** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC  20549**

** **

**FORM 10-Q**

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** **

** **

| **ý** | **Quarterly Report Pursuant to Section 13 or  15(d) of the   Securities Exchange Act of 1934**                                                                                                                                                                                                                                 |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       | **For  the quarterly period ended June 30, 2002**                                                                                                                                                                                                                                                                              |
|       | **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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** **

**Commissionfile number 0-13093**

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

** **

**HYPERFEED TECHNOLOGIES, INC.**

(a Delaware 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

 

Indicate the number of shares outstanding of each of theissuer’s classes of common stock, as of the latest practicable date: 23,964,393shares of the Company’s common stock ($.001 par value) were outstanding as ofJuly 31, 2002.

 

 

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HYPERFEED TECHNOLOGIES,INC.

 

INDEX

 
| PART I.                       | Financial Information                                                                            |   |
|-------------------------------|--------------------------------------------------------------------------------------------------|--------|
|                          |                                                                                             |   |
| Item 1.                       | Consolidated Balance Sheets  as of June 30, 2002 and December 31, 2001                           |   |
|                          |                                                                                             |   |
|                          | Consolidated  Statements of Operations for the six month periods ended June 30, 2002 and  2001   |   |
|                          |                                                                                             |   |
|                          | Consolidated  Statements of Operations for the three month periods ended June 30, 2002 and  2001 |   |
|                          |                                                                                             |   |
|                          | Consolidated  Statements of Cash Flows for the six month periods ended June 30, 2002 and  2001   |   |
|                          |                                                                                             |   |
|                          |  Notes to Unaudited  Interim Consolidated Financial Statements                              |   |
|                          |                                                                                             |   |
| Item  2.                      | Management’s  Discussion and Analysis of Results of Operations and Financial Condition      |   |
|                          |                                                                                             |   |
| Item  3.                      | Quantitative  and Qualitative Disclosures about Market Risk                                      |   |
|                          |                                                                                             |   |
| 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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HYPERFEED TECHNOLOGIES, INC.

Consolidated Balance Sheets

June 30, 2002 and December 31, 2001

 

 
|                                                                                                       |   | **June 30,  2002** |      | **December  31, 2001** |   |
|------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|------------------------|--------|
|                                                                                                       |   | **(Unaudited)**    |      | **(Audited)**          |   |
| ASSETS                                                                                                     |   |               |      |                   |   |
| Current Assets                                                                                             |   |               |      |                   |   |
| Cash and cash  equivalents                                                                                 |   | $                  | 689,000   |                   | $      | 607,263 |   |
| Restricted cash  equivalents                                                                               |   | 250,000            |      | 250,000                |   |
| Accounts  receivable, less allowance for doubtful accounts of: 2002: $310,830;  2001: $413,554             |   | 958,041            |      | 1,310,936              |   |
| Note receivable                                                                                            |   | 99,142             |      | 100,000                |   |
| Prepaid license  fees                                                                                      |   | 490,000            |      | 1,330,000              |   |
| Prepaid expenses  and other current assets                                                                 |   | 424,694            |      | 312,106                |   |
|                                                                                                       |   |               |      |                   |   |
| TOTAL CURRENT  ASSETS                                                                                      |   | 2,910,877          |      | 3,910,305              |   |
|                                                                                                       |   |               |      |                   |   |
| Property and  equipment                                                                                    |   |               |      |                   |   |
| Satellite  receiving equipment                                                                             |   | 89,417             |      | 89,417                 |   |
| Computer  equipment                                                                                        |   | 3,088,592          |      | 3,214,129              |   |
| Communication  equipment                                                                                   |   | 1,459,217          |      | 1,631,960              |   |
| Furniture and  fixtures                                                                                    |   | 394,016            |      | 430,996                |   |
| Leasehold  improvements                                                                                    |   | 972,481            |      | 962,288                |   |
|                                                                                                       |   |               |      |                   |   |
|                                                                                                       |   | 6,003,723          |      | 6,328,790              |   |
| Less:  Accumulated depreciation and amortization                                                           |   | 3,474,161          |      | 3,306,865              |   |
|                                                                                                       |   |               |      |                   |   |
|                                                                                                       |   | 2,529,562          |      | 3,021,925              |   |
|                                                                                                       |   |               |      |                   |   |
| Goodwill and  other intangible assets, net of accumulated amortization of: 2002:  $552,095; 2001: $327,895 |   | 1,007,002          |      | 1,243,614              |   |
|                                                                                                       |   |               |      |                   |   |
| Software  development costs, net of accumulated amortization of: 2002:  $2,515,051; 2001: $7,199,318       |   | 2,081,749          |      | 2,069,975              |   |
|                                                                                                       |   |               |      |                   |   |
| Deposits and  other assets                                                                                 |   | 129,288            |      | 128,936                |   |
|                                                                                                       |   |               |      |                   |   |
| TOTAL ASSETS                                                                                               |   | $                  | 8,658,478 |                   | $      | 10,374,755 |   |

 

See Notes to Unaudited Interim Consolidated Financial Statements.

 

3

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|                                                                                                                                                              |   | **June  30,2002** |      | **December  31, 2001** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|------------------------|--------|
|                                                                                                                                                              |   | **(Unaudited)**   |      | **(Audited)**          |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                        |   |              |      |                   |   |
| Current  Liabilities                                                                                                                                              |   |              |      |                   |   |
| Notes payable                                                                                                                                                     |   | $                 | —    |                   | $      | 250,000 |   |
| Accrued  satellite termination fees                                                                                                                               |   | 75,000            |      | 225,000                |   |
| Accounts payable                                                                                                                                                  |   | 959,705           |      | 1,070,163              |   |
| Accrued expenses                                                                                                                                                  |   | 475,731           |      | 340,286                |   |
| Accrued  compensation                                                                                                                                             |   | 218,252           |      | 240,297                |   |
| Income taxes  payable                                                                                                                                             |   | —            |      | 5,000                  |   |
| Unearned revenue                                                                                                                                                  |   | 1,082,363         |      | 1,565,446              |   |
|                                                                                                                                                              |   |              |      |                   |   |
| TOTAL CURRENT  LIABILITIES                                                                                                                                        |   | 2,811,051         |      | 3,696,192              |   |
|                                                                                                                                                              |   |              |      |                   |   |
| Accrued  expenses, less current portion                                                                                                                           |   | 73,368            |      | 35,435                 |   |
| Unearned  revenue, less current portion                                                                                                                           |   | 54,134            |      | 72,178                 |   |
|                                                                                                                                                              |   |              |      |                   |   |
| TOTAL NONCURRENT  LIABILITIES                                                                                                                                     |   | 127,502           |      | 107,613                |   |
|                                                                                                                                                              |   |              |      |                   |   |
| TOTAL  LIABILITIES                                                                                                                                                |   | 2,938,553         |      | 3,803,805              |   |
|                                                                                                                                                              |   |              |      |                   |   |
| Stockholders’  Equity                                                                                                                                        |   |              |      |                   |   |
| Common stock, $.001 par value; authorized 50,000,000shares; issued and  outstanding 23,964,393 shares atJune 30, 2002 and 23,849,605 shares at  December 31, 2001 |   | 23,964            |      | 23,850                 |   |
| Additional paid-in capital                                                                                                                                        |   | 44,225,195        |      | 44,179,600             |   |
| Accumulated  deficit                                                                                                                                              |   |  (38,529,234 | )         |  (37,632,500      | )      |
|                                                                                                                                                              |   |              |      |                   |   |
| TOTAL  STOCKHOLDERS’ EQUITY                                                                                                                                  |   | 5,719,925         |      | 6,570,950              |   |
|                                                                                                                                                              |   |              |      |                   |   |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                  |   | $                 | 8,658,478 |                   | $      | 10,374,755 |   |

 

See Notes to UnauditedInterim Consolidated Financial Statements.

 

 

4

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HYPERFEED TECHNOLOGIES,INC.

Consolidated Statements of Operations

** **
|                                                  |   | **For The Six Months Ended** |      |
|-------------------------------------------------------|--------|------------------------------|-----------|
|                                                  |   | **June 30,  2002**           |      | **June 30,  2001** |   |
|                                                  |   | **(Unaudited)**              |      | **(Unaudited)** |   |
| REVENUE                                               |   |                         |      |   |   |
| HyperFeed  Services                                   |   | $                            | 8,946,388 |   | $ | 13,383,064 |   |
| PCQuote Services                                      |   | 1,670,928                    |      | 5,628,367 |   |
|                                                  |   |                         |      |   |   |
| TOTAL REVENUE                                         |   | 10,617,316                   |      | 19,011,431 |   |
|                                                  |   |                         |      |   |   |
| DIRECT COST OF  SERVICES                              |   |                         |      |   |   |
| HyperFeed  Services                                   |   | 5,014,910                    |      | 6,709,189 |   |
| PCQuote Services                                      |   | 1,536,590                    |      | 4,523,204 |   |
|                                                  |   |                         |      |   |   |
| TOTAL DIRECT  COST OF SERVICES                        |   | 6,551,500                    |      | 11,232,393 |   |
|                                                  |   |                         |      |   |   |
| GROSS MARGIN                                          |   | 4,065,816                    |      | 7,779,038 |   |
|                                                  |   |                         |      |   |   |
| OPERATING  EXPENSES                                   |   |                         |      |   |   |
| Sales                                                 |   | 1,026,880                    |      | 1,972,601 |   |
| General and  administrative                           |   | 1,769,675                    |      | 2,360,040 |   |
| Product and  market development                       |   | 1,231,207                    |      | 3,065,378 |   |
| Depreciation and  amortization                        |   | 944,205                      |      | 761,069 |   |
|                                                  |   |                         |      |   |   |
| TOTAL OPERATING  EXPENSES                             |   | 4,971,967                    |      | 8,159,088 |   |
|                                                  |   |                         |      |   |   |
| LOSS FROM  OPERATIONS                                 |   | (906,151                     | )         | (380,050 | ) |
|                                                  |   |                         |      |   |   |
| OTHER INCOME  (EXPENSE)                               |   |                         |      |   |   |
| Interest income                                       |   | 12,526                       |      | 76,662 |   |
| Interest expense                                      |   | (2,772                       | )         | (49,937 | ) |
|                                                  |   |                         |      |   |   |
| NET OTHER INCOME  (EXPENSE)                           |   | 9,754                        |      | 26,725 |   |
|                                                  |   |                         |      |   |   |
| LOSS BEFORE  INCOME TAXES AND  MINORITY INTEREST |   | (896,397                     | )         | (353,325 | ) |
| INCOME TAXES                                          |   | 337                          |      | 25,000 |   |
|                                                  |   |                         |      |   |   |
| LOSS BEFORE  MINORITY INTEREST                        |   | (896,734                     | )         | (378,325 | ) |
|                                                  |   |                         |      |   |   |
| Minority  interest in loss                            |   | —                       |      | 1,829 |   |
|                                                  |   |                         |      |   |   |
| NET LOSS                                              |   | $                            | (896,734  | ) | $ | (376,496 | ) |
|                                                  |   |                         |      |   |   |
| Basic net loss  per share                             |   | $                            | (0.04     | ) | $ | (0.02 | ) |
| Diluted net loss  per share                           |   | $                            | (0.04     | ) | $ | (0.02 | ) |
|                                                  |   |                         |      |   |   |
| Basic  weighted-average common shares outstanding     |   | 23,870,488                   |      | 15,935,492 |   |
| Diluted  weighted-average common shares outstanding   |   | 23,870,488                   |      | 15,935,492 |   |

 

See Notes toUnaudited Interim Consolidated Financial Statements.

 

 

5

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HYPERFEED TECHNOLOGIES,INC.

Consolidated Statements of Operations

 

 

 
|                                                  |   | **For The Three Months Ended** |      |
|-------------------------------------------------------|--------|--------------------------------|-----------|
|                                                  |   | **June 30,  2002**             |      | **June 30,  2001** |   |
|                                                  |   | **(Unaudited)**                |      | **(Unaudited)** |   |
| REVENUE                                               |   |                           |      |   |   |
| HyperFeed  Services                                   |   | $                              | 4,199,311 |   | $ | 6,516,669 |   |
| PCQuote Services                                      |   | 771,765                        |      | 2,738,445 |   |
|                                                  |   |                           |      |   |   |
| TOTAL REVENUE                                         |   | 4,971,076                      |      | 9,255,114 |   |
|                                                  |   |                           |      |   |   |
| DIRECT COST OF  SERVICES                              |   |                           |      |   |   |
| HyperFeed  Services                                   |   | 2,395,655                      |      | 3,433,212 |   |
| PCQuote Services                                      |   | 735,603                        |      | 2,286,113 |   |
|                                                  |   |                           |      |   |   |
| TOTAL DIRECT  COST OF SERVICES                        |   | 3,131,258                      |      | 5,719,325 |   |
|                                                  |   |                           |      |   |   |
| GROSS MARGIN                                          |   | 1,839,818                      |      | 3,535,789 |   |
|                                                  |   |                           |      |   |   |
| OPERATING  EXPENSES                                   |   |                           |      |   |   |
| Sales                                                 |   | 457,596                        |      | 1,054,576 |   |
| General and  administrative                           |   | 952,859                        |      | 1,128,994 |   |
| Product and  market development                       |   | 635,518                        |      | 1,961,592 |   |
| Depreciation and  amortization                        |   | 455,768                        |      | 433,242 |   |
|                                                  |   |                           |      |   |   |
| TOTAL OPERATING  EXPENSES                             |   | 2,501,741                      |      | 4,578,404 |   |
|                                                  |   |                           |      |   |   |
| LOSS FROM  OPERATIONS                                 |   | (661,923                       | )         | (1,042,615 | ) |
|                                                  |   |                           |      |   |   |
| OTHER INCOME  (EXPENSE)                               |   |                           |      |   |   |
| Interest income                                       |   | 6,051                          |      | 40,184 |   |
| Interest expense                                      |   | —                         |      | (19,926 | ) |
|                                                  |   |                           |      |   |   |
| NET OTHER INCOME  (EXPENSE)                           |   | 6,051                          |      | 20,258 |   |
|                                                  |   |                           |      |   |   |
| LOSS BEFORE  INCOME TAXES AND  MINORITY INTEREST |   | (655,872                       | )         | (1,022,357 | ) |
| INCOME TAXES                                          |   | 337                            |      | — |   |
|                                                  |   |                           |      |   |   |
| LOSS BEFORE  MINORITY INTEREST                        |   | (656,209                       | )         | (1,022,357 | ) |
|                                                  |   |                           |      |   |   |
| Minority  interest in loss                            |   | —                         |      | — |   |
|                                                  |   |                           |      |   |   |
| NET LOSS                                              |   | $                              | (656,209  | ) | $ | (1,022,357 | ) |
|                                                  |   |                           |      |   |   |
| Basic net loss  per share                             |   | $                              | (0.03     | ) | $ | (0.06 | ) |
| Diluted net loss  per share                           |   | $                              | (0.03     | ) | $ | (0.06 | ) |
|                                                  |   |                           |      |   |   |
| Basic  weighted-average common shares outstanding     |   | 23,891,141                     |      | 16,109,767 |   |
| Diluted  weighted-average common shares outstanding   |   | 23,891,141                     |      | 16,109,767 |   |

 

See Notes toUnaudited Interim Consolidated Financial Statements.

 

 

6

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HYPERFEED TECHNOLOGIES,INC.

Consolidated Statements of Cash Flows

 

** **

** **
|                                                                                        |   | **For The Six Months Ended** |     |
|---------------------------------------------------------------------------------------------|--------|------------------------------|----------|
|                                                                                        |   | **June 30,  2002**           |     | **June 30,  2001** |   |
|                                                                                        |   | **(Unaudited)**              |     | **(Unaudited)** |   |
| Cash Flows from  Operating Activities:                                                      |   |                         |     |   |   |
| Net loss                                                                                    |   | $                            | (896,734 | ) | $ | (376,496 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities:            |   |                         |     |   |   |
| Depreciation and  amortization                                                              |   | 944,205                      |     | 761,069 |   |
| Provision for  doubtful accounts                                                            |   | 17,000                       |     | 95,000 |   |
| Amortization of  software development costs                                                 |   | 671,640                      |     | 974,088 |   |
| Amortization of  value assigned to common stock warrant issued in lieu of cash license fees |   | 840,000                      |     | 840,000 |   |
| Minority  interest in loss                                                                  |   | —                       |     | (1,829 | ) |
| Changes in  assets and liabilities:                                                         |   |                         |     |   |   |
| Accounts  receivable                                                                        |   | 335,895                      |     | 1,060,996 |   |
| Prepaid expenses  and other current assets                                                  |   | (112,588                     | )        | (394,515 | ) |
| Deposits and  other assets                                                                  |   | (352                         | )        | (48,378 | ) |
| Accounts payable                                                                            |   | (110,458                     | )        | 683,501 |   |
| Accrued expenses                                                                            |   | 95,356                       |     | (144,609 | ) |
| Accrued  satellite termination fees                                                         |   | (150,000                     | )        | (216,000 | ) |
| Income taxes  payable                                                                       |   | (5,000                       | )        | 25,000 |   |
| Unearned revenue                                                                            |   | (445,150                     | )        | (94,895 | ) |
|                                                                                        |   |                         |     |   |   |
| NET CASH  PROVIDED BY OPERATING ACTIVITIES                                                  |   | 1,183,814                    |     | 3,162,932 |   |
| Cash Flows From  Investing Activities:                                                      |   |                         |     |   |   |
| Purchase of  property and equipment                                                         |   | (215,230                     | )        | (1,138,974 | ) |
| Purchase of  Marketscreen, net of cash acquired                                             |   | —                       |     | (449,963 | ) |
| Software  development costs capitalized                                                     |   | (683,414                     | )        | (831,154 | ) |
| Repayment  (issuance) of note receivable                                                    |   | 858                          |     | (100,000 | ) |
|                                                                                        |   |                         |     |   |   |
| NET CASH USED IN  INVESTING ACTIVITIES                                                      |   | (897,786                     | )        | (2,520,091 | ) |
| Cash Flows From  Financing Activities:                                                      |   |                         |     |   |   |
| Proceeds from  issuance of common stock                                                     |   | 45,709                       |     | 113,503 |   |
| Principal  payments on notes payable                                                        |   | (250,000                     | )        | (650,000 | ) |
|                                                                                        |   |                         |     |   |   |
| NET CASH USED IN  FINANCING ACTIVITIES                                                      |   | (204,291                     | )        | (536,497 | ) |
|                                                                                        |   |                         |     |   |   |
| Net increase in  cash and cash equivalents                                                  |   | 81,737                       |     | 106,344 |   |
| Cash and cash  equivalents:                                                                 |   |                         |     |   |   |
| Beginning of the  period                                                                    |   | 607,263                      |     | 2,522,593 |   |
|                                                                                        |   |                         |     |   |   |
| End of the  period                                                                          |   | $                            | 689,000  |   | $ | 2,628,937 |   |
|                                                                                        |   |                         |     |   |   |
| **Supplemental disclosure of non-cash transactions:**                                       |   |                         |     |   |   |
| Value of stock consideration for acquisition of Marketscreen                                |   | $                            | —   |   | $ | 1,147,500 |   |

 

See Notes to Unaudited Interim Consolidated Financial Statements.

 

 

7

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HYPERFEED TECHNOLOGIES, INC.

NOTES TO UNAUDITED INTERIMCONSOLIDATED FINANCIAL STATEMENTS

 

 

(1) BASIS OF PRESENTATION

 

PRINCIPLES OF CONSOLIDATION: The accompanying unaudited interim consolidated financial statementsinclude the accounts of HyperFeed Technologies, Inc. (“HyperFeed” or the“Company”) and its subsidiary, PCQuote.com, Inc. (“PCQuote”), and have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and in conjunctionwith the rules and regulations of the Securities and Exchange Commission.Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements. The consolidated interim financial statementsinclude all adjustments, including the elimination of all significantintercompany transactions in consolidation, which, in the opinion ofmanagement, are necessary in order to make the financial statements notmisleading. The amounts indicated as “audited” have been extracted from theCompany’s December 31, 2001 annual report. For further information, refer tothe consolidated financial statements and footnotes included in HyperFeed’sannual report on Form 10-K for the year ended December 31, 2001.

 

SOFTWARE DEVELOPMENT COSTS:  TheCompany’s continuing investment in software development consists primarily ofenhancements to its existing Windows-based private network and Internetservices, development of new data analysis software and programmer toolsdesigned to afford easy access to its data-feed for data retrieval and analysispurposes, and application of new technology to increase the data volume anddelivery speed of its distribution system and network.

 

Costs associated with the planning and design phase of softwaredevelopment, including coding and testing activities necessary to establishtechnological feasibility of computer software products to be licensed orotherwise marketed, are expensed as research and development costs as incurred.Once technological feasibility has been determined, costs incurred in theconstruction phase of software development including coding, testing, andproduct quality assurance are capitalized.

 

Amortization commences at the time of capitalization or, in the case ofa new service offering, at the time the service becomes available for use.Unamortized capitalized costs determined to be in excess of the net realizablevalue of the product are expensed at the date of such determination. Theaccumulated amortization and related software development costs are removedfrom the respective accounts in the year following full amortization.

 

The Company’s policy is to amortize capitalized software costs by thegreater of (a) the ratio that current gross revenue for a product bear to thetotal of current and anticipated future gross revenue for that product or (b)the straight line method over three years, the remaining estimated economiclife of the product including the period being reported. The Company assessesthe recoverability 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.

 

FINANCIAL INSTRUMENTS:  TheCompany has no financial instruments for which the carrying value materiallydiffers from fair value.

 

INCOME TAXES:  Income taxes areaccounted for under the asset and liability method whereby deferred tax assetsare recognized for deductible temporary differences and operating loss and taxcredit carryforwards and deferred tax liabilities are recognized for taxabletemporary differences. Temporary differences are the differences between thereported amounts of assets and liabilities and their tax bases. Deferred taxassets are reduced by a valuation allowance when, in the opinion of management,it is more likely than not that some portion or all of the deferred tax assetswill not be realized. Deferred tax assets and liabilities are adjusted for theeffects of changes in tax laws and rates on the date of enactment.

 

 

8

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REVENUE RECOGNITION:  The Companyprincipally derives its revenue from service contracts for the provision ofmarket data only (“HyperFeed® license fees”), service contracts for theprovision of market data together with analytical software (“Analytics licensefees”), and the sale of advertising on its Web site, www.pcquote.com. Revenuefrom service contracts is recognized ratably over the contract term as thecontracted services are rendered. Revenue from the sale of advertising isrecognized as the advertising is displayed on the Web site. HyperFeed licensefees and Analytics license fees for satellite and landline services aregenerally billed one month in advance with 30-day payment terms. License feesfor Analytics on the Internet are generally paid by credit card within five daysprior to the month of service. These and other payments received prior toservices being rendered are classified as unearned revenue on the balancesheet. Customers’ deposits on service contracts are classified as eithercurrent unearned revenue, if the contract expires in one year or less, ornon-current unearned revenue, if the contract expiration date is greater thanone year.

 

HyperFeed services primarily consist of the provision of HyperFeedmarket data and HyperFeed market data with analytics to the business-to-businessmarketplace, while PCQuote services primarily consist of analytics service,powered by the HyperFeed datafeed, to the consumer marketplace.

 

The Company applies the provisions of Statement of Position 97-2,“Software Revenue Recognition,”, as amended, which specifies the following fourcriteria that must be met prior to recognizing revenue: (1) persuasive evidenceof the existence of an arrangement, (2) delivery, (3) fixed or determinablefee, and (4) probable collection. In addition, revenue earned on softwarearrangements involving multiple elements is allocated to each element based onthe relative fair value of the elements. When applicable, revenue allocated tothe Company’s software products (including specified upgrades/enhancements) isrecognized upon delivery of the products. Revenue allocated to post contractcustomer support is recognized ratably over the term of the support and revenueallocated to service elements (such as training) is recognized as the servicesare performed.

 

GOODWILL AND OTHER INTANGIBLE ASSETS: Intangible assets consist principally of developed technology,noncompete agreements, customer lists, and the excess of acquisition costs overthe estimated fair value of net assets acquired (goodwill). The fair value ofintangible assets acquired is determined primarily through the use ofindependent appraisals. Amortization is calculated using the straight-linemethod over the respective estimated useful lives, three years for developedtechnology and customer lists and five years for noncompete agreements. Duringthe first quarter of 2002, the Company implemented SFAS 142, “Goodwill andOther Intangible Assets,” which replaces the requirements to amortizeintangible assets with indefinite lives and goodwill with a requirement for anannual impairment test. See Note 4.

 

 

(2) INCOME TAXES

 

At December 31, 2001, the Company had Federal income tax net operatingloss carryforwards of approximately $22,878,000 for Federal income tax purposesand approximately $22,393,000 for the alternative minimum tax. Approximately$1,058,000 of these net operating losses relates to exercise of incentiveemployee stock options and will be credited directly to stockholders’ equitywhen realized. The future utilization of these net operating losses will belimited due to changes in Company ownership. The net operating losscarryforwards will expire, if not previously utilized, as follows: 2002:$560,000; 2003: $79,000; 2004: $576,000; 2005: $1,557,000; 2006: $301,000; andthereafter: $19,805,000.

 

 

9

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(3) SEGMENT INFORMATION

 

While the Company operates in one industry, financial services, inapplying SFAS No. 131, “Disclosures about Segments of an Enterprise and RelatedInformation”, the Company has identified two segments within which it operates.The parent Company’s services are principally in the business-to-businesssector, while its subsidiary, PCQuote, operates in the business-to-consumermarketplace. The Company evaluates performance and allocates resources based onoperating profitability and growth potential. The accounting policies of thereportable segments are the same as those described in Note 1. Financialinformation relating to industry segments for the quarters ended June 30, 2002and June 30, 2001 is as follows:

 
|                                 |   | **June 30,  2002** |      | **June 30,  2001** |   |
|--------------------------------------|--------|--------------------|-----------|--------------------|--------|
|                                 |   | **Amount**         |      | **%**              |   | **Amount** |   | **%** |   |
| **Sales to unaffiliated customers:** |   |               |      |               |   |   |   |   |   |
| HyperFeed  services                  |   | $                  | 4,199,311 |               | 84.5   | % | $ | 6,516,669 |   | 70.4 | % |
| PCQuote services                     |   | 771,765            |      | 15.5               | %      | 2,738,445 |   | 29.6 | % |
|                                 |   |               |      |               |   |   |   |   |   |
| Total revenue                        |   | $                  | 4,971,076 |               | 100.0  | % | $ | 9,255,114 |   | 100.0 | % |
|                                 |   |               |      |               |   |   |   |   |   |
| **Operating income (loss):**         |   |               |      |               |   |   |   |   |   |
| HyperFeed  services                  |   | $                  | (225,028  | )                  | 34.0   | % | $ | 760,932 |   | * |   |
| PCQuote services                     |   | (436,895           | )         | 66.0               | %      | (1,803,547 | ) | * |   |
|                                 |   |               |      |               |   |   |   |   |   |
| Total operating  loss                |   | $                  | (661,923  | )                  | 100.0  | % | $ | (1,042,615 | ) | * |   |
|                                 |   |               |      |               |   |   |   |   |   |
| **Identifiable assets:**             |   |               |      |               |   |   |   |   |   |
| HyperFeed  services                  |   | $                  | 7,714,427 |               | 89.1   | % | $ | 10,812,140 |   | 73.0 | % |
| PCQuote services                     |   | 944,051            |      | 10.9               | %      | 3,999,795 |   | 27.0 | % |
|                                 |   |               |      |               |   |   |   |   |   |
| Total  identifiable assets           |   | $                  | 8,658,478 |               | 100.0  | % | $ | 14,811,935 |   | 100.0 | % |

----

*not meaningful

 

Financialinformation relating to the segments for the six months ended June 30, 2002 andJune 30, 2001 is as follows:

 
|                                 |   | **June 30,  2002** |       | **June 30,  2001** |   |
|--------------------------------------|--------|--------------------|------------|--------------------|--------|
|                                 |   | **Amount**         |       | **%**              |   | **Amount** |   | **%** |   |
| **Sales to unaffiliated customers:** |   |               |       |               |   |   |   |   |   |
| HyperFeed  services                  |   | $                  | 8,946,388  |               | 84.3   | % | $ | 13,383,064 |   | 70.4 | % |
| PCQuote services                     |   | 1,670,928          |       | 15.7               | %      | 5,628,367 |   | 29.6 | % |
|                                 |   |               |       |               |   |   |   |   |   |
| Total revenue                        |   | $                  | 10,617,316 |               | 100.0  | % | $ | 19,011,431 |   | 100.0 | % |
|                                 |   |               |       |               |   |   |   |   |   |
| **Operating income (loss):**         |   |               |       |               |   |   |   |   |   |
| HyperFeed  services                  |   | $                  | (84,342    | )                  | 9.3    | % | $ | 2,323,319 |   | * |   |
| PCQuote services                     |   | (821,809           | )          | 90.7               | %      | (2,703,369 | ) | * |   |
|                                 |   |               |       |               |   |   |   |   |   |
| Total operating  loss                |   | $                  | (906,151   | )                  | 100.0  | % | $ | (380,050 | ) | * |   |
|                                 |   |               |       |               |   |   |   |   |   |
| **Identifiable assets:**             |   |               |       |               |   |   |   |   |   |
| HyperFeed  services                  |   | $                  | 7,714,427  |               | 89.1   | % | $ | 10,812,140 |   | 73.0 | % |
| PCQuote services                     |   | 944,051            |       | 10.9               | %      | 3,999,795 |   | 27.0 | % |
|                                 |   |               |       |               |   |   |   |   |   |
| Total  identifiable assets           |   | $                  | 8,658,478  |               | 100.0  | % | $ | 14,811,935 |   | 100.0 | % |

----

*not meaningful

 

 

10

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(4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

On January 1, 2002, the Company adopted Statement of FinancialAccounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS142”). SFAS 142 addresses how intangible assets that are acquired individuallyor with a group of other assets (but not those acquired in a businesscombination) should be accounted for in financial statements upon theiracquisition. SFAS 142 also addresses how goodwill and other intangible assetsshould be accounted for after they have been initially recognized in thefinancial statements.

 

Intangible asset data as of June 30, 2002 is as follows:

 
|                                    |   | **As of June  30, 2002**   |      |
|-----------------------------------------|--------|----------------------------|-----------|
|                                    |   | **Gross  Carrying Amount** |      | **Accumulated  Amortization** |   |
| Amortized  intangible assets            |   |                       |      |   |   |
| Developed  technology                   |   | $                          | 1,327,239 |   | $ | (516,148 | ) |
| Noncompete  agreements                  |   | 132,724                    |      | (30,969 | ) |
| Customer lists                          |   | 12,800                     |      | (4,978 | ) |
|                                    |   |                       |      |   |   |
| Unamortized  intangible assets          |   |                       |      |   |   |
| Goodwill                                |   | $                          | 86,334    |   |   |   |
|                                    |   |                       |      |   |   |
| Aggregate  amortization expense         |   |                       |      |   |   |
| For the quarter  ended June 30, 2002    |   | $                          | 118,307   |   |   |   |
| For the six  months ended June 30, 2002 |   | $                          | 236,613   |   |   |   |
|                                    |   |                       |      |   |   |
| Estimated  amortization                 |   |                       |      |   |   |
| For the year  ended December 31, 2002   |   | $                          | 473,225   |   |   |   |
| For the year ended  December 31, 2003   |   | 473,225                    |      |   |   |
| For the year  ended December 31, 2004   |   | 175,438                    |      |   |   |
| For the year  ended December 31, 2005   |   | 26,545                     |      |   |   |
|                                         |        |                            |           |  |  |  |  |

 

The Company’s net loss for the three and six month periods ended June30, 2001 would have been $1,019,367 and $373,506, respectively, if the Companyhad initially applied SFAS 142 on January 1, 2001. The Company’s basic anddiluted net loss per share for the three and six month periods ended June 30,2001 would have been $0.06 and $0.02, respectively, if the Company hadinitially applied SFAS 142 on January 1, 2001.

 

 

(5)SUBSEQUENT EVENTS

 

InNovember 2001, the Company filed a collection suit against Andover Brokerage,LLC and Andover Brokerage Corporation (collectively “Andover”). On February 28,2002, Andover filed an answer and counterclaim. As of July 26, 2002, theCompany and Andover entered into a settlement agreement. The settlement willnot have a material impact on the consolidated financial statements.

 

 

11

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PART I. ITEM 2

Management’s Discussion and Analysis of

Results of Operations and Financial Condition

 

INTRODUCTION — SAFE HARBOR DISCLOSURE

 

The following discussion and analysis contains historical information.It also contains forward-looking statements within the meaning of the “safeharbor” 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. Forward-looking statements may beimpacted by a number of factors, risks and uncertainties that could causeactual results to differ materially from those described in the forward-lookingstatements. Our filings with the Securities and Exchange Commission identifyfactors that could cause material differences. Among these factors are ourability to:

 
| (i)   |   | fund our current and future business  strategies either through continuing operations or external financing; |
|-------|--------|--------------------------------------------------------------------------------------------------------------|
| (ii)  |   | attract and retain key employees;                                                                            |
| (iii) |   | compete successfully against competitive products  and services;                                             |
| (iv)  |   | maintain relationships with key suppliers and  providers of market data; and                                 |
| (v)   |   | respond to the effect of economic and business  conditions generally.                                        |

 

 

 

RECENT BUSINESSDEVELOPMENTS

 

**HyperFeedProducts and Services Upgraded for Compatibility with SuperMontage Data**

 

On July 29, 2002, HyperFeed announced upgrades to its products andservices for compatibility with Nasdaq’s SuperMontage. When SuperMontage isreleased over the next several weeks, HyperFeed customers using HyperServerSix, HyperFeed(R) Market Data, HyperFeed SDKs, and HyperView will be able toreceive, process, analyze and view Nasdaq Level 1 as well as all SuperMontageentitlements, which include QuoteView, DepthView, PowerView, and TotalView.

 

**HyperFeedChooses AT&T For Distribution of Market Data**

 

On May 31, 2002, HyperFeed selected AT&T Managed Router Solution todistribute its compressed HyperFeed IP Multicast market data to its customers.The Company believes that the agreement, consistent with HyperFeed’s aggressiveexpansion into the institutional market, gives HyperFeed customers aneasy-to-access, cost-effective, fully secure, managed and redundant servicethat capitalizes on AT&T’s extensive global frame relay network.

 

The agreement is designed to optimize cost efficiency in New York andChicago, two of HyperFeed’s major install base concentrations. HyperFeed’s datamonitoring and control centers will continue to operate from its headquartersin Chicago and its development center in Aurora, Illinois.

 

AT&T Managed Router Solution integrates multiple protocols andsupports multiple interfaces, as well as provides 24 x 7 proactive monitoring,a fully managed dial backup option for key sites and maintenance of a routerdatabase. The service also includes monthly performance reports on networkavailability and router utilization, as well as a Web tool that provides accessto customer network reports.

 

This relationship builds on an earlier agreement where HyperFeed choseAT&T as its web hosting services provider. Under terms of the agreement,Hyperfeed moved the majority of its Internet hosting solutions to AT&T’sInternet Data Center in Lisle, Illinois.

 

 

12

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**HyperFeedTechnologies Transfers to Nasdaq SmallCap Market**

 

On May 30, 2002, HyperFeed announced that its application to transferits securities to The Nasdaq SmallCap Market was approved effective at theopening of business on May 31, 2002. Its symbol will continue as HYPR.HyperFeed applied to list on the Nasdaq SmallCap market as an interim move thatprovides additional listing flexibility while enabling it to focus on its primaryobjective of generating long-term stockholder value. This transfer will notaffect the method by which HyperFeed’s shares are bought and sold.

 

 

**HyperFeedTechnologies Launches Java Software Development Kit**

 

On May 7, 2002, HyperFeed announced the release of its Java SoftwareDevelopment Kit (SDK), enabling financial institutions and others who programwith Java to directly integrate HyperFeed market data into their Javaenvironments.

 

This user-friendly application programming interface (API) is designedspecifically to complement HyperFeed’s COM SDK, which uses Microsoft’sComponent Object Model to create customized market data modules. The Java SDKis part of HyperFeed’s offering of development tools that also includes Windowsand UNIX/Linux versions.

 

HyperFeed’s Java SDK helps to create seamless data charts and graphswithin a company’s existing web page interface. The simple Java codeapplication helps companies to save programming time and allows access to allavailable HyperFeed data, including options, securityprofiles, and historic charting

 

 

RESULTS OF OPERATIONS:

FOR THE SIX MONTHS AND QUARTERS ENDED JUNE 30, 2002 AND 2001

 

Totalrevenue decreased $8.4 million, or 44.2%, to $10.6 million for the six monthsended June 30, 2002, and decreased $4.3 million, or 46.3%, to $5.0 million forthe quarter ended June 30, 2002 versus the comparable prior year periods. Bothour HyperFeed services and our PCQuote services posted decreases for the firstsix months of 2002 from 2001 and for the quarter ended June 30, 2002. For thefirst six months of 2002, HyperFeed service revenue decreased $4.4 million, or33.2%, to $8.9 million in 2002 as compared to the same period in 2001. For thequarter ended June 30, 2002, HyperFeed service revenue decreased $2.3 million,or 35.6%, from $6.5 million in 2001 to $4.2 million in 2002. Decreases in thenumber of end users and related services associated with the provision of theRealTick analytics application accounted for $3.1 million of the decline inHyperFeed service revenue for the six months ended June 30, 2002 and $1.7million for the quarter. Revenue from our PCQuote services decreased $4.0million, or 70.3%, for the first six months of 2002 from $5.6 million for thesame period in 2001. For the second quarter in 2002, revenue from PCQuoteservices decreased $2.0 million, or 71.8%, from $2.7 million in 2001. Thedeclines in PCQuote services are principally due to the transfer at the end ofthe third quarter 2001 of PCQuote 6.0 RealTick Internet customers to TownsendAnalytics, Ltd. (“Townsend”).

 

On July 31, 2001, PCQuote and Townsend entered into an agreement toterminate their Software License and Distributor Agreement dated May 28, 1999.PCQuote subsequently entered into a new agreement with Townsend to market theInternet version of the software application currently marketed as PCQuote 6.0RealTick. Under the new agreement, Townsend will provide the services, formerlyprovided by PCQuote, to our existing subscribers of its software and pay toPCQuote a portion of the license fee collected from those subscribers and newsubscribers referred through PCQuote. The new agreement replaced the prioragreement between Townsend Analytics and the Company’s subsidiary, PCQuote.

 

 

13

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Directcosts of services decreased $4.7 million, or 41.7%, to $6.6 million for the sixmonths ended June 30, 2002 from the comparable 2001 period, and decreased $2.6million, or 45.3%, to $3.1 million for the quarter ended June 30, 2002 ascompared to $5.7 million for the comparable 2001 period. Principal componentsof the decrease were royalties and payments to providers of market data,principally attributable to the transfer at the end of the third quarter 2001of PCQuote 6.0 RealTick Internet customers to Townsend and the decline inanalytics subscriptions. Amortization of software development costs decreasedfor the six months from $974,000 in 2001 to $672,000 in 2002. Gross margindecreased $3.7 million, or 47.7%, to $4.1 million for the first six months of2002 from $7.8 million for the same period in 2001 and decreased $1.7 million,or 48.0%, to $1.8 million for the quarter ended June 30, 2002 from $3.5 millionfor the comparable 2001 period.

 

Directcosts associated with HyperFeed services decreased from $6.7 million for thesix months ended June 30, 2001 to $5.0 million for the first six months of2002, a 25.3% decrease. For the quarter ended June 30, 2002, direct costsassociated with HyperFeed services were $2.4 million, a 30.2% decrease from$3.4 million in the same period of 2001. The principal components of thedecrease were costs related to license and exchange fees, directly attributableto the decrease in analytics subscription revenue. Amortization of softwaredevelopment costs decreased 8.2% to $672,000 for the first six months of 2002from $731,000 for the same period in 2001. For the quarter ended June 30, 2002,amortization of software development costs decreased 11.1% to $341,000, from$384,000 in the second quarter of 2001. For the first six months of 2002,resulting gross margin for HyperFeed services decreased $2.7 million, or 41.1%,to $3.9 million in 2002 from $6.7 million in 2001. For the quarter ended June30, 2002, the resulting gross margin for HyperFeed services was $1.8 million, adecrease of $1.3 million, or 41.5%, from the $3.1 million recognized in thesecond quarter of 2001.

 

Directcosts associated with PCQuote services decreased to $1.5 million for the firstsix months of 2002 from $4.5 million in the comparable 2001 period, a 66.0%decrease. For the quarter ended June 30, 2002, direct costs associated withPCQuote services were $736,000, a 67.8% decrease from $2.3 million in the sameperiod of 2001. The transfer at the end of the third quarter 2001 of PCQuote6.0 RealTick Internet customers to Townsend substantially reduced royalty andexchange fees, the principal component of direct costs. There were no softwareamortization costs for 2002 versus $243,000 for the first six months in 2001and $121,000 for the second quarter 2001. The gross margin on PCQuote servicesdecreased 87.8% to $134,000 for the first six months of 2002 from $1.1 millionin the comparable 2001 period. PCQuote services gross margin decreased 92.0%from $452,000 in the second quarter of 2001 to $36,000 for the same period in2002.

 

Totaloperating expenses decreased 39.1% to $5.0 million for the six months endedJune 30, 2002 from $8.2 million for the comparable 2001 period, and decreased45.4% to $2.5 million for the quarter ended June 30, 2002 as compared to $4.6million for the comparable 2001 period. Decreases, principally due to costsaving measures implemented in the third quarter of 2001, were experienced inall categories except for depreciation and amortization.

 

Salescosts decreased to $1.0 million for the first six months of 2002 as compared to$2.0 for the same 2001 period. For the second quarter of 2002, sales costs were$458,000, a 56.6% decrease from the prior year period of $1.1 million. Thedecrease in sales costs result from the elimination of our consumer sales forcein the third quarter of 2001 and lower commission expense commensurate with thedecrease in revenue.

 

General and administrative expenses decreased 25.0% to $1.8 million inthe first six months of 2002 from $2.4 million for the first six months of2001. For the quarter ended June 30, 2002, general and administrative expensesdecreased 15.6% to $1.0 million from $1.1 million in same period in 2001. Thedecreases were principally due to a reduction in personnel at the end of thethird quarter of 2001.

 

Productand market development costs decreased 59.8% to $1.2 million for the six monthsended June 30, 2002 from $3.1 million for the comparable 2001 period, anddecreased 67.6% to $636,000 for the quarter ended June 30, 2002 as compared to$2.0 million for the comparable 2001 period. The decreases were due to loweradvertising expenditures.

 

 

14

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Depreciation and amortization increased 24.1% to $944,000 for the firstsix months of 2002 from $761,000 for the comparable 2001 period, and increased5.2% to $456,000 in the second quarter of 2002 from $433,000 for the comparable2001 period as a result of the amortization of intangible assets acquired fromMarketscreen.com, Inc. and Lasdorf Corporate Services, Inc. in the secondquarter of 2001.

 

 

CRITICAL ACCOUNTING POLICIES

 

Management’s Discussion and Analysis of Financial Condition and Resultsof Operations discusses the Company’s unaudited interim consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States of America.  The preparation of these financial statements requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and the disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenues andexpenses during the reporting period.

 

On an on-going basis, management evaluates its estimates and judgments,including those related to bad debts and intangible assets.  Management bases its estimates and judgmentson historical experience and on various other factors that are believed to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions. Management believes the followingcritical accounting policies, among others, affect its more significantjudgments and estimates used in the preparation of its consolidated financialstatements.

 

ALLOWANCE FOR DOUBTFUL ACCOUNTS: We maintain allowances for doubtful accounts for estimated lossesresulting from the inability of our customers to make payments forservices.  We analyze accountsreceivable, customer credit-worthiness, current economic trends and changes inour customer payment terms when evaluating the adequacy of the allowance fordoubtful accounts.  If the financialcondition of our customers deteriorates, resulting in an impairment of theirability to make payments, additional allowances may be required.

 

VALUATION OF INTANGIBLE ASSETS AND SOFTWARE DEVELOPMENT COSTS:  We assess the impairment of intangibleassets whenever events or changes in circumstances indicate that the carryingvalue may not be recoverable. Factors we consider important which could triggeran impairment review include significant underperformance relative to expectedhistorical or projected future operating results, significant changes in themanner of our use of the acquired assets or the strategy for our overallbusiness, and significant negative industry or economic trends.  The Company assesses the recoverability ofits software development costs against estimated future revenue over theestimated remaining economic life of the software.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Net cash and cash equivalents increased $82,000 from year-end 2001 to$689,000 at the end of the second quarter of 2002. Expenditures for newequipment were $215,000, an 81.1% decrease from the $1,139,000 for the sameperiod in 2001. The decrease is the result of improved tickerplant hardwareacquisitions made in 2001, coupled with infrastructure expenditures in 2001 forexpanded facilities, and the generally lower prices for computer andcommunications equipment in 2002. Capitalized software costs of $683,000 forthe six months ended June 30, 2002 were 17.8% lower than the $831,000 recordedfor the same period for 2001. There were no new direct borrowings during thesix months ended June 30, 2002. We received approximately $46,000 in netproceeds from the sale of shares of common stock to employees pursuant to ourEmployee Stock Purchase Plan.

 

 

15

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Earnings before interest, taxes, depreciation and amortization(“EBITDA”) decreased to $1.5 million for the first six months of 2002 from $2.2million for the comparable 2001 period, but increased to $555,000 for thesecond quarter of 2002 as compared to $316,000 for the same period in 2001. Webelieve our existing capital resources, our ability to access external capital,if necessary, and cash generated from continuing operations are sufficient forworking capital purposes for at least the next twelve months.

 

As we have previously reported, we have explored multiple alternativesthat may be available for the purpose of enhancing stockholder value, includinga merger, a spin-off or sale of all or part of our business, a strategicrelationship or joint venture with another technology or financial servicesfirm and equity financing. We continue to explore opportunities to enhancestockholder value.

 

 

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In August 2001, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards No. 143, “Accounting forAsset Retirement Obligations” (“SFAS 143”), which applies to legal obligationsthat are associated with the retirement of long-lived assets that result fromthe acquisition, construction, development, and (or) normal operation of along-lived asset, except for certain obligations of lessees. SFAS 143 requiresthat an asset retirement liability be recorded at fair value when an enterpriseincurs the legal obligation to retire a long-lived asset. The enterprise alsowould record the carrying amount of the related long-lived asset and depreciatethat asset over its useful life. In subsequent periods, the asset retirementliability would be adjusted to reflect (1) the passage of time and (2) changesin the undiscounted estimates of cash flows that were associated with theinitial measurement. SFAS 143 is effective for financial statements issued forfiscal years beginning after June 15, 2002, with earlier applicationencouraged. Management is currently evaluating the impact that adoption of SFAS143 will have on its consolidated financial statements.

 

In July 2002, the FASB issued Statement of Financial AccountingStandards No. 146, "Accounting for Costs Associated with Exit or DisposalActivities" ("SFAS 146"). This standard requires companies torecognize costs associated with exit or disposal activities when they areincurred rather than at the date of a commitment to an exit or disposal plan.Examples of costs covered by the standard include lease termination costs andcertain employee severance costs that are associated with a restructuring,discontinued operation, or other exit or disposal activity. This standard willbe applied prospectively to exit or disposal activities initiated afterDecember 15, 2002. Management does not believe the adoption of SFAS 146 willhave a significant impact on the Company's consolidated financial statements.

 

 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Therehave been no material changes in the Company’s market risk during the three andsix month periods ended June 30, 2002. For additional information, refer to theCompany’s Annual Report on Form 10-K for the fiscal year ended December 31,2001.

 

 

PART II. OTHERINFORMATION

 

ITEM 1. LEGALPROCEEDINGS

 

InNovember 2001, the Company filed a collection suit against Andover Brokerage,LLC and Andover Brokerage Corporation (collectively “Andover”). On February 28,2002, Andover filed an answer and counterclaim. As of July 26, 2002, theCompany and Andover entered into a settlement agreement. The settlement willnot have a material impact on the consolidated financial statements.

 

 

 

16

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ITEM 2. CHANGES IN SECURITIES AND USE OFPROCEEDS

 

During the first and second quarters of 2002, we issued 41,536 and73,252 shares of our common stock, respectively, to employees, who purchasedthe shares under our Employee Stock Purchase Plan.

 

ITEM 4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

 

The annual meeting of the stockholders of HyperFeed Technologies, Inc.was held on May 16, 2002. The following proposals were submitted, consideredand voted upon, as indicated below, by the stockholders.

 

1. To elect seven members to our Board of Directors to serve until the2003 Annual Meeting, or until their successors are elected and shall havequalified.

 
| **Director**        |   | **Shares For** |   | **Shares Withheld** |
|---------------------|--------|----------------|--------|---------------------|
| Jim R. Porter       |   | 14,722,336     |   | 71,719              |   |
| John R. Hart        |   | 14,622,136     |   | 171,919             |   |
| Charles J. Henry    |   | 14,722,336     |   | 71,719              |   |
| Ronald Langley      |   | 14,533,686     |   | 260,369             |   |
| Louis J. Morgan     |   | 14,722,336     |   | 71,719              |   |
| Kenneth J. Slepicka |   | 14,722,336     |   | 71,719              |   |
| John L. Borling     |   | 14,722,336     |   | 71,719              |   |

 

 

2. To approve and ratify the appointment of KPMG LLP as our independentauditors for 2002.

 
| **Shares For** |   | **Shares Against** |   | **Abstentions** |
|----------------|--------|--------------------|--------|-----------------|
| 14,723,657     |   | 29,299             |   | 41,099          |

 

 

No other matters were submitted for vote.

 

 

ITEM 5. OTHERINFORMATION

 

On May 30, 2002, HyperFeed announced that its application to transferits securities to The Nasdaq SmallCap Market was approved effective at theopening of business on May 31, 2002. Its symbol will continue as HYPR.HyperFeed applied to list on the Nasdaq SmallCap market as an interim move thatprovides additional listing flexibility while enabling it to focus on itsprimary objective of generating long-term stockholder value. This transfer willnot affect the method by which HyperFeed’s shares are bought and sold.

 

On August 8, 2002, the Board of Directors appointed Mr. KennethSlepicka, Mr. Charles Henry and General John Borling as independent directorsto serve on the Audit Committee. General John Borling replaces Mr. RonaldLangley.

 

 

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

 

REPORTS ON FORM 8-K

 

There were no reports on Form 8-K filed during the period covered bythis report.

 

 

17

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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 

 

HYPERFEED TECHNOLOGIES, INC.

 

 

 
| Date:  | August 12, 2002                                           |
|--------|-----------------------------------------------------------|
|   |                                                      |
| By:    | /s/ Jim R. Porter                                         |   |
|   |                                                      |
|   | Jim R. Porter                                             |
|   | Chairman and Chief Executive Officer                      |
|   |                                                      |
| By:    | /s/ John E. Juska                                         |   |
|   |                                                      |
|   | John E. Juska                                             |
|   | Chief Financial Officer and Principal Accounting  Officer |

 

 

 

18

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