<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14937
PMC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-0627374
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 17th Street, 14th Floor, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 292-1177
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X. No .
Indicate the number of shares outstanding of each of the issuer's classes of
Common stock, as of 07-31-95
Common Stock $0.01 Par Value 5,540,501
Class Number of Shares
Page 1 of 13 Pages
Exhibit Index Begins on Page 11
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PMC INTERNATIONAL, INC.
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
-- June 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Income 5
--Three months ended June 30, 1995
and June 30, 1994; Six months ended
June 30, 1995 and June 30, 1994
Condensed Consolidated Statements of Cash Flow 6
--Six months ended June 30, 1995
and June 30, 1994
Notes to Unaudited Condensed Consolidated Financial 7
Statements
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results
of Operations
PART II. Other Information
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Securities Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
June 30, December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 174,488 $ 139,918
Receivables
Receivable from customers 15,458 4,196
Investment management fees 28,443 71,818
Other receivables 119,532 81,210
TOTAL 337,921 297,142
SECURED DEMAND NOTE 225,000 225,000
FURNITURE AND EQUIPMENT, at cost,
net of accumulated depreciation of
$252,664 and $206,664 425,494 340,669
PREPAID EXPENSES AND OTHER ASSETS 234,693 230,114
GOODWILL (net of amortization of $40,843
and $29,173) 309,157 320,827
LONG TERM NOTE RECEIVABLE 1,012,846 1,166,181
TOTAL ASSETS $2,545,111 $2,579,933
See notes to unaudited condensed consolidated financial statements.
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
June 30, December 31,
1995 1994
CURRENT LIABILITIES
Accounts payable $ 586,976 $ 604,092
Accrued expenses 644,884 712,857
Other liabilities 238,244 106,990
Deferred revenue 435,717 374,001
Notes payable to shareholders 50,000 45,000
Convertible bridge notes payable 300,000 -
Liabilities subordinated to claim of
general creditors 225,000 225,000
TOTAL LIABILITIES 2,480,821 2,067,940
SHAREHOLDERS' EQUITY
Preferred stock - no par value - authorized
5,000,000 shares; issued and outstanding,
349,017 shares and 349,017 shares 872,543 872,543
Common stock, $.01 par value - authorized,
50,000,000 shares, issued and outstanding,
5,540,501 shares and 5,540,501 shares 276,564 276,564
Additional paid-in capital 3,637,689 3,637,689
Accumulated deficit (4,722,506) (4,274,803)
TOTAL SHAREHOLDERS' EQUITY 64,290 511,993
TOTAL $2,545,111 $2,579,933
See notes to unaudited condensed consolidated financial statements.
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
REVENUE:
Investment management fees $2,092,085 $2,116,541 $4,183,853 $4,240,632
Trading income 16,791 23,047 52,477 251,758
Other income 76,458 62,696 180,172 170,473
Total revenue 2,185,334 2,202,284 4,416,502 4,662,863
EXPENSES:
Investment manager and
other fees 1,193,269 1,182,888 2,351,005 2,342,453
Salaries and benefits 550,227 568,280 1,084,013 1,139,816
Clearing charges and user
fees 184,301 252,328 386,865 555,276
Advertising and promotion 178,700 119,415 277,621 226,010
General and administrative 100,735 189,701 206,168 405,453
Office supplies and expense 42,668 41,536 85,976 75,055
Occupancy and equipment costs 144,123 81,467 276,670 158,302
Professional fees 145,825 130,330 195,887 191,054
Total expenses 2,539,848 2,565,945 4,864,205 5,093,419
NET LOSS BEFORE
INCOME TAXES $(354,514) $(363,661) $(447,703) $(430,556)
DEFERRED INCOME TAX BENEFIT - - - 11,594
NET LOSS $(354,514) $(363,661) $(447,703) $(418,962)
NET LOSS PER COMMON SHARE $ (0.07) $ (0.07) $ (0.09) $ (0.08)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,540,501 5,537,914 5,540,501 5,537,654
See notes to unaudited condensed consolidated financial statements.
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $(447,703) $(418,962)
Adjustments to reconcile net income/(loss) to
net cash provided by (used in) operating activities:
Deferred income tax benefit - (11,594)
Accretion of discount on notes receivable (40,998) (36,285)
Loss on sale of marketable securities 2,201
Depreciation and amortization 57,670 47,670
Changes in operating assets
and liabilities
Receivable from customers (11,262) 72,891
Investment management fees receivable 43,375 18,676
Other receivables (38,322) (68,231)
Prepaid expenses and other assets (4,579) (94,388)
Accounts payable (17,116) 64,147
Accrued expenses (67,973) 84,985
Other liabilities 131,254 (13,249)
Deferred revenues 61,716 84,322
Net cash provided by (used in)
operating activities (333,938) (267,817)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (130,825) (128,286)
Reduction of long-term note receivable 194,333 152,748
Proceeds from sale of marketable securities - 50,262
Net cash provided by investing activities 63,508 74,724
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable to shareholders 5,000 -
Issuance of convertible
promissory notes 300,000 -
Net cash provided by financial activities 305,000 -
NET INCREASE (DECREASE) IN CASH 34,570 (193,093)
CASH, at beginning of period 139,918 407,444
CASH, at end of period $174,488 $214,351
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $18,669 $12,441
See notes to unaudited condensed consolidated financial statements.
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB
and Regulation S-B. In the opinion of management, all adjustments (consist-
ing of normal accruals and elimination of intercompany accounts and
transactions) considered necessary for a fair presentation have been
included. The unaudited condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB
for the year ended December 31, 1994.
SUBSEQUENT EVENTS
On July 31, 1995 PMC International, Inc. announced the completion of a
subordinated debt agreement with Bedford Capital Financial Corporation,
an international merchant bank with offices in Nassau, Bahamas; Toronto,
Ontario; New York; and London, England and whose stock is publicly traded
on the Toronto Stock Exchange and in London.
Under the terms of the agreement, Bedford has purchased from PMCI a
US $1.2 million, subordinated debenture, with an option to purchase an
additional US $1.8 million debenture under the same terms and conditions.
The option is subject to PMCI achieving certain objectives.
As additional consideration for making the loan, PMCI has issued to
Bedford stock warrants which will allow Bedford to purchase shares of PMCI
common stock, over the next ten years, at US $1.00 per share although the
warrants must be exercised earlier if PMCI meets certain earnings tests. A
warrant has been and will be issued for each dollar of subordinated debt
received by PMCI.
Ladenberg, Thalmann & Co., Inc. acted as advisor to PMC International, Inc.
in connection with this transaction.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial Analysis
PMC International, Inc.'s ("PMCI") consolidated revenues are generated
through its subsidiaries Portfolio Management Consultants, Inc. ("PMC") and
Portfolio Brokerage Services, Inc. ("PBS"). These revenues are primarily
derived from fees charged to clients for certain investment advisory, broker-
dealer, portfolio administration and reporting services ("Investment
Management Fees") which generally are collected in advance on a quarterly
basis from each of its clients. PMCI's Investment Management Fees, which are
collected as a percentage of client assets, are impacted by both net assets
under management and the performance of the equity and fixed income markets.
During the first six months of 1995 the U.S. equity markets, as measured by
the Standard & Poors 500 Stock Index, increased in value by 20.2% and the
U.S. bond markets, as measured by Lehman Brothers Government and Corporate
Bond Index, increased by 11.5%. PMCI's net assets under management at June
30, 1995 were comprised of approximately 65% in the equity markets and 35%
in the fixed income markets. PMCI's Investment Management Fees for the six
months ending June 30, 1995 were $4,183,853 vs. $4,240,632 for the same
period in 1994. The decline is due to partial fees collected on new
accounts which were $114,000,000 in the first quarter of 1994 vs. $23,000,000
in the first quarter of 1995. PMCI's robust first quarter of 1994 was mainly
from the addition of a major relationship.
The Company's total revenues for the first six months of 1995 were
$4,416,502 vs. $4,662,863 for the same period in 1994 representing a 5%
decrease which is largely the result of discontinuation of principal trading
activities in April of 1994. Revenues generated from principal trading in the
first quarter of 1994 were approximately $200,000.
PMCI's total expenses for the six months ended June 30, 1995, were
$4,864,205 as compared to $5,093,419 in total expenses for the corresponding
period in 1994. That portion of the Investment Management Fees paid to
investment advisers who render specific investment advice on a discretionary
basis ("Portfolio Manager") and broker dealer and/or investment adviser agents
who service the client ("Financial Adviser") for these periods accounted
for 48% and 46% respectively of total expenses.
PMCI losses of $447,703 for the first six months of 1995 were mainly
attributable to:
1. Developmental costs of the Allocation Manager $133,500
2. Fund-raising efforts 73,000
3. SEC investigation 90,000
4. Additional one-time custody expenses 50,000
--------
$346,500
The addition of approximately 9,000 square feet of office space to the
Company's already existing 9,000 square feet in July of 1994 accounts for the
Company's increased rent expense for the six months ended June 30, 1995 as
compared to the comparable period in 1994.
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Management Discussion
The first six months of 1995 were significant for PMCI. As disclosed in
the "subsequent events" section of this report, a new investor/partner joined
PMCI, both as an investor and as members of the Board of Directors. PMCI's
President and founder, Kenneth S. Phillips, was named Chief Executive Officer
in addition to his continuing role as President. Although much of
management's time during 1995 has been spent working with PMCI's investment
banker, Ladenberg, Thalman & Co., Inc., in connection with the Bedford Capital
financing, management believes a valuable partnership has been forged with
Bedford which will contribute greatly to PMCI's future development plans.
Also during the first half of 1995 extensive progress was made in the
development and marketing of PMC's new PC based mutual fund wrap-fee product,
Allocation ManagerTM ("AM"TM). Targeted at the proprietary bank and insurance
company mutual fund markets, management is very encouraged by the industry's
preliminary response to the product and believes AMTM will have a significant
impact on future revenues and earnings. In connection with PMC's efforts with
AMTM, Ms. Carolyn Kling recently joined the firm to direct domestic marketing
and business development. Formerly President of Transamerica Fund Management
Company and Senior Vice President of Putnam Investments, Ms. Kling is well
known and respected throughout the bank, insurance and financial planning
industries.
As discussed in PMCI's 1994 Form 10-KSB, the ongoing investigation by
the U.S. Securities and Exchange Commission ("SEC") of PMC trading practices
that were terminated in 1994 has cost the firm significantly. Aside from the
$90,000 in direct professional fees expended during the first half of 1995,
business development efforts and new customer sales slowed as a result of the
firm's precarious financial condition. PMCI's new relationship with Bedford
Capital resolves the financial aspect of the problem. We are also hopeful that
current settlement discussions with the Central Regional Office of the SEC
will resolve the other half of this issue. Of course, no assurance can be
offered regarding these discussions.
PMCI continues to receive the vast majority of its revenues from its
wholly owned subsidiary Portfolio Management Consultants, Inc., ("PMC").
PMC is one of the industry's largest providers of privately managed account
and "wrap-fee" services. Targeted towards middle market investors with between
$500,000 and $50 million, PMC distributes its services through a large network
of banks, insurance companies and independent financial planners, both under
its own name and pursuant to private label agreements. PMC has little direct
competition in this area although the sales people marketing its programs
compete with brokerage firms, banks and money managers. Lack of capital has
limited PMC's recent expansion although traditionally PMC has enjoyed robust
growth as a result of its many marketing and distribution agreements.
Liquidity and Capital Resources
The five year subordinated debenture agreement with Bedford Capital
Financial Corporation provided $1,200,000 in cash to PMCI on July 31.
PMCI will use this cash to fund further development of its new products,
as well as retiring $300,000 of bridge subordinated debt which was raised
in March to fund cash flow deficiencies.
<PAGE>
PART II. OTHER INFORMATION
Item 3. DEFAULTS UPON SENIOR SECURITIES
Holders of Preferred Stock are entitled to receive dividends at
a rate of $0.325 per share per annum (equal to 13% of the purchase
price per share attributable to the Preferred Stock). Dividends are
payable semi-annually on January 15 and July 15 in each year.
Dividends accrue from the date of the Preferred Stock issuance and
are cumulative. Upon liquidation or dissolution of the Company,
holders of Preferred Stock are entitled to a preference over the
holders of Common Stock in an amount per share equal to the original
purchase price attributed to a share of Preferred Stock ($2.50)
plus all unpaid cumulative dividends. The Preferred Stock is
non-participating and the holders of Preferred Stock have no
preemptive rights and no voting rights except as may be required by
Colorado law. At the option of the Company, the Preferred Stock
may be redeemed in whole, or in part, at a price of $2.75 per share,
plus unpaid cumulative dividends. Redemption can only occur if
certain conditions regarding the bid prices of the Company's common
stock and the Company's after-tax earnings are met. As of July 15,
1995, cumulative dividends in arrears totalled $470,146.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Number Exhibit Page Number
(2) Financial Data Schedule 13
B. An 8-K Report was filed on August 11, 1995 regarding the
completion of the subordinated debt agreement from Bedford
Capital Financial Corporation and the resultant changes in
control of registrant and resignation of registrant's directors.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PMC INTERNATIONAL, INC.
REGISTRANT
Date: August 14, 1995 Kenneth S. Phillips
_______________________________
Kenneth S. Phillips
President, Chief Executive Officer
Date: August 14, 1995 Vali Nasr
______________________________
Vali Nasr
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 174,488
<SECURITIES> 0
<RECEIVABLES> 1,401,279
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543,850
<PP&E> 678,158
<DEPRECIATION> 252,664
<TOTAL-ASSETS> 2,545,111
<CURRENT-LIABILITIES> 2,480,821
<BONDS> 0
<COMMON> 276,564
0
872,543
<OTHER-SE> (1,084,817)
<TOTAL-LIABILITY-AND-EQUITY> 2,545,111
<SALES> 4,416,502
<TOTAL-REVENUES> 4,416,502
<CGS> 2,351,005
<TOTAL-COSTS> 2,351,005
<OTHER-EXPENSES> 2,478,181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,019
<INCOME-PRETAX> (447,703)
<INCOME-TAX> 0
<INCOME-CONTINUING> (447,703)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (447,703)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
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