUAL PROPERTY
Our success is and will be heavily dependent on proprietary technology,
including existing trading tools, as well as the trading tool, Internet, web
site and order execution technology currently in development. We view our
technology as proprietary, and rely, and will be relying, on a combination of
copyright, trade secret and trademark laws, nondisclosure agreements and other
contractual provisions and technical measures to protect our proprietary rights.
Policing unauthorized use of our products and services is difficult, however,
and we are unable to determine the extent to which piracy of our products and
services exists. There can be no assurance that the steps taken by us to protect
our proprietary rights will be adequate or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technologies or products and services.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks
and uncertainties. These statements relate to future events or our future
financial performance and include statements about our plans, objectives,
products and services as well as our expectations and intentions. In some cases,
you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "RISK FACTORS," that may cause our (or our industry's) actual results,
activities, performance or achievements to be materially different from any
future results, activities, performance or achievements expressed or implied by
any forward-looking statements.
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Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
specific activities, performance or achievements. We are under no duty to update
any of the forward-looking statements after the date of this prospectus to
conform these statements to actual results.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of these shares
of common stock. All proceeds from the sale of these shares of common stock will
be for the account of the selling shareholders, as described below. See "SELLING
SHAREHOLDERS" and "PLAN OF DISTRIBUTION" described below.
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this prospectus, the
names of the selling shareholders, the number of shares that the selling
shareholders own as of such date and that may be offered for sale from time to
time by this prospectus, and, assuming the sale of all of the shares offered
hereby, the number of shares to be held by the selling shareholders.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned If All
Prior To Offering And Being Shares Being Registered
Registered For Sale (1) Hereunder Are Sold (2)(3)
- ------------------------------------------------------------------------------------------------------------------------
Selling Shareholder Number Percent Number Percent
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John R. Jennings........................... 664,645 2.7 0 0
T. Keith Black ......................... 664,645 2.7 0 0
Alan Moore................................. 611,363 2.5 40,000 *
Jeffrey L. Hines........................... 29,726 * 0 0
Ashgar Afghani............................. 11,147 * 19,409 *
Dinh Nguyen................................ 11,147 * 0 0
David Barnes............................... 4,219 * 55,443 *
Jerry Trojan............................... 2,682 * 0 0
Carl Martin................................ 421 * 0 0
TOTAL.................................... 1,999,995 8.1 114,852 *
</TABLE>
- -----------------
* Less than 1.0%.
(1) The number and percentage of shares beneficially owned prior to
offering and being registered for sale does not include any shares
which the individual owns that are not being registered for sale or
which the individual has the right to acquire after the date of this
prospectus because the shares underlying any such rights to acquire
shares are not being registered pursuant to this prospectus. In all
other respects, the number and percentage of shares beneficially owned
is determined in
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accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and
the information is not necessarily indicative of beneficial ownership
for any other purpose.
(2) The number and percentage of shares beneficially owned includes (i)
40,000 shares beneficially owned by Alan Moore which were purchased on
the open market and (ii) shares which two other individuals have the
right to acquire after the date of this prospectus, none of which are
being registered pursuant to this prospectus.
(3) Assumes that the selling shareholders will sell all the shares set
forth above under "Shares Beneficially Owned Prior to Offering and
Being Registered for Sale." There can be no assurance that the selling
shareholders will sell all or any of the shares offered hereunder.
PLAN OF DISTRIBUTION
The shares of common stock covered by this prospectus may be offered
and sold from time to time by the selling shareholders, including donees,
transferees, pledgees or other successors in interest that receive such shares
as a gift or other non-sale related transfer. Each of the selling shareholders
will act independently of us in making decisions with respect to the timing,
manner and size of any sale. Each of the selling shareholders may sell the
shares as follows:
o on The Nasdaq National Market at prices and under terms then
prevailing or at prices related to the then current market
price or at negotiated prices;
o through a block trade in which the broker-dealer so engaged
will attempt to sell shares as agent, but may position and
resell a portion of the block as principal to facilitate the
transaction;
o through purchases by a broker-dealer as principal;
o through an over-the-counter distribution in accordance with
the rules of The Nasdaq National Market;
o through ordinary brokerage transactions and transactions in
which the broker solicits purchasers;
o in privately negotiated transactions;
o through underwriters, dealers and agents who may receive
compensation in the form of underwriting discounts,
concessions or commissions from the selling shareholder and/or
purchasers of the shares for whom they may act as agent;
o through the writing of options on the shares;
o through the pledge of shares as security for any loan or
obligation, including pledges to brokers or dealers who may
from time to time effect distributions of the shares or other
interests in the shares;
o through exchange distributions in accordance with the rules of
the applicable exchange;
o in any combination of one or more of these methods; or
o in any other lawful manner.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, each of the selling
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shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with these transactions, broker-dealers or
other financial institutions may engage in short sales of Omega Research common
stock in the course of hedging the positions they assume with such selling
shareholder. Each of the selling shareholders may also sell short Omega Research
common stock and redeliver the shares to close out such short positions. Each of
the selling shareholders also may enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to the
broker-dealer or other financial institution of shares offered hereby, which the
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). Each of the
selling shareholders also may pledge shares to a broker-dealer or other
financial institution, and, upon a default, the broker-dealer or other financial
institution may effect sales of the pledged shares pursuant to this prospectus
(as supplemented or amended to reflect such transaction). In addition, any
shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this prospectus.
In effecting sales, brokers, dealers or agents engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling shareholders in amounts negotiated prior to the sale. These brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with these sales, and any commissions, discounts or concessions may be deemed to
be underwriting discounts or commissions under the Securities Act of 1933. We
will pay all expenses incident to the offering and sale of the shares to the
public other than any commissions or discounts of underwriters, dealers or
agents or any transfer taxes.
In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirements is available and is complied with.
We have advised each of the selling shareholders that the
anti-manipulation rules of Regulation M under the Securities and Exchange Act of
1934 may apply to sales of shares in the market and to the activities of the
selling shareholders and their respective affiliates. In addition, Omega
Research will make copies of this prospectus available to each of the selling
shareholders and has informed each of them of the need for delivery of copies of
this prospectus to purchasers at or prior to the time of any sale of the shares.
Each of the selling shareholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act of 1933.
At the time a particular offer of shares is made, a prospectus
supplement will, if required, be distributed that sets forth the number of
shares being offered and the terms of the offering, including the name of any
dealer or agent, any discount, commission and other item constituting
compensation, any discount, commission or concession allowed or reallowed or
paid to any dealer, and the proposed selling price to the public. We cannot
assure you that the selling shareholders will sell all or any of the shares.
We have agreed with each of the selling shareholders to keep the
registration statement of which this prospectus constitutes a part effective
until the earlier to occur of (i) the sale of all the shares covered by this
prospectus and (ii) October 25, 2001. We intend to de-register any of the shares
not sold by any selling shareholder prior to October 25, 2001.
LEGAL MATTERS
The validity of the shares offered will be passed upon by Bilzin
Sumberg Dunn Price & Axelrod LLP, Miami, Florida, counsel to Omega Research.
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EXPERTS
The audited consolidated financial statements of Omega Research as of
December 31, 1999 and 1998 and for each of the years in the three-year period
ended December 31, 1999 incorporated by reference in this prospectus and
included in our Annual Report on Form 10-K for the year ended December 31, 1999,
have been audited by Arthur Andersen LLP, independent certified public
accountants, as indicated in their report with respect thereto, and are included
therein in reliance upon the authority of such firm as experts in giving said
report.
The financial statements of onlinetradinginc.com corp. as of and for
the year ended ended January 31, 2000, incorporated by reference in this
prospectus and included in our Form 8-K/A as filed on April 28, 2000, have been
audited by Arthur Andersen LLP, independent certified public accountants, as
indicated in their report with respect thereto, and are included therein in
reliance upon the authority of such firm as experts in giving said report.
The statement of financial condition of onlinetradinginc.com corp. as
of January 31, 1999 and the related statements of income, changes in
stockholders' equity and cash flows for the year ended January 31, 1999
incorporated by reference in this prospectus on Form S-3 as included in our Form
8-K/A as filed April 28, 2000, with a Date of Report (date of earliest event
reported) of January 19, 2000, have been audited by Ahearn, Jasco + Company,
P.A., independent auditors, as stated in their report appearing with the
financial statements in the Form 8-K/A referred to above, and this report is
included in reliance on their authority as experts in accounting and auditing.
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