<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
000-30527
(Commission file number)
OPTIMARK HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 22-3730995
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10 EXCHANGE PLACE CENTRE, 24TH FLOOR, JERSEY CITY, NJ 07302
(Address of Principal Executive Offices) (Zip Code)
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(201) 536-7112
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
At November 13, 2000, the number of shares outstanding of the registrant's
common stock was 36,612,057.
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INDEX
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PART I FINANCIAL INFORMATION
Page
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Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999. 4
Consolidated Statements of Operations for the Nine Months and
Three Months Ended September 30, 2000 and September 30, 1999. 5
Condensed, Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and September 30, 1999. 6
Consolidated Statement of Stockholders' Equity for the Nine
Months Ended September 30, 2000. 7
Notes to Consolidated Financial Statements. 8-16
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations. 16-22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
EXHIBIT INDEX 25
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<PAGE> 3
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are based on our beliefs and assumptions, and on information
currently available to us. Forward-looking statements include the information
concerning our possible or assumed future results of operations set forth in
Part I, Item 2 - "Financial Information Management's Discussion and Analysis of
Financial Condition and Results of Operations." Forward-looking statements also
include statements in which words such as "expect", "anticipate", "contemplate",
"intend", "plan", "believe", "estimate", "consider" or similar expressions are
used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions, including the risks discussed
under the heading, "Business - Risk Factors" in the Company's Report for Form
10/A-3 as filed with the SEC and elsewhere in this Quarterly Report. Our future
results and stockholder values may differ materially from those expressed in
these forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict,. Investors are
cautioned not to put undue reliance on any forward-looking statements. In
addition, we do not have any intention or obligation to update forward-looking
statements after the filing of this Quarterly Report, even if new information,
future events or other circumstances have made them incorrect or misleading. For
these statements, we claim the protection of the safe harbor for forward-looking
statements contained in Section 21E of the Exchange Act.
<PAGE> 4
OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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(unaudited)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,409,182 $ 62,637,410
Receivable from affiliate 2,927,922 521,880
Accounts receivable -- 151,002
Other current assets 1,128,011 5,140,562
------------- -------------
Total current assets 12,465,115 68,450,854
PROPERTY AND EQUIPMENT - Net 8,173,722 19,967,364
CAPITALIZED SOFTWARE COSTS - Net -- 10,816,389
INTANGIBLE ASSETS - Net 25,199,993 27,849,752
OTHER ASSETS 1,252,421 2,595,748
------------- -------------
TOTAL ASSETS $ 47,091,251 $ 129,680,107
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable and accrued liabilities $ 1,429,819 $ 10,453,825
Accrued compensation 2,323,190 1,631,823
Current portion of capital leases payable 147,154 4,186,624
Accrued restructuring 50,634 1,342,551
CURRENT NET LIABILITIES OF DISCONTINUED OPERATIONS 6,455,116 --
Other current liabilities 215,593 601,937
------------- -------------
Total current liabilities 10,621,506 18,216,760
CAPITAL LEASES PAYABLE, LESS CURRENT
PORTION 219,682 4,814,696
OTHER LIABILITIES 100,034 123,891
------------- -------------
Total liabilities 10,941,222 23,155,347
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, authorized and unissued 17,277,932
and 16,952,932 at September 30, 2000 and December 31, 1999,
respectively
Series A preferred stock, convertible and participating,
$0.01 par value; 3,222,068 and 3,547,068 shares
authorized; 3,222,068 and 3,472,068 shares issued
and outstanding at September 30, 2000 and December
31, 1999, respectively 32,221 34,721
Series B preferred stock, convertible, $0.01 par value;
11,000,000 shares authorized, issued and outstanding
at September 30, 2000 and December 31, 1999 110,000 110,000
Series C preferred stock, convertible, $0.01 par value;
8,250,000 shares authorized, issued and outstanding
at September 30, 2000 and December 31, 1999 82,500 82,500
Series D preferred stock, convertible, $0.01 par value;
250,000 shares authorized, issued and outstanding
at September 30, 2000 and December 31, 1999 2,500 2,500
Common stock, $0.01 par value; 150,000,000 shares
authorized; 36,612,057 and 36,496,057 shares issued
and outstanding at September 30, 2000 and December 31, 1999,
respectively 366,121 364,961
Warrants, common stock 35,686,523 35,686,523
Additional paid-in capital 301,662,055 309,564,789
Accumulated deficit (301,817,396) (229,284,323)
Accumulated other comprehensive loss 25,505 (36,911)
Treasury stock, Series A preferred; at cost, no shares at
September 30, 2000 and 250,000 shares at December 31, 1999,
respectively -- (10,000,000)
------------- -------------
Total stockholders' equity 36,150,029 106,524,760
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,091,251 $ 129,680,107
============= =============
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<PAGE> 5
OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
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REVENUE:
Revenue from affiliate $ 3,836,244 $ 175,234 $ 9,620,266 $ 175,234
------------ ------------ ------------ ------------
EXPENSES:
COST OF REVENUE 2,419,964 303,908 7,384,797 809,969
Communications and data center 273,516 13,832 1,031,649 16,829
Business development 565,182 328,790 1,449,684 612,944
General and administrative 1,122,126 3,279,323 5,305,871 8,757,999
Depreciation and amortization 519,710 566,272 1,570,785 1,162,002
Restructuring expense 50,634 -- 2,158,053 --
Warrant compensation expense -- 7,271 14,542 6,809,551
------------ ------------ ------------ ------------
Total expenses 4,951,132 4,499,396 18,915,381 18,169,294
------------ ------------ ------------ ------------
OTHER (INCOME)/EXPENSES:
Interest income (225,246) (1,058,311) (1,446,080) (2,237,330)
Interest expense 11,112 17,254 34,395 52,053
Equity in income of investee -- -- -- 69,112
Gain on recovery of bad debt -- (609,240) -- (700,000)
------------ ------------ ------------ ------------
Total other income (214,134) (1,650,297) (1,411,686) (2,816,165)
------------ ------------ ------------ ------------
OPERATING LOSS (900,754) (2,673,865) (7,883,429) (15,177,895)
------------ ------------ ------------ ------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations (15,112,872) (19,478,223) (52,138,665) (52,907,210)
Loss on disposal of segment (12,510,979) -- (12,510,979) --
------------ ------------ ------------ ------------
Loss from discontinued operations (27,623,851) (19,478,223) (64,649,644) (52,907,210)
------------ ------------ ------------ ------------
NET LOSS (28,524,605) (22,152,088) (72,533,073) (68,085,105)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments 33,581 (3,547) 25,505 (13,751)
------------ ------------ ------------ ------------
COMPREHENSIVE LOSS $(28,491,024) $(22,155,635) $(72,507,568) $(68,098,856)
============ ============ ============ ============
LOSS PER SHARE - BASIC AND DILUTED:
Continuing operations $ (0.02) $ (0.07) $ (0.22) $ (0.44)
Discontinued operations $ (0.75) $ (0.54) $ (1.77) $ (1.52)
------------ ------------ ------------ ------------
TOTAL LOSS PER SHARE $ (0.77) $ (0.61) $ (1.99) $ (1.96)
============ ============ ============ ============
Weighted average number of common
shares outstanding - basic and diluted 36,612,057 36,418,843 36,601,070 34,768,854
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OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (72,533,073) $ (68,085,105)
Deduct loss from discontinued operations (64,649,644) (52,907,210)
------------- -------------
Loss from continuing operations (7,883,429) (15,177,895)
Adjustments to reconcile net loss from continuing
operations to net cash used in continuing operations 888,264 9,260,712
------------- -------------
Net Cash Used in Continuing Operations (6,995,165) (5,917,183)
Net Cash Used in Discontinued Operations (43,455,197) (54,265,188)
------------- -------------
Net Cash Used in Operating Activities (50,450,362) (60,182,371)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (621,667) (8,994,618)
Purchases of software licenses for discontinued operations (293,331) (819,038)
Payments on capitalized software costs for discontinued
operations -- (12,075,111)
Proceeds from disposal of assets 22,028 --
------------- -------------
Net cash used in investing activities (892,970) (21,888,767)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 205,611 50,004
Proceeds from issuance of preferred stock 99,989,121
Proceeds from exercise of warrants for common stock -- 5,984,484
Proceeds from exercise of options for common stock -- 719,208
Proceeds from term loan -- 999,653
Payments on capital leases for continuing operations (1,328,918) (942,022)
Payments on capital leases for discontinued operations (1,761,589) (1,248,727)
------------- -------------
Net cash (used in) provided by financing activities (2,884,896) 105,551,721
------------- -------------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (54,228,228) 23,480,583
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 62,637,410 63,839,270
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,409,182 $ 87,319,853
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments for interest $ 722,468 $ 776,140
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
WRITE DOWN OF IMPAIRED ASSETS $ 16,971,000 --
NET REDUCTION IN VENDOR OBLIGATIONS $ 3,489,000 --
Increase in capital leases $ -- $ 6,359,305
Acquisition of license $ -- $ 28,000,000
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OPTIMARK HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD ENDED SEPTEMBER 30, 2000
(unaudited)
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SERIES A SERIES B SERIES C
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
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BALANCE, JANUARY 1, 2000 3,472,068 $34,721 11,000,000 $110,000 8,250,000 $82,500
Options exercised
Warrants forfeited
Retirement of treasury stock (250,000) (2,500)
Restructuring option charge
Net loss
Other comprehensive loss
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BALANCE, SEPTEMBER 30, 2000 3,222,068 $32,221 11,000,000 $110,000 8,250,000 $82,500
==========================================================================================================================
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SERIES D COMMON STOCK
CONVERTIBLE --------------------------------------------------------
PREFERRED STOCK VOTING NON-VOTING
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
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BALANCE, JANUARY 1, 2000 250,000 $2,500 35,756,057 $357,561 740,000 $7,400
Options exercised 116,000 1,160
Warrants forfeited
Retirement of treasury stock
Restructuring option charge
Net loss
Other comprehensive loss
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BALANCE, SEPTEMBER 30, 2000 250,000 $2,500 35,872,057 $358,721 740,000 $7,400
=====================================================================================================================
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COMMON STOCK
---------------------------- COMMON STOCK ADDITIONAL
TOTAL WARRANTS PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
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BALANCE, JANUARY 1, 2000 36,496,057 364,961 46,389,819 $35,686,523 $309,564,789
Options exercised 116,000 1,160 204,451
Warrants forfeited (124,000)
Retirement of treasury stock (9,997,500)
Restructuring option charge 1,890,315
Net loss
Other comprehensive loss
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BALANCE, SEPTEMBER 30, 2000 36,612,057 $366,121 46,265,819 $35,686,523 $301,662,055
================================================================================================================================
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TREASURY STOCK ACCUMULATED
SERIES A SERIES A OTHER TOTAL
ACCUMULATED PREFERRED PREFERRED COMPREHENSIVE STOCKHOLDERS'
DEFICIT SHARES AMOUNT LOSS EQUITY
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BALANCE, JANUARY 1, 2000 ($229,284,323) (250,000) ($10,000,000) ($36,911) $106,524,760
Options exercised 205,611
Warrants forfeited -
Retirement of treasury stock 250,000 10,000,000 -
Restructuring option charge 1,890,315
Net loss (72,533,073) (72,533,073)
Other comprehensive loss 62,416 62,416
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BALANCE, SEPTEMBER 30, 2000 ($301,817,396) -- $-- $25,505 $ 36,150,029
===========================================================================================================================
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<PAGE> 8
OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
1. GENERAL INFORMATION
OptiMark Holdings, Inc. (the "Company" or "OptiMark") was established as a
holding company on June 12, 2000 as the result of a reorganization of the
company formerly known as OptiMark Technologies, Inc. OptiMark Technologies Inc.
was the successor to a company that had been founded in 1996 to begin
development of the OptiMark matching engine technology for use in an electronic
trading system for equity securities and related technologies. Until September
19, 2000, the Company had operated in two segments, the Exchange Solutions
Business (formerly referred to as Electronic Markets Business) and the US
Equities Business, under two separate wholly owned subsidiaries, OptiMark, Inc.
and OptiMark US Equities, Inc., respectively. (See Note 6)
In the Exchange Solutions Business, OptiMark provides advanced electronic
commerce tools and design and implementation expertise for building electronic
markets and exchanges. OptiMark enables enterprises to build either standalone
marketplaces or internal enterprise-based electronic markets or exchanges.
OptiMark attempts to generate revenue by providing consulting and software
development services related to the customization of its technology, from
royalties for licensing its technology and, if possible, from participating in
the economics of the transactions that it enables. Additionally, the Company
may, at times, also seek to obtain an equity position in the entities to which
it provides its technology and services.
As of September 30, 2000, the Company had entered into agreements with seven
customers under the Exchange Solutions Business segment. The Company had a
definitive agreement to provide development services with only one of these
seven customers, Japan OptiMark Systems ("JOS") and letters of intent from the
remaining six customers. JOS is a joint venture between OptiMark and several
investors domiciled in Japan and is the only customer of this segment that has
generated any revenue to date. The Company is developing an equity trading
system, the Osaka Securities application, for JOS that will be used as a
facility of the Osaka Securities Exchange.
In the US Equities Business, OptiMark had created, developed and implemented its
matching engine technology into an equities trading system to be used by buyers
and sellers of US equity securities. The OptiMark equities trading system
utilized a computer implemented matching algorithm designed to allow traders to
preserve their anonymity, maintain the confidentiality of their positions and
trading strategies and also permit them to avoid the market impact that might
otherwise result from the disclosure of such information. Unlike the Exchange
Solutions Business, where the Company licenses its technology to third parties,
in the US Equities Business OptiMark had chosen to maintain full ownership and
management of the system. The US Equities Business was operated through two
wholly owned subsidiaries, OptiMark Services, Inc. and OptiMark OTC
<PAGE> 9
Services, Inc., which matched buyers and sellers on the Pacific Exchange and
the Nasdaq, respectively.
DISCONTINUATION OF THE US EQUITIES BUSINESS - On September 19, 2000 the Company
announced the discontinuation of its US Equities Business, in view of the lack
of success in generating revenues from this segment and in order to materially
reduce the expenses associated with maintaining it. As of that date all criteria
for the measurement date per APB 30, "Reporting the Results of Operations --
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions", had been met.
CONTINUATION AS A GOING CONCERN - The Company's December 31, 1999 audited
financial statements disclosed that while those financial statements had been
prepared assuming that the Company will continue to operate as a going concern,
there is substantial doubt as to its ability to do so. To date, the Company has
generated insufficient revenue to meet its operating expenses and has met its
cash needs primarily through equity financing and equipment leasing.
At September 30, 2000, the Company had approximately $8,400,000 of cash and cash
equivalents. At the current rate of operating expenditures and existing levels
of committed development contracts with customers, the Company believes that it
will have sufficient cash flows to allow it to continue operations at least
through April 1, 2001. In order to be able to continue operations beyond that
point, the Company is pursuing the following three initiatives:
Pursue Business strategy. The Company continues to actively pursue new
applications of its technology through developing customers and strategic
alliances in electronic business-to-business and electronic exchange markets.
The Company is making progress in completing the initial stages of product
definitions for previously announced alliances and believes that it will begin
to generate new revenues from these ventures beginning in the fourth quarter of
2000. In addition, the Company expects that the Osaka application will be
operational before the end of the fourth quarter 2000.
Additional capital. The Company has commenced discussions with several
prospective investors, including existing stockholders, with a view towards
raising additional equity capital. The Company believes that it will obtain
additional capital prior to the end of the fourth quarter sufficient to fund its
operations into the second quarter of 2002.
Reduce Operating Expenses. The Company continues to aggressively seek cost
reduction
<PAGE> 10
initiatives that will minimize expenses related to personnel, premises, travel
and entertainment and other general operating expenses.
2. PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS
PRESENTATION - The accompanying unaudited, condensed, consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. In the opinion of management, all normal recurring adjustments
have been made so as to state fairly the results for the interim periods.
Companies in which OptiMark has an equity investment of 50% or less and has the
ability to exercise significant influence are accounted for using the equity
method. All significant intercompany transactions and balances have been
eliminated. Certain footnote disclosures normally included in financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to SEC rules and
regulations. The nature of the Company's business is such that the results of an
interim period are not necessarily indicative of the results for a full year.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's audited
financial statements as of December 31, 1999 included in the Company's Report on
Form 10/A-3, as filed with the SEC.
USE OF ESTIMATES - The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results may differ from those
estimates.
INTANGIBLE ASSETS - In March of 1999, OptiMark acquired a software license that
allows it to exploit its technology in various non-securities industries, to be
used in Exchange Solutions Business. The cost basis of the license at the time
of acquisition was determined to be $28,000,000 and its useful life was
established at fifteen years. Based on recent developments in the
business-to-business industry, as well as the success by competing firms in
obtaining new electronic exchange business and the rapid development of their
competing technologies, the Company has reevaluated the useful life of this
license. Effective October 1, 2000, the Company prospectively changed its
amortization period to a remaining life of five years, to better reflect the
period over which the economic benefit of the license is expected to be
realized. In addition, the Company will continually evaluate the use of this
license relative to competing technologies and the need to upgrade and customize
its own technology and may, if necessary and appropriate, further revise the
useful life of the license. This change in estimated remaining useful life has
had no impact on the current period financial statements. The future impact will
be to increase the quarterly amortization of this asset from $466,667 to
$1,260,000. The carrying value of the asset as of September 30, 2000 is
approximately $25,200,000.
<PAGE> 11
RECENT ACCOUNTING PRONOUNCEMENTS - The Financial Accounting Standards Board has
issued Interpretation 44, Accounting for Certain Transactions Involving Stock
Compensation, which was effective as of July 1, 2000. Interpretation 44 has had
no material effect on the third quarter consolidated financial statements of
the Company (See Note 8).
RECLASSIFICATIONS - Certain prior period amounts have been reclassified to
conform to the 2000 presentation.
3. BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share information for all periods is presented
under the requirements of FASB Statement 128, "Earnings per Share". Basic loss
per share has been computed using the weighted-average number of shares of
common stock outstanding during the period and excludes any dilutive effects of
options, warrants, convertible securities and potentially dilutive issuances,
since, due to the Company's net loss for the periods presented, their inclusion
would be anti-dilutive.
4. ACCRUED RESTRUCTURING
The Company recorded approximately $2,024,000 of restructuring charges in the
first quarter of 2000 associated with a workforce reduction of seven employees.
Included in this amount is approximately $1,835,000 representing the charge
associated with the revaluation of options that had been granted to these
employees. The remaining balance of approximately $189,000 includes notice
period salaries of approximately $121,000, severance of approximately $41,000
and vacation pay earned during the notice period and other employee related
costs of approximately $27,000.
<PAGE> 12
The Company recorded approximately $80,000 of restructuring charges in the
second quarter of 2000 associated with a workforce reduction of one employee.
Included in this amount is approximately $56,000 representing the charge
associated with the revaluation of options that had been granted to this
employee. The remaining balance of approximately $24,000 includes notice period
salary of approximately $17,000, severance of approximately $4,000 and vacation
pay earned during the notice period and other employee related costs of
approximately $3,000.
As of December 31, 1999, the Company had an accrued liability of $1,360,761
representing unpaid amounts related to approximately $1,882,000 in restructuring
charges taken in the fourth quarter of 1999. As of September 30, 2000, all
payments associated with the employee layoffs from the fourth quarter of 1999
and the first and second quarters of 2000 have been made. Of the aggregate
restructuring accrual of approximately $2,095,000 for the prior three quarters,
the actual costs incurred were approximately $2,098,000. This under accrual of
approximately $3,000 was included in restructuring expense in the second quarter
of 2000. As of September 30, 2000, the restructuring accrual represents the
outstanding liability payable to employees and creditors, net of payments
already made through September 30, 2000, resulting from the restructuring
announced in the third quarter 2000.
We recorded a restructuring charge in the third quarter of 2000 for $50,634
related to the impact on our continuing operations as a result of the
discontinuation of our US Equities Business. The charge includes approximately
$50,000 related to a workforce reduction of 4 employees. This amount includes
notice period salary of approximately $37,000, severance of approximately
$8,000, vacation pay earned during the notice period of approximately $2,000 and
other employee related costs of approximately $3,000.
5. DISCONTINUED OPERATIONS
On September 19, 2000, the Company announced its intention to discontinue its US
Equities Business. As of that date all criteria for the measurement date per APB
30 had been met. As of September 30, 2000 there was approximately $6,455,116 in
net liabilities attributable to the business, representing approximately $32,000
in Accounts Receivable and approximately $6,488,000 in Accounts Payable and
other Accrued Expenses which includes $3,500,000 relating to contract
renegotiations (see below). The net loss from operations related to this segment
for the three months and nine months ended September 30, 2000 was $27,623,851
and $64,649,644, respectively. Net losses and any proceeds from the disposal of
assets related to this segment for the period from the date of the announced
discontinuation until the end of the third quarter 2000 were immaterial.
The Company recorded a charge of $12,510,979 in the third quarter
of 2000 associated with the discontinuation of the US Equities Business. This
amount is comprised of approximately $2,209,000, representing a workforce
reduction of 99 employees and approximately $10,302,000, representing the
impairment of various assets and liabilities, primarily including computer
equipment, software licenses, equipment warranties, capitalized software and
premise related items. The amount related to the workforce reduction includes
notice period salaries of approximately $1,540,000; severance of approximately
$466,000; vacation pay earned during the notice period of approximately $89,000
and other employee related
<PAGE> 13
costs of approximately $103,000. Due to the recent revaluation of the fair
market value of the Company's common stock, by the Board of Directors, in
connection with the anticipated repricing of the exercise price of stock options
for continuing employees, there was no financial impact related to the stock
options for those terminated employees (see Note 8).
Included in the foregoing charge for net asset impairment, the Company has
provided a $3,500,000 reserve related to contract renegotiations and
terminations in connection with certain capital and operating leases and certain
service and maintenance agreements, including telecommunications network
services and computer software and hardware services which were entered into by
a subsidiary, US Equities, Inc., in connection with the creation, maintenance
and operation of facilities for trading equity securities. This amount is
significantly less than the estimated termination charges of approximately
$22,000,000 provided in the relevant agreements. The Company is currently in
discussions with these lessors and service providers with a view to
restructuring payments and performance obligations under the relevant
agreements. The Company believes that there are several mitigating factors that
would enable it to substantially reduce the contractual termination charges for
its outstanding obligation to these creditors, such as the following: (a)
certain termination charges are the subject of bona fide disputes which are
expected to be resolved in our favor as a result of negotiation or arbitration;
(b) certain service charges include payments made by the service provider to
third parties for services and equipment needed to provide the primary service;
(c) we may purchase certain equipment outright which is the subject of capital
or operating leases thereby substantially mitigating contractual termination
charges; (d) we may be able to identify potential third party purchasers or
lessees of certain equipment, having an estimated salvage value of approximately
$1,800,000, which is the subject of capital or operating leases thereby
substantially mitigating contractual termination charges; (e) the capital and
operating lessors may have one or more potential purchasers of, sub-lessees of,
or alternate uses for the equipment which is the subject of capital or operating
leases, having an estimated salvage value of approximately $3,500,000, thereby
substantially mitigating contractual termination charges and; (f) we may be able
to reach settlements and accords with lessors and service providers based on
some combination of partial payments, extended payments, reduced payments or
exchanges of equity in lieu of payments. In addition, the Company has forfeited
approximately $1,142,000 of security deposits held by certain creditors. The
restructuring charge provided represents management's best estimate of the
Company's potentially restructured obligations with the lessors and service
providers based on currently available information.
The results from operations from the discontinued segment for the three months
and nine months ended September 30, 2000 and 1999 are as follows:
<PAGE> 14
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Revenue $ (26,686) $ 428,922
Operating expenses (excluding
depreciation and amortization) 11,650,119 17,555,752
Depreciation and amortization 3,244,598 2,049,819
Total expenses 14,894,717 19,605,571
Net non-operating (income) / expense 191,468 301,574
Loss on disposal of segment 12,510,979 --
Net (Loss) (27,623,850) (19,478,223)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Revenue $ 294,754 $ 1,060,394
Operating expenses (excluding
depreciation and amortization) 42,040,070 48,790,535
Depreciation and amortization 9,711,221 4,452,982
Total expenses 51,751,301 53,243,517
Net non-operating (income) / expense 682,118 724,087
Loss on disposal of segment 12,510,979 --
Net (Loss) (64,649,644) (52,907,210)
</TABLE>
6. SEGMENTS
Prior to September 19, 2000, the Company operated in two industry segments, the
Exchange Solutions Business and the US Equities Business. Following the
announcement by the Company on September 19, 2000 to discontinue its US Equities
Business, OptiMark now operates in only one industry segment, the Exchange
Solutions Business. At September 30, 1999, the Company operated in both industry
segments. Assets of the two segment groups are neither relevant internally for
management of the Business nor for financial statement disclosure.
7. INCOME TAXES
The Company has not generated any taxable income since its inception and,
therefore, has not paid any federal income taxes to date. The resulting net
operating loss carry forwards, that will begin to expire in 2004, may be subject
to certain limitations under
<PAGE> 15
Section 382 of the Internal Revenue Code of 1986, as amended. Due to
uncertainties surrounding the Company's ability to utilize the net operating
loss carry forwards to defer or otherwise offset future taxes, it has provided a
valuation allowance in an amount necessary to reduce its deferred tax asset to
zero.
8. STOCKHOLDERS' EQUITY
In January 2000, the Company retired 250,000 shares of Series A Participating
Preferred Stock that were held in treasury. Such shares were returned to
authorized, but unissued, preferred stock.
In March 2000, in connection with a workforce reduction of seven employees,
approximately $1,835,000 was added to additional paid-in capital, representing
the charge associated with the revaluation of the stock options granted to those
employees.
In April 2000, in connection with a workforce reduction of one employee,
approximately $56,000 was added to additional paid-in capital, representing the
charge associated with the revaluation of the stock options granted to that
employee.
On September 19, 2000, the Company's board of directors authorized but have not
yet executed a repricing, to $0.50 per share, of the exercise price of all
outstanding stock options that had been granted to those employees who remained
with the company after the restructuring. The original options were granted at
varying amounts, ranging from $1.83 to $14, per share, over several grant dates.
All outstanding stock options that had been granted to employees who either left
the company prior to September 19, 2000 or whose employment was terminated by
the Company as a result of the discontinue of the US Equities Business were not
repriced and remain at the original exercise price set at the time of grant. The
new exercise price of $0.50 per share was based on a determination of the fair
market value of the Company's common stock by its board of directors. This
repricing is expected to take effect during the fourth quarter of 2000 and,
therefore, has no impact on the period ended September 30, 2000. The repriced
options will be subject to variable accounting.
9. STOCK OPTIONS
<TABLE>
<S> <C>
Options outstanding at January 1, 2000 6,946,060
Options granted during nine months ended September 30, 2000 9,110,600
Options exercised during nine months ended September 30, 2000 (116,000)
Options canceled during nine months ended September 30, 2000 (4,977,274)
----------
Options outstanding at September 30, 2000 10,963,386
----------
All options were issued at fair market value at the date of grant.
</TABLE>
<PAGE> 16
10. SUBSEQUENT EVENTS
In October 2000, the Company entered into definitive agreements to provide
development services for three customers with which it previously had only
signed letters of intent, as referred to in Note 1 referenced above. The Company
has now also begun to recognize revenue and receive payments for the same from
one of these three customers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
History of Losses
We have experienced losses each quarter since our inception. Although
we have restructured our business, losses are likely to continue for the
foreseeable future. As of September 30, 2000, our accumulated deficit was
approximately $294,897,000.
Limited Operating History and Changing Business Model
We have had a limited history of operating results that makes it
difficult to forecast future operating results. Prior to the third quarter of
1999, our main business focus was the US Equities Business. We have spent most
of our capital to create, develop and implement the OptiMark equities trading
system for use on the Pacific Exchange and Nasdaq. During late 1999, we began to
expand our focus into other markets besides US Equities through our Exchange
Solutions Business. As of September 19, 2000, we have decided to discontinue the
US Equities Business and focus entirely on our Exchange Solutions Business.
As of September 30, 2000, we have entered into seven agreements to
provide services through our Exchange Solutions Business segment of which only
one, Japan OptiMark Systems, has generated any revenue through the end of the
third quarter. We anticipate that we will begin to recognize revenue from the
other remaining ventures, partly in the fourth quarter of 2000 and partly in the
first quarter of 2001. In October 2000, we entered into broader definitive
agreements with three of our existing customers to provide consulting, licensing
and development services, consistent with the new business model, and have since
recorded revenues from one of those relationships under the Exchange Solutions
Business segment.
Through our Exchange Solutions Business, we intend to provide advanced
electronic commerce tools and design and implementation expertise for building
electronic markets and exchanges. We intend to enable enterprises to build
either stand-alone electronic marketplaces and internal enterprise-based markets
or electronic exchanges. We intend to license our technology to them and charge
royalties for the use of our license. We also expect to generate revenues from
consulting and development services, maintenance fees and other value added
services. However, we have limited
<PAGE> 17
experience with this business model and there is a risk that we will not be
successful.
Results of Operations
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999.
Revenue. We began to recognize revenue from our Exchange Solutions
Business in July 1999. All of the $3,836,244 and $175,234 in revenues earned in
the third quarter of 2000 and 1999, respectively, were derived from development
services provided to JOS.
Operating Expense. Operating expense for the quarter ended September
30, 2000 totaled $4,951,705 as compared to $4,499,396 for the quarter ended
September 30, 1999. The following is an explanation of the increase as it
relates to each of the components in total operating expense:
Cost of Revenue Expense. Our cost of revenue expense for the third
quarter of 2000 of $2,419,964 as compared to $303,908 for the third quarter of
1999. The increase of $2,116,056 is primarily due to the increase in
development services associated with the Osaka application and other new
customers. The increase consists primarily of personnel related expenses and
other general operating expenses.
Communications and Data Center Expense. We incurred communications and
data center expense for the third quarter of 2000 of $273,516 as compared to
$13,832 for the third quarter of 1999. The increase of $259,684 is primarily due
to the increase in operations and support costs associated with the Osaka
application. The increase consists primarily of personnel related expenses and
other general operating expenses.
Business Development. We incurred business development expense for the
third quarter of 2000 of $565,182 as compared to $328,790 for the third quarter
of 1999. The increase of $236,392 is primarily due to the increase in the costs
associated with the additional focus on developing existing relationships and on
exploring potential applications of our technology. The increase consists
primarily of personnel related expenses, travel and entertainment expense and
other general operating expenses.
General and Administrative Expense. We incurred general and
administrative expense for the third quarter of 2000 of $1,122,126 as compared
to $3,279,323 for the third quarter in 1999. The decrease of $2,157,197 is
primarily due to a reduction in the Company's bonus accrual and decreases in
external professional fees, corporate travel and entertainment expense and other
general office expenses.
Depreciation and Amortization Expense. We incurred depreciation and
amortization expense in the third quarter of 2000 of $519,710 as compared to
$566,272 for the third quarter in 1999. The decrease of $46,562 is primarily due
to certain fixed
<PAGE> 18
assets having been fully depreciated.
Restructuring Expense. We recorded a restructuring charge in the third
quarter of 2000 for $50,634 related to the impact on our continuing operations
as a result of the discontinuation of our US Equities Business. The charge
includes approximately $50,000 related to a workforce reduction of four
employees. This amount includes notice period salary of approximately $37,000,
severance of approximately $8,000, vacation pay earned during the notice period
of approximately $2,000 and other employee related costs of approximately
$3,000.
Other Income and Expense. Other income and expense includes interest
income on cash and cash equivalents, interest expense on capital leases, equity
loss in investee and gain on recovery of bad debt. Other income, net, was
$214,134 for the third quarter of 2000 as compared to $1,650,297 for the third
quarter of 1999. The decrease of $1,436,163 is due primarily to a reduction in
interest bearing deposits over the course of the prior twelve months and the
absence of an approximately $610,000 gain recognized in 1999 associated with the
partial recovery of a bad debt that had previously been written off.
Discontinued Operations. Discontinued Operations represents the net of
all revenues and expenses associated with the US Equities Business. We have
shown the loss from operations related to this industry segment separate from
the loss on disposal of the segment as a result of discontinuing such
operations. The loss from operations for the third quarter of 2000 was
$15,112,872 as compared to $19,478,223 for the third quarter of 1999. The
decrease of $4,365,351 is primarily due to a decrease in staff as a result of
previous restructurings as well as a shift in resources towards the Osaka
application and other new projects. In addition, there was a decrease in revenue
of approximately $449,000 from the third quarter of 1999.
The loss on disposal of segment for the third quarter of 2000 was
$12,510,979. This amount is comprised of approximately $2,209,000 representing a
workforce reduction of 99 employees and approximately $10,302,000 of charges
associated with the impairment of net assets directly related to the US Equities
Business. The amount related to the workforce reduction includes notice period
salary of approximately $1,540,000, severance of approximately $466,000,
vacation pay earned during the notice period of approximately $89,000 and other
employee related costs of approximately $103,000. The amount related to the net
asset impairment includes write offs of capitalized software costs and various
other intangible assets of approximately $8,461,000, security deposits held by
creditors of approximately $1,142,000, a write down in the value of fixed assets
of approximately $7,368,000 and miscellaneous expenses related to office
closings of approximately $320,000, offset by a net reduction in lease
obligations and other accrued expenses of approximately $6,989,000. The lease
obligations included both on balance sheet and off balance sheet commitments.
Included in the foregoing, we have provided $3,500,000 as a reserve related to
contract renegotiations and terminations in connection with certain capital and
operating leases and service agreements.
<PAGE> 19
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999.
Revenue. All of the $9,620,266 and $175,234 earned as revenue in the
nine months ended September 30, 2000 and September 30, 1999, respectively, were
derived from development services provided to JOS.
Operating Expense. Operating expense for the nine months ended
September 30, 2000 totaled $18,915,381 as compared to $18,169,294 for the nine
months ended September 30, 1999. The following is an explanation of the increase
as it relates to each of the components in total operating expense:
Cost of Revenue Expense. Our cost of revenue expense of $7,384,797 for
the nine months ended September 30, 2000 as compared to $809,969 for the nine
months ended September 30, 1999. The increase of $6,574,828 is primarily due to
the increase in development services provided to Osaka application and
other new business ventures.
Communications and Data Center Expense. We incurred communications and
data center expense for the nine months ended September 30, 2000 of $1,031,649
as compared to $16,829 for the nine months ended September 30, 1999. The
increase of $1,014,820 is primarily due to the increase in operations and
support costs associated with the Osaka application. The increase primarily
consists of increases in personnel related expenses and other general operating
expenses.
Business Development. We incurred business development expense for the
nine months ended September 30, 2000 of $1,449,684 as compared to $612,944 for
the nine months ended September 30, 1999. The increase of $836,740 is primarily
due to the costs associated with the additional focus on developing existing
relationships and on bringing in new Business related to the Exchange Solutions
Business segment. The increase primarily consists of increases in personnel
related expenses, travel and entertainment expense and other general operating
expenses.
General and Administrative Expense. We incurred general and
administrative expense for the nine months ended September 30, 2000 of
$5,305,871 as compared to $8,757,999 for the nine months ended September 30,
1999. The decrease of $3,452,128 is primarily due to a decrease in external
professional fees of approximately $1,844,000, a decrease in travel and
entertainment expenses of approximately $278,000 and a decrease of approximately
$1,330,000 in other general office expenses.
Depreciation and Amortization Expense. We incurred depreciation and
amortization expense for the nine months ended September 30, 2000 of $1,570,785
as compared to $1,162,002 for the nine months ended September 30, 1999. The
increase of $408,783 is primarily due to a software license, acquired in March
of 1999, being amortized over a full nine months in 2000 as compared to only two
quarters in 1999.
<PAGE> 20
Restructuring Expense. We recorded a restructuring charge during the
nine months of 2000 of $2,158,053 associated with workforce reductions of twelve
employees over the first two quarters of 2000. Included in this amount is
approximately $1,890,000 representing a charge associated with the revaluation
of stock options that had been granted to these employees, the remaining balance
of approximately $268,000 includes notice period salaries of approximately
$175,000, severance of approximately $53,000, vacation pay earned during the
notice period and other employee related costs of approximately $33,000 and
approximately $3,000 from an under accrual of prior quarters' restructuring
charges.
Warrant Compensation Expense. We incurred a non-cash warrant
compensation expense for the nine months ended September 30, 2000 of $14,542 as
compared to $6,809,551 for the nine months ended September 30, 1999. The
decrease of $6,795,009 is attributable to certain warrants' being charged to
expense in accordance with the Emerging Issues Task Force 96-18, "Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with, Selling Goods or Services". In May 1999, we issued series B
convertible participating preferred stock warrants to five investors in order
for them to acquire 1,666,667 shares of our common stock at $10 per share. In
connection with this issuance, we recorded a non-cash expense in May 1999 of
approximately $6,786,000, the value obtained by using the Black-Scholes model.
All of these warrants expired unexercised in June 1999.
Other Income and Expense. Other income and expense includes interest
income on cash and cash equivalents, interest expense on capital leases, equity
loss in investee and gain on recovery of bad debt. Other income, net, was
$1,411,686 for the nine months ended September 30, 2000 as compared to
$2,816,165 for the nine months ended September 30, 1999. The decrease of
$1,404,479 is primarily due to a reduction in interest bearing deposits over the
course of the prior twelve months, the absence of a $700,000 gain recognized in
1999 associated with the partial recovery of a bad debt that had previously
written off, offset by an equity participation in a loss from an investee of
approximately $69,000 in 1999.
Discontinued Operations. Discontinued Operations represents the net of
all revenues and expenses associated with the US Equities Business. We have
shown the loss from operations related to this segment separate from the loss on
disposal of the segment. The loss from operations for the nine months ended
September 30, 2000 was $52,138,665 as compared to $52,907,210 for the nine
months ended September 30, 1999. The decrease of $768,545 is primarily due to a
reduction in staff through previous restructurings and a shift in the allocation
of our resources to the Exchange Solutions Business, offset by a decrease in
revenue of approximately $766,000.
The restructuring expense for Discontinued Operations in the third
quarter of 2000 was $12,510,979. This amount is comprised of approximately
$2,209,000 representing a workforce reduction of 99 employees and approximately
$10,302,000 of charges associated with the impairment of net assets directly
related to the US Equities Business. The amount related to the workforce
reduction includes notice period salaries
<PAGE> 21
of approximately $1,540,000, severance of approximately $466,000, vacation pay
earned during the notice period of approximately $89,000 and other employee
related costs of approximately $103,000. The amount related to impairments
includes write offs of capitalized software costs and various other intangible
assets of approximately $8,461,000, security deposits held by creditors of
approximately $1,142,000, disposals of fixed assets of approximately $7,368,000
and miscellaneous expenses related to office closings of approximately $320,000,
offset by a net reduction in lease obligations and other accrued expenses of
approximately $6,989,000. The lease obligations included both on balance sheet
and off balance sheet commitments.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, our principal sources of liquidity consisted
of $8,409,182 of cash and cash equivalents as compared to $62,637,410 of cash
and cash equivalents as of December 31, 1999.
Net cash used in operating activities was $50,450,362 and $60,182,371
for the nine months ended September 30, 2000 and 1999, respectively. Net
operating cash flows were primarily attributable to net losses partially offset
by non-cash charges such as depreciation and amortization in both periods, the
value assigned to options in connection with restructurings in the current
period and the value assigned to warrants issued as compensation in the prior
period. The fluctuation between periods was affected by net changes in working
capital. The current period includes an increase in Accounts Receivable,
representing the revenues earned but not yet collected from JOS and the
restructuring accrual, which was expensed in the current period but not yet
paid.
Net cash used in investing activities was $892,970 and $21,888,767 for
the nine months ended September 30, 2000 and 1999, respectively. The uses of
cash in the current period consisted of purchases of fixed assets and software
licenses predominately for the Pacific Exchange and Nasdaq. The uses in the
prior period resulted primarily from the acquisition of capital assets to build
the Nasdaq data center and payments for personnel related expenses that had been
included in the capitalization of software development costs, related to the
Pacific Exchange and Nasdaq applications, in accordance with SOP 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use".
Net cash used in financing activities for the nine months ended
September 30, 2000 was $2,884,896 and net cash provided by financing activities
for the nine months ended September 30, 1999 was $105,551,721. The use of cash
in 2000 was primarily for payments on capital leases offset by proceeds from the
issuance of common stock. The net cash provided in 1999 was primarily due to the
proceeds from the issuance of preferred stock, the exercise of warrants and
options on common stock and a term loan used for equipment financing, offset by
payments on capital leases.
The results indicated in our Consolidated Statement of Operations for
the period ended September 30, 2000 are not necessarily indicative of the
expense run rates for the
<PAGE> 22
ongoing operations related to our Exchange Solutions Business. The results from
operations in future periods may differ materially as we continue to shift our
resources from the US Equities Business to the Exchange Solutions Business. In
particular, our current operating expenses may increase as additional employees
are hired and as a result of normal compensation increases.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our only exposure to market risk is related to changes in interest
rates and foreign currency exchange rates. We do not consider these risks to be
material as of September 30, 2000. This discussion contains forward-looking
statements that are subject to risks and uncertainties. Actual results could
vary materially as a result of a number of factors including those mentioned in
the risk factors included in our Report on Form 10/A-3, as filed with the SEC.
Interest Rate Risk. As of September 30, 2000, we had cash and cash
equivalents of $8,409,182 that consisted of cash and highly liquid short-term
investments. These investments may be subject to interest rate risk and would
decrease in value if interest rates increased in the marketplace. A hypothetical
increase or decrease of 10 percent in market interest rates at September 30,
2000 would have caused the fair value of these short-term investments to change
by an immaterial amount. Declines in interest rates over time would, however,
reduce our interest income.
Foreign Currency Exchange Rate Risk. All of our revenues recognized to
date have been denominated in U.S. dollars. Although revenues from international
customers to date have been U.S. dollar denominated, we cannot be certain that
future international customers or future business ventures will result
exclusively in U.S. dollar denominated revenues, royalties or dividends. As a
result, our operating results could become subject to significant fluctuations
based upon changes in the exchange rates of certain currencies in relation to
the U.S. dollar. We have operations in Canada where the functional currency is
the Canadian dollar. A hypothetical increase or decrease of 10 percent in the
Canadian dollar against the US dollar at September 30, 2000 would have caused
the US dollar equivalent of our Canadian operations to change by an immaterial
amount.
Equity Price Risk. As of September 30, 2000, we are not subject to
equity price risk.
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits.
27.1 Financial Data Schedule
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OPTIMARK HOLDINGS, INC.
Dated: November 14, 2000 By:/s/ David C. Johnson, Jr.
------------------------------------
Name: David C. Johnson, Jr.
Title: Co-Chief Executive Officer
By:/s/ Robert J. Warshaw
------------------------------------
Name: Robert J. Warshaw
Title: Co-Chief Executive Officer
<PAGE> 25
EXHIBIT INDEX
No.
27.1 Financial Data Schedule
