SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): DECEMBER 29, 2000
TradeStation Group, Inc.
------------------------
(Exact name of registrant as specified in its charter)
Florida
-------
(State or other jurisdiction of incorporation or organization)
0-31049 65-0977576
------- ----------
(Commission File Number) (I.R.S. Employer Identification No.)
8700 West Flagler Street, Miami, Florida 33174
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 485-7000
------------------------------
(Registrant's telephone number, including area code)
OnlineTrading.com Group, Inc.
------------------------------
(Former name or former address, if changed since last report)
Page 1 of 25
<PAGE>
This Current Report on Form 8-K of TradeStation Group, Inc., a Florida
corporation (the "Registrant" or "TradeStation Group") amends and supercedes
that certain Current Report on Form 8-K of Omega Research, Inc., a Florida
corporation ("Omega Research"), dated January 19, 2000 and originally filed with
the Securities and Exchange Commission on January 28, 2000 and amended on April
28, 2000, as a result of the mergers described in Item 2 of this report causing
the Registrant's securities to be registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended, and the Registrant to become the
publicly traded and reporting company in place of Omega Research.
Item 2. Acquisition or Disposition of Assets
Mergers
On December 29, 2000 (the "Effective Time"), Omega Research and
onlinetradinginc.com corp., a Florida corporation ("OnlineTrading.com"),
completed the mergers pursuant to that certain Agreement and Plan of Merger and
Reorganization (as amended the "Merger Agreement") dated January 19, 2000
pursuant to which Omega Research and OnlineTrading.com were merged and combined
in a stock-for-stock transaction as described hereinafter. The parties to the
Merger Agreement were Omega Research, OnlineTrading.com, TradeStation Group, a
Florida corporation formed by Omega Research that became the holding company for
Omega Research and OnlineTrading.com upon completion of the mergers, Omega
Acquisition Corporation, a recently-formed Florida corporation that is owned by
TradeStation Group ("Omega Merger Sub"), and Onlinetrading Acquisition
Corporation, a recently-formed Florida corporation that is owned by TradeStation
Group ("Online Merger Sub"). Omega Merger Sub was merged into Omega Research
which was renamed TradeStation Technologies, Inc. ("Technologies"), Online
Merger Sub was merged into OnlineTrading.com, which was renamed TradeStation
Securities, Inc. ("Securities"), and Technologies and Securities became
wholly-owned subsidiaries of TradeStation Group. The mergers were approved
immediately prior to the Effective Time by the shareholders of each of Omega
Research and OnlineTrading.com at a special meeting of shareholders of each
company.
As a result of the conversion at the Effective Time of all of the
outstanding shares of common stock of each of Omega Research and
OnlineTrading.com into shares of common stock of TradeStation Group and the
listing on The Nasdaq National Market of the common stock of TradeStation Group
under the symbol "TRAD" as of the opening of trading on January 2, 2001,
TradeStation Group is the sole publicly-traded company in the group. Omega
Research shareholders received one share of TradeStation Group common stock for
each share of Omega Research common stock (a 1 to 1 ratio) and OnlineTrading.com
shareholders received 1.7172 shares of TradeStation Group common stock for each
share of OnlineTrading.com (a 1.7172 to 1 ratio). Cash will be paid in lieu of
fractional shares of TradeStation Group. As of the Effective Time, TradeStation
Group was owned approximately 57% (on a fully diluted basis) by former Omega
Research's shareholders and approximately 43% (on a fully diluted basis) by
OnlineTrading.com's former shareholders. Immediately after the Effective Time
and after giving effect to the mergers, there were outstanding an aggregate
amount of approximately 44,333,120 shares of common stock of TradeStation Group.
The mergers are intended to qualify as a tax-free reorganization for United
States federal income tax purposes and TradeStation Group intends to account for
the mergers as a pooling-of-interests.
Omega Research and OnlineTrading.com Stock Options, Warrants and Stock Plans
At the Effective Time, TradeStation Group assumed the following:
(i) the Omega Research 1997 Employee Stock Purchase Plan, the 1997
Nonemployee Director Stock Option Plan, as amended, and the Amended
and Restated 1996 Incentive Stock Plan, as amended (the reserved
shares under which were increased with the approval of Omega
Research's shareholders from 4,500,000 to 7,500,000 shares at the
special meeting of shareholders held on December 29, 2000 to approve
the mergers) (collectively, the "Omega Incentive Stock Plans");
(ii) all options to purchase Omega Research common stock outstanding
under any of the Omega Incentive Stock Plans and/or assumed by Omega
Research in connection with Omega Research's acquisition of Window
On WallStreet Inc.("Window On WallStreet") and originally granted
under Window On WallStreet's 1997 Long Term Incentive Plan or
otherwise granted to employees of Window OnWallStreet prior to the
adoption of such plan;
(iii) the OnlineTrading.com 1999 Stock Option Plan;
(iv) all options to purchase OnlineTrading.com common stock then
outstanding under the OnlineTrading.com 1999 Stock Option Plan; and
2
<PAGE>
(v) warrants to purchase up to 225,000 shares of OnlineTrading.com common
stock at an exercise price of $11.55 issued to the underwriters of
OnlineTrading.com's initial public offering.
Each Omega Research stock option, OnlineTrading.com stock option and
OnlineTrading.com warrant described above was assumed by TradeStation Group
under the same terms and conditions that were applicable to the option or
warrant immediately prior to the Effective Time, except that (i) each Omega
Research stock option will be exercisable for the same number of shares of
TradeStation Group at the same exercise price; (ii) each OnlineTrading.com stock
option and OnlineTrading.com warrant will be exercisable for shares of
TradeStation Group common stock and the number of shares of TradeStation Group
common stock issuable upon exercises of any given option or warrant will be
determined by multiplying the 1.7172 exchange ratio for a share of
OnlineTrading.com common stock in the merger by the number of shares of
OnlineTrading.com common stock underlying the option or warrant, rounded down to
the nearest whole number; and (iii) the per share exercise price of any given
OnlineTrading.com stock option and OnlineTrading.com warrant will be determined
by dividing the exercise price of the option or warrant immediately prior to the
Effective Time by the 1.7172 exchange ratio for a share of OnlineTrading.com
stock in the merger rounded up to the nearest whole cent. Immediately after the
Effective Time and after giving effect to the mergers, there were outstanding
(i) options to purchase in the aggregate approximately 4,998,900 shares of
commons stock of TradeStation Group and (ii) warrants to purchase in the
aggregate approximately 386,370 shares of common stock of TradeStation Group.
TradeStation Group has agreed to file a registration statement on Form S-8
for the shares of TradeStation Group common stock issuable with respect to the
assumed OnlineTrading.com and Omega Research stock options within twenty (20)
business days after the Effective Time.
Directors After the Mergers
As of the Effective Time, the board of directors of TradeStation Group is
comprised of eight directors. The directors of TradeStation Group from and after
the Effective Time were initially designated as follows: Omega Research
designated five directors, including two Co-Chairman of the Board and two who
are required to be independent directors, and OnlineTrading.com designated three
directors, one of whom is required to be an independent director. Accordingly,
as of the Effective Time, the board of directors of TradeStation Group was
comprised of William R. Cruz, Ralph L. Cruz and Salomon Sredni, executive
officers of Omega Research, and Brian D. Smith and Stephen C. Richards,
independent directors of Omega Research, E. Steven zum Tobel and Farshid
Tafazzoli, executive officers of OnlineTrading.com, and Lothar Mayer, who was an
independent director of OnlineTrading.com until October 4, 2000.
Voting Trust Agreements
In connection with entering into the Merger Agreement, certain shareholders
of Omega Research and OnlineTrading.com entered into a voting trust agreement to
be effective at the Effective Time pursuant to which shares of common stock of
TradeStation Group owned by them after the Effective Time are subject to the
terms of such voting trust. The relevant shareholders of Omega Research who
entered into the voting trust agreement are affiliates of William R. Cruz and
Ralph L. Cruz (Co-Chairman of the Board and Co-Chief Executive Officers of
TradeStation Group) who held an aggregate of 18,313,208 shares of TradeStation
Group immediately after the Effective Time, representing approximately 41.3% of
the outstanding shares. The shareholders of OnlineTrading.com who entered into
the voting trust agreement are Andrew A. Allen (the former Chairman of the Board
and Chief Executive Officer of OnlineTrading.com) and his affiliates, affiliates
of E. Steven zum Tobel and Farshid Tafazzoli (Vice President of Brokerage
Operations and Vice President of Brokerage Technology, respectively, of
TradeStation Group), Derek J. Hernquist (the former Vice President of Operations
and Secretary and a former director of OnlineTrading.com) and a former director
of OnlineTrading.com who held an aggregate of approximately 15,263,998 shares of
TradeStation Group common stock immediately after the Effective Time,
representing approximately 34.4% of the outstanding shares. The parties to the
voting trust agreement have agreed that during the term of the voting trust
agreement and the continuance of the voting trust created under that agreement
the voting trustee, Marc J. Stone, will be entitled to exercise with respect to
TradeStation Group shares subject to the voting trust all rights of voting and
abstaining from voting or otherwise to participate in shareholder actions,
including executing written consents, in all matters relating to TradeStation
Group as provided in the voting trust agreement.
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From and after the Effective Time, the Omega Research shareholders who are
a party to the voting trust agreement have the right to direct the voting
trustee to vote all of the shares subject to the voting trust in a manner such
that five of the total of eight directors constituting the board of directors of
TradeStation Group, two of which are required to be independent directors, are
designated by those Omega Research shareholders. The former OnlineTrading.com
shareholders who are a party to the voting trust agreement have the right to
direct the voting trustee to vote all of the shares subject to the voting trust
in a manner such that three of such total number of eight directors, one of
which is required to be an independent director, are designated by those former
OnlineTrading.com shareholders. In the event that the number of directors
constituting the board of directors of TradeStation Group is increased or
decreased from time to time on or after the Effective Time, then each group of
shareholders will be entitled to designate its number of the total number of
directors of TradeStation Group based upon a ratio of 62.5% for the former Omega
Research shareholders and 37.5% for the former OnlineTrading.com shareholders.
If the foregoing ratio yields other than whole numbers as to the number of
directors for which each group of shareholders is entitled to designate the
shares to be voted, then the number of directors which each such group is
entitled to designate shall be rounded down to the nearest whole number, and the
one remaining directorship that this rounding down will create shall be
designated by the former Omega Research shareholders.
With respect to all matters other than the election of directors as to
which a vote (or written consent) of shareholders of TradeStation Group will be
made, the voting trustee will vote the shares owned by each TradeStation Group
shareholder who is a party to the voting trust agreement as specifically
instructed in writing by the shareholder owning the beneficial interest in, and
voting trust certificate relating to, such shares.
The voting trust shall dissolve on the earliest of the following dates: (i)
the second anniversary of the Effective Time; (ii) the date when the voting
trustee shall resign in writing unless such vacancy is timely filled as provided
under the voting trust agreement; (iii) the date when TradeStation Group
shareholders who are parties to the voting trust agreement holding 67% or more
of the shares then subject to the agreement shall execute a written instrument
so declaring; or (iv) the date when less than 75% of the aggregate number of
shares owned as of the Effective Time by either the former Omega Research or
former OnlineTrading.com shareholders who are a party to the voting trust
agreement remains subject to the voting trust.
There were no material relationships prior to the mergers between
OnlineTrading.com (or any of its affiliates, any director or officer of
OnlineTrading.com or any associate of any such director or officer), on the one
hand, and TradeStation Group (or any of its affiliates, any director or officer
of Omega Research or any associate of any such director or officer), on the
other hand, except as described above.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
Financial Statements of Omega Research, Inc.
(1) Report of Independent Certified Public Accountants as of December
31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999 *
(2) Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999 and 1998 *
(3) Consolidated Statements of Operations for the nine months ended
September 30, 2000 and 1999 (unaudited) and for the years ended
December 31, 1999, 1998 and 1997 *
(4) Consolidated Statements of Shareholder's Equity for the nine
months ended September 30, 2000 (unaudited) and for the years
ended December 31, 1999, 1998 and 1997 *
(5) Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 (unaudited) and for the years ended
December 31, 1999, 1998 and 1997 *
(6) Notes to Consolidated Financial Statements *
4
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Financial Statements of onlinetradinginc.com corp.
(1) Report of Independent Certified Public Accountants as of and for the
year ended January 31, 2000 *
(2) Independent Auditors Report as of and for the year ended January 31,
1999 *
(3) Statements of Financial Condition as of January 31, 2000 and 1999 *
(4) Statements of Income for the years ended January 31, 2000 and 1999 *
(5) Statements of Changes in Stockholders' Equity for the years ended
January 31, 2000 and 1999 *
(6) Statements of Cash Flows for the years ended January 31, 2000 and
1999 *
(7) Notes to Financial Statements *
Interim Financial Statements of onlinetradinginc.com corp.
(1) Statements of Financial Condition as of October 31, 2000 (unaudited)
and January 31, 2000 **
(2) Statements of Income (unaudited) for the three and nine months ended
October 31, 2000 and 1999 **
(3) Statements of Cash Flows (unaudited) for the nine months ended October
31, 2000 and 1999 **
(4) Notes to Financial Statements **
(b) Unaudited Pro Forma Combined Financial Data
(1) Pro Forma Combined Balance Sheet as of September 30, 2000 **
(2) Pro Forma Combined Statement of Operations for the nine months ended
September 30, 2000 **
(3) Pro Forma Combined Statement of Operations for the nine months ended
September 30, 1999 **
(4) Pro Forma Combined Statement of Operations for the year ended December
31, 1999 **
(5) Pro Forma Combined Statement of Operations for the year ended December
31, 1998 **
(6) Pro Forma Combined Statement of Operations for the year ended December
31, 1997 **
(c) Exhibits
Exhibit
Number Description
------ -----------
2.1 Agreement and Plan of Merger and Reorganization dated as of
January 19, 2000 by and among Omega Research,
OnlineTrading.com, TradeStation Group, Omega Acquisition
Corporation and Onlinetrading Acquisition Corporation, as
amended, together with the following exhibits thereto: (i)
Form of Omega Affiliate Agreement; (ii) Form of Online
Affiliate Agreement; (iii) Form of Employment Agreement; and
(iv) Form of Non-Competition and Non-Disclosure Agreement
(attached as Appendix A to the Prospectus, as defined below) *
2.2 Voting Trust Agreement dated January 19, 2000 by and among
certain former shareholders of each of Omega Research and
OnlineTrading.com and Marc J. Stone, as voting trustee
(attached as Appendix F to the Prospectus) *
23.1 Consent of Arthur Andersen LLP, Independent Certified Public
Accountants, with respect to Omega Research's consolidated
financial statements **
23.2 Consent of Arthur Andersen LLP, Independent Certified Public
Accountants, with respect to OnlineTrading.com's financial
statements **
23.3 Consent of Ahearn Jasco + Company, P.A., Independent Auditors,
with respect to OnlineTrading.com's financial statements **
----------------
* Previously filed as part of and incorporated from the Rule 424 (b)(1) Proxy
Statement/Prospectus of TradeStation Group filed with the Securities and
Exchange Commission on December 12, 2000 (the "Prospectus").
** Filed herewith.
5
<PAGE>
Interim Financial Statements of onlinetradinginc.com corp.
Index
Page
Statements of Financial Condition as of October 31, 2000 (unaudited)
and January 31, 2000 7
Statements of Income (unaudited) for the Three and Nine
Months Ended October 31, 2000 and 1999 8
Statements of Cash Flows (unaudited) for the Nine Months Ended
October 31, 2000 and 1999 9
Notes to Financial Statements 10
6
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onlinetradinginc.com corp.
Statements of Financial Condition
<TABLE>
<CAPTION>
October 31, 2000 January 31, 2000
---------------- ----------------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $16,950,645 $15,127,790
Receivable from clearing organization 910,083 759,183
Securities owned, at market value 153,616 155,012
Other current assets 177,277 103,987
----------- -----------
Total Current Assets 18,191,621 16,145,972
Property and Equipment, net 711,127 400,776
Intangible Assets, net 2,190,300 2,592,600
Other Assets 240,198 221,456
----------- -----------
TOTAL ASSETS $21,333,246 $19,360,804
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease payable $ 103,748 $ 39,944
Accounts payable and accrued liabilities 1,828,604 1,291,317
Income taxes payable 454,580 653,141
Securities sold but not yet purchased, at market value 1,731 25,938
----------- -----------
Total Current Liabilities 2,388,663 2,010,340
----------- -----------
Deferred Income Taxes 34,300 34,300
----------- -----------
Capital Lease Payable, net of current portion 124,365 72,131
----------- -----------
Commitments and Contingencies (Note 8)
Stockholders' Equity:
Common stock; $0.01 par value; 100,000,000 shares
authorized; 11,476,388 shares issued
and outstanding 114,763 114,763
Additional paid-in capital 15,943,179 15,943,179
Retained earnings 2,727,976 1,186,091
----------- -----------
Total Stockholders' Equity 18,785,918 17,244,033
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $21,333,246 $19,360,804
=========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
onlinetradinginc.com corp.
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
----------------------------- ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 4,337,402 $ 2,092,667 $ 12,040,084 $ 6,050,161
Investment gains, net 122,126 331,479 321,067 869,727
Interest - revenue sharing 322,154 108,909 633,372 246,119
Interest and dividends 265,380 234,814 758,184 336,890
Other revenues 30,918 -- 54,628 --
------------ ------------ ------------ ------------
5,077,980 2,767,869 13,807,335 7,502,897
------------ ------------ ------------ ------------
Expenses:
Employee compensation and benefits 1,942,460 1,276,917 5,301,055 3,683,646
Floor brokerage 1,279 14,755 12,649 41,806
Clearing and other transaction costs 1,201,982 539,944 3,268,815 1,823,223
Communications 83,955 43,134 236,374 107,599
Occupancy and equipment 126,659 85,223 376,436 216,350
Promotional costs 20,038 44,564 37,155 56,517
Product development 172,061 -- 514,027 --
Interest expense 14,981 5,356 35,230 19,605
Regulatory fees and expenses 24,635 6,258 69,408 32,129
Amortization expense 135,183 1,083 405,549 4,949
Other operating expenses 365,658 95,633 1,038,215 212,709
------------ ------------ ------------ ------------
4,088,891 2,112,867 11,294,913 6,198,533
------------ ------------ ------------ ------------
Income from operations 989,089 655,002 2,512,422 1,304,364
Non-operating items:
Loss on disposal of assets -- -- (685) --
Settlement payment received -- -- -- 175,000
------------ ------------ ------------ ------------
Income before income taxes 989,089 655,002 2,511,737 1,479,364
Income tax provision 381,987 240,120 969,852 556,387
------------ ------------ ------------ ------------
Net income $ 607,102 $ 414,882 $ 1,541,885 $ 922,977
============ ============ ============ ============
Earnings per share:
Basic $ 0.05 $ 0.04 $ 0.14 $ 0.10
============ ============ ============ ============
Diluted $ 0.05 $ 0.04 $ 0.13 $ 0.09
============ ============ ============ ============
Weighted average common shares outstanding:
Basic 11,328,240 11,031,944 11,296,880 9,432,595
============ ============ ============ ============
Diluted 11,476,915 11,482,334 11,498,111 9,886,304
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
onlinetradinginc.com corp.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,541,885 $ 922,977
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization 488,040 36,245
Loss on sale of property and equipment 685 --
Deferred income taxes -- 2,500
Other non-cash charges 89,974 --
Changes in operating assets and liabilities:
Receivable from clearing organization (150,900) 211,174
Other receivables -- (118,509)
Securities owned, at market value 1,396 (395,859)
Other current assets (73,290) (120,350)
Other assets (21,992) 11,289
Accounts payable and accrued liabilities 537,287 (78,491)
Income taxes payable (198,561) 490,527
Other current liabilities -- 79,010
Securities sold, but not yet purchased, at market value (24,207) 322,913
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,190,317 1,363,426
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 5,300 --
Purchase of property and equipment (308,345) (139,394)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (303,045) (139,394)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligation (64,417) --
Proceeds from issuance of common stock and warrants -- 15,810,991
Repayment of subordinated loan -- (125,000)
Redemption of preferred stock -- (330,000)
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (64,417) 15,355,991
------------ ------------
Net increase in cash and cash equivalents 1,822,855 16,580,023
Cash and cash equivalents, beginning of period 15,127,790 1,005,944
------------ ------------
Cash and cash equivalents, end of period $ 16,950,645 $ 17,585,967
============ ============
Supplemental Disclosure of Non-cash Financing and Investing Activities:
Equipment acquired under capital lease $ 180,455 $ --
============ ============
For the nine months ended October 31, 1999, OnlineTrading.com acquired the domain name "onlinetrading.com"
for cash and stock options. Accordingly, other assets and additional paid-in capital were increased by
$55,000, the value of the stock options.
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 978,633 $ 64,140
============ ============
Cash paid for interest $ 35,230 $ 23,012
============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
onlinetradinginc.com corp.
Notes to Financial Statements
Three and Nine Months Ended October 31, 2000 and 1999
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with Item 310(b) of Regulation S-B, "Interim Financial Statements"
and, accordingly, do not include all information and footnotes required under
accounting principles generally accepted in the United States for complete
financial statements. For additional information, refer to the financial
statements and footnotes for the year ended January 31, 2000 included in the
onlinetradinginc.com corp. (the "OnlineTrading.com") Form 10-KSB/A Annual
Report. Financial information as of January 31 has been derived from the audited
financial statements of OnlineTrading.com for the year ended January 31, 2000.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position as of
October 31, 2000, the results of operations for the nine months ended October
31, 2000 and 1999 and cash flows for the nine months ended October 31, 2000 and
1999 have been included in the accompanying financial statements. Certain prior
period amounts in the accompanying financial statements have been reclassified
to conform with current period presentation. The results of operations and cash
flows for the interim periods, is not necessarily indicative of the results of
operations or cash flows that may be expected for the remainder of the year.
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 October 31, 2000,
OnlineTrading.com had net capital of $14,745,197, which was $14,495,197 in
excess of its required net capital of $250,000. The ratio of aggregate
indebtedness to net capital was .17 to 1.
NOTE 3 - SECURITIES OWNED
Securities owned consists of marketable trading and investment securities
at quoted market values. These securities consist of the following as of October
31, 2000 and January 31, 2000:
October 31, January 31,
2000 2000
------------------ ----------------
Corporate Stocks/Options $ 3,475 $ 5,200
Obligations of U.S. Government 150,141 149,812
------------------ ----------------
$ 153,616 $ 155,012
================== ================
NOTE 4 - INCOME TAXES
Income taxes for the interim periods were computed using the effective tax
rate estimated to be applicable for the full fiscal year, which is subject to an
ongoing quarterly review by management.
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NOTE 5 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net earnings available to common
shareholders $ 607,102 $ 414,882 $ 1,541,885 $ 922,977
=========== =========== =========== ===========
Denominator:
Denominator for earnings per share
weighted average shares outstanding 11,328,240 11,031,944 11,296,880 9,432,595
Effect of dilutive securities - stock options 527 5,946 21,723 9,265
Effect of shares subject to repurchase by
OnlineTrading.com 148,148 444,444 179,508 444,444
----------- ----------- ----------- -----------
Denominator for earnings per share -
assuming dilution - adjusted weighted
average shares outstanding 11,476,915 11,482,334 11,498,111 9,886,304
=========== =========== =========== ===========
Basic earnings per share $ 0.05 $ 0.04 $ 0.14 $ 0.10
=========== =========== =========== ===========
Diluted earnings per share $ 0.05 $ 0.04 $ 0.13 $ 0.09
=========== =========== =========== ===========
</TABLE>
NOTE 6 - 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 $112,070 representing a portion of the total
furniture and computer equipment to be received. The balance of the equipment
totaling $180,455 was funded during the quarter ended April 30, 2000, making the
total amount of the capital lease $292,525. The lease is to be paid over 36
months which commenced in April 2000 with an initial payment of $25,937 to be
followed by 33 monthly payments of $8,646 and a final payment of $20,477. All
payments are also subject to applicable sales tax.
NOTE 7 - INTANGIBLE ASSETS
Intangible assets consist of the following:
October 31, January 31,
2000 2000
----------------- -----------------
Covenants not to compete $ 500,000 $ 500,000
Customer lists 2,182,000 2,182,000
----------------- -----------------
2,682,000 2,682,000
Accumulated amortization (491,700) (89,400)
----------------- -----------------
$ 2,190,300 $ 2,592,600
================= =================
The above intangibles are amortized over an estimated useful life of 5
years.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Operating Leases
On March 2, 1999, OnlineTrading.com entered into a three-year operating
lease to rent office furniture, office equipment and computer hardware. The
monthly rental payment under the agreement is $6,862 plus applicable taxes.
11
<PAGE>
On June 29, 1999, an amendment to OnlineTrading.com's current lease
agreement for its office space located in Boca Raton, Florida became effective.
The amendment added 5,009 square feet of office space to its Boca Raton
location. The space was completed on March 1, 2000 and results in additional
monthly rent of $11,028 plus applicable taxes.
Litigation
On January 11, 2000, Robert A. Whigham, Jr. and Patricia F. Whigham filed a
civil action against onlinetradinginc.com corp., Barry Goodman, Jan Bevivino,
William L. Mark and Bear Stearns Securities Corp. OnlineTrading.com's attorneys
moved the case to the United States District Court for the District of
Massachusetts, Eastern Division and on May 5, 2000 the United States District
Court granted OnlineTrading.com's motion to compel arbitration and subsequently
entered a procedural order dismissing the Whigham's civil action without
prejudice. On September 9, 2000, OnlineTrading.com received notification from
NASD Dispute Resolution, Inc. that the Whighams had filed a statement of claim
and initiated arbitration against all parties named in the former civil action.
The Whighams have alleged that, during the period from January 1999 through
August 1999, their accounts were serviced by an unregistered person, Barry
Goodman, in violation of Massachusetts General Laws c.110A and that
OnlineTrading.com aided and abetted Mr. Goodman in violation of c.110A. The
Whighams have also made allegations of excessive trading, excessive commissions,
negligent supervision and fraud in violation of 18 U.S.C. ss.1962. The Whighams
seek total alleged damages of $561,000 plus interest, costs, fees and treble
damages. OnlineTrading.com intends to present a vigorous defense and to seek
reimbursement for certain costs associated with OnlineTrading.com's defense.
OnlineTrading.com believes the allegations to be without merit; however, there
can be no assurance that OnlineTrading.com's defense of this claim will be
successful.
NOTE 9 - SUBSEQUENT EVENT
On December 29, 2000 (the "Effective Time"), OnlineTrading.com and Omega
Research, Inc., a Florida corporation ("Omega Research"), completed, the mergers
pursuant to that certain Agreement and Plan of Merger and Reorganization (as
amended the "Merger Agreement") dated January 19, 2000 pursuant to which
OnlineTrading.com and Omega Research were merged and combined in a
stock-for-stock transaction as described hereinafter. The parties to the Merger
Agreement were Omega Research, OnlineTrading.com, TradeStation Group, Inc.
("TradeStation Group"), a Florida corporation formed by Omega Research that
became the holding company for Omega Research and OnlineTrading.com upon
completion of the mergers, Omega Acquisition Corporation, a recently-formed
Florida corporation that is owned by TradeStation Group ("Omega Merger Sub"),
and Onlinetrading Acquisition Corporation, a recently-formed Florida corporation
that is owned by TradeStation Group ("Online Merger Sub"). Omega Merger Sub was
merged into Omega Research which was renamed TradeStation Technologies, Inc.
("Technologies"), Online Merger Sub was merged into OnlineTrading.com which was
renamed TradeStation Securities, Inc. ("Securities"), and Technologies and
Securities became wholly-owned subsidiaries of TradeStation Group.
As a result of the conversion at the Effective Time of all of the
outstanding shares of common stock of each of Omega Research and
OnlineTrading.com into shares of common stock of TradeStation Group and the
listing on The Nasdaq National Market of the common stock of TradeStation Group
under the symbol "TRAD" as of the opening of trading on January 2, 2001,
TradeStation Group is the sole publicly-traded company in the group. Omega
Research shareholders received one share of TradeStation Group common stock for
each share of Omega Research common stock (a 1 to 1 ratio) and OnlineTrading.com
shareholders received 1.7172 shares of TradeStation Group common stock for each
share of OnlineTrading.com (a 1.7172 to 1 ratio). Cash will be paid in lieu of
fractional shares of TradeStation Group. As of the Effective Time, TradeStation
Group was owned approximately 57% (on a fully diluted basis) by former Omega
Research's shareholders and approximately 43% (on a fully diluted basis) by
OnlineTrading.com's former shareholders. Immediately after the Effective Time
and after giving effect to the mergers, there were outstanding an aggregate
amount of approximately 44,333,120 shares of common stock of TradeStation Group.
The mergers are intended to qualify as a tax-free reorganization for United
States federal income tax purposes and TradeStation Group intends to account for
the mergers as a pooling-of-interests.
12
<PAGE>
TRADESTATION GROUP, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction to Unaudited Pro Forma Combined Financial Data................................. 14
Pro Forma Combined Balance Sheet as of September 30, 2000................................... 15
Pro Forma Combined Statement of Operations for the nine months ended September 30, 2000..... 16
Pro Forma Combined Statement of Operations for the nine months ended September 30, 1999..... 17
Pro Forma Combined Statement of Operations for the year ended December 31, 1999............. 18
Pro Forma Combined Statement of Operations for the year ended December 31, 1998............. 19
Pro Forma Combined Statement of Operations for the year ended December 31, 1997 ............ 20
</TABLE>
13
<PAGE>
TRADESTATION GROUP, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined financial statements give effect to the
merger of Omega Research and OnlineTrading.com, on a pooling-of-interests basis.
At the Effective Time, Omega Research and OnlineTrading.com became wholly-owned
subsidiaries of TradeStation Group. TradeStation Group's unaudited pro forma
combined balance sheet assumes that the mergers took place on September 30, 2000
and combines the Omega Research consolidated balance sheet at September 30, 2000
with OnlineTrading.com's consolidated balance sheet as of October 31, 2000.
TradeStation Group'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 Research's consolidated statements of operations for the nine
months ended September 30, 2000 and 1999 and the years ended December 31, 1999,
1998 and 1997 with OnlineTrading.com's statements of operations for the nine
months ended October 31, 2000 and 1999 and the years ended January 31, 2000,
1999 and 1998, respectively. TradeStation Group's unaudited pro forma combined
financial statements are based on Omega Research and OnlineTrading.com's
historical financial statements and related notes thereto, which have not been
restated for the effect of the mergers. See Item 7.(a) of this report.
Nonrecurring merger expenses incurred in connection with the mergers are
estimated to be approximately $4.5 million, comprised of approximately $2.1
million in banking fees, $1.4 million in legal, accounting and tax service fees,
$0.6 million in severance expenses and $0.4 million in printing and
miscellaneous expenses. Such expenses are not reflected in the unaudited pro
forma combined statements of operations, but are reflected as a reduction of
equity and cash in the unaudited pro forma combined balance sheet.
The unaudited pro forma combined financial statements are presented for
illustrative purposes only 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.
14
<PAGE>
TRADESTATION GROUP, INC.
PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
TRADESTATION
OMEGA GROUP
RESEARCH ONLINETRADING.COM PRO FORMA COMBINED
9/30/00 10/31/00 ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,523,334 $ 16,950,645 $ (3,560,000) (A) $ 14,913,979
Marketable securities -- 153,616 -- 153,616
Accounts receivable, net 694,000 -- -- 694,000
Receivable from clearing organization -- 910,083 -- 910,083
Income tax receivable 8,242,105 -- -- 8,242,105
Other current assets 646,615 177,277 (241,000) (B) 582,892
Deferred income taxes 4,983,000 -- -- 4,983,000
------------ ------------ ------------ ------------
Total current assets 16,089,054 18,191,621 (3,801,000) 30,479,675
------------ ------------ ------------ ------------
PROPERTY, PLANT & EQUIPMENT, net 2,146,603 711,127 -- 2,857,730
GOODWILL, net 1,258,769 -- -- 1,258,769
OTHER INTANGIBLE ASSETS, net 10,445,138 2,190,300 -- 12,635,438
OTHER ASSETS 1,585,454 240,198 (940,000) (A) 885,652
DEFERRED INCOME TAXES 585,000 -- -- 585,000
------------ ------------ ------------ ------------
Total assets $ 32,110,018 $ 21,333,246 $ (4,741,000) $ 48,702,264
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,685,472 $ 423,272 $ -- $ 4,108,744
Accrued expenses and other current liabilities 1,978,788 1,407,063 (241,000) (B) 3,144,851
Income taxes payable -- 454,580 -- 454,580
Current portion of capital lease -- 103,748 -- 103,748
Deferred revenue 1,005,915 -- -- 1,005,915
------------ ------------ ------------ ------------
Total current liabilities 6,670,175 2,388,663 (241,000) 8,817,838
------------ ------------ ------------ ------------
DEFERRED INCOME TAXES -- 34,300 -- 34,300
------------ ------------ ------------ ------------
CAPITAL LEASE PAYABLE, net of current
portion -- 124,365 -- 124,365
------------ ------------ ------------ ------------
Total liabilities 6,670,175 2,547,328 (241,000) 8,976,503
------------ ------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock -- -- -- --
Common stock 246,031 114,763 82,310 (C) 443,104
Additional paid-in capital 35,078,519 15,943,179 (82,310) (C) 50,939,388
Accumulated (deficit) earnings (9,884,707) 2,727,976 (4,500,000) (A) (11,656,731)
------------ ------------ ------------ ------------
Total shareholders' equity 25,439,843 18,785,918 (4,500,000) 39,725,761
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity $ 32,110,018 $ 21,333,246 $ (4,741,000) $ 48,702,264
============ ============ ============ ============
Book value per share $ 1.03 $ 0.90
============ ============
Outstanding common stock 24,603,081 19,707,253 (C) 44,310,334
============ ============ ============
</TABLE>
--------------------------------------------------------------------------------
(A) To reflect payment or recognition of non-recurring merger expenses.
(B) To reflect the elimination of intercompany payables / receivables.
(C) To reflect the common stock to be issued by TradeStation Group in
connection with the merger.
15
<PAGE>
TRADESTATION GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA
RESEARCH ONLINETRADING.COM TRADESTATION
NINE MONTHS NINE MONTHS GROUP
ENDED ENDED PRO FORMA COMBINED
9/30/00 10/31/00 ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 14,948,460 $ -- $ -- $ 14,948,460
Commissions and fees -- 12,040,084 -- 12,040,084
Subscription services 5,472,961 -- -- 5,472,961
Net investment gains -- 321,067 (321,067) (A) --
Other revenues 6,654,971 1,446,184 (758,184) (A) 7,342,971
------------ ------------ ------------ ------------
Total net revenues 27,076,392 13,807,335 (1,079,251) 39,804,476
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees 494,045 -- -- 494,045
Clearing and other transaction costs -- 3,281,464 -- 3,281,464
Cost of subscription services 2,767,012 -- -- 2,767,012
Product development 5,640,827 514,027 -- 6,154,854
Sales and marketing 17,805,915 2,881,785 -- 20,687,700
General and administrative 5,959,838 4,212,088 (35,230) (B) 10,136,696
Amortization of goodwill 306,189 -- -- 306,189
Amortization of other intangible assets 3,706,251 405,549 -- 4,111,800
------------ ------------ ------------ ------------
Total operating expenses 36,680,077 11,294,913 (35,230) 47,939,760
------------ ------------ ------------ ------------
(Loss) income from operations (9,603,685) 2,512,422 (1,044,021) (8,135,284)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE), net:
Interest expense -- -- (35,230) (B) (35,230)
Other income (expense), net 85,970 (685) 1,079,251 (A) 1,164,536
------------ ------------ ------------ ------------
Total other income (expense), net 85,970 (685) 1,044,021 1,129,306
------------ ------------ ------------ ------------
(Loss) income before income taxes (9,517,715) 2,511,737 -- (7,005,978)
INCOME TAX PROVISION -- 969,852 -- 969,852
------------ ------------ ------------ ------------
Net (loss) income $ (9,517,715) $ 1,541,885 $ -- $ (7,975,830)
============ ============ ============ ============
Loss per share:
Basic $ (0.39) $ (0.18)
============ ============
Diluted $ (0.39) $ (0.18)
============ ============
Weighted average common stock:
Basic 24,568,404 19,399,002 (C) 43,967,406
============ ============ ============
Diluted 24,568,404 19,399,002 (C) 43,967,406
============ ============ ============
</TABLE>
--------------------------------------------------------------------------------
(A) To reclass interest, dividends and investment gains.
(B) To reclass interest expense.
(C) To reflect the conversion of Omega Research and OnlineTrading.com's
weighted average shares outstanding to shares of TradeStation Group
common stock in connection with the merger.
16
<PAGE>
TRADESTATION GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA
RESEARCH ONLINETRADING.COM TRADESTATION
NINE MONTHS NINE MONTHS GROUP
ENDED ENDED PRO FORMA COMBINED
9/30/99 10/31/99 ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES:
Licensing fees $ 12,288,532 $ -- $ -- $ 12,288,532
Commissions and fees -- 6,050,161 -- 6,050,161
Net investment gains -- 869,727 (869,727) (A) --
Other revenues 5,633,784 583,009 (336,890) (A) 5,879,903
------------ ------------ ------------ ------------
Total net revenues 17,922,316 7,502,897 (1,206,617) 24,218,596
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees 1,397,818 -- -- 1,397,818
Clearing and other transaction costs -- 1,865,029 -- 1,865,029
Product development 3,301,462 -- -- 3,301,462
Sales and marketing 12,826,516 2,195,868 -- 15,022,384
General and administrative 2,878,801 2,137,636 (19,605) (B) 4,996,832
------------ ------------ ------------ ------------
Total operating expenses 20,404,597 6,198,533 (19,605) 26,583,525
------------ ------------ ------------ ------------
(Loss) income from operations (2,482,281) 1,304,364 (1,187,012) (2,364,929)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE), net:
Interest expense -- -- (19,605) (B) (19,605)
Other income, net 321,411 175,000 1,206,617 (A) 1,703,028
------------ ------------ ------------ ------------
Total other income, net 321,411 175,000 1,187,012 1,683,423
------------ ------------ ------------ ------------
(Loss) income before income taxes (2,160,870) 1,479,364 -- (681,506)
INCOME TAX (BENEFIT) PROVISION (896,000) 556,387 -- (339,613)
------------ ------------ ------------ ------------
Net (loss) income $ (1,264,870) $ 922,977 $ -- $ (341,893)
============ ============ ============ ============
Loss per share:
Basic $ (0.06) $ (0.01)
============ ============
Diluted $ (0.06) $ (0.01)
============ ============
Weighted average common stock:
Basic 22,374,055 16,197,652 (C) 38,571,707
============ ============ ============
Diluted 22,374,055 16,197,652 (C) 38,571,707
============ ============ ============
</TABLE>
--------------------------------------------------------------------------------
(A) To reclass interest, dividends and investment gains.
(B) To reclass interest expense.
(C) To reflect the conversion of Omega Research and OnlineTrading.com's
weighted average shares outstanding to shares of TradeStation Group
common stock in connection with the merger.
17
<PAGE>
TRADESTATION GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA TRADESTATION
RESEARCH ONLINETRADING.COM GROUP
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 $ 16,217,922 $ -- $ -- $ 16,217,922
Commissions and fees -- 9,471,435 -- 9,471,435
Net investment gains -- 1,129,493 (1,129,493) (A) --
Other revenues 7,518,613 914,912 (603,978) (A) 7,829,547
------------ ------------ ------------ ------------
Total net revenues 23,736,535 11,515,840 (1,733,471) 33,518,904
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees 1,931,731 -- -- 1,931,731
Clearing and other transaction costs -- 3,012,284 -- 3,012,284
Product development 4,698,319 279,387 -- 4,977,706
Sales and marketing 18,161,741 3,048,623 -- 21,210,364
General and administrative 4,534,084 3,472,384 (51,863) (B) 7,954,605
Amortization of goodwill 68,042 -- -- 68,042
Amortization of other intangible assets 823,611 95,432 -- 919,043
------------ ------------ ------------ ------------
Total operating expenses 30,217,528 9,908,110 (51,863) 40,073,775
------------ ------------ ------------ ------------
(Loss) income from operations (6,480,993) 1,607,730 (1,681,608) (6,554,871)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE), net:
Interest expense -- -- (51,863) (B) (51,863)
Other income, net 422,475 175,000 1,733,471 (A) 2,330,946
------------ ------------ ------------ ------------
Total other income, net 422,475 175,000 1,681,608 2,279,083
------------ ------------ ------------ ------------
(Loss) income before income taxes (6,058,518) 1,782,730 -- (4,275,788)
INCOME TAX (BENEFIT) PROVISION (2,336,000) 702,224 -- (1,633,776)
------------ ------------ ------------ ------------
Net (loss) income $ (3,722,518) $ 1,080,506 $ -- $ (2,642,012)
============ ============ ============ ============
Loss per share:
Basic $ (0.16) $ (0.07)
============ ============
Diluted $ (0.16) $ (0.07)
============ ============
Weighted average common stock:
Basic 22,758,654 17,306,706 (C) 40,065,360
============ ============ ============
Diluted 22,758,654 17,306,706 (C) 40,065,360
============ ============ ============
</TABLE>
--------------------------------------------------------------------------------
(A) To reclass interest, dividends and investment gains.
(B) To reclass interest expense.
(C) To reflect the conversion of Omega Research and OnlineTrading.com's
weighted average shares outstanding to shares of TradeStation Group
common stock in connection with the merger.
18
<PAGE>
TRADESTATION GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA TRADESTATION
RESEARCH ONLINETRADING.COM GROUP
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 $ 22,005,324 $ -- $ -- $ 22,005,324
Commissions and fees -- 5,525,427 -- 5,525,427
Net investment gains -- 328,495 (328,495) (A) --
Other revenues 6,211,181 138,142 (36,021) (A) 6,313,302
------------ ------------ ------------ ------------
Total net revenues 28,216,505 5,992,064 (364,516) 33,844,053
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees 1,798,078 -- -- 1,798,078
Clearing and other transaction costs -- 2,002,055 -- 2,002,055
Product development 3,318,310 -- -- 3,318,310
Sales and marketing 14,381,923 1,174,998 -- 15,556,921
General and administrative 6,134,608 2,654,988 (36,566) (B) 8,753,030
------------ ------------ ------------ ------------
Total operating expenses 25,632,919 5,832,041 (36,566) 31,428,394
------------ ------------ ------------ ------------
Income from operations 2,583,586 160,023 (327,950) 2,415,659
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE), net:
Interest expense -- -- (36,566) (B) (36,566)
Other income, net 423,961 -- 364,516 (A) 788,477
------------ ------------ ------------ ------------
Total other income, net 423,961 -- 327,950 751,911
------------ ------------ ------------ ------------
Income before income taxes 3,007,547 160,023 -- 3,167,570
INCOME TAX PROVISION 1,052,000 52,080 -- 1,104,080
------------ ------------ ------------ ------------
Net income $ 1,955,547 $ 107,943 $ -- $ 2,063,490
============ ============ ============ ============
Earnings per share:
Basic $ 0.09 $ 0.06
============ ============
Diluted $ 0.09 $ 0.05
============ ============
Weighted average common stock:
Basic 22,255,627 14,500,799 (C) 36,756,426
============ ============ ============
Diluted 22,757,913 15,209,635 (C) 37,967,548
============ ============ ============
</TABLE>
--------------------------------------------------------------------------------
(A) To reclass interest, dividends and investment gains.
(B) To reclass interest expense.
(C) To reflect the conversion of Omega Research and OnlineTrading.com's
weighted average shares outstanding to shares of TradeStation Group
common stock in connection with the merger.
19
<PAGE>
TRADESTATION GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OMEGA TRADESTATION
RESEARCH ONLINETRADING.COM GROUP
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 $ 24,364,990 $ -- $ -- $ 24,364,990
Commissions and fees -- 3,673,728 -- 3,673,728
Net investment losses -- (187,973) 187,973 (A) --
Other revenues 4,861,284 62,630 -- 4,923,914
------------ ------------ ------------ ------------
Total net revenues 29,226,274 3,548,385 187,973 32,962,632
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of licensing fees 1,848,993 -- -- 1,848,993
Clearing and other transaction costs -- 1,751,472 -- 1,751,472
Product development 1,890,392 -- -- 1,890,392
Sales and marketing 11,272,290 229,562 -- 11,501,852
General and administrative 5,420,760 1,589,329 (71,805) (B) 6,938,284
------------ ------------ ------------ ------------
Total operating expenses 20,432,435 3,570,363 (71,805) 23,930,993
------------ ------------ ------------ ------------
Income (loss) from operations 8,793,839 (21,978) 259,778 9,031,639
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE), net:
Interest expense -- -- (71,805) (B) (71,805)
Other income (expense), net 146,474 -- (187,973) (A) (41,499)
------------ ------------ ------------ ------------
Total other income (expense), net 146,474 -- (259,778) (113,304)
------------ ------------ ------------ ------------
Income (loss) before income taxes 8,940,313 (21,978) -- 8,918,335
INCOME TAX BENEFIT (934,000) (2,550) -- (936,550)
------------ ------------ ------------ ------------
Income (loss) before pro forma tax
adjustment 9,874,313 (19,428) -- 9,854,885
PRO FORMA INCOME TAX ADJUSTMENTS:
Pro forma income taxes for periods
prior to Sept 30, 1997 3,255,731 -- -- 3,255,731
Non-recurring tax credit 1,167,000 -- -- 1,167,000
------------ ------------ ------------ ------------
Pro forma net income (loss) $ 5,451,582 $ (19,428) $ -- $ 5,432,154
============ ============ ============ ============
Pro forma earnings per share:
Basic $ 0.27 $ 0.16
============ ============
Diluted $ 0.26 $ 0.15
============ ============
Weighted average common stock:
Basic 20,171,527 14,500,799 (C) 34,672,326
============ ============ ============
Diluted 20,884,675 14,500,799 (C) 35,385,474
============ ============ ============
</TABLE>
--------------------------------------------------------------------------------
(A) To reclass interest, dividends and investment gains.
(B) To reclass interest expense.
(C) To reflect the conversion of Omega Research and OnlineTrading.com's
weighted average shares outstanding to shares of TradeStation Group
common stock in connection with the merger.
20
<PAGE>
SIGNATURE
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 thereunto duly authorized.
TRADESTATION GROUP, INC.
Registrant
January 5, 2001 /s/ Gregg F. Stewart
--------------- ----------------------------------------------
Date Gregg F. Stewart
Chief Financial Officer, Vice President of
Finance and Treasurer
(Signing both in his capacity as an authorized
officer and as Principal Financial and
Accounting Officer of the Registrant)
21
<PAGE>
TRADESTATION GROUP, INC.
EXHIBIT INDEX
Exhibit
No. Document Description
------- --------------------
2.1 Agreement and Plan of Merger and Reorganization dated as of
January 19, 2000 by and among Omega Research,
OnlineTrading.com, TradeStation Group, Omega Acquisition
Corporation and Onlinetrading Acquisition Corporation, as
amended, together with the following exhibits thereto: (i)
Form of Omega Affiliate Agreement; (ii) Form of Online
Affiliate Agreement; (iii) Form of Employment Agreement; and
(iv) Form of Non-Competition and Non-Disclosure Agreement,
(attached as Appendix A to the Rule 424 (b)(1) Proxy
Statement/Prospectus of TradeStation Group filed with the
Securities and Exchange Commission on December 12, 2000 (the
"Prospectus"))
2.2 Voting Trust Agreement dated January 19, 2000 by and among
certain former shareholders of each of Omega Research and
OnlineTrading.com, and Marc J. Stone, as voting trustee
(attached as Appendix F to the Prospectus)
23.1 Consent of Arthur Andersen LLP, Independent Certified Public
Accountants, with respect to Omega Research's consolidated
financial statements (filed herewith)
23.2 Consent of Arthur Andersen LLP, Independent Certified Public
Accountants, with respect to OnlineTrading.com's financial
statements (filed herewith)
23.3 Consent of Ahearn Jasco + Company, P.A., Independent Auditors,
with respect to OnlineTrading.com's financial statements
(filed herewith)
22
