**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

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**ý****Quarterly Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934**

** **

**For the quarterly period ended June 30, 2003**

** **

**Or**

** **

**o****Transition Report Pursuant to Section 13 or 15(d) of****the Securities Exchange Act of 1934**

** **

**For the transition period from             to             **

 

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**Commission file number 0-13093**

** **

I.R.S. Employer Identification Number **36-3131704**

 

**HYPERFEED TECHNOLOGIES, INC.**

(aDelaware Corporation)

 

**300 S. Wacker, Suite 300**

**Chicago, Illinois 60606**

**Telephone (312) 913-2800**

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ý   No o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inRule 12b-2 of the Exchange Act).  Yes o   No ý.

 

Asof August 13, 2003, the registrant had 3,043,805 shares of $.001 par valuecommon stock outstanding.

 

 

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HYPERFEED TECHNOLOGIES, INC.

 

INDEX

 
| PART I.  | Financial Information                                                                                                |
|----------|----------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                 |
| Item 1.  | Consolidated Balance Sheets  as of June 30, 2003 (unaudited) and December 31, 2002                                   |
|     |                                                                                                                 |
|     | Consolidated  Statements of Operations for the three and six month periods ended  June 30, 2003 and 2002 (unaudited) |
|     |                                                                                                                 |
|     | Consolidated  Statements of Cash Flows for the six month periods ended   June 30, 2003 and 2002 (unaudited)          |
|     |                                                                                                                 |
|     | Notes  to Unaudited Interim Consolidated Financial Statements                                                        |
|     |                                                                                                                 |
| Item 2.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                          |
|     |                                                                                                                 |
| Item 3.  | Quantitative  and Qualitative Disclosures about Market Risk                                                          |
|     |                                                                                                                 |
| Item  4. | Controls and Procedures                                                                                              |
|     |                                                                                                                 |
| PART II. | Other  Information                                                                                                   |
|     |                                                                                                                 |
| Item 1.  | Legal  Proceedings                                                                                                   |
|     |                                                                                                                 |
| Item 2.  | Changes in  Securities and Use of Proceeds                                                                           |
|     |                                                                                                                 |
| Item 4.  | Submission  of Matters to a Vote of Security Holders                                                                 |
|     |                                                                                                                 |
| Item 5.  | Other  Information                                                                                                   |
|     |                                                                                                                 |
| Item  6. | Exhibits and Reports  on Form 8-K                                                                                    |
|     |                                                                                                                 |
|     | Company’s Signature Page                                                                                        |

 

2

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HYPERFEEDTECHNOLOGIES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

June30, 2003 and December 31, 2002

 
|                                                                                                                                                             |   | **June 30,  2003** |      | **December 31,  2002** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|------------------------|--------|
|                                                                                                                                                             |   | **(Unaudited)**    |      | **(Audited)**          |   |
| **Assets**                                                                                                                                                       |   |               |      |                   |   |
| **Current Assets**                                                                                                                                               |   |               |      |                   |   |
| Cash and cash equivalents                                                                                                                                        |   | $                  | 946,529   |                   | $      | 1,096,711 |   |
| Accounts receivable, less allowance for doubtful  accounts of:2003:  $104,715; 2002: $82,355                                                                     |   | 638,759            |      | 700,942                |   |
| Notes receivable, less allowance for doubtful  accounts of:2003:  $75,000; 2002: $150,000                                                                        |   | 249,571            |      | 199,142                |   |
| Prepaid expenses and other current assets                                                                                                                        |   | 429,046            |      | 328,128                |   |
| **Total Current Assets**                                                                                                                                         |   | 2,263,905          |      | 2,324,923              |   |
|                                                                                                                                                             |   |               |      |                   |   |
| Property and equipment                                                                                                                                           |   |               |      |                   |   |
| Computer equipment                                                                                                                                               |   | 2,371,096          |      | 3,345,614              |   |
| Communication equipment                                                                                                                                          |   | 1,359,624          |      | 1,463,954              |   |
| Furniture and fixtures                                                                                                                                           |   | 82,839             |      | 108,947                |   |
| Leasehold improvements                                                                                                                                           |   | 531,809            |      | 531,397                |   |
|                                                                                                                                                             |   | 4,345,368          |      | 5,449,912              |   |
| Less: Accumulated depreciation and amortization                                                                                                                  |   | (2,896,565         | )         | (3,762,376             | )      |
|                                                                                                                                                             |   | 1,448,803          |      | 1,687,536              |   |
| Notes receivable, less allowance for doubtful  accounts of: 2003: $75,000                                                                                        |   | 99,571             |      | —                 |   |
| Intangible assets, net of accumulated  amortization of:  2003: $40,000; 2002: $10,000                                                                            |   | 140,000            |      | 170,000                |   |
| Software development costs, net of accumulated  amortization of:  2003: $2,637,258; 2002: $3,189,313                                                             |   | 1,913,736          |      | 2,013,703              |   |
| Deposits and other assets                                                                                                                                        |   | 64,614             |      | 99,428                 |   |
| **Total Assets**                                                                                                                                                 |   | $                  | 5,930,629 |                   | $      | 6,295,590 |   |
|                                                                                                                                                             |   |               |      |                   |   |
| **Liabilities and Stockholders’  Equity**                                                                                                                   |   |               |      |                   |   |
| **Current Liabilities**                                                                                                                                          |   |               |      |                   |   |
| Note payable                                                                                                                                                     |   | $                  | 23,011    |                   | $      | — |   |
| Accounts payable                                                                                                                                                 |   | 1,314,638          |      | 1,249,350              |   |
| Accrued expenses                                                                                                                                                 |   | 318,946            |      | 717,519                |   |
| Accrued restructuring charge                                                                                                                                     |   | 165,884            |      | 405,301                |   |
| Accrued compensation                                                                                                                                             |   | 148,437            |      | 106,576                |   |
| Unearned revenue                                                                                                                                                 |   | 1,054,884          |      | 1,173,402              |   |
| **Total Current Liabilities**                                                                                                                                    |   | 3,025,800          |      | 3,652,148              |   |
|                                                                                                                                                             |   |               |      |                   |   |
| Note payable, less current portion                                                                                                                               |   | 44,104             |      | —                 |   |
| Deferred rent                                                                                                                                                    |   | 289,743            |      | 36,089                 |   |
| Unearned revenue, less current portion                                                                                                                           |   | 17,303             |      | 12,536                 |   |
| **Total Noncurrent Liabilities**                                                                                                                                 |   | 351,150            |      | 48,625                 |   |
| **Total Liabilities**                                                                                                                                            |   | 3,376,950          |      | 3,700,773              |   |
|                                                                                                                                                             |   |               |      |                   |   |
| **Stockholders’ Equity**                                                                                                                                    |   |               |      |                   |   |
| Common stock, $.001 par value; authorized  50,000,000 shares;issued  and outstanding 3,043,805 shares at June 30, 2003 and 2,503,069 shares at December 31, 2002 |   | 3,044              |      | 2,503                  |   |
| Additional paid-in capital                                                                                                                                       |   | 46,039,300         |      | 44,585,588             |   |
| Accumulated deficit                                                                                                                                              |   | (43,488,665        | )         | (41,993,274            | )      |
| **Total Stockholders’ Equity**                                                                                                                              |   | 2,553,679          |      | 2,594,817              |   |
|                                                                                                                                                             |   |               |      |                   |   |
| **Total Liabilities and  Stockholders’ Equity**                                                                                                             |   | $                  | 5,930,629 |                   | $      | 6,295,590 |   |

 

See Notes to Unaudited Interim ConsolidatedFinancial Statements.

 

3

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HYPERFEEDTECHNOLOGIES, INC. AND SUBSIDIARY

Consolidated Statements ofOperations(Unaudited)

 
|                                                         |   | **For The Three Months Ended  June 30,** |      | **For The Six Months Ended  June 30,** |   |
|--------------------------------------------------------------|--------|------------------------------------------|-----------|----------------------------------------|--------|
|                                                         |   | **2003**                                 |      | **2002**                               |   | **2003** |   | **2002** |   |
| **Revenue**                                                  |   |                                     |      |                                   |   |   |   |   |   |
| HyperFeed Services                                           |   | $                                        | 2,847,394 |                                   | $      | 4,183,725 |   | $ | 5,877,100 |   | $ | 8,914,021 |   |
| PCQuote Services                                             |   | 304,480                                  |      | 371,278                                |   | 624,608 |   | 820,025 |   |
| **Total Revenue**                                            |   | 3,151,874                                |      | 4,555,003                              |   | 6,501,708 |   | 9,734,046 |   |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Direct Cost of Services**                                  |   |                                     |      |                                   |   |   |   |   |   |
| HyperFeed Services                                           |   | 2,141,994                                |      | 2,390,408                              |   | 4,285,081 |   | 5,004,416 |   |
| PCQuote Services                                             |   | 49,490                                   |      | 477,423                                |   | 109,862 |   | 969,988 |   |
| **Total Direct Cost of Services**                            |   | 2,191,484                                |      | 2,867,831                              |   | 4,394,943 |   | 5,974,404 |   |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Gross Margin**                                             |   | 960,390                                  |      | 1,687,172                              |   | 2,106,765 |   | 3,759,642 |   |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Operating Expenses**                                       |   |                                     |      |                                   |   |   |   |   |   |
| Sales                                                        |   | 466,961                                  |      | 437,586                                |   | 903,725 |   | 985,511 |   |
| General and administrative                                   |   | 626,275                                  |      | 722,131                                |   | 1,185,077 |   | 1,305,177 |   |
| Product and market development                               |   | 544,810                                  |      | 618,551                                |   | 1,023,757 |   | 1,191,825 |   |
| Depreciation and amortization                                |   | 268,671                                  |      | 434,099                                |   | 539,436 |   | 900,366 |   |
| **Total Operating Expenses**                                 |   | 1,906,717                                |      | 2,212,367                              |   | 3,651,995 |   | 4,382,879 |   |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Loss from Operations**                                     |   | (946,327                                 | )         | (525,195                               | )      | (1,545,230 | ) | (623,237 | ) |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Other Income (Expense)**                                   |   |                                     |      |                                   |   |   |   |   |   |
| Interest income                                              |   | 3,205                                    |      | 6,051                                  |   | 6,078 |   | 12,526 |   |
| Interest expense                                             |   | (312                                     | )         | —                                 |   | (312 | ) | (2,772 | ) |
| **Net Other Income**                                         |   | 2,893                                    |      | 6,051                                  |   | 5,766 |   | 9,754 |   |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Loss from Continuing Operations  Before  Income Taxes**    |   | (943,434                                 | )         | (519,144                               | )      | (1,539,464 | ) | (613,483 | ) |
| Income taxes                                                 |   | —                                   |      | 337                                    |   | — |   | 337 |   |
| **Loss from Continuing Operations**                          |   | (943,434                                 | )         | (519,481                               | )      | (1,539,464 | ) | (613,820 | ) |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Discontinued Operations**                                  |   |                                     |      |                                   |   |   |   |   |   |
| Loss from discontinued operations                            |   | (139,258                                 | )         | (136,728                               | )      | (318,116 | ) | (282,914 | ) |
| Gain on disposition of discontinued operations               |   | 362,189                                  |      | —                                 |   | 362,189 |   | — |   |
| **Income (Loss) from Discontinued  Operations**              |   | 222,931                                  |      | (136,728                               | )      | 44,073 |   | (282,914 | ) |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| **Net Loss**                                                 |   | $                                        | (720,503  | )                                      | $      | (656,209 | ) | $ | (1,495,391 | ) | $ | (896,734 | ) |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| Basic and diluted net income (loss) per share:               |   |                                     |      |                                   |   |   |   |   |   |
| Continuing operations                                        |   | $                                        | (0.34     | )                                      | $      | (0.22 | ) | $ | (0.58 | ) | $ | (0.26 | ) |
| Discontinued operations                                      |   | 0.08                                     |      | (0.05                                  | )      | 0.01 |   | (0.12 | ) |
| Basic and diluted net loss per share                         |   | $                                        | (0.26     | )                                      | $      | (0.27 | ) | $ | (0.57 | ) | $ | (0.38 | ) |
|                                                         |   |                                     |      |                                   |   |   |   |   |   |
| Basic and diluted weighted-average common shares outstanding |   | 2,776,121                                |      | 2,389,115                              |   | 2,640,349 |   | 2,387,049 |   |

 

SeeNotes to Unaudited Interim Consolidated Financial Statements.

 

4

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HYPERFEEDTECHNOLOGIES, INC. AND SUBSIDIARY

Consolidated Statements ofCash Flows(Unaudited)

 
|                                                                                        |   | **For The Six Months  Ended********June 30,** |       |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|
|                                                                                        |   | **2003**                                      |       | **2002** |   |
| **Cash Flows from Operating  Activities:**                                                  |   |                                          |       |   |   |
| Net loss                                                                                    |   | $                                             | (1,495,391 | ) | $ | (896,734 | ) |
| Adjustments to reconcile net loss to net cash  provided by (used in) operating activities:  |   |                                          |       |   |   |
| Depreciation and amortization                                                               |   | 539,436                                       |       | 900,366 |   |
| Provision for doubtful accounts                                                             |   | 60,000                                        |       | 17,000 |   |
| Amortization of software development costs                                                  |   | 676,385                                       |       | 661,146 |   |
| Amortization of value assigned to common stock  warrantissued in lieu  of cash license fees |   | —                                        |       | 840,000 |   |
| Loss from discontinued operations                                                           |   | 318,116                                       |       | 282,914 |   |
| Gain on disposition of discontinued operations                                              |   | (362,189                                      | )          | — |   |
| Changes in assets and liabilities, net of effects  from disposition:                        |   |                                          |       |   |   |
| Accounts receivable                                                                         |   | 23,503                                        |       | 335,895 |   |
| Prepaid expenses and other current assets                                                   |   | (32,212                                       | )          | (112,588 | ) |
| Deposits and other assets                                                                   |   | 34,814                                        |       | (352 | ) |
| Accounts payable                                                                            |   | 65,288                                        |       | (5,358 | ) |
| Accrued expenses                                                                            |   | (972,660                                      | )          | (456,600 | ) |
| Deferred rent                                                                               |   | 253,654                                       |       | (18,044 | ) |
| Income taxes payable                                                                        |   | —                                        |       | (5,000 | ) |
| Unearned revenue                                                                            |   | 14,276                                        |       | (358,831 | ) |
| **Net Cash Provided By (Used In)  Operating Activities**                                    |   | (876,980                                      | )          | 1,183,814 |   |
|                                                                                        |   |                                          |       |   |   |
| **Cash Flows from Investing  Activities:**                                                  |   |                                          |       |   |   |
| Purchase of property and equipment                                                          |   | (347,402                                      | )          | (215,230 | ) |
| Software development costs capitalized                                                      |   | (597,168                                      | )          | (683,414 | ) |
| Proceeds from sale of discontinued operations                                               |   | 150,000                                       |       | — |   |
| Repayment of note receivable                                                                |   | —                                        |       | 858 |   |
| **Net Cash Used In Investing  Activities**                                                  |   | (794,570                                      | )          | (897,786 | ) |
|                                                                                        |   |                                          |       |   |   |
| **Cash Flows from Financing  Activities:**                                                  |   |                                          |       |   |   |
| Proceeds from issuance of common stock                                                      |   | 1,454,253                                     |       | 45,709 |   |
| Issuance (repayment) of notes payable                                                       |   | 67,115                                        |       | (250,000 | ) |
| **Net Cash Provided By (Used In)  Financing Activities**                                    |   | 1,521,368                                     |       | (204,291 | ) |
|                                                                                        |   |                                          |       |   |   |
| **Net increase (decrease) in cash  and cash equivalents**                                   |   | (150,182                                      | )          | 81,737 |   |
| Cash and cash equivalents:                                                                  |   |                                          |       |   |   |
| Beginning of the period                                                                     |   | 1,096,711                                     |       | 607,263 |   |
|                                                                                        |   |                                          |       |   |   |
| **End of the period**                                                                       |   | $                                             | 946,529    |   | $ | 689,000 |   |
|                                                                                        |   |                                          |       |   |   |
| **Supplemental Disclosures of  Noncash Investing Activities:**                              |   |                                          |       |   |   |
| Note received as consideration for disposition of  discontinued operations                  |   | $                                             | 150,000    |   | $ | — |   |

 

SeeNotes to Unaudited Interim Consolidated Financial Statements.

 

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HYPERFEEDTECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO UNAUDITED INTERIMCONSOLIDATEDFINANCIAL STATEMENTS

 

(1)BASIS OF PRESENTATION

 

PRINCIPLESOF CONSOLIDATION:  The accompanyingunaudited interim consolidated financial statements include the accounts ofHyperFeed Technologies, Inc. (“HyperFeed” or the “Company”) and its subsidiary,PCQuote.com, Inc. (“PCQuote”), and have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial information and in conjunction with the rules and regulationsof the Securities and Exchange Commission. Accordingly, they do not include allof the information and footnotes required by accounting principles generallyaccepted in the United States of America for complete financial statements. Theconsolidated interim financial statements include all adjustments, includingthe elimination of all significant intercompany transactions in consolidation,which, in the opinion of management, are necessary in order to make thefinancial statements not misleading. The amounts indicated as “audited” havebeen extracted from the Company’s December 31, 2002 annual report. For furtherinformation, refer to the consolidated financial statements and footnotesincluded in HyperFeed’s annual report on Form 10-K for the year ended December31, 2002.

 

SOFTWAREDEVELOPMENT COSTS:  The Company’s continuinginvestment in software development consists primarily of enhancements to itsManaged Exchange Platform Service (“MEPS”) and H!BOX, its existingWindows-based market data distribution platform, the direct exchange services,the development of new data analysis software and programmer tools and theapplication of new technology to increase the data volume and delivery speed ofthe Company’s distribution system.

 

Costsassociated with the planning and design phase of software development,including coding and testing activities necessary to establish technologicalfeasibility of computer software products to be licensed or otherwise marketed,are expensed as research and development costs as incurred. Once technologicalfeasibility has been determined, costs incurred in the construction phase ofsoftware development including coding, testing, and product quality assuranceare capitalized.

 

Amortizationcommences at the time of capitalization or, in the case of a new serviceoffering, at the time the service becomes available for use. Unamortizedcapitalized costs determined to be in excess of the net realizable value of theproduct are expensed at the date of such determination. The accumulatedamortization and related software development costs are removed from therespective accounts effective in the year following full amortization.

 

TheCompany’s policy is to amortize capitalized software costs by the greater of(a) the ratio that current gross revenue for a product bear to the total ofcurrent and anticipated future gross revenue for that product or (b) thestraight line method over three years, the remaining estimated economic life ofthe product including the period being reported. The Company assesses therecoverability of its software development costs against estimated futureundiscounted cash flows. Given the highly competitive environment andtechnological changes, it is reasonably possible that those estimates ofanticipated future gross revenue, the remaining estimated economic life of theproduct, or both may be reduced significantly.

 

FINANCIALINSTRUMENTS:  The Company has nofinancial instruments for which the carrying value materially differs from fairvalue.

 

INCOMETAXES:  Income taxes are accounted forunder the asset and liability method whereby deferred tax assets are recognizedfor deductible temporary differences and operating loss and tax creditcarryforwards and deferred tax liabilities are recognized for taxable temporarydifferences. Temporary differences are the differences between the reportedamounts of assets and liabilities and their tax bases. Deferred tax assets arereduced by a valuation allowance when, in the opinion of management, it is morelikely than not that some portion or all of the deferred tax assets will not berealized. Deferred tax assets and liabilities are adjusted for the effects ofchanges in tax laws and rates on the date of enactment.

 

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STOCK BASED COMPENSATION:  AtJune 30, 2003, the Company had one stock-based employee compensation plan.The Company has adopted the disclosure-only provisions of Financial AccountingStandards Board (“FASB”) Statement No. 123, “Accounting for Stock-BasedCompensation” (“SFAS 123”),as amended by FASB Statement No. 148, “Accounting for Stock-Based Compensation— Transition and Disclosure” (“SFAS 148”)and will continue to use the intrinsic value based method of accountingprescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accountingfor Stock Issued to Employees.” Under APB No. 25, no compensation cost has beenrecognized for options granted with an option price equal to the grant datemarket value of the Company’s common stock. Had compensation cost for theCompany’s options granted been determined based on the fair value of the optionat the grant date consistent with the provisions of SFAS 123, the Company’s netloss and net loss per share for the three and six months ended June 30,2003 and 2002 would have been adjusted to the pro forma amounts indicated below:

 
|                                                                                           |   | **Three months ended********June 30,** |     | **Six months ended********June 30,** |   |
|------------------------------------------------------------------------------------------------|--------|---------------------------------------------|----------|-------------------------------------------|--------|
|                                                                                           |   | **2003**                                    |     | **2002**                                  |   | **2003** |   | **2002** |   |
| Net loss, as reported                                                                          |   | $                                           | (720,503 | )                                         | $      | (656,209 | ) | $ | (1,495,391 | ) | $ | (896,734 | ) |
|                                                                                           |   |                                        |     |                                      |   |   |   |   |   |
| Stock-based compensation recovery (expense)  determined under fair value method for all awards |   | 136,560                                     |     | (629,086                                  | )      | 83,434 |   | (1,402,420 | ) |
|                                                                                           |   |                                        |     |                                      |   |   |   |   |   |
| Pro forma net loss                                                                             |   | $                                           | (583,943 | )                                         | $      | (1,285,295 | ) | $ | (1,411,957 | ) | $ | (2,299,154 | ) |
|                                                                                           |   |                                        |     |                                      |   |   |   |   |   |
| Basic and diluted net loss per share, as reported                                              |   | $                                           | (0.26    | )                                         | $      | (0.27 | ) | $ | (0.57 | ) | $ | (0.38 | ) |
|                                                                                           |   |                                        |     |                                      |   |   |   |   |   |
| Pro forma basic and diluted net loss per share                                                 |   | $                                           | (0.21    | )                                         | $      | (0.54 | ) | $ | (0.53 | ) | $ | (0.96 | ) |

 

EARNINGSPER SHARE:  Basic earnings per share(“EPS”) is based on the weighted-average number of shares outstanding andexcludes the dilutive effect of unexercised common stock equivalents. Dilutedearnings per share includes the dilutive effect of unexercised common stockequivalents. The Company had equity securities that, if exercised, would havehad a dilutive effect on EPS had the Company generated income during the threeand six months ended June 30, 2003. The dilutive effect of such securitieswould have been an additional 27,575 weighted-average shares outstanding duringthe three months ended June 30, 2003 and an additional 21,835 weighted-averageshares outstanding during the six months ended June 30, 2003. The Companydid not have any equity securities that, if exercised, would have had adilutive effect on EPS had the Company generated income during the three andsix months ended June 30, 2002. For the three months ended June 30,2003 and 2002, weighted-average equity securities totaling 518,967 and 885,279,respectively, were excluded from the calculations as their effect wasanti-dilutive due to such securities having exercise prices in excess of theweighted-average fair value of the Company’s common stock during the threemonth periods. For the six months ended June 30, 2003 and 2002,weighted-average equity securities totaling 1,013,023 and 1,378,567,respectively, were excluded from the calculations as their effect wasanti-dilutive due to such securities having exercise prices in excess of theweighted-average fair value of the Company’s common stock during the six monthperiods.

 

REVENUERECOGNITION:  The Company principallyderives its revenue from service contracts for the provision of market dataonly (“HyperFeed® license fees”) and service contracts for the provision ofmarket data together with analytical software (“Analytics license fees”).HyperFeed primarily services the business-to-business marketplace. Revenue fromservice contracts is recognized ratably over the contract term as thecontracted services are rendered. HyperFeed customers are generally billed onemonth in advance with 30-day payment terms. Payments received prior to servicesbeing rendered are classified as unearned revenue on the balance sheet.Customers’ deposits on service contracts are classified as either currentunearned revenue, if the contract expires in one year or less, or non-currentunearned revenue, if the contract expiration date is greater than one year.

 

OnJune 2, 2003, the Company sold certain assets of PCQuote, consisting ofits retail investor unit and Web site. Revenue recognized prior to June 2,2003 related to the PCQuote assets sold was primarily derived from analyticsservice, powered by the HyperFeed data feed, for Internet users in the consumermarketplace and from the sale of advertising on its Web site, www.pcquote.com.Revenue from the sale of advertising was recognized as the advertising wasdisplayed on the Web site. License fees for Analytics on the Internet weregenerally paid by credit card within five days prior to the month of serviceand classified as unearned revenue on the balance sheet. The retained PCQuoteassets generate revenue from HyperFeed market data delivered over the Internetand integrated into customer’s proprietary Web application or used to populateelectronic tickerboards. Additionally, PCQuote derives revenue from licensefees for customers referred by PCQuote to Townsend Analytics, Ltd. prior toDecember 31, 2002. Following the completion of the sale, the corporatename of PCQuote.com, Inc. was changed to HYPRWare, Inc.

 

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TheCompany applies the provisions of Statement of Position 97-2, “Software RevenueRecognition,” as amended, which specifies the following four criteria that mustbe met prior to recognizing revenue: (1) persuasive evidence of the existenceof an arrangement, (2) delivery, (3) fixed or determinable fee, and (4)probable collection. In addition, revenue earned on software arrangementsinvolving multiple elements is allocated to each element based on the relativefair value of the elements. When applicable, revenue allocated to the Company’ssoftware products (including specified upgrades/enhancements) is recognizedupon delivery of the products. Revenue allocated to post contract customersupport is recognized ratably over the term of the support and revenueallocated to service elements (such as training) is recognized as the servicesare performed.

 

(2)RECLASSIFICATIONS

 

Wehave reclassified our consolidated statements of operations data for allperiods presented to reflect the sale on June 2, 2003 of the individualretail investor unit and related assets of our subsidiary, PCQuote, which hasbeen accounted for as a discontinued operation.

 

(3)INCOME TAXES

 

AtDecember 31, 2002, the Company had Federal income tax net operating losscarryforwards of $24.9 million for Federal income tax purposes and $24.5million for the alternative minimum tax. Of these net operating losses, $1.1million relates to exercise of incentive employee stock options and will becredited directly to stockholders’ equity when realized. The Company also hadresearch and development credits of $106,000 that will all expire by 2011 ifnot previously utilized. The future utilization of these net operating lossesand research and development credits will be limited due to changes in Companyownership. The net operating loss carryforwards expire through 2022. TheCompany has not recorded any tax benefits related to these net operating losscarryforwards.

 

8

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(4)SEGMENT INFORMATION

 

Whilethe Company operates in one industry, financial services, in applying SFAS No.131, “Disclosures about Segments of an Enterprise and Related Information”, theCompany has identified two segments within which it operates. The parentCompany’s services are principally in the business-to-business sector, whileits subsidiary, PCQuote, operates in the business-to-consumer marketplace. TheCompany evaluates performance and allocates resources based on operatingprofitability and growth potential. The accounting policies of the reportablesegments are the same as those described in Note 1. Financial informationrelating to industry segments for the three and six months ended June 30,2003 and June 30, 2002 is as follows:

 
|                                                   |   | **Three Months  Ended**June 30, |       | **Six Months Ended**June 30, |   |
|--------------------------------------------------------|--------|--------------------------------------|------------|-----------------------------------|--------|
|                                                   |   | **2003**                             |       | **2002**                          |   | **2003** |   | **2002** |   |
| **Sales to unaffiliated customers:**                   |   |                                 |       |                              |   |   |   |   |   |
| HyperFeed services                                     |   | $                                    | 2,847,394  |                              | $      | 4,183,725 |   | $ | 5,877,100 |   | $ | 8,914,021 |   |
| PCQuote services                                       |   | 304,480                              |       | 371,278                           |   | 624,608 |   | 820,025 |   |
| Total revenue                                          |   | $                                    | 3,151,874  |                              | $      | 4,555,003 |   | $ | 6,501,708 |   | $ | 9,734,046 |   |
|                                                   |   |                                 |       |                              |   |   |   |   |   |
| HyperFeed services                                     |   | 90.3                                 | %          | 91.8                              | %      | 90.4 | % | 91.6 | % |
| PCQuote services                                       |   | 9.7                                  | %          | 8.2                               | %      | 9.6 | % | 8.4 | % |
| Total revenue                                          |   | 100.0                                | %          | 100.0                             | %      | 100.0 | % | 100.0 | % |
|                                                   |   |                                 |       |                              |   |   |   |   |   |
| **Operating income (loss) from continuing operations** |   |                                 |       |                              |   |   |   |   |   |
| HyperFeed services                                     |   | $                                    | (1,068,471 | )                                 | $      | (235,367 | ) | $ | (1,783,856 | ) | $ | (106,215 | ) |
| PCQuote services                                       |   | 122,144                              |       | (289,828                          | )      | 238,626 |   | (517,022 | ) |
| Total operating loss from continuing operations        |   | $                                    | (946,327   | )                                 | $      | (525,195 | ) | $ | (1,545,230 | ) | $ | (623,237 | ) |
|                                                   |   |                                 |       |                              |   |   |   |   |   |
| HyperFeed services                                     |   |                                 | *          | 44.8                              | %      |   | * | 17.0 | % |
| PCQuote services                                       |   |                                 | *          | 55.2                              | %      |   | * | 83.0 | % |
| Total operating loss from continuing operations        |   |                                 | *          | 100.0                             | %      |   | * | 100.0 | % |
|                                                   |   |                                 |       |                              |   |   |   |   |   |
| **Identifiable assets:**                               |   |                                 |       |                              |   |   |   |   |   |
| HyperFeed services                                     |   | $                                    | 5,454,594  |                              | $      | 7,714,427 |   | $ | 5,454,594 |   | $ | 7,714,427 |   |
| PCQuote services                                       |   | 476,035                              |       | 944,051                           |   | 476,035 |   | 944,051 |   |
| Total identifiable assets                              |   | $                                    | 5,930,629  |                              | $      | 8,658,478 |   | $ | 5,930,629 |   | $ | 8,658,478 |   |
|                                                   |   |                                 |       |                              |   |   |   |   |   |
| HyperFeed services                                     |   | 92.0                                 | %          | 89.1                              | %      | 92.0 | % | 89.1 | % |
| PCQuote services                                       |   | 8.0                                  | %          | 10.9                              | %      | 8.0 | % | 10.9 | % |
| Total identifiable assets                              |   | 100.0                                | %          | 100.0                             | %      | 100.0 | % | 100.0 | % |

 

----

*not meaningful

 

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(5)DISCONTINUED OPERATIONS

 

OnJune 2, 2003, the Company sold the individual retail investor unit andrelated assets of its subsidiary, PCQuote, to a third party and recorded a$362,189 gain on the sale. The sale was part of the Company's definitivestrategy to reduce its dependence on revenue from the individual investor andreplace and grow that revenue from MEPS technology licensing sales. It alsoallowed us to expand and transition our customer base from two targetmarkets (retail and institutional) to six target markets, including exchanges,content providers, re-distributors, institutions, channel partners, and value-addedresellers. The sale priceconsisted of (1) $150,000 cash received in June 2003, (2) $70,000 cashreceived in July 2003, and (3) a $150,000 promissory note due in twelveequal installments commencing on July 15, 2003 with an interest rate of8.0% per annum. The Company transferred net assets with a net book value of$7,811 to the third party. As a result of the sale, the disposition has beenaccounted for as a discontinued operation in accordance with SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”, and,accordingly, amounts in the consolidated statement of operations for allperiods shown have been reclassified to reflect the disposition as adiscontinued operation. The results of operations for the discontinued businessare as follows:

 
|                              |   | **Three months ended********June 30,** |     | **Six months ended********June 30,** |   |
|-----------------------------------|--------|---------------------------------------------|----------|-------------------------------------------|--------|
|                              |   | **2003**                                    |     | **2002**                                  |   | **2003** |   | **2002** |   |
| Revenue                           |   | $                                           | 182,711  |                                      | $      | 416,073 |   | $ | 485,543 |   | $ | 883,270 |   |
| Direct Cost of Services           |   | 131,301                                     |     | 263,427                                   |   | 337,445 |   | 577,096 |   |
| Gross Margin                      |   | 51,410                                      |     | 152,646                                   |   | 148,098 |   | 306,174 |   |
| Operating Expenses                |   | 190,668                                     |     | 289,374                                   |   | 466,214 |   | 589,088 |   |
| Loss from discontinued operations |   | $                                           | (139,258 | )                                         | $      | (136,728 | ) | $ | (318,116 | ) | $ | (282,914 | ) |

 

(6)PRIVATE PLACEMENT OFFERING

 

OnMay 15, 2003, the Company completed a planned private placement of 526,063shares of common stock to its executive officers, individual board members, andlargest investor, PICO Holdings, Inc., for an aggregate purchase price of $1.4million.

 

(7)REVERSE STOCK SPLIT

 

OnAugust 13, 2003, the Company effected a one-for-ten (1:10) reverse splitof its common stock. All share and per share data of the Company in theaccompanying unaudited interim consolidated financial statements and in thesenotes to the unaudited consolidated financial statements give effect to thereverse stock split.

 

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PARTI. ITEM 2

Management’s Discussion andAnalysis ofFinancial Condition and Results of Operations

 

INTRODUCTION– SAFE HARBOR DISCLOSURE

 

Thefollowing discussion and analysis contains historical information. It alsocontains forward-looking statements within the meaning of the “safe harbor”provisions of the Private Securities Litigation Reform Act of 1995,particularly in reference to statements regarding our expectations, plans, andobjectives. You can generally identify forward-looking statements by the use ofthe words “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,”“believe,” “continue,” or similar language. Forward-looking statements involvesubstantial risks and uncertainties. You should give careful consideration tocautionary statements made in this discussion and analysis. We base ourstatements on our current expectations. HyperFeed undertakes no obligation topublicly release the results of any revision to these forward-lookingstatements which may be made to reflect events or circumstances after the dateshereof or to reflect the occurrence of unanticipated events. Forward-lookingstatements may be impacted by a number of factors, risks, and uncertaintiesthat could cause actual results to differ materially from those described inthe forward-looking statements. Among these factors are:

 

(i)                                     that the information is of a preliminarynature and may be subject to further adjustment;

(ii)                                  variability in our quarterly operatingresults;

(iii)                               our ability to fund our current and futurebusiness strategies either through continuing operations or external financing;

(iv)                              our ability to successfully attract andretain qualified management and key employees;

(v)                                 our ability to successfully compete againstcompetitive products and services;

(vi)                              our ability to deliver and maintainperformance standards according to the terms and conditions of our customercontracts;

(vii)                           our ability to maintain relationships withkey suppliers and providers of market data;

(viii)                        our ability to maintain our existingcustomer base while increasing our presence in the financial institutionalmarketplace;

(ix)                                our ability to develop, complete andintroduce new product and service initiatives in a timely manner and atcompetitive price and performance levels;

(x)                                   our ability to manage the timing of thedevelopment and introduction of new products or enhanced versions of existingproducts;

(xi)                                our ability to gain the market’s acceptanceof new products;

(xii)                             the effect of economic and businessconditions generally;

(xiii)                          risks related to pending or future legalproceedings;

(xiv)                         risks relating to possible delisting fromThe Nasdaq SmallCap Market; and

(xv)                            other risks identified from time to time inour reports and registration statements filed with the Securities and ExchangeCommission.

 

OVERVIEW

 

Weare a provider of Managed Exchange Platform Services (“MEPS”) to exchanges,content providers, re-distributors, institutions, channel partners, andvalue-added resellers. Our ticker plant technology and financial exchangemanaged services are designed specifically to support the delivery of real-timedata, data management, data reporting, and value added services for use in distributingand receiving financial content with a competitive edge. Beginning with acomprehensive understanding of the diverse needs of the financial equitiesindustry, we apply advanced technologies to the processing, delivery,distribution and access to financial market data. HyperFeed® offers some of thefastest, most complete and reliable MEPS that can be used with industry-leadingAPIs, third-party applications or online desktop solutions.

 

Weare focused on products and services that produce the most revenue from ourticker plant technologies. Our sales model includes direct sales, alliancepartner (channel) sales, and building business development relationships.

 

Inthe second quarter of 2003, we achieved major milestones in the execution ofour strategy to license our core ticker plant technologies in a managedservices model. Specifically, we (i) launched our new product initiatives, MEPSand H!BOX; (ii) obtained validation and buy-in on the new products by signingcontracts with key industry customers; (iii) divested a portion of the assetsassociated with our retail investor subsidiary, PCQuote; and (iv) launched ourH!VE Partnership Program.

 

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**(i) MEPS and H!BOX Launch**

 

OnMay 15, 2003, we launched MEPS to our target customer base. MEPS is a newrevenue stream, addressing the expected decrease in revenue from retailinvestors in general and from the sale of part of our subsidiary, PCQuote. Uponlaunch, we had already secured our first MEPS customer, CBOE. We have sinceadded two enterprise level ($125,000/month or greater) MEPS customers. Weexpect to realize revenue from MEPS technology sales after the installationperiod is completed, which can be from three to six months after the sale.

 

MEPSoffers customers the ability to interchange combinations of content providersand direct exchange connectivity with a fully managed suite of services. As acomplete turnkey solution for the normalization, data-basing, integration andtransmission of high performance, real-time data sources from exchanges,consolidated data vendors and proprietary in-house sources, MEPS providesdirect access to all North American exchanges and offers a complete set of datacleansing and management tools for remote or on-site use. It provides adaptorsto a number of widely used middleware platforms and can be used collectively asa complete solution or individually to augment the functionality of othervendor system products. There are five components to our MEPS: Front End Processors(“FEP”), Data Management, Value Added Services, Technologies, and Tools andAdaptors.

 

OnJune 16, 2003, we released our on-site ticker plant — H!BOX. H!BOX is anoffering born from MEPS, that allows customers to have a complete on-sitefinancial ticker plant solution. While MEPS is a high level solution offeringthe utmost in flexibility and customization, H!BOX is an off-the-shelf solutionfor customers who want the benefits associated with direct exchange access, butwho do not require the development and breadth of customization MEPS offers. Asa complete, on-site financial exchange information processing solution, H!BOXis housed in a server class machine to reduce infrastructure costs. It providescustomers with the means to receive and manage real-time data lines directlyfrom any source. H!BOX plugs into all five MEPS components to offer customers acomplete solution.

 

**(ii) MEPS Customers**

 

Simultaneouswith the launch of MEPS on May 15, 2003, we announced our first MEPScustomer, The Chicago Board Options Exchange (“CBOE”). CBOE is using ourticker plant technologies in a MEPS model to manage market data availablethrough CBOE*direct* HyTSTM,CBOE’s innovative new Hybrid Trading System. Our MEPS, coupled with CBOE’ssystems, is providing exchange data for auto quoting in the exchange’s newHybrid trading environment.

 

On May 29, 2003, we announced that we hadextended and renewed our contract with OptionsXpress. OptionsXpress customersare making complex trading decisions based on proprietary trading applicationspowered by our high performance exchange data, a component of MEPS. Ourexchange data feed is known for its speed, its dynamic options data, itsability to transmit complete options strings and its capability to producein-depth delayed options data. Options traders can log into the OptionsXpressWeb site and access our real-time streaming data, as well as snapshot anddelayed information via OptionsXpress trading products.

 

Subsequent to the second quarter, we signedcontracts with more key customers including MoneyLine Telerate, FutureTrade,MidasTrade, First Options of Chicago, and a large enterprise level customer.The total potential aggregate revenue from these contracts will beapproximately $350,000 per month. We expect to realize revenue from these contracts after the installationperiod is completed, which can be from three to six months after the signing ofthe contract. There is no assurance that the total potential revenue will be realized.

 

On July 10, 2003, we announced that MoneyLineTelerate (“MLT”) signed a multi-year, multi-million dollar agreement to licenseand deploy our MEPS and H!BOX ticker plant technologies globally. MLT, aleading global provider of real-time information and transaction services, willuse our MEPS and H!BOX to augment its own global ticker plant, Crucible, and asthe distribution technology for its data.

 

**(iii) Sale of PCQuote**

 

On June 2, 2003, we executed a definitiveagreement for the sale of the individual retail investor unit of oursubsidiary, PCQuote, to Money.net, Inc. (“Money.net”), a leading provider ofstreaming real time market data and custom financial software and technology.Money.net acquired the PCQuote Web site and the retail investor applicationsavailable through PCQuote. We retained the portion of PCQuote that providesstreaming real-time quote objects over customer’s Web sites. Following the completion of the sale, thecorporate name of PCQuote.com, Inc. was changed to HYPRWare, Inc.

 

This sale was part of our definitive strategy toreduce our dependence on revenue from the individual investor and replace andgrow that revenue with MEPS technology licensing sales. It also allowed us toexpand and transition our customer

 

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base from two target markets (retail andinstitutional) to six target markets, including exchanges, content providers,re-distributors, institutions, channel partners, and value-added resellers.

 

**(iv) H!VE Partnership Program Launch**

 

OnJune 10, 2003, we launched our H!VE Partnership Program. The goal of theH!VE Program is to allow access to exchange information and services to a widevariety of Joint Products Partners, Alliance Partners, Network ServiceProviders, Technology Partners and Contributors. We encourage partners and endusers to utilize our standards based offerings in a non-proprietary model tofacilitate solutions that make sense for their own customers. Our customers getthe added benefit of being able to utilize H!VE Partner products with theircurrent distribution systems. By leveraging our MEPS, H!VE partners can takeadvantage of their core competencies while saving on costs and benefiting fromexpanded distribution and increased exposure to an expanded customer base.

 

Key H!VE partnerships executed in the secondquarter of 2003 include: Tibco, Savvis, VhaYu, EGAR, InfoReach, Visualize andFusion InfoTech.

 

RECENTBUSINESS DEVELOPMENTS

 

**PC Quote Canada Settlement**

 

OnJuly 24, 2003, the Company and PC Quote Canada signed a settlementagreement each releasing the other from all claims. The case has been dismissedwith each party agreeing to bear their own costs.

 

**MoneyLine Telerate**

 

OnJuly 10, 2003, HyperFeed announced that MoneyLine Telerate had signed amulti-year, multi-million dollar agreement to license and deploy HyperFeed’sMEPS and H!BOX ticker plant technologies globally. MoneyLine Telerate, aleading global provider of real-time information and transaction services, willuse HyperFeed’s MEPS and H!BOX to augment its own global ticker plant, Crucible,and as the distribution technology for its data.

 

**Continuation of Listing on The Nasdaq SmallCap Market**

 

OnJuly 15, 2003, the Company was notified that its common stock wouldcontinue to be listed on The Nasdaq SmallCap Market in accordance with the exceptionfrom the continued listing criteria granted by the Nasdaq ListingQualifications Panel (the “Panel”). The exception was granted subsequent to theJune 19, 2003 hearing held before the Panel.

 

Underthe terms and conditions of the exception, HyperFeed is required to meetcertain interim performance and disclosure milestones. Specifically, on orbefore August 14, 2003 and for ten consecutive trading days thereafter,HyperFeed must demonstrate a closing bid price of at least $1.00 per share. Further,on or before the same date, HyperFeed must file its Quarterly Report on Form10-Q for the quarter ended June 30, 2003 evidencing stockholders’ equityof at least $2.5 million. Finally, on or before November 14, 2003,HyperFeed must file its Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2003 evidencing stockholders’ equity of at least $2.5million.

 

Theexception will expire on November 14, 2003 subject to said milestones tobe achieved and evidenced by HyperFeed. In the event that the Company is deemedto have met all of the terms of the exception, its securities will continue tobe listed on The Nasdaq SmallCap Market. HyperFeed has presented the Panel witha definitive plan that should enable the Company to achieve compliance with continuedlisting criteria during the period of time set forth in the Panel’s decision.However, there is no assurance that it will be able to do so.

 

ShouldHyperFeed’s securities cease to be listed on The Nasdaq SmallCap Market, theCompany’s securities may continue to be listed on the OTC Bulletin Board. Aswitch to the OTC market will likely result in more volatility for theCompany’s stock, less volume, and no analyst coverage. As a result, theCompany’s stock price would likely decline further and the ability of anypotential or future investors to achieve liquidity from HyperFeed’s commonstock could be severely limited, not only in the number of shares that could bebought and sold at a given price, but also through delays in the timing oftransactions and reduction in media coverage of the Company. This couldinhibit, if not preclude, the Company’s ability to raise additional workingcapital on acceptable terms, if at all. In addition, current and prospectivecustomers and strategic partners may limit or cease their businessrelationships with the Company because of concerns or perceptions regarding itslisting status and future liquidity.

 

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Effectiveas of July 18, 2003 and for the duration of the exception, HyperFeed’strading symbol will be modified to include a fifth character qualifier from“HYPR” to “HYPRC.”

 

**Reverse Stock Split**

 

OnAugust 8, 2003, the Company held a special meeting of stockholders toapprove a proposal to grant the Board of Directors authority to effect areverse stock split of HyperFeed’s common stock currently listed on The NasdaqSmallCap Market. Following the special meeting of stockholders, the Board ofDirectors voted to execute a one-for-ten reverse stock split.

 

Toeffect the reverse stock split, the Company filed an amendment to its Articlesof Incorporation on August 8, 2003. The Company will begin trading underthe new symbol “HYPCD” on August 13, 2003. After 20 trading days, thesymbol will revert back to “HYPRC.”

 

Asa result of the reverse stock split, the Company’s total number of shares ofcommon stock issued and outstanding will decrease from 30,438,046 to 3,043,805.Fractional shares will be rounded up to the next whole number and HyperFeedwill not be paying cash in lieu of issuing fractional shares. ComputershareInvestor Services, Inc., HyperFeed’s transfer agent, will act as the exchangeagent for purposes of implementing the reverse split and exchanging stockcertificates.

 

HyperFeed’s stockholders, management team, andBoard of Directors feel that it is important to take the necessary steps toremain listed on The Nasdaq SmallCap Market; a market that will provide greatervisibility for the Company’s recent and future successes, including the threeenterprise licensing deals it was recently awarded on its new MEPS platform.

 

RESULTSOF OPERATIONS: FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2003 AND 2002

 

Wehave reclassified our consolidated statements of operations data for allperiods presented to reflect the sale on June 2, 2003 of the individualretail investor unit and related assets of our subsidiary, PCQuote, which hasbeen accounted for as a discontinued operation.

 

**Revenues**

 

Totalrevenue for the six months ended June 30, 2003 decreased 33.2% to $6.5million compared with $9.7 million for the six months ended June 30, 2002.Total revenue for the three months ended June 30, 2003 decreased 30.8% to$3.2 million compared with $4.6 million for the three months endedJune 30, 2002. Both our HyperFeed services and our PCQuote services posteddecreases for the six months and three months ended June 30, 2003 comparedto the same periods in 2002.

 

HyperFeedservice revenue decreased 34.1% to $5.9 million for the six months endedJune 30, 2003 compared with $8.9 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, HyperFeedservice revenue decreased 31.9% to $2.8 million compared with $4.2 million forthe three months ended June 30, 2002. Decreases in the number of end usersand related services associated with the provision of analytics applicationsaccounted for 42.6% of the decline in HyperFeed service revenue for the sixmonths ended June 30, 2003 and for 38.7% of the decline for the threemonths ended June 30, 2003. Additionally, decreases in data feed licensefees accounted for 55.0% of the decline in HyperFeed service revenue for thesix months ended June 30, 2003 and for 55.9% of the decline for the threemonths ended June 30, 2003, of which 30.6% and 36.4%, respectively, resultedfrom a reduction in services provided to our largest customer.

 

PCQuoteservice revenue decreased 23.8% to $0.6 million for the six months endedJune 30, 2003 compared with $0.8 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, PCQuoteservice revenue decreased 18.0% to $0.3 million compared with $0.4 million forthe three months ended June 30, 2002. The decline in PCQuote servicerevenue is primarily due to decreases in revenue from Townsend Analytics, Ltd.

 

**Direct Costs of Services**

 

Totaldirect costs of services decreased 26.4% to $4.4 million for the six monthsended June 30, 2003 compared with $6.0 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, total directcosts of services decreased 23.6% to $2.2 million compared with $2.9 millionfor the three months ended June 30, 2002. Principal components of thedecrease in both periods were royalties and payments to providers of marketdata, attributable to the decline in analytics subscriptions, and the decreasein amortization of prepaid license fees, which were fully amortized in thefourth quarter of 2002, offset by increases in datafeed operations costsrelated to data acquisition and distribution costs. Amortization of softwaredevelopment costs remained unchanged at $0.7 million for the six months endedJune 30,

 

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2003and at $0.3 million for the three months ended June 30, 2003. Gross margindecreased 44.0% to $2.1 million for the six months ended June 30, 2003compared with $3.8 million for the six months ended June 30, 2002. Grossmargin decreased 43.1% to $1.0 million for the three months ended June 30,2003 compared with $1.7 million for the three months ended June 30, 2002.Direct costs, as a percentage of revenue, increased to 67.6% for the six monthsended June 30, 2003 compared with 61.4% for the six months endedJune 30, 2002. Direct costs as a percentage of revenue increased to 69.5%for the three months ended June 30, 2003 compared with 63.0% for the threemonths ended June 30, 2002.

 

Directcosts associated with HyperFeed services decreased 14.4% to $4.3 million forthe six months ended June 30, 2003 compared with $5.0 million for the sixmonths ended June 30, 2002. For the three months ended June 30, 2003,direct costs associated with HyperFeed services decreased 10.4% to $2.1 millioncompared with $2.4 million for the three months ended June 30, 2002.Increases in datafeed operations costs related to data acquisition anddistribution costs were offset by decreases in costs related to productroyalties and exchange fees, directly attributable to the decrease in analyticssubscription revenue. The resulting gross margin for HyperFeed servicesdecreased 59.3% to $1.6 million for the six months ended June 30, 2003compared with $3.9 million for the six months ended June 30, 2002 anddecreased 60.7% to $0.7 million for the three months ended June 30, 2003compared with $1.8 million for the three months ended June 30, 2002.HyperFeed services gross margin as a percentage of HyperFeed services revenuedecreased to 27.1% for the six months ended June 30, 2003 compared to43.9% for the six months ended June 30, 2002 and decreased to 24.8% forthe three months ended June 30, 2003 compared to 42.9% for the threemonths ended June 30, 2002. This decrease in gross margin is due todeclines in revenue exceeding the cost saving measures implemented in thefourth quarter of 2002.

 

Directcosts associated with PCQuote services decreased 88.7% to $0.1 million for thesix months ended June 30, 2003 compared with $1.0 million for the sixmonths ended June 30, 2002. For the three months ended June 30, 2003,direct costs associated with PCQuote services decreased 89.6% to $49,000compared with $0.5 million for the three months ended June 30, 2002. Theamortization of prepaid license fees, which were fully amortized in the fourthquarter of 2002, was the principal component of the decrease in direct costs.The resulting gross margin on PCQuote services increased to $0.5 million forthe six months ended June 30, 2003 compared with ($0.1) million for thesix months ended June 30, 2002 and increased to $0.3 million for the threemonths ended June 30, 2003 compared with ($0.1) million for the threemonths ended June 30, 2002. PCQuote services gross margin as a percentageof PCQuote services revenue increased to 82.4% for the six months endedJune 30, 2003 compared to (18.3)% for the six months ended June 30,2002 and increased to 83.7% for the three months ended June 30, 2003compared to (28.6)% for the three months ended June 30, 2002.

 

**Operating Expenses**

 

Totaloperating expenses decreased 16.7% to $3.7 million for the six months endedJune 30, 2003 compared with $4.4 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, totaloperating expenses decreased 13.8% to $1.9 million compared with $2.2 millionfor the three months ended June 30, 2002. Decreases, principally due tocost saving measures associated with the restructuring in the fourth quarter of2002, were experienced in all categories for the six months ended June 30,2003 and in all categories except sales for the three months endedJune 30, 2003. As a percentage of revenue, total operating expenses increasedto 56.2% for the six months ended June 30, 2003 compared to 45.0% for thesix months ended June 30, 2002 and increased to 60.5% for the three monthsended June 30, 2003 compared to 48.6% for the three months endedJune 30, 2002. This increase was due to declines in revenue exceeding thecost saving measures implemented in the fourth quarter of 2002.

 

Salescosts decreased 8.3% to $0.9 million for the six months ended June 30,2003 compared with $1.0 million for the six months ended June 30, 2002, asa result of lower commission expense commensurate with the decrease in revenue.For the three months ended June 30, 2003, sales costs increased 6.7% to$0.5 million compared with $0.4 million for the three months endedJune 30, 2002, as a result of higher travel and entertainment expenses.Sales costs as a percentage of revenue increased to 13.9% for the six monthsended June 30, 2003 compared to 10.1% for the six months endedJune 30, 2002 and increased to 14.8% for the three months ended June 30,2003 compared to 9.6% for the three months ended June 30, 2002.

 

Generaland administrative expenses decreased 9.2% to $1.2 million for the six monthsended June 30, 2003 compared with $1.3 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, general andadministrative expenses decreased 13.3% to $0.6 million compared with $0.7million for the three months ended June 30, 2002. The decreases were dueto cost saving measures implemented in the fourth quarter of 2002, principally incompensation and related expenses, rent expense, and professional fees. Generaland administrative expenses as a percentage of revenue increased to 18.2% forthe six months ended June 30, 2003

 

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comparedto 13.4% for the six months ended June 30, 2002 and increased to 19.9% forthe three months ended June 30, 2003 compared to 15.9% for the threemonths ended June 30, 2002.

 

Productand market development costs decreased 14.1% to $1.0 million for the six monthsended June 30, 2003 compared with $1.2 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, product andmarket development costs decreased 11.9% to $0.5 million compared with $0.6million for the three months ended June 30, 2002. The decreases wereprincipally due to reductions in employee compensation and related expensesattributable to the workforce reduction in the fourth quarter of 2002. Productand market development costs as a percentage of revenue increased to 15.7% forthe six months ended June 30, 2003 compared to 12.2% for the six monthsended June 30, 2002 and increased to 17.3% for the three months endedJune 30, 2003 compared to 13.6% for the three months ended June 30,2002.

 

Depreciationand amortization decreased 40.1% to $0.5 million for the six months endedJune 30, 2003 compared with $0.9 million for the six months endedJune 30, 2002. For the three months ended June 30, 2003, depreciationand amortization decreased 38.1% to $0.3 million compared with $0.4 million forthe three months ended June 30, 2002. The decrease primarily results fromthe write-down of intangible assets and the write-off of certain fixed assetsrelating to the restructuring in the fourth quarter of 2002. Depreciation andamortization as a percentage of revenue decreased to 8.3% for the six monthsended June 30, 2003 compared to 9.2% for the six months endedJune 30, 2002 and decreased to 8.5% for the three months endedJune 30, 2003 compared to 9.5% for the three months ended June 30,2002.

 

**Discontinued Operations**

 

OnJune 2, 2003, the Company disposed of the individual retail investor unitand related assets of its subsidiary, PCQuote. Income from discontinuedoperations of $44,000 for the six months ended June 30, 2003 includes again on disposition of $0.4 million compared with a net loss from operations of$0.3 million for the six months ended June 30, 2002. Income fromdiscontinued operations of $0.2 million for the three months endedJune 30, 2003 includes a gain on disposition of $0.4 million compared witha net loss from operations of $0.1 million for the three months endedJune 30, 2002.

 

CRITICALACCOUNTING POLICIES

 

Management’sDiscussion and Analysis of Financial Condition and Results of Operationsdiscusses the Company’s unaudited interim consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these financialstatements requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.

 

Onan on-going basis, management evaluates its estimates and judgments, includingthose related to bad debts and intangible assets. Management bases itsestimates and judgments on historical experience and on various other factorsthat are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources. Actualresults may differ from these estimates under different assumptions orconditions. Management believes the following critical accounting policies,among others, affect its more significant judgments and estimates used in thepreparation of its consolidated financial statements.

 

**Allowance For Doubtful Accounts**:  Wemaintain allowances for doubtful accounts for estimated losses resulting fromthe inability of our customers to make payments for services or debtors tosatisfy note receivable obligations. We analyze accounts receivable, customercredit-worthiness, current economic trends and changes in our customer paymentterms when evaluating the adequacy of the allowance for doubtful accounts andnotes receivable. If the financial condition of our customers or debtorsdeteriorates, resulting in an impairment of their ability to make payments,additional allowances may be required.

 

**Valuation of Intangible Assets and Software Development Costs**:  Weassess the impairment of intangible assets whenever events or changes incircumstances indicate that the carrying value may not be recoverable. Factorswe consider important which could trigger an impairment review includesignificant underperformance relative to expected historical or projectedfuture operating results, significant changes in the manner of our use of theacquired assets or the strategy for our overall business, and significantnegative industry or economic trends. The Company assesses the recoverabilityof its software development costs against estimated future revenue over theestimated remaining economic life of the software.

 

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LIQUIDITYAND CAPITAL RESOURCES

 

Netcash and cash equivalents of $0.9 million at June 30, 2003 decreased $0.2million from $1.1 million at December 31, 2002. The decrease is due to ouroperating loss as well as our continuing investment in equipment and ourdeveloped technology.

 

Thenet cash of $0.9 million used in operating activities for the six months endedJune 30, 2003 is due to our net loss and a decrease in accrued expenses,offset in part by non-cash items such as depreciation and amortization oflong-lived assets. The decrease in accrued expenses relates to therestructuring charge recorded in fourth quarter of 2002. Net cash of $1.2million provided by operating activities for the six months ended June 30,2002 is primarily due to depreciation and amortization, including amortizationof prepaid license fees as a result of the value assigned to the warrant issuedin April 1999 to CNNfn, offset by changes in operating assets andliabilities.

 

Thenet cash of $0.8 million used in investing activities for the six months endedJune 30, 2003 is due to our investment in equipment and our developedtechnology, offset by $0.2 million of proceeds from the sale of our discontinuedoperation. Net cash used in investing activities for the six months endedJune 30, 2002 was $0.9 million. Capital expenditures were $0.3 million forthe six months ended June 30, 2003 compared to $0.2 million for the sixmonths ended June 30, 2002. The increase in capital expenditures isprimarily due to our business strategy of licensing our ticker plant technologyin a MEPS model. We anticipate our capital expenditures to continue to increaseas we purchase equipment to support and maintain our MEPS product. Capitalizedsoftware costs were $0.6 million for the six months ended June 30, 2003compared to $0.7 million for the six months ended June 30, 2002.

 

OnJune 2, 2003, we sold the individual retail investor unit and relatedassets of our subsidiary, PCQuote, to Money.net, a HyperFeed customer and aleading provider of streaming real time market data and custom financialsoftware and technology. Money.net acquired the PCQuote Web site and theretail-trading applications available through PCQuote. We recorded a gain of$0.4 million related to the sale. The consideration included (1) $150,000 cashreceived in June 2003, (2) $70,000 cash received in July 2003, and(3) a $150,000 promissory note. The Company transferred net assets with a netbook value of $7,811 to Money.net.

 

Netcash of $1.5 million provided by financing activities for the six months endedJune 30, 2003 is primarily due to the $1.4 private placement of commonstock with our executive officers, individual board members, and the Company’smajority stockholder, PICO Holdings, Inc., completed in May 2003. Net cashused in financing activities for the six months ended June 30, 2002 was$0.2 million. Net proceeds from the sale of shares of common stock to employeespursuant to our Employee Stock Purchase Plan provided $31,000 and $46,000 forthe six months ended June 30, 2003 and 2002, respectively. In the secondquarter of 2003, we borrowed $69,000 to finance capital expenditures relatingto specific customers and repaid $2,000 in June 2003. In the first quarterof 2002, we made the last $250,000 installment payment on our note payable toMotorola.

 

Earningsbefore interest, taxes, depreciation, and amortization (“EBITDA”) was a loss of$0.3 million for the six months ended June 30, 2003 compared to income of$1.8 million for the six months ended June 30, 2002. EBITDA was a loss of$0.3 million for the three months ended June 30, 2003 compared to incomeof $0.7 million for the three months ended June 30, 2002. A reconciliationof EBITDA to net loss for the three and six months ended June 30, 2003 andJune 30, 2002 follows:

 
|                                                                                        |   | **Three months ended  June 30,** |     | **Six months ended********June 30,** |   |
|---------------------------------------------------------------------------------------------|--------|---------------------------------------|----------|-------------------------------------------|--------|
|                                                                                        |   | **2003**                              |     | **2002**                                  |   | **2003** |   | **2002** |   |
| EBITDA                                                                                      |   | $                                     | (338,015 | )                                         | $      | 664,950 |   | $ | (329,409 | ) | $ | 1,778,275 |   |
| Depreciation and amortization                                                               |   | (268,671                              | )        | (434,099                                  | )      | (539,436 | ) | (900,366 | ) |
| Amortization of value assigned to common stock  warrant issued in lieu of cash license fees |   | —                                |     | (420,000                                  | )      | — |   | (840,000 | ) |
| Amortization of software development costs                                                  |   | (339,641                              | )        | (336,046                                  | )      | (676,385 | ) | (661,146 | ) |
| Interest income, net                                                                        |   | 2,893                                 |     | 6,051                                     |   | 5,766 |   | 9,754 |   |
| Income (loss) from discontinued operations                                                  |   | 222,931                               |     | (136,728                                  | )      | 44,073 |   | (282,914 | ) |
| Income taxes                                                                                |   | —                                |     | (337                                      | )      | — |   | (337 | ) |
| Net loss                                                                                    |   | $                                     | (720,503 | )                                         | $      | (656,209 | ) | $ | (1,495,391 | ) | $ | (896,734 | ) |

 

Webelieve our existing capital resources, available line of credit, cashgenerated from continuing operations and our ability to access externalcapital, if necessary, are sufficient for working capital and to fundoperations over the next twelve months.

 

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Aspreviously reported, we have explored multiple alternatives that may beavailable for the purpose of enhancing stockholder value, including a merger, aspin-off or sale of part of our business, a strategic relationship or jointventure with another technology or financial services firm and equityfinancing. We continue to explore opportunities to enhance stockholder value.

 

EFFECTOF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

InDecember 2002, the FASB issued SFAS No. 148, “Accounting for Stock-BasedCompensation - Transition and Disclosure, an amendment of FASB Statement No.123”. This Statement amends FASB Statement No. 123, “Accounting for Stock-BasedCompensation”, to provide alternative methods of transition for a voluntarychange to the fair value method of accounting for stock-based employeecompensation. In addition, this Statement amends the disclosure requirements ofStatement No. 123 to require prominent disclosures in both annual and interimfinancial statements. The Company adopted the disclosure provisions of SFAS No.148 in December 2002.

 

InNovember 2002, the FASB reached a consensus on EITF Issue 00-21,“Accounting for Revenue Arrangements with Multiple Deliverables” (“the Issue”).The guidance in this Issue is effective for revenue arrangements entered intofor fiscal periods beginning after June 15, 2003. The Issue addressescertain aspects of the accounting by a vendor for arrangements under which itwill perform multiple revenue-generating activities. Specifically, the Issueaddresses how to determine whether an arrangement involving multipledeliverables contains more than one earnings process and, if it does, how todivide the arrangement into separate units of accounting consistent with the identifiedearnings processes for revenue recognition purposes. The Issue also addresseshow arrangement consideration should be measured and allocated to the separateunits of accounting in the arrangement. Management is currently reviewing theimpact that EITF 00-21 will have on the Company’s future results of operations.

 

ITEM3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

 

Therehave been no material changes in the Company’s market risk during the three andsix month periods ended June 30, 2003. For additional information, referto the Company’s Annual Report on Form 10-K for the fiscal year endedDecember 31, 2002.

 

ITEM4. CONTROLS AND PROCEDURES

 
| (a)    |   | *Disclosure Controls and Procedures. *The Company's management, with the participation of the Company's  Chief Executive Officer and Chief Financial Officer, has evaluated the  effectiveness of the Company's disclosure controls and procedures (as such  term is defined in Rule 15d-15(e) under the Securities Exchange Act of 1934,  as amended (the "Exchange Act")) as of the end of the period  covered by this quarterly report.   Based on such evaluation, the Company's Chief Executive Officer and  Chief Financial Officer have concluded that, as of the end of such period,  the Company's disclosure controls and procedures are effective in recording,  processing, summarizing and reporting, on a timely basis, information  required to be disclosed by us in the reports that the Company file or submit  under the Exchange Act. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (b)    |   | *Internal Control Over Financial Reporting. *There have not been any changes in the Company's internal control over  financial reporting (as such term is defined in Rule 15d-15(f) under the  Exchange Act) during the fiscal quarter to which this report relates that  have materially affected, or are reasonably likely to materially affect, the  Company's internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

 

PARTII. OTHER INFORMATION

 

ITEM1. LEGAL PROCEEDINGS

 

*HyperFeed v. PC Quote Canada**:*  OnJuly 3, 2002, the Company filed a two-count action against PC Quote Canadaasserting breach of Agency License Agreement (the “Agreement”) and fraud andunjust enrichment and requests damages, plus interest, costs and attorneysfees. The defendant filed an answer, affirmative defenses and counterclaimasserting that oral agreement modified the Agency License Agreement andrequests damages.

 

OnJanuary 28, 2003, the defendant filed a motion for a preliminaryinjunction to enjoin HyperFeed from terminating services provided under theAgreement and HyperFeed has agreed not to terminate such services until acourt-ordered audit of the defendant’s records has been completed.

 

OnMarch 28, 2003, the defendant filed an amended counterclaim claimingbreach of the contract. In its amended counterclaim, the defendant (1) claims unjustenrichment, (2) claims overpayment of communication fees, (3) claims thatHyperFeed licensed directly to users in Canada and/or allowed U.S. customers todo so in violation of the defendant’s exclusive license in Canada, (4) claimsbreach of contract for terminating the Agreement, and (5) requests aninjunction.

 

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Thedefendant requests damages in excess of $1.4 million. HyperFeed answered thecounterclaim denying all material allegations and believes the claims arewithout merit.

 

OnJuly 24, 2003, the Company and the defendant signed a settlementagreement, releasing the other from all claims. The case has been dismissedwith each party to bear their own costs.

 

*HyperFeed v. John Juska**:* HyperFeed filed a one-count complaint action in the Circuit Courtof Cook County, Illinois on December 17, 2002, claiming failure to pay ona promissory note and requesting damages in excess of $250,000, plus interestthrough the date of payment, costs and attorneys fees. Mr. Juska filed ananswer and affirmative defenses to the Complaint. The parties are nowconducting discovery.

 

ITEM2. CHANGES IN SECURITIES AND USEOF PROCEEDS

 

OnMay 15, 2003 we completed a planned private placement of 526,063 shares ofcommon stock to our executive officers, individual board members, and largestinvestor, PICO Holdings, Inc., for an aggregate purchase price of $1.4 million.During the first and second quarters of 2003, we issued 7,126 and 7,547 sharesof our common stock, respectively, to employees, who purchased the shares underour Employee Stock Purchase Plan.

 

ITEM4. SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS

 

Theannual meeting of the stockholders of HyperFeed Technologies, Inc. was held onMay 15, 2003. The following proposals were submitted, considered and votedupon, as indicated below, by the stockholders. The share amounts listed belowhave not been adjusted for the reverse stock split, effective August 13, 2003.

 

1. To elect seven members to our Board of Directorsto serve until the 2004 Annual Meeting, or until their successors are electedand shall have qualified.

 

| **Director**        |   | **Shares For** |   | **Shares Withheld** |   |
|---------------------|--------|----------------|--------|---------------------|--------|
| Jim  R. Porter      |   | 23,845,247     |   | 133,254             |   |
| Louis J. Morgan     |   | 23,844,859     |   | 133,642             |   |
| Ronald Langley      |   | 23,725,951     |   | 252,550             |   |
| John R. Hart        |   | 23,845,297     |   | 133,204             |   |
| Charles J. Henry    |   | 23,845,097     |   | 133,404             |   |
| Kenneth J. Slepicka |   | 23,844,858     |   | 133,643             |   |
| John L. Borling     |   | 23,845,297     |   | 133,204             |   |

 

2. To approve an amendment to the 1995 EmployeeStock Purchase Plan to increase the number of shares issuable under the planfrom 1,000,000 shares to 2,000,000 shares.

 

| **Shares For** |   | **Shares Against** |   | **Abstentions** |   | **Not Voted** |   |
|----------------|--------|--------------------|--------|-----------------|--------|---------------|--------|
| 13,923,737     |   | 511,255            |   | 51,245          |   | 9,492,264     |   |

 

3. To approve a private placement of 5,260,628shares of common stock (representing 17.4% of the Company’s outstanding commonstock after including the shares from this transaction) at $0.2705 per share toofficers, board members and an affiliate for an aggregate purchase price of$1,423,000.

 

| **Shares For** |   | **Shares Against** |   | **Abstentions** |   | **Not Voted** |   |
|----------------|--------|--------------------|--------|-----------------|--------|---------------|--------|
| 13,903,751     |   | 540,425            |   | 42,061          |   | 9,492,264     |   |

 

4. To approve and ratify the appointment of KPMGLLP as our independent auditors for 2003.

 

| **Shares For** |   | **Shares Against** |   | **Abstentions** |   |
|----------------|--------|--------------------|--------|-----------------|--------|
| 23,879,554     |   | 69,747             |   | 29,200          |   |

 

Noother matters were submitted for vote.

 

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ITEM5. OTHER INFORMATION

 

InMay 2003, the Company received notification from Nasdaq indicating thatthe Company failed to comply with the minimum $1.00 per share continued listingrequirements set forth in NASD Marketplace Rule 4310(c)(4) and that it is notin compliance with listing maintenance standards established by Nasdaqrequiring that the Company have stockholders’ equity of at least $2.5 million,or a $35 million market value of listed securities, or $500,000 of net incomefrom continuing income for the most recently completed fiscal year or two ofthe three most recently completed fiscal years.

 

Nasdaqfurther informed the Company that if it did not appeal the decision, HyperFeed’scommon stock would be delisted from The Nasdaq SmallCap Market at the openingof business on May 22, 2003. The Company requested and was granted ahearing with Nasdaq on June 19, 2003 to appeal Nasdaq’s determination todelist HyperFeed’s common stock from The Nasdaq SmallCap Market.

 

OnJuly 15, 2003, the Company was notified that its common stock wouldcontinue to be listed on The Nasdaq SmallCap Market in accordance with theexception from the continued listing criteria granted by the Nasdaq Listing QualificationsPanel (the “Panel”).

 

Underthe terms and conditions of the exception, HyperFeed is required to meetcertain interim performance and disclosure milestones. Specifically, on orbefore August 14, 2003 and for ten consecutive trading days thereafter,HyperFeed must demonstrate a closing bid price of at least $1.00 per share.Further, on or before the same date, HyperFeed must file its Quarterly Reporton Form 10-Q for the quarter ended June 30, 2003 evidencing stockholders’equity of at least $2.5 million. Finally, on or before November 14, 2003,HyperFeed must file its Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2003 evidencing stockholders’ equity of at least $2.5million.

 

Theexception will expire on November 14, 2003 subject to said milestones tobe achieved and evidenced by HyperFeed. In the event that the Company is deemedto have met all of the terms of the exception, its securities will continue tobe listed on The Nasdaq SmallCap Market. HyperFeed has presented the Panel witha definitive plan that should enable the Company to achieve compliance withcontinued listing criteria during the period of time set forth in the Panel’sdecision. However, there is no assurance that it will be able to do so.

 

ShouldHyperFeed’s securities cease to be listed on The Nasdaq SmallCap Market, theCompany’s securities may continue to be listed on the OTC Bulletin Board. Aswitch to the OTC market will likely result in more volatility for theCompany’s stock, less volume, and no analyst coverage. As a result, theCompany’s stock price would likely decline further and the ability of anypotential or future investors to achieve liquidity from HyperFeed’s commonstock could be severely limited, not only in the number of shares that could bebought and sold at a given price, but also through delays in the timing oftransactions and reduction in media coverage of the Company. This couldinhibit, if not preclude, the Company’s ability to raise additional workingcapital on acceptable terms, if at all. In addition, current and prospectivecustomers and strategic partners may limit or cease their businessrelationships with the Company because of concerns or perceptions regarding itslisting status and future liquidity.

 

Effectiveas of July 18, 2003 and for the duration of the exception, HyperFeed’strading symbol will be modified to include a fifth character qualifier from“HYPR” to “HYPRC.”

 

ITEM6. EXHIBITS and REPORTS on FORM 8-K

 

(a)  Exhibits

 

Exhibit10(a) – Asset Purchase Agreement dated June 2, 2003.

 

Exhibit31.1 - Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a)and 15d-14(a) under the Exchange Act.

 

Exhibit31.2 - Certification of the Chief Financial Officer Pursuant to Rules 13a-14(a)and 15d-14(a) under the Exchange Act.

 

Exhibit32 – Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of theUnited States Code.

 

(b)  A Form 8-K was filed on April 30, 2003attaching a copy of the press release reporting the first quarter 2003 results.

 

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SIGNATURES

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
| HYPERFEED TECHNOLOGIES, INC. |
|------------------------------|
|                         |   |
|                         |   |
| Date:                        | August 14, 2003 |
|                         |   |
| By:                          | /s/ Jim R. Porter |   |
|                         |   |
|                         | Jim R. Porter |
|                         | Chairman and Chief Executive Officer |
|                         |   |
| By:                          | /s/ Randall J. Frapart |   |
|                         |   |
|                         | Randall J. Frapart |
|                         | Chief Financial Officer and Principal Accounting Officer |
|                              |  |  |  |

 

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