<PAGE>1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
[ ] 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 0-26088
PCT HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0431483
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
434 Olds Station Road, Wenatchee, Washington 98801
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (509) 664-8000
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______
-----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 11, 1995, 5,332,008
shares of the Company's Common Stock, par value $.001 per share, were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes_____ No X
-----
<PAGE>2
PART 1 -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - August 31 and May 31, 1995
Consolidated Statements of Income - First Quarter Ended August 31, 1995 and 1994
Consolidated Statements of Cash Flow - First Quarter Ended August 31, 1995 and
1994
Management's Statement and Notes to Consolidated Financial Statements
<PAGE>3
PCT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AUGUST 31 AND MAY 31, 1995
AUGUST 31 MAY 31
Assets 1995 1995
- ------ ----------- ---------
(unaudited) (audited)
Current Assets
Cash $ 476,051 $ 1,078,637
Receivables 1,621,033 1,075,999
Inventory 4,942,063 4,375,162
Prepaid Expense 68,936 39,721
Other 281,181 278,795
------------ ------------
Total Current Assets 7,389,264 6,848,314
============ ============
Net Property, Plant & 3,209,609 3,008,122
Equipment
Real Estate Held for Resale 676,253 676,253
Patents, net 454,635 478,092
Costs in Excess of NBV 462,687 462,687
Non-compete Agreement 100,000 100,000
Other 115,908 56,444
------------ ------------
Total Assets $ 12,408,356 $ 11,629,912
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities
Accounts Payable $ 2,122,108 $ 1,527,467
Accrued Liabilities 366,622 518,065
Current Portion - LTD 2,677,401 2,448,000
Current Portion - C/L 48,585 51,000
Current Portion - N/P 600,000 510,000
Current Portion - Non-Com 35,000 35,000
------------ ------------
Total Current Liabilities 5,849,716 5,089,532
============ ============
Long Term Debt, net 540,739 319,574
Capital Leases, net 51,063 115,281
Notes Payable, net -- 457,644
Non-compete Agreement, net 65,000 65,000
Deferred Rent 146,710 128,711
------------ ------------
Total Liabilities 6,653,228 6,175,742
============ ============
Shareholders' Equity
Common Stock 11,511,777 11,018,406
Accumulated Deficit (5,756,649) (5,564,236)
------------ ------------
Total Shareholders' Equity 5,755,128 5,454,170
------------ ------------
Total Liabilities & Equity $ 12,408,356 $ 11,629,912
============ ============
The accompanying notes are an integral part of the consolidated financial
statements
<PAGE>4
PCT HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
First Quarters Ended August 31, 1995 and 1994
Quarters Ended
-----------------------------
August 31 August 31
1995 1994
Unaudited Unaudited
--------- ---------
NET SALES $ 3,456,473 $ 2,824,024
COST OF SALES 2,795,475 2,218,324
----------- -----------
GROSS PROFIT 660,998 605,700
OPERATING EXPENSES 808,687 508,948
----------- -----------
INCOME (LOSS) OPERATIONS (147,689) 96,752
----------- -----------
OTHER INCOME AND EXPENSE
Interest Income --- 18,920
Interest Expense (44,776) (93,815)
Other 52 11,535
----------- -----------
NET INCOME (LOSS) BEFORE
FEDERAL INCOME TAX (44,724) (63,360)
----------- -----------
LESS: INCOME TAXES 0 (9,850)
----------- -----------
NET INCOME (LOSS) FOR THE PERIOD ($ 192,413) $ 23,542
=========== ===========
PER SHARE OF COMMON STOCK ($ 0.02) $ 0.01
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING DURING THE PERIOD 5,264,008 2,764,952
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements
<PAGE>5
PCT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FIRST QUARTERS ENDED AUGUST 31, 1995 AND 1994
August 31 August 31
1995 1994
Unaudited Unaudited
--------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Net cash from operating activities ($ 741,800) $ 203,734
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (293,661) (105,611)
Purchase of Patents --- (450,000)
Other Changes, net (74,299) ---
----------- -----------
Net cash from investing activities (367,960) (555,611)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Payments of Debt and Capital Leases (72,447) (104,404)
Proceeds from Financing Debt 86,250 2,025,896
Payments on notes payable to stockholders --- (1,492,838)
Sale of common stock 493,371 410,000
----------- -----------
Net cash from financing activities 507,174 838,654
----------- -----------
NET CHANGE IN CASH (602,586) 486,777
Cash, beginning of period 1,078,637 27,208
----------- -----------
Cash, end of period $ 476,051 $ 513,985
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>6
PCT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management's Statement
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and, in the opinion of
management, contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's consolidated financial
position as of August 31, 1995 and 1994, the consolidated results of
operations for the three-month periods ended August 31, 1995 and 1994, and the
consolidated statements of cash flow for the three-month periods ended August
31, 1995 and 1994. These results have been determined on the basis of
generally accepted accounting principles and practices applied consistently
with those used in the preparation of the Company's Annual Report(s) on Form
10-KSB.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The financial statements should be
read in conjunction with the audited financial statements and notes thereto
for the years ended May 31, 1995 and 1994, which have been provided in their
entirety in the Company's Form 10-KSB for the period ended May 31, 1995.
The results of operations for the three-month periods ended August 31, 1995
and 1994 are not necessarily indicative of the results to be expected for the
full year. Also, certain reclassifications have been made to the balance
sheet and the statements of operations and cash flow to conform to the fiscal
year 1995 presentations.
Computations of Income and Loss per Share
Income and Loss per common and common equivalent share are computed using the
weighted average number of common and common equivalent shares outstanding
during each period reflected in these financial statements. Common equivalent
shares consist of stock options, which are excluded from the computation if
antidilutive. Fully diluted income and loss per share did not differ
significantly from primary income and loss per share in any period being
reported.
<PAGE>7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview:
The Company's revenues for the three-month period ended August 31, 1995 were
derived from its three operating subsidiaries involved in the manufacture and
sale of electrical connectors and instrument packages (Pacific Coast
Technologies, Inc. ("PCTI")); high quality machined aluminum and metal parts
(Cashmere Manufacturing Company, Inc. ("CMC")); and devices that filter out
electromagnetic interference (Ceramic Devices, Inc ("CDI"), which was
acquired on February 28, 1995). Revenues for the three-month period ended
August 31, 1994 were derived from the operations of PCTI and CMC only.
Results of Operations:
Gross revenues for the quarter ended August 31, 1994 versus the quarter ended
August 31, 1995 increased from $2,824,024 to $3,456,473, an increase of
$632,449. $445,782 of the increase was attributable to CDI, leaving a net
increase of $186,667, mostly attributable to the operations of PCTI, or a
21.9% increase in PCTI's revenues. This increase was due to generally higher
average activity among the customer base of PCTI and a larger backlog in
comparison to the same period in the prior year. CMC's revenues declined
modestly during the same period, from $1,861,238 in 1994 to $1,836,129 in
1995, a $28,109 decrease, or 1.5%. Gross margins for the two comparable
periods were 21.4% in 1994 versus 20.4% in 1995, a decrease due in part to
higher levels of overtime labor utilization. Management is actively
recruiting and training qualified production employees, particularly
machinists, to reduce this factor. Operating expenses increased from $508,948
in 1994 to $808,687, an increase of $299,739. $146,112 of the increase was
due to the addition of the CDI operating subsidiary. The balance of the
increase, amounting to $155,627, was due in large part to legal costs of
nearly $70,000 incurred during the quarter in connection with the Balo
litigation described below and to legal and accounting fees related to
completion and reporting of the transactions closed by the Company and its
subsidiaries during fiscal year 1995. Interest expense declined from $93,815
in 1994 to $44,776 in 1995, reflecting reductions in long-term and short-term
debt in comparison to the prior year. As reflected in the cash flow
statement, the Company used a significant portion of stock sale proceeds to
reduce debt. The corresponding decline in net income from the above stated
factors totalled approximately $216,000, from income of $23,542 in 1994 to a
net loss of $192,413 in 1995.
<PAGE>8
Liquidity:
At August 31, 1995, total current assets were $7,389,264 and total current
liabilities were $5,849,716, resulting in net working capital of $1,539,548,
and a current asset and liability ratio of 1.3 to 1.0. Comparable amounts at
August 31, 1994 were $6,848,314 of current assets and $5,089,532 in current
liabilities, resulting in net working capital of $1,758,782, and a current
ratio of 1.35 to 1.0. Although the Company continues to experience operating
losses and will continue to require working capital and cash to support
operations, management has adopted operational plans intended to bring each
operating subsidiary to some level of profitability during the upcoming fiscal
year 1996. Irrespective of these plans, there can be no assurance that the
Company will reach profitability.
During the quarter ended August 31, 1995, the Company completed its agreement
for a working capital line of credit and a capital equipment line of credit
with a technology-based bank, resulting in a net working capital line
availability of $1,500,000 and capital equipment line availability of
$250,000. Subsequent to the end of the first quarter, $1,000,000 of the
operating line was drawn to provide a compensating balance to secure a letter
of credit backing a demand loan of $2,000,000 included in current liabilities.
An additional $150,000 has been drawn to support operations. The capital
equipment line has not yet been utilized.
Capital Resources:
At August 31, 1995, the Company had no material purchase commitments for
capital equipment. Additions and/or replacements of plant and equipment are
generally provided through working capital or a trade-in for down payment
resources, and a capital lease of long-term purchase note secured by the
related equipment purchased.
Inflation:
Inflation has not had a significant impact on the Company's operations in the
past two years, and is not expected to have a significant impact in the
foreseeable future.
<PAGE>II-1
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In July 1992, Balo Precision Parts, Inc. ("Balo") informed PCTI that Balo
believed that PCTI's hermetic connectors infringed Balo's U.S. Patent No.
5,110,307. Balo and PCTI were unable to resolve this matter and, on May 17,
1993, PCTI requested the U.S. Patent and Trademark Office to reexamine Balo's
patent. The next day Balo filed a patent infringement action against PCTI in
the U.S. District Court for the District of New Jersey. Balo's lawsuit was
stayed pending the outcome of the Patent Office's reexamination of Balo's
patent. The reexamination of Balo's patent has been concluded, and the New
Jersey lawsuit has resumed. PCTI has answered Balo's complaint and has
pursued discovery.
On July 28, 1995, PCTI filed a motion for summary judgment in its favor,
which was denied on September 8, 1995, on the basis that factual issues remain
to be resolved at trial. PCTI also filed a patent infringement action against
Balo, which has been consolidated with Balo's lawsuit. PCTI's lawsuit alleges
that Balo's sales of hermetic connectors infringes U.S. Patent Nos. 4,690,480
and 5,041,019, both owned by PCTI. Balo and PCTI are seeking damages and an
injunction against each other's continued manufacture and sale of hermetic
connectors.
The Company believes, and has been advised by its patent counsel, that PCTI
has meritorious defenses to Balo's claims and that Balo infringes PCTI's
patents. However, such opinions are not binding on a court, and it is not
possible to predict the outcome of any litigation with certainty. If PCTI is
not successful in this litigation, it could suffer a serious, material adverse
impact on its financial condition and its operations, particularly its
hermetic connector business.
Item 2. Changes in Securities
There were no changes in the instruments defining the rights of holders of any
class of registered securities during the quarter.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE>II-2
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: 27 - Financial Data Schedule.
b. Report on Form 8-K: During the period covered by this Report, no
reports on Form 8-K were filed.
<PAGE>II-3
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PCT HOLDINGS, INC.
Date: October 11, 1995 /s/ DONALD A. WRIGHT
-----------------------------------------
Donald A. Wright, President & CEO
Date: October 11, 1995 /s/ Nick A. Gerde
-----------------------------------------
Nick A. Gerde, Vice President Finance/CFO
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted
from the audited
financial statements of PCT Holdings, Inc., and its
subsidiaries for the
three-month period ended August 31, 1995, and is qualified in
its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> AUG-31-1995
<CASH> 476,051
<SECURITIES> 0
<RECEIVABLES> 1,666,240
<ALLOWANCES> 45,207
<INVENTORY> 4,942,063
<CURRENT-ASSETS> 7,389,264
<PP&E> 5,275,502
<DEPRECIATION> (2,065,893)
<TOTAL-ASSETS> 12,408,356
<CURRENT-LIABILITIES> 5,849,716
<BONDS> 540,739
<COMMON> 11,511,777
0
0
<OTHER-SE> (5,756,649)
<TOTAL-LIABILITY-AND-EQUITY> 12,408,356
<SALES> 3,456,473
<TOTAL-REVENUES> 3,456,473
<CGS> 2,795,475
<TOTAL-COSTS> 808,687
<OTHER-EXPENSES> (52)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,776
<INCOME-PRETAX> (192,413)
<INCOME-TAX> 0
<INCOME-CONTINUING> (192,413)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,413)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
