-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B9dfGfQPyGgjVPgt8aqSTuBDVw8wzpoVzRY2aUYp1ucl6YBtmTrbcbbrInP0S5kh hnxB9P0o0puVQVZBYC0rnA== 0000913355-02-000074.txt : 20020826 0000913355-02-000074.hdr.sgml : 20020826 20020826143415 ACCESSION NUMBER: 0000913355-02-000074 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTIMARK HOLDINGS INC CENTRAL INDEX KEY: 0001062023 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 223730995 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30527 FILM NUMBER: 02748170 BUSINESS ADDRESS: STREET 1: 10 EXCHANGE PLACE CENTRE STREET 2: 24TH FLOOR CITY: JERSEY CITY STATE: NJ ZIP: 07302 BUSINESS PHONE: 201-536-7088 MAIL ADDRESS: STREET 1: 10 EXCHANGE PLACA CENTRE STREET 2: 24TH FLOOR CITY: JERSY CITY STATE: NJ ZIP: 07302 FORMER COMPANY: FORMER CONFORMED NAME: OPTIMARK TECHNOLOGIES INC DATE OF NAME CHANGE: 20000329 10-Q 1 o10q82602.txt QUARTERLY REPORT FOR PERIOD ENDED 3-31-2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 000-30527 (Commission file number) OPTIMARK HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 22-3730995 (State or Other Jurisdiction of Incorporation or (I.R.S. Employer Organization) Identification No.) 10 Exchange Place, 24th Floor, Jersey City, NJ 07302 (Address of Principal Executive Offices) (Zip Code) (201) 536-7088 (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 Section 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 / / No /X/ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At July 31, 2002, the number of shares outstanding of the registrant's common stock was 33,369,913. INDEX Page No. -------- PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Consolidated Balance Sheets as of March 31, 2002 (Unaudited) and December 31, 2001 4 Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2002 and March 31, 2001 (Unaudited) 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and March 31, 2001 (Unaudited) 6 Notes to Unaudited Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 PART II OTHER INFORMATION 21 Item 1. Legal Proceedings 21 Item 2. Changes in Securities and Use of Proceeds 22 Item 6. Exhibits and Reports on Form 8-K 23 2 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 (the "Exchange Act"). 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 - "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements also include statements in which such words 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 in Part II, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's amended and restated Annual Report on Form 10-K/A for the year ended December 31, 2001 as filed with the Securities and Exchange Commission and elsewhere in this Quarterly Report. Our future results and stockholder values may differ materially from those expressed in or indicated by 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. 3 OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 2002 (Unaudited) December 31, 2001 ----------- ----------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ........................................... $ 212,406 $ 1,624,017 Accounts receivable, less allowance for doubtful accounts of $73,002 at December 31, 2001 ............................................. -- 774,180 Other current assets ................................................ 264,115 446,911 ------------- ------------- Total current assets ........................................ 476,521 2,845,108 PROPERTY AND EQUIPMENT - NET .......................................... 1,041,126 1,381,435 SOFTWARE LICENSES - NET ............................................... 2,973,767 59,347 OTHER ASSETS .......................................................... 610,015 837,072 ------------- ------------- TOTAL ASSETS .......................................................... $ 5,101,429 $ 5,122,962 ============= ============= LIABILITIES AND STOCKHOLDERS' DEFICIENCY LIABILITIES: CURRENT LIABILITIES: Accounts payable and accrued liabilities .......................... $ 756,339 $ 678,901 Accrued compensation .............................................. 542,367 1,141,246 Loan payable ...................................................... 501,528 -- Net liabilities of discontinued operations (Note 4) ............... 13,403,266 13,816,260 Other current liabilities ......................................... 946,523 879,842 ------------- ------------- Total current liabilities ................................... 16,150,023 16,516,249 ------------- ------------- OTHER LIABILITIES: Long term portion of license fee obligation ....................... 2,650,000 -- Minority Interest ................................................. 147,362 -- ------------- ------------- Total other liabilities ..................................... 2,797,362 -- ------------- ------------- COMMITMENTS AND CONTINGENCIES MANDATORILY REDEEMABLE STOCK Series E preferred stock, convertible, $0.01 par value; 1,000,000 shares authorized; 983,333 and 926,665 issued and outstanding at March 31, 2002 and, December 31, 2001, respectively 14,437,426 13,630,854 Series F preferred stock, $0.01 par value; 7,400,000 shares authorized and no shares issued and outstanding at March 31, 2002 and December 31, 2001 respectively ................. -- -- Series G preferred stock, $0.01 par value; 300,000 shares authorized, issued and outstanding at March 31, 2002 and December 31, 2001 respectively ................. 3,000 3,000 ------------- ------------- TOTAL MANDATORILY REDEEMABLE STOCK .................................... 14,440,426 13,633,854 ------------- ------------- STOCKHOLDERS' DEFICIENCY: Preferred stock, authorized and unissued 8,577,932 at March 31, 2002 and December 31, 2001 Series A preferred stock, convertible and participating, $0.01 par value; 3,222,068 shares authorized; 925,683 shares issued and outstanding at March 31, 2002 and December 31, 2001 .... 9,257 9,257 Series B preferred stock, convertible, $0.01 par value; 11,000,000 shares authorized; 10,820,000 shares issued and outstanding at March 31, 2002 and December 31, 2001 ............... 108,200 108,200 Series C preferred stock, convertible, $0.01 par value; 8,250,000 shares authorized, issued and outstanding at March 31, 2002 and December 31, 2001 ........................... 82,500 82,500 Series D preferred stock, convertible, $0.01 par value; 250,000 shares authorized, issued and outstanding at March 31, 2002 and December 31, 2001 ........................... 2,500 2,500 Common stock, $0.01 par value; 150,000,000 shares authorized; issued 36,612,557 shares at March 31, 2002 and December 31, 2001, respectively, of which 3,242,644 shares are held as treasury stock at March 31, 2002 and December 31, 2001, respectively ...................................................... 366,126 366,126 Warrants, common stock .............................................. 35,686,523 35,686,523 Additional paid-in capital .......................................... 301,687,065 301,687,065 Accumulated deficit ................................................. (366,165,836) (362,906,807) Accumulated other comprehensive loss ................................ (62,716) (62,504) Treasury stock ...................................................... (1) (1) ------------- ------------- TOTAL STOCKHOLDERS' DEFICIENCY .............................. (28,286,382) (25,027,141) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY ........................ $ 5,101,429 $ 5,122,962 ============= =============
See notes to consolidated financial statements 4 OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS THREE MONTHS ENDED MARCH 31, 2002 2001 Unaudited Unaudited --------- --------- REVENUE: Revenue from affiliate .................... $ -- $ 1,317,965 Revenue, other ............................ -- 2,100,000 ------------ ------------ Total revenue ..................... -- 3,417,965 EXPENSES: Cost of sales ............................. -- 2,250,851 Sales and marketing ....................... 313,848 446,203 Research and development .................. 1,462,859 1,544,053 General and administrative ................ 1,124,042 3,115,602 Depreciation and amortization ............. 390,833 1,033,728 ------------ ------------ Total operating expenses .......... 3,291,582 8,390,437 OTHER (INCOME) EXPENSE: Interest income ........................... (4,139) (19,803) Interest expense .......................... 4,397 62,498 ------------ ------------ Total other expense ............... 258 42,695 ------------ ------------ LOSS FROM CONTINUING OPERATIONS ............. (3,291,840) (5,015,167) DISCONTINUED OPERATIONS: Loss from discontinued operations ......... -- -- Loss on disposal of discontinued operations (69,827) (681,283) ------------ ------------ Loss from discontinued operations ......... (69,827) (681,283) ------------ ------------ Loss before minority interest ............... (3,361,667) (5,696,450) Minority interest in loss of subsidiary ..... 102,638 -- NET LOSS .................................... (3,259,029) (5,696,450) OTHER COMPREHENSIVE LOSS: Foreign currency translation adjustments .. 212 94,550 ------------ ------------ COMPREHENSIVE LOSS .......................... $ (3,258,817) $ (5,601,900) ============ ============ LOSS PER SHARE - BASIC AND DILUTED: Continuing operations ..................... $ (0.09) $ (0.14) ------------ ------------ Discontinued operations ................... $ (0.00) $ (0.02) ------------ ------------ Total loss per share ...................... $ (0.09) $ (0.16) ------------ ------------ Weighted average number of common shares outstanding - basic and diluted . 36,369,913 36,612,557 ============ ============ See notes to consolidated financial statements 5 OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31
2002 2001 (Unaudited) (Unaudited) ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss ...................................................... $(3,259,029) $(5,696,450) Deduct loss from discontinued operations ...................... (69,827) (681,283) ----------- ----------- Loss from continuing operations ............................... (3,189,202) (5,015,167) ----------- ----------- Adjustments to reconcile net loss from continuing operations to net cash used in continuing operations: Depreciation and amortization ............................... 390,833 1,033,728 Minority interest in income of subsidiary ................... (102,638) -- (Gain) loss on disposal of assets ........................... (333,924) (379) Changes in operating assets and liabilities: Receivables ................................................. 774,180 2,157,740 Other assets ................................................ 409,853 101,699 Accounts payable and accrued liabilities .................... (417,487) 458,106 Other liabilities ........................................... (135,957) 346,692 ----------- ----------- Net cash used in continuing operations ........................ (2,604,342) (917,581) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment ........................... (12,000) (522,104) Proceeds from disposal of assets .............................. 380,980 2,279 Net cash provided by/(used in) investing activities ......... 368,980 (519,825) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of preferred stock ................. 806,572 -- Proceeds from shareholder loan ................................ 500,000 -- Payments on capital leases .................................... -- (82,337) ----------- ----------- Net cash provided by/(used in) financing activities ......... 1,306,572 (82,337) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS ......................... $ (928,790) (1,519,743) NET CASH USED IN DISCONTINUED OPERATIONS .......................... (482,821) (638,870) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD ................ 1,624,017 2,919,548 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD ...................... $ 212,406 $ 760,935 ----------- ----------- Supplemental disclosure of cash flow information: Cash payments for interest - continuing operations ............ $ 4,397 $ 15,335 Cash payments for interest - discontinued operations .......... -- -- Non-cash transaction Purchase of software license .................................. $ 3,000,000 $ --
See notes to consolidated financial statements 6 OPTIMARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 1. GENERAL INFORMATION OptiMark Holdings, Inc. ("Holdings" or the "Company") was established on May 19, 2000, and became the sole stockholder of two operating subsidiaries on June 12, 2000 pursuant to the reorganization of the legal structure of the company formerly known as OptiMark Technologies, Inc. ("OTI"). OTI 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. The reorganization was effected pursuant to which (i) OTI formed Holdings as a direct wholly-owned subsidiary of OTI, (ii) Holdings formed OTI Acquisition Corporation ("OTIA") as a direct wholly-owned subsidiary of Holdings, (iii) OTI merged with OTIA pursuant to Section 251(g) of the Delaware General Corporation Law, with the name of the surviving company becoming OptiMark US Equities, Inc. ("UEI"), and with stockholders of UEI being deemed to have received shares of Holdings by operation of law. As a result of such merger, UEI became a direct wholly-owned subsidiary of Holdings. References herein to the "Company" refer to Holdings and its subsidiaries, with respect to periods following the reorganization, and to OTI and its subsidiaries, with respect to periods prior to the reorganization. Until September 19, 2000, the Company had operated in two segments, the Exchange Solutions Services Business (formerly referred to as the Electronic Markets Business) and the US Equities Business, under two separate wholly owned subsidiaries, OptiMark, Inc. ("OptiMark"), and OptiMark US Equities, Inc., respectively. Effective September 19, 2000, the US Equities Business was discontinued. On December 28, 2001, OptiMark formed a then majority-owned subsidiary, OptiMark Innovations Inc. (formerly known as OTSH, Inc. and referred to below as "Innovations"). Innovations was capitalized on December 31, 2001, and at that time OptiMark held a 67% voting interest and the remaining interest was held by SOFTBANK Capital Partners LP, SOFTBANK Capital LP and SOFTBANK Capital Advisors' Fund LP (collectively, "SOFTBANK"). Innovations has authorized capital stock of 7,000 shares of common stock, par value $.01 per share (the "Innovations Common Stock"), and 3,000 shares of preferred stock, par value $.01 per share (the "Innovations Preferred Stock"). Innovations has designated 2,000 shares of Innovations Preferred Stock, as "Non-Qualified Preferred Stock," which has a cumulative preferred dividend at an annual rate of $500 per share, payable when and if declared by the Board of Directors of Innovations. The liquidation preference of the Non-Qualified Preferred Stock is equal to $10,000 per share plus the aggregate amount of accrued and unpaid dividends or distributions. The Non-Qualified Preferred Stock is also subject to a mandatory redemption, at a price equal to the liquidation preference amount, in four equal quarterly installments on December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017. Innovations designated 1,000 shares of Innovations Preferred Stock as "Series B Preferred Stock," which has a cumulative preferred dividend at an annual rate of $519.21 7 per share, payable when and if declared by the Board of Directors of Innovations. The liquidation preference of the Series B Preferred Stock is equal to $10,389.61 per share plus the aggregate amount of accrued and unpaid dividends or distributions. On December 31, 2001, OptiMark received 200 shares of Innovations Common Stock in exchange for a cash payment of $500,000 and 2,000 shares of Non-Qualified Preferred Stock in exchange for the transfer to Innovations of certain intangible assets consisting of software, a patent application and other assets relating to a securities trading technology which is under development (the "Assets"). The stated value of the Non-Qualified Preferred Stock was the result of the evaluation by the board of directors of Innovations of the value of the Assets based, in part, upon preliminary discussions with independent parties regarding an approximate $10,000,000 investment for a one-third interest in Innovations (see Note 7). SOFTBANK received 100 shares of Innovations Common Stock (the "SOFTBANK Shares") for $250,000 cash. Simultaneously, SOFTBANK's remaining obligation to purchase shares of Series E Cumulative Preferred Stock ("Series E Preferred Stock") from Holdings pursuant to that certain Series E Preferred Stock Purchase Agreement, dated as of June 29, 2001 (as amended on August 16, 2001 and November 16, 2001), by and among Holdings and SOFTBANK was reduced by $250,000. Upon its formation and initial capitalization, Innovations' aggregate assets consisted of the Assets and $750,000 in cash. The principal business of Innovations is to (a) consummate a purchase of a controlling interest in The Ashton Technology Group, a Delaware corporation ("Ashton") through the purchase of Ashton's common stock and (b) hold Ashton's common stock for the benefit of the shareholders of Holdings and Innovations. OptiMark also has an approximately 15% voting interest in Japan OptiMark Systems, Inc. ("JOS"), a Japanese corporation. The investment in JOS previously accounted for on the equity method does not have any carrying value in financial statements of the Company as of March 31, 2002. JOS has realized continuing losses since its inception in 1998. Since the Company has not provided any guarantees and is not committed to provide any future funding to JOS it has not recorded its equity share of JOS' losses, as the investment cannot have a carrying value below $0 (see Note 7). Effective in January 2002, the development, sales and marketing efforts of the Exchange Solutions Services Business were suspended. As of that date, the primary purpose of the Company was to hold the securities of Innovations and to consummate financing and strategic transactions with other parties. As a result of the capitalization of Innovations, Holdings and SOFTBANK have certain call and put rights described below. The Independent Committee of the Board has the right commencing October 1, 2002 and exercisable until September 30, 2003, to recommend to the Board that Holdings purchase all, but not less than all, of the SOFTBANK Shares for $125,000 in cash and 16,667 shares of Series E Preferred Stock of Holdings. If the Board of Directors accepts such recommendation, SOFTBANK would be obligated to sell the SOFTBANK shares for that consideration. Upon the occurrence of a Liquidity Event (defined below) on or before September 30, 2003, the SOFTBANK Shares will be purchased by 8 Holdings for $125,000 in cash and 16,667 shares of Series E Preferred Stock of Holdings. A "Liquidity Event" means any of the following: (i) Innovations' sale, conveyance or other disposition of all or substantially all of its assets, (ii) the acquisition of Innovations by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of Innovations for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, unless the stockholders of Innovations immediately prior to the consummation of such transaction hold at least 50% of the voting power of the surviving corporation as a result of such transaction, (iii) the consummation by Innovations of a transaction or series of related transactions, including the issuance or sale of voting securities, if the stockholders of Innovations immediately prior to such transaction (or, in the case of a series of transactions, the first of such transactions) hold less than 50% of the voting power of Innovations immediately after the consummation of such transaction (or, in the case of a series of transactions, the last of such transactions), or (iv) any initial underwritten public offering of Innovations Common Stock. Notwithstanding the foregoing, Holdings will not exercise this call option in the event that the Independent Committee recommends that Holdings not purchase the SOFTBANK Shares. In the event that: (i) the call rights of Holdings described above have not been exercised on or before September 30, 2003, (ii) the Independent Committee no longer exists and (iii) no independent directors serve on the Holdings Board of Directors and, after reasonable good faith efforts by the remaining members of the Holdings Board of Directors, no independent persons qualified to serve on the Holdings Board of Directors have been found or, if found, are not willing to serve on the Holdings Board of Directors, then the Holdings Board of Directors will engage an independent investment banking, accounting or third party valuation firm to evaluate whether or not it is in the best interests of Holdings that it purchase the SOFTBANK Shares. If such third party determines it is in the best interests of Holdings to purchase the SOFTBANK Shares, Holdings will be obligated to purchase such shares on or before December 31, 2003 for $125,000 in cash and 16,667 shares of Series E Preferred Stock of Holdings. SOFTBANK has the right, commencing on October 1, 2002 and continuing until September 30, 2003, to put all, but not less than all, of the SOFTBANK Shares to Holdings in exchange for 16,667 shares of Series E Preferred Stock of Holdings. In the event that no put of, or call on, the SOFTBANK Shares has been exercised by October 31, 2003, then commencing on November 1, 2003 and continuing until November 30, 2003, SOFTBANK has the right to require Holdings to purchase all, but not less than all, of the SOFTBANK Shares for 16,667 shares of Series E Preferred Stock of Holdings. DISCONTINUED OPERATIONS On September 19, 2000, the Company announced its intention to discontinue its US Equities Business. The Company has discontinued all operations of the equities trading system for the US Equities Business and terminated all communications networks and other related systems that were necessary to support that business. Accordingly, results of 9 this operation have been classified as discontinued operations in the consolidated financial statements and prior periods have been reclassified to conform to this classification. CONTINUATION AS A GOING CONCERN The Company's current cash and cash equivalents, plus the expected cash flows for 2002, are not expected to be sufficient to meet its 2002 operating and financial commitments. Accordingly, if the Company is unable to raise additional cash either directly or through sale or borrowing against Innovations' holdings of shares of the Ashton common stock, par value $.01 per share (the "Ashton Common Stock"), or that certain senior secured convertible note of Ashton in favor of Innovations (the "Note") (see Note 4) , the Company would face the imminent and likely potential for bankruptcy or liquidation. If the Company is forced to declare bankruptcy or pursue liquidation, the value of the Company's assets may not be sufficient to pay its creditors in full and, accordingly, the Company's common stock and preferred stock would have no value. The Company will continue to seek additional funding both to support its operation as a holding company as well as its very limited efforts related to potential new product development. While the Company hopes to be able to obtain additional financing for these limited product development activities, continue to borrow money or raise capital through the sale or borrowing against the shares of Innovations related to its holdings of shares of the Ashton Common Stock and the Note, the Company may not be able to raise this capital before it runs out of cash. In addition, the Company has pledged a portion of its shares of capital stock in Innovations to SOFTBANK as payment for loans that have already been provided. In the event that the Company does not have enough cash to pay the principal and interest on these loans as they come due, the Company's holdings in Innovations would be reduced accordingly. This would reduce the Company's ability to utilize these assets to raise additional capital necessary to ensure continuation as a going concern. There is no assurance that the Company's holdings in Innovations, as represented by Innovations' holdings of shares of the Ashton Common Stock, will have any value useable as collateral for a loan or sellable to raise cash at any time or in a time frame that would let the Company continue as a going concern. 2. PRESENTATION Presentation - The accompanying unaudited, condensed, consolidated financial statements include the accounts of the Company. In the opinion of management, all adjustments have been made which are of a normal recurring nature, so as to fairly state the results for the interim periods. All significant intercompany transactions and balances have been eliminated. Certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to Securities and Exchange Commission ("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 statements should be read in conjunction with the financial statements and the notes thereto included in the Company's audited financial statements as of December 31, 2001 included in the Company's amended and restated Annual Report 10 on Form 10-K/A, as filed with the Securities and Exchange Commission on July 22, 2002. Use of Estimates - The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. It is reasonably possible that actual results could differ significantly from those estimates and significant changes to estimates could occur in the near term. Recent Accounting Pronouncements - In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 requires that goodwill and other intangible assets with indefinite lives no longer be amortized, but instead tested for impairment at least annually. In addition, the standard includes provisions for the reclassification of certain existing intangibles as goodwill and reassessment of the useful lives of existing recognized intangibles. SFAS 142 is effective for fiscal years beginning after December 15, 2001. As of January 1, 2002, OptiMark had no goodwill or intangible assets recorded on its books. Therefore, management does not believe the adoption of SFAS 142 has a significant impact on its financial position and results of operations. In July 2001 the FASB issued SFAS 143, "Accounting for Asset Retirement Obligations" ("SFAS 143") which requires the recognition of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the carrying amount of the related long-lived asset is correspondingly increased. Over time, the liability is accreted to its present value and the related capitalized charge is depreciated over the useful life of the asset. SFAS 143 is effective for fiscal years beginning after June 15, 2002. The Company is currently reviewing the impact of SFAS 143 on the Company. In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 supersedes FASB Statement 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", and the accounting and reporting provisions of APB Opinion 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", for the disposal of a segment of a business. This Statement also amends ARB 51, "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001. The Company adopted the new accounting standard for 2002 and determined it had no impact on its financial statements for the first quarter. 3. DISCONTINUED OPERATIONS Changes in Net Liabilities of Discontinued Operations from December 31, 2001 to March 31, 2002 is as follows: 11
Paid or Additional Balance at Charged Accruals and Balance at December 31, Against Other March 31, 2001 Liability Adjustments 2002 ---- --------- ----------- ---- Net Liabilities of Discontinued Operations (13,816,260) 482,821 (69,827) (13,403,266)
4. FINANCING ACTIVITIES On February 4, 2002, Ashton and Innovations entered into a securities purchase agreement (as amended on March 6, 2002 and May 3, 2002, the "Securities Purchase Agreement"). Pursuant to the terms of the Securities Purchase Agreement, Innovations purchased 608,707,567 shares of Ashton common stock in exchange for $7,272,727 in cash and intellectual property and other non-cash assets of Innovations valued by Ashton and Innovations for the purposes of the Securities Purchase Agreement at $20 million. The value ascribed to the intellectual property and other non-cash assets by OptiMark Innovations was based in part on preliminary discussions with a potential investor in Innovations. Ashton or Innovations did not obtain an appraisal or other third party valuation of the fair market value of the intellectual property and other non-cash assets. There can be no assurance that the fair market value of the intellectual property and other non-cash assets is equal to the value ascribed to these assets by Innovations in the Securities Purchase Agreement. On May 7, 2002 (the "Closing Date"), Innovations and Ashton closed the transactions contemplated by the Securities Purchase Agreement. In addition, pursuant to the terms of the Securities Purchase Agreement, Innovations loaned approximately $2.7 million in cash to Ashton in exchange for the Note. The Note will mature in five years, may, at the option of Innovations, be convertible into shares of Ashton Common Stock at a rate of $.0515838 per share (subject to customary anti-dilution adjustments after the closing) and will accrue interest at a rate of 7.5% per annum. Currently, the Note is convertible into 52,870,757 shares of Ashton Common Stock. The Note is secured by a pledge and security agreement pursuant to which Innovations has received a blanket lien on Ashton's assets, including, without limitation, the pledge of the equity interests of Ashton and Universal Trading Technologies Corporation, a Delaware corporation and majority-owned subsidiary of Ashton ("UTTC"), in each of ATG Trading LLC, wholly-owned subsidiary of Ashton, Electronic Market Center, Inc., a majority-owned subsidiary of Ashton, Ashton Technology Canada, Inc., a majority-owned subsidiary of Ashton , Croix Securities, Inc., a wholly-owned subsidiary of UTTC, REB Securities Inc., a wholly-owned subsidiary of UTTC; and NextExchange, Inc., a wholly-owned subsidiary of UTTC. As of the Closing Date, Innovations owns approximately 80% of the diluted outstanding shares of the Ashton Common Stock calculated as of May 3, 2002. Diluted shares include the outstanding shares of the Ashton Common Stock and (i) shares of any series of capital stock of Ashton or its subsidiaries that vote together with the Ashton Common 12 Stock, (ii) any outstanding options issued to employees and third parties, and (iii) shares of the Ashton Common Stock, or any securities described in clause (i) above, issuable pursuant to or upon conversion or exercise of all rights granted to any party. Assuming conversion of the Note, Innovations would own approximately an additional 7% of Ashton's fully-diluted shares of the Ashton Common Stock, calculated as of May 3, 2002. On March 21, 2002, the Company entered into a loan agreement with certain of its shareholders. Under the terms of the agreement, the Company borrowed $500,000 for a period of 180 days at an interest rate of 10% per annum. The loan is secured by substantially all of the assets of the Company. In lieu of repayment of principal in cash, the lenders may require the Company to repay the principal amount of the loan by causing OptiMark, Inc. to transfer eight shares of common stock and forty-eight shares of the Non-Qualified Preferred Stock of Innovations subject to adjustment as provided in the loan agreement with accrued interest payable in cash at maturity. During the three months ended March 31, 2002, the Company sold 56,668 shares of Series E Preferred at $15 per share. The aggregate amount received from this sale was $850,000, which was paid in cash. The shares were sold to SOFTBANK Capital Partners LP, SOFTBANK Capital LP, SOFTBANK Capital Advisors Fund LP, and Big Island LLC, each of whom is an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. 5. RELATED PARTY TRANSACTIONS On February 7, 2002, a loan to an officer in the amount of $150,000 plus accrued interest was forgiven in accordance with the terms and conditions of the officer's employment agreement. 6. COMMITMENTS AND CONTINGENCIES OptiMark and certain of its subsidiaries are subject to the legal proceedings described in the Company's amended and restated Annual Report on Form 10-K/A for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on July 22, 2002. Finova Capital Corporation (Plaintiff) v. OptiMark Technologies, Inc., OptiMark, Inc. and OptiMark Holdings, Inc. (Defendants), Superior Court of New Jersey - Hudson County. Plaintiff filed this action on June 15, 2001, asserting claims that allegedly arise out of an equipment lease agreement pursuant to which it is alleged that OptiMark Technologies, Inc. (now known as OptiMark US Equities, Inc.) agreed to lease certain equipment. Plaintiff contends that OptiMark Technologies, Inc. breached the equipment lease by, among other things, failing to pay the amounts due under the equipment lease. Based on these allegations, Plaintiff has made claims for breach of contract, tortuous interference, fraudulent conveyance of such equipment lease agreement and/or the related equipment and/or other assets from OptiMark Technologies, Inc. to OptiMark, Inc. and/or OptiMark Holdings, Inc. and damages in unspecified amounts exceeding $6,000,000, plus interest, late charges, litigation costs and expenses, and reasonable counsel fees. In the fourth quarter of 2001, most, if not all, of the 13 equipment that was the subject of the equipment lease was returned consensually to Plaintiff. The parties currently are engaged in exchanging responses to written discovery requests. On February 14, 2002, Plaintiff made a motion to add Innovations as a defendant in the case. In the motion, Plaintiff alleges that the transfer of certain assets from OptiMark to Innovations on December 31, 2001 constituted a fraudulent conveyance of such assets. On March 25, 2002, the court granted Finova permission to amend its complaint to include Innovations. The amended complaint was served on Innovations on April 22, 2002 and Innovations has until approximately mid-August 2002 to file a response to the complaint. On June 13, 2002, Finova amended the complaint to include Ashton. The Defendants, Innovations and Ashton intend to defend this action and the motion vigorously. The outcome of this litigation cannot be predicted at this time, although it may have a material affect on the Company's financial condition and results of operations. Comdisco, Inc. (Plaintiff) v. OptiMark Technologies, Inc. (now known as OptiMark US Equities, Inc.) (Defendant) and Avnet, Inc. State of Connecticut Superior Court, Judicial District of Fairfield at Bridgeport. Plaintiff filed a Complaint on December 18, 2000. The action seeks possession of leased equipment, proceeds from the sale of leased equipment, a deficiency judgment in an unspecified amount, and fees and costs and interest. Since the complaint was filed, most, if not all, of the equipment was returned consensually to Plaintiff. Based on the complaint filed in a related action in New Jersey (described below) and on other information received from Comdisco, it is believed that amount of damages claimed is approximately $6,500,000. On March 30, 2001, the parties agreed to consolidate a related case captioned Comdisco, Inc. v. OptiMark Technologies, Inc., Superior Court of New Jersey Law Division Hudson County (filed on January 23, 2001) with the Connecticut proceeding. To effect the consolidation, on or about April 2, 2001, the parties filed a stipulation withdrawing Defendant's motion to dismiss Comdisco's Complaint filed in the Superior Court of New Jersey. That motion had sought dismissal principally on grounds that an identical action alleging breach of contract had previously been filed by Comdisco in Connecticut State Court. In exchange for Defendant's agreement to withdraw its motion, Comdisco agreed to withdraw its New Jersey Complaint without prejudice. In June 2001, Comdisco made a motion for summary judgment with respect to a claim against Avnet relating to a guaranty by Avnet of Defendant's obligations under a Master Lease Agreement for computer equipment leased from Comdisco. Avnet responded to Comdisco's motion by denying liability under the guaranty and asserting a variety of special defenses. In addition, Avnet filed a cross claim against Defendant. The cross claim alleges that if Avnet is found liable under the guaranty, then Avnet becomes subrogated to Comdisco's rights under the Master Lease Agreement to the extent of the payments Avnet makes to Comdisco and that OptiMark is liable to Avnet for any such payments. Defendant has responded to the cross-claim by denying its material allegations. The Company intends to defend this action vigorously. On February 12, 2002, Plaintiff filed a motion for default for failure to plead, alleging that OptiMark Technologies, Inc. did not file a pleading responsive to Plaintiff's second amended complaint. This default will be set aside if OptiMark Technologies, Inc. files an answer before a judgment after default has been rendered. OptiMark Technologies, Inc. intends to file such a 14 responsive pleading. The outcome of this litigation cannot be predicted at this time, although it may have a material affect on the Company's financial condition and results of operations. Management intends to vigorously contest these suits ; however, the likelihood that these claims will result in loss or impairment of an asset is probable. Any loss or impairment resulting from any of these suits may have a material impact on the Company's financial position, results of operations and cash flows in future years. An accrual of $13,525,000 with respect to these loss contingencies has been recorded by the Company as part of its loss on discontinued operations, which represents management's best estimate of the outcome of the negotiations. In August 2001, the Company entered into a new one-year employment agreement with an officer of the Company, which provides for annual compensation of $250,000 and a guaranteed bonus of $200,000, to be paid ratably over the term of the agreement. On February 21, 2002, Innovations entered into a software license agreement in connection with the development of a Volume Weighted Average Price trading platform. Under the terms of the agreement, Innovations is required to pay $25,000 per month for ten years for the license and related support (see Note 7). 7. SUBSEQUENT EVENTS On April 11, 2002, the Company entered into a second loan agreement with certain of its shareholders. Under this second loan agreement, the Company borrowed $570,000 for a period of 180 days at an interest rate of 10% per annum. The second loan is secured by substantially all of the assets of the Company. In lieu of repayment of principal in cash, the lenders may require the Company to repay the principal amount of the loan by causing OptiMark, Inc. to transfer twelve shares of common stock and fifty-four shares of the Non-Qualified Preferred Stock of Innovations subject to adjustment as provided in the second loan agreement with accrued interest payable in cash at maturity. On April 30, 2002, Draper Fisher Jurvetson ePlanet Ventures, L.P., Draper Fisher Jurvetson ePlanet Partners Fund, L.L.C. and Draper Fisher Jurvetson ePlanet Ventures GmbH & Co. KG (collectively, "Draper") purchased 150 shares of Innovations Common Stock for an aggregate cash purchase price of $375,000. On May 7, 2002, Draper purchased 963 shares of Innovations Series B Preferred Stock for an aggregate cash purchase price of $9,630,000. As a result of these transactions, OptiMark's ownership percent of Innovations was reduced to less than 50%. Therefore, Innovations is no longer a subsidiary and will be accounted for as an investment using the equity method of accounting. On May 3, 2002, Innovations transferred its interest in the software license and related obligation (see Note 6) to Ashton. On May 24, 2002, the Company's agreement with Asset International was terminated. Under the terms of the agreement, the Company returned 15 the shares representing its investment in Asset International and the Company was relieved of any obligation to provide services to Asset International. On May 31, 2002, the Company entered into a third loan agreement with certain of its shareholders. Under this loan agreement, the Company borrowed $1,650,000 for a period of 180 days at an interest rate of 10% per annum. The third loan is secured by substantially all of the assets of the Company. In lieu of repayment of principal in cash, the lenders may require the Company to repay the principal amount of the loan by causing OptiMark, Inc. to transfer twenty-eight shares of common stock and one hundred fifty-eight shares of the Non-Qualified Preferred Stock of Innovations subject to adjustment as provided in the third loan agreement with accrued interest payable in cash at maturity. On May 31, 2002, the shareholders of JOS elected to dissolve the company. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Discontinued Operations On September 19, 2000, the Company announced its intention to discontinue its US Equities Business. The Company has discontinued all operations of the equities trading system for the US Equities Business and terminated all communications networks and other related systems that were necessary to support that business. Accordingly, results of this operation have been classified as discontinued operations in the consolidated financial statements and prior periods have been reclassified to conform to this classification. The discussion of results of operations in this section relates only to the Company's continuing operations, its Exchange Solutions Business. Continuation as a Going Concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has realized net losses from operations each year since inception. The Company's current cash and cash equivalents, plus the expected cash flows for 2002, are not expected to be sufficient to meet its 2002 operating and financial commitments. Accordingly, if the Company is unable to raise additional cash either directly or through sale or borrowing against Innovations' holdings of shares of the Ashton Common Stock or the Note, the Company would face the imminent and likely potential for bankruptcy or liquidation. If the Company is forced to declare bankruptcy or pursue liquidation, the value of the Company's assets may not be sufficient to pay its creditors in full and, accordingly, the Company's common stock and preferred stock would have no value. The Company will continue to seek additional funding both to support its operation as a holding company as well as its very limited efforts related to potential new product development. While the Company hopes to be able to obtain additional financing for these 16 limited product development activities, continue to borrow money or raise capital through the sale or borrowing against the shares of Innovations related to its holdings of shares of the Ashton Common Stock and the Note, the Company may not be able to raise this capital before it runs out of cash. In addition, the Company has pledged a portion of its shares of Capital Stock in Innovations to SOFTBANK as payment for loans that have already been provided. In the event that the Company does not have enough cash to pay the principal and interest on these loans as they come due, the Company's holdings in Innovations would be reduced accordingly. This would reduce the Company's ability to utilize these assets to raise additional capital necessary to ensure continuation as a going concern. There is no assurance that the Company's holdings in Innovations, as represented by Innovations' holdings of shares of the Ashton Common Stock, will have any value useable as collateral for a loan or sellable to raise cash at any time or in a time frame that would let the Company continue as a going concern. History of Losses OptiMark has experienced losses each quarter since its inception. Although the business has been restructured, losses are likely to continue for the foreseeable future. As of March 31, 2002 the Company's accumulated deficit was approximately $366,166,000. Critical Accounting Policies As a result of the Company's having discontinued its US Equities Business and suspended its Exchange Solutions Services Business, the Company considers the two critical policies described below to be most important to the portrayal of its financial condition and that require the most subjective judgment and, as a result decrease the inherent level of precision in our financial statements. Reserve Related to Contract Renegotiations and Terminations. At the time we discontinued the US Equities Business, this reserve was recorded to reflect the contingent liability to those companies from which we had previously contracted for leased equipment and related services. The reserve balance is substantially less than the gross claims made by the former suppliers and management must use substantial judgment based on, among other factors, disputing the size of the gross claims based on contractual provisions, asserting counterclaims and affirmative defenses, mitigating the claims through returns or sales of leased equipment and negotiating substantial reductions in the net amounts claimed after mitigation. Impairment of Property and Equipment. As a result of the Company having discontinued its US Equities Business in September 2000 and having suspended its Exchange Solutions Services Business in January 2002, certain property and equipment is no longer in use and must be considered impaired. Some of these assets may be directly identifiable to the discontinued business; however, many others are shared and/or non-specific and careful judgment is required to determine the appropriate impairment reserve. 17 Results of Operations THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2001 Revenue. Total revenue for the three months ended March 31, 2002 was $0 as compared to approximately $3,418,000 for the three months ended March 31, 2001. Of these amounts, approximately $1,318,000 in 2001 was derived from services provided to our affiliate, Japan OptiMark Systems, Inc. ("JOS"). The balance in 2001 was derived from services to Nasdaq and the recognition of revenue previously deferred. The reduction in services to JOS resulted from the suspension of the JOS trading system which operated on the Osaka Securities Exchange, per OptiMark's amended agreement with Japan OptiMark Systems, Inc., dated May 23, 2001. Billings for enhancement and maintenance ceased as of August 31, 2001. Operating Expenses. Operating expenses for the three months ended March 31, 2002 totaled approximately $3,292,000 as compared to approximately $8,390,000 for the three months ended March 31, 2001. The following is a discussion of the changes as it relates to each of the components: Cost of Sales. Cost of sales includes all direct costs and expenses incurred in order to develop and implement our products. Cost of sales for the three months ended March 31, 2002 totaled $0 as compared to approximately $2,251,000 for the three months ended March 31, 2001. The decrease of $2,251,000 is due to the absence of revenue generating projects in 2002. Sales and Marketing. Sales and marketing expense for the three months ended March 31, 2002 totaled $314,000 as compared to approximately $446,000 for the three months ended March 31, 2001. The decrease of $132,000 was primarily due to a decrease in personnel related expenses, communication expense and public relations expenses in connection with the decrease in resources utilized in promoting the company's products and headcount reductions within the marketing department. Research and Development. Research and development expense totaled approximately $1,463,000 for the three months ended March 31, 2002 compared to approximately $1,544,000 for the three months ended March 31, 2001. The decrease of $81,000 is primarily due to reduced expenditures to customize and develop OptiMark's proprietary matching technology for use in future applications. The decrease consists primarily of personnel related expenses and communication expense. General and Administrative. General and administrative expense totaled approximately $1,124,000 for the three months ended March 31, 2002 as compared to approximately $3,116,000 for the three months ended March 31, 2001. The decrease of $1,992,000 is primarily due to a decrease in the cost of OptiMark's bonus program, gain realized on the sale of assets and decreases in personnel related expenses, corporate insurance expense and other general office expenses. The cost of the 18 bonus program was $0 for the three months ended March 31, 2002 and approximately $1,000,000 for the three months ended March 31, 2001. Depreciation and Amortization. Depreciation and amortization expense totaled approximately $391,000 for the three months ended March 31, 2002 as compared to approximately $1,034,000 for the three months ended March 31, 2001. The decrease of $643,000 is primarily due to the write off of assets deemed permanently impaired during the latter part of 2001. Other Income and Expense. Other income and expense includes interest income on cash and cash equivalents and interest expense on capital leases. Other expense, net, was approximately $300 for the three months ended March 31, 2002 as compared to other expense, net of approximately $43,000 for the three months ended March 31, 2001. The decrease of $42,700 is due to a reduction in interest incurred on capital lease obligations. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2002, OptiMark's principal sources of liquidity consisted of approximately $212,000 of cash and cash equivalents as compared to approximately $761,000 of cash and cash equivalents as of March 31, 2001. Net cash used in continuing operating activities for the three months ended March 31, 2002 was approximately $2,604,000 and net cash used in operating activities for the three months ended March 31, 2001 was approximately $918,000. The change in net operating cash flows was attributable to net losses in both periods, partially reduced by non-cash charges such as depreciation and amortization. The fluctuation between periods was also affected by net changes in working capital. Net cash provided by investing activities was approximately $369,000 for the three months ended March 31, 2002 and net cash used in investing activities was approximately $520,000 for the three months ended March 31, 2001. The cash provided by investing activities in 2002 primarily consisted of the proceeds received from the sale of assets, chiefly computer equipment. The uses of cash in 2001 for investing activities primarily consisted of the purchase of a mainframe computer as part of a settlement of all amounts owed to a company from which Optimark had previously leased equipment. Net cash provided by financing activities for the three months ended March 31, 2002 was approximately $1,307,000 and net cash used in financing activities for the three months ended March 31, 2001 was approximately $82,000. In 2002, cash was provided from the sale of Series E Cumulative Preferred Stock ("Series E Preferred") and a shareholder loan. The results indicated for continuing operations in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2002 are not necessarily indicative of the spending rates for the continuing operations. The results from operations in future periods may differ materially as we continue to focus our resources on the new business model. 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's only exposure to market risk at March 31, 2002 is related to interest rates. Interest Rate Risk. As of March 31, 2002 OptiMark had cash and cash equivalents of approximately $212,000 that consisted of cash and highly liquid overnight investments. These investments may be subject to interest rate risk however because of the low level of cash balances, any such risk would not be material. Foreign Currency Exchange Rate Risk. As of March 31, 2002, the Company is not subject to foreign currency exchange rate risk. Equity Price Risk. As of March 31, 2002, the Company is not subject to equity price risk. 20 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS OptiMark and certain of its subsidiaries are subject to the legal proceedings described in the Company's amended and restated Annual Report on Form 10-K/A for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on July 22, 2002. Finova Capital Corporation (Plaintiff) v. OptiMark Technologies, Inc., OptiMark, Inc. and OptiMark Holdings, Inc. (Defendants), Superior Court of New Jersey - Hudson County. Plaintiff filed this action on June 15, 2001, asserting claims that allegedly arise out of an equipment lease agreement pursuant to which it is alleged that OptiMark Technologies, Inc. (now known as OptiMark US Equities, Inc.) agreed to lease certain equipment. Plaintiff contends that OptiMark Technologies, Inc. breached the equipment lease by, among other things, failing to pay the amounts due under the equipment lease. Based on these allegations, Plaintiff has made claims for breach of contract, tortuous interference, fraudulent conveyance of such equipment lease agreement and/or the related equipment and/or other assets from OptiMark Technologies, Inc. to OptiMark, Inc. and/or OptiMark Holdings, Inc. and damages in unspecified amounts exceeding $6,000,000, plus interest, late charges, litigation costs and expenses, and reasonable counsel fees. In the fourth quarter of 2001, most, if not all, of the equipment that was the subject of the equipment lease was returned consensually to Plaintiff. The parties currently are engaged in exchanging responses to written discovery requests. On February 14, 2002, Plaintiff made a motion to add Innovations as a defendant in the case. In the motion, Plaintiff alleges that the transfer of certain assets from OptiMark to Innovations on December 31, 2001 constituted a fraudulent conveyance of such assets. On March 25, 2002, the court granted Finova permission to amend its complaint to include Innovations. The amended complaint was served on Innovations on April 22, 2002 and Innovations has until approximately mid-August 2002 to file a response to the complaint. On June 13, 2002, Finova amended the complaint to include Ashton. The Defendants, Innovations and Ashton intend to defend this action and the motion vigorously. The outcome of this litigation cannot be predicted at this time, although it may have a material affect on the Company's financial condition and results of operations. Comdisco, Inc. (Plaintiff) v. OptiMark Technologies, Inc. (now known as OptiMark US Equities, Inc.) (Defendant) and Avnet, Inc. State of Connecticut Superior Court, Judicial District of Fairfield at Bridgeport. Plaintiff filed a Complaint on December 18, 2000. The action seeks possession of leased equipment, proceeds from the sale of leased equipment, a deficiency judgment in an unspecified amount, and fees and costs and interest. Since the complaint was filed, most, if not all, of the equipment was returned consensually to Plaintiff. Based on the complaint filed in a related action in New Jersey (described below) and on other information received from Comdisco, it is believed that amount of damages claimed is approximately $6,500,000. On March 30, 2001, the parties agreed to consolidate a related case captioned Comdisco, Inc. v. OptiMark Technologies, Inc., Superior Court of New Jersey Law Division Hudson 21 County (filed on January 23, 2001) with the Connecticut proceeding. To effect the consolidation, on or about April 2, 2001, the parties filed a stipulation withdrawing Defendant's motion to dismiss Comdisco's Complaint filed in the Superior Court of New Jersey. That motion had sought dismissal principally on grounds that an identical action alleging breach of contract had previously been filed by Comdisco in Connecticut State Court. In exchange for Defendant's agreement to withdraw its motion, Comdisco agreed to withdraw its New Jersey Complaint without prejudice. In June 2001, Comdisco made a motion for summary judgment with respect to a claim against Avnet relating to a guaranty by Avnet of Defendant's obligations under a Master Lease Agreement for computer equipment leased from Comdisco. Avnet responded to Comdisco's motion by denying liability under the guaranty and asserting a variety of special defenses. In addition, Avnet filed a cross claim against Defendant. The cross claim alleges that if Avnet is found liable under the guaranty, then Avnet becomes subrogated to Comdisco's rights under the Master Lease Agreement to the extent of the payments Avnet makes to Comdisco and that OptiMark is liable to Avnet for any such payments. Defendant has responded to the cross-claim by denying its material allegations. The Company intends to defend this action vigorously. On February 12, 2002, Plaintiff filed a motion for default for failure to plead, alleging that OptiMark Technologies, Inc. did not file a pleading responsive to Plaintiff's second amended complaint. This default will be set aside if OptiMark Technologies, Inc. files an answer before a judgment after default has been rendered. OptiMark Technologies, Inc. intends to file such a responsive pleading. The outcome of this litigation cannot be predicted at this time, although it may have a material affect on the Company's financial condition and results of operations. Management intends to vigorously contest these suits ; however, the likelihood that these claims will result in loss or impairment of an asset is probable. Any loss or impairment resulting from any of these suits may have a material impact on the Company's financial position, results of operations and cash flows in future years. An accrual of $13,525,000 with respect to these loss contingencies has been recorded by the Company as part of its loss on discontinued operations, which represents management's best estimate of the outcome of the negotiations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS During the three months ended March 31, 2002, the Company sold 56,668 shares of Series E Preferred at $15 per share. The aggregate amount received from this sale was $850,000, which was paid in cash. The shares were sold to SOFTBANK Capital Partners LP, SOFTBANK Capital LP, SOFTBANK Capital Advisors Fund LP, and Big Island LLC, each of whom is an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. The issuance of the Series E Preferred constitutes a private placement under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. 22 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits 10.1 Separation Agreement, dated April 11, 2002, by and between OptiMark Holdings, Inc. and Neil G. Cohen. 99 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 B. Reports on Form 8-K Form 8-K, filed January 15, 2002, responding to Items 2 and 7. The Report related to the capitalization of OptiMark Innovations Inc. (formerly known as "OTSH, Inc."). Form 8-K, filed January 31, 2002, responding to Items 5 and 7. The Report related to the settlement reached between the Company and a former vendor. Form 8-K, filed February 8, 2002, responding to Items 7 and 9. The Report related to the execution of the Securities Purchase Agreement between the Ashton Technology Group, Inc. and OptiMark Innovations Inc. 23 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. August 26, 2002 By: /s/ Robert J. Warshaw -------------------------------- Name: Robert J. Warshaw Title: Chief Executive Officer and Principal Financial Officer EX-10.1 3 o10_1q82602.txt SEPARATION AGREEMENT EXHIBIT 10.1 Separation Agreement April 11, 2002 Mr. Neil G. Cohen 3 Whittier Way Livingston, NJ 07039 Dear Neil: This letter confirms your resignation from employment as an officer, director, administrator, and/or trustee with OptiMark Holdings, Inc. ("Holdings"), its wholly-owned subsidiaries, OptiMark US Equities, Inc. ("US Equities") and OptiMark, Inc. ("OI"), and the majority owned subsidiary of OI, OptiMark Innovations Inc. ("OII" and collectively, the "Company"), effective as of the Effective Date (as hereinafter defined). This agreement (the "Agreement") sets forth the entire agreement between the Company and you regarding the termination of your employment. Reference is made to that certain employment agreement, dated June 3, 1999, by and between Holdings and you, as amended by that certain amendment, dated June 19, 2001, by and between OI and you (collectively, the "Employment Agreement"). The Company recognizes that without all of the benefits conferred to you under this Agreement, you would have terminated employment sooner than the Company otherwise would have wanted, without rights to the Benefits (as hereinafter defined). In view of the foregoing, the parties hereto agree as follows: 1. OBLIGATIONS. A. Effective Date. The effective date of your resignation from the Company (the "Effective Date") will be the close of business on the date of the earliest to occur of: (i) Friday, May 31, 2002; 2 (ii) your termination for "Cause" (as hereinafter defined); (iii) your death or "Disability" (as hereinafter defined); (iv) an "Event of Default" (as defined in the Bridge Loan Agreement) under Section 8.1(g) of that certain Loan Agreement, dated March 21, 2002 (the "Bridge Loan Agreement"), by and among Holdings, SOFTBANK Capital Partners LP, SOFTBANK Capital Advisors Fund LP and SOFTBANK Capital LP; and (v) completion to the reasonable satisfaction of the board of directors of Holdings, of each of the tasks set forth on Exhibit A hereto. For purposes hereof, (i) "Cause" shall mean (I) fraud, dishonesty, gross negligence, breach of fiduciary duty, or malfeasance by you in connection with the performance of your duties under the Employment Agreement and which results in material harm to the Company as determined by the board of directors of the Company, or (II) your conviction of a felony or crime involving moral turpitude and (ii) "Disability" shall mean your physical or mental inability to render services in connection with your employment for thirty (30) consecutive days from the date of this Agreement. B. Salary; Benefits. Until the Effective Date, you shall continue employment with the Company pursuant to the terms of the Employment Agreement and shall be entitled to all rights and subject to all obligations thereunder. 2. PAYMENT. On the date first written above (the "Execution Date"), you will be immediately entitled to the following (collectively, the "Benefits"): A. Salary. You shall receive an amount in cash equal to your salary from the Execution Date through May 31, 2002, less applicable withholding or other amounts in respect of taxes and 401(k) contributions that you have elected. B. Stay-on Bonus. You shall receive a stay-on bonus payment of fifty thousand dollars ($50,000) cash, less applicable withholding or other amounts in respect of taxes and 401(k) contributions that you have elected. C. Accrued but Unused Vacation. You shall receive a cash payment reflecting 100 hours of your accrued but unused vacation 3 time as of the date of this Agreement less applicable withholding or other amounts in respect of taxes and 401(k) contributions that you have elected. D. Medical Benefits. So long as you are not terminated for Cause, commencing on the Effective Date and continuing through August 31, 2002, the Company shall pay all premiums, excluding customary co-payment amounts, in connection with standard COBRA coverage benefits that will be made available to you; provided, however, that in the event that you commence employment elsewhere with coverage under a medical insurance plan prior to August 31, 2002, then the Company's payment obligations in respect of COBRA shall immediately cease and you shall be obligated to return any premium amounts paid by the Company for periods covered by the medical insurance plan of such subsequent employer. E. Options. So long as you are not terminated for Cause, options to purchase 120,250 shares of Series F Preferred Stock, par value $.01 per share, of Holdings (the "Series F Preferred Stock") previously granted to you pursuant to that certain Stock Option Agreement dated November 14, 2001 (the "Stock Option Agreement"), shall automatically vest and such options (the "Accelerated Options"), together with existing options to purchase 18,500 shares of Series F Preferred Stock currently exercisable by you (the "Vested Options"), shall be exercisable by you for a period of thirty-six (36) months from the Effective Date. In the event that you are terminated for Cause, then you shall have no rights to the Accelerated Options (except Accrued Options (as hereinafter defined)) and your rights to the Vested Options and any other options to purchase Series F Preferred Stock that vest prior to the Effective Date (the "Accrued Options"), shall be governed by Section 1 of the Stock Option Agreement (i.e., the Vested Options and Accrued Options shall be exercisable for ninety (90) days from the Effective Date). F. Laptop Computer and Cellular Telephone. So long as you are not terminated for Cause, you shall receive all right, title and interest in (i) that certain IBM Thinkpad laptop computer (Type 2645-51U, serial number 78-CN147), excluding any proprietary Company software, third party software licensed to the Company and all files, Company electronic mail messages, or other Confidential Information (as hereinafter defined) copied or residing on or in the hard drive and (ii) that certain Nokia model 3390 cellular telephone; provided, however, that your cellular telephone shall be disconnected from any Company calling plan as of the Effective Date and you shall have sole 4 responsibility to subscribe and make all payments for cellular telephone service thereafter. G. Reasonable Fees of Counsel. Upon (i) execution of this Agreement by the parties and (ii) your presentment of an itemized bill for time and disbursements, the Company shall reimburse you for fees of counsel in connection with the negotiation of this Agreement, such fees not to exceed two thousand five hundred dollars ($2,500.00). The amounts owed in respect of the Benefits described in paragraphs 2(A), 2(B) , 2(C), and 2(G) shall be made within one (1) business day of the execution of this Agreement and shall be made by wire transfer to the account on file with the Company to which your salary has been deposited to directly by the Company. In the event that you are terminated for Cause, then you shall repay to the Company the net amount that you received under paragraph 2B hereof. The sums and Benefits being paid to or provided to you pursuant to this paragraph 2 are in lieu of any other payment, obligation, distribution, salary, bonus, incentive plan payment, severance pay, unused accrued vacation pay or any other form of compensation, benefit or damages of any kind otherwise due, owing or payable by the Company to you. You and the Company also acknowledge and agree that, except as detailed in written expense reports that you have submitted or will submit to the Company on or before the Effective Date, or as expressly set forth in this Agreement, no other monetary or other payments or other consideration or benefits are due to you from the Company, whether or not pursuant to any employment agreement between the Company and you. 3. Non-Solicitation; Non-Disclosure; Assignment of Inventions. A. Non-Solicitation. From the Effective Date and during the period of eighteen (18) months from the Effective Date, you agree that you will not, directly or indirectly, as an equity owner, director, employee, consultant, lender, agent or in any other capacity, (i) solicit, induce or entice for employment, retention or affiliation, or recommend to any corporation, entity or other person the solicitation, inducement or enticement for employment, retention or affiliation of, any employee, consultant, independent contractor or other person employed or retained by, or affiliated with, the Company, or any of its affiliates or (ii) engage in any activity intended to terminate, disrupt or interfere with the Company's or 5 any of its affiliate's relationship with a customer, supplier, lessor or other person. B. Non-Disclosure. You hereby acknowledge and agree that during the period of your employment with the Company you were in a confidential relationship with the Company and have had access to confidential information and trade secrets of the Company and its affiliates (collectively, the "Confidential Information"). Confidential Information includes, but is not limited to, all confidential or any proprietary information regarding the Company and its affiliates or any aspect of their respective business or operations, including, but not limited to, customer and client lists, financial information, price lists, pricing strategies, marketing and sales strategies and procedures, computer programs, databases and software, supplier, vendor and service information, personnel information, operating procedures and techniques, business plans and strategies, terms of products strategic alliances (both those in existence and those contemplated), operational techniques, intellectual property strategies, the status of the Company's intellectual property, quality control procedures and systems, internal control procedures, accounting and reporting systems, special projects, employee compensation, personnel, and all other records, files, and information in respect of the Company. You shall use reasonable measures to maintain the confidentiality of all Confidential Information and shall not use or permit the use of, or disclose, discuss, communicate or transmit or permit the disclosure, discussion, communication or transmission of, any Confidential Information except with the express written permission of the Company. This paragraph 3B shall not apply to (i) information that, by means other than your deliberate or inadvertent disclosure, becomes generally known to the public, or (ii) information the disclosure of which is compelled by law (including judicial or administrative proceedings and legal process). In that connection, in the event that you are requested or required (by oral question, interrogatories, requests for information or documents, subpoenas, civil investigative demand or other legal process) to disclose any Confidential Information, you agree to provide the Company with prompt written notice of such request or requirement so that the Company may seek an appropriate protective order or relief therefrom or may waive the requirements of this paragraph 3B. If, failing the entry of a protective order or the receipt of a waiver hereunder, you are, in the opinion of counsel, compelled to disclose Confidential Information under pain of liability for contempt or other censure or penalty, you may disclose such Confidential Information to the extent so required. In the event of a breach or threatened breach by you of any of the provisions of this paragraph 3, the 6 Company shall be entitled to an injunction to be issued by any court or tribunal of competent jurisdiction to restrain you from committing or continuing any such violation. In any proceeding for an injunction, you agree that your ability to answer in damages, or your or the Company's ability to take any other lawful remedial action, shall not be a bar or be interposed as a defense to the granting of a temporary or permanent injunction against you. You acknowledge that the Company will not have an adequate remedy at law in the event of any breach by you as aforesaid and that the Company may suffer irreparable damage and injury in the event of such a breach by you. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedy or remedies available to the Company in respect of such breach or threatened breach. C. Assignment of Inventions. With respect to Intellectual Property (as hereinafter defined) made or conceived by you (either solely or jointly with another or others) during your employment by the Company and which Intellectual Property is in any way based on or related to your work for or on behalf of the Company or otherwise result from work performed for or at the request of the Company: (i) you shall promptly and fully inform the Company of each such item of Intellectual Property in writing, setting forth in detail the procedures employed and the results achieved; (ii) you shall apply, at the Company's request and expense, or at the request and expense of such other person or entity as the Company shall designate, for United States and foreign patents or copyrights or other form of protection either in the Company's name or otherwise as the Company or its designee shall desire; (iii) you agree to and hereby do assign to the Company or such other person or entity as the Company shall designate all of your rights to such Intellectual Property, including but not limited to applications for United States and/or foreign patents or copyrights, and United States and/or foreign patents or copyrights granted upon such Intellectual Property; and (iv) you shall execute and deliver promptly to the Company or its designee (without charge but at the Company's or its designee's expense) such written instruments, and do such other acts, such as giving testimony in support of inventorship, authorship or contribution, as may be reasonably necessary in the opinion of the Company to obtain and maintain United 7 States and/or foreign patents or copyright or other protection and to vest the entire right and title of same in the Company or its designee. As used herein, "Intellectual Property" means inventions, discoveries, concepts and ideas, whether or not patentable, copyrightable, trademarkable, protectable as a mask work, or protectable as a trade secret including, but not limited to any process, method, formula, article, composition, device, product, tool, machine, computer program, source code, object code, apparatus, appliance, design, drawing, practice, manufacture or technique, as well as any improvements thereto and know-how related thereto. To the extent possible, any Intellectual Property made or conceived by you shall be deemed a "work made for hire" within the meaning of ss. 101 of the Federal Copyright Act, as amended. D. It is expressly acknowledged and agreed by you that your obligations set forth in this paragraph 3 were an inducement to the Company to enter into this Agreement and that the scope of the provisions set forth in this paragraph 3 are in each case reasonable and necessary in light of the circumstances. If, for any reason, any aspect of any of the provisions set forth in this paragraph 3 as they apply to you is determined by a court of competent jurisdiction to be unreasonable, illegal, invalid or unenforceable, the provisions shall, to the fullest extent possible, be modified by the court to the minimum extent required by applicable law in order to make the provisions legal, valid and enforceable to the fullest extent permitted by applicable law. You hereby acknowledge and agree that your services were and continue to be of a unique character and you expressly grant the Company the right to enforce the provisions of this paragraph 3 through the use of all remedies available at law or in equity, including, but not limited to, obtaining a court order, injunction or other equitable relief prohibiting you from threatening to breach, breaching or continuing to breach any provision of this paragraph 3, without the Company being required to post a bond or other security or prove any amount of actual damages. If you are adjudicated by a court of competent jurisdiction to have violated any of the provisions of this paragraph 3, the Company shall be excused and discharged from any obligation to make payments to you pursuant to paragraph 2 hereof for the period commencing from the date of the violations. 4. FURTHER OBLIGATIONS. On the Effective Date, you hereby agree to return to the Company your keys to the Company office, photo 8 identification and all Company office equipment and property possessed by you, except for the items set forth in paragraph 2E above. 5. RELEASE. In consideration of the Benefits and the other transactions contemplated herein, for which there was no prior existing obligation, you, for yourself and your relatives, heirs, executors, administrators, personal representatives, agents, and affiliates, as the case may be, hereby release and forever discharge the Company and their respective officers, directors, employees, shareholders, partners, agents, affiliates, successors and assigns, and their respective heirs, executors, administrators, personal representatives, agents, affiliates, successors and assigns, as the case may be (collectively, "Released Parties"), from any and all obligations, actions, causes of action, suits, debts, liabilities, damages, guarantees, judgments, claims and demands whatsoever, whether known or unknown, fixed or contingent, and whether in administrative proceeding, in arbitration, in law or in equity, other than any claim to enforce your rights pursuant to this Agreement, (collectively, the "Claims"), that you ever had, now have, or hereinafter may have against such Released Parties, as the case may be, by reason of any matter, cause or thing whatsoever, including, without limitation, Claims arising under, or in any way related to or connected with: (i) your Employment Agreement and your activities in connection therewith; (ii) all claims to profit participation, dividends, distributions, allocations or other equity or ownership interests in the Company; (iii) any federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance prohibiting, among other things, sexual harassment or discrimination on the basis of sex, race, color, creed, religion, age, disability, national origin, sexual orientation or marital status; (iv) any public policy, contract, tort, or other common law claim or cause of action, including but not limited to breach of implied or express contract, intentional or negligent infliction of emotional distress, negligent misrepresentation, defamation, wrongful discharge; (v) any claim or cause of action for commission, back wages or other compensation, including, but not limited to, commissions, back wages or compensation, related to or arising out of any payments or sums the Company has received or may receive in the future from any source at any time; (vi) any claim or allegation for costs, fees, or other expenses, including attorneys' fees, incurred in any matter or proceeding, except for the attorneys' fees provided for in paragraph 2(G) above. 6. REPRESENTATIONS AND WARRANTIES. Each party hereto represents and warrants to the other party hereto that it has had a full and fair opportunity to seek the advice of legal counsel prior to signing this Agreement and that the parties hereto cannot now or in the future assert that any party had superior bargaining power over the other, as 9 each party has had a full and fair opportunity to ascertain their respective rights and responsibilities hereunder. By signing and returning this Agreement, you acknowledge that you: (a) have had sufficient time to review and consider its terms; (b) have carefully read and fully understand the terms of this Agreement; (c) are entering into this Agreement voluntarily and knowing that you are releasing Claims that you have or may have against the Company; (d) have not assigned any Claims that your have or may have against the Company to any third party; (e) have had a reasonable opportunity to seek advice from an attorney of your choosing prior to signing this Agreement; and (f) release all claims, whether known or unknown, that arise up to and including the date of execution of this agreement in return for the Benefits. 7. INTEGRATION; WAIVER. This Agreement constitutes the entire agreement and understanding among the parties and, except as expressly provided herein, supersedes, terminates and cancels any prior written or oral, express or implied agreements, understandings, arrangements, covenants, communications, negotiations, commitments and representations or warranties by any party hereto or any director, officer, employee, agent, partner or affiliate of any party hereto. This Agreement is not being executed by the parties hereto in reliance upon any representation or warranty not expressly set forth herein. Subject to paragraph 5, this Agreement is intended solely for the benefit of the parties hereto. Subject to paragraph 5, neither this Agreement nor any of the relationships or transactions contemplated hereby shall be deemed to create or enlarge any rights in any parties not a party hereto, under any third-party beneficiary theory or otherwise. Except as otherwise set forth herein, no waiver, amendment, modification or cancellation of any term or condition hereof shall be effective unless executed in writing by the party charged therewith. No written waiver shall excuse the performance of any act other than those specifically referred to therein. The waiver by any party hereto of a breach of any provision of this Agreement by any other party hereto shall not operate or be construed as a waiver of any other breach or provision of this Agreement. 10 8. NO DISPARAGING STATEMENTS. Each party to this Agreement agrees to refrain from making any disparaging statements, either orally or in writing, about the other party or, in the case of the Company, about any of the Company's directors, officers, employees, agents or representatives. 9. CONSULTING. You acknowledge and agree that the Company may, from time to time and on terms and conditions mutually acceptable to the parties, engage you to provide consulting services to the Company on legal matters, including, without limitation, matters related to the intellectual property rights and obligations of the Company. 10. CONFIDENTIALITY. Except for communicating with legal or financial advisors, and except as otherwise may be required by applicable law, the parties will keep confidential the terms and conditions of this Agreement. 11. SEVERABILITY. If any term or terms of this Agreement are declared invalid by any court of competent jurisdiction, the Agreement shall be deemed amended by excluding the invalid term or terms, and all remaining terms shall continue in full force and effect. You agree to execute such amendments as may be necessary to accomplish the intent of this provision, which is to maintain in force all terms of this Agreement to the full extent permitted by law. 12. GOVERNING LAW. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of New Jersey, without regard to the conflicts of laws principles thereof. 13. WAIVER OF JURY TRIAL. To the extent not prohibited by applicable law which cannot be waived, each of the parties hereto hereby waives and covenants that it will not assert (whether as plaintiff, defendant or otherwise), any right to trial by jury in any forum in respect of any issue or action, claim, cause of action or suit (in contract, tort, equity, or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or the subject matter hereof or in any way connected with or related or incidental to the transactions contemplated hereby, in each case whether now existing or hereafter arising, except for issues, actions, claims, causes of action or suits, inquiries, proceedings or investigations arising out of or based solely upon your alleged gross negligence or willful misconduct. Any party hereto may file an original counterpart or a copy of this paragraph 13 with any court as written evidence of the consent of each such party to the waiver of its right to trial by jury. [The remainder of this page is intentionally left blank] Please review this Agreement carefully. If you have any questions about any of the information contained in this Agreement, please call me at (201) 536-7121. Sincerely, OPTIMARK HOLDINGS, INC. /s/Robert J. Warshaw --------------------------- By: Robert J. Warshaw Title: Chief Executive Officer ACCEPTED AND AGREED: /s/Neil G. Cohen - ------------------------------ Name: Neil G. Cohen Date: April 12, 2002 Exhibit A --------- Section 1(A)(v) Tasks --------------------- (a) the closing of the transactions contemplated by that certain Securities Purchase Agreement, dated February 4, 2002, as amended by that certain Amendment dated March 6, 2002, by and between OII and The Ashton Technology Group, Inc.; and (b) the closing of the transactions contemplated by that certain non-binding term sheet for the investment of $10,000,000 of cash by Draper Fisher Jurvetson ePlanet in OII; and (c) the filing with the Securities and Exchange Commission ("SEC") of the Annual Report on Form 10-K of Holdings for the period ended December 31, 2001; and (d) the (I) acceptance by the SEC of the filing of the definitive proxy statement of Holdings pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended and (II) mailing of materials to shareholders of record in connection with the 2002 annual meeting of stockholders of Holdings; and (e) the closing of the transactions contemplated by the Bridge Loan Agreement; and (f) execution and closing of definitive settlement agreements, on terms and conditions acceptable to the board of directors of the Company, covering all matters arising in connection with (I) Finova Capital Corporation v. OptiMark Technologies, Inc., OptiMark, Inc. and OptiMark Holdings, Inc., filed June 15, 2001 in the Superior Court of New Jersey - Hudson County, and (II) Comdisco, Inc. v. OptiMark Technologies, Inc. (now known as OptiMark US Equities, Inc. and Avnet, Inc., filed December 15, 2000 in the Superior Court of the State of Connecticut, Judicial District of Fairfield at Bridgeport; and (g) the written submission of a transition plan covering (I) procedures for accessing and engaging outside counsel to provide legal advice related to routine legal issues and inquiries, including, without limitation, shareholder inquiries, stock transfer requests, vendor inquiries, and intellectual property portfolio management, and (II) the engagement of outside counsel for the purpose of resolving creditor issues and providing legal advice related to bankruptcy issues. EX-99 4 exhibit99.txt CEO CERTIFICATION EXHIBIT 99 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of OptiMark Holdings, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Warshaw, the Chief Executive Officer and the Principal Financial and Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of tHE Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert J. Warshaw --------------------- Robert J. Warshaw Chief Executive Officer /s/ Robert J. Warshaw --------------------- Robert J. Warshaw Principal Financial and Accounting Officer August 26, 2002 -----END PRIVACY-ENHANCED MESSAGE-----