-----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, QKAzcH6NQQp3c5PMv5hH96HUos5/ZVDTFVJrzSkmHup1PJVpCeat4Ta+/3uozLQM A13vkpM3AuqT+PHFtHMu7A== /in/edgar/work/20000814/0000921895-00-000552/0000921895-00-000552.txt : 20000921 0000921895-00-000552.hdr.sgml : 20000921 ACCESSION NUMBER: 0000921895-00-000552 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NYFIX INC CENTRAL INDEX KEY: 0000099047 STANDARD INDUSTRIAL CLASSIFICATION: [3577 ] IRS NUMBER: 061344888 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12292 FILM NUMBER: 696134 BUSINESS ADDRESS: STREET 1: 333 LUDLOW STREET CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2034258000 FORMER COMPANY: FORMER CONFORMED NAME: TRINITECH SYSTEMS INC DATE OF NAME CHANGE: 19940404 10-Q 1 0001.txt QUARTERLY REPORT ON FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to________ Commission File No. 0-21324 NYFIX, INC. (Exact name of registrant as specified in its charter) NEW YORK 06-1344888 (State of incorporation) (I.R.S. Employer identification number) 333 LUDLOW STREET, STAMFORD, CONNECTICUT 06902 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 425-8000 ------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / 24,752,536 shares of Common Stock were issued and outstanding as of July 28, 2000. NYFIX, INC. FORM 10-Q For the quarterly period ended June 30, 2000 CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999 3 Condensed Consolidated Statements of Income (unaudited) for the three month and six month periods ended June 30, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows (unaudited) for the six month periods ended June 30, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 2 NYFIX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2000 1999 ---- ---- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 3,479,802 $ 1,565,649 Accounts receivable - less allowance of $214,000 and $125,000, respectively 10,531,381 7,088,820 Inventories, net 1,273,077 1,303,658 Prepaid expenses and other current assets 617,484 478,641 Due from NYFIX Millennium 675,131 861,970 Receivable from officers 145,720 156,992 ------------- ------------ Total Current Assets 16,722,595 11,455,730 EQUIPMENT, net 6,557,924 5,873,037 INVESTMENT IN NYFIX MILLENNIUM 19,500,000 19,500,000 OTHER ASSETS, net 2,375,942 1,999,258 ------------- ------------ TOTAL ASSETS $ 45,156,461 $38,828,025 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,540,877 $ 1,845,996 Accrued expenses 1,890,685 1,269,070 Current portion of debt 1,000,000 500,000 Advance billings 4,928,106 3,178,636 Payroll and other taxes payable 170,883 149,043 ------------- ------------ Total Current Liabilities 9,530,551 6,942,745 LONG-TERM DEBT 1,500,000 2,000,000 ------------- ------------ Total Liabilities 11,030,551 8,942,745 ------------- ------------ STOCKHOLDERS' EQUITY: 10% Convertible preferred stock - par value $1.00; 5,000,000 shares authorized; - - none issued Common stock - par value $.001; 60,000,000 authorized, 24,694,036 and 15,903,302 shares issued and outstanding, respectively 24,694 15,903 Warrants 227,283 189,509 Additional paid-in capital 37,980,359 35,681,437 Accumulated deficit (3,529,126) (5,369,945) Due from officers and directors (577,300) (631,624) ------------ ----------- Total Stockholders' Equity 34,125,910 29,885,280 ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,156,461 $38,828,025 ============ ===========
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements. 3 NYFIX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Month Period Ended Six Month Period Ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- REVENUES: Sales $1,222,646 $1,041,267 $2,148,087 $1,874,506 Subscription revenues 3,649,670 1,575,478 6,566,170 2,726,050 Service contracts 662,012 424,821 1,200,079 846,172 ----------- ------------ ----------- ----------- Total Revenues 5,534,328 3,041,566 9,914,336 5,446,728 ----------- ------------ ----------- ----------- COST OF REVENUES: Cost of sales 216,901 247,785 390,923 316,620 Cost of subscription revenues 1,162,147 604,086 2,002,196 1,072,778 Cost of service contracts 158,861 125,078 294,838 250,442 ----------- ------------ ----------- ----------- Total Cost of Revenues 1,537,909 976,949 2,687,957 1,639,840 ----------- ------------ ----------- ----------- GROSS PROFIT 3,996,419 2,064,617 7,226,379 3,806,888 ----------- ------------ ----------- ----------- EXPENSES: Selling, general and administrative 2,453,788 1,732,643 4,557,474 3,296,717 Depreciation and amortization 254,081 147,250 482,360 280,715 ----------- ------------ ----------- ----------- Total Expenses 2,707,869 1,879,893 5,039,834 3,577,432 ----------- ------------ ----------- ----------- EARNINGS FROM OPERATIONS 1,288,550 184,724 2,186,545 229,456 Interest expense (65,888) (49,461) (131,970) (99,246) Interest and other income 50,819 22,577 75,484 60,607 ----------- ------------ ----------- ----------- EARNINGS BEFORE PROVISION FOR INCOME TAXES 1,273,481 157,840 2,130,059 190,817 PROVISION FOR INCOME TAXES 196,422 7,675 289,240 10,475 ----------- ------------ ----------- ----------- NET EARNINGS $1,077,059 $ 150,165 $1,840,819 $ 180,342 =========== ============ =========== =========== BASIC EARNINGS PER COMMON SHARE $0.04 $0.01 $0.08 $0.01 =========== ============ =========== =========== BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 24,286,943 21,210,883 24,317,960 21,197,484 =========== ============ =========== =========== DILUTED EARNINGS PER COMMON SHARE $0.04 $0.01 $0.07 $0.01 =========== ============ =========== =========== DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 26,481,865 22,340,835 26,416,915 22,187,495 =========== ============ =========== ===========
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements. 4 NYFIX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Month Period Ended June 30, 2000 June 30, 1999 ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,152,311 $ 74,245 ----------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for equipment (1,686,605) (1,946,805) Payments for software development costs and other assets (913,590) (718,867) ----------- ------------- Net cash used in investing activities (2,600,195) (2,665,672) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 2,362,037 148,369 ----------- ------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,914,153 (2,443,058) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,565,649 3,948,004 ----------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,479,802 $ 1,504,946 =========== =============
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements. 5 NYFIX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION NYFIX, Inc. and subsidiary (the "Company") is listed on the Nasdaq Stock Market under the symbol NYFX. Prior to March 6, 2000, the Company's common stock was traded on the American Stock Exchange under the ticker symbol NYF. 2. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. In the opinion of management, all adjustments, which comprise normal and recurring accruals considered necessary for a fair presentation, have been included. Operating results for the three and six month periods ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. Certain 1999 balances have been reclassified to conform to the 2000 presentation. 3. CAPITAL STOCK On March 13, 2000, the Board of Directors authorized a three for two stock split in the form of a 50% stock dividend to stockholders of record on March 24, 2000, payable April 4, 2000. All share and per share information included in the accompanying consolidated financial statements have been retroactively restated for the stock split. 4. PER SHARE INFORMATION The Company's basic earnings per share ("EPS") is calculated based on net earnings available to common stockholders and the weighted-average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. 6
Three Month Six Month Period Ended Period Ended ------------------------------------------------------------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ------------------------------------------------------------------------------------- Net Earnings $ 1,077,059 $150,165 $ 1,840,819 $180,342 ====================================== ======================================== Basic Weighted Average Shares Outstanding 24,286,943 21,210,883 24,317,960 21,197,484 -------------------------------------- ---------------------------------------- Basic Earnings per Common Share $0.04 $0.01 $0.08 $0.01 -------------------------------------- ---------------------------------------- Dilutive Options 2,128,477 934,965 2,033,353 795,024 Dilutive Warrants 66,445 194,987 65,602 194,987 -------------------------------------- ---------------------------------------- Diluted Weighted Average Shares Outstanding 26,481,865 22,340,835 26,416,915 22,187,495 ====================================== ======================================== Diluted Earnings per Common Share $0.04 $0.01 $0.07 $0.01 ====================================== ========================================
5. INCOME TAXES The Company's projected annual Federal income tax provision has been offset through the utilization of net operating loss carryforwards. The Company's income tax provision consists of estimated state, local, and foreign income taxes. 6. INVENTORIES Inventories consist of parts, finished goods and minor materials and are stated at the lower of cost, determined on an average cost basis, or market.
June 30, December 31, 2000 1999 ---- ---- Parts $ 768,060 $ 828,259 Finished goods 587,017 557,399 Less: allowance for obsolescence 82,000 82,000 ----------- ----------- Total $ 1,273,077 $ 1,303,658 =========== ===========
7. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes standards for the accounting and reporting for derivative instruments and for hedging activities and requires the recognition of all derivatives as assets or liabilities measured at their fair value. Gains or losses resulting from changes in the fair value of derivatives would be recognized in earnings in the period of change unless certain hedging criteria are met. We do not expect the Statement to have a material impact on our consolidated financial statements. The Financial Accounting Standards Board issued SFAS No. 137, which deferred the effective date for SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. 7 In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. On June 26, 2000, the SEC issued SAB 101B to defer the effective date of implementation of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 31, 1999. The Company is required to adopt SAB 101 by December 31, 2000. The Company does not expect the adoption of SAB 101 to have a material impact on its consolidated financial statements. 8. BUSINESS SEGMENT INFORMATION The Company has two principal business groups: Equities and Futures & Options. The Equities Group operates primarily out of Stamford/New York offices, while the Futures & Options Group operates primarily out of the London and Chicago offices. However, each office has the opportunity to sell all of the Company's products. The Company views each office as its own business segment and measures its performance based on the revenues of each location. The Company makes decisions on each segment based on gross profit. Information on reportable segments is as follows (in 000's):
Three Month Period Ended Six Month Period Ended --------------------------------------------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ------------------------------ ---------------------------- Revenues: Stamford/New York $4,192 $2,429 $7,709 $4,107 London 1,098 574 1,823 1,298 Chicago 244 39 382 42 Inter-Segment Sales - 21 5 21 Inter-Segment Elimination - (21) (5) (21) ------------------------------ ---------------------------- Total Revenues $5,534 $3,042 $9,914 $5,447 ============================== ============================ Gross Profit: Stamford/New York $2,787 $1,560 $5,254 $2,618 London 982 470 1,622 1,153 Chicago 227 35 350 36 ------------------------------ ---------------------------- Gross Profit $3,996 $2,065 $7,226 $3,807 ============================== ============================
9. JOINT VENTURE On October 27, 1999, the Company announced the formation of NYFIX Millennium, L.L.C. ("NYFIX Millennium") with a consortium of seven leading international investment banks and brokerage firms. NYFIX owns 50% of the joint venture and the seven other investors own the remaining 50%. NYFIX Millennium intends to operate as an alternative trading system. All of the members of the consortium, including the Company, have invested $2,000,000 each in NYFIX Millennium. Each non-NYFIX, Inc. partner received 281,250 shares of common stock of the Company for an aggregate 1,968,750 shares in return for granting the Company an option allowing the Company the right to purchase up to an additional 30% of NYFIX Millennium. The Company may exercise the option through the exchange of one share of the Company's common stock for each unit to be purchased, subject to adjustments in the event of any 8 split, combination, reclassification or other adjustments to the capital structure of the Company. NYFIX's total investment in the joint venture of $19,500,000 consists of $17,500,000 (1,968,750 shares x $8.89) plus the capital cash contribution of $2,000,000. Pursuant to the Operating Agreement, the first $14,000,000 in losses will be allocated to the seven non-NYFIX, Inc. investors, which equals the extent of their capital investment in NYFIX Millennium. The Company has incurred operating and capital costs on behalf of NYFIX Millennium. Such costs are reflected as Due from NYFIX Millennium on the Company's balance sheet. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto. Historical results and percentage relationships are not necessarily indicative of the operating results for any future period. The Company commenced its present business operations in January 1991 through the acquisition of a software license for its Guided-Input(R) Touchpad system. Since that time, the Company has transitioned from a hardware vendor to a software development company focusing exclusively on applications for the financial marketplace. The Company provides a complete line of workstation products for the financial trading desk environment and its systems provide order management and routing software for firms engaged in financial trading. The Company currently offers its trading products (integrated systems including hardware and software) together with linkage through its NYFIX data center. The data center is a communication infrastructure enabling the Company to provide its customers with global electronic connectivity for order routing and allows the Company to deploy and monitor its systems and services from a single location. Customers subscribe to various products, paying a monthly fee per terminal for the Company's integrated software systems. Most contracts provide the customer with a basic system or infrastructure, via the Company's NYFIX data center and are entered into by the customer with the intention to expand the level of services subscribed to, once the basic system and infrastructure are operational. Subscription revenue contracts range from one to three year periods. The Company begins recording subscription revenue once installation is complete. In addition to significant logistical improvements in delivery and support of its products, the Company expanded its business to offer the industry a central electronic meeting place between the buy-side and sell-side, while simultaneously providing a single point of universal access to different exchange floor environments. Management has made a considerable effort with respect to an expansion of its operations, development of various trading systems and changes to its business model to that of a subscription-based product offering. The Company believes this expansion of personnel, facilities, product portfolio and subscription-based model will continue to benefit the Company and its future growth. In the previous model, the Company would only receive revenue one time for products or services sold. It is important to note that this transition is causing revenue to be recognized over a longer period of time than the previous capital sales model. Management believes our subscription business model has strengthened the Company's market share as well as its financial position going forward. On October 27, 1999, the Company announced the formation of NYFIX Millennium LLC ("NYFIX Millennium") with a consortium of leading international banks and brokerage firms. NYFIX Millennium is registering as a Broker/Dealer and plans to operate in compliance with Regulation ATS. NYFIX Millennium is an "Integrated ATS, Exchange Access and Intelligent `Best Execution' Order-Routing System" designed to provide the financial community with "Best-Execution." NYFIX Millennium is built upon NYFIX's proprietary "Super FIX Engine" technology and existing NYFIX network infrastructure. NYFIX Millennium is a Hybrid Market System leveraging new regulation and technology with the power of the traditional markets. 9 Revenues Overall revenue for the three and six months ended June 30, 2000 exceeded the same periods in 1999 by 82% in both periods, from $3 million to $5.5 million and $5.4 million to $9.9 million, respectively. Each component of revenue improved period over period. Subscription revenues was the most improved component of revenue demonstrating that the Company's overall strategy to lease its products has ensured steady growth in subscription revenue period over period. Subscription revenues increased 132% over the three-month period and 141% over the six-month period, or $2.1 and $3.8 million over the same respective periods in 1999. Service revenues increased 56% and 42% over the comparable three and six month periods in 1999. The increase in service revenues was principally due to the increase in subscription revenues, partially offset by a decrease in service revenue from sales resulting from the Company's strategy to focus on subscription basis revenue. Sales revenue incurred a modest increase of 17% and 15% over the comparable three and six month periods in 1999. Cost of Revenues While the Company is primarily focusing on leasing its equity software products, its derivatives products have been very successful using its capital sales model. From time to time, the Company generates capital sales on its hardware products. Cost of sales decreased for the comparable three-month period by 12%, but increased over the comparable six-month period by 23%. This increase over the six-month period was primarily due to a larger percentage of hardware sales for the period ended June 30, 2000 over the same period in 1999. The cost of subscription revenue increased over the three and six month periods by $558,000 and $929,000, or 92% and 87%, respectively. These increases are attributable to an increased number of customers, translating into increased costs of subscriptions. Included in cost of subscriptions are product enhancement amortization costs (development costs for enhancements to existing products) which have increased by $128,000 or 76% from $167,000 to $295,000 over the comparable three month period in 1999 and $236,000 or 79% from $300,000 to $536,000 over the comparable six month period. Also included in cost of subscriptions is depreciation expense for subscription-based equipment of approximately $290,000 and $521,000 for the three and six month periods, respectively. This is a 129% increase or $164,000 over the comparable three months and 125% or $290,000 over the comparable six-month period. Cost of service increased for both the three and six month periods by $34,000 and $44,000 or 27% and 18%, respectively. Increases for both the cost of subscriptions and the cost of service can be linked directly to the increases in subscription and service revenues. Gross Profit Overall gross profit improved over the three and six month periods by $1.9 and $3.4 million or 94% and 90%, respectively. This represents a 4-point margin improvement from 68% to 72% for the same three-month period in 1999, and a 3-point margin improvement from 70% to 73% for the six-month period. The increase in gross profit margin can be attributable to a growing market for our FixTrader product. As of June 30, 2000, our FixTrader product has grown to over 580 desk-tops. This is an increase of approximately 350 units from a year ago and 100 units over the previous first quarter. Sales revenue, subscription revenue and service revenue all had positive gross profit improvements for the three-month period of 27%, 156%, and 68%, respectively. The six-month gross profit improvements were 13%, 176%, and 52%, respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses for the three and six month periods ended June 30, 2000 were $2.5 and $4.6 million as compared to $1.7 and $3.3 million in the comparable periods in 1999. Part of the increase in expenses for the Company is from a continuing expansion of operations in both the U.S. and London. As a result of the Company's continued growth, the Company has experienced increases in salaries and related personnel costs. The Company's recruitment effort continues to strengthen the Company's infrastructure and position the Company to respond to increasing market and revenue opportunities. In addition, during June 1999, the Company relocated its London office, which resulted in higher office occupancy costs. Management continues to believe that the ongoing investment in development of the NYFIX data center, and its services, are designed to better leverage the existing products together with providing additional sources of revenue. The Company has improved its customer service by 10 adding resources in its installation and project management organization. Research and development (new explorative research) expenses for the three and six month periods ended June 30, 2000 were $102,000 and $214,000, as compared to $127,500 and $144,000 for the comparable periods in 1999, a decrease of 20% for three months ended and an increase of 48% for six months ended. Depreciation and Amortization Expense Depreciation and amortization expense for the three-and six month periods ended June 30, 2000 were $254,000 and $482,000 as compared to $147,000 and $281,000 in the comparable periods in 1999, an increase of 73% and 72%, respectively. Such increases principally reflect the continued investment in the Company's infrastructure in its NYFIX data center. Interest Expense Interest expense for the three and six month periods ended June 30, 2000 were $66,000 and $132,000 as compared to $49,000 and $99,000 for the comparable periods in 1999. The increase was primarily due to higher balances outstanding on the Company's line of credit during 2000, combined with an increase in interest rates during 2000 and the effect of increased financing expense on the warrants issued in connection with the line of credit resulting from the higher balances outstanding on the line of credit during 2000. Interest and Other Income Interest and other income primarily consists of interest earned on cash balances and notes receivable. Interest income for the three and six-month periods ended June 30, 2000 was $51,000 and $75,000, as compared to $23,000 and $61,000 for the comparable periods in 1999. The increase in interest income was principally due to increased average cash balances during the three and six months ended June 30, 2000. Along with bank interest, interest income is also being derived through notes receivable from officers and directors. Net Earnings Net earnings for the three and six months ended June 30, 2000 were $1.1 and $1.8 million, respectively, or $0.04 per basic and diluted common share for three months and $0.08 per basic common share and $0.07 per diluted common share for six months. Net earnings for the three and six month periods in 1999 were $150,000 and $180,000, respectively, or $0.01 per basic and diluted common share for both periods. The net earnings principally resulted from the higher level of revenues and margins, stable product costs and nominal increases in Selling, General and Administrative expenses. Liquidity and Capital Resources The Company's primary source of liquidity has been equity capital and draw downs from its line of credit. At June 30, 2000 cash balances increased to $3.5 million from $1.6 million at December 31, 1999 as a result of the increase in net earnings and the exercise of options and warrants, partially offset by the acquisition of equipment and other assets. The Company at June 30, 2000 had total debt of $2.5 million, which represents amounts drawn down from its line of credit. In addition, at June 30, 2000, the Company had no material commitments for capital expenditures or inventory purchases. The Company believes that with its available capital and anticipated funds generated from operations it will be able to fund its cash needs through the end of 2000 without the need for additional capital or financing. The Company intends to utilize its projected positive financial position to internally finance its continued development activities and anticipated sales growth. The Company's financial requirements and its ability to meet them thereafter will depend largely on its future financial performance. However, in the event the Company's operations grow more rapidly than anticipated and do not generate cash to the extent currently anticipated by management of the Company, it is possible 11 that the Company could require additional funds beyond 2000. At this time, the Company does not know what sources, if any, would be available to it for such funds, if required. Working Capital At June 30, 2000 and December 31, 1999 the Company had working capital of $7.2 million and $4.5 million, respectively. The Company's present capital resources include proceeds from its September 1999 and November 1998 private placement of common stock and drawings from its bank credit facility. Cash Provided by / Used in Operating Activities During the six months ended June 30, 2000, net cash provided by operations were $2.2 million as compared to net cash provided by operations for the six months ended June 30, 1999 of $74,000. This increase is primarily due to net earnings of $1.8 million for the six months ended June 30, 2000. Cash Used in Investing Activities During the six months ended June 30, 2000 and 1999, net cash used in investing activities was $2.6 million and $2.7 million, respectively, and principally represents payments for the purchases of equipment related to the Company's data center and subscription equipment and payments related to product enhancement costs for the Company's product portfolio. Proceeds From Financing Activities During the six months ended June 30, 2000 and 1999, proceeds from financing activities were $2.4 million and $148,000, respectively. The increase is primarily due to the exercise of options and warrants. Seasonality The Company believes that its operations are not significantly affected by seasonality. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes standards for the accounting and reporting for derivative instruments and for hedging activities and requires the recognition of all derivatives as assets or liabilities measured at their fair value. Gains or losses resulting from changes in the fair value of derivatives would be recognized in earnings in the period of change unless certain hedging criteria are met. We do not expect the Statement to have a material impact on our consolidated financial statements. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. On June 26, 2000, the SEC issued SAB 101B to defer the effective date of implementation of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 31, 1999. The Company is required to adopt SAB 101 by December 31, 2000. The Company does not expect the adoption of SAB 101 to have a material impact on its consolidated financial statements. Risk Factors: Forward Looking Statements This document contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to market and develop its products. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no 12 assurance that the forward-looking statements included in this document will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. PART II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meeting of Shareholders of the Company was held on June 5, 2000. Votes were cast with respect to the Proposals described in the Proxy Statement as follows: Proposal 1 - Election of Directors for a term of one year. Name For Withheld Vote ---- --- ------------- Peter K. Hansen 16,123,118 953,758 Dean G. Stamos 16,742,831 334,045 Carl E. Warden 16,744,269 332,607 Proposal 2 - To approve an amendment to the Company's Amended and Restated 1991 Incentive and Nonqualified Stock Option Plan. For 16,603,415 Against 449,727 Abstain 23,734 Proposal 3 - To ratify the appointment of Deloitte & Touche LLP as auditors of the Company for the year 2000. For 16,300,265 Against 768,900 Abstain 7,711 13 Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS 27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for information purposes only and not filed. (b) REPORTS ON FORM 8-K On April 28, 2000 the Company filed a current report on Form 8-K relating to the change in its certifying accountants. 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 thereunto duly authorized. NYFIX, INC. (Registrant) By: /s/ Richard A. Castillo ------------------------------------- Richard A. Castillo Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) 14 EX-27 2 0002.txt ARTICLE 5 FDS FOR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 3,479,820 0 10,745,381 214,000 1,273,077 16,722,595 10,258,343 3,700,419 45,156,461 9,530,551 0 0 0 24,694 34,101,216 45,156,461 2,148,087 9,914,336 2,687,957 7,727,791 0 0 131,970 2,130,059 289,240 1,840,819 0 0 0 1,840,819 0.08 0.07
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