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UNITED STATES 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 September 30, 2004

Commission file number 0-28191


eSpeed, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-4063515
(State or Other Jurisdiction of
Incorporation or
Organization)		 (I.R.S. Employer
Identification
No.)
135 East 57th Street
(Address of Principal Executive Offices)
New York, New York 10022
(City, State, Zip Code)
(212) 938-5000
(Registrant's Telephone Number, Including Area Code)

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 12 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 [X]        No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X]        No [ ]

As of November 3, 2004, the registrant had 32,486,156 shares of Class A common stock, $0.01 par value, and 23,889,270 shares of Class B common stock, $0.01 par value, outstanding.



eSpeed, Inc. and Subsidiaries
Quarterly Report on Form 10-Q

TABLE OF CONTENTS

PART I. — FINANCIAL INFORMATION


  Page
ITEM 1.    Financial Statements
Condensed Consolidated Statements of Financial Condition:
September 30, 2004 (unaudited) and December 31, 2003		   3  
Condensed Consolidated Statements of Income (unaudited):
Three Months Ended September 30, 2004 and September 30, 2003		   4  
Condensed Consolidated Statements of Income (unaudited):
Nine Months Ended September 30, 2004 and September 30, 2003		   5  
Condensed Consolidated Statements of Cash Flows (unaudited):
Nine Months Ended September 30, 2004 and September 30, 2003		   6  
Notes to Condensed Consolidated Financial Statements (unaudited)    7  
ITEM 2.    Management's Discussion and Analysis of Financial Condition
and Results of Operations		   21  
ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk   33  
ITEM 4.    Controls and Procedures    34  
PART II. — OTHER INFORMATION
ITEM 1.    Legal Proceedings   35  
ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds    35  
ITEM 4.    Submission of Matters to a Vote of Security Holders    36  
ITEM 6.    Exhibits   36  
  Signatures   36  
  Exhibit Index   37  

2



PART I.    FINANCIAL INFORMATION

ITEM 1.    Financial Statements

eSpeed, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)


  September 30, 2004 December 31, 2003
  (Unaudited)  
Assets            
Cash & cash equivalents $ 37,116   $ 55,318  
Reverse repurchase agreements with related parties   185,951     173,182  
Total cash and cash equivalents   223,067     228,500  
Fixed assets, net   46,568     34,467  
Investments   12,394     11,449  
Intangible assets, net   18,906     18,927  
Receivable from related parties   1,218     1,518  
Other assets   2,460     2,707  
Total assets $ 304,613   $ 297,568  
Liabilities and Stockholders' Equity            
Liabilities:            
Payable to related parties $ 3,416   $ 6,323  
Accounts payable and accrued liabilities   30,209     19,560  
Total liabilities   33,625     25,883  
 
Commitments and contingencies (Note 12)      
Stockholders' Equity:      
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized, 600 and 8,000,600 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively   —     80  
Class A common stock, par value $.01 per share; 200,000,000 shares
authorized; 32,484,734 and 30,953,867 shares issued at September 30, 2004 and December 31, 2003, respectively		   325     310  
Class B common stock, par value $.01 per share; 100,000,000 shares
authorized; 23,889,270 and 25,139,270 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively		   239     251  
Additional paid-in capital   290,530     287,593  
Unamortized expense of business partner and non-employee securities   (471 )    (1,192 ) 
Treasury stock, at cost: 2,852,715 and 186,399 shares of Class A common stock at September 30, 2004 and December 31, 2003, respectively   (31,846 )    (2,094 ) 
Retained earnings (accumulated deficit)   12,211     (13,263 ) 
Total stockholders' equity   270,988     271,685  
Total liabilities and stockholders' equity $ 304,613   $ 297,568  

See notes to the condensed consolidated financial statements.

3



eSpeed, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)


  Three Months Ended September 30,
  2004 2003
Revenues:      
Transaction revenues with related parties
Fully electronic transactions $ 25,489   $ 32,300  
Voice-assisted brokerage transactions   5,233     5,153  
Screen-assisted open outcry transactions   225     128  
Total transaction revenues with related parties   30,947     37,581  
Software Solutions fees from related parties   4,681     3,821  
Software Solutions and licensing fees from unrelated parties   3,278     2,321  
Interest income   865     547  
Total revenues   39,771     44,270  
Expenses:      
Compensation and employee benefits   10,499     9,790  
Occupancy and equipment            
Amortization of software development costs   2,553     1,981  
Other occupancy and equipment costs   6,322     6,210  
Professional and consulting fees   1,663     953  
Communications and client networks   1,684     1,715  
Marketing   319     373  
Administrative fees to related parties   3,435     2,579  
Amortization of business partner and non-employee securities   136     648  
Other   3,742     3,706  
Total expenses   30,353     27,955  
Income before income tax provision   9,418     16,315  
Income tax provision   3,683     6,353  
Net income $ 5,735