<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 1995
PCT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-26088 87-0431483
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
434 Olds Station Road, Wenatchee, WA 98801
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (509) 664-8000
None
(Former name or former address, if changed since last report)
<PAGE>2
Item 2. Acquisition of Assets
- -----------------------------
On December 1, 1995 (the "Effective Date"), PCT Holdings, Inc., a
Nevada corporation (the "Company"), effected a merger (the "Merger")
between a subsidiary of the Company that was formed for such purpose and
Morel Industries, Inc., a Washington corporation ("Morel"). The Merger was
effected pursuant to the terms of an Agreement and Plan of Merger (the
"Merger Agreement") between and among the Company, Morel, Stephen L. Morel
and Mark Morel (together, the "Shareholders"), and Morel Acquisition
Corporation, a Washington corporation and wholly-owned subsidiary of the
Company. As a result of the Merger, the Company acquired a significant
amount of assets otherwise than in the ordinary course of business.
As consideration for the Company's acquisition by merger of Morel, the
Company tendered to the Shareholders 900,000 shares of the Company's
authorized but previously unissued common stock (the "Shares") upon
surrender and cancellation of all of the issued and outstanding stock of
Morel. As a result of the Merger, the Shareholders own an aggregate of
12.5% of the shares of the Company's common stock outstanding as of the
Effective Date, and the Company owns all of the outstanding capital stock
of Morel. The parties to the Merger Agreement valued the Shares at $4.75
per share, the closing bid price for the common stock of the Company as
quoted on the NASDAQ SmallCap Market on the Effective Date. The purchase
price was determined pursuant to arms-length negotiations between the
Company and the Shareholders.
In connection with the Merger, the Company entered into a registration
rights agreement with the Shareholders, pursuant to which the Company
granted to the Shareholders the right to have up to 50% of the Shares
registered, at the Company's expense, on an equal basis with other
shareholders of the Company, if the Company proposes, within two years
after the date of closing, to register any of its common stock under the
Securities Act of 1933, as amended (except for registrations (i) under
compensation plans on Form S-8 or any successor form or (ii) in connection
with the acquisition by merger, tender offer or otherwise of another public
company).
Prior to the Merger, no material relationship existed between Morel
and the Company or any of its affiliates, directors, officers, or their
associates, except that Morel and certain subsidiaries of the Company
transacted business from time to time in the ordinary course of business.
Morel's purchase of its Entiat, Washington, facility was financed by
the Chelan County Development Corporation (the "Lender"). The Company has
guaranteed repayment of that financing in exchange for the Lender's consent
to the Merger. Prior to the Merger, Morel owned or leased the equipment
used in its business. After the Merger, Morel intends to continue to use
the same equipment (whether owned or leased) for the same business purposes
for which they were employed by Morel prior to the Merger.
<PAGE>3
Morel was incorporated in 1946, and its primary business has been the
operation of a foundry that designs and manufactures precision cast metal
parts for the aerospace and automotive industries. After the Merger, Morel
has continued, and presently intends to continue, the business operations
described above. Morel owns and occupies its facility located at 14351
Shamel Street, Entiat, WA 98822. The principal executive office of Morel
will be at the Company's headquarters in Wenatchee, Washington.
As of January 26, 1995, the Company entered into an agreement (the
"Agreement") with the Shareholders, pursuant to which the Shareholders
returned to the Company an aggregate of 250,000 of the 900,000 shares of
the Company's common stock that were acquired by the Shareholders as a
result of the Merger. As a result, the Shareholders' aggregate ownership of
the Company's common stock was reduced to 650,000 shares, or approximately
9.3% of the common stock of the Company outstanding as of the date of the
Agreement (after giving effect to the return of shares). The number of
shares of the Company's common stock returned by the Shareholders was
negotiated at arms' length between the Company and the Shareholders based
on Morel's audited financial statements for its fiscal year ended June 30,
1995. These financial statements became available to the parties after the
closing of the Merger.
Item 7. Financial Statements and Exhibits
- -----------------------------------------
A. Financial Statements
--------------------
Presented on the following pages 4 through 33 are (i) a Table of
Contents for the supplementary financial information presented
herein; (ii) management's introduction and notes to the
supplemental financial information; (iii) the Report of
Independent Accountants and the accompanying audited balance
sheet of Morel Industries, Inc., as of June 30, 1995, and the
related statements of operations, changes in stockholders'
equity, and cash flows for the fiscal year then ended; and (iv)
proforma supplemental financial statements combining the
Company's historical financial statements with those of the
acquired entity.
<PAGE>4
PCT HOLDINGS, INC.
TABLE OF CONTENTS FOR SUPPLEMENTARY FINANCIAL INFORMATION
FORM 8-K FINANCIAL DISCLOSURE - POOLING OF INTEREST
TRANSACTION WITH MOREL INDUSTRIES, INC.
SUPPLEMENTARY FINANCIAL INFORMATION PAGE
- ----------------------------------- ----
1. Management's introduction and notes to the
supplemental financial information, including
incorporation by reference of the audited
financial statements of the Company at and for the
annual periods ended May 31, 1995 and 1994
previously filed with the Commission in
conjunction with the Company's annual report on
Form 10-KSB; and the unaudited quarterly financial
statements at and for the quarterly periods
ended August 31, 1995 and 1994 previously filed
with the Commission in conjunction with the
Company's quarterly report on Form 10-QSB. 5
2. Audited Financial Statements of Morel
Industries, Inc. at and for the annual periods
ended June 30, 1995 and 1994. 6
3. Proforma supplemental financial statements
combining the Company's historical financial
statements with those of the acquired entity,
Morel Industries, Inc., including the balance
sheets, income statements and statements of cash
flow, as follows: 19
a. At and for the quarterly periods ended August
31 and September 30, 1995; 21
b. At and for the annual periods ended May 31
and June 30, 1995; 23
c. At and for the annual periods ended May 31
and June 30, 1994; and 28
d. Quarterly periods ended August 31 and
September 30, 1994 (Income Statements and
Cash Flow only). 32
<PAGE>5
PCT HOLDINGS, INC.
SUPPLEMENTARY FINANCIAL INFORMATION FOR FORM 8-K
MANAGEMENT'S INTRODUCTION AND NOTES THERETO
The financial statements included and incorporated herein include the
financial statements of the registrant, PCT Holdings, Inc., and the
financial statements of Morel Industries, Inc., the acquired entity.
Proforma supplementary financial information combining the two entities has
been prepared in form and content in reference to these financial
statements and the associated notes. Management has not chosen to eliminate
or adjust the historical financial information since it considers that any
material changes to the operations of the two entities will or may not
occur until a time significantly after the business combination, and are
therefore not estimable at this time. Captions have been modified slightly
to allow consistency in reporting the proforma combined results of the two
entities accounted for as a pooling of interest. Earnings per share on the
related income statements reflects the shares issued by the registrant in
the business combination as if issued at the beginning of the periods.
<PAGE>6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Morel Industries, Inc.
Entiat, Washington
We have audited the accompanying balance sheets of Morel Industries,
Inc. as of June 30, 1995 and 1994, and the related statements of income,
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Morel
Industries, Inc. at June 30, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
November 8, 1995, except as to
Notes 4 and 9 which date is December 1, 1995
Seattle, Washington
<PAGE>7
MOREL INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 4)
CURRENT ASSETS
Cash $ 151,825 $ 636,114
Accounts receivable (Note 3) 1,395,527 1,415,762
Project receivable (Note 8) 126,000 897,656
Inventories (Notes 1 and 3) 936,311 821,021
Prepaid expenses and other 112,728 28,970
---------- ----------
Total Current Assets 2,722,391 3,799,523
PROPERTY AND EQUIPMENT, less accumulated
depreciation (Notes 2 and 3) 6,667,079 2,625,767
RECEIVABLE FROM STOCKHOLDERS --- 111,403
DEFERRED BOND COSTS 24,745 ---
---------- ----------
$9,414,215 $6,536,693
========== ==========
</TABLE>
<PAGE>8
MOREL INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line-of-credit (Note 3) $ 968,539 $ 889,554
Accounts payable 1,106,331 937,286
Accrued expenses 540,622 454,141
Current maturities of long-term debt
(Note 4) 1,001,781 103,149
Pre-billed moving expenditures (Note 8) -- 768,500
---------- ----------
Total Current Liabilities 3,617,273 3,152,630
---------- ----------
DEFERRED SALES TAX 144,891 --
LONG-TERM DEBT, net of current
maturities (Note 4) 2,147,672 --
DEFERRED INCOME TAXES (Note 6) 727,848 681,645
---------- ----------
Total Liabilities 6,637,684 3,834,275
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Note 9)
Common stock, $100 par value; 2,500
shares authorized; 416 shares
issued and outstanding 41,600 41,600
Common stock, non-voting, $2,000 par
value; 2,500 shares authorized;
87.5 shares issued and outstanding 175,000 175,000
Additional paid-in capital 825,938 825,938
Retained earnings 1,733,993 1,659,880
---------- ----------
Total Stockholders' Equity 2,776,531 2,702,418
---------- ----------
$9,414,215 $6,536,693
========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>9
MOREL INDUSTRIES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended June 30, 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
SALES $ 10,707,838 $ 9,895,578
COST OF SALES 9,622,768 8,327,254
Gross Profit 1,085,070 1,568,324
OPERATING EXPENSES 1,189,553 1,240,742
------------ ------------
Income (Loss) from Operations (104,483) 327,582
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 30,844 18,326
Interest expense (267,477) (130,500)
Realized recovery (loss) on investment 28,881 (77,471)
Other expense (13,886) (40,235)
------------ ------------
Total Other Income (Expense) (221,638) (229,880)
------------ ------------
Income (Loss) Before Extraordinary Item (326,121) 97,702
EXTRAORDINARY ITEM, gain on sale of
foundry less applicable income
taxes of $151,789 and $988,134
(Note 8) 294,648 1,918,142
------------ ------------
Income (Loss) Before Income Taxes (31,473) 2,015,844
Deferred Income Tax (Provision)
Benefit (Note 6) 105,586 (38,708)
------------ ------------
Net Income $ 74,113 $ 1,977,136
============ ============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>10
MOREL INDUSTRIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Non-voting Additional Retained
Common Common Paid-in Earnings
Stock Stock Capital (Deficit) Total
------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1993 $ 41,600 $ 175,000 $ 825,938 $ (317,256) $ 725,282
Net income -- -- -- 1,977,136 1,977,136
----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1994 41,600 175,000 825,938 1,659,880 2,702,418
Net income -- -- -- 74,113 74,113
----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1995 $ 41,600 $ 175,000 $ 825,938 $ 1,733,993 $ 2,776,531
=========== =========== =========== =========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>11
MOREL INDUSTRIES, INC.
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years Ended June 30 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 74,113 $ 1,977,136
----------- -----------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Gain on sale of foundry (294,648) (1,918,142)
Depreciation and amortization 356,600 112,241
Deferred income taxes (105,586) 38,708
Settlement of stockholder 111,403 --
receivable as a bonus
Changes in operating assets and
liabilities:
Decrease (increase) in assets:
Accounts receivable 20,235 (194,725)
Inventories (115,290) (118,583)
Prepaid expenses and other (83,758) (17,096)
Increase (decrease) in
liabilities
Accounts payable 169,045 (262,525)
Accrued expenses 86,481 247,960
----------- -----------
Net Cash Provided by (Used in)
Operating Activities 218,595 (135,026)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and relocation 2,508,860 3,336,528
of foundry
Acquisition of property and (4,492,197) (1,937,427)
equipment
Payment of relocation costs (1,963,807) (512,761)
Increase in deferred sales tax 144,891 --
Increase in receivable from
stockholder -- (111,403)
----------- -----------
Net Cash Provided by (Used in) (3,802,253) 774,937
----------- -----------
Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in line-of- 78,985 89,555
credit
Proceeds from long-term borrowings 3,438,868 --
Principal payments on long-term (392,564) (435,660)
debt
Increase in deferred bond costs (25,920) --
----------- -----------
Net Cash Provided by (Used in)
Financing Activities 3,099,369 (346,105)
----------- -----------
Net Increase (Decrease) in Cash (484,289) 293,806
CASH, beginning of period $ 636,114 $ 342,308
----------- -----------
CASH, end of period $ 151,825 $ 636,114
=========== ===========
SUPPLEMENTAL CASH FLOWS DISCLOSURE:
Cash paid for interest $ 260,733 $ 130,500
=========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>12
MOREL INDUSTRIES, INC.
SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS Morel Industries, Inc. ("Morel") is
AND SIGNIFICANT a manufacturer of aluminum castings located in Entiat,
CUSTOMER Washington. During 1994, Morel changed its name from Morel
Foundry Corporation to emphasize Morel's expanding
capabilities in machining and powder coat painting.
In 1995 and 1994 sales to a major customer in the Class 8
truck industry were 75% and 78% of total sales.
INVENTORIES Inventories are valued at the lower of cost (first-in,
first-out) or market. Work-in-process is valued at the
lower of estimated cost or market. Estimated cost is
derived through an analysis of historical gross profit
margins.
PROPERTY AND Property and equipment is recorded at cost and is
EQUIPMENT depreciated using the straight-line method over estimated
useful lives as follows:
Years
----------------------------------------------------------
Office equipment 3-7
Foundry equipment 7-10
Building 15-40
----------------------------------------------------------
Expenditures for repairs and maintenance which do not
extend the useful life of the related asset are expensed as
incurred.
INCOME TAXES Deferred taxes are provided for temporary differences in
the basis of assets and liabilities for book and income tax
reporting purposes. If it is more likely than not that
some of a deferred tax asset will not be realized, a
valuation allowance is recognized.
<PAGE>13
MOREL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: Inventories consisted of the following:
Inventories
June 30, 1995 1994
----------------------------------------------------------
Work-in-process $695,411 $593,064
Raw materials 112,538 100,812
Foundry supplies 128,362 127,145
----------------------------------------------------------
Total inventories $936,311 $821,021
==========================================================
NOTE 2: Property and equipment consisted of the following:
Property and
Equipment
June 30, 1995 1994
----------------------------------------------------------
Machinery, equipment and
furniture $3,768,755 $2,874,282
Land and building 3,684,314 823,844
Accumulated depreciation (785,990) (1,072,359)
----------------------------------------------------------
Net property and equipment $6,667,079 $2,625,767
==========================================================
NOTE 3: Morel has a line-of-credit with a bank with interest at
Line-of-Credit bank's prime rate (9% at June 30, 1995) plus 2%. The
agreement allows Morel to borrow up to the lesser of
$1,000,000 or 80% of eligible accounts receivable as
defined by the bank. At June 30, 1995, $968,539 was
outstanding and $31,461 was available for borrowing.
The line-of-credit is secured by accounts receivable,
inventories and equipment and is personally guaranteed
by the stockholders, see Notes 4 and 9.
<PAGE>14
June 30, 1995 1994
--------------------------------------------------------
Industrial revenue bond
payable to a bank with
monthly payments of
$19,252, including
interest at 8.12% through
November 2009, secured by
land, building and equipment,
and personally guaranteed by
the stockholders $1,953,154 --
Note payable to a supplier
with quarterly interest
payments of 12% on the
outstanding balance;
principal due February 1996
and 1997, secured by property
and equipment 277,291 --
Note payable to an organization
with monthly payments of
$1,718, including interest at
10.5% through September 2000,
secured by personal residences
and guarantee of the
stockholders 100,000 --
Note payable to an individual,
interest only at 14% through
September 30, 1995, when interest
increases to 15%. Due in
full in March 1996. Secured by
substantially all assets of
Morel and subordinated to
the industrial revenue bond 500,000 --
Notes payable to suppliers
with monthly payments of
$757 to $44,543 including
interest at 10%. Unsecured
with maturities through
February 1996 318,320 --
Note payable to a supplier in
quarterly installments of
$25,000, plus interest at 12%
through May 1995, unsecured 100,000 --
Other 688 3,149
--------------------------------------------------------
$3,149,453 $103,149
Less current maturities 1,001,781 103,149
--------------------------------------------------------
<PAGE>15
Total Long-Term Debt $2,147,672 --
========================================================
Scheduled maturities of long-term debt as of June 30,
1995, are as follows:
----------------------------------------------------------
1996 $1,001,781
1997 270,316
1998 100,415
1999 109,207
2000 118,774
Thereafter 1,548,960
----------------------------------------------------------
Total $3,149,453
==========================================================
Morel's line-of-credit and industrial revenue bond
agreements require, among other matters, that Morel
maintain minimum working capital, tangible net worth
and debt to tangible net worth ratios. Morel was not in
compliance with the covenants at June 30, 1995. In
conjunction with the merger of Morel on December 1, 1995,
the bank provided a waiver of the covenants through
November 30, 1995, and restructured the covenants through
the expiration of the agreements, see Note 9. Management
believes Morel will be in compliance with the covenants
through June 30, 1996.
<PAGE>16
NOTE 5: Morel leases equipment and vehicles under noncancelable
Commitments and operating leases. Future minimum lease payments are as
Contingencies follows:
----------------------------------------------------------
1996 $32,336
1997 22,142
1998 5,092
1999 1,796
2000 974
----------------------------------------------------------
$62,340
==========================================================
Rent expense for the years ended June 30, 1995 and 1994,
was $57,386 and $66,669.
During the normal course of business, matters arise which
may ultimately subject Morel to claims and litigation.
Management believes that the resolution of these
matters will not have a material adverse effect on
Morel's financial condition.
NOTE 6: Deferred tax liabilities are comprised of the following:
Income Taxes
----------------------------------------------------------
June 30, 1995 1994
----------------------------------------------------------
Property and equipment $(1,227,233) $(1,065,361)
Officers' bonus 93,424 47,964
Other 58,502 39,782
Net operating loss
carryforward 347,459 295,970
----------------------------------------------------------
$(727,848) $(681,645)
==========================================================
Morel has net operating loss carryforwards of approximately
$1,022,000 with expiration dates through fiscal year 2010.
The difference between Morel's effective income tax rate
and the statutory rate of 34% consists of the following:
June 30, 1995 1994
-----------------------------------------------------------
Income tax (provision) benefit
at the statutory rate $110,881 $(33,219)
Amortization of goodwill -- (2,487)
Meals and entertainment (3,426) (1,388)
Officer's life insurance (1,869) (1,614)
-----------------------------------------------------------
$105,586 $(38,708)
===========================================================
<PAGE>17
NOTE 7: Morel participates in a multi-employer pension plan
Employee Benefit pursuant to an agreement between Morel and its employee
Plans bargaining unit. Although the plan is a defined
benefit plan, the specific benefit levels are not
negotiated with or known by Morel. Contributions expense
related to the plan was $36,014 and $29,411 for the
years ended June 30, 1995 and 1994. Subsequent to year
end, Morel's collective bargaining agreement expired and
was not renewed. Accordingly, Morel no longer
participates in the multi-employer plan. Morel has a
401(k) employee benefit plan for those employees who
meet the eligibility requirements set forth in the
plan. Eligible employees may contribute up to 15% of
their compensation. Morel's annual contribution to the
plan is determined by the board of directors. Morel made
no contributions during the years ended June 30, 1995
and 1994.
NOTE 8: In 1994, Morel was required to sell its facility in
Sale of Foundry Seattle, Washington, to the Port of Seattle (the Port).
Property Under terms of the sale Morel received $2,533,000 for the
facility and $3,626,000 for relocation costs. In March
1994, Morel purchased a facility in Entiat, Washington,
and began operations in Entiat during August 1994.
For financial statement purposes, Morel recognized an
extraordinary gain of $294,648 and $1,918,142 for the
years ended June 30, 1995 and 1994. For tax reporting
purposes, Morel retained its original basis in the
assets sold and, accordingly, did not recognize a
taxable gain.
At June 30, 1995 and 1994, Morel was due $126,000 and
$897,656 from the Port for relocation costs. During the
year ended June 30, 1994, Morel billed the Port
$768,500 for relocation costs which had not yet been
incurred, and which are recorded in the accompanying
balance sheet as a liability.
NOTE 9: On December 1, 1995, Morel entered into an agreement to
Subsequent Events merge with PCT Holdings, Inc. (PCTH), in a transaction
expected to be accounted for as a pooling of interests.
PCTH serves as a holding company for subsidiaries
providing sealed connectors and components, ceramic
capacitors and filters and machined aluminum parts for the
medical, energy, aerospace, communications and electronics
industries.
Morel has reported a loss before extraordinary item of
$362,121 in 1995 and as of June 30, 1995, has a working
capital deficit of $894,822. Additionally, at June 30,
1995, Morel was in violation of certain debt covenants
on the line-of-credit and industrial revenue bond
agreements. Subsequent to the merger, PCTH provided
Morel with $1 million of working capital. The proceeds
of the loan were used primarily to repay $500,000 of
the industrial revenue bond. The balance was used to
fund $260,000 of accounts payable, prepayment penalties
of $140,000 and provide working capital for Morel.
<PAGE>18
In conjunction with the repayment of the industrial
revenue bond, the bank provided Morel with a waiver of
its debt covenants through November 30, 1995, and
restructured the covenants through the expiration of
the agreements.
Morel's 1996 operating plan has been developed to
improve operating efficiency and continue to broaden
Morel's revenue base. Additionally, PCTH has committed
to provide Morel with sufficient working capital until
profitable operations are restored. Although Morel
believes that its operating plan and working capital
available from PCTH will be adequate to meet its 1996
working capital needs and maintain compliance with the
restructured debt covenants, there can be no assurance
that Morel may not experience liquidity problems
because of adverse market conditions or other
unfavorable events.
<PAGE>19
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED BALANCE SHEET - SUPPLEMENTAL DISCLOSURE FORM 8-K
AUGUST 31, 1995 and SEPTEMBER 30, 1995, RESPECTIVELY
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND.
unaudited unaudited
August 31, 1995 Sept. 30, 1995 COMBINED
<S> <C> <C> <C>
Assets:
Current Assets
Cash $ 476,051 $ 89,513 $ 565,564
Receivables 1,621,033 1,555,739 3,176,772
Inventory 4,942,063 839,068 5,781,131
Prepaid Expense 68,936 45,972 114,908
Other 281,181 0 281,181
Total Current Assets $ 7,389,264 $ 2,530,292 $ 9,919,556
Net Property, Plant & Equip 3,209,609 6,593,842 9,803,451
Real Estate Held for Resale 676,253 676,253
Cost in Excess of NBV 462,687 462,687
Patents, net 454,635 0 454,635
Non-compete Agreement 100,000 100,000
Other 115,908 24,241 140,149
Total Assets $ 12,408,356 $ 9,148,375 $ 21,556,731
Liabilities and Shareholders' Equity
Current Liabilities
Bank Line of Credit 0 $ 964,140 $ 964,140
Accounts Payable $ 2,122,108 1,373,033 3,495,141
Accrued Liabilities 366,622 501,448 868,070
Current Portion - LTD 2,677,401 799,071 3,476,472
Current Portion - C/L 48,585 0 48,585
Current Portion - N/P 600,000 0 600,000
Current Portion - Non-compete 35,000 0 35,000
Total Current Liabilities 5,849,716 3,637,692 9,487,408
Long Term Debt, net 540,739 2,128,992 2,669,731
Capital Leases, net 51,063 0 51,063
Deferred Sales Tax 0 144,891 144,891
Non-compete Agreement, net 65,000 0 65,000
Deferred Rent/Taxes 146,710 637,554 784,264
Total Liabilities 6,653,228 6,549,129 13,202,357
Shareholders' Equity
Common Stock 11,511,777 41,600 11,553,377
Common Stock, Non-Voting 0 175,000 175,000
Additional Paid in Capital 0 825,938 825,938
Accumulated Deficit (5,756,649) 1,556,708 (4,199,941)
Total Shareholders' Equity 5,755,128 2,599,246 8,354,374
<PAGE>20
Total Liabilities & Equity $ 12,408,356 $ 9,148,375 $ 21,556,731
The accompanying notes are an integral part of the combined financial
statements
<PAGE>21
PCT HOLDINGS, INC AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF INCOME
QUARTER ENDED AUGUST 31, 1995 AND SEPTEMBER 30, 1995, RESPECTIVELY
PCT HOLDINGS, INC AND MOREL INDUSTRIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
</TABLE>
<TABLE>
<CAPTION>
PCT HOLDINGS, INC MOREL IND, INC.
QUARTERS ENDED
August 31, 1995 Sept 30, 1995
unaudited unaudited CONSOLIDATED
----------------- --------------- ------------
<S> <C> <C> <C>
NET SALES $ 3,456,473 $ 2,785,422 $ 6,241,895
COST OF SALES 2,795,475 2,669,528 5,465,003
GROSS PROFIT 660,998 115,894 776,892
OPERATING EXPENSES 808,687 245,554 1,054,241
INCOME (LOSS) FROM OPERATIONS (147,689) (129,660) (277,349)
OTHER INCOME AND EXPENSE
Interest Income 1,075 1,075
Interest Expense (44,776) (103,461) (148,237)
Other 52 (35,533) (35,481)
(44,724) (137,919) (182,643)
NET INCOME(LOSS) BEFORE FEDERAL
INCOME TAX
(192,413) (267,579) (459,992)
FEDERAL INCOME TAX - deferred 0 90,294 90,294
NET INCOME (LOSS) FOR THE YEAR ($ 192,413) (177,285) ($ 369,698)
NET INCOME (LOSS PER SHARE ($ 0.02) ($ 0.27) ($ 0.06)
</TABLE>
The accompanying notes are an integral part of the proforma combined
financial statements
<PAGE>22
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF CASH FLOW
PCT HOLDINGS, INC. AND MOREL INDUSTRIES, INC.
FIRST QUARTER ENDED AUGUST 31 AND SEPTEMBER 30, 1995, RESPECTIVELY
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND CONSOLIDATED
Quarters Ending
August 31, 1995 Sept 30, 1995
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Cash Provided by (Used in) Operating Activities ($ 741,800) $ 54,017 ($ 687,783)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (293,661) (16,540) (310,201)
Proceeds from Sale and Relocation of Foundry 126,000 126,000
Other Changes, net (74,299) (74,299)
Net Cash Provided by (Used in) Investing Activities (367,960) 109,460 (258,500)
CASH FLOW FROM FINANCING ACTIVITIES
Payments of Debt and Capital Leases (72,447) (221,390) (293,837)
Proceeds from Financing Debt 86,250 86,250
Sale of Common Stock 493,371 493,371
Other Changes, net (4,399) (4,399)
Net Cash Provided by (Used in) Financing
Activities 507,174 (225,789) 281,385
NET INCREASE (DECREASE) IN CASH (602,586) (62,312) (664,898)
CASH, beginning of period 1,078,637 151,825 1,230,462
CASH, end of period $ 476,051 $ 89,513 $ 565,564
</TABLE>
The accompanying notes are an integral part of the proforma combined
financial statements
<PAGE>23
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED BALANCE SHEET - SUPPLEMENTAL DISCLOSURE FORM 8-K
MAY 31, 1995 and JUNE 30, 1995, RESPECTIVELY
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND.
audited audited
May 31, 1995 June 30, 1995 COMBINED
<S> <C> <C> <C>
Assets:
Current Assets
Cash $ 1,078,637 $ 151,825 $ 1,230,462
Receivables 1,075,999 1,521,527 2,597,526
Inventory 4,375,162 936,311 5,311,473
Prepaid Expense 39,721 112,728 152,449
Other 278,795 473,045 751,840
Total Current Assets $ 6,848,314 $ 3,195,436 $ 10,043,750
Net Property, Plant & Equip 3,008,122 6,667,079 9,675,201
Real Estate Held for Resale 676,253 676,253
Patents, net 478,092 478,092
Costs in Excess of NBV 462,687 462,687
Non-compete Agreement 100,000 100,000
Other 56,444 24,745 81,189
Total Assets $ 11,629,912 $ 9,887,260 $ 21,517,172
Liabilities and Shareholders' Equity
Current Liabilities
Bank Line of Credit $ 968,539 $ 968,539
Accounts Payable $ 1,527,467 1,106,331 2,633,798
Accrued Liabilities 518,065 540,622 1,058,687
Current Portion - LTD 2,448,000 1,001,781 3,449,781
Current Portion - C/L 51,000 51,000
Current Portion - N/P 510,000 510,000
Current Portion - Non-Com 35,000 35,000
Total Current Liabilities 5,089,532 3,617,273 8,706,805
Long Term Debt, net 319,574 2,147,672 2,467,246
Capital Leases, net 115,281 115,281
Notes Payable, net 457,644 457,644
Non-compete Agreement, net 65,000 65,000
Deferred Rent/Taxes 128,711 1,345,784 1,474,495
Total Liabilities 6,175,742 7,110,729 13,286,471
Shareholders' Equity
Common Stock 11,018,406 41,600 13,794,937
Common Stock, Non-Voting 175,000
Additional Paid in Capital 825,938
Accumulated Deficit (5,564,236) 1,733,993 (5,564,236)
Total Shareholders' Equity 5,454,170 2,776,531 8,230,701
<PAGE>24
Total Liabilities & Equity $ 11,629,912 $ 9,887,260 $ 21,517,172
</TABLE>
The accompanying notes are an integral part of the combined financial
statements
<PAGE>25
PCT HOLDINGS, INC AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF INCOME
FISCAL YEAR ENDED MAY 31, 1995 AND JUNE 30, 1995, RESPECTIVELY
PCT HOLDINGS, INC AND MOREL INDUSTRIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS, INC MOREL IND, INC.
YEARS ENDED
May 31, 1995 June 30, 1995
AUDITED AUDITED CONSOLIDATED
<S> <C> <C> <C>
NET SALES $ 11,035,595 $ 10,707,838 $ 21,743,433
COST OF SALES 9,092,157 9,622,768 18,714,925
GROSS PROFIT 1,943,438 1,085,070 3,028,508
OPERATING EXPENSES 2,788,940 1,189,553 3,978,493
INCOME (LOSS) FROM OPERATIONS (845,502) (104,483) (949,985)
OTHER INCOME AND EXPENSE
Interest Income 74,352 30,844 105,196
Interest Expense (356,360) (267,477) (623,837)
Gain on sale of foundry, net
of income taxes of $151,789 323,529 323,529
Other 13,835 (13,886) (51)
(268,173) 73,010 (195,163)
NET LOSS BEFORE MERGER AND EQUITY
CAPITAL COSTS
(1,113,675) (31,473) (1,145,148)
MERGER AND EQUITY CAPITAL COSTS (538,040) (538,040)
INCOME(LOSS) BEFORE FEDERAL TAX (1,651,715) (31,473) (1,683,188)
FEDERAL INCOME TAX(DEFERRED) 241,000 105,586 346,586
NET INCOME (LOSS) FOR THE YEAR ($ 1,410,715) $ 74,113 ($ 1,336,602)
INCOME(LOSS) PER SHARE OF COMMON ($ 0.41) $ 0.12 ($ 0.33)
STOCK
</TABLE>
<PAGE>26
The accompanying notes are an integral part of the combined financial
statements
<PAGE>27
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF CASH FLOW
PCT HOLDINGS, INC. AND MOREL INDUSTRIES, INC.
YEARS ENDED MAY 31 AND JUNE 30, 1995, RESPECTIVELY
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND CONSOLIDATED
Years Ending
May 31, 1995 June 30, 1995
Audited Audited
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Cash Provided by (Used in) ($ 416,646) $ 218,595 ($ 198,051)
Operating Activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (604,904) (4,492,197) (5,097,101)
Proceeds from Sale and Relocation of Foundry 2,508,860 2,508,860
Proceeds from Sale of Property and Equipment 0
Payment of Relocation Costs (1,963,807) (1,963,807)
Purchase of Patents (461,000) (461,000)
Payments Received on Notes Receivable 20,159 20,159
Other Changes, net 144,891 144,891
Net Cash Provided by (Used in) Investing Activities (1,045,745) (3,802,253) (4,847,998)
CASH FLOW FROM FINANCING ACTIVITIES
Payments of Debt and Capital Leases (1,299,601) (392,564) (1,692,165)
Proceeds from Financing Debt 2,229,336 3,438,868 5,668,204
Proceeds from Notes Payable to Stockholders 50,000 50,000
Net change in Note Payable (1,388,779) (1,388,779)
Payments on Notes Payable to Stockholders (1,659,994) (1,659,994)
Sale of Common Stock 4,582,858 4,582,858
Other Changes, net 53,065 53,065
Net Cash Provided by (Used in) Financing Activities 2,513,820 3,099,369 5,613,189
NET INCREASE (DECREASE) IN CASH 1,051,429 (484,289) 567,140
CASH, beginning of period 27,208 636,114 663,322
CASH, end of period $ 1,078,637 $ 151,825 $ 1,230,462
</TABLE>
The accompanying notes are an integral part of the proforma combined
financial statements
<PAGE>28
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED BALANCE SHEET - SUPPLEMENTAL DISCLOSURE FORM 8-K
MAY 31, 1994 and JUNE 30, 1994, RESPECTIVELY
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND.
audited audited
May 31, 1994 June 30, 1994 COMBINED
<S> <C> <C> <C>
Assets:
Current Assets
Cash $ 27,208 $ 636,114 $ 663,322
Receivables 923,894 2,313,418 3,237,312
Inventory 3,459,969 821,021 4,280,990
Prepaid Expense 62,242 28,970 91,212
Other 23,000 0 23,000
Total Current Assets $ 4,496,313 $ 3,799,523 $ 8,295,836
Net Property, Plant & Equip 2,307,564 2,625,767 4,933,331
Note Receivable from Stkhldr 952,207 111,403 1,063,610
Patents, net 46,781 0 46,781
Other 90,666 0 90,666
Total Assets $ 7,893,531 $ 6,536,693 $ 14,430,224
Liabilities and Shareholders' Equity
Current Liabilities
Bank Line of Credit $ 1,388,779 $ 889,554 $ 2,278,333
Accounts Payable 958,850 937,286 1,896,136
Accrued Liabilities 371,417 454,141 825,558
Current Portion - LTD 1,008,000 103,149 1,111,149
Current Portion - C/L 1,917,838 0 1,917,838
Current Portion - N/P 88,000 0 88,000
Pre-billed Moving Exp 0 768,500 768,500
Total Current Liabilities 5,732,884 3,152,630 8,885,514
Long Term Debt, net 415,329 0 415,329
Capital Leases, net 73,407 0 73,407
Notes Payable, Stockholder 160,000 0 160,000
Deferred Rent/Taxes 286,000 681,645 967,645
Total Liabilities 6,667,620 3,834,275 10,501,895
Shareholders' Equity
Common Stock 5,379,432 41,600 5,421,032
Common Stock, Non-Voting 0 175,000 175,000
Additional Paid in Capital 0 825,938 825,938
Accumulated Deficit (4,153,521) 1,659,880 (2,493,641)
Total Shareholders' Equity 1,225,911 2,702,418 3,928,329
Total Liabilities & Equity $ 7,893,531 $ 6,536,693 $ 14,430,224
</TABLE>
The accompanying notes are an integral part of the combined financial
statements
<PAGE>29
PCT HOLDINGS, INC AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF INCOME
FISCAL YEAR ENDED MAY 31, 1994 AND JUNE 30, 1994, RESPECTIVELY
PCT HOLDINGS, INC AND MOREL INDUSTRIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS, INC MOREL IND, INC.
YEARS ENDED
May 31, 1994 June 30, 1994
AUDITED AUDITED COMBINED
<S> <C> <C> <C>
NET SALES $ 2,940,019 $ 9,895,578 $12,835,597
COST OF SALES 2,859,791 8,327,254 11,187,045
GROSS PROFIT 80,228 1,568,324 1,648,552
OPERATING EXPENSES 963,811 1,240,742 2,204,553
INCOME (LOSS) FROM OPERATIONS 80,228 1,568,324 (556,001)
OTHER INCOME AND EXPENSE
Interest Income 4,008 18,326 22,334
Interest Expense (207,205) (130,500) (337,705)
Realized recovery (loss) on
investment (77,471) (77,471)
Other (11,227) (40,235) (51,462)
(214,424) (229,880) (444,304)
INCOME (LOSS) BEFORE EXTRAORDINARY (134,196) 1,338,444 (1,000,305)
ITEM
EXTRAORDINARY ITEM, gain on sale of
assets, net of applicable income
taxes of $988,134 1,918,142 1,918,142
NET INCOME (LOSS) BEFORE FEDERAL
INCOME TAX (134,196) 3,256,586 917,837
FEDERAL INCOME TAX (38,708) (38,708)
NET INCOME (LOSS) FOR THE YEAR ($ 134,196) $ 3,217,878 $ 879,129
INCOME (LOSS) PER SHARE ($ 0.60) $ 3.04 $ 0.35
</TABLE>
The accompanying notes are an integral part of the combined financial
statements
<PAGE>30
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF CASH FLOW
PCT HOLDINGS, INC. AND MOREL INDUSTRIES, INC.
YEARS ENDED MAY 31 AND JUNE 30, 1994, RESPECTIVELY
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND CONSOLIDATED
Years Ending
May 31, 1994 June 30, 1994
Audited Audited
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Cash Provided by (Used in)
Operating Activities ($1,274,661) ($ 135,026) ($1,409,687)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (81,189) (1,937,427) (2,018,616)
Proceeds from Sale and Relocation of Foundry 3,336,528 3,336,528
Proceeds from Sale of Property and Equipment 100,030 100,030
Payment of Relocation Costs (512,761) (512,761)
Purchase of Patents 0
Payments Received on Notes Receivable 0
Other Changes, net (111,403) (111,403)
Net Cash Provided by (Used in)
Investing Activities 18,841 774,937 793,778
CASH FLOW FROM FINANCING ACTIVITIES
Payments of Debt and Capital Leases (322,709) (435,660) (758,369)
Proceeds from Financing Debt 88,571 89,555 178,126
Proceeds from Notes Payable to Stockholders 616,838 616,838
Payments on Notes Payable to Stockholders (287,344) (287,344)
Sale of Common Stock 1,147,206 1,147,206
Other Changes, net 0
Net Cash Provided by (Used in)
Financing Activities 1,242,562 (346,105) 896,457
NET INCREASE (DECREASE) IN CASH (13,258) 293,806 280,548
CASH, beginning of period 40,466 342,308 382,774
CASH, end of period $ 27,208 $ 636,114 $ 663,322
</TABLE>
The accompanying notes are an integral part of the proforma consolidated
financial statements
<PAGE>32
PCT HOLDINGS, INC AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF INCOME
QUARTER ENDED AUGUST 31, 1994 AND SEPTEMBER 30, 1994, RESPECTIVELY
PCT HOLDINGS, INC AND MOREL INDUSTRIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS, INC MOREL IND,INC.
QUARTERS ENDED
August 31, 1994 Sept 30, 1994
unaudited unaudited CONSOLIDATED
<S> <C> <C> <C>
NET SALES $ 2,824,024 $ 2,454,330 $ 5,278,354
COST OF SALES 2,218,324 2,386,790 4,605,114
GROSS PROFIT 605,700 67,540 673,240
OPERATING EXPENSES 508,948 224,920 733,868
INCOME (LOSS) FROM OPERATIONS 96,752 (157,380) (60,628)
OTHER INCOME AND EXPENSE
Interest Income 28,127 28,127
Interest Expense (93,815) (25,980) (119,795)
Gain on the Sale of Property (28,881) (28,881)
Other 30,455 (7,368) 23,087
(63,360) (34,102) (97,462)
NET INCOME (LOSS) BEFORE FEDERAL
INCOME TAX
33,392 (191,482) (158,090)
FEDERAL INCOME TAX (9,850) 61,704 51,854
NET INCOME (LOSS) FOR THE YEAR $ 23,542 ($ 129,778) ($ 106,236)
INCOME (LOSS) PER SHARE $ 0.01 ($ 0.20) ($ 0.03)
</TABLE>
The accompanying notes are an integral part of the proforma combined
financial statements
<PAGE>33
PCT HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENTS OF CASH FLOW
PCT HOLDINGS, INC. AND MOREL INDUSTRIES, INC.
FIRST QUARTER ENDED AUGUST 31 AND SEPTEMBER 30, 1994, RESPECTIVELY
SUPPLEMENTAL FINANCIAL INFORMATION FOR FORM 8-K
<TABLE>
<CAPTION>
PCT HOLDINGS MOREL IND
Quarters Ending CONSOLIDATED
Aug 31 Sept 30, 1994
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Cash Provided by (Used in) Operating
Activities $ 203,734 $ 316,087 $ 519,821
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (105,611) (1,634,288) (1,739,899)
Proceeds from Sale and Relocation of Foundry 89,400 89,400
Purchase of Patents (450,000) (450,000)
Net Cash Provided by (Used in) Investing
Activities (555,611) (1,544,888) (2,100,499)
CASH FLOW FROM FINANCING ACTIVITIES
Payments of Debt and Capital Leases (104,404) (26,841) (131,245)
Proceeds from Financing Debt 2,025,896 660,852 2,686,748
Payments on Notes Payable to Stockholders (1,492,838) (1,492,838)
Sale of Common Stock 410,000 410,000
Net Cash Provided by (Used in) Financing
Activities 838,654 634,011 1,472,665
NET INCREASE (DECREASE) IN CASH 486,777 (594,790) (108,013)
CASH, beginning of period 27,208 636,114 663,322
CASH, end of period $ 513,985 $ 41,324 $ 555,309
</TABLE>
The accompanying notes are an integral part of the proforma combined
financial statements
<PAGE>34
B. Exhibits
The following are filed as exhibits to this Amendment No. 1:
23.1 Consent of Moss Adams LLP.
<PAGE>35
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 hereunto duly authorized.
PCT HOLDINGS, INC.
By: /s/ Donald A. Wright
----------------------------------
Donald A. Wright
President and Chief Executive Officer
Dated: February 14, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description Page
23.1 Consent of Moss Adams LLP.
<PAGE>
Exhibit 23.1
Moss Adams LLP
Certified Public Accountants
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Current Report of PCT Holdings, Inc., on Form
8-K/A of our report dated July 14, 1995, incorporated by reference and
included as part of this Current Report.
/s/ Moss Adams LLP
Everett, Washington
February 13, 1996
