UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
------------
Date of Report (Date of earliest event reported): January 19, 2000
OMEGA RESEARCH, INC.
(Exact name of registrant as specified in its charter)
---------------------------
FLORIDA 0-22895 59-2223464
(State or other jurisdiction (Commission File (I.R.S. Employer Identification
incorporation or organization) Number) Number)
8700 WEST FLAGLER STREET
MIAMI, FLORIDA 33174
(Address, including zip code, of registrant's principal executive offices)
(305) 485-7000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On January 19, 2000, Omega Research, Inc. ("Omega") and
onlinetradinginc.com corp., a Florida corporation ("Online"), entered into an
Agreement and Plan of Merger and Reorganization (the "Merger Agreement") under
which Omega and Online are to be merged in a stock-for-stock transaction. The
parties to the Merger Agreement are Omega, Online, OnlineTrading.com Group,
Inc., a recently-formed Florida corporation that will be the holding company for
Omega and Online if the merger is completed ("Holding Company"), Omega
Acquisition Corporation, a recently-formed Florida corporation that is owned by
Holding Company ("Omega Merger Sub"), and Onlinetrading Acquisition Corporation,
a recently-formed Florida corporation that is owned by Holding Company ("Online
Merger Sub"). Assuming that the merger is completed, Omega Merger Sub will merge
into Omega, Online Merger Sub will merge into Online, and Omega and Online will
then be wholly-owned subsidiaries of Holding Company. Consummation of the merger
is contingent upon satisfying all broker-dealer regulatory requirements relating
to the merger, approval by the shareholders of Omega and of Online of the
merger, the effectiveness of the registration statement on Form S-4 filed by
Holding Company, and the listing of Holding Company shares on The Nasdaq
National Market.
The audited financial statements of Online as of January 31, 2000 and
1999 and for each of the two years in the period ended January 31, 2000 are
filed herewith. In addition, the unaudited pro forma combined financial
statements as of December 31, 1999 filed herewith have been prepared to give
effect to, and assuming completion of, the contemplated merger between Omega and
Online on a pooling-of-interests basis.
ITEM 7(C). EXHIBITS.
23.1 Consent of Independent Certified Public Accountants
23.2 Independent Auditors' Consent
99.1 Audited Financial Statements of onlinetradinginc.com corp.
(1) Index to Financial Statements
(2) Report of Independent Certified Public Accountants as of and
for the year ended January 31, 2000
(3) Independent Auditors' Report as of and for the year ended
January 31, 1999
(4) Statements of Financial Condition as of January 31, 2000 and
1999
(5) Statements of Income for the years ended January 31, 2000 and
1999
(6) Statements of Changes in Stockholders' Equity for the years
ended January 31, 2000 and 1999
(7) Statements of Cash Flow for the years ended January 31, 2000
and 1999
(8) Notes to Financial Statements
99.2 Unaudited Pro Forma Combined Financial Statements
(1) Index to Pro Forma Combined Financial Statements
(2) Holding Company Pro Forma Combined Balance Sheet as of
December 31, 1999
(3) Holding Company Pro Forma Combined Statement of Operations for
the year ended December 31, 1999
(4) Holding Company Pro Forma Combined Statement of Operations for
the year ended December 31, 1998
(5) Holding Company Pro Forma Combined Statement of Operations for
the year ended December 31, 1997
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunder duly authorized.
Date: April 28, 2000
Omega Research, Inc.
By: /S/ WILLIAM R. CRUZ
-----------------------------
William R. Cruz
Co-Chief Executive Officer
By: /S/ RALPH L. CRUZ
-----------------------------
Ralph L. Cruz
Co-Chief Executive Officer
3
<PAGE>
EXHIBIT INDEX
23.1 Consent of Independent Certified Public Accountants
23.2 Independent Auditors' Consent
99.1 Audited Financial Statements of onlinetradinginc.com corp.
(1) Index to Financial Statements
(2) Report of Independent Certified Public Accountants as of and
for the year ended January 31, 2000
(3) Independent Auditors' Report as of and for the year ended
January 31, 1999
(4) Statements of Financial Condition as of January 31, 2000 and
1999
(5) Statements of Income for the years ended January 31, 2000 and
1999
(6) Statements of Changes in Stockholders' Equity for the years
ended January 31, 2000 and 1999
(7) Statements of Cash Flow for the years ended January 31, 2000
and 1999
(8) Notes to Financial Statements
99.2 Unaudited Pro Forma Combined Financial Statements
(1) Index to Pro Forma Combined Financial Statements
(2) Holding Company Pro Forma Combined Balance Sheet as of
December 31, 1999
(3) Holding Company Pro Forma Combined Statement of Operations for
the year ended December 31, 1999
(4) Holding Company Pro Forma Combined Statement of Operations for
the year ended December 31, 1998
(5) Holding Company Pro Forma Combined Statement of Operations for
the year ended December 31, 1997
i
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report dated March 15, 2000 with respect to the onlinetradinginc.com corp.
financial statements included in this report and to all references to our Firm
included in or made a part of this report.
/S/ ARTHUR ANDERSEN LLP
- -------------------------
Arthur Andersen LLP
Miami, Florida,
April 26, 2000.
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this report of Omega Research, Inc. on Form
8-K/A of our report dated March 2, 1999 (March 25, 1999 as to Note 10) relating
to the financial statements of onlinetradinginc.com corp. for the year ended
January 31, 1999.
/S/ AHEARN, JASCO + COMPANY, P.A.
- ---------------------------------
AHEARN, JASCO + COMPANY, P.A.
Pompano Beach, Florida
April 26, 2000
EXHIBIT 99.1
ONLINETRADINGINC.COM CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Certified Public Accountants as of and for the year
ended January 31, 2000.......................................................F-2
Independent Auditors' Report as of and for the year ended January 31, 1999...F-3
Statements of Financial Condition as of January 31, 2000 and 1999............F-4
Statements of Income for the years ended January 31, 2000 and 1999...........F-5
Statements of Changes in Stockholders' Equity for the years ended
January 31, 2000 and 1999....................................................F-6
Statements of Cash Flows for the years ended January 31, 2000 and 1999.......F-7
Notes to Financial Statements.............................................F-8-19
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To onlinetradinginc.com corp.:
We have audited the accompanying statement of financial condition of
onlinetradinginc.com corp. (a Florida corporation, formerly doing business as
Online Trading, Inc.) as of January 31, 2000, and the related statements of
income, changes in stockholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of onlinetradinginc.com corp. as
of January 31, 2000, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States.
/s/ ARTHUR ANDERSEN LLP
- ---------------------------------
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 15, 2000.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors onlinetradinginc.com corp.
We have audited the accompanying statement of financial condition of
onlinetradinginc.com corp. (the "Company") as of January 31, 1999, and the
related statements of income, changes in stockholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of onlinetradinginc.com corp. as
of January 31, 1999, and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles.
/s/AHEARN, JASCO + COMPANY, P.A.
- --------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
March 2, 1999, except for Note 10, for
which the date is March 25, 1999
F-3
<PAGE>
ONLINETRADINGINC.COM CORP.
STATEMENTS OF FINANCIAL CONDITION
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
2000 1999
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $15,127,790 $ 1,005,944
Receivable from clearing organization 759,183 572,433
Securities owned, at market value 155,012 381,084
Other current assets 103,987 15,583
----------- -----------
TOTAL CURRENT ASSETS 16,145,972 1,975,044
PROPERTY AND EQUIPMENT, net 400,776 136,146
INTANGIBLE ASSET, net 2,592,600 --
OTHER ASSETS 221,456 43,398
----------- -----------
TOTAL ASSETS $19,360,804 $ 2,154,588
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease $ 39,944 $ --
Accounts payable and accrued liabilities 1,291,317 948,422
Income taxes payable 653,141 38,230
Securities sold but not yet purchased, at market value 25,938 --
----------- -----------
TOTAL CURRENT LIABILITIES 2,010,340 986,652
----------- -----------
DEFERRED INCOME TAXES 34,300 15,400
----------- -----------
CAPITAL LEASE PAYABLE, net of current portion 72,131 --
----------- -----------
SUBORDINATED LOANS -- 525,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 14 and 15)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000
shares authorized; issued and outstanding,
none in 2000 and 300 shares of Series A,
stated value $1,000, voting, redeemable at
110% of stated par value in 1999 -- 300,000
Common stock, $0.01 par value;
100,000,000 shares authorized; issued and
outstanding, 11,476,388 in 2000 and
8,888,888 in 1999 114,763 88,888
Additional paid-in capital 15,943,179 103,063
Retained earnings 1,186,091 135,585
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 17,244,033 627,536
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,360,804 $ 2,154,588
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
ONLINETRADINGINC.COM CORP.
STATEMENTS OF INCOME
FOR THE YEARS ENDED JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
2000 1999
----------- -----------
<S> <C> <C>
REVENUES:
Commissions $ 9,471,435 $ 5,525,427
Net dealer inventory and investment gains and losses 1,129,493 328,495
Interest and dividends 603,978 36,021
Interest revenue sharing 295,934 102,121
Other 190,000 --
----------- -----------
TOTAL REVENUES 11,690,840 5,992,064
----------- -----------
OPERATING EXPENSES:
Employee compensation and benefits 5,340,165 3,356,688
Clearing and other transaction costs 3,012,284 2,002,055
Occupancy and administration 1,093,248 406,814
Product development 279,387 --
Interest expense 51,863 36,566
Depreciation and amortization 131,163 29,918
----------- -----------
TOTAL OPERATING EXPENSES 9,908,110 5,832,041
----------- -----------
INCOME BEFORE INCOME TAXES 1,782,730 160,023
PROVISION FOR INCOME TAXES 702,224 52,080
----------- -----------
NET INCOME $ 1,080,506 $ 107,943
=========== ===========
EARNINGS PER SHARE:
Basic $ 0.10 $ 0.01
=========== ===========
Diluted $ 0.10 $ 0.01
=========== ===========
Weighted average common shares outstanding - basic 10,522,889 8,857,230
=========== ===========
Weighted average common shares outstanding - diluted 10,630,263 8,857,230
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
ONLINETRADINGINC.COM CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SERIES A
PREFERRED STOCK COMMON STOCK
--------------------- ---------------------
AMOUNT AT ADDITIONAL
SHARES STATED SHARES AMOUNT AT PAID-IN RETAINED
ISSUED VALUE ISSUED PAR VALUE CAPITAL EARNINGS TOTAL
-------- ---------- ---------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January
31, 1998 300 $ 300,000 8,444,444 $ 84,444 $ 81,507 $ 27,642 $ 493,593
Common stock
granted to officer -- -- 444,444 4,444 21,556 -- 26,000
Net income -- -- -- -- -- 107,943 107,943
-------- ---------- ---------- --------- ------------ ----------- ------------
BALANCE, January
31, 1999 300 300,000 8,888,888 88,888 103,063 135,585 627,536
Issuance of common
stock for cash -- -- 2,587,500 25,875 15,785,016 -- 15,810,891
Redemption of
preferred stock (300) (300,000) -- -- -- (30,000) (330,000)
Options and warrants
granted to
non-employees -- -- -- -- 55,100 -- 55,100
Net income -- -- -- -- -- 1,080,506 1,080,506
-------- ---------- ---------- --------- ------------ ----------- ------------
BALANCE, January
31, 2000 -- $ -- 11,476,388 $ 114,763 $ 15,943,179 $ 1,186,091 $ 17,244,033
======== ========== ========== ========= ============ =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
ONLINETRADINGINC.COM CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,080,506 $ 107,943
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 131,163 29,918
Common stock granted to officer -- 26,000
Loss on disposal of assets 38,706 --
Deferred income taxes 18,900 13,850
Changes in operating assets and liabilities:
Receivable from clearing organization (186,750) (271,533)
Securities owned at market value 226,072 302,251
Other current assets (88,404) (15,022)
Other assets (125,585) --
Accounts payable and accrued expenses 342,895 737,312
Income taxes payable 614,911 38,230
Securities sold but not yet purchased, at market value 25,938 (131,782)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,078,352 837,167
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 3,600 --
Cash paid for intangible asset (2,682,000) --
Other assets -- (25,667)
Purchase of property and equipment (234,097) (48,891)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (2,912,497) (74,558)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 15,810,891 --
Proceeds from issuance of common stock warrants 100 --
Proceeds from issuance of subordinated loans 360,000 25,000
Repayment of subordinated loans (885,000) --
Redemption of preferred stock (330,000) --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,955,991 25,000
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 14,121,846 787,609
CASH AND CASH EQUIVALENTS, beginning of year 1,005,944 218,335
------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 15,127,790 $ 1,005,944
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 75,279 $ --
============ ============
Cash paid for interest $ 57,806 $ 35,831
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
During the year ended January 31, 2000, the Company acquired $112,075 of office
furniture and equipment through a capital lease. During the year ended January
31, 2000, the Company granted 40,000 options valued at $55,000 to acquire a
domain name.
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Online Trading, Inc. was incorporated in the State of Florida
on September 7, 1995 and operates as a registered securities
broker/dealer under the rules of the National Association of Securities
Dealers ("NASD"). In February 1999, OnlineTrading.com changed its name
to onlinetradinginc.com corp. ("OnlineTrading.com"). OnlineTrading.com
is headquartered in Boca Raton, Florida and has branch offices in
Massachusetts, Pennsylvania and Ohio.
OnlineTrading.com manages its customer accounts through Bear
Stearns Securities Corp., and US Clearing Corporation (collectively,
the "Clearing Firms") on a fully disclosed basis. The Clearing Firms
provide services, handle OnlineTrading.com's customers' funds, hold
securities, and remit monthly activity statements to the customers on
behalf of OnlineTrading.com. The amount receivable from brokers and
dealers relates to commissions earned by OnlineTrading.com for trades
executed by the Clearing Firms on behalf of OnlineTrading.com.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
MARKETABLE SECURITIES
Marketable securities are valued at market value and
securities not readily marketable (if any) are valued at fair value as
determined by the board of directors. The resulting difference between
cost and market (or fair value) is included in the statements of
income.
PROPERTY AND EQUIPMENT
Furniture, equipment and leasehold improvements are recorded
at cost and depreciated over the estimated useful lives of those assets
using the straight-line and accelerated methods. Expenditures for
routine maintenance and repairs are charged to expenses as incurred.
INTANGIBLE ASSET
The intangible asset is a result of the acquisition as
described in Note 13, and is being amortized on a straight-line basis
over five years.
LONG-LIVED ASSETS
OnlineTrading.com reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. For the years ended January
31, 2000 and 1999, there were no write-downs in value.
SECURITIES TRANSACTIONS
Proprietary securities transactions in regular-way trades are
recorded on the trade date, as if they settled. Profit and loss arising
from all securities transactions entered into for the account and risk
of OnlineTrading.com are recorded on a trade date basis. Customers'
securities transactions are reported on a settlement date basis to the
customer with related commission income and expenses reported on a
trade date basis.
F-8
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
COMMISSIONS
Commissions and related clearing expenses are recorded on a
trade-date basis as securities transactions occur.
ADVERTISING
The costs of advertising, promotion, and marketing programs
are charged to operations in the year incurred. Such expense items
totaled $103,000 and $30,382, respectively, for the years ended January
31, 2000 and 1999.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid
investments purchased with an original maturity of three months or
less. Cash and cash equivalents consist primarily of money market funds
and commercial paper with an original maturity of three months or less.
OnlineTrading.com occasionally maintains cash balances in financial
institutions in excess of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, accounts receivable, and accounts payable and accrued
expenses are reflected in the financial statements at cost, which
approximates fair value because of the short-term maturity of those
instruments. The fair value of OnlineTrading.com's subordinated loans
payable, as described in Note 7, and OnlineTrading.com's capital lease
obligation, as described in Note 8, are the same as the recorded
amounts because rates and terms approximate current market conditions.
INCOME TAXES
OnlineTrading.com accounts for income taxes in accordance with
the Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets at currently enacted tax rates for
the expected future tax consequences of events that have been included
in the financial statements and tax returns.
EARNINGS PER SHARE
Earnings per share is calculated in accordance with SFAS No.
128, "Earnings Per Share," which requires companies with complex
capital structures or common stock equivalents to present both basic
and diluted earnings per share ("EPS") on the face of the income
statement. Basic EPS is calculated as income available to common
stockholders divided by the weighted average number of common shares
outstanding during the period. Diluted EPS is calculated using the "if
converted" method for convertible securities and the treasury stock
method for options and warrants as previously prescribed by Accounting
Principles Board Opinion No. 15, "Earnings Per Share."
F-9
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
COMPREHENSIVE INCOME
In accordance with SFAS No. 130, "Reporting Comprehensive
Income," OnlineTrading.com is required to report its other
comprehensive income. Other comprehensive income refers to revenue,
expenses, gains, and losses that under accounting principles generally
accepted in the United States are included in comprehensive income but
are excluded from net income, as these amounts are recorded directly as
an adjustment to stockholders' equity. A statement of comprehensive
income is not presented since OnlineTrading.com had no items of other
comprehensive income. Comprehensive income is the same as net income
for all periods presented herein.
SEGMENT INFORMATION
OnlineTrading.com adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," effective January
31, 1999. SFAS No. 131 establishes standards for the way that public
companies report selected information about operating segments in
annual and interim financial reports to shareholders. It also
establishes standards for related disclosures about an enterprise's
business segments, products, services, geographic areas and major
customers. OnlineTrading.com operates its business as a single segment.
As a result, no additional disclosure was required.
RECENT ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board
("FASB") issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of FASB Statement No. 133." SFAS No.
137 defers for one year the effective date of SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 will
now apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS No. 133 will require OnlineTrading.com to recognize
all derivatives on the balance sheet as either assets or liabilities
measured at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. OnlineTrading.com will adopt
SFAS No. 133 effective for the year ending January 31, 2002.
OnlineTrading.com has not yet determined the impact SFAS No. 133 will
have on its financial position or results of operations when such
statement is adopted.
NOTE 2 - NET CAPITAL REQUIREMENTS
OnlineTrading.com is subject to the Securities and Exchange
Commission uniform net capital rule (Rule 15c3-1), which requires the
maintenance of minimal net capital and requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not
exceed 15 to 1. As of January 31, 2000, OnlineTrading.com had net
capital of $14,051,801, which was $13,914,699 in excess of its required
net capital of $137,102.
NOTE 3 - PENSION PLAN
OnlineTrading.com had maintained a "SIMPLE" retirement plan
for all eligible employees. Eligible employees may contribute up to
$500 per month for which OnlineTrading.com will match
dollar-for-dollar, up to 3% of the employees' compensation.
Contributions by OnlineTrading.com under this plan totaled $39,928 and
$46,987 for the years ended January 31, 2000 and 1999, respectively.
Effective December 31, 1999, OnlineTrading.com decided to terminate the
plan.
F-10
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 3 - PENSION PLAN (continued)
Effective January 15, 2000, OnlineTrading.com started a
defined contribution 401(k) plan. Eligible employees can contribute up
to 15% of their eligible salary for which OnlineTrading.com will match
fifty percent up to $2,500. Contributions by OnlineTrading.com under
this plan totaled $6,658 for the year ended January 31, 2000.
NOTE 4 - SECURITIES OWNED AND SECURITIES SOLD BUT NOT YET PURCHASED
Securities owned and securities sold but not yet purchased
consist of marketable trading and investment securities at quoted
market values. These securities consist of the following:
<TABLE>
<CAPTION>
2000 1999
---------------------------------- ---------------------------------
SOLD SOLD
NOT YET NOT YET
OWNED PURCHASED OWNED PURCHASED
-------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Corporate stocks $ 5,200 $ 25,938 $ 224,428 $ --
Obligations of U.S. Government 149,812 -- 156,656 --
-------------- --------------- ------------- --------------
Total $ 155,012 $ 25,938 $ 381,084 $ --
============== =============== ============= ==============
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at January 31,
2000 and 1999:
2000 1999
--------- ---------
Computers, software, and equipment $ 307,915 $ 145,009
Furniture and fixtures 122,784 36,651
Leasehold improvements 38,773 14,521
--------- ---------
Total cost 469,472 196,181
Less: Accumulated depreciation (68,696) (60,035)
--------- ---------
Property and equipment, net $ 400,776 $ 136,146
========= =========
Depreciation expense for the years ended January 31, 2000 and
1999 was $39,236 and $29,918, respectively.
F-11
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at January 31, 2000
and 1999 consist of the following:
2000 1999
---------- ----------
Accounts payable $ 497,694 $ 163,074
Accrued liabilities:
Research fees 177,918 124,828
Payroll, and related expenses 521,115 644,148
Clearing deposit 50,000 --
Professional fees and other 44,590 16,372
---------- ----------
Total $1,291,317 $ 948,422
========== ==========
NOTE 7 - SUBORDINATED LOANS
The borrowings under subordinated agreements as of January 31,
1999 are as follows:
Subordinated equity loan with a shareholder, unsecured, at a
rate of 5% with a scheduled maturity on February 11, 2002.
This loan was paid in full on November 30, 1999. $ 400,000
Subordinated loan, unsecured, at a rate of 5% with a
scheduled maturity on February 1, 2000. This loan was paid
in full on July 2, 1999. 100,000
Subordinated loan, unsecured, at a rate of 6%. This loan was
paid in full on its scheduled maturity of August 31, 1999. 25,000
-----------
$ 525,000
===========
By being designated as subordinated, these loans were
available in computing net capital under the SEC's uniform net capital
rule at January 31, 1999.
NOTE 8 - CAPITAL LEASE
On December 1, 1999, OnlineTrading.com entered into a capital
lease for office furniture, computer equipment and phone system. As of
January 31, 2000, the leasing company had funded $112,075 representing
a portion of the total furniture and computer equipment to be received.
The balance of the equipment totaling $180,450 was not received as of
January 31, 2000 and accordingly, not included in the statement of
financial condition. The lease is to be paid over 36 months with an
estimated monthly payment expected to commence on April 1, 2000 of
$8,698 with a final payment of 7% of the original invoice amounts.
F-12
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- ------------------------------------------------------------
NOTE 8 - CAPITAL LEASE (continued)
Anticipated future minimum payments based on the amount of
furniture and equipment received are as follows:
YEAR ENDING
JANUARY 31,
-----------
2001 $ 39,944
2002 39,944
2003 39,944
2004 7,845
---------
Total payments 127,677
Less: amount representing interest (15,602)
---------
Original capitalized cost $ 112,075
=========
NOTE 9 - INCOME TAXES
A summary of the income tax provision for the years ended
January 31, 2000 and 1999 is as follows:
2000 1999
-------- --------
Current taxes:
Federal $587,587 $ 29,730
State 95,737 8,500
-------- --------
Total current taxes 683,324 38,230
-------- --------
Deferred tax provision:
Federal 16,000 10,800
State 2,900 3,050
-------- --------
Total deferred tax provision 18,900 13,850
-------- --------
Total income tax provision $702,224 $ 52,080
======== ========
F-13
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES (continued)
Temporary differences between the reported amounts in the
financial statements and tax bases of assets and liabilities that give
rise to the deferred income tax liabilities relate to the following:
2000 1999
-------- --------
Property and equipment, due to differences in
depreciation $ 60,000 $ 15,400
Intangible asset, due to differences in amortization (25,700) --
-------- --------
Net deferred income tax liability $ 34,300 $ 15,400
======== ========
The effective income tax rate varied from the statutory
Federal tax rate as follows:
2000 1999
------ ------
Federal statutory rate 35.0% 34.0%
State income taxes, net of federal income tax effect 4.5 5.3
Other, including permanent differences, non-deductible
expenses and the effect of the rate brackets (.1) (6.8)
------ ------
Effective income tax rate 39.4% 32.5%
====== ======
NOTE 10 - STOCKHOLDERS' EQUITY
(a) CAPITAL STOCK
On March 24, 1999, the shareholders and directors affected an
amendment to OnlineTrading.com's articles of incorporation to change
the number of authorized common shares to 30,000,000 with a par value
per share of $0.01 and to change the number of authorized preferred
shares to 1,000,000 with a par value of $0.01 per share. Prior to that
date, OnlineTrading.com had 1,000 authorized common shares with no par
value and authorized preferred shares of 300,000 with a stated value
per share of $1,000. All of the shares outstanding at that date were
converted into 8,000,000 shares of the new $0.01 par value common
stock, and into 300 shares of Series A preferred stock, stated value
$1,000 per share.
On April 3, 1999, a stock split of 11.11111 shares for each 10
shares of common stock outstanding was effected. All of the common
shares outstanding at that date were converted into 8,888,888 shares.
On May 8, 1999, the shareholders and directors affected an
amendment to OnlineTrading.com's articles of incorporation to change
the number of authorized common shares to 100,000,000 with a par value
per share of $0.01. The effect of the stock split has been
retroactively reflected in the accompanying financial statements.
Each holder of the new $0.01 par value common stock is
entitled to one vote for each share held on all matters presented to a
vote of shareholders, including the election of directors.
F-14
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 10 - STOCKHOLDERS' EQUITY (continued)
Holders of common stock have no cumulative voting rights or
preemptive rights to purchase or subscribe for any stock or other
securities, and there are no conversion rights or redemption or sinking
fund provisions with respect to this stock.
OnlineTrading.com's directors have the authority to issue
1,000,000 shares of the new $0.01 par value preferred stock in one or
more series and to fix, by resolution, conditional, full, limited or no
voting powers, and the designations, preferences and relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any, including
the number of shares in the series (which the board may increase or
decrease as permitted by Florida law), liquidation preferences,
dividend rates, conversion or exchange rights, redemption provisions of
the shares constituting any series and such other special rights and
protective provisions with respect to any class or series as the board
may deem advisable without any further vote or action by the
shareholders. Any shares of preferred stock so issued could have
priority over the common stock with respect to dividend or liquidation
rights or both and could have voting and other rights of shareholders.
The board has authorized and issued a Series A preferred with
the following terms: 300 shares with a stated value of $1,000 per
share, one vote per share, and redeemable at 110% of stated value at
the option of OnlineTrading.com. In July 1999, OnlineTrading.com
redeemed all of the then outstanding preferred stock.
(b) INITIAL PUBLIC OFFERING
OnlineTrading.com completed its initial public offering (the
"IPO") by issuing 2,587,500 shares of common stock (including 337,500
shares to cover over-allotments), $0.01 par value (the "IPO Shares") on
June 11, 1999. The IPO shares were issued in a registered offering
pursuant to a Registration Statement on Form SB-2 (Commission File No.
333-75119; effective date June 11, 1999) through a syndicate of
underwriters, the principal representatives of which were Werbel-Roth
Securities, Inc., OnlineTrading.com, Seaboard Securities, Inc.
and The Agean Group, Inc.
The IPO shares were offered and sold by the underwriters at an
initial public offering price of $7.00 per share, resulting in
aggregate gross offering proceeds of $18,112,500, net concession and
management fee proceeds for participation in the underwriting of the
IPO of $189,867 and net proceeds to OnlineTrading.com of $15,810,891.
OnlineTrading.com incurred offering expenses in connection
with this offering as follows:
Underwriting discounts and commissions $ 1,539,563
Expenses paid to/for underwriters 486,461
Other offering expenses 465,452
-----------
$ 2,491,476
===========
Except for the concessions earned by OnlineTrading.com as a
result of participating in the underwriters syndicate, none of the
above expenses were paid either directly or indirectly to directors,
officers, general partners of OnlineTrading.com or its associates, or
to persons owning more than 10% of any class of equity security of
OnlineTrading.com or to affiliates of OnlineTrading.com.
In conjunction with the IPO, OnlineTrading.com issued 225,000
warrants to the underwriters for $100. The warrants have an exercise
price of $11.55 (165% of the $7.00 IPO price).
F-15
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 11 - EARNINGS PER SHARE
Weighted average shares outstanding for the years ended
January 31, 2000 and 1999 are calculated as follows:
2000 1999
---------- ----------
Weighted average shares outstanding (basic) 10,522,889 8,857,230
Impact of dilutive options and warrants after
applying the treasury stock method 107,374 --
---------- ----------
Weighted average shares outstanding (diluted) 10,630,263 8,857,230
========== ==========
Options and warrants outstanding which are
not included in the calculation of diluted
earnings per share because their impact
is antidultive 384,000 --
========== ==========
NOTE 12 - STOCK OPTIONS
In June 1999, OnlineTrading.com adopted the 1999 Stock Option
Plan. Pursuant to the terms of this plan, employees, non-employee
directors, consultants and independent contractors are eligible to
receive options to purchase common stock. Up to 1,000,000 shares may be
issued under the plan and will be drawn from either authorized but
previously unissued shares or from treasury shares. Options granted
under this plan are granted at the fair market value of the common
stock at the date of grant. In general, the employee options become
exercisable over a five-year period beginning June 11, 2000. All
options expire ten years after the date of grant.
OnlineTrading.com has granted the following options:
OPTION PRICE PER SHARE
---------------------------------
TYPE SHARES LOW HIGH WEIGHTED
---- ------- --------- --------- ---------
Employee 390,500 $ 7.00 $ 11.93 $ 8.37
Non-employee directors 40,000 $ 7.00 $ 11.31 $ 9.16
Non-employee consultants 40,000 $ 13.50 $ 13.50 $ 13.50
No stock options have been exercised during the year ended
January 31, 2000.
OnlineTrading.com, as permitted by SFAS No. 123, applies the
APB Opinion No. 25 for options granted to employees. Accordingly, no
compensation is recognized for such grants to the extent their exercise
price is equal to the fair market value of the underlying stock at the
date of grant. Had compensation cost for OnlineTrading.com's stock
options been based on fair value at the grant dates consistent with the
methodologies of SFAS No. 123, OnlineTrading.com's pro forma net income
(and pro forma earnings per share on a diluted basis) for the year
ended January 31, 2000 would have been $919,424 (.07 per share). The
fair value of each option grant is estimated on the date of grant using
the Black-Scholes model with the following assumptions: risk free
interest rate - 6%; dividend yield - 0%; volatility factor - 70%; and
weighted average life (years) - 5.
F-16
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 13 - ACQUISITION
On December 6, 1999, OnlineTrading.com acquired certain
intangible assets of Newport Discount Brokerage, Inc. ("Newport")
pursuant to an Asset Purchase Agreement dated September 21, 1999 (the
"Asset Purchase Agreement"). Pursuant to the Asset Purchase Agreement,
OnlineTrading.com purchased all of Newport's right, title and interest
in and to its clients. The total consideration paid by
OnlineTrading.com in connection with this acquisition included cash of
$2,682,000 and up to 125,000 shares of OnlineTrading.com's common
stock.
Issuance and delivery of the common stock consideration is
contingent upon the acquired assets achieving certain revenue goals and
maintaining customer accounts within one year from closing. For
accounting purposes, the transaction was treated as a purchase.
OnlineTrading.com recorded an intangible asset of $2,682,000 in
connection with this acquisition, which is being amortized over five
years. Amortization expense for the year ending January 31, 2000 was
$89,400.
NOTE 14 - CONCENTRATIONS AND CREDIT RISKS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
OnlineTrading.com will periodically sell securities that it
does not currently own and will therefore be obligated to purchase such
securities at a future date. OnlineTrading.com has recorded these
obligations in the financial statements at January 31, 2000, at market
values of the related securities. As of January 31, 1999,
OnlineTrading.com had none of these transactions outstanding.
OnlineTrading.com's customer securities activities are
transacted on either a cash or margin basis. In margin transactions,
OnlineTrading.com extends credit to its customers, subject to various
regulatory and internal margin requirements, collateralized by cash and
securities in the customers' accounts. In connection with these
activities, OnlineTrading.com executes and clears customer transactions
involving the sale of securities not yet purchased, substantially all
of which are transacted on a margin basis subject to individual
exchange regulations. Such transactions may expose OnlineTrading.com to
significant off-balance-sheet risk in the event margin requirements are
not sufficient to fully cover losses that customers may incur. In the
event the customer fails to satisfy its obligations, OnlineTrading.com
may be required to purchase or sell financial instruments at prevailing
market prices to fulfill the customer's obligations.
OnlineTrading.com seeks to control the risks associated with
its customer activities by requiring customers to maintain margin
collateral in compliance with various regulatory and internal
guidelines. OnlineTrading.com and its clearing firm monitor required
margin levels daily and, pursuant to such guidelines, require the
customers to deposit additional collateral or to reduce positions when
necessary.
OnlineTrading.com's customer financing and securities
settlement activities require OnlineTrading.com to pledge customer
securities as collateral in support of various secured financing
sources such as bank loans and securities loaned. In the event the
counterparty is unable to meet its contractual obligation to return
customer securities pledged as collateral, OnlineTrading.com may be
exposed to the risk of acquiring the securities at prevailing market
prices in order to satisfy its customers obligations. OnlineTrading.com
controls this risk by monitoring the market value of securities pledged
on a daily basis and by requiring adjustments of collateral levels in
the event of excess market exposure. In addition, OnlineTrading.com
establishes credit limits for such activities and monitors compliance
on a daily basis.
F-17
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 14 - CONCENTRATIONS AND CREDIT RISKS (continued)
CONCENTRATIONS OF CREDIT RISK
OnlineTrading.com is engaged in various trading and brokerage
activities in which counterparties primarily include broker-dealers,
banks, and other financial institutions. In the event counterparties do
not fulfill their obligations, OnlineTrading.com may be exposed to
risk. The risk of default depends on the creditworthiness of the
counterparty or issuer of the instrument. It is OnlineTrading.com's
policy to review, as necessary, the credit standing of each
counterparty.
NOTE 15 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
OnlineTrading.com is obligated under four non-cancelable
operating leases for office space with expiration dates ranging from
February 2000 to February 2007. OnlineTrading.com subleases space to
three unrelated entities in its corporate headquarters. On March 2,
1999, OnlineTrading.com entered into a three year operating lease for
office furniture and equipment.
Rent expense for the years ended January 31, 2000 and 1999 was
as follows:
2000 1999
--------- ---------
Base rent - office space $ 259,655 $ 119,705
Sublease income (118,975) (14,300)
Base rent - furniture & equipment 73,020 --
--------- ---------
Rent expense, net $ 213,700 $ 105,405
========= =========
As of January 31, 2000, future minimum rental payments
required under the leases are as follows:
YEAR ENDING RENTAL SUBLEASE NET MINIMUM
JANUARY 31, PAYMENTS PAYMENTS PAYMENTS
----------- ---------- ---------- ----------
2001 $ 381,216 $ 119,300 $ 261,916
2002 394,546 124,072 270,474
2003 340,335 129,034 211,301
2004 335,983 134,196 201,787
2005 321,379 139,564 181,815
Thereafter 703,567 308,718 394,849
---------- ---------- ----------
$2,477,026 $ 954,884 $1,522,142
========== ========== ==========
F-18
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
- --------------------------------------------------------------------------------
NOTE 15 - COMMITMENTS AND CONTINGENCIES (continued)
LITIGATION
OnlineTrading.com has been named in a civil action by a former
customer alleging excessive trading and commissions, violation of
Massachusetts General Laws c.93A ss. and c.110A ss.ss.101 and 102 and
violation of NASD conduct rules. The claimant is seeking total alleged
damages of $566,345 plus interest, costs, fees, and treble damages.
OnlineTrading.com's attorneys moved the case to the United States
District Court for the District of Massachusetts, Eastern Division,
where the matter is currently pending and awaiting ruling on our motion
to compel arbitration.
The case is in the early stages and no estimate of a potential
liability against OnlineTrading.com, if any, can be determined at this
time. Management believes the case to be completely without merit and
intends to present a vigorous defense and to seek reimbursement for all
costs and fees associated with our defense.
In addition, from time to time, OnlineTrading.com may become
engaged in ordinary routine litigation and/or arbitration incidental to
its business. OnlineTrading.com does not believe that such ordinary
routine litigation/arbitration would have a material adverse effect on
its financial position or results of operations.
F-19
EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined financial statements give effect to,
and assume the completion of, the proposed merger of Omega Acquisition
Corporation, a recently-formed corporation wholly-owned by OnlineTrading.com
Group, Inc. ("Holding Company"), with and into Omega, and the merger of
Onlinetrading Acquisition Corporation, a recently-formed corporation also
wholly-owned by Holding Company with and into Online, on a pooling-of-interests
basis. Immediately after the mergers, Omega and Online would be wholly-owned
subsidiaries of Holding Company. Holding Company's unaudited pro forma combined
balance sheet assumes that the mergers took place on December 31, 1999 and
combines the Omega consolidated balance sheet at December 31, 1999 with Online's
balance sheet as of January 31, 2000. Holding Company's unaudited pro forma
combined statements of operations assume that the mergers took place as of the
beginning of the periods presented and combine Omega's consolidated statements
of operations for the years ended December 31, 1999, 1998 and 1997 with Online's
statements of operations for the years ended January 31, 2000, 1999 and 1998,
respectively. Holding Company's unaudited pro forma combined financial
statements are based on Omega and Online's historical annual financial
statements and related notes thereto, which have not been restated for the
effect of the merger.
It is anticipated that nonrecurring merger expenses in the amount of
approximately $4.1 million will be incurred in connection with the merger. Such
expenses are not reflected in the unaudited pro forma combined statements of
operations.
The unaudited pro forma combined financial statements are presented for
illustrative purposes only, assume the completion of the proposed merger, and
are not necessarily indicative of the combined financial position or results of
operations of future periods or the results that actually would have been
realized had the entities been a single entity during these periods.
Certain amounts presented in the unaudited pro forma combined financial
statements have been reclassified for comparative purposes.
INDEX TO PRO FORMA COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Holding Company Pro Forma Combined Balance Sheet as of December 31, 1999.......................................PF-2
Holding Company Pro Forma Combined Statement of Operations for the year ended December 31, 1999................PF-3
Holding Company Pro Forma Combined Statement of Operations for the year ended December 31, 1998................PF-4
Holding Company Pro Forma Combined Statement of Operations for the year ended December 31, 1997................PF-5
</TABLE>
PF - 1
<PAGE>
HOLDING COMPANY
PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
OMEGA HOLDING COMPANY
RESEARCH ONLINETRADING.COM PRO FORMA COMBINED
12/31/99 1/31/00 ADJUSTMENTS PRO FORMA
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,175,852 $ 15,127,790 $ -- $ 17,303,642
Marketable securities 1,695,304 155,012 -- 1,850,316
Accounts receivable, net 13,695,059 -- -- 13,695,059
Receivable from clearing organization -- 759,183 -- 759,183
Inventories 67,371 -- -- 67,371
Other current assets 1,469,383 103,987 -- 1,573,370
Deferred income taxes 9,192,000 -- -- 9,192,000
------------ ------------- ------------ ------------
TOTAL CURRENT ASSETS 28,294,969 16,145,972 -- 44,440,941
------------ ------------- ------------ ------------
PROPERTY, AND EQUIPMENT, NET 2,611,454 400,776 -- 3,012,230
INTANGIBLE ASSETS, NET -- 2,592,600 -- 2,592,600
OTHER ASSETS 473,344 221,456 -- 694,800
------------ ------------- ------------ ------------
TOTAL ASSETS $ 31,379,767 $ 19,360,804 $ -- $ 50,740,571
============ ============= ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,786,739 $ 497,694 $ -- $ 3,284,433
Accrued expenses and other current liabilities 1,861,321 793,623 -- 2,654,944
Income taxes payable -- 653,141 -- 653,141
Current portion of capital lease -- 39,944 -- 39,944
Securities sold but not yet purchased, at
market value -- 25,938 -- 25,938
Deferred revenue 1,256,824 -- -- 1,256,824
------------ ------------- ------------ ------------
TOTAL CURRENT LIABILITIES 5,904,884 2,010,340 -- 7,915,224
------------ ------------- ------------ ------------
DEFERRED INCOME TAXES -- 34,300 -- 34,300
------------ ------------- ------------ ------------
CAPITAL LEASE PAYABLE, NET OF CURRENT
PORTION -- 72,131 -- 72,131
------------ ------------- ------------ ------------
TOTAL LIABILITIES 5,904,884 2,116,771 -- 8,021,655
------------ ------------- ------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock -- -- -- --
Common stock 244,751 114,763 82,310 (A) 441,824
Additional paid-in capital 26,560,893 15,943,179 (82,310)(A) 42,421,762
Retained (deficit) earnings (1,330,761) 1,186,091 -- (144,670)
------------ ------------- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 25,474,883 17,244,033 -- 42,718,916
------------ ------------- ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 31,379,767 $ 19,360,804 $ -- $ 50,740,571
============ ============= ============ ============
</TABLE>
- --------------------------------------------------------------------------------
(A) To reflect the common stock to be issued by Holding Company in connection
with the merger.
PF-2
<PAGE>
HOLDING COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA
RESEARCH ONLINETRADING.COM HOLDING COMPANY
YEAR ENDED YEAR ENDED PRO FORMA COMBINED
12/31/99 1/31/00 ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 33,767,832 $ -- $ -- $ 33,767,832
Commissions and fees -- 9,471,435 -- 9,471,435
Net investment gains -- 1,129,493 -- 1,129,493
Other revenues 9,102,137 1,089,912 -- 10,192,049
------------ ------------ ------------ ------------
Total net revenues 42,869,969 11,690,840 -- 54,560,809
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees and services 2,985,409 -- -- 2,985,409
Clearing and other transaction costs -- 3,012,284 -- 3,012,284
Product development 5,144,658 279,387 -- 5,424,045
Sales and marketing 18,979,103 3,048,623 -- 22,027,726
General and administrative 12,435,758 3,567,816 (51,863)(A) 15,951,711
Acquisition costs 1,200,000 -- -- 1,200,000
------------ ------------ ------------ ------------
Total operating expenses 40,744,928 9,908,110 (51,863) 50,601,175
------------ ------------ ------------ ------------
Income from operations 2,125,041 1,782,730 51,863 3,959,634
------------ ------------ ------------ ------------
OTHER (EXPENSE) INCOME, NET:
Interest expense (1,691,185) -- (51,863)(A) (1,743,048)
Other income, net 445,535 -- -- 445,535
------------ ------------ ------------ ------------
Total other expense, net (1,245,650) -- (51,863) (1,297,513)
------------ ------------ ------------ ------------
Income before income taxes 879,391 1,782,730 -- 2,662,121
INCOME TAX PROVISION 1,846,000 702,224 -- 2,548,224
------------ ------------ ------------ ------------
Net (loss) income $ (966,609) $ 1,080,506 $ -- $ 113,897
============ ============ ============ ============
(Loss) earnings per share:
Basic $ (0.04) $ 0.00
============ ============
Diluted $ (0.04) $ 0.00
============ ============
Weighted average common stock:
Basic 24,294,179 18,069,905 (B) 42,364,084
============ ============ ============
Diluted 24,294,179 20,299,288 (B) 44,593,467
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
(A) To reclass interest expense.
(B) To reflect the conversion of Omega Research and OnlineTrading.com's weighted
average shares outstanding to shares of Holding Company common stock in
connection with the merger.
PF-3
<PAGE>
HOLDING COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA
RESEARCH ONLINETRADING.COM HOLDING COMPANY
YEAR ENDED YEAR ENDED PRO FORMA COMBINED
12/31/98 1/31/99 ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 25,057,098 $ -- $ -- $ 25,057,098
Commissions and fees -- 5,525,427 -- 5,525,427
Net investment gains -- 328,495 -- 328,495
Other revenues 6,653,655 138,142 -- 6,791,797
------------ ------------ ------------ ------------
Total net revenues 31,710,753 5,992,064 -- 37,702,817
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees and services 2,494,445 -- -- 2,494,445
Clearing and other transaction costs -- 2,002,055 -- 2,002,055
Product development 4,001,981 -- -- 4,001,981
Sales and marketing 15,573,786 1,174,998 -- 16,748,784
General and administrative 8,545,073 2,654,988 (36,566)(A) 11,163,495
------------ ------------ ------------ ------------
Total operating expenses 30,615,285 5,832,041 (36,566) 36,410,760
------------ ------------ ------------ ------------
Income from operations 1,095,468 160,023 36,566 1,292,057
------------ ------------ ------------ ------------
OTHER (EXPENSE) INCOME, NET:
Interest expense (907,196) -- (36,566)(A) (943,762)
Other income, net 435,181 -- -- 435,181
------------ ------------ ------------ ------------
Total other expense, net (472,015) -- (36,566) (508,581)
------------ ------------ ------------ ------------
Income before income taxes 623,453 160,023 -- 783,476
INCOME TAX PROVISION 1,052,000 52,080 -- 1,104,080
------------ ------------ ------------ ------------
Net (loss) income $ (428,547) $ 107,943 $ -- $ (320,604)
============ ============ ============ ============
Loss per share:
Basic $ (0.02) $ (0.01)
============ ============
Diluted $ (0.02) $ (0.01)
============ ============
Weighted average common stock:
Basic 23,913,762 15,209,636 (B) 39,123,398
============ ============ ============
Diluted 23,913,762 15,209,636 (B) 39,123,398
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
(A) To reclass interest expense.
(B) To reflect the conversion of Omega Research and OnlineTrading.com's weighted
average shares outstanding to shares of Holding Company common stock in
connection with the merger.
PF-4
<PAGE>
HOLDING COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA
RESEARCH ONLINETRADING.COM HOLDING COMPANY
YEAR ENDED YEAR ENDED PRO FORMA COMBINED
12/31/97 1/31/98 ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 27,729,549 $ -- $ -- $ 27,729,549
Commissions and fees -- 3,673,728 -- 3,673,728
Net investment losses -- (187,973) -- (187,973)
Other revenues 5,220,899 62,630 -- 5,283,529
------------ ------------ ------------ ------------
Total net revenues 32,950,448 3,548,385 -- 36,498,833
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees and services 2,688,277 -- -- 2,688,277
Clearing and other transaction costs -- 1,751,472 -- 1,751,472
Product development 2,355,716 -- -- 2,355,716
Sales and marketing 12,217,117 229,562 -- 12,446,679
General and administrative 7,465,942 1,589,329 (71,805)(A) 8,983,466
------------ ------------ ------------ ------------
Total operating expenses 24,727,052 3,570,363 (71,805) 28,225,610
------------ ------------ ------------ ------------
Income (loss) from operations 8,223,396 (21,978) 71,805 8,273,223
------------ ------------ ------------ ------------
OTHER (EXPENSE) INCOME, NET:
Interest expense (265,469) -- (71,805)(A) (337,274)
Other income, net 195,995 -- -- 195,995
------------ ------------ ------------ ------------
Total other expense, net (69,474) -- (71,805) (141,279)
------------ ------------ ------------ ------------
Income (loss) before income
taxes 8,153,922 (21,978) -- 8,131,944
INCOME TAX BENEFIT (934,000) (2,550) -- (936,550)
------------ ------------ ------------ ------------
Income (loss) before pro forma
income tax adjustments 9,087,922 (19,428) -- 9,068,494
PRO FORMA INCOME TAX
ADJUSTMENTS:
Pro forma income taxes for periods
prior to September 30, 1997 3,255,731 -- -- 3,255,731
Non-recurring tax credit 1,167,000 -- -- 1,167,000
------------ ------------ ------------ ------------
Pro forma net income (loss) $ 4,665,191 $ (19,428) $ -- $ 4,645,763
============ ============ ============ ============
Earnings per share:
Basic $ 0.21 $ 0.13
============ ============
Diluted $ 0.21 $ 0.13
============ ============
Weighted average common stock:
Basic 21,829,417 14,500,799 (B) 36,330,216
============ ============ ============
Diluted 22,620,064 14,500,799 (B) 37,120,863
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
(A) To reclass interest expense.
(B) To reflect the conversion of Omega Research and OnlineTrading.com's weighted
average shares outstanding to shares of Holding Company common stock in
connection with the merger.
PF-5
