U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the Fiscal Year Ended December 31, 1997
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition
Period from to
Commission File No. 0-14937
PMC INTERNATIONAL, INC.
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(Name of Small Business Issuer in its Charter)
COLORADO 84-0627374
(State of Incorporation) (IRS Employer Identification No.)
555 17th Street, 14th Floor, 80202
Denver, Colorado
(Address of Principal Executive (Zip Code)
Offices)
Issuer's telephone number: (303) 292-1177
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The Issuer's revenues for the most recent fiscal year were $14,862,714.
The aggregate market value of the common equity held by non-affiliates
(4,107,846 shares) based upon the average bid and asked prices of the
Registrant's Common Stock on March 17, 1998, as quoted in the National
Quotation Bureau was $18,998,788.
As of March 17, 1998, the Registrant had 4,857,903 shares of common stock
issued and outstanding.
Documents Incorporated by Reference: NONE
Transitional Small Business Disclosure Format: Yes No X
Page 1 of 14 Pages
<PAGE>
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FORM 10-KSB/A
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YEAR ENDED DECEMBER 31, 1997
Introduction
PMC International, Inc. (the "Company" or the "Registrant")
hereby amends its Annual Report on Form 10-KSB for the year ended
December 31, 1997 by: Revising Item 1: Description of Business,
by replacing the section entitled "Competition"; Replacing Item
2: Description of Properties; Replacing Item 6: Management
Discussion and Analysis of Financial Condition and Results of
Operation; and Revising Item 10: Executive Compensation, by
replacing the section entitled "Executive Compensation," all as
set forth below:
ITEM 1: Description of Business
Competition
In offering services through its Institutional and
Independent Channels, the Company competes with other firms that
offer wrap and managed account programs. These distribution
channels in turn compete with banks, insurance companies, large
securities brokers and other financial institutions which offer
wrap or managed account programs to the public. The Company
believes that firms compete in this market primarily on the basis
of service, since the wrap fees charged by others are similar to
those charged by the Company. While a number of firms each
provide a portion of the services provided by the Company through
its Institutional Channels, the Company believes it is one of a
few firms offering integrated services to customers. Firms that
compete with the Company in providing services to its Independent
Channels and Institutional Channels have more financial resources
and greater recognition in the financial community than the
Company. Competitors may reduce the fees charged for wrap or
managed account programs or pursue other competitive strategies
that could have an adverse impact on the Company.
The Company's success is in large part a function of the
Independent Channels and Institutional Channels through which its
services are offered to others. There are many alternatives to
wrap programs that are being offered to the public, such as life
cycle funds, asset allocation funds, portfolio strategies and
third-party asset allocation services, and these services are
competitive with those offered by the Company. As financial
institutions continue to grow and build in-house asset
administration service capabilities, some will be able to provide
these services internally rather than using outsourcing
providers. Competitors may succeed in developing products and
services that are more effective than those that have been or may
be developed by the Company and may also prove to be more
successful than the Company in developing these products and
marketing these services to third-party asset managers.
<PAGE>
The Company believes that there will be increasing demand
in the financial services industry for the delivery of products
and services electronically or on-line. At present, the Company
delivers or makes available certain of its products and services
to selected clients through the Internet or electronically. The
Company's products were developed with Internet delivery in mind
and the Company anticipates that a modest investment of resources
over the coming year will result in significantly broader
availability of its products and services on-line. There can be
no assurance, however, that the Company will be able to keep pace
with its competitors in the electronic delivery of services.
ITEM 2: Description of Properties
The Company leases approximately 20,000 square feet of office
space for its corporate headquarters in the Qwest Tower at 555
17th Street, Denver, Colorado pursuant to a lease which expires
in 2001. The Company pays approximately $20,000 per month for
this office space. PMCIS subleases approximately 12,000 square
feet of office space in the Galleria Plaza, 100 Galleria Parkway,
Suite 1200, Atlanta, Georgia, pursuant to a sublease which
expires April, 1999. PMCIS pays approximately $24,000 per month
for this office space. On January 21, 1998, PMCIS entered into a
sublease agreement for its Atlanta office space. Pursuant to the
agreement, PMCIS sublet a substantial portion of the above
described office space for: $4.25 per square foot until February
17, 1998; $8.50 per square foot from February 17, 1998 until
March 31, 1998; and $17.00 per square foot from April 1, 1998
until the termination of the lease in April, 1999. PMCIS still
occupies the remaining space and will remain responsible for the
balance of the lease payments not covered by such sublease.
ITEM 6: 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. This discussion contains "forward looking statements"
within the meaning of the federal securities laws, including
statements regarding opportunities for growth from expanded use
of existing distribution channels and expanded use by existing
distribution channels 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.
Overview
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
<PAGE>
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 20 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.
The Company acquired PMCIS on September 24, 1997 (see Note
1 to Financial Statements of the Company). The impact of the
acquisition on the Company's statements of income is fully
reflected on the December 31, 1997 balance sheet. Beginning in
the fourth quarter 1997, PMCIS's operations were fully reflected
in the Company's financial statements.
Results of Operations
Year Ended December 31, 1997, Compared to Year Ended December 31,
1996
Revenues. Revenues were $14,900,000 for the year ended December
31, 1997, compared to $10,100,000 for the year ended December 31,
1996, an increase of 48%. The increase was attributable
primarily to the PMCIS acquisition contribution of $3,000,000 for
the fourth quarter and the contribution of $733,000 arising from
the Company's new relationship with Ernst & Young, LLP. New
business, such as Ernst & Young LLP, pays the Company only its
net portion of the fees, and does not include the fees for third
parties (i.e, portfolio managers, solicitors, brokerage or
custody). Historically, fees paid to the Company through its
primary distribution channels included fees payable for these
other services. Revenues from Republic National Bank of $550,000
were not recognized in 1997 as was anticipated due to product
roll-out delays.
Investment Manager and Other Fees. Investment Manager and
Other Fees were $8,200,000 for the year ended December 31, 1997,
compared to $5,600,000 for the year ended December 31, 1996, an
increase of 46%. Direct expenses increased primarily as a result
of the PMCIS acquisition. However, as discussed above, direct
expenses did not increase in proportion to revenues as certain of
these revenues, such as Ernst & Young LLP, are recognized on a
net basis to the Company.
Net Revenues after Investment Manager and Other Fees. Net
Revenues after Investment Manager and Other Fees were $6,700,000
for the year ended December 31, 1997, compared to $4,500,000 for
the year ended December 31, 1996, an increase of 49%. These
increases are explained above under Revenues and Investment
Management and Other Fees.
<PAGE>
Operating Expenses. Operating Expenses were $10,500,000
for the year ended December 31, 1997, compared to $8,500,000 for
the year ended December 31, 1996, an increase of 24%. These
increases were due primarily to an increase in salaries and
benefits which increased $1,400,000 or 40%, and depreciation and
amortization increased as a result of the expansion of the
Company's products and services, the development of internal
systems and the servicing of several new distribution channels
and customers, primarily PMCIS, Republic National Bank and Ernst
& Young LLP. On a favorable note, the Company has been able to
decrease payroll and related expenses in 1998 which will result
in savings of approximately $1,500,000 annually; this is the
result of layoffs, attrition, and the PMCIS acquisition. The
Company does not anticipate significant purchases of equipment or
capital assets in 1998.
Income Taxes. The Company's effective tax rate for 1997 is
0.
Net Loss. The Company recorded a net loss of $3,800,000
for the year ended December 31, 1997 as compared to $4,000,000
for the year ended December 31, 1996. The improvement in
earnings was the result of revenues growing at a faster pace than
direct and operating expenses. However 1997 earnings estimates
were not met. This was due to higher than expected the costs
related to: development of the infrastructure to support new
business relationships; management restructuring; the PMCIS
acquisition; and raising capital.
The Company is in the process of converting certain assets
under administration from one portfolio accounting system to a
third party system. The ability to transfer those accounts,
maintain customer satisfaction, and manage related operating
costs could impact the financial results of the Company.
The revenues of the Company are directly dependent upon the
amount of assets under management or administered by the Company.
A decline in market value or in assets under management as a
result of market conditions or customer satisfaction could impact
the future profitability of the Company.
Liquidity and Capital Resources
At December 31, 1997, the Company had cash of $3,000,000, a
substantial portion of which was held in short-term interest
bearing accounts, including restricted cash of $1,500,000.
Year Ended December 31, 1997. Cash used in operating
activities was $3,400,000. This was due primarily to a net loss
from operations. Cash used in investing activities was
$6,400,000. Cash used in investing activities was the result of
goodwill generated from the PMCIS acquisition and capital
expenditures incurred as a result of business expansion. Cash
provided by financing activities of $6,300,000 was primarily
related to the September 1997 private placement of common stock.
<PAGE>
PMCIS Acquisition and Financing. On September 24, 1997,
the Company completed the acquisition of PMCIS (formerly ADAM
Investment Services, Inc.), a financial services and investment
advisory company headquartered in Atlanta, Georgia. PMCIS has
provided investment consulting services to institutional
investors since 1980. PMCIS's primary services are based around
mutual funds. PMCIS offers seventeen model portfolios
constructed using no-load mutual funds and funds available at net
asset value. These "standard" portfolios consist of five global
tactical asset allocation portfolios, five global strategic asset
allocation portfolios and seven asset class portfolios that
concentrate on narrow asset class groups. PMCIS also has five
strategic asset allocation portfolios constructed using mutual
funds that invest in companies that are identified as operating
in a socially responsible manner. PMCIS's mutual fund portfolios
are also offered as options for use by 401(k) plans and with an
insurance company within a variable life contract. PMCIS
currently has a staff of approximately 16 people who are located
either in its corporate headquarters in Atlanta, Georgia or in
the Company's headquarters in Denver, Colorado. In 1995, PMCIS
acquired Optima Funds Management, Inc. ("Optima"), a company that
provides mutual fund wrap services to clients. Optima was merged
into PMCIS in December, 1997.
The agreement providing for the acquisition of PMCIS by the
Company provided that the Company would acquire all of the
outstanding capital stock of PMCIS for up to $9.0 million in cash
and up to $200,000 in Common Stock if certain conditions are met
over time. In addition, the Company agreed to assume the normal
operating liabilities of PMCIS at closing of the acquisition,
estimated to be approximately $1.6 million. At the closing of
the PMCIS transaction, the Company paid $5,000,000 in cash and
agreed to make two earn-out payments on the first and second
anniversary dates of the closing. The first earn-out payment
will equal 1.0% of PMCIS's standard fee assets under management
in excess of $500 million, determined on the one-year
anniversary of the closing of the PMCIS acquisition, not to
exceed $2.0 million, plus interest thereon at a rate of 8.75%.
The second earn-out payment will equal 1.0% of PMCIS's standard
fee assets under management in excess of $700 million, determined
on the two-year anniversary of the closing of the PMCIS
acquisition, not to exceed $2.0 million. The Company anticipates
that PMCIS will continue to operate as a wholly owned subsidiary
of the Company in the future.
In connection with the PMCIS acquisition, on September 24,
1997, the Company sold 1,220,749 shares of its Common Stock in
the PMCIS Private Placement at a price of $6.00 per share
(adjusted for the Reverse Split). The proceeds from this
transaction, after deducting expenses relating to the issuance of
the Common Stock, were approximately $6,500,000, of which the
Company used $5,000,000 to purchase PMCIS at the PMCIS closing.
The additional $1,500,000 is currently being used by the Company
for working capital purposes.
Cash Flow Requirements. Most of the Company's ongoing
losses and additional cash flow requirements relate to its
addition of staff and incurrence of capital expenditures in
anticipation of establishing and developing new distribution
relationships, specifically new institutional clients and, more
recently, the increased spending in integrating the PMCIS
business in the Company. The Company recognizes that there
generally is a substantial delay between when such relationship
costs as these are incurred and when the related revenues are
recognized.
<PAGE>
While there can be no assurance such will be the
case, the Company anticipates that its use of cash will increase
in the first quarter of 1998 before decreasing in the second and
third quarters of 1998 as cash is received from developing
distribution relationships and the PMCIS business is more fully
integrated into the Company. Future cash needs will depend
largely upon the Company's success in developing customer
relationships and servicing existing relationships, with the
intended result of increasing assets managed using the Company's
products and services. The Company anticipates that it will
continue to experience operating losses until such time as it can
realize the benefits of: the PMCIS acquisition, the related
assets under management and the expected economies of scale of
merged operations; employee attrition and turnover, and related
reduction in payroll and associated costs; the launching of new
institutional programs and the realization of associated fee
income; and, other developing relationships and the ability to
leverage personnel and manage operating costs in a normal
operating environment.
On March 9, 1998, the Company obtained a line of credit in the
amount of $600,000 from a bank to finance the outstanding
receivable from Ernst & Young. Pursuant to its agreement with
Ernst & Young, the Company is to receive certain minimum revenues
quarterly through 1998. Those revenues are reflected as an
account receivable in the amount of $733,000 at December 31,
1997.
The Company is currently investigating sources of short and
long term capital as well as the restructuring of certain
operational systems and customer relationships, 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 financings 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 experience 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. As
of December 31, 1997, 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. In March 1998, the Company
implemented a cost reduction plan. Management believes that this
plan along with projected increases in revenues and deferral of
payments of expenses should allow the Company to continue without
requiring additional resources, excluding the PMCIS payment. The
Company is currently investigating sources of short and long term
capital to meet the PMCIS payment as well as working capital
needs. Should additional capital not be raised, the Company will
be required to restructure the terms of the PMCIS payment, to
remove the restriction from its cash balances, restructure its
operations or a combination of the above.
<PAGE>
1996 Private Placement and Restructuring. In December 1996
the Company completed a private placement of 1,294,250 shares of
Common Stock at a price of $8.50 per share. Also in December
1996, the Company completed a restructuring of its debt and a
partial restructuring of its outstanding Preferred Stock. The
restructuring involved (i) the payment of all outstanding
interest on the Bedford loans, the repayment to Bedford of
$1,976,250 of outstanding principal on the Bedford loans, the
exercise by Bedford of warrants to purchase 255,937 shares of
Common Stock and the delivery by Bedford of canceled promissory
notes in the amount of $1,023,750 in satisfaction of the exercise
price of the warrants, the cancellation of Bedford's remaining
warrants, and the issuance to Bedford of new warrants to purchase
up to 37,500 shares of Common Stock at an exercise price of $8.50
per share; (ii) the issuance of 375,000 shares of Common Stock
upon the exercise of warrants issued to investors in connection
with the Company's private placement of promissory notes and
warrants in December 1995/January 1996 and May/June 1996 and the
delivery of canceled promissory notes in the aggregate principal
amount of $1,500,000 in satisfaction of the exercise price of
such warrants, payment by the Company of all interest accrued on
such notes as of the exercise date, and the issuance of new
warrants to purchase an aggregate of up to 37,500 shares of
Common Stock to such investors; (iii) the repayment of the
November 1996 bridge loan, and (iv) the conversion of 173,120
shares of Preferred Stock into 59,510 shares of Common Stock,
resulting in a reduction in the Company's cumulative dividend
obligation to the holders of Preferred Stock from $583,576 as of
September 30, 1996, to $322,700 as of December 31, 1996. The
conversion of additional shares of Preferred Stock into Common
Stock was effected in January 1997.
As a result of the private placement and restructuring, the
Company's shareholders' equity increased from a $4,047,682
deficit at September 30, 1996 to $6,270,537 at December 31, 1996
and cash increased from $701,160 at September 30, 1996 to
$6,499,000 at December 31, 1996. Through December 31, 1997,
approximately $1.4 million of the net proceeds was pledged by the
Company as collateral for a loan made to a limited liability
company owned and controlled by the Company's Chief Executive
Officer, approximately $1.8 million was used to pay aged accounts
payable of the Company in late 1996 and early 1997 and
approximately $1.8 million was used to fund the Company's other
working capital and capital expenditure requirements during 1997.
Uses of Cash. Between December 31, 1996, and December 31,
1997, cash and cash equivalents decreased from $6,499,000 at
December 31, 1996 to $3,000,000 ($1,500,000 of which was
unrestricted) at December 31, 1997 as the Company made capital
investments into furniture, fixtures and product development and
reduced other liabilities and accounts payable. Investment
management fees receivable increased $736,000 during the period
primarily as a result of the accrual of fees due from the new
relationships being established with Institutional Channels.
Other assets and liabilities have increased as a result of the
PMCIS acquisition and in conjunction with the increase of sales
volume. See "--Results of Operations--Twelve Months Ended
December 31, 1997 Compared to Twelve Months Ended December 31,
1996."
<PAGE>
In January 1997, the Company provided assistance to Mr.
Phillips, the Company's President and Chief Executive Officer, by
pledging cash collateral in the amount of $1,890,000 to a bank in
connection with the bank's loan to KP3, LLC (" KP3"), a company
owned and controlled by Mr. Phillips. The loan was made to KP3
for the purpose of financing payment of the deferred portion of
the purchase price of 410,961 shares of the Company's Common
Stock owned by KP3 that were purchased from Mr. Marc Geman, a
former officer of the Company, at the time he terminated his
association with the Company (the " KP3 Shares"). The Company
agreed to provide collateral for the loan for up to two years and
to lend funds to KP3 to service interest payments on the loan
during that period. The pledge by the Company of collateral for
the loan permitted the deferred portion of the purchase price of
the Company's Common Stock to be paid to Mr. Geman, thereby
eliminating the possibility that Mr. Geman could reacquire a
substantial stock ownership in the Company. Through December 31,
1997 and March 31, 1998, the Company had lent $150,800 and
$190,000, respectively, to KP3 specifically to service interest
payments on the KP3 loans. KP3 has agreed to reimburse the
Company for all 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 the KP3 Shares. Such loan was restructured through a
different bank on October 1, 1997 and April 15, 1998. In
connection therewith, the Company has provided two cash
collateral guarantees totaling $1,750,000; the Company retains
the 410,961 KP3 shares as collateral. The due date of the new
loans are December 31, 1998.
Year 2000. Many existing computer programs use only two
digits to identify a specific year and therefore may not
accurately recognize the upcoming change in the century. If not
corrected, many computer applications could fail or create
erroneous results by or at the year 2000. Due to the Company's
dependence on computer technology to operate its business, and
the dependence of the financial services industry on computer
technology, the nature and impact of Year 2000 processing
failures on the Company's business could be material. The
Company is currently modifying its computer systems in order to
enable its systems to process data and transactions incorporating
year 2000 dates without material errors or interruptions.
The success of the Company's plan depends in large part on
parallel efforts being undertaken by other entities, including
third party vendors, with which the Company's systems interact
and therefore, the Company is taking steps to determine the
status of these other entities' Year 2000 compliance. The
Company is formulating contingency plans to be implemented in the
event that any other entity with which the Company's systems
interact, or the Company itself, fails to achieve timely and
adequate Year 2000 compliance.
The Company currently expects that costs to comply will not
be material since these costs will be born substantially by
outside entities. These costs exclude the time that may be
spent by management and administrative staff in guiding and
assisting the information technology effort described above or
for bringing internal systems into Year 2000 compliance.
<PAGE>
Capitalized Software Development Costs. The Company has
incurred significant costs during the past several years in
developing internal operational systems and in developing,
marketing and supporting its proprietary Allocation Manager(TM)
investment advisory software for use by professional financial
consultants and expects to have continuing costs in 1997 relating
to the enhancement of Allocation Manager(TM). Prior to achieving
technological feasibility in 1995, the Company incurred
approximately $50,000 in research and development costs after
receiving the products from the unrelated individuals. These
costs have been included in the statement of operations for
1995. All subsequent costs incurred directly related to the
development of the software were capitalized. Capitalized costs
are being amortized over the economic life of the software, which
in this case is three years. The Company's policy is to
capitalize all software costs incurred in developing computer
software products until such products are available for release
to customers. Subsequent cost incurred to enhance and redesign
existing software products are capitalized and such
capitalization ceases when the enhanced or redesigned products
are released. It is the Company's policy to amortize and
evaluate software for net realizable value on a
product-by-product basis. The software became available for
sale, subject to enhancement and customization, during 1996. The
Company's plans to generate revenues from this product are
four-fold: license fees, customization fees, a continuing fee
equal to a percentage of assets under management of the end users
purchasing such software, and annual maintenance fees. Costs of
maintenance and customer support are charged to expense when the
related revenue is recognized, or when those costs are incurred,
whichever occurs first.
The Company has also capitalized the acquisition costs of
software acquired from third parties in connection with the
development of its internal systems. See "--Results of
Operations--1996 Compared to 1995--Software Development Costs."
Other Matters. In seeking to capture greater market share,
the Company has introduced restructured and unbundled pricing
which in some instances results in lower pricing for some of its
services in certain of its distribution channels. The Company
may make additional adjustments in the future. As a result of
the restructured pricing, gross revenues as a percentage of
assets under management may decrease.
The Company anticipates that it will continue to
experience operating losses until such time, if ever, as
investment management fees from managed assets and consulting and
license fees increase sufficiently to cover the Company's
increasing operating expenses. The Company is investigating
sources of long and short term capital, as well as the
restructuring of certain of its operational systems and customer
relationships in order to obtain and/or generate sufficient
working capital to meet its requirements for the balance of
1998. There can be no assurance that the Company's products and
services will be successful, that they will generate adequate
revenue to meet the Company's capital needs, that sources of
capital will be available to the Company as the need arises, or
that the Company will become profitable in the future.
<PAGE>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
-------------------------- ------------
Securities
Fiscal Other Underlying
Name and Principal Salary Bonus Annual
Position Year ($) ($) Compensation Options(1)
- ------------------------------------------------------------------------
Kenneth S. 1997 300,865 50,000 * 938
Phillips 1996 252,000 - * 12,500
President, Chief 1995 228,124 - * -0-
Executive Officer
Scott A. MacKillop(2)1997 206,331(3) 75,750
Executive Vice
President & Chief
Operating Officer
David L. Andrus(4) 1997 292,500 50,000 -0-
Former Executive 1996 240,000 - 262,500
Vice President 1995 40,000 - -0-
Vali Nasr(5) 1997 191,456 20,360 -0-
Former Chief 1996 129,375 9,640 12,500
Financial Officer & 1995 126,475 -0-
Treasurer
(1) The shares of Common Stock to be received upon the exercise of all
stock options granted during the period covered by the Table.
(2) Mr. MacKillop joined the Company in September 1997, in connection with
the acquisition of PMCIS.
(3) Includes $150,000 in salary received in 1997 from PMCIS for services
rendered prior to its acquisition by the Company.
(4) Mr. Andrus' employment with the Company terminated effective
January 11, 1998.
(5) Mr. Nasr's employment with the Company terminated effective January 30,
1998. Subsequently, Mr. Nasr served as a consultant to the Company
until mid-March 1998.
* Amount received was less than $50,000 or 10% of total salary and bonus
for the year.
<PAGE>
During the year ended December 31, 1997, the Company granted to the
Named Executive Officers options to acquire a total of 76,688 shares of
Common Stock as set forth in the following table.
Option Grants in Last Fiscal Year
Name Number of % of Total ($/Share) Expiration
Shares Options Exercise Date
Underlying Granted to Price
Options Employees
Granted in
Fiscal
Year(4)
Kenneth S. Phillips 938(1) 0.6 6.485 12/31/2002
Scott A. MacKillop 62,500(2) 51.6 6.485 09/24/2003
12,500(3) 6.485 10/27/2002
750(1) 6.485 12/31/2002
_______________________
(1) Options were granted on December 31, 1997 and are fully vested.
(2) Options were granted on September 24, 1997 and vest ratably 20% per year
over a five-year period commencing September 24, 1998.
(3) Options were granted on October 24, 1997; 2,500 options are vested and
20% of the remainder vest each time the average bid and asked price of
the Common Stock equals $4.75, $8.75, $12.75, $16.75 and $20.75,
respectively, for twenty consecutive trading days.
(4) Based on an aggregate of 146,826 options granted in 1997 to employees of
the Company, including the Named Executive Officers.
<PAGE>
The following table sets forth certain information with respect to the value
of options held at December 31, 1997 by the Named Executive Officers. The
Named Executive Officers did not exercise any options to purchase Common
Stock during 1997.
Fiscal Year End Option Values
Name Number of Securities ($)Value of
Underlying Unexercised
Unexercised Options In-the-Money Options
at Year End at Year End (1)
------------------------ ----------------------
ExercisableUnexercisable ExercisableUnexercisable
------------------------ ----------------------
Kenneth S. Phillips 5,938 7,500 $12,500 $18,750
David L. Andrus 193,750(2) 0 $71,250 0
Scott A. MacKillop 3,250 72,500 $49 $1,088
Vali Nasr 12,500(3) 0 $31,250 0
(1) The closing price for the Common Stock as reported on the over the
counter market on December 31, 1997 (the last day of trading in 1997)
was $6.50. Value is calculated on the basis of the difference between
the option exercise price and $6.50, multiplied by the number of shares
of Common Stock underlying the option.
(2) As of April 11, 1998, options to purchase 23,750 shares expired.
(3) As of April 30, 1998, options to purchase 12,500 shares will expire.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this amendment number 1 to Form 10-KSB to be signed on its behalf
by the undersigned, thereunto duly authorized.
PMC INTERNATIONAL, INC.
By: /s/ Scott A. MacKillop
----------------------------------------
Scott A. MacKillop
Executive Vice President and Chief
Operating Officer
By: /s/ Stephen M. Ash
----------------------------------------
Stephen M. Ash, Treasurer, Principal
Financial and Accounting Officer
Date: June 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,953,740
<SECURITIES> 0
<RECEIVABLES> 1,830,726
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,023,364
<PP&E> 9,955,853
<DEPRECIATION> (2,387,366)
<TOTAL-ASSETS> 13,376,317
<CURRENT-LIABILITIES> 4,494,630
<BONDS> 0
0
345,455
<COMMON> 48,579
<OTHER-SE> 8,487,653
<TOTAL-LIABILITY-AND-EQUITY> 13,376,317
<SALES> 14,862,714
<TOTAL-REVENUES> 14,862,714
<CGS> 8,151,912
<TOTAL-COSTS> 8,151,912
<OTHER-EXPENSES> 10,490,111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,227
<INCOME-PRETAX> (3,822,536)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,822,536)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,822,536)
<EPS-PRIMARY> (.98)
<EPS-DILUTED> (.98)
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