SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 26, 1999
Omega Research, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
0-22895 59-2223464
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(Commission File Number) (I.R.S. Employer Identification No.)
8700 West Flagler Street, Miami, Florida 33174
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(Address of principal executive offices)
(Zip Code)
(305) 485-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
This Amendment No. 2 to the Registrant's Current Report on Form 8-K
dated October 26, 1999 and originally filed with the Securities and Exchange
Commission ("SEC") on November 8, 1999 and amended on January 7, 2000 (the
"Report") is being filed to reflect the subsequent restatement of the financial
statements of Omega Research, Inc. (the "Company") as discussed below. This
Amendment No. 2 amends and restates in their entirety Items 2 and 7(b) of the
Report.
In connection with its review of a registration statement on Form S-4
related to the proposed merger with onlinetradinginc.com corp.
("OnlineTrading.com"), the Staff of the SEC expressed concern about the method
of accounting for revenue recognition of licensing fees used by the Company and
its method of accounting for the acquisition of Window On WallStreet Inc., a
privately-held Texas corporation ("Window On WallStreet"). As a result of
consultation with the Staff of the SEC, the Company restated certain of its
annual and quarterly financial statements as follows: (i) beginning in 1999,
revenues with respect to the Company's sales of its 2000i products are
recognized on an as due basis in accordance with the payment terms of the sales;
and (ii) the Company's October 1999 merger with Window On WallStreet was
accounted for under the purchase method of accounting. For more information, see
Note 2 of Notes to Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1999 filed with the
SEC on November 13, 2000.
Item 2. Acquisition or Disposition of Assets
Effective with the filing of Articles of Merger on October 26, 1999
with the Secretary of State of the State of Texas (the "Effective Time"), the
Company acquired Window on WallStreet. The acquisition was made pursuant to an
Agreement and Plan of Merger (the "Merger Agreement") dated as of October 25,
1999 among the Company, Window on WallStreet and WOW Acquisition Corporation, a
Texas corporation and wholly-owned subsidiary of the Company ("Merger Sub").
Pursuant to the Merger Agreement, Merger Sub was merged with and into Window on
WallStreet (the "Merger"), the separate corporate existence of Merger Sub
ceased, and Window on WallStreet continued as the surviving corporation and
became a wholly-owned subsidiary of the Company. The Merger is intended to
qualify as a tax-free reorganization under the Internal Revenue Code and is
accounted for as a purchase for financial accounting purposes. A copy of the
Merger Agreement is filed as Exhibit 2.1 hereto and is incorporated herein by
reference.
In consideration of the Merger, the shareholders of Window on
WallStreet received an aggregate of 1,999,995 shares (collectively, the
"Shares") of the common stock, $.01 par value, of the Company ("Company Common
Stock") in exchange for the cancellation of all of the outstanding shares of
capital stock of Window on WallStreet ("WOW Stock"). The Shares, post Merger and
at the Effective Time, represent approximately 8.2% of the outstanding Company
Common Stock. Based on 9,479,845 shares of WOW Stock outstanding at the
Effective Time, the exchange ratio (the "Exchange Ratio") was .210974 shares of
Company Common Stock for one share of WOW Stock. No fraction of a share of
Company Common Stock was issued in the Merger, but, in lieu thereof, each holder
of WOW Stock who was entitled to a fraction of a share of Company Common Stock
received cash from the Company in lieu of such fractional share. In addition,
the Company (i) repaid in accordance with its terms the indebtedness (including
accrued and unpaid interest) of Window on WallStreet owed to two of its
shareholders in the approximate aggregate amount of $4,085,000, which was funded
from the Company's available working capital, (ii) assumed all outstanding stock
options to purchase WOW Stock ("WOW Options") which, based on the Exchange
Ratio, will be exercisable for an aggregate of 182,529 shares of Company Common
Stock (82,783 shares of Company Common Stock at an exercise price of $.48 per
share and 99,746 shares of Company Common Stock at an exercise price of $8.06
per share), and (iii) paid fees and costs relating to the acquisition of $1.2
million.
Since the Shares were not registered under the Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, are restricted securities
subject to the Securities Act and Rule 144 thereunder, the Company also entered
into a Registration Rights Agreement with Window on WallStreet and its
shareholders pursuant to which the Company agreed to file, within six months of
the closing date of the Merger, a shelf registration statement on Form S-3
covering the Shares. Such registration statement was filed on April 28, 2000.
The Company also granted piggyback registration rights to the shareholders of
Window on WallStreet for a period of two years from the closing date of the
Merger.
2
<PAGE>
As a condition to the Company consummating the Merger, (i) six of the
nine shareholders of Window on WallStreet (including its three principal
shareholders, John R. Jennings, T. Keith Black and Alan Moore, who collectively
owned approximately 97% of the outstanding WOW Stock) entered into a Shareholder
Non-Competition and Non-Disclosure Agreement in favor of the Company and Window
on WallStreet which provides, among other things, for non-disclosure of
confidential information, non-solicitation of employees, independent contractors
and consultants and a covenant not-to-compete for four years from the closing
date of the Merger and (ii) four employees of Window on WallStreet (John R.
Jennings, T. Keith Black, David Barnes and Sean Davis) entered into an Agreement
Regarding Employment with Window on WallStreet (as the surviving corporation)
providing for, among other things, a one-year employment term (except for Sean
Davis, who received a two-year employment term).
The Company also granted options to purchase an aggregate of 335,000
shares of Company Common Stock pursuant to its 1996 Amended and Restated
Incentive Stock Plan, as amended (the "Incentive Stock Plan") to employees of
Window on WallStreet, including options covering 75,000 shares of Company Common
Stock to each of John R. Jennings and T. Keith Black, its Co-Presidents. The
date of grant of such options was the Effective Time, the exercise price was
$4.53 per share, which was equal to the fair market value of Company Common
Stock on such date of grant as determined under and in accordance with the
Incentive Stock Plan, and the options will vest 20% per year on each anniversary
date of the date of grant over a five-year period and have a term of ten years.
Window on WallStreet is a leading Internet-based provider of streaming
real-time and historical quotes through its Financial Data Cast Network ("FDCN")
and a developer of award-winning, on-line investment analysis tools, including
Internet Trader (formerly Window on WallStreet) and Day Trader. FDCN is a
subscription service that delivers streaming real-time quotes and historical
intraday and daily price data for charting on demand. FDCN includes Nasdaq Level
II bid and ask quotes, fundamental financial information and real-time streaming
news.
There were no material relationships prior to the Merger between Window
on WallStreet (or any of its shareholders) and the Company (or any of its
affiliates, any director or officer of the Company or any associate of any such
director or officer).
3
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
(1) Window On WallStreet Inc. Report of Independent Accountants *
(2) Window On WallStreet Inc. Consolidated Balance Sheets as of
December 31, 1998 and 1997 *
(3) Window On WallStreet Inc. Consolidated Statements of
Operations and Accumulated Deficit for the years ended
December 31, 1998 and 1997 *
(4) Window On WallStreet Inc. Consolidated Statements of Cash
Flows for the years ended December 31, 1998 and 1997 *
(5) Window On WallStreet Inc. Notes to Consolidated Financial
Statements *
Unaudited Interim Financial Statements of Business Acquired
(1) Window On WallStreet Inc. Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 *
(2) Window On WallStreet Inc. Consolidated Statements of
Operations and Accumulated Deficit for the nine months ended
September 30, 1999 and 1998 *
(3) Window On WallStreet Inc. Consolidated Statements of Cash
Flows for the nine months ended September 30, 1999 and 1998 *
(4) Window On WallStreet Inc. Notes to Unaudited Consolidated
Interim Financial Statements *
(b) Unaudited Pro Forma Combined Financial Data
(1) Pro Forma Combined Balance Sheet as of September 30, 1999 **
(2) Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1999 **
(3) Pro Forma Combined Statement of Operations for the year ended
December 31, 1998 **
(c) Exhibits
Exhibit
Number Description
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2.1 Agreement and Plan of Merger, dated as of October 25, 1999,
by and among Omega Research, Inc., WOW Acquisition
Corporation and Window on WallStreet Inc., together with the
following exhibits thereto: (i) Articles of Merger; (ii)
Form of Company Affiliate Agreement; (iii) Form of Agreement
Regarding Employment; (iv) Form of Shareholder
Non-Competition and Non-Disclosure Agreement; (v) Form of
Stock Option Agreement (All Employees); (vi) Form of Stock
Option Agreement (Jennings and Black); (vii) Form of
Investment Acknowledgment Agreement; (viii) Registration
Rights Agreement; and (ix) Opinion Letter Matters ***
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants *
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* Previously filed on January 7, 2000 as part of Amendement No. 1 to the Report.
** Filed herewith.
*** Previously filed on November 8, 1999 as part of the Report.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 8-K/A (Amendment No. 2) to be signed on its
behalf by the undersigned thereunto duly authorized.
OMEGA RESEARCH, INC.
Registrant
November 17, 2000 /s/ Gregg F. Stewart
----------------- --------------------------------------------
Date Gregg F. Stewart
Chief Financial Officer, Vice President of
Finance and Treasurer
5
<PAGE>
OMEGA RESEARCH, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
INDEX
<TABLE>
<S> <C>
Introduction to Unaudited Pro Forma Combined Financial Data................................... 7
Unaudited Pro Forma Combined Balance Sheet as of September 30, 1999........................... 8
Unaudited Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1999.................................................................... 9
Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 1998..... 10
Notes to Unaudited Pro Forma Combined Financial Data.......................................... 11
</TABLE>
6
<PAGE>
OMEGA RESEARCH, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
Effective October 26, 1999, Omega Research, Inc. (the "Company")
acquired privately held Window On WallStreet Inc. ("Window On WallStreet"), an
Internet-based provider of streaming real-time and historical quotes and a
developer of on-line investment analysis tools. Under the terms of the merger
agreement, Window On WallStreet shareholders received 1,999,995 newly issued
shares of the Company's common stock for all of the issued and outstanding
shares of Window On WallStreet's common stock. In addition, the Company (i)
repaid in accordance with its terms approximately $4.1 million of debt and
related accrued interest, (ii) assumed all outstanding stock options to purchase
Window On WallStreet common stock which, based on an exchange ratio of 0.210974,
are exercisable for an aggregate of 182,529 shares of the Company's common stock
and issued to employees 335,000 stock options to purchase the Company's common
stock, and (iii) paid fees and costs relating to the acquisition of $1.2
million. Immediately following the merger, which is being accounted for as a
purchase, Window On WallStreet shareholders own approximately 8.2 percent of the
Company's outstanding common stock.
The following tables set forth certain unaudited pro forma combined
financial information for the Company after giving effect to the merger with
Window on WallStreet as if it had been consummated, with respect to statement of
operations data, at the beginning of the periods presented, or, with respect to
the balance sheet data, as of the date presented. The tables reflect the merger
being accounted for as a purchase. The Company's historical and quarterly
financial information included herein has been derived from its respective
historical and quarterly financial statements which have not been restated for
the effect of the merger with Window On WallStreet. The pro forma combined
financial information has been prepared for comparative purposes only and does
not purport to indicate what necessarily would have occurred had the entities
merged at the beginning of the periods presented, or what results may be in the
future.
7
<PAGE>
OMEGA RESEARCH, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Omega
Research
Omega Window On Pro Forma Pro Forma
Research WallStreet Adjustments Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 6,697,071 $ 187,058 $ (5,256,347) (a) $ 1,627,782
Marketable securities 4,473,143 - - 4,473,143
Accounts receivable, net 3,003,119 115,916 - 3,119,035
Inventory 86,001 9,897 - 95,898
Income tax receivable 589,106 - - 589,106
Other current assets 390,633 23,409 - 414,042
Deferred income taxes, short term 11,781,000 - - 11,781,000
------------- ------------- ------------- -------------
Total current assets 27,020,073 336,280 (5,256,347) 22,100,006
PROPERTY AND EQUIPMENT, net 2,138,096 257,640 - 2,395,736
GOODWILL, net - - 1,746,067 (b) 1,746,067
OTHER INTANGIBLE ASSETS, net - - 14,975,000 (b) 14,975,000
OTHER ASSETS 413,535 1,114 - 414,649
------------- ------------- ------------- -------------
Total assets $ 29,571,704 $ 595,034 $ 11,464,720 $ 41,631,458
============= ============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 1,426,529 $ 197,439 $ - $ 1,623,968
Accrued expenses 1,289,296 1,363,069 - 2,652,365
Deferred revenue 103,375 379,178 - 482,553
------------- ------------- ------------- -------------
Total current liabilities 2,819,200 1,939,686 - 4,758,886
------------- ------------- ------------- -------------
LONG TERM DEBT - 4,056,347 (4,056,347) (a) -
------------- ------------- -------------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock - - - -
Common stock 224,634 1,000 (1,000) (c) 244,634
20,000 (d)
Additional paid-in capital 24,437,214 2,010,347 (2,010,347) (c) 34,537,282
8,605,009 (d)
1,495,059 (e)
Treasury stock - (218,468) 218,468 (c) -
Accumulated earnings (deficit) 2,090,656 (7,193,878) 7,193,878 (c) 2,090,656
------------- ------------- ------------- -------------
Total shareholders' equity 26,752,504 (5,400,999) 15,521,067 36,872,572
------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 29,571,704 $ 595,034 $ 11,464,720 $ 41,631,458
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
8
<PAGE>
OMEGA RESEARCH, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Omega
Omega Research
Research Window On Pro Forma Pro Forma
As Reported WallStreet Adjustments Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 12,288,532 $ 939,331 $ - $ 13,227,863
Subscription services - 1,289,794 - 1,289,794
Other revenues 5,633,784 102,407 - 5,736,191
------------- ------------- ------------- -------------
Total net revenues 17,922,316 2,331,532 - 20,253,848
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Cost of licensing fees 1,397,818 302,688 - 1,700,506
Cost of subscription services - 783,228 - 783,228
Product development 3,301,462 403,267 - 3,704,729
Sales and marketing 12,826,516 806,648 - 13,633,164
General and administrative 2,878,801 2,139,405 - 5,018,206
Amortization of goodwill - - 327,388 (f) 327,388
Amortization of other intangible assets - - 3,706,250 (f) 3,706,250
------------- ------------- ------------- -------------
Total operating expenses 20,404,597 4,435,236 4,033,638 28,873,471
------------- ------------- ------------- -------------
Loss from operations (2,482,281) (2,103,704) (4,033,638) (8,619,623)
OTHER INCOME (EXPENSE), net:
Interest expense - (1,578,915) - (1,578,915)
Other income, net 321,411 23,470 - 344,881
------------- ------------- ------------- -------------
Total other income (expense), net 321,411 (1,555,445) - (1,234,034)
------------- ------------- ------------- -------------
Loss before income taxes (2,160,870) (3,659,149) (4,033,638) (9,853,657)
INCOME TAX BENEFIT (896,000) - - (896,000)
------------- ------------- ------------- -------------
Net loss $ (1,264,870) $ (3,659,149) $ (4,033,638) $ (8,957,657)
============= ============= ============= =============
LOSS PER SHARE:
Basic and diluted $ (0.06) $ (0.37)
============= =============
WEIGHTED AVERAGE SHARES:
Basic and diluted 22,374,055 1,999,995 (g) 24,374,050
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
9
<PAGE>
OMEGA RESEARCH, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Omega
Omega Research
Research Window On Pro Forma Pro Forma
As Reported WallStreet Adjustments Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 22,005,324 $ 3,051,774 $ - $ 25,057,098
Other revenues 6,211,181 442,474 - 6,653,655
------------- ------------- ------------- -------------
Total net revenues 28,216,505 3,494,248 - 31,710,753
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Cost of licensing fees 1,798,078 696,367 - 2,494,445
Product development 3,318,310 683,671 - 4,001,981
Sales and marketing 14,381,923 1,191,863 - 15,573,786
General and administrative 6,134,608 2,410,465 - 8,545,073
Amortization of goodwill - - 436,517 (f) 436,517
Amortization of other intangible assets - - 4,941,667 (f) 4,941,667
------------- ------------- ------------- -------------
Total operating expenses 25,632,919 4,982,366 5,378,184 35,993,469
------------- ------------- ------------- -------------
Income (loss) from operations 2,583,586 (1,488,118) (5,378,184) (4,282,716)
OTHER INCOME (EXPENSE), net:
Interest expense - (907,196) - (907,196)
Other income, net 423,961 11,220 - 435,181
------------- ------------- ------------- -------------
Total other income (expense), net 423,961 (895,976) - (472,015)
------------- ------------- ------------- -------------
Income (loss) before income taxes 3,007,547 (2,384,094) (5,378,184) (4,754,731)
INCOME TAX PROVISION 1,052,000 - - 1,052,000
------------- ------------- ------------- -------------
Net income (loss) $ 1,955,547 $ (2,384,094) $ (5,378,184) $ (5,806,731)
============= ============= ============= =============
EARNINGS (LOSS) PER SHARE:
Basic $ 0.09 $ (0.24)
============= =============
Diluted $ 0.09 $ (0.24)
============= =============
WEIGHTED AVERAGE SHARES:
Basic 22,255,627 1,999,995 (g) 24,255,622
============= ============= =============
Diluted 22,757,913 1,497,709 (h) 24,255,622
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
10
<PAGE>
OMEGA RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
Balance Sheet:
(a) To reflect the repayment of $4.1 million in long term debt and the
payment of $1.2 million in acquisition costs paid in association with
the merger.
(b) To record goodwill and other intangible assets based on an independent
appraisal, calculated as follows:
<TABLE>
<S> <C> <C>
Consideration paid:
Common stock, at fair value $ 8,625,009
Fair value of stock options assumed/issued 1,495,059
Acquisition costs 1,200,000
-------------
Total consideration paid $ 11,320,068
-------------
Net identifiable assets acquired:
Net liabilities of Window On WallStreet at September 30, 1999 $ (5,400,999)
Identified intangible assets, based on an independent appraisal:
Purchased technology and workforce $ 11,600,000
Trade names and patents 1,500,000
Customer lists 1,275,000
Non-compete agreements 600,000
-------------
Total identifiable intangible assets 14,975,000
-------------
Net identifiable assets acquired $ 9,574,001
-------------
Goodwill $ 1,746,067
=============
</TABLE>
(c) To eliminate the shareholders' equity of Window On WallStreet.
(d) To record shares issued in conjunction with the merger at fair value.
(e) To record the value of stock options assumed/issued in association with
the merger at fair value.
Statements of Operations:
(f) To record goodwill and other intangible asset amortization, calculated
as follows:
<TABLE>
<CAPTION>
Amortization
------------------------------
Life Value Full Year Nine Months
---- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Purchased technology and workforce 3 $ 11,600,000 $ 3,866,667 $ 2,900,000
Trade names and patents 3 1,500,000 500,000 375,000
Customer lists 3 1,275,000 425,000 318,750
Non-compete agreements 4 600,000 150,000 112,500
------------- ------------- -------------
Total identifiable intangible assets $ 14,975,000 $ 4,941,667 $ 3,706,250
============= ============= =============
Goodwill 4 $ 1,746,067 $ 436,517 $ 327,388
============= ============= =============
</TABLE>
(g) To reflect shares issued in conjunction with the merger.
(h) To reflect shares issued in conjunction with the merger net of impact
of stock options which are antidulitive.
11
