-----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, RoSzrpq74SW3a+OQMp6opNqpyN1BO8RkxD6YE/42VNo6clg3sOIPYyRM8BwejJWv OyQjcobcZ1J65Tem29FdMQ== 0000912057-97-018435.txt : 19970521 0000912057-97-018435.hdr.sgml : 19970521 ACCESSION NUMBER: 0000912057-97-018435 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970520 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: 97612069 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 FORM 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 March 31, 1997 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 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: 7,365,254 shares of the Company's common stock ($.001) par value) were outstanding as of May 13, 1997. Page 1 of 10 PC QUOTE, INC. INDEX PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Balance Sheets as of March 31, 1997 and December 31, 1996 3 Statements of Operations for the three month period ended March 31, 1997 and 1996. 4 Statements of Cash Flows for three month period ended March 31, 1997 and 1996. 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of: Results of Operations and Financial Condition 7-8 Liquidity and Capital Resources PART II. OTHER INFORMATION Item 5. Other Information 9 Item 6. Exhibit 27 9 Company's Signature Page 10 Page 2 of 10 PC QUOTE, INC. Balance Sheets March 31, 1997 and December 31, 1996
March 31, December 31, 1997 1996 ASSETS (Unaudited) (Audited) ------------- ------------- CURRENT ASSETS: Cash and cash equivalents $652,124 $1,321,512 Accounts receivable, net of allowance for doubtful accounts of $425,095 (1997) and $234,000 (1996) 942,247 1,100,253 Income tax refunds receivable 40,000 40,000 Prepaid expenses and other current assets 154,456 185,071 ------------- ------------- Total current assets 1,788,827 2,646,836 ------------- ------------- PROPERTY AND EQUIPMENT: Satellite receiving equipment 870,976 865,454 Computer equipment 6,474,280 6,382,179 Communication equipment 2,667,788 2,656,057 Furniture and fixtures 293,786 293,240 Leasehold improvements 366,326 359,126 ------------- ------------- 10,673,156 10,556,056 Less accumulated depreciation and amortization 8,073,849 7,791,849 ------------- ------------- 2,599,307 2,764,207 ------------- ------------- Software development costs, net of accumulated amortization of $4,005,204 (1997) and $3,600,204 (1996) 5,981,512 5,789,845 Deposits and other assets 404,937 353,182 ------------- ------------- TOTAL ASSETS $10,774,583 $11,554,070 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Note payable, bank, current 300,000 300,000 Capital lease obligations 71,731 142,685 Accounts payable 3,015,121 1,774,390 Accrued expenses 845,198 918,918 Income Taxes Payable 6,264 6,264 Unearned revenue 978,455 995,600 ------------- ------------- Total current liabilities 5,216,769 4,137,857 ------------- ------------- Note payable to bank, noncurrent 1,025,000 1,100,000 Convertible Subordinated Debenture Bond Payable 918,250 850,000 Net of Unamortized Discount of $1,581,750 Unearned revenue, noncurrent 163,562 134,636 ------------- ------------- Total liabilities 7,323,581 6,222,493 ------------- ------------- STOCKHOLDERS' EQUITY: Common stock, par value $.001; 10,000,000 shares authorized; 7,365,254 (1997) and 7,355,621 (1996) shares issued and outstanding 7,365 7,356 Paid in capital 12,636,166 12,615,995 Paid in Capital - Convertible Subordinated Debenture 1,650,000 1,650,000 Accumulated deficit (10,842,529) (8,941,774) ------------- ------------- Total stockholders' equity 3,451,002 5,331,577 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,774,583 $11,554,070 ------------- ------------- ------------- -------------
The accompanying notes are an integral part of the financial statements. PC QUOTE, INC. STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------- 1997 1996 ------------------------------- NET REVENUES Services $4,055,067 $3,974,483 Direct costs of services 3,438,699 1,841,770 ------------- --------------- 616,368 2,132,713 ------------- --------------- OPERATING COSTS AND EXPENSES Amortization of software development 405,000 240,000 Research and development 236,696 151,726 Selling and marketing 831,014 719,043 General and administrative 890,477 694,796 ------------- --------------- 2,363,187 1,805,565 ------------- --------------- OPERATING INCOME (1,746,819) 327,148 OTHER INCOME (EXPENSE) Interest income 9,342 1,227 Interest expense (163,278) (23,597) ------------- --------------- NET INCOME(LOSS) ($1,900,755) $304,778 ------------- --------------- ------------- --------------- NET INCOME(LOSS) PER ------------- --------------- COMMON SHARE ($0.26) $0.04 ------------- --------------- ------------- --------------- The accompanying notes are an integral part of the financial statements. PC QUOTE, INC STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ($1,900,755) $304,778 --------------- ------------- Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization of property and equipment 282,000 309,360 Amortization of software development cost 405,000 240,000 Amortization of discount on convertible subordinated debenture bond payable 68,250 0 Changes in assets and liabilities: Accounts receivable, net of allowance 158,006 (74,403) Prepaid expenses and other current assets 30,615 111,623 Deposits and other assets (51,755) (65,173) Accounts payable 1,240,731 (445,307) Unearned revenue 11,781 (56,610) Accrued expenses (73,720) 121,511 --------------- ------------- Total adjustments 2,070,908 141,001 --------------- ------------- Net cash provided by operating activities 170,153 445,779 --------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (117,100) (179,022) Software development costs capitalized (596,667) (810,913) --------------- ------------- Net cash used by investing activities (713,767) (989,935) --------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 20,180 128,052 Principal payments under capital leases obligations (70,954) (162,814) Principal payments on note payable to banks (75,000) (25,000) Net borrowings under line of credit 0 500,000 --------------- ------------- Net cash used by financing activities (125,774) 440,238 --------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH & CASH EQUIVALENTS 0 0 --------------- ------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (669,388) (103,918) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 1,321,512 1,043,478 --------------- ------------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $652,124 $939,560 --------------- ------------- --------------- ------------- - ---------------------------------------------------------------------------------- ------------- - ---------------------------------------------------------------------------------- ------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest Paid $37,218 $23,597 Income taxes paid None None - ---------------------------------------------------------------------------------- ------------- - ---------------------------------------------------------------------------------- -------------
The accompanying notes are an integral part of the financial statements. PC QUOTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 (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 that, 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, 1996 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, 1996. 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, 1996, the Company had federal income tax net operating loss carryforwards of approximately $12,059,000 federal income tax purposes and approximately $9,794,000 for alternative minimum tax purposes. The net operating loss carryforwards will expire in the years 1999 to 2011. Page 6 of 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: FOR THE THREE MONTHS AND QUARTER ENDED MARCH 31, 1997 Service revenues for the first quarter ended March 31, 1997 increased 2% from the first quarter in 1996. The increase in service revenues primarily resulted from PCW 6.0 in the Company's core and internet businesses and the sale of advertising on the internet. This change in business mix more than offset the loss of two major customers that accounted for over 25% of last year's first quarter revenue. Direct costs increased for the quarter 86.7% from the first quarter in 1996. Direct cost increases were partially due to the significant growth of the internet operations, and the addition of customers on the PCW 6.0 product. The principal areas of increases were leased equipment, royalties, compensation and communication costs. These costs increased disproportionately due to the change in business mix. Research and development costs increased 56% for the quarter ended March 31, 1997 for the same quarter last year. The increase was due to additional internet staffing over the prior year. Selling and marketing costs increased 15.6% for the quarter ended March 31, 1997 from the same quarter last year. The increase was mainly due to compensation and commissions. General and administrative expenses increased 28% for the quarter ended March 31, 1997. The main increases were due to an increase in the provision for doubtful accounts and an increase in professional fees compared to the same quarter in 1996. Interest expense increased 592% for the three months ended March 31, 1997. This reflects the increase in term loan amount outstanding and the $2.5 million convertible debenture issued in December 1996. Page 7 of 10 ITEM 2 MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULT OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES: FOR THE THREE MONTHS AND QUARTER ENDED MARCH 31, 1997 Although the company continued to generate positive cash flow from operating activities due mainly to an increase in accounts payable of over $1.7 million, net cash provided declined by 62%. New equipment and capitalized software costs were 28% lower than last year and no new direct borrowings were incurred. The Company's $1.0 million line of credit expired in February 1997. The company is experiencing working capital constraints which has hindered operations. To lessen such constraints, on May 5, 1997 the Company entered into a loan and security agreement with its principal shareholder, PICO Holdings ("PICO"), to provide working capital loans of up to $1.0 million. In connection with the extension by PICO of such $1.0 million facility, the Company and PICO restructured the terms of its $2.5 million subordinated convertible debenture ("Debenture") and agreed that the contemplated Company rights offering of 1.25 million shares to the Company's common stockholders (other than PICO), at a price of $2.00 per share with PICO purchasing all shares which remained unsubscribed, would occur at a time to be determined by the Company and at a price to be determined by PICO. 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 8 of 10 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On May 5, 1997, the Company executed a Loan and Security Agreement (the "Loan Agreement") with Physicians Insurance Company of Ohio ("PICO"), under which PICO agreed to make a secured loan to the Company of up to $1,000,000. Borrowings under the Loan Agreement bear interest at a fixed rate equal to 14% per annum, and are payable on September 30, 1997, the maturity date of the loans. All advances under the Loan Agreement will be secured by a pledge of substantially all the Company's assets, which liens are subject to the prior lien of the Company's lender. The consummation of the loan transaction is subject to the consent of the Company's lender. At the time of the Loan Agreement, PICO was the beneficial owner of 3,396,400 shares of the Company's outstanding common stock which includes 1.25 million shares deliverable upon conversion of a $2.5 million Convertible Subordinated Debenture purchased on November 27, 1996 (the "Debenture"). In connection with the $1,000,000 Loan, the terms of the Debenture were amended. The maturity date of the Debenture was changed from December 31, 2001 to April 30, 1999, the Company's ability to prepay or redeem the Debenture was eliminated, the conversion rate was changed from $2.00 per share to the lesser of $1.56 per share (the market value on the date of the Loan Agreement) or the average trading price of the Company's stock over the twenty (20) trading days prior to conversion and certain restrictive covenants were added to the Debenture. In addition, the agreement made in connection with the sale of the Subordinated Debenture was amended to provide that the contemplated Company rights offering of 1.25 million shares to the Company's common stockholders (other than PICO), at a price of $2.00 per share with PICO purchasing all shares which remained unsubscribed, would occur at a time to be determined by the Company and at a price to be determined by PICO. The Company has also granted PICO a Common Stock Purchase Warrant for 640,000 shares. The Warrant is exercisable until April 30, 2000 at the lower of $1.56 per share (the market value of the Company's common stock on the date of the Agreement) or the average price per share during the fifteen consecutive trading days preceding the exercise of the Warrant. The Warrant also provides for certain anti-dilution protection, piggyback rights and a one-time demand registration right. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT 27 (b) REPORT ON FORM 8-K - NONE Page 9 of 10 SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, there unto duly authorized. PC QUOTE, INC. Date: May 20, 1997 By: /s/ Louis J. Morgan -------------------- Louis J. Morgan Chairman and Treasurer By: /s/ Michael A. Press -------------------- Michael A. Press Chief Financial Officer Page 10 of 10 EX-27 2 EXHIBIT 27
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 652,124 0 942,247 425,095 0 1,788,827 10,673,156 8,073,849 10,774,583 5,216,769 1,025,000 0 0 7,365 3,443,637 10,774,583 4,055,067 4,055,067 3,438,699 3,438,699 2,363,187 195,000 163,278 (1,900,755) 0 0 0 0 0 (1,900,755) (0.26) (0.26)
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