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PROSPECTUS
PC QUOTE, INC.
5,419,032 SHARES OF COMMON STOCK, $.001 PAR VALUE
_________________
This Prospectus relates to an aggregate of 5,419,032 shares (the
"Shares") of common stock, par value $.001 per share (the "Common Stock"), of
PC Quote, Inc., a Delaware corporation (the "Company"), consisting of
3,049,032 shares of Common Stock issuable upon the exercise and conversion of
convertible securities (the "Issuable Shares"), and 2,370,000 issued and
outstanding shares of Common Stock (the "Outstanding Shares") previously
acquired by Physicians Insurance Company of Ohio ("PICO") and PICO Holdings,
Inc. ("Holdings"), that may be sold from time to time by the Selling
Shareholders, as defined hereinafter. See "Selling Shareholders." The
Issuable Shares are deliverable upon exercise of the following convertible
securities: (i) a Common Stock Purchase Warrant (herein referred to as the
"Class A Purchase Warrant"), issued to Holdings, on May 5, 1997, entitling
Holdings to purchase up to 320,000 shares of Common Stock; (ii) a Common
Stock Purchase Warrant (herein referred to as the "Class B Purchase
Warrant"), issued to Holdings in August, 1997, entitling Holdings to purchase
up to 500,000 shares of Common Stock; (iii) a Common Stock Purchase Warrant
(herein referred to as the "Class C Purchase Warrant"), issued to Holdings on
September 22, 1997, entitling Holdings to purchase up to 129,032 shares of
Common Stock; (iv) Common Stock Purchase Warrants (herein referred to as the
"Class D Purchase Warrants", and together with the Class A Purchase Warrant,
the Class B Purchase Warrant and the Class C Purchase Warrant, the "Purchase
Warrants"), issued to Imprimis Investors LLC and Wexford Spectrum Investors
LLC (collectively, the "Wexford Affiliates"), in October, 1997, entitling the
Wexford Affiliates to purchase up to 500,000 shares of Common Stock; and (v)
a Subordinated Convertible Debenture (the "Debenture", and together with the
Purchase Warrants, the "Convertible Securities"), which may be converted at
any time by PICO into a minimum of 1,600,000 shares of Common Stock. See
"Selling Shareholders." The Company will not receive any proceeds from the
sale of any of the Shares by the Selling Shareholders. The Company has
agreed to pay the expenses of registration of the Shares, including certain
legal and accounting fees.
The Common Stock is traded on the American Stock Exchange under the symbol
"PQT." On May 19, 1998, the closing market price of the Common Stock on the
American Stock Exchange was $3.25 per share.
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The Selling Shareholders may sell, from time to time, in one or more
transactions (which may include block transactions), all or a portion of the
shares of Common Stock being registered hereby on the American Stock
Exchange, in special offerings, in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or
at negotiated prices. The Selling Shareholders may effect such transactions
by selling the shares of Common Stock directly to purchasers or to or through
broker-dealers which may act as agents or principals. If any of the Common
Stock offered hereby is sold through brokers or dealers, the Selling
Shareholders may pay customary discounts and brokerage commissions and
charges. The Selling Shareholders and any brokers or dealers or other
persons who participate with them in the distribution of the Shares offered
hereby may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), although the
Selling Shareholders disclaim such status. Any commission and discounts
received by such brokers or dealers, and any profit on the resale of the
stock by such brokers or dealers, may be deemed to be underwriting discounts
and commissions under the Securities Act. The Shares being offered hereby
may also be sold by the Selling Shareholders pursuant to Rule 144 promulgated
under the Securities Act. See "Plan of Distribution."
The Shares offered hereby have not been registered under the blue sky or
securities laws of any jurisdiction, and any broker or dealer should assure the
existence of an exemption from registration or effectuate such registration in
connection with the offer and sale of the Shares.
_________________
FOR INFORMATION CONCERNING CERTAIN FACTORS RELATING TO THIS OFFERING, SEE
"RISK FACTORS" SECTION OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
_________________
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The date of this Prospectus is May 27, 1998.
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AVAILABLE INFORMATION
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 reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, and at the Commission's Regional Offices at
7 World Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, DC 20549, at prescribed rates. The
Commission also maintains a World Wide Web site which provides on-line access
to reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission at the address
"http://www.sec.gov." In addition, the Common Stock of PC Quote, Inc. is
listed on the American Stock Exchange, and reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Shares
being offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement, which may be inspected and copied in the manner and
at the sources described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended on April 30, 1998;
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998;
(c) the Company's Current Reports on Form 8-K dated July 16, 1997, as
amended on August 26, 1997; and
(d) the description of the Company's Common Stock contained in the
Company's Registration Statement filed October 31, 1997, on Form S-2
under Section 12 of the Exchange Act and any amendment or report
filed for the purpose of updating any such description.
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All documents filed by the Company pursuant to Section 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 offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein
or in a document all or part of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than certain exhibits to 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: John Juska,
Tel. No. (312) 913-2800.
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THE COMPANY
GENERAL DEVELOPMENT OF BUSINESS
PC Quote, Inc. (the "Company" or the "Registrant") was incorporated in the
State of Illinois on June 23, 1980 as On-Line Response, Inc. and was
incorporated in Delaware on August 12, 1987. The Company provides real-time
and delayed securities quotations and news to professional and consumer markets
worldwide. Professional clients include brokerage firms, banks, insurance
companies, fund managers, institutional and professional traders. The Company
has expanded its service offerings to the individual investor, application
developers and businesses by offering its products through the Internet. 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 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 into 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 executive offices are located in Chicago, Illinois. The Company
also maintains sales offices in New York, Dallas and Chicago.
GENERAL
The Company maintains a real-time database of last sale and bid/ask prices
of more than 250,000 issues that contains the most comprehensive options data
and has also been optimized for Level 2 NASDAQ market-maker quotes. The
database includes all North American equities and options, major stock indices,
Level 1 NASDAQ-quoted stocks, Level 2 NASDAQ market-maker quotes, mutual funds,
money market funds, futures contracts and options on futures contracts. Also
covered are exchange-traded issues from Europe and Asia. The Company creates
its database by gathering ticker and news feeds from stock, options and
commodities exchanges and other sources and processing such information into a
single data feed. The Company's primary processing plant is located in its
executive offices in Chicago, Illinois.
PC Quote software applications, running on the customer's computer,
process the data stream to allow the user to monitor securities on an on-going
real-time basis. They also create in the user's computer a complete database
of trading symbols, continuously updated by the data stream. This database
gives the user instant access to security prices. The same data stream is used
to create an equivalent database on the Company's computers, accessible to its
customers via the Internet.
The following is a description of the principal products and services
marketed by the Company.
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PRODUCTS AND SERVICES
HYPERFEED-TM-
HyperFeed, the cornerstone of the services provided by the Company, is the
Registrant's digital real-time market data feed. It is broadcast at 1024
kilobytes per second and 112 kilobytes per second and contains all North
American stock, options, and commodity exchange, in addition to international
exchange, issues. HyperFeed also carries:
- Dynamic Nasdaq Level II market maker quotes;
- Dow Jones Composite News Service (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 Filings);
- Multiple levels of fundamental data;
- Fixed income pricing; and
- Other types of fixed and dynamic financial data.
HyperFeed underlies all of the Registrant'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 Registrant'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 either over a satellite
communications network or by 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 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 a
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 both
instances the software applications accessing the data may be supplied by the
Registrant, by third parties, or by the customers themselves.
Third party or customer supplied software utilize the Registrant'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 on-line systems, the
Internet, or wide area networks. Third party developers and customers
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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.
The Registrant also maintains Internet Quote Servers at its facility.
These Quote Servers function just like any other Quote Servers, supporting
applications developed by the Registrant, or by third parties or customers
using Internet-enabled versions of the Registrant's APIs. In this way the
Registrant 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 APPLICATIONS AND SERVICES 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 for Windows is a comprehensive suite of real-time
professional trading 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.
Quote Server with Quote Tools - custom applications using robust and easy-
to-use APIs, the Quote Tools enable 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 Visual Basic to CGI
to C++ for all levels of programming in all environments.
In 1995 the Company established an Internet web site, and MarketSmart,
offering free delayed quotes and other information to all visitors. Commencing
in 1996 and continuing to build thereafter, the Company generated revenue by
selling advertising on its web site's free quote pages and MarketSmart,
providing market information for other web sites, offering development tools
for Internet-based applications, and forming strategic relationships with other
major Internet players. The Company's expanded web site now offers, in
addition to links to unlimited free delayed quote information, subscription fee
real-time quote information, corporate profiles and press releases, information
about PC Quote's products and services and paths for learning about and signing
up for subscription services available on the site.
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The Company's Internet Business Services provide custom and template web-
site 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
meet a customer's specific needs.
The Company has become a quote service for the major office applications
companies. In Microsoft Excel's 1997 version, Web Query technology features
the ability to access data from PC Quote. In February 1997 Lotus development
Corporation also featured PC Quote's data as the "in the box" feature for its
SmartSuite application.
PATENTS, TRADEMARKS AND LICENSES
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.
The following products are registered trademarks: BasketMaker-Registered
Trademark-, QuoteWare-Registered Trademark-, PriceWare-Registered Trademark-
and QuoteBlaster-Registered Trademark-. The HyperFeed-TM- product is a
servicemark of the Company.
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
name recognition than the Company.
SEASONALITY
The Company has not experienced any material seasonal fluctuations in its
business. Barring any prolonged period of investor inactivity in trading
securities, the Company does not believe that seasonality is material to its
business activities.
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RESEARCH AND DEVELOPMENT
The Company's systems development personnel expend their time and effort
developing new software programs and high-speed data delivery systems and
expanding or enhancing existing ones. Development efforts focus on providing a
solution to the informational and analytical needs of both the professional and
private investors. Development activity has increased with the implementation
of high-level design and prototyping tools. The Company's continuing
investment in software development consists primarily of enhancements to its
existing Windows-based private network and Internet products and services,
development of new data analysis software and programmer tools (application
programming interfaces) designed to afford easy access to its datafeed for data
retrieval and analysis purposes, and application of new technology to increase
the data volume and delivery speed of its distribution system and network.
ENVIRONMENT
Compliance with federal, state, and local provisions with respect to the
environment has not had a material adverse effect on the Company's capital
expenditures, earnings, or competitive position.
EMPLOYEES
As of April 30, 1998, the Company employed 118 people, none of whom are
represented by a collective bargaining unit. The Company believes it has a
satisfactory relationship with its employees. From time to time the Company
retains the services of outside consultants on an hourly basis.
GOVERNMENT CONTRACTS
The Company has no material contracts with the Government.
BACKLOGS
Due to the nature of the business, backlogs are not a typical occurrence
in the industry.
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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.
RECENT OPERATING LOSSES AND DECLINING CASH. The Company incurred a loss
of approximately $1.9 million for the quarter ended March 31, 1998, and as of
March 31, 1998, had an accumulated deficit of approximately $22.0 million and
deficit working capital of $6.7 million. These conditions raise 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. See
"Management Discussion and Analysis of Financial Condition and Results of
Operations" and Note 14 of the Notes to Financial Statements for the fiscal
year ended December 31, 1997, as filed on Form 10-K incorporated herein by
reference. See also "Management's Discussion and Analysis of Results of
Operations and Financial Condition" for the fiscal quarter ended March 31,
1998, as filed on Form 10-Q incorporated herein by reference.
Net cash and cash equivalents declined $749,000 from year-end 1997 to
$364,000 at the end of the first quarter of 1998. Expenditures for new
equipment were $256,000, $138,000 or 118% higher for the first three months of
1998 versus 1997 as operating cash was used to effect new purchases.
Capitalized software costs of $534,000 were $63,000, or 11%, lower for the
quarter ended March 31, 1998, compared to the same period for 1997, as the
Company decreased its overhead allocation to capitalizable projects. There
were no new direct borrowings during the period, and the Company repaid $75,000
of the principal balance on its bank term loan. Agreements were reached with
various vendors to extend payments under negotiated payment plans.
The Company's $1.0 million line of credit with Lakeside Bank expired in
February 1997. The Company was experiencing, and continues to experience,
working capital constraints which has hindered operations. To lessen such
constraints the Company entered into several financing transactions during
1997. On May 5, 1997 the Company entered into a loan and security agreement
with its principal shareholder, PICO Holdings, Inc. ("Holdings"), to provide
working capital loans of up to $1.0 million. In connection with the extension
by Holdings of such $1.0 million facility, the Company and Physicians Insurance
Company of Ohio, a wholly-owned subsidiary of Holdings, restructured the terms
of its $2.5 million subordinated convertible debenture (the "Debenture"). In
August 1997, the Company and Holdings amended the loan and security agreement
increasing the facility by $1.0 million to $2.0 million. In September 1997,
the Company and Holdings further amended the loan and security agreement
increasing the facility by $0.25 million to $2.25 million and extending the due
date for all borrowings on the facility, plus accrued interest to December 31,
1997. The loan and security agreement was further amended in December 1997,
February 1998, March 1998 and May 1998 to extend the due date to January 31,
1998, February 28, 1998, April 30, 1998 and May 31, 1998, respectively (the
loan and security agreement, as amended, hereinafter referred to as the "Loan
Agreement").
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In October 1997 the Company issued five million (5,000,000) shares of
Common Stock in exchange for five million dollars ($5,000,000), subject to the
Company's obligation to repurchase up to four million shares at one dollar ($1)
per share upon completion of a rights offering.
In November 1997 the Company commenced the rights offering whereby it
granted 7,402,246 transferable subscription rights to shareholders as of
November 21, 1997, entitling them to purchase one additional share of Common
Stock for each right at a price of $1.00 per share. If fully subscribed, the
Company anticipated it would have received approximately $7.0 million in net
proceeds from the sale of shares of common stock underlying the rights, of
which $4.0 million would then have been used to repurchase, at $1.00 per
share, a portion of the shares previously issued in October. Proceeds in
excess of $4.0 million, if received, would then be available for general
corporate purposes.
In January 1998 the Company completed the rights offering and received
approximately $3.0 million in gross proceeds from the sale of shares underlying
exercised rights. Pursuant to the October Stock Purchase Agreement, the entire
proceeds were used to fulfill the Company's obligation to repurchase shares.
See Note 3 and Note 15 of the Notes to Financial Statements for the Fiscal Year
Ended December 31, 1997, as filed on Form 10-K incorporated herein by
reference.
NEED FOR ADDITIONAL FINANCING. Due to the decline in cash flow from
operating activities, to levels expected to be insufficient for debt services
(including the $2,250,000 due on May 31, 1998 pursuant to the Loan Agreement),
working capital, and capital expenditures, the Company is exploring multiple
alternatives to raise capital. Such alternatives include refinancing existing
debt, a merger, a spin-off or sale of part of the Company's business, a
strategic relationship or joint venture with another technology or financial
service firm or other financing to further fund the Company's business. Any
capital raised may be costly to the Company and/or dilutive to stockholders.
There can be no assurances, however, that the Company will be successful in
concluding a transaction, or that if a transaction is concluded that such
transaction will result in alleviating the Company's present financial
situation.
If the Company is not able to secure additional capital, the lack of funds
may significantly limit the Company's ability to satisfy its obligations under
the Loan Agreement, realize value from its assets and its product offerings,
and continue its business as currently conducted or as a going concern. See
"Management Discussion and Analysis of Financial Condition and Results of
Operations" and Note 14 of the Notes to Financial Statements for the Fiscal
Year Ended December 31, 1997, as filed on Form 10-K incorporated herein by
reference. See also "Management's Discussion and Analysis of Results of
Operations and Financial Condition" for the fiscal quarter ended March 31,
1998, as filed on Form 10-Q incorporated herein by reference.
REQUIREMENTS FOR LISTING SECURITIES ON THE AMERICAN STOCK EXCHANGE. The
Common Stock is currently listed with the American Stock Exchange. The Company
currently does not meet the standards for continued listing, however, the
Common Stock has not been de-listed from the American Stock Exchange. If the
Common Stock were to be de-listed, 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.
CONTROL BY PRINCIPAL STOCKHOLDERS. As of the date of this prospectus,
Holdings and its affiliate, PICO, own approximately 18% of the outstanding
shares of Common Stock. If Holdings and PICO exercise and convert their
Convertible Securities registered hereby,
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Holdings and PICO would beneficially own approximately 32% of the outstanding
shares of Common Stock, provided the Wexford Affiliates do not exercise their
Purchase Warrants. Pursuant to Holdings' and PICO's equity interest in the
Company and certain negative covenants contained in the Debenture Agreement,
as defined below, Holdings and PICO are in a position 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.
VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company's revenue,
operating 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 clients 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 non-renewal of any of these
agreements could inhibit the Company's ability to provide high quality services
to its clients 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 non-renewal 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 certain of its executive officers and key
employees have entered into agreements with the Company which contain,
nondisclosure covenants, such agreements do not guarantee that these
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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 name 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 non-
renewal 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 revenue from a limited number of large customers. In 1995, 1996 and 1997,
the Company's largest customer accounted for approximately 29%, 20% and 4% of
its revenue, respectively, and its ten largest clients accounted for
approximately 43%, 39% and 14% of its revenue, 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
12
<PAGE>
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 products are registered trademarks: BasketMaker-
Registered Trademark-, QuoteWare-Registered Trademark-, PriceWare-Registered
Trademark- and QuoteBlaster-Registered Trademark-. The HyperFeed-TM- product
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, 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 the
Company 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.
13
<PAGE>
POSSIBLE VOLATILITY OF STOCK PRICE. The Company's Common Stock has been
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.
DILUTION. As of May 19, 1998, there were 12,826,357 common shares of
the Company issued and outstanding. Assuming all of the Convertible
Securities are exercised or converted and the corresponding shares of Common
Stock are issued to the Selling Shareholders, there would be approximately
15,875,389 common shares outstanding. If all outstanding Convertible
Securities were exercised at their current offering price, an existing
shareholder would experience dilution of his or her ownership interest in the
Company to the extent such shareholder held none of the Convertible
Securities being exercised or converted. For example, an existing 10%
shareholder before such issuances would become a 8.1% shareholder after such
issuances, assuming such shareholder held none of the Convertible Securities
being exercised or converted, and other existing shareholders would
experience a similar dilution of their ownership interest in the Company.
SHARES ELIGIBLE FOR FUTURE SALE. The shares of Common Stock registered
hereby may be immediately available for resale without restriction, except to
the extent persons deemed affiliates of the Company may be limited by the
volume restrictions of Rule 144 promulgated under the Securities Act of 1933,
as amended. Sales or the expectation of sales of substantial amounts of
Common Stock in the public market could adversely affect the prevailing
market price for the Common Stock and the Company's ability to raise
additional capital at a price favorable to 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.
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
14
<PAGE>
exchanges and markets. Any significant downturn or other negative
development with respect to those exchanges and markets could adversely effect
the Company's revenue.
USE OF PROCEEDS
The 2,370,000 outstanding shares of Common Stock offered hereby are
being sold by the Selling Shareholders for their own account. The Company
will not receive any of the proceeds from the sale of any shares of Common
Stock by the Selling Shareholders. Any proceeds received by the Company upon
exercise of the Convertible Securities for up to 3,049,032 shares of Common
Stock will be used for general corporate purposes, including, but not limited
to, operating and working capital requirements. The Company has agreed to
pay the expenses of registration of the Common Stock, including a certain
amount of legal and accounting fees. See "Plan of Distribution."
15
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's shares of Common Stock are traded on the American Stock
Exchange under the symbol "PQT." The following tables show for 1998, 1997 and
1996 the high and low closing prices of the Company's Common Stock for the
periods indicated, as reported by the American Stock Exchange.
<TABLE>
<CAPTION>
1998 QUARTERLY INFORMATION HIGH LOW
- - -------------------------- ---- ---
<S> <C> <C>
First 1-1/8 11/16
Second (through May 19, 1998) 5 3/4
1997 QUARTERLY INFORMATION HIGH LOW
- - -------------------------- ---- ---
First 3-7/16 2-5/16
Second 2-7/16 1-1/8
Third 2-7/16 1-9/16
Fourth 2-3/16 15/16
1996 QUARTERLY INFORMATION
- - --------------------------
First 15-1/8 8-3/4
Second 13-3/8 7-1/8
Third 7-11/16 3-15/16
Fourth 5-5/16 2-3/8
</TABLE>
The closing market price for the shares of Common Stock as reported by the
American Stock Exchange on May 19, 1998 was $3.25.
As of April 30, 1998, the Company had 425 stockholders of record of its
Common Stock.
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. The
Company's agreement with a lender prohibits the payment of dividends without
the lender's prior consent.
16
<PAGE>
SELLING SHAREHOLDERS
This Prospectus relates to an aggregate of 5,419,032 shares of Common
Stock, consisting of 3,049,032 shares of Common Stock issuable upon the
exercise and conversion of the Convertible Securities (the "Issuable Shares"),
and 2,370,000 issued and outstanding shares of Common Stock (the "Outstanding
Shares") previously acquired by PICO and Holdings, that may be sold from time
to time by the Selling Shareholders. The Issuable Shares are deliverable upon
exercise and conversion of the following convertible securities: (i) the
Purchase Warrants entitling Holdings and the Wexford Affiliates to purchase
up to 1,449,032 shares of Common Stock of the Company; and (ii) the
Debenture, which may be converted at any time by PICO into a minimum of
1,600,000 shares of Common Stock. The Shares underlying the Convertible
Securities offered hereby are being registered by the Company pursuant to the
terms of the Convertible Securities. The Company will not receive any
proceeds from the sale of any of the Shares by the Selling Shareholders.
HOLDINGS AND PICO
On November 14, 1996, the Company entered into an agreement (the
"Debenture Agreement") with 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 the
Debenture in the principal amount of $2.5 million with interest at 1% over
prime. Interest is payable semiannually, beginning January 1, 1998. PICO made
the investment and the Debenture was issued on December 2, 1996. The Debenture
was to mature on December 31, 2001 and was convertible at any time by PICO into
1.25 million shares of Common Stock (subject to adjustment in certain cases).
On May 5, 1997, the Company and 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 was
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 was also entitled to be paid a "facility fee" of $40,000 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 was changed to 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 was
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 conversion of the Debenture or
(ii) $1.5625 per share (the market price of the 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 was to be at such time as determined by the Company and at a price as
determined by PICO. Interest under the Debenture continued to be payable in
cash or, at the option of PICO, in shares of Common Stock at the market value
of such shares at the time of payment.
17
<PAGE>
Also on May 5, 1997, in consideration of the loan by Holdings to the
Company, the Company issued the Class A Purchase Warrant to Holdings
entitling Holdings to purchase up to 640,000 shares of Common Stock at a
price per share (the "Class A Purchase 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 Class A Purchase Warrant or (b) $1.5625 per share
(the market value of the Common Stock on the date the Class A Purchase
Warrant was issued). The Class A Purchase Warrant expires on April 30, 2000.
On May 19, 1998, Holdings exercised a portion of the warrant and purchased
320,000 shares of Common Stock for $500,000, thereby reducing the number of
shares entitled to be purchased pursuant to the Class A Purchase Warrant to
320,000 shares. In lieu of exercising the Class A Purchase Warrant for cash,
Holdings may elect to receive shares of Common Stock equal to the "value" of
the Class A Purchase Warrant determined in accordance with a formula
specified in the Class A Purchase Warrant (the "Class A Purchase Warrant
Conversion Value"). The number of shares of Common Stock subject to the
Class A Purchase Warrant and the Class A Purchase 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 Common Stock exercisable at less than
the current market price per share; and other distributions to all holders of
shares of 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
of the Class A Purchase Warrant and Holdings has not fully exercised the
Class A Purchase Warrant, the unexercised portion of the Class A Purchase
Warrant will be deemed automatically converted into shares of Common Stock at
the Class A Purchase Warrant Conversion Value. Alternatively, Holdings may
elect to cause the Company to purchase the exercised portion of the Class A
Purchase 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 Class A
Purchase Warrant immediately before the record date for determining
stockholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Class A Purchase Warrant Price. The Class A Purchase
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 the Class B Purchase Warrant for up to 500,000 shares of
Common Stock. The terms of the Class B Purchase Warrant are substantially
the same as those contained in the Class A Purchase 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
Class B Purchase Warrant. The Class B Purchase Warrant also provides for
certain piggyback registration rights and a one-time demand registration
right.
18
<PAGE>
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 the
Class C Purchase Warrant for up to 129,032 shares of Common Stock. The terms
of the Class C Purchase Warrant are substantially the same as contained in
the Class A Purchase 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 the Class C Purchase Warrant.
The Class C Purchase Warrant also provides for certain piggyback registration
rights and a one-time demand registration right.
On December 30, 1997, February 5, 1998, March 10, 1998 and May 5, 1998,
the Company and Holdings executed the third, fourth, fifth and sixth amendments
to the Loan Agreement, respectively, extending the due date for borrowings by
the Company, plus accrued interest, to January 31, 1998, February 28, 1998,
April 30, 1998, and May 31, 1998, respectively. No further warrants were
issued in connection with the third, fourth, fifth or sixth amendments to the
Loan Agreement.
THE WEXFORD AFFILIATES
In October 1997, the Wexford Affiliates purchased 5,000,000 shares of
Common Stock and the Class D Purchase Warrants for 500,000 shares of Common
Stock at an exercise price of $2.00 per share, exercisable at any time prior to
October 15, 2002, in exchange for $5.0 million.
The Wexford Affiliates acquired the Common Stock and the Class D Purchase
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"). Up to 4,000,000 of the shares of Common
Stock purchased by the Wexford Affiliates were 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 was required to use its best efforts to consummate the
Repurchase from the proceeds of a rights offering. In the event that the
rights offering was not completed on or prior to January 24, 1998, the Wexford
Affiliates would be entitled to receive, out of escrow, warrants to purchase an
additional 250,000 shares of Common Stock (the "Additional Warrants") with the
same terms as the Class D Purchase Warrants and, in the event the Rights
Offering was not completed on or prior to February 28, 1998, the Wexford
Affiliates would be entitled to receive, out of escrow, 250,000 more Additional
Warrants to purchase shares of Common Stock with the same terms as the Class D
Purchase Warrants.
On October 31, 1997, the Company filed a Form S-2 Registration Statement
with the Securities and Exchange Commission in contemplation of the rights
offering. The Registration Statement was amended on November 20, 1997, and
became effective on November 21, 1997. The Company distributed 7,402,246
transferable subscription rights to shareholders of record
19
<PAGE>
as of the close of business on November 21, 1997, entitling them to purchase
one additional share of Common Stock for each right at a price of $1.00 per
share. The initial expiration date of the rights, December 19, 1997, was
extended by the Company to January 15, 1998.
On January 23, 1998, the Company completed the rights offering initiated
in 1997. The Company received approximately $3.0 million in gross proceeds
from the sale of shares underlying exercised rights. Pursuant to the Purchase
Agreement, 2,988,949 shares of the Common Stock purchased by the Wexford
Affiliates were repurchased by the Company on January 26, 1998, at a purchase
price of $1.00 per share, and the Additional Warrants reverted back to the
Company.
SUMMARY
As a result of the foregoing, in connection with the Company's financing
and related party transactions, the Company issued the following Purchase
Warrants for purchase of shares of Common Stock, all of which were outstanding
at May 19, 1998.
<TABLE>
<CAPTION>
NUMBER REMAINING LIFE
OF EXPIRATION EXERCISE IN YEARS AT
SHARES DATE PRICE APRIL 30, 1998
<S> <C> <C> <C> <C>
Class A Purchase Warrants 320,000 04/30/2000 (1) 2.0
Class B Purchase Warrants 500,000 04/30/2000 (2) 2.0
Class C Purchase Warrants 129,032 04/30/2000 (3) 2.0
Class D Purchase Warrants 500,000 10/15/2002 $2.00 4.46
</TABLE>
(1) lesser of the mean of the closing bid price per share for the 20 trading
days preceding exercise of the warrant or $1.5625 per share.
(2) lesser of the mean of the closing bid price per share for the 20 trading
days preceding exercise of the warrant or $2.00 per share.
(3) lesser of the mean of the closing bid price per share for the 20 trading
days preceding exercise of the warrant or $1.9375 per share.
PLAN OF DISTRIBUTION
This offering, consisting of 3,049,032 shares of Common Stock issuable
upon the exercise and conversion of the Convertible Securities, and 2,370,000
shares of Common Stock issued and outstanding, is being made by the Selling
Shareholders, who have indicated they are acting independently of the Company
in determining the manner and extent of sales of the shares of Common Stock
included herein. The Company will receive none of the proceeds from the sale
of any Shares by the Selling Shareholders.
20
<PAGE>
Although all of the Shares are being registered for public sale, the sale
of any or all of such Shares by the Selling Shareholders may depend on the sale
price of such Shares and market conditions generally prevailing at the time.
The Selling Shareholders reserve the right to reject any order in whole or in
part.
The Selling Shareholders may sell the Shares being offered hereby in one
or more transactions (which may include block transactions) effected from
time to time on the American Stock Exchange, in special offerings, in the
over-the-counter market, in negotiated transactions, or through a combination
of such methods of sale, in each case at market prices prevailing at the time
of sale, at prices relating to such prevailing market prices, or at
negotiated prices. The Shares may be sold by one or more of
the following methods: (i) a block trade in which the broker or dealer so
engaged will attempt to sell the Shares as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (ii)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (iii) an exchange
distribution and/or a security distribution in accordance with the rules of
the American Stock Exchange; (iv) directly to purchasers and (v) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate.
If any of the Shares offered hereby is sold through brokers or dealers,
the Selling Shareholders may pay customary discounts and brokerage
commissions and charges. The Selling Shareholders and any brokers or dealers
or other persons who participate with them in the distribution of the Shares
offered hereby may be deemed to be "underwriters" within the meaning of the
Securities Act, although the Selling Shareholders disclaim such status. Any
commissions and discounts received by such brokers or dealers, and any profit
on the resale of the stock by such brokers or dealers, may be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Shareholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Securities against
certain liabilities, including liabilities arising under the Securities Act.
Liabilities under the federal securities laws cannot be waived.
Because the Selling Shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Shareholders will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event of a "distribution" of the shares,
such Selling Shareholders, any selling broker or dealer and any "affiliated
purchasers" may be subject to Regulation M under the Exchange Act, which
Regulation would prohibit, with certain exceptions, any such person from
bidding for or purchasing any security which is the subject of such
distribution until his participation in that distribution is completed. In
addition, Regulation M also prohibits any bid or purchase for the purpose of
pegging, fixing or stablizing the price of Common Stock in connection with
this offering.
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<PAGE>
The Selling Shareholders have agreed to indemnify and hold harmless the
Company, its officers and directors, with respect to any untrue statement in or
omission from, this Prospectus or the Registration Statement of which it is a
part, including amendments and supplements, if such statement or omission was
made in reliance upon information furnished to the Company by such Selling
Shareholder for use in the preparation of this Prospectus or Registration
Statement.
The Company will pay all expenses incidental to the registration of the
Shares, but will not pay selling or other expenses incurred in the offering,
including the discounts and commissions of broker-dealers. The Company has
agreed to indemnify the Selling Shareholders against certain civil liabilities,
including liabilities under the Securities Act, in connection with the Shares
offered hereby.
The Shares being offered hereby may also be sold by the
Selling Shareholders pursuant to Rule 144 promulgated under the Securities Act.
EXPERTS
The financial statements and schedule of the Company included in the
Company's Annual Report on Form 10-K, for the year ended December 31, 1997,
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, have been audited by KPMG Peat Marwick LLP, independent public
accountants, as indicated in their reports with respect thereto, and such
financial statements and schedule are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
Our report on the financial statements contains an explanatory paragraph
that states that the Company has experienced significant operating losses
which has 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. The financial statements and
financial statement schedule do not include any adjustments that might result
from the outcome of that uncertainty.
The financial statements and schedule of the Company as of December 31,
1996, and for each of the two years for the period then ended, included in the
Company's Annual Report on Form 10-K, for the year ended December 31, 1997,
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, have been audited by McGladrey and Pullen, LLP, independent public
accountants, as indicated in their reports with respect thereto, and such
financial statements and schedule are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Wildman, Harrold, Allen & Dixon, 225 West Wacker Drive, Suite 2800,
Chicago, Illinois 60606-1229.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized
22
<PAGE>
by the Company, any Selling Shareholder or any other person. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy to
any person in any jurisdiction in which such offer or solicitation would be
unlawful or to any person to whom it is unlawful. Neither the delivery of
this Prospectus nor any offer or sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company or that the information contained herein is correct as
of any time subsequent to the date hereof.
23
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information 2
Incorporation of Certain Documents By Reference 2
The Company 4
Risk Factors 9
Use of Proceeds 15
Price Range of Common Stock 16
Selling Shareholders 17
Plan of Distribution 20
Experts 22
Legal Matters 22
</TABLE>
<PAGE>
PC QUOTE, INC.
5,419,032 SHARES OF COMMON STOCK, $.001 PAR VALUE
-------------
PROSPECTUS
-------------
May 27, 1998
