<PAGE>
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
_________________________________
[x] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1996
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
_______________________ to ________________________
_______________________________________
Commission file number 0-13093
I.R.S. Employer Identification Number 36-3131704
PC QUOTE, INC.
(a Delaware Corporation)
300 S. WACKER DRIVE
CHICAGO, ILLINOIS 60606
TELEPHONE (312) 913-2800
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve months,
(or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
---- ----
State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: 7,343,019 shares of
the Company's common stock ($.001 par value) were outstanding as of
November 7, 1996.
Page 1 of 13
<PAGE>
PC QUOTE, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Balance Sheets as of September 30, 1996 and
December 31, 1995 3
Statements of Operations for the nine month
And Quarter ended September 30, 1996 and 1995 4-5
Statements of Cash Flows for the nine month
periods ended September 30, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of:
Results of Operations and Financial Condition 8-9
Liquidity and Capital Resources 10
PART II. OTHER INFORMATION
Item 5. None 11
Item 6. Exhibit 27 11
Company's Signature Page 12
Page 2 of 12
<PAGE>
PC QUOTE, INC.
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 111,201 $1,043,478
Accounts receivable, net of allowance for doubtful
accounts of $183,336 (1996) and $95,000 (1995) 1,011,770 1,320,508
Income tax refunds receivable 40,000 40,000
Prepaid expenses and other current assets 106,522 294,536
Deferred tax asset 158,000 158,000
------------ ------------
Total current assets 1,427,493 2,856,522
------------ ------------
PROPERTY AND EQUIPMENT:
Satellite receiving equipment 842,978 785,718
Computer equipment 6,325,511 6,158,855
Communication equipment 2,582,607 2,437,279
Furniture and fixtures 289,425 256,260
Leasehold improvements 353,076 340,271
------------ ------------
10,393,597 9,978,383
Less accumulated depreciation
and amortization 7,465,034 6,759,973
------------ ------------
2,928,563 3,218,410
------------ ------------
Software development costs, net of
accumulated amortization of
$3,889,146 (1996) and $3,088,146 (1995) 5,713,594 4,172,215
Deposits and other assets 302,624 275,693
------------ ------------
TOTAL ASSETS $10,372,274 $10,522,840
------------ ------------
------------ ------------
LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Note payable, bank, current 300,000 100,000
Capital lease obligations 196,634 587,731
Accounts payable 1,709,126 1,700,998
Unearned revenue 466,441 546,869
Accrued expenses 631,573 488,597
------------ ------------
Total current liabilities 3,303,774 3,424,195
------------ ------------
Note payable to bank, noncurrent 1,175,000 100,000
Capital lease obligations, noncurrent 0 133,176
Unearned revenue, noncurrent 155,481 254,191
------------ ------------
Total liabilities 4,634,255 3,911,562
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.001; 10,000,000
shares authorized; 7,281,452 (1996) and 7,185,732
(1995) shares issued and outstanding 7,281 7,186
Paid in capital 12,494,663 12,289,897
Accumulated deficit (6,763,925) (5,685,805)
------------ ------------
Total stockholders' equity 5,738,019 6,611,278
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,372,274 $10,522,840
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3 of 12
<PAGE>
PC QUOTE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------------------------
1996 1995
(UNAUDITED) (UNAUDITED)
--------------------------------------
<S> <C> <C>
NET REVENUES
Services $12,883,133 $9,812,101
Direct costs of services 7,575,431 3,871,392
----------- ----------
5,307,702 5,940,709
----------- ----------
OPERATING COSTS AND EXPENSES
Amortization of software development 801,000 846,000
Research and development 543,292 494,979
Selling and marketing 2,341,820 1,656,292
General and administrative 2,603,026 1,607,966
----------- ----------
6,289,138 4,605,237
----------- ----------
OPERATING INCOME (981,436) 1,335,472
OTHER INCOME (EXPENSE)
Interest income 4,112 18,437
Interest expense (100,796) (169,682)
----------- ----------
INCOME BEFORE INCOME TAXES ($1,078,120) $1,184,227
Provision for income taxes 0 30,392
----------- ----------
NET INCOME(LOSS) ($1,078,120) $1,153,835
----------- ----------
----------- ----------
NET INCOME(LOSS) PER
COMMON SHARE ($0.15) $0.16
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 4 of 12
<PAGE>
PC QUOTE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR QUARTER ENDED SEPTEMBER 30,
----------------------------------------
1996 1995
(UNAUDITED) (UNAUDITED)
----------------------------------------
<S> <C> <C>
NET REVENUES
Services $4,460,823 $3,389,336
Direct costs of services 3,075,128 1,263,776
----------- ----------
1,385,695 2,125,560
----------- ----------
OPERATING COSTS AND EXPENSES
Amortization of software development 308,000 303,000
Research and development 197,281 191,989
Selling and marketing 882,293 539,540
General and administrative 1,081,249 569,175
----------- ----------
2,468,823 1,603,704
----------- ----------
OPERATING INCOME (1,083,128) 521,856
OTHER INCOME (EXPENSE)
Interest income 0 11,635
Interest expense (39,636) (56,674)
----------- ----------
INCOME BEFORE INCOME TAXES ($1,122,764) $476,817
Provision for income taxes 0 30,392
----------- ----------
NET INCOME(LOSS) ($1,122,764) $446,425
----------- ----------
----------- ----------
NET INCOME(LOSS) PER
COMMON SHARE ($0.15) $0.06
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5 of 12
<PAGE>
PC QUOTE, INC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------------
1996 1995
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ($1,078,120) $1,153,834
----------- ----------
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization of property and equipment 705,061 949,998
Amortization of software development cost 801,000 846,000
Changes in assets and liabilities:
Accounts receivable, net of allowance 308,738 (806,701)
Prepaid expenses and other current assets 188,014 (29,687)
Deposits and other assets (26,931) (169,751)
Accounts payable 8,128 (455,341)
Unearned revenue (179,138) 1,039,827
Accrued expenses 142,976 34,061
----------- ----------
Total adjustments 1,947,848 1,408,406
----------- ----------
Net cash provided by operating activities 869,728 2,562,240
----------- ----------
CASH FLOWS FROM INVESTING ACTIVTIES:
Purchase of property and equipment (415,214) (831,975)
Software development costs capitalized (2,342,379) (1,531,163)
----------- ----------
Net cash used by investing activities (2,757,593) (2,363,138)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 204,861 132,640
Principal payments under capital leases obligations (524,273) (615,871)
Principal payments on note payable to bank (old note) (200,000) (58,383)
Proceeds from note payable to bank (new note) 1,500,000 0
Principal payments on note payable to bank (new note) (25,000) 0
----------- ----------
Net cash used by financing activities 955,588 (541,614)
----------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (932,277) (342,512)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 1,043,478 1,384,086
----------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 111,201 $1,041,574
----------- ----------
----------- ----------
- ------------------------------------------------------------------------------ ----------
- ------------------------------------------------------------------------------ ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid $ 100,796 $113,009
Income taxes paid None None
- ------------------------------------------------------------------------------ ----------
- ------------------------------------------------------------------------------ ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6 of 12
<PAGE>
PC QUOTE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) BASIS OF PRESENTATION
The accompanying interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and in conjunction with the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The interim financial
statements include all adjustments which, in the opinion of management, are
necessary in order to make the financial statements not misleading. The
amounts indicated as "audited" have been extracted from the Company's
December 31, 1995 annual report. For further information, refer to the
consolidated financial statements and footnotes included in PC Quote's annual
report on Form 10-K for the year ended December 31, 1995. Certain
reclassifications have been made to conform to the current presentation.
Costs associated with the planning and designing phase of software
development, including coding and testing activities necessary to establish
technological feasibility of computer software products to be sold, leased or
otherwise marketed, are charged to research and development costs as
incurred. Once technological feasibility has been determined, costs incurred
in the construction phase of software development, including coding, testing
and product quality assurance, are capitalized.
Amortization is provided over an estimated life of the software products and
commences when the product is available for general release to customers.
Unamortized capitalized costs determined to be in excess of the net
realizable value of the product are expensed at the date of such
determination. It is reasonably possible that the estimated anticipated
future gross revenues, the remaining estimated economic life of the products,
or both will be reduced significantly in the near term. Accumulated
amortization and related software development costs are removed in the year
following full amortization.
(2) INCOME TAXES
At December 31, 1995, the Company had federal income tax net operating loss
carryforwards of approximately $7,327,400 federal income tax purposes and
approximately $4,753,400 for alternative minimum tax purposes. The net
operating loss carryforwards will expire in the years 1999 to 2007.
Page 7 of 12
<PAGE>
ITEM 2
_____________________________________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
FOR THE NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1996
Service revenues for the nine months and quarter ended September 30, 1996
increased 31.3% and 31.6%, respectively, from the same periods of 1995. The
increase in service revenue continues from the release of a new product, PCW
6.0, in the Company's core and internet business.
Selling and marketing costs increased 41.4% and 63.5%, respectively, for the
nine months and quarter ended September 30, 1996, over the same periods in
1995. The increase was due to the increase in commissions costs which relates
to the increase in service revenues and advertising costs for core and
internet products.
Direct costs of services for the nine months and quarter ended September 30,
1996 increased 95.7% and 143.3%, respectively, over the same periods last
year. This reflects an increase in staffing levels in customer support and
operations and royalty and communications costs related to the increase in
volume. Additional technological infrastructure costs, principally staffing,
equipment, and communications were incurred to invest in the growth of the
core business and the internet operations.
Research and Development costs increased 9.8% and 2.8%, respectively, for
the nine months and quarter ended September 30, 1996, from the corresponding
periods in 1995. There was a increase in research costs related to additional
staffing.
Page 8 of 12
<PAGE>
ITEM 2
_____________________________________________
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED):
FOR THE NINE MONTH AND QUARTER ENDED SEPTEMBER 30, 1996
General and administrative expenses increased 61.9% and 89.9%, respectively,
for the nine months and quarter ended September 30, 1996, from the same
periods in 1995. The main increases were in salaries and related costs, due
to additional staffing and reallocation of personnel to support major
business opportunities. There was also an increase in the provision for
doubtful accounts and shareholders services as compared to the same period in
1995.
Interest income decreased 77.7% and 100.%, respectively, for the nine months
and quarter ended September 30, 1996, from the corresponding periods in 1995.
Interest income decreased due to our use of cash over credit for some
equipment needs.
Interest expense decreased 40.6% and 30.1%, respectively, for the nine months
and quarter ended September 30, 1996 over the same periods in 1995. This
reflects the switch to operating leases from capital leases.
Page 9 of 12
<PAGE>
ITEM 2
_____________________________________________
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES:
FOR THE NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1996
The company established a $1,500,000 five year Note, in addition to it's
$1,000,000 line of credit with the its' lender. The company retired an
existing note on the balance sheet and consolidated the borrowings from the a
line of credit. Investments in software development increased substantially
due to the Company's targeted effort to launch more products on the internet.
Financing activities used cash for capital lease obligations.
The Company believes general inflation does not materially impact its sales
and operating results nor is it expected that the effect of existing tax
reform will significantly affect the Company's future position, liquidity or
operating results.
Page 10 of 12
<PAGE>
PART II
OTHER INFORMATION
_________________
ITEM 5. Other Information
The Company has reached an agreement in principle with Physicians
Insurance Company of Ohio, Inc. ("PICO"), which owns approximately 30% of the
Company's outstanding shares of common stock. The proposed agreement, which
is subject to the execution of definitive agreements, contemplates that PICO
will invest $2.5 million cash in the Company in exchange for a Subordinated
Convertible Debenture (the "Debenture") in the principal amount of $2.5
million with interest at 1% over prime. The Debenture would mature on
December 31, 2001 and will be convertible at any time by PICO, or by the
Company at the conclusion of the rights offering (discussed below) into 1.25
million shares of common stock of the Company.
The Company and PICO also agreed in principle that the Company will
offer, pro rata to its stockholders other than PICO, rights to purchase up to
1.25 million additional shares of the Company's common stock at an exercise
price of $2.00 per share. It is contemplated that the rights offering and the
shares underlying the rights would be registered with the Securities and
Exchange Commission. The rights will be non-transferable and will expire
thirty days from the date of issuance. PICO has agreed to exercise all rights
which remain unexercised after termination of the rights period at the
exercise price of $2.00 per share.
The Company and PICO have agreed that the Company will obtain
shareholder approval of the rights offering and an amendment to the Company's
Certificate of Incorporation to increase its number of authorized common
shares from 10,000,000 to 20,000,000 shares. The Company and PICO further
agreed that within fourteen days from the closing of the debenture offering,
the Board of Directors of the Company would be reconstituted to consist of
Mr. Louis Morgan, Mr. Ronald Langley, Mr. Paul DiBiasio, Mr. John Hart and
Mr. Michael Ellis. Messrs, Morgan, Langley and DiBiasio currently serve on
the Company's Board of Directors.
On October 30, 1996, the Company and Global Financial Information
Corporation, (formerly Bridge Information Systems), amended their January 25,
1995 Agreement by eliminating Global's obligation to pay PC Quote
approximately $150,000 per month for each of the first three months of 1997.
Instead, Global shall pay the Company based on the per site pricing schedule
which was to begin on April 1, 1997.
ITEM 6.
(a) EXHIBIT 27
(b) REPORTS ON FORM 8-K- NONE
Page 11 of 12
<PAGE>
SIGNATURES
__________
Pursant to the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PC QUOTE, INC.
(Company)
Date: November 10, 1996 By: /s/ Louis J. Morgan
--------------------------------
Louis J. Morgan
Chairman
By: /s/ Michael A . Press
--------------------------------
Michael A. Press
Vice President of Finance
and Chief Financial Officer
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 111,201
<SECURITIES> 0
<RECEIVABLES> 1,011,770
<ALLOWANCES> 183,336
<INVENTORY> 0
<CURRENT-ASSETS> 1,427,493
<PP&E> 10,393,597
<DEPRECIATION> 7,465,034
<TOTAL-ASSETS> 10,372,274
<CURRENT-LIABILITIES> 3,303,774
<BONDS> 0
0
0
<COMMON> 7,275
<OTHER-SE> 5,730,744
<TOTAL-LIABILITY-AND-EQUITY> 10,372,274
<SALES> 0
<TOTAL-REVENUES> 4,460,823
<CGS> 0
<TOTAL-COSTS> 3,075,128
<OTHER-EXPENSES> 2,468,823
<LOSS-PROVISION> 180,000
<INTEREST-EXPENSE> 39,636
<INCOME-PRETAX> (1,122,764)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,122,764)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,122,764)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
