U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
[ ] 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 small business issuer as specified in its charter)
COLORADO 84-0627374
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
555 17th Street, 14th Floor, Denver, Colorado 80202
(Address of principal executive offices)
(303) 292-1177
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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
----- -----
As of May 13, 1998, the issuer had outstanding 4,857,803 shares
of Common Stocks, par value $.01 per share.
Transitional Small Business Disclosure Format
Yes No X
----- -----
Page 1 of 18
Exhibits Begin on Page 16
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
Page #
PART I Financial Information
Item 1 Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets 3
- March 31, 1998 & December 31, 1997
Consolidated Statements of Income 5
- Three months ended
March 31, 1998 & March 31, 1997
Condensed Consolidated Statements 6
of Cash Flow
- Three months ended
March 31, 1998 & March 31, 1997
Notes to Unaudited Condensed
Consolidated Financial Statements 7
Item 2 Management's Discussion & Analysis 9
of Financial Condition & Results
of Operations
PART II Other Information
Item 1 Legal Proceedings 13
Item 6 Exhibits & Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
Page 2 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (Note 1)
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March December
31, 31,
1998 1997
---- ----
CASH AND CASH EQUIVALENTS (Note 2) $2,068,106 $2,953,740
RECEIVABLES:
Investment management fees 1,013,533 1,041,390
Other receivables 140,222 166,221
FURNITURE AND EQUIPMENT, at cost,
net of accumulated depreciation
of $1,198,974 and $1,277,801 842,060 965,168
SOFTWARE AND PRODUCT DEVELOPMENT,
at cost, net of accumulated
amortization o f$1,148,169
and $963,469 1,222,806 1,208,713
PREPAID EXPENSES AND OTHER ASSETS 1,112,965 1,023,364
LONG TERM NOTE RECEIVABLE 410,945 623,115
GOODWILL, net of amortization
of $282,294 and $146,096 5,258,407 5,394,606
---------- -----------
TOTAL ASSETS $12,069,044 $13,376,317
=========== ============
Page 3 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(cont'd)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
March December
31, 31,
1998 1997
LIABILITIES
Accounts payable $1,543,316 $1,687,967
Accrued expenses 658,406 644,012
Other liabilities 103,361 104,125
Deferred revenue 1,273,583 1,307,382
Notes payable - current (Note 3) 763,818 166,158
Obligations under capital lease 342,924 384,986
Notes payable - long term 40,000 200,000
----------- ------------
TOTAL LIABILITIES 4,725,408 4,494,630
----------- ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value -
authorized 5,000,000 shares;
issued and outstanding,
138,182 shares and 138,182
shares 345,455 345,455
Common stock, $.01 par value -
authorized 50,000,000 shares;
issued and outstanding,
4,857,803 shares and
4,857,903 shares 48,578 48,579
Additional paid-in capital 22,969,211 22,977,526
Accumulated deficit (16,019,608) (14,489,873)
----------- ------------
TOTAL SHAREHOLDERS' EQUITY 7,343,636 8,881,687
----------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $12,069,044 $13,376,317
=========== ============
Page 4 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
REVENUE
1998 1997
Investment management fees $5,422,766 $2,787,040
Other income 47,683 74,081
---------- ----------
Total revenue 5,470,449 2,861,121
---------- ----------
DIRECT EXPENSES
Investment manager and other fees 3,348,801 1,390,723
---------- ---------
2,121,648 1,470,398
---------- ---------
OPERATING EXPENSES
Salaries and benefits 1,847,069 968,449
Clearing charges and user fees 159,299 157,207
Advertising and promotion 264,001 213,448
General and administrative 395,884 227,347
Occupancy and equipment costs 599,612 276,245
Professional fees 182,747 155,320
Amortization of goodwill 136,198 -
Amortization of software
development costs 66,572 50,630
--------- --------
Total operating expense 3,651,382 2,048,646
NET LOSS BEFORE INCOME TAXES (1,529,734) (578,248)
INCOME TAXES - -
----------- ------------
NET LOSS $(1,529,734) $(578,248)
----------- -----------
NET LOSS PER COMMON SHARE $ (0.32) $ (0.16)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,857,803 3,627,775
----------- ----------
Page 5 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(1,529,734) $(578,248)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Accretion of discount on notes
receivable (15,205) (19,234)
Depreciation and amortization 296,107 145,500
Changes in operating assets and
liabilities
Investment management fees
receivable 27,857 (395,190)
Other receivables 25,999 36,108
Prepaid expenses and other
assets (89,601) (77,440)
Accounts payable (144,651) (213,257)
Accrued expenses 14,394 3,142
Other liabilities (764) (4,491)
SEC Settlement Distribution - (603,091)
Deferred revenues (33,799) (17,087)
--------- ---------
Net cash used in operating
activities (1,449,397) (1,723,288)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture & equipment (122,366) (172,661)
Disposal of furniture &
equipment-PMCIS 261,949
Decrease of long term note
receivable 227,375 (126,078)
Cost of product development (198,793) -
--------- ---------
Net cash provided by (used in)
investing activities 168,165 (298,739)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from notes payable 600,000 -
Principal payments on notes
payable (162,340) (1,956)
Principal payments on
obligations under capital lease (42,062) (24,922)
--------- ----------
Net cash provided by financing
activities 395,598 (26,878)
NET INCREASE (DECREASE) IN CASH (885,634) (2,048,905)
========= ===========
CASH, at beginning of period 2,953,740 6,499,390
----------- ------------
CASH, at end of period $2,068,106 $4,450,485
=========== ============
Page 6 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements include the historical accounts of Portfolio
Management Consultants, Inc. ("PMC") for all periods, the
accounts of PMCI since September 30, 1993, the accounts of
Portfolio Brokerage Services, Inc., and Portfolio Technology
Services, Inc. since inception, and PMC Investment Services, Inc.
(formerly ADAM Investment Services, Inc.) since September 24,
1997. These financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management,
all adjustments (consisting 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, 1997.
NOTE 2 - CASH AND CASH EQUIVALENTS
The Company holds cash of $2,068,000 of which $1,445,000 is
restricted as a result of the following transaction: In January,
1997, a company (the "LLC") owned and controlled by the Company's
president and CEO, borrowed $1,750,000 from a bank with a due
date of December 31, 1997. The purpose of the loan was to
finance payment of the deferred portion of the purchase price of
410,961 shares of PMCI common stock owned by the LLC that were
purchased from a former officer of the Company at the time of his
departure in July 1995. In connection with this borrowing, the
Company agreed to collateralize the loan on behalf of the LLC and
the 410,961 shares of common stock owned by the LLC were pledged
to the Company. Accordingly, $1,890,000 of cash was originally
restricted for this purpose. In October 1997, the Company and
the LLC renegotiated the arrangement with another bank resulting
in a $1,400,000 loan to the LLC due and payable December 31, 1998
and collateralized by the Company, and a $350,000 loan due March
31, 1998, collateralized with 87,500 shares of PMCI stock owned
by the LLC and released from a pledge to the Company.
Accordingly, as of March 31, 1998, $1,445,000 included in Cash
and Cash Equivalents in the accompanying balance sheet is
restricted under this arrangement with the Company guaranteeing
the balance collateralized by stock owned by the LLC. The
Company also agreed to loan the LLC amounts sufficient to pay
interest on the loan so long as the amount of loans made and bank
collateral provided would not exceed $2,000,000. As of March 31,
1998, the Company has loaned the LLC approximately $190,000
designated to pay the interest on the bank loan. The LLC has
agreed to reimburse the Company for any amounts paid by the
Company toward the loan or for collateral applied to the loan,
including interest at an annual rate of 9%, and has granted the
Company a security interest in 323,461 shares of the Company's
common stock held by it. See Note 4.
Page 7 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
NOTE 3 - NOTES PAYABLE
Notes payable include a loan from a bank of $600,000
collateralized by accounts receivable. Principal payments are
due as follows: $400,000 on July 1, 1998, and $200,000 on October
1, 1998. Interest on the note of 11% is due and payable monthly.
NOTE 4 - SUBSEQUENT EVENTS
In April 1998, the $350,000 portion of the LLC loan described in
Note 2 was restructured with the due date extended to December
31, 1998, the Company providing $350,000 of additional cash
collateral to the bank and the Company receiving a pledge from
the LLC of the 87,500 shares of common stock previously pledged
to the bank.
Page 8 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion provides information that the Company
believes is relevant to an assessment and understanding of its
results of operations. It should be read in conjunction with the
Financial Statements and Notes included elsewhere herein and in
the consolidated financial statements and footnotes included in
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997. The discussion below contains "forward
looking statements" within the meaning of the federal securities
laws, including statements regarding the Company's prospects,
cash flows, liquidity, and potential of the Company's products
and services and similar expressions concerning matters that are
not historical facts. These statements are subject to risks and
uncertainties that could cause results to differ materially from
those expressed in the statements.
General
The Company develops, markets, and manages sophisticated
investment management products and services. Not a money manager
itself, the Company provides products and services to facilitate
the selection and/or monitoring of unaffiliated money managers or
mutual funds for customers of the Company's distribution channels
depending upon the size, sophistication and requirements of such
customers. The Company's products and services address
investment suitability and diversification, asset allocation
recommendations, portfolio modeling and rebalancing,
comprehensive accounting and portfolio performance reporting.
The Company's revenues are realized primarily from fees charged
to clients based on a percentage of managed assets and to a
lesser extent from consulting fees for certain advisory services
and licensing fees from its software products. Fees based upon
managed assets typically range from 10 to 250 basis points per
year, based upon a number of factors such as the size of account
and scope of services provided. At the present time, the
principal factors affecting the Company's revenues are whether
the Company adds or loses clients for its investment management
services, the performance of equity and fixed income markets, and
the type and size of accounts managed by the Company and related
differences in fees charged.
Results of Operations
The Quarter in Review
During the first quarter of 1998, the Company experienced a
mixture of accomplishments, difficulties and disappointing
operating results. On the positive side, the Company moved
forward with the integration of PMCIS (formerly ADAM Investment
Services, Inc.) including the relocation of its headquarters to
Denver and the integration of personnel, operations and systems.
Management expects economies of scale and other benefits of the
combined entities to emerge over the second, third and fourth
quarters. The Company's relationship with Ernst and Young LLP,
("E&Y") continues to progress with the E&Y program gaining
momentum and assets under management increasing significantly in
the first quarter. Although this program has taken
substantial effort and resources over the past twelve months
and has experienced delays in rollout, Management believes this
channel is now on track to grow significantly during the balance
of 1998.
Page 9 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (cont'd)
In February, PMC entered into an agreement with CIGNA Financial
Services, Inc. to provide a mutual fund asset allocation program,
called CIGNA Compass, to clients referred to the Company by
CIGNA. Accounts have begun to open within this new program.
The Company continues to devote significant resources to the
growth of its independent adviser channels. Although
relationships and alliances with Schwab Institutional and other
broker-dealers and custodians for the Company's programs which
were entered into over the past year have evolved more slowly
than anticipated and have required more resources than expected,
during the first part of 1998, the Company has started to see
benefits from its efforts to build its business in these channels.
In April, PMC hired Robert A. Brown, Ph.D., as an Executive Vice
President and Senior Managing Director of Consulting Services.
Dr. Brown will be responsible for PMC's consulting operations as
well as the manager search and due diligence areas. Prior to joining
PMC, Dr. Brown was a Managing Director, Senior Consultant and
Director of Research with SEI Capital Resources. Dr. Brown has
also held senior positions with the Ameritech Pension plan where
he was a Director of Asset Allocation and Equity Strategy,
Cambridge Associates, William M. Mercer and Ibbotson Associates.
He spent four years as a Professor of Finance at the University
of Colorado at Boulder, where he instructed Ph.D. and MBA
students in investment theory and practice. Dr. Brown was
awarded a Ph.D. in Finance from Northwestern University and M.A.s
in Economics from both Northwestern University and the University
of Maryland at College Park. He is also a Chartered Financial
Analyst.
The Company also experienced adversity during the first quarter.
Significant difficulties were encountered with one of the
Company's internal software systems. This problem required the
unplanned expenditure of substantial personnel resources and
negatively impacted the Company's productivity and operations.
It also adversely affected a program administered by the Company
for an institutional client. The Company had expended
significant resources developing its deliverables for that
specific program over the prior year and as a result of the
systems difficulties described above, the parties are no longer
going forward with their relationship on that program. The
Company does have other relationships with that client which are
proceeding as expected at this time.
The Company continued to work through a management and personnel
reorganization during the first quarter, including the
substantial restructuring of information technology. The Company
incurred non-recurring costs of approximately $100,000 related to
such changes. Although the PMCIS integration progressed during
the first quarter, the Company incurred $100,000 in non-recurring
expense associated with the relocation of PMCIS to Denver. In
addition, the Company bore the overhead expense of the Atlanta
office. The Company has significantly reduced this expense by
subleasing most of its Atlanta office space.
Page 10 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (cont'd)
Management believes that the disappointing operating results and
systems problems experienced in the first quarter are primarily
attributable to the Company's aggressive 1997 efforts to expand
distribution channels and service new institutional clients.
These efforts placed greater burdens on the Company's resources
and personnel than had been anticipated. Additionally, the
maturation of these channels has been slower than expected.
Management has been taking action to more closely manage expenses
to revenues in order to improve the Company's operating results
going forward. While there is no assurance the Company will be
successful, Management is optimistic that there will be growth in
assets under management and administration in developing and
existing channels, with a corresponding positive impact on future
operating results, particularly as the one time charges
described here have been fully absorbed.
Three Months Ended March 31, 1998 Compared to Three Months Ended
March 31, 1997 Revenues
Revenues were $5,500,000 for the quarter ended March 31, 1998,
compared to $2,900,000 for the quarter ended March 31, 1997, an
increase of 90%. The increase was attributable primarily to the
PMCIS contribution to Investment Management Fees of $2,300,000
and revenues of $100,000 from the E&Y channel. Revenues from
Republic National Bank of New York ("Republic") of $150,000 were
not recognized in the first quarter as was budgeted for, due to
the termination of the contract.
Investment Management and Other Fees
Investment Manager and Other Fees were $3,300,000 for the quarter
ended March 31, 1998, compared to $1,400,000 for the quarter
ended March 31, 1997, an increase of 35%. The increase in Direct
Expenses was principally the result of a $1,600,000 increase
attributable to the PMCIS acquisition.
Net Revenues after Investment Manager and Other Fees
Net Revenues after Investment Manager and Other Fees were
$2,100,000 for the quarter ended March 31, 1998, compared to
$1,500,000 for the quarter ended March 31, 1997, an increase of
40%. The change was primarily the result of revenues and
expenses attributable to the PMCIS acquisition.
Operating Expenses
Operating Expenses were $3,700,000 for the quarter ended March
31, 1998, compared to $2,000,000 for the quarter ended March 31,
1997, an increase of 85%. These increases were due primarily to
an increase in Salaries and Benefits of $900,000 (91%), and
Amortization of Goodwill which increased $100,000 (100%).
Salaries and Benefits increased as a result of the PMCIS
acquisition and the increase in business related to the E&Y
channel. Eighteen people were added to payroll in conjunction
with the PMCIS acquisition. Four people have been added to
support the E&Y program. Goodwill Amortization is a direct
result of the PMCIS transaction. General and Administrative and
Occupancy and Equipment also increased $500,000 primarily as
Page 11 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (cont'd)
a result of the PMCIS acquisition and increase in business
related with E&Y. For example, operating expenses excluding
salaries and benefits for PMCIS totaled $270,000 for the first
quarter.
Income Taxes
The Company's effective tax rate for 1997 is 0.
Net Loss
The Company recorded a net loss of $1,500,000 for the quarter
ended March 31, 1998, as compared to $600,000 for the quarter
ended March 31, 1997.
The increase in the loss is primarily due to:
Republic revenue decrease $150,000
adjustment in E&Y minimum fee guarantee $100,000
relocation costs associated with PMCIS $100,000
maintenance of Atlanta office $100,000
PMCIS goodwill amortization $150,000
increase in depreciation/amortization $200,000
severance payments/employment agency fees $100,000
--------
$900,000
========
Liquidity and Capital Resources
At March 31, 1998, the Company had cash of $2,000,000, a
substantial portion of which was held in short-term interest
bearing accounts, including restricted cash of $1,400,000.
For the Quarter Ended March 31, 1998:
Cash used in operating activities was $1,400,000. This was due
primarily to the net loss from operations.
Cash provided by investing activities was $200,000. Cash
provided by investing activities was the result of payments
received on a note receivable.
Cash provided by financing activities of $400,000 was primarily
related to the borrowings to finance accounts receivable.
The Company anticipates that it will continue to experience
operating losses until such time as it can realize the benefits
of:
1. the PMCIS acquisition, the related assets under
management and the expected economies of scale of merged
operations;
2. employee attrition and turnover, and related reduction
in payroll costs;
3. the realization of associated fee income from E&Y; and
4. significant growth in assets under management and
administration.
Page 12 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (cont'd)
The Company is currently investigating sources of short and long
term capital in order to support its working capital requirements
for the balance of 1998. The Company's future liquidity needs
are dependent upon the Company's ability to generate higher
levels of cash flow from operations, to borrow funds, to complete
additional equity offerings, or to reduce operations, or a
combination of the above. There can be no assurance that
financing will be available to the Company or that the Company
will otherwise find sources to meet its cash flow requirements.
The Company has historically incurred net losses and accordingly
experienced cash flow problems. As a result of the acquisition
of PMCIS, the Company is obligated to make a deferred purchase
payment on September 24, 1998. The payment will be equal to 1.0%
of certain PMCIS assets under management in excess of
$500,000,000, with the payment not to exceed $2,000,000, plus
interest. As of March 31, 1998, this payment would not be able
to be made principally due to the fact that $1,400,000 of cash is
restricted. In addition, through the first quarter of 1998,
continuing losses from operations have resulted in the Company's
cash balances decreasing further. During the first quarter, the
Company continued its efforts to reduce expenses. Management
believes that these efforts, along with projected increases in
revenues and assets under management and deferral of expenses and
liabilities, should allow the Company to continue without
requiring additional resources, excluding the PMCIS payment.
While the Company is seeking out sources of short and long term
capital to meet the PMCIS payment as well as working capital
needs, there is no assurance that sources of such funds will be
available to the Company. Should additional capital not be
raised, the Company will be required to restructure the terms of
the PMCIS payment, to seek to remove the restriction from its
cash balances, to restructure its operations and/or customer
relationships, or a combination of the above. There is no
assurance that the Company's restructuring efforts would be
successful.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In early June 1997, the Company received a letter from an
attorney representing a former employee which threatened
litigation relating to a dispute over such former employee's
remuneration by the Company unless the Company agreed to settle
with him by a specified date. The Company responded to the
letter and stated its position that no amounts are owed. By
correspondence from The National Association of Security Dealers
("NASD") dated December 19, 1997, PMC was notified that the
matter was submitted by the employee to the NASD for
arbitration. The employee is seeking damages for lost earnings
from his prior employer, lost commissions from PMC and other
damages, totaling $1,190,000. PMC has responded to the NASD
Arbitration demand by denying that the NASD has jurisdiction over
the matter and seeking to have the matter dismissed. The matter
has been transferred to the NASD's regional office in Denver. On
May 13, 1998, the Company filed a verified Application for Stay
of Arbitration in Denver District Court, asking for an order
staying arbitration due to the fact that there is no agreement
for arbitration between the parties. The Company believes that
the claims described in the NASD Arbitration notice are without
basis and intends to defend the matter vigorously.
Page 13 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
In October 1997, the Company notified its then Executive Vice
President, Mr. David Andrus, that under the terms of his
employment agreement, his employment with the Company as an
officer and employee would cease effective January 11, 1998. The
employment agreement stipulated that Mr. Andrus was to receive
severance payments in an amount equal to his base salary, payable
ratably on a semi-monthly basis for up to one year after the date
of his separation from the Company. Such payments would cease
sooner in the event Mr. Andrus were to gain employment affording
him comparable compensation. The Company believes there is
sufficient basis to dispute Mr. Andrus' right to receive
severance payments. The Company ceased paying Mr. Andrus in
February 1998, retained legal counsel regarding this matter and
has notified Mr.
Andrus that the Company disputes his right to receive such
payments. An attorney for Mr. Andrus has made demand on the
Company for payments under the agreement. The Company intends to
vigorously defend this matter.
The Company is not aware of any other material legal proceedings
or investigations currently pending or threatened against the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.1 Addendum to Employment Agreement with Kenneth S. Phillips
27 Financial Data Schedule
B. Reports on Form 8-K
None
Page 14 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PMC INTERNATIONAL, INC.
REGISTRANT
Date: May 15, 1998 /s/ Kenneth S. Phillips
Kenneth S. Phillips
President, Chief Executive Officer
Date: May 15, 1998 /s/ Stephen M. Ash
Stephen M. Ash
Chief Financial Officer
Page 15 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT INDEX
A. Number Exhibit Page Number
10.1 Addendum to Employment Agreement
with Kenneth S. Phillips 17
27 Financial Data Schedule 18
Page 16 of 18
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PMC INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 10.1
ADDENDUM TO EMPLOYMENT AGREEMENT
This addendum ("Addendum") to the Employment Agreement
("Agreement") entered into between PMC International, Inc. and
Kenneth S. Phillips (the "Executive") as of July 26, 1995, shall
be effective as of April 15, 1998.
The parties agree that Section 1. of the Agreement is hereby
amended in its entirety to read as follows:
"1. Employment; Position; Term. The Company hereby employs
the Executive, and the Executive hereby accepts employment with
the Company, in the capacity of President and Chief Executive
Officer. Subject to Section 4, the term of the Executive's
employment under this Agreement shall be for three (3) years,
beginning July 26, 1995. The term of this Agreement shall be
extended for successive one-year periods on July 26 of each year
beginning July 26, 1998, unless on or before May 26, 1998, or on
or before April 26 of 1999 and all subsequent years, the Company
or the Executive provides written notice to the other of its/his
intention not to renew."
PMC INTERNATIONAL, INC.
/s/ Scott A. MacKillop
By: Scott A. MacKillop
Executive Vice President & COO
THE EXECUTIVE:
/s/ Kenneth S. Phillips
Kenneth S. Phillips
Page 17 of 18
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 27
Financial Data Schedule
Page 18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,068,106
<SECURITIES> 0
<RECEIVABLES> 1,564,700
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,112,965
<PP&E> 9,952,710
<DEPRECIATION> (2,629,437)
<TOTAL-ASSETS> 12,069,044
<CURRENT-LIABILITIES> 4,725,408
<BONDS> 0
0
345,455
<COMMON> 48,578
<OTHER-SE> 6,949,603
<TOTAL-LIABILITY-AND-EQUITY> 12,069,044
<SALES> 5,470,449
<TOTAL-REVENUES> 5,470,449
<CGS> 3,348,801
<TOTAL-COSTS> 3,348,801
<OTHER-EXPENSES> 3,634,662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,720
<INCOME-PRETAX> (1,529,734)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,529,734)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,529,734)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
