UNITED
STATES


SECURITIES AND EXCHANGE COMMISSION





Washington,
D.C. 20549





FORM
10-K





(Mark
One)





þ      Annual
report pursuant to section 13 or
15(d) of
the securities exchange act of 1934


For
the fiscal year ended December 31,
2008





o      Transition
report pursuant to section 13 or
15(d) of
the securities exchange act of 1934


For the Transition period from _______
to  ________


Commission
file number0-24634










TRACK
DATA CORPORATION





(Exact
name of registrant as specified in its charter)





DELAWARE
            22-3181095(State
      or other jurisdiction of
            (I.R.S.Employer
      Identification No.)incorporation
      or organization)95
      Rockwell PlaceBrooklyn,
      New York
            11217(Address
      of principal executive offices)
            (Zip
      Code)(718)
      522-7373(Registrant's
      telephone number)





Securities
registered pursuant to Section 12(b) of the Exchange
Act:       None





Securities
registered pursuant to Section 12(g) of the Exchange
Act:       Common Stock, $.01 par
value





Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


o Yes  þ No





Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.


o Yes  þ No





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.Yes þ No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this


Form
10-K.þ





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “Smaller
Reporting Company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
Accelerated Filer o          Accelerated
Filer    o          Non-Accelerated
Filer   o          Smaller
Reporting Company þ





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


o Yes  þ No





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the Registrant's most recently completed second fiscal
quarter.  Based on the average bid and ask price of the Company's
Common Stock on June 30, 2008 of $2.23 per share. $8,106,000





Indicate
the number of shares outstanding of each of the Registrant’s classes of common
stock, as of the latest practicable date.





8,392,000 shares of
common stock, $.01 par value, as of February 28, 2009.





DOCUMENTS
INCORPORATED BY REFERENCE


[SEE
INDEX TO EXHIBITS]





TABLE OF CONTENTS





PART
      IITEM
      1.
            BUSINESS
            I-1ITEM
      1A
            RISK
      FACTORS
            I-9ITEM
      1B.
            UNRESOLVED
      STAFF
      COMMENTS
            I-9ITEM
      2.
            PROPERTIES
            I-9ITEM
      3.
            LEGAL
      PROCEEDINGS
            I-9ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            I-10PART
      IIITEM
      5.
            MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
              MATTERS
      AND ISSUER PURCHASES OF EQUITY SECURITIES
            II-1ITEM
      6.
            SELECTED
      FINANCIAL
      DATA
            II-2ITEM
      7.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            II-3ITEM
      8.
            FINANCIAL
      STATEMENTS
            II-11ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES
            II-33ITEM
      9A(T).
            CONTROLS
      AND
      PROCEDURES
            II-33PART
      IIIITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            III-1ITEM
      11.
            EXECUTIVE
      COMPENSATION
            III-3ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            III-7ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
            III-8ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND
      SERVICES
            III-9PART
      IVITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT
      SCHEDULES
            IV-1


i


PART
I





Disclosures in this Form 10-K contain certain forward-looking statements,
including, without limitation, statements concerning the Company's operations,
economic performance and financial condition. These forward-looking statements
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The words "believe," "expect," "anticipate" and
other similar expressions generally identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
largely on the Company's current expectations and are subject to a number of
risks and uncertainties, including, without limitation, changes in external
market factors, changes in the Company's business or growth strategy or an
inability to execute its strategy due to changes in its industry or the economy
generally, the emergence of new or growing competitors, various other
competitive factors and other risks and uncertainties indicated from time to
time in the Company's filings with the Securities and Exchange Commission.
Actual results could differ materially from the results referred to in the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the results referred to in the forward-looking statements
contained in this Form 10-K will in fact occur.  The Company makes no
commitment to revise or update any forward looking statements in order to
reflect events or circumstances after the date any such statement is
made.





ITEM
1.  BUSINESS















Background





Since its inception in 1981, the
Company has been providing real-time financial market data to institutional
customers through the operation of its own proprietary ticker
plant.  In 1998, the Company began to offer financial market data to
individuals through the Internet.  Later, through its wholly owned
broker-dealer subsidiary, TDSC, the Company combined an online trading
application with its market data in its myTrack service. In 2002, trading for
institutional customers was introduced with proTrack. Further, the Company
commenced operations of its Track ECN. The Company now offers trading and market
data services to all members of the financial trading community. The offerings
include trading in stocks, options and e-mini futures.





Segments







I-1


A.
            ONLINE
      TRADING, MARKET DATA SERVICES AND ECN SERVICES TO THE INSTITUTIONAL
      PROFESSIONAL INVESTMENT COMMUNITY





MarkeTrack










proTrack Online Trading










Electronic Communications
Network















NewsWatch
Service







I-2


Marketing




















Competition



























I-3


B.
            INTERNET-BASED
      ONLINE TRADING, MARKET DATA SERVICES, AND OTHER SERVICES TO THE
      NON-PROFESSIONAL INDIVIDUAL INVESTMENT
COMMUNITY





Internet-Based Online
Trading and Market Data Services















Other
Internet-Based Market Data Services





AIQ
Systems










Dial/Data
Service










Marketing












I-4


The marketing effort for the Dial/Data
service is directed towards the software vendors who offer analytic programs for
the individual investor. By agreeing to provide royalties to these vendors, the
Company seeks to encourage these vendors to make their programs compatible with
the Company’s databases, and to encourage customers to select the Company’s
databases in preference to databases made available by others.





Competition






























MATTERS RELATED TO SEGMENTS, OTHER THAN ARBITRAGE TRADING





Securities Regulation












I-5


Broker-dealers are subject to
regulations covering all aspects of the securities business, including sales
methods, trade practices among broker-dealers, use and safekeeping of clients'
funds and securities, capital structure, record keeping and the conduct of
directors, officers and employees.  Because of the number of
complaints by online traders, the SEC, FINRA and other regulatory organizations
may adopt more stringent regulations for online firms and their practices. If
the Company fails to comply with any laws, rules or regulations, the Company
could be censured, fined, or issued a cease-and-desist order, or TDSC and/or its
officers and employees could be suspended or expelled.  The operations
of TDSC are subject to reviews by regulators within its industry, which include
the SEC, FINRA and various exchanges.  In the past, certain reviews
have resulted in the Company incurring fines and required the Company to change
certain of its internal control and operating procedures.  Ongoing and
future reviews may result in the Company incurring additional fines and changes
in its internal control and operating procedures.  Management does not
expect any ongoing reviews to have a material affect on the Company's financial
position or statement of operations.





Operations





Clearing
and Order Processing










The Company’s agreement with Penson
provides that the clearing broker process all securities transactions for the
Company’s clients for a fee. Services of the clearing broker include billing and
credit control and receipt, custody and delivery of securities.  The
Company has agreed to indemnify and hold the clearing broker harmless from
certain liabilities or claims, including claims arising from the transactions of
its clients, which could be material in amount.  The Company’s
clearing agreement may be terminated by either party, upon 45 days’ written
notice.  The Company relies on the operational capacity and the
ability of the clearing broker for the orderly processing of
transactions.










Margin lending is subject to the margin
rules of the Board of Governors of the Federal Reserve System. Margin lending
subjects the Company to the risk of a market decline that would reduce the value
of collateral below the client’s indebtedness before the collateral could be
sold. Under applicable rules, in the event of a decline in the market value of
the securities in a margin account, the client is required to deposit additional
securities or cash in the account.  The margin agreement allows the
Company or Penson to sell securities owned by the client under certain
circumstances.







I-6


Network
Infrastructure


















Net Capital
Requirements




















Limited Proprietary
Information

















I-7


Research, Development and
Maintenance










Employees










C.
            ARBITRAGE
      TRADING





The Company engages in arbitrage
trading activity. The Company's trading strategy consists principally of
establishing hedged positions consisting of stocks and options.  The
Company is subject to market risk in attempting to establish a hedged position,
as the market prices could change, precluding a profitable hedge.  In
these instances, any positions that were established for this hedge would be
immediately sold, usually resulting in small losses.  If the hedged
positions are successfully established at the prices sought, the positions
generally stay until the next option expiration date, resulting in small gains,
regardless of market value changes in these securities.  While
virtually all positions are liquidated at option expiration date, certain stock
positions remain.   The liquidation of these positions generally
results in small profits or losses.  From time to time, losses may
result from certain dividends that may have to be delivered on positions held,
as well as from certain corporate restructurings and mergers that may not have
been taken into account when the positions were originally
established.





The
Company also engages in options trading with a higher risk
profile.   The Company's trading strategy consists of selling
short deep out-of-the-money calls and puts.  These naked option
positions (when there is no underlying security position held) are not
hedged.  The investment strategy is to take advantage of options that
have a very low probability of becoming “in-the-money.”  The Company
seeks to earn the low premiums that these options are selling for, and expects
that all or most of the options will end up expiring worthless.  To
minimize risk, the Company limits its exposure to any one underlying stock and
constantly monitors the option against the real time underlying stock price, and
immediately seeks to cover its option position by buying/selling the underlying
stock to protect against a larger loss.  From time to time,
significant losses may result from option positions whose underlying stock price
realized a sudden large increase or decrease. During October, 2008, the Company
incurred a loss of approximately $600,000 in connection with this trading
strategy.





In
connection with the arbitrage trading activity, the Company incurs margin
loans.  The Company is exposed to interest rate change market risk
with respect to these margin loans.  The level of trading in the
arbitrage trading account is partially dependent on the margin value of Track
Data common stock pledged by its Principal Stockholder, and the Company’s
investment in Innodata common stock, an available-for-sale security which is
used as collateral.  The market value of such securities is dependent
on future market conditions for these companies over which the Company has
little or no control.


I-8


ITEM
1A.  RISK FACTORS





Not
required.




ITEM 1B.  UNRESOLVED STAFF
COMMENTS




Not
applicable.





ITEM
2.  PROPERTIES




















ITEM 3.   LEGAL
PROCEEDINGS












I-9


ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS





The Company held its Annual Meeting on
December 11, 2008. The results of matters voted at that Meeting are presented
below:


Election
      of Directors:Nominee
              For
              Against
              Withheld
              AbstainAbraham
      Biderman
              7,636,351
              
              313,139Albert
      Drillick
              7,323,032
              
              626,458E.
      Bruce Fredrikson
              7,635,951
              
              313,539Martin
      Kaye
              7,326,852
              
              622,638Philip
      Ort
              7,631,211
              
              318,279Shaya
      Sofer
              7,635,831
              
              313,659Stanley
      Stern
              7,318,552
              
              630,938Appointment
      of Auditors:
              7,701,133
              66,280
              
              182,076
          I-10


PART
II





ITEM
5.   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES












Common
      StockSale
      PriceHigh
            
            
            Low2007First
      Quarter
            
            $
            4.00
            
            
            $
            3.10Second
      Quarter
            
            
            3.49
            
            
            
            3.08Third
      Quarter
            
            
            3.15
            
            
            
            2.30Fourth
      Quarter
            
            
            2.84
            
            
            
            1.812008First
      Quarter
            
            $
            2.67
            
            
            $
            1.45Second
      Quarter
            
            
            3.42
            
            
            
            2.00Third
      Quarter
            
            
            2.43
            
            
            
            1.60Fourth
      Quarter
            
            
            3.11
            
            
            
            .78





Dividends










Issuer
Purchases of Equity Securities


Number
      of
            
            
            
            Total
      Number of
            
            Maximum
      NumberShares
      of
            
            Average
            
            Shares
      Purchased as
            
            of
      Shares That MayPeriod
            
            Common
      Stock
            
            Price
      Paid
            
            Part
      of Publicly
            
            Yet
      be PurchasedPurchased
            
            Purchased
            
            Per
      Share
            
            Announced
      Plans
            
            Under
      the PlansOctober,
      2008November,
      2008December,
      2008Total
            
            
            None
            
            
            
            
            
            
            
            None
            
            
            
            993,501





On November 1, 2005, the Board of
Directors approved a buy back of up to 1,000,000 shares of the Company’s Common
Stock in market or private negotiated transactions from time to
time.





Equity
Compensation Plans





See Item 12 for disclosures of the
Company’s equity compensation plans.


II-1


ITEM
6.  SELECTED FINANCIAL DATA


Year
      Ended December 31,
            
            
            2008
            
            
            
            2007
            
            
            
            2006
            
            
            
            2005
            
            
            
            2004(in
      thousands, except earnings and dividends per share)SERVICE
      FEES AND REVENUEMarket
      Data Services
            
            $
            17,554
            
            
            $
            18,648
            
            
            $
            21,474
            
            
            $
            23,175
            
            
            $
            26,308ECN
      Services
            
            
            2,527
            
            
            
            6,764
            
            
            
            13,375
            
            
            
            6,911
            
            
            
            5,050Broker-Dealer
      Commissions (includes $79 in 2008,$125
      in 2007 and $89 in 2006 from related party)
            
            
            10,578
            
            
            
            8,668
            
            
            
            7,137
            
            
            
            6,008
            
            
            
            8,735Total
            
            
            30,659
            
            
            
            34,080
            
            
            
            41,986
            
            
            
            36,094
            
            
            
            40,093COSTS,
      EXPENSES AND OTHER:Direct operating
      costs
            
            
            19,104
            
            
            
            24,963
            
            
            
            30,465
            
            
            
            25,002
            
            
            
            23,544Selling and administrative
      expenses
            
            
            9,051
            
            
            
            10,575
            
            
            
            10,986
            
            
            
            12,485
            
            
            
            13,815Rent
      expense – related party
            
            
            657
            
            
            
            637
            
            
            
            630
            
            
            
            623
            
            
            
            600Marketing and
      advertising
            
            
            297
            
            
            
            247
            
            
            
            200
            
            
            
            274
            
            
            
            414Net gain on sale of investments
      in private companies
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            (412
            )
            
            
            -Gain on arbitrage
      trading
            
            
            (775
            )
            
            
            (2,114
            )
            
            
            (1,013
            )
            
            
            (819
            )
            
            
            (1,512
            )Gain on marketable
      securities-Innodata and Edgar Online
            
            
            (65
            )
            
            
            (344
            )
            
            
            (1,777
            )
            
            
            (1,067
            )
            
            
            (5,887
            )Impairment of
      goodwill
            
            
            200
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Interest (income) expense –
      net
            
            
            (166
            )
            
            
            291
            
            
            
            (84
            )
            
            
            223
            
            
            
            305Total
            
            
            28,303
            
            
            
            34,255
            
            
            
            39,407
            
            
            
            36,309
            
            
            
            31,279INCOME  (LOSS)
      BEFORE INCOME TAXES
            
            
            2,356
            
            
            
            (175
            )
            
            
            2,579
            
            
            
            (215
            )
            
            
            8,814INCOME
      TAX PROVISION (BENEFIT)
            
            
            1,015
            
            
            
            (43
            )
            
            
            1,030
            
            
            
            (178
            )
            
            
            3,614NET
      INCOME (LOSS)
            
            $
            1,341
            
            
            $
            (132
            )
            
            $
            1,549
            
            
            $
            (37
            )
            
            $
            5,200BASIC
      AND DILUTED NET INCOME (LOSS)PER
      SHARE
            
            
            $.16
            
            
            
            $(.02
            )
            
            
            $.18
            
            
            
            $(.00
            )
            
            
            $.53DIVIDENDS
      PER SHARE
            
            
            $.00
            
            
            
            $.00
            
            
            
            $.00
            
            
            
            $.00
            
            
            
            $.05WEIGHTED
      AVERAGE SHARES OUTSTANDING
            
            
            8,392
            
            
            
            8,392
            
            
            
            8,382
            
            
            
            9,221
            
            
            
            9,732ADJUSTED
      DILUTIVE SHARES OUTSTANDING
            
            
            8,392
            
            
            
            8,392
            
            
            
            8,401
            
            
            
            9,221
            
            
            
            9,740December 31,
            
            
            2008
            
            
            
            2007
            
            
            
            2006
            
            
            
            2005
            
            
            
            2004(in
      thousands)TOTAL
      ASSETS
            
            $
            58,886
            
            
            $
            32,953
            
            
            $
            34,848
            
            
            $
            36,207
            
            
            $
            69,438TOTAL
      LIABILITIES
            
            
            35,267
            
            
            
            10,219
            
            
            
            12,415
            
            
            
            14,658
            
            
            
            42,570STOCKHOLDERS’
      EQUITY
            
            
            23,619
            
            
            
            22,734
            
            
            
            22,433
            
            
            
            21,549
            
            
            
            26,868




II-2


ITEM
7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





Business










Relevant
Factors





The
Company's Professional Market segment market data revenues experienced
significant declines since 2001 from a combination of staffing reductions in the
securities industry, the use by customers of internally developed services, or
lower priced services offered by the Company or other vendors.  This
trend has continued into 2009.  Track ECN currently displays its
orders on the National Stock Exchange (NSX).  In November, 2008, the
NSX changed its pricing for accessing its order delivery system pursuant to
which it no longer pays rebates for adding liquidity to its book.  As
a result, Track ECN can only pay its subscribers for adding liquidity when there
is an internal match on its own book.  This change resulted in further
deterioration of the trading volume on the Track ECN.  The Company is
presently exploring other venues for displaying its orders.  Until
such time, there is no expectation of increasing volume of trading.





The
Non-Professional Market segment revenues have been inconsistent month to month,
but grew overall in 2008. The Company is attempting to grow revenues in this
segment, principally through marketing alliances and limited advertising to
attract new customers, and by offering additional services to existing
customers.  The Company presently offers trading of U.S. based stocks,
options and e-mini futures.





The
trading and market data services for both segments require the Company to
maintain a market data ticker plant on a 24/7 basis, as well as all back office
trading functions.  The Company's focus is to increase revenues in
both segments, as the underlying costs of maintaining the operations and back
office will not increase commensurate with any revenue increase, allowing
greater operating margins on incremental revenues.





The
Company engages in arbitrage trading activity. The Company's trading strategy
consists principally of establishing hedged positions consisting of stocks and
options.  The Company is subject to market risk in attempting to
establish a hedged position, as the market prices could change, precluding a
profitable hedge.  In these instances, any positions that were
established for this hedge would be immediately sold, usually resulting in small
losses.  If the hedged positions are successfully established at the
prices sought, the positions generally stay until the next option expiration
date, resulting in small gains, regardless of market value changes in these
securities.  While virtually all positions are liquidated at option
expiration date, certain stock positions remain.   The
liquidation of these positions generally results in small profits or
losses.  From time to time, losses may result from certain dividends
that may have to be delivered on positions held, as well as from certain
corporate restructurings and mergers that may not have been taken into account
when the positions were originally established.


II-3


The
Company also engages in options trading with a higher risk
profile.   The Company's trading strategy consists of selling
short deep out-of-the-money calls and puts.  These naked option
positions (when there is no underlying security position held) are not
hedged.  The investment strategy is to take advantage of options that
have a very low probability of becoming “in-the-money.”  The Company
seeks to earn the low premiums that these options are selling for, and expects
that all or most of the options will end up expiring worthless.  To
minimize risk, the Company limits its exposure to any one underlying stock and
constantly monitors the option against the real time underlying stock price, and
immediately seeks to cover its option position by buying/selling the underlying
stock to protect against a larger loss.  From time to time,
significant losses may result from option positions whose underlying stock price
realized a sudden large increase or decrease. During October, 2008, the Company
incurred a loss of approximately $600,000 in connection with this trading
strategy.










Results
of Operations





Years
ended December 31, 2008 and 2007





Revenues
for the year ended December 31, 2008 and 2007 were $30,659,000 and $34,080,000,
respectively, a decrease of 10%.  The Company’s Professional Market
segment had revenues for the year ended December 31, 2008 and 2007 of
$14,525,000 and $20,803,000, respectively, a decrease of 30% for this
segment.  The Company’s Non-Professional Market segment had revenues
of $16,134,000 and $13,277,000, respectively, for the year ended December 31,
2008 and 2007, an increase of 22% for this segment, principally due to increased
broker-dealer commissions.  The decrease in revenues in 2008 was
primarily attributable to the Company’s Track ECN revenues which decreased
approximately $4.2 million. ECN revenues were down significantly since the
second half of 2007. In November, 2008, the NSX changed its pricing for
accessing its order delivery system pursuant to which it no longer pays rebates
for adding liquidity to its book.  As a result, Track ECN can only pay
its subscribers for adding liquidity when there is an internal match on its own
book.  This change resulted in further deterioration of the trading
volume on the Track ECN.  The Company is presently exploring other
venues for displaying its orders.  Until such time, there is no
expectation of increasing volume of trading.  Market data revenues
decreased approximately $1.1 million in 2008 compared to 2007. Since 2001, the
Company has experienced a decline in revenues from its market data services to
the Professional Market segment due principally to staffing reductions in the
securities industry, the use by customers of internally developed services, or
lower priced services that are offered by the Company or other
vendors.  This trend has continued in 2009. The declines in ECN and
market data revenues in 2008 were partially offset by an increase of
approximately $2 million in broker-dealer commissions, principally from the
Non-Professional Market Segment.





Direct
operating costs were $19,104,000 for the year ended December 31, 2008 and
$24,963,000 for the similar period in 2007, a decrease of 23%.  Direct
operating costs as a percentage of revenues were 62% in 2008 and 73% in
2007.  Without giving effect to unallocated depreciation, amortization
expense and costs directly allocated to the Arbitrage segment, the Company’s
Professional Market segment had $9,036,000 and $16,568,000 of direct costs for
the year ended December 31, 2008 and 2007, respectively, a decrease of
45%.   Direct operating costs as a percentage of revenues for the
Professional segment were 63% in 2008 and 80% in 2007.  The dollar
decrease in direct costs is due principally to the decrease in ECN rebates due
to reduced ECN revenues. The Company’s Non-Professional Market segment had
$9,197,000 and $7,598,000 in direct costs for the year ended December 31, 2008
and 2007, respectively, an increase of 21%.  The dollar increase in
direct costs is due principally to the increased broker-dealer commissions in
2008. Direct operating costs as a percentage of revenues for the
Non-Professional segment were 57% in 2008 and 2007.  Certain direct
operating costs are allocated to each segment based on revenues. Direct
operating costs include direct payroll, direct telecommunication costs, computer
supplies, depreciation, equipment lease expense and the amortization of software
development costs, costs of clearing, back office payroll and other direct
broker-dealer expenses and ECN customer commissions and clearing.


II-4




Selling
and administrative expenses were $9,051,000 and $10,575,000 in the 2008 and 2007
periods, respectively, a decrease of 14%.  Selling and administrative
expenses as a percentage of revenues were 30% in 2008 and 31% in 2007. Without
giving effect to unallocated depreciation, amortization expense and costs
directly allocated to the Arbitrage segment, selling and administrative expenses
for the Professional Market segment were $5,231,000 and $7,064,000 in the 2008
and 2007 periods, respectively, a decrease of 26%.  The reduction in
expenses was due principally to cost cutting measures instituted in the fourth
quarter of 2007, including closing certain offices and across the board salary
reductions. For the Professional Market segment selling and administrative
expenses as a percentage of revenues were 36% in 2008 and 34% in 2007. Selling
and administrative expenses for the Non-Professional segment were $3,727,000 and
$3,418,000 in the 2008 and 2007 periods, respectively, an increase of
9%.  For the Non-Professional segment selling and administrative
expense as a percentage of revenue was 23% in 2008 and 26% in 2007. Certain
selling and administrative expenses are allocated to each segment based on
revenues.




The
Professional Market segment realized a loss of $226,000 in 2008 compared to a
loss of $3,320,000 in 2007 before unallocated amounts and income
taxes.  The Non-Professional Market segment realized income of
$2,739,000 in 2008 and $1,870,000 in 2007 before unallocated amounts and income
taxes. The Arbitrage segment realized income of $641,000 in 2008 compared to
$1,584,000 in 2007 before unallocated amounts and income taxes.





In 2008
and 2007, the Company recognized gains of $65,000 and $344,000 from the sale of
available-for-sale securities of Innodata.





Net
interest income in 2008 was $166,000 compared to net interest expense of
$291,000 in 2007. The decrease in interest expense in 2008 is due principally to
decreased levels of net margin debt in connection with the Company's arbitrage
trading program.





In 2008,
the Company recognized an impairment of goodwill charge of $200,000 in
connection with a business division of its Non-Professional Market
Segment.





As
a result of the above-mentioned factors, the Company realized income before
income taxes of $2,356,000 in the 2008 period compared to a loss before income
taxes of $175,000 in the 2007 period.





The
Company’s effective tax rate was 43% in 2008 and 25% in 2007.  The
lower rate in 2007 was due principally to non-taxable items and permanent
differences.





The
Company realized net income of $1,341,000 in 2008 compared to a net loss of
$132,000 in 2007.





Years
ended December 31, 2007 and 2006





Revenues
for the years ended December 31, 2007 and 2006 were $34,080,000 and $41,986,000,
respectively, a decrease of 19%.  The Company’s Professional Market
segment had revenues for the years ended December 31, 2007 and 2006 of
$20,803,000 and $29,642,000, respectively, a decrease of 30% for this
segment.  The Company’s Non-Professional Market segment had revenues
of $13,277,000 and $12,344,000, respectively, for the years ended December 31,
2007 and 2006, an increase of 8% for this segment.  The decrease in
revenues was principally attributable to the Company’s Track ECN which revenues
decreased approximately $6.6 million.  Until October, 2006, Track ECN
displayed orders submitted by its subscribers on Nasdaq's trading
platform.  Broker-dealers could access this liquidity through
Nasdaq.  Nasdaq was authorized to operate as an exchange and Track ECN
was no longer able to operate its business on Nasdaq’s
platform.  Track ECN currently displays its quotes on the National
Stock Exchange. This change has resulted in significantly lower ECN revenues
since November, 2006. Market data revenues decreased approximately $2.8 million
in 2007 compared to 2006. Since 2001, the Company has experienced a decline in
revenues from its market data services to the Professional Market segment due
principally to staffing reductions in the securities industry, the use by
customers of internally developed services, or lower priced services that are
offered by the Company or other vendors.  This trend has continued in
2008, negatively impacting revenues and profits. The declines in ECN and market
data revenues were partially offset by in increase of $1.5 million in
broker-dealer commissions, principally from the Non-Professional Market
Segment.


II-5


Direct operating costs were $24,963,000
for the year ended December 31, 2007 and $30,465,000 for the similar period in
2006, a decrease of 18%.  Direct operating costs as a percentage of
revenues were 73% in 2007 and 2006.  Without giving effect to
unallocated depreciation, amortization expense and costs directly allocated to
the Arbitrage segment, the Company’s Professional Market segment had $16,568,000
and $23,153,000 of direct costs for the years ended December 31, 2007 and 2006,
respectively, a decrease of 28%.   Direct operating costs as a
percentage of revenues for the Professional segment were 80% in 2007 and 78% in
2006.  The dollar decrease in direct costs is due principally to the
decrease in ECN rebates due to reduced ECN revenues. The Company’s
Non-Professional Market segment had $7,598,000 and $6,542,000 in direct costs
for the years ended December 31, 2007 and 2006, respectively, an increase of
16%.  The dollar increase in direct costs is due principally to the
increased broker-dealer commissions in 2007. Direct operating costs as a
percentage of revenues for the Non-Professional segment were 57% in 2007 and 53%
in 2006.  Certain direct operating costs are allocated to each segment
based on revenues.















In 2007 and 2006, the Company
recognized gains of $344,000 and $1,777,000, respectively, from the sale of
available-for-sale securities of Innodata and Edgar Online common
stock.





Net
interest expense in 2007 was $291,000 compared to net interest income of $84,000
in 2006. The increase in interest expense in 2007 is due principally to
increased levels of margin debt in connection with the Company's arbitrage
trading program.





As a result of the above-mentioned
factors, the Company realized a loss before income taxes of $175,000 in the 2007
period compared to income before income taxes of $2,579,000 in the 2006
period.










The Company realized a net loss of
$132,000 in 2007 compared to net income of $1,549,000 in 2006.


II-6


Liquidity
and Capital Resources





































II-7


Off
Balance Sheet Risk









Critical Accounting Policies










Revenue
Recognition















Marketable
Securities












II-8


Long-lived
Assets










New
Pronouncements





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (previously referred to as minority interests). SFAS
160 also requires that a retained noncontrolling interest upon the
deconsolidation of a subsidiary be initially measured at its fair value. Upon
adoption of SFAS 160, the Company would be required to report any noncontrolling
interests as a separate component of stockholders’ equity. The Company would
also be required to present any net income allocable to noncontrolling interests
and net income attributable to the stockholders of the Company separately in its
consolidated statements of operations. SFAS 160 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December
15, 2008. SFAS 160 requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
of SFAS 160 shall be applied prospectively. SFAS 160 would have an impact on the
presentation and disclosure of the noncontrolling interests of any non
wholly-owned businesses acquired in the future.





In
December 2007, the FASB issued SFAS No. 141R,  “Business Combinations”
(“SFAS 141R”), which replaces SFAS No. 141, “Business Combinations.” SFAS 141R
establishes principles and requirements for determining how an enterprise
recognizes and measures the fair value of certain assets and liabilities
acquired in a business combination, including noncontrolling interests,
contingent consideration, and certain acquired contingencies.  SFAS
141R also requires acquisition-related transaction expenses and restructuring
costs be expensed as incurred rather than capitalized as a component of the
business combination. SFAS 141R will be applicable prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. SFAS 141R
would have an impact on accounting for any businesses acquired after the
effective date of this pronouncement.





In
December 2007, the SEC staff issued Staff Accounting Bulletin 110 (“SAB 110”),
“Share-Based Payment,” which amends SAB 107, “Share-Based Payment,” to permit
public companies, under certain circumstances, to use the simplified method in
SAB 107 for employee option grants after December 31, 2007. Use of the
simplified method after December 2007 is permitted only for companies whose
historical data about their employees’ exercise behavior does not provide a
reasonable basis for estimating the expected term of the options. The adoption
of this pronouncement did not have a material effect on the Company’s
consolidated financial position, results of operations or cash
flows.





On March
19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - an Amendment of FASB Statement 133” (“SFAS
161”). SFAS 161 enhances required disclosures regarding derivatives and hedging
activities, including enhanced disclosures regarding how: (a) an entity uses
derivative instruments; (b) derivative instruments and related hedged items are
accounted for under SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities”; and (c) derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows.
Specifically, SFAS 161 requires: disclosure of the objectives for using
derivative instruments be disclosed in terms of underlying risk and accounting
designation; disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format; information about credit-risk-related
contingent features; and cross-reference from the derivative footnote to other
footnotes in which derivative-related information is disclosed.  SFAS
161 is effective for fiscal years and interim periods beginning after November
15, 2008.  The adoption of this pronouncement is not expected to have
a material affect on the Company’s consolidated financial position, results of
operations or cash flows.


II-9


In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles."  The statement is intended to improve
financial reporting by identifying a consistent hierarchy for selecting
accounting principles to be used in preparing financial statements that are
prepared in conformance with generally accepted accounting principles. Unlike
Statement on Auditing Standards (SAS) No. 69, "The Meaning of Present in
Conformity With GAAP," SFAS No. 162 is directed to the entity rather than the
auditor. The statement is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity with GAAP," and is not expected to
have any impact on the Company's consolidated results of operations, financial
condition or liquidity.





Inflation
and Seasonality





To date, inflation has not had a
significant impact on the Company’s operations.  The Company’s
revenues are not affected by seasonality.


II-10


ITEM
8.   FINANCIAL STATEMENTS











INDEX TO FINANCIAL STATEMENTS


REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            II-12CONSOLIDATED
      BALANCE SHEETS
            
            II-13CONSOLIDATED
      STATEMENTS OF OPERATIONS
            
            II-14CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’
              EQUITY
      AND COMPREHENSIVE INCOME
            
            II-15CONSOLIDATED
      STATEMENTS OF CASH FLOWS
            
            II-16NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
            
            II-17




II-11


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Audit Committee of the Board of Directors


and
Stockholders of Track Data Corporation








We have
audited the accompanying consolidated balance sheets of Track Data Corporation
and Subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the
related consolidated statements of operations, stockholders’ equity and
comprehensive income and cash flows for each of the three years in the period
ended December 31, 2008.  These financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these financial statements based on our
audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Track Data
Corporation and Subsidiaries as of December 31, 2008 and 2007, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2008 in conformity with United States generally accepted
accounting principles.











/S/  Marcum
      & Kliegman LLPMelville,
      New YorkMarch
      26, 2009




II-12


Track
Data Corporation and Subsidiaries


Consolidated
Balance Sheets


December
31, 2008 and 2007


(in
thousands, except share data)





2008
            
            
            
            
            2007ASSETSCASH
      AND EQUIVALENTS
            
            $
            7,139
            
            
            
            $
            5,275ACCOUNTS RECEIVABLE–
      net of allowance for doubtfulaccounts of $213 in 2008 and $227
      in 2007
            
            
            976
            
            
            
            
            1,382DUE
      FROM CLEARING BROKER
            
            
            760
            
            
            
            
            635DUE
      FROM BROKER
            
            
            42,029
            
            
            
            
            12,258MARKETABLE
      SECURITIES
            
            
            3,616
            
            
            
            
            8,581FIXED ASSETS - at cost
      (net of accumulated depreciation and amortization)
            
            
            1,818
            
            
            
            
            2,093EXCESS OF COST OVER NET ASSETS
      ACQUIRED – net
            
            
            1,700
            
            
            
            
            1,900OTHER
      ASSETS
            
            
            848
            
            
            
            
            829TOTAL
            
            $
            58,886
            
            
            
            $
            32,953LIABILITIES
      AND STOCKHOLDERS’ EQUITYLIABILITIESAccounts payable and accrued
      expenses
            
            $
            3,707
            
            
            
            $
            3,540Trading securities sold, but not
      yet purchased
            
            
            30,896
            
            
            
            
            5,060Net deferred income tax
      liabilities
            
            
            496
            
            
            
            
            755Other liabilities
            
            
            168
            
            
            
            
            864Total
liabilities
            
            
            35,267
            
            
            
            
            10,219COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITYCommon
      stock - $.01 par value; 60,000,000 sharesauthorized; issued
      and outstanding –8,392,000 shares
            
            
            84
            
            
            
            
            84Additional paid-in
      capital
            
            
            10,183
            
            
            
            
            10,183Retained earnings
            
            
            13,132
            
            
            
            
            11,791Accumulated other comprehensive
      income
            
            
            220
            
            
            
            
            676Total stockholders’
      equity
            
            
            23,619
            
            
            
            
            22,734TOTAL
            
            $
            58,886
            
            
            
            $
            32,953




See notes
to consolidated financial statements
 II-13


Track
Data Corporation and Subsidiaries


Consolidated
Statements of Operations


Years
Ended December 31, 2008, 2007 and 2006


(in
thousands, except earnings per share)


2008
            
            
            
            2007
            
            
            
            2006SERVICE
      FEES AND REVENUEMarket Data
      Services
            
            $
            17,554
            
            
            $
            18,648
            
            
            $
            21,474ECN Services
            
            
            2,527
            
            
            
            6,764
            
            
            
            13,375Broker Dealer Commissions(includes $79 in 2008,$125 in 2007
      and$89 in
      2006 from related party)
            
            
            10,578
            
            
            
            8,668
            
            
            
            7,137Total
            
            
            30,659
            
            
            
            34,080
            
            
            
            41,986COSTS,
      EXPENSES AND OTHER:Direct operating costs
      (includes depreciation and amortizationof $667, $628 and $559 in
      2008, 2007 and 2006, respectively)
            
            
            19,104
            
            
            
            24,963
            
            
            
            30,465Selling and administrative
      expenses(includes depreciation andamortization of $94, $94
      and $100 in 2008, 2007and 2006,
      respectively)
            
            
            9,051
            
            
            
            10,575
            
            
            
            10,986Rent expense – related
      party
            
            
            657
            
            
            
            637
            
            
            
            630Marketing and
      advertising
            
            
            297
            
            
            
            247
            
            
            
            200Gain on arbitrage
      trading
            
            
            (775
            )
            
            
            (2,114
            )
            
            
            (1,013
            )Gain on sale of marketable
      securities – Innodata and Edgar Online
            
            
            (65
            )
            
            
            (344
            )
            
            
            (1,777
            )Impairment of
      goodwill
            
            
            200
            
            
            
            -
            
            
            
            -Interest income
            
            
            (372
            )
            
            
            (445
            )
            
            
            (430
            )Interest expense
            
            
            206
            
            
            
            736
            
            
            
            346Total
            
            
            28,303
            
            
            
            34,255
            
            
            
            39,407INCOME
      (LOSS) BEFORE INCOME TAXES
            
            
            2,356
            
            
            
            (175
            )
            
            
            2,579INCOME
      TAX PROVISION (BENEFIT)
            
            
            1,015
            
            
            
            (43
            )
            
            
            1,030NET
      INCOME (LOSS)
            
            $
            1,341
            
            
            $
            (132
            )
            
            $
            1,549BASIC
      AND DILUTED NET INCOME (LOSS) PER SHARE
            
            
            $.16
            
            
            
            $(.02
            )
            
            
            $.18WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
            
            
            8,392
            
            
            
            8,392
            
            
            
            8,382ADJUSTED
      DILUTIVE SHARES OUTSTANDING
            
            
            8,392
            
            
            
            8,392
            
            
            
            8,401




See notes
to consolidated financial statements
 II-14


Track
Data Corporation and Subsidiaries


Consolidated
Statements of Stockholders’ Equity and Comprehensive Income


Years
Ended December 31, 2008, 2007 and 2006


(in
thousands)


AccumulatedNumber
            
            
            
            Additional
            
            
            
            
            
            
            
            Other
            
            Stock-
            
            Compre-of
            
            Common
            
            Paid-in
            
            Retained
            
            Comprehensive
            
            holders’
            
            hensiveShares
            
            Stock
            
            Capital
            
            Earnings
            
            Income
            
            Equity
            
            IncomeBALANCE,
      JANUARY 1, 2006
            
            
            8,380
            
            
            
            $
            84
            
            
            
            
            $
            10,136
            
            
            
            
            $
            10,374
            
            
            
            
            $
            955
            
            
            
            
            $
            21,549Net
income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,549
            
            
            
            
            
            
            
            
            
            
            
            1,549
            
            
            
            
            $
            1,549Exercise of stock options
            
            
            18
            
            
            
            
            
            
            
            
            
            
            56
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            56Purchase and retirement oftreasury
      stock
            
            
            (6
            )
            
            
            
            
            
            
            
            
            
            (20
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (20
            )Tax effect of stock
      optionsexercised
            
            
            
            
            
            
            
            
            
            
            
            
            
            11
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            11Reclassification adjustmentfor
      gain on marketablesecurities - net of
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (946
            )
            
            
            
            
            (946
            )
            
            
            
            
            (946
            )Unrealized gain on marketablesecurities - net of
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            234
            
            
            
            
            
            234
            
            
            
            
            
            234Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            837BALANCE,
      DECEMBER 31, 2006
            
            
            8,392
            
            
            
            
            84
            
            
            
            
            
            10,183
            
            
            
            
            
            11,923
            
            
            
            
            
            243
            
            
            
            
            
            22,433Net loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (132
            )
            
            
            
            
            
            
            
            
            
            
            (132
            )
            
            
            
            $
            (132
            )Reclassification
      adjustmentfor
      gain on marketablesecurities - net of
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (142
            )
            
            
            
            
            (142
            )
            
            
            
            
            (142
            )Unrealized gain on
      marketablesecurities - net of
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            575
            
            
            
            
            
            575
            
            
            
            
            
            575Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            301BALANCE,
      DECEMBER 31, 2007
            
            
            8,392
            
            
            
            
            84
            
            
            
            
            
            10,183
            
            
            
            
            
            11,791
            
            
            
            
            
            676
            
            
            
            
            
            22,734Net income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,341
            
            
            
            
            
            
            
            
            
            
            
            1,341
            
            
            
            
            $
            1,341Reclassification
      adjustmentfor
      gain on marketablesecurities - net of
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (34
            )
            
            
            
            
            (34
            )
            
            
            
            
            (34
            )Unrealized loss on
      marketablesecurities - net of
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (422
            )
            
            
            
            
            (422
            )
            
            
            
            
            (422
            )Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            885BALANCE,
      DECEMBER 31, 2008
            
            
            8,392
            
            
            
            $
            84
            
            
            
            
            $
            10,183
            
            
            
            
            $
            13,132
            
            
            
            
            $
            220
            
            
            
            
            $
            23,619




See notes
to consolidated financial statements
 II-15


Track
Data Corporation and Subsidiaries


Consolidated
Statements of Cash Flows


Years
Ended December 31, 2008, 2007 and 2006


(in
thousands)


2008
            
            
            
            2007
            
            
            
            2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net income
(loss)
            
            $
            1,341
            
            
            $
            (132
            )
            
            $
            1,549Adjustments to reconcile net
      income (loss) to net cashprovided by operating
      activities:Depreciation and
      amortization
            
            
            761
            
            
            
            722
            
            
            
            659Deferred taxes
            
            
            45
            
            
            
            (62
            )
            
            
            43Impairment of
      goodwill
            
            
            200
            
            
            
            -
            
            
            
            -Provision for doubtful
      accounts
            
            
            -
            
            
            
            -
            
            
            
            33Tax effect of stock options
      exercised and phantom shares
            
            
            -
            
            
            
            -
            
            
            
            (11
            )Loss on surrender of
      leases
            
            
            -
            
            
            
            36
            
            
            
            -Gain on sale of Innodata and
      Edgar Online common stock
            
            
            (65
            )
            
            
            (344
            )
            
            
            (1,777
            )Changes in operating assets
      and liabilities:Accounts receivable and due from
      clearing broker
            
            
            281
            
            
            
            (245
            )
            
            
            299Due from broker
            
            
            (29,771
            )
            
            
            704
            
            
            
            2,629Marketable
    securities
            
            
            4,229
            
            
            
            818
            
            
            
            (462
            )Other assets
            
            
            55
            
            
            
            140
            
            
            
            306Accounts payable and accrued
      expenses
            
            
            167
            
            
            
            (388
            )
            
            
            221Trading securities sold, but not
      yet purchased
            
            
            25,836
            
            
            
            (1,042
            )
            
            
            (2,121
            )Other liabilities
            
            
            100
            
            
            
            (26
            )
            
            
            (60
            )Net cash provided by operating
      activities
            
            
            3,179
            
            
            
            181
            
            
            
            1,308CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase of fixed
      assets
            
            
            (488
            )
            
            
            (869
            )
            
            
            (1,031
            )Investment in private
      companies
            
            
            -
            
            
            
            -
            
            
            
            (150
            )Purchase of Innodata common
      stock
            
            
            (35
            )
            
            
            -
            
            
            
            -Proceeds from sale of Innodata
      and Edgar Online common stock
            
            
            77
            
            
            
            420
            
            
            
            1,787Issuance of note receivable, net
      of repayments
            
            
            (72
            )
            
            
            -
            
            
            
            -Net cash (used in) provided by
      investing activities
            
            
            (518
            )
            
            
            (449
            )
            
            
            606CASH
      FLOWS FROM FINANCING ACTIVITIES:Net payments on note payable –
      bank
            
            
            -
            
            
            
            (987
            )
            
            
            (150
            )Net (repayments) proceeds from
      contributions to employee savings program
            
            
            (782
            )
            
            
            25
            
            
            
            233Proceeds from exercise of stock
      options
            
            
            -
            
            
            
            -
            
            
            
            56Excess tax benefit from exercise
      of stock options
            
            
            -
            
            
            
            -
            
            
            
            11Purchase of treasury
      stock
            
            
            -
            
            
            
            -
            
            
            
            (20
            )Net cash (used in) provided by
      financing activities
            
            
            (782
            )
            
            
            (962
            )
            
            
            130EFFECT
      OF EXCHANGE RATE DIFFERENCES ON CASH
            
            
            (15
            )
            
            
            (3
            )
            
            
            (5
            )NET
      INCREASE (DECREASE) IN CASH AND EQUIVALENTS
            
            
            1,864
            
            
            
            (1,233
            )
            
            
            2,039CASH
      AND EQUIVALENTS, BEGINNING OF YEAR
            
            
            5,275
            
            
            
            6,508
            
            
            
            4,469CASH
      AND EQUIVALENTS, END OF YEAR
            
            $
            7,139
            
            
            $
            5,275
            
            
            $
            6,508SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash paid for: Interest
            
            $
            206
            
            
            $
            737
            
            
            $
            346Income
      taxes
            
            
            924
            
            
            
            50
            
            
            
            708NON-CASH
      INVESTING ACTIVITIESRetirement of treasury
      stock
            
            $
            -
            
            
            $
            -
            
            
            $
            20


See notes
to consolidated financial statements
 II-16


Track
Data Corporation and Subsidiaries


Notes
To Consolidated Financial Statements


Years
Ended December 31, 2008, 2007 and 2006





A.    The
Company and Summary of Significant Accounting Policies





Description of
Business and Basis of Presentation--Track Data Corporation (the
"Company") is a financial services company that provides real-time financial
market data, fundamental research, charting and analytical services to
institutional and individual investors through dedicated telecommunication lines
and the Internet.  The Company also disseminates news and third-party
database information from more than 100 sources worldwide.  The
Company’s wholly-owned subsidiary, Track Data Securities Corp. ("TDSC"), is a
registered securities broker-dealer and member of Financial Industry Regulatory
Authority (“FINRA”).  The Company provides a proprietary, fully
integrated Internet-based online trading and market data system, proTrack, for
the professional institutional traders, and myTrack and myTrack Edge, for the
individual trader.  The Company also operates Track ECN, an electronic
communications network (“ECN”) that enables traders to display and match limit
orders for stocks.  The Company's operations are classified in three
business segments: (1) Professional Market -- Market data services and trading,
including ECN services, to the institutional professional investment community,
(2) Non-Professional Market -- Internet-based online trading and market data
services to the non-professional individual investor community, and (3)
Arbitrage trading.





Principles of
Consolidation--The consolidated financial statements of the Company
include its subsidiaries, all of which are wholly owned. All significant
intercompany transactions and accounts have been eliminated in
consolidation.





Cash and Cash
Equivalents--For financial statement purposes (including cash flows), the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less and money market funds to be cash equivalents.
The Company’s cash and cash equivalents includes $500,000 of restricted cash on
deposit with the Company’s clearing broker. The Company has cash balances in
banks in excess of the maximum amount insured by the FDIC as of December 31,
2008.





Accounts
Receivable--Accounts receivable, principally trade, are generally due
within 30 days and are stated at amounts due from customers net of an allowance
for doubtful accounts.  The Company continuously monitors agings,
collections and payments from customers and a provision for estimated credit
losses is maintained based upon its historical experience and any specific
customer collection issues that have been identified.  While such
credit losses have historically been within the Company’s expectation and the
provisions established, the Company cannot guarantee that the same credit loss
rates will be experienced in the future. The Company writes off accounts
receivable when they become uncollectible.  The Company’s allowance
for doubtful accounts was $213,000 and $227,000 at December 31, 2008 and 2007,
respectively.  There have been no significant write offs during the
years ended December 31, 2008, 2007 and 2006.





Marketable
Securities--The Company accounts for securities owned in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."  SFAS 115 requires
investments in debt and equity securities to be classified as either "held to
maturity," "trading," or "available for sale."  The accounting
treatment for unrealized gains and losses on those securities is then determined
by the classification chosen.  Arbitrage trading securities
transactions, consisting of stocks and options, are recorded on a trade-date
basis, as if they had been settled.  Securities are valued at quoted
market value.  The resulting difference between cost and market (or
fair value) is included in “gain (loss) on arbitrage
trading.”  Securities sold, but not yet purchased, consist of trading
securities at market values.  The difference between the proceeds
received from securities sold short and the current market value is included in
gain on arbitrage trading.  Securities available for sale are carried
at fair value, with unrealized gains and losses, net of deferred taxes, reported
as comprehensive income (loss), a separate component of stockholders' equity,
and realized gains and losses, determined on a specific identification basis,
are included in earnings.  The Company reviews these holdings on a
regular basis to evaluate whether or not each security has experienced an
other-than-temporary decline in fair value.  If the Company believes
that an other-than-temporary decline exists in the marketable securities, the
equity investments are written down to market value and an investment loss is
recorded in the consolidated statement of operations.


II-17


Due From
Broker--Due from broker includes cash, securities owned and securities
sold, but not yet purchased carried by the Company’s broker.





Fixed
Assets--Fixed assets are depreciated on a straight-line basis over their
estimated useful lives which are as follows: equipment – 3-10 years; furniture
and fixtures – 10 years; and transportation equipment – 4
years.  Leasehold improvements are amortized on a straight-line basis
over the respective lease term or estimated useful life, whichever is
less.





Software and
Database Costs--Certain costs of internally developed software are
capitalized and are amortized at the greater of the ratio that current gross
revenues bear to the total of current and anticipated future gross revenues or
the straight-line method, generally five years. Other software costs are
amortized on a straight-line basis over their estimated useful lives, generally
five years.  Costs incurred for internal use software in the
preliminary project stage and for application maintenance are
expensed.  Costs incurred for application development are
capitalized.  Most costs are incurred for upgrades and enhancements
that are constantly upgraded and changed with useful lives of less than one
year.  Accordingly, these costs are expensed as
incurred.  No development costs have been capitalized during the three
years ended December 31, 2008.  Software and database costs, net of
accumulated amortization, at December 31, 2008 and 2007 of $31,000 and $30,000,
respectively, were included in other assets.  Database costs are
amortized on a straight-line basis over their estimated useful lives of ten
years. Amortization expense for the years ended December 31, 2008, 2007 and 2006
was approximately $9,000, $7,000 and $4,000, respectively.  At each
balance sheet date, the unamortized capitalized costs of a computer software
product is compared to the net realizable value of that product. The amount by
which the unamortized capitalized costs of a computer software product exceed
the net realizable value of that asset is written off. The net realizable value
is the estimated future revenues from that product reduced by the estimated
future costs of completing and disposing of that product, including the costs of
performing maintenance and customer support required to satisfy the Company’s
responsibility set forth at the time of sale. The reduced amount of capitalized
computer software costs that have been written down to net realizable value at
the close of an annual fiscal period is considered to be the costs for
subsequent accounting purposes, and the amount of the write-down shall not be
subsequently restored.





Long-lived
Assets--In accordance with SFAS 142, "Goodwill and Other Intangible
Assets," all intangible assets acquired that are obtained through contractual or
legal right, or are capable of being separately sold, transferred, licensed,
rented or exchanged are recognized as an asset apart from
goodwill.  Goodwill and intangibles with indefinite lives are not
subject to amortization, but are subject to at least an annual assessment for
impairment by applying a fair value based test.  SFAS 142 requires
that an impairment test for goodwill be performed in two steps, (i) determine
impairment based upon fair value of a reporting unit as compared to its carrying
value, and (ii) if there is an impairment, measure the impairment loss by
comparing the implied fair value of goodwill with the carrying amount of
goodwill.  The excess of the purchase price of acquired businesses
over the fair value of net assets ("goodwill") on the dates of acquisition
amounts to $1,700,000, net of accumulated amortization of $2,494,000 and a 2008
impairment charge of $200,000, at December 31, 2008, and $1,900,000, net of
accumulated amortization of $2,494,000 at December 31, 2007.





The
Non-Professional Segment is tested for impairment in the fourth
quarter.  Due to a decline in operating profits and cash flows in the
fourth quarter of 2008 and which decline is expected to continue in 2009, the
earnings forecast for the next five years was revised.  In December
2008, a goodwill impairment loss of $200,000 was recognized in a division of the
Non-Professional reporting segment. The fair value was estimated using the
expected present value of future cash flows.





II-18


In
accordance with SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," management assesses the recoverability of the remaining
unamortized costs of long-lived assets other than goodwill based principally
upon a comparison of the carrying value of the asset to the undiscounted
expected future cash flows to be generated by the asset.  To date, the
Company has not provided an impairment charge.





Foreign Currency
Translation--The Company has a division which operates in a foreign
country for which the functional currency is the British pound. Balance sheet
accounts are translated at the exchange rates in effect at December 31, 2008 and
2007, and the income statement accounts are translated at the weighted average
rates prevailing during the years ended December 31, 2008, 2007 and 2006.
Unrealized foreign exchange gains and losses resulting from this translation are
insignificant.





Revenue
Recognition--The Company recognizes revenue from market data and ECN
services as services are performed. Billings in advance of services provided are
recorded as unearned revenues. All other revenues collected in advance of
services are deferred until services are rendered.  The Company earns
commissions as an introducing broker and for licensing its trading system for
the transactions of its customers.  Commissions and related clearing
expenses are recorded on a trade-date basis as securities transactions
occur.





For ECN
services, transaction fees are earned on a per trade basis, based on shares
transacted, and are recognized as transactions occur. For each transaction
executed, there is an associated liquidity payment or routing charge paid.
Pursuant to Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting
Revenue Gross as a Principal versus Net as an Agent,” the Company records such
expenses as liquidity payments or routing charges in the consolidated statements
of operations.





Income
Taxes--Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future.
Such deferred income tax asset and liability computations are based on enacted
tax laws and rates applicable to periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized and are
adjusted when conditions indicate that deferred assets will be
realized.  Income tax expense (benefit) is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities (excluding charges related to comprehensive income
items).





The
Company accounts for uncertainties in income tax positions in accordance with
the provisions of Financial Accounting Standards Board ("FASB") Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes (as amended) - an
interpretation of FASB Statement No. 109" ("FIN 48") which prescribes a
recognition threshold and measurement process for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 states that a tax benefit from an uncertain tax position may
be recognized only if it is "more likely than not" that the position is
sustainable, based on its technical merits. The tax benefit of a qualifying
position is the largest amount of tax benefit that is greater than 50% likely of
being realized upon settlement with a taxing authority having full knowledge of
all relevant information. Under FIN 48, the liability for unrecognized tax
benefits is classified as noncurrent unless the liability is expected to be
settled in cash within 12 months of the reporting date.





No
liability for unrecognized tax benefits was required to be reported at December
31, 2008 and 2007.  The Company has identified its federal tax return
and its state and city tax returns in New York as "major" tax jurisdictions, as
defined.  The Company is also subject to filings in multiple other
state and city jurisdictions.  Based on the Company's evaluation, it
has concluded that there are no significant uncertain tax positions requiring
recognition in the Company's financial statements.  The Company's
evaluation was performed for tax years ended 2003 through 2008, the only periods
subject to examination.  The Company believes that its income tax
positions and deductions will be sustained on audit and does not anticipate any
adjustments that will result in a material change to its financial position. The
Company's New York City tax returns for 2003 through 2005 are presently under
audit. The outcome cannot be reasonably estimated at this time.


II-19


The
Company's policy for recording interest and penalties associated with uncertain
tax positions is to record such items as a component of income before income
taxes.  Penalties are recorded in other expense and interest paid or
received is recorded in interest expense or interest income, respectively, in
the statement of operations.  For the years ended December 31, 2008
and 2007, penalties and interest related to the settlements of audits were
insignificant.





Research,
Development and Maintenance--The Company charges all costs incurred to
establish the technological feasibility of a product or product enhancement, as
well as correction of software bugs and minor enhancements to existing software
applications, to research, development and maintenance expense. Research,
development and maintenance expenses, included in direct operating costs, were
approximately $75,000, $162,000 and $159,000 for the years ended December 31,
2008, 2007 and 2006, respectively.





Marketing and
Advertising--Marketing and advertising costs are charged to expense when
incurred.  Marketing and advertising costs were approximately
$297,000, $247,000 and $200,000 for the years ended December 31, 2008, 2007 and
2006, respectively.





Segment
Reporting--The Company uses the "management approach" as defined by SFAS
131, "Disclosures about Segments of an Enterprise and Related Information" for
its segment reporting.  The management approach designates the
internal organization that is used by management for making operating decisions
and assessing performance as the basis for disclosures about products and
services, geographic areas, and major customers.





Fair Value of
Financial Instruments—Through December 31, 2007, the Company estimated
the fair value of financial instruments using available market information and
other valuation methodologies in accordance with SFAS 107, “Disclosures About
Fair Value of Financial Instruments.”





Effective
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”), for assets and liabilities measured at fair value on a recurring
basis. SFAS 157 accomplishes the following key objectives:





·
            Defines
      fair value as the price that would be received to sell an asset or paid to
      transfer a liability in an orderly transaction between market participants
      at the measurement date;





·
            Establishes
      a three-level hierarchy (“Valuation Hierarchy”) for fair value
      measurements;





·
            Requires
      consideration of the Company’s creditworthiness when valuing liabilities;
      and





·
            Expands
      disclosures about instruments measured at fair
  value.





The
Valuation Hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability as of the measurement date. A financial instrument’s
categorization within the Valuation Hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. The three levels of the
Valuation Hierarchy and the distribution of the Company’s financial assets
within it are as follows:





·
            Level
      1 – inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active markets. The fair values of the
      Company’s arbitrage trading securities and Innodata common stock are based
      on quoted prices and therefore classified as level
  1.





II-20


·
            Level
      2 – inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.





·
            Level
      3 – inputs to the valuation methodology are unobservable and significant
      to the fair value measurement.





The
Company’s assets carried at fair value on a recurring basis at December 31, 2008
are as follows (in thousands):


Quoted
      Market Pricesin
      Active Markets(Level
      1)Arbitrage
      trading securitiesLong
      Positions
            
            
            
            $
            2,980Short
      Positions
            
            
            
            
            30,896Available
      for sale securities (1)Innodata
      common stock
            
            
            
            
            636


(1)  Available-for-sale
securities are carried at fair value based on quoted market prices.





Certain
financial instruments are carried at cost on the consolidated balance sheets,
which approximates fair value due to their short-term, highly liquid nature.
These instruments include cash and cash equivalents, accounts receivable,
prepaid expenses, accounts payable and accrued expenses.





Unrealized
gains and losses on available for sale securities are recorded as a separate
component of other comprehensive income in the consolidated statements of
stockholders’ equity and comprehensive income.





In
February 2008, the FASB issued Staff Position 157-2 (“FSP 157-2”). FSP 157-2
permits delayed adoption of SFAS 157 for certain non-financial assets and
liabilities, which are not recognized at fair value on a recurring basis, until
fiscal years and interim periods beginning after November 15, 2008. As permitted
by FSP 157-2, the Company has elected to delay the adoption of SFAS 157 for
qualifying non-financial assets and liabilities, such as fixed assets, goodwill
and intangible assets measured at fair value in an impairment
assessment.  The effect of SFAS No. 157 on applicable non-financial
assets and liabilities, when effective, is not expected to have a material
effect on the financial statements.





Also
effective January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of
FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value.
Election of the fair value option is irrevocable and is applied on a
contract-by-contract basis. The Company has elected not to apply the fair value
option to its eligible financial assets and liabilities, and accordingly, the
adoption of SFAS 159 had no financial statement impact.





Use of
Estimates--In preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates relate to: useful lives and recoverability of
long-lived assets, including goodwill; fair values of marketable securities;
income tax calculations; and allowances for doubtful accounts.


II-21


Comprehensive
Income (Loss)--The Company reports
comprehensive income (loss) in accordance with SFAS 130, "Reporting
Comprehensive Income."  SFAS 130 requires foreign currency translation
adjustments and unrealized gains and losses on available for sale securities to
be included in accumulated other comprehensive income.





Earnings Per
Share--Basic earnings per share is based on the weighted average number
of common shares outstanding without consideration of potential common
stock.  Diluted earnings per share are based on the weighted average
number of common and potential dilutive common shares
outstanding.  There was no effect on earnings per share as a result of
potential dilution.  The calculation takes into account the shares
that may be issued upon exercise of stock options (Note J), reduced by the
shares that may be repurchased with the funds received from the exercise, based
on the average price during the year.





Accounting for
Stock Options--At December 31, 2008, the Company has seven stock-based
employee compensation plans, which are described more fully in Note
J.  No stock-based employee compensation cost is reflected in the
statement of operations, as there was no vesting of outstanding stock option
awards in 2008, 2007 and 2006.





The
Company is required pursuant to SFAS 123(R), “Share-Based Payments,” to account
for its options and other stock based awards at fair value.  No such
awards were granted during the three years ended December 31, 2008.





New
Pronouncements--In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial Statements – An Amendment of
ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary (previously referred
to as minority interests). SFAS 160 also requires that a retained noncontrolling
interest upon the deconsolidation of a subsidiary be initially measured at its
fair value. Upon adoption of SFAS 160, the Company would be required to report
any noncontrolling interests as a separate component of stockholders’ equity.
The Company would also be required to present any net income allocable to
noncontrolling interests and net income attributable to the stockholders of the
Company separately in its consolidated statements of operations. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. SFAS 160 requires retroactive adoption
of the presentation and disclosure requirements for existing minority interests.
All other requirements of SFAS 160 shall be applied prospectively. SFAS 160
would have an impact on the presentation and disclosure of the noncontrolling
interests of any non wholly-owned businesses acquired in the
future.





In
December 2007, the FASB issued SFAS No. 141R,  “Business Combinations”
(“SFAS 141R”), which replaces SFAS No. 141, “Business Combinations.” SFAS 141R
establishes principles and requirements for determining how an enterprise
recognizes and measures the fair value of certain assets and liabilities
acquired in a business combination, including noncontrolling interests,
contingent consideration, and certain acquired contingencies.  SFAS
141R also requires acquisition-related transaction expenses and restructuring
costs be expensed as incurred rather than capitalized as a component of the
business combination. SFAS 141R will be applicable prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. SFAS 141R
would have an impact on accounting for any businesses acquired after the
effective date of this pronouncement.





In
December 2007, the SEC staff issued Staff Accounting Bulletin 110 (“SAB 110”),
“Share-Based Payment,” which amends SAB 107, “Share-Based Payment,” to permit
public companies, under certain circumstances, to use the simplified method in
SAB 107 for employee option grants after December 31, 2007. Use of the
simplified method after December 2007 is permitted only for companies whose
historical data about their employees’ exercise behavior does not provide a
reasonable basis for estimating the expected term of the options. The adoption
of this pronouncement did not have a material effect on the Company’s
consolidated financial position, results of operations or cash
flows.


II-22


On March
19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - an Amendment of FASB Statement 133” (“SFAS
161”). SFAS 161 enhances required disclosures regarding derivatives and hedging
activities, including enhanced disclosures regarding how: (a) an entity uses
derivative instruments; (b) derivative instruments and related hedged items are
accounted for under SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities;” and (c) derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows.
Specifically, SFAS 161 requires: disclosure of the objectives for using
derivative instruments be disclosed in terms of underlying risk and accounting
designation; disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format; information about credit-risk-related
contingent features; and cross-reference from the derivative footnote to other
footnotes in which derivative-related information is disclosed.  SFAS
161 is effective for fiscal years and interim periods beginning after November
15, 2008.  The adoption of this pronouncement is not expected to have
a material affect on the Company’ consolidated financial position, results of
operations or cash flows.





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles."  The statement is intended to improve
financial reporting by identifying a consistent hierarchy for selecting
accounting principles to be used in preparing financial statements that are
prepared in conformance with generally accepted accounting principles. Unlike
Statement on Auditing Standards (SAS) No. 69, "The Meaning of Present in
Conformity With GAAP," SFAS No. 162 is directed to the entity rather than the
auditor. The statement is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity with GAAP," and is not expected to
have any impact on the Company's consolidated results of operations, financial
condition or liquidity.





B. 
Fixed Assets





Fixed
assets consist of the following at December 31, 2008 and 2007 (in
thousands):


2008
            
            
            
            2007Equipment
            
            
            $
            6,413
            
            
            $
            6,231Telephone
      systems
            
            
            
            1,018
            
            
            
            804Furniture
      and fixtures
            
            
            
            392
            
            
            
            368Transportation
      equipment
            
            
            
            104
            
            
            
            70Leasehold
      improvements
            
            
            
            212
            
            
            
            1898,139
            
            
            
            7,662Less
      accumulated depreciationand
      amortization
            
            
            
            6,321
            
            
            
            5,569Fixed
      assets - net
            
            
            $
            1,818
            
            
            $
            2,093





Depreciation
and amortization expense for the years ended December 31, 2008, 2007 and 2006
was $752,000, $715,000 and $655,000, respectively.





C.           Marketable
Securities





Marketable
securities consists of the following (in thousands):


December 31,2008
            
            
            
            2007Innodata
      - Available for sale securities - at market
            
            $
            636
            
            
            $
            1,372Arbitrage
      trading securities - at market
            
            
            2,980
            
            
            
            7,209Marketable
      securities
            
            $
            3,616
            
            
            $
            8,581Arbitrage
      trading securities sold but not yet purchased – at market
            
            $
            30,896
            
            
            $
            5,060




II-23


During
the year ended December 31, 2006, the Company sold its remaining 403,498 shares
of Edgar Online, Inc. (“EOL”), an Internet-based supplier of business, financial
and competitive intelligence derived from U.S. Securities and Exchange
Commission data.  As a result, the Company received proceeds of
$1,771,000 and recorded a gain of $1,766,000 during the year ended December 31,
2006.





The
Company owns 254,272 shares of Innodata, a provider of digital content
outsourcing services.  The Company carries the investment at $636,000,
the market value at December 31, 2008. The difference between the cost of
$269,000 and fair market value of these securities, net of $147,000 in deferred
taxes, or $220,000 is classified as a component of accumulated other
comprehensive income included in stockholders' equity as of December 31, 2008.
The Company purchased 10,800 shares at a cost of $35,000 during the year ended
December 31, 2008.  The Company sold 13,030 shares, received proceeds
of $77,000 and recorded a gain of $65,000 during the year ended December 31,
2008.  At December 31, 2007, the Company owned 256,502 shares of
Innodata.  The Company carried the investment at $1,372,000, the
market value at December 31, 2007. The difference between the cost of $246,000
and fair market value of these securities, net of $450,000 in deferred taxes, or
$676,000 is classified as a component of accumulated other comprehensive income
included in stockholders' equity as of December 31, 2007. The Company sold
81,795 shares, received proceeds of $420,000 and recorded a gain of $344,000
during the year ended December 31, 2007. In addition, the Company purchased 399
shares during the year ended December 31, 2007. At December 31, 2006, the
Company owned 337,898 shares of Innodata.  The Company sold 6,750
shares, received proceeds of $16,000 and recorded a gain of $11,000 during the
year ended December 31, 2006. In addition, the Company purchased 100 shares
during the year ended December 31, 2006. The Company carried the investment at
$730,000, the market value at December 31, 2006. The difference between the cost
of $324,000 and fair market value of these securities, net of $163,000 in
deferred taxes, or $243,000 is classified as a component of accumulated other
comprehensive income included in stockholders’ equity at December 31,
2006.





The
Company engages in arbitrage trading activity. The Company's trading strategy
consists principally of establishing hedged positions consisting of stocks and
options.  The Company is subject to market risk in attempting to
establish a hedged position, as the market prices could change, precluding a
profitable hedge.  In these instances, any positions that were
established for this hedge would be immediately sold, usually resulting in small
losses.  If the hedged positions are successfully established at the
prices sought, the positions generally stay until the next option expiration
date, resulting in small gains, regardless of market value changes in these
securities.  While virtually all positions are liquidated at option
expiration date, certain stock positions remain.  The liquidation of
these positions generally results in small profits or losses.  From
time to time, losses may result from certain dividends that may have to be
delivered on positions held, as well as from certain corporate restructurings
and mergers that may not have been taken into account when the positions were
originally established.





The
Company also engages in options trading with a higher risk
profile.   The Company's trading strategy consists of selling
short deep out-of-the-money calls and puts.  These naked option
positions (when there is no underlying security position held) are not
hedged.  The investment strategy is to take advantage of options that
have a very low probability of becoming “in-the-money.”  The Company
seeks to earn the low premiums that these options are selling for, and expects
that all or most of the options will end up expiring worthless.  To
minimize risk, the Company limits its exposure to any one underlying stock and
constantly monitors the option against the real time underlying stock price, and
immediately seeks to cover its option position by buying/selling the underlying
stock to protect against a larger loss.  From time to time,
significant losses may result from option positions whose underlying stock price
realized a sudden large increase or decrease.





As of
December 31, 2008, trading securities had a long market value of $2,980,000 with
a cost of $3,108,000, or a net unrealized loss of
$128,000.  Securities sold but not yet purchased, had a short market
value of $30,896,000 with a cost/short proceeds of $31,030,000, or a net
unrealized gain of $134,000.  The Company expects that its December
31, 2008 positions will be closed during the first quarter of 2009 and that
other positions with the same strategy will be established.  The
Company pledged its holdings in Innodata as collateral for its trading
accounts.  In addition, the Company's Principal Stockholder, who
served as its Chairman and CEO until his resignation on March 16, 2007 (referred
to hereafter as “Principal Stockholder”), pledged approximately 3 million shares
of his holdings in the Company's common stock as collateral for these accounts
of which 2.3 million shares were held as collateral as of December 31,
2008.  The Company is paying its Principal Stockholder at the rate of
2% per annum on the value of the collateral pledged.  Such payments
aggregated $39,000, $39,000 and $42,000, respectively, for the years ended
December 31, 2008, 2007 and 2006, respectively.


II-24


The
Company recognized gains from arbitrage trading of $775,000, $2,114,000 and
$1,013,000 for the years ended December 31, 2008, 2007 and 2006,
respectively.





At
December 31, 2007, trading securities had a long market value of $7,209,000 with
a cost of $7,209,000.  Securities sold but not yet purchased, had a
short market value of $5,060,000 with a cost/short proceeds of $5,069,000, or a
net unrealized gain of $9,000.





In
connection with the arbitrage trading activity, the Company incurs margin
loans.  The Company is exposed to interest rate change market risk
with respect to these margin loans.  The level of trading in the
arbitrage trading account is partially dependent on the margin value of the
Company’s common stock pledged by its Principal Stockholder, and Innodata common
stock, which is used as collateral. The market value of such securities is
dependent on future market conditions for these companies over which the Company
has little or no control.





D.  Note
Payable - Bank





The note
payable - bank is a revolving line of credit up to a maximum of $3 million which
bears interest at a per annum rate of 1.75% above the bank’s prime rate (5% at
December 31, 2008) and is due on demand. The line expires in August, 2009,
subject to automatic renewal. The note is collateralized by substantially all of
the assets of Track Data Corporation. The Company may borrow up to 80% of
eligible accounts receivable and is required to maintain a compensating cash
balance of not less than 10% of the outstanding loan obligation and is required
to comply with certain covenants.  There were no borrowings
outstanding at December 31, 2008. Borrowings available under the line of credit
at December 31, 2008 were $577,000 based on these formulas.





E.  Segment
Information





The
Company is a financial services company that provides real-time financial market
data, fundamental research, charting and analytical services to institutional
and individual investors through dedicated telecommunication lines and the
Internet.  The Company also disseminates news and third-party database
information from more than 100 sources worldwide.  The Company owns
Track Data Securities Corp., a registered securities broker-dealer and member of
FINRA.  The Company provides a proprietary, fully integrated
Internet-based online trading and market data system, proTrack, for the
professional institutional traders, and myTrack and myTrack Edge, for the
individual trader.  The Company also operates Track ECN, an electronic
communications network that enables traders to display and match limit orders
for stocks.  The Company's operations are classified in three business
segments:  (1) market data services and trading, including ECN
services, to the institutional professional investment community, (2)
Internet-based online trading and market data services to the non-professional
individual investor community, and (3) arbitrage trading. See Note
C.





The
accounting policies of the segments are the same as those described in Note A,
Summary of Significant Accounting Policies.  Segment data includes
charges allocating corporate overhead to each segment.  The Company
has not disclosed asset information by segment, as the information is not
produced internally.  One market data customer of the Non-professional
segment accounted for 10% of that segment’s revenues during the year ended
December 31, 2008.  Substantially all long-lived assets are located in
the U.S.  The excess of the purchase price of acquired businesses over
the fair value of net assets (“goodwill”) on the dates of acquisition amounts to
$1,700,000, net of accumulated amortization of $2,494,000 and a 2008 impairment
charge of $200,000, at December 31, 2008, and $1,900,000, net of accumulated
amortization of $2,494,000 at December 31, 2007.  Goodwill is an asset
of the non-professional market segment. The Company's business is predominantly
in the U.S.  Revenues and net income (loss) from international
operations are not material.


II-25


Information
concerning operations in its business segments is as follows (in
thousands):


Revenues
            
            
            2008
            
            
            
            2007
            
            
            
            2006Professional
      Market
            
            $
            14,525
            
            
            $
            20,803
            
            
            $
            29,642Non-Professional
      Market
            
            
            16,134
            
            
            
            13,277
            
            
            
            12,344Total Revenues
            
            $
            30,659
            
            
            $
            34,080
            
            
            $
            41,986Arbitrage
      Trading – Gain on sale of marketable securities
            
            $
            775
            
            
            $
            2,114
            
            
            $
            1,013(Loss)
      income before unallocated amounts and income taxes:Professional
    Market
            
            $
            (226
            )
            
            $
            (3,320
            )
            
            $
            (1,829
            )Non-Professional
      Market
            
            
            2,739
            
            
            
            1,870
            
            
            
            2,404Arbitrage Trading (including
      interest)
            
            
            641
            
            
            
            1,584
            
            
            
            843Unallocated
    amounts:Depreciation and
      amortization
            
            
            (761
            )
            
            
            (722
            )
            
            
            (659
            )Gain on sale of Innodata common
      stock
            
            
            65
            
            
            
            344
            
            
            
            1,777Impairment of
      goodwill
            
            
            (200
            )
            
            
            -
            
            
            
            -Interest income
      (expense)-net
            
            
            98
            
            
            
            69
            
            
            
            43Income
      (loss) before income taxes
            
            $
            2,356
            
            
            $
            (175
            )
            
            $
            2,579





F.      Income
Taxes





The
components of the provision for (benefit from) income taxes are as follows (in
thousands):


2008
            
            
            
            2007
            
            
            
            2006Federal:Current
            
            $
            746
            
            
            $
            10
            
            
            $
            712Deferred
            
            
            41
            
            
            
            (56
            )
            
            
            36Total
      federal
            
            
            787
            
            
            
            (46
            )
            
            
            748State
      and local:Current
            
            
            224
            
            
            
            9
            
            
            
            275Deferred
            
            
            4
            
            
            
            (6
            )
            
            
            7Total
      state and local
            
            
            228
            
            
            
            3
            
            
            
            282Provision
      for (benefit from) income taxes
            
            $
            1,015
            
            
            $
            (43
            )
            
            $
            1,030





Reconciliation
of the U.S. statutory rate with the Company's effective tax rate is summarized
as follows:


2008
            
            2007
            
            2006Federal
      statutory rate
            
            
            34.0
            %
            
            
            (34.0
            )%
            
            
            34.0
            %State
      and local income taxes
            
            
            6.3
            
            
            
            3.4
            
            
            
            7.0Non-deductible
      penalties
            
            
            2.9
            
            
            
            10.0
            
            
            
            -Non
      taxable dividends
            
            
            -
            
            
            
            (12.7
            )
            
            
            -Other
      permanent differences
            
            
            (.1
            )
            
            
            8.7
            
            
            
            (1.1
            )Effective
      rate
            
            
            43.1
            %
            
            
            (24.6
            )%
            
            
            39.9
            %




II-26


The
components of the Company’s net deferred taxes are as follows (in
thousands):


2008
            
            2007Deferred
      tax assets:Charitable
      contributions
            
            $
            276
            
            
            $
            249Allowance for doubtful
      accounts
            
            
            85
            
            
            
            91Other
            
            
            123
            
            
            
            117484
            
            
            
            457Deferred
      tax liabilities:Unrealized
      gain on marketable securities
            
            
            (199
            )
            
            
            (509
            )Accelerated
      depreciation
            
            
            (781
            )
            
            
            (703
            )(980
            )
            
            
            (1,212
            )Net
      deferred tax liability
            
            $
            (496
            )
            
            $
            (755
            )





G.  Commitments
and Contingencies





Leases--The
Company is obligated under various lease agreements covering office space and
computer equipment which expire at various dates through 2010. The lease
agreements for office space contain escalation clauses based principally on
increases in real estate taxes, building maintenance and utility costs. A
summary of  such commitments as of December 31, 2008 follows (in
thousands):




Operating
      LeasesYear
      Ending
              
              Office
              
              ComputerDecember
      31,
              
              Space
              
              Equipment
              
              Total2009
              
              $
              493,000
              
              
              
              $
              22,000
              
              
              
              $
              515,0002010
              
              
              -
              
              
              
              
              22,000
              
              
              
              
              22,000Total
              
              $
              493,000
              
              
              
              $
              44,000
              
              
              
              $
              537,000
 Rent
expense for the years ended December 31, 2008, 2007 and 2006 amounted to
$732,000, $994,000 and $1,058,000 for office space and $44,000, $78,000 and
$77,000 for computer equipment, respectively.





Included
in the Company’s rent expense is a lease for its executive office facilities in
Brooklyn which is leased from a limited partnership owned by the Company’s
Principal Stockholder and members of his family.  The Company paid the
partnership rent of $657,000 in 2008, $637,000 in 2007 and $630,000 in
2006.  The lease provides for the Company to pay $657,000 per annum
plus real estate taxes through September 30, 2009.





Transactions with
Clearing Broker and Customers--The Company conducts business through a
clearing broker which settles all trades for the Company, on a fully disclosed
basis, on behalf of its customers.  The Company earns commissions as
an introducing broker for the transactions of its customers.  In the
normal course of business, the Company's customer activities involve the
execution of various customer securities transactions.  These
activities may expose the Company to off-balance-sheet risk in the event the
customer or other broker is unable to fulfill its contractual obligations and
the Company has to purchase or sell the financial instrument underlying the
obligation at a loss.





II-27


The
Company's customer securities activities are transacted on either a cash or
margin basis.  In margin transactions, the clearing broker extends
credit to the Company's customers, subject to various regulatory margin
requirements, collateralized by cash and securities in the customers'
accounts.  However, the Company is required to either obtain
additional collateral or to sell the customer's position if such collateral is
not forthcoming.  The Company is responsible for any losses on such
margin loans, and has agreed to indemnify its clearing broker for losses that
the clearing broker may sustain from the customer accounts introduced by the
Company.  At December 31, 2008, the Company had $5.8 million in margin
credit extended to its customers.  The Company believes it is unlikely
it will have to make material payments under the indemnification agreement and
has not recorded any related liability in the consolidated financial
statements.  There were no indemnifications paid by the Company under
this agreement.





The
Company and its clearing broker seek to control the risks associated with
customer activities by requiring customers to maintain margin collateral in
compliance with various regulatory and internal guidelines. The Company and its
clearing broker monitor required margin levels daily and, pursuant to such
guidelines, require the customer to deposit additional collateral or to reduce
positions when necessary.





Net Capital
Requirements--The SEC, FINRA, and various other regulatory agencies have
stringent rules requiring the maintenance of specific levels of net capital by
securities brokers, including the SEC’s uniform net capital rule, which governs
TDSC.  Net capital is defined as assets minus liabilities, plus other
allowable credits and qualifying subordinated borrowings less mandatory
deductions that result from excluding assets that are not readily convertible
into cash and from valuing other assets, such as a firm’s positions in
securities, conservatively. Among these deductions are adjustments in the market
value of securities to reflect the possibility of a market decline prior to
disposition.





As of
December 31, 2008, TDSC was required to maintain minimum net capital, in
accordance with SEC rules, of approximately $1 million and had total net capital
of $4,998,000, or approximately $3,998,000 in excess of minimum net capital
requirements.





If TDSC
fails to maintain the required net capital it may be subject to suspension or
revocation of registration by the SEC and suspension or expulsion by FINRA and
other regulatory bodies, which ultimately could require TDSC's liquidation. In
addition, a change in the net capital rules, the imposition of new rules, a
specific operating loss, or any unusually large charge against net capital could
limit those operations of TDSC that require the intensive use of capital and
could limit its ability to expand its business.





The
operations of TDSC are subject to reviews by regulators within its industry,
which include the SEC, FINRA and various exchanges.  In the past,
certain reviews have resulted in the Company incurring fines and required the
Company to change certain of its internal control and operating
procedures.  The Company was fined $50,000, which was accrued at
December 31, 2007 and an estimated $260,000 in 2008 (actual amounts may differ
from these estimates), $200,000 of which was accrued at December 31, 2008.
Ongoing and future reviews may result in the Company incurring additional fines
and changes in its internal control and operating
procedures.  Management does not expect any ongoing reviews to have a
material affect on the Company's financial position or results of
operations.





Litigation--The
Company is subject to legal proceedings and claims which arise in the ordinary
course of its business. In the opinion of management, the amount of ultimate
liability with respect to these actions will not materially affect the Company's
financial position or results of operations.





On June
14, 2005, the SEC filed a civil complaint against Barry Hertz, the Company’s
Chairman and CEO at that time, in the U.S. District Court for the Eastern
District of New York in Brooklyn alleging violations of various provisions of
the federal securities laws in connection with certain transactions in the
Company’s stock owned by others. Mr. Hertz reached a settlement with the SEC
regarding these charges.   Mr. Hertz consented, without admitting
or denying the allegations in the SECs complaint, to a permanent injunction from
violations of Section 10(b) and 10b-5 of the Exchange Act and Section 17(a) of
the Securities Act of 1933, a two-year bar from serving as an officer or
director of a publicly traded company, a permanent bar from association with a
broker or dealer, with the right to apply for reinstatement after a two-year
period, and also agreed to pay approximately $136,000 in disgorgement, interest
and civil penalties.  On March 16, 2007, Mr. Hertz resigned as
Chairman and CEO of the Company.  In May, 2007, the Board of Directors
agreed to reimburse Mr. Hertz under the indemnification provisions of Delaware
law, $75,000 for the disgorgement and interest portion of the amounts paid to
the SEC by him.  The Company from time to time is subject to informal
inquiries and document requests from the SEC to review compliance with Mr.
Hertz's association bar. As of March 16, 2009, the two-year officer or director
bar expired.  Mr. Hertz has not applied for reinstatement and
termination of his association bar.


II-28


In July,
2007, a subscriber of the Track ECN services filed an arbitration claim with
FINRA alleging that the Company’s website confused the subscriber with respect
to its fee schedule for ECN transactions, and that, as a result, a customer of
the subscriber was billed a greater amount for ECN transactions than was
expected.   The subscriber sought a return of its fees paid and
for loss of its customer for a total claim of $500,000.  In May 2008,
the Company settled this matter for a payment of $10,000.





H.  Savings
Program





The
Company had an employee savings program (terminated as of February 29, 2008)
under which employees made deposits and received interest at the prime rate
until the program was terminated and the balances distributed to the
participants in February, 2008. As of December 31, 2007, the Company’s CEO/CFO
had deposits in the program of $583,000.  He received interest of
$8,000, $44,000 and $32,000 during the years ended December 31, 2008, 2007 and
2006, respectively.  Amounts due to employees under the program
aggregated $770,000 at December 31, 2007, which was included in other
liabilities.





I.      Capital
Stock and Dividends





Common
Stock--During the year ended December 31, 2006, the Company purchased
6,000 shares of its common stock at a cost of $20,000.





In
November 2005, the Board of Directors authorized the buy-back of up to 1 million
shares from time to time in open market or privately negotiated transactions. As
of December 31, 2008, 6,000 shares had been repurchased under this
program.





Dividends--No
dividends were declared during the three years ended December 31, 2008, 2007 and
2006. The Board expects to consider future dividends, if any, based on such
factors as the Company's earnings, financial condition, cash requirements,
future prospects and other factors.





Preferred
Stock--The Company is authorized to issue up to 5,000,000 shares of $.01
par value preferred stock. The Board of Directors is authorized to fix the
terms, rights, preferences and limitations of the preferred stock and to issue
the preferred stock in series which differ as to their relative terms, rights,
preferences and limitations. No preferred shares have been issued.





Common Stock
Reserved--At December 31, 2008, the Company reserved for issuance
1,432,000 shares of its common stock pursuant to the Company's Stock Option
Plans.





J.      Stock
Options





The
Company adopted, with stockholder approval, the 1994, 1995, 1995 Disinterested
Director, 1996, 1998, 2001 and 2002 Stock Option Plans (the “1994 Plan,” “1995
Plan,” “1995 DD Plan,” “1996 Plan,” “1998 Plan, ”  “2001 Plan” and the
“2002 Plan”) which provided for the granting of options to purchase not more
than an aggregate of 240,000, 400,000, 40,000, 640,000, 640,000, 560,000 and
500,000 shares of common stock, respectively, subject to adjustment under
certain circumstances. Such options may be incentive stock options ("ISOs")
within the meaning of the Internal Revenue Code of 1986, as amended, or options
that do not qualify as ISOs ("Non-Qualified Options").  No options may
be granted under the 1994 Plan after March 31, 2004, under the 1995 Plan and
1995 DD Plan after May 15, 2005, under the 1996 Plan after July 8, 2006, under
the 1998 Plan after July 9, 2008, under the 2001 Plan after May 3, 2011 and
under the 2002 Plan after May 2, 2012.  At December 31, 2008, the
total options available for issuance under the plans were options to purchase
1,432,000 shares (431,000 currently outstanding and 1,001,000 available for
future issuance).


II-29


The
option exercise price per share for a Non-Qualified Option may not be less than
85% of the fair market value per share of common stock on the date of grant and
for an ISO may not be less than the fair market value per share of common stock
on the date of grant (110% of such fair market value for an ISO, if the grantee
owns stock possessing more than 10% of the combined voting power of all classes
of the Company's stock). Options may be granted under the Stock Option Plan to
all officers, directors and employees of the Company and, in addition,
Non-Qualified Options may be granted to other parties who perform services for
the Company.





The Stock
Option Plans may be amended from time to time by the Board of Directors of the
Company. However, the Board of Directors may not, without stockholder approval,
amend the Stock Option Plans to increase the number of shares of common stock
which may be issued under the Stock Option Plans (except upon changes in
capitalization as specified in the Stock Option Plans), decrease the minimum
exercise price provided in the Plans or change the class of persons eligible to
participate in the Plans.





The
intrinsic value of options exercised in 2006 was $28,000.  No options
were exercised in 2008 or 2007. No options vested during the three years ended
December 31, 2008.





A summary
of the Company's Stock Option Plans is as follows:


WeightedPer
      Share
              
              
              
              
              
              Average
              
              Weighted
              
              
              
              
              
              WeightedRange
      of
              
              
              
              
              
              Remaining
              
              Average
              
              
              
              
              
              AverageExercise
              
              Number
              
              Contractual
              
              Exercise
              
              Number
              
              ExercisePrices
              
              Outstanding
              
              Life (Years)
              
              Price
              
              Exercisable
              
              PriceBalance
      1/1/06
              
              $
              3.00
              -
              3.05
              
              
              
              202,650
              
              
              5
              
              $
              3.01
              
              
              
              202,650
              
              
              $
              3.01$
              5.00
              -
              6.25
              
              
              
              240,300
              
              
              2
              
              $
              5.63
              
              
              
              240,300
              
              
              $
              5.63$
              7.50
              
              
              
              
              
              816,960
              
              
              3
              
              $
              7.50
              
              
              
              816,960
              
              
              $
              7.501,259,910
              
              
              
              
              
              
              
              
              
              1,259,910Canceled
              
              $
              3.00
              -
              7.50
              
              
              
              (555,320
              )
              
              4
              
              $
              7.47Exercised
              
              $
              3.00
              
              
              
              
              
              (18,750
              )
              
              4
              
              $
              3.00Balance
      12/31/06
              
              $
              3.00
              -
              3.05
              
              
              
              182,500
              
              
              4
              
              $
              3.01
              
              
              
              182,500
              
              
              $
              3.01$
              5.00
              -
              6.25
              
              
              
              234,510
              
              
              1
              
              $
              5.63
              
              
              
              234,510
              
              
              $
              5.63$
              7.50
              
              
              
              
              
              268,830
              
              
              2
              
              $
              7.50
              
              
              
              268,830
              
              
              $
              7.50685,840
              
              
              
              
              $
              5.67
              
              
              
              685,840
              
              
              $
              5.67Canceled
              
              $
              3.00
              -
              7.50
              
              
              
              (14,290
              )
              
              1
              
              $
              5.81Balance
      12/31/07
              
              $
              3.00
              -
              3.05
              
              
              
              178,750
              
              
              3
              
              $
              3.01
              
              
              
              178,750
              
              
              $
              3.01$
              5.00
              -
              6.25
              
              
              
              230,710
              
              
              0
              
              $
              5.63
              
              
              
              230,710
              
              
              $
              5.63$
              7.50
              
              
              
              
              
              262,090
              
              
              1
              
              $
              7.50
              
              
              
              262,090
              
              
              $
              7.50671,550
              
              
              
              
              $
              5.79
              
              
              
              671,550
              
              
              $
              5.79Cancelled
              
              $
              3.00
              -
              7.50
              
              
              
              (240,420
              )
              
              1
              
              $
              5.59Balance
      12/31/08
              
              $
              3.00
              -
              3.05
              
              
              
              172,500
              
              
              2
              
              $
              3.01
              
              
              
              172,500
              
              
              $
              3.01$
              7.50
              
              
              
              
              
              258,630
              
              
              0
              
              $
              7.50
              
              
              
              258,630
              
              
              $
              7.50431,130
              
              
              
              
              $
              5.70
              
              
              
              431,130
              
              
              $
              5.70


All
options have a life of five years and all are exercisable at December 31,
2008.  There was no intrinsic value of outstanding and exercisable
options at December 31, 2008.


II-30


K.  Retirement
Plan





The
Company has a profit sharing plan, which qualifies, under Section 401(k) of the
Internal Revenue Code. The plan covers substantially all employees who have
completed six months of service. Company contributions to the plan are
discretionary and vest at a rate of 20% after two years of service, and 20% each
year thereafter until employees are fully vested after 6 years. Company
contributions to the plan for the years ended December 31, 2008, 2007 and 2006,
were approximately $22,000, $28,000 and $21,000, respectively.





L.   Investment
in Private Companies





In May,
2006, the Company purchased a non-dilutable 15% interest in SFB Market Systems,
Inc. (“SFB”) for $150,000 cash.  SFB is a privately held company that
provides an online centralized securities symbol management system and related
equity and option information for updating and loading of master
files.  The Company currently has a representative on SFB’s four
member Board of Directors.  The Company accounts for its investment in
SFB under the cost method, and is included in other assets in the balance sheet
as of December 31, 2008 and 2007.





M.
            Related
      Party Transactions





In April
2006, the Company's Principal Stockholder formed a private limited partnership
of which he is the general partner for the purpose of operating a hedge fund for
trading in certain options strategies.  The Company has no financial
interest in or commitments related to, the hedge fund.  The hedge fund
opened a trading account with the Company's broker-dealer.  The
Company charged commissions to the hedge fund totaling $79,000, $125,000 and
$89,000 for the years ended December 31, 2008, 2007 and 2006,
respectively.





In May,
2008, the Company made a non-interest bearing loan of $100,000 to a qualified
charitable organization, which the Company’s Principal Stockholder is a member
of its Board of Directors.  The loan is repayable in 25 consecutive
equal monthly installments of $4,000 which repayments commenced in June,
2008.  The balance, included in other assets, at December 31, 2008 was
$72,000.





N.
            Loss
      on Closing of Offices





In
October 2007, in an effort to reduce costs, the Company decided to close certain
of its satellite offices which, for the most part, were communication hubs for
local customers.  By moving customers to internet services or direct
lines to other locations, the majority of customers were not
affected.  The loss includes writeoffs of leasehold improvements and
furniture and fixtures of $36,000 and a loss on buyout of leases of $32,000 and
is included in selling and administrative expenses. These offices were closed by
December 31, 2007 and no further costs are to be incurred in connection with the
closings.





O.
            Income
      (Loss) Per Share (in thousands, except per
  share)


Year
      Ended December 312008
            
            2007
            
            2006Net
      income (loss)
            
            $
            1,341
            
            
            $
            (132
            )
            
            $
            1,549Weighted
      average common shares outstanding
            
            
            8,392
            
            
            
            8,392
            
            
            
            8,382Dilutive
      effect of outstanding options
            
            
            -
            
            
            
            -
            
            
            
            19Adjusted
      for dilutive computation
            
            
            8,392
            
            
            
            8,392
            
            
            
            8,401Basic
      income (loss) per share
            
            
            $.16
            
            
            
            $(.02
            )
            
            
            $.18Diluted
      income (loss) per share
            
            
            $.16
            
            
            
            $(.02
            )
            
            
            $.18





II-31


Diluted
net income (loss) per share is based on the weighted average number of common
and potential dilutive common shares outstanding.  The calculation
takes into account the shares that may be issued upon exercise of stock options
(Note J), reduced by the shares that may be repurchased with the funds received
from the exercise, based on the average price during the year.  The
calculation did not take into account options to purchase 431,000, 672,000 and
667,000 shares at December 31, 2008, 2007 and 2006, respectively, as they were
antidilutive.


II-32


ITEM
9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES





Not
applicable





ITEM
9A(T).    CONTROLS AND PROCEDURES





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this annual report.





Evaluation
of Disclosure Controls and Procedures





We
maintain a set of disclosure controls and procedures, as defined in Section
13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), that are designed to ensure that information required to be disclosed by
us in the reports filed by us under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms.





An
evaluation has been carried out under the supervision and with the participation
of our management, including our Chief Executive Officer/Chief Financial
Officer, of the effectiveness of the design and the operation of our "disclosure
controls and procedures" (as such term is defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934) as of December 31, 2008 (“Evaluation Date”).
Based on such evaluation, our Chief Executive Officer/Chief Financial Officer
concluded that, as of the Evaluation Date, the disclosure controls and
procedures are effective.





Notwithstanding
the foregoing, there can be no assurance that the Company’s disclosure controls
and procedures will detect or uncover all failures of persons within the Company
to disclose material information otherwise required to be set forth in the
Company’s periodic reports. There are inherent limitations to the effectiveness
of any system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can
only provide reasonable, not absolute, assurance of achieving their control
objectives.





Management’s
Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f).  Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.  Internal
control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures are being made only
with proper authorizations; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material affect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.


II-33


Our
management, under the supervision of and with the participation of the Chief
Executive Officer/Chief Financial Officer, assessed the effectiveness of our
internal control over financial reporting as of December 31, 2008 based on
criteria for effective control over financial reporting described in Internal
Control – Integrated Framework issued by the COSO. Based on this assessment, our
management concluded that our internal control over financial reporting was
effective as of December 31, 2008.





Changes
in Internal Control over Financial Reporting





An
evaluation was performed under the supervision of the Company’s management,
including the Chief Executive Officer/Chief Financial Officer, as requested
under Exchange Act Rule 13a-15(d) and 15-d-15(d), of whether any change in the
Company’s internal control over financial reporting occurred during the fiscal
quarter ended December 31, 2008. Based on that evaluation, the Company’s
management, including the Chief Executive Officer/Chief Financial Officer,
concluded that no change in the Company’s internal controls over financial
reporting occurred during the fiscal quarter ended December 31, 2008 that has
materially affected or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.


II-34


PART
III





ITEM
10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





Officers
and Directors





The officers and directors of the
Company are as follows:





Name
            
            Age
            
            PositionMartin
      Kaye
            
            61
            
            Chief
      Executive Officer since March 16, 2007,Chief
      Financial Officer, Secretary and DirectorStanley
      Stern
            
            58
            
            Chief
      Compliance Officer, TDSC, DirectorAlbert
      Drillick
            
            62
            
            Senior
      Systems Analyst, DirectorAbraham
      Biderman
            
            60
            
            DirectorE.
      Bruce Fredrikson
            
            70
            
            Chairman
      of the Board since March 16, 2007Philip
      Ort
            
            59
            
            DirectorShaya
      Sofer
            
            59
            
            DirectorKey
      Employees are as follows:Barry
      Hertz
            
            58
            
            Chief
      of Technology, served as Chairman of the Boardand
      Chief Executive Officer until March 16, 2007David
      Drillick
            
            37
            
            Chief
      Operating Officer, TDSC





Martin Kaye has been Chief
Executive Officer since March 16, 2007, and has been Chief Financial Officer,
Secretary and a Director of the Company since 1994.  Mr. Kaye is a
certified public accountant.  Mr. Kaye served as Chief Financial
Officer of Innodata from October 1993 and Director from March 1995 until his
resignation from those positions in May 2001.  He had been an audit
partner with Deloitte & Touche LLP for more than five years until his
resignation in 1993. Mr. Kaye holds a B.B.A. in accounting from Baruch College
(1970).





Stanley Stern has been Chief
Compliance Officer of the Company’s broker-dealer subsidiary, TDSC, since April,
2005.  He served as Senior Vice President - Customer Relations from
June 2000 to November 2005.  He has been a Director of the Company
since May 1999.  He previously served as Director from April 1994
until his resignation in September 1997.  He served as Vice President
of the Company and in other capacities for more than five years until his
resignation in December 1996.  From January 1998 through May 2000, Mr.
Stern was Chief Operating Officer of Integrated Medical Technologies, Inc., an
Internet-based provider of medical services information.  Mr. Stern
holds a B.B.A. from Baruch College (1973).





Albert Drillick has been a
Director of the Company since February 2004. He has served as a Director of
Applications and Senior Systems Analyst for the Company for more than the past
five years. He holds a Ph.D. degree in Mathematics from New York University
Courant Institute (1971).





Abraham Biderman has been a
Director of the Company since August 2002.  Mr. Biderman is Chairman
of Eagle Advisers, LLC, a diversified financial services and money management
firm.  From January 1990 to September 2003, he was Executive Vice
President of Lipper & Company, Inc., a diversified financial services
firm.  Prior thereto, he served as special advisor to the Deputy Mayor
and then the Mayor during New York City's Koch Administration.  From
January 1988 through December 1989, Mr. Biderman was Commissioner of New York
City's Department of Housing, Preservation and Development.  Prior
thereto, he served as Commissioner of New York City's Department of Finance and
as Chairman of New York City's Employee Retirement System. Mr. Biderman is a
member of the Fiscal Opportunities Task Force of the New York City Partnership,
a member of the Housing Committee of the Real Estate Board of New York, a
Director of m-Phase Technologies, Inc., a company that manufactures and markets
high-bandwidth telecommunications products incorporating DSL technology, and is
also on the boards of numerous not-for-profit and philanthropic
organizations.  Mr. Biderman is a certified public accountant and
graduated with a B.A. in Accounting from Brooklyn College (1970).





III-1


Dr. E. Bruce Fredrikson has
been a Director of the Company since June 1994 and he has served as Chairman
since March 16, 2007. Dr. Fredrikson is currently an independent consultant in
corporate finance and governance.  He is Professor of Finance,
Emeritus, at Syracuse University's Martin J. Whitman School of Management where
he taught from 1966 until his retirement in May 2003. He is a director of
Consumer Portfolio Services, Inc., a consumer finance company, and Colonial
Commercial Corp., a supplier of HVAC products and supplies.  Dr.
Fredrikson holds an A.B. in economics from Princeton University and a M.B.A. in
accounting and a Ph.D. in finance from Columbia University.





Philip Ort has been a Director
of the Company since June 2004.  Mr. Ort has been the owner/operator
of a family Real Estate Management and Investment business comprising
residential and commercial properties since 1972.  He serves on the
boards of several not-for-profit organizations.  He attended Brooklyn
College from 1967 to 1970.





Shaya Sofer has been a
Director of the Company since June 2004.  Since January 2001, he has
been Senior Managing Project Director of Energy Spectrum Inc., an energy
consulting firm focusing on CHP "Combine Heat and Power" (Cogeneration). Prior
thereto, he was a consultant.  He served as Director of Facilities for
Track Data Corp. and as Executive Vice President of Fast Track Systems, a
disaster recovery business, from 1985 through 1998.  He also was a
member of the board of directors of Track Data Corp. from 1986 through 1995,
prior to its merger with Global Market Information, Inc. Mr. Sofer holds a B.A.
in Mathematics from Queens College (1972).





Barry Hertzhas served as
Chief of Technology since March 16, 2007. Prior thereto he served as the
Company's Chairman and Chief Executive Officer since its
inception.  Mr. Hertz reached a settlement with the Securities and
Exchange Commission ("SEC") regarding insider-trading charges.  Mr.
Hertz consented, without admitting or denying the allegations in the SECs
complaint, to a two-year bar from serving as an officer or director of a
publicly traded company and a permanent bar from association with a broker or
dealer, with the right to apply for reinstatement after a two-year
period.  As of March 16, 2009 the officer or director bar
expired.  Mr. Hertz has not applied for reinstatement and termination
of his association bar.  He holds a Masters degree in Computer Science
from New York University (1973) and a B.S. degree in Mathematics from Brooklyn
College (1971).  Until his resignation in May 2001, Mr. Hertz also
served as Chairman of Innodata Corporation ("Innodata"), a public company
co-founded by Mr. Hertz, of which the Company was a Principal Stockholder, and
which is a global outsourcing provider of Internet and on-line digital content
services.





David Drillick has been Chief
Operating Officer of TDSC, the Company's broker-dealer subsidiary, since
December 2005.  He has served as the Company's Vice President of
Online Trading Operations since August 2000.  Mr. Drillick was a
Principal at Pond Equities, a full service securities broker-dealer, from
November 1997 through August 2000.  He had previously been a Branch
Manager for King Financial Services, a self-clearing and full service securities
broker-dealer.  Mr. Drillick holds a B.S. degree in
Mathematics/Actuarial Studies from Touro College (1992).





Directors
are elected to serve until the next annual meeting of stockholders and until
their successors are elected and qualified.  Officers serve at the
discretion of the Board. There are no family relationships among directors or
officers, except that Albert Drillick is the father of David Drillick, Chief
Operating Officer of TDSC, the Company’s broker-dealer
subsidiary.


III-2


Audit
Committee





The Company has a separately designated
standing audit committee established in accordance with Section 3(a)(58)(A) of
the Exchange Act. Serving on the Committee are Dr. E. Bruce Fredrikson, Abraham
Biderman and Philip Ort. The Board of Directors has determined that it has an
audit committee financial expert serving on the audit committee, Abraham
Biderman. Mr. Biderman is an independent director as defined in item 7(d)(3)(iv)
of Schedule 14A.





Code
of Ethics





The Company has adopted a Code of
Ethics that applies to its Chief Executive Officer and Chief Financial Officer.
The Code as well as any amendments and waivers of the Code, if any, is posted on
the Company’s website at http://www.trackdata.com/codeofethics.





Compliance
      With Section 16(a) of the Securities Exchange Act of
  1934





The Company believes that during the
period from January 1, 2008 through December 31, 2008 all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with.








ITEM
11.  EXECUTIVE COMPENSATION





COMPENSATION
DISCUSSION AND ANALYSIS





Overview





This
compensation discussion describes the material elements of compensation awarded
to, earned by, or paid to each of our executive officers who served as named
executive officers during the last completed fiscal year. This compensation
discussion focuses on the information contained in the following tables and
related footnotes and narrative for primarily the last completed fiscal
year.  Our Board oversaw and administered our executive compensation
program. There is no compensation committee.





The
principal elements of our executive compensation program are base salary and
long-term equity incentives in the form of stock options.  Other
benefits and perquisites consist of health insurance benefits and a qualified
401(k) savings plan. Our philosophy is to position the aggregate of these
elements at a level that is commensurate with our size and sustained
performance.





Compensation
Program Objectives and Philosophy





In
General.The objectives of our compensation
programs are to attract, motivate and retain talented and dedicated executive
officers, provide our executive officers with both cash and equity incentives to
further the interests of the Company and our stockholders, and provide employees
with long-term incentives so we can retain them.





Generally,
the compensation of our executive officers is composed of a base salary and
equity awards in the form of stock options. In setting base salaries, the Board
generally reviewed the individual contributions of the particular executive. In
addition, stock options are granted to provide the opportunity for long-term
compensation based upon the performance of our common stock over
time.





Competitive
Market.  We define our competitive market for executive talent
and investment capital to be the technology and business services industries. To
date, we have not engaged in the benchmarking of executive compensation but we
may choose to do so in the future.





Compensation
Process.  Our Board approved the compensation of our named
executive officers taking into consideration recommendations from our principal
executive officer (for compensation other than his own), as well as competitive
market guidance.





Regulatory
Considerations.  Given the compensation cost to us of awarding
stock options under recent accounting pronouncements, we will consider the size
and frequency of any future stock option awards under our long-term equity
incentive program.


III-3


Base
Salaries





In
General.We provide the opportunity for our named executive
officers and other executives to earn a competitive annual base salary. We
provide this opportunity to attract and retain an appropriate caliber of talent
for the position, and to provide a base wage that is not subject to performance
risk. We review base salaries for our named executive officers annually and
increases are based on our performance and individual performance. The salary of
our principal executive officer was set by our Board at $242,400 for 2009. Our
Board also approved no increase in compensation for 2009 from the annual base
salary rate from 2008 for Mr. Stern – $123,600; Mr. Hertz - $363,600; and Mr.
Drillick – $166,000.





Total
Compensation Comparison.   No options were awarded to
executive officers in 2008 or 2007 and bonuses of $18,940 in 2008 and $15,000 in
2007 were awarded to Mr. Drillick. In 2008, bonuses of $6,060, $9,090 and $3,090
were awarded to Messrs. Kaye, Hertz and Stern, respectively.  Further,
in 2008 and 2007 Messrs. Kaye, Stern and Hertz received long-term health care
benefit insurance.





Annual
Cash Incentives





In
General.There are no programs presently in place to provide
the opportunity for our named executive officers and other executives to earn an
annual cash incentive award. There are no specific individual performance
goals for 2009 incentive awards, but the Board may exercise discretion and take
into account individual and corporate performance in determining
awards.





Long-term
Equity Incentives





In
General.We provide the opportunity for our named executive
officers and other executives to earn a long-term equity incentive award.
Long-term incentive awards provide employees with the incentive to stay with us
for longer periods of time, which in turn, provides us with greater stability.
These awards also are less costly to us in the short term than cash
compensation. We review long-term equity incentives for our named executive
officers and other executives annually.





Stock
Options.For our named executive officers, our stock option
program is based on grants that are individually negotiated.  We have
traditionally used stock options as our form of equity compensation because
stock options provide a relatively straightforward incentive for our executives,
result in less immediate dilution of existing shareholders’ interests and, prior
to our adoption of FAS 123(R), resulted in less compensation expense for us
relative to other types of equity awards. For a discussion of the determination
of the fair market value of these grants, see Note A to Notes to Consolidated
Financial Statements.





There
were no option grants in 2008 or 2007 to our named executive
officers.





We do not
time stock option grants to executives in coordination with the release of
material non-public information. Our stock options have a 5-year contractual
exercise term. In general, the option grants are also subject to the following
post-termination and change in control provisions:


III-4




Event
            
            Award
      Vesting
            
            Exercise
      TermTermination
      by Us for Reason Other than Cause, Disability or Death
            
            Forfeit
      Unvested
            
            Vested
      – 30 daysDisability
      or Death
            
            Forfeit
      Unvested
            
            Vested
      – 12 monthsTermination
      for Cause
            
            Forfeit
      Vested and Unvested
            
            ExpireChange
      in Control
            
            Not
      accelerated, comparable substitute, if necessary
            
            Unchanged





Executive
Benefits and Perquisites





We
provide the opportunity for our named executive officers and other executives to
receive certain perquisites and general health and welfare benefits. We also
offer participation in our defined contribution 401(k) plan. We do not match
employee contributions for executive officers under our 401(k) plan. We provide
these benefits to provide an additional incentive for our executives and to
remain competitive in the general marketplace for executive talent. For the last
completed fiscal year, we provided the following personal benefits and
perquisites to our named executive officers:  the Company pays a
portion of medical insurance premiums, and, in 2008 and 2007, paid long term
healthcare insurance for Messrs. Kaye, Stern and Hertz with premiums of $18,700,
$12,300 and $13,100, respectively.





The
following table sets forth information with respect to compensation paid by the
Company for services during the years ended December 31, 2008 and 2007 to the
Company's Chief Executive Officer and to the executive officers whose aggregate
annual salary and bonus exceeded $100,000.





Summary
Compensation Table


AllFiscal
            
            
            Annual
            
            
            
            
            
            OtherName and
      Position
            
            Year
            
            
            Salary
            
            Bonus
            
            Compensation
            
            
            TotalMartin
      Kaye
            
            2008
            
            
            $
            242,400
            
            
            $
            6,060
            
            
            $
            18,700
            (1)
            
            $
            267,160Chief
      Executive Officer since March 16, 2007,
            
            2007
            
            
            $
            287,850
            
            
            
            -
            
            
            $
            18,700
            (1)
            
            $
            306,550Chief
      Financial OfficerKey
      EmployeesBarry
      Hertz
            
            2008
            
            
            $
            363,600
            
            
            $
            9,090
            
            
            $
            13,100
            (1)
            
            $
            385,790Chairman,
      CEO until his resignation on March 16, 2007
            
            2007
            
            
            $
            431,775
            
            
            
            -
            
            
            $
            88,100
            (1)(2)
            
            $
            519,875Serves
      as Chief of Technology since that dateStanley
      Stern
            
            2008
            
            
            $
            123,600
            
            
            $
            3,090
            
            
            $
            12,300
            (1)
            
            $
            138,990Chief
      Compliance Officer of TDSC
            
            2007
            
            
            $
            146,875
            
            
            
            -
            
            
            $
            12,300
            (1)
            
            $
            159,175David
      Drillick
            
            2008
            
            
            $
            157,700
            
            
            $
            18,940
            
            
            
            -
            
            
            $
            176,640Chief
      Operating Officer of TDSC
            
            2007
            
            
            $
            158,050
            
            
            $
            15,000
            
            
            
            -
            
            
            $
            173,050


(1)
            Long-term
      health care premiums


(2)
            Includes
      $75,000 for officer/director indemnification paid in
  2007.





There were no options awarded in 2008
or 2007. There are no employment agreements, stock appreciation rights, pension
plans or long-term incentive plans or deferred compensation plans. No options
were exercised in 2008 or 2007.


III-5


Outstanding
Equity Awards at December 31, 2008


Name
            
            Number
      of Securities Underlying Unexercised Options (1)
            
            Option
      Exercise Price
            
            Option
      Expiration DateMartin
      Kaye
            
            40,000
            
            
            $7.50
            
            
            03/11/0950,000
            
            
            $3.00
            
            
            12/27/10Barry
      Hertz
            
            100,000
            
            
            $7.50
            
            
            03/11/09Stanley
      Stern
            
            4,000
            
            
            $7.50
            
            
            03/11/0910,000
            
            
            $3.00
            
            
            12/27/10David
      Drillick
            
            4,000
            
            
            $7.50
            
            
            01/04/0910,000
            
            
            $3.00
            
            
            12/27/10


(1) All
outstanding options are presently exercisable.





Directors
Compensation Table





Name
            
            Fees
      Earned or Paid in Cash
            
            All
      Other Compensation
            
            TotalE.
      Bruce Fredrikson
            
            $30,000
            
            $2,000
            
            $32,000Abraham
      Biderman
            
            $15,000
            
            $2,000
            
            $17,000Philip
      Ort
            
            $15,000
            
            $2,000
            
            $17,000Shaya
      Sofer
            
            $15,000
            
            $2,000
            
            $17,000





E. Bruce
Fredrikson, Chairman, is paid at the rate of $30,000 per annum. All other
directors receive $15,000 per annum.  In addition, directors receive
$500 for each meeting attended. At December 31, 2008 the aggregate number of
outstanding options for each director is as follows: E. Bruce Fredrikson –
18,000; Abraham Biderman – 18,000; Philip Ort – 18,000; and Shaya Sofer –
18,000.


III-6


ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT





The
following table sets forth, as of February 28, 2009, information regarding the
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of the Company's Common Stock based upon the most recent information
available to the Company for (i) each person known by the Company to own
beneficially more than five (5%) percent of the Company's outstanding Common
Stock, (ii) each of the Company's officers and directors and (iii) all officers
and directors of the Company as a group.  Unless otherwise indicated,
each stockholder's address is c/o the Company, 95 Rockwell Place, Brooklyn, New
York 11217.




Shares
      Owned Beneficially (1)Name
            No.
      of Shares
            
            %
      of ClassBarry
      Hertz (2)
            
            4,802,775
            
            
            56.
            6%Martin
      Kaye (3)
            
            97,680
            
            
            1.
            2%Stanley
      Stern (4)
            
            23,953
            
            
            *Albert
      Drillick (5)
            
            33,380
            
            
            *Abraham
      Biderman (6)
            
            18,000
            
            
            *E.
      Bruce Fredrikson (7)
            
            23,600
            
            
            *Philip
      Ort (6)
            
            18,000
            
            
            *Shaya
      Sofer (6)
            
            18,000
            
            
            *All
      Officers and Directors as a Group(seven
      persons)(8)
            
            232,613
            
            
            2.
            7%


---------------


* = less
than 1%


(1)
            Unless
      otherwise indicated, (i) each person has sole investment and voting power
      with respect to the shares indicated and (ii) the shares indicated are
      currently outstanding shares.  For purposes of this table, a
      person or group of persons is deemed to have "beneficial ownership" of any
      shares as of a given date which such person has the right to acquire
      within 60 days after such date.  For purposes of computing the
      percentage of outstanding shares held by each person or group of persons
      named above on a given date, any security which such person or persons has
      the right to acquire within 60 days after such date is deemed to be
      outstanding for the purpose of computing the percentage ownership of such
      person or persons, but is not deemed to be outstanding for the purpose of
      computing the percentage ownership of any other person.  Subject
      to the foregoing, the percentages are calculated based on 8,392,000 shares
      outstanding.





(2)
            Consists
      of 3,557,906 shares owned by Mr. Hertz, 1,025,880 shares owned by Trusts
      established in the names of Mr. Hertz’s children, 18,989 shares held by a
      family LLC managed by Mr. Hertz who owns 8% of such LLC and 100,000 shares
      owned by Rockwell Fulton Partners, LP, a partnership of which Mr. Hertz is
      the general partner.  Mr. Hertz disclaims beneficial interest in
      shares owned by the Trust and 92% of the family LLC not owned by him. Also
      includes 100,000 shares issuable upon the exercise of presently
      exercisable options under the Company’s Stock Option
  Plans.





(3)
            Consists
      of 7,680 shares owned of record and 90,000 shares issuable upon the
      exercise of presently exercisable options granted under the Company's
      Stock Option Plans.





(4)
            Consists
      of 9,953 shares owned of record and 14,000 shares issuable upon the
      exercise of presently exercisable options granted under the Company's
      Stock Option Plans.





(5)
            Consists
      of 30,220 shares owned of record jointly with his wife, 660 shares owned
      by a trust in the name of his child, and 2,500 shares issuable upon the
      exercise of presently exercisable options granted under the Company's
      Stock Option Plans.





(6)
            Consists
      of shares issuable upon the exercise of presently exercisable options
      granted under the Company’s Stock Option
Plans.





(7)
            Consists
      of 5,600 shares owned of record and 18,000 shares issuable upon the
      exercise of presently exercisable options granted under the Company's
      Stock Option Plans.





(8)
            Consists
      of 54,113 outstanding shares and 178,500 shares issuable upon exercise of
      options described in footnotes 3 through 7
  above.




III-7


Potential
Change in Control





Mr. Hertz has pledged approximately 3
million shares owned by him as collateral for the Company's arbitrage trading
program and 1.6 million shares in connection with certain family related
accounts.  A change in control could occur in the event Mr. Hertz lost
control of these pledged shares.





Equity
Compensation Plan Information





All equity compensation plans have been
approved by the Company's stockholders.


At
      December 31, 2008a)
            Number
      of securities to be issued upon exercise of outstandingoptions
            431,000b)
            Weighted-average
      exercise price of outstanding options
            $5.70c)
            Number
      of securities remaining available for future issuanceunder
      equity compensation plans (excluding securities reflectedin
      (a) above)
            1,001,000





ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE










In connection with the Company's
arbitrage trading program, the Company's Principal Stockholder pledged
approximately 3.0 million shares of his holdings of the Company's common stock
as additional collateral for the arbitrage trading accounts, of which 2.3
million shares were held as collateral as of December 31, 2008.  The
Company is paying its Principal Stockholder at the rate of 2% per annum on the
value of the collateral pledged.  Such payments aggregated $39,000 and
$39,000 for the years ended December 31, 2008 and 2007,
respectively.










In May,
2008, the Company made a non-interest bearing loan of $100,000 to a qualified
charitable organization, which the Company’s Principal Stockholder is a member
of its Board of Directors.  The loan is repayable in 25 consecutive
equal monthly installments of $4,000, which repayments commenced in June,
2008.  The balance at December 31, 2008 was $72,000.





The
Company had an employee savings program under which employees made deposits and
received interest at the prime rate. As of December 31, 2007, the Company’s
Chief Financial Officer (also Chief Executive Officer since March 16, 2007) had
deposits in the program of $583,000 and received interest of $8,000 and $44,000
during the years ended December 31, 2008 and 2007, respectively.  The
savings program was terminated on February 29, 2008 and the outstanding balance
was repaid.


III-8


On June
14, 2005, the SEC filed a civil complaint against Barry Hertz, the Company’s
Chairman and CEO at that time alleging violations of various provisions of the
federal securities laws in connection with certain transactions in the Company’s
stock owned by others. Mr. Hertz reached a settlement with the SEC regarding
these charges.   Mr. Hertz consented, without admitting or
denying the allegations in the SECs complaint, to a permanent injunction from
violations of Section 10(b) and 10b-5 of the Exchange Act and Section 17(a) of
the Securities Act of 1933, a two-year bar from serving as an officer or
director of a publicly traded company, a permanent bar from association with a
broker or dealer, with the right to apply for reinstatement after a two-year
period and also agreed to pay approximately $136,000 in disgorgement, interest
and civil penalties.  In May, 2007, the Board of Directors agreed to
reimburse Mr. Hertz under the indemnification provisions of Delaware law,
$75,000 for the disgorgement and interest portion of the amounts paid to the SEC
by him.





The
Company does not have any written policies and procedures for review, approval
or ratification of any transaction required to be reported as related party
transactions.  The Board of Directors determines in each matter, based
on their review of the transaction, whether to approve such
transaction.  The Board policy is to obtain approval of a majority of
the indendent directors and a majority of the entire
Board.  Continuing transactions will be reviewed
annually.





Corporate
Governance





The Board
of Directors has determined each of the following directors to be an
“independent director” as defined in Rule 4200(a)(15) of the listing standards
of the NASDAQ Stock Market: E. Bruce Fredrikson, Abraham Biderman, Phillip Ort
and Shaya Sofer.










The Board
of Directors does not have a Compensation Committee or a Nominating Committee.
In accordance with NASDAQ Stock Market’s Marketplace Rule 4200, a majority of
“independent” directors is required to recommend and approve the compensation of
executive officers.





ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit Fees.


The audit
fees for 2008 and 2007 were $168,000 and $164,000, respectively, for Marcum
& Kliegman LLP.  All services provided by independent accountants
were approved by the audit committee.





Audit Related Fees.


During
the fiscal years 2008 and 2007, Marcum & Kliegman LLP did not render audit
related services.





Tax
Fees.


Tax fees
consisted of representation on tax exams and preparation of tax returns. The
fees were $30,000 in 2008 and $31,000 in 2007 for Marcum & Kliegman
LLP.





All Other
Fees.


During
the fiscal years 2008 and 2007, Marcum & Kliegman LLP rendered no
professional services other than Audit and Tax matters.





Audit
Committee Pre-Approval Policies and Procedures.


The Audit
Committee is directly and solely responsible for oversight, engagement and
termination of any independent auditor employed by the Company for the purpose
of preparing or issuing an audit report or related work.


III-9


The
Committee:


Meets
with the independent auditor prior to the audit and discusses the planning and
staffing of the audit;





Approves
in advance the engagement of the independent auditor for all audit services and
non-audit services and approves the fees and other terms of any such
engagement;





Obtains
periodically from the independent auditor a formal written statement of the
matters required to be discussed by Statement of Auditing Standards No. 61, as
amended, and, in particular, describing all relationships between the auditor
and the Company; and





Discusses
with the auditor any disclosed relationships or services that may impact auditor
objectivity and independence.


III-10





PART
IV





ITEM
15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.





(a)
            1.
            Financial
      Statements. See Item 8. Index to Financial Statements.2.
            Financial
      Statement Schedules. Not applicable3.
            Exhibits
            
            Description3.1
            
            Certificate
      of Incorporation, as amended (1)3.2
            
            By-Laws
      (1)4.2
            
            Specimen
      of Common Stock certificate (1)10.1
            
            1994
      Stock Option Plan (1)10.2
            
            Form
      of indemnity agreement with directors (1)10.3
            
            Fully
      Disclosed Clearing Agreement with Penson Financial Services,
      Inc.,dated
      October 13, 2000 (2)10.4
            
            1995
      Stock Option Plan (3)10.5
            
            1995
      Disinterested Directors’ Stock Option Plan (4)10.6
            
            1996
      Stock Option Plan (5)10.7
            
            1998
      Stock Option Plan (6)10.8
            
            2001
      Stock Option Plan (7)10.9
            
            2002
      Stock Option Plan (8)10.10
            
            No
      Action Letter issued by Securities Exchange Commission dated June 28,
      2006to
      operate Track ECN (9)10.11
            
            Lease
      with Hertz Investors Group L.P. (10)23
            
            Consent
      of Marcum & Kliegman LLP filed herewith31
            
            Certification
      of Martin Kaye pursuant to Rule 13a-14(a) under the Securities Exchange
      Act of 1934.32
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
      ofthe
      Sarbanes-Oxley Act of 2002_ _
      _ _ _ _ _ _ _ _ _ _ _ _ _(1)
            Incorporated
      by reference to Exhibits 3.1, 3.2, 4.2, 10.3 and 10.4 to Form S-1
      Registration Statement No. 33-78570.(2)
            Incorporated
      by reference to Exhibit 10.3 to 10-K Annual Report for the year ended
      December 31, 2001(3)
            Incorporated
      by reference to Exhibit A to Definitive Proxy for August 10, 1995, Annual
      Meeting of Stockholders(4)
            Incorporated
      by reference to Exhibit B to Definitive Proxy for August 10, 1995, Annual
      Meeting of Stockholders(5)
            Incorporated
      by reference to Appendix A to Definitive Proxy for November 7, 1996,
      Annual Meeting of Stockholders(6)
            Incorporated
      by reference to Appendix A to Definitive Proxy for November 5, 1998,
      Annual Meeting of Stockholders(7)
            Incorporated
      by reference to Appendix A to Definitive Proxy for November 1, 2001,
      Annual Meeting of Stockholders(8)
            Incorporated
      by reference to Appendix A to Definitive Proxy for August 13, 2002, Annual
      Meeting of Stockholders(9)
            Incorporated
      by reference to Exhibit 10.10 to 10-Q Quarterly Report for the six months
      ended June 30, 2006(10)
            Incorporated
      by reference to Exhibit 10.11 to 10-K Annual Report for the year ended
      December 31, 2007.


IV -
1




SIGNATURES





In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.





TRACK
      DATA CORPORATIONBy
            /s/ Martin KayeMartin Kaye, Chief Executive Officer





In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.








Signature
            
            Title
            
            Date/s/
      Martin Kaye
            
            Chief
      Executive Officer, Chief
            
            March
      26, 2009Martin
      Kaye
            
            Financial
      Officer, Secretary and Director(principal
      Financial and Accounting Officer)/s/
      Stanley Stern
            
            Director
            
            March
      26, 2009Stanley
      Stern/s/
      Albert Drillick
            
            Director
            
            March
      26, 2009Albert
      Drillick/s/
      Abraham Biderman
            
            Director
            
            March
      26, 2009Abraham
      Biderman/s/
      E. Bruce Fredrikson
            
            Director
            
            March
      26, 2009E.
      Bruce Fredrikson/s/
      Philip Ort
            
            Director
            
            March
      26, 2009Philip
      Ort/s/
      Shaya Sofer
            
            Director
            
            March
      26, 2009Shaya
      Sofer