Restatement of Prior Years' Financial Statements

The Company has completed the previously announced restatement of its financial statements for the years ended December 31, 2003 and 2002 to be included in its 2004 Annual Report on Form 10-K with respect to its accounting for i) compensation expense attributable to stock options; and ii) deferred income taxes in connection with certain acquisitions.

The Company accounted for compensation expense attributable to stock options granted to certain employees and directors between 1993 and 2003 incorrectly as the intrinsic value of these stock options was calculated as of a date other than the measurement date. Correcting this error had the effect of increasing the net loss by $0.5 million and $2.0 million for the years ended December 31, 2003 and 2002, respectively; $9.8 million for prior years; and $0.1 million for the three months ended March 31, 2004. The Company accounted for deferred income taxes in connection with certain acquisitions incorrectly, whereby the Company did not correctly identify and account for the allocation of the deferred tax assets and liabilities acquired.

The net effect of the adjustments made to restate the Company's previously issued consolidated financial statements, with respect to the accounting described above, was for the Company to increase its total assets by $4.6 million, and increase its total liabilities and stockholders' equity by $4.6 million as of December 31, 2003.

First Quarter 2005 Financial Results

Revenue for the first quarter of 2005 was $23.7 million, up 17% from $20.3 million for the fourth quarter of 2004 and an increase of 39% from $17.1 million for the first quarter of 2004. The increase from the fourth quarter of 2004 was attributable to continued growth in transaction revenue and a strong performance in subscription revenue and capital sales in the NYFIX Network. Transaction revenue increased to $6.0 million, up 33% from $4.5 million in fourth quarter 2004. Subscription and service contract revenue increased to $12.3 million and $3.0 million, respectively, which represented increases of 16% and 3% from $10.6 million and $2.9 million in fourth quarter 2004, respectively. The net loss was $0.1 million ($0.00 per common share) for the first quarter of 2005 as compared to a net loss of $5.0 million ($0.16 per common share) for the fourth quarter of 2004.

Cash, cash equivalents and short-term investments were $23.6 million at March 31, 2005 as compared to $26.9 million at December 31, 2004. Accounts receivable was $16.0 million at March 31, 2005 as compared to $13.4 million at December 31, 2004. Cash used in operating activities was $1.5 million for the first quarter of 2005 as compared to cash provided by operating activities of $1.9 million in the first quarter of 2004 and as compared to $2.3 million in fourth quarter 2004. The reduction in cash from operating activities in the first quarter ended March 31, 2005 was a result of an increase in accounts receivable from the higher revenue generated and also from cash used for reducing accounts payable.


Fourth Quarter 2004 Financial Results

Revenue for the fourth quarter of 2004 was $20.3 million, an increase of 23% from $16.5 million for the fourth quarter of 2003 and an increase of 4% from $19.5 million for the third quarter of 2004. The net loss was $5.0 million ($0.16 per common share) for the fourth quarter of 2004 as compared to a net loss of $2.4 million ($0.08 per common share) for the fourth quarter of 2003 and a net loss of $23.5 million ($0.73 per common share) for the third quarter of 2004.

2004 Annual Financial Results

Revenue for the year ended December 31, 2004 was $75.1 million, an increase of 14% from $65.9 million for the year ended December 31, 2003. The net loss was $32.7 million ($1.02 per common share) for the year ended December 31, 2004 as compared to a net loss of $4.9 million ($0.16 per common share) for the year ended December 31, 2003.

In the third quarter of 2004 the Company recorded a non-cash, deferred tax asset valuation allowance of $22.4 million ($0.69 per common share) at September 30, 2004, in accordance with Statement of Financial Accounting Standards No. 109. In addition, the net loss was adversely impacted by a combination of higher than anticipated legal fees, initial Sarbanes-Oxley implementation costs, and other professional fees. Upon the achievement of profitability, the Company expects to utilize its net operating loss carryforwards and other tax credit carryforwards which are included in the deferred tax asset.

Cash, cash equivalents and short-term investments were $26.9 million at December 31, 2004 as compared to $24.5 million at December 31, 2003. Accounts receivable was $13.4 million at December 31, 2004 as compared to $10.4 million at December 31, 2003. Cash provided by operating activities was $7.1 million for the year ended December 31, 2004 as compared to $15.4 million for the year ended December 31, 2003.

In connection with its assessment of internal control over financial reporting, management of the Company concluded that, as of December 31, 2004, the Company did not maintain effective internal control over financial reporting, due to the following material weakness: NYFIX, Inc. did not design and implement adequate policies and procedures to review certain transactions for compliance with generally accepted accounting principles. The material weakness resulted in the misapplication of generally accepted accounting principles related to accounting for compensation expense attributable to stock options granted, a tenant allowance and the recognition of rent expense as of the lease commencement date contained in an operating lease, and deferred income taxes in connection with certain acquisitions. Management has subsequently remediated each of these internal control weaknesses and properly reflected the underlying transactions in the financial statements as of December 31, 2004.

NASDAQ Listing Status

On April 5, 2005, Nasdaq notified the Company that the Company was not in compliance with NASDAQ's listing requirements because the Company had not timely filed its Annual Report on Form 10-K for the year ended December 31, 2004. At a May 12, 2005 hearing with the NASDAQ Listing Qualifications Panel, the Company requested an extension to meet the NASDAQ listing requirements. On June 14, 2005, Nasdaq granted the Company's request for continued listing on the Nasdaq National Market, subject to the Company's filing its 2004 Form 10-K and its Report on Form 10-Q for the three months ended March 31, 2005 by June 30, 2005. The Company has filed its 2004 Form 10-K and first quarter 2005 Form 10-Q today and will request that NASDAQ dismiss the pending delisting action against the Company and permit the Company's common stock to resume trading on the Nasdaq National Market System under the symbol NYFX.

Guidance

The Company expects revenue for the second quarter of 2005 to be in the range of $24.0 million to $25.0 million. Second quarter earnings per common share are expected to be in the range of a net loss of $0.04 to breakeven.