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.
<PAGE>
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
<PAGE>
NYFIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
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
============ ===========
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
3
<PAGE>
NYFIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Month Period Ended Six Month Period Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
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
=========== ============ =========== ===========
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
4
<PAGE>
NYFIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Month Period Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
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
=========== =============
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
5
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
Three Month Six Month
Period Ended Period Ended
-------------------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
====================================== ========================================
</TABLE>
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.
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
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
=========== ===========
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
Three Month Period Ended Six Month Period Ended
---------------------------------------------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------------------------ ----------------------------
Revenues:
<S> <C> <C> <C> <C>
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
============================== ============================
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
