eTrade 2000 Annual Report Download - page 76

collateral and requires certain disclosures, but it carries over most of SFAS No. 125’ s provisions without reconsideration. SFAS No.
140 is effective for transactions after March 31, 2001. The Company is currently evaluating the impact of SFAS No. 140 to our
consolidated financial statements.
3. BUSINESS COMBINATIONS
Poolings of Interests
VERSUS
On August 28, 2000, the Company completed the acquisition of VERSUS, a Canadian-based provider of electronic securities trading
services for institutional and retail investors and owner of the E*TRADE Canada license, in a share exchange. Prior to the acquisition,
VERSUS had been a strategic partner of E*TRADE, holding the rights to the E*TRADE Canada license since 1997. Through the
acquisition of VERSUS, the Company will increase its retail and institutional client base and be able to incorporate the technology
underlying the VERSUS Network, a scalable proprietary electronic trading platform, into its global cross-border trading platform.
Each
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VERSUS shareowner received approximately .725 shares of E*TRADE common stock or .725 shares of EGI Canada Corporation that
are exchangeable on a one-for-one basis for common stock of E*TRADE (the “Exchangeable Shares” see Note 16). Options held by
VERSUS employees were assumed by E*TRADE and, upon exercise, are convertible into approximately .725 shares of E*TRADE
common stock. In total, 10,644,223 Exchangeable Shares were authorized for issuance in an exchange valued at approximately $173.9
million. The acquisition was accounted for as a pooling of interests, and accordingly, the historical consolidated financial statements of
the Company have been restated to include the financial position, results of operations, and cash flows of VERSUS for all periods
presented. No significant adjustments were made to conform the consolidated financial statements of VERSUS from accounting
principles generally accepted in Canada to accounting principles generally accepted in the United States of America or to conform the
accounting policies of the entities. All intercompany transactions related to the licensing arrangement between E*TRADE and
VERSUS and the prior investment in VERSUS by E*TRADE have been eliminated in all periods presented.
ETFC
On January 12, 2000, the Company completed the acquisition of Telebanc Financial Corporation (now ETFC). ETFC is the holding
company for the Bank, formerly Telebank, an Internet-based federally chartered savings bank. Under the terms of the agreement,
ETFC shareowners received 1.05 shares of E*TRADE common stock for each share of ETFC common stock, representing a total of
35,671,622 shares of the Company’ s common stock. The Company also assumed all outstanding ETFC options, which were converted
to options to purchase approximately 5,494,000 shares of the Company’ s common stock. Prior to the acquisition, ETFC reported on a
calendar year basis. Fiscal 1998 includes the results of ETFC for the twelve months ended December 31, 1998. Fiscal 1999 includes
the results of ETFC for the twelve months ended September 30, 1999. The results of operations for the quarter ended December 31,
1998 (gross revenues of $37,758,000, net revenues of $8,905,000 and net income of $655,000), have been included in both fiscal
1999 and 1998, and are reflected as an adjustment to retained earnings in fiscal 1999. The acquisition was accounted for as a pooling
of interests and, accordingly, all prior financial data of the Company has been restated to include the historical operations of ETFC. No
adjustments were required to conform accounting policies of the entities. There were no significant intercompany transactions
requiring elimination for any periods presented.
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The following table shows the historical results of the Company, ETFC and VERSUS for the periods prior to the consummation of the
acquisitions of the entities by E*TRADE (in thousands):
Net Revenues Income (Loss)
Before Cumulative
Effect of
Accounting
Change and
Extraordinary
Loss
Net Income
(Loss)
Fiscal year ended September 30, 2000
E*TRADE Group $ 1,317,104 $ 26,364 $ 26,364
ETFC (through December 31, 2000) 23,423 423 423
2002. EDGAR Online, Inc.