-----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, ScGZX9XnTn+Vy3n2qTViMlAVu78FfisWuBcQA2FyMMoCP6oyfGohYorIdYRp2Ey3 jUsKzEzqrtLQzaIX6U45NA== 0001047469-97-002301.txt : 19971103 0001047469-97-002301.hdr.sgml : 19971103 ACCESSION NUMBER: 0001047469-97-002301 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19971031 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: S-2 SEC ACT: SEC FILE NUMBER: 333-39245 FILM NUMBER: 97705934 BUSINESS ADDRESS: STREET 1: 300 S WACKER DR STREET 2: STE 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 S-2 1 FORM S-2 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION OCTOBER 31, 1997. REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ PC QUOTE, INC. DELAWARE 36-3131704 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) PC QUOTE, INC. WILDMAN, HARROLD, ALLEN & DIXON 300 SOUTH WACKER DRIVE, #300 225 WEST WACKER DRIVE CHICAGO, IL 60606 CHICAGO, ILLINOIS 60606-1229 (312) 913-2800 (312) 201-2000 ATTENTION: JIM R. PORTER ATTENTION: DONALD E. FIGLINLO CHIEF EXECUTIVE OFFICER (Name, address, including zip code, and (Address, including zip code, and telephone number, including area code, of telephone number, including area code, agent for service) of registrant's principal executive office) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividends or interest reinvestment plans, check the following box. /X/ If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1), check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. / / CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE* REGISTRATION FEE Transferable Subscription Rights........ 7,384,245 0 0 0 Common Stock, $.001 par value........... 7,384,245* $1.00 $7,384,245.00* $2,237.65
* Estimated solely for the purpose of calculating the Registration Fee. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED OCTOBER 31, 1997 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS 7,384,245 SHARES [LOGO] COMMON STOCK ------------------ PC Quote, Inc., a Delaware corporation (the "Company"), is distributing to holders of record of shares of its common stock, $.001 par value per share (the "Common Stock"), as of the close of business on , 1997 (the "Record Date"), other than Imprimis Investors LLC and Wexford Spectrum Investors LLC (together, the "Wexford Affiliates") which have agreed not to participate in the Rights Offering, transferable subscription rights (the "Rights") to purchase additional shares of Common Stock (the "Basic Subscription Privilege") at a price of $1.00 per share (the "Subscription Price"). Stockholders will be entitled to one Right for each share of Common Stock held on the Record Date. Each Right will entitle its holder (a "Holder") to purchase one share of Common Stock (collectively the "Underlying Shares"). No fractional shares of Common Stock will be sold, and fractional interests will be rounded down. Upon exercise of the Basic Subscription Privilege, a Holder will also be entitled to purchase at the Subscription Price a pro rata portion of any Underlying Shares that are not otherwise subscribed for pursuant to the exercise of Basic Subscription Privileges (the "Oversubscription Privilege"). In the event there are any unexercised Rights after the Basic Subscription Privileges and Oversubscription Privileges have been fulfilled, then any such remaining unexercised Rights (the "Unexercised Allotment;" and, collectively, with the Basic Subscription Privilege, Oversubscription Privilege, and the sale of shares of Common Stock in connection therewith, the "Rights Offering") shall be offered at the Subscription Price to an unaffiliated third party or members of management. The Common Stock is currently traded on The American Stock Exchange. On , 1997 the closing bid price of the Common Stock as reported on The American Stock Exchange was per share. The Company intends to make application to list the Rights and the Underlying Shares issuable upon exercise of the Rights on The American Stock Exchange. There can be no assurance that such Rights or Underlying Shares will be so listed before completion of the Rights Offering or at all. Moreover, even if the Rights are listed no assurances can be given that a market for the Rights will develop. THE RIGHTS WILL EXPIRE AT , Chicago Time, on , , unless extended by the Company (such date, as it may be extended on one or more occasions, is referred to herein as the "Expiration Date"). In no event will the Expiration Date be extended beyond , . If the Company elects to extend the term of the Rights, it will issue a press release to such effect not later than the first day The American Stock Exchange is open for trading following the most recently announced Expiration Date. Funds provided in payment of the Subscription Price will be held by American Securities Transfer, Inc., as the Subscription Agent, until the Closing, which will occur promptly following Expiration Date. The exercise of Rights is irrevocable once made, and no interest will be paid to Holders exercising their Rights. AN INVESTMENT IN THE COMPANY'S COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES OFFERED HEREBY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS , . AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-2 (together with any amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Rights and the Underlying Shares. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are contained in schedules and exhibits to the Registration Statement as permitted by the rules and regulations of the Commission. Statements contained in this Prospectus as to the contents of any contract or other document referred to herein or therein are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, or incorporated by reference therein, for a more complete description of the matter involved and each such statement shall be deemed qualified in all respects by such reference. Such additional information may be obtained from the Commission's principal office in Washington, D.C. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files periodic reports, proxy and information statements and other information with the Commission. The Registration Statement and the exhibits thereto, as well as such reports, proxy and information statements and other information, filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and at the Regional Offices of the Commission located at 7 World Trade Center, New York, NY 10048 and Citicorp Center, 500 Madison Street, Suite 1400, Chicago, IL 60661. Copies of such material can be obtained upon written request addressed to the Public Reference Section of the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Web site on the Internet at www.sec.gov that contains reports, proxy and information statements and other information filed electronically with the Commission by registrants like the Company. The Common Stock is traded on The American Stock Exchange and reports, proxy and information statements and other information concerning the Company may be inspected at the offices of The American Stock Exchange, 86 Trinity Place, New York, NY 10006. DOCUMENTS INCORPORATED BY REFERENCE The following documents filed by Company with the Commission are incorporated herein by reference: (i) the Company's 1996 Annual Report to Stockholders, containing the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as amended; (ii) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997; (iii) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, as amended on October 30, 1997; and (iv) the Company's Current Report on Form 8-K dated July 16, 1997, as amended on August 26, 1997. Copies of the Company's 1996 Annual Report to Stockholders, containing its Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 accompany this Prospectus. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior to the termination of the Rights Offering, shall be deemed to be incorporated by reference to this Prospectus and to be a part hereof from the respective dates of the filing thereof. Any statement contained in a document incorporated or 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 each person, including each beneficial owner, to whom a copy of this Prospectus is delivered, on the written or oral request of such person, a copy of any or all documents incorporated by reference into this Prospectus that are not delivered herewith, except the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Requests for such copies should be directed to the Company's principal office: PC Quote, Inc., 300 South Wacker Drive, Suite 300, Chicago, Illinois 60606, Attn: Darlene Czaja, Tel. No. (312) 913-2800. 2 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. THE COMPANY PC Quote, Inc., a Delaware corporation (the "Company"), provides real-time and delayed financial data, including equities, commodities, futures and options quotations and news on a subscription basis to professional and consumer markets worldwide. Professional clients include brokerage firms, banks, insurance companies, fund managers, institutional and professional traders. The Company's "web site" offers non-fee delayed quotes to all visitors and real time subscription market data services to fee-based subscribers. The Company's principal executive offices are located at 300 South Wacker Drive, #300, Chicago, Illinois 60606 and its telephone number is (312) 913-2800. The Company's World Wide Web address is www.pcquote.com. THE RIGHTS OFFERING Rights............................ Each Holder of Common Stock (other than the Wexford Affiliates) will receive one transferable Right for each share of Common Stock held of record on the Record Date. An aggregate of 7,384,245 Rights will be distributed pursuant to the Rights Offering. An aggregate of 7,384,245 shares of Common Stock will be sold if all Rights are exercised. The exercise of Rights is irrevocable once made, and no Underlying Shares will be issued until the closing following the Expiration Date. Basic Subscription Privilege...... Holders are entitled to purchase at the Subscription Price one share of Common Stock for each Right held. See "The Rights Offering--The Rights" and "Subscription Privileges--Basic Subscription Privilege." Oversubscription Privilege........ Each Holder who elects to exercise his or her Basic Subscription Privilege may also subscribe at the Subscription Price for Underlying Shares, if any, remaining unissued after satisfaction of all subscriptions pursuant to the Basic Subscription Privilege. If an insufficient number of Underlying Shares is available to satisfy fully all elections to exercise the Oversubscription Privilege, the available Underlying Shares will be allocated on a pro rata basis among Holders who exercise their Oversubscription Privilege based on the respective numbers of Underlying Shares subscribed for by such Holders pursuant to the Basic Subscription Privilege. In the event any Rights remain unexercised following satisfaction of the Basic Subscription and Oversubscription Privileges, the Company intends to offer the remaining Underlying Shares for purchase at the Subscription Price to an unaffiliated third party or members of management. See "The Rights Offering--The Rights" and "Subscription Privileges--Oversubscription Privilege." Subscription Price................ $1.00 in cash per share of Common Stock.
3 Shares of Common Stock Outstanding after Rights Offering........... Assuming that all Rights are fully exercised, 19,768,490 shares will be outstanding after the Rights Offering, based on 12,384,245 shares outstanding on the Record Date. The final number of shares of Common Stock that will be outstanding after the Rights Offering is dependent upon the extent to which Rights are exercised. Assuming the availability of sufficient funds therefor, the Company intends to use a portion of the net proceeds of the Rights Offering to repurchase an aggregate of four million shares of Common Stock from the Wexford Affiliates. Upon consummation of this proposed repurchase, 15,768,490 shares of Common Stock will be outstanding and the Company will hold 4,000,000 shares in its treasury. See"--Use of Proceeds," "Recent Developments--Financing Transaction with the Wexford Affiliates," and "Reason for the Rights Offering and Use of Proceeds." Transferability of Rights......... The Rights are transferable, and it is anticipated that they will trade on The American Stock Exchange until the close of business on the last trading day prior to the Expiration Date. In addition, the Company intends to make application to list the Rights and the Underlying Shares on The American Stock Exchange. There can be no assurance that such Rights or Underlying Shares will be so listed before completion of the Rights Offering or at all. The Basic Subscription Privilege and the Oversubscription Privilege are only transferable together, and any transfer of a Right will be deemed a transfer of both the Basic Subscription Privilege and the Oversubscription Privilege. There can be no assurance, however, that any market for Rights will develop. See "The Rights Offering--Method of Transferring Rights." Record Date....................... , . Expiration Date................... , , unless extended by the Company from time to time, provided that the Expiration Date shall not be later than , , unless the Board of Directors determine that a material event has occurred which necessitates one or more further extensions of the Rights in order to permit adequate disclosure of information concerning such event to Holders. See "The Rights Offering--Expiration Date." If the Company elects to extend the term of the Rights, it will issue a press release to such effect not later than the first day on which The American Stock Exchange is open for trading following the most recently announced Expiration Date. In the event Company elects to extend the term of the Rights Offering by more than 14 calendar days, it will, in addition, cause written notice of such extension to be promptly sent to all Holders of record on the Record Date.
4 Procedure for Exercising Rights... Rights may be exercised by properly completing the certificate evidencing such Rights (the "Subscription Certificate") and forwarding such Subscription Certificate (or following the Guaranteed Delivery Procedures, as defined below) to the Subscription Agent on or prior to the Expiration Date, together with payment in full of the Subscription Price for each Underlying Share subscribed for pursuant to the Subscription Privileges. If the mail is used to forward Subscription Certificates, it is recommended that insured, registered mail be used. The exercise of a Right may not be revoked or amended. If time does not permit a Holder or transferee of a Right to deliver its Subscription Certificate to the Subscription Agent on or before the Expiration Date, such Holder or transferee should make use of the Guaranteed Delivery Procedures described under "The Rights Offering--Exercise of Rights." If paying by uncertified personal check, please note that the funds paid thereby may take at least five business days to clear. Accordingly, Holders who wish to pay the Subscription Price by means of uncertified personal check are urged to make payment sufficiently in advance of the Expiration Date to ensure that such payment is received and clears by such date and are urged to consider payment by means of certified or cashier's check, money order or wire transfer of funds. Persons Holding Shares, or Wishing to Exercise Rights Through Others.......................... Persons holding shares of Common Stock, and receiving the Rights distributable with respect thereto, through a broker, dealer, commercial bank, trust company or other nominee, as well as persons holding certificates of Common Stock personally who would prefer to have such institutions effect transactions relating to the Rights on their behalf, should contact the appropriate institution or nominee and request it to effect the transactions for them. See "The Rights Offering--Exercise of Rights." Closing and Issuance of Common Stock........................... The closing will occur and certificates representing Underlying Shares will be delivered to subscribers as soon as practicable after the Expiration Date and after all prorations have been effected. See "The Rights Offering--Subscription Privileges." No Underlying Shares will be issued until the closing. Funds delivered to the Subscription Agent for the exercise of Subscription Privileges will be held in escrow by the Subscription Agent until the closing. No interest will be paid to Holders on funds held by the Subscription Agent. In the case of Holders exercising Oversubscription Privileges, any excess funds will be returned to the Holders as soon as practicable following the closing.
5 Use of Proceeds................... It is anticipated that the net proceeds to Company will be approximately $7.2 million if all of the Underlying Shares are purchased in the Rights Offering. If less than all of the Underlying Shares are purchased, the proceeds will be correspondingly reduced. $4.0 million of such proceeds will be used to repurchase an aggregate of four million shares of Common Stock from the Wexford Affiliates with any additional proceeds used for general corporate purposes. See "Recent Developments-- Financing Transaction with Wexford Affiliates," and "Reason for the Rights Offering and Use of Proceeds." Subscription Agent................ American Securities Transfer, Inc. The American Stock Exchange Com- mon Symbol...................... PQT The American Stock Exchange Rights Symbol..........................
6 RISK FACTORS Prospective investors should carefully consider the following risk factors in addition to other information set forth in this Prospectus before making a decision to purchase any of the securities offered hereby. LOSS OF SIGNIFICANT CUSTOMERS; RECENT OPERATING LOSSES AND DECLINING REVENUES. In December 1996, the Company discontinued providing services to a major client which accounted for net revenues of approximately $1.7 million, $0.6 million and $0.6 million in 1996, 1995, and 1994, respectively. Also, beginning in January 1997, the Company significantly reduced the level of services to another major customer that accounted for revenue of $3.4 million, $3.9 million, and $3.6 million in 1996, 1995 and 1994, respectively. The Company incurred a loss of approximately $3.3 million for the year ended December 31, 1996, and as of December 31, 1996, had an accumulated deficit of approximately $8.9 million and deficit working capital of $1.5 million. These conditions raised substantial doubt about the Company's ability to continue as a going concern. There can be no assurance that the Company will operate profitably in the future. The ability of the Company to continue as a going concern is dependent upon a number of factors including completion of this Rights Offering. See "Management Discussion and Analysis of Financial Condition and Results of Operations" and Note 14 to the Financial Statements for the Fiscal Year Ended December 31, 1996, as filed on Form 10-K/A incorporated herein by reference. For the six months and quarter ended June 30, 1997, the Company's service revenue decreased 2% and 6%, respectively, from the same periods of 1996. The decrease in revenue was due to the loss of two major customers in the Company's traditional direct data feed business. The lost revenue, $3.4 million and $1.4 million for the six months and quarter respectively, was substantially offset by increases in service revenue in the Company's traditional and internet businesses, as well as revenue from the sale of advertising on the internet. NEED FOR ADDITIONAL FINANCING. The Company believes at this time that the maximum net proceeds to the Company from the Rights Offering will be sufficient to satisfy the Company's current need for capital. However, events could occur or opportunities could arise which could increase such need for capital beyond the amount of the maximum net proceeds to the Company from the Rights Offering. Upon such events or opportunities the Company would be required to generate additional sources of funding to continue its planned activities or exploit the perceived opportunities. There is no assurance that any such additional sources of funding will be available. Should such additional funding become necessary, and should PC Quote be unable to obtain such funding, the Company may be required to sell certain of its assets, cease operations or forego the perceived opportunities. None of the stockholders receiving or exercising Rights in the Rights Offering will be obligated to provide any additional capital to the Company beyond amounts paid pursuant to the Basic Subscription Privilege or the Oversubscription Privilege. CONTROL BY PRINCIPAL STOCKHOLDERS. Provided PICO Holdings, Inc. and its affiliate, Physicians Insurance Company of Ohio (together, "PICO"), neither exercises nor converts outstanding warrants or a convertible subordinated debenture, and after giving effect to the Rights Offering and the proposed repurchase of four million shares from the Wexford Affiliates, PICO will beneficially own approximately 49.1% of the outstanding shares of Common Stock, assuming PICO and all other Holders fully exercise all of the Rights distributed to them under the Basic Subscription Privilege. As a result, PICO will be able to control the outcome of matters requiring a stockholder vote, including the election of directors. Such control could preclude any unsolicited acquisition of the Company and, consequently, adversely affect the market price of the Common Stock. See "Recent Developments--Transactions with Physicians Insurance Company of Ohio and PICO Holdings, Inc." Prior to giving effect to the Rights Offering, the Wexford Affiliates are deemed to beneficially own five million five hundred thousand shares of Common Stock, constituting approximately 42.7% of the outstanding shares of Common Stock. In connection with the terms of a certain Stock and Warrant Purchase Agreement dated October 15, 1997 between the Company and the Wexford Affiliates (the 7 "Purchase Agreement"), the Wexford Affiliates have agreed not to participate in the Rights Offering. The Company intends to use $4.0 million of the net proceeds from the Rights Offering to repurchase from the Wexford Affiliates an aggregate of four million shares of Common Stock, which shares the Company plans to hold in its treasury upon consummation of the repurchase. After giving effect to the Rights Offering and the repurchase, the Wexford Affiliates will beneficially own 9.2% of the outstanding shares of Common Stock. Such ownership could have the effect of further discouraging the unsolicited acquisition of the Company and, consequently, adversely affect the market price of the Common Stock. See "Recent Developments--Financing Transaction with Wexford Affiliates." VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company's revenue, gross profits and earnings have fluctuated and, in the future, may fluctuate from quarter to quarter based on such factors as the number, size and scope of services and software applications which the Company provides, the contractual terms for the provision of such services and software applications, any delays incurred in connection with an agreement to provide services and software applications, the adequacy of provisions for losses, the accuracy of estimates of resources required to complete ongoing service offerings and general economic conditions. Unanticipated variations in any of such factors may cause significant variations in operating results in any particular quarter and could result in losses for such quarter. An existing customer's unanticipated termination of or failure to renew a major agreement for the provision of services and software applications during a quarter could have a material adverse effect on the Company's business, financial condition and results of operations. AGREEMENTS WITH EXCHANGES. The Company's ability to provide services enabling its 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 nonrenewal 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 Distribution Agreement is for a two-year term but provides for automatic one-year renewals thereafter unless terminated pursuant to ninety days' notice. The termination, expiration or nonrenewal of the Distributor Agreement could have a material adverse effect on the Company's business, financial condition and results of operations. RELIANCE UPON EXECUTIVE OFFICERS AND KEY EMPLOYEES. The success of the Company is highly dependent upon the efforts and abilities of its executive officers, particularly Mr. Jim Porter, the Company's Chairman of the Board and Chief Executive Officer. Although its executive officers and key employees have entered into agreements with the Company which contain nondisclosure covenants, such agreements do not guarantee that these individuals will continue their employment with the Company. The loss of services of certain executive officers or key employees for any reason could have a material adverse effect upon the Company's business, financial condition and results of operations. COMPETITION. The market for the on-line provision of financial information such as equities, commodities, futures and options quotations and news through services and software applications similar to those the Company provides includes a large number of competitors and is subject to rapid change. The Company believes its primary competitors include Automatic Data Processing, the Telerate unit of Dow Jones & Co., Bloomberg, the Comstock unit of Standard & Poors, the ILX unit of Thomson Corporation, Telesphere Global Ticker, Reuters, Quote.com and Data Broadcasting Corporation. Many of these competitors have significantly greater financial, technical and marketing resources and greater name 8 recognition than the Company. Such competition may impose additional pricing pressures on the Company. There can be no assurance that the Company can compete successfully with its existing competitors or with any new competitors. SUBSCRIPTION CONTRACT RISKS. Many of the Company's subscription contracts are for services and software applications which are critical to the operations of its customers' businesses. The Company's failure or inability to deliver services and software to its customers' satisfaction could have a material adverse effect on its customers' operations and could consequently subject the Company to litigation or damage the Company's reputation, which could have a material adverse effect on the Company's business, financial condition and results of operations. Substantially all of the Company's subscription contracts are of relatively short duration; their maximum length is three years. Although these contracts carry early termination penalties, the unexpected termination or nonrenewal by a client of a significant contract could have a material adverse effect on the Company's business, financial condition and results of operations. CUSTOMER CONCENTRATION. The Company has derived a significant portion of its revenues from a limited number of large customers. In 1995, 1996 and for the six months ended June 30, 1997, the Company's largest customer accounted for approximately %, % and % of its revenues, respectively, and its ten largest clients accounted for approximately %, % and % of its revenues, respectively. The volume of services provided to specific customers varies from year to year. There can be no assurance that a large customer in one year will continue to use the Company's services in a subsequent year. Furthermore, the Company is not always the exclusive provider of securities quotations and news to its customers. The loss of any large customer could have a material adverse effect on the Company's business, financial condition and results of operations. TECHNOLOGICAL ADVANCES. The information technology industry has experienced and is continuing to experience rapid technological advances and developments. The Company's success will depend in part on its ability to develop solutions which keep pace with continuing changes in information processing technology, evolving industry standards and changing client preferences. While the Company is actively engaged in research and development activities to meet such client needs and preferences, there can be no assurance that the Company will be successful in addressing these developments on a timely basis or that, if addressed, the Company will be successful in the marketplace. The Company's delay or failure to address these developments could have a material adverse effect on the Company's results of operations. In addition, there can be no assurance that technologies developed by others will not render the Company's services noncompetitive or obsolete. INTELLECTUAL PROPERTY RIGHTS. Software developed by PC Quote in connection with customer services typically is licensed for use by the customers. The Company holds no patents or registered copyrights and has no present intention of registering any copyrights or filing any patent applications. The following 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, 9 however that the steps taken by the Company will be adequate to deter misappropriation of proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. RISKS OF LICENSING PROPRIETARY SOFTWARE APPLICATIONS. The Company does not have patent or federal copyright protection for its proprietary software products. Although applicable software is readily duplicated illegally by anyone having access to appropriate hardware, the Company attempts to protect its proprietary software through license agreements with customers and common law trade secret protection and non-disclosure contract provisions in its agreements with its employees. The Company uses security measures, including a hardware key, which restricts access to its on-line services unless proper password identification from a PC Quote user is provided. As an additional safeguard, the Company provides only the object code on its diskette and retains the source code. There can be no assurance that such licensees will properly utilize the Company's software applications and services. The failure by licensees to adhere strictly to the Company's standards could subject PC Quote to litigation and harm the Company's reputation thereby resulting in a material adverse effect on the Company's business, financial condition and results of operations. SIGNIFICANT UNALLOCATED NET PROCEEDS. The only specific allocation of the Company's anticipated net proceeds from the Rights Offering is the repurchase of an aggregate of four million shares of Common Stock for total consideration of $4.0 million. Accordingly, a portion of the Company's anticipated net proceeds of the Rights Offering has not been committed to specific uses. The Board of Directors of the Company will have broad discretion with respect to the use of such unallocated net proceeds. See "Reason for the Rights Offering and Use of Proceeds." REQUIREMENTS FOR LISTING SECURITIES ON THE AMERICAN STOCK EXCHANGE. The Common Stock is currently listed with The American Stock Exchange. The Company intends to make application to list the Rights and the Underlying Shares of Common Stock issuable upon their exercise for trading on The American Stock Exchange. If the Company is unable to maintain the standards for continued listing, the Common Stock and the Rights, if listed, could be subject to delisting from The American Stock Exchange. Trading, if any, would thereafter be conducted on an electronic bulletin board established for securities that do not meet listing requirements or in what is commonly referred to as the "pink sheets." As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company's securities. POSSIBLE VOLATILITY OF STOCK PRICE. The Company's Common Stock is thinly traded and may experience significant price and volume fluctuations which could adversely affect the market price of the Common Stock without regard to the operating performance of the Company. ANTI-TAKEOVER PROVISIONS. The Company's Certificate of Incorporation and By-laws, the Delaware General Corporation Law and the Securities Exchange Act of 1934 contain certain provisions that could have the effect of discouraging or making more difficult the acquisition of the Company by means of a tender offer, a proxy contest or otherwise, even though such an acquisition might be economically beneficial to the Company's stockholders. These include provisions under which (i) only the Board of Directors or an authorized special committee thereof may call meetings of stockholders, and (ii) stockholders must comply with certain advance notice procedures to nominate candidates for election as directors of the Company and to submit proposals for consideration at stockholders' meetings. The ability of the Board of Directors to issue up to 5,000,000 shares of preferred stock, in one or more classes or series, and with such powers, designations, preferences and relative, participating, optional or special rights, qualifications, limitations or restrictions as may be determined by the Board of Directors of the Company, also could make an acquisition of the Company more difficult. In addition, these provisions may make the removal of management more difficult, even in cases where such removal would be favorable to the interests of the Company's stockholders. 10 DEPENDENCE UPON FINANCIAL MARKETS. A significant portion of the Company's revenue is derived from supplying financial data and quotations related to U.S. financial exchanges and markets. Any significant downturn or other negative development with respect to those exchanges and markets could adversely effect the Company's revenue. CERTAIN RIGHTS OFFERING CONSIDERATIONS NO COMMITMENTS TO PURCHASE AND NO MINIMUM SIZE OF RIGHTS OFFERING. The Company does not have a commitment from any person to purchase any shares of Common Stock pursuant to the Rights Offering. In addition, no minimum amount of proceeds is required for the Company to consummate the Rights Offering. Accordingly, no assurances can be given as to the amount of gross proceeds that the Company will realize from the Rights Offering. See "Purpose of the Rights Offering and Use of Proceeds," "The Rights Offering," and "Plan of Distribution." ADDITIONAL SHARES ISSUABLE TO THE WEXFORD AFFILIATES. Pursuant to the terms of the Purchase Agreement, in the event the Rights Offering is not completed on or prior to January 24, 1998, the Wexford Affiliates will be entitled to receive, out of escrow, warrants to purchase up to 250,000 shares of Common Stock and, in the event the Rights Offering is not completed on or prior to February 28, 1998, the Wexford Affiliates will be entitled to receive warrants to purchase up to an additional 250,000 shares of Common Stock (such warrants, collectively, the "Additional Warrants"). The exercise price for the Additional Warrants is $2.00 per share. Were the Rights Offering not completed on or prior to February 28, 1998, thereby entitling the Wexford Affiliates to receive all of the Additional Warrants, their deemed beneficial ownership of Common Stock would increase to 44.8% of the outstanding Common Stock. See "--Control by Principal Stockholders" and "Recent Developments--Financing Transaction with Wexford Affiliates." DILUTION; DISCOUNT FROM MARKET PRICE. Holders who do not exercise their Subscription Privileges in full will realize a dilution in their percentage voting interest and ownership interest in future net earnings, if any, of the Company to the extent that Rights are exercised by other Holders. Provided PICO neither exercises nor converts outstanding warrants or a convertible subordinated debenture and assuming PICO fully subscribes to its Basic Subscription Privilege, and assuming no other Rights were exercised, and assuming the proposed repurchase of four million shares from the Wexford Affiliates does not occur, PICO would collectively own approximately 52.7% of the Company's Common Stock. In addition, the Subscription Price represents a % discount from the market price and could result in a reduction in the market price for the Company's Common Stock. LIMITED LIQUIDITY OF SECURITIES AND TRADING ACTIVITY. The Common Stock is thinly traded. The Company intends to make application to list the Rights and the Underlying Shares of Common Stock issuable upon exercise of the Rights on The American Stock Exchange. There can be no assurance that such Shares or Rights will be so listed before completion of the Rights Offering or at all. Furthermore, while the Company anticipates that the Rights will be traded on The American Stock Exchange, no assurances can be given that an efficient market for the Rights will develop or, if developed, be maintained. See "Risk Factors-- Control by Principal Stockholders." POSSIBLE EXTENSION OF EXPIRATION DATE. The Company has reserved the right to extend the Expiration Date to as late as , 199 . Funds deposited in payment of the Subscription Price may not be withdrawn and no interest will be paid thereon to Holders. See "The Rights Offering--Expiration Date." 11 THE COMPANY COMPANY OVERVIEW PC Quote, Inc. has over 17 years of experience in providing real-time and delayed financial information such as equities, commodities, futures and options quotations and news to professional and consumer markets worldwide. With its objective to become the leading provider of such quotations and news to new and existing clients, the Company focuses its marketing efforts on institutions such as brokerage firms, banks, insurance companies, fund managers, institutional and professional traders. To meet its objective the Company maintains a real-time database of last sale and bid/ask prices of more than 400,000 issues, including stocks, major stock indices, options on stocks and indices, Level 1 NASDAQ-quoted stocks, Level 2 NASDAQ market maker quotes, mutual funds, money market funds, futures contracts and options on futures contracts, traded on all North American stock, option and commodity exchanges. Also covered are exchange-traded issues from over 30 other countries around the world. The Company creates its database by gathering ticker and news feeds from stock 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. To support its database, the Company has software applications, which, running on clients' computers, process the data stream to allow the clients to monitor securities on an on-going real-time basis. They also create in the clients' computers a complete database of trading symbols, continuously updated by the data stream. This database gives the Company's clients instant access to security prices. The Company generates revenue primarily through subscriptions to its principal services. In addition, subscribers are charged certain installation and delivery fees, depending upon the service and broadcast delivery method selected. PRODUCTS AND SERVICES The cornerstone of the services provided by the Company is HyperFeed-TM-, the Company's digital real-time market data feed ("HyperFeed"). It is broadcast at 1024 kbs and 112 kbs and covers over 400,000 issues traded in over 30 countries, as well as the following additional information: (a) Dynamic NASDAQ Level II market maker quotes; (b) 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); (c) multiple levels of fundamental data; (d) fixed income pricing; and (e) other types of fixed and dynamic financial data. HyperFeed underlies all of the Company's other products and services, which basically function to access, view and utilize HyperFeed data in different ways. To produce and transmit HyperFeed, PC Quote uses multiple redundant, high speed data circuits to gather ticker and news feeds from securities exchanges and other sources. At the Company's production center in Chicago these feeds are directed into multiple redundant dynamic real-time databases from which HyperFeed is generated. HyperFeed is transmitted to customer sites over a satellite communications network, or by dedicated digital data circuits. At the customer site HyperFeed is received by a QuoteServer, an industry standard PC, which creates and maintains databases of real-time news and fundamental information. The QuoteServer can reside on a local area network, where the data it maintains is accessible to software applications running on workstations on the network, or it can function as a stand-alone unit, in which case its data is available to software applications running on the QuoteServer itself. In both instances the software applications accessing the data may be supplied by the Company, by third parties, or by the customer itself. 12 Software supplied by third parties, or customers themselves, utilize the Company's high-performance application program interfaces to access the QuoteServer's data. In this way the QuoteServer can supply data for virtually any purpose, including proprietary order execution systems, analytical modeling, internal risk management, order matching, or redistribution by on-line systems and wide area networks. Third party developers and customers using the application program interfaces for their own development pay a monthly fee for the interfaces, in addition to monthly HyperFeed fees. Customers using an application developed and marketed by a third party for use with HyperFeed do not pay for the interfaces; they pay only for HyperFeed itself. The Company also maintains Internet QuoteServers at its facility. These QuoteServers function just like any other QuoteServers, supporting applications developed by the Company, or by third parties or customers using Internet-enabled versions of the Company's application program interfaces. In this way the Company and its customers are able to benefit from the Internet's substantially lower costs for service, communications and startup, its ease of access, and its worldwide availability. SOFTWARE APPLICATIONS AND SERVICES MARKETED BY REGISTRANT To complement the HyperFeed database, the Company has several high-end software applications which it licenses to HyperFeed subscribers. PC QUOTE 6.0. PC Quote 6.0 for Windows is a comprehensive suite of real-time professional trading analysis tools. Running under Microsoft-TM- Windows-TM-3.1 or Windows-TM-95, or Windows NT-TM-, PC Quote 6.0 offers unlimited quote pages, charting, technical analysis, searchable news, time of sale and quote, NASDAQ Level II market maker screens, dynamic data exchange into Microsoft-TM- Excel-TM- tickers, alerts, baskets and more. PC Quote 6.0 can be fed by QuoteServers on the customer's local area network or on 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 wider range of the professional marketplace. The software application for PC Quote 6.0 is licensed from an unaffiliated third party pursuant to a Software Distributor Agreement dated December 4, 1995. See "Risk Factors--Software Licensing Agreement." MARKETSMART. Another of the Company's software applications is MarketSmart, a consumer-level, non-professional service that is available on the Internet's World Wide Web. Using leading World Wide Web "browsers" such as Netscape Navigator-TM- and Microsoft Internet Explorer-TM-, subscribers log in to Company-maintained "sites" on the Web to get unlimited real-time or 20-minute delayed quotes, charts, portfolio services, option pages, fund pages and other pages of market information. Unlike PC Quote 6.0, these pages are not dynamic; they present static snapshots of data, but can be refreshed manually at any time and as often as the subscriber wishes. Data presented via MarketSmart is currently limited to U.S. and Canadian exchanges, although subscribers may be from any country. PC QUOTE FOR DOS AND OS/2. PC Quote for DOS and OS/2 displays the full range of HyperFeed data, including news and fixed income data, in a variety of colorful, easy to use displays and windows. The OS/2 version also displays dynamic NASDAQ Level II market maker quotes. MARKET DATA CONTROLS. Market Data Controls do not display information, but rather represent application program interfaces that allow a Microsoft(5) and Visual Basic(5) developer to write custom applications which include real-time market data and related fundamental information. The Company recently released Internet-enabled versions of the Market Data Controls, and plans to use its World Wide Web site to market applications developed with the Controls. CO-MARKETED SOFTWARE APPLICATIONS AND SERVICES. A number of third party applications and services are also co-marketed by the Company. These include FirstAlert--charting and technical analysis software 13 developed by Roberts-Slade, Inc., Market Guide fundamental databases, S&P Electronic Stock Guide, Comtex News and Dow Jones News. INTERNET SERVICES. In July of 1995, the Company established an internet web site offering free real-time delayed quotes and other information to all visitors. PC Quote realizes revenue from its Internet Services through subscription fees derived from real-time quotes. During 1996 PC Quote began to realize revenue from the sale of advertising on its web site's free quote pages and MarketSmart, provide market information for other web sites, offer development tools for internet-based applications, and form 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. The Company's primary Internet Services include MarketSmart and PC Quote 6.0 for Windows ("Internet-based PC Quote 6.0"). MarketSmart offers non-professional investors internet access to a range of quote viewing options. Internet-based PC Quote 6.0 is identical to the Company's PC Quote 6.0 for professional investors. Internet-based PC Quote 6.0 provides data powered by HyperFeed such as unlimited quote pages, news, charts, technical analysis and time-of-sale quotes among other products. Additionally, in January 1997, Microsoft Excel's-TM- new interactive Web Query technology implemented as the "in the box" enables Microsoft Excel 97-TM- users to query PC Quote data. In addition to its own Web site, the Company makes its data available to those accessing the Internet via on-line service providers through redistribution agreements with Microsoft Network, CompuServe Information Service, AT&T Interchange/Business Net, the Chicago Sun-Times, Apple e-world, and Newscorp/MCI Ventures. Redistribution agreements are essentially wholesaling arrangements whereby other organizations resell the Company's data to their customers. Redistributors differ from the Company's web site service in that redistributors have the Company's QuoteServer(s) at their operations center and the redistributor becomes responsible for end-user billing. RECENT DEVELOPMENTS TRANSACTIONS WITH PHYSICIANS INSURANCE COMPANY OF OHIO AND PICO HOLDINGS, INC. On November 14, 1996, the Company entered into an agreement (the "Debenture Agreement") with Physicians Insurance Company of Ohio, ("PICO"), which then owned approximately 30% of the Company's outstanding shares of Common Stock. Pursuant to the Debenture Agreement, PICO invested $2.5 million in the Company in exchange for a Subordinated Convertible Debenture (the "Debenture") in the principal amount of $2.5 million with interest at 1% over prime. PICO made the investment and the Debenture was issued on December 2, 1996. The Debenture was to mature on December 31, 2001 and is convertible at any time by PICO into 1.25 million shares of Common Stock of the Company (subject to adjustment in certain cases). On May 5, 1997, the Company and PICO Holdings, Inc. ("Holdings") entered into a Loan and Security Agreement (the "Loan Agreement"), under which Holdings agreed to make a secured loan to the Company in an aggregate principal amount of up to $1.0 million at a fixed rate equal to 14% per annum. Unless otherwise extended, the entire principal balance and all accrued interest due under the Loan Agreement were payable on September 30, 1997. All advances under the Loan Agreement are secured by a pledge of substantially all of the assets of the Company. These liens are subject to the prior lien of the Company's primary lender, Lakeside Bank. Holdings will be paid a "facility fee" of $40,000, plus interest at a rate equal to 14% per annum, on the maturity date of the loan contemplated by the Loan Agreement. In connection with the Loan Agreement, the Company and PICO entered into a First Amendment to the Debenture and Debenture Agreement (the "Debenture Amendment"), pursuant to which the terms of the Debenture were restructured as follows: (a) the maturity date of the Debenture is now April 30, 1999 instead of December 31, 2001; (b) the Debenture may not be prepaid or redeemed without the consent of 14 PICO; (c) the conversion rate on the Debenture has been changed from $2.00 per share to the lower of (i) the mean of the closing bid price per share for the 20 trading days preceding exercise of the Debenture or (ii) $1.5625 per share (the market price of the Company's Common Stock on the date of the Debenture Amendment); (d) certain negative covenants were added to the Debenture Agreement; and (e) the rights offering contemplated by the Debenture Agreement will be at such time and at a price as PICO and the Company shall agree. Interest under the Debenture will continue to be payable in cash or, at the option of PICO, in shares of the Company's Common Stock at the market value of such shares at the time of payment. Also on May 5, 1997, in consideration of the loan by Holdings to the Company, the Company issued a Common Stock Purchase Warrant (the "Warrant") to Holdings entitling Holdings to purchase a minimum of 640,000 shares of the Company's Common Stock at a price per share (the "Warrant Price") equal to the lesser of (a) the mean of the closing bid price per share for the 20 trading days preceding exercise of the Warrant or (b) $1.5625 per share (the market value of the Company's Common Stock on the date the Warrant was issued). The Warrant expires on April 30, 2000. In lieu of exercising the Warrant for cash, Holdings may elect to receive shares of the Company's Common Stock equal to the "value" of the Warrant determined in accordance with a formula specified in the Warrant (the "Conversion Value"). The number of shares of the Company's Common Stock subject to the Warrant and the Warrant Price will be adjusted to reflect stock dividends; reclassifications or changes of outstanding securities of the Company; any consolidation, merger or reorganization of the Company; stock splits; issuances of rights, options or warrants to all holders of shares of the Company's Common Stock exercisable at less than the current market price per share; and other distributions to all holders of shares of the Company's Common Stock. In the event of any sale, license or other disposition of all or substantially all of the assets of the Company or any reorganization, consolidation or merger involving the Company in which the holders of the Company's securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity (an "Acquisition"), if the successor entity does not assume the obligations of the Warrant and Holdings has not fully exercised the Warrant, the unexercised portion of the Warrant will be deemed automatically converted into shares of the Company's Common Stock at the Conversion Value. Alternatively, Holdings may elect to cause the Company to purchase the exercised portion of the Warrant for cash upon the closing of any Acquisition for an amount equal to (a) the fair market value of any consideration that would have been received had Holdings exercised the unexercised portion of the Warrant immediately before the record date for determining stockholders entitled to participate in the proceeds of the Acquisition, less (b) the aggregate Warrant Price. The Warrant also provides for certain piggyback registration rights and a one-time demand registration right. In August 1997, the Company and Holdings agreed to amend the Loan Agreement and related documents to increase the amount of the secured loan from Holdings to the Company from $1.0 million up to $2.0 million. The terms of the Loan Agreement otherwise remained substantially the same, except that the "facility fee" of $40,000 was eliminated for new advances. In connection with the increase of the loan amount pursuant to such amendment, the Company granted Holdings an additional Common Stock Purchase Warrant for a minimum of 500,000 shares of the Company's Common Stock. The terms of the additional warrant are substantially the same as those contained in the Warrant, except that the conversion price is the lesser of (a) $2.00 per share or (b) the mean of the closing bid price per share for the 20 trading days preceding exercise of the additional warrant. The additional warrant also provides for certain piggyback registration rights and a one-time demand registration right. On September 22, 1997 the Company and Holdings executed a second amendment to the Loan Agreement to further increase the amount of the secured loan from Holdings to the Company from $2.0 million to $2.25 million. The terms of the Loan Agreement otherwise remained substantially the same, except that the maturity date was extended to December 31, 1997. In consideration of the amendment to the Loan Agreement, the Company granted Holdings another Common Stock Purchase Warrant for up to 129,032 shares of Common Stock. The terms of such warrant are substantially the same as contained in the 15 Warrant, except that the conversion price is the lesser of (a) $1.9375 per share or (b) the mean of the closing bid price per share for the 20 trading days preceding exercise of this warrant. This warrant also provides for certain piggyback registration rights and a one-time demand registration right. FINANCING TRANSACTION WITH WEXFORD AFFILIATES. Imprimis Investors LLC and Wexford Spectrum Investors LLC (collectively, the "Wexford Affiliates") expended $5.0 million to purchase five million shares of Common Stock and warrants to purchase five hundred thousand shares of Common Stock at an exercise price of $2.00 per share, exercisable at any time prior to October 15, 2002 (the "Initial Warrants"). The Wexford Affiliates have acquired the Common Stock and the Warrants for investment purposes pursuant to a certain Stock and Warrant Purchase Agreement dated October 15, 1997, between PC Quote and the Wexford Affiliates (the "Purchase Agreement"). Pursuant to the terms of the Purchase Agreement, on October 15, 1997, the Wexford Affiliates purchased 1,450,000 shares of Common Stock and the Initial Warrants for a purchase price of $1.45 million (the "First Closing"). On October 20, 1997, pursuant to the terms of the Purchase Agreement, the Wexford Affiliates purchased an additional 550,000 shares of Common Stock for a purchase price of $0.55 million (the "Second Closing"). On October 23, 1997, pursuant to the terms of the Purchase Agreement, the Wexford Affiliates purchased an additional 3,000,000 shares of Common Stock for a purchase price of $3.0 million (the "Third Closing" and, together with the First Closing and the Second Closing, the "Closings"). Up to four million of the shares of Common Stock purchased by the Wexford Affiliates are subject to repurchase by PC Quote at a purchase price of $1.00 per share pursuant to the terms of the Purchase Agreement (the "Repurchase"). Pursuant to the terms of the Purchase Agreement, PC Quote will use its best efforts to consummate the Repurchase from the proceeds of the Rights Offering. In the event that the Rights Offering is not completed on or prior to January 24, 1998, the Wexford Affiliates will be entitled to receive, out of escrow, warrants to purchase an additional 250,000 shares of Common Stock with the same terms as the Initial Warrants and, in the event the Rights Offering is not completed on or prior to February 28, 1998, the Wexford Affiliates will be entitled to receive, out of escrow, warrants to purchase an additional 250,000 shares of Common Stock with the same terms as the Initial Warrants (such warrants, collectively, the "Additional Warrants"). In contemplation of the Purchase Agreement, the Wexford Affiliates have agreed not to participate in the Rights Offering. REASON FOR THE RIGHTS OFFERING AND USE OF PROCEEDS The net proceeds to the Company from the Rights Offering are estimated to be approximately $7.2 million. The Company intends to use $4.0 million of such net proceeds to repurchase an aggregate of four million shares of Common Stock recently sold to Imprimis Investors LLC and Wexford Spectrum Investors LLC (the "Wexford Affiliates") pursuant to the terms and subject to the conditions set forth in that certain Stock and Warrant Purchase Agreement between the Company and each of the Wexford Affiliates dated October 15, 1997. The Company intends to use the remaining net proceeds for general corporate purposes, including working capital. Pending any of the foregoing uses, the Company intends to invest the net proceeds in short-term, investment grade securities, certificates of deposit or direct or guaranteed obligations of the United States government. 16 DESCRIPTION OF CAPITAL STOCK COMMON STOCK The authorized capital stock of the Company includes 50,000,000 shares of Common Stock, par value $.001 per share. Holders of Common Stock have no preemptive rights. The outstanding shares of Common Stock are fully paid and non-assessable. Holders of Common Stock are entitled to dividends when, as, and if declared by the Board of Directors of the Company out of any funds legally available to the Company for that purpose. Holders of Common Stock are entitled to one vote per share held of record with respect to all matters submitted to a vote of the stockholders. There is no cumulative voting for the election of directors, who are elected annually to one-year terms. Directors are elected by a plurality; all other matters require the affirmative vote of a majority of the votes cast the meeting. PREFERRED STOCK The Company is authorized to issue 5,000,000 shares of Preferred Stock, par value $.001 per share, and to establish and issue shares of Preferred Stock in series and to fix, determine and vary the voting rights, designations, preference qualifications, privileges, options, conversion rights and other special rights of each series of Preferred Stock. CERTAIN PROVISIONS OF DELAWARE LAW The Company is subject to Section 203 of Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a wide range of specified transactions with any "interested stockholder," as such term is defined to include, among others, any person or entity who in the previous three years obtained 15% or more of any class or series of stock entitled to vote in the election of directors, unless, among other exceptions, the transaction is approved by (i) the Board of Directors prior to the date the interested stockholder obtained such status or (ii) the holders of two-thirds of the outstanding shares of each class or series owned by the interested stockholder. PRICE RANGE OF COMMON STOCK The following table shows for the three quarterly periods ended September 30, 1997 and for each 1996 quarterly period the high and low closing prices of the Company's Common Stock for the periods indicated, as reported by The American Stock Exchange. TRADE
HIGH LOW --------- ----- 1997 QUARTERLY INFORMATION First............................................................................................. 3 11/16 2 1/4 Second............................................................................................ 2 1/2 1 1/8 Third............................................................................................. 2 9/16 1 1/2 1996 QUARTERLY INFORMATION First............................................................................................. 16 8 3/8 Second............................................................................................ 14 1/8 6 3/4 Third............................................................................................. 8 3 7/8 Fourth............................................................................................ 5 1/2 2 1/4
17 DIVIDEND POLICY The Company has not paid dividends on its Common Stock and it does not presently anticipate making any such payments in the near future. HOLDERS OF RECORD At , , the approximate number of holders of record of the Common Stock was . THE RIGHTS OFFERING THE RIGHTS The Company is distributing, at no cost, to the record holders of its outstanding Common Stock as of , (the "Record Date"), other than the Wexford Affiliates, transferable Rights to purchase additional shares of Common Stock (the "Basic Subscription Privilege") at a price of $1.00 per share (the "Subscription Price"). The Company will distribute one Right for each share of Common Stock held on the Record Date. Each Right will entitle its Holder to purchase one share of Common Stock. The Rights will be evidenced by transferable subscription certificates (the "Subscription Certificates"). An aggregate of 7,384,245 shares of Common Stock (the "Underlying Shares") will be sold if all Rights are exercised. No fractional Underlying Shares, or cash in lieu thereof, will be issued or paid. The number of Underlying Shares distributed to each Holder will be rounded down to the nearest whole share in connection with the exercise of Subscription Privileges. SUBSCRIPTION PRIVILEGES BASIC SUBSCRIPTION PRIVILEGE. Each Right will entitle the Holder thereof to receive, upon payment of the Subscription Price, one share of Common Stock. Certificates representing shares of Common Stock purchased pursuant to the Basic Subscription Privilege will be delivered to subscribers as soon as practicable after the Expiration Date, irrespective of whether the Subscription Privilege is exercised immediately prior to the Expiration Date or earlier. Holders exercising their Subscription Privilege will not be stockholders of record with respect to the shares issuable pursuant to such Subscription Privilege until the closing, which it is anticipated will occur five business days after the Expiration Date. OVERSUBSCRIPTION PRIVILEGE. Subject to the allocation described below, each Right also carries the right to subscribe at the Subscription Price for any Underlying Shares not subscribed for through the exercise of Basic Subscription Privileges by other Holders (the "Excess Shares"). If the Excess Shares are not sufficient to satisfy all subscriptions pursuant to the Oversubscription Privilege, such Excess Shares will be allocated pro rata (subject to the elimination of fractional shares) among those Holders exercising the Oversubscription Privilege, in proportion, not to the number of shares requested pursuant to the Oversubscription Privilege, but to the number of shares each Holder exercising the Oversubscription Privilege subscribed for pursuant to the Basic Subscription Privilege; provided, however, that if such pro rata allocation results in any Holder being allocated a greater number of Excess Shares than such Holder subscribed for pursuant to the exercise of such holder's Oversubscription Privilege, then such Holder will be allocated only such number of Excess Shares as such Holder subscribed for and the remaining Excess Shares will be allocated among all other Holders exercising the Oversubscription Privilege. Only beneficial holders who exercise the Basic Subscription privilege in full will be entitled to exercise the Oversubscription Privilege. Certificates representing Excess Shares purchased pursuant to the Oversubscription Privilege will be delivered to subscribers as soon as practicable after the Expiration Date and after all prorations have been effected. In the event Rights remain unexercised after satisfaction of the Basic Subscription and Oversubscription Privileges, the Company intends to offer the remaining Underlying Shares for purchase at the Subscription Price to an unaffiliated third party or members of management. 18 EXPIRATION DATE The Rights will expire at , Chicago time, on , 1998 unless extended by the Company from time to time. Notwithstanding the foregoing, the Expiration Date in no event shall be later than , , except that the Company reserves the right to extend the exercise period on one or more occasions if the Board of Directors determines that the occurrence of a material event necessitates amendment of the Registration Statement or recirculation of the Prospectus that forms a part thereof in order to permit time for the distribution of such information. After the Expiration Date, unexercised Rights will be null and void. The Company will not be obligated to honor any purported exercise of Rights received by the Subscription Agent after the Expiration Date, regardless of when the documents relating to such exercise were sent, except pursuant to the Guaranteed Delivery Procedures described below. EXERCISE OF RIGHTS Rights may be exercised by delivering to the Subscription Agent, on or prior to , Chicago time, on the Expiration Date, the properly completed and executed Subscription Certificate evidencing such Rights with any required signatures guaranteed, together with payment in full of the Subscription Price for the Underlying Shares subscribed for pursuant to the Subscription Privileges (except as permitted pursuant to clause (iii) of the next sentence). Such payment in full must be by: (i) check or bank draft drawn upon a U.S. bank or postal telegraphic or express money order payable to American Securities Transfer, Inc., as Subscription Agent; or (ii) wire transfer of funds to the account maintained by the Subscription Agent for such purpose; or (iii) in such other manner as Company may approve in writing in the case of persons acquiring Underlying Shares at an aggregate Subscription Price of $500,000 or more, provided in each case that the full amount of such Subscription Price is received by the Subscription Agent in currently available funds within five American Stock Exchange trading days following the Expiration Date (the payment method under (iii) being an "Approved Payment Method"). Payment of the Subscription Price will be deemed to have been received by the Subscription Agent only upon (a) clearance of any uncertified check, (b) receipt by the Subscription Agent of any certified check or bank draft drawn upon a United States bank or of any postal, telegraphic or express money order, (c) receipt of good funds in the Subscription Agent's account designated above, or (d) receipt of good funds by the Subscription Agent through an Approved Payment Method. If paying by uncertified personal check, please note that the funds paid thereby may take at least five business days to clear. Accordingly, Holders who wish to pay the Subscription Price by means of uncertified personal check are urged to make payment sufficiently in advance of the Expiration Date to ensure that such payment is received and clears by such date and are urged to consider payment by means of certified or cashier's check, money order or wire transfer of funds. The address to which the Subscription Certificates and payment of the Subscription Price should be delivered is: American Securities Transfer, Inc. Attention: Tammy Davis 938 Quail Street Lakewood, CO 80215 If a Holder wishes to exercise Rights, but time will not permit such Holder to cause the Subscription Certificate or Subscription Certificates evidencing such Rights to reach the Subscription Agent on or prior to the Expiration Date, such Rights may nevertheless be exercised if all of the following conditions (the "Guaranteed Delivery Procedures") are met: (i) such Holder has caused payment in full of the Subscription Price for each Underlying Share being subscribed for pursuant to the Subscription Agent on or prior to the Expiration Date; 19 (ii) the Subscription Agent receives, on or prior to the Expiration Date, a guaranteed notice (a "Notice of Guaranteed Delivery"), substantially in the form provided with the Instructions as to Use of PC Quote, Inc. Subscription Certificates (the "Instructions") distributed with the Subscription Certificates, from an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934), stating the name of the exercising Holder, the number of Rights represented by the Subscription Certificate(s) held by such exercising Holder, the number of Underlying Shares being subscribed for pursuant to the Subscription Privileges and guaranteeing the delivery to the Subscription Agent of any Subscription certificate(s) evidencing such Rights within three American Stock Exchange trading days following the date of the Notice of Guaranteed Delivery; and (iii) the properly completed Subscription Certificate(s), with any required signatures guaranteed, is received by the Subscription Agent within three American Stock Exchange trading days following the date of the Notice of Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates at the addresses set forth above, or may be transmitted to the Subscription Agent by facsimile transmission (telecopy number (303) 234-5340). Additional copies of the form of Notice of Guaranteed Delivery are available upon request from the Subscription Agent, whose address and telephone number are set forth under "Subscription Agent" below. Funds received in payment of the Subscription Price for Excess Shares subscribed for pursuant to the Oversubscription Privilege will be held in a segregated account pending issuance of such Excess Shares. If a Holder exercising the Oversubscription Privilege is allocated less than all of the Excess Shares that such Holder wished to subscribe for pursuant to the Oversubscription Privilege, the excess funds paid by such Holder in respect of the Subscription Price for shares not issued shall be returned by mail without interest or deduction as soon as practicable after the Expiration Date. A holder who holds shares of Common Stock for the account of others, such as a broker, a trustee or a depository for securities, should notify the respective beneficial owners of such shares as soon as possible to ascertain such beneficial owner's intentions and to obtain instructions with respect to the Rights. If the beneficial owner so instructs, the record Holder of such Rights should complete the Subscription Certificate and submit it to the Subscription Agent with the proper payment. In addition, the beneficial owner of Common Stock or Rights held through such a holder of record should contact the Holder and request the Holder to effect transactions in accordance with the beneficial owner's instructions. Unless a Subscription Certificate (i) provides that the shares of Common Stock to be issued pursuant to the exercise of Right represented thereby are to be delivered to the Holder or (ii) is submitted for the account of an Eligible Guarantor Institution, signatures on such Subscription Certificate must be guaranteed by an Eligible Guarantor Institution. If either the number of Underlying Shares being subscribed for payment to the Basic Subscription Privilege is not specified on the Subscription Certificate, or the amount delivered is not enough to pay the Subscription Price for all Underlying Shares stated to be subscribed for, the number of Underlying Shares subscribed for will be assumed to be the maximum amount that could be subscribed for upon payment of such amount, after allowance for the Subscription Price of any specified Underlying Shares. If the number of Underlying Shares being subscribed for is not specified, or payment of the Subscription Price for the indicated number of Rights that are being exercised exceeds the required Subscription Price, the payment will be applied, until depleted, to subscribe for Underlying Shares in the following order: (i) to subscribe for the number of Underlying Shares indicated, if any, pursuant to the Basic Subscription Privilege; (ii) to subscribe for Underlying Shares until the Basic Subscription Privilege has been fully exercised with respect to all of the Rights represented by the Subscription Certificate; and (iii) to subscribe for additional Underlying Shares pursuant to the Oversubscription Privilege (subject to any applicable proration). The Instructions accompanying the Subscription Certificates should be read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE COMPANY. 20 THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO , CHICAGO TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, THE RIGHTS HOLDER IS STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIERS CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS. All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Company, whose determinations will be final and binding. The Company, in its sole discretion, may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Company determines in its sole discretion. Any questions or requests for assistance concerning the method of exercising Rights or requests for additional copies of this Prospectus or the Instructions or the Notice of Guaranteed Delivery should be directed to the Subscription Agent, telephone number (303) 234-5300. NO REVOCATION ONCE A HOLDER OR RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE OR THE OVERSUBSCRIPTION PRIVILEGE SUCH EXERCISE MAY NOT BE REVOKED. METHOD OF TRANSFERRING RIGHTS The Company intends to make application to list the Rights for trading on The American Stock Exchange. Upon such listing, the Rights may be purchased or sold through usual investment channels, including banks and brokers. Trading in Rights will cease on the close of business on The American Stock Exchange trading day preceding the Expiration Date. The Rights evidenced by a single Subscription Certificate may be transferred in whole by endorsing the Subscription Certificate for transfer in accordance with the accompanying instructions. A portion of the Rights evidenced by a single Subscription Certificate may be transferred by delivering to the Subscription Agent a Subscription Certificate properly endorsed for transfer, with instructions to register such portion of the Rights evidenced thereby in the name of the transferee (and to issue a new Subscription Certificate to the transferee evidencing such transferred Rights). In such event, a new Subscription Certificate evidencing the balance of the Rights will be issued to the Holder or, if the Holder so instructs, to an additional transferee. Holders wishing to transfer all or a portion of their Rights should allow a sufficient amount of time prior to the Expiration Date for (i) the transfer instructions to be received and processed by the Subscription Agent, (ii) a new Subscription Certificate to be issued and transmitted to the transferee or transferees with respect to the transferred Rights, and to the transferor with respect to retained Rights, if any, and (iii) the Rights evidenced by such new Subscription Certificates to be exercised or sold by the recipients thereof. If time does not permit a transferee of a Right who wishes to exercise its Right to deliver its Subscription Certificate to the Subscription Agent on or before the Expiration Date, such transferee should make use of the Guaranteed Delivery Procedure described under "The Rights Offering--Exercise of Rights." Neither the Company nor the Subscription Agent shall have any liability to a 21 transferee or transferor or Rights if Subscription Certificates or new Subscription Certificates are not received in time for exercise or sale prior to the Expiration Date. All commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise of Rights will be for the account of the transferor or subscriber of the Rights, and none of such commissions, fees or expenses will be paid by the Company or the Subscription Agent. The Company anticipates that the Rights will be eligible for transfer, and that the Rights will be exercisable through the facilities of The Depository Trust Company ("DTC"). 22 CERTAIN FEDERAL INCOME TAX CONSEQUENCES In the opinion of Wildman, Harrold, Allen & Dixon, counsel to the Company, the following is an accurate discussion of the material federal income tax consequences of the Rights Offering to the holders of Common Stock upon the distribution (the "Distribution") of Rights, and to holders of Rights upon the exercise and disposition of the Rights. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated thereunder, judicial authority, and current administrative rulings and practice, all of which are subject to change on a prospective or retroactive basis. The tax consequences of the Rights Offering under state, local and foreign law are not discussed. Moreover, special considerations not described herein may apply to certain taxpayers, such as financial institutions, broker-dealers, life insurance companies, and tax-exempt organizations. The discussion is limited to those who have held the Common Stock, and will hold the Rights and any Common Stock acquired upon the exercise of Rights as capital assets (generally, property held for investment) within the meaning of Section 1221 of the Code. DISTRIBUTION OF THE RIGHTS. Holders of Common Stock will not recognize taxable income for federal income tax purposes in connection with the receipt of the Rights. STOCKHOLDER BASIS AND HOLDING PERIOD OF THE RIGHTS. Except as provided in the following sentence, the basis of the Rights received by a stockholder as a distribution with respect to such stockholder's Common Stock will be zero. If, however, either (i) the fair market value of the Rights on the date of Distribution is 15% or more of the fair market value (on the date of Distribution) of the Common Stock with respect to which they are received or (ii) the stockholder properly elects, in his or her federal income tax return for the taxable year in which the Rights are received, to allocate basis, part of his or her basis in Common Stock will be allocated between the Common Stock and the Rights in proportion to the fair market value of each on the date of Distribution. The holding period of a stockholder with respect to the Rights received as a distribution on such stockholder's Common Stock will include the stockholder's holding period for the Common Stock with respect to which the Rights were issued. In the case of a stockholder who purchased Rights, the tax basis of such Rights will be equal to the purchase price paid therefor, and the holding period for such Rights will commence on the day following the date of the purchase. SALE OF THE RIGHTS. A Stockholder who sells the Rights received in the Distribution prior to exercise will recognize gain or loss equal to the difference between the amount realized on the sale and such stockholder's adjusted basis (if any) in the Rights sold. Such gain or loss will be capital gain or loss if gain or loss from a sale of Common Stock held by such stockholder would be characterized as capital gain or loss at the time of such sale. Any gain or loss recognized on a sale of Rights acquired by purchase will be capital gain or loss if Common Stock would be a capital asset in the hands of the stockholder. Generally such capital gain or loss will be classified as short-term if the stockholder's holding period in the Rights is one year or less and long-term if the stockholder's holding period in the Rights is more than one year. Under current law, generally long-term capital gains are subject to a maximum marginal tax rate of 28% for individuals, estates and trusts if the capital asset is held for more than one year but not more than 18 months, and a maximum marginal tax rate of 20% if the capital asset is held for more than 18 months. LAPSE OF THE RIGHTS. Stockholders who allow the Rights received by them in the Distribution to lapse will not recognize any gain or loss, and no adjustment will be made to the basis of the Common Stock, if any, owned by such stockholders. 23 Stockholders who are purchasers of the Rights will be entitled to a loss equal to their adjusted tax basis in the Rights if such Rights expire unexercised. If the Rights expire unexercised not more than one year after the stockholder's holding period began, any loss recognized on the expiration of the Rights acquired by purchase will be a short-term capital loss if Common Stock would be a capital asset in the hands of the purchaser. EXERCISE OF THE RIGHTS, BASIS AND HOLDING PERIOD OF COMMON STOCK. Stockholders will not recognize any gain or loss upon the exercise of Rights. The basis of the Common Stock acquired through exercise of the Rights will be equal to the sum of the Subscription Price therefor and the stockholder's basis in such Rights (if any). A stockholder's holding period for the Common Stock acquired through exercise of the Rights will begin on the date the Rights are exercised. SALE OF COMMON STOCK. The sale of Common Stock acquired through exercise of the Rights will result in the recognition of gain or loss to the stockholder in an amount equal to the difference between the amount realized on the sale and the stockholder's adjusted basis in the Common Stock. Gain or loss on the sale of such Common Stock will be classified as short-term capital gain or loss, if the stockholder's holding period in such Common Stock is one year or less and long-term capital gain or loss if the stockholder's holding period in such Common Stock is more than one year. Under current law, generally long-term capital gains are subject to a maximum marginal tax rate of 28% for individuals, estates and trusts if the capital asset is held for more than one year but not more than 18 months, and a maximum marginal tax rate of 20% if the capital asset is held for more than 18 months. THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING APPLICABLE TO HIS OR HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS. SUBSCRIPTION AGENT The Company has appointed American Securities Transfer, Inc. as Subscription Agent for the Rights Offering. The Subscription Agent's address, which is the address to which the Subscription Certificates and payment of the Subscription Price should be delivered, as well as the address to which Notice of Guaranteed Delivery must be delivered, and the Subscription Agent's telephone number and facsimile number, are: American Securities Transfer, Inc. Attn: Tammy Davis 938 Quail Street Lakewood, CO 80215 Tel. No.: (303) 234-5300 Facsimile No.: (303) 234-5340 The Company will pay the fees and expenses of the Subscription Agent, and will also agree to indemnify it from any liability which it may incur in connection with the Rights Offering. PLAN OF DISTRIBUTION The Common Stock offered hereby is being offered by Company pursuant to the issuance of Rights directly to holders of shares of Common Stock on the Record Date. Certain employees, officers or directors of the Company may solicit responses from Holders to the Rights Offering, but such individuals will not receive any commissions or compensation for such services other than their normal employment compensation. 24 The Company intends to distribute Rights and copies of this Prospectus to stockholders of record on the Record Date promptly following the effective date of the Registration Statement of which this Prospectus forms a part. Holders who desire to subscribe for the purchase of shares of Common Stock in the Rights Offering are urged to complete, date and sign the Subscription Certificate and return it to the Subscription Agent on or before the Expiration Date, together with payment in full of shares should be directed to the Subscription Agent. INFORMATION AGENT The Company has appointed American Securities Transfer, Inc. as Information Agent for the Rights Offering. Any questions or requests for additional copies of this Prospectus, the Instructions or the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone number and address below. American Securities Transfer, Inc. Attn: Tammy Davis 938 Quail Street Lakewood, CO 80215 Tel. No.: (303) 234-5300 Facsimile No.: (303) 234-5340 The Company will pay the fees and expenses of the Information Agent and will also agree to indemnify the Information Agent from certain liabilities in connection with the Rights Offering. LEGAL MATTERS The validity of the authorization and issuance of the securities offered hereby and the tax matters discussed under "Certain Federal Income Tax Consequences" are being passed upon for Company by Wildman, Harrold, Allen & Dixon, Chicago, Illinois. EXPERTS The financial statements of PC Quote, Inc. as of December 31, 1996 and for the two year period ended December 31, 1996 incorporated in this Prospectus by reference to the Annual Report on Form 10-K, as amended, have been so incorporated in reliance on the report of McGladrey & Pullen LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The income statement for the year ended December 31, 1994 incorporated in this Prospectus by reference to the Annual Report on Form 10-K, as amended, has been so incorporated in reliance on the report of Coopers & Lybrand LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. CHANGE IN ACCOUNTANTS On July 9, 1997, McGladrey & Pullen LLP declined to stand for re-election as the independent auditors for the Company. At a meeting held August 19, 1997, the Company's Board of Directors unanimously approved the appointment of KPMG Peat Marwick LLP to be the independent auditors for the year ending December 31, 1997. The reports of McGladrey & Pullen LLP on the financial statements for the past two fiscal years contained no adverse opinions or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle, except for a going concern phrase that was included in the report relating to the Company's audited financial statements for the year ended December 31, 1996 as follows: "The accompanying financial statements have been prepared assuming that PC Quote, Inc. will 25 continue as a going concern. As more fully described in Note 14, the Company has experienced significant operating losses, which adversely affected the Company's current results of operations and liquidity. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 14. The financial statements do not include any adjustments that might result from the outcome of this uncertainty." In connection with its audits for the two most recent fiscal years and through July 9, 1997, there have been no disagreements with McGladrey & Pullen LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of McGladrey & Pullen LLP would have caused them to make reference thereto in their report on the financial statements for such years. The Company has requested that McGladrey & Pullen LLP furnish it with a letter addressed to the SEC stating whether or not its agrees with the above statements. A copy of such letter is filed as Exhibit 16.1 to this Registration Statement. INDEMNIFICATION OF DIRECTORS AND OFFICERS-- DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION Under provisions of the Company's Certificate of Incorporation, any person made a party to any lawsuit by reason of being a director or officer of the Company, or any parent or subsidiary thereof, may be identified by the Company to the full extent authorized by the General Corporation Law of the State of Delaware. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. 26 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
Available Information..................................................... 2 Documents Incorporated By Reference....................................... 2 The Company............................................................... 2 Prospectus Summary........................................................ 3 Risk Factors.............................................................. 7 Reason For the Offering and Use of Proceeds............................... 16 Description of Capital Stock.............................................. 17 Price Range of Common Stock............................................... 17 The Rights Offering....................................................... 18 Certain Federal Income Tax Consequences................................... 23 Subscription Agent........................................................ 24 Plan of Distribution...................................................... 24 Information Agent......................................................... 25 Legal Matters............................................................. 25 Experts................................................................... 25 Change In Accountants..................................................... 25 Indemnification of Directors and Officers--Disclosure of Commission's Position On Indemnification............................................. 26
7,384,245 SHARES [LOGO] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. SEC Registration Fee.............................................. The American Stock Exchange Listing Fee........................... Subscription Agent's fees and expenses............................ Printing fees..................................................... Legal fees and expenses........................................... Accounting fees and expenses...................................... Blue Sky fees and expenses (including legal fees)................. Miscellaneous..................................................... TOTAL...........................................................
The foregoing, except for the Securities and Exchange Commission registration fee and The American Stock Exchange listing fee are estimates. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145(a) of the General Corporation Law of Delaware (the "DGCL") empowers a corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, employee or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no cause to believe his conduct was unlawful. Subsection 145(b) of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under similar standards, except that no indemnification may be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, and that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled. It empowers the corporation to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. II-1 The Company's certification of incorporation provides that to the fullest extent permitted by Delaware law, the Company shall indemnify and advance indemnification expenses to all of its directors and officers. In addition, the certificate to the fullest extent permitted by Delaware law, of incorporation provides that a director shall not be liable to the Company or its stockholders for breach of fiduciary duty as a director. The Company has entered into indemnification agreements with each director providing for indemnification to the fullest extent permitted by Delaware law.
EXHIBIT SEQUENTIALLY NO. DESCRIPTION NUMBERED PAGE - ------ -------------------------------------------------------------------------- --------------------- 5.1* Opinion of Wildman, Harrold, Allen & Dixon 8.1* Opinion of Wildman, Harrold, Allen & Dixon 10.1* Stock and Warrant Purchase Agreement between the Company and Imprimis Investors LLC and Wexford Spectrum Investors LLC 13.1* 1996 Annual Report to Stockholders 13.2* Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997 as amended to date 16.1 Letter of McGladrey & Pullen LLP 23.1 Consent of McGladrey & Pullen LLP 23.2* Consent of Coopers & Lybrand LLP 23.3* Consent of Wildman, Harrold, Allen & Dixon (contained in its opinion filed as Exhibit 5.1 hereto) 27.1* Financial Data Schedule 99.1 Form of Rights Certificate and Notice of Exercise
- ------------------------ * To be filed by Amendment. ITEM 17. UNDERTAKINGS. A. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement. (i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each employee to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each employee to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. D. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on October 31, 1997. PC QUOTE, INC. By: /s/ JIM R. PORTER ----------------------------------------- Jim R. Porter CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities on October 31, 1997. SIGNATURE TITLE - ------------------------------ -------------------------- /s/ JIM R. PORTER - ------------------------------ Chairman of the Board and Jim R. Porter Chief Executive Officer /s/ JOHN E. JUSKA - ------------------------------ Chief Financial Officer John E. Juska /s/ LOUIS J. MORGAN - ------------------------------ Director Louis J. Morgan - ------------------------------ Director Ronald Langley /s/ JOHN R. HART - ------------------------------ Director John R. Hart /s/ TIMOTHY K. KRAUSKOPF - ------------------------------ Director Timothy K. Krauskopf - ------------------------------ Director William Floersch II-4 EX-16.1 2 LETTER MCGLADREY EXHIBIT 16.1 October 31, 1997 Securities and Exchange Commission Washington D.C. 20549 We were previously the independent accountants for PC Quote, Inc., and on March 7, 1997, we reported on the financial statements of PC Quote, Inc. as of and for the two years ended December 31, 1996. On July 9, 1997, we declined to stand for reelection as independent accountants of PC Quote, Inc. We have read PC Quote, Inc.'s statements included under the heading "Change in Accountants" appearing in the Registration Statement on Form S-2 (Rights Offering), and we agree with such statements, except we are not in a position to agree or disagree with the Company's statements relating to actions taken at meetings of the Company's Board of Directors. /s/ MCGLADREY & PULLEN, LLP ------------------------------------------ McGLADREY & PULLEN, LLP
EX-23.1 3 CONSENT MCGLADREY EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to incorporation by reference in the Registration Statement on Form S-2 (Rights Offering) of PC Quote, Inc. of our report dated March 7, 1997, relating to the balance sheets of PC Quote, Inc. as of December 31, 1996 and 1995, and the related statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 1996, which report appears in the December 31, 1996, Annual Report on Form 10-K of PC Quote, Inc. and to the reference of our firm under the heading "Experts" in the Registration Statement. /s/ MCGLADREY & PULLEN, LLP ------------------------------------------ McGladrey & Pullen, LLP
October 31, 1997 Schaumburg, Illinois EX-99.1 4 FORM OF RIGHTS CERTIFICATES EXHIBIT 99.1 PC QUOTE, INC. SUBSCRIPTION CERTIFICATE NO. NUMBER OF RIGHTS: CUSIP NO.___________ THE TERMS AND CONDITIONS OF THE OFFERING ARE SET FORTH IN THE PC QUOTE, INC. PROSPECTUS DATED _____________, 1997 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM PC QUOTE, INC., THE SUBSCRIPTION AGENT AND THE INFORMATION AGENT. THIS CERTIFICATE OR A NOTICE OF GUARANTEED DELIVER MUST BE RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY _____________, CHICAGO TIME, ON _____________ (SUCH DATE, SUBJECT TO EXTENSION AS PROVIDED IN THE PROSPECTUS, IS REFERRED TO IN THIS CERTIFICATE AS THE "EXPIRATION DATE"). The Rights represented by this Subscription Certificate may be exercised by duly completing Form 1; and may be transferred, assigned, exercised or sold through a bank or broker by duly completing Form 2; Rights holders are advised to review the Prospectus and instructions (copies of which are available from PC Quote, Inc. and the Subscription Agent) before exercising or selling their Rights. IMPORTANT: Complete the appropriate FORM and if applicable, delivery instructions, and SIGN on reverse side. SUBSCRIPTION PRICE $1.00 PER SHARE RIGHTS TO PURCHASE COMMON STOCK OF PC QUOTE, INC. The registered owner, or assigns, whose name is inscribed hereon is entitled to subscribe for shares of Common Stock upon the terms and subject to the conditions set forth in the Prospectus and instructions relating thereto. By:____________________________________________________________________________ Jim R. Porter, Chairman of the Board and Chief Executive Officer By:____________________________________________________________________________ Darlene E. Czaja, Secretary THIS SUBSCRIPTION CERTIFICATE IS TRANSFERABLE AND MAY BE COMBINED OR DIVIDED AT THE OFFICE OF THE SUBSCRIPTION AGENT. 1 RIGHTS HOLDERS SHOULD BE AWARE THAT IF THEY CHOOSE TO EXERCISE OR TRANSFER LESS THAN ALL OF THE RIGHTS EVIDENCED HEREBY, THEY MAY NOT RECEIVE A NEW SUBSCRIPTION CERTIFICATE IN SUFFICIENT TIME TO EXERCISE THE REMAINING RIGHTS EVIDENCED THEREBY. Delivery:__________________________ Holder:____________________________ [SUBSCRIPTION AGENT] 2 FORM 1 - EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocable exercises one or more Rights evidenced by this Certificate to subscribe for shares of Common Stock as indicated below, on the terms and subject to the conditions specified in this Prospectus, receipt of which is hereby acknowledged. (a) Number of shares subscribed for pursuant to the Basic Subscription Privilege. (One Right equal one shares.) _____________X $_______ per share + $____________________ (Number of shares - whole number only) (b) Number of shares subscribed for pursuant to the Oversubscription Privilege. (No shares may be subscribed for pursuant to the Oversubscription Privilege unless all of the Rights represented by this Subscription Certificate are fully exercised pursuant to the Basic Subscription Privilege)* _____________X $_______ per share + $_________________________ (Number of shares - whole number only) (c) Total Subscription Price. (Add far right columns in a and b.) $_______________________ METHOD OF PAYMENT (CHECK ONE) ___ CHECK, BANK DRAFT OR MONEY ORDER PAYABLE TO ___ WIRE TRANSFER DIRECTLY TO _______________________, ACCOUNT NO. _____________, ABA NO. _____________ (d) If the number of Rights being exercised pursuant to the Basic Subscription Privilege is less than all of the Rights represented by this Subscription Certificate (check only one): ___ DELIVER TO ME A NEW SUBSCRIPTION CERTIFICATE EVIDENCING THE REMAINING RIGHTS TO WHICH I AM ENTITLED. ___ DELIVER A NEW SUBSCRIPTION CERTIFICATE EVIDENCING THE REMAINING RIGHTS IN ACCORDANCE WITH MY FORM 2 INSTRUCTIONS (please include any required signature guarantees). ___ CHECK HERE IF RIGHTS ARE BEING EXERCISED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE SUBSCRIPTION AGENT PRIOR TO THE DATE HEREOF AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s):________________________________________________ 3 Window Ticket Number (if any)_______________________________________________ Date of Execution of Notice of Guaranteed Delivery__________________________ Name of Institution which guaranteed delivery_______________________________ ___ FORM 2 CHECK HERE TO TRANSFER YOUR SUBSCRIPTION CERTIFICATE OR SOME OR ALL OF YOUR RIGHTS EVIDENCED HEREBY OR TO EXERCISE OF SELL RIGHTS THROUGH YOUR BANK OR BROKER: For value received, __________ Rights represented by this Subscription Certificate are hereby assigned to (please print name and address and Taxpayer Identification No. of transferee in full: Name___________________________________________________________________________ Address________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ Taxpayer Identification No.**__________________________________________________ _______________________________________________________________________________ Signature of Subscriber/Transferor*** *The number of Underlying Shares available to Holders pursuant to the Oversubscription Privilege may be limited in the Prospectus. If the number of Underlying Shares subscribed for exceeds the number of shares actually tendered to the subscriber, the portion of the Subscription Price tendered corresponding to those excess shares shall be returned to the subscriber, without interest, as soon as practicable after the Expiration Date. **Social Security Number of individuals. ***For a Transfer, A Signature Guarantee must be provided by an Eligible Guarantor Institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934. 4 -----END PRIVACY-ENHANCED MESSAGE-----