<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1999
REGISTRATION NO. 333-80335
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 8
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
PCQUOTE.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7375 36-4284139
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) No.)
</TABLE>
300 SOUTH WACKER DRIVE, SUITE 300
CHICAGO, ILLINOIS 60606
(312) 913-2800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JIM R. PORTER, CHIEF EXECUTIVE OFFICER
PCQUOTE.COM, INC.
300 SOUTH WACKER DRIVE, SUITE 300
CHICAGO, ILLINOIS 60606
(312) 913-2800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
DONALD E. FIGLIULO, ESQ. NEIL GOLD, ESQ.
Wildman, Harrold, Allen & Dixon Fulbright & Jaworski L.L.P.
225 West Wacker Drive 666 Fifth Avenue
Chicago, Illinois 60606-1229 New York, New York 10103
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[STOCK TICKER ART]
SUBJECT TO COMPLETION -- OCTOBER 4, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
PCQUOTE.COM MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
5,000,000 Shares
[LOGO]
Common Stock
- -------------------------------------------------------------------------
PCQuote.com, Inc. is offering 4,500,000 shares and HyperFeed Technologies, Inc.,
the selling stockholder, is offering 500,000 shares of common stock in an
initial public offering. Prior to this offering, HyperFeed Technologies owned
98.7% of the outstanding shares of our common stock.
PCQuote.com is an Internet-based provider of real-time and delayed market
quotes, timely business news and comprehensive tools for researching and
analyzing financial information.
Prior to this offering, there has been no public market for our common stock. It
is anticipated that the public offering price will be between $8.00 and $10.00
per share. The shares of PCQuote.com will be included for quotation in the
Nasdaq National Market under the symbol "PCQT".
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price............................................ $ $
Underwriting discounts and commissions........................... $ $
Proceeds, before expenses, to PCQuote.com........................ $ $
Proceeds to selling stockholder.................................. $ $
</TABLE>
SEE "RISK FACTORS" ON PAGES 7 TO 20 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE
INVESTING IN THE SHARES OF PCQUOTE.COM.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
The underwriters may, under certain circumstances, purchase up to 750,000
additional shares from the selling stockholder at the public offering price,
less underwriting discounts and commissions. Delivery and payment for the shares
will be on , 1999.
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
FAC/EQUITIES
E*OFFERING
COMMERZBANK CAPITAL MARKETS CORPORATION
PRUDENTIALSECURITIES.COM
,1999
[STOCK TICKER ART]
<PAGE>
[Pictures of the WWW.PCQUOTE.COM, MARKETSMART-REAL.PCQUOTE.COM and
WWW.CNNFN.COM Web sites and PCQuote 6.0 RealTick]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 7
Use of Proceeds................... 21
Dividend Policy................... 21
Dilution.......................... 22
Capitalization.................... 23
Pro Forma Financial Information... 24
Selected Financial Data........... 27
Forward-Looking Statements........ 28
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 29
<CAPTION>
PAGE
----
<S> <C>
Business.......................... 37
Management........................ 48
Principal and Selling
Stockholders.................... 53
Certain Transactions.............. 55
Description of Capital Stock...... 62
Shares Eligible for Future Sale... 64
Underwriting...................... 65
Legal Matters..................... 67
Experts........................... 67
Where You Can Find Additional
Information..................... 67
Index to Financial Statements..... F-1
</TABLE>
- --------------------------------------------------------------------------------
The terms "PCQuote.com", "we", "our" and "us" refer to PCQuote.com, Inc.
unless the context suggests otherwise. The term "you" refers to a prospective
investor.
PCQuote and PCQuote.com are two of our service marks. This prospectus also
includes trademarks and trade names of other companies.
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
1
<PAGE>
(This page has been left blank intentionally.)
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that
investors should consider before investing in the common stock of PCQuote.com.
Investors should read the entire prospectus carefully.
PCQUOTE.COM
PCQuote.com is an Internet-based provider of real-time and delayed market
quotes, timely business news and comprehensive tools for researching and
analyzing financial information. We combine all of these features in a
comprehensive portfolio of services targeted at investors. Our investor service
offerings consist of two Web sites, WWW.PCQUOTE.COM and
MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled desktop applications,
PCQuote 6.0 RealTick and PCQuote Orbit. Our services provide access to
sophisticated and dynamic financial information that allows users to make their
own informed investment decisions. We also offer several business-to-business
services that enable clients to present financial data and information on their
Web sites or desktop applications. We have no operating history as a stand-alone
entity and have limited revenues and a history of losses.
WWW.PCQUOTE.COM is our free Web site that provides access to delayed quotes,
news, research and analytical tools. Through our relationship with CNNFN, we
provide users of our Web sites with access to timely news headlines and stories
published by CNNFN. WWW.PCQUOTE.COM serves as the primary marketing and
promotions engine for the rest of the services we provide. According to @plan,
our demographics provider, the number of unique visitors to our WWW.PCQUOTE.COM
Web site grew from approximately 796,000 per month in their Winter 1999 report
(covering the months of July to September 1998) to approximately 987,000 per
month in their Summer 1999 report (covering the months of January to March
1999). We are ranked third among approximately 311 content Web sites (second
among all financially-oriented Web sites) surveyed in @plan's Summer 1999 report
in terms of the percentage of the Web sites' audience that is male and has a
household income of at least $50,000. According to the same report, the
percentage of our Web sites' audience that is male, has a household income of at
least $50,000 and has shopped online in the last six months is ranked sixth
among the surveyed content Web sites (fifth among all financially-oriented Web
sites).
We believe these user demographics are attractive to potential advertisers.
MARKETSMART-REAL.PCQUOTE.COM is our subscription-based Web site that
provides real-time, snapshot market quotations, along with all of the news,
research and analytical tools that are available on WWW.PCQUOTE.COM. Because of
its ability to provide real-time quotes, this site is targeted toward a more
active investor than is WWW.PCQUOTE.COM. MARKETSMART-REAL.PCQUOTE.COM uses
sparse graphics, text indices and creative advertising to speed download times
and give users faster access to the site's content.
We offer two Internet-enabled desktop services, PCQuote 6.0 RealTick and
PCQuote Orbit, that provide automatically updated quotes, commonly known as
streaming quotes, and a variety of real-time analytical tools. PCQuote 6.0
RealTick provides our subscribers with a professional-quality, NASDAQ level II,
real-time quote system that offers reliable, streaming real-time market data for
all North American equities and options. PCQuote 6.0 RealTick is online
trading-enabled and offers order execution capabilities through participating
broker-dealers. PCQuote Orbit, which we expect to launch in Fall 1999, provides
subscribers with streaming, real-time market quotations delivered via an
Internet-enabled desktop application.
3
<PAGE>
OUR STRATEGY
Our objective is to strengthen our position as an Internet-based provider of
real-time and delayed market quotes, timely business news and comprehensive
tools for researching and analyzing financial information. We intend to achieve
our objective by pursuing the following key strategies:
- build brand awareness to attract additional traffic;
- capitalize on user demographics attractive to advertisers;
- create up-sell opportunities through our service offerings;
- leverage our relationships with providers of global financial news and
other content and services;
- expand our Web sites as comprehensive financial information destinations;
- maintain our superior technological platform.
To date, we have not spent significant amounts marketing our services to a
broad audience. We intend to use approximately $11.0 million of our net proceeds
from this offering to aggressively market and promote our Web sites and other
service offerings in a variety of traditional and online media. We believe that
our marketing efforts will enable us to significantly grow our advertising base
by capitalizing on the attractive demographics of our users. These marketing
efforts are also intended to build brand awareness, increase traffic to our Web
sites and create a source of potential subscribers for our services. For the six
months ended June 30, 1999, we derived approximately 88.9% of our revenues from
the sale of subscriptions to our services and approximately 7.7% from
advertising. We believe that
our varied service offerings provide us with the opportunity to derive increased
revenues from multiple revenue sources, including subscriptions, advertising and
business-to-business services.
ABOUT US
Our WWW.PCQUOTE.COM Web site was first established in July 1995 by our
parent, PC Quote, Inc., a provider of securities market data. PC Quote, which
was founded in 1983, approved a change of its corporate name to HyperFeed
Technologies, Inc., in April 1999. This name change was approved by its
stockholders at its annual meeting held on June 16, 1999. We operated as part of
HyperFeed Technologies until we were incorporated in March 1999 as a
wholly-owned subsidiary of HyperFeed Technologies.
On August 30, 1999, HyperFeed Technologies formally separated the business
of PCQuote.com and our associated assets and liabilities from HyperFeed
Technologies' other businesses and operations. We believe the separation will
allow us to establish a separate identity as a Web-based company. This will
enable us to take advantage of opportunities more readily available to Internet
businesses. We believe we will be able to better attract and retain key
employees by offering compensation tied to the financial and stock market
performance of our business. In addition, the separation will allow us to pursue
our own financing avenues.
We have entered into a number of agreements with HyperFeed Technologies
providing for our formal separation from them and governing various interim and
ongoing relationships between us and HyperFeed Technologies. These agreements
provide for the contribution to us of intellectual property and other assets
relating to our business, the licensing of a data feed from HyperFeed
Technologies, maintenance by HyperFeed Technologies of our PCQuote Orbit service
and various support services.
Our address is 300 South Wacker Drive, Suite 300, Chicago, Illinois 60606
and our telephone number is (312) 913-2800. Our Web sites' addresses are
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM. The information on our Web
sites is not a part of this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares offered by PCQuote.com............... 4,500,000 shares
Shares offered by the selling stockholder... 500,000 shares
Total shares outstanding after this
offering.................................. 14,428,948 shares
Use of proceeds by PCQuote.com.............. Sales and marketing, acquisition of content,
purchase of new systems and technologies,
hiring of additional employees, repayment of
debt and short-term liabilities, and general
corporate purposes, including working capital.
Proposed Nasdaq National Market symbol...... PCQT
</TABLE>
You should be aware that the total shares outstanding after this offering do
not include:
- 386,842 shares subject to an outstanding warrant with an aggregate
exercise price of $0.40; and
- 1,538,600 shares reserved for issuance under options that we may grant
under our 1999 Combined Incentive and Non-statutory Stock Option Plan, of
which options to purchase 1,210,779 shares will be granted as of the date
of this prospectus with an exercise price equal to the initial public
offering price.
The shares offered by the selling stockholder do not include 750,000 shares
that may be sold upon exercise of the underwriters' over-allotment option from
the selling stockholder.
Unless otherwise specified, the information in this prospectus reflects the
9,800-for-1 stock split of our common stock as of August 30, 1999.
RISK FACTORS
You should consider the risk factors before investing in our common stock
and the impact from various events that could adversely affect our business.
5
<PAGE>
SUMMARY FINANCIAL DATA
The following tables summarize the financial data for our business and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Pro Forma Financial
Information" and our financial statements and the related notes appearing
elsewhere in this prospectus. The financial data are presented as if our
business had been a separate entity since we commenced operations in July 1995.
The As Adjusted column in the Balance Sheet Data table below reflects our
receipt of the estimated net proceeds of $36.3 million from our sale of
4,500,000 shares of common stock in this offering at an assumed initial public
offering price of $9.00 per share.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- -----------------------------------
1998 1999
------------------------ ------------------------
1995 1996 1997 ACTUAL PRO FORMA(1) 1998 ACTUAL PRO FORMA(1)
--------- --------- --------- --------- ------------- --------- --------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $ -- $ 973 $ 4,763 $ 9,912 $ 9,912 $ 4,376 $ 6,944 $ 6,944
Total operating expenses.... 70 2,096 3,850 5,027 5,665 2,651 3,113 3,404
Loss from operations........ (70) (1,936) (3,288) (1,658) (3,817) (1,144) (1,962) (2,725)
Net loss.................... $ (70) $ (1,962) $ (4,572) $ (2,162) $ (4,321) $ (1,551) $ (1,966) $ (2,729)
--------- --------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- --------- ------------- --------- --------- -------------
Pro forma basic and diluted
net loss per share........ $ (0.22) $ (0.44) $ (0.16) $ (0.20) $ (0.28)
--------- ------------- --------- --------- -------------
--------- ------------- --------- --------- -------------
Pro forma weighted-average
shares used in the
calculation of basic and
diluted net loss per
share..................... 9,800,000 9,800,000 9,800,000 9,844,882 9,844,882
--------- ------------- --------- --------- -------------
--------- ------------- --------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash.............................................................................. $ 238 $ 34,055
Total assets...................................................................... 4,335 38,152
Long-term liabilities............................................................. -- --
Total stockholders' equity (deficit).............................................. (410) 35,855
</TABLE>
(1) Reflects (a) the impact of the agreements with HyperFeed Technologies,
Townsend Analytics and CNNFN as if such agreements were in place beginning
January 1, 1998 and (b) additional executive compensation payable to four
officers as if these officers had been employed by us commencing January 1,
1998. See "Pro Forma Financial Information."
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to the
other information included in this prospectus, before purchasing shares of our
common stock. Each of these risk factors could adversely affect our business,
financial condition and results of operations, as well as adversely affect the
value of an investment in our common stock. This investment involves a high
degree of risk.
RISKS RELATED TO OUR BUSINESS
WE HAVE NO OPERATING HISTORY AS AN INDEPENDENT ENTITY.
We have yet to conduct our business as an independent entity. Our financial
statements are reported on a basis as if we had been separated from HyperFeed
Technologies during the periods reported. A purchaser of our common stock must
consider the risks, expenses and difficulties we may encounter as an early stage
company in the new and rapidly evolving Web-based financial data and business
information market. The principal risks we may face as an early stage company
relate to our ability to:
- anticipate and adapt to the changing Internet market;
- attract more subscribers and advertisers;
- implement our sales and marketing initiatives;
- attract, retain and motivate qualified personnel;
- respond to actions taken by our competitors; and
- integrate acquired technologies, products and services.
WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT FUTURE LOSSES BECAUSE WE
ANTICIPATE THAT OUR OPERATING EXPENSES WILL GROW MORE QUICKLY THAN OUR
REVENUES.
We have incurred operating losses in each fiscal quarter reported. As of
June 30, 1999, we had incurred aggregate accumulated losses of approximately
$10.7 million. For the six month period ended June 30, 1999, our operating
losses were 28.3% of our revenues. We expect operating losses and negative cash
flows to continue for the foreseeable future. We intend to significantly
increase our operating expenses by spending approximately $11.0 million over the
next 12 months to promote our Web site and service offerings and through the
rapid growth in the number of our employees. In the most recent quarter ended
June 30, 1999, the number of our full-time employees increased 29.7%. We will
need to generate significant revenues to achieve and maintain profitability and
we cannot assure you that we will be able to do so. If we are able to become
profitable, we cannot assure you that we will be able to sustain or increase our
profitability on a quarterly or annual basis.
IF WE ARE UNABLE TO INCREASE OUR SUBSCRIBER BASE, WE MAY NOT ACHIEVE
PROFITABILITY.
For the six months ended June 30, 1999, we derived approximately 88.9% of
our revenues from the sale of subscriptions to our services. Our future success
is highly dependent on our ability to increase the number of subscribers to our
services. The number of Internet users willing to subscribe to real-time
financial data and analytical tools may not increase. If the market for
subscription-based, real-time financial data and analytical tools develops
slower than we expect, our business, financial condition and results of
operations could be materially and adversely affected. Any significant downturn
or other negative development with respect to activity in financial exchanges
and markets could significantly reduce the number of subscribers to our
services. In addition, we presently offer a portion of our content for free. We
may increase the amount of content or services offered for free to increase
traffic to our Web sites. Increased free content or services could reduce the
number of persons willing to pay for our subscription services. Our
business-to-business subscription contracts typically have a
7
<PAGE>
one-year term and typically may be canceled on either 30 days or 60 days notice.
Our MARKETSMART-REAL.PCQUOTE.COM and PCQuote 6.0 RealTick subscription contracts
typically have either a monthly or one-year term and may be canceled on 30 days
notice.
FAILURE TO CONTINUE TO ADD CONTENT THAT ATTRACTS OUR TARGET AUDIENCE COULD
CAUSE OUR AUDIENCE SIZE TO DECREASE OR CHANGE THE DEMOGRAPHICS OF OUR
AUDIENCE.
Our future success depends on our ability to continue to add content that
satisfies the financial and investing information needs of our target audience.
If our content does not satisfy the needs of our users, then the size of our
audience could decrease or the demographic characteristics of our audience could
change. Either of these results would adversely affect our ability to attract
advertisers. Our ability to expand and enhance our Web sites depend on several
factors, including the following:
- technical expertise of our production and design staff;
- ability to enter into additional strategic relationships; and
- access to third-party content.
IF WE FAIL TO INCREASE THE NUMBER OF VISITORS TO OUR WWW.PCQUOTE.COM WEB
SITE, WE WILL NOT BE ABLE TO INCREASE OUR ADVERTISING REVENUE.
We expect that the portion of our revenues derived from advertising will
grow. We plan to aggressively promote our services in print, broadcast and
online media to build traffic to our Web sites. Increasing the number of
visitors to our WWW.PCQUOTE.COM Web site is critical to selling advertising and
generating larger revenues. If we cannot increase the size of our audience, then
we may be unable to attract new or retain existing advertisers. To attract and
retain a demographically desirable audience, we must do the following:
- offer content that satisfies the financial and investment needs of our
audience;
- build a community of loyal users;
- conduct effective marketing campaigns;
- develop new and maintain existing advertising and business-to-business
relationships, such as arrangements that provide for us to distribute our
content to other businesses, with other Web sites;
- update and enhance the features of our Web sites; and
- increase awareness of the "PCQuote" brand.
Our failure to achieve one or more of these objectives could adversely
affect our business. We cannot assure you that we will be successful in these
efforts.
We may not be able to build a loyal user base for WWW.PCQUOTE.COM. We
believe community features, such as online discussion forums, will encourage
users to interact with each other and with us and will help us to retain
actively engaged users. The concept of developing a community of loyal users on
a Web site is unproven. If developing this type of community is not successful,
then it may be more difficult to increase the size of our audience.
We also depend on establishing and maintaining advertising and
business-to-business relationships, such as content distribution arrangements,
with high-traffic Web sites to increase our audience. There is intense
competition for placement on these sites, and we may not be able to enter into
these types of relationships on commercially reasonable terms or at all. Even if
we enter into relationships with other Web sites, they may not attract
significant numbers of users and we may not obtain additional users from these
relationships.
8
<PAGE>
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE, ADVERSELY AFFECTING THE PRICE
OF OUR COMMON STOCK.
Our quarterly operating results may fluctuate significantly as a result of a
variety of factors, including:
- the number of individuals who use the Web, which has not historically been
subject to seasonal fluctuations;
- the number of visitors to our Web sites, which can and historically has
fluctuated significantly as a result of financial market activity and
business and financial news events;
- increases in fees that we are required to pay to financial exchanges for
quotes and other financial information;
- changes in rates paid for Web advertising resulting from competition or
other factors;
- the amount and timing of costs related to our marketing efforts;
- fees we may pay for advertising, business-to-business or content
agreements;
- our ability to attract and retain advertisers;
- new services or Web sites introduced by us or our competitors; or
- technical difficulties or system downtime affecting the Web generally or
the operation of our Web sites specifically.
In addition to creating potential fluctuations in quarterly results, a
number of the factors listed above may also have an impact on the long-term
viability of our business. These factors include the number of visitors to our
Web sites, our ability to attract advertisers and new services or Web sites
introduced by our competitors.
We believe that quarter-to-quarter comparisons of our results of operations
are not necessarily meaningful and should not be relied upon as indications of
future performance. In addition, it is possible that in a particular quarter our
operating results may be below the expectations of market analysts and
investors. This could result in the price of our common stock being materially
and adversely affected.
OUR REVENUES MAY NOT BE ABLE TO KEEP PACE WITH OUR EXPENSES IN THE FUTURE.
To attract and retain a larger audience, we plan to significantly increase
our expenditures for marketing our "PCQuote" brand and for content, technology
and infrastructure development. Many of these expenditures are planned or
committed in advance in anticipation of future revenues. Our cost structure
could change dramatically as we increasingly operate independently from
HyperFeed Technologies. If our revenues are lower than expected, we may not be
able to reduce spending accordingly. We believe brand awareness will be critical
to increasing our audience. If we do not increase our revenues as a result of
our branding and other marketing efforts or if we otherwise fail to promote our
brand successfully, our business, financial condition and results of operations
could be materially and adversely affected.
THERE IS INTENSE COMPETITION WITH RESPECT TO WEB SITES PROVIDING BUSINESS
AND FINANCIAL NEWS AND INFORMATION.
Many Web sites compete for consumers' and advertisers' attention and
spending. The competition is particularly intense with respect to Web sites in
the business and financial news and information areas. New competitors may
emerge and rapidly acquire significant market share. For example, Dow Jones
recently introduced a free Web site that offers business and financial
information. Increased competition could result in price reductions for
subscription services or advertising, reduced margins or
9
<PAGE>
loss of market share. Any of these could materially and adversely affect our
business, financial condition and results of operations.
We compete for subscribers, advertisers and content providers with many
types of companies, including:
- Web sites targeted to business, finance and investing needs, such as
CBS.Marketwatch.com, TheStreet.com, The Motley Fool and Quote.com;
- Web portals, such as EXCITE.COM, INFOSEEK.GO.COM, LYCOS.COM, YAHOO.COM and
other high-traffic Web sites that offer quotes, financial news and/or
other programming, as well as links to business-and finance-related Web
sites;
- proprietary online services, such as America Online and Microsoft Network,
that provide access to financial and business-related content and
services;
- online brokerage firms, such as Charles Schwab and E*TRADE, many of which
provide financial and investment news and information;
- providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service; and
- publishers and distributors of traditional media, including television,
radio and print, such as CNNFN, CNBC, Marketplace on National Public Radio
and The Wall Street Journal.
We also compete with private label distributors of PCQuote 6.0 RealTick to
which we offer private label versions of this service for distribution to their
customers. For example, A.B. Watley, Inc., our largest customer, markets a
private label version of PCQuote 6.0 RealTick called AB Watley Ultimate Trader
to its brokerage customers.
MANY OF OUR EXISTING OR POTENTIAL COMPETITORS HAVE GREATER RESOURCES THAN
US.
Many of our existing competitors, as well as our potential competitors, have
longer operating histories on the Web, greater name recognition, larger customer
bases, higher amounts of user traffic and significantly greater financial,
technical and marketing resources than we do. These competitors may also be able
to
- undertake more extensive marketing campaigns;
- adopt more aggressive pricing policies;
- engage in more extensive research and development;
- make more attractive offers to existing and potential employees, strategic
partners, advertisers and content providers;
- respond more quickly to new or emerging technologies and changes in Web
user requirements; and
- develop services that are superior to or achieve greater market acceptance
than our services.
IF WE ARE UNABLE TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH PROVIDERS OF
GLOBAL FINANCIAL NEWS AND OTHER CONTENT, OUR ABILITY TO INCREASE TRAFFIC TO
OUR WEB SITES WILL BE ADVERSELY AFFECTED.
Our business strategy depends on establishing and maintaining relationships
with providers of global financial news and other content. There is intense
competition for these types of relationships. Many companies from whom we wish
to acquire content also offer services that compete with our services. For
example, CNNFN, which provides global financial news to our Web site, offers
several features, such as delayed quotes and analytical tools, on its Web site
that are similar to services
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provided by us. In addition, QuickenFN, a division of CNNFN, is a direct
competitor of ours. CNNFN may attempt to divert our customers to its services or
may decide not to renew its agreement with us for competitive reasons. This
could have a material and adverse effect upon our business, financial condition
and results of operations. We may not be able to enter into the relationships
that we pursue or maintain our current relationships on commercially reasonable
terms, or at all. We cannot be sure that any of these relationships will result
in increased use of our Web sites or other services. To the extent we enter into
a relationship to build traffic to our Web sites, any decline in the popularity
of the other party's Web site would adversely affect our ability to increase
traffic to our sites.
WE RELY ON AN AGREEMENT WITH CNNFN TO PROVIDE OUR USERS WITH ACCESS TO
TIMELY FINANCIAL NEWS HEADLINES AND STORIES; THE EXCLUSIVITY PROVISION OF
THIS AGREEMENT CONTAINS EXTENSIVE EXCEPTIONS.
We rely on an agreement with CNNFN to provide users of our Web sites with
access to timely financial news headlines and stories. Our agreement with CNNFN
contains an exclusivity provision that prohibits CNNFN from licensing CNNFN
headlines to our direct competitors. However, this exclusivity is subject to
numerous exceptions. The exclusivity does not apply to:
- any registered broker-dealer Web site that is used for trading and is
accessible only by its clients;
- financial Web sites currently controlled by CNNFN or its affiliates;
- several of CNNFN's existing relationships; and
- any Web sites operated by our competitors that do not have the primary
purpose of providing users with investment and/or financial tools,
including real-time or delayed equity and/or futures quotes.
In addition, CNNFN can terminate the exclusivity provision of the agreement
at any time after the one-year anniversary of the agreement, after giving us 120
days notice, if CNNFN, its parent company or any of its affiliated or subsidiary
companies:
- acquires a company engaged in whole or in part in providing information
and services similar to those provided by us; or
- develops an information service internally which is similar to that
provided by us.
WE RELY ON A SOFTWARE LICENSING AGREEMENT THAT COULD BE TERMINATED OR
ALLOWED TO EXPIRE.
The software we use to offer our PCQuote 6.0 RealTick service is licensed to
us from Townsend Analytics. For the year ended December 31, 1998, we derived
78.2 % of our revenues, and for the six months ended June 30, 1999, we derived
86.4% of our revenues, from subscriptions to our PCQuote 6.0 RealTick service or
from private label versions of that service. Accordingly, if our license from
Townsend Analytics were terminated or if we were for any reason unable to make
use of the licensed software, it would have a material and adverse effect upon
our business, financial condition and results of operations. If any upgrade is
made by Townsend Analytics to the licensed software, they are required to make
the same upgrade available to us. Townsend Analytics is not required to make
changes in the licensed software to assist us in responding to changes in the
industry or the introduction of new or improved competitive services. Any
resulting inability on our part to enhance or otherwise modify our PCQuote 6.0
RealTick service in response to these developments could have a material and
adverse effect on our business, financial condition and results of operations.
Our license agreement with Townsend Analytics is for an initial term ending
December 4, 2000 and provides for automatic one-year renewals unless either
party delivers a notice of nonrenewal 90 days prior to the termination date.
Townsend Analytics offers a similar service that may compete with our PCQuote
6.0 RealTick service. Townsend Analytics may attempt to divert our customers to
its service or may terminate the agreement or allow it to expire for competitive
reasons, which would have a material and adverse effect upon our business,
financial condition and results of operations.
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WE MAY NOT BE ABLE TO EMPLOY THE ADDITIONAL PERSONNEL WE NEED TO CONDUCT AND
GROW OUR BUSINESS.
As a result of our separation from HyperFeed Technologies and our
anticipated growth, we need to employ additional technical and other personnel
to perform functions for us that were previously handled by employees of
HyperFeed Technologies. The number of our full-time employees grew from 37 as of
March 31, 1999 to 48 as of June 30, 1999, a growth rate of 29.7%. We expect that
our number of employees will grow rapidly in the future. We believe that our
future success will depend upon our ability to identify, attract, hire, train,
motivate and retain highly-skilled technical, managerial, engineering,
marketing, sales and customer service personnel. Competition for qualified
computer programming and other technical personnel is particularly intense. At
times we have experienced difficulties in attracting new technical personnel. We
may not be successful in attracting, assimilating or retaining a sufficient
number of qualified personnel to conduct our business in the future. The failure
to do so could have a material adverse effect on our business, financial
condition and results of operations.
WE MAY NOT BE ABLE TO ADEQUATELY MANAGE OUR EXPECTED GROWTH.
We have experienced rapid growth in our operations. As of June 30, 1999 we
had a total of 48 full-time employees, as compared to 37 full-time employees as
of March 31, 1999. We expect that our number of employees will grow rapidly in
the future. Our rapid growth has placed, and our anticipated future growth will
continue to place, a significant strain on our managerial, operational and
financial resources. Jim R. Porter, our Chief Executive Officer and Chairman of
our Board of Directors, will devote only one-half of his business time to our
business. This will place further strain on our managerial resources. We will
have to implement and improve operational and financial systems, procedures and
managerial controls. We cannot assure you that we have made adequate allowances
for the costs and risks associated with our expected expansion. Our systems,
procedures and managerial controls may not be adequate to support our
operations. We may not be able to successfully offer and expand our services. If
we are unable to successfully manage this growth, our business, financial
condition and results of operations could be materially and adversely affected.
WE RELY HEAVILY ON OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES.
Our success is highly dependent upon the efforts and abilities of the
following executive officers and key employees: Jim R. Porter, our Chief
Executive Officer and Chairman of our Board of Directors; Timothy K. Krauskopf,
our President and Chief Operating Officer; Andrew N. Peterson, our Chief
Financial Officer and Secretary; Stephen F. Rawls, our Vice President,
Interactive Operations; David C. Kahl, our Vice President of Sales and
Marketing; Thomas F. Cunningham, our Vice President of Technical Services; and
Matthew M. Rees, our Director of Web Services. The loss of services of one or
more of our executive officers or key employees could have a material and
adverse effect upon our business, financial condition and results of operations.
Two of our executive officers, Timothy K. Krauskopf, our President and Chief
Operating Officer, and Andrew N. Peterson, our Chief Financial Officer and
Secretary, joined us in April 1999. Thomas F. Cunningham, our Vice President of
Technical Services, joined us in June 1999, and David C. Kahl, our Vice
President of Sales and Marketing joined us in July 1999. These individuals have
not previously worked together or with the other members of our management team.
We cannot be sure that our new management team will be able to successfully
manage our growth.
OUR CHIEF EXECUTIVE OFFICER WILL DEVOTE ONLY ONE-HALF OF HIS BUSINESS TIME
TO US, LIMITING HIS AVAILABILITY TO US.
Mr. Porter, our Chief Executive Officer and Chairman of our Board of
Directors, will devote one-half of his business time to our business and the
other half to the business of HyperFeed
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Technologies. This limitation on Mr. Porter's availability could impact our
ability to expand our operations and develop our business.
AN INCREASE IN USERS MAY STRAIN OUR SYSTEMS AND CAUSE THEM TO MALFUNCTION.
News, financial developments or a significant growth in average trading
volume from current levels could cause an increase in the use of our services,
materially and adversely affecting our ability to deliver services.
Historically, we have experienced an increase in the number of visitors to our
Web sites when these types of events have occurred. We are seeking to
significantly grow our user base. Our infrastructure must be able to accommodate
an increasing volume of traffic and deliver the real-time quotes and frequently
updated news that our subscribers expect. Our infrastructure has in the past,
and may in the future, experience slower response times due to an increase in
the number of users or other problems. For example, in one instance, access to
our service was interrupted for less than one hour due to the loss of our
Internet connection. Historically, we have experienced service disruptions
several times per year. These disruptions typically last from approximately
thirty seconds to approximately fifteen minutes. These problems could cause us
to lose a portion of our customer base and materially and adversely affect our
business, financial condition and results of operations.
We depend on information providers, including HyperFeed Technologies, to
provide us with information and data on a timely basis. Our services could
experience disruptions or interruptions due to a failure or delay in the
transmission of this information. We are currently prohibited under the terms of
our Contribution and Separation Agreement with HyperFeed Technologies from
providing for a back-up data feed source for our PCQuote Orbit service during
the term of our DataFeed License Agreement with HyperFeed Technologies. The
DataFeed License Agreement has a five-year term and will automatically renew for
additional one-year periods unless we terminate at least 60 days prior to the
end of the initial or any renewal terms. The parties may also terminate this
agreement sooner under circumstances described in "Certain
Transactions--HyperFeed Technologies". This prohibition against providing for a
back-up data feed source for our PCQuote Orbit service could exacerbate
complications arising from any interruption of data feed services from HyperFeed
Technologies. In addition, our users depend on Internet service providers,
online service providers and other Web site operators for access to our
services. Many of these providers and operators have experienced outages or
service delays in the past, and could experience outages, delays and other
difficulties in the future. These types of occurrences could cause users to
perceive our products as not functioning properly and cause them to use other
services to obtain financial data or utilize analytical tools.
THE FAILURE OF OUR SYSTEMS COULD HARM OUR REPUTATION AND REDUCE OUR REVENUE.
Our ability to provide timely information, current market data and
continuous news updates depends on the efficient and uninterrupted operation of
our computer and communications hardware and software systems. Similarly, our
ability to track, measure and report the delivery of advertisements on our site
depends on the efficient and uninterrupted operation of a third-party system,
Dart by DoubleClick. These systems and operations are vulnerable to damage or
interruption from:
- human error;
- natural disasters;
- telecommunication failures;
- computer viruses; and
- intentional acts of vandalism and similar events.
We do not have a formal disaster recovery plan. Any system failure that
causes an interruption in our service or a decrease in responsiveness of our Web
sites could result in reduced traffic, reduced revenue and harm to our
reputation, brand and our relations with advertisers. Any disruption in the
Internet access to our Web sites could materially and adversely affect our
business, financial condition and results of operations. Our insurance policies
may not adequately compensate us for any losses that
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we may incur because of any failures in our system or interruptions in our
delivery of content or services.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR INTELLECTUAL
PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES.
We rely primarily on a combination of copyright, trade secret and common law
trademark law and restrictions on disclosure to protect our intellectual
property, such as our content, source codes, trademarks, trade names and trade
secrets. Although we consider our trademarks to be among our most valuable
assets, we do not currently have any registered trademarks or copyrights. When
appropriate, we enter into confidentiality agreements with our employees,
consultants and third parties with whom we enter into business relationships and
seek to control access to and distribution of our proprietary information.
Despite our efforts to protect our intellectual property rights and proprietary
information from unauthorized use or disclosure, parties may attempt to
disclose, obtain or use our proprietary information. This could result in our
losing our intellectual property rights. We may need to engage in litigation in
order to enforce our intellectual property rights in the future. This litigation
could result in substantial costs and diversion of management and other
resources, either of which could have a material and adverse effect on our
business, financial condition and results of operations.
From time to time, we may be subject to claims by third parties for alleged
infringement of their intellectual property. These claims and any resulting
litigation could subject us to significant liability for damages and could
result in the invalidation of our proprietary rights. Even if we prevail,
litigation could be time-consuming, expensive to defend and result in the
diversion of our time and attention. In the event of a successful claim of
infringement by a third party, we may need to introduce new content or
trademarks, develop non-infringing technology or license the infringed or
similar technology, which may be unavailable on commercially reasonable terms.
Our failure or inability to do so on a timely basis could materially and
adversely affect our business, financial condition and results of operations.
We use licensed technology, such as software from DoubleClick and data and
content from third parties. Because we license some data and content from third
parties, our exposure to copyright infringement actions may increase because we
must rely upon these third parties for information as to the origin and
ownership of the licensed content. The outcome of any litigation between these
licensors and a third party or between us and a third party could lead to
royalty obligations for which we are not indemnified or for which
indemnification is insufficient.
WE MAY NOT BE ABLE TO MAINTAIN EXCLUSIVE RIGHTS TO WEB DOMAIN NAMES RELATING
TO OUR BRAND, WHICH MAY CAUSE CONFUSION AMONG WEB USERS AND DECREASE THE
VALUE OF OUR BRAND NAMES.
We currently hold two Web domain names relating to our brands,
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM. Currently, the acquisition and
maintenance of domain names is regulated by governmental agencies and their
designees. The regulation of domain names in the U.S. and in foreign countries
is expected to change in the near future. As a result, we may not be able to
acquire or maintain relevant domain names in all countries in which we conduct
our business. These changes could include the introduction of additional top
level domains, which could cause confusion among Web users trying to locate our
sites. Furthermore, the relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear. We may
be unable to prevent third parties from acquiring domain names that are similar
to our trademarks. The acquisition of similar domain names by third parties
could cause confusion among Web users attempting to locate our sites and could
decrease the value of our brand names.
WE MAY NOT BE ABLE TO KEEP UP PACE WITH CONTINUING CHANGES IN TECHNOLOGY.
Our market is characterized by rapidly changing technology and frequent
introduction of new Web sites and other service offerings. To be successful, we
must adapt to this rapidly changing environment
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by continually improving the performance, features and reliability of our
services. We could incur substantial costs if we need to modify our services or
infrastructure or adapt our technology to respond to these changes. Our business
could be materially and adversely affected if we experience difficulties in
introducing new services or if these new services are not accepted by users. For
example, we intend to introduce additional or enhanced services, such as
commentary on options, e-mailed financial updates and news searches. A delay or
failure to address technological advances and developments or an increase in
costs resulting from these changes could have a material and adverse effect on
our business, financial condition and results of operations.
WE MAY LOSE OUR LARGEST CUSTOMER, A.B. WATLEY, FROM WHICH WE DERIVE A
SIGNIFICANT PORTION OF OUR REVENUES.
Our largest customer, A.B. Watley, a private label redistributor of PCQuote
6.0 RealTick, accounted for 11.1% of our total revenues in 1998 and 18.7% of our
total revenues in the six months ended June 30, 1999. Our agreement with A.B.
Watley is for an initial term ending December 31, 2000. The loss of our largest
customer would have a material and adverse effect on our business, financial
condition and results of operations. The revenue derived from specific customers
and advertisers varies from year to year. We cannot be sure that a specific
large customer or advertiser in one year will continue to use our services or
advertise on our Web sites in a subsequent year.
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE
MATERIALLY AND ADVERSELY AFFECTED IF WE ARE NOT YEAR 2000-COMPLIANT.
We and our subscribers are dependent, to a substantial degree, upon the
proper functioning of our and their computer systems, as well as the computer
systems of our suppliers and service providers. A failure of these computer
systems to correctly recognize dates beyond December 31, 1999 could materially
disrupt our operations or the ability of our subscribers to access our Web sites
or other service offerings. Disruptions or, in the worst case scenario, a
complete failure of all of our services, also may arise as a result of third
parties not being Year 2000-compliant. We do not currently have a contingency
plan in place to adequately deal with a complete failure of all of our services.
Any malfunction in our information technology systems, or those of our suppliers
or major customers, could cause us to incur significant costs and have a
material and adverse effect on our business, financial condition and results of
operations. In addition, we have relied on written representations made by
HyperFeed Technologies regarding the Year 2000-readiness of the information
technology systems contributed to us as part of our separation. We have not
independently assessed, remediated or corrected any Year 2000 risks relating to
these systems.
RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS DEPENDS ON CONTINUED GROWTH IN USE OF THE INTERNET.
The market for Internet-based delivery of financial data and related
business information is new and rapidly evolving. Our business, financial
condition and results of operations would be materially and adversely affected
if Internet usage does not continue to grow significantly. Internet usage may be
inhibited for a number of reasons, such as:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service; and
- inability to provide cost-effective, high-speed service.
Even if Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth. As a result, its performance
and reliability may decline. Web sites and
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proprietary online services have experienced interruptions in their service as a
result of outages and other delays. If these outages or delays occur frequently,
use of the Internet as a medium for the exchange of information and for commerce
could grow more slowly or decline.
THE ENACTMENT OF NEW LAWS OR CHANGES IN GOVERNMENT REGULATIONS RELATING TO
THE INTERNET COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.
Due to the increasing popularity of the Internet, it is possible that laws
or regulations may be adopted regarding the Internet, any of which could
materially and adversely affect our business. These laws may relate to issues
such as user privacy, pricing, taxation and the characteristics and quality of
products and services. For example, the Telecommunications Act of 1996 sought to
prohibit the transmission of certain types of information and content over the
Web. The Federal Communications Commission recently decided that a Web user's
calls to gain access to the Internet are interstate communications. This could
result in an increase in the cost of using or transmitting data over the
Internet since the costs to Internet users could rise as a result of this
characterization and since there could be increased federal regulatory
requirements. In addition, the three year moratorium preventing state and local
governments from taxing Internet access, from imposing taxes that would subject
participants in electronic commerce to taxes in multiple states and from
imposing taxes that would discriminate against electronic commerce, will expire
on October 21, 2001. Once the moratorium ends, state and local governments could
impose these types of taxes. Any of these taxes would affect the viability of
electronic commerce and could have a material and adverse affect on our
business, financial condition and results of operations. The applicability to
the Internet of existing laws in various jurisdictions governing issues like
property ownership, libel and personal privacy is ambiguous and may take years
to resolve. Due to the global nature of the Internet, it is possible that the
U.S., state governments or foreign countries might attempt to adopt new laws,
regulate our services or levy sales or other taxes on our activities. We might
unintentionally violate these laws or any new laws that are enacted in the
future. Any of these developments could have a material and adverse effect on
our business, financial condition and results of operations.
SECURITY CONCERNS COULD HINDER INTERNET-BASED COMMERCE.
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Web. Any well-publicized compromise of security could cause Internet usage to
decline. Security breaches could also make people reluctant to use the Internet
to conduct transactions that involve transmitting confidential information, such
as stock trades or purchases of goods or services. This could result in
decreased traffic to our Web sites and reduced subscription and advertising
revenue. We may also incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by security breaches.
WE COULD BE LIABLE IF PERSONAL INFORMATION ABOUT OUR USERS IS DISCLOSED;
THERE MAY BE LIMITS IMPOSED ON USES OF PERSONAL INFORMATION GATHERED USING
THE INTERNET.
If third parties are able to penetrate our network security or otherwise
misappropriate our users' personal or credit card information, we could be
subject to liability. We could be subject to claims for unauthorized purchases
with credit card information, impersonation or other misuses of personal
information, such as providing personal imformation about our users to
advertisers without the users' authorization. These claims could result in
litigation.
Several states have proposed legislation that would limit the uses of
personal information gathered using the Internet. The European Union recently
enacted its own privacy regulations that may result in
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limits on the collection and use of user information. Changes to existing laws
or the passage of new laws intended to address these issues could, among other
things:
- create uncertainty in the marketplace that could reduce demand for our
services;
- limit our ability to collect and to use data from our users;
- increase the cost of doing business as a result of litigation costs or
increased service delivery costs; or
- decrease the efficacy of Internet advertising.
Like most Web sites, we typically place information, commonly referred to as
cookies, on a user's hard drive without the user's knowledge or consent. For
example, we use cookies to allow users access to personal information, such as
portfolios, stored on our servers or to enable us to limit the frequency with
which a user is shown a particular advertisement. Current Internet browsers
allow users to modify their browser settings to remove cookies at any time or to
prevent cookies from being stored on their hard drives. In addition, some
Internet commentators, privacy advocates and governmental bodies have suggested
limiting or eliminating the use of cookies. Any reduction or limitation in the
use of cookies could limit the effectiveness of this technology.
ACCEPTANCE AND EFFECTIVENESS OF THE INTERNET FOR ADVERTISING ARE UNPROVEN.
Our future success is dependent, in part, on an increase in the use of the
Internet for advertising. If the Internet advertising market fails to develop or
develops more slowly than we expect, then our business could be adversely
affected. The Internet advertising market is new and rapidly evolving and the
industry cannot yet gauge the effectiveness of advertising on the Internet as
compared to traditional media. As a result, demand for Internet advertising is
uncertain. Many advertisers have little or no experience using the Internet for
advertising purposes. The adoption of Internet advertising requires the
acceptance of a new way of conducting business, exchanging information and
advertising products and services. Businesses may find advertising on the
Internet to be undesirable or less effective for promoting their products and
services relative to traditional advertising media.
Due in part to the proliferation of Web sites selling advertising space on
their Web pages, advertising rates charged within the industry generally have
been declining over the last year. During the period from December 1997 to March
1999 average advertising rates in the Internet industry have declined from
$37.21 to $34.96 per thousand page views, or CPMs, as they are commonly known.
We do not know whether advertising rates will continue to decline in the future.
In addition, different pricing models are used to sell advertising on the Web
and it is difficult to predict which model will emerge as the industry standard.
For example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on an advertisement,
instead of rates based on the number of impressions, or times an advertisement
is displayed, could adversely affect our revenues since much of our existing
advertising is impression-based. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to an Internet user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
RISKS RELATED TO OUR RELATIONSHIP WITH HYPERFEED TECHNOLOGIES
HYPERFEED TECHNOLOGIES IS IN A POSITION TO CONTROL MATTERS REQUIRING A
STOCKHOLDER VOTE, WHICH MAY MATERIALLY AND ADVERSELY AFFECT THE MARKET PRICE
OF OUR COMMON STOCK OR DENY OUR STOCKHOLDERS AN OPPORTUNITY TO REALIZE A
PREMIUM ON THEIR SHARES.
Upon the closing of this offering, HyperFeed Technologies will beneficially
own 64.5% of our outstanding common stock (59.3% if the underwriters exercise
their over-allotment option in full). As a practical matter, HyperFeed
Technologies will have sufficient voting power to control our management, as
well as the outcome of matters submitted to our stockholders for approval,
including the election of
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directors and any merger, consolidation or sale of substantially all of our
assets. The members of the Board of Directors of HyperFeed Technologies may be
elected by two of HyperFeed Technologies' principal stockholders, PICO Holdings,
Inc. and Physicians Insurance Company of Ohio, which collectively beneficially
own 47.9% of HyperFeed Technologies' common stock. These two affiliated
stockholders are currently in a position to effectively control HyperFeed
Technologies' management and the outcome of matters submitted to its
stockholders for approval.
The concentration of ownership of our common stock could delay or prevent
proxy contests, mergers, tender offers, open-market purchase programs or other
purchases of our common stock that could give our stockholders the opportunity
to realize a premium over the then-prevailing market price for our common stock.
In addition, the market price of our common stock may be materially and
adversely affected by events relating to HyperFeed Technologies that are
unrelated to us.
WE DEPEND SOLELY ON HYPERFEED TECHNOLOGIES FOR CERTAIN SERVICES AND IT MAY
BE COSTLY TO OBTAIN THESE SERVICES FROM ANOTHER PROVIDER IF HYPERFEED
TECHNOLOGIES IS UNABLE OR UNWILLING TO PROVIDE THESE SERVICES TO US.
HyperFeed Technologies currently provides us with research and development
assistance, data feeds, communications lines and related facilities and network
operations, as well as administrative, engineering and human resources services.
HyperFeed Technologies incurred aggregate operating losses of approximately
$16.6 million from 1996 through 1998. Financial problems at HyperFeed
Technologies could materially and adversely affect its ability to provide
services to us. We may not be able to replace these services, especially the
market data feed, without incurring significant additional costs. If we choose
to perform these services ourselves, we may not be able to perform them
adequately. During any transition, our business could be disrupted. As a result,
we could lose a significant number of subscribers, users and advertisers.
WE DEPEND ON HYPERFEED TECHNOLOGIES FOR IMPROVEMENTS TO PCQUOTE ORBIT AND
QUOTESOCKETS.
We currently license PCQuote Orbit and Quotesockets from HyperFeed
Technologies. We may license additional services or technologies from HyperFeed
Technologies in the future. HyperFeed Technologies acts as a research and
development resource to us and is responsible for providing software updates to
the services we license from them. A delay or failure by HyperFeed Technologies
to provide us with updates and improvements to these services may result in our
inability to keep pace with changes in technology and user preferences.
OUR AGREEMENTS WITH HYPERFEED TECHNOLOGIES ARE NOT SUBJECT TO DISINTERESTED
NEGOTIATIONS.
As part of our separation from HyperFeed Technologies, we have entered into
agreements with them providing for, among other things, our separation from that
company, the contribution of assets to us and the provision to us by HyperFeed
Technologies of licenses and various services that are important to the conduct
of our business. Because we were a division of HyperFeed Technologies, none of
these agreements resulted from disinterested negotiations.
CERTAIN MEMBERS OF OUR MANAGEMENT HAVE CONFLICTS OF INTEREST WITH HYPERFEED
TECHNOLOGIES.
Jim R. Porter, Chief Executive Officer and a director of HyperFeed
Technologies, is Chief Executive Officer and a director of PCQuote.com. John E.
Juska, Chief Financial Officer of HyperFeed Technologies, is a director of
PCQuote.com. John R. Hart, a director of HyperFeed Technologies, is a director
of PCQuote.com. In addition, several of our executive officers, directors and
employees hold shares of HyperFeed Technologies common stock and options to
acquire shares of HyperFeed Technologies common stock. Mr. Porter beneficially
owns approximately 7.8% of the outstanding common stock of HyperFeed
Technologies and Mr. Juska beneficially owns approximately 1.5% of the
outstanding common stock of HyperFeed Technologies. Mr. Hart is Chief Executive
Officer and a
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director of PICO Holdings, Inc. and Physicians Insurance Company of Ohio, which
collectively beneficially own 47.9% of the outstanding common stock of HyperFeed
Technologies.
These individuals have conflicts of interest with respect to business
opportunities and similar matters that may arise in the ordinary course of the
business of HyperFeed Technologies or PCQuote.com. They also have conflicts of
interest with respect to relationships between HyperFeed Technologies and
PCQuote.com under inter-company agreements between us and HyperFeed
Technologies. We currently do not have a system in place to resolve these
conflicts of interests. As a result, conflicts could be resolved in a manner
adverse to us and our stockholders.
RISKS RELATED TO THIS OFFERING
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
You will experience an immediate and substantial dilution of $6.65 per share
in the net tangible book value per share of our common stock from the initial
public offering price, assuming an initial public offering price of $9.00 per
share. In addition, the exercise of warrants currently outstanding could cause
additional dilution to you.
THERE IS A SIGNIFICANT AMOUNT OF UNALLOCATED NET PROCEEDS AND WE WILL HAVE
BROAD DISCRETION IN HOW WE USE THESE PROCEEDS.
We have not designated any specific uses for a significant portion of our
net proceeds from this offering. Therefore, we will have broad discretion in how
we use these net proceeds. We may use net proceeds for working capital, business
expansion and other general corporate purposes. Investors will have to rely on
the judgment of our management regarding the application of our net proceeds
from this offering.
BECAUSE AN ACTIVE TRADING MARKET FOR OUR SHARES MAY NOT DEVELOP AFTER THIS
OFFERING, IT MAY BE DIFFICULT TO SELL YOUR SHARES.
Prior to this offering, there has not been a public market for our common
stock. We do not know the extent to which investor interest in PCQuote.com will
lead to the development of a trading market for our common stock or how our
common stock will trade in the future. If an active and liquid trading market
does not develop, you may have difficulty selling your shares.
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY BE UNABLE TO SELL YOUR SHARES
AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
The initial public offering price of shares of our common stock may not be
indicative of market prices that will prevail after this offering. Therefore,
you may be unable to sell your shares for more than you paid for them. Numerous
factors may cause the market price of our shares to fluctuate significantly,
such as:
- fluctuations in our quarterly revenues and earnings and those of our
competitors;
- shortfalls in our operating results from levels forecast by securities
analysts;
- announcements concerning us or our competitors;
- the introduction of new financial or business Web sites or Web-based
services;
- changes in service price policies by us or our competitors;
- market conditions in our industry; and
- the general state of the securities market (particularly the Internet
sector).
19
<PAGE>
In addition, trading in shares of companies listed on the Nasdaq National
Market in general and trading in shares of Internet companies in particular have
experienced extreme price and volume fluctuations that have been unrelated or
disproportionate to operating performance. The trading prices and multiples of
the shares of many Internet companies are at or near historical highs. These
trading prices and multiples may not be sustainable. These broad market and
industry factors may depress our stock price, regardless of our actual operating
results.
SUBSTANTIAL FUTURE SALES OF OUR SHARES AFTER THIS OFFERING COULD MATERIALLY
AND ADVERSELY AFFECT OUR STOCK PRICE.
The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of our common stock.
After this offering, 14,428,948 shares of our common stock will be
outstanding. Of these shares, the 5,000,000 shares sold in this offering
(5,750,000 shares if the underwriters' over-allotment option is exercised in
full) will be freely tradable without restrictions under the Securities Act,
except for any shares purchased by our affiliates, defined as any person that,
directly or indirectly, controls, or is controlled by, or is under common
control with, PCQuote.com. We have granted CNNFN one demand registration right
and unlimited piggyback registration rights covering the 128,948 shares of our
common stock they own and the 386,842 shares they may acquire upon exercise of
the warrant held by them. We granted to HyperFeed Technologies unlimited
"piggyback" and demand registration rights covering the 9,300,000 shares of our
common stock they will own after this offering (8,550,000 shares if the
underwriters' over-allotment option from them is exercised in full).
All of our officers, directors and stockholders, including the selling
stockholder, have entered into lock-up agreements pursuant to which they have
agreed not to offer or sell any shares of our common stock for a period of 180
days after the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. Prudential Securities may,
at any time and without notice, waive the terms of these lock-up agreements
specified in the underwriting agreement. Upon expiration of this lock-up period,
9,428,948 outstanding shares may be sold in the future subject to compliance
with the volume limitations and other restrictions of Rule 144.
WE DO NOT CURRENTLY HAVE AN INTENTION TO PAY DIVIDENDS.
We have not declared or paid, and in the near future we do not anticipate
declaring or paying, dividends on our common stock. Investors who anticipate a
need for immediate income from their investment should not purchase shares of
our common stock.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to PCQuote.com from the sale of common stock in this
offering, assuming an initial public offering price of $9.00 per share, are
estimated to be approximately $36.3 million, after deducting underwriting
discounts and commissions and estimated offering expenses. We intend to use
these net proceeds as follows:
- INCREASED MARKETING AND PROMOTIONAL EFFORTS. We plan to initiate an
aggressive marketing campaign that will include advertising in a variety
of traditional and online media to promote our Web sites and service
offerings. We expect to spend approximately $11.0 million for marketing
and promotional purposes over the next 12 months. We believe that these
increased marketing efforts will enable us to significantly grow our
advertising base by capitalizing on the attractiveness of our high-end
user, as well as build brand awareness, increase traffic and create a
ready source of potential subscribers for our services;
- ACQUISITION OF ADDITIONAL CONTENT TO ENHANCE OUR SERVICES. In order to
enable both current and future users to receive the type of online
experience they desire, we will use a portion of our net proceeds to
acquire the content and the technology needed to enhance our services,
such as personalization and community features;
- PURCHASE OF NEW SYSTEMS, TECHNOLOGIES AND RESOURCES TO SUPPORT OUR GROWTH.
As our content and service offerings grow, we anticipate that we will have
a greater need for additional back-end production systems and
infrastructure. We will use a portion of our net proceeds to support our
services with new systems, technologies and resources;
- HIRING OF ADDITIONAL EMPLOYEES. We will use a portion of our net proceeds
to hire additional management, technical and administrative personnel;
- REPAYMENT OF SHORT-TERM LIABILITIES TO HYPERFEED TECHNOLOGIES. We will use
a portion of our net proceeds to pay HyperFeed Technologies an aggregate
amount of approximately $2.3 million, which consists of: (1) $213,500 per
month for services provided to us beginning in April 1999, (2) $500,000,
representing one-half of the amount to be paid by HyperFeed Technologies
to Townsend Analytics under a termination agreement between them, and (3)
approximately $514,000 for data feed services provided to us beginning in
April 1999;
- REPAYMENT OF OTHER SHORT-TERM LIABILITIES. In September 1999, we borrowed
$2.0 million from Motorola, Inc. under a promissory note that bears
interest at the prime rate from time to time announced in the WALL STREET
JOURNAL (8.25% as of September 9, 1999) and is payable in quarterly
installments from June 30, 2000 through March 31, 2002. However, this
note, plus a prepayment fee of $140,000, is required to be repaid in full
upon the closing of this offering. We will use a portion of the net
proceeds to pay this prepayment fee. In addition, to the extent we use any
of the proceeds of this note prior to the closing of this offering, we
will use a portion of the net proceeds from this offering to repay this
amount; and
- GENERAL CORPORATE PURPOSES, INCLUDING CAPITAL EXPENDITURES.
In addition, we may use a portion of our net proceeds to pay up to $2.0
million which we may be required to pay to HyperFeed Technologies to satisfy any
shortfall in the $5.0 million minimum aggregate license fees HyperFeed
Technologies is required to pay to Townsend Analytics under a new agreement
between those two companies.
Pending these uses, we may invest our net proceeds from this offering
temporarily in short-term, investment grade, interest-bearing securities or
guaranteed obligations of the U.S. government. We will not receive any proceeds
from the sale of shares by the selling stockholder.
DIVIDEND POLICY
We have not declared or paid, and do not anticipate declaring or paying, any
dividends on our common stock in the near future. Any future determination as to
the declaration and payment of dividends will be at the discretion of our Board
of Directors and will depend on then existing conditions, including our
financial conditions, result of operations, contractual restrictions, capital
requirements, business prospects and such other factors as our Board of
Directors deems relevant.
21
<PAGE>
DILUTION
Purchasers of common stock in this offering will experience immediate and
substantial dilution in
the net tangible book value of the common stock from the initial public offering
price. Net tangible book value per share represents the amount of the total
tangible assets less total liabilities of PCQuote.com, divided by the number of
shares of common stock outstanding. At June 30, 1999, PCQuote.com had a deficit
in net tangible book value of $2.3 million or $0.24 per share of common stock.
After giving effect to the sale of 4,500,000 shares of common stock by
PCQuote.com at an assumed initial public offering price of $9.00 per share and
the deduction of underwriting discounts and commissions and estimated offering
expenses payable by PCQuote.com, the pro forma net tangible book value of
PCQuote.com at June 30, 1999 would have been $33.9 million or $2.35 per share.
This represents an immediate increase in net tangible book value of $2.59 per
share to existing stockholders and an immediate and substantial dilution of
$6.65 per share to new investors purchasing common stock in this offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C> <C>
Assumed initial public offering price......................... $ 9.00
Deficit in net tangible book value as of June 30, 1999...... (0.24)
Increase attributable to new investors...................... 2.59
Pro forma net tangible book value after this offering......... 2.35
---------
Dilution in pro forma net tangible book value to new
investors................................................... $ 6.65
---------
---------
</TABLE>
The following table summarizes the differences between existing stockholders
and new investors in this offering with respect to the number of shares of
common stock purchased from PCQuote.com, the total consideration paid to
PCQuote.com and the average consideration paid per share (before the deduction
of underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)........................ 9,928,948 68.8% $ 918,952 2.2% $ 0.09
New investors.................................... 4,500,000 31.2% 40,500,000 97.8% 9.00
------------ --------- ------------- ---------
Total............................................ 14,428,948 100.0% $ 41,418,952 100.0%
------------ -------------
------------ -------------
</TABLE>
(1) Sales by HyperFeed Technologies in this offering will cause the number of
shares held by existing stockholders to be reduced to 9,428,948, or 65.3% of
the total number of our shares outstanding after the offering, and will
increase the number of shares held by new investors to 5,000,000, or 34.7%
of the total number of our shares outstanding after this offering.
22
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1999, the cash and
capitalization of PCQuote.com, and the cash and capitalization of PCQuote.com
adjusted to reflect this offering and the application of the estimated net
proceeds to PCQuote.com. The following table should be read in conjunction with
our financial statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash................................................................................... $ 238 $ 34,055
--------- -------
--------- -------
Stockholders' equity:
Preferred stock, par value $0.01 per share; 1,000,000 shares authorized; none issued
and outstanding actual and as adjusted............................................. -- --
Common stock, par value $0.01 per share; 74,000,000 shares authorized; 9,928,948
shares issued and outstanding; and 14,428,948 shares issued and outstanding as
adjusted (2)....................................................................... $ 99 $ 144
Additional paid-in capital........................................................... 6,700 42,920
License fee.......................................................................... (5,530) (5,530)
Accumulated deficit.................................................................. (1,679) (1,679)
--------- -------
Total stockholders' equity (deficit)................................................... (410) 35,855
--------- -------
Total capitalization................................................................... $ (410) $ 35,855
--------- -------
--------- -------
</TABLE>
(1) Assumes no exercise of the underwriters' over-allotment option from us.
(2) Excludes an aggregate of 1,538,600 shares of common stock reserved for
issuance under our 1999 Combined Incentive and Non-statutory Stock Option
Plan, of which options to purchase 1,210,779 shares will be granted as of
the date of this prospectus, and 386,842 shares of common stock issuable
upon the exercise of the outstanding CNNFN warrant.
23
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The accompanying pro forma financial information reflects (a) the impact of
the agreements with HyperFeed Technologies, Townsend Analytics and CNNFN as if
such agreements were in place beginning January 1, 1998 and (b) additional
executive compensation payable to four officers as if these officers had been
employed by the Company commencing January 1, 1998. The pro forma financial
information presented below is not necessarily indicative of the operating
results that would have been achieved had the events contemplated by the
agreements occurred or had the officers been hired at the beginning of the
periods presented; nor does it purport to represent our future financial
position.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------
YEAR ENDED
ACTUAL ADJUSTMENTS DECEMBER 31, 1998
------------- --------------- -----------------
<S> <C> <C> <C>
Revenues:
Subscription................................................ $ 7,995,691 $ 7,995,691
Advertising................................................. 1,368,463 1,368,463
Other....................................................... 547,957 547,957
------------- -----------------
Total revenues.......................................... 9,912,111 9,912,111
Direct cost of revenues....................................... 6,542,787 $ (272,000)(a) 8,063,787
------------- -----------------
113,000(b)
1,680,000(e)
Gross profit.................................................. 3,369,324 1,848,324
Operating expenses:
General and administrative.................................. 2,481,583 295,000(c) 3,040,583
264,000(d)
Sales and marketing......................................... 2,108,399 49,000(d) 2,157,399
Research and development.................................... 241,223 30,000(d) 271,223
Depreciation................................................ 196,216 196,216
------------- -----------------
Total operating expenses................................ 5,027,421 5,665,421
------------- -----------------
Loss from operations.......................................... (1,658,097) (3,817,097)
Other income (expense):
Interest income............................................. 8,292 8,292
Interest expense............................................ (512,646) (512,646)
------------- -----------------
Other expense, net............................................ (504,354) (504,354)
------------- -----------------
Loss before income taxes...................................... (2,162,451) (4,321,451)
Income taxes.................................................. -- --
------------- -----------------
Net loss...................................................... $ (2,162,451) $ (4,321,451)
------------- -----------------
------------- -----------------
Pro forma basic and diluted net loss per share................ $ (0.22) $ (0.44)
------------- -----------------
------------- -----------------
Pro forma weighted-average shares used in the calculation of
basic and diluted net loss per share........................ 9,800,000 9,800,000
------------- -----------------
------------- -----------------
</TABLE>
24
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------
SIX MONTHS
ACTUAL ADJUSTMENTS ENDED JUNE 30, 1999
------------- --------------- -------------------
<S> <C> <C> <C>
Revenues:
Subscription.............................................. $ 6,171,371 $ 6,171,371
Advertising............................................... 536,455 536,455
Other..................................................... 235,975 235,975
------------- -------------------
Total revenues........................................ 6,943,801 6,943,801
Direct cost of revenues..................................... 5,792,913 $ (75,000)(a) 6,264,913
------------- -------------------
57,000(b)
490,000(e)
Gross profit................................................ 1,150,888 678,888
Operating expenses:
General and administrative................................ 1,864,984 142,000(c) 2,114,984
108,000(d)
Sales and marketing....................................... 961,126 19,000(d) 980,126
Research and development.................................. 133,842 22,000(d) 155,842
Depreciation.............................................. 152,803 152,803
------------- -------------------
Total operating expenses.............................. 3,112,755 3,403,755
------------- -------------------
Loss from operations........................................ (1,961,867) (2,724,867)
Other income (expense)
Interest income........................................... -- --
Interest expense.......................................... (4,354) (4,354)
------------- -------------------
Other expense, net.......................................... (4,354) (4,354)
------------- -------------------
Loss before income taxes.................................... (1,966,221) (2,729,221)
Income taxes................................................ -- --
------------- -------------------
Net loss.................................................... $(1,966,221) $ (2,729,221)
------------- -------------------
------------- -------------------
Pro forma basic and diluted net loss per share.............. $ (0.20) $ (0.28)
------------- -------------------
------------- -------------------
Pro forma weighted-average shares used in the calculation of
basic and diluted net loss per share...................... 9,844,882 9,844,882
------------- -------------------
------------- -------------------
</TABLE>
(a) To record the impact of our license with HyperFeed Technologies to use its
data feed as if the license agreement had been in effect as of January 1,
1998. For the license to use HyperFeed Technologies' data feed, we will pay
HyperFeed Technologies monthly fees based on the number of users and quotes
accessed. If the license had been in effect during the period described, the
direct cost of revenues would have been lower than if the license had not
been in effect during the same period. The decrease in direct cost of
revenues during this period is a result of the negotiated rate per user and
quote accessed included in the license. This pro forma charge was less than
the costs related to the data feed allocated to us during this period. The
license was negotiated by us and Hyperfeed Technologies such that HyperFeed
Technologies would provide the data feed at a cost that approximated the
amount HyperFeed Technologies would charge an unaffiliated third party.
(b) To record the impact of our license agreement with Townsend Analytics under
which they licensed to us the right to use a software application which we
market as PCQuote 6.0 RealTick as if the agreement had been in effect as of
January 1, 1998.
25
<PAGE>
(c) To record the impact of compensation for four executive officers as if these
officers had been hired as of January 1, 1998.
(d) To record the impact of our agreement with HyperFeed Technologies for the
provision of managerial, marketing, technological support, clerical,
financial, legal and administrative services as if the agreement had been in
effect as of January 1, 1998.
(e) To record the impact of the non-cash charge relating to the warrants issued
to CNNFN in connection with our license agreement with CNNFN as if the
warrants had been issued as of January 1, 1998. The estimated value of the
warrant ($5,880,000) will be amortized as a non-cash charge ratably over the
42-month term of the license agreement.
26
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to, and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," our financial statements and the
related notes appearing elsewhere in this prospectus. The statement of
operations data presented below for the year ended December 31, 1995 are derived
from unaudited financial statements not included in this prospectus. The
statement of operations data of PCQuote.com presented below for the years ended
December 31, 1996, 1997 and 1998, and the balance sheet data as of December 31,
1997 and 1998 are derived from financial statements of PCQuote.com that have
been audited by KPMG LLP, independent certified public accountants, and are
included elsewhere in this prospectus. The statement of operations data for the
six months ended June 30, 1998 and 1999 and the balance sheet data as of June
30, 1999 are derived from unaudited financial statements which, in the opinion
of management, have been prepared on the same basis as the audited financial
statements and contain all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the results of operations for
such periods. The results of operations for the six months ended June 30, 1999
are not necessarily indicative of results to be expected for the full year. We
commenced operations in July 1995.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ ------------------------
1995 1996 1997 1998 1998 1999
------------- --------- --------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Subscription......................... $ -- $ 776 $ 3,402 $ 7,996 $ 3,376 $ 6,171
Advertising.......................... -- 167 1,131 1,368 735 537
Other................................ -- 30 230 548 265 236
--- --------- --------- ----------- ----------- -----------
Total revenues..................... -- 973 4,763 9,912 4,376 6,944
Direct cost of revenues................ 70 813 4,201 6,543 2,869 5,793
--- --------- --------- ----------- ----------- -----------
Gross profit........................... (70) 160 562 3,369 1,507 1,151
Operating expenses:
General and administrative........... -- 1,084 2,298 2,482 1,358 1,865
Sales and marketing.................. -- 620 1,226 2,108 1,115 961
Research and development............. -- 392 254 241 84 134
Depreciation......................... -- -- 72 196 94 153
--- --------- --------- ----------- ----------- -----------
Total operating expenses........... -- 2,096 3,850 5,027 2,651 3,113
--- --------- --------- ----------- ----------- -----------
Loss from operations................... (70) (1,936) (3,288) (1,658) (1,144) (1,962)
Other income (expense), net............ -- (26) (1,284) (504) (407) (4)
--- --------- --------- ----------- ----------- -----------
Loss before income taxes............... (70) (1,962) (4,572) (2,162) (1,551) (1,966)
Income taxes........................... -- -- -- -- -- --
--- --------- --------- ----------- ----------- -----------
Net loss............................... $ (70) $ (1,962) $ (4,572) $ (2,162) $ (1,551) $ (1,966)
--- --------- --------- ----------- ----------- -----------
--- --------- --------- ----------- ----------- -----------
Pro forma basic and diluted net loss
per share............................ $ (0.22) $ (0.16) $ (0.20)
----------- ----------- -----------
----------- ----------- -----------
Pro forma weighted-average shares used
in the calculation of basic and
diluted net loss per share........... 9,800,000 9,800,000 9,844,882
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................................................... $ -- $ -- $ 238
Total assets....................................................................... 2,885 3,306 4,335
Long-term liabilities.............................................................. -- -- --
Total stockholders' equity (deficit)............................................... 1,064 1,080 (410)
</TABLE>
27
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions about PCQuote.com including, among other things:
- our limited operating history as a stand-alone entity and history of
losses;
- our need to maintain and increase our subscriber base to increase
profitability;
- our ability to increase the number of visitors to our WWW.PCQUOTE.COM Web
site in order to increase advertising revenues;
- the need to establish relationships with content and service providers;
- the intense competition with respect to Web sites providing business and
financial news and information;
- existing and future regulations affecting our business or the Internet
generally;
- our dependence on HyperFeed Technologies, Inc.; and
- other risk factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe", "may", "will",
"estimate", "continue", "anticipate", "intend", "expect" and similar
expressions, as they relate to PCQuote.com, our business or our management are
intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this prospectus except as may be required under the federal
securities laws. In light of these risks and uncertainties, the forward-looking
events and circumstances discussed in this prospectus may not occur and actual
results could differ materially from those anticipated or implied in the
forward-looking statements.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the related notes appearing elsewhere in this prospectus. The
historical financial information included in this prospectus does not
necessarily reflect what our financial condition and results of operations would
have been had we been operated as an independent entity during the periods
presented.
OVERVIEW
Our WWW.PCQUOTE.COM Web site was first established in July 1995 and our
subscription-based Web site, MARKETSMART-REAL.PCQUOTE.COM, was introduced in
March 1996. In the second quarter of 1996, we began selling subscriptions to our
PCQuote 6.0 RealTick service, in addition to selling advertising sponsorships
and rotating advertising banners on our Web pages. In late 1996, we began
offering our Web Template and Hyperscript services to businesses and application
developers. Our Web Template service allows users to create their own "private
label" Web sites with many of the features of our own Web sites, such as access
to delayed or real-time quotes and research and analysis tools. Our Hyperscript
service allows users to develop their own Internet-based market data
applications. We were incorporated on March 19, 1999, as a wholly-owned
subsidiary of HyperFeed Technologies. Prior to that time, we operated as part of
HyperFeed Technologies. Our assets, as reflected in the financial statements
included in this prospectus, have been contributed to us by HyperFeed
Technologies as an additional capital contribution. We have assumed the
liabilities of HyperFeed Technologies related to our business. These assets and
liabilities will be recorded by us using HyperFeed Technologies' historical cost
basis.
We have incurred significant net losses and negative cash flows from
operations since our inception. We intend to continue to make significant
investments in marketing and promotion, content development and technology and
infrastructure development. As a result, we believe that we will incur operating
losses and negative cash flows from operations in the near future, and that such
losses and negative cash flows will increase for at least the next year.
REVENUES
We currently derive our revenues primarily from:
- subscription revenue consisting of the sale of subscriptions to PCQuote
6.0 RealTick and private label versions of PCQuote 6.0 RealTick, and our
MARKETSMART-REAL.PCQUOTE.COM Web site, which together accounted for 80.7%
of our total revenues in 1998 and 88.9% of our total revenues for the six
months ended June 30, 1999;
- advertising revenue consisting of the sale of advertising banners and
sponsorships displayed on our Web pages, which accounted for 13.8% of our
total revenues in 1998 and 7.7% of our total revenues for the six months
ended June 30, 1999; and
- other revenue consisting of business-to-business services, such as our Web
Template Service, Web developer tools and content access to businesses and
developers, which accounted for 5.5% of our revenues in 1998 and 3.4% of
our total revenues for the six months ended June 30, 1999.
Subscription and other revenue are recognized ratably over the contract term
as services are rendered by us. Advertising revenue is recognized as the
advertising is displayed on our Web sites.
DIRECT COST OF REVENUES
Our direct cost of revenues consists of:
- market data acquisition costs;
29
<PAGE>
- license fees and royalties paid to software developers and content
providers;
- pass-through exchange fees paid to original market data providers;
- sales commissions based on a percentage of generated revenue; and
- amortization of previously capitalized software development costs.
Previously capitalized software development costs include the costs of
initial development of our Web sites; the cost of delivering, controlling access
to, monitoring and billing for our subscription and advertising services, and
our portion of the costs incurred to develop analytical software for resale
related to our new PCQuote Orbit service. As of June 30, 1999, there were $1.9
million of these capitalized costs that will be amortized through 2001. With
these development efforts essentially completed, we anticipate further costs
will be related only to maintenance and will be expensed as incurred. The
balance of unamortized software development costs as of June 30, 1999 is
scheduled to be charged against operations as follows: $600,000 in the last six
months of 1999, $900,000 in 2000 and $400,000 in 2001.
OPERATING EXPENSES
Our operating expenses consist of general and administrative expenses, sales
and marketing expenses, research and development expenses and depreciation.
- General and administrative expenses include the cost of customer service
and technical assistance for users of our subscription services, finance
and accounting costs and corporate and general administrative costs. We
anticipate hiring additional personnel to support our growth and incurring
additional costs related to being a public company, including the hiring
of our new management team. As a result, we anticipate that general and
administrative expenses will increase.
- Sales and marketing expenses include base salary compensation to our sales
and marketing employees and related costs, advertising and promotion costs
and costs related to the management of service offerings and market
development. We expect sales and marketing expenses to increase
significantly as we pursue an aggressive marketing campaign to increase
the traffic to our Web sites, expand marketing of the "PCQuote" brand, add
to our subscription base and hire additional sales and marketing
personnel.
- Research and development expenses include expenses for research and
development of new services and maintenance costs related to existing
services We will require significant investments in content and service
development to remain competitive. Accordingly, we expect that research
and development expenses will increase.
- Depreciation expenses represent non-cash charges for the pro-rata benefit
of previously expended amounts for capital equipment purchases. We expect
that depreciation expense will increase as we purchase additional capital
equipment to build out our infrastructure and to support the growth of our
business. We also expect to incur amortization expense when we establish
our own facilities in connection with our expected growth.
AGREEMENTS WITH HYPERFEED TECHNOLOGIES
As a part of the separation from HyperFeed Technologies, HyperFeed
Technologies contributed intellectual property and technology relating to our
business, including Hyperscript, PCQuote Software Development Kit, our domain
names and Web sites and Web Templates. HyperFeed Technologies also granted us a
license to use its data feed, including HyperFeed 2000. For the license to use
HyperFeed Technologies' data feed, we will pay HyperFeed Technologies monthly
fees based on the number of users and quotes accessed. If the data feed license
agreement had been in effect as of January 1, 1999, we would have paid HyperFeed
Technologies approximately $555,000 for the six months ended June 30,
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1999. Under a maintenance agreement, we will pay HyperFeed Technologies a
service fee for future modifications, upgrades and enhancements to PCQuote Orbit
in an amount equal to 3% of our gross revenues derived from all permitted uses
and sub-licensing of PCQuote Orbit. PCQuote Orbit is expected to be launched in
Fall 1999.
We have entered into an agreement with HyperFeed Technologies effective as
of April 1, 1999 for the provision of managerial, marketing, technological
support, clerical, financial, legal and administrative services. We will pay
HyperFeed Technologies $1.8 million over the last nine months of 1999 and
$756,000 over the first six months of 2000 for these services. We will also pay
an amount to be negotiated, if we continue to need any of these services after
June 30, 2000. The agreement is structured to assist us until we are able to
perform these services ourselves, which we plan to do no later than December 31,
2000.
AGREEMENT WITH CNNFN
On April 12, 1999, we entered into a license agreement with CNNFN under
which CNNFN granted us a license to display on our Web sites headlines from
original stories published on the CNNFN Web site at WWW.CNNFN.COM. The term of
the agreement is for 3 1/2 years. We issued to CNNFN a warrant to purchase
515,790 shares of our common stock, representing a 5% interest in our
outstanding common stock at the time the agreement was executed. 25% of the
shares subject to this warrant vested immediately and an additional 25% vests on
each anniversary date of the signing of the agreement. CNNFN exercised the
vested portion of this warrant on April 29, 1999. The estimated value assigned
to the warrant was $5.9 million and was recorded as a contra-equity account.
This license fee will be amortized as a non-cash charge ratably over the term of
the agreement.
AGREEMENT WITH TOWNSEND ANALYTICS
On May 28, 1999, we entered into a new license agreement with Townsend
Analytics under which they licensed to us the right to use a software
application which we market as PCQuote 6.0 RealTick. We also offer private label
versions of this application. The new agreement replaced the prior agreement
between Townsend Analytics and HyperFeed Technologies with respect to our
business. The initial term of the agreement ends December 4, 2000. We agree to
pay them 33% of the subscription revenues we derive from our PCQuote 6.0
RealTick service and 50% of revenues relating to the private label version that
we presently sublicense to two of our customers. For certain of our customers,
Townsend Analytics provides hosting services and order execution capabilities,
and receives a license fee of 66% of our revenues derived from these customers.
Regardless of actual subscription revenues we receive, we are required under the
license agreement to make minimum license fee payments to Townsend Analytics of
$220,000 per month until we pay aggregate license fees of $5.0 million. This
$5.0 million payment represents one-half of the $10.0 million guaranteed minimum
aggregate license payment arrangement among Townsend Analytics, HyperFeed
Technologies and us. In addition, we could be required to pay up to $2.0 million
to satisfy any shortfall in the $5.0 million minimum license fee payment
allocated to HyperFeed Technologies if the amounts paid by us and HyperFeed
Technologies do not in the aggregate reach $10.0 million. Since we expect to
receive 70% of the revenue derived collectively by us and HyperFeed Technologies
from products licensed to both us and HyperFeed Technologies, we believe this
approach will equitably split the $10.0 million guaranteed minimum. We will also
pay $500,000 to HyperFeed Technologies to reimburse them for a portion of the
amount to be paid by them to Townsend Analytics under a termination agreement
between those parties.
RESULTS OF OPERATIONS
Our results of operations prior to April 1, 1999 have been compiled from the
historical results of operations of HyperFeed Technologies as they relate to our
service offerings prior to our separation from that company. These results of
operations reflect all revenues and costs directly attributable to
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our service offerings, including costs for facilities, communications network,
data feed operations, sales and customer support and product and market
development resources shared by both us and HyperFeed Technologies and
allocations of costs for certain administrative functions and services performed
by centralized departments within HyperFeed Technologies.
For all periods presented prior to April 1, 1999, general and administrative
expenses reflected in the financial statements include allocations of corporate
expenses from HyperFeed Technologies. These allocations took into consideration
personnel, business volume or other appropriate bases and generally include
administrative expenses related to general management, insurance, information
management and other miscellaneous services. Interest expense shown in the
financial statements reflects interest expense associated with our share of the
aggregate borrowings of HyperFeed Technologies for each of the periods
presented. Allocations of corporate expenses are estimates based on our
management's best assessment of actual expenses. It is our management's opinion
that the expenses charged to PCQuote.com are reasonable. Commencing April 1,
1999, general and administrative expenses are based on a combination of our
actual expenses and the costs under our agreement with HyperFeed Technologies.
The financial statements were prepared as if PCQuote.com operated as a
stand-alone entity since its inception. The financial information included
herein may not necessarily reflect the financial position, results of operation
or cash flows of PCQuote.com in the future or what the balance sheets, results
of operations or cash flows of PCQuote.com would have been if it had been a
separate, stand-alone, publicly-held corporation during the periods presented.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Total revenues increased 58.7% for the six months ended June 30,
1999 to $6.9 million from $4.4 million for the comparable 1998 period. Total
subscription-based revenue increased 82.8% to $6.2 million in the 1999 period
from $3.4 million in the 1998 period, while total advertising revenue decreased
to $537,000 in the 1999 period from $735,000 in the 1998 period. Other revenue
remained essentially unchanged. The growth in subscription revenue was primarily
attributable to an increase in the number of subscribers to our PCQuote 6.0
RealTick service and to the private label version of this service. Although ad
impressions increased, advertising revenue decreased due, in part, to the
increased sales during the 1999 period of smaller-sized advertisements for which
lower rates are charged. In addition, our advertising rates declined for
traditional size banner ads in response to generally declining ad rates within
the industry.
DIRECT COST OF REVENUES. Direct cost of revenues increased 101.9% to $5.8
million for the 1999 period from $2.9 million for the comparable 1998 period,
primarily due to increased royalties, commissions, payments to providers of
market data and data distribution costs directly attributable to the growth in
the number of subscribers to our PCQuote 6.0 RealTick service. Costs in the 1999
period also included our obligation to reimburse HyperFeed Technologies for
$500,000 as part of HyperFeed Technologies' termination agreement with Townsend
Analytics and the amortization of $350,000 relating to the warrant we issued
under our license agreement with CNNFN. Amortization of software development
costs increased to $542,000 in the 1999 period from $392,000 in the 1998 period,
as a result of increased development efforts related to our Web sites and other
service offerings.
GROSS PROFIT. Our gross profit decreased to $1.2 million in the 1999 period
from $1.5 million in the 1998 period.
OPERATING EXPENSES. Total operating expenses increased to $3.1 million in
the 1999 period from $2.7 million in the comparable 1998 period. This was
primarily due to the initiation of the services and support agreement with
HyperFeed Technologies and an increase in the number of employees during the
1999 period. Sales and marketing expenses decreased to $961,000 in the 1999
period from $1.1 million in the 1998 period. The decrease was due to lower sales
personnel costs and a decrease in
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promotional expenditures. Research and development expenses increased to
$134,000 in the 1999 period from $84,000 in the 1998 period as a result of an
increase in the number of development personnel and related expenses.
Depreciation expense increased to $153,000 in the 1999 period from $94,000 in
the 1998 period as the result of acquisitions of computer equipment to support
the growth associated with increased traffic to our Web sites, and the growth in
subscribers to our PCQuote 6.0 RealTick service.
INTEREST EXPENSE. Interest expense decreased to $4,000 in the 1999 period
from $412,000 in the 1998 period. The decrease was the result of a reduction in
the level of contributions required from HyperFeed Technologies to fund our
operations, coupled with a decrease in their cost of borrowing in 1999.
NET LOSS. As a result of the factors discussed, our net loss increased to
$2.0 million in the 1999 period from $1.6 million in the 1998 period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES. Total revenues increased 108.1% to $9.9 million in 1998 from $4.8
million in 1997. Total subscription-based revenue increased 135.1% to $8.0
million in 1998 from $3.4 million in 1997, while total advertising revenue
increased 21.0% to $1.4 million in 1998 from $1.1 million in 1997. Other revenue
grew to $548,000 in 1998 from $230,000 in 1997. The growth in subscription
revenue was primarily attributable to an increase in the number of subscribers
to our PCQuote 6.0 RealTick service and the private label version of this
service. The increase in advertising revenues was attributable to an increase in
the number of visitors to our Web site, resulting in an increase in advertising
page impressions sold. Other revenue increased primarily due to growth in our
Web hosting and Web developer business-to-business services.
DIRECT COST OF REVENUES. Direct cost of revenues increased 55.7% to $6.5
million in 1998 from $4.2 million in 1997, primarily due to increased royalties,
commissions, payments to providers of market data and communication costs
directly attributable to the growth in the number of subscribers to our PCQuote
6.0 RealTick service and the private label version of this service. Amortization
of software development costs increased to $726,000 in 1998 from $550,000 in
1997, as a result of increased development efforts related to our Web sites and
other service offerings.
GROSS PROFIT. Our gross profit increased to $3.4 million in 1998 from
$562,000 in 1997.
OPERATING EXPENSES. Total operating expenses increased 30.6% to $5.0
million in 1998 from $3.8 million in 1997. General and administrative expenses
increased to $2.5 million in 1998 from $2.3 million in 1997. This was primarily
due to increases in customer service and technical support costs attributable to
the growth in subscribers to our services, offset, in part, by reductions in
corporate and administrative compensation and related costs. Sales and marketing
expenses increased to $2.1 million in 1998 from $1.2 million in 1997. The
increase was due to the hiring of additional sales and marketing personnel in
1998 and increased advertising and promotional expenditures. Research and
development expenditures during 1998 were essentially unchanged from 1997.
Depreciation expense increased to $196,000 in 1998 from $72,000 in 1997. The
increase was the result of increased depreciation expense associated with
acquisitions of computer equipment during the second half of 1997 and throughout
1998 to support the growth associated with increased traffic to our Web sites
and the growth in subscribers to our PCQuote 6.0 RealTick service.
INTEREST EXPENSE. Interest expense decreased to $513,000 in 1998 from $1.3
million in 1997. The decrease was the result of a reduction in the level of
contributions required from HyperFeed Technologies to fund our operations,
coupled with a decrease in their cost of borrowing in 1998.
NET LOSS. As a result of the factors discussed, our net loss decreased to
$2.2 million in 1998 from $4.6 million in 1997.
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YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES. Total revenues increased to $4.8 million in 1997 from $973,000 in
1996. Total subscription-based revenue increased to $3.4 million in 1998 from
$776,000 in 1996, while total advertising revenue increased to $1.1 million in
1997 from $167,000 in 1996. Other revenue increased to $230,000 in 1997 from
$30,000 in 1996. The growth in subscription revenue was primarily attributable
to an increase in the number of subscribers to our PCQuote 6.0 RealTick service
and the private label version of this service. The increase in advertising
revenue was attributable to an increase in the number of visitors to our Web
sites, resulting in an increase in advertising page impressions sold. Increases
in co-branding and Web developer business-to-business services contributed to
the increase in other revenue.
DIRECT COST OF REVENUES. Direct cost of revenues increased to $4.2 million
in 1997 from $813,000 in 1996, primarily due to increased royalties,
commissions, payments to providers of market data and communication costs
attributable to growth of our business. Amortization of software development
costs increased to $550,000 in 1997 from $267,000 in 1996, as a result of
increased Internet development efforts.
GROSS PROFIT. Our gross profit increased to $562,000 in 1997 from $160,000
in 1996.
OPERATING EXPENSES. Total operating expenses increased to $3.8 million in
1997 from $2.1 million in 1996. General and administrative expenses increased to
$2.3 million in 1997 from $1.1 million in 1996. This growth was principally due
to additional personnel and related employee costs required for customer service
and technical support and corporate administration, as well as increased
collection costs and a higher provision for bad debts in connection with the
growth in advertising revenue. Sales and marketing expenses increased to $1.2
million in 1997 from $620,000 in 1996. The increase was due to the hiring of
additional personnel and related costs, coupled with an increase in advertising
and promotional expenditures. Research and development costs decreased to
$254,000 in 1997 from $392,000 in 1996, reflecting a decrease in development
resources required after the launch of our Internet service offerings.
Depreciation expense was $72,000 in 1997. There was no depreciation in 1996. We
switched from leasing to outright purchases in 1997 for a portion of our
equipment needs. Capital acquisitions included computer equipment to support
increased traffic to our Web sites and the growth in subscribers to our PCQuote
6.0 RealTick service and the private label version of this service.
INTEREST EXPENSE. Interest expense increased to $1.3 million for 1997 from
$26,000 in 1996. The increase reflects the substantially higher level of
contributions required from HyperFeed Technologies to fund our operations,
coupled with their significantly higher cost of borrowing in 1997.
NET LOSS. As a result of the factors discussed, our net loss increased to
$4.6 million in 1997 from $2.0 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Since 1995, our operations have been financed by contributions from
HyperFeed Technologies. Cash used in operating activities was $1.3 million in
1996, $3.0 million in 1997 and $898,000 in 1998. For each of these years, cash
was used to support growth. For the six months ended June 30, 1999, cash
provided by operating activities increased to $749,000, as a result of the
increase in accrued expenses.
Cash used in investing activities was $1.3 million in 1996, $1.4 million in
1997, $1.3 million in 1998 and $637,000 for the six months ended June 30, 1999.
The primary use of cash for investing activities in these periods was for
capital equipment purchases and software development. Equipment purchases of
$432,000 in 1997, $315,000 in 1998 and $511,000 during the first six months of
1999 were for computer equipment to support increased traffic to our Web sites
and to support the growth in the number of subscribers to our PCQuote 6.0
RealTick service. Capitalized software development costs decreased
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from $1.3 million in 1996 to $976,000 in 1997 and $965,000 in 1998. The decrease
from 1996 to 1997 was principally due to the completion of the development
efforts to launch our Web sites and service offerings during 1996. Capitalized
software development costs decreased to $126,000 for the six months ended June
30, 1999 from $512,000 for the six months ended June 30, 1998, as a result of
lower development costs related to our new PCQuote Orbit service.
Cash from financing activities, consisting of contributions from HyperFeed
Technologies, were $2.6 million in 1996, $4.4 million in 1997, $2.2 million in
1998 and $126,000 for the first six months of 1999, as compared to $1.1 million
for the first six months of 1998.
On September 7, 1999, we borrowed $2.0 million from Motorola, Inc. evidenced
by a promissory note. The note bears interest at the prime rate from time to
time as announced in the WALL STREET JOURNAL. Payments are due on a quarterly
basis commencing June 30, 2000 through March 31, 2002, subject to early
repayment in full upon the closing of this offering. The promissory note
provides that we are required to pay Motorola a prepayment fee of $140,000 if we
prepay the note on or before June 30, 2000, including as a result of the closing
of this offering. We are also currently in discussions with Motorola regarding a
possible business relationship under which we would provide market data and
investor information content to wireless applications and services being
developed by Motorola. These discussions are in a preliminary stage and there
can be no assurance that any business relationships will develop or that, if a
relationship does develop, it would be of value to us. Motorola has indicated an
interest in purchasing up to $2.0 million of our common stock in this offering
and it is expected that the underwriters will accommodate Motorola's interest in
that regard.
We had no cash balance as of December 31, 1998 and a cash balance of
$238,000 as of June 30, 1999. Our current liabilities exceeded current assets by
$1.7 million as of December 31, 1998 and by $3.2 million as of June 30, 1999.
The majority of our revenues are prepaid with credit cards providing funds for
immediate use.
We believe that the net proceeds to us from our public offering of common
stock will satisfy our working capital and capital expenditure requirements for
at least the next 24 months.
YEAR 2000 READINESS
OVERVIEW. We have relied on written representations made by HyperFeed
Technologies regarding the Year 2000 readiness of the information technology
systems contributed to us as part of our separation. HyperFeed Technologies has
advised us that it implemented a plan to attempt to assess, remediate and
correct any Year 2000 critical risks relating to our systems.
STATE OF READINESS. HyperFeed Technologies has approached the Year 2000
risks in four phases:
- assessment -- identifying Year 2000 risks;
- remediation -- taking corrective action to best mitigate identified Year
2000 risks;
- testing -- validating a specific remediation effort that we have made or
confirming a third-party capability or certification of Year 2000
compliance; and
- contingency planning -- identifying an alternate course of action and/or
procedure in the event we cannot or fail to remediate or mitigate a known
Year 2000 risk.
HyperFeed Technologies has advised us that it has completed the assessment
phase for our products, information systems and critical suppliers. We are
currently in the final stages of the remediation and testing phases. This
includes verifying Year 2000 compliance of outside vendors and suppliers and
testing all mission critical items. We are currently verifying the Year 2000
compliance of our outside vendors and suppliers by reviewing reports on their
Web sites and in their periodic filings under the Securities Exchange Act of
1934. We have reviewed the Year 2000 disclosures of our vendors and suppliers as
to the compliance of their systems. Of those reviewed,
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- 50.0% indicate they are currently Year 2000-compliant;
- 50.0% indicate they are assessing their systems;
We have not had a response from 5 of our vendors.
We are not directly contacting our outside vendors and suppliers to obtain
assurances as to the compliance of their systems due to low response rates to
earlier efforts to obtain direct assurances.
Testing also includes all personal computers, routers, modems, phone lines,
Internet service providers, commonly known as ISP's, and production computers,
known as servers, used internally. We are also checking our outbound satellite,
phone companies and ISP's distribution network, in addition to some ISP's that
our customers may use.
On May 1, 1999, HyperFeed Technologies participated in the full "end-to-end"
Year 2000 scenario test sponsored by the Financial Information Forum in
conjunction with the Securities Industry Association. This was an industry-wide
test to provide securities, options and futures exchanges and market data
providers with the ability to test their systems under simulated Year 2000
conditions. Time was essentially moved forward into the Year 2000. HyperFeed
Technologies performed the test on its mission-critical software and hardware
and reported the results to the Financial Information Forum which, in turn,
informed them that they passed. Based on the results of this test, we believe
that these mission-critical systems are currently Year 2000-compliant.
As of June 30, 1999, approximately 90% of the testing of mission-critical
systems have been completed. All testing, including internal infrastructure, is
scheduled to be completed by September 30, 1999. We have not started contingency
planning because we are concentrating our efforts on remediation and testing. We
believe effective contingency planning should not begin until after these phases
are complete. We expect to begin comprehensive contingency planning at the start
of the third quarter of 1999. We may or may not engage in contingency planning
for individual subproject components where successful Year 2000 remediation has
been validated through the testing process or other methods.
COSTS. As of June 30, 1999, we have spent $47,000 on Year 2000 remediation
and testing. This includes internal personnel resources, hardware, software and
equipment replacement and upgrades necessary to be Year 2000-compliant. We will
be upgrading various administrative systems that use commercial third-party
software for accounting, billing and customer management. The total remaining
cost of software, replacement equipment and internal resources for remediation
and testing to become Year 2000-compliant is not expected to exceed $250,000.
Based upon currently available information, we do not believe that the cost of
Year 2000 compliance will have a material impact on our financial condition,
results of operations or liquidity.
RISKS. Achieving Year 2000 compliance depends on many factors. Some factors
may be beyond our control because we use services of others. Should our internal
systems or the internal system of one of our critical vendors fail to achieve
Year 2000 compliance and fail in the Year 2000, our business, financial
condition and results of operations could be adversely affected.
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BUSINESS
OVERVIEW
PCQuote.com is an Internet-based provider of real-time and delayed market
quotes, timely business news and comprehensive tools for researching and
analyzing financial information. We combine all of these features into a
comprehensive portfolio of services targeted at investors. Our investor service
offerings consist of two Web sites, WWW.PCQUOTE.COM and
MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled desktop applications,
PCQuote 6.0 RealTick and PCQuote Orbit. Our services provide access to
sophisticated and dynamic financial information that allows users to make their
own informed investment decisions. We also offer several business-to-business
services that enable clients to present financial data and information on their
Web sites or desktop applications.
INDUSTRY BACKGROUND
The Internet is experiencing dramatic growth and is an increasingly
important global medium for communication, news, information and commerce. The
Internet allows content providers to deliver information in a manner not
possible with traditional broadcast and print media.
According to Forrester Research, the amount of money invested by individuals
in securities is growing. Investors are also taking a more active role in their
investments by directly managing their portfolios, researching information on
investments and trading securities. This growing population of sophisticated
investors is relying more on the Internet to keep abreast of current business
developments, track industry and competitive trends, make informed investment
decisions and manage their financial assets.
According to Forrester Research, at the beginning of 1999, 3.1 million U.S.
households used the Internet as an investing tool. According to International
Data Corporation, the number of online brokerage accounts in the U.S. is
expected to grow from 3.5 million at the end of 1997 to approximately 24.0
million, representing more than $1.5 trillion in assets, by the end of 2002.
With the emergence and growth of online investing in recent years, there has
also been a dramatic increase in the demand for timely, comprehensive and
accurate financial data and information. According to THE NEW YORK TIMES, 20
million households use the Internet for investment news, quotes and ideas.
Traditional information sources such as newspapers, magazines and
broadcasters are seeking to address this increasing demand for financial
information. However, these sources are limited in their ability to effectively
meet the sophisticated investor's need for timely business information.
Traditional media are limited to a specific location, can deliver only limited
content and do not offer real-time information or the means to interactively
analyze that information. Newspapers and magazines cannot keep pace with the
financial markets due to their publication cycles. Broadcasters are limited in
the depth and availability of their content. Neither source offers its users
analytical tools or the ability to interact with the information source or each
other. By comparison, the Internet allows users, wherever they are, to rapidly
access, search and interact with a rich repository of content.
Internet advertising permits advertisers to gather demographic information
and direct messages at specific groups of users. It also gives advertisers an
enhanced ability to measure the effectiveness of their advertising. Due in part
to these advantages, Internet advertising is growing rapidly and is projected to
experience significant growth in the future. Simba Information estimates that
worldwide Internet advertising will grow from $2.1 billion in 1998 to $7.1
billion in 2002. Advertisers have come to realize that online investors
represent a highly attractive audience and that the Internet represents a medium
through which they can reach this audience in a focused manner. During the six
month period ended June 30, 1999, we derived approximately 7.7% of our revenues
from advertising.
As the Internet becomes a more popular medium for gathering, analyzing and
sharing information and the number of sophisticated investors taking an active
role in managing their finances continues to grow, we believe a significant
opportunity exists for a company to provide real-time market data, timely
financial news and comprehensive research and analytical tools via the Internet.
By integrating all of
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these features, an Internet-based service can provide sophisticated investors
with the financial information they require to make their own informed
investment decisions. By assembling this loyal base of online investors, a
company can create a targeted and demographically attractive audience for
advertisers.
THE PCQUOTE.COM ADVANTAGE
PCQuote.com offers online investors a combination of real-time and delayed
market data, timely worldwide financial and business news provided by CNNFN and
a wide variety of research and analytical tools for researching and analyzing
financial information. These features allow our users to screen, research,
analyze and track their investments online. All of these resources are located
or accessible from one or more of our service offerings and are presented in a
user-friendly manner.
ADVANTAGES TO OUR USERS
We differentiate ourselves by providing:
- Real-time, accurate financial data -- We use HyperFeed 2000 to deliver
real-time and delayed market data from all North American exchanges on
over 350,000 securities, including stocks, bonds, options, mutual funds,
currencies, indices, over the counter issues and futures. We offer
real-time quotes on our premium, subscription-based site,
MARKETSMART-REAL.PCQUOTE.COM, and real-time streaming quotes via our
desktop applications. Streaming quotes, as they are commonly known,
automatically update as more current data becomes available. We offer 20
minute delayed quotes on our free Web site, WWW.PCQUOTE.COM.
- Financial and business news -- We offer users of our Web sites access to
timely financial news and stories from a variety of sources, including
CNNFN. Our agreement with CNNFN is described in greater detail in "Certain
Transactions."
- Comprehensive research and analytical tools -- We provide users of our
services with a variety of research and analytical tools with which to
analyze market data, enabling them to make informed investment decisions.
Examples of these tools include Stock Analysis, Stock Criteria Search,
Charting, Corporate Profiles, Quote Grid and Scrolling Ticker.
We believe that our ability to provide all of these features in an effective
format differentiates us from other Internet-based providers of financial
information.
ADVANTAGES TO OUR ADVERTISERS
We provide advertisers with a growing, demographically desirable audience.
According to @plan, our third party demographics provider, the number of unique
individuals visiting our WWW.PCQUOTE.COM Web site on a monthly basis increased
24% between their Winter 1998 report (covering the months of July to September
1998) and Summer 1999 report (covering the months of January to March 1999). We
pay @plan a fee for its services. Based on surveys conducted by The Gallup
Organization, @plan's Summer 1999 report states that we have a significantly
greater concentration of users and subscribers in the demographic categories set
forth below than both the World Wide Web at large and the overall Investing and
Finance Web Site category, as measured by @plan:
- men with a household income of $50,000 or more
- men with a household income of $50,000 or more who have monitored their
investments online in the last 30 days
- men with a household income of $50,000 or more who have engaged in online
shopping during the past six months
- viewers with investment portfolios valued at $50,000 or more
- viewers who currently own shares of common stock
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Based on the results of the @plan report, we believe our user demographics
are attractive to online advertisers. Audiences with higher incomes and past
online shopping experience are generally considered by online advertisers to be
demographically desirable.
GROWTH STRATEGY
Our objective is to strengthen our position as an Internet-based provider of
real-time and delayed market quotes, timely business news and comprehensive
tools for researching and analyzing financial information. We intend to achieve
our objective by pursuing the following key strategies:
BUILD BRAND AWARENESS TO ATTRACT ADDITIONAL TRAFFIC. We believe that
increased brand awareness is critical to differentiating ourselves and
attracting additional traffic and subscribers. We intend to use a portion of our
net proceeds from this offering to significantly increase our marketing
activities in order to increase our brand awareness and visibility among both
Internet users and online advertisers. We will aggressively advertise in print,
broadcast and online media and use our business-to-business relationships to
provide links to our Web sites. These marketing and brand building efforts are
intended to increase our subscriber base and enable us to significantly grow our
advertising base.
CAPITALIZE ON USER DEMOGRAPHICS ATTRACTIVE TO ADVERTISERS. We believe our
Web sites attract users who are highly desirable to companies that advertise
online. According to @plan, approximately 57% of our users have shopped online
during the six month period ending March 31, 1999. We intend to increase the
size of our advertising sales force in order to capitalize on this highly
desirable user base.
CREATE UP-SELL OPPORTUNITIES THROUGH OUR SERVICE OFFERINGS. Our various
levels of service offerings provide online investors the opportunity to upgrade
from one service to the next as their investment goals and needs evolve. We
offer free content, including delayed market quotes, charts and portfolios on
WWW.PCQUOTE.COM. We offer real-time, snapshot quotes on our subscription-based
MARKETSMART-REAL.PCQUOTE.COM site. We also offer premium desktop services for
sophisticated investors requiring streaming, real-time quotes and other
real-time information and analysis. We intend to promote our ability to offer a
range of solutions in order to create up-sell opportunities for each user. The
free content on our WWW.PCQUOTE.COM site is key to this strategy by building
traffic and thereby broadening our base of potential subscribers to our
fee-based services.
LEVERAGE OUR RELATIONSHIPS WITH PROVIDERS OF GLOBAL FINANCIAL NEWS AND OTHER
CONTENT AND SERVICES. CNNFN is a leading provider of global financial and
business news both on and off the Web. Through our relationship with CNNFN, we
offer users of our Web sites access to timely news, headlines and stories
published by CNNFN. Our relationship with HyperFeed Technologies allows us to
use HyperFeed 2000, a real-time market data feed, to offer timely and accurate
quotes. We plan to enter into relationships with other providers of content and
services and to leverage these relationships to establish ourselves as a single
source solution for online investors.
EXPAND OUR WEB SITES AS COMPREHENSIVE FINANCIAL INFORMATION
DESTINATIONS. We are continually expanding and enhancing WWW.PCQUOTE.COM and
MARKETSMART-REAL.PCQUOTE.COM so that users can satisfy their financial and
investing information needs without leaving our sites. For example, we plan to
add new personalization and community features, such as online discussion forums
where investors will be able to question top financial traders, managers and
journalists, post messages and read the opinions of others. We intend to provide
the type of informative and entertaining online experience sought by our users
and thereby expand their involvement with us.
MAINTAIN OUR SUPERIOR TECHNOLOGICAL PLATFORM. We intend to continue to
expend substantial capital and other resources developing, acquiring and
implementing technology-driven enhancements to our Web sites and other services,
including those related to HyperFeed 2000. Our intuitive user interface and
desktop services enable our users to navigate easily through an environment rich
in information. For advertisers, our systems permit the tracking and parsing of
valuable demographic information regarding the users of our Web sites. In order
to allow for our anticipated expansion in content and service offerings, we plan
to invest in the necessary back-end production systems and infrastructure, such
as hardware, software, Internet bandwidth and Web hosting facilities.
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PCQUOTE.COM SERVICES
Our services consist of comprehensive financial information and market data
combined with analytical tools that can be used by both individual investors and
businesses. Our various levels of service offerings complement each other by
providing online investors the opportunity to upgrade from one service to the
next as their investment goals and needs evolve. In addition, our service
offerings have been developed to use a common data feed and infrastructure. Our
desktop applications provide links to our Web sites.
INVESTOR SERVICES
We offer a range of services designed to meet the needs of individual
investors, regardless of their level of sophistication or information
requirements. Our investor service offerings consist of two Web sites,
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled
desktop applications, PCQuote 6.0 RealTick and PCQuote Orbit. Our desktop
services offer the added benefit of faster data download time, enabling the
delivery of streaming quotes and a host of other real-time applications.
WEB SITES
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
WWW.PCQUOTE.COM Provides access to delayed quotes, as Free
well as financial and business news
and a full array of research and
analytical tools.
MARKETSMART-REAL.PCQUOTE.COM Provides access to real-time quotes, $9.95 per month, plus exchange fees
as well as the financial and business
news and research and analytical tools
that are available on WWW.PCQUOTE.COM.
</TABLE>
WWW.PCQUOTE.COM. WWW.PCQUOTE.COM is our free Web site and also serves as
the primary marketing and promotions engine for the rest of the services we
provide. WWW.PCQUOTE.COM provides the following tools and information:
Delayed Quote Tools--We use HyperFeed 2000 as the source of all of the raw
data presented on WWW.PCQUOTE.COM. This site includes a variety of tools
that can be used to manipulate the raw financial data:
- DETAILED QUOTE allows users to request equity, commodity, option,
mutual and money market fund and bond quotations by ticker symbol.
- MULTIPLE QUOTE allows users to request quotations for up to five ticker
symbols at one time.
- PORTFOLIO enables users to track up to five portfolios containing up to
ten securities each.
- MARKETS AT A GLANCE provides a basic overview of various market
indices, including their current position and net change for the day.
- DETAILED INDICES provides a detailed list of, and quotations for, the
individual securities underlying various indices.
- TOP TEN allows users to view the top ten gainers, losers and most
active stocks on the primary exchanges in North America.
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<PAGE>
- FUTURES offers market quotations from various futures and commodities
exchanges.
- OPTIONS STRINGS shows relative prices for all options related to a
particular security.
- FUNDS provides information with respect to the various mutual funds
within a particular fund family.
- SYMBOL SEARCH enables investors to enter a company's name and receive
the matching ticker symbol.
News--We provide users access to timely financial news and stories:
- CNNFN headlines are provided through a license from CNNFN and gives
users access to timely financial and business news headlines and
stories published by CNNFN.
- WIRE-BASED NEWS offers users access to press releases and other
wire-based news provided by COMTEX Scientific Corporation, including
feeds from PR Newswire, Business Newswire, M2 Communications and UPI
Spots.
Research and Analytical Tools--We allow users to research and analyze market
quotations with tools and information from a variety of sources:
- STOCK ANALYSIS is available through our relationship with VectorVest,
Inc. and provides users access to three free VectorVest analysis
reports per day.
- STOCK CRITERIA SEARCH is provided through our relationship with IQC,
Inc., and enables users to run search queries on various stocks that
fit user-defined investment criteria. Queries can be based on such
factors as industry, price/earnings ratio and dividend history.
- CHARTING is provided by IQC and allows users to display historical and
intra-day charts for publicly traded securities and all major indices.
- EARNINGS ANALYSIS AND REPORTING TOOLS gives users access to consensus
earnings estimates and other earnings-related reports provided by Zacks
Investment Research.
- CORPORATE PROFILES is provided by MarketGuide and gives users access to
corporate profiles for most publicly traded companies.
- THE IPO RESOURCE CENTER is provided by IPO.com and gives users the
ability to research initial public offerings, monitor the post-offering
performance of IPOs, search filings made with the SEC and receive news
stories about upcoming IPOs.
- THE WEATHER CENTER presents worldwide weather information aimed at
commodities traders and is provided by Strategic Weather Services for a
nominal fee.
- COMMODITY NEWSLETTERS enables users to receive analyses of different
commodities and is provided by the Hightower Report for a nominal fee.
MARKETSMART-REAL.PCQUOTE.COM. MARKETSMART-REAL.PCQUOTE.COM is our
subscription-based Web site and provides real-time, snapshot market quotations,
along with all of the news, research and analytical tools available on
WWW.PCQUOTE.COM. This site is targeted toward a more sophisticated investor than
is WWW.PCQUOTE.COM and uses sparse graphics, text indices and creative
advertising to speed download times and give users faster access to the site's
content. MARKETSMART-REAL.PCQUOTE.COM can be accessed from WWW.PCQUOTE.COM.
To complement the enhanced nature of real-time market quotations available
on MARKETSMART-REAL.PCQUOTE.COM, we plan to enter into relationships with
content and service providers to offer additional real-time research and
analytical tools. We believe these tools will provide our users with enhanced
investment decision-making capabilities and will further attract new
subscribers.
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<PAGE>
DESKTOP SERVICES
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
PCQUOTE 6.0 REALTICK Provides real-time streaming quotes via a $75 to $455 per month, plus exchange fees
desktop application with order execution
capability and analytical tools
PCQUOTE ORBIT Provides real-time streaming quotes via a $55 per month, plus exchange fees
desktop application and analytical tools
</TABLE>
PCQUOTE 6.0 REALTICK. PCQuote 6.0 RealTick is a professional-quality,
NASDAQ level II, real-time quote system that offers users reliable, streaming
real-time market data for all North American equities and options. PCQuote 6.0
RealTick empowers sophisticated investors by giving them the freedom to decide
how and when to trade on a daily basis. This service is online trading-enabled
and offers order execution capabilities through participating broker-dealers.
Orders can be sent directly from the user's desktop to a participating
broker-dealer for execution.
PCQuote 6.0 RealTick offers desktop versions of the quote tools available on
WWW.PCQUOTE.COM. These tools are similar to those offered on our Web sites, but
work with our streaming, real-time data. In addition, PCQuote 6.0 RealTick
offers all or a portion of the following tools depending on the monthly fee paid
by the user:
- QUOTE GRID enables users to create a grid of ticker symbols that displays
market quotations, such as high, low, bid, ask, last and close.
- SCROLLING TICKER enables users to display current prices and daily changes
of selected stocks on a digital ticker tape that scrolls across their
screen.
- NASDAQ LEVEL II SCREENS provides users with access to broker quotations.
- CHARTING provides high-end, tick by tick technical analysis and is
completely customizable.
- TECHNICAL ANALYSIS enables users to make use of a variety of technical
analysis formulas.
- MARKET GUIDE provides users with access to a selected, publicly-traded
company's financial and other corporate information, such as income
statements, balance sheets and contact information.
- NEWS is provided by Dow Jones and COMTEX and allows access to news stories
via a scrolling headline ticker or by keyword search.
- ALARMS enables users to set customizable alerts for one or more tickers
with a variety of parameters, such as volume, price, highs and lows.
We also offer private label versions of PCQuote 6.0 RealTick for
distribution by third parties to their customers. For example, A.B. Watley,
Inc., our largest customer, markets a private label version of PCQuote 6.0
RealTick called AB Watley Ultimate Trader. Users of this application can monitor
and research their investments similar to a PCQuote 6.0 RealTick user.
PCQUOTE ORBIT. PCQuote Orbit, expected to be launched in Fall 1999, was
developed to bridge the gap between MARKETSMART-REAL.PCQUOTE.COM and PCQuote 6.0
RealTick. PCQuote Orbit provides subscribers with streaming, real-time market
quotations delivered via an Internet-enabled desktop application. It provides
users with the benefits of working with a desktop application at a lower price
than many other desktop applications. PCQuote Orbit allows users access to
streaming real-time quotes and more complex research and analytical tools than
are currently available through our Web sites,
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<PAGE>
because the only data we provide over the Internet are the market quotations
themselves. The analytical tools reside within the desktop application.
PCQuote Orbit offers desktop versions of the quote tools available on
WWW.PCQUOTE.COM that work with our streaming, real-time data. In addition,
PCQuote Orbit offers Quote Grid and Scrolling Ticker.
BUSINESS-TO-BUSINESS SERVICES
We offer several business-to-business services for clients that want to
present financial data or information on their own Web sites or desktop
applications.
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
WEB TEMPLATE Provides access to delayed or real-time $250 to $2,000 per program per month
quotes and research and analysis tools
HYPERSCRIPT Provides developer access to quotes from $125 to $1,000 per month, plus exchange fees
HyperFeed 2000 via the Web
PCQUOTE SOFTWARE Allows software developers to code delayed $500 for a three month license
DEVELOPMENT KIT market data into their own software or
Web-based applications
</TABLE>
WEB TEMPLATE. Web Template allows users to create their own "private label"
Web sites with many of the features of our own Web sites. Using standard
templates, the actual Web pages that house the data applications are hosted at
PCQuote.com and accessed by the client through a simple series of links over the
Web. All servers are maintained and serviced by us. Similar to WWW.PCQUOTE.COM,
our clients are able to offer the following tools: Detailed Quote, Multiple
Quote, Portfolio, Markets at a Glance, Detailed Indices, Top Ten and Option
Strings. We also offer access to third-party research and analysis. We have
entered into agreements to allow business-to-business clients access to charting
and wire-based news for an additional fee.
As of June 1999, The New York Times was our largest Web Template customer
based on revenue. The New York Times subscribes to Web Template in order to
offer a series of quote services to its users. By using Web Template, The New
York Times was able to create a financial area within its Web site and provide
its readers with financial quotes and tools without any development or
maintenance on its part.
HYPERSCRIPT. Hyperscript is a proprietary development tool used to create
data-rich Web sites and Internet-based market data applications. Hyperscript
allows users to develop their own applications using HyperFeed 2000 data. Using
standard development techniques to access data and present it on third-party Web
sites, Hyperscript makes development of complex data applications a simple task.
Customers can subscribe to Hyperscript for either limited or unlimited access to
data. For example, Pfizer, Inc. uses Hyperscript to create a customized,
graphical image of its current stock price on its Web site at WWW.PFIZER.COM.
PCQUOTE SOFTWARE DEVELOPMENT KIT AND QUOTESOCKETS. PCQuote SDK allows
third-party software developers to code delayed or real-time market data into
their own software or Web-based applications. Developers use this service to
create an interface to view market data and then code HyperFeed 2000 data into
the application. Once completed, developers become subscribers to Quotesockets,
our related subscription plan, and pay monthly fees for access to delayed or
real-time data. The developers then have the ability to market the product it
has developed. Our current pricing for Quotesockets is $39 per month for delayed
data and $135 per month for real-time data.
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<PAGE>
Omega Pro Suite, Omega Research's desktop application, uses PCQuote SDK and
Quotesockets to obtain real-time data. Omega Pro Suite is used primarily by
individual investors for technical analysis and charting. The end-user pays
Omega Research a fee to use the application and pays us a monthly fee for the
market data. In order to activate the data portion of the developer's
application, the end-users must subscribe to the Quotesockets service through
PCQuote.com.
SIGNIFICANT RELATIONSHIPS
We believe that our relationships with CNNFN, HyperFeed Technologies and
Townsend Analytics help us to establish ourselves as a single-source solution
for online financial information. See "Certain Transactions" for a more complete
description of our agreements with CNNFN and HyperFeed Technologies.
CNNFN
Through our relationship with CNNFN, we provide access to timely global
business news and stories regarding the financial markets and other areas of
interest to our users. CNNFN headlines appear on the front pages of our Web
sites and are continously updated throughout the trading day.
HYPERFEED TECHNOLOGIES
Through our relationship with HyperFeed Technologies, we use HyperFeed 2000
to offer timely and accurate market data on our Web sites and other services.
HyperFeed 2000 is HyperFeed Technologies' newest generation data feed. It
delivers real-time and delayed market data from all North American exchanges on
more than 350,000 securities, including stocks, bonds, options, mutual funds,
currencies, indices, over the counter issues and futures. In addition, we
license PCQuote Orbit and Quotesockets from HyperFeed Technologies. HyperFeed
Technologies provides us with various administrative services and technical and
operational support.
TOWNSEND ANALYTICS
Through our relationship with Townsend Analytics, we license the right to
use a software application that we market as PCQuote 6.0 RealTick. We also
sublicense private label versions of this application. Our license agreement
with Townsend Analytics is for an initial term ending December 4, 2000 and
provides for automatic one-year renewals unless either party delivers a notice
of nonrenewal 90 days prior to the termination date.
SALES AND MARKETING
To date, we have not spent significant amounts marketing our services to a
broad audience. We intend to use approximately $11.0 million of our net proceeds
from this offering to aggressively market and promote our Web sites and other
service offerings in a variety of traditional and online media, including:
- Web sites, including content providers, online newspapers, search engines
and portals;
- financial, business and other publications; and
- radio and television.
In addition, our marketing efforts may include establishing advertising
relationships with leading Web sites, developing brand extensions and engaging
in ongoing media relations. We may also market our services by establishing
business-to-business relationships with leading Web sites. For example, we may
enter into relationships with high-traffic Web portals to establish direct links
to our Web sites or we may distribute our content to other Web sites based on
revenue-sharing or other arrangements. We
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<PAGE>
also intend to increase the size of our team of in-house customer service
representatives to provide our users and subscribers with the highest level of
service possible.
We believe that our marketing efforts will enable us to build brand
awareness and increase traffic to our Web sites. This is intended to create a
ready source of potential subscribers for our services and a large,
demographically desirable audience for our advertisers. We believe that our
varied service offerings provide us with the opportunity to derive increased
revenues from multiple sources, including subscriptions, advertising and
business-to-business services.
SUBSCRIPTION SALES
We offer a series of Web and Internet-enabled desktop services on a
subscription basis. Our broad range of services gives us multiple up-sell
opportunities by allowing our users to upgrade to enhanced levels of service as
their expertise, information needs and interest in investing grows. We believe
that a key component of this strategy is to build traffic on our WWW.PCQUOTE.COM
Web site, thereby broadening our base of potential subscribers. We currently
market our subscription services to investors through a variety of channels,
including the Web, telemarketing and traditional media advertising campaigns.
Certain services, including our subscription-based, business-to-business
services, are marketed by a sales staff that is contracted from HyperFeed
Technologies, as well as by our own sales staff. We pay a sales commission to
HyperFeed Technologies for these sales. Our business-to-business target clients
include online brokerages, content aggregation Web sites, large content owners,
community-based portal sites and desktop or online software developers.
As our service offerings continue to grow, we intend to build a larger, more
specialized sales team to meet the needs of our users, subscribers and
business-to-business clients. We also plan to promote online registration and
self-service where applicable.
Our largest customer, A.B. Watley, a private label redistributor of PCQuote
6.0 RealTick, accounted for 11.1% of our total revenues in 1998 and 18.7% of our
total revenues in the six months ended June 30, 1999. No other customer
accounted for more than 2.3% of our revenues in either period.
ADVERTISING SALES
Advertisements are displayed throughout our Web sites. We have established a
demographically desirable user base that has enabled us to build a growing base
of online advertisers. In order to attract new users and further develop a loyal
audience that appeals to a broad range of advertisers and business-to-business
customers, we plan to offer improved, expanded content and features, such as
commentary on options, e-mailed financial updates and news searches, and conduct
aggressive branding and promotional campaigns.
We believe that a direct advertising sales force allows us to better
understand and meet advertisers' needs, to increase our access to potential
advertisers and to maintain strong relationships with our existing advertising
clients. We plan to develop and expand our direct sales force to attract a
greater number of advertisers and better meet the needs of existing advertisers.
In 1998, approximately 70 companies advertised on our Web sites. During the
six month period ended June 30, 1999, approximately 60 companies advertised on
our Web sites. While many of our advertisers in the past have been from the
financial services industry, we recently have attracted
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<PAGE>
advertisers from outside of this industry. During the second quarter of 1999,
the largest advertisers on our Web site, based on revenue, were as follows:
<TABLE>
<S> <C>
- - Datek Online - OnSale.com
- - Discover Brokerage - Oracle
- - DLJdirect - Scottrade
- - Fidelity - StockInvestor.com
Investments - TheStreet.com
- - Hewlett-Packard
- - IBM
</TABLE>
Advertising on our Web sites ranges in price depending on the type and level
of placement provided, including whether the arrangement is based on impressions
or click-throughs. DoubleClick provides us with advertising management and
delivery services and provides our advertisers with reports describing the
delivery of their advertisements.
COMPETITION
An increasing number of financial data and information sources compete for
consumers' and advertisers' attention and spending. We expect this competition
to increase. The market for Internet services and products is relatively new,
intensely competitive and rapidly changing. The number of Web sites on the
Internet competing for consumers' attention and spending has proliferated and we
expect that competition will continue to intensify. We compete, directly and
indirectly, for advertisers, viewers, subscribers and content providers with the
following categories of companies:
- Web sites targeted to business, finance and investing needs, such as
CBS.Marketwatch.com, TheStreet.com, The Motley Fool and Quote.com;
- Web portals, such as EXCITE.COM, INFOSEEK.GO.COM, LYCOS.COM, YAHOO.COM,
and other high-traffic Web sites that offer quotes, financial news and/or
other programming, as well as links to business- and finance-related Web
sites;
- proprietary online services, such as America Online and Microsoft Network,
that provide access to financial and business-related content and
services;
- online brokerage firms, such as Charles Schwab and E*TRADE, many of which
provide financial and investment news and information;
- providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service; and
- publishers and distributors of traditional media, including television,
radio and print, such as CNNFN, CNBC, Marketplace on National Public Radio
and The Wall Street Journal.
Our ability to compete depends on many factors, including the timeliness,
comprehensiveness and trustworthiness of our content, the ease-of-use of our
services and the effectiveness of our sales and marketing efforts. We believe
our services compare favorably with those of our competitors.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
Our technological infrastructure is built and maintained for reliability,
security and flexibility. We host our servers at two distribution centers in
Chicago, Illinois. We use load balancing technology to distribute user traffic
to available servers at either of the two sites. This, combined with built-in
excess capacity at both sites, allows each site to operate as a backup for the
other site. We currently use no more than 50% of our total available capacity.
We intend to expand our excess capacity, from time to time, as necessary to
maintain this level of excess capacity. In the event one site experiences an
outage
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due to an ISP or other failure, traffic is seamlessly serviced by the other
site. We also use multiple high speed paths to receive data at these two sites
and we have two ISPs for distribution to our users.
INTELLECTUAL PROPERTY
We rely primarily on a combination of trade secret and common law trademark
law and restrictions on disclosure to protect our intellectual property, such as
our content, trademarks, trade names and trade secrets. We do not currently have
any registered trademarks or copyrights. We attempt to enter into
confidentiality agreements with our employees, consultants and third parties
with whom we enter into business relationships if we believe these persons will
have access to information we consider to be confidential, and seek to control
access to and distribution of our proprietary information. We cannot be sure
that these precautions will prevent misappropriation or infringement of our
intellectual property. We also license technology from third parties, such as
software from Townsend Analytics and DoubleClick, and data and content from
third parties. In the future, we may seek to license additional technology or
content in order to enhance our current features or to introduce new services,
such as the online discussion forums we may introduce.
EMPLOYEES
As of June 30, 1999, we had 48 full time employees. No personnel are
represented under collective bargaining agreements. We consider our employee
relations to be good.
FACILITIES
Our principal administrative, sales, marketing and research development
facilities are located in approximately 8,000 square feet of office space in
Chicago, Illinois. This office space is provided to us by HyperFeed
Technologies. HyperFeed Technologies' lease expires on December 31, 2004, unless
renewed. We anticipate relocating or expanding our space due to increased
requirements resulting from our expected growth.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information regarding the executive
officers, directors, director designees and key employees of PCQuote.com:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Jim R. Porter............................... 59 Chief Executive Officer and Chairman
Timothy K. Krauskopf........................ 36 President, Chief Operating Officer and Director
Andrew N. Peterson.......................... 47 Chief Financial Officer and Secretary
Stephen F. Rawls............................ 48 Vice President, Interactive Operations
David C. Kahl............................... 39 Vice President of Sales and Marketing
Thomas F. Cunningham........................ 39 Vice President of Technical Services
Matthew M. Rees............................. 25 Director of Web Services
John R. Hart................................ 39 Director
John E. Juska............................... 44 Director
Ronald J. Grabe (1)......................... 54 Director Designee
Francis J. Harvey (1)....................... 56 Director Designee
James R. Quandt (1)......................... 50 Director Designee
</TABLE>
- ------------
(1) Messrs. Quandt, Grabe and Harvey have been designated to become members of
our Board of Directors.
JIM R. PORTER has served as our Chief Executive Officer and Chairman since
March 1999. Mr. Porter is currently serving as HyperFeed Technologies' Chairman,
a position he has held since October 1997, and Chief Executive Officer, a
position he has held since July 1997. Since 1993, he has been the President and
Chief Executive Officer of New Century Investment Research & Management, Inc.
From 1990 to 1993, he was an associate of Chicago Research & Trading, Inc., a
commodity trading firm. From 1979 to 1990, Mr. Porter was a principal and Chief
Executive Officer of First Options of Chicago, Inc., a securities, futures and
options clearing firm, and a partner of Spear Leeds & Kellogg, a specialist firm
on the New York Stock Exchange.
TIMOTHY K. KRAUSKOPF has served as our President and Chief Operating Officer
since April 1999 and has been a member of our Board of Directors since March
1999. He has served as a director of HyperFeed Technologies since September
1997. Mr. Krauskopf will resign as a director of HyperFeed Technologies as of
the closing of this offering. From 1997 to 1999, Mr. Krauskopf was the Head of
Information Services at the Field Museum of Natural History in Chicago,
Illinois. From 1990 to 1997, Mr. Krauskopf held a number of positions at
Spyglass, Inc., a company he co-founded, including Vice President of Research
and Development and Chief Technology Officer. Mr. Krauskopf currently serves as
a director of Spyglass. Spyglass commercialized and marketed the Mosaic Internet
browser developed at the University of Illinois.
ANDREW N. PETERSON has served as our Chief Financial Officer since April
1999 and as Secretary since May 1999. From April 1997 to October 1998, Mr.
Peterson served as Chief Financial Officer of TRO Learning, Inc., a
publicly-held developer of educational software. From May 1995 to December 1996,
he served as Chief Financial Officer of TSR, Inc., a privately-held publisher of
games and books. From 1986 to 1994, Mr. Peterson served as the Chief Financial
Officer of Duplex Products, Inc., a publicly-held manufacturer of business
forms.
STEPHEN F. RAWLS has served as our Vice President, Interactive Operations,
since April 1999. From February 1998 to April 1999, Mr. Rawls was Vice
President, Marketing, for HyperFeed Technologies. From 1995 to 1998, Mr. Rawls
held a number of Internet-related positions at Ameritech Corp. From 1991 to
1995, he served as Vice President of FutureSource, a financial data provider,
and was responsible for international business development.
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DAVID C. KAHL has served as our Vice President of Sales and Marketing since
July 1999. From 1986 to 1999, Mr. Kahl held a number of positions at Gartner
Group, Inc., including Vice President & Program Director of the IT Executive
Program and Regional Sales Manager. From 1984 to 1986, he was a sales
representative for the Hewlett-Packard Company.
THOMAS F. CUNNINGHAM has served as our Vice President of Technical Services
since June 1999. From February 1998 to April 1999, Mr. Cunningham was Director
of Quality Assurance for INSO Corporation, a provider of software document
management tools. From July 1997 to February 1998, he was an independent quality
assurance consultant. From May 1995 to July 1997, he served as Director of
Software Development and Manager of Quality Assurance for Spyglass, Inc. From
1990 to 1995, Mr. Cunningham was Head of Technical Quality Assurance for
Josten's Learning Corp, Inc., a publisher of the Compton's Multi-Media
Encyclopedia. From 1987 to 1990, he was a Senior Quality Assurance Specialist
for Mitchell International.
MATTHEW M. REES has served as our Director of Web Services since April 1999.
From April 1998 to April 1999, he served as Product Manager of our Web site.
From June 1997 to April 1998, Mr. Rees served as Account Manager for HyperLOCK
Technologies, a Web-based cryptography firm. From May 1996 to June 1997, Mr.
Rees served as Interactive Producer for four Web sites at Spiegel, Inc. From
September 1994 to October 1995, he consulted as an Interactive Media Producer
and Art Director for the University of Illinois Department of Music.
JOHN R. HART has served as a member of our Board of Directors since May
1999. He has been a director of HyperFeed Technologies since 1997. He has been
President, Chief Executive Officer and a director of PICO Holdings. Inc., a
publicly held holding company since November 1996. He has also served as
President and Chief Executive Officer since 1995 and as a director since 1993 of
Physicians Insurance Company of Ohio. Mr. Hart also served as President and
Chief Executive Officer of Global Equity Corporation, an international
investment and operating company, since 1995, and as President of Quaker
Holdings Limited, an investment company since 1991. From 1982 to 1991 he served
as Principal of Detwiler, Ryan & Company Inc., an investment bank.
JOHN E. JUSKA has served as a member of our Board of Directors since March
1999. He currently serves as the Chief Financial Officer of HyperFeed
Technologies, a position he has held since July 1997. From 1994 to July 1997,
Mr. Juska served as Vice President and Chief Financial Officer for the Chicago
Mercantile Exchange. From 1986 to 1994, Mr. Juska served in various positions
for the Chicago Mercantile Exchange, including Controller and Vice President of
Finance.
RONALD J. GRABE is designated to become a member of our Board of Directors.
Mr. Grabe currently serves as Senior Vice President and Deputy General Manager,
Launch Systems Group, Orbital Sciences Corporation, a position he has held since
1996. From 1994 to 1996, he served as Vice President, Business Development,
Launch Systems Group, Orbital Sciences Corporation. From 1983 to 1993, Mr. Grabe
served in various positions at the National Aeronautics and Space
Administration, including Commander for Space Shuttle Mission STS-57
(1992-1993), Chief Operational Evaluator of Russian Soyuz Spacecraft (1992),
Commander, Space Shuttle Mission STS-42 (1990-1992) and Lead Astronaut Space
Station Development (1989-1991).
FRANCIS J. HARVEY is designated to become a member of our Board of
Directors. Dr. Harvey currently serves as an independent consultant for various
companies. From 1969 to 1997, Dr. Harvey served in various positions at
Westinghouse Electric Corporation, most recently as Chief Operating Officer,
Industries and Technology Group (1996-1997), President, Electronic Systems
(1995-1996), President, Government and Environmental Services Co. (1994-1995),
Vice President, Science and Technology Center (1993-1994) and General Manager,
Marine Division (1986-1993). Dr. Harvey currently serves as a director of GTS
Duratek, Inc. and IT Group, Inc.
JAMES R. QUANDT is designated to become a member of our Board of Directors.
Mr. Quandt currently serves as a Partner and Managing Director of Korn/Ferry
International, an executive search firm, a position he has held since August
1998. From February 1996 to August 1998, he served as
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President and Chief Executive Officer of National Telephone & Communication,
Inc., a telecommunications firm. From February 1995 to January 1996, Mr. Quandt
served as Chairman of the Board of Bridge Information Systems, Inc., a privately
held group of companies in the financial information and technology industry.
Mr. Quandt served as President of Standard & Poors Financial Information
Services from 1991 to 1995.
We plan to appoint two additional independent directors within 90 days after
the closing of this offering. Directors are elected by the stockholders at each
annual meeting of stockholders or until their successors are duly elected and
qualified.
All executive officers are appointed by, and serve at the discretion of, our
Board of Directors.
BOARD COMMITTEES
We intend to establish an Audit Committee and a Compensation Committee
comprised of independent directors. Our Audit Committee will have the
responsibility of reviewing our audited financial statements and accounting
practices. This committee will consider and recommend the employment of
independent accountants and approve fee arrangements with them for both audit
functions and for advisory and other consulting services. The Compensation
Committee will review and approve the compensation and benefits for our key
executive officers, administer our employee benefit plans and make
recommendations to the full Board of Directors regarding these matters.
DIRECTOR COMPENSATION
We reimburse our directors for all reasonable out-of-pocket expenses
incurred in connection with their attendance at Board and Board committee
meetings. Members of our Board of Directors are eligible to participate in our
1999 Combined Incentive and Non-statutory Stock Option Plan. On the same day as
each annual meeting of our stockholders, we intend to grant each non-employee,
independent director a fully vested option to purchase 5,000 shares of our
common stock at the then-current market price if he has served continuously as a
member of the Board of Directors since the date of the previous annual meeting.
In addition, we intend to grant each of our non-employee, independent directors
a fully vested option to purchase 5,000 shares of our common stock on the
effective date of this prospectus, having an exercise price equal to the initial
public offering price. Each of Messrs. Grabe, Harvey and Quandt will receive
this initial grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to this offering, our Board of Directors did not have a Compensation
Committee and all compensation decisions were made by the full Board of
Directors. Upon completion of this offering, it is intended that the
Compensation Committee will make all compensation decisions. No interlocking
relationship exists between the Board of Directors or Compensation Committee and
the Board of Directors or Compensation Committee of any other company, nor has
any such interlocking relationship existed in the past.
EXECUTIVE COMPENSATION
We were incorporated in March 1999 and, therefore, had no executive officers
as of the end of 1998. Effective April 1, 1999, we began paying Jim R. Porter,
our Chief Executive Officer, a base salary of $90,000 per year. Mr. Porter has
an arrangement with us under which he is required to devote only one-half of his
business time to our business. He will devote the remaining one-half of his
business time to HyperFeed Technologies. We have five executive officers, other
than our Chief Executive Officer, who we expect will earn more than $100,000
annually. Effective April 28, 1999, we began paying Timothy K. Krauskopf, our
President and Chief Operating Officer, a base salary of $150,000 per year.
Effective April 28, 1999, we began paying Andrew N. Peterson, our Chief
Financial Officer and Secretary, a base salary of $175,000 per year. Effective
April 1, 1999, we began paying Stephen F. Rawls, our Vice President, Interactive
Operations, a base salary of $100,000 per year. Effective June 21,
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1999, we began paying Thomas F. Cunningham, our Vice President of Technical
Services, a base salary of $120,000 per year. Effective July 19, 1999, we began
paying David C. Kahl, our Vice President of Sales and Marketing, a base salary
of $150,000 per year.
EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Andrew N. Peterson. Under
the employment agreement, Mr. Peterson will be paid an annual base salary of
$175,000. The employment agreement can be terminated by either party at any
time, subject to the terms of the agreement. If we terminate Mr. Peterson
without cause or if he voluntarily terminates his employment for specified
reasons, we will be required to pay him all of his accrued base salary and
continue to pay him his base salary for 12 months following the termination. If
we terminate him for cause or if he voluntarily terminates his employment other
than for the reasons described above, we will not be obligated to pay any
continuation of base salary.
The employment agreement also contains provisions governing the benefits
payable to Mr. Peterson if there is a change in control of PCQuote.com. If Mr.
Peterson is terminated by us or our successor, other than for cause, within six
months after a change in control or if he voluntarily terminates his employment
for the reasons described above within six months after the change in control,
we are required to pay him an amount equal to his annual base salary. This
employment agreement contains confidentiality and nonsolicitation obligations
and a one-year covenant not to compete.
1999 COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
Our 1999 Combined Incentive and Non-statutory Stock Option Plan was adopted
in May 1999. There are 1,538,600 shares of common stock reserved for issuance
under this plan. The plan terminates in September 2009, unless terminated sooner
by our Board of Directors. The plan authorizes the award of options and
restricted stock purchase rights.
The plan will be administered by our Board of Directors or a committee
appointed by our Board of Directors. The administrator has the authority to
interpret the plan, grant awards and make all other determinations necessary to
administer the plan.
The plan provides for the grant of both incentive stock options, commonly
called ISOs, that qualify under Section 422 of the Internal Revenue Code, and
nonqualified stock options, commonly called NQSOs. ISOs may be granted only to
our employees or employees of a parent or subsidiary. NQSOs and restricted stock
purchase rights may be granted to our employees, directors and consultants.
Generally, the exercise price of ISOs must be at least equal to the fair market
value of our common stock on the date of grant. Any grant of an ISO to a holder
of 10% or more of our outstanding shares of common stock must have an exercise
price of at least 110% of the fair market value of our common stock on the date
of grant. The exercise price of NQSOs must be at least equal to 85% of the fair
market value of our common stock on the date of grant. Options granted under the
plan have a maximum term of ten years. Awards granted under the plan may not be
transferred other than by will or by the laws of descent and distribution. They
generally also must be exercised during the lifetime of the optionee only by the
optionee.
Options granted under the plan generally expire three months after the
termination of the optionee's service, except in the case of death or
disability, in which case the options generally may be exercised up to 12 months
following the date of death or termination of service. If PCQuote.com is
dissolved or liquidated or has a "change in control" transaction, outstanding
awards may be assumed or substituted by the successor corporation, if any. If a
successor corporation does not assume or substitute the awards, the vesting of
the awards will be accelerated.
We intend to grant options to purchase an aggregate of 1,210,779 shares of
our common stock as of the date of this prospectus at an exercise price equal to
the initial public offering price including
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options to the following officers for the indicated number of shares: Mr.
Porter--237,088 shares, Mr. Krauskopf--296,360 shares, Mr. Peterson--177,816
shares, Mr. Rawls--75,000 shares, Mr. Kahl-- 177,816 shares and Mr.
Cunningham--75,000 shares. These options will vest ratably over a three-year
period beginning on the date of this prospectus.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our Certificate of Incorporation includes a provision that eliminates the
personal liability of our directors for monetary damages for breach of fiduciary
duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful dividends and stock purchases under the section 174 of the
Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
Our Bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions;
- we may indemnify our other employees and agents to the same extent that we
indemnified our officers and directors, unless otherwise required by law,
our Certificate of Incorporation, our Bylaws or agreements; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions.
Prior to the completion of this offering, we intend to enter into indemnity
agreements with each of our directors and executive officers to give them
additional contractual assurances regarding the scope of the indemnification
described above. Under these indemnity agreements, we agree to indemnify our
officers and directors if they are a party to a proceeding relating to actions
taken in their capacity as officers or directors. We also agree to advance the
expenses of officers or directors incurred as part of the investigation,
defense, settlement or appeal of any proceeding relating to actions taken in
their capacity as officers or directors. An officer or director must undertake
to promptly repay any amounts advanced if it is ultimately determined that the
officer or director is not entitled to be indemnified under the indemnification
agreement. In addition, we intend to obtain directors' and officers' insurance
providing indemnification for our directors, officers and certain employees for
certain liabilities. We believe that these indemnification provisions and
agreements are necessary to attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our
Certificate of Incorporation and Bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of common stock as adjusted to reflect the completion of this offering
by:
- each of PCQuote.com's directors, director designees and executive
officers,
- all directors, director designees and executive officers of PCQuote.com as
a group,
- each person who is known by PCQuote.com to own beneficially more than five
percent of the outstanding shares of our common stock, and
- the selling stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING(2) AFTER THE OFFERING(2)(3)
------------------------ SHARES ------------------------
NAME AND ADDRESS (1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HyperFeed Technologies, Inc...................... 9,800,000 98.7% 500,000 9,300,000 64.5%
Jim R. Porter.................................... -- -- -- -- --
Timothy K. Krauskopf............................. -- -- -- -- --
Andrew N. Peterson............................... -- -- -- -- --
Stephen F. Rawls................................. -- -- -- -- --
David C. Kahl.................................... -- -- -- -- --
Thomas F. Cunningham............................. -- -- -- -- --
John R. Hart (4)................................. 9,800,000 98.7% 500,000 9,300,000 64.5%
6101 Camino de la Costa
La Jolla, California 92037
John E. Juska.................................... -- -- -- -- --
Ronald J. Grabe (5)(6)........................... 5,000 * -- 5,000 *
514 Fortress Circle
Leesburg,Virginia 20175
Francis J. Harvey (5)(6)......................... 5,000 * -- 5,000 *
116 Twin Oaks Drive
Los Gatos, California 95032-5650
James R. Quandt (5)(6)........................... 5,000 * -- 5,000 *
17 Cherry Hills Drive
Coto de Caza, California 92679
All directors and executive officers as a group
(11 persons)(4)(7)............................. 9,815,000 98.7% 500,000 9,315,000 64.5%
</TABLE>
- ------------
* Less than 1%
(1) Unless otherwise indicated, the address of each person named in the table is
300 South Wacker Drive, Suite 300, Chicago, Illinois 60606-6688.
(2) Beneficial ownership includes shares of our outstanding common stock and
shares of our common stock that any person has the right to acquire within
60 days after the date of this prospectus. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of our common stock beneficially owned by them.
(3) Assumes no exercise of the underwriters' over-allotment option. If the
over-allotment option is exercised in full, HyperFeed Technologies would own
8,550,000 shares after the offering, representing 59.3% of our outstanding
common stock.
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(4) Includes 9,800,000 shares of our common stock owned by HyperFeed
Technologies. Mr. Hart is Chief Executive Officer and a director of PICO
Holdings, Inc. and Physicians Insurance Company of Ohio, which collectively
beneficially own 47.9% of the outstanding common stock of HyperFeed
Technologies. These two affiliated companies may be considered to control
HyperFeed Technologies and, as a result, may be considered to beneficially
own the shares of our common stock owned by HyperFeed Technologies. These
companies and Mr. Hart disclaim beneficial ownership of the shares of our
common stock owned by HyperFeed Technologies.
(5) Director designee.
(6) Consists of 5,000 shares of our common stock issuable upon exercise of
options that will become exercisable within 60 days after the date of this
prospectus.
(7) Includes 15,000 shares of our common stock issuable upon exercise of
options.
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CERTAIN TRANSACTIONS
HYPERFEED TECHNOLOGIES
The following includes brief summaries of the material provisions of the
Contribution and Separation Agreement and ancillary agreements, including the
Maintenance Agreement, the DataFeed License Agreement, the Services Agreement,
the Non-competition Agreement, the Registration Rights Agreement and the Tax
Indemnification and Allocation Agreement. All of these agreements are between
HyperFeed Technologies and us and were entered into contemporaneously on August
30, 1999. The summaries of these agreements are qualified in their entirety by
the agreements themselves, copies of which are filed as exhibits to the
registration statement of which this prospectus is a part.
HISTORICAL INTERCOMPANY RELATIONSHIPS
Our WWW.PCQUOTE.COM Web site was first established in July 1995 by PC Quote,
Inc., a provider of securities market data. PC Quote, Inc., which was founded in
1983, approved a change of its corporate name to HyperFeed Technologies, Inc. in
April 1999. This name change was approved by its stockholders at its annual
meeting held on June 16, 1999. We were initially organized in December 1998 as a
division of HyperFeed Technologies. We were incorporated in March 1999 as a
wholly-owned subsidiary of HyperFeed Technologies.
On August 30, 1999, HyperFeed Technologies formally separated the business
of PCQuote.com and the associated assets and liabilities from HyperFeed
Technologies' other businesses and operations. HyperFeed Technologies and we
have entered into a Contribution and Separation Agreement and other agreements
providing for, among other things, the separation, the contribution of certain
assets to us, and the provision by HyperFeed Technologies of licenses and
interim services to us. We believe the terms of these agreements are
substantially similar to the terms we could obtain in negotiations with
unaffiliated third parties.
The Contribution and Separation Agreement established PCQuote.com as a
stand-alone entity with objectives separate from those of HyperFeed
Technologies. We believe the separation will allow us to establish a separate
identity as a Web-based company. This will enable us to take advantage of
opportunities more readily available to Internet businesses. We believe we will
be able to better attract and retain key employees by offering compensation tied
to the financial and stock market performance of our business. In addition, the
separation will allow us to pursue our own financing avenues.
CONTRIBUTION AND SEPARATION AGREEMENT
The Contribution and Separation Agreement entered into by HyperFeed
Technologies and us sets forth matters with respect to the principal corporate
transactions required to effect the contribution of assets to us, the assumption
of liabilities by us and other agreements governing the relationship between
HyperFeed Technologies and us.
CONTRIBUTION OF ASSETS. The Contribution and Separation Agreement provides
that HyperFeed Technologies will contribute to us as of March 31, 1999, the
assets relating to our business, including:
- all furniture, office equipment, computer equipment, machinery, equipment
and other items of personal property relating to our business;
- all records relating to the operation of our business, including financial
and business records, customer lists and files, supplier records and
personnel and payroll records;
- all accounts receivable, notes receivable and all other receivables of any
kind related to our business;
- all goodwill of our business;
- all customer lists relating to our business;
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- intellectual property and technology relating to our business, including
Hyperscript, PCQuote Software Development Kit, our domain names and Web
sites, Pay Per Quote and Web Template; and
- all rights arising from the contracts and agreements relating to our
business.
In addition, HyperFeed Technologies has granted to us a perpetual,
world-wide, non-exclusive license to use the intellectual property relating to
PCQuote Orbit, Quotesockets and HyperServer. HyperServer is a specially
configured server for receiving market data from HyperFeed 2000. Until we
terminate the DataFeed License Agreement in the event of a bankruptcy event or a
material breach by HyperFeed Technologies, we covenant to take reasonable steps
to insure that PCQuote Orbit remains compatible with Quotesockets and that
PCQuote Orbit be able to receive a data feed only from HyperFeed Technologies.
The agreement provides that if the transfer or assignment by HyperFeed
Technologies to us of any asset or the assumption by us of any liability
requires the consent of a third party, then the assignment or assumption will be
made subject to the receipt of the required consent. To the extent any contract
of HyperFeed Technologies is not assigned to us due to the absence of any
necessary consent, then we will not be entitled to receive any benefits arising
under that contract nor be required to assume any liabilities of HyperFeed
Technologies arising under that contract.
ASSUMPTION OF LIABILITIES. Under the Contribution and Separation Agreement,
we assume:
- all of the current liabilities relating to our business as of March 31,
1999;
- any obligations arising under the contracts and agreements assigned to us
as part of the contribution;
- any other liabilities of HyperFeed Technologies, in an amount not to
exceed $500,000, relating to our business and not included in the current
liabilities relating to our business as of March 31, 1999;
- an obligation to pay $500,000, representing one-half of the amount owed by
HyperFeed Technologies to Townsend Analytics under a termination agreement
between those parties; and
- up to $2.0 million to satisfy any shortfall in the $5.0 million minimum
aggregate license fees HyperFeed Technologies is required to pay to
Townsend Analytics under its new agreement with Townsend Analytics.
YEAR 2000. The Contribution and Separation Agreement includes a
representation that all computer systems and software contributed or licensed to
us under this agreement will be Year 2000-compliant.
INDEMNIFICATION. Under the Contribution and Separation Agreement, we and
HyperFeed Technologies indemnify each other for:
- any breach of any representation or warranty that survives the closing of
the separation transaction and is contained in the Contribution and
Separation Agreement or any of the ancillary agreements;
- any breach of any covenant contained in the Contribution and Separation
Agreement or any of the ancillary agreements;
- our respective liabilities; and
- the disclosure by current or former personnel of any proprietary
information of the other party.
Any representations and warranties contained in the Contribution and
Separation Agreement or any of the ancillary agreements will survive the closing
of the separation transaction solely for the purpose of the indemnification
provisions and will terminate at the close of business five years following the
date of the separation.
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SERVICES AGREEMENT
Under the Services Agreement, HyperFeed Technologies will perform the
following services for us:
- administrative services, including provision of telephones, secretarial
assistance and facilities management, use of office administrative
equipment, internal computer operations and systems and related services;
- provision of customer information, including customer billing,
collections, accounting and related services;
- technical and operational support, including assistance with the operation
and marketing of the online services (including advertising services)
offered by us;
- human resources, risk management and accounting services, including,
without limitation, assistance with legal, employee benefits, accounting
and other related issues, with such services to be provided by HyperFeed
Technologies personnel not by retained outside advisors; and
- network services, operations and management support.
In addition, we will continue to occupy a portion of the premises leased by
HyperFeed Technologies at 300 South Wacker Drive, Chicago, Illinois.
As compensation for these services and for the provision of office space, we
will pay HyperFeed Technologies the following monthly fees:
- from April 1999 to September 1999: $213,500 per month;
- from October 1999 to December 1999: $163,500 per month;
- from January 2000 to March 2000: $138,500 per month;
- from April 2000 to June 2000: $113,500 per month; and
- any month beyond June 2000: an amount to be agreed upon by the parties.
All monthly fees incurred prior to the closing of this offering will be
accrued and be payable from the net proceeds of this offering. We expect to pay
approximately $1,281,000 from the proceeds of this offering to HyperFeed
Technologies for amounts accrued under this agreement since April 1, 1999. The
decrease in monthly fees reflects the intent of the parties to reduce the amount
of services HyperFeed Technologies will provide to us as we develop the
capability to perform these services internally.
The Services Agreement has an initial term through June 30, 2000. We may
extend the agreement for additional one-month terms on 30 days notice to
HyperFeed Technologies.
Either party has the right to terminate the Services Agreement if there is a
material breach by the other party or the other party is subject to a bankruptcy
or insolvency event.
MAINTENANCE AGREEMENT
Under the Maintenance Agreement, HyperFeed Technologies agrees to continue
to provide any software features, upgrades or enhancements to PCQuote Orbit as
they are tested and become available during the normal course of its business.
HyperFeed Technologies is not obligated to add any special features, upgrades or
enhancements to PCQuote Orbit that are requested by us. In exchange for this
maintenance obligation, we will pay HyperFeed Technologies a fee in an amount
equal to 3% of our gross revenues derived from all permitted uses, licensing and
sub-licensing of PCQuote Orbit.
This agreement is for a perpetual term. However, HyperFeed Technologies may
immediately terminate this agreement if the term of the DataFeed License
Agreement expires and is not renewed by us or if HyperFeed Technologies
terminates the DataFeed License Agreement as a result of a breach of that
agreement by us. In addition, either party may immediately terminate this
agreement if
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there is a material breach by the other party or the other party is subject to a
bankruptcy or insolvency event.
DATAFEED LICENSE AGREEMENT
The DataFeed License Agreement grants us a non-exclusive license to use
HyperFeed Technologies' data feed in both delayed and real-time formats
beginning in April 1999. We may use the data feed only with HyperFeed
Technologies' Hypertools. These are modules and applications that enable us to
interface with the data feed. Unless HyperFeed Technologies agrees otherwise, we
may distribute the data feed via the Internet only and users are required to
access the data feed through our servers.
This agreement has a five-year term and will automatically renew for
additional one-year terms unless we terminate at least 60 days prior the end of
the initial or any renewal term. Either party may terminate the agreement in the
event of a material breach of the agreement by the other party that is not cured
within 30 days. HyperFeed Technologies may immediately suspend our use of the
data feed if we redistribute the data feed, either internally or externally, to
third parties without the consent of HyperFeed Technologies and of the
appropriate data feed sources. If we do not cure the breach within 15 days after
notice of the breach is given to us, HyperFeed Technologies may terminate the
agreement. Either party may also immediately terminate this agreement if the
other party files a petition in bankruptcy or fails to timely discharge any
petition in bankruptcy filed against it.
We will pay HyperFeed Technologies monthly fees based on the number of users
and quotes accessed. If this agreement had been in effect as of January 1, 1999,
we would have paid HyperFeed Technologies a license fee of approximately
$555,000 for the six months ended June 30, 1999. We expect to pay approximately
$514,000 from the proceeds of this offering to HyperFeed Technologies for
amounts accrued under this agreement since April 1, 1999.
We are also responsible for paying all additional costs directly related to
our use of the data feed, such as:
- computer hardware and communications equipment;
- on-site training and support;
- satellite transmission;
- leased phone lines; and
- exchange fees, including indirect access fees.
These costs will be charged to us at the lowest price that HyperFeed
Technologies charges to its other data feed customers.
Prior to commencing use of the data feed, we are required to apply for and
receive approval from each data feed source whose approval is required for
receipt or dissemination of the information contained in the data feed.
NON-COMPETITION AGREEMENT
We have also entered into a Non-competition Agreement with HyperFeed
Technologies. This agreement provides that until the earlier of three years
after the closing of the separation transaction or the date on which the
DataFeed License Agreement is terminated by HyperFeed Technologies for
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our breach of that agreement or expires and is not renewed, HyperFeed
Technologies will not, either by itself or through any affiliate or subsidiary
directly or indirectly:
- engage in the maintenance of a computer system designed to receive data
feed from a data feed provider and to repackage the information for the
delivery of financial market data and market analytics with financial news
services via the Internet;
- own more than 5% of the outstanding equity interest of any entity (other
than us) that engages in the maintenance of a computer system designed to
receive data feed from a data feed provider and to repackage the
information for the delivery of financial market data and market analytics
with financial news services via the Internet;
- license, sub-license or assign to any entity engaged in the maintenance of
a computer system designed to receive data feed from a data feed provider
and to repackage the information for the delivery of financial market data
and market analytics with financial news services via the Internet, all or
any part of the intellectual property relating to PCQuote Orbit licensed
to us under the Contribution and Separation Agreement or of the software
package licensed to both us and HyperFeed Technologies by Townsend
Analytics. However, HyperFeed Technologies will remain free to license or
sub-license all or part of these intellectual properties to any licensed
broker or dealer for redistribution to persons having an account with such
broker or dealer and for other limited uses by such broker or dealer; or
- hire or solicit any person employed by us.
The agreement provides that until the later of three years after the closing
of the separation transaction or the date on which the DataFeed License
Agreement is terminated by us or expires and is not renewed, we will not, either
by ourselves or through any affiliate or subsidiary:
- engage in the business of redistributing data feed in any way other than
through a computer system designed to receive and repackage data feed,
such as the ones we currently operate;
- own more than five percent of the outstanding equity interest of any
entity that engages in the business of redistributing via the Internet
data feed in any way other than through a computer system designed to
receive and repackage data feed, such as the ones we currently operate; or
- hire or solicit any person employed by HyperFeed Technologies.
REGISTRATION RIGHTS AGREEMENT
Under the Registration Rights Agreement, we granted to HyperFeed
Technologies unlimited piggyback and demand registration rights for the common
stock acquired by HyperFeed Technologies under the Contribution and Separation
Agreement. However, HyperFeed Technologies may exercise its demand registration
right no more than twice per year during any period in which we are not
permitted to file registration statements on Form S-3 on behalf of HyperFeed
Technologies. We are not obligated to effect a registration if securities for
which a registration is demanded can be sold within a single 90-day period
pursuant to Rule 144 under the Securities Act. Subject to several exceptions, we
would bear all registration expenses incurred in connection with these
registrations. HyperFeed Technologies would pay all underwriting discounts and
commissions applicable to the sale of the securities sold by them.
HyperFeed Technologies has entered into a lock-up agreement pursuant to
which it has agreed not to offer or sell shares of our common stock held by it
for a period of 180 days from the date of this prospectus without the prior
written consent of Prudential Securities, on behalf of the underwriters.
We believe that the terms of each of the transactions with HyperFeed
Technologies described above, taken as a whole, were no less favorable than we
could have obtained from unaffiliated third parties. All future transactions
with our officers, directors and principal stockholders and their affiliates
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will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested outside directors.
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
Under the Tax Indemnification and Allocation Agreement, HyperFeed
Technologies will indemnify us against all tax liabilities incurred by us if
their contribution of assets to us fails to qualify as a tax-free transaction.
In addition, each party will indemnify the other party for:
- all income tax liabilities for which it is held liable or required to
reimburse the other party; and
- all income tax liabilities incurred by the other party due to a breach of
any covenant under this agreement.
In addition, this agreement provides for the allocation and payment of taxes
for periods during which HyperFeed Technologies and we are included in the same
consolidated group for federal, state, local or foreign income tax purposes. For
periods during which we are included in HyperFeed Technologies' consolidated
federal, state, local or foreign income tax returns, we will be required to pay
an amount of income tax equal to the amount we would have paid had we filed a
tax return as a separate entity.
CNNFN
On April 12, 1999, we entered into a 3 1/2 year agreement with CNNFN under
which CNNFN granted us a license to display on our Web sites certain headlines
from CNNFN original stories published on the CNNFN Web site at CNNFN.COM. CNNFN
also granted us a limited non-exclusive license to use CNNFN's logo. Under the
agreement, the following items will appear on our Web sites: Web site link to
the full story, short headline, ticker symbols contained in the story, the lead
paragraph of the story and the timestamp of each story post. The CNNFN headlines
appearing on our Web sites will serve as an access point to CNNFN's Web site.
Under the agreement, no more than five CNNFN headlines may appear on any one
of our Web site pages and these pages are subject to CNNFN's reasonable
approval. We have no right to sell any advertising specifically for placement on
the CNNFN headlines. CNNFN retains exclusive editorial control over the
production and selection of the CNNFN headlines provided to us. We do not have
the right to alter the CNNFN headlines provided to us. In other words, we must
use the headlines "as is." CNNFN agreed to hold us harmless from any claims
resulting from CNNFN headlines provided to us.
Our agreement with CNNFN will expire on October 12, 2003, and CNNFN will
have no obligation to renew it. Either party will also have the right to
terminate this agreement if:
- there is a material breach by the other party and this breach is not
cured;
- the other party is the subject of a bankruptcy event;
- any third party reasonably considered to be a competitor of the other
party merges with or acquires all or substantially all of the assets of
the other party;
- the other party undergoes a material change in control, involving a
competitor of the terminating party; or
- the other party makes any material adverse changes in its Web site or
conducts its business in a manner that would have a material adverse
effect on the terminating party's reputation, integrity or goodwill.
The agreement with CNNFN contains an exclusivity provision under which CNNFN
agrees not to license the CNNFN headlines to any unaffiliated third party for
display on a generally accessible Web
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<PAGE>
site that has as its primary purpose the providing of investment and/or
financial tools, including real-time or delayed equity and/or futures quotes.
However, this exclusivity does not apply to:
- any registered broker-dealer Web sites that are used for trading and are
accessible only by its clients;
- financial Web sites currently controlled by CNNFN or its affiliates;
- several of CNNFN's existing relationships; and
- any sites operated by our competitors that do not have the primary purpose
of providing users with investment and/or financial tools, including
real-time or delayed equity and/or futures quotes.
CNNFN can terminate the exclusivity provisions of the agreement at any time
after the one year anniversary of the agreement, after giving us 120 days
notice, if CNNFN, its parent company (Time Warner, Inc.) or one of its
affiliated or subsidiary companies:
- merges or consolidates with, acquires all or substantially all of the
assets of a company engaged in whole or in part in providing information
and services similar to those provided by us; or
- develops an information service internally which is similar to that
provided by us.
Notwithstanding the termination of the exclusivity provisions contained in
the agreement, we would retain a non-exclusive right to receive CNNFN headlines
without charge for the remainder of the term of the agreement.
In connection with the agreement, we granted CNNFN a warrant to purchase
515,790 shares of our common stock, representing a 5% interest in the common
stock of PCQuote.com outstanding prior to the offering, for an exercise price of
$.000001 per share. The shares subject to this warrant vest as follows: 25% on
the date of execution of the agreement with CNNFN and 25% on each anniversary
date of the agreement. CNNFN exercised the vested portion of this warrant on
April 29, 1999. If the agreement with CNNFN is terminated by us for reasons
relating to a change in control of CNNFN or a change in its Web site, or if
CNNFN terminates the exclusivity provision, the unvested portion of this warrant
is terminated. If there is a change in control of PCQuote.com and the acquiring
company does not assume CNNFN's warrant, then the unvested portion of the
warrant automatically vests and is treated as outstanding common stock. This
warrant contains customary provisions adjusting the number of shares acquirable
upon exercise of the warrant for stock splits, stock dividends and
reclassifications. The estimated value assigned to this warrant was $5.9 million
and was recorded as a contra-equity account.
We also granted CNNFN one demand registration right and unlimited piggyback
registration rights for the common stock acquirable upon exercise of the
warrant. These registration rights terminate on October 12, 2004. We are not
obligated to effect a registration if securities for which a registration is
demanded can be sold within a single 90-day period pursuant to Rule 144 under
the Securities Act.
We would bear all registration expenses incurred in connection with these
registrations. CNNFN would pay all underwriting discounts and commissions
applicable to the sale of the securities sold by them.
CNNFN has waived any registration rights with respect to this offering and
has entered into a lock-up agreement pursuant to which it has agreed not to
offer or sell the warrant or the shares that would be received upon exercise of
the warrant for a period of 180 days from the date of this prospectus without
the prior written consent of Prudential Securities.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following is a summary description of the material terms of our capital
stock. This summary is not intended to be complete. Since the terms of our
capital stock must comply with the provisions of our Certificate of
Incorporation and Bylaws, which are included as exhibits to the registration
statement of which this prospectus is a part, as well as the General Corporation
Law of the State of Delaware, you should read these two documents carefully.
We have the authority to issue up to 74,000,000 shares of common stock, par
value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01
per share.
COMMON STOCK
Prior to this offering, there were 9,928,948 shares of our common stock
outstanding, held of record by two stockholders.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as our Board from time to time may determine. Holders
of common stock are entitled to one vote for each share held on all matters
submitted to a vote of stockholders. Cumulative voting for the election of
directors is not authorized by our Certificate of Incorporation, which means
that the holders of a majority of the shares voted can elect all of the
directors then standing for election. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon our
liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders would be distributable ratably among the holders of
our common stock after payment of liquidation preferences, if any, on any
outstanding preferred stock and payment of our creditors. Each outstanding share
of our common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be upon payment therefor, duly and validly
issued, fully paid and nonassessable.
PREFERRED STOCK
Our Board is authorized, subject to any limitations under Delaware law, to
issue preferred stock in one or more series. The Board can fix the rights,
preferences and privileges of the shares of each series and any qualifications,
limitations or restrictions thereon.
Our Board may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of common stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of PCQuote.com. We have no current plan to issue any shares of preferred
stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents Delaware
corporations like us from engaging, under certain circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets, with any interested stockholder, or a stockholder who owns
15% or more of the corporation's outstanding voting stock, as well as affiliates
and associates of any such persons, for three years following the date that such
stockholder became an "interested stockholder" unless:
- the transaction in which such stockholder became an interested stockholder
is approved by the Board of Directors prior to the date the interested
stockholder attained such status;
62
<PAGE>
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who are
directors and also officers and, under certain circumstances, shares held
in employee stock plans; or
- the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock
not owned by the interested stockholder.
This statute could prohibit or delay mergers or other takeover or
change-in-control attempts with respect to PCQuote.com and, accordingly, may
discourage attempts to acquire us.
Our Bylaws provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting may only be taken if it is
properly brought before such meeting. Our Certificate of Incorporation and
Bylaws provide that special meetings of the stockholders may only be called by
the Chairman of our Board, our President, our Board or by any stockholder
holding at least 10% of our outstanding common stock. These provisions may have
the effect of delaying or preventing a change-in-control of PCQuote.com.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Certificate of Incorporation limits the liability of directors to the
fullest extent permitted by Delaware law. In addition, our Certificate of
Incorporation and Bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by Delaware law. We intend to enter
into separate indemnification agreements with our directors and executive
officers that provide them indemnification protection in the event the
Certificate of Incorporation is subsequently amended.
Our Certificate of Incorporation and Bylaws will provide that we will
indemnify officers and directors against losses that they may incur in
investigations and legal proceedings resulting from their services to us, which
may include services in connection with takeover defense measures. Such
provisions may have the effect of preventing changes in our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, 14,428,948 shares of our common stock will be
outstanding (1,925,442 shares of our common stock are issuable upon the exercise
of authorized options and warrants). Of these shares, the 5,000,000 shares
(5,750,000 shares if the underwriters exercise their over-allotment option in
full) sold in this offering will be freely tradable without restriction under
the Securities Act, except for any shares purchased by any of our affiliates,
defined as any person that, directly or indirectly, controls, or is controlled
by, or is under common control with, PCQuote.com. The remaining 9,428,948 shares
are restricted securities, defined as:
- securities acquired directly or indirectly from us, or from an affiliate
of ours, or in a transaction or chain of transactions not involving any
public offering; and
- securities acquired from us that are subject to the resale limitations
under the Securities Act.
Restricted securities generally may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144 under the Securities Act.
Our officers and directors and all stockholders, including the selling
stockholder, have entered into lock-up agreements pursuant to which they have
agreed not to offer or sell any shares of common stock for a period of 180 days
after the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. Prudential Securities may,
at any time and without notice, waive any of the terms of these lock-up
agreements specified in the underwriting agreement. Following the lock-up
period, these shares will not be eligible for sale in the public market without
registration under the Securities Act unless such sales meet the conditions and
restrictions of Rule 144 as described below.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (1)
1% of the then-outstanding shares of common stock and (2) the average weekly
trading volume of the common stock during the four calendar weeks immediately
preceding the date on which the notice of such sale on Form 144 is filed with
the SEC. Sales under Rule 144 are also subject to certain provisions relating to
notice and manner of sale and the availability of current public information
about the Company. In addition, a person (or persons whose shares are
aggregated) who has not been an affiliate of the Company at any time during the
90 days immediately preceding a sale of our common stock, and who has
beneficially owned the shares for at least two years, would be entitled to sell
their shares under Rule 144(k) without regard to the volume limitation and other
conditions described above. The foregoing summary of Rule 144 is not intended to
be a complete description.
As soon as practicable following the consummation of this offering, we
intend to file a registration statement under the Securities Act to register the
shares of our common stock available for issuance under our 1999 Combined
Incentive and Non-statutory Stock Option Plan. Shares issued under this plan
generally will be available for sale in the open market, subject to the
expiration of the 180-day lock-up period,
We have granted CNNFN one demand registration right and unlimited piggyback
registration rights covering the 128,948 shares of our common stock they own and
the 386,842 shares they may acquire upon exercise of the warrant held by them.
We granted to HyperFeed Technologies unlimited "piggyback" and demand
registration rights covering the 9,300,000 shares of our common stock it will
own after this offering.
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UNDERWRITING
We have entered into an underwriting agreement with the underwriters for
whom Prudential Securities Incorporated, U.S. Bancorp Piper Jaffray, Inc.,
FAC/Equities, a division of First Albany Corporation, E*OFFERING Corp.,
Commerzbank Capital Markets Corporation and PrudentialSecurities.com, a division
of Prudential Securities Incorporated, are acting as representatives. We and the
selling stockholder are obligated to sell, and the underwriters are obligated to
purchase, all of the shares offered on the cover page of this prospectus, if any
are purchased. Subject to certain conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the shares indicated opposite its
name:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
Prudential Securities Incorporated.................................................................
U.S. Bancorp Piper Jaffray, Inc....................................................................
FAC/Equities, a division of First Albany Corporation...............................................
E*OFFERING Corp....................................................................................
Commerzbank Capital Markets Corporation............................................................
PrudentialSecurities.com...........................................................................
-------------
Total.......................................................................................... 5,000,000
-------------
-------------
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to 750,000 additional shares from the selling stockholder. If any additional
shares are purchased, the underwriters will severally purchase the shares in the
same proportion as per the table above.
The representatives of the underwriters have advised us that the shares will
be offered to the public at the offering price indicated on the cover page of
this prospectus. The underwriters may allow to selected dealers a concession not
in excess of $ per share and such dealers may reallow a concession
not in excess of $ per share to certain other dealers. After the
shares are released for sale to the public, the representatives may change the
offering price and the concessions. The representatives have informed us that
the underwriters do not intend to sell shares to any investor who has granted
them discretionary authority.
We and the selling stockholder have agreed to pay to the underwriters the
following fees, assuming both no exercise and full exercise of the underwriters'
over-allotment option to purchase additional shares:
<TABLE>
<CAPTION>
TOTAL FEES
--------------------------------------------
FEE WITHOUT EXERCISE OF FULL EXERCISE OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by us...................................... $ $ $
Fees paid by the selling stockholder................. $ $ $
</TABLE>
Underwriting fees are calculated as a percentage of the initial public
offering price. At present, the representatives of the underwriters have advised
us that underwriting fees will not exceed 7% of the proceeds from the sale of
the shares offered. There will be no additional items of compensation paid to
the underwriters as part of this offering. In addition, we estimate that we will
spend approximately $1,400,000 in expenses for this offering including those of
the selling stockholder, for filing fees,
65
<PAGE>
printing, legal and accounting fees and expenses, and transfer agent and
registrar fees. We and the selling stockholder have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in respect of these liabilities.
We, our officers, directors and stockholders, including the selling
stockholder, have entered into lock-up agreements pursuant to which we and they
have agreed not to offer or sell any shares of common stock or securities
convertible into or exchangeable or exercisable for shares of common stock for a
period of 180 days from the date of this prospectus without the prior written
consent of Prudential Securities, on behalf of the underwriters. Prudential
Securities may, at any time and without notice, waive the terms of these lock-up
agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for the common stock
of our Company. The public offering price, negotiated among PCQuote.com, the
selling stockholder and the representatives, is based upon our financial and
operating history and condition, our prospects, the prospects for the industry
we are in and prevailing market conditions.
Prudential Securities, on behalf of the underwriters, may engage in the
following activities in accordance with applicable securities rules:
- Over-allotments involving sales in excess of the offering size, creating a
short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment options.
- Stabilizing and short covering. Stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in the
open market may also reduce the short position. These activities may cause
the price of the shares to be higher than would otherwise exist in the
open market.
- Penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions that were retained by, or released to, the syndicate
member.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
- the Public Offers of Securities Regulations 1995;
- the Financial Services Act 1986; and
- the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1996 (as amended).
We have asked the underwriters to reserve approximately 230,000 of the
shares offered for sale at the same offering price directly to our officers,
directors, employees, persons with whom we have vendor, supplier or other
business relationships, and other persons designated by us. The number of shares
available for sale to the general public in the offering will be reduced to the
extent these persons purchase the reserved shares.
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor-SM-, a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.
E*OFFERING Corp. is making a prospectus in electronic format available on
its Internet Web site. Other than the prospectus in electronic format, the
information on such Web site is not part of this prospectus or the registration
statement of which the prospectus forms a part.
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<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Wildman, Harrold, Allen & Dixon, Chicago, Illinois. Wildman,
Harrold, Allen & Dixon owns 83,900 shares of the common stock of HyperFeed
Technologies. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Fulbright & Jaworski L.L.P., New York, New
York.
EXPERTS
The financial statements of PCQuote.com, Inc. as of December 31, 1997 and
1998 and for each of the years in the three year period ended December 31, 1998,
have been included in this prospectus and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of our
common stock we are selling in this offering. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
filed with the registration statement. For further information with respect to
PCQuote.com and our common stock, we refer you to the registration statement and
the exhibits filed with the registration statement. Statements contained in this
prospectus regarding the contents of any contract or any other document filed as
an exhibit are not necessarily complete, and, in each instance, we refer you to
the copy of such contract or other document filed as an exhibit to the
registration statement and each such statement is qualified in all respects by
the contract or other document in question. A copy of the registration statement
and the exhibits and schedule filed with the registration statement may be
inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the registration statement may be obtained from these offices upon the payment
of the fees charged by the SEC. The SEC maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is http://www.sec.gov.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
PCQUOTE.COM, INC.
Independent Auditors' Report............................................................................. F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999 (unaudited)............................ F-3
Statements of Operations for the years ended December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (unaudited)............................................................... F-4
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1996, 1997 and 1998 and for
the six months ended June 30, 1999 (unaudited)......................................................... F-5
Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (unaudited)............................................................... F-6
Notes to Financial Statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
PCQuote.com, Inc.:
We have audited the accompanying balance sheets of PCQuote.com, Inc.
(Company), as of December 31, 1997 and 1998, and the related statements of
operations, stockholders' equity (deficit) and cash flows for each of the years
in the three-year period ended December 31, 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 financial statements referred to above present fairly,
in all material respects, the financial position of PCQuote.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
July 28, 1999,
except as to the first and fourth paragraphs of Note 8,
which are as of August 30, 1999
Chicago, Illinois
F-2
<PAGE>
PCQUOTE.COM, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30, 1999
1997 1998 -------------
------------ ------------ (UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................................................. $ -- $ -- $ 238,302
Accounts receivable, net of allowance for doubtful accounts of
$33,998, $109,036 and $252,079 as of December 31, 1997, December
31, 1998 and June 30, 1999, respectively........................... 400,121 437,043 798,308
Prepaid expenses and other current assets............................ 16,358 42,446 529,888
------------ ------------ -------------
Total current assets................................................... 416,479 479,489 1,566,498
Property and equipment, net of accumulated depreciation of $71,989,
$268,205 and $421,008, as of December 31, 1997, December 31, 1998 and
June 30, 1999, respectively.......................................... 359,946 478,574 836,926
Software development costs, net of accumulated amortization of
$886,373, $1,612,293 and $2,118,429 as of December 31, 1997, December
31, 1998 and June 30, 1999, respectively............................. 2,108,640 2,348,027 1,932,067
------------ ------------ -------------
Total assets....................................................... $ 2,885,065 $ 3,306,090 $ 4,335,491
------------ ------------ -------------
------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable..................................................... $ 1,025,360 $ 1,402,603 $ 1,808,308
Accrued compensation................................................. 133,569 111,457 145,337
Accrued interest..................................................... 223,206 -- --
Accrued exchange fees................................................ 149,976 32,325 141,151
Accrued royalties.................................................... 9,708 -- 500,000
Due to Parent........................................................ -- -- 854,072
Other accrued liabilities............................................ 28,933 55,698 99,715
Unearned revenue..................................................... 249,845 623,827 1,196,579
------------ ------------ -------------
Total current liabilities.......................................... 1,820,597 2,225,910 4,745,162
------------ ------------ -------------
Stockholders' equity (deficit):
Preferred stock, par value $.01 per share; authorized 1,000,000
shares; no shares issued and outstanding........................... -- -- --
Common stock, par value $.01 per share; authorized 74,000,000 shares;
9,928,948 shares issued and outstanding............................ -- -- 99,289
Additional paid-in capital........................................... -- -- 6,699,663
License fee.......................................................... -- -- (5,530,000)
Accumulated deficit.................................................. -- -- (1,678,623)
Stockholder's investment............................................. 1,064,468 1,080,180 --
------------ ------------ -------------
Total stockholders' equity (deficit)............................... 1,064,468 1,080,180 (409,671)
------------ ------------ -------------
Total liabilities and stockholders' equity......................... $ 2,885,065 $ 3,306,090 $ 4,335,491
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscription........................ $ 776,282 $ 3,401,469 $ 7,995,691 $ 3,375,524 $ 6,171,371
Advertising......................... 166,497 1,131,120 1,368,463 735,532 536,455
Other............................... 30,058 230,323 547,957 265,096 235,975
------------- ------------- ------------- ------------- -------------
Total revenues........................ 972,837 4,762,912 9,912,111 4,376,152 6,943,801
Direct cost of revenues............... 812,988 4,201,310 6,542,787 2,869,052 5,792,913
------------- ------------- ------------- ------------- -------------
Gross profit.......................... 159,849 561,602 3,369,324 1,507,100 1,150,888
Operating expenses:
General and administrative.......... 1,083,490 2,297,383 2,481,583 1,357,741 1,864,984
Sales and marketing................. 620,450 1,226,021 2,108,399 1,114,548 961,126
Research and development............ 392,158 253,973 241,223 83,763 133,842
Depreciation........................ -- 71,989 196,216 94,834 152,803
------------- ------------- ------------- ------------- -------------
Total operating expenses.............. 2,096,098 3,849,366 5,027,421 2,650,886 3,112,755
------------- ------------- ------------- ------------- -------------
Loss from operations.................. (1,936,249) (3,287,764) (1,658,097) (1,143,786) (1,961,867)
Other income (expense):
Interest income..................... 556 10,537 8,292 5,143 --
Interest expense.................... (26,171) (1,295,090) (512,646) (412,208) (4,354)
------------- ------------- ------------- ------------- -------------
Other expense, net.................... (25,615) (1,284,553) (504,354) (407,065) (4,354)
------------- ------------- ------------- ------------- -------------
Loss before income taxes.............. (1,961,864) (4,572,317) (2,162,451) (1,550,851) (1,966,221)
Income taxes.......................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Net loss.............................. $ (1,961,864) $ (4,572,317) $ (2,162,451) $ (1,550,851) $ (1,966,221)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Pro forma basic and diluted loss per
share............................... $ (0.22) $ (0.16) $ (0.20)
------------- ------------- -------------
------------- ------------- -------------
Pro forma weighted-average shares used
in the calculations of basic and
diluted loss per share.............. 9,800,000 9,800,000 9,844,882
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- ADDITIONAL STOCKHOLDERS'
PAR VALUE PAID-IN LICENSE ACCUMULATED STOCKHOLDER'S EQUITY
SHARES AMOUNT CAPITAL FEE DEFICIT INVESTMENT (DEFICIT)
--------- --------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ -- $ -- $ -- $ -- $ -- $ 624,440 $ 624,440
Net loss for the period........... -- -- -- -- -- (1,961,864) (1,961,864)
Contributions from Parent, net.... -- -- -- -- -- 2,610,827 2,610,827
--------- --------- ----------- ----------- ------------ ------------- -------------
Balance at December 31, 1996........ -- -- -- -- -- 1,273,403 1,273,403
Net loss for the period........... -- -- -- -- -- (4,572,317) (4,572,317)
Contributions from Parent, net.... -- -- -- -- -- 4,363,382 4,363,382
--------- --------- ----------- ----------- ------------ ------------- -------------
Balance at December 31, 1997........ -- -- -- -- -- 1,064,468 1,064,468
Net loss for the period........... -- -- -- -- -- (2,162,451) (2,162,451)
Contributions from Parent, net.... -- -- -- -- -- 2,178,163 2,178,163
--------- --------- ----------- ----------- ------------ ------------- -------------
Balance at December 31, 1998........ -- -- -- -- -- 1,080,180 1,080,180
Common stock issued upon
incorporation (unaudited)....... 9,800,000 98,000 (97,990) -- -- -- 10
Net loss for period (unaudited)... -- -- -- -- (1,678,623) (287,598) (1,966,221)
Contributions from Parent, net
(unaudited)..................... -- -- -- -- -- 126,360 126,360
Transfer of stockholder's
investment on March 31, 1999
(unaudited)..................... -- -- 918,942 -- -- (918,942) --
Warrant issued for license fee
(unaudited)..................... -- -- 5,880,000 (5,880,000) -- -- --
Warrant exercised (unaudited)..... 128,948 1,289 (1,289) -- -- -- --
Amortization of license fee
(unaudited)..................... -- -- -- 350,000 -- -- 350,000
--------- --------- ----------- ----------- ------------ ------------- -------------
Balance at June 30, 1999
(unaudited)....................... 9,928,948 $99,289 $6,699,663 $(5,530,000) $(1,678,623) $ -- $ (409,671)
--------- --------- ----------- ----------- ------------ ------------- -------------
--------- --------- ----------- ----------- ------------ ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................. $ (1,961,864) $ (4,572,317) $ (2,162,451) $ (1,550,851) $ (1,966,221)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation........................ -- 71,989 196,216 94,834 152,803
Provision for doubtful accounts..... -- 95,018 148,625 78,072 160,000
Amortization of software development
costs............................. 266,671 549,698 725,920 391,717 541,580
Amortization of warrant issued for
license fee....................... -- -- -- -- 350,000
Changes in assets and liabilities:
Accounts receivable............... (91,782) (403,357) (185,547) (151,286) (521,265)
Prepaid expenses and other current
assets.......................... (24,807) 8,449 (26,088) (8,678) (487,442)
Accounts payable.................. 284,181 741,179 377,243 466,341 416,256
Accrued expenses.................. 142,983 402,409 (345,912) (149,312) 1,530,244
Unearned revenue.................. 98,193 151,652 373,982 365,073 572,752
------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities................ (1,286,425) (2,955,280) (898,012) (464,090) 748,707
INVESTING ACTIVITIES
Purchase of property and equipment.... -- (431,935) (314,844) (162,698) (511,155)
Software development costs
capitalized......................... (1,324,402) (976,167) (965,307) (512,278) (125,620)
------------- ------------- ------------- ------------- -------------
Net cash used in investing
activities.......................... (1,324,402) (1,408,102) (1,280,151) (674,976) (636,775)
FINANCING ACTIVITIES
Contributions from Parent, net........ 2,610,827 4,363,382 2,178,163 1,139,066 126,370
------------- ------------- ------------- ------------- -------------
Net cash provided by financing
activities.......................... 2,610,827 4,363,382 2,178,163 1,139,066 126,370
Net change in cash.................... -- -- -- -- 238,302
Cash at the beginning of the period... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Cash at the end of the period......... $ -- $ -- $ -- $ -- $ 238,302
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Warrant issued for license fee.................................................................... $ 5,880,000
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS
PCQuote.com, Inc. (the "Company"), a subsidiary of PC Quote, Inc. (the
"Parent"), is an Internet-based provider of real-time and delayed market quotes,
timely business news and comprehensive tools for researching and analyzing
financial information. PCQuote.com's service offerings consist of two Web sites,
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled
desktop applications, PCQuote 6.0 RealTick and PCQuote Orbit. In addition, the
Company offers several business-to-business services that enable clients to
present financial data and information on their Web sites or desktop
applications. The Company's principal customers are individual investors,
financial Web site advertisers and other Web sites and businesses.
The Company's first Web site was established in July 1995 ("inception"). The
financial statements have been prepared as if the Company operated as a
stand-alone entity since inception.
On March 19, 1999, the Company was incorporated as a Delaware Corporation
and became a wholly-owned subsidiary of the Parent.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements present the results of operations,
financial condition and cash flows of the Company as a component of the Parent
prior to the consummation of the transactions contemplated by the Contribution
and Separation Agreement described in Note 8. The financial information included
herein may not necessarily reflect the financial position, results of operations
or cash flows of the Company in the future or what the balance sheets, results
of operations or cash flows of the Company would have been if it had been a
separate, stand-alone publicly-held corporation during the periods presented.
Since the Company's inception, the Parent has provided funding to the
Company for working capital. The Company participates in the Parent's cash
management process. As a part of the Parent's central cash management system,
all cash generated from and cash required to support the Company's operations
were deposited and received through the Parent's corporate operating cash
accounts. As a result, there were no separate bank accounts or accounting
records for these transactions until June 1999 when the Company opened a
separate bank account for certain receipts and disbursements. Accordingly, the
amounts represented by the caption "Contributions from Parent" in the Company's
Statements of Cash Flows represent the net effect of all cash transactions
between the Company and the Parent.
For all periods presented, general and administrative expenses reflected in
the financial statements include allocations of corporate expenses from the
Parent. These allocations took into consideration personnel, business volume or
other appropriate bases and generally include administrative expenses related to
general management, insurance, information management and other miscellaneous
services. Interest expense shown in the financial statements reflects interest
expense associated with the Company's share of the aggregate borrowings of the
Parent for each of the periods presented. Allocations of corporate expenses are
estimates based on management's best assessment of actual expenses. It is
management's opinion that the expenses charged to the Company are reasonable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets
F-7
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
REVENUE RECOGNITION
The Company principally derives its revenue from short-term subscription
contracts for its services, including the supply of real-time financial data and
quotations from North American financial exchanges and markets, advertising that
appears on the Company's Web sites and the licensing of PCQuote 6.0 RealTick
software to customers. Revenue from such subscription contracts is recognized
ratably over the contract term as the contracted services are rendered. Revenue
from the sale of advertising is recognized as the advertising is displayed on
the Web sites. Revenue from the licensing of PCQuote 6.0 RealTick is recognized
as software is downloaded and services are rendered. Such fees are either billed
one month in advance of the month in which the service is provided or are
automatically paid by credit card within five days prior to the month of
service. The majority of PCQuote 6.0 RealTick customers pay by credit card.
These and other payments received prior to services being rendered are
classified as unearned revenue on the balance sheet. Revenue and the related
receivable for advance billings are not reflected in the financial statements.
The Company adopted the provisions of Statement of Position ("SOP") 97-2
SOFTWARE REVENUE RECOGNITION, on January 1, 1998. SOP 97-2 specifies the
following four criteria that must be met prior to recognizing revenue: (1)
persuasive evidence of the existence of an arrangement, (2) delivery, (3) fixed
or determinable fee and (4) probability of collection. In addition, revenue
earned on software arrangements involving multiple elements is allocated to each
element based on the relative fair value of the elements. In accordance with SOP
97-2, revenue allocated to the Company's software products (including specified
upgrades/enhancements) is recognized upon delivery of the products. Revenue
allocated to post contract customer support is recognized ratably over the term
of the support and revenue allocated to service elements (such as training and
installation) is recognized as the services are performed.
ACCOUNTS RECEIVABLE
Accounts receivable include amounts owed under short-term subscription
contracts, advertising arrangements and licensing agreements. A majority of the
Company's customers pay via a credit card that is authorized before delivery of
the software in connection with the performance of services. The Company
maintains an allowance for doubtful accounts to cover exposure related to
accounts that are deemed uncollectible. The Company recorded a provision for
doubtful accounts of $0, $95,000 and $149,000 and expensed $0, $61,000 and
$74,000 against the allowance during the years ended December 31, 1996, 1997 and
1998, respectively.
SOFTWARE DEVELOPMENT COSTS
The Company's investment in software development consists primarily of the
formation and enhancement to its Web sites and its other service offerings.
Costs associated with the planning and design phase of software development,
including coding and testing activities necessary to establish technological
feasibility of computer software products to be licensed or otherwise marketed,
are charged to research and development as incurred. Once technological
feasibility has been reached, costs incurred in the construction phase of
software development, including coding, testing and product quality assurance,
are capitalized.
Amortization commences at the time of capitalization or, in the case of a
new service offering, at the time the service becomes available for use.
Unamortized capitalized costs determined to be in
F-8
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
excess of the net realizable value of the product are expensed at the date of
such determination. The accumulated amortization and related software
development costs are removed from the respective accounts effective in the year
following full amortization.
The Company's policy is to amortize capitalized software costs by the
greater of (a) the ratio of current gross revenue to the total of current and
anticipated future gross revenue for that product or (b) the straight line
method over the remaining estimated economic life of the product including the
period being reported on, principally three to five years. The Company assesses
the recoverability of its software development costs against estimated future
undiscounted cash flows. Given the highly competitive environment and
technological changes in the Company's industry, these estimates of anticipated
future gross revenue, the remaining estimated economic life of the product, or
both may be reduced significantly.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is provided
using the straight line method over an estimated useful life of three years for
computer equipment and five years for communication equipment.
Office furniture, fixtures and leasehold improvements of the Company
provided by the Parent are not reflected in the accompanying balance sheets of
the Company. The Company's portion of the cost incurred by the Parent has been
included in the historical financial data presented in the accompanying
statements of operations using estimates based on personnel and or square
footage utilized by the Company in the Parent's facility.
Maintenance and repair costs are charged to expense as incurred. Costs of
improvements are capitalized. Upon retirement or disposition, the cost and
related accumulated depreciation and amortization are removed from the accounts
and any gain or loss is included in the statements of operations.
ADVERTISING COSTS
Advertising costs are charged to expense as incurred. Advertising expense
were approximately $37,000, $162,000 and $551,000 for the years ended December
31, 1996, 1997 and 1998, respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") 109, ACCOUNTING FOR INCOME TAXES. The
Company is included in the income tax return of the Parent. Pursuant to a tax
sharing agreement effective as of the consummation of the transaction described
in Note 8, the provision for income taxes of the Company has been calculated as
if the Company were a stand-alone corporation filing separate tax returns.
BASIC AND DILUTED LOSS PER SHARE
The Company computes net loss per share in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). Under the provisions of SFAS 128, basic and diluted net loss per share is
computed by dividing the net loss for the period by the weighted average number
of common shares outstanding for the period. All share and per share data have
been retroactively adjusted to reflect the incorporation of the Company on March
19, 1999 and the stock split described in Note 8 as if all shares were
outstanding for all periods presented.
F-9
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
BUSINESS SEGMENT INFORMATION
The Company operates in one reportable segment of financial data services.
One customer, a private label redistributor of the Company's PCQuote 6.0
RealTick service, accounted for 0%, 6% and 11% of the Company's revenue during
the years ended December 31, 1996, 1997 and 1998, respectively. Accounts
receivable from this customer accounted for 47% and 23% of total accounts
receivable at December 31, 1997 and 1998, respectively.
BUSINESS CONCENTRATIONS
The Company is dependent upon the Parent to provide software programming
assistance, data feeds, communications lines and related facilities, network
operations and Web site management services, and certain administrative,
engineering and human resources services. The inability of the Parent to
continue to provide such services could in the near term negatively affect the
competitive position of the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amounts of its financial instruments,
consisting of accounts receivable, accounts payable and accrued liabilities,
approximates the fair value of such items.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The financial statements as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 are unaudited; however, in the opinion of management, all
adjustments, consisting solely of normal recurring adjustments, necessary for a
fair presentation of the financial statements for the interim periods have been
included. The results of operations for the six months ended June 30, 1999 are
not necessarily indicative of the results to be achieved for the full fiscal
year.
(3) LIQUIDITY
Operations of the Company for the current and prior year did not generate
sufficient cash flow to cover current obligations. The Parent has funded such
obligations and has made a commitment to continue to provide financing to the
Company until the transaction described in Note 7 is consummated.
(4) RELATED PARTY TRANSACTIONS
The Company engages in transactions with the Parent in the normal course of
its business. These transactions include the purchase of Web site hosting
services from the Parent, assistance with software programming, data feeds,
communications lines and related facilities, network operations and Web site
management services and certain administrative, engineering and human resources
services.
In consideration for these services, the Parent has allocated a portion of
its overhead costs related to such services to the Company. The allocations were
estimated using proportional cost allocation methods.
Administration costs for services provided by the Parent to the Company were
determined by identifying the Parent's personnel who supported the Company.
Their pay, based on the number of hours of service provided, plus benefits, was
used to calculate these costs. Employees of the Company are eligible for various
benefits under programs maintained by the Parent. The cost related to property
usage is determined based on the square footage used by the Company. The Company
is also charged
F-10
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
a pro-rata share, based on square footage, of the utilities, property taxes and
other costs. Internet/ telecom costs include an allocation of monthly
depreciation for all hardware and software based on usage by the Company, as
well as monthly rates for telecommunications services used by the Company.
In management's opinion, the methods to identify and allocate costs to the
Company for these services provided by the Parent are reasonable.
(5) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1997 1998
---------- -----------
<S> <C> <C>
Computer equipment................................................... $ 431,935 $ 743,242
Communications equipment............................................. -- 3,537
---------- -----------
431,935 746,779
Less accumulated depreciation........................................ 71,989 268,205
---------- -----------
Property and equipment, net.......................................... $ 359,946 $ 478,574
---------- -----------
---------- -----------
</TABLE>
Depreciation expense recorded by the Company was $71,989 and $196,216 during
the years ended December 31, 1997 and 1998, respectively.
(6) INCOME TAXES
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. Federal income tax rate of 35% to losses before income tax expense as a
result of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ------------- -------------
<S> <C> <C> <C>
Computed "expected" tax benefit.................... $ (686,652) $ (1,600,311) $ (756,858)
Increase (decrease) in tax benefit resulting from:
Change in valuation allowance.................... 775,917 1,808,351 855,249
State and local income taxes, net of federal
benefit........................................ (89,265) (208,040) (98,392)
----------- ------------- -------------
Income tax expense (benefit)....................... $ -- $ -- $ --
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
No deferred income tax expense (benefit) was recognized as the results from
temporary differences in the recognition of income and expense for income tax
and financial reporting purposes were offset
F-11
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
by a valuation allowance. The sources and tax effects of those temporary
differences are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Deferred tax assets:
Unearned revenue.............................................. $ 98,814 $ 246,724
Allowance for doubtful accounts............................... 13,446 43,124
Accrued expenses.............................................. 7,801 16,814
Property and equipment........................................ 4,146 13,466
------------- -------------
Net operating loss............................................ 3,321,715 4,075,722
Gross deferred tax assets................................... 3,445,922 4,395,850
Less valuation allowance.................................... (2,611,955) (3,467,205)
------------- -------------
Net deferred tax assets................................... 833,967 928,645
Deferred tax liabilities:
Capitalized software.......................................... (833,967) (928,645)
------------- -------------
Gross deferred tax liabilities.............................. (833,967) (928,645)
------------- -------------
Net deferred income taxes....................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The net change in the valuation allowance for the years ended December 31,
1997 and 1998 was an increase of $1,808,351 and $855,250, respectively. The net
operating loss carryforward will remain an asset of the Parent subsequent to the
consummation of the contribution and separation agreement described in Note 8,
and therefore will not be available to the Company to be utilized in future tax
periods.
(7) EQUITY TRANSACTIONS
On March 19, 1999, the Company was incorporated as a wholly-owned subsidiary
of the Parent and was capitalized through the authorization and issuance of
common stock to its Parent. The Company has filed a registration statement with
the Securities and Exchange Commission to sell authorized common stock to the
public. The Company adopted the 1999 Combined Incentive and Non-statutory Stock
Option Plan in May 1999. There are 1,538,600 shares of common stock reserved for
issuance under this plan. The plan terminates in September 2009, unless
terminated sooner by the Company's Board of Directors. The plan authorizes the
award of options and restricted stock purchase rights. The plan will be
administered by the Company's Board of Directors or a committee appointed by the
Company's Board of Directors. The administrator has the authority to interpret
the plan, grant awards and make all other determinations necessary to administer
the plan. Stock options are exercisable for a period not to exceed ten years
from the date of the grant and, to the extent determined at the time of grant,
may be paid for in cash or by a reduction in the number of shares issuable upon
exercise of the option.
On April 12, 1999, the Company entered into a 3 1/2 year agreement with
CNNFN under which CNNFN granted the Company a license to display on the
Company's Web sites certain headlines from CNNFN original stories published on
the CNNFN Web site at CNNFN.COM. In connection with the agreement, the Company
issued to CNNFN a warrant to acquire 515,790 shares of common stock,
representing a five percent interest in the common stock of the Company
outstanding prior to the offering. The warrant has an aggregate exercise price
of $0.52. On April 29, 1999, CNNFN exercised the
F-12
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
vested portion of this warrant and acquired 128,948 shares of common stock. The
estimated value of the warrant, as of the date of the agreement, was recorded as
a contra-equity account and will be amortized over the term of the agreement.
(8) CERTAIN TRANSACTIONS
On August 30, 1999, the Company and its Parent entered into certain
agreements, effective March 31, 1999, governing various interim and ongoing
relationships, including a Contribution and Separation Agreement, Maintenance
Agreement, DataFeed License Agreement, Services Agreement, Non-Competition
Agreement, Registration Rights Agreement and Tax Indemnification and Allocation
Agreement. Under the Contribution and Separation Agreement, the Parent
transferred certain assets to the Company and the Company assumed certain
liabilities of the Parent. Under the Services Agreement, which has an initial
term ending June 30, 2000, the Parent will perform certain services and provide
office space for $213,500 per month through September 1999, $163,500 per month
thereafter through December 1999, $138,500 per month thereafter through March
2000 and $113,500 per month thereafter. Under the Maintenance Agreement, the
Company will receive software features, upgrades and enhancements to PCQuote
Orbit and will pay the Parent 3% of gross revenues obtained from use or
sublicensing of PCQuote Orbit. Under the DataFeed License Agreement, the Company
will be entitled to use the Parent's data feed for a monthly fee based on the
number of users and quotes accessed. The rates or amounts to be paid by the
Company under these agreements are not expected to be materially different than
the rates or amounts currently being charged by the Parent.
On May 28, 1999, the Company entered into a new license agreement with
Townsend Analytics for the right to use a software application which is marketed
as PCQuote 6.0 RealTick. The Company also offers private label versions of this
application. The new agreement replaced the prior agreement between Townsend
Analytics and the Parent. The initial term of the agreement ends December 4,
2000. The Company agrees to pay them 33% of the subscription revenue derived
from its PCQuote 6.0 RealTick service and 50% of revenues relating to the
private label version that it presently sublicenses to two of its customers. For
certain of its customers, Townsend Analytics provides hosting services and order
execution capabilities and receives a license fee of 66% of the Company's
revenues derived from these customers. Regardless of actual subscription
revenues it receives, the Company is required under the license agreement to
make minimum license fee payments to Townsend Analytics of $220,000 per month
until we pay aggregate license fees of $5.0 million. This $5.0 million payment
represents one-half of the $10.0 million guaranteed minimum aggregate license
payment arrangement among Townsend Analytics, HyperFeed Technologies and the
Company. In addition, the Company could be required to pay up to $2.0 million to
satisfy any shortfall in the $5.0 million minimum license fee payment allocated
to HyperFeed Technologies if the amounts paid by us and HyperFeed Technologies
do not in the aggregate reach $10.0 million. Since the Company expects to
receive 70% of the revenue derived collectively by us and HyperFeed Technologies
from products licensed to both us and HyperFeed Technologies, we believe this
approach will equitably split the $10.0 million guaranteed minimum. The Company
will also pay $500,000 to the Parent to reimburse them for a portion of the
amount to be paid by them to Townsend Analytics under a termination agreement
between those parties.
On June 8, 1999, the Board of Directors approved a 9,800-for-one stock split
of the Company's outstanding common stock. All common shares and per share data
have been retroactively adjusted to reflect this stock split.
On August 30, 1999, the Company amended its articles of incorporation to
increase its authorized common stock to 74,000,000 and to authorize 1,000,000
shares of $0.01 par value preferred stock for future issuance.
F-13
<PAGE>
EMPOWERING TODAY'S ON-LINE INVESTORS. [PCQUOTE.COM LOGO]
Until , 1999, all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
[PCQUOTE.COM LOGO]
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
FAC/EQUITIES
E*OFFERING
COMMERZBANK CAPITAL MARKETS CORPORATION
PRUDENTIALSECURITIES.COM
HTTP://MARKETSMART-REAL.PCQUOTE.COM HTTP://PCQUOTE.COM
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by us in connection with this offering are as
follows. All amounts other than the SEC registration fee, NASD filing fee and
Nasdaq National Market application fee are estimates.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 34,687.00
NASD filing fee............................................... $ 12,977.50
Nasdaq National Market listing fee............................ $ 85,500.00
Printing...................................................... $ 190,000.00
Legal fees and expenses....................................... $ 400,000.00
Accounting fees and expenses.................................. $ 350,000.00
Blue sky fees and expenses.................................... $ 1,500.00
Transfer agent and registrar fees............................. $ 3,000.00
Miscellaneous................................................. $ 322,335.50
-------------
Total......................................................... $1,400,000.00
-------------
-------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
As permitted by the Delaware General Corporation Law, our certificate of
incorporation includes a provision that eliminates the personal liability of our
directors for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to us
or our stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of the General Corporation Law of the State of Delaware (regarding
unlawful dividends and stock purchases) or (iv) for any transaction from which
the director derived an improper personal benefit.
As permitted by the General Corporation Law of the State of Delaware, our
Bylaws provide that (i) we are required to indemnify our directors and officers
to the fullest extent permitted by the General Corporation Law of the State of
Delaware, subject to certain very limited exceptions, (ii) we may indemnify our
other employees and agents as set forth in the General Corporation Law of the
State of Delaware, (iii) we are required to advance expenses, as incurred, to
our directors and executive officers in connection with a legal proceeding to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, subject to certain very limited exceptions and (iv) the rights
conferred in our Bylaws are not exclusive.
We intend to enter into Indemnification Agreements with each of our
directors and executive officers to give them additional contractual assurances
regarding the scope of the indemnification set forth in our certificate of
incorporation and to provide additional procedural protections. At present,
there is no pending litigation or proceeding involving one of our directors,
officers or employees regarding which indemnification is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
Reference is also made to Section 8 of the Underwriting Agreement, which
provides for the indemnification of our officers, directors and controlling
persons against certain liabilities. The indemnification provision in our
certificate of incorporation, Bylaws and the Indemnification
II-1
<PAGE>
Agreements entered into between us and each of our directors and executive
officers may be sufficiently broad to permit indemnification of our directors
and executive officers for liabilities arising under the Securities Act.
We expect, with approval by our Board of Directors, to obtain directors' and
officers' liability insurance.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
- ----------------------------------------------------------------------------- -----------------
<S> <C>
Form of Underwriting Agreement............................................... 1.1
Amended and Restated Articles of Incorporation of PCQuote.com................ 3.1
Bylaws of PCQuote.com........................................................ 3.2
Form of Indemnification Agreement............................................ 10.12
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On March 19, 1999, we issued 9,800,000 shares of our common stock to
HyperFeed Technologies for an aggregate of $10.00.
On April 12, 1999, we granted CNNFN a warrant to purchase 515,790 shares of
our common stock exercisable for less than $.01 per share for an aggregate of
$0.13. On April 29, 1999, CNNFN purchased 128,948 shares of our common stock
upon exercise of the vested portion of this warrant.
All issuances of securities were made in reliance on Section 4(2) of the
Securities Act.
The above share numbers reflect the 9,800-for-1 split of our common stock.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation**
3.2 By-laws**
4.1 Specimen Stock Certificate**
4.2 Warrant issued by Registrant to CNNFN**
4.3 Statement of Registration Rights by and between registrant and CNNFN (included in Exhibit 4.2)**
4.4 Form of Registration Rights Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
5.1 Opinion of Wildman, Harrold, Allen & Dixon regarding legality of the securities being
registered**
10.1 Contribution and Separation Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.2 Form of Services Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.3 Form of Maintenance Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------------
<C> <S>
10.4 Form of Datafeed License Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.5 Form of Non-Competition Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.6 Tax Indemnification and Allocation Agreement to be entered into by and between registrant and
HyperFeed Technologies Inc.**
10.7 Agreement dated April 12, 1999 by and between registrant and CNNFN+**
10.8 Software License and Distributor Agreement dated May 28, 1999 by and between registrant and
Townsend Analytics, Ltd.**
10.9 Executive Employment Agreement dated June 8, 1999 by and between registrant and Andrew
Peterson**
10.10 1999 Combined Incentive and Non-statutory Stock Option Plan**
10.11 Co-Branding Agreement dated October 11, 1996 by and between registrant and AB Watley+**
10.12 Form of Indemnification Agreement to be entered into by and between registrant and its directors
and executive officers**
10.13 Sublease to be entered into by and between registrant and HyperFeed Technologies, Inc.**
10.14 Amendment No. 1 dated August 12, 1999 to Software License and Distributor Agreement dated May
28, 1999 by and between registrant and Townsend Analytics, Ltd.**
10.15 Promissory Note, dated September 3, 1999, issued to Motorola, Inc.**
23.1 Consent of KPMG LLP
23.2 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.1)
23.3 Consent of @plan**
24.1 Power of Attorney**
27.1 Financial Data Schedule**
99.1 Consent of James R. Quandt**
99.2 Consent of Francis J. Harvey**
99.3 Consent of Ronald J. Grabe**
</TABLE>
- ------------
* To be filed by amendment
** Previously filed
+ Confidentiality Requested, confidential portions have been omitted and filed
separately with the Commission, as required by Rule 406(b).
(b) Financial Statement Schedules
No financial statement schedules are provided because the information called
for is not required or is shown either in the financial statements or the notes
thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 8 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on the 1st day of October, 1999.
PCQuote.com, INC.
By: /s/ TIMOTHY K. KRAUSKOPF
-----------------------------------------
Timothy K. Krauskopf
CHIEF OPERATING OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 8 to the Registrant's Registration Statement has been signed by the
following persons in the capacities indicated on October 1st, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------- --------------------------------------
<C> <S>
/s/ JIM R. PORTER
- -------------------------------------- Chairman of the Board and Chief
Jim R. Porter Executive Officer
/s/ TIMOTHY K. KRAUSKOPF
- -------------------------------------- President, Chief Operating Officer and
Timothy K. Krauskopf Director
/s/ ANDREW N. PETERSON
- -------------------------------------- Chief Financial Officer and Secretary
Andrew N. Peterson
*
- -------------------------------------- Director
John E. Juska
*
- -------------------------------------- Director
John R. Hart
</TABLE>
*By /s/ TIMOTHY K.
KRAUSKOPF
-------------------------
Timothy K. Krauskopf
AS ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation**
3.2 By-laws**
4.1 Specimen Stock Certificate**
4.2 Warrant issued by Registrant to CNNFN**
4.3 Statement of Registration Rights by and between registrant and CNNFN (included in Exhibit
4.2)**
4.4 Form of Registration Rights Agreement to be entered into by and between registrant and
HyperFeed Technologies, Inc.**
5.1 Opinion of Wildman, Harrold, Allen & Dixon regarding legality of the securities being
registered**
10.1 Contribution and Separation Agreement to be entered into by and between registrant and
HyperFeed Technologies, Inc.**
10.2 Form of Services Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.3 Form of Maintenance Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.4 Form of Datafeed License Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.5 Form of Non-Competition Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.6 Tax Indemnification and Allocation Agreement to be entered into by and between registrant and
HyperFeed Technologies Inc.**
10.7 Agreement dated April 12, 1999 by and between registrant and CNNFN+**
10.8 Software License and Distributor Agreement dated May 28, 1999 by and between registrant and
Townsend Analytics, Ltd.**
10.9 Executive Employment Agreement dated June 8, 1999 by and between registrant and Andrew
Peterson**
10.10 1999 Combined Incentive and Non-statutory Stock Option Plan**
10.11 Co-Branding Agreement dated October 11, 1996 by and between registrant and AB Watley+**
10.12 Form of Indemnification Agreement to be entered into by and between registrant and its
directors and executive officers**
10.13 Sublease to be entered into by and between registrant and HyperFeed Technologies, Inc.**
10.14 Amendment No. 1 dated August 12, 1999 to Software License and Distributor Agreement dated May
28, 1999 by and between registrant and Townsend Analytics, Ltd.**
10.15 Promissory Note, dated September 3, 1999, issued to Motorola, Inc.**
23.1 Consent of KPMG LLP
23.2 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.1)
23.3 Consent of @plan**
24.1 Power of Attorney**
27.1 Financial Data Schedule**
99.1 Consent of James R. Quandt**
99.2 Consent of Francis J. Harvey**
99.3 Consent of Ronald J. Grabe**
</TABLE>
- ------------
* To be filed by amendment
** Previously filed
+ Confidentiality Requested, confidential portions have been omitted and filed
separately with the Commission, as required by Rule 406(b).
<PAGE>
Exhibit 1.1
PCQUOTE.COM, INC.
5,000,000 Shares *
Common Stock
UNDERWRITING AGREEMENT
___________________, 1999
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
FIRST ALBANY CORPORATION
E*OFFERING CORP.
COMMERZBANK CAPITAL MARKETS CORPORATION
PRUDENTIALSECURITIES.COM
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
PCQuote.com, Inc., a Delaware corporation (the "Company"), and HyperFeed
Technologies Inc., a Delaware corporation (the "Selling Securityholder"),
hereby confirm their agreement with the several underwriters named in
Schedule 1 hereto (the "Underwriters"), for whom you have been duly
authorized to act as representatives (in such capacities, the
"Representatives"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be to the
Underwriters.
1. SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the several Underwriters
4,500,000 shares (the "Company Firm Securities") of the Company's Common
Stock, par value $0.01 per share ("Common Stock"), and the Selling
Securityholder proposes to sell to the several Underwriters 500,000
authorized and
- ------------------------
* Plus an option to purchase from the Selling Securityholder up
to 750,000 additional shares to cover over-allotments.
<PAGE>
outstanding shares of Common Stock (the "Selling Securityholder Firm
Securities" and together with the Company Firm Securities, the "Firm
Securities"). The Selling Securityholder also proposes to sell to the
several Underwriters up to 750,000 additional shares of Common Stock if
requested by the Representatives as provided in Section 3 of this Agreement.
Any and all shares of Common Stock to be purchased by the Underwriters
pursuant to such options are referred to herein as the "Option Securities,"
and the Firm Securities and any Option Securities are collectively referred
to herein as the "Securities."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDER. The Company and the Selling Securityholder, jointly and
severally, represent and warrant to, and agree with, each of the several
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-80335)
with respect to the Securities, including a prospectus subject to
completion, has been filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"), and one or more amendments to such registration
statement may have been so filed. After the execution of this
Agreement, the Company will file with the Commission either (i) if such
registration statement, as it may have been amended, has been declared
by the Commission to be effective under the Act, either (A) if the
Company relies on Rule 434 under the Act, a Term Sheet (as hereinafter
defined) relating to the Securities, that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b)
under the Act or (B) if the Company does not rely on Rule 434 under the
Act, a prospectus in the form most recently included in an amendment to
such registration statement (or, if no such amendment shall have been
filed, in such registration statement), with such changes or insertions
as are required by Rule 430A under the Act or permitted by Rule 424(b)
under the Act, and in the case of either clause (i)(A) or (i)(B) of this
sentence as have been provided to and approved by the Representatives
prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the
Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Representatives
prior to the execution of this Agreement. The Company may also file a
related registration statement with the Commission pursuant to Rule
462(b) under the Act for the purpose of registering certain additional
Securities, which registration shall be effective upon filing with the
Commission. As used in this Agreement, the term "Original Registration
Statement" means the registration statement initially filed relating to
the Securities, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under
the Act and included in the Prospectus (as hereinafter defined); the
term "Rule 462(b) Registration Statement" means any registration
statement
<PAGE>
filed with the Commission pursuant to Rule 462(b) under the Act
(including the Registration Statement and any Preliminary Prospectus or
Prospectus incorporated therein at the time such Registration Statement
becomes effective); the term "Registration Statement" includes both the
Original Registration Statement and any Rule 462(b) Registration
Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any
amendment thereto (including the prospectus subject to completion, if
any, included in the Registration Statement or any amendment thereto at
the time it was or is declared effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Act, the
prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act; or
(C) if the Company does not rely on Rule 434 under the Act and if no
prospectus is required to be filed pursuant to Rule 424(b) under
the Act, the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Act. Any reference herein to the "date"
of a Prospectus that includes a Term Sheet shall mean the date of such Term
Sheet.
(b) The Commission has not issued any order preventing or
suspending use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with th e Commission it (i) contained all
statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder and (ii) did not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
When the Registration Statement or any amendment thereto was or is
declared effective, it (i) contained or will contain all statements
required to be stated therein in accordance with, and complied or will
comply in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading. When the Prospectus or any Term Sheet that is a part
thereof or any amendment or supplement to the Prospectus is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or part
thereof or such amendment or supplement is not required to be so filed,
when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was
<PAGE>
or is declared effective) and on the Firm Closing Date and any Option
Closing Date (both as hereinafter defined), the Prospectus, as amended
or supplemented at any such time, (i) contained or will contain all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder
and (ii) did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The foregoing provisions of this paragraph
(b) do not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement has not been declared effective (i)
the Company has filed a Rule 462(b) Registration Statement in compliance
with and that is effective upon filing pursuant to Rule 462(b) and has
received confirmation of its receipt and (ii) the Company has given
irrevocable instructions for transmission of the applicable filing fee
in connection with the filing of the Rule 462(b) Registration Statement,
in compliance with Rule 111 promulgated under the Act or the Commission
has received payment of such filing fee.
(d) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware and is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified does not amount to a material liability or
disability to the Company.
(e) The Company has full power (corporate and other) to own or
lease its properties and conduct its business as described in the
Registration Statement and the Prospectus or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus; and the Company
has full power (corporate and other) to enter into this Agreement and to
carry out all the terms and provisions hereof to be carried out by it.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus. All of the
issued shares of capital stock of the Company, including the Selling
Securityholder Firm Securities and the Option Securities to be sold by
the Selling Securityholder, have been duly authorized and validly issued
and are fully paid and nonassessable. The Company Firm Securities to be
sold by the Company have been duly authorized and at the Firm Closing
Date after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. No holder of outstanding shares
of capital stock of the Company is entitled as such to any preemptive or
other rights to subscribe for any of the Securities which will not
terminate on or prior to the Firm Closing Date, and no holder of
securities of the Company has any right which has not been fully
<PAGE>
exercised or waived to require the Company to register the offer or
sale of any securities owned by such holder under the Act in the public
offering contemplated by this Agreement.
(g) The capital stock of the Company conforms to the description
thereof contained in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus.
(h) Except as disclosed in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there are
no outstanding (A) securities or obligations of the Company convertible
into or exchangeable for any capital stock of the Company, (B) warrants,
rights or options to subscribe for or purchase from the Company any such
capital stock or any such convertible or exchangeable securities or
obligations, or (C) obligations of the Company to issue any shares of
capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
(i) The financial statements and schedules of the Company
included in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
fairly present the financial position of the Company and the results of
operations and changes in financial condition as of the dates and
periods therein specified. Such financial statements and schedules have
been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except
as otherwise noted therein). The selected financial data set forth
under the caption "Selected Financial Data" in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present, on the basis stated in the Prospectus (or
such Preliminary Prospectus), the information included therein. The pro
forma statement of operations data of the Company together with the
related notes thereto included under the caption "Pro Forma Financial
Information" and elsewhere in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) present fairly the information contained
therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and have
been properly presented on the pro forma basis described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(j) KPMG LLP, who have certified certain financial statements of
the Company and delivered their report with respect to the audited
financial statements and schedules included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), are independent public
accountants as required by the Act and the applicable rules and
regulations thereunder.
(k) The execution and delivery of this Agreement have been duly
authorized by the Company and this Agreement has been duly executed and
delivered by the Company,
<PAGE>
and is the valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles.
(l) The execution and delivery of the Contribution and
Separation Agreement, the Services Agreement, the Non-competition
Agreement, the DataFeed License Agreement (the "DataFeed License
Agreement"), the Maintenance Agreement, the Registration Rights
Agreement (the "Registration Rights Agreement") and the Tax
Indemnification and Allocation Agreement (collectively, the
"Intercompany Agreements") have been duly authorized by the Company and
the Intercompany Agreements have been duly executed and delivered by the
Company, and are the valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except
as rights to indemnification and contribution under the Registration
Rights Agreement may be limited by applicable law and except as the
enforcement of any such agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting the rights and remedies of creditors or by general
equitable principles.
(m) Following the consummation of the transactions contemplated
by the Intercompany Agreements, Company will own or have rights to use
all properties and assets, both real and personal, tangible and
intangible, necessary or appropriate for the conduct of its business as
described in the Prospectus.
(n) No legal or governmental proceedings are pending to which
the Company is a party or to which the property of the Company is
subject that are required to be described in the Registration Statement
or the Prospectus and are not described therein (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), and no
such proceedings have been threatened against the Company or with
respect to any of its properties; and no contract or other document is
required to be described in the Registration Statement or the Prospectus
or to be filed as an exhibit to the Registration Statement that is not
described therein (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) or filed as required.
(o) The issuance, offering and sale of the Securities to the
Underwriters pursuant to this Agreement, the compliance by the Company
with the other provisions of this Agreement, the consummation of the
other transactions herein contemplated and the compliance by the Company
with the provisions of the Intercompany Agreements do not (i) require
the consent, approval, authorization, registration or qualification of
or with any governmental authority, except such as have been obtained or
are required under applicable Blue Sky laws, and, if the registration
statement filed with respect to the Securities (as amended) is not
effective under the Act as of the time of execution hereof, such as may
be required (and shall be obtained as provided in this Agreement) under
the Act or under applicable Blue Sky laws, or (ii) conflict with or
result in a breach or violation of any of
<PAGE>
the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company is a party or by which the Company or
any of its properties are bound, or the charter documents or by-laws of
the Company, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to the Company .
(p) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus,
the Company has not sustained any material loss or interference with its
business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding and there has not been any
material adverse change, or any development involving a prospective
material adverse change, in the condition (financial or otherwise),
management, business prospects, net worth, or results of the operations
of the Company, except in each case as described in or contemplated by
the Prospectus or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus.
(q) The Company has not, directly or indirectly, (i) taken any
action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company or the Selling
Securityholder to facilitate the sale or resale of the Securities or
(ii) since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of,
the Securities or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company or the Selling Securityholder.
(r) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
(1) the Company has not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in
the ordinary course of business; (2) the Company has not purchased any
of its outstanding capital stock, nor declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock; and (3)
there has not been any material change in the capital stock, short-term
debt or long-term debt of the Company, except in each case as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(s) The Company does not own any real property. The Company has
good and marketable title to all personal property owned by it, free
and clear of any security interests, liens, encumbrances, equities,
claims and other defects, except such as do not materially and adversely
affect the value of such property and do not interfere with the use made
or
<PAGE>
proposed to be made of such property and do not interfere with the use
made or proposed to be made of such property by the Company, and any
real property and buildings held under lease by the Company are held
under valid, subsisting and enforceable leases, with such exceptions as
are not material and do not interfere with the use made or proposed to
be made of such property and buildings by the Company and except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles, in each case
except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(t) No labor dispute with the employees of the Company exists or
is threatened or imminent that could result in a material adverse change
in the condition (financial or otherwise), business prospects, net worth
or results of operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(u) The Company owns or possesses all material patents, patent
applications, trademarks, service marks, trade names, licenses,
copyrights and proprietary or other confidential information currently
employed by it in connection with its business, including, without
limitation, all rights to the names PCQuote and PCQuote.com, and the
Company has not received any notice of infringement of or conflict with
asserted rights of any third party with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse change
in the condition (financial or otherwise), business prospects, net worth
or results of operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(v) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which it is engaged; the
Company has not been refused any insurance coverage sought or applied
for; and the Company does not have any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not
materially and adversely affect the condition (financial or otherwise),
business prospects, net worth or results of operations of the Company,
except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(w) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or
results of operations of the Company, except as described in or
contemplated by
<PAGE>
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(x) The Company will conduct its operations in a manner that
will not subject it to registration as an investment company under the
Investment Company Act of 1940, as amended, and this transaction will
not cause the Company to become an investment company subject to
registration under such Act.
(y) Each of the Company, the Selling Securityholder and any
subsidiary of the Selling Securityholder has filed all foreign, federal,
state and local tax returns that are required to be filed or has
requested extensions thereof (except in any case in which the failure so
to file would not have a material adverse effect on the Company or the
Selling Securityholder) and has paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(z) The Company is not in violation of any federal or state law
or regulation relating to occupational safety and health or to the
storage, handling or transportation of hazardous or toxic materials and
the Company has received all permits, licenses or other approvals
required of it under applicable federal and state occupational safety
and health and environmental laws and regulations to conduct its
business, and the Company is in compliance with all terms and conditions
of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals which would not, singly or in the
aggregate, result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or results of
operations of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(aa) Each certificate signed by an officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall
be deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
(ab) The Company does not own any shares of stock or any other
equity securities of any corporation or have any equity interest in any
firm, company, partnership, association or other entity.
(ac) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (3)
access to assets is permitted
<PAGE>
only in accordance with management's general or specific authorization;
and (4) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(ad) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company is a party or by which the Company or
any of its properties is bound or may be affected except for any such
defaults which would not, in the aggregate, have a material adverse
effect upon the property, business or operations of the Company.
(ae) The Company has not distributed and, prior to the later of
(i) the Closing Date and (ii) the completion of the distribution of the
Securities, will not distribute any offering material in connection with
the offering and sale of the Securities other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or other materials,
if any permitted by the Act.
(af) The Company has reviewed its operations and any third parties
with which the Company has a material relationship to evaluate the
extent to which the business or operations of the Company will be
affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe, and does not believe, that the Year
2000 Problem will have a material adverse effect upon the property,
business or operations of the Company. The "YEAR 2000 PROBLEM" as used
herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not be
able to reliably distinguish dates beginning on January 1, 2000 from
dates prior to January 1, 2000.
2A. REPRESENTATIONS AND WARRANTIES OF THE SELLING SECURITYHOLDER. The
Selling Securityholder represents and warrants to, and agrees with, each of the
several Underwriters that:
(a) The Selling Securityholder has full power (corporate and
other) to enter into this Agreement, to sell, assign, transfer and
deliver to the Underwriters the Securities to be sold by the Selling
Securityholder hereunder in accordance with the terms of this Agreement
and the full power (corporate and other) to enter into the Intercompany
Agreements; and this Agreement and each of the Intercompany Agreements
has been duly executed and delivered by the Selling Securityholder and
constitutes the legal, valid and binding agreement of the Selling
Securityholder, in each case enforceable in accordance with its terms,
except as rights to indemnification and contribution under the
Registration Rights Agreement may be limited by applicable law and
except as the enforcement of any
<PAGE>
such agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(b) The Selling Securityholder is the lawful owner of the
Securities to be sold by the Selling Securityholder hereunder and upon
sale and delivery of, and payment for, such Securities, as provided
herein, the Selling Securityholder will convey good and marketable title
to such Securities, free and clear of any security interests, liens,
encumbrances, equities, claims or other defects.
(c) The Selling Securityholder has not, directly or indirectly,
(i) taken any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company or the Selling Securityholder to facilitate the sale or resale
of the Securities or (ii) since the filing of the Registration Statement
(A) sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Securities or (B) paid or agreed to pay to
any person any compensation for soliciting another to purchase any other
securities of the Company or the Selling Securityholder.
(d) To the extent that any statements or omissions are made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by the
Selling Securityholder specifically for use therein, such Preliminary
Prospectus did, and the Registration Statement and the Prospectus and
any amendments or supplements thereto, when they become effective or are
filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act, the Exchange Act and
the respective rules and regulations of the Commission thereunder and
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Selling Securityholder has
reviewed the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) and the Registration Statement, and
the information regarding the Selling Securityholder set forth therein
is complete and accurate.
(e) The sale of the Securities by the Selling Securityholder
pursuant hereto is not prompted by any adverse information concerning
the Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(f) The sale of the Securities to the Underwriters by the
Selling Securityholder pursuant to this Agreement, the compliance by the
Selling Securityholder with the provisions of this Agreement, the
consummation of the other transactions herein contemplated and the
compliance by the Selling Securityholder with the provisions of the
Intercompany Agreements do not (i) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have
<PAGE>
been obtained or are required under applicable Blue Sky laws and, if the
Registration Statement filed with respect to the Securities (as amended)
is not effective under the Act as of the time of execution hereof, such
as may be required (and shall be obtained as provided in this Agreement)
under the Act or under applicable Blue Sky laws, or (ii) conflict with
or result in a breach or violation of any of the terms and provisions
of, or constitute a default under any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Selling
Securityholder is a party or by which the Selling Securityholder or any
of its properties are bound, or any statute or any judgment, decree,
order, rule or regulation of any court or other governmental authority
or any arbitrator applicable to the Selling Securityholder, except for
such conflicts, breaches or violations which would not, in the
aggregate, have a material adverse effect upon the property, business or
obligations of the Selling Securityholder.
(g) The Selling Securityholder has not distributed and, prior to
the later of (i) the Closing Date and (ii) the completion of the
distribution of the Securities, will not distribute any offering
material in connection with the offering and sale of the Securities
other than the Registration Statement or any amendment thereto, and
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or other materials, if any, permitted by the Act.
(h) The transactions contemplated hereby will not cause the
Selling Securityholder to become an investment company subject to the
registration under the Investment Company Act.
(i) Each certificate signed by any officer of the Selling
Securityholder and delivered to the Representatives or counsel for the
Underwriters shall be deemed to be a representation and warranty by the
Selling Securityholder to each Underwriter as to the matters covered
thereby.
(j) Each of the Company, the Selling Securityholder and any
subsidiary of the Selling Securityholder has filed all foreign, federal,
state and local tax returns that are required to be filed or has
requested extensions thereof (except in any case in which the failure so
to file would not have a material adverse effect on the Company or the
Selling Securityholder) and has paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. (a) On the basis
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, the Company agrees
to issue and sell the Company Firm Securities and the Selling Securityholder
agrees to sell the Selling Securityholder Firm Securities to the
Underwriters, and each of the Underwriters, severally and not jointly, agrees
to purchase from the Company and the Selling Securityholder, at a purchase
price of $________ per share, the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule 1 hereto. The
<PAGE>
number of Firm Securities to be purchased from the Company and the Selling
Securityholder, respectively (as adjusted by the Representatives to avoid
fractions), by each of the Underwriters shall be determined by multiplying
the aggregate number of such Firm Securities to be sold by the Company or the
Selling Securityholder, as the case may be, by a fraction, the numerator of
which is the number of Firm Securities, set forth opposite the name of such
Underwriter on Schedule 1 hereto and the denominator of which is the total
number of Firm Securities set forth on Schedule 1 hereto. One or more
certificates in definitive form for the Firm Securities that the several
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Representatives
request upon notice to the Company and the Selling Securityholder at least 48
hours prior to the Firm Closing Date, shall be delivered by or on behalf of
the Company and the Selling Securityholder to the Representatives for the
respective accounts of the Underwriters, against payment by or on behalf of
the Underwriters of the purchase price therefor by wire transfer in same-day
funds (the "Wired Funds") to the respective accounts of the Company and the
Selling Securityholder. Such delivery of and payment for the Firm Securities
shall be made at the offices of Wildman, Harrold, Allen & Dixon, Chicago,
Illinois, at 8:30 A.M., Chicago time, on ________, 1999, or at such other
place, time or date as the Representatives, the Company and the Selling
Securityholder may agree upon or as the Representatives may determine
pursuant to Section 9 hereof, such time and date of delivery against payment
being herein referred to as the "Firm Closing Date". Each of the Company and
the Selling Securityholder severally will make such certificate or
certificates for the Firm Securities available for checking and packaging by
the Representatives at the offices in New York, New York of the Company's
transfer agent or registrar or of Prudential Securities Incorporated at least
24 hours prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Selling Securityholder hereby grants to the several
Underwriters an option to purchase, severally and not jointly, the Option
Securities in the amount of 750,000 shares. The purchase price to be paid for
any Option Securities shall be the same price per share as the price per
share for the Firm Securities set forth above in paragraph (a) of this
Section 3. The option granted hereby may be exercised as to all or any part
of the Option Securities from time to time within thirty (30) days after the
date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or
a holiday, on the next business day thereafter when the New York Stock
Exchange is open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. The Representatives may from time to time exercise the option
granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company and the Selling Securityholder setting forth the
aggregate number of Option Securities as to which the several Underwriters
are then exercising the option and the date and time for delivery of and
payment for such Option Securities. Any such date of delivery shall be
determined by the Representatives but shall not be earlier than two business
days or later than five business days after such exercise of the option and,
in any event, shall not be earlier than the Firm Closing Date. The time and
date set forth in such notice, or such other time on such other date as the
Representatives, the Company and the
<PAGE>
Selling Securityholder may agree upon or as the Representatives may determine
pursuant to Section 9 hereof, is herein called the "Option Closing Date" with
respect to such Option Securities. Upon exercise of the option as provided
herein, the Selling Securityholder shall become obligated to sell to each of
the several Underwriters, and, subject to the terms and conditions herein set
forth, each of the Underwriters (severally and not jointly) shall become
obligated to purchase from the Selling Securityholder, the same percentage of
the total number of the Option Securities as to which the several
Underwriters are then exercising the option as such Underwriter is obligated
to purchase of the aggregate number of Firm Securities, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares. If the option is exercised as to all or any portion of the Option
Securities, one or more certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
paragraph (a) of this Section 3, except that reference therein to the Firm
Securities and the Firm Closing Date shall be deemed, for purposes of this
paragraph (b), to refer to such Option Securities and Option Closing Date,
respectively.
(c) Each of the Company and the Selling Securityholder hereby
acknowledges that the wire transfer by or on behalf of the Underwriters of
the purchase price for any Securities does not constitute closing of a
purchase and sale of the Securities. Only execution and delivery of a
receipt for Securities by the Underwriters indicates completion of the
closing of a purchase of the Securities from the Company or the Selling
Securityholder, as the case may be. Furthermore, in the event that the
Underwriters wire funds to the Company or the Selling Securityholder prior to
the completion of the closing of a purchase of Securities, each of the
Company and the Selling Securityholder hereby acknowledges that until the
Underwriters execute and deliver a receipt for the Securities, by facsimile
or otherwise, the Company or the Selling Securityholder, as the case may be,
will not be entitled to the wired funds and shall return the wired funds to
the Underwriters as soon as practicable (by wire transfer of same-day funds)
upon demand. In the event that the closing of a purchase of Securities is
not completed and the wired funds are not returned by the Company or the
Selling Securityholder, as the case may be, to the Underwriters on the same
day the wired funds were received by the Company or the Selling
Securityholder, as the case may be, each of the Company and the Selling
Securityholder agrees to pay to the Underwriters in respect of each day the
wire funds are not returned by it, in same-day funds, interest on the amount
of such wire funds in an amount representing the Underwriters' cost of
financing as reasonably determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and not as one of
the Representatives, may (but shall not be obligated to) make payment on
behalf of any Underwriter or Underwriters for any of the Securities to be
purchased by such Underwriter or Underwriters. No such payment shall relieve
such Underwriter or Underwriters from any of its or their obligations
hereunder.
4. OFFERING BY THE UNDERWRITERS. Upon your authorization of the
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
5. COVENANTS OF THE COMPANY AND THE SELLING SECURITYHOLDER. The
Company and the
<PAGE>
Selling Securityholder, jointly and severally, covenant and agree with each
of the Underwriters that:
(a) The Company and the Selling Securityholder will use their best
efforts to cause the Registration Statement, if not effective at the time of
execution of this Agreement, and any amendments thereto to become effective
as promptly as possible. If required, the Company will file the Prospectus
or any Term Sheet that constitutes a part thereof and any amendment or
supplement thereto with the Commission in the manner and within the time
period required by Rules 434 and 424(b) under the Act. During any time when
a prospectus relating to the Securities is required to be delivered under the
Act, the Company (i) will comply with all requirements imposed upon it by the
Act and the rules and regulations of the Commission thereunder to the extent
necessary to permit the continuance of sales of or dealings in the Securities
in accordance with the provisions hereof and of the Prospectus, as then
amended or supplemented, and (ii) will not file with the Commission the
prospectus, Term Sheet or the amendment referred to in the second sentence of
Section 2(a) hereof, any amendment or supplement to such Prospectus, Term
Sheet or any amendment to the Registration Statement or any Rule 462(b)
Registration Statement of which the Representatives previously have been
advised and furnished with a copy for a reasonable period of time prior to
the proposed filing and as to which filing the Representatives shall not have
given their reasonable consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Representatives or counsel for the Underwriters,
any amendments to the Registration Statement or amendments or supplements to
the Prospectus that may, in the opinion of counsel for the Underwriters and
counsel for the Company, be necessary or advisable in connection with the
distribution of the Securities by the several Underwriters, and will use its
best efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission as promptly as possible. The Company
will advise the Representatives, promptly after receiving notice thereof, of
the time when the Registration Statement or any amendment thereto has been
filed or declared effective or the Prospectus or any amendment or supplement
thereto has been filed and will provide evidence satisfactory to the
Representatives of each such filing or effectiveness.
(b) The Company will advise the Representatives, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Original
Registration Statement or any Rule 462(b) Registration Statement or any
amendment thereto or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, (iii) the institution, threatening or
contemplation of any proceeding for any such purpose or (iv) any request made
by the Commission for amending the Original Registration Statement or any
Rule 462(b) Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Company will use its best
efforts to prevent the issuance of any such stop order and, if any such stop
order is issued, to obtain the withdrawal thereof as promptly as possible.
(c) The Company will cooperate with the Representatives and counsel
for the Underwriters for the qualification of the Securities for offering
and sale under (or obtain
<PAGE>
exemptions from the application of) the securities or Blue Sky laws of such
jurisdictions as the Representatives may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities, PROVIDED, HOWEVER, that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction.
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the
Act or (ii) the Option Closing Date, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Prospectus to comply with
the Act or the rules or regulations of the Commission thereunder, the Company
will promptly notify the Representatives thereof and, subject to Section 5(a)
hereof, will prepare and file with the Commission, at the Company's expense,
an amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance.
(e) The Company will, without charge, provide (i) to the
Representatives and to counsel for the Underwriters a signed copy of the
registration statement originally filed with respect to the Securities and
each amendment thereto (in each case including exhibits thereto) or any Rule
462(b) Registration Statement, certified by the Secretary or an Assistant
Secretary of the Company to be true and complete copies thereof as filed with
the Commission by electronic transmission, (ii) to each other Underwriter, a
conformed copy of such registration statement or any Rule 462(b) Registration
Statement and each amendment thereto (in each case without exhibits thereto)
and (iii) so long as a prospectus relating to the Securities is required to
be delivered under the Act, as many copies of each Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request, PROVIDED, HOWEVER, that if any such delivery is more
than nine (9) months after the effective date of the Registration Statement,
the costs (printing and other) of such delivery shall be at the expense of
the requesting Underwriter(s); without limiting the application of clause
(iii) of this sentence, the Company, not later than (A) 6:00 PM, New York
City time, on the date of determination of the public offering price, if such
determination occurred at or prior to 10:00 A.M., New York City time, on such
date or (B) 2:00 PM, New York City time, on the business day following the
date of determination of the public offering price, if such determination
occurred after 10:00 A.M., New York City time, on such date, will deliver to
the Underwriters, without charge, as many copies of the Prospectus and any
amendment or supplement thereto as the Representatives may reasonably request
for purposes of confirming orders that are expected to settle on the Firm
Closing Date.
(f) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representatives an earnings
statement of the Company that satisfies the provisions of Section 11(a) of
the Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds from the sale of the
Securities as set forth
<PAGE>
under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the prior
written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock
for a period of 180 days after the date hereof, except pursuant to this
Agreement and except for (i) issuances of stock options to current or
prospective employees or directors under the Company's 1999 Combined
Incentive and Non-statutory Stock Option Plan, provided that any such grant
may only be made to an executive officer or director of the Company if such
person agrees not to sell, offer, dispose of or otherwise transfer the shares
acquired on exercise of such option during the remainder of the 180-day
period covered by the agreements delivered pursuant to Section 7(g), (ii)
issuances pursuant to the exercise of employee stock options outstanding on
the date hereof and (iii) the exercise of that certain warrant held by CNNfn,
a division of Cable News Network LP ("CNNfn"), but only if CNNfn agrees not
to sell, offer, dispose of or otherwise transfer the shares acquired on
exercise of such warrant during the remainder of the 180-day period covered
by the agreements delivered pursuant to Section 7(g).
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company or the Selling Securityholder to
facilitate the sale or resale of the Securities or (ii) (A) sell, bid for,
purchase, or pay anyone any compensation for soliciting purchases of, the
Securities or (B) pay or agree to pay to any person any compensation for
soliciting another to purchase any other securities of the Company or the
Selling Securityholder.
(j) The Company will obtain the agreements described in Section 7(g)
hereof prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Closing Date,
any rumor, publication or event relating to or affecting the Company shall
occur as a result of which in your opinion the market price of the Common
Stock has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after notice from you advising the Company
to the effect set forth above, forthwith prepare, consult with you concerning
the substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you and the Company, responding to or commenting
on such rumor, publication or event.
(l) If the Company elects to rely on Rule 462(b), the Company shall
both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the
<PAGE>
applicable fees in accordance with Rule 111 promulgated under the Act by the
earlier of (i) 10:00 P.M. Eastern time on the date of this Agreement and (ii)
the time confirmations are sent or given, as specified by Rule 462(b)(2).
(m) The Company will cause the Securities to be duly included for
quotation on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") prior to the Firm Closing Date. The Company will ensure that the
Securities remain included for quotation on the Nasdaq National Market
following the Firm Closing Date.
5A. COVENANTS OF THE SELLING SECURITYHOLDER. The Selling
Securityholder covenants and agrees with each of the several Underwriters
that:
(a) The Selling Securityholder will not, directly or indirectly, (i)
take any action designed to cause or result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company or the Selling
Securityholder to facilitate the sale or resale of the Securities or (ii) (A)
sell, bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Securities or (B) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company or the Selling Securityholder other than as provided by this
Agreement.
(b) The Selling Securityholder will not, directly or indirectly,
without the prior written consent of Prudential Securities Incorporated,
offer, sell, offer to sell, contract to sell, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, grant of any option to purchase or other sale or
disposition) of any Securities legally or beneficially owned by the Selling
Securityholder or any securities convertible into, or exchangeable or
exercisable for, Securities for a period of 180 days after the date hereof,
except pursuant to this Agreement.
(c) As soon as the Selling Securityholder is advised thereof, the
Selling Securityholder will advise the Representatives (and immediately
thereafter confirm such advise in writing), (i) of receipt by the Selling
Securityholder or by any representative or agent of the Selling
Securityholder, of any communication from the Commission relating to the
Registration Statement, the Prospectus or any Preliminary Prospectus, or any
notice or order of the Commission relating to the Company or the Selling
Securityholder in connection with the transactions contemplated by this
Agreement and (ii) of the happening of any event which makes or may make any
statement of a material fact made in the Registration Statement, the
Prospectus or any Preliminary Prospectus untrue or that requires the making
of any change in the Registration Statement, Prospectus or Preliminary
Prospectus, as the case may be, in order to make such statement, in light of
the circumstances in which it was made, not misleading.
6. EXPENSES. The Company will pay all costs and expenses incident
to the performance of its obligations under this Agreement, whether or not
the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing or other production of documents with respect to
<PAGE>
the transactions, including any costs of printing the registration statement
originally filed with respect to the Securities and any amendment thereto,
any Rule 462(b) Registration Statement, any Preliminary Prospectus and the
Prospectus and any amendment or supplement thereto, this Agreement and any
blue sky memoranda, (ii) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or
advisors retained by the Company, (iv) preparation, issuance and delivery to
the Underwriters of any certificates evidencing the Securities, including
transfer agent's and registrar's fees, (v) the qualification of the
Securities under state securities and Blue Sky laws, including filing fees
and reasonable fees and disbursements of counsel for the Underwriters
relating thereto, (vi) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the Securities, (vii) any
quotation of the Securities on the Nasdaq National Market, (viii) any
meetings with prospective investors in the Securities (other than as shall
have been specifically approved by the Representatives to be paid for by the
Underwriters) and (ix) advertising relating to the offering of the Securities
(other than any tombstone advertisement in the national edition of the Wall
Street Journal which shall be paid for by the Underwriters). If the sale of
the Securities provided for herein is not consummated because any condition
to the obligations of the Underwriters set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated pursuant to Section 11 hereof
or because of any failure, refusal or inability on the part of the Company or
the Selling Securityholder to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder other than by
reason of a default by any of the Underwriters, the Company will reimburse
the Underwriters severally upon demand for all out-of-pocket expenses
(including counsel fees and disbursements) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities.
The Company shall not in any event be liable to any of the Underwriters for
the loss of anticipated profits from the transactions covered by this
Agreement. The provisions of this Section 6 are intended to relieve the
Underwriters from payment of the costs and expenses which the Company hereby
agrees to pay and shall in no way affect any agreement between the Company
and the Selling Securityholder for the sharing of such costs and expenses.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and the Selling Securityholder
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's and the Selling Securityholder's officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Securityholder of their respective covenants and agreements hereunder and to
the following additional conditions:
(a) If the Original Registration Statement or any amendment thereto
filed prior to the Firm Closing Date has not been declared effective as of
the time of execution hereof, the Original Registration Statement or such
amendment and, if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have been declared effective not later
than the earlier of (i) 11:00 A.M., New York time, on the date on which the
amendment to the registration statement originally filed with respect to the
Securities or to the Registration Statement, as the case
<PAGE>
may be, containing information regarding the initial public offering price of
the Securities has been filed with the Commission and (ii) the time
confirmations are sent or given as specified by Rule 462(b)(2), or with
respect to the Original Registration Statement, or such later time and date
as shall have been consented to by the Representatives; if required, the
Prospectus or any Term Sheet that constitutes a part thereof and any
amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under
the Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or, to the
knowledge of the Company or the Representatives, shall be contemplated by the
Commission; and the Company shall have complied with any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise).
(b) The Representatives shall have received an opinion, dated the
Firm Closing Date, of Wildman, Harrold, Allen & Dixon, counsel for the
Company and the Selling Securityholder, to the effect that:
(i) the Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware
and is duly qualified to transact business as a foreign corporation and is
in good standing under the laws of all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified
does not amount to a material liability or disability to the Company;
(ii) the Company has corporate power to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus, and the Company has corporate power to enter
into this Agreement and to carry out all the terms and provisions hereof to
be carried out by it;
(iii) to the best knowledge of such counsel, the Company does not
own any shares of stock or any other equity securities of any corporation
or have any equity interest in any firm, company, partnership, association
or other entity;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the outstanding
shares of capital stock of the Company, including the Selling
Securityholder Securities, have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
applicable federal and state securities laws and, to the best knowledge of
such counsel, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities; the
Securities have been duly authorized by all necessary corporate action of
the Company and, the Company Firm Securities when issued and delivered to
and paid for by the Underwriters pursuant to this Agreement, will be
<PAGE>
validly issued, fully paid and nonassessable; the Securities have been duly
included for trading on the Nasdaq National Market; to the best knowledge
of such counsel, (a) no holders of outstanding shares of capital stock of
the Company are entitled as such to any preemptive or other rights to
subscribe for any of the Securities; and (b) no holders of securities of
the Company are entitled to have such securities registered under the
Registration Statement pursuant to any right which has not been waived;
(v) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide a
fair summary of such provisions; and the statements set forth under the
headings "Risk Factors - Risks Related to Our Business - We rely on a
software licensing agreement that could be terminated or allowed to
expire," "Business - Intellectual Property," "Certain Transactions,"
"Description of Capital Stock" and "Shares Eligible for Future Sale" in
the Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, provide a fair
summary of such legal matters, documents and proceedings;
(vi) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and the Selling
Securityholder and this Agreement has been duly executed and delivered by
the Company and the Selling Securityholder;
(vii) the execution, delivery and performance of the Intercompany
Agreements have been duly authorized by all necessary corporate action of
the Company and the Selling Securityholder and the Intercompany Agreements
have been duly executed and delivered by the Company and the Selling
Securityholder, and are the legal, valid, binding and enforceable
agreements of the Company and the Selling Securityholder, except as to
indemnification and contribution obligations under the Registration Rights
Agreement which may not be enforceable under applicable law, subject to
applicable bankruptcy, insolvency and similar laws effecting creditors'
rights generally, and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or in law);
(viii) to the best knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company is a party or to
which the property of the Company is subject that are required to be
described in the Registration Statement or the Prospectus and are not
described therein and no such proceedings have been threatened against the
Company or with respect to any of its properties, and (B) no contract or
other document is required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
that is not described therein or filed as required;
(ix) the issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the sale of the
Securities to the Underwriters by the
<PAGE>
Selling Securityholder pursuant to this Agreement, the compliance by the
Company and the Selling Securityholder with the other provisions of this
Agreement, the consummation of the other transactions herein
contemplated and the compliance by the Company and the Selling
Securityholder with the terms of the Intercompany Agreements do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained, except as may be required under applicable Blue Sky laws
or (B) conflict with or result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument, known
to such counsel, to which the Company, the Selling Securityholder or any
subsidiary of the Selling Securityholder is a party or by which the
Company, the Selling Securityholder or any subsidiary of the Selling
Securityholder or any of their respective properties are bound which
individually or in the aggregate could have a material adverse effect on
the business of the Company, or the charter documents or by-laws of the
Company, the Selling Securityholder or any subsidiary of the Selling
Securityholder, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator known to such counsel and applicable to the Company, the
Selling Securityholder or any subsidiary of the Selling Securityholder;
(x) upon delivery by the Selling Securityholder to the several
Underwriters of certificates for the Securities being sold hereunder by the
Selling Securityholder against payment therefor as provided herein, the
Underwriters will acquire good and marketable title to such Securities,
free and clear of any adverse claim, assuming that each Underwriter
purchases such Securities in good faith without notice of any adverse
claim, except under applicable Blue Sky laws;
(xi) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner
and within the time period required by Rules 434 and 424(b); and, to the
best knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement or any amendment thereto has been issued, and
no proceedings for that purpose have been instituted or threatened or, to
the best knowledge of such counsel, are contemplated by the Commission;
(xii) the Registration Statement originally filed with respect to
the Securities and each amendment thereto, any Rule 462(b) Registration
Statement and the Prospectus (in each case, other than the financial
statements and other financial information, data and schedules contained
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements of the Act
and the rules and regulations of the Commission thereunder;
(xiii) if the Company elects to rely on Rule 434, the Prospectus is
not "materially different", as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective
<PAGE>
amendment thereto (including such information that is permitted to be
omitted pursuant to Rule 430A);
(xiv) the Company owns or possesses all material patents, patent
applications, trademarks, service marks, trade names, licenses, copyrights
and proprietary or other confidential information currently employed by the
Company in connection with its business as described in the Prospectus,
including, without limitation, all rights to the names PCQuote and
PCQuote.com, and, except as described in such opinion, to the best
knowledge of such counsel, the Company has not received any notice of
infringement of or conflict with asserted rights of any third party with
respect to any of the foregoing; and
(xv) the Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business as described in the
Prospectus, except where the failure to possess any such certificate,
authorization or permit would not, individually or in the aggregate, have a
material adverse effect on the Company's financial condition, business,
prospects or results of operations and, to the best knowledge of such
counsel, the Company has not received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or
permit.
Such counsel shall, based upon such counsel's participation in the
preparation of the Registration statement and the Prospectus, and any amendment
or supplement thereto, and upon such counsel's review and discussion of the
contents thereof, but without independent check or verification of the accuracy
or completeness thereof except as specified in such opinion, nothing has come to
the attention of such counsel that has caused them to believe that the
Registration Statement, as of its effective date, (except for financial
statements and other financial information, data and schedules) contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus, as of its date or the date of such opinion,
(except for financial statements and other financial information, data and
schedules) included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials. Such counsel may also state that
their opinions are limited in all respects to the laws of the State of Illinois,
the General Corporation Law of the State of Delaware and applicable United
States federal law, and that they have relied with respect to certain matters
relating to authorization by the Selling Securityholder covered by paragraphs
(vi), (vii) and (ix) upon the opinion of Morris, Nichols, Arsht & Tunnell so
long as such opinion is addressed to the Underwriters and provided further that,
in each case, Wildman, Harrold, Allen & Dixon shall state that they believe that
they
<PAGE>
and the Underwriters are justified in relying on such other counsel.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Fulbright & Jaworski L.L.P., New York, New York, counsel for
the Underwriters, with respect to the issuance and sale of the Firm Securities,
the Registration Statement and the Prospectus, and such other related matters as
the Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(d) The Representatives shall have received from KPMG LLP, a letter or
letters dated, respectively, the date hereof and the Firm Closing Date, in form
and substance satisfactory to the Representatives, to the effect that:
(i) they are independent accountants with respect to the Company
within the meaning of the Act and the applicable rules and regulations
thereunder;
(ii) in their opinion, the audited financial statements and
schedules and pro forma financial statements examined by them and included
in the Registration Statement and the Prospectus comply in form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations;
(iii) on the basis of a reading of the latest available interim
unaudited financial statements of the Company, carrying out certain
specified procedures (which do not constitute an examination made in
accordance with generally accepted auditing standards) that would not
necessarily reveal matters of significance with respect to the comments set
forth in this paragraph (iii) a reading of the minute books of the
stockholders, the board of directors and any committees thereof of the
Company, and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements of the Company included
in the Registration Statement and the Prospectus do not
comply in form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations thereunder or are not in conformity
with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited
financial statements included in the Registration Statement
and the Prospectus; and
(B) at a specific date not more than five days prior to the date
of such letter, there were any changes in the capital stock
or long-term debt of the Company or any decreases in net
current assets or stockholders' equity of the Company, in
each case compared with amounts shown on the June 30,
<PAGE>
1999 unaudited balance sheet included in the Registration
Statement and the Prospectus, or for the period from July
1, 1999 to such specified date there were any decreases,
in net revenues or gross margin, or any increase in loss
from operations or the total or per share amounts of net
loss of the Company as compared, on a proportional basis,
with the amounts shown in the Company's income statement
for the three months ended June 30, 1999, except in all
instances for changes, decreases or increases set forth
in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and are included in the Registration Statement and the
Prospectus under the captions "Prospectus Summary," "Risk Factors," "Use of
Proceeds," "Dividend Policy," "Capitalization," "Dilution," "Selected
Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management," "Certain
Transactions," "Principal and Selling Stockholders," and "Description of
Capital Stock," and have compared such amounts, percentages and financial
information with such records of the Company and with information derived
from such records and have found them to be in agreement, excluding any
questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma
financial statements included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments set
forth in this paragraph (v), inquiries of certain officials of the Company
who have responsibility for financial and accounting matters and proving
the arithmetic accuracy of the application of the pro forma adjustments to
the historical amounts in the unaudited pro forma financial statements,
nothing came to their attention that caused them to believe that the
unaudited pro forma financial statements do not comply in form in all
material respects with the applicable accounting requirements of Rule 11-02
of Regulation S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such statements.
In the event that the letters referred to above set forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Underwriters that (A) such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Securities as contemplated by the Registration Statement, as amended as of the
date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
<PAGE>
(e) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the Company, signed by its Chief Executive Officer and the
Chief Financial Officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
the Company has performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Firm
Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the
best of the Company's knowledge, are contemplated by the Commission; and
(iii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the Company has
not sustained any material loss or interference with its business or
properties from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse
change, or any development involving a prospective material adverse change,
in the condition (financial or otherwise), management, business prospects,
net worth or results of operations of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment
or supplement thereto).
(f) The Representatives shall have received a certificate from the
Selling Securityholder, signed by the Selling Securityholder, dated the Closing
Date, to the effect that:
(i) the representations and warranties of the Selling
Securityholder in this Agreement are true and correct as if made on and as
of the Closing Date;
(ii) the Registration Statement, as amended as of the Closing
Date, does not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading, and the Prospectus, as amended or supplemented as of the
Closing Date, does not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and
(iii) the Selling Securityholder has performed all covenants and
agreements on
<PAGE>
its part to be performed or satisfied at or prior to the Closing Date.
(g) The Representatives shall have received from each person who is a
director or officer of the Company, who owns shares of Common Stock (other than
the Selling Securityholder) or who has an option or warrant to acquire shares of
Common Stock an agreement to the effect that such person will not, directly or
indirectly, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of an option to purchase or other sale or disposition) of any shares of
Common Stock or any securities convertible into, or exchangeable or exercisable
for, shares of Common Stock for a period of 180 days after the date of this
Agreement.
(h) On or before the Firm Closing Date, the Representatives and counsel
for the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company and the
Selling Securityholder.
(i) Prior to the commencement of the offering of the Securities, the
Securities shall have been included for trading on the Nasdaq National Market.
(j) The Company shall have received all consents and approvals required
for the consummation of the transactions contemplated by the Intercompany
Agreements except where the failure to obtain such consents or authorizations,
considered in the aggregate, would not have material adverse effect with regard
to property, business or operations of the Company; PROVIDED, HOWEVER, the
Company shall have obtained all approvals required pursuant to Section 10 of the
DataFeed License Agreement irrespective of whether the failure to do so would
have a material adverse effect on the property, business or operations of the
Company.
(k) No default exists, and no event has occurred which, with notice or
lapse of time or both, would constitute a default in the due performance and
observance of any term, covenant or condition contained in the Company's
agreements with CNNFN, a division of Cable News Network LP, LLP, dated April 12,
1999, and Townsend Analytics, Ltd., dated May 28, 1999, and each such agreement
shall be in full force and effect.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and
pay for any Option Securities shall be subject, in their discretion, to each
of the foregoing conditions to purchase the Firm Securities, except that all
references to the Firm Securities and the Firm Closing Date shall
<PAGE>
be deemed to refer to such Option Securities and the related Option Closing
Date, respectively.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and, subject
to Section 8(e) of the Agreement, the Selling Securityholder jointly and
severally agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20 of the Securities Exchange Act of 1934 (the
"Exchange Act"), against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or the Selling Securityholder in Section 2 or 2A of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or the Selling
Securityholder or based upon written information furnished by or on behalf
of the Company or the Selling Securityholder filed in any jurisdiction in
order to qualify the Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities association or
securities exchange (each an "Application"),
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to
make the statements therein not misleading, or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials provided by the
Company or based upon written information furnished by or on behalf of the
Company including, without limitation, slides, videos, films, tape
recordings, used in connection with the marketing of the Securities,
including, without limitation, statements communicated to securities
analysts employed by the Underwriters,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company and the Selling
Securityholder will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein; and PROVIDED,
<PAGE>
FURTHER, that the Company and the Selling Securityholder will not be liable
to any Underwriter or any person controlling such Underwriter with respect to
any such untrue statement or omission made in any Preliminary Prospectus that
is corrected in the Prospectus (or any amendment or supplement thereto) if
the person asserting any such loss, claim, damage or liability purchased
Securities from such Underwriter but was not sent or given a copy of the
Prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Securities to such person in any case where
such delivery of the Prospectus (as amended or supplemented) is required by
the Act, unless such failure to deliver the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5(d)
or (e) of this Agreement. This indemnity agreement will be in addition to
any liability which the Company and the Selling Securityholder may otherwise
have. Neither the Company nor the Selling Securityholder will, without the
prior written consent of the Underwriter or Underwriters purchasing, in the
aggregate, more than fifty percent (50%) of the Securities, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Underwriter
or any person who controls any such Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim, action,
suit or proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, the Selling Securityholder and each person,
if any, who controls the Company or the Selling Securityholder within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company, the Selling
Securityholder or any such director, officer or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or any Application
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives specifically for use therein; and, subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses reasonably incurred by the Company, the
Selling Securityholder, or any such director, officer or controlling person of
the Company or the Selling Securityholder in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the
<PAGE>
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; PROVIDED, HOWEVER, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or
more legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying
party, the indemnifying party shall not have the right to direct the defense
of such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate counsel
to defend such action on behalf of such indemnified party or parties. After
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof and approval by such indemnified party of
counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred
by such indemnified party in connection with the defense thereof, unless (i)
the indemnified party shall have employed separate counsel in accordance with
the proviso to the next preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially similar
actions in the same jurisdiction arising out of the same general allegations
or circumstances, designated by the Representatives in the case of paragraph
(a) of this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs
and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient,
for any reason, to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and
the indemnified party on the other from the offering of the Securities or
(ii) if the allocation provided by the foregoing clause (i) is not permitted
by applicable law, not only such relative benefits but also the relative
fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in
<PAGE>
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Securityholder
on the one hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company and the Selling Securityholder bear to the
total underwriting discounts and commissions received by the Underwriters.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Selling Securityholder or the
Underwriters, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any
other equitable considerations appropriate in the circumstances. The
Company, the Selling Securityholder and the Underwriters agree that it would
not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not
take into account the equitable considerations referred to above in this
paragraph (d). Notwithstanding any other provision of this paragraph (d), no
Underwriter shall be obligated to make contributions hereunder that in the
aggregate exceed the total public offering price of the Securities purchased
by such Underwriter under this Agreement, less the aggregate amount of any
damages that such Underwriter has otherwise been required to pay in respect
of the same or any substantially similar claim, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
hereunder are several in proportion to its underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the
provisions of the Prudential Securities Incorporated Master Agreement Among
Underwriters. For purposes of this paragraph (d), each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, and each director of the Company or the Selling
Securityholder, each officer of the Company who signed the Registration
Statement and each person, if any, who controls the Company or the Selling
Securityholder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, shall have the same rights to contribution as the Company
or the Selling Securityholder, as the case may be.
(e) The liability of the Selling Securityholder under this Agreement
(including this Section 8) shall not exceed the proceeds to the Selling
Securityholder from the sale of the Securities sold by the Selling
Securityholder to the Underwriters.
9. DEFAULT OF UNDERWRITERS. If one or more Underwriters default in
their obligations to purchase Firm Securities or Option Securities hereunder
and the aggregate number of such Securities that such defaulting Underwriter
or Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by
all of the Underwriters at such time hereunder, the other Underwriters may
make arrangements satisfactory to the Representatives for the purchase of
such Securities by other persons (who may include one or more of the
non-defaulting Underwriters, including the Representatives), but if no
<PAGE>
such arrangements are made by the Firm Closing Date or the related Option
Closing Date, as the case may be, the other Underwriters shall be obligated
severally in proportion to their respective commitments hereunder to purchase
the Firm Securities or Option Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of Securities that is more than
ten percent of the aggregate number of Firm Securities or Option Securities,
as the case may be, to be purchased by all of the Underwriters at such time
hereunder, and if arrangements satisfactory to the Representatives are not
made within 36 hours after such default for the purchase by other persons
(who may include one or more of the non-defaulting Underwriters, including
the Representatives) of the Securities with respect to which such default
occurs, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company other than as provided in Section
10 hereof. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may
be, established as provided in Section 3 hereof for not more than seven
business days in order that any necessary changes may be made in the
arrangements or documents for the purchase and delivery of the Firm
Securities or Option Securities, as the case may be. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 9. Nothing herein shall relieve any defaulting
Underwriter from liability for its default.
10. SURVIVAL. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers, the Selling Securityholder and the several Underwriters set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, the Selling Securityholder, any Underwriter or any controlling
person referred to in Section 8 hereof and (ii) delivery of and payment for
the Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated with respect
to the Firm Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company and the Selling Securityholder given
prior to the Firm Closing Date or the related Option Closing Date,
respectively, in the event that the Company or the Selling Securityholder
shall have failed, refused or been unable to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder at
or prior thereto or, if at or prior to the Firm Closing Date or such Option
Closing Date, respectively,
(i) the Company shall have, in the sole judgment of the
Representatives, sustained any material loss or interference with its
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding or there shall have been any material
adverse change, or any development involving a prospective material adverse
change (including without limitation a change in management or control of
the Company), in the
<PAGE>
condition (financial or otherwise), business prospects, net worth or
results of operations of the Company, except in each case as described
in or contemplated by the Prospectus (exclusive of any amendment or
supplement thereto);
(ii) trading in the Common Stock or in the Common Stock of the
Selling Securityholder shall have been suspended by the Commission or the
Nasdaq National Market, or trading in securities generally on the New York
Stock Exchange, the American Stock Exchange or Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been
established on either such exchange or market system;
(iii) a banking moratorium shall have been declared by New York or
United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or material
adverse change in general economic, political or financial conditions
having an effect on the U.S. financial markets that, in the sole judgment
of the Representatives, makes it impractical or inadvisable to proceed with
the public offering or the delivery of the Securities as contemplated by
the Registration Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY UNDERWRITERS. The statements set forth
in the last paragraph on the front cover page and under the heading
"Underwriting" in any Preliminary Prospectus or the Prospectus (to the extent
such statements relate to the Underwriters) constitute the only information
furnished by any Underwriter through the Representatives to the Company for
the purposes of Sections 2(b) and 8 hereof. The Underwriters confirm that
such statements (to such extent) are correct.
13. NOTICES. All communications hereunder shall be in writing and,
if sent to any of the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; and if sent to the Company or the Selling Securityholder,
shall be delivered or sent by mail, telex or facsimile transmission and
confirmed in writing to the Company at 300 South Wacker Drive, Suite 300,
Chicago, Illinois 60606, Attention: Chief Executive Officer.
14. SUCCESSORS. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, the Selling
Securityholder and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or
<PAGE>
in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit
of no other person except that (i) the indemnities of the Company and the
Selling Securityholder contained in Section 8 of this Agreement shall also be
for the benefit of any person or persons who control any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and
(ii) the indemnities of the Underwriters contained in Section 8 of this
Agreement shall also be for the benefit of the directors of the Company and
the Selling Securityholder, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company or
the Selling Securityholder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and the Selling Securityholder. No purchaser
of Securities from any Underwriter shall be deemed a successor because of
such purchase.
15. APPLICABLE LAW. The validity and interpretation of this
Agreement, and the terms and conditions set forth herein, shall be governed
by and construed in accordance with the laws of the State of New York,
without giving effect to any provisions relating to conflicts of laws.
16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings arising out of or relating to this Agreement may be brought in
any state or federal court of competent jurisdiction in the State of New
York, and by execution and delivery of this Agreement, each of the Company
and the Selling Securityholder accepts for itself and in connection with its
properties, generally and unconditionally, the nonexclusive jurisdiction of
the aforesaid courts and waives any defense of forum non conveniens and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Each of the Company and the Selling Securityholder
designates and appoints [The Corporation Trust Company, 111 Eighth Avenue,
New York, New York 10011], and such other persons as may hereafter be selected
by the Company or the Selling Securityholder irrevocably agreeing in writing
to so serve, as their agent to receive on their behalf service of all process
in any such proceedings in any such court, such service being hereby
acknowledged by the Company and the Selling Securityholder to be effective
and binding service in every respect. A copy of any such process so served
shall be mailed by registered mail to the Company and the Selling
Securityholder at the address provided in Section 13 hereof; PROVIDED,
HOWEVER, that, unless otherwise provided by applicable law, any failure to
mail such copy shall not affect the validity of service of such process. If
any agent appointed by the Company or the Selling Securityholder refuses to
accept service, the Company and the Selling Securityholder each hereby agree
that service of process sufficient for personal jurisdiction in any action
against the Company or the Selling Securityholder in the State of New York
may be made by registered or certified mail, return receipt requested, to the
Company or the Selling Securityholder, as the case may be, at the address
provided in Section 13 hereof, and the Company and the Selling Securityholder
each hereby acknowledge that such service shall be effective and binding in
every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Underwriter to
bring proceedings against the Company and the Selling Securityholder in the
courts of any other jurisdiction.
<PAGE>
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company and
each of the several Underwriters.
Very truly yours,
PCQUOTE.COM, INC.
By
-----------------------------
Jim R. Porter
Chief Executive Officer
HYPERFEED TECHNOLOGIES INC.
By
-----------------------------
John Juska
Chief Financial Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
FIRST ALBANY CORPORATION
E*OFFERING CORP.
COMMERZBANK CAPITAL MARKETS CORPORATION
PRUDENTIALSECURITIES.COM
By PRUDENTIAL SECURITIES INCORPORATED
By
---------------------------------------------
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
<PAGE>
SCHEDULE 1
UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm
Securities to
Underwriter be Purchased
- ----------- ------------
<S> <C>
Prudential Securities Incorporated.....................
U.S. Bancorp Piper Jaffray Inc.........................
First Albany Corporation...............................
E*Offering Corp........................................
Commerzbank Capital Markets Corporation ...............
PrudentialSecurities.com...............................
------------
Total .................. 5,000,000
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors
PCQuote.com, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG LLP
Chicago, Illinois
October 1, 1999
