-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CdGQmnLTN1akr8bhPKrOZFBArUVKra07GxG8AThZ57oUgSSjMD4NY273I0eXL7SE h4MKXDtpj8SIotaCgSEh2w== 0000912057-96-026570.txt : 19961118 0000912057-96-026570.hdr.sgml : 19961118 ACCESSION NUMBER: 0000912057-96-026570 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PC QUOTE INC CENTRAL INDEX KEY: 0000745774 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 363131704 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11108 FILM NUMBER: 96666348 BUSINESS ADDRESS: STREET 1: 300 SOUTH WACKER DRIVE STREET 2: SUITE 300 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129132800 MAIL ADDRESS: STREET 1: 300 S WACKER STREET 2: SUITE 300 CITY: CHICAGO STATE: IL ZIP: 60606 10-Q 1 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q _________________________________ [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended September 30, 1996 Or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________________ to ________________________ _______________________________________ Commission file number 0-13093 I.R.S. Employer Identification Number 36-3131704 PC QUOTE, INC. (a Delaware Corporation) 300 S. WACKER DRIVE CHICAGO, ILLINOIS 60606 TELEPHONE (312) 913-2800 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past twelve months, (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 7,343,019 shares of the Company's common stock ($.001 par value) were outstanding as of November 7, 1996. Page 1 of 13 PC QUOTE, INC. INDEX PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Balance Sheets as of September 30, 1996 and December 31, 1995 3 Statements of Operations for the nine month And Quarter ended September 30, 1996 and 1995 4-5 Statements of Cash Flows for the nine month periods ended September 30, 1996 and 1995 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of: Results of Operations and Financial Condition 8-9 Liquidity and Capital Resources 10 PART II. OTHER INFORMATION Item 5. None 11 Item 6. Exhibit 27 11 Company's Signature Page 12 Page 2 of 12 PC QUOTE, INC. BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
SEPTEMBER 30, DECEMBER 31, 1996 1995 (UNAUDITED) (AUDITED) ------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 111,201 $1,043,478 Accounts receivable, net of allowance for doubtful accounts of $183,336 (1996) and $95,000 (1995) 1,011,770 1,320,508 Income tax refunds receivable 40,000 40,000 Prepaid expenses and other current assets 106,522 294,536 Deferred tax asset 158,000 158,000 ------------ ------------ Total current assets 1,427,493 2,856,522 ------------ ------------ PROPERTY AND EQUIPMENT: Satellite receiving equipment 842,978 785,718 Computer equipment 6,325,511 6,158,855 Communication equipment 2,582,607 2,437,279 Furniture and fixtures 289,425 256,260 Leasehold improvements 353,076 340,271 ------------ ------------ 10,393,597 9,978,383 Less accumulated depreciation and amortization 7,465,034 6,759,973 ------------ ------------ 2,928,563 3,218,410 ------------ ------------ Software development costs, net of accumulated amortization of $3,889,146 (1996) and $3,088,146 (1995) 5,713,594 4,172,215 Deposits and other assets 302,624 275,693 ------------ ------------ TOTAL ASSETS $10,372,274 $10,522,840 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Note payable, bank, current 300,000 100,000 Capital lease obligations 196,634 587,731 Accounts payable 1,709,126 1,700,998 Unearned revenue 466,441 546,869 Accrued expenses 631,573 488,597 ------------ ------------ Total current liabilities 3,303,774 3,424,195 ------------ ------------ Note payable to bank, noncurrent 1,175,000 100,000 Capital lease obligations, noncurrent 0 133,176 Unearned revenue, noncurrent 155,481 254,191 ------------ ------------ Total liabilities 4,634,255 3,911,562 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock, par value $.001; 10,000,000 shares authorized; 7,281,452 (1996) and 7,185,732 (1995) shares issued and outstanding 7,281 7,186 Paid in capital 12,494,663 12,289,897 Accumulated deficit (6,763,925) (5,685,805) ------------ ------------ Total stockholders' equity 5,738,019 6,611,278 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,372,274 $10,522,840 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. Page 3 of 12 PC QUOTE, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------- 1996 1995 (UNAUDITED) (UNAUDITED) -------------------------------------- NET REVENUES Services $12,883,133 $9,812,101 Direct costs of services 7,575,431 3,871,392 ----------- ---------- 5,307,702 5,940,709 ----------- ---------- OPERATING COSTS AND EXPENSES Amortization of software development 801,000 846,000 Research and development 543,292 494,979 Selling and marketing 2,341,820 1,656,292 General and administrative 2,603,026 1,607,966 ----------- ---------- 6,289,138 4,605,237 ----------- ---------- OPERATING INCOME (981,436) 1,335,472 OTHER INCOME (EXPENSE) Interest income 4,112 18,437 Interest expense (100,796) (169,682) ----------- ---------- INCOME BEFORE INCOME TAXES ($1,078,120) $1,184,227 Provision for income taxes 0 30,392 ----------- ---------- NET INCOME(LOSS) ($1,078,120) $1,153,835 ----------- ---------- ----------- ---------- NET INCOME(LOSS) PER COMMON SHARE ($0.15) $0.16 ----------- ---------- ----------- ----------
The accompanying notes are an integral part of the financial statements. Page 4 of 12 PC QUOTE, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
FOR QUARTER ENDED SEPTEMBER 30, ---------------------------------------- 1996 1995 (UNAUDITED) (UNAUDITED) ---------------------------------------- NET REVENUES Services $4,460,823 $3,389,336 Direct costs of services 3,075,128 1,263,776 ----------- ---------- 1,385,695 2,125,560 ----------- ---------- OPERATING COSTS AND EXPENSES Amortization of software development 308,000 303,000 Research and development 197,281 191,989 Selling and marketing 882,293 539,540 General and administrative 1,081,249 569,175 ----------- ---------- 2,468,823 1,603,704 ----------- ---------- OPERATING INCOME (1,083,128) 521,856 OTHER INCOME (EXPENSE) Interest income 0 11,635 Interest expense (39,636) (56,674) ----------- ---------- INCOME BEFORE INCOME TAXES ($1,122,764) $476,817 Provision for income taxes 0 30,392 ----------- ---------- NET INCOME(LOSS) ($1,122,764) $446,425 ----------- ---------- ----------- ---------- NET INCOME(LOSS) PER COMMON SHARE ($0.15) $0.06 ----------- ---------- ----------- ----------
The accompanying notes are an integral part of the financial statements. Page 5 of 12 PC QUOTE, INC STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 1996 1995 ------------ ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ($1,078,120) $1,153,834 ----------- ---------- Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization of property and equipment 705,061 949,998 Amortization of software development cost 801,000 846,000 Changes in assets and liabilities: Accounts receivable, net of allowance 308,738 (806,701) Prepaid expenses and other current assets 188,014 (29,687) Deposits and other assets (26,931) (169,751) Accounts payable 8,128 (455,341) Unearned revenue (179,138) 1,039,827 Accrued expenses 142,976 34,061 ----------- ---------- Total adjustments 1,947,848 1,408,406 ----------- ---------- Net cash provided by operating activities 869,728 2,562,240 ----------- ---------- CASH FLOWS FROM INVESTING ACTIVTIES: Purchase of property and equipment (415,214) (831,975) Software development costs capitalized (2,342,379) (1,531,163) ----------- ---------- Net cash used by investing activities (2,757,593) (2,363,138) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 204,861 132,640 Principal payments under capital leases obligations (524,273) (615,871) Principal payments on note payable to bank (old note) (200,000) (58,383) Proceeds from note payable to bank (new note) 1,500,000 0 Principal payments on note payable to bank (new note) (25,000) 0 ----------- ---------- Net cash used by financing activities 955,588 (541,614) ----------- ---------- NET CHANGE IN CASH AND CASH EQUIVALENTS (932,277) (342,512) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 1,043,478 1,384,086 ----------- ---------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 111,201 $1,041,574 ----------- ---------- ----------- ---------- - ------------------------------------------------------------------------------ ---------- - ------------------------------------------------------------------------------ ---------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest Paid $ 100,796 $113,009 Income taxes paid None None - ------------------------------------------------------------------------------ ---------- - ------------------------------------------------------------------------------ ----------
The accompanying notes are an integral part of the financial statements. Page 6 of 12 PC QUOTE, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (1) BASIS OF PRESENTATION The accompanying interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The interim financial statements include all adjustments which, in the opinion of management, are necessary in order to make the financial statements not misleading. The amounts indicated as "audited" have been extracted from the Company's December 31, 1995 annual report. For further information, refer to the consolidated financial statements and footnotes included in PC Quote's annual report on Form 10-K for the year ended December 31, 1995. Certain reclassifications have been made to conform to the current presentation. Costs associated with the planning and designing phase of software development, including coding and testing activities necessary to establish technological feasibility of computer software products to be sold, leased or otherwise marketed, are charged to research and development costs as incurred. Once technological feasibility has been determined, costs incurred in the construction phase of software development, including coding, testing and product quality assurance, are capitalized. Amortization is provided over an estimated life of the software products and commences when the product is available for general release to customers. Unamortized capitalized costs determined to be in excess of the net realizable value of the product are expensed at the date of such determination. It is reasonably possible that the estimated anticipated future gross revenues, the remaining estimated economic life of the products, or both will be reduced significantly in the near term. Accumulated amortization and related software development costs are removed in the year following full amortization. (2) INCOME TAXES At December 31, 1995, the Company had federal income tax net operating loss carryforwards of approximately $7,327,400 federal income tax purposes and approximately $4,753,400 for alternative minimum tax purposes. The net operating loss carryforwards will expire in the years 1999 to 2007. Page 7 of 12 ITEM 2 _____________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: FOR THE NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1996 Service revenues for the nine months and quarter ended September 30, 1996 increased 31.3% and 31.6%, respectively, from the same periods of 1995. The increase in service revenue continues from the release of a new product, PCW 6.0, in the Company's core and internet business. Selling and marketing costs increased 41.4% and 63.5%, respectively, for the nine months and quarter ended September 30, 1996, over the same periods in 1995. The increase was due to the increase in commissions costs which relates to the increase in service revenues and advertising costs for core and internet products. Direct costs of services for the nine months and quarter ended September 30, 1996 increased 95.7% and 143.3%, respectively, over the same periods last year. This reflects an increase in staffing levels in customer support and operations and royalty and communications costs related to the increase in volume. Additional technological infrastructure costs, principally staffing, equipment, and communications were incurred to invest in the growth of the core business and the internet operations. Research and Development costs increased 9.8% and 2.8%, respectively, for the nine months and quarter ended September 30, 1996, from the corresponding periods in 1995. There was a increase in research costs related to additional staffing. Page 8 of 12 ITEM 2 _____________________________________________ MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) RESULTS OF OPERATIONS (CONTINUED): FOR THE NINE MONTH AND QUARTER ENDED SEPTEMBER 30, 1996 General and administrative expenses increased 61.9% and 89.9%, respectively, for the nine months and quarter ended September 30, 1996, from the same periods in 1995. The main increases were in salaries and related costs, due to additional staffing and reallocation of personnel to support major business opportunities. There was also an increase in the provision for doubtful accounts and shareholders services as compared to the same period in 1995. Interest income decreased 77.7% and 100.%, respectively, for the nine months and quarter ended September 30, 1996, from the corresponding periods in 1995. Interest income decreased due to our use of cash over credit for some equipment needs. Interest expense decreased 40.6% and 30.1%, respectively, for the nine months and quarter ended September 30, 1996 over the same periods in 1995. This reflects the switch to operating leases from capital leases. Page 9 of 12 ITEM 2 _____________________________________________ MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES: FOR THE NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1996 The company established a $1,500,000 five year Note, in addition to it's $1,000,000 line of credit with the its' lender. The company retired an existing note on the balance sheet and consolidated the borrowings from the a line of credit. Investments in software development increased substantially due to the Company's targeted effort to launch more products on the internet. Financing activities used cash for capital lease obligations. The Company believes general inflation does not materially impact its sales and operating results nor is it expected that the effect of existing tax reform will significantly affect the Company's future position, liquidity or operating results. Page 10 of 12 PART II OTHER INFORMATION _________________ ITEM 5. Other Information The Company has reached an agreement in principle with Physicians Insurance Company of Ohio, Inc. ("PICO"), which owns approximately 30% of the Company's outstanding shares of common stock. The proposed agreement, which is subject to the execution of definitive agreements, contemplates that PICO will invest $2.5 million cash in the Company in exchange for a Subordinated Convertible Debenture (the "Debenture") in the principal amount of $2.5 million with interest at 1% over prime. The Debenture would mature on December 31, 2001 and will be convertible at any time by PICO, or by the Company at the conclusion of the rights offering (discussed below) into 1.25 million shares of common stock of the Company. The Company and PICO also agreed in principle that the Company will offer, pro rata to its stockholders other than PICO, rights to purchase up to 1.25 million additional shares of the Company's common stock at an exercise price of $2.00 per share. It is contemplated that the rights offering and the shares underlying the rights would be registered with the Securities and Exchange Commission. The rights will be non-transferable and will expire thirty days from the date of issuance. PICO has agreed to exercise all rights which remain unexercised after termination of the rights period at the exercise price of $2.00 per share. The Company and PICO have agreed that the Company will obtain shareholder approval of the rights offering and an amendment to the Company's Certificate of Incorporation to increase its number of authorized common shares from 10,000,000 to 20,000,000 shares. The Company and PICO further agreed that within fourteen days from the closing of the debenture offering, the Board of Directors of the Company would be reconstituted to consist of Mr. Louis Morgan, Mr. Ronald Langley, Mr. Paul DiBiasio, Mr. John Hart and Mr. Michael Ellis. Messrs, Morgan, Langley and DiBiasio currently serve on the Company's Board of Directors. On October 30, 1996, the Company and Global Financial Information Corporation, (formerly Bridge Information Systems), amended their January 25, 1995 Agreement by eliminating Global's obligation to pay PC Quote approximately $150,000 per month for each of the first three months of 1997. Instead, Global shall pay the Company based on the per site pricing schedule which was to begin on April 1, 1997. ITEM 6. (a) EXHIBIT 27 (b) REPORTS ON FORM 8-K- NONE Page 11 of 12 SIGNATURES __________ Pursant to the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PC QUOTE, INC. (Company) Date: November 10, 1996 By: /s/ Louis J. Morgan -------------------------------- Louis J. Morgan Chairman By: /s/ Michael A . Press -------------------------------- Michael A. Press Vice President of Finance and Chief Financial Officer Page 12 of 12 EX-27 2 EXHIBIT 27 FDS
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 111,201 0 1,011,770 183,336 0 1,427,493 10,393,597 7,465,034 10,372,274 3,303,774 0 0 0 7,275 5,730,744 10,372,274 0 4,460,823 0 3,075,128 2,468,823 180,000 39,636 (1,122,764) 0 (1,122,764) 0 0 0 (1,122,764) (.15) (.15)
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