form10072q.htm
 
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended June 30, 2007

Commission File Number 0-24634


TRACK DATA CORPORATION
(Exact name of registrant as specified in its charter)


DELAWARE
22-3181095
(State or other jurisdiction
(I.R.S. Employer
of incorporation)
Identification No.)


95 Rockwell Place
Brooklyn, NY 11217
(Address of principal executive offices)

(718) 522-7373
(Registrant's telephone number)


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 past 12 months (or 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 ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o                            Accelerated Filer o                                  Non-Accelerated Filer 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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of July 31, 2007, there were 8,392,000 shares of common stock outstanding.




     
PART I.  FINANCIAL INFORMATION
     
Item 1.
  
Financial Statements
     
   
See pages 2-13
     
Item 2.
  
Management's Discussion and Analysis of Financial Condition and Results of Operations
     
   
See pages 14 - 19
     
Item 3.
  
Quantitative and Qualitative Disclosures About Market Risk
     
   
See page 20
     
Item 4.
  
Controls and Procedures
     
   
See page 20
     
     
PART ll.  OTHER INFORMATION
     
   
See page 21


1

Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares)

 
June 30,
  
December 31,
   
 2007 
      
 2006 
  
                       
ASSETS
(unaudited)
  
(audited)
                       
CASH AND EQUIVALENTS
  
$
6,306
        
$
6,508
    
                       
ACCOUNTS RECEIVABLE – net of allowance for doubtful
                      
accounts of $212 in 2007 and $326 in 2006
    
1,634
          
1,277
    
                       
DUE FROM CLEARING BROKER
    
536
          
495
    
                       
DUE FROM BROKER
    
6,354
          
12,962
    
                       
MARKETABLE SECURITIES
    
13,479
          
8,757
    
                       
FIXED ASSETS - at cost (net of accumulated depreciation)
    
2,134
          
1,998
    
                       
EXCESS OF COST OVER NET ASSETS ACQUIRED– net
    
1,900
          
1,900
    
                       
OTHER ASSETS, including income taxes
    
1,458
          
951
    
                       
TOTAL
  
$
33,801
        
$
34,848
    
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY
                      
                       
LIABILITIES
                      
    Accounts payable and accrued expenses
  
$
4,186
        
$
3,928
    
    Note payable - bank
    
745
          
987
    
    Trading securities sold, but not yet purchased
    
4,915
          
6,102
    
    Net deferred income tax liabilities
    
777
          
528
    
    Other liabilities
    
1,028
          
870
    
                       
        Total liabilities
    
11,651
          
12,415
    
                       
COMMITMENTS AND CONTINGENCIES
                      
                       
STOCKHOLDERS’ EQUITY
                      
    Common stock - $.01 par value; 60,000,000 shares
                      
         authorized; issued and outstanding –8,392,000 shares
    
84
          
84
    
    Additional paid-in capital
    
10,183
          
10,183
    
    Retained earnings
    
11,267
          
11,923
    
    Accumulated other comprehensive income
    
616
          
243
    
                       
        Total stockholders’ equity
    
22,150
          
22,433
    
                       
TOTAL
  
$
33,801
        
$
34,848
    
                       




See notes to condensed consolidated financial statements
2

Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(in thousands, except earnings per share)
(unaudited)

                   
     
2007
      
2006
    
                   
SERVICE FEES AND REVENUE
                  
    Market Data Services
  
$
9,465
    
$
11,044
    
    ECN Services
    
4,030
      
7,769
    
    Broker-Dealer Commissions (includes
                  
         $51 in 2007 and $24 in 2006 from related party)
    
3,839
      
3,706
    
                   
        Total
    
17,334
      
22,519
    
                   
COSTS, EXPENSES AND OTHER:
                  
         Direct operating costs (includes depreciation and amortization
                  
of $324 and $296 in 2007 and 2006, respectively)
    
13,133
      
16,314
    
    Selling and administrative expenses (includes depreciation and
                  
amortization of $46 and $46 in 2007 and 2006, respectively)
    
5,482
      
5,417
    
    Rent expense – related party
    
315
      
315
    
    Marketing and advertising
    
131
      
139
    
    Gain on arbitrage trading
    
(637
)
    
(566
)
  
    Gain on sale of marketable securities – Innodata and Edgar Online
    
     -
      
(1,776
)
  
    Interest income
    
(268
)
    
(207
)
  
    Interest expense
    
270
      
191
    
                   
        Total
    
18,426
      
19,827
    
                   
(LOSS) INCOME BEFORE INCOME TAXES
    
(1,092
)
    
2,692
    
                   
INCOME TAXES (BENEFIT) EXPENSE
    
(436
)
    
1,077
    
                   
 NET (LOSS) INCOME  
$
 (656
)
    $
 1,615
    
                   
BASIC AND DILUTED NET (LOSS) INCOME PER SHARE
    
$(.08
)
    
$.19
    
                   
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    
8,392
      
8,378
    
                   
ADJUSTED DILUTIVE SHARES OUTSTANDING
    
8,392
      
8,378
    
                   

See notes to condensed consolidated financial statements
3

Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2007 AND 2006
(in thousands, except earnings per share)
(unaudited)

                   
     
2007
      
2006
    
SERVICE FEES AND REVENUE
                  
     Market Data Services
  
$
4,490
    
$
5,499
    
     ECN Services
    
1,826
      
4,568
    
     Broker-Dealer Commissions (includes $27 in 2007
                  
           and $24 in 2006 from related party)
    
1,870
      
1,928
    
                   
                    Total
    
8,186
      
11,995
    
                   
COSTS, EXPENSES AND OTHER:
                  
     Direct operating costs (includes depreciation and amortization
                  
         of $162 and $154 in 2007 and 2006, respectively)
    
6,212
      
8,960
    
     Selling and administrative expenses (includes depreciation and
                  
        amortization of $23 and $23 in 2007 and 2006, respectively)
    
2,713
      
2,643
    
     Rent expense – related party
    
158
      
158
    
     Marketing and advertising
    
84
      
107
    
     Gain on arbitrage trading
    
(153
)
    
(309
)
  
     Gain on sale of marketable securities – Innodata and Edgar Online
    
  -
      
(1,088
)
  
     Interest income
    
(136
)
    
(102
)
  
     Interest expense
    
122
      
102
    
                   
                    Total
    
9,000
      
10,471
    
                   
 (LOSS) INCOME BEFORE INCOME TAXES
    
(814
)
    
1,524
    
                   
INCOME TAXES (BENEFIT) EXPENSE
    
(325
)
    
610
    
                   
NET (LOSS) INCOME
  
$
(489
)
  
$
914
    
                   
BASIC AND DILUTED NET (LOSS) INCOME PER SHARE
    
$(.06
)
    
$.11
    
                   
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    
8,392
      
8,377
    
                   
ADJUSTED DILUTIVE SHARES OUTSTANDING
    
8,392
      
8,377
    
                   




See notes to condensed consolidated financial statements
4


Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS
SIX MONTHS ENDED JUNE 30, 2007
(in thousands)
(unaudited)

                                                                                   
                                               
Accumulated
                  
   
Number
              
Additional
      
Other
  
Stock-
  
Compre-
  
   
of
  
Common
  
Paid-in
  
Retained
  
Comprehensive
  
holders’
  
hensive
  
   
Shares
  
Stock
  
Capital
  
Earnings
  
Income
  
Equity
  
Loss
  
                                                                                   
 BALANCE,                                                                                  
    JANUARY 1, 2007
    
8,392
      
$
84
        
$
10,183
        
$
11,923
        
$
243
        
$
22,433
                  
                                                                                   
   Net loss
                                      
(656
)
                    
(656
)
      
$
 (656
)
    
                                                                                   
Unrealized gain on marketable securities
                                                                                 
       - net of taxes
                                                  
374
          
374
          
374
      
                                                                                   
   Foreign currency                                                                                  
        translation                                                                                  
         adjustment
                                                  
(1
)
        
(1
)
        
(1
)
    
                                                                                   
 Comprehensive loss
                                                                        
$
(283
)
    
                                                                                   
 BALANCE,                                                                                  
    JUNE 30, 2007
    
8,392
      
$
84
        
$
10,183
        
$
11,267
        
$
616
        
$
22,150
                  
                                                                                   

See notes to condensed consolidated financial statements
5


Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(in thousands)
(unaudited)
                   
     
2007
      
2006
    
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
     Net (loss) income
  
$
(656
)
  
$
1,615
    
     Adjustments to reconcile net (loss) income to net cash provided by
                  
        operating activities:
                  
          Depreciation and amortization
    
370
      
342
    
          Gain on sale of Innodata and Edgar Online common stock
    
    -
      
(1,776
)
  
          Other
    
    -
      
2
    
          Changes in operating assets and liabilities:
                  
                Accounts receivable and due from clearing broker
    
(398
)
    
(1,204
)
  
                Due from broker
    
6,608
      
1,905
    
                Marketable securities
    
(4,099
)
    
674
    
                Other assets
    
(488
)
    
432
    
                Accounts payable and accrued expenses
    
258
      
646
    
                Trading securities sold, but not yet purchased
    
(1,187
)
    
(2,758
)
  
                Other liabilities, including deferred income taxes
    
22
      
217
    
                   
                    Net cash provided by operating activities
    
430
      
95
    
                   
CASH FLOWS FROM INVESTING ACTIVITIES:
                  
     Purchase of fixed assets
    
(526
)
    
(539
)
  
     Investment in private company
    
    -
      
(150
)
  
     Proceeds from sale of Innodata and Edgar Online common stock
    
    -
      
1,785
    
                   
                    Net cash (used in) provided by investing activities
    
(526
)
    
1,096
    
                   
CASH FLOWS FROM FINANCING ACTIVITIES:
                  
     Net payments of note payable - bank
    
(242
)
    
(46
)
  
     Net proceeds on loans from employee savings program
    
137
      
84
    
     Purchase of treasury stock
    
    -
      
(20
)
  
                   
                    Net cash (used in) provided by financing activities
    
(105
)
    
18
    
                   
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH
    
(1
)
    
(3
)
  
                   
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS
    
(202
)
    
1,206
    
                   
CASH AND EQUIVALENTS, BEGINNING OF PERIOD
    
6,508
      
4,469
    
                   
CASH AND EQUIVALENTS, END OF PERIOD
  
$
6,306
    
$
5,675
    
                   
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                  
     Cash paid for:
                  
          Interest
  
$
270
    
$
191
    
          Income taxes
    
67
      
293
    

See notes to condensed consolidated financial statements
6

Track Data Corporation and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(unaudited)


1.
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position as of June 30, 2007, and the results of operations for the three and six month periods ended June 30, 2007 and 2006 and cash flows for the six months ended June 30, 2007 and 2006.  The results of operations for the six months ended June 30, 2007 are not necessarily indicative of results that may be expected for any other interim period or for the full year.

These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2006 included in the Company’s Annual Report on Form 10-K. The accounting policies used in preparing these financial statements is the same as those described in the December 31, 2006 financial statements.


2.
The Company charges all costs incurred to establish the technological feasibility of a product or product enhancement to research and development expense. Research and development expenses, included in direct operating costs, were approximately $81,000 and $80,000 for the six months and $40,000 and $40,000 for the three months ended June 30, 2007 and 2006, respectively.


3.
Marketable securities consists of the following (in thousands):

                         
   
June 30,
  
December 31,
       
2007
          
2006
    
 
Innodata - Available for sale securities - at market
  
$
1,353
        
$
730
    
 
Arbitrage trading securities - at market
    
12,126
          
8,027
    
 
Marketable securities
  
$
13,479
        
$
8,757
    
 
Arbitrage trading securities sold but not yet purchased – at market
  
$
4,915
        
$
6,102
    

During the year ended December 31, 2006, the Company sold its remaining 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. The Company received proceeds of $1,771,000 and recorded a gain of $1,766,000 during the six months ended June 30, 2006.

The Company owns 337,898 shares of Innodata, a provider of digital content outsourcing services.  The Company carries the investment at $1,353,000 the market value at June 30, 2007.  The difference between the cost of $324,000 and fair market value of these securities, net of $412,000 in deferred taxes, or $617,000 is classified as a component of accumulated other comprehensive income included in stockholders’ equity as of June 30, 2007.  At December 31, 2006, the Company owned 337,898 shares of Innodata.  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 sold 3,500 shares, received proceeds of $14,000 and recorded a gain of $10,000 during the six months ended June 30, 2006.

7
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.

As of June 30, 2007, trading securities had a long market value of $12,126,000 with a cost of $12,076,000 or a net unrealized gain of $50,000. Securities sold but not yet purchased, had a short market value of $4,915,000 with a cost/short proceeds of $4,816,000, or a net unrealized loss of $99,000.  The Company expects that its June 30, 2007 positions will be closed during the third quarter of 2007 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 1.3 million shares of his holdings in the Company's common stock as collateral for these accounts.  These shares were removed in July 2007 and may be repledged at a later date.  The Company is paying its Principal Stockholder at the rate of 2% per annum on the value of the collateral pledged.  Such payments aggregated $20,000 and $19,000 for the six months and $9,000 and $11,000 for the three months ended June 30, 2007 and 2006, respectively.

The Company recognized gains from arbitrage trading of $637,000 and $566,000 for the six months ended June 30, 2007 and 2006, respectively. The Company recognized gains from arbitrage trading of $153,000 and $309,000 for the three months ended June 30, 2007 and 2006, respectively.

At December 31, 2006, trading securities had a long market value of $8,027,000 with a cost of $8,013,000, or a net unrealized gain of $14,000.  Securities sold but not yet purchased, had a short market value of $6,102,000 with a cost/short proceeds of $6,102,000.

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 Track Data 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.

4.
The Company has a line of credit with a bank up to a maximum of $3 million.  The line is collateralized by the assets of the Company and is guaranteed by its Principal Stockholder.  Interest is charged at 1.75% above the bank’s prime rate (11% at June 30, 2007) and is due on demand.  The Company may borrow up to 80% of eligible market data service receivables as defined, and is required to maintain a compensating balance of 10% of the outstanding loans.  At June 30, 2007, the Company had borrowings of $745,000 under the line.  Additional borrowings available on the line of credit at June 30, 2007 were $129,000 based on these formulas.

8
5.
Earnings (Loss) Per Share--Basic earnings (loss) per share is computed based on the weighted average number of common shares outstanding without consideration of potential common stock equivalents.  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, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the period. For the three and six months ended June 30, 2007 and 2006, the Company had 685,000 and 1,260,000 stock options outstanding, respectively, that were not included in the dilutive calculation because the effect on earnings (loss) per share is antidilutive.

 (Loss) earnings per share (in thousands, except per share):
                                 
   
Three Months Ended
  
Six Months
Ended
  
     
June 30,
      
June 30,
  
     
2007
      
2006
      
2007
      
2006
  
Net (loss) income
  
$
(489
)
  
$
914
    
$
(656
)
  
$
1,615
  
                                 
Weighted average common shares outstanding
    
8,392
      
8,377
      
8,392
      
8,378
  
Dilutive effect of outstanding options
    
  -
      
  -
      
  -
           -  
Adjusted for dilutive computation
    
8,392
      
8,377
      
8,392
      
8,378
  
                                 
Basic (loss) income per share
    
$(.06
)
    
$.11
      
$(.08
)
    
$.19
  
                                 
Diluted (loss) income per share
    
$(.06
)
    
$.11
      
$(.08
)
    
$.19
  

6.
At June 30, 2007, the Company had seven stock-based employee compensation plans of which there were outstanding awards exercisable into 685,000 shares of common stock. No stock-based employee compensation cost is reflected in the statement of operations, as there was no vesting of outstanding stock option awards in 2006 or 2007.

The Company accounts for employee stock-based compensation in accordance with SFAS 123(R), “Share-Based Payment.” The requirements of SFAS 123(R) result in compensation charges to the Company’s statement of operations for the fair value of options granted to employees. At December 31, 2005, all of the Company's outstanding stock options were fully vested and the Company made no option grants since December 31, 2005.

7.
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. (“TDSC”), a registered securities broker-dealer and member of the National Association of Securities Dealers, Inc (“NASD”).  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 Pro, 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) 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. See Note 3.

The accounting policies of the segments are the same as those described in Note A, Summary of Significant Accounting Policies in the Company’s financial statements for the year ended December 31, 2006 included in Form 10-K.  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.  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 $1,900,000, net of accumulated amortization of $2,494,000 as of June 30,  2007 and December 31, 2006. The Company's business is predominantly in the U.S.  Revenues and net income from international operations are not material.

9
Information concerning operations in its business segments is as follows (in thousands):
                                 
     
Three Months
      
Six Months
  
     
Ended June 30,
      
Ended June 30,
  
     
2007
      
2006
      
2007
      
2006
  
Revenues
                                
     Professional Market
  
$
5,305
    
$
8,712
    
$
11,412
    
$
16,161
  
     Non-Professional Market
    
2,881
      
3,283
      
5,922
      
6,358
  
Total Revenues
  
$
8,186
    
$
11,995
    
$
17,334
    
$
22,519
  
                                 
Arbitrage Trading – gain on sale
                                
     of marketable securities
  
$
153
    
$
309
    
$
637
    
$
566
  
(Loss) income before unallocated
                                
amounts and income taxes:
                                
     Professional Market
  
$
(980
)
  
$
(422
)
  
$
(1,854
)
  
$
(476
)
     Non-Professional Market
    
214
      
775
      
587
      
1,247
  
     Arbitrage Trading (including interest)
    
120
      
254
      
518
      
474
  
Unallocated amounts:
                                
Depreciation and amortization
    
(185
)
    
(177
)
    
(370
)
    
(342
)
Gain on sale of Innodata and Edgar Online
                                
  common stock
    
  -
      
1,088
      
     -
      
1,776
  
Interest income, net
    
17
      
     6
      
27
      
13
  
                                 
 (Loss) income before income taxes
  
$
(814
)
  
$
1,524
    
$
 (1,092
)
  
$
2,692
  
                                 

8.
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 contracted obligations and the Company has to purchase or sell the financial instrument underlying the obligation at a loss.

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 June 30, 2007, the Company had $15 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 contingent liability in the condensed consolidated financial statements.

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.

10
9.
Net Capital Requirements -- The Securities and Exchange Commission (“SEC”), NASD, 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 June 30, 2007, TDSC was required to maintain minimum net capital, in accordance with SEC rules, of $1 million and had total net capital of $4,400,000, or approximately $3,400,000 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 the NASD 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 and the NASD. In the past, certain reviews have resulted in the Company incurring fines and required the Company to change certain of its internal controls and operating procedures. In April 2007, the Company settled one such review by the NASD for $185,000 which was accrued at December 31, 2006.  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.

10.     Comprehensive (loss) income is as follows (in thousands):
                                       
 
Three Months Ended
  
Six Months
Ended
   
June 30,
      
June 30,
  
   
2007
  
2006
      
2007
  
2006
  
Net (loss) income
  
$
(489
)
  
$
914
        
$
(656
)
  
$
1,615
    
Unrealized (loss) gain on marketable
                                      
     securities-net of taxes
    
228
      
(96
)
        
374
      
311
    
Reclassification adjustment for
                                      
     gain on marketable securities
                                      
     - net of taxes
    
-
      
(772
)
        
-
      
(944
)
  
Foreign currency translation adjustment
    
(1
)
    
 -
          
(1
)
    
  -
    
Comprehensive (loss) income
  
$
(262
)
  
$
46
        
$
(283
)
  
$
982
    
 
11.
The Company leases its executive office facilities in Brooklyn from a limited partnership owned by the Company’s Principal Stockholder and members of his family.  The Company paid the partnership rent of $158,000 for each of the three months and $315,000 for each of the six months ended June 30, 2007 and 2006, respectively.  The lease provided for the Company to pay $630,000 per annum through April 1, 2006.  The Company is presently paying at the same rate without a new lease. This lease is expected to be renewed for another one-year period.

11
12.
From time to time 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.

13.
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 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 June 30, 2007 and December 31, 2006.

14.
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 of $27,000 and $24,000 for the three months and $51,000 and $24,000 for the six months ended June 30, 2007 and 2006, respectively.

15.
The Company has an employee savings program under which employees may make deposits and receive interest at the prime rate. As of June 30, 2007, the Company’s CEO/CFO had savings in the program of $561,000 and received interest of $11,000 and $21,000 during the three and six months ended June 30, 2007, respectively.  Amounts due to employees under the program aggregated $883,000 which is included in other liabilities at June 30, 2007.

16.
In April 2007, the Company entered into an agreement with EuroECN S.A. ("EURO"), a Luxembourg based company that intends to develop and operate an electronic trading system for the European market.  EURO has not as yet commenced operations.  The agreement provides for the Company to sell its ECN matching engine software to EURO for its exclusive use in the European market in exchange for $250,000 cash and an initial 8% equity position in EURO.  The equity interest is non-dilutable to less than 5%.  EURO has not made the payments required in the agreement and the Company has not delivered the software.  The Company views the non-payment as a termination of the agreement by EURO, although the Company may agree to amend this arrangement at a later date.  The Company has not recorded this transaction and has been unsuccessful in its efforts to contact EURO.

17.
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 in March, 2007 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 two-year bar from association with a broker or dealer, 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.

12
18.
The Company has adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"), on January 1, 2007.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement 109, "Accounting for Income Taxes," and 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 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company has identified its federal tax return and its state tax return in New York as "major" tax jurisdictions, as defined.  Based on the Company's evaluation, it has been 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 2001 through 2006, 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.  In addition, the Company did not record a cumulative effect adjustment related to the adoption of FIN 48.

The Company's policy for recording interest and penalties associated with audits 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 six months ended June 30, 2007, penalties and interest related to the settlements of audits was insignificant.

13

Disclosures in this Form 10-Q 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-Q 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.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Business

Track Data Corporation (the “Company”) is a Delaware corporation that was formed in 1981. The Company maintains offices in the U.S. and Europe, with executive offices located at 95 Rockwell Place, Brooklyn, New York 11217. Its telephone number is 212-943-4555 or 718-522-7373.

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. ("TDSC"), a registered securities broker-dealer and member of the National Association of Securities Dealers, Inc.  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 Pro, 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) 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.

14
Relevant Factors

The Company's Professional Market segment 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 2007.  One customer, with monthly revenues of approximately $90,000, cancelled a customized market data service in March, 2007.  Despite the addition of new subscribers to Track ECN, the Company has not been able to significantly increase revenues.  Profit margins are very low in this business and significant volume is necessary to have an impact on the results of operations.  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 orders on the National Stock Exchange. This change has resulted in significantly lower revenues.  Recently, Track ECN has experienced increases in its business although it has not reached the revenue levels it achieved on Nasdaq. In addition, revenues were reduced in the second quarter of 2007 by a new regulation that limited ECN charges for trading of stocks under $1.00.  The Company commenced self-clearing of its ECN business at the end of the third quarter of 2005 in an effort to decrease costs associated with ECN revenues.  Although TDSC has approval from NASD-R for “clearing” of its Track ECN business, it is a limited approval for it to submit two sided trade data respecting trades which were executed by broker-dealers on the Track ECN.  TDSC submits this data to the National Securities Clearing Corporation so that the actual trading counterparties can compare, clear and settle their trades and, except in the case of a rare error, TDSC “drops out” of the clearing process.  This effort to "self-clear" was a step to reduce costs of having a third party handle this function.

The Non-Professional Market segment revenues have been inconsistent month to month but have been down overall when compared to the same periods in the prior year.  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.

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 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.

15
Results of Operations

Three Months Ended June 30, 2007 and 2006

Revenues for the three months ended June 30, 2007 and 2006 were $8,186,000 and $11,995,000, respectively, a decrease of 32%.  The Company’s Professional Market segment had revenues for the three months ended June 30, 2007 and 2006 of $5,305,000 and $8,712,000 respectively, a decrease of 39% for this segment.  The Company’s Non-Professional Market segment had revenues of $2,881,000 and $3,283,000, respectively, for the three months ended June 30, 2007 and 2006, a decrease of 12% for this segment.  The decrease in revenues was principally attributable to the Company’s Track ECN which revenues decreased approximately $2.7 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.  In addition, ECN revenues were reduced by a new regulation that limited the charges for trading of stocks priced under $1.00.  ECN revenues have been increasing recently, although not to levels experienced on Nasdaq. 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 2007, negatively impacting revenues and profits.  One customer, with monthly revenues of approximately $90,000, cancelled a customized market data service in March, 2007.

Direct operating costs were $6,212,000 for the three months ended June 30, 2007 and $8,960,000 for the similar period in 2006, a decrease of 31%.  Direct operating costs as a percentage of revenues were 76% in 2007 and 75% in 2006.  Without giving effect to unallocated depreciation, amortization expense and costs directly allocated to the Arbitrage segment, the Company’s Professional Market segment had $4,265,000 and $7,033,000 of direct costs for the three months ended June 30, 2007 and 2006, respectively, a decrease of 39%.   Direct operating costs as a percentage of revenues for the Professional segment were 80% in 2007 and 81% in 2006.  The dollar decrease is due principally to the decreased ECN and market data revenues. The Company’s Non-Professional Market segment had $1,755,000 and $1,724,000 in direct costs for the three months ended June 30, 2007 and 2006, respectively, an increase of 2%.  Direct operating costs as a percentage of revenues for the Non-Professional segment were 61% in 2007 and 53% in 2006. 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.

Selling and administrative expenses were $2,713,000 and $2,643,000 in the 2007 and 2006 periods, respectively, an increase of 3%.  Selling and administrative expenses as a percentage of revenues was 33% in 2007 and 22% in 2006.  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 $1,873,000 and $1,911,000 in the 2007 and 2006 periods, respectively, a decrease of 2%.  For the Professional Market segment selling and administrative expenses as a percentage of revenues was 35% in 2007 and 22% in 2006.  Selling and administrative expenses for the Non-Professional segment were $817,000 and $709,000 in the 2007 and 2006 periods, respectively, an increase of 15%.  For the Non-Professional segment selling and administrative expense as a percentage of revenue was 28% in 2007 and 22% in 2006.  Certain selling and administrative expenses are allocated to each segment based on revenues.

The Professional Market segment realized a loss of $980,000 in 2007 compared to a loss of $422,000 before unallocated amounts and income taxes in 2006.  The Non-Professional Market segment realized income of $214,000 in 2007 and $775,000 in 2006 before unallocated amounts and income taxes. The Arbitrage segment realized income of $120,000 in 2007 compared to $254,000 in 2006 before unallocated amounts and income taxes.

In 2006, the Company recognized a gain of $1,088,000 from the sale of shares of Innodata and Edgar Online common stock.

16
Net interest income in 2007 was $14,000 compared to net interest expense of $0 in 2006. The increase in interest income in 2007 is due principally to reduced 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 taxes of $814,000 in the 2007 period compared to income before taxes of $1,524,000 in 2006.

The Company realized a net loss of $489,000 in 2007 compared to net income of $914,000 in 2006.

Six Months Ended June 30, 2007 and 2006

Revenues for the six months ended June 30, 2007 and 2006 were $17,334,000 and $22,519,000, respectively, a decrease of 23%.  The Company’s Professional Market segment had revenues for the six months ended June 30, 2007 and 2006 of $11,412,000 and $16,161,000, respectively, a decrease of 29% for this segment.  The Company’s Non-Professional Market segment had revenues of $5,922,000 and $6,358,000, respectively, for the six months ended June 30, 2007 and 2006, a decrease of 7% for this segment. The decrease in revenues was principally attributable to the Company’s Track ECN which revenues decreased approximately $3.7 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.  ECN revenues have been increasing recently, although not to levels experienced on Nasdaq. Market data revenues decreased approximately $1.5 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 2007, negatively impacting revenues and profits.  One customer, with monthly revenues of approximately $90,000, cancelled a customized market data service in March, 2007.

Direct operating costs were $13,133,000 for the six months ended June 30, 2007 and $16,314,000 for the similar period in 2006, a decrease of 19%.  Direct operating costs as a percentage of revenues were 76% in 2007 and 72% in 2006.  Without giving effect to unallocated depreciation, amortization expense and costs directly allocated to the Arbitrage segment, the Company’s Professional Market segment had $9,264,000 and $12,547,000 of direct costs for the six months ended June 30, 2007 and 2006, respectively, a decrease of 26%.   Direct operating costs as a percentage of revenues for the Professional segment were 81% in 2007 and 78% in 2006.  The dollar decrease is due principally to the decreased ECN and market data revenues. The Company’s Non-Professional Market segment had $3,455,000 in 2007 and $3,375,000 in direct costs for the six months ended June 30, 2007 and 2006, respectively, an increase of 2%.  Direct operating costs as a percentage of revenues for the Non-Professional segment were 58% in 2007 and 53% in 2006.  Certain direct operating costs are allocated to each segment based on revenues.

Selling and administrative expenses were $5,482,000 and $5,417,000 in the 2007 and 2006 periods, respectively, an increase of 1%.  Selling and administrative expenses as a percentage of revenues was 32% in 2007 and 24% in 2006.  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 $3,737,000 and $3,784,000 in the 2007 and 2006 periods, respectively, a decrease of 1%.  For the Professional Market segment selling and administrative expenses as a percentage of revenues was 33% in 2007 and 23% in 2006.  Selling and administrative expenses for the Non-Professional segment were $1,699,000 and $1,587,000 in the 2007 and 2006 periods, respectively, an increase of 7%.  For the Non-Professional segment selling and administrative expense as a percentage of revenue was 29% in 2007 and 25% in 2006.  Certain selling and administrative expenses are allocated to each segment based on revenues.

17
The Professional Market segment realized a loss of $1,854,000 in 2007 compared to a loss of $476,000 before unallocated amounts and income taxes in 2006.  The Non-Professional Market segment realized income of $587,000 in 2007 and $1,247,000 in 2006 before unallocated amounts and income taxes. The Arbitrage segment realized income of $518,000 in 2007 compared to income of $474,000 in 2006 before unallocated amounts and income taxes.

In 2006, the Company recognized a gain of $1,776,000 from the sale of shares of Innodata and Edgar Online common stock.

Net interest expense in 2007 was $2,000 compared to net interest income of $16,000 in 2006. The decrease in interest income 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 taxes of $1,092,000 in the 2007 period compared to income before taxes of $2,692,000 in 2006.

The Company realized a net loss of $656,000 in 2007 compared to net income of $1,615,000 in 2006.

Liquidity and Capital Resources

During the six months ended June 30, 2007, cash provided by operating activities was $430,000 compared to $95,000 in 2006.  The increase in 2007 was principally due to decreased receivables. Cash flows used in investing activities in 2007 were $526,000 compared to cash provided by investing activities of $1,096,000 in 2006.  The decrease was due principally to sales of Innodata and Edgar Online common stock in 2006. Cash flows used in financing activities were $105,000 in 2007 compared to cash provided by financing activities of $18,000 in 2006. The decrease was due to repayment of bank obligations in 2007.

The Company has a line of credit with a bank up to a maximum of $3 million.  The line is collateralized by the assets of the Company and is guaranteed by its Principal Stockholder.  Interest is charged at 1.75% above the bank’s prime rate and is due on demand.  The Company may borrow up to 80% of eligible market data service receivables as defined, and is required to maintain a compensating balance of 10% of the outstanding loans.  At June 30, 2007, the Company had borrowings of $745,000 under the line.  Additional borrowings available on the line of credit at June 30, 2007 were $129,000 based on these formulas.

The Company has significant positions in stocks and options and receives significant proceeds from the sale of trading securities sold but not yet purchased under the arbitrage trading strategy described in Note 3 of Notes to the accompanying Condensed Consolidated Financial Statements.  The Company expects that its June 30, 2007 positions will be closed during the third quarter of 2007 and that other positions with the same strategy will be established.  The level of trading activity is partially dependent on the value of the shares of Track Data pledged by its Principal Stockholder and Innodata common stock that is held as collateral.

In November, 2005, the Board authorized the purchase of up to 1 million shares of the Company’s common stock from time to time in market purchases or in negotiated transactions.  Since that authorization, the Company purchased 6,000 shares of its common stock in 2006 at a cost of $20,000. No major capital expenditures are anticipated beyond the normal replacement of equipment and additional equipment to meet customer requirements.  The Company believes that borrowings available under the Company’s line of credit, its present cash position, including cash available in its Arbitrage trading, and any cash that may be generated from operations are sufficient for the Company’s cash requirements for the next 12 months.

18
The Company’s broker-dealer subsidiary, TDSC, is subject to a minimum net capital requirement of $1 million by the NASD.  TDSC operations are subject to reviews by regulators within its industry, which include the SEC and the NASD.  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.

From time to time the Company is subject to legal proceedings and claims that 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.

Off Balance Sheet Risk

In connection with the Company's broker-dealer operations, certain customer securities activities are transacted on a margin basis.  The Company's clearing broker extends credit to the Company's customers, subject to various regulatory margin requirements, collateralized by cash and securities in the customers' accounts.  In the event of a decline in the market value of the securities in a margin account, the Company is required to either obtain additional collateral from the customer 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.  The Company and its clearing broker seek to control the risks associated with customer activities by monitoring required margin levels daily and, pursuant to such guidelines, requiring the customer to deposit additional collateral or to reduce positions when necessary.  At June 30, 2007, the Company had $15 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 contingent liability in the Condensed Consolidated Financial Statements.

Contractual Obligations and Commitments

In connection with the Company's broker-dealer operations, certain customer securities activities are transacted on a margin basis.  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.

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.


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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to interest rate change market risk with respect to its credit facility with a financial institution, which is priced based on the prime rate of interest. At June 30, 2007, there was $745,000 outstanding under the credit facility. Changes in the prime interest rate during fiscal 2007 will have a positive or negative effect on the Company's interest expense. Such exposure will increase should the Company maintain higher levels of borrowing during 2007.

The Company has significant positions in stocks and options and receives significant proceeds from the sale of trading securities sold but not yet purchased under the arbitrage trading strategy described in Note 3 of Notes to the accompanying Condensed Consolidated Financial Statements.  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. Such exposure will increase should the Company maintain higher levels of borrowing.  The level of trading in the arbitrage trading account is partially dependent on the 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.  If the stock collateral is not available, the Company will decrease its trading or seek additional collateral.

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 contracted obligations and the Company has to purchase or sell the financial instrument underlying the obligation at a loss.  At June 30, 2007, the Company had $15 million in margin credit extended to its customers.

ITEM 4.  CONTROLS AND PROCEDURES

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 June 30, 2007 (“Evaluation Date”). Based on such evaluation, our Chief Executive Officer, Chief Financial Officer has concluded that, as of the Evaluation Date, the disclosure controls and procedures are reasonably designed and effective to ensure that (i) information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
20
 
                                           
 
PART II.
  
OTHER INFORMATION
    
                                           
 
Item 1.
  
Legal Proceedings. Not Applicable
    
                                           
 
Item 1a.
  
Risk Factors.  There were no material changes from Risk Factors disclosed in the Company’s Form 10-K for the year ended December 31, 2006.
    
                                           
 
Item 2.
  
Unregistered Sales of Equity Securities and Use of Proceeds.
    
                                           
                         
Total Number
            
                         
of Shares
            
         
Number of
          
Purchased as
  
Maximum Number
    
         
Shares of
  
Average
  
Part of
  
of Shares That May
    
     
Period
  
Common Stock
  
Price Paid
  
Publicly
  
Yet be Purchased
    
     
Purchased
  
Purchased
  
Per Share
  
Announced Plans
  
Under the Plans
    
                                           
     
April, 2007
                                    
                                           
     
May, 2007
                                    
                                           
     
June, 2007
                                    
                                           
     
Total
    
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 privately negotiated transactions from time to time.
    
                                           
 
Item 3.
  
Defaults upon Senior Securities. Not Applicable
    
                                           
 
Item 4.
  
Submission of Matters to a Vote of Security Holders. Not Applicable
    
                                           
 
Item 5.
  
Other Information. Not Applicable
    
                                           
 
Item 6.
  
Exhibits
                                    
                                           
     
31
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 of the Sarbanes-Oxley Act of 2002
  

21

 
SIGNATURES

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


TRACK DATA CORPORATION

       
Date:
8/13/07
  
/s/  Martin Kaye
     
 Martin Kaye
     
Chief Executive Officer
     
Principal Financial Officer