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PROSPECTUS
Filed Pursuant to Rule 424(b)(3)
Reg. No. 333-39245
7,402,246 SHARES
[LOGO]
COMMON STOCK
(AND RIGHTS TO ACQUIRE UP TO
7,402,246 OF SUCH SHARES)
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PC Quote, Inc., a Delaware corporation (the "Company"), is distributing to
holders of record of shares of its common stock, $.001 par value per share (the
"Common Stock"), as of the close of business on November 21, 1997 (the "Record
Date"), other than Imprimis Investors LLC and Wexford Spectrum Investors LLC
(together, the "Wexford Affiliates") which have agreed not to participate in the
Rights Offering, transferable subscription rights (the "Rights") to purchase
additional shares of Common Stock (the "Basic Subscription Privilege") at a
price of $1.00 per share (the "Subscription Price"). Stockholders will be
entitled to one Right for each share of Common Stock held on the Record Date.
Each Right will entitle its holder (a "Holder") to purchase one share of Common
Stock (collectively the "Underlying Shares"). No fractional shares of Common
Stock will be sold, and fractional interests will be rounded up.
Upon exercise of the Basic Subscription Privilege, a Holder will also be
entitled to purchase at the Subscription Price a pro rata portion of any
Underlying Shares that are not otherwise subscribed for pursuant to the exercise
of Basic Subscription Privileges (the "Oversubscription Privilege"). In the
event there are any unexercised Rights after the Basic Subscription Privileges
and Oversubscription Privileges have been fulfilled, then any such remaining
unexercised Rights (the "Unexercised Allotment;" and, collectively, with the
Basic Subscription Privilege, Oversubscription Privilege, and the sale of shares
of Common Stock in connection therewith, the "Rights Offering") shall be offered
to members of management, including Directors. If available, management intends
to exercise a minimum of 250,000 Rights in such Unexercised Allotment and
purchase the respective shares underlying such Rights at the Subscription Price.
The Common Stock is currently traded on The American Stock Exchange. On
November 14, 1997 the closing price of the Common Stock as reported on The
American Stock Exchange was $1.50 per share. The Company has applied to list the
Rights and the Underlying Shares issuable upon exercise of the Rights on The
American Stock Exchange. The Company believes the Rights will commence trading
on November 24, 1997. However, no assurances can be given that a market for the
Rights will develop.
THE RIGHTS WILL EXPIRE AT 4:30 p.m., Chicago Time, on December 19, 1997,
unless extended by the Company (such date, as it may be extended on one or more
occasions, is referred to herein as the "Expiration Date"). In no event will the
Expiration Date be extended beyond February 27, 1998. If the Company elects to
extend the term of the Rights, it will issue a press release to such effect not
later than the first day The American Stock Exchange is open for trading
following the most recently announced Expiration Date. Funds provided in payment
of the Subscription Price will be held by American Securities Transfer & Trust,
Inc., as the Subscription Agent, until the Closing, which will occur promptly
following Expiration Date. The exercise of Rights is irrevocable once made, and
no interest will be paid to Holders exercising their Rights.
AN INVESTMENT IN THE COMPANY'S COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 21, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Rights and the Underlying
Shares. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, or
incorporated by reference therein, for a more complete description of the matter
involved and each such statement shall be deemed qualified in all respects by
such reference. Such additional information may be obtained from the
Commission's principal office in Washington, D.C.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy and information statements and other
information with the Commission. The Registration Statement and the exhibits
thereto, as well as such reports, proxy and information statements and other
information, filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, DC 20549, and at the Regional Offices of the
Commission located at 7 World Trade Center, New York, NY 10048 and Citicorp
Center, 500 Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
material can be obtained upon written request addressed to the Public Reference
Section of the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a World Wide Web site on the
Internet at www.sec.gov that contains reports, proxy and information statements
and other information filed electronically with the Commission by registrants
like the Company. The Common Stock is traded on The American Stock Exchange and
reports, proxy and information statements and other information concerning the
Company may be inspected at the offices of The American Stock Exchange, 86
Trinity Place, New York, NY 10006.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by Company with the Commission are
incorporated herein by reference:
(i) the Company's 1996 Annual Report to Stockholders, containing the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, as amended;
(ii) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997;
(iii) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997, as amended on October 31, 1997;
(iv) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997; and
(v) the Company's Current Report on Form 8-K dated July 16, 1997, as amended
on August 26, 1997.
Copies of the Company's 1996 Annual Report to Stockholders, containing its
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as
amended, and its Quarterly Report on Form 10-Q for the quarter ended September
30, 1997 accompany this Prospectus. All documents filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the
date of this Prospectus and prior to the termination of the Rights Offering,
shall be deemed to be incorporated by reference to this Prospectus and to be a
part hereof from the respective dates of the filing thereof.
The Company will provide without charge to each person, including each
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
or oral request of such person, a copy of any or all documents incorporated by
reference into this Prospectus that are not delivered herewith, except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should be directed to
the Company's principal office: PC Quote, Inc., 300 South Wacker Drive, Suite
300, Chicago, Illinois 60606, Attn: Darlene Czaja, Tel. No. (312) 913-2800.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND
RELATED NOTES THERETO APPEARING ELSEWHERE IN OR INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS.
THE COMPANY
PC Quote, Inc., a Delaware corporation (the "Company"), provides real-time
and delayed financial data, including equities, commodities, futures and options
quotations and news on a subscription basis to professional and consumer markets
worldwide. Professional clients include brokerage firms, banks, insurance
companies, fund managers, institutional and professional traders. The Company's
"web site" offers non-fee delayed quotes to all visitors and real time
subscription market data services to fee-based subscribers. The Company's
principal executive offices are located at 300 South Wacker Drive, #300,
Chicago, Illinois 60606 and its telephone number is (312) 913-2800. The
Company's World Wide Web address is www.pcquote.com.
THE RIGHTS OFFERING
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Rights............................ Each Holder of Common Stock (other than the Wexford
Affiliates) will receive one transferable Right for each
share of Common Stock held of record on the Record Date.
An aggregate of 7,402,246 Rights will be distributed
pursuant to the Rights Offering. An aggregate of
7,402,246 shares of Common Stock will be sold if all
Rights are exercised. The exercise of Rights is
irrevocable once made, and no Underlying Shares will be
issued until the closing following the Expiration Date.
Basic Subscription Privilege...... Holders are entitled to purchase at the Subscription
Price one share of Common Stock for each Right held. See
"The Rights Offering--The Rights" and "Subscription
Privileges--Basic Subscription Privilege."
Oversubscription Privilege........ Each Holder who elects to exercise his or her Basic
Subscription Privilege may also subscribe at the
Subscription Price for Underlying Shares, if any,
remaining unissued after satisfaction of all
subscriptions pursuant to the Basic Subscription
Privilege. If an insufficient number of Underlying
Shares is available to satisfy fully all elections to
exercise the Oversubscription Privilege, the available
Underlying Shares will be allocated on a pro rata basis
among Holders who exercise their Oversubscription
Privilege based on the respective numbers of Underlying
Shares subscribed for by such Holders pursuant to the
Basic Subscription Privilege. In the event any Rights
remain unexercised following satisfaction of the Basic
Subscription and Oversubscription Privileges, the
Company intends to offer the remaining Underlying Shares
for purchase at the Subscription Price to members of
management, including Directors. See "The Rights
Offering-- The Rights" and "Subscription
Privileges--Oversubscription Privilege."
Subscription Price................ $1.00 in cash per share of Common Stock.
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Shares of Common Stock Outstanding
after Rights Offering........... Assuming that all Rights are fully exercised, 19,804,492
shares will be outstanding after the Rights Offering,
based on 12,402,246 shares outstanding on the Record
Date. The final number of shares of Common Stock that
will be outstanding after the Rights Offering is
dependent upon the extent to which Rights are exercised.
Assuming the availability of sufficient funds therefor,
the Company intends to use a portion of the net proceeds
of the Rights Offering to repurchase an aggregate of
four million shares of Common Stock from the Wexford
Affiliates. Upon consummation of this proposed
repurchase, 15,804,492 shares of Common Stock will be
outstanding and the Company will hold 4,000,000 shares
in its treasury. See"--Use of Proceeds," "Recent
Developments--Financing Transaction with the Wexford
Affiliates," and "Reason for the Rights Offering and Use
of Proceeds."
Transferability of Rights......... The Rights are transferable, and it is anticipated that
they will trade on The American Stock Exchange until the
close of business on the last trading day prior to the
Expiration Date. In addition, the Company has applied to
list the Rights and the Underlying Shares on The
American Stock Exchange. The Company believes the Rights
will commence trading on November 24, 1997. The Basic
Subscription Privilege and the Oversubscription
Privilege are only transferable together, and any
transfer of a Right will be deemed a transfer of both
the Basic Subscription Privilege and the
Oversubscription Privilege. There can be no assurance,
however, that any market for Rights will develop. See
"The Rights Offering--Method of Transferring Rights."
Record Date....................... November 21, 1997.
Expiration Date................... December 19, 1997, unless extended by the Company from
time to time, provided that the Expiration Date shall
not be later than February 27, 1998, unless the Board of
Directors determine that a material event has occurred
which necessitates one or more further extensions of the
Rights in order to permit adequate disclosure of
information concerning such event to Holders. See "The
Rights Offering--Expiration Date." If the Company elects
to extend the term of the Rights, it will issue a press
release to such effect not later than the first day on
which The American Stock Exchange is open for trading
following the most recently announced Expiration Date.
In the event Company elects to extend the term of the
Rights Offering by more than 14 calendar days, it will,
in addition, cause written notice of such extension to
be promptly sent to all Holders of record on the Record
Date.
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Procedure for Exercising Rights... Rights may be exercised by properly completing the
certificate evidencing such Rights (the "Subscription
Certificate") and forwarding such Subscription
Certificate (or following the Guaranteed Delivery
Procedures, as defined below) to the Subscription Agent
on or prior to the Expiration Date, together with
payment in full of the Subscription Price for each
Underlying Share subscribed for pursuant to the
Subscription Privileges. If the mail is used to forward
Subscription Certificates, it is recommended that
insured, registered mail be used. The exercise of a
Right may not be revoked or amended. If time does not
permit a Holder or transferee of a Right to deliver its
Subscription Certificate to the Subscription Agent on or
before the Expiration Date, such Holder or transferee
should make use of the Guaranteed Delivery Procedures
described under "The Rights Offering--Exercise of
Rights."
If paying by uncertified personal check, please note
that the funds paid thereby may take at least five
business days to clear. Accordingly, Holders who wish to
pay the Subscription Price by means of uncertified
personal check are urged to make payment sufficiently in
advance of the Expiration Date to ensure that such
payment is received and clears by such date and are
urged to consider payment by means of certified or
cashier's check, money order or wire transfer of funds.
Persons Holding Shares, or Wishing
to Exercise Rights Through
Others.......................... Persons holding shares of Common Stock, and receiving
the Rights distributable with respect thereto, through a
broker, dealer, commercial bank, trust company or other
nominee, as well as persons holding certificates of
Common Stock personally who would prefer to have such
institutions effect transactions relating to the Rights
on their behalf, should contact the appropriate
institution or nominee and request it to effect the
transactions for them. See "The Rights
Offering--Exercise of Rights."
Closing and Issuance of Common
Stock........................... The closing will occur and certificates representing
Underlying Shares will be delivered to subscribers as
soon as practicable after the Expiration Date and after
all prorations have been effected. See "The Rights
Offering--Subscription Privileges." No Underlying Shares
will be issued until the closing. Funds delivered to the
Subscription Agent for the exercise of Subscription
Privileges will be held in escrow by the Subscription
Agent until the closing. No interest will be paid to
Holders on funds held by the Subscription Agent. In the
case of Holders exercising Oversubscription Privileges,
any excess funds will be returned to the Holders as soon
as practicable following the closing.
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Use of Proceeds................... It is anticipated that the net proceeds to Company will
be approximately $7.0 million if all of the Underlying
Shares are purchased in the Rights Offering. If less
than all of the Underlying Shares are purchased, the
proceeds will be correspondingly reduced. $4.0 million
of such proceeds will be used to repurchase an aggregate
of four million shares of Common Stock from the Wexford
Affiliates with any additional proceeds used for general
corporate purposes. See "Recent Developments-- Financing
Transaction with Wexford Affiliates," and "Reason for
the Rights Offering and Use of Proceeds."
Subscription Agent................ American Securities Transfer & Trust, Inc.
The American Stock Exchange Com-
mon Symbol...................... PQT
The American Stock Exchange Rights
Symbol.......................... PQT.Rt
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RISK FACTORS
Prospective investors should carefully consider the following risk factors
in addition to other information set forth in this Prospectus before making a
decision to purchase any of the securities offered hereby.
LOSS OF SIGNIFICANT CUSTOMERS; RECENT OPERATING LOSSES AND DECLINING
REVENUES. In December 1996, the Company discontinued providing services to a
major client which accounted for net revenues of approximately $1.7 million,
$0.6 million and $0.6 million in 1996, 1995, and 1994, respectively. Also,
beginning in January 1997, the Company significantly reduced the level of
services to another major customer that accounted for revenue of $3.4 million,
$3.9 million, and $3.6 million in 1996, 1995 and 1994, respectively.
The Company incurred a loss of approximately $3.3 million for the year ended
December 31, 1996, and as of December 31, 1996, had an accumulated deficit of
approximately $8.9 million and deficit working capital of $1.5 million. These
conditions raised substantial doubt about the Company's ability to continue as a
going concern. There can be no assurance that the Company will operate
profitably in the future. The ability of the Company to continue as a going
concern is dependent upon a number of factors including completion of this
Rights Offering. See "Management Discussion and Analysis of Financial Condition
and Results of Operations" and Note 14 to the Financial Statements for the
Fiscal Year Ended December 31, 1996, as filed on Form 10-K, as amended,
incorporated herein by reference.
For the nine months ended September 30, 1997, the Company's service revenue
decreased 2% from the same period of 1996 and was essentially unchanged for the
quarter. The decrease in revenue was due to the loss of two major customers in
the Company's traditional direct data feed business. The lost revenue, $3.8
million and $400,000 for the nine months and quarter respectively, was
substantially offset by increases in service revenue in the Company's
traditional and internet businesses, as well as revenue from the sale of
advertising on the internet.
NEED FOR ADDITIONAL FINANCING. The Company believes at this time that the
maximum net proceeds to the Company from the Rights Offering will be sufficient
to satisfy the Company's current need for capital. However, events could occur
or opportunities could arise which could increase such need for capital beyond
the amount of the maximum net proceeds to the Company from the Rights Offering.
Upon such events or opportunities the Company would be required to generate
additional sources of funding to continue its planned activities or exploit the
perceived opportunities. There is no assurance that any such additional sources
of funding will be available. Should such additional funding become necessary,
and should PC Quote be unable to obtain such funding, the Company may be
required to sell certain of its assets, cease operations or forego the perceived
opportunities. None of the stockholders receiving or exercising Rights in the
Rights Offering will be obligated to provide any additional capital to the
Company beyond amounts paid pursuant to the Basic Subscription Privilege or the
Oversubscription Privilege.
CONTROL BY PRINCIPAL STOCKHOLDERS. Provided PICO Holdings, Inc. and its
affiliate, Physicians Insurance Company of Ohio (together, "PICO"), neither
exercises nor converts outstanding warrants or a convertible subordinated
debenture, and after giving effect to the Rights Offering and the proposed
repurchase of four million shares from the Wexford Affiliates, PICO will
beneficially own approximately 49.1% of the outstanding shares of Common Stock,
assuming PICO and all other Holders fully exercise all of the Rights distributed
to them under the Basic Subscription Privilege. As a result, PICO will be able
to control the outcome of matters requiring a stockholder vote, including the
election of directors. Such control could preclude any unsolicited acquisition
of the Company and, consequently, adversely affect the market price of the
Common Stock. See "Recent Developments--Transactions with Physicians Insurance
Company of Ohio and PICO Holdings, Inc."
Prior to giving effect to the Rights Offering, the Wexford Affiliates are
deemed to beneficially own five million five hundred thousand shares of Common
Stock, constituting approximately 42.7% of the outstanding shares of Common
Stock. In connection with the terms of a certain Stock and Warrant Purchase
Agreement dated October 15, 1997 between the Company and the Wexford Affiliates
(the
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"Purchase Agreement"), the Wexford Affiliates have agreed not to participate in
the Rights Offering. The Company intends to use $4.0 million of the net proceeds
from the Rights Offering to repurchase from the Wexford Affiliates an aggregate
of four million shares of Common Stock, which shares the Company plans to hold
in its treasury upon consummation of the repurchase. After giving effect to the
Rights Offering and the repurchase, the Wexford Affiliates will beneficially own
9.2% of the outstanding shares of Common Stock. Such ownership could have the
effect of further discouraging the unsolicited acquisition of the Company and,
consequently, adversely affect the market price of the Common Stock. See "Recent
Developments--Financing Transaction with Wexford Affiliates."
VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company's revenue, gross
profits and earnings have fluctuated and, in the future, may fluctuate from
quarter to quarter based on such factors as the number, size and scope of
services and software applications which the Company provides, the contractual
terms for the provision of such services and software applications, any delays
incurred in connection with an agreement to provide services and software
applications, the adequacy of provisions for losses, the accuracy of estimates
of resources required to complete ongoing service offerings and general economic
conditions. Unanticipated variations in any of such factors may cause
significant variations in operating results in any particular quarter and could
result in losses for such quarter. An existing customer's unanticipated
termination of or failure to renew a major agreement for the provision of
services and software applications during a quarter could have a material
adverse effect on the Company's business, financial condition and results of
operations.
AGREEMENTS WITH EXCHANGES. The Company's ability to provide services
enabling its customers to access real-time and delayed financial data such as
equities, commodities, futures and options quotations and news is dependent on
its ability to gather ticker and news feeds from securities exchanges and other
sources. The Company has agreements in place with such exchanges and other
sources which permit the Company to gather the information it needs for its
services. The termination, expiration or nonrenewal of any of these agreements
could inhibit the Company's ability to provide high quality services to its
customers and, accordingly, have a material adverse effect upon the Company's
business, financial condition and results of operations. See "The Company."
SOFTWARE LICENSING AGREEMENT. A significant software application which is
offered to subscribers for the Company's financial data quotations and news
services, PC Quote 6.0, is licensed by the Company from an unaffiliated third
party pursuant to a Software Distributor Agreement dated December 4, 1995 (the
"Distributor Agreement"). The Distributor Agreement is for a three-year term but
provides for automatic two-year renewals thereafter unless terminated pursuant
to ninety days' notice. The termination, expiration or nonrenewal of the
Distributor Agreement could have a material adverse effect on the Company's
business, financial condition and results of operations.
RELIANCE UPON EXECUTIVE OFFICERS AND KEY EMPLOYEES. The success of the
Company is highly dependent upon the efforts and abilities of its executive
officers, particularly Mr. Jim Porter, the Company's Chairman of the Board and
Chief Executive Officer. Although its executive officers and key employees have
entered into agreements with the Company which contain nondisclosure covenants,
such agreements do not guarantee that these individuals will continue their
employment with the Company. The loss of services of certain executive officers
or key employees for any reason could have a material adverse effect upon the
Company's business, financial condition and results of operations.
COMPETITION. The market for the on-line provision of financial information
such as equities, commodities, futures and options quotations and news through
services and software applications similar to those the Company provides
includes a large number of competitors and is subject to rapid change. The
Company believes its primary competitors include Automatic Data Processing, the
Telerate unit of Dow Jones & Co., Bloomberg, the Comstock unit of Standard &
Poors, the ILX unit of Thomson Corporation, Telesphere Global Ticker, Reuters,
Quote.com and Data Broadcasting Corporation. Many of these competitors have
significantly greater financial, technical and marketing resources and greater
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recognition than the Company. Such competition may impose additional pricing
pressures on the Company. There can be no assurance that the Company can compete
successfully with its existing competitors or with any new competitors.
SUBSCRIPTION CONTRACT RISKS. Many of the Company's subscription contracts
are for services and software applications which are critical to the operations
of its customers' businesses. The Company's failure or inability to deliver
services and software to its customers' satisfaction could have a material
adverse effect on its customers' operations and could consequently subject the
Company to litigation or damage the Company's reputation, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Substantially all of the Company's subscription contracts are of relatively
short duration; their maximum length is three years. Although these contracts
carry early termination penalties, the unexpected termination or nonrenewal by a
client of a significant contract could have a material adverse effect on the
Company's business, financial condition and results of operations.
CUSTOMER CONCENTRATION. The Company has derived a significant portion of
its revenues from a limited number of large customers. In 1995, 1996 and for the
nine months ended September 30, 1997, the Company's largest customer accounted
for approximately 29%, 20% and 4% of its revenues, respectively, and its ten
largest clients accounted for approximately 43%, 39% and 16% of its revenues,
respectively. The volume of services provided to specific customers varies from
year to year. There can be no assurance that a large customer in one year will
continue to use the Company's services in a subsequent year. Furthermore, the
Company is not always the exclusive provider of securities quotations and news
to its customers. The loss of any large customer could have a material adverse
effect on the Company's business, financial condition and results of operations.
TECHNOLOGICAL ADVANCES. The information technology industry has experienced
and is continuing to experience rapid technological advances and developments.
The Company's success will depend in part on its ability to develop solutions
which keep pace with continuing changes in information processing technology,
evolving industry standards and changing client preferences. While the Company
is actively engaged in research and development activities to meet such client
needs and preferences, there can be no assurance that the Company will be
successful in addressing these developments on a timely basis or that, if
addressed, the Company will be successful in the marketplace. The Company's
delay or failure to address these developments could have a material adverse
effect on the Company's results of operations. In addition, there can be no
assurance that technologies developed by others will not render the Company's
services noncompetitive or obsolete.
INTELLECTUAL PROPERTY RIGHTS. Software developed by PC Quote in connection
with customer services typically is licensed for use by the customers. The
Company holds no patents or registered copyrights and has no present intention
of registering any copyrights or filing any patent applications. The following
are registered trademarks: BasketMaker-Registered Trademark-,
QuoteWare-Registered Trademark-, PriceWare-Registered Trademark- and
QuoteBlaster-Registered Trademark-. HyperFeed-TM- is a servicemark of the
Company.
Although the Company believes that its services and software applications do
not infringe upon the intellectual property rights of others and that it has all
rights necessary to utilize the intellectual property employed in its business,
the Company is subject to the risk of litigation alleging infringement of third-
party intellectual property rights. The Company typically agrees to indemnify
its clients against such claims. Any such claims could require the Company to
spend significant sums in litigation, pay damages, develop non-infringing
intellectual property or acquire licenses to the intellectual property which is
the subject of asserted infringement.
The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
rights, the rights of third parties from whom the Company licenses intellectual
property and the proprietary rights of its clients. There can be no assurance,
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however, that the steps taken by the Company will be adequate to deter
misappropriation of proprietary information or that the Company will be able to
detect unauthorized use and take appropriate steps to enforce its intellectual
property rights.
RISKS OF LICENSING PROPRIETARY SOFTWARE APPLICATIONS. The Company does not
have patent or federal copyright protection for its proprietary software
products. Although applicable software is readily duplicated illegally by anyone
having access to appropriate hardware, the Company attempts to protect its
proprietary software through license agreements with customers and common law
trade secret protection and non-disclosure contract provisions in its agreements
with its employees. The Company uses security measures, including a hardware
key, which restricts access to its on-line services unless proper password
identification from a PC Quote user is provided. As an additional safeguard, the
Company provides only the object code on its diskette and retains the source
code. There can be no assurance that such licensees will properly utilize the
Company's software applications and services. The failure by licensees to adhere
strictly to the Company's standards could subject PC Quote to litigation and
harm the Company's reputation thereby resulting in a material adverse effect on
the Company's business, financial condition and results of operations.
SIGNIFICANT UNALLOCATED NET PROCEEDS. The only specific allocation of the
Company's anticipated net proceeds from the Rights Offering is the repurchase of
an aggregate of four million shares of Common Stock for total consideration of
$4.0 million. Accordingly, a portion of the Company's anticipated net proceeds
of the Rights Offering has not been committed to specific uses. The Board of
Directors of the Company will have broad discretion with respect to the use of
such unallocated net proceeds. See "Reason for the Rights Offering and Use of
Proceeds."
REQUIREMENTS FOR LISTING SECURITIES ON THE AMERICAN STOCK EXCHANGE. The
Common Stock is currently listed with The American Stock Exchange. The Company
has applied to list the Rights and the Underlying Shares of Common Stock
issuable upon their exercise for trading on The American Stock Exchange. If the
Company is unable to maintain the standards for continued listing, the Common
Stock and the Rights, if listed, could be subject to delisting from The American
Stock Exchange. Trading, if any, would thereafter be conducted on an electronic
bulletin board established for securities that do not meet listing requirements
or in what is commonly referred to as the "pink sheets." As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities.
POSSIBLE VOLATILITY OF STOCK PRICE. The Company's Common Stock is thinly
traded and may experience significant price and volume fluctuations which could
adversely affect the market price of the Common Stock without regard to the
operating performance of the Company.
ANTI-TAKEOVER PROVISIONS. The Company's Certificate of Incorporation and
By-laws, the Delaware General Corporation Law and the Securities Exchange Act of
1934 contain certain provisions that could have the effect of discouraging or
making more difficult the acquisition of the Company by means of a tender offer,
a proxy contest or otherwise, even though such an acquisition might be
economically beneficial to the Company's stockholders. These include provisions
under which (i) only the Board of Directors or an authorized special committee
thereof may call meetings of stockholders, and (ii) stockholders must comply
with certain advance notice procedures to nominate candidates for election as
directors of the Company and to submit proposals for consideration at
stockholders' meetings. The ability of the Board of Directors to issue up to
5,000,000 shares of preferred stock, in one or more classes or series, and with
such powers, designations, preferences and relative, participating, optional or
special rights, qualifications, limitations or restrictions as may be determined
by the Board of Directors of the Company, also could make an acquisition of the
Company more difficult. In addition, these provisions may make the removal of
management more difficult, even in cases where such removal would be favorable
to the interests of the Company's stockholders.
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DEPENDENCE UPON FINANCIAL MARKETS. A significant portion of the Company's
revenue is derived from supplying financial data and quotations related to U.S.
financial exchanges and markets. Any significant downturn or other negative
development with respect to those exchanges and markets could adversely effect
the Company's revenue.
CERTAIN RIGHTS OFFERING CONSIDERATIONS
NO COMMITMENTS TO PURCHASE AND NO MINIMUM SIZE OF RIGHTS OFFERING. The
Company does not have a written commitment from any person to purchase any
shares of Common Stock pursuant to the Rights Offering. In addition, no minimum
amount of proceeds is required for the Company to consummate the Rights
Offering. Accordingly, no assurances can be given as to the amount of gross
proceeds that the Company will realize from the Rights Offering. See "Purpose of
the Rights Offering and Use of Proceeds," "The Rights Offering," and "Plan of
Distribution."
ADDITIONAL SHARES ISSUABLE TO THE WEXFORD AFFILIATES. Pursuant to the terms
of the Purchase Agreement, in the event the Rights Offering is not completed on
or prior to January 24, 1998, the Wexford Affiliates will be entitled to
receive, out of escrow, warrants to purchase up to 250,000 shares of Common
Stock and, in the event the Rights Offering is not completed on or prior to
February 28, 1998, the Wexford Affiliates will be entitled to receive warrants
to purchase up to an additional 250,000 shares of Common Stock (such warrants,
collectively, the "Additional Warrants"). The exercise price for the Additional
Warrants is $2.00 per share. Were the Rights Offering not completed on or prior
to February 28, 1998, thereby entitling the Wexford Affiliates to receive all of
the Additional Warrants, their deemed beneficial ownership of Common Stock would
increase to 44.8% of the outstanding Common Stock. See "--Control by Principal
Stockholders" and "Recent Developments--Financing Transaction with Wexford
Affiliates."
DILUTION; DISCOUNT FROM MARKET PRICE. Holders who do not exercise their
Subscription Privileges in full will realize a dilution in their percentage
voting interest and ownership interest in future net earnings, if any, of the
Company to the extent that Rights are exercised by other Holders. Provided PICO
neither exercises nor converts outstanding warrants or a convertible
subordinated debenture and assuming PICO fully subscribes to its Basic
Subscription Privilege, and assuming no other Rights were exercised, and
assuming the proposed repurchase of four million shares from the Wexford
Affiliates does not occur, PICO would collectively own approximately 52.7% of
the Company's Common Stock. In addition, the Subscription Price represents a
33 1/3% discount from the closing market price of $1.50 as of November 14, 1997
and could result in a reduction in the market price for the Company's Common
Stock.
LIMITED LIQUIDITY OF SECURITIES AND TRADING ACTIVITY. The Common Stock is
thinly traded. The Company has applied to list the Rights and the Underlying
Shares of Common Stock issuable upon exercise of the Rights on The American
Stock Exchange. The Company believes the Rights will commence trading on
November 24, 1997. However, no assurances can be given that an efficient market
for the Rights will develop or, if developed, be maintained. See "Risk
Factors--Control by Principal Stockholders."
POSSIBLE EXTENSION OF EXPIRATION DATE. The Company has reserved the right
to extend the Expiration Date to as late as February 27, 1998. Funds deposited
in payment of the Subscription Price may not be withdrawn and no interest will
be paid thereon to Holders. See "The Rights Offering--Expiration Date."
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THE COMPANY
COMPANY OVERVIEW
PC Quote, Inc. has over 17 years of experience in providing real-time and
delayed financial information such as equities, commodities, futures and options
quotations and news to professional and consumer markets worldwide. With its
objective to become the leading provider of such quotations and news to new and
existing clients, the Company focuses its marketing efforts on institutions such
as brokerage firms, banks, insurance companies, fund managers, and institutional
and professional traders, individual investors, and software companies.
To meet this objective the Company has developed a reputation for providing
high speed real-time transmission of security prices to the professional
investor community through a ticker plant regarded as one of the fastest and
most accurate in the industry. Its real-time database of last sale and bid/ask
prices of more than 250,000 issues contains the most comprehensive options data
and has also been optimized for NASDAQ Level II. The database includes all North
American equities and options, major stock indices, Level 1 NASDAQ-quoted
stocks, mutual funds, money market funds, futures contracts, and commodities.
The Company has recently expanded its service offering to the individual
investor, applications developers and businesses by offering its products
through the Internet.
The Company generates revenue from its securities quotations services,
individual investor subscriptions, Internet business services, software and web
site development services, OEM and redistributor services, and from advertising
sold on its web site. The Company classifies its data services in two
categories: real-time satellite broadcast or dedicated landline for professional
trading desktops and networks; and Internet services for individual investors,
developers, corporations and financial institutions.
The Company's Network/Desktop Services provide real-time securities
quotations and optional analytic applications for professional investors such as
securities brokers, dealers, traders and portfolio managers. HyperFeed-TM-, the
Company's digital real-time market data feed, supports all of the Company's
products and services. The Company believes that HyperFeed is one of the world's
fastest and one of the most accurate digital market data feeds. The speed and
accuracy of data delivery are crucial factors for active equity traders.
HyperFeed provides traders a high speed link to real-time data through satellite
feeds and terrestrial delivery systems. The Company's quality control personnel
work to eliminate corrupted/bad data prior to the data's redistribution to its
customers. In addition, the Company believes its software interface is highly
regarded by its customers as user friendly and conducive to finding data
quickly. As a result of these and other factors, the Company has developed a
leading position with the NASDAQ day trader market, supplying the data feed to a
significant percentage of this market. Furthermore, PC Quote's unique
applications programming interfaces (APIs) are noted for their robustness and
ease of use, enabling IT departments of financial institutions to create their
own quote systems, or switch from their current systems to PC Quote's HyperFeed
with relative ease.
The Company's Internet Services provide a wide range of Internet technology
solutions, in addition to marketing opportunities leveraged by the very strong
brand awareness of PC Quote on the Worldwide Web. Through its Internet Services
the Company:
1. Makes available to the individual investor the same data feed and analytical
capabilities as it provides the professional investor. In addition, the
Company's web site (www.pcquote.com) enables non-professional individual
investors access to delayed and real-time quotes on stocks, options, mutual
funds, futures, commodities and indices, as well as news, fundamentals, SEC
filings, historical data, earnings estimates and other research.
2. Provides the software developer of a software company, IT department of a
financial institution, or programmer the ability to create custom
applications using PC Quote's datafeed for personal, intranet/WAN, or retail
use utilizing the wide distribution mechanism of the Internet.
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3. Provides advertising on PC Quote's popular Web site for non-professional
individual investors, a high-traffic marketing engine that brings a targeted
audience to financial services companies, computer and technology
businesses, and consumer goods advertisers.
4. Provides PC Quote the opportunity for strategic business relationships and
co-content marketing opportunities with technology, financial, and Internet
industry leaders.
PC Quote believes its Internet Services are the most advanced available for
custom and turnkey applications. The depth and quality of the Company's market
data has made PC Quote's web site a popular business site on the Internet. It is
visited more than 133,000 times every business day with an average duration of
over 12 minutes, with more than 9 million quotes being queried each day.
The Company intends to leverage its core competency in high speed/high
quality data collection and delivery and strengthen its technology leadership
position in Internet and broadcast solutions to clients needing fast, reliable
market data. [On the Internet--given the initial success of PC Quote's Internet
subscription service, PC Quote 6.0 for Windows, Web site advertising revenue,
and Internet business solution services--the Company believes that its Internet
Services provides a platform for continued growth in subscription, advertising,
and datafeed revenues. In the real-time Network and Desktop arena, greater
bandwidth, databasing technology and superior backbone systems and client
services positions the Company to continue to attract and retain customers.]
PRODUCTS AND SERVICES
HyperFeed, the cornerstone of the services provided by the Company, is
broadcast at 1024 kilobytes per second and 112 kilobytes per second. The Company
transmits market data, including dynamic NASDAQ Level II market maker quotes, on
over 400,000 issues traded in over 30 countries, in addition to financial news
and information such as the Dow Jones Composite News Services (up to 90-day
retrieval of nine wires "Broadtape," Professional Investor Report, Capital
Markets Report, International News Wire, World Equities Report, European
Corporate Report, Electronic Wall Street Journal, International Petroleum
Reports, Federal Filing), multiple levels of fundamental data, and fixed income
pricing.
HyperFeed underlies all of the Company's other products and services, which
capitalize on HyperFeed to access, view and utilize data in a variety of ways.
To produce and transmit HyperFeed, PC Quote uses multiple redundant, high-speed
data circuits to gather ticker and news feeds from securities exchanges and
other sources. At the Company's production center in Chicago these feeds are
directed into multiple redundant dynamic real-time databases from which
HyperFeed is generated. HyperFeed is transmitted to customer sites over either a
satellite communications network or dedicated digital data circuits. At the
customer site HyperFeed is received by a Quote Server, an industry standard PC,
which creates and maintains databases of real-time data, news and fundamental
information.
The Quote Server can reside on a local area network, where the data it
maintains is accessible to software applications running on workstations on the
network, or it can function as a stand-alone unit, in which case its data is
available to software applications running on the Quote Server itself. In either
case, the software applications accessing the data may be supplied by the
Company, by third parties, or the customer.
Third party and customer supplied software utilize the Company's
high-performance application program interfaces ("APIs") to access the Quote
Server's data. In this way the Quote Server can supply data for virtually any
purpose, including proprietary order execution systems, analytical modeling,
internal risk management, order matching, or redistribution via online systems,
the Internet, or wide area networks. Third party developers and customers using
the APIs for their own development pay a monthly fee for the interfaces, in
addition to monthly HyperFeed licensing fees and per-user or per-unit charges
once the application is ready for distribution or redistribution.
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The Company also maintains Internet Quote Servers at its facility. These
Quote Servers function just like any other Quote Servers, supporting
applications developed by the Company, or by third parties or customers using
Internet-enabled versions of the Company's APIs. In this way the Company and its
customers are able to benefit from the Internet's substantially lower costs for
service, communications and startup, its ease of access, and its worldwide
availability.
SOFTWARE AND SERVICES CURRENTLY MARKETED BY REGISTRANT
To complement the HyperFeed database, the Company has several high-end
applications and programming tools which it licenses to HyperFeed subscribers.
PC QUOTE 6.0. PC Quote 6.0 for Windows is a comprehensive suite of
real-time professional trading analysis tools. Running under Microsoft-TM-
Windows-TM- 3.1 or Windows-TM- 95, or Windows NT-TM-, PC Quote 6.0 offers
unlimited quote pages, charting, technical analysis, searchable news, time of
sale and quote, NASDAQ Level II market maker screens, options analytical tools,
dynamic data exchange into Microsoft-TM- Excel-TM- tickers, alerts, baskets and
more.
PC Quote 6.0 can be fed by Quote Servers on the customer's local area
network or through a connection to the Internet. Monthly fees for Internet
service are lower than fees for local area network service; this makes PC Quote
6.0 more affordable around the world for individual investors and affords a wide
range of options for the professional marketplace. The software application for
PC Quote 6.0 is licensed from an unaffiliated third party pursuant to a Software
Distributor Agreement. See "Risk Factors--Software Licensing Agreement."
QUOTE SERVER WITH QUOTE TOOLS. For custom applications using robust and
easy-to-use APIs, the Quote Server enables a customer to build anything from
real-time trading desktop interfaces, to Web sites with portfolio management and
the latest in Internet push technology. The Quote Server APIs are unique in that
they give a complete suite of programming interfaces, from ActiveX to CGI, to
C++ and Visual Basic for all levels of programming in all environments.
Furthermore, the Quote Server can run in multiple environments including NT and
UNIX.
WEB SITE, ADVERTISING, AND MARKETSMART. The PC Quote Web site is the
company's marketing engine supported by advertising revenues. The site's current
50 million monthly page views, over 133,000 daily unique visitors, and 50,000
registered users for MarketSmart, the Company's Web-based free subscription
service, attest to its popularity. The site provides marketing opportunities for
individual investor services, business services, wholesale services, and other
strategic partners of the Company. Advertising revenue is tied to this
high-traffic web site, and pays for many of the Web-based subscription services
as well as assists in securing strategic relations with ad revenue sharing
programs.
INTERNET BUSINESS SERVICES. The Company offers custom and template Website
services and software development services--from basic tools to complete turnkey
installations--to software vendors, financial institutions, corporations, and
Internet content providers. All of the Company's Internet services, including
the Web site, advertising, PC Quote 6.0 on the Internet, and Quote Tools, can be
wholesaled, private-labeled, cloned or customized to help a client grow its
business on the Web and increase market share, retain customer loyalty, increase
trading activity, or showcase its services through PC Quote's popular Web site.
Clients include the Microsoft Network and MSNBC, CompuServe Information Service,
CNET, the American Stock Exchange, Dow Jones SMART MONEY and Earthlink Network.
STRATEGIC RELATIONS
The Company has become a premier quote service for the major office
applications companies. In Microsoft Excel's-TM- new 1997 version, Web Query
technology features the ability to access data from PC Quote. In February of
1997 Lotus Development Corporation also featured PC Quote's data as the "in the
box" feature for its SmartSuite application. The Web site and Internet Business
Services has additionally
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procured strategic relationships with AT&T Worldnet, Market Guide, Edgar Online,
Zacks Investment Research, SkyTel, Sandbox Entertainment Corporation, CNET,
Microsoft Corporation, and others.
RECENT DEVELOPMENTS
TRANSACTIONS WITH PHYSICIANS INSURANCE COMPANY OF OHIO AND PICO HOLDINGS,
INC. On November 14, 1996, the Company entered into an agreement (the
"Debenture Agreement") with Physicians Insurance Company of Ohio, ("PICO"),
which then owned approximately 30% of the Company's outstanding shares of Common
Stock. Pursuant to the Debenture Agreement, PICO invested $2.5 million 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. PICO
made the investment and the Debenture was issued on December 2, 1996. The
Debenture was to mature on December 31, 2001 and is convertible at any time by
PICO into 1.25 million shares of Common Stock of the Company (subject to
adjustment in certain cases).
On May 5, 1997, the Company and PICO Holdings, Inc. ("Holdings") entered
into a Loan and Security Agreement (the "Loan Agreement"), under which Holdings
agreed to make a secured loan to the Company in an aggregate principal amount of
up to $1.0 million at a fixed rate equal to 14% per annum. Unless otherwise
extended, the entire principal balance and all accrued interest due under the
Loan Agreement were payable on September 30, 1997. All advances under the Loan
Agreement are secured by a pledge of substantially all of the assets of the
Company. These liens are subject to the prior lien of the Company's primary
lender, Lakeside Bank. Holdings will be paid a "facility fee" of $40,000, plus
interest at a rate equal to 14% per annum, on the maturity date of the loan
contemplated by the Loan Agreement.
In connection with the Loan Agreement, the Company and PICO entered into a
First Amendment to the Debenture and Debenture Agreement (the "Debenture
Amendment"), pursuant to which the terms of the Debenture were restructured as
follows: (a) the maturity date of the Debenture is now April 30, 1999 instead of
December 31, 2001; (b) the Debenture may not be prepaid or redeemed without the
consent of PICO; (c) the conversion rate on the Debenture has been changed from
$2.00 per share to the lower of (i) the mean of the closing bid price per share
for the 20 trading days preceding exercise of the Debenture or (ii) $1.5625 per
share (the market price of the Company's Common Stock on the date of the
Debenture Amendment); (d) certain negative covenants were added to the Debenture
Agreement; and (e) the rights offering contemplated by the Debenture Agreement
will be at such time and at a price as PICO and the Company shall agree.
Interest under the Debenture will continue to be payable in cash or, at the
option of PICO, in shares of the Company's Common Stock at the market value of
such shares at the time of payment.
Also on May 5, 1997, in consideration of the loan by Holdings to the
Company, the Company issued a Common Stock Purchase Warrant (the "Warrant") to
Holdings entitling Holdings to purchase a minimum of 640,000 shares of the
Company's Common Stock at a price per share (the "Warrant Price") equal to the
lesser of (a) the mean of the closing bid price per share for the 20 trading
days preceding exercise of the Warrant or (b) $1.5625 per share (the market
value of the Company's Common Stock on the date the Warrant was issued). The
Warrant expires on April 30, 2000. In lieu of exercising the Warrant for cash,
Holdings may elect to receive shares of the Company's Common Stock equal to the
"value" of the Warrant determined in accordance with a formula specified in the
Warrant (the "Conversion Value"). The number of shares of the Company's Common
Stock subject to the Warrant and the Warrant Price will be adjusted to reflect
stock dividends; reclassifications or changes of outstanding securities of the
Company; any consolidation, merger or reorganization of the Company; stock
splits; issuances of rights, options or warrants to all holders of shares of the
Company's Common Stock exercisable at less than the current market price per
share; and other distributions to all holders of shares of the Company's Common
Stock. In the event of any sale, license or other disposition of all or
substantially all of the assets of the Company or any reorganization,
consolidation or merger involving the Company in which the holders of the
Company's securities before the transaction beneficially own less than 50% of
the outstanding voting securities of the surviving entity (an "Acquisition"), if
the successor entity does not assume the obligations
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of the Warrant and Holdings has not fully exercised the Warrant, the unexercised
portion of the Warrant will be deemed automatically converted into shares of the
Company's Common Stock at the Conversion Value. Alternatively, Holdings may
elect to cause the Company to purchase the exercised portion of the Warrant for
cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration that would have been received had Holdings
exercised the unexercised portion of the Warrant immediately before the record
date for determining stockholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price. The Warrant also provides for
certain piggyback registration rights and a one-time demand registration right.
In August 1997, the Company and Holdings agreed to amend the Loan Agreement
and related documents to increase the amount of the secured loan from Holdings
to the Company from $1.0 million up to $2.0 million. The terms of the Loan
Agreement otherwise remained substantially the same, except that the "facility
fee" of $40,000 was eliminated for new advances. In connection with the increase
of the loan amount pursuant to such amendment, the Company granted Holdings an
additional Common Stock Purchase Warrant for a minimum of 500,000 shares of the
Company's Common Stock. The terms of the additional warrant are substantially
the same as those contained in the Warrant, except that the conversion price is
the lesser of (a) $2.00 per share or (b) the mean of the closing bid price per
share for the 20 trading days preceding exercise of the additional warrant. The
additional warrant also provides for certain piggyback registration rights and a
one-time demand registration right.
On September 22, 1997 the Company and Holdings executed a second amendment
to the Loan Agreement to further increase the amount of the secured loan from
Holdings to the Company from $2.0 million to $2.25 million. The terms of the
Loan Agreement otherwise remained substantially the same, except that the
maturity date was extended to December 31, 1997. In consideration of the
amendment to the Loan Agreement, the Company granted Holdings another Common
Stock Purchase Warrant for up to 129,032 shares of Common Stock. The terms of
such warrant are substantially the same as contained in the Warrant, except that
the conversion price is the lesser of (a) $1.9375 per share or (b) the mean of
the closing bid price per share for the 20 trading days preceding exercise of
this warrant. This warrant also provides for certain piggyback registration
rights and a one-time demand registration right.
FINANCING TRANSACTION WITH WEXFORD AFFILIATES. In October 1997 Imprimis
Investors LLC and Wexford Spectrum Investors LLC (collectively, the "Wexford
Affiliates") expended $5.0 million to purchase five million shares of Common
Stock and warrants to purchase five hundred thousand shares of Common Stock at
an exercise price of $2.00 per share, exercisable at any time prior to October
15, 2002 (the "Initial Warrants").
The Wexford Affiliates have acquired the Common Stock and the Warrants for
investment purposes pursuant to a certain Stock and Warrant Purchase Agreement
dated October 15, 1997, between PC Quote and the Wexford Affiliates (the
"Purchase Agreement"). Pursuant to the terms of the Purchase Agreement, on
October 15, 1997, the Wexford Affiliates purchased 1,450,000 shares of Common
Stock and the Initial Warrants for a purchase price of $1.45 million. On October
20, 1997, pursuant to the terms of the Purchase Agreement, the Wexford
Affiliates purchased an additional 550,000 shares of Common Stock for a purchase
price of $0.55 million. On October 23, 1997, pursuant to the terms of the
Purchase Agreement, the Wexford Affiliates purchased an additional 3,000,000
shares of Common Stock for a purchase price of $3.0 million.
Up to four million of the shares of Common Stock purchased by the Wexford
Affiliates are subject to repurchase by PC Quote at a purchase price of $1.00
per share pursuant to the terms of the Purchase Agreement (the "Repurchase").
Pursuant to the terms of the Purchase Agreement, PC Quote will use its best
efforts to consummate the Repurchase from the proceeds of the Rights Offering.
In the event that the Rights Offering is not completed on or prior to January
24, 1998, the Wexford Affiliates will be entitled to receive, out of escrow,
warrants to purchase an additional 250,000 shares of Common Stock with the same
terms as the Initial Warrants and, in the event the Rights Offering is not
completed on or prior to
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February 28, 1998, the Wexford Affiliates will be entitled to receive, out of
escrow, warrants to purchase an additional 250,000 shares of Common Stock with
the same terms as the Initial Warrants.
In contemplation of the Purchase Agreement, the Wexford Affiliates have
agreed not to participate in the Rights Offering.
REASON FOR THE RIGHTS OFFERING AND USE OF PROCEEDS
The net proceeds to the Company from the Rights Offering are estimated to be
approximately $7.0 million. The Company intends to use $4.0 million of such net
proceeds to repurchase an aggregate of four million shares of Common Stock
recently sold to Imprimis Investors LLC and Wexford Spectrum Investors LLC (the
"Wexford Affiliates") pursuant to the terms and subject to the conditions set
forth in that certain Stock and Warrant Purchase Agreement between the Company
and each of the Wexford Affiliates dated October 15, 1997.
The Company intends to use the remaining net proceeds for general corporate
purposes, including working capital. Pending any of the foregoing uses, the
Company intends to invest the net proceeds in short-term, investment grade
securities, certificates of deposit or direct or guaranteed obligations of the
United States government.
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DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Company includes 50,000,000 shares of
Common Stock, par value $.001 per share. Holders of Common Stock have no
preemptive rights. The outstanding shares of Common Stock are fully paid and
non-assessable. Holders of Common Stock are entitled to dividends when, as, and
if declared by the Board of Directors of the Company out of any funds legally
available to the Company for that purpose.
Holders of Common Stock are entitled to one vote per share held of record
with respect to all matters submitted to a vote of the stockholders. There is no
cumulative voting for the election of directors, who are elected annually to
one-year terms. Directors are elected by a plurality; all other matters require
the affirmative vote of a majority of the votes cast the meeting.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock, par
value $.001 per share, and to establish and issue shares of Preferred Stock in
series and to fix, determine and vary the voting rights, designations,
preference qualifications, privileges, options, conversion rights and other
special rights of each series of Preferred Stock.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is subject to Section 203 of Delaware General Corporation Law,
which prohibits a Delaware corporation from engaging in a wide range of
specified transactions with any "interested stockholder," as such term is
defined to include, among others, any person or entity who in the previous three
years obtained 15% or more of any class or series of stock entitled to vote in
the election of directors, unless, among other exceptions, the transaction is
approved by (i) the Board of Directors prior to the date the interested
stockholder obtained such status or (ii) the holders of two-thirds of the
outstanding shares of each class or series owned by the interested stockholder.
PRICE RANGE OF COMMON STOCK
The following table shows for the three quarterly periods ended September
30, 1997 and for each 1996 quarterly period the high and low closing prices of
the Company's Common Stock for the periods indicated, as reported by The
American Stock Exchange.
TRADE
<TABLE>
<CAPTION>
HIGH LOW
--------- -----
<S> <C> <C>
1997 QUARTERLY INFORMATION
First............................................................................................. 3 11/16 2 1/4
Second............................................................................................ 2 1/2 1 1/8
Third............................................................................................. 2 9/16 1 1/2
1996 QUARTERLY INFORMATION
First............................................................................................. 16 8 3/8
Second............................................................................................ 14 1/8 6 3/4
Third............................................................................................. 8 3 7/8
Fourth............................................................................................ 5 1/2 2 1/4
</TABLE>
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DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and it does not
presently anticipate making any such payments in the near future.
HOLDERS OF RECORD
At November 12, 1997, the approximate number of holders of record of the
Common Stock was 400.
THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing, at no cost, to the record holders of its
outstanding Common Stock as of November 21, 1997 (the "Record Date"), other than
the Wexford Affiliates, transferable Rights to purchase additional shares of
Common Stock (the "Basic Subscription Privilege") at a price of $1.00 per share
(the "Subscription Price"). The Company will distribute one Right for each share
of Common Stock held on the Record Date. Each Right will entitle its Holder to
purchase one share of Common Stock. The Rights will be evidenced by transferable
subscription certificates (the "Subscription Certificates"). An aggregate of
7,402,246 shares of Common Stock (the "Underlying Shares") will be sold if all
Rights are exercised.
No fractional Underlying Shares, or cash in lieu thereof, will be issued or
paid. The number of Underlying Shares distributed to each Holder will be rounded
up to the nearest whole share in connection with the exercise of Subscription
Privileges.
SUBSCRIPTION PRIVILEGES
BASIC SUBSCRIPTION PRIVILEGE. Each Right will entitle the Holder thereof to
receive, upon payment of the Subscription Price, one share of Common Stock.
Certificates representing shares of Common Stock purchased pursuant to the Basic
Subscription Privilege will be delivered to subscribers as soon as practicable
after the Expiration Date, irrespective of whether the Subscription Privilege is
exercised immediately prior to the Expiration Date or earlier. Holders
exercising their Subscription Privilege will not be stockholders of record with
respect to the shares issuable pursuant to such Subscription Privilege until the
closing, which it is anticipated will occur five business days after the
Expiration Date.
OVERSUBSCRIPTION PRIVILEGE. Subject to the allocation described below, each
Right also carries the right to subscribe at the Subscription Price for any
Underlying Shares not subscribed for through the exercise of Basic Subscription
Privileges by other Holders (the "Excess Shares"). If the Excess Shares are not
sufficient to satisfy all subscriptions pursuant to the Oversubscription
Privilege, such Excess Shares will be allocated pro rata (subject to the
elimination of fractional shares) among those Holders exercising the
Oversubscription Privilege, in proportion, not to the number of shares requested
pursuant to the Oversubscription Privilege, but to the number of shares each
Holder exercising the Oversubscription Privilege subscribed for pursuant to the
Basic Subscription Privilege; provided, however, that if such pro rata
allocation results in any Holder being allocated a greater number of Excess
Shares than such Holder subscribed for pursuant to the exercise of such holder's
Oversubscription Privilege, then such Holder will be allocated only such number
of Excess Shares as such Holder subscribed for and the remaining Excess Shares
will be allocated among all other Holders exercising the Oversubscription
Privilege. Only beneficial holders who exercise the Basic Subscription privilege
in full will be entitled to exercise the Oversubscription Privilege.
Certificates representing Excess Shares purchased pursuant to the
Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations have been
effected.
In the event Rights remain unexercised after satisfaction of the Basic
Subscription and Oversubscription Privileges, the Company intends to offer the
remaining unexercised Rights (the "Unexercised
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<PAGE>
Allotment") to members of management, including Directors. If available,
management intends to exercise a minimum of 250,000 Rights in such Unexercised
Allotment and purchase the respective shares underlying such Rights at the
Subscription Price.
EXPIRATION DATE
The Rights will expire at 4:30 p.m., Chicago time, on December 19, 1997
unless extended by the Company from time to time. Notwithstanding the foregoing,
the Expiration Date in no event shall be later than February 27, 1998, except
that the Company reserves the right to extend the exercise period on one or more
occasions if the Board of Directors determines that the occurrence of a material
event necessitates amendment of the Registration Statement or recirculation of
the Prospectus that forms a part thereof in order to permit time for the
distribution of such information. After the Expiration Date, unexercised Rights
will be null and void. The Company will not be obligated to honor any purported
exercise of Rights received by the Subscription Agent after the Expiration Date,
regardless of when the documents relating to such exercise were sent, except
pursuant to the Guaranteed Delivery Procedures described below.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the Subscription Agent, on or prior
to 4:30 p.m., Chicago time, on the Expiration Date, the properly completed and
executed Subscription Certificate evidencing such Rights with any required
signatures guaranteed, together with payment in full of the Subscription Price
for the Underlying Shares subscribed for pursuant to the Subscription Privileges
(except as permitted pursuant to clause (iii) of the next sentence). Such
payment in full must be by: (i) check or bank draft drawn upon a U.S. bank or
postal telegraphic or express money order payable to American Securities
Transfer & Trust, Inc., as Subscription Agent; or (ii) wire transfer of funds to
the account maintained by the Subscription Agent for such purpose; or (iii) in
such other manner as Company may approve in writing in the case of persons
acquiring Underlying Shares at an aggregate Subscription Price of $500,000 or
more, provided in each case that the full amount of such Subscription Price is
received by the Subscription Agent in currently available funds within five
American Stock Exchange trading days following the Expiration Date (the payment
method under (iii) being an "Approved Payment Method"). Payment of the
Subscription Price will be deemed to have been received by the Subscription
Agent only upon (a) clearance of any uncertified check, (b) receipt by the
Subscription Agent of any certified check or bank draft drawn upon a United
States bank or of any postal, telegraphic or express money order, (c) receipt of
good funds in the Subscription Agent's account designated above, or (d) receipt
of good funds by the Subscription Agent through an Approved Payment Method.
If paying by uncertified personal check, please note that the funds paid
thereby may take at least five business days to clear. Accordingly, Holders who
wish to pay the Subscription Price by means of uncertified personal check are
urged to make payment sufficiently in advance of the Expiration Date to ensure
that such payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire transfer
of funds.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
American Securities Transfer & Trust, Inc.
Attention: John G. Harmann
938 Quail Street
Lakewood, CO 80215
If a Holder wishes to exercise Rights, but time will not permit such Holder
to cause the Subscription Certificate or Subscription Certificates evidencing
such Rights to reach the Subscription Agent on or prior to the Expiration Date,
such Rights may nevertheless be exercised if all of the following conditions
(the "Guaranteed Delivery Procedures") are met:
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<PAGE>
(i) such Holder has caused payment in full of the Subscription Price for
each Underlying Share being subscribed for pursuant to the Subscription
Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guaranteed notice (a "Notice of Guaranteed Delivery"), substantially
in the form provided with the Instructions as to Use of PC Quote, Inc.
Subscription Certificates (the "Instructions") distributed with the
Subscription Certificates, from an "Eligible Guarantor Institution" (as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934), stating
the name of the exercising Holder, the number of Rights represented by the
Subscription Certificate(s) held by such exercising Holder, the number of
Underlying Shares being subscribed for pursuant to the Subscription
Privileges and guaranteeing the delivery to the Subscription Agent of any
Subscription certificate(s) evidencing such Rights within three American
Stock Exchange trading days following the date of the Notice of Guaranteed
Delivery; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures guaranteed, is received by the Subscription Agent within
three American Stock Exchange trading days following the date of the Notice
of Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery
may be delivered to the Subscription Agent in the same manner as
Subscription Certificates at the addresses set forth above, or may be
transmitted to the Subscription Agent by facsimile transmission (telecopy
number (303) 234-5340). Additional copies of the form of Notice of
Guaranteed Delivery are available upon request from the Subscription Agent,
whose address and telephone number are set forth under "Subscription Agent"
below.
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Holder
exercising the Oversubscription Privilege is allocated less than all of the
Excess Shares that such Holder wished to subscribe for pursuant to the
Oversubscription Privilege, the excess funds paid by such Holder in respect of
the Subscription Price for shares not issued shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date.
A holder who holds shares of Common Stock for the account of others, such as
a broker, a trustee or a depository for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owner's intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record Holder of such Rights
should complete the Subscription Certificate and submit it to the Subscription
Agent with the proper payment. In addition, the beneficial owner of Common Stock
or Rights held through such a holder of record should contact the Holder and
request the Holder to effect transactions in accordance with the beneficial
owner's instructions.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Right represented thereby are to
be delivered to the Holder or (ii) is submitted for the account of an Eligible
Guarantor Institution, signatures on such Subscription Certificate must be
guaranteed by an Eligible Guarantor Institution.
If either the number of Underlying Shares being subscribed for payment to
the Basic Subscription Privilege is not specified on the Subscription
Certificate, or the amount delivered is not enough to pay the Subscription Price
for all Underlying Shares stated to be subscribed for, the number of Underlying
Shares subscribed for will be assumed to be the maximum amount that could be
subscribed for upon payment of such amount, after allowance for the Subscription
Price of any specified Underlying Shares. If the number of Underlying Shares
being subscribed for is not specified, or payment of the Subscription Price for
the indicated number of Rights that are being exercised exceeds the required
Subscription Price, the payment will be applied, until depleted, to subscribe
for Underlying Shares in the following order: (i) to subscribe for the number of
Underlying Shares indicated, if any, pursuant to the Basic Subscription
Privilege; (ii) to subscribe for Underlying Shares until the Basic Subscription
Privilege has been fully exercised with respect to all of the Rights represented
by the Subscription Certificate; and (iii) to subscribe for additional
Underlying Shares pursuant to the Oversubscription Privilege (subject to any
applicable proration).
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<PAGE>
The Instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 4:30 P.M., CHICAGO
TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT
LEAST FIVE BUSINESS DAYS TO CLEAR, THE RIGHTS HOLDER IS STRONGLY URGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIERS CHECK, MONEY ORDER OR
WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as the Company
determines in its sole discretion.
Any questions or requests for assistance concerning the method of exercising
Rights or requests for additional copies of this Prospectus or the Instructions
or the Notice of Guaranteed Delivery should be directed to the Subscription
Agent, telephone number (303) 234-5300.
NO REVOCATION
ONCE A HOLDER OR RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE OR
THE OVERSUBSCRIPTION PRIVILEGE SUCH EXERCISE MAY NOT BE REVOKED.
METHOD OF TRANSFERRING RIGHTS
The Company has applied to list the Rights for trading on The American Stock
Exchange. Upon such listing, the Rights may be purchased or sold through usual
investment channels, including banks and brokers. The Company believes the
Rights will commence trading on November 24, 1997. Trading in Rights will cease
on the close of business on The American Stock Exchange trading day preceding
the Expiration Date.
The Rights evidenced by a single Subscription Certificate may be transferred
in whole by endorsing the Subscription Certificate for transfer in accordance
with the accompanying instructions. A portion of the Rights evidenced by a
single Subscription Certificate may be transferred by delivering to the
Subscription Agent a Subscription Certificate properly endorsed for transfer,
with instructions to register such portion of the Rights evidenced thereby in
the name of the transferee (and to issue a new Subscription Certificate to the
transferee evidencing such transferred Rights). In such event, a new
Subscription Certificate evidencing the balance of the Rights will be issued to
the Holder or, if the Holder so instructs, to an additional transferee.
Holders wishing to transfer all or a portion of their Rights should allow a
sufficient amount of time prior to the Expiration Date for (i) the transfer
instructions to be received and processed by the Subscription Agent, (ii) a new
Subscription Certificate to be issued and transmitted to the transferee or
transferees with respect to the transferred Rights, and to the transferor with
respect to retained Rights, if any, and (iii) the Rights evidenced by such new
Subscription Certificates to be exercised or sold by the recipients thereof. If
time does not permit a transferee of a Right who wishes to exercise its Right to
22
<PAGE>
deliver its Subscription Certificate to the Subscription Agent on or before the
Expiration Date, such transferee should make use of the Guaranteed Delivery
Procedure described under "The Rights Offering--Exercise of Rights." Neither the
Company nor the Subscription Agent shall have any liability to a transferee or
transferor or Rights if Subscription Certificates or new Subscription
Certificates are not received in time for exercise or sale prior to the
Expiration Date.
All commissions, fees and other expenses (including brokerage commissions
and transfer taxes) incurred in connection with the purchase, sale or exercise
of Rights will be for the account of the transferor or subscriber of the Rights,
and none of such commissions, fees or expenses will be paid by the Company or
the Subscription Agent.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Wildman, Harrold, Allen & Dixon, counsel to the Company,
the following is an accurate discussion of the material federal income tax
consequences of the Rights Offering to the holders of Common Stock upon the
distribution (the "Distribution") of Rights, and to holders of Rights upon the
exercise and disposition of the Rights.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Regulations promulgated thereunder, judicial
authority, and current administrative rulings and practice, all of which are
subject to change on a prospective or retroactive basis. The tax consequences of
the Rights Offering under state, local and foreign law are not discussed.
Moreover, special considerations not described herein may apply to certain
taxpayers, such as financial institutions, broker-dealers, life insurance
companies, and tax-exempt organizations. The discussion is limited to those who
have held the Common Stock, and will hold the Rights and any Common Stock
acquired upon the exercise of Rights as capital assets (generally, property held
for investment) within the meaning of Section 1221 of the Code.
DISTRIBUTION OF THE RIGHTS. Holders of Common Stock will not recognize
taxable income for federal income tax purposes in connection with the receipt of
the Rights.
STOCKHOLDER BASIS AND HOLDING PERIOD OF THE RIGHTS. Except as provided in
the following sentence, the basis of the Rights received by a stockholder as a
distribution with respect to such stockholder's Common Stock will be zero. If,
however, either (i) the fair market value of the Rights on the date of
Distribution is 15% or more of the fair market value (on the date of
Distribution) of the Common Stock with respect to which they are received or
(ii) the stockholder properly elects, in his or her federal income tax return
for the taxable year in which the Rights are received, to allocate basis, part
of his or her basis in Common Stock will be allocated between the Common Stock
and the Rights in proportion to the fair market value of each on the date of
Distribution.
The holding period of a stockholder with respect to the Rights received as a
distribution on such stockholder's Common Stock will include the stockholder's
holding period for the Common Stock with respect to which the Rights were
issued.
In the case of a stockholder who purchased Rights, the tax basis of such
Rights will be equal to the purchase price paid therefor, and the holding period
for such Rights will commence on the day following the date of the purchase.
SALE OF THE RIGHTS. A Stockholder who sells the Rights received in the
Distribution prior to exercise will recognize gain or loss equal to the
difference between the amount realized on the sale and such stockholder's
adjusted basis (if any) in the Rights sold. Such gain or loss will be capital
gain or loss if gain or loss from a sale of Common Stock held by such
stockholder would be characterized as capital gain or loss at the time of such
sale.
Any gain or loss recognized on a sale of Rights acquired by purchase will be
capital gain or loss if Common Stock would be a capital asset in the hands of
the stockholder.
Generally such capital gain or loss will be classified as short-term if the
stockholder's holding period in the Rights is one year or less and long-term if
the stockholder's holding period in the Rights is more than one year. Under
current law, generally long-term capital gains are subject to a maximum marginal
tax rate of 28% for individuals, estates and trusts if the capital asset is held
for more than one year but not more than 18 months, and a maximum marginal tax
rate of 20% if the capital asset is held for more than 18 months.
LAPSE OF THE RIGHTS. Stockholders who allow the Rights received by them in
the Distribution to lapse will not recognize any gain or loss, and no adjustment
will be made to the basis of the Common Stock, if any, owned by such
stockholders.
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<PAGE>
Stockholders who are purchasers of the Rights will be entitled to a loss
equal to their adjusted tax basis in the Rights if such Rights expire
unexercised. If the Rights expire unexercised not more than one year after the
stockholder's holding period began, any loss recognized on the expiration of the
Rights acquired by purchase will be a short-term capital loss if Common Stock
would be a capital asset in the hands of the purchaser.
EXERCISE OF THE RIGHTS, BASIS AND HOLDING PERIOD OF COMMON
STOCK. Stockholders will not recognize any gain or loss upon the exercise of
Rights. The basis of the Common Stock acquired through exercise of the Rights
will be equal to the sum of the Subscription Price therefor and the
stockholder's basis in such Rights (if any).
A stockholder's holding period for the Common Stock acquired through
exercise of the Rights will begin on the date the Rights are exercised.
SALE OF COMMON STOCK. The sale of Common Stock acquired through exercise of
the Rights will result in the recognition of gain or loss to the stockholder in
an amount equal to the difference between the amount realized on the sale and
the stockholder's adjusted basis in the Common Stock. Gain or loss on the sale
of such Common Stock will be classified as short-term capital gain or loss, if
the stockholder's holding period in such Common Stock is one year or less and
long-term capital gain or loss if the stockholder's holding period in such
Common Stock is more than one year. Under current law, generally long-term
capital gains are subject to a maximum marginal tax rate of 28% for individuals,
estates and trusts if the capital asset is held for more than one year but not
more than 18 months, and a maximum marginal tax rate of 20% if the capital asset
is held for more than 18 months.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY,
EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES OF THE RIGHTS OFFERING APPLICABLE TO HIS OR HER OWN
PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL INCOME AND OTHER TAX LAWS.
SUBSCRIPTION AGENT
The Company has appointed American Securities Transfer & Trust, Inc. as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Subscription Certificates and payment of the
Subscription Price should be delivered, as well as the address to which Notice
of Guaranteed Delivery must be delivered, and the Subscription Agent's telephone
number and facsimile number, are:
American Securities Transfer & Trust, Inc.
Attn: John G. Harmann
938 Quail Street
Lakewood, CO 80215
Tel. No.: (303) 234-5300
Facsimile No.: (303) 234-5340
The Company will pay the fees and expenses of the Subscription Agent, and
will also agree to indemnify it from any liability which it may incur in
connection with the Rights Offering.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by Company pursuant to the
issuance of Rights directly to holders of shares of Common Stock on the Record
Date. Certain employees, officers or directors of the Company may solicit
responses from Holders to the Rights Offering, but such individuals will not
receive any commissions or compensation for such services other than their
normal employment compensation.
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<PAGE>
The Company intends to distribute Rights and copies of this Prospectus to
stockholders of record on the Record Date promptly following the effective date
of the Registration Statement of which this Prospectus forms a part.
Holders who desire to subscribe for the purchase of shares of Common Stock
in the Rights Offering are urged to complete, date and sign the Subscription
Certificate and return it to the Subscription Agent on or before the Expiration
Date, together with payment in full of shares should be directed to the
Subscription Agent.
INFORMATION AGENT
The Company has appointed American Securities Transfer & Trust, Inc. as
Information Agent for the Rights Offering. Any questions or requests for
additional copies of this Prospectus, the Instructions or the Notice of
Guaranteed Delivery may be directed to the Information Agent at the telephone
number and address below.
American Securities Transfer & Trust, Inc.
Attn: John G. Harmann
938 Quail Street
Lakewood, CO 80215
Tel. No.: (303) 234-5300
Facsimile No.: (303) 234-5340
The Company will pay the fees and expenses of the Information Agent and will
also agree to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby and the tax matters discussed under "Certain Federal Income Tax
Consequences" are being passed upon for Company by Wildman, Harrold, Allen &
Dixon, Chicago, Illinois.
EXPERTS
The financial statements of PC Quote, Inc. as of December 31, 1996 and for
the two year period ended December 31, 1996 incorporated in this Prospectus by
reference to the Annual Report on Form 10-K, as amended, have been so
incorporated in reliance on the report of McGladrey & Pullen LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. The statements of operations, stockholder's equity and cash flows
and related schedule for the year ended December 31, 1994 incorporated in this
Prospectus by reference to the Annual Report on Form 10-K, as amended, has been
so incorporated in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
CHANGE IN ACCOUNTANTS
On July 9, 1997, McGladrey & Pullen LLP declined to stand for re-election as
the independent auditors for the Company. At a meeting held August 19, 1997, the
Company's Board of Directors unanimously approved the appointment of KPMG Peat
Marwick LLP to be the independent auditors for the year ending December 31,
1997.
The reports of McGladrey & Pullen LLP on the financial statements for the
past two fiscal years contained no adverse opinions or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principle, except for a going concern phrase that was included in the report
relating to the Company's audited financial statements for the year ended
December 31, 1996 as follows: "The accompanying financial statements have been
prepared assuming that PC Quote, Inc. will
26
<PAGE>
continue as a going concern. As more fully described in Note 14, the Company has
experienced significant operating losses, which adversely affected the Company's
current results of operations and liquidity. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 14. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty."
In connection with its audits for the two most recent fiscal years and
through July 9, 1997, there have been no disagreements with McGladrey & Pullen
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of McGladrey & Pullen LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Company has requested that McGladrey & Pullen LLP furnish it with a
letter addressed to the SEC stating whether or not its agrees with the above
statements. A copy of such letter is filed as Exhibit 16.1 to this Registration
Statement.
INDEMNIFICATION OF DIRECTORS AND OFFICERS--
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION
Under provisions of the Company's Certificate of Incorporation, any person
made a party to any lawsuit by reason of being a director or officer of the
Company, or any parent or subsidiary thereof, may be identified by the Company
to the full extent authorized by the General Corporation Law of the State of
Delaware.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS
GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Available Information..................................................... 2
Documents Incorporated By Reference....................................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
The Company............................................................... 12
Reason For the Offering and Use of Proceeds............................... 17
Description of Capital Stock.............................................. 18
Price Range of Common Stock............................................... 18
The Rights Offering....................................................... 19
Certain Federal Income Tax Consequences................................... 24
Subscription Agent........................................................ 25
Plan of Distribution...................................................... 25
Information Agent......................................................... 26
Legal Matters............................................................. 26
Experts................................................................... 26
Change In Accountants..................................................... 26
Indemnification of Directors and Officers--Disclosure of Commission's
Position On Indemnification............................................. 27
</TABLE>
7,402,246 SHARES
[LOGO]
COMMON STOCK
(AND RIGHTS TO ACQUIRE UP TO
7,402,246 OF SUCH SHARES)
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