U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                 FORM 10-KSB
(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.
------------------------------------------------------------------------------
                (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 35 Pages
                       Exhibit Index Begins on Page 34



<PAGE>
-------------------------------------------------------------------
                            FORM 10-KSB
-------------------------------------------------------------------
                   YEAR ENDED DECEMBER 31, 1997

                         Table of Contents


                                                               Page
PART I
ITEM 1.  DESCRIPTION  OF  BUSINESS................................3

ITEM 2.  DESCRIPTION  OF  PROPERTIES.............................16

ITEM 3.  LEGAL  PROCEEDINGS......................................16

ITEM 4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY
           HOLDERS...............................................17

PART II
ITEM 5.  MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
           MATTERS...............................................18

ITEM 6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
           CONDITION  AND  RESULTS  OF  OPERATIONS...............19

ITEM 7.  FINANCIAL  STATEMENTS...................................23

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON
           ACCOUNTING  AND  FINANCIAL  DISCLOSURE................23

PART III
ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND
           CONTROL  PERSONS; COMPLIANCE WITH SECTION 16(a) OF
           THE  EXCHANGE  ACT....................................23

ITEM 10. EXECUTIVE  COMPENSATION.................................26

ITEM 11. SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL
           OWNERS  AND  MANAGEMENT...............................30

ITEM 12. CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS......32

ITEM 13. EXHIBITS  AND  REPORTS  ON  FORM  8-K...................34

SIGNATURES.......................................................35

-2-
<PAGE>
PART I
ITEM 1. DESCRIPTION  OF  BUSINESS.

Industry Overview

The  financial  services  industry  has  been  one of  the  fastest
growing  sectors in recent  years.  As the  industry  has grown,  a
substantial  shift from commission and  transaction-based  products
to advisory and  fee-based  products has occurred.  Evidenced  most
clearly in the  popularity  of mutual  funds,  consumer  demand for
investment  advice and services in  connection  with managed  asset
products  has  increased  enormously  over the past 10  years.  The
mutual fund industry has grown from 1,528 funds  encompassing  $495
billion  of  assets  in  1985 to  6,809  funds  encompassing  $4.49
trillion  of assets in 1997.  Increasingly,  investors  are looking
for  expertise  to  assist  them  in  understanding  the  range  of
investment   products  that  are  currently   marketed.   As  such,
managed  account  programs,  such  as  asset  allocation  and  wrap
accounts  which assist  investors in  developing  and  implementing
appropriate  investment  strategies,  have grown  significantly  to
service  this  segment of the  marketplace.  Wrap  programs,  which
offer   a    highly-personalized,    fee-based   (as   opposed   to
commission-based)  platform for  financial  management,  have grown
to more than $139 billion in assets at year-end 1996.

In recent years,  there have been two  principal  objectives in the
development  and marketing of asset  allocation  and wrap programs.
First,  to  improve  customer  service,   programs  were  developed
offering  asset  allocation  and   professional   money  management
services  that  would  better  position  a  customer's   investment
portfolio.  Asset  allocation  is  believed  to  be  a  significant
determinant  of successful  long-term  investment  performance.  In
addition,   by  consolidating  the  numerous  investment  services,
costs of portfolio  management  can often be reduced as compared to
purchasing   individual   services  in   traditional   a  la  carte
fashion.  The second reason for  developing  these  programs was to
shift customer assets from dormant custody  accounts,  which traded
periodically and without  predictability,  into predictable revenue
producing  assets for the  sponsoring  firm. In developing a "trust
building"  product,  wrap program  sponsors  provide the  following
four  basic   functions   for  a  customer  in  addition  to  money
management,   brokerage   and  custody   services:   (i)   customer
evaluation,   (ii)   asset   allocation   and   investment   policy
development,    (iii)   investment    management   evaluation   and
selection, and (iv) quarterly monitoring and reporting services.

As wrap  programs  have  grown in size and  popularity,  investment
portfolio   managers   (those  that  manage   individual   accounts
consisting  of stocks and bonds) and mutual fund  distributors  are
increasing   their   involvement   within  these  programs.   These
programs  give  money  managers  and  mutual  funds the  ability to
market  themselves  and  participate  in  distribution  channels of
financial   planners,   which  in  turn   provide   them  with  the
opportunity  to  increase  their  assets  under  management.   With
attention   rapidly   shifting  to   long-term   asset   allocation
strategies,    consultant   wrap   assets,    assets   managed   by
professional  money  managers,  have grown from $60 billion in 1993
to $103.2  billion in 1996,  while  mutual  fund wrap  assets  have
grown from $8 billion  in 1993 to $36.2  billion in 1996.  In 1988,
assets  in these  wrap  programs  were  estimated  at less  than $2
billion.

-3-
<PAGE>

Background of the Company

Founded  in  1986,  the  Company  is  an  independent   sponsor  of
privately   managed   accounts  and  asset   allocation   and  wrap
programs.  The  majority  of the  Company's  revenues  are  derived
from its  individually  managed  wrap  program,  which the  Company
created  and  has  administered  since  1987.  In  addition  to its
traditional  wrap  program,  since 1994 the Company has invested in
developing  a range of related  technology-based  services  and has
added  staff to develop and support  the  Company's  new  products.
The  Company's   products  and  services  are  designed  to  assist
professional  financial  consultants  in their  efforts  to  market
high quality,  fully  diversified  portfolio  management  products.
Through  the use of  technology,  the Company  assists  third-party
financial   advisors  such  as  banks,   insurance   companies  and
brokerage  firms  (collectively,   "Institutional   Channels")  and
independent   financial   planners   ("Independent   Channels")  in
allocating  and  diversifying  a  customer's  investment  portfolio
across  multiple  asset  classes  and  investments.  In  respect to
Institutional   Channels,   the  Company's  products  allow  for  a
repeatable  sales process which helps increase  sales  productivity
while  ensuring   compliance  with  the   Institutional   Channels'
corporate and regulatory policies.

The  Company  has a staff of  approximately  85  people,  including
approximately 55  professionals,  and conducts business in a number
of  countries.  The Company has four  subsidiaries:  (i)  Portfolio
Management  Consultants,  Inc., an investment  advisory firm;  (ii)
Portfolio   Brokerage  Services,   Inc.,  a  broker/dealer;   (iii)
Portfolio   Technology   Services,   Inc.,  which   specializes  in
developing  proprietary  software for use in the financial services
industry;  and (iv) PMC  Investment  Services,  Inc., an investment
advisory  firm which  specializes  in mutual fund asset  allocation
products.

Products and Services

Portfolio Management Consultants, Inc.
Portfolio  Management  Consultants,  Inc.  ("PMC"),  a wholly owned
subsidiary  of  the  Company,   currently  has  four  discrete  but
vertically  integrated  product lines.  Each product offered by PMC
is  designed  to  assist  professional   financial  consultants  in
various  aspects of their  business.  The four  services  are:  (i)
Private Wealth  Management(TM),  PMC's  individually  managed asset
and wrap account  program,  (ii) Allocation  Manager(TM),  a mutual
fund asset allocation  program  available both on paper and through
the Company's  proprietary  software  that  provides  comprehensive
and   detailed   investment   suitability   analysis,   recommended
allocation  of assets,  portfolio  modeling  and  rebalancing,  and
comprehensive   portfolio  performance  reporting,   (iii)  Managed
Account Reporting  Services  ("MARS"),  a portfolio  accounting and
reporting  service  that  operates  as a service  bureau,  and (iv)
Style Manager,  a discretionary  money  management  program,  using
style  index  funds and mutual  funds,  that  offers  equity  style
rotation.   In  addition,   PMC  provides  consulting  services  to
Institutional Channels and high net worth customers.

-4-
<PAGE>

Private Wealth Management(TM)
Private Wealth  Management(TM),  PMC's multi-manager  institutional
wrap  program,   has   historically   been  PMC's  largest  revenue
producer.   Targeted   toward   customers   with   high  net  worth
(typically  having a portfolio  larger  than one million  dollars),
Private  Wealth   Management(TM)   assists  financial  planners  in
assembling a  custom-selected  team of professional  money managers
which   precisely   matches  an  individual   investor's   personal
investment goals, risk tolerance, and objectives.

Each portion of an  individual's  portfolio  (allocated  into asset
classes  such  as  equity,   fixed  income  and  cash,   and  asset
sub-classes  such as value,  growth,  large  cap,  small  cap,  and
emerging   markets)   is   managed   by   a   carefully    selected
institutional  money  management  firm  that has been  chosen  from
PMC's  list of  recommended  managers  as best  suited  to match an
investor's  investment  philosophy  within a  specific  discipline.
An  important  and  proprietary  component  of the  Private  Wealth
Management(TM)  program  involves  the basis of  selection of these
money  managers.  PMC currently  recommends a number of independent
money    managers   for   its   Private    Wealth    Management(TM)
multi-manager   program,    representing   a   diverse   range   of
philosophies  and styles.  These  managers are chosen based largely
on quantitative  analysis  emphasizing  return-based,  multi-factor
style   benchmarking.   High  correlation  to  benchmark   indices,
supported   by  positive   alpha,   are   necessary   to  meet  the
"Preferred"    standard   for   manager    recommendations.    Also
considered  in  manager  evaluations  are  historical  performance,
investment  philosophy and style,  disciplines,  employee turnover,
rate  of   growth,   accounts   gained   or  lost,   and   industry
reputation.  To help a customer  choose and  understand  investment
options,  PMC provides  detailed  profiles on money managers in the
context  of style and  methodology  to achieve  maximum  investment
diversification.  Additionally,  PMC will  provide  guidance on the
termination  of  existing  managers  and  the  rebalancing  of  the
customer's   assets.   The  Company  considers  periodic  portfolio
rebalancing  decisions to be an extremely important  determinant of
long-term  performance.   Thus,  several  rebalancing  options  are
offered within PMC's private account programs.

Private  Wealth  Management(TM)  is  marketed  under  both  the PMC
label and private labels.  Institutional  Channels  currently using
private-label  versions of Private  Wealth  Management(TM)  include
Chase Investment Services Corp.,  National Financial  Correspondent
Services  ("NFCS"),   the  wholly-owned  brokerage  and  securities
clearing  subsidiary of Fidelity  Management  and Research,  Israel
Discount  Bank of New York,  Ernst & Young LLP,  Republic  National
Bank of New York,  TD  Securities,  Inc.,  an  affiliate of Toronto
Dominion Bank and Cowen & Company.  The  relationship  with Ernst &
Young  also  encompasses   institutional   consulting,   Allocation
Manager(TM)   services,   and  Managed  Account  Reporting  Service
("MARS").    Additionally,    PMC   distributes    Private   Wealth
Management(TM)   under  its  own  name  through  thirty   financial
planning  broker-dealers and investment advisors  representing more
than 10,000  registered sales  professionals.  To support the sales
process,    the    Company    employs   a   staff   of    marketing
representatives.  The  Company  has  a  joint  marketing  agreement
with  Schwab  Institutional  Management  ("Schwab"),   pursuant  to
which a specialized  version of the Private  Wealth  Management(TM)
program  is  marketed  to  independent   investment   advisors  who
utilize  the  services  of  Schwab.  Currently,  PMC  is  servicing
Institutional  Channels  in the

-5-

<PAGE>

United  States,  Canada  and seven Latin  American  countries with
many  institutional  money managers participating in the Company's
wrap programs.

Allocation Manager(TM)
Allocation   Manager(TM),   introduced  in  late  1995  and  as  an
operating   product   during  the  third  quarter  of  1996,  is  a
Windows-based  software  program.  The  program is  designed to aid
in  the   solicitation,   sale,  and  servicing  of  mutual  funds,
variable  annuities,   offshore   investments  and  other  selected
financial   products.   A   highly-flexible   program   based  upon
theories  of mass  customization,  Allocation  Manager(TM)  has the
capability  of  being  tailored  for  use  by  specific   financial
distribution  channels  having their own  proprietary  product mix.
This product  assists in guiding a wide range of investors  through
the  complex  process of  choosing an  appropriate  combination  of
mutual funds.

Allocation  Manager(TM)  was  built  with  the  intention  of being
customized  by PMC's  existing  and  prospective  clients,  many of
whom  have  proprietary  families  of  mutual  funds.  As a result,
Allocation   Manager(TM)   supports  a  broad  range  of  financial
products and programs,  both domestically and globally,  and can be
customized  to  the  individual   requirements   of   Institutional
Channels.   Customized  versions  of  Allocation  Manager(TM)  have
been created for Chase  Investment  Services  Corp.,  Ernst & Young
LLP,   Republic   National  Bank  of  New  York,   CIGNA  Financial
Services,  MONY  Securities  Corporation,  Texas  Commerce Bank and
others.

A version of  Allocation  Manager(TM),  called Fund  Counselor,  is
being  marketed by NFCS.  Under the Fund  Counselor  program,  NFCS
will provide  brokerage,  clearing and custodial  services and will
make the  program  available  to its more than 225 bank,  insurance
and financial planning  broker/dealers.  Allocation  Manager(TM) is
being  distributed  through the Schwab  system  pursuant to a joint
marketing   agreement.   It  is  also  being  made   available   to
correspondents of EVEREN Clearing Corp.

Based  upon  (i)  the  substantial   growth  in  the  mutual  funds
industry  over the last 15 years,  (ii)  investor  trends in mutual
fund  investment  and  (iii)  industry   expectations,   management
believes  PMC's  existing  expertise and  operations  will permit a
smooth  integration  of this  program  with  existing  products and
services  offered by the Company while  expanding and  diversifying
the   distribution   channels  for  such   products  and  services.
Because the program also provides educational  tutorials,  training
modules and dynamic portfolio modeling,  Allocation  Manager(TM) is
much  more  than  simply  a  "front-end"  sales  tool.  It  can  be
positioned as a technology  sale with licensing  revenues to PTS or
it can be positioned,  subject to applicable  regulatory guidelines
and restrictions,  as an investment  management tool,  allowing PMC
to receive asset-based pricing.

Managed Account Reporting Services
Management  believes  that as a result  of the  growth  within  the
fee-based  financial  advisory  segment  of the  industry  over the
past  ten  years,  many  institutions  have  been  seeking  ways to
improve their  reporting  capabilities.  The Company's MARS is used
by  financial   professionals  in  providing   customers  with  the
increasingly    important   value-added   services   of   portfolio
performance  reporting and cost-based tax  accounting.  Essentially
a service  bureau/data

-6-

<PAGE>

processing  service, MARS leverages a PMC core  competency, allowing
PMC to sell,  on a stand alone  basis, its monthly and quarterly reports.

MARS  provides  detailed  statements  that  include   comprehensive
management   reporting,   account   reconciliation  and  cost-based
accounting  on a  full-accrual  basis.  In  addition,  PMC provides
full   color,   quarterly   performance   reports   detailing   the
investor's   objectives   and   performance   of  each   investment
strategy,  money  manager  or mutual  fund,  as well as the  entire
portfolio.

During 1996 PMC entered into an agreement  with National  Financial
Services  Corporation,  an  affiliate  of Fidelity  Management  and
Research  ("NFSC"),  to manage  NFSC's  newly  created  performance
reporting  service  called MAPS Tool Box  ("MAPS").  MAPS  provides
NFSC's  correspondents  with  access  to  high  quality,  quarterly
performance  reports  and tax lot,  cost  basis and  fully  accrued
account  statements.  This  service is  targeted  at high net worth
investors managed by financial  planners and financial  consultants
who use the  securities  clearing  services  of NFSC.  MARS is also
being  marketed  within  the Schwab  system to the many  investment
advisors that use Schwab's  custodial  services.  Effective October
1997,  the  Company  began  providing  MARS  reports  to clients of
Scotia McLeod, Inc. through a third party vendor agreement.

Style Manager Asset Management Products
Style  Manager  is  a  family  of  discretionary  asset  management
products which  recommend  strategies for the periodic  rebalancing
of both  institutional  and  retail  investor  portfolios.  Through
the use of Style  Manager,  clients'  portfolios  are  periodically
rebalanced  through  the  rotation  of U.S.  equity  styles  (i.e.,
growth   and   value   companies   and   large,   mid   and   small
capitalization   companies),   with  the   intention  of  capturing
superior   performance   that  results  from  taking  advantage  of
certain   cyclical  sector  trends  in  the  U.S.  equity  markets.
Recommended  shifts  in equity  allocations  are  designed  to move
assets  away from  under-performing  sectors  into those  likely to
perform  best.  Although  Style  Manager  recommends  shifts within
the U.S.  equity  markets,  it does not  recommend  shifts  between
macro  asset  classes  such as  stocks,  bonds and  cash,  thus the
program is not a market  timing  program  as the term is  generally
used.   Currently,   three  Style   Manager   versions   have  been
developed.

Portfolio Brokerage Services, Inc.
Portfolio  Brokerage   Services,   Inc.  ("PBS"),  a  wholly  owned
subsidiary of the Company,  is registered as a  broker/dealer  with
the NASD  and in all  U.S.  jurisdictions.  PBS  executes  security
transactions  for  certain  of  PMC's  privately   managed  account
programs  on behalf of its  customers  on a  delivery  vs.  payment
basis. A  self-clearing  broker/dealer,  substantially  all trading
activity of PBS is  unsolicited  and  initiated by the  independent
money  managers  used  in  PMC's  Private   Wealth   Management(TM)
program.  Managers  make all buy and sell  decisions and place most
orders with PBS for  execution  All  transactions  are  effected on
an agency basis.

-7-
<PAGE>

Portfolio Technology Services, Inc.
Portfolio  Technology  Services,   Inc.  ("PTS"),  a  wholly  owned
subsidiary  of the Company,  is a technology  company  dedicated to
assisting  the  Company in  providing  innovative  products  to the
financial  services  industry.  PTS leverages the product knowledge
of PMC to design and build  integrated  product  solutions  to meet
the  challenge  of  consolidating  products and pricing in multiple
segments  of  the  financial  services  industry.  As  its  primary
contribution   to  the  Company,   PTS  has   developed  the  sales
workstation   platform   used  for   Allocation   Manager(TM)   and
communication   interfaces  to  multiple  custodial  systems.   PTS
licenses  its  technology  and provides  customization  services in
support  of  the  Company's  relationship  with  its  Institutional
Channels.  The Company  estimates  that it has spent  approximately
$1.1 million for software  development  activities  in its last two
fiscal  years.  In some cases  customers  may bear the cost of such
activities   directly  when   software  is  customized   for  their
particular  requirements.  Payments by  customers  for this purpose
during the last two fiscal years are not material.

PMC Investment Services, Inc.
PMC Investment Services,  Inc. ("PMCIS"),  formerly ADAM Investment
Services,   Inc.,   was  formed  in  1980  to  provide   investment
consulting  services to  institutional  investors.  PMCIS's primary
services  are based  around  mutual  funds.  PMCIS  offers 17 model
portfolios   constructed  using  no-load  mutual  funds  and  funds
available at net asset value.  PMCIS's  mutual fund  portfolios are
offered  as  options  for use by 401(k)  plans and by The  Hartford
Insurance Company within a variable life contract.

Today  PMCIS  offers  independent  financial  advisers a variety of
investment  services for use in helping  their  clients reach their
financial  goals.   With  respect  to  standard  fee  assets  under
management,  PMCIS's  services  are  typically  provided  for a fee
that is based on a  percentage  of assets  under  management.  Fees
based on  managed  assets  typically  range  from 100 to 185  basis
points  per  year.  Fees are  reduced  as  accounts  reach  certain
breakpoints.  Occasionally  fees are  established  on a  negotiated
basis.  PMCIS  collects all fees directly from client  accounts and
pays the  adviser's  portion to the adviser.  In certain  instances
PMCIS does not  collect  the  adviser's  portion of the fee and the
adviser invoices the client directly.

The services PMCIS provides are described below.

Mutual Fund Portfolios
PMCIS offers 17 model portfolios  constructed  using no-load mutual
funds and funds  available  at net asset  value.  These  "standard"
portfolios   consist  of  5  global   tactical   asset   allocation
portfolios,  5 global strategic asset  allocation  portfolios and 7
asset  class  portfolios  that  concentrate  on narrow  asset class
groups.   PMCIS  will  also   construct   customized   mutual  fund
portfolios for larger accounts.

Socially Responsible Portfolios
PMCIS offers 5 strategic asset  allocation  portfolios  constructed
using  mutual funds that invest in  companies  that are  identified
as operating in a socially  responsible  manner.  These  portfolios
are  targeted to  individual  investors as well as  endowments  and
foundations that support social or religious causes.

-8-
<PAGE>

401(k) Services
PMCIS  offers  its mutual  fund  portfolios  as options  for use by
401(k)  plans.  PMCIS  has  developed  marketing,   enrollment  and
educational  material  for  use in the  401(k)  market.  PMCIS  has
also  developed  relationships  with  custodial and record  keeping
firms that work with advisers using PMCIS's 401(k) services.

Insurance and Annuity Services
PMCIS  has   developed   relationships   with   several   insurance
companies  under which it provides  asset  allocation and portfolio
construction  services within  variable life  contracts.  Financial
advisers  can use  these  contracts  in  conjunction  with  PMCIS's
mutual  fund  portfolios  to  manage  an  investor's  assets  in  a
consistent manner both inside and outside of insurance policies.

Private Label Program
PMCIS has  developed and is  initiating a "private  label"  program
that  will  allow  advisers  to  determine  the  asset   allocation
strategy  and select the mutual funds used in  constructing  client
portfolios.  This program will give advisers more  involvement  in,
and   influence   over,    investment    strategy   and   portfolio
construction.

Marketing, Education and Training Services
PMCIS  provides  advisers  with a variety of  marketing  materials,
newsletters,    slide   presentations,    software   and   proposal
preparation  services that support the advisers'  efforts to market
PMCIS's   services.   PMCIS  also  supports   advisers'   marketing
efforts  through field  wholesalers and in-house  customer  service
personnel.  PMCIS  educates  advisers  in its  investment  approach
and trains  advisers how to market its services  through  visits to
the advisers' offices and through periodic regional seminars.

Back-Office and Administrative Services
PMCIS  assists  advisers in opening  client  accounts  and monitors
and  trades  client  portfolios  on a  discretionary  basis.  PMCIS
provides comprehensive quarterly reports to all clients.

Distribution
PMCIS    distributes    its   services    through   six   marketing
representatives   who  are  supported  by  five  account  servicing
representatives.  Marketing  representatives  recruit new  advisers
to  use  PMCIS's   services  and  provide  training  and  marketing
support  to  advisers  on  an  ongoing  basis.   Account  servicing
representatives    support   the    efforts   of   the    marketing
representatives and provide customer assistance to advisers.

In  1995,   PMCIS  acquired   Optima  Funds,   Inc.,  a  registered
investment  advisor.  Optima  was merged  into  PMCIS in  December,
1997.  At the  time of the  merger,  Optima  provided  mutual  fund
wrap   services  to  clients  with  assets  under   management   of
approximately  $100  million.   PMCIS's  current  Chief  Investment
Officer was the President and Chief Investment Officer of Optima.

-9-
<PAGE>

Significant Relationships

Most of the  Company's  gross  revenues are  generated by fees from
the Company's  Private Wealth  Management(TM)  and PMCIS investment
advisory   programs.   The   programs  are  marketed  and  sold  by
Institutional  Channels and  Independent  Channels either under the
Company's  name or  under  the  "private  label"  of such  channel.
While  the  Company  has no  reason  to  believe  that its  current
investment  advisory  relationships  will not  continue to generate
revenues for the Company  consistent  with prior  years,  there can
be no assurance that such will be the case.

Pursuant  to a joint  marketing  agreement  between the Company and
Schwab,    a   specialized    version   of   the   Private   Wealth
Management(TM)   program   is  being   marketed   as  an   optional
additional service to independent  registered  investment  advisors
("RIAs")  who  utilize  the  services  of Schwab.  Schwab  provides
custody and clearing  services for  independent  RIAs. With respect
to Schwab  Institutional  Management's  RIA customers who determine
to use the  Company's  products and  services,  Schwab will provide
brokerage,  custody  and  securities  clearing  services  while PMC
will  provide  asset  allocation,   money  manager  due  diligence,
monthly and quarterly reporting, sales support and training.

In July 1997,  the  Company and PTS entered  into  agreements  with
Ernst  &Young  LLP to  provide  institutional  consulting,  Private
Wealth  Management(TM),  Allocation  Manager(TM) and MARS reporting
services.  Under the  agreement,  the Company  provides  end to end
investment  advisory  services  to Ernst & Young LLP in  support of
its  advisory  and  reporting  services to  clients.  Also in 1997,
the Company  entered into  agreements  with Republic  National Bank
of  New  York  to  provide   customized   software,   advisory  and
reporting   services  in  connection  with  both  mutual  fund  and
privately managed accounts.

The Company targets other means of  distribution,  and has executed
selling   agreements  with  new  Institutional   Channels  for  its
products.   Examples  of  these  new  relationships  include  CIGNA
Financial  Services,  Inc.,  Cowen & Company,  Texas  Commerce Bank
and EVEREN Clearing Corp.

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

-10-
<PAGE>

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.

Government Regulation

The  Company's   business  falls  entirely  within  the  securities
industry,  an industry  which is heavily  regulated  by the federal
and  state  governments.   New  regulatory  changes  affecting  the
securities   industry   could   adversely   affect  the   Company's
business.    In   addition,    as   investment   advisers   and   a
broker/dealer,   the   Company's   subsidiaries   are   subject  to
regulation  by  the   Securities  and  Exchange   Commission,   the
National  Association  of Securities  Dealers and state  regulatory
agencies.   Consequently,  the  Company  could  become  subject  to
restrictions  or sanctions  from the  Commission,  the NASD or such
state  regulatory  agencies.   It  is  impossible  to  predict  the
direction  future  regulations  will  take  or the  effect  of such
regulations on the Company's business.

Corporate History

SEC Investigation and Settlement
During  November  1993,  the  staff  of  the  Commission  began  an
examination  of PMC and in January 1994,  the  Commission  issued a
"Formal Order of  Investigation."  In April 1994,  the staff of the
Commission made a formal  enforcement  recommendation  against PMC,
its  President  Mr.  Kenneth  S.  Phillips  and  its  former  Chief
Executive  Officer,  Mr.  Marc  Geman.  Mr.  Geman  terminated  his
association  with the  Company  to pursue  other  interests  at the
closing of the initial  Bedford  Loan (as  hereinafter  defined) in
July 1995.

Over the course of the  following  two years the Company  committed
significant  resources  to  its  defense  and  the  defense  of its
officers.  The case addressed  issues  associated with  disclosures
and standards of "best  execution"  in advisory and wrap  programs.
The  investigation  adversely  affected the  Company's new business
development  activities  during the period,  as very few firms were
willing  to  develop   relationships  with  the  Company  while  an
enforcement recommendation was pending.

-11-
<PAGE>

On June 27,  1996,  PMC and Mr.  Phillips  announced  that they had
reached a settlement  agreement  with the  Commission.  Pursuant to
the settlement agreement,  PMC and Mr. Phillips,  without admitting
or denying  the  Commission's  allegations,  consented  to an Order
whereby PMC agreed to engage a compliance  executive  and to refund
net principal  trading profits together with  prejudgment  interest
thereon,   in  an  amount  to  be  determined  by  an   independent
accountant.   The  net  trading   profits  were  determined  to  be
$457,000,  plus  $146,000 of interest  through the date of payment.
The  refund  process  was  substantially completed  in  1997.  In  addition,
Mr. Phillips agreed to a censure and payment of a $25,000 fine.

Bedford
In July 1995, the Company  entered into a transaction  with Bedford
pursuant to which  Bedford  loaned $1.2  million to the Company and
received  an option to loan up to an  additional  $1.8  million  to
the  Company  for a  specified  period  of  time  and  pursuant  to
certain  call  provisions.  Each dollar  loaned  carried a ten-year
warrant to  purchase  one share of the Common  Stock at an exercise
price of $4.00 per  share.  In  connection  with this  funding  and
the  related   shareholder  and  investment   agreements,   Bedford
received  certain rights  including,  but not limited to, the right
to  elect  two  of the  Company's  five  directors,  the  right  to
receive  options that mirrored  certain  issuances or option grants
by the  Company,  and a  security  interest  in all  assets  of the
Company and its  subsidiaries.  Contemporaneously  with the closing
of the  July  1995  transaction  with  the  Company,  Bedford  also
purchased 1.0 million  shares of Common Stock from Mr.  Geman,  the
former  chief  executive  officer of the  Company who was a subject
of the  investigation  by the  staff  of  the  Commission.  Between
July  1995  and July  1996,  the  Company  obtained  the full  $3.0
million  financing  from  Bedford and certain  assignees of Bedford
(the "Bedford Loans").

In addition,  the Company  granted to Bedford  certain other rights
in  connection  with  future  debt  and  equity   financings  which
included a right of first  negotiation  regarding  future fundings,
a  30-day  exclusive  negotiation  period,  and a  right  of  first
refusal to match  unsolicited  offers for  financing.  The  Company
also  agreed to pay a  $100,000  annual  monitoring  fee to Nevcorp
Inc.,  which is owned by J.W.  Nevil Thomas,  who was designated by
Bedford to serve on the Company's Board of Directors.

The  Company's   relationship  with  Bedford  was  restructured  in
December 1996.  See "--December 1996 Restructuring."

December 1995 and June 1996 Offerings
In December  1995 and January 1996,  the Company  issued a total of
482.5  units  through  a  private   offering  (the  "December  1995
Offering"),  with each unit consisting of a convertible  promissory
note with a  principal  amount of $1,000 and a warrant to  purchase
250  shares  of  common  stock at an  exercise  price of $4.00  per
share.  During June 1996 the Company  issued an additional  1,017.5
units through another  private  offering (the "June 1996 Offering")
under  substantially  the same terms.  These private offerings were
issued primarily to employees,  business  associates and affiliates
of  the  Company  or  Bedford.  The  purchasers  of  units  in  the
December  1995  and  June  1996  Offerings  received   registration
rights with  respect to the shares of Common Stock  underlying  the
warrants.

-12-
<PAGE>

Phillips & Andrus, LLC; KP3, LLC
Phillips  & Andrus,  LLC,  a  Colorado  limited  liability  company
("P&A"),  was  formed in July  1995 to  acquire  410,961  shares of
Common  Stock from Mr.  Geman in  exchange  for a  promissory  note
issued to Mr.  Geman in the amount of  $2,015,000.  The  promissory
note  was  secured  by  the  Common  Stock   acquired.   While  Mr.
Phillips,  President  and Chief  Executive  Officer of the Company,
and David L.  Andrus,  the then  Executive  Vice  President  of the
Company,  were  the  members  of  P&A,  substantially  all  of  the
membership  interests  in  P&A  were  owned  by Mr.  Phillips.  The
Company and Messrs.  Phillips and Andrus  believed that it would be
in the Company's  interest that Mr.  Geman's  involvement  with the
Company  and  direct   ownership   interest  in  Common   Stock  be
eliminated.  In October  1996,  affiliates  of  Bedford  loaned P&A
funds to make the  initial  interest  payments  on the note owed to
Mr. Geman. In December 1996,  after  notifying its  shareholders of
the  proposal to do so, the  Company  loaned a total of $250,000 to
P&A to  repay  principal  owed  under  the  promissory  note to Mr.
Geman.  These  loans  permitted  P&A to avoid  defaults  under  the
promissory note owed to Mr. Geman.

In  January  1997  P&A  was  liquidated  and  the  assets  of  P&A,
consisting   of  the   410,961   shares  of  Common   Stock,   were
transferred,  subject  to  certain  liabilities,  to  KP3,  LLC,  a
Colorado limited  liability  company ("KP3"),  the members of which
are Mr.  Phillips  and a  custodian  for  Mr.  Phillips'  son.  Mr.
Phillips  owns  substantially  all of the  membership  interests in
KP3.  Also  in  January  1997,  KP3  obtained  a bank  loan  in the
amount of  $1,750,000  for a term of  approximately  12 months (the
"KP3  Loan"),  the  proceeds  of which  were  used (i) to repay the
loans  made  to  P&A by  the  Company  and  certain  affiliates  of
Bedford,  and (ii) to prepay the balance of the  principal  and all
interest  owing  under  the  promissory  note  to  Mr.  Geman.  The
Company  pledged  certain  collateral  for the KP3 Loan,  valued at
approximately  $1,890,000,  and KP3 agreed to reimburse the Company
for  any   amount   paid  by  it  toward   the  KP3   Loan.   KP3's
reimbursement  obligation  is  secured  by a pledge of all  410,961
shares of Common  Stock held by KP3.  The pledge by the  Company to
the bank to secure the KP3 Loan  permitted the  promissory  note to
Mr.  Geman to be paid and to  eliminate  the  possibility  that Mr.
Geman  could  reacquire  a  substantial   stock  ownership  in  the
Company.    Through   February   1998,   the   Company   has   lent
approximately  $158,000,  including  interest,  to KP3 specifically
to  service  interest  payments  on the  loan.  KP3 has  agreed  to
reimburse  the Company  for all amounts  paid by the Company on the
loan  or  for  collateral  applied  to  the  KP3  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.  In  connection
therewith,  the  collateral  pledge by the  Company  in  connection
with  the KP3  Loan  was  reduced  to  $1,400,000  and the  Company
released  87,500 of the KP3 Shares  previously  held as collateral.
The new loan due date is December 31, 1998.

Bedford and certain of its affiliates  have an option,  exercisable
through  July 26,  2000,  to  acquire a total of  83,750  shares of
Common  Stock  currently  owned  by KP3 for an  aggregate  purchase
price  of  $410,637.85,  increasing  at a  rate  of  9%  per  annum
subsequent to July 27, 1995.

-13-
<PAGE>

November 1996 Bridge Loan
In November  1996,  the Company  borrowed  $250,000 (the  "November
1996  Bridge  Loan")  to  fund  its  working  capital  requirements
pending   closing  of  the  December   1996  Offering  (as  defined
below).  Half  of the  loan  was  provided  by  Keefe,  Bruyette  &
Woods,  Inc.   ("KBW"),   placement  agent  in  the  December  1996
Offering,  and the balance by certain  members of management of the
Company  and  a  subsidiary  of  Bedford.   The  lenders   received
five-year  warrants  to purchase an  aggregate  of 6,250  shares of
Common  Stock.  The  warrants  have an exercise  price of $6.50 per
share.  The lenders  received  registration  rights with respect to
the Common Stock to be issued upon  exercise of the  warrants.  The
November  1996  Bridge  Loan was repaid in  December  1996 from the
proceeds of the December 1996 Offering.

December 1996 Offering
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
(the  "December 1996  Offering").  A portion of the proceeds of the
December  1996  Offering  were used (i) to repay  interest  due and
owing  on the  promissory  notes  issued  in  connection  with  the
December  1995 and June 1996  Offerings,  including  the notes held
by the father and  brother of Mr.  Phillips,  the  Company's  Chief
Executive  Officer,   Mr.  Andrus,  the  Company's  Executive  Vice
President,  and certain  employees  of the  Company,  (ii) to repay
interest  due and owing under the Bedford  Loans,  (iii) to repay a
portion of the  principal  on the  Bedford  Loans and (iv) to repay
the  November  1996  Bridge Loan  (including  the notes held by Mr.
Phillips,  Mr.  Andrus and certain  other  members of the Company's
management).

December 1996 Restructuring
Simultaneous  with the closing of the December 1996  Offering,  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 and its
assignees of  $1,976,250  of  outstanding  principal on the Bedford
Loans,  the  exercise by Bedford and its  assignees  of warrants to
purchase  255,938  shares  of  Common  Stock  and the  delivery  by
Bedford  and its  assignees  of  canceled  promissory  notes in the
amount of $1,023,750 in  satisfaction  of the exercise price of the
warrants,  the  cancellation  of the remaining  warrants to Bedford
and its  assignees,  and the issuance to Bedford and its  assignees
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 the December  1995
and June  1996  Offerings,  the  delivery  of  canceled  promissory
notes  in  the   aggregate   principal   amount  of  $1,500,000  in
satisfaction  of the exercise price of such  warrants,  the payment
by the Company of all  outstanding  interest  due and owing on such
notes as of the  exercise  date and the  issuance to the holders of
such  warrants of new  warrants to purchase up to 37,500  shares of
Common  Stock;  (iii) the  repayment  of the  November  1996 Bridge
Loan,  and (iv) the  conversion  of  173,120  shares  of  Preferred
Stock  into  59,511  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.  The new

-14-
<PAGE>

warrants issued by the Company to  Bedford  and  others  pursuant
to clauses (i) and (ii) are referred to hereafter as the "New Warrants."

The New Warrants are  exercisable  over a period of five years,  at
an  exercise  price of $8.50 per share.  Registration  rights  were
granted  with  respect  to  the  Common  Stock  received  upon  the
exercise  of the  old  warrants  and the  shares  of  Common  Stock
underlying the New Warrants.  The New Warrants  contain  adjustment
provisions  relating  to the  exercise  price  per  share  and  the
number of shares of Common  Stock to be issued upon their  exercise
in the event of  issuances  of  additional  shares of Common  Stock
(including  through the issuance of options,  rights or warrants to
purchase  Common  Stock  or  securities   convertible  into  Common
Stock)  by the  Company  at a price  below  market  price,  certain
extraordinary  dividends  and  distributions  on the Common  Stock,
stock splits or other  reclassifications  of the outstanding shares
of Common Stock, and any merger,  consolidation  or  reorganization
involving   the   Company   or  a  transfer   by  the   Company  of
substantially all of its assets or properties.

PMCIS Acquisition and Financing
On September 24, 1997,  the Company  completed the  acquisition  of
ADAM  Investment  Services,  Inc.,  now  known  as  PMC  Investment
Services,  Inc.  ("PMCIS"),  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 17 model portfolios  constructed  using
no-load  mutual  funds and  funds  available  at net  asset  value.
These  "standard"  portfolios  consist of 5 global  tactical  asset
allocation   portfolios,   5  global   strategic  asset  allocation
portfolios  and  7  asset  class  portfolios  that  concentrate  on
narrow  asset  class  groups.  PMCIS  also  has 5  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 The  Hartford
Insurance  Company within a variable life  contract.  PMCIS had one
wholly-owned  subsidiary,   Optima,  which  it  acquired  in  1995.
Optima  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  $1.5  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.  PMCIS is now a wholly
owned subsidiary of the Company,  and the Company

-15-
<PAGE>

anticipates that PMCIS will continue to operate as a wholly  owned
subsidiary  of the Company in the near 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.  The
proceeds from this transaction,  after deducting  expenses relating
to  the   issuance  of  the  Common   Stock,   were   approximately
$6,400,000,  of which  the  Company  used  $5,000,000  to  purchase
PMCIS  at  the  PMCIS  closing  and a  substantial  amount  of  the
balance for employee  severance,  relocation,  and related expenses
associated   with  the  closing  of  the  Atlanta   facility.   The
additional  $1,400,000  is currently  being used by the Company for
working capital purposes.

ITEM 2. DESCRIPTION  OF  PROPERTY.

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  $25,000 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  is to
sublease  all of the  above  described  office  space at $4.25  per
square  foot until  February  17,  1998.  From  February  17,  1998
until March 31,  1998,  the office  space is to be sublet for $8.50
per square foot,  and from April 1, 1998 until the  termination  of
the lease in April  1999,  the  office  space is to be  sublet  for
$17.00  per square  foot.  PMCIS will  remain  responsible  for the
balance of the lease payments not covered by such sublease.

ITEM 3. LEGAL  PROCEEDINGS.

In  early  June  1997,  PMC  received  a  letter  from an  attorney
representing  a  former   employee  which   threatened   litigation
relating to a dispute over such former  employee's  remuneration by
the  Company  unless  the  Company  agreed to settle  with him by a
specified  date.  The  Company  responded  to the letter and stated
its  position  that no amounts  are owed.  By  correspondence  from
the  NASD  dated  December  19,  1997,  PMC was  notified  that the
matter   was   submitted   by  the   employee   to  the   NASD  for
arbitration.  The  employee is seeking  damages  for lost  earnings
from his  prior  employer,  lost  commissions  from  PMC and  other
damages,  totaling  $1,190,000.  PMC  has  responded  to  the  NASD
Arbitration  demand by denying that the NASD has jurisdiction  over
the matter and  seeking to have the matter  dismissed.  The Company
believes that the claims described in the NASD  Arbitration  notice
are  without  basis and  intends to defend  the matter  vigorously.
The Company is not aware of any other  material  legal  proceedings
or  investigations  currently  pending or  threatened  against  the
Company.

-16-
<PAGE>

ITEM 4. SUBMISSION   OF   MATTERS   TO  A   VOTE   OF   SECURITY
HOLDERS.

On  December  15,  1997,  the  Company  held an annual  meeting  of
Shareholders.   The  following   matters  were  voted  on  at  said
meeting:

   (1)     A proposal  for  election of all members of the Board of
   Directors.  The  Company  solicited  proxies  in  favor  of  the
   election of Kenneth S. Phillips, Scott A. MacKillop,  J.W. Nevil
   Thomas,  D. Porter  Bibb,  Emmett J. Daly,  and Richard C. Hyde,
   all of  whom  were  existing  members  of the  Board.  No  other
   nominees were  presented and all members were reelected with one
   seat remaining vacant.  Voting results were as follows:

                                         against
                                            or
                             for         withheld   abstain
                          ---------      --------   -------
   Kenneth S. Phillips    4,117,479      1,366         0
   Scott A. MacKillop     4,117,479      1,366         0
   J.W. Nevil Thomas      4,117,479      1,366         0
   D. Porter Bibb         4,117,478      1,367         0
   Emmett J. Daly         4,117,479      1,366         0
   Richard C. Hyde        4,117,479      1,366         0

   (2)     A proposal  to the holders of the  Company's  Common and
   Preferred   Stock   to   amend   the   Company's   Articles   of
   Incorporation  to  provide  for  automatic  conversion  of  each
   outstanding  share of the Company's  Preferred  Stock,  together
   with  any and all  accrued  but  unpaid  dividends,  into  1,375
   shares of the  Company's  Common Stock.  A sufficient  number of
   votes of Preferred  Stockholders  were not present and voting at
   the meeting and this matter was  continued  until  December  29,
   1997,  at which time there were not  sufficient  votes to act on
   the proposal and the meeting was adjourned.

   (3)     A proposal to holders of the  Company's  Common Stock to
   amend  the  Company's  Articles  of  Incorporation  to  effect a
   one-for-four  reverse  split of the Common  Stock,  subject to a
   determination  by the  Board  that the  reverse  split is in the
   best  interests  of  the  Company  and  its  Shareholders.  This
   proposal was approved by the common  shareholders with a vote of
   4,087,813 for, 30,871 against or withheld,  161 abstaining.  The
   reverse split was made effective on December 30, 1997.

   (4)     A proposal to approve  the  Company's  Equity  Incentive
   Plan  adopted by the  Company's  Board of  Directors on November
   12, 1997.  This  proposal was approved  with a vote of 4,055,451
   for, 57,252 against or withheld, 6,141 abstaining.

-17-
<PAGE>
PART II
ITEM 5. MARKET  FOR  COMMON   EQUITY  AND  RELATED   STOCKHOLDER
        MATTERS.

Prior to February  1995,  the Common Stock was traded on The Nasdaq
Small  Cap  Market.  See  "Risk  Factors--Limited  Market  for  the
Company's  Common  Stock  May  Adversely  Affect  Share  Price  and
Liquidity."   The  Common  Stock   currently   trades  on  the  OTC
Bulletin  Board  under  the  symbol  "PMCI."  The  following  table
shows  the  high  and low bid  prices  and  trading  volume  of the
Common  Stock  for  the  periods   indicated  as  reported  by  the
principal  market  maker  in the  Common  Stock.  These  quotations
reflect  inter-dealer  prices without retail markup,  markdown,  or
commissions and may not necessarily represent actual transactions.
-------------------------------------------

                       High Bid    Low Bid
-------------------------------------------
-------------------------------------------
1995
-------------------------------------------
-------------------------------------------
First Quarter             $5.00      $2.75
-------------------------------------------
-------------------------------------------
Second Quarter            $2.75      $2.00
-------------------------------------------
-------------------------------------------
Third Quarter             $5.25      $2.25
-------------------------------------------
-------------------------------------------
Fourth Quarter            $6.50      $3.00
-------------------------------------------
-------------------------------------------

1996
-------------------------------------------
-------------------------------------------
First Quarter             $4.00      $2.50
-------------------------------------------
-------------------------------------------
Second Quarter            $7.25      $3.75
-------------------------------------------
-------------------------------------------
Third Quarter             $8.25      $5.50
-------------------------------------------
-------------------------------------------
Fourth Quarter (1)        $8.00      $5.50
-------------------------------------------
-------------------------------------------

1997
-------------------------------------------
-------------------------------------------
First Quarter            $10.00      $8.00
-------------------------------------------
-------------------------------------------
Second Quarter           $10.00      $6.50
-------------------------------------------
-------------------------------------------
Third Quarter             $7.75      $5.00
-------------------------------------------
-------------------------------------------
Fourth Quarter            $7.50      $6.00
-------------------------------------------
-------------------------------------------

1998
First Quarter(2)          $7.00      $4.00
-------------------------------------------
-------------------------------------------
______________________________
(1)   Does not reflect the private  placement of  1,294,250  shares
      of Common  Stock by the Company in  December  1996 at a price of
      $8.50 per share.
(2)   Through March 17, 1998.

As of March 17,  1998 the  Company  had 392  record  holders of its
Common Stock.

The Company  currently has  outstanding  a total of 138,182  shares
of  Preferred  Stock.  As of March 17,  1998,  the  Company  was in
default in the payment of dividends on the  Preferred  Stock in the
amount  of  $298,419.  The  Company  may not pay  dividends  on its
Common  Stock  so  long  as it is in  default  in  the  payment  of
dividends on the Preferred Stock.

The  Company  has never  paid  dividends  on the  Common  Stock and
currently  intends to retain all future  earnings,  if any, for the
continued  growth and  development of its business and has no plans
to pay cash  dividends in the future.  Any change in the  Company's
dividend  policy will

-18-

<PAGE>

be made in the  discretion  of the  Company's Board  of  Directors
in light of the  Company's  future  earnings, financial  condition
and  capital   requirements  and  of  general business   conditions
and  other   factors  that  cannot  now  be predicted.

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.

General

The  Company   develops,   markets,   and   manages   sophisticated
investment  management  products and services.  Not a money manager
itself,  the Company  provides  products and services to facilitate
the selection and/or  monitoring of unaffiliated  money managers or
mutual funds for customers of the Company's  distribution  channels
depending upon the size,  sophistication  and  requirements of such
customers.    The   Company's   products   and   services   address
investment   suitability  and  diversification,   asset  allocation
recommendations,     portfolio     modeling    and     rebalancing,
comprehensive   accounting  and  portfolio  performance  reporting.
The  Company's  revenues are realized  primarily  from fees charged
to  clients  based  on a  percentage  of  managed  assets  and to a
lesser extent from  consulting fees for certain  advisory  services
and  licensing  fees from its  software  products.  Fees based upon
managed  assets  typically  range  from 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.

Results of Operations

The Year in Review
The year was marked by accomplishments, disappointments, and
changes.

The  acquisition  of PMCIS was  completed  on  September  24, 1997.
The full  benefits,  both in strategic  focus and in potential  for
profitability,   of  this   transaction  are  not  expected  to  be
realized until the latter part of 1998.

-19-
<PAGE>

Contracts  were  signed  with  both  Ernst  &  Young  and  Republic
National Bank, two  significant  relationships  in terms of revenue
opportunities  and changes in line of business.  Significant  money
and  resources  were  expended  in 1997 to launch  these  programs.
The Company  experienced  cost  overruns  and delays in  connection
with the  development  of the  Republic  National  Bank program and
has also  experienced  delays  in the  roll-out  of the  Ernst  and
Young  program.  These  factors  adversely  impacted the  Company's
operating  results in 1997 and will  negatively  impact  operations
in 1998 until these programs are fully rolled-out.

As a result  of the PMCIS  acquisition  (formerly  ADAM  Investment
Services,  Inc.),  attrition  and internal  restructuring,  several
executives  and senior  managers  left the Company late in 1997 and
early  1998.   This  resulted  in  the  need  to   transition   new
personnel to numerous  developing  relationships and projects.  The
sales and  marketing  force  was also  reorganized  in  conjunction
with  the  PMCIS   acquisition.   These  transitions  were  costly.
Management  believes  that there are  likely to be  certain  bottom
line savings  associated  with these changes that will not be fully
realized until the latter part of 1998.

The Company's success  is contingent  upon  effectively  leveraging
resources and  managing  operating  costs.  In 1997,  the  Company  committed
extensive   resources   to   raising   capital,    completing   and
integrating  the  PMCIS  transaction,  developing  significant  new
business  relationships,   and  managing  turnover.  These  efforts
took  a  significant  toll  on  the  Company's  human  and  capital
resources.   An   inability  to  attain   profitability   or  raise
additional   working  capital  in  1998  will  have  a  substantial
negative impact on the Company.

1997 Compared to 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  contribution  of $3,000,000 for the fourth quarter and Ernst
& Young  contribution  of $733,000.  New business,  such as Ernst &
Young,  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 Management and Other Fees
Investment  Management 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,  are recognized on a net basis to the Company.

-20-
<PAGE>

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.

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  $1,500,000
or  43%,  and  depreciation   and   amortization   which  increased
$600,000  or  42%.   Salaries  and  benefits,   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.  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 reduction
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 small 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 costs related to:
    1. development of infrastructure to support new business relationships;
    2. management restructuring;
    3. the PMCIS acquisition; and
    4. 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.

-21-
<PAGE>

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.

For the 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.

The  Company  anticipates  that  it  will  continue  to  experience
operating  losses  until such time as it can realize  the  benefits
of:
     1. the  PMCIS   acquisition,   the  related  assets  under
        management  and the  expected  economies of scale of merged
        operations;
     2. employee attrition and turnover,  and related reduction
        in payroll and associated costs;
     3. the  launching  of new  institutional  programs and the
        realization of associated fee income; and
     4. other  developing  relationships  and  the  ability  to
        leverage  personnel  and  managing  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.

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  financing  will be available to the Company or
that the Company will  otherwise  find sources to meet its cashflow
requirements.

The Company has  historically  incurred net losses and  accordingly
experienced  cash flow  problems.  As a result  of the  acquisition
of ADAM,  the  Company is  obligated  to make a  deferred  purchase
payment on September  24,  1998.  The payment will be equal to 1.0%
of   certain   ADAM   assets   under   management   in   excess  of
$500,000,000,  with the  payment  not to  exceed  $2,000,000,  plus
interest.  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.

-22-

<PAGE>

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 ADAM  payment.  The Company is currently  investigating
sources of short and long term  capital  to meet the ADAM  payment as well as
working  capital needs.  Should  additional  capital not be raised,
the Company will be required to  restructure  the terms of the ADAM
payment,   to  remove  the  restriction  from  its  cash  balances,
restructure its operations or a combination of the above.

ITEM 7. FINANCIAL  STATEMENTS.

See the  financial  statements  attached to this report which start
at page F1.

ITEM 8. CHANGES  IN  AND   DISAGREEMENTS   WITH   ACCOUNTANTS  ON
        ACCOUNTING  AND  FINANCIAL  DISCLOSURE.

None.
PART III
ITEM 9. DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL
        PERSONS,   COMPLIANCE   WITH   SECTION   16  (a)  OF  THE
        EXCHANGE  ACT.

Directors and Executive Officers

The following  table sets forth certain  information  regarding the
Company's directors and executive officers:

--------------------------------------------------------------------

      Name                Age     Position
--------------------------------------------------------------------
--------------------------------------------------------------------
Kenneth S. Phillips        46     President, Chief Executive
                                     Officer and Director
--------------------------------------------------------------------
--------------------------------------------------------------------
Scott A. MacKillop         46     Executive Vice President, Chief
                                     Operating Officer and Director
--------------------------------------------------------------------
--------------------------------------------------------------------
Stephen M. Ash             40     Chief Financial Officer and
                                     Treasurer
--------------------------------------------------------------------
--------------------------------------------------------------------
Maureen E. Dobel           39     General Counsel, Corporate
                                     Secretary and Director
--------------------------------------------------------------------
--------------------------------------------------------------------
J. W. Nevil Thomas         59     Chairman of the Board of
                                     Directors
--------------------------------------------------------------------
--------------------------------------------------------------------
D. Porter Bibb             60     Director
--------------------------------------------------------------------
--------------------------------------------------------------------
Emmett J. Daly             37     Director
--------------------------------------------------------------------
--------------------------------------------------------------------
Richard C. Hyde            52     Director
--------------------------------------------------------------------

Kenneth  S.   Phillips--President   and  Chief  Executive  Officer,
Director.  Mr.  Phillips  founded  PMC in 1986  and  serves  as the
President  and  Chief  Executive   Officer  of  the  Company.   Mr.
Phillips  is   responsible   for   corporate   direction,   product
development   and   strategic   planning.    He   was   co-founding
participant in the Wilshire  cooperative in 1986  (associated  with
the  institutional   consulting  firm  Wilshire   Associates).   He
served  as  Chairman   of  the   Publications   Committee   of  the
Investment Management Consultants Association ("IMCA") in 1994 and

-23-

<PAGE>

1995,  as a member of IMCA's  officer and  director  Nominating
Committee  in 1994 and  1996,  and has  recently  been  elected  to
serve  as  a  member  of  IMCA's  Advisory  Council.  IMCA  is  the
investment   consulting  industry's  principal  trade  organization
with  more  than  1,200  members,  representing  virtually  all the
major  national,   regional  and  independent   consulting   firms.
Additionally,  Mr.  Phillips  has  been a  guest  speaker  for  the
International  Association  of Financial  Planners,  the Investment
Management   Institute   and  the   Institute   for   International
Research.  Mr.  Phillips  received his education at Colorado  State
University and holds numerous NASD license designations.

Scott  A.  MacKillop--Executive  Vice  President,  Chief  Operating
Officer,  Director.  Mr.  MacKillop joined the Company in September
1997 as Executive  Vice President and the Chief  Operating  Officer
of the Company,  and as President of PMCIS,  the  Company's  wholly
owned  subsidiary,  as Chief Operating  Officer of Optima, a wholly
owned  subsidiary  of  PMCIS,  and as a  member  of the  Boards  of
Directors of both PMCIS and Optima.  Mr.  MacKillop  was  appointed
to the Board of Directors on October 27, 1997.  Mr.  MacKillop  has
been  employed  by PMCIS  since  1992.  From  1991  until  1992 Mr.
MacKillop   served  as  outside  general  counsel  to  PMCIS.   Mr.
MacKillop  received a B.A. degree from Stanford  University in 1972
and a J.D. degree from George  Washington  University Law School in
1976.

Stephen M. Ash,  CPA--Chief  Financial  Officer and Treasurer.  Mr.
Ash joined the  Company  during the fourth  quarter of 1997 as Vice
President  Finance and  Operations.  In February 1998, he was named
Treasurer  and  President of Portfolio  Brokerage  Services,  Inc.,
the  Company's  wholly  owned   subsidiary.   He  was  named  Chief
Financial  Officer in March  1998.  Prior to joining  the  Company,
from 1994 until 1997, Mr. Ash was a Senior  Operations  Manager for
Mees  Pierson  Trust  Company,  a division  of  Fortis,  located in
Curacao,  Netherlands  Antilles.  Mr.  Ash has more  than ten years
experience  as a  Certified  Public  Accountant,  first as a Senior
Manager in the audit  department  of KPMG - Peat  Marwick from 1986
to 1993  serving a diverse  base of  clients,  and then as a Senior
Manager with Ernst & Young from 1993 to 1994,  specializing  in the
audit  of  off-shore   mutual   funds,   partnerships,   and  other
investment   vehicles.   Mr.  Ash  is  a  graduate   of  The  State
University of New York with a B.S. in Business Administration..

Maureen  E.   Dobel--General   Counsel,   Corporate  Secretary  and
Director.  Ms.  Dobel  joined PMC in  September  1995 as  Corporate
Counsel and was named General  Counsel and  Corporate  Secretary in
December  1995.  Ms. Dobel was  appointed to the Board on March 27,
1998.  Prior  to  joining  PMC,  Ms.  Dobel  spent  eight  years in
private  practice,  specializing  in  securities,  corporate,  real
estate  and  transactional  matters.  Ms.  Dobel  received  a  B.A.
degree  from Drake  University  in 1980 and a J.D.  degree from the
University of Nebraska - Lincoln College of Law in 1984.

J.W.  Nevil  Thomas--Chairman  of the Board.  Mr. Thomas has been a
Director  of the  Company  since July 1995.  Since 1970 Mr.  Thomas
has served as  President  of Nevcorp,  Inc.,  an  investment  and a
financial  and  management   consulting  firm.  In  addition,   Mr.
Thomas is a  director  of  Bedford  Capital  Financial  Corporation
("Bedford")  and is  Chairman  of Bedford  Capital  Corporation,  a
subsidiary of Bedford, whose principal business is  merchant banking.

-24-
<PAGE>

In  addition  to being a Director  of the  Company and of
Bedford and its  subsidiary  as described  above,  Mr.  Thomas is a
director of Gan Canada  Limited,  Reliable Life Insurance  Company,
Pet Valu Inc.,  French  Fragrances,  Inc.,  Old Republic  Insurance
and several  other  private  Canadian and American  companies.  Mr.
Thomas holds a B.B.  Com. from the  University of Toronto,  an M.A.
in  Economics  from  Queens   University,   an  M.B.A.   from  York
University and is a Chartered Financial Analyst.

D.  Porter  Bibb--Director.  Mr.  Bibb  became  a  Director  of the
Company  in  October  1995.  Mr.  Bibb is a  Managing  Director  of
Ladenburg,  Thalmann  & Co.,  Inc.,  an  investment  banking  firm.
Prior to  joining  Ladenburg  in  1984,  Mr.  Bibb  was a  Managing
Director of Bankers  Trust  Company,  involved  in the  start-up of
their  investment  banking  operations.  Prior to that time, he was
Director  of  Corporate  Development  for the New  York  Times.  In
addition  to  being  a  Director  of the  Company,  Mr.  Bibb  is a
Director  of  East  Wind  Group,  Inc.  Mr.  Bibb  has  a  B.A.  in
History,  Economics and Political  Science from Yale University and
engaged in graduate studies at New York  University,  London School
of Economics and Harvard Business School.

Emmett  J.  Daly--Director.  Mr.  Daly  became  a  Director  of the
Company  in  February  1997.  Mr.  Daly is  currently  Senior  Vice
President of Corporate  Finance of Keefe,  Bruyette & Woods,  Inc.,
an  investment  banking  firm  that Mr.  Daly  joined in 1987 as an
Associate in the  Corporate  Finance  Department.  Before that time
he spent  two years as Credit  Analyst  followed  by one year as an
Assistant  Treasurer of  Manufacturers  Hanover Trust Company.  Mr.
Daly  received a B.A. in  Economics  from College of the Holy Cross
and  his  M.B.A  from  the  Kenan  Flager  School  of  Business  at
University of North Carolina, Chapel Hill.

Richard  C.  Hyde--Director.  Mr.  Hyde  became a  director  of the
Company in July 1997.  Mr. Hyde is President  of Moreland  Capital,
Inc., an asset  management  and investment  consulting  firm. He is
also a Principal in Vestor  Associates,  LLC,  the general  partner
of Vestor  Partners,  LP, a private equity  investment  fund. Prior
to his current  affiliations,  from 1970 to 1995 Mr. Hyde served in
investment/asset  management  positions with Ameritrust Company and
its  successor  organizations,  Society  Corporation  and Key Corp.
From 1984  through  1993,  he was Chief  Investment  officer.  From
1993  through  1995,   Mr.  Hyde  was  the  CEO  of  Society  Asset
Management   and   Managing   Director  of  Key  Asset   Management
Holdings.  Mr.  Hyde holds both a  Bachelor  of Science  and MBA --
Finance from Miami University of Ohio.

The Bylaws of the  Company  were  amended in  December  1996 to set
the  number of members of the Board of  Directors  at seven.  Under
subscription   agreements  with  investors  in  the  December  1996
Offering,  those  investors  are entitled to designate one director
and one  additional  director is to be mutually  acceptable  to the
Company and such  investors.  The mutually  acceptable  director is
currently  Emmett J. Daly,  a Senior  Vice  President  of KBW.  The
director to be designated by the investors is Mr. Hyde.

Under a Shareholders  Agreement  among Bedford,  the Company,  Mr.
Phillips, Mr. David Andrus and KP3,LLC, (as successor to Phillips
& Andrus, LLC (i) Bedford is entitled to designate one director
and one additional director is to be reasonably acceptable to Bedford and

-25-

<PAGE>

Messrs.  Phillips and Andrus and (ii) Messrs.  Phillips
and Andrus are entitled to  designate  three  directors,  including
one member of senior  management  designated  after the date of the
agreement.  Mr.  Thomas is  currently  the director  designated  by
Bedford  and Mr.  Phillips,  Mr.  MacKillop  and Ms.  Dobel are the
three   directors   management  is  entitled  to   designate.   The
director  acceptable to Bedford and Messrs.  Phillips and Andrus is
currently Mr. Bibb.

The Company  believes that during  fiscal year 1997,  the following
officers,  directors  or 10% holders of its Common Stock filed late
reports,  failed  to  report  transactions  on a  timely  basis  or
failed to file a form required  under Section 16 of the  Securities
Exchange Act of 1934, as amended:

Kenneth S. Phillips  - late  filing  of  one  required report
Scott A. MacKillop   - late  filing  of  one  required report
J.W. Nevil Thomas    - late  filing  of  one  required report

ITEM 10.   EXECUTIVE  COMPENSATION.

The following table provides certain summary information
concerning compensation paid by the Company and its subsidiaries
to the Company's Chief Executive Officer and to each of its other
executive officers at the end of 1997.

-26-
<PAGE>


                             Summary Compensation Table

                                       Annual           Long-Term
                                     Compensation     Compensation
                                     ------------     ------------
        Name and Principal  Fiscal                       Options
             Position         Year       Salary          Granted(1)
        ------------------  ------    ----------       ------------
      Kenneth S. Phillips     1997      $350,865            938
        President, Chief      1996       252,000         12,500
        Executive Officer     1995       228,124            -0-

      Scott A. MacKillop      1997      $206,331(2)      75,750
        Executive Vice
        President & Chief
        Operating Officer

      David L. Andrus(3)      1997      $342,501            -0-
        Executive Vice        1996       240,000        262,500
        President             1995        40,000            -0-

      Vali Nasr(3)            1997      $211,816            -0-
        Chief Financial       1996       139,015         12,500
        Officer & Treasurer   1995       126,475            -0-




        (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)Includes $150,000 in salary received from ADAM
           Investment Services, Inc. for services rendered prior
           to its acquisition by the Company.
        (3)Mr. Andrus and Mr. Nasr's employment ceased in January 1998.

-27-
<PAGE>

During the year ended December 31, 1997 the Company granted to
its Chief Executive Officer and the other executive officers
listed in the Summary Compensation Table 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
                 ---------------------------------

                                 Percentage
                    Number of     of Total
                     Shares       Options
                   Underlying    Granted to              Expiration
      Name          Options      Employees    Exercise      Date
                     Granted     in Fiscal    Price(1)
                                    Year
-------------      ------------  ---------   ---------   -----------
Kenneth S. Phillips         938      .6%       $6.485    12/31/2002

Scott A. MacKillop       62,500    51.4%       $6.485     9/24/03
                         12,500                $6.485     10/27/02
                            750                $6.485     12/31/02

(1)   All figures reflect a reverse split effective 12/30/97.
_______________________

The following table sets forth certain information with respect
to options exercised during the year ended December 31, 1997 by
those officers listed in the Summary Compensation Table.
<TABLE>
        Aggregated Option/SAR Exercises in Last Fiscal Year
                                and
                 Fiscal Year End Option/SAR Values
<CAPTION>

                                         Number of Securities       Value of
                      Shares             Underlying Unexercised  Unexercised Money
                     Acquired              Options at FY End     Options at FY End
                        on       Value       Exercisable/          Exercisable/
       Name          Exercise  Realized    Unexercisable(1)      Unexercisable(1)
       ----          --------  --------    ---------------       ----------------
<S>                   <C>       <C>        <C>                   <C>
Kenneth S. Phillips     0        0           5,938 / 7,500           $26,083 / $30,000

David L. Andrus         0        0         193,750 / 0            $1,193,125 / $0

Vali Nasr               0        0          12,500 / 0               $50,000 / $0

Scott A. MacKillop      0        0           3,250 / 72,500          $21,076 / $470,163
<FN>
(1)   All figures reflect a reverse split effective 12/30/97
</FN>
</TABLE>

-28-
<PAGE>

Compensation of Directors

During  1997,  the Company did not pay its employee  directors  for
attending  board  meetings.  Each of the  three  outside  directors
received a $5,000  annual  retainer and a $500 fee for each meeting
attended.  The Company  reimburses  all of its directors for travel
and  out-of-pocket  expenses in connection with their attendance at
meetings of the Board of Directors.

On February  28,  1997,  Mr.  Daly was granted  options to purchase
12,500  shares of Common  Stock at an exercise  price of $10.00 per
share.  Such  options  expire five years from the date of grant and
vest 20% at such time as the  average  bid and offer  price for the
Common Stock equals $10.00,  $14.00,  $18.00,  $22.00,  and $26.00,
respectively, for twenty consecutive trading days.

On July 9, 1997,  Mr. Hyde was granted  options to purchase  12,500
shares of Common  Stock at an  exercise  price of $7.872 per share.
Such  options  expire  five  years  from the date of grant and vest
20% at  such  time  as the  average  bid and  offer  price  for the
Common  Stock  equals  $7.872,  $11.872,   $15.872,   $19.872,  and
$23.872, respectively, for twenty consecutive trading days.

On  October  27,  1997,  Mr.   MacKillop  was  granted  options  to
purchase  12,500  shares of Common  Stock at an  exercise  price of
$6.485  per share.  Such  options  expire  five years from the date
of grant  and vest 20% at such  time as the  average  bid and offer
price for the Common Stock equals $6.485,  $10.50,  $14.50, $18.50,
and $22.50, respectively, for twenty consecutive trading days.

Employment Agreements

The  Company  has  employment  agreements  with Mr.  Phillips,  its
President   and  Chief   Executive   Officer,   and  PMCIS  has  an
employment  agreement  with  Mr.  MacKillop,   the  Executive  Vice
President  and  Chief   Operating   Officer  of  the  Company.   In
addition,   the  Company  had  an  employment  agreement  with  Mr.
Andrus,  its former  Executive Vice  President.  The Agreement with
Mr.   Phillips   is  dated  July  26,  1995  and  is  for  a  three
year-term.  Either  party  may  terminate  the  agreement  upon  90
days' prior  notice.  The agreement  provides for a minimum  salary
of $240,000  ($300,000  if the  Company  has pre-tax  profits of at
least  $1,000,000),  40% of the annual  bonus pool (equal to 10% of
the   Company's   pre-tax   profits),   a   car   allowance,    and
participation  in the  Company's  other  benefit  plans.  Effective
January 1, 1997,  Mr.  Phillips  salary was  increased to $300,000.
If the Company  terminates the agreement  without cause, it will be
obligated to make severance  payments to Mr.  Phillips in an amount
equal  to  two-years'  compensation.  In  addition,  the  agreement
provides   that  any   options   granted  to  Mr.   Phillips   vest
immediately  upon  his  death or upon a change  in  control  of the
Company.

The agreement with Mr.  MacKillop is dated  September 23, 1997, and
is for a two-year  term.  PMCIS may  terminate the agreement at any
time after the one-year  anniversary  of the date of the  agreement
by  giving  six  months'  prior  written   notice.   The  agreement
provides for a

-29-

<PAGE>

minimum  salary of  $240,000,  an annual bonus of up
to $50,000,  options to acquire 62,500 shares of Common Stock,  and
participation in the Company's other benefit plans.

The  agreement  with  Mr.  Andrus  is  dated  July  26,  1995,  was
amended in December  1996,  and was  terminated  effective  January
11, 1998.  It  originally  had a three  year-term  ending  November
1998.  'The  agreement  provided for a minimum  salary of $240,000,
options   to  acquire   250,000   shares  of  Common   Stock,   and
participation  in the  Company's  other  benefit  plans.  Effective
January  1,  1997,   Mr.  Andrus  salary  had  been   increased  to
$300,000.   The  agreement  provided  that  if  it  was  terminated
without  cause,  the Company will be  obligated  to make  severance
payments   to  Mr.   Andrus   in  an   amount   up  to   one-years'
compensation.   In  addition,   the  agreement  provided  that  all
options  granted to Mr.  Andrus vest  immediately  upon a change in
control  of  the  Company.   On  October  13,  1997,   the  Company
notified  Mr.  Andrus that his  affiliation  with the Company as an
officer and employee  would cease  effective  January 11, 1998. Mr.
Andrus'  employment   contract   stipulated  he  receive  severance
payments  in an  amount  equal  to his  base  salary  of  $240,000,
payable  ratably on a  semi-monthly  basis for up to one year after
January 11,  1998,  the date of his  separation  from the  Company.
Such  payments  would cease sooner in the event Mr.  Andrus  gained
employment  affording him comparable  compensation.  However,  'the
Company  believes  there  to be  sufficient  basis to  dispute  Mr.
Andrus' right to receive  severance  payments.  The Company  ceased
paying Mr.  Andrus in February  1998,  has retained  legal  counsel
and plans to address the matter vigorously.

ITEM 11.   SECURITY   OWNERSHIP  OF  CERTAIN   BENEFICIAL  OWNERS
        AND  MANAGEMENT.

The  following   table  and  related   notes  contain   information
concerning  beneficial  ownership of the Company's  Common Stock as
of March 16,  1998 by:  (i) each  person  known by the  Company  to
own beneficially  more than five percent of the Common Stock,  (ii)
each director of the Company,  (iii) each executive  officer of the
Company  named  in the  Summary  Compensation  Table,  and (iv) all
directors  and  executive  officers of the Company as a group.  The
share  amounts  in  this  table  reflect  shares  of  Common  Stock
issuable  upon the  exercise  of options and  warrants  exercisable
within the next 60 days.

-30-
<PAGE>


      Beneficial Ownership of the Company's Common Stock
                     as of March 27, 1998
     Shareholder          Footnotes           Shares    Percent
     ----------           ---------           ------    -------
Kenneth S. Phillips(1)    (10)(11)           688,379      14.15

Scott A. MacKillop(1)       (13)               8,750        .18

Stephen M. Ash(1)                                  0          0
Maureen E. Dobel(1)         (19)               6,563        .13

J.W. Nevil Thomas(2)      (11)(14)             7,500        .15

D. Porter Bibb(3)         (11)(15)             5,000        .10

Emmett J. Daly(4)         (12)(18)            52,500       1.07

Richard C, Hyde(5)          (12)               2,500        .05

Bedford Capital Financial   (16)             742,813      15.18
   Corporation (6)

KP3, LLC(1)                 (17)             410,961       8.46

OCH ZIFF Capital                             466,666       9.61
   Mgmt(9)

Bay Pond Partners, LP(7)                     365,832       5.56

Bay Pond Investors                           270,250       7.53
   (Bermuda) (7)

Wheatley Partners(8)                         401,916       8.27

Officers and Directors      (20)             771,192      15.67
   (8 persons)
-----------------------
FOOTNOTES:

(1) The address of Mr. Phillips, Mr. Ash, Mr. MacKillop,  Ms. Dobel
    and KP3, LLC is 555 17th Street, 14th Floor,  Denver,  Colorado
    80202.
(2) The address of Mr. Thomas is Scotia Plaza,  Suite 4712, 40 King
    Street West, Toronto, Ontario M5H 3Y2.
(3) The address of Mr. Bibb is 590 Madison  Avenue,  New York,  New
    York 10022.
(4) The address of Mr. Daly is Two World Trade Center,  85th Floor,
    New York, New York 10048.
(5) The  address  of Mr.  Hyde is  Moreland  Capital,  Inc.,  30050
    Chagrin Boulevard, Suite 100, Pepper Pike, Ohio 44124.
(6) The address of Bedford  Capital  Financial  Corporation  is 2nd
    Floor, Charlotte Hs., Shirly Street, Box N964, Nassau, Bahamas.
(7) The address of Bay Pond  Partners,  L.P. and Bay Pond Investors
    (Bermuda),  Ltd. Is c/o Wellington Management Company,  L.L.P.,
    75 State Street, Boston, Massachusetts 02109.
(8) The address of Wheatley  Partners is 80 Cutter Mill Road, Suite
    311, Great Neck, New York 11021.
(9) The  address of OCH ZIFF  Capital  Management  is 153 East 53rd
    Street, 43rd Floor, New York, New York 10022.
(10)Includes  410,961  shares  owned  by  KP3,  LLC  ("KP3"),   a
    Colorado limited  liability  company,  of which Mr. Phillips is
    the  managing   member  and  has  the   controlling   ownership
    interest;  includes  2,313 common shares  underlying  presently
    exercisable warrants.
(11)Includes   5,000   common   shares    underlying    presently
    exercisable options.
(12)Includes   2,500   common   shares    underlying    presently
    exercisable options.
(13)Includes   3,250   common   shares    underlying    presently
    exercisable options.
(14 Includes 2,500 shares owned by Mr. Thomas'  spouse,  Suzanne E.
    Thomas.  Does  not  include  shares  owned by  Bedford  Capital
    Financial  Corporation  ("Bedford")  of which  Mr.  Thomas is a
    director and a 6.13% shareholder.
(15)Does not include  50,000 common shares  underlying  presently
    exercisable  options  granted  to  Ladenburg,  Thalmann  & Co.,
    Inc., of which Mr. Bibb is a managing director.
(16)Includes  34,063  shares  underlying  presently   exercisable
    options or warrants,  and 58,750 common shares owned by KP3 and
    included in the  beneficial  ownership  of Mr.  Phillips  which
    Bedford  may  acquire  pursuant  to  a  presently   exercisable
    option.  See, "Recent Offerings."
(17)All  common  shares  have  been  included  in the  beneficial
    ownership  of Mr.  Phillips;  58,750  common  shares  have been
    included in the beneficial ownership of Bedford.
(18)Includes 12,500 shares jointly owned with Regina Daly.
(19)Includes   6,563   common   shares    underlying    presently
    exercisable options.
(20)Based upon total common shares  outstanding of 4,857,903 plus
    63,376 common shares underlying presently exercisable options.

-31-

<PAGE>

ITEM 12.   CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

The Company  entered into an agreement with  Ladenburg,  Thalmann &
Co.,  Inc.,  investment  bankers  ("Ladenburg"),  in January  1995,
pursuant to which  Ladenburg  would assist the Company in financing
efforts.  Ladenburg  was  involved  in the  Company's  transactions
with  Bedford.  Mr. D. Porter Bibb, a principal of  Ladenburg,  was
named to the Company's Board of Directors in September 1995.

In July 1995,  the Company  borrowed $1.2 million from Bedford.  As
a  result  of  this  transaction  and  a  simultaneous  transaction
wherein  Bedford  purchased 1 million shares of outstanding  Common
Stock  of the  Company  from a  former  principal  of the  Company,
Bedford  became a  greater  than 10%  shareholder  of the  Company,
with  the  right  to  acquire  in  excess  of 50% of the  Company's
Common  Stock.  Mr.  J.W.  Nevil  Thomas and another  affiliate  of
Bedford  were  appointed  to the  Company's  Board of  Directors in
connection   with  that   transaction.   See   "Business--Corporate
History--Bedford."

Also in July 1995, the Company's then Chief  Executive  Officer and
a  director,   Marc  Geman,   resigned.   In  connection  with  his
resignation,   Mr.  Geman  was   entitled  to  severance   payments
totaling  $180,000,  due in  monthly  payments  of  $15,000.  As of
December  31, 1996,  Mr.  Geman had  received all of the  severance
payments to which he was  entitled.  The Company  also entered into
an  Indemnification  Agreement  with Mr. Geman  whereby the Company
agreed to hold him harmless,  in an amount not to exceed  $100,000,
for expenses  incurred in defense of the pending  investigation  by
the  Commission.  As of December 31, 1996,  and September 30, 1997,
a total of $50,786 and $72,000,  respectively,  in  indemnification
payments had been made by the Company under that agreement.

David L. Andrus,  former  Executive  Vice President of the Company,
participated  in the June  1996  offering  of debt  securities  and
warrants.   See    "Business--Corporate    History."   Mr.   Andrus
purchased  $100,000 of subordinated  debt and received a promissory
note and warrants to purchase  25,000  shares of Common  Stock.  In
addition,  certain  employees of PMC  participated in the offering,
purchasing a total of $162,500 of  subordinated  debt and receiving
warrants to purchase  40,625  shares of Common  Stock.  Mr.  Andrus
and the other  Company  employees  participated  in the offering on
the same terms as all other investors.

In November  1996 the  Company  borrowed  $250,000 to fund  working
capital  requirements  pending the  closing of a private  placement
of  Common  Stock  in  December  1996.  The  lenders  included  Mr.
Phillips  and  Mr.  Andrus,  the  Company's   President  and  Chief
Executive    Officer   and   former   Executive   Vice   President,
respectively,   and  certain   other   employees  of  the  Company.
Bedford,  a  shareholder  affiliate  of  the  Company,  and  Keefe,
Bruyette & Woods,  Inc., the placement  agent for the December 1996
Offering,  were also  lenders.  The  loans  were  evidenced  by 12%
notes to be repaid on the  earlier of the  closing of the  December
1996  Offering  or  March  31,  1997.  The  lenders  also  received
warrants to purchase a total of 6,250  shares of Common  Stock at a
price of $6.50 per share and  registration  rights with  respect to
the shares of Common Stock underlying the warrants.

-32-

<PAGE>

In December  1996,  the Company  completed a  restructuring  of its
outstanding  debt.  As  part  of  the  restructuring,  Bedford  and
certain of its assignees  were repaid  certain of the  subordinated
debt  held by  them,  exercised  certain  of the  warrants  held by
them,  were issued  certain  shares of Common  Stock by the Company
in  cancellation  of  their  other  warrants  and were  issued  new
five-year  warrants to purchase  37,500  shares of the Common Stock
with an  exercise  price  equal to the  price to  investors  in the
December  1996  Offering.  As a result of these  transactions,  all
$3 million in outstanding  debt  previously  owed by the Company to
Bedford   and  its   assignees   was   eliminated.   Bedford   also
relinquished  certain  rights  held by it and its  right  to  elect
directors  of the Company was  modified  such that  Bedford now has
the right to  designate  one  director so long as it holds at least
10% of the  outstanding  Common  Stock.  In addition,  at least one
additional  director  must be acceptable to Bedford and the Company
so long as  Bedford  owns at  least  5% of the  outstanding  Common
Stock.  Bedford also  retained  demand and  piggyback  registration
rights with respect to  restricted  securities  acquired by it from
the Company.  In connection with the  restructuring,  the Company's
consulting  agreement  with  Nevcorp,  Inc.,  was  terminated.  See
"Business--Corporate History--December 1996 Restructuring."

In connection with the December 1996  restructuring,  the investors
in the  December  1995  and June  1996  Offerings  exercised  their
warrants  to  purchase  an  aggregate  of 375,000  shares of Common
Stock and surrendered  canceled  promissory  notes in the aggregate
principal  amount of  $1,500,000  in  satisfaction  of the exercise
price  for  the  warrants.  In  connection  with  the  exercise  of
warrants and  cancellation  of debt,  the investors  also received,
pro rata,  five-year  warrants to purchase an  aggregate  of 37,500
shares of Common  Stock at an  exercise  price of $8.50 per  share.
The brother and father of Mr.  Phillips,  the  Company's  President
and Chief  Executive  Officer,  Mr. Andrus,  former  Executive Vice
President  of the  Company,  and  certain  other  employees  of the
Company,  participated  in the  restructuring  on the same terms as
the other parties.

As part of the  September  1997  Offering,  Emmett J. Daly and J.W.
Nevil Thomas,  directors of the Company,  Scott A.  MacKillop,  the
President  of PMCIS and current  Executive  Vice  President,  Chief
Operating   Officer  and  director  of  the  Company,   Michael  T.
Wilkinson,  former director and principal  shareholder of PMCIS and
two other PMCIS  employees,  participated  in the offering.  All of
these  individuals  participated  in the offering on the same terms
as all other investors.

-33-
<PAGE>

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

A.   Exhibits

   3.1      Articles of Incorporation of the Company (1)
   3.2      Bylaws of the Company (2)
  10.1      Stock Purchase  Agreement among PMC  International,  Inc.,
              Michael  T.  Wilkinson,  Scott  A.  MacKillop,  Gary  A.
              Miller,  Michael J.  Flinn,  Jared L.  Shope,  Graham L.
              Guy,  John W.  Burgin,  and  ADAM  Investment  Services,
              Inc., dated as of July 25, 1997 (3)
  10.2      Non-Compete  Agreement  between ADAM Investment  Services,
              Inc., and Michael T. Wilkinson (3)
  10.3      Employment  Agreement  between ADAM  Investment  Services,
              Inc., and Scott A. MacKillop (3)
  10.4      Form of  Subscription  Agreement  between  the Company and
              each of the purchasers in the ADAM Private Placement (4)
  21.1      List of Subsidiaries (4)
  23.1      Consent  of  Spicer  Jeffries  &  Co.,   Certified  Public
              Accountants

(1)   Incorporated  by reference  from the  Company's  Registration
      Statement  on Form S-1 (File No.  33-37800)  dated  November 15,
      1990.
(2)   Incorporated  by reference  from the  Company's  Registration
      Statement  on Form SB-2 (File No.  333-21335)  dated  February 7,
      1997.
(3)   Incorporated  by reference from the Company's  Current Report
      on Form 8-K  (Commission  File No.  0-14937),  dated  October 9,
      1997.
(4)   Incorporated  by  reference  from  the  Company's  Registered
      Statement  on Form SB-2 (File No.  333-40805),  dated  February 6,
      1998.

B.  Report on Form 8-K

The Company filed a report on Form 8-K dated October 9, 1997, describing
the acquision of ADAM Investment Services, Inc., now known as PMC Investment
Services, Inc.  The report included financial statements for ADAM as of
December 31, 1996 and 1995 and certain pro forma financial information.

-34-
<PAGE>


SIGNATURES

in  accordance  with  Section  13 or 15(d)  of  Exchange  Act,  the
registrant  has  caused  this  report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                    PMC  INTERNATIONAL,  INC.


                                    By: /s/  Kenneth S. Phillips
                                        -----------------------------
                                        Kenneth S. Phillips
                                        President,  Chief Executive
                                        Officer


                                    By: /s/  Stephen M. Ash
                                        -----------------------------
                                        Stephen M. Ash,  Treasurer,
                                        Principal Financial and Accounting
                                        Officer

                                          Date:   March 30, 1998

In  accordance  with the Exchange  Act, this report has been signed
below by the following  persons on behalf of the  registrant and in
the capacities and on the dates indicated.

         Signature                   Title                 Date


/s/ Kenneth S. Phillips
----------------------------
Kenneth S. Phillips             President, Chief      March 30, 1998
                               Executive Officer,
                                    Director
/s/ Scott A. MacKillop
----------------------------
Scott A. MacKillop               Executive Vice       March 30, 1998
                                   President,
                            Chief Operating Officer,
                                    Director
/s/  Maureen E. Dobel
----------------------------
Maureen E. Dobel                General Counsel,      March 30, 1998
                              Corporate Secretary
                                    Director

/s/  J.W. Nevil Thomas
----------------------------
J.W. Nevil Thomas                   Director          March 30, 1998

/s/ D. Porter Bibb
----------------------------
D. Porter Bibb                      Director          March 30, 1998

/s/  Emmett J. Daly
----------------------------
Emmett J. Daly                      Director          March 30, 1998

/s/  Richard C. Hyde
----------------------------
Richard C. Hyde                     Director          March 30, 1998

<PAGE>

                       PMC INTERNATIONAL, INC.
                          AND SUBSIDIARIES

                              CONTENTS
                        ======================


Financial statements for the years ended
December 31, 1997 and 1996

      Independent Auditors' Report                              F-2

      Consolidated Balance Sheets                               F-3

      Consolidated Statements of Operations                     F-4

      Consolidated Statements of Changes in
        Shareholders' Equity (Deficit)                          F-5

      Consolidated Statements of Cash Flows                     F-6

      Notes to Consolidated Financial Statements                F-8

<TABLE>
                                                                    PMC INTERNATIONAL, INC.

                                                                       AND SUBSIDIARIES

                                                                   CONSOLIDATED BALANCE SHEETS
                                                                    DECEMBER 31, 1997 AND 1996

<CAPTION>
                                     ASSETS                                                1997                  1996
                                     ------                                                ----                  ----
<S>                                                                                 <C>                   <C>

CASH AND CASH EQUIVALENTS (Notes 1 and 7)                                            $      2,953,740     $       6,499,390

RECEIVABLES:
    Investment management fees                                                              1,041,390               113,778
    Other receivables                                                                         166,221               187,109

FURNITURE AND EQUIPMENT, at cost, net of accumulated
    depreciation of $1,277,801 and $539,782                                                   965,168               604,085

SOFTWARE AND PRODUCT DEVELOPMENT COSTS,
    at cost, net of accumulated amortization of
        $963,469 and $352,971 (Note 1)                                                      1,208,713               843,272

PREPAID EXPENSES AND OTHER ASSETS                                                           1,023,364               340,006

LONG TERM NOTES RECEIVABLE (Note 2)                                                           623,115               575,804

GOODWILL (net of amortization of $146,096) (Note 1)                                         5,394,606                     -
                                                                                    -----------------      ----------------

                                                                                         $ 13,376,317     $       9,163,444
                                                                                    =================      ================
                      LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
    Accounts payable                                                                 $      1,687,967     $         839,095
    Accrued expenses                                                                          644,012               535,520
    Other liabilities                                                                         104,125               730,909
    Deferred revenue                                                                        1,307,382               552,868
    Notes payable (Note 6)                                                                    366,158                14,694
    Obligations under capital leases (Note 7)                                                 384,986               219,821
                                                                                    -----------------      ----------------

            Total liabilities                                                               4,494,630             2,892,907
                                                                                    -----------------      ----------------

COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS' EQUITY (Note 3):
    Preferred stock - no par value - authorized 5,000,000 shares;
issued and outstanding, 138,182 and 175,897 shares                                            345,455               439 742
    Common stock, $.01 par value - authorized, 50,000,000 shares;
issued and outstanding, 4,857,903 and 3,617,939 shares                                         48,579                36 179
    Additional paid-in capital                                                             22,977,526            16,461,953
    Deficit                                                                               (14,489,873)          (10,667,337)
                                                                                    -----------------      ----------------
            Total shareholders' equity                                                      8,881,687             6,270,537
                                                                                    -----------------      ----------------
                                                                                     $     13,376,317     $       9,163,444
                                                                                    =================      ================

</TABLE>


<PAGE>
<TABLE>


                                                                    PMC INTERNATIONAL, INC.
                                                                       AND SUBSIDIARIES

                                                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                        DECEMBER 31, 1997 AND 1996

<CAPTION>
                                                                                           1997                  1996
                                                                                           ----                  ----
<S>                                                                                 <C>                   <C>
REVENUE:
    Investment management fees (Note 1)                                              $     14,668,348     $       9,944,544
    Other income                                                                              194,366               142,337
                                                                                    -----------------      ----------------
            Total revenue                                                                  14,862,714            10,086,881
                                                                                    -----------------      ----------------
EXPENSES:
    Investment manager and other fees                                                       8,151,912             5,580,846
    Salaries and benefits                                                                   5,039,136             3,524,825
    Clearing charges and user fees                                                            613,794               813,239
    Advertising and promotion                                                               1,060,930               830,140
    General and administrative                                                              1,317,354             1,098,895
    Software development costs                                                                272,772               132,392
    Occupancy and equipment costs                                                           1,708,714             1,125,744
    Professional fees                                                                         520,638               827,292
    Settlement expense                                                                              -               155,000
                                                                                    -----------------      ----------------
            Total expenses                                                                 18,685,250            14,088,373
                                                                                    -----------------      ----------------

NET LOSS                                                                             $     (3,822,536)    $      (4,001,492)
                                                                                      ===============      ================
NET LOSS PER COMMON SHARE (Note 1)                                                   $          (0.98)    $           (2.85)
                                                                                      ===============      ================

WEIGHTED AVERAGE NUMBER OF SHARES
  OUTSTANDING (Note 1)                                                                      3,961,768             1,425,509
                                                                                    =================      ================
</TABLE>


<PAGE>

<TABLE>
                                                     PMC INTERNATIONAL, INC.
                                                         AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
                                                    DECEMBER 31, 1997 AND 1996
<CAPTION>
                                                                                                                        Total
                                                 Common Stock        Additional  Preferred                           Shareholders'
                                                 ------------        Paid - In    Stock                                 Equity
                                               Shares     Amount      Capital    Shares    Amount        Deficit       (Deficit)
                                              --------   -------      -------    ------    ------        -------      -----------
<S>                                          <C>         <C>       <C>          <C>      <C>        <C>             <C>

BALANCES, December 31, 1995
  as previously stated                        5,555,713  $ 55,556   $3,523,909   349,017 $ 872,543  $  (6,665,845)   $(2,213,837)

   Stock Split effected (Note 1)             (4,166,785)  (41,667)      41,667        -          -              -           -
                                             ----------  --------  -----------  -------- ---------  -------------    ------------

BALANCES, December 31, 1995 as restated       1,388,928    13,889    3,565,576   349,017   872,543     (6,665,845)    (2,213,837)

   Stock options exercised                          250         2        1,373         -         -              -          1,375

   Notes payable converted to common stock      875,000     8,750    2,515,000         -         -              -      2,523,750

   Preferred stock converted to common stock     59,511       595      432,206  (173,120) (432,801)             -              -

   Issuance of stock                          1,294,250    12,943   10,988,182         -         -              -     11,001,125

   Less stock issuance costs                          -         -   (1,040,384)        -         -              -     (1,040,384)

   Net loss                                           -         -            -         -         -     (4,001,492)    (4,001,492)
                                             ----------  --------  -----------  -------- ---------  -------------    ------------

BALANCES, December 31, 1996                   3,617,939    36,179   16,461,953   175,897   439,742    (10,667,337)     6,270,537

   Stock options exercised                        6,250        63       26,812         -         -              -         26,875

   Issuance of stock                          1,220,749    12,207    7,312,287         -         -              -      7,324,494

   Preferred stock converted to common stock     12,965       130       94,157   (37,715)  (94,287)             -              -

   Less stock issuance costs                          -         -     (917,683)        -         -              -       (917,683)

   Net loss                                           -         -            -         -         -     (3,822,536)    (3,822,536)
                                             ----------  --------  -----------  -------- ---------  -------------    ------------

BALANCES, December 31, 1997                   4,857,903  $ 48,579  $22,977,526   138,182 $ 345,455  $ (14,489,873)  $  8,881,687
                                             ==========  ========  ===========  ======== =========  =============    ============
</TABLE>


<PAGE>
<TABLE>

                                                                    PMC INTERNATIONAL, INC.
                                                                       AND SUBSIDIARIES

                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                        DECEMBER 31, 1997 AND 1996
                                                                  INCREASE (DECREASE) IN CASH
<CAPTION>

                                                                                 1997               1996
                                                                                 ----               ----
<S>                                                                        <C>               <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                             $     (3,822,536) $      (4,001,492)
      Adjustments to reconcile net loss to net cash used in
          operating activities:
          Depreciation and amortization                                           1,137,790            537,522
          Accretion of discount on note receivable                                  (96,590)           (67,181)
          Changes in operating assets and liabilities:
              Investment management fees receivable                                (736,202)          (105,981)
              Other receivables                                                      (5,738)           (97,273)
              Prepaid expenses and other assets                                     121,788           (119,401)
              Accrued expenses                                                      108,492           (172,377)
              Accounts payable                                                      525,947           (597,029)
              SEC settlement distribution                                          (605,591)              -
              Other liabilities                                                     (21,193)           159,520
              Deferred revenue                                                      (21,547)           141,521
                                                                             --------------     --------------

                  Net cash used in operating activities                          (3,415,380)        (4,322,171)
                                                                             --------------     --------------


  CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of furniture and equipment                                          (303,028)          (376,574)
      Reduction of long-term note receivable                                        345,582            393,854
      Issuance of notes receivable                                                 (301,613)                 -
      Acquisition of ADAM, net of cash acquired                                  (5,104,007)                 -
      Cost of software development                                               (1,027,163)          (295,022)
                                                                             --------------     --------------

                  Net cash used in investing activities                          (6,390,229)          (277,742)
                                                                             --------------     --------------

  CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from notes payable                                                         -          3,125,000
      Principal payments on notes payable                                            (8,536)        (2,234,026)
      Payments on obligations under capital lease                                  (165,191)           (67,672)
      Sale of common stock, less offering costs                                   6,406,811          9,960,741
      Proceeds from exercise of stock options                                        26,875              1,375
                                                                             --------------     --------------

                  Net cash provided by financing activities                       6,259,959         10,785,418
                                                                             --------------     --------------

  NET INCREASE (DECREASE) IN CASH                                                (3,545,650)         6,185,505

  CASH, at beginning of year                                                      6,499,390            313,885
                                                                             --------------     --------------

  CASH, at end of year                                                     $      2,953,740  $       6,499,390
                                                                             ==============     ==============
</TABLE>
<PAGE>
<TABLE>
                                                                    PMC INTERNATIONAL, INC.
                                                                       AND SUBSIDIARIES

                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                        DECEMBER 31, 1997 AND 1996
                                                                  INCREASE (DECREASE) IN CASH
                                                                          (Continued)
<CAPTION>

                                                                                    1997                    1996
                                                                                    ----                    ----
<S>                                                                         <C>                    <C>

SUPPLEMENTAL DISCLOSURE OF CASH
 FLOW INFORMATION:
    Cash paid for interest                                                  $          34,137      $       367,180
                                                                               ==============         ============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
    Purchase of equipment via capital lease obligation                      $         330,356      $       205,433
                                                                               ==============         ============
    Conversion of preferred stock to common stock                           $          94,287      $       432,801
                                                                               ==============         ============
    Conversion of notes payable to common stock                             $            -         $     2,523,750
                                                                               ==============         ============
    Transfer of assets via accounts receivable at net book value            $          43,002      $             -
                                                                               ==============         ============
    The Company purchased all of the capital stock of
    ADAM for $5,163,386.  In connection with the
    acquisition, liabilities were assumed as follows:

        Fair value of assets acquired                                       $       6,622,370
                                                                               ==============
        Cash paid for the capital stock                                            (5,163,386)
                                                                               ==============
            Liabilities assumed                                             $       1,458,984
                                                                               ==============
</TABLE>
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 1 -  ORGANIZATION   AND  SUMMARY  OF  SIGNIFICANT   ACCOUNTING
          POLICIES

Organization

On  September  23, 1993,  the  shareholders  of Schield  Management
Company  ("Schield")  approved  an  exchange  of  common  stock  of
Schield  for  all of the  outstanding  common  stock  of  Portfolio
Management  Consultants,  Inc.  ("PMC")  and  a  name  change  from
Schield  to PMC  International,  Inc.  ("PMCI"  or the  "Company").
The share  exchange was  completed  on September  30, 1993 and as a
result of this  transaction,  PMC is a wholly owned  subsidiary  of
PMCI.  The share  exchange  between  Schield and PMC was treated as
a reverse  acquisition  and accounted for under the purchase method
of  accounting.  Under  reverse  acquisition  accounting,  PMC  was
considered  the acquiror for  accounting  and  financial  reporting
purposes,  and acquired the assets and assumed the  liabilities  of
Schield.

On  September  24,  1997,  PMCI  completed  its  acquisition   (the
"Acquisition")  of  PMC  Investment   Services,   Inc.,   ("PMCIS")
formerly  ADAM  Investment  Services,  Inc.  ("ADAM"),  a  Delaware
Corporation,  and its wholly owned subsidiary,  Optima Funds, Inc.,
("Optima")  a Georgia  corporation,  pursuant  to a Stock  Purchase
Agreement  dated  July  25,  1997  ("the   Agreement")   among  the
Company,  ADAM and ADAM's  shareholders.  PMCI  acquired all of the
issued  and  outstanding  shares of  common  stock of ADAM from its
shareholders  in  consideration   for  payment  of  $5  million  at
closing  and  two  earn-out   payments  on  the  first  and  second
anniversary  dates  of the  closing.  The  first  earn-out  payment
will equal 1.0% of ADAM's  standard fee assets under  management in
excess of $500 million,  determined on the one-year  anniversary of
the closing of the  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 ADAM's  standard fee assets under  management in
excess of $700 million,  determined on the two-year  anniversary of
the closing of the  Acquisition,  not to exceed $2.0  million.  The
Acquisition   was  accounted  for  using  the  purchase  method  of
accounting.  The  excess  of the cost of the  Acquisition  over the
fair value of the  assets  acquired  and  liabilities  assumed  was
recorded  as  goodwill.   The   Acquisition  was  funded  from  the
proceeds of a private  placement  of PMCI  common  stock which also
closed on September  24,  1997.  The Company  raised  approximately
$6.4  million by selling  1,220,749  shares of PMCI common stock at
$6.00 per share.

PMC was  organized in 1986 and its principal  business  activity is
the  administration  of private and  institutional  managed account
programs with its  customers  located  substantially  in the United
States.  Its  services  include  investment  suitability  analysis,
portfolio  modeling and asset allocation,  money manager selection,
portfolio   accounting   and   performance   reporting.    PMC   is
registered as an investment  advisor under the Investment  Advisors
Act of 1940.

F-8
<PAGE>
                     PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 1 -  ORGANIZATION   AND  SUMMARY  OF  SIGNIFICANT   ACCOUNTING
          POLICIES (continued)

Organization (continued)
In June,  1994,  Portfolio  Brokerage  Services,  Inc.  ("PBS") was
capitalized  through  a series of  transactions  with PMCI and PMC,
whereby  PBS became a wholly  owned  subsidiary  of PMCI by issuing
1,000  shares of its common  stock in exchange  for certain  assets
and  liabilities  with a book value of  $1,532,332.  PBS is engaged
in business as a securities  broker-dealer.  As a broker-dealer  it
executes   security   transactions  for  PMC's  privately   managed
account  programs,   on  behalf  of  its  customers,   through  the
customer's custodian bank on a delivery versus payment basis.

Portfolio   Technology  Service,   Inc.  ("PTS"),  a  wholly  owned
subsidiary  of  PMCI,  was  organized  in  June,  1994  but  had no
operations   until  1995.   PTS  was  formed  for  the  purpose  of
developing  proprietary  software for use in the financial services
industry.

ADAM was formed in 1980 to provide investment  consulting  services
to  institutional  investors.  ADAM's  primary  services  are based
around mutual funds.  ADAM offers 17 model  portfolios  constructed
using  no-load  mutual  funds  and  funds  available  at net  asset
value.  ADAM's  mutual fund  portfolios  are offered as options for
use by 401(k) plans and with an insurance company within a variable
annuity contract.

The  accompanying  consolidated  financial  statements  include the
historical  accounts  of PMC for all  periods  and the  accounts of
PMCI since  September  30, 1993,  PBS and PTS since  inception  and
ADAM since  September  24,  1997.  All  intercompany  accounts  and
transactions have been eliminated in consolidation.

On December  15, 1997,  at the Annual  Meeting of  Shareholders  of
the Company,  the  Shareholders  of the Company  approved a 1 for 4
reverse  split  of the  Common  Stock  (the  "Reverse  Split").  On
December 30, 1997,  the Company  effected the Reverse  Split to all
shareholders of record as of December 30, 1997.

Unless   otherwise  noted,  all  references  to  shares  and  share
prices,  including  retroactive  treatment,   reflect  the  Reverse
Split.

Significant Accounting Policies

Revenue  from  investment  management  services is recorded as such
revenues   accrue  under  the  terms  of  the  related   investment
management  contracts.  A specific  charge to  earnings is recorded
when a significant  and  permanent  contingency  exists;  primarily
the inability to collect amounts due according to contract terms.

F-9
<PAGE>

                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 1 -  ORGANIZATION   AND  SUMMARY  OF  SIGNIFICANT   ACCOUNTING
          POLICIES (continued)

Significant Accounting Policies (continued)

Securities   transactions   and  related   commission   income  are
recorded  on  a  trade  date  basis.   In  the  normal   course  of
business,  PBS  executes,  as  agent,  transactions  on  behalf  of
customers.  If the agency  transactions  do not  settle  because of
failure to perform by either  the  customer  or the  counter-party,
PBS  may  be  obligated  to  discharge   the   obligation   of  the
non-performing  party  and,  as a  result,  may incur a loss if the
market  value  of the  security  is  different  from  the  contract
amount of the transactions.

The Company  has  developed a  windows-based  software  program for
sale to financial  product  distribution  entities.  The product is
designed  to guide  clients of these  entities  through the process
of  choosing  appropriate  combinations  of mutual  funds for their
own  portfolios.  The majority of costs  incurred to establish  the
technological  feasibility  of this product were borne by unrelated
individuals   prior  to  the  product   being   introduced  to  the
Company.  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.  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.  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
during 1996.  The Company  generates  revenues  from four  sources:
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.

During 1997, PMC entered into  agreements  with certain  clients to
provide  customized  software,  advisory,  consulting and reporting
services  in  connection  with  the  clients'  investment  advisory
services.   PMC   has   capitalized   product   development   costs
consisting  of salaries and other  direct  costs  relating to these
products.  These costs are being  amortized  on the  straight  line
method over the terms of the related contracts.

The Company  provides for  depreciation  of furniture and equipment
on the  straight  line  and  declining  balance  methods  based  on
estimated lives of three to seven years.

Goodwill,   which  resulted  from  the   acquisition  of  ADAM,  as
described above, is being amortized over a period of 120 months.

The   preparation  of  financial   statements  in  conformity  with
generally accepted  accounting  principles  requires  management to
make  estimates and  assumptions  that affect the reported  amounts
of assets and liabilities  and disclosure of contingent  assets and
liabilities  at  the  date  of the  financial  statements  and  the
reported  amounts of revenues  and  expenses  during the  reporting
period. Actual results could differ from those estimates.

F-10
<PAGE>

                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 1 -  ORGANIZATION   AND  SUMMARY  OF  SIGNIFICANT   ACCOUNTING
          POLICIES (continued)

Significant Accounting Policies (continued)

The  Company   follows  the   intrinsic   value  based   method  of
accounting as prescribed by APB 25,
Accounting  for Stock  Issued  to  Employees,  for its  stock-based
compensation.   Under  the   Company's   stock  option  plan,   the
exercise  price is equal to the fair  value of the  options  at the
grant date and no compensation cost is recognized.

Cash and cash  equivalents  for  purposes of the  statement of cash
flows includes highly liquid  investments  with a maturity of three
months or less at the date of acquisition.

Net  loss  per  share of  common  stock  is  based on the  weighted
average  number  of  shares of  common  stock  outstanding.  Common
stock   equivalents  are  not  included  in  the  weighted  average
calculation  since their effect would be  anti-dilutive.  Dividends
on  cumulative  preferred  stock,  of $44,909  and  $57,166 for the
years  ended  December  31, 1997 and 1996  respectively,  have been
added back to the net loss in computing the net loss per share.

The Company  adopted the  provisions of SFAS 121,  Accounting  for
the Impairment of Long-Lived  Assets and for Long-Lived  Assets to
Be  Disposed  Of, in its  financial  statements  for the year ended
December  31,  1996.  The  adoption  of SFAS  121  had no  material
affect on the Company's financial  statements.  The Company reviews
its  long-lived  assets for impairment to determine if the carrying
amount of the asset is recoverable.

Certain  1996  amounts  have been  reclassified  to conform to 1997
presentation.


NOTE 2 -  LONG TERM NOTES RECEIVABLE

In connection  with the Schield  reverse  acquisition,  the Company
acquired  a long  term  note  receivable  related  to the  sale  of
Schield's market timing  operations from an entity  controlled by a
founder of  Schield.  The note is  payable in monthly  installments
of $32,000,  including  interest,  through  August,  1998. The note
was  recorded  at its  estimated  fair  value as of  September  30,
1993.  The  discount  from the face  amount of the note  receivable
is a credit  to  interest  income  over the life of the note  using
the  interest  method.  The  principal  balance  of the  note as of
December 31, 1997 is $379,377  compared to its  carrying  amount of
$349,332.  While the  original  transaction  involved a transfer of
operations,  the  transaction  was handled on an arms length basis.
The Company did not provide any  guarantee  of the  obligations  of
the buyer and had no further  involvement  with the business  after
the sale.  As of December  31,  1997,  the Company  agreed to defer
the September 1997 through  December 1997 payments;  these payments
were made in January 1998.

F-11
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 2 -  LONG TERM NOTE RECEIVABLE (continued)

During January,  1997, the Company  authorized  financing of 38,672
shares of PMCI's  common stock which had been  purchased  and owned
by a number of PMC employees,  including one officer,  as part of a
private  sale of stock by a  shareholder  of the  Company  in 1993.
This  purchase was  originally  financed  through a bank loan which
came due on  December  31,  1996.  The  balloon  amount  due at the
expiration of the loan was  $142,093,  $46,300 from the one officer
and $95,793  from  employees  of the Company  that are not officers
or  directors.  In January,  1997 PMCI paid off the prior bank loan
and financed  this amount for its  employees  as notes  receivable,
collateralized   by  the  underlying   stock.   PMCI  is  receiving
installments  in the  amount of $3,435  collected  through  payroll
deductions.  These  notes will mature on December  31,  1999,  with
balloon  payments of $38,825 due from  employees.  At December  31,
1997,  $118,057 was included in notes  receivable  related to these
notes.

During 1997, the Company loaned a limited  liability  company owned
and  controlled  by the  Company's  president  and chief  executive
officer,  (the "LLC") amounts  sufficient to pay interest on a bank
loan  guaranteed  by the Company  (see Note 7). The balance of such
loan  at  December   31,  1997  was  $155,726   including   accrued
interest.  The loan matures on December 31, 1998.


NOTE 3 -  SHAREHOLDERS' EQUITY

Preferred Stock

Holders of preferred  stock are entitled to receive  dividends at a
rate of $0.325  per share per annum  (equal to 13% of the  purchase
price per share  attributable  to the preferred  stock).  Dividends
are  payable  semi-annually  on  January  15 and  July  15 in  each
year.  Dividends  accrue  from  the  date  of the  preferred  stock
issuance and are  cumulative.  Upon  liquidation  or dissolution of
the  Company,   holders  of  preferred  stock  are  entitled  to  a
preference  over the  holders  of  common  stock in an  amount  per
share equal to the original  purchase  price  attributed to a share
of preferred  stock ($2.50) plus all unpaid  cumulative  dividends.
The  preferred  stock  is  non-participating  and  the  holders  of
preferred  stock have no  preemptive  rights  and no voting  rights
except as may be  required  by  Colorado  law. At the option of the
Company,  the  preferred  stock may be  redeemed  in  whole,  or in
part,  at a price  of  $2.75  per  share,  plus  unpaid  cumulative
dividends.   Redemption  can  only  occur  if  certain   conditions
regarding  the bid  prices of the  Company's  common  stock and the
Company's after-tax earnings are met.

As of January 15, 1998,  cumulative  dividends  in arrears  totaled
approximately $298,400.

F-12
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
              ==========================================

NOTE 3 -  SHAREHOLDERS' EQUITY (continued)

Common Stock

During  December,  1996, the Company issued 2,229,011 shares of its
common  stock  through   several   issuances.   First,   a  private
placement was completed  whereby  1,294,250  shares were issued for
cash of $11,001,125  less offering  costs of $1,040,384.  Secondly,
convertible  promissory  notes  issued  in  December,  1995 and the
first  half of 1996 in the  amount of  $1,500,000  were  repaid and
the  proceeds  were used to exercise  warrants  for 375,000  common
shares,  and 37,500 new warrants were issued to the  noteholders in
connection  therewith  (see Note 6).  Thirdly,  in connection  with
the  shareholder  note payable as described in Note 6,  warrants to
purchase  255,938  shares of common stock were  exercised  for cash
of  $1,023,750  and warrants to purchase  494,062  shares of common
stock were  exchanged  for 244,062  shares of common and 37,500 new
warrants.  Additionally,  certain preferred  shareholders exercised
their  conversion  rights and exchanged  173,120  preferred  shares
for 59,511 shares of common.

During January,  1997, certain shareholders  voluntarily  exchanged
37,715  shares  of  Preferred  Stock  for  12,965  shares of common
stock.

In September  1997, the Company issued  1,220,749  shares of common
stock in a private  placement for cash of $7,324,494  less offering
costs of $917,683.

NOTE 4 -  INCOME TAXES

The  Company  has an unused  net  operating  loss  carryforward  of
approximately  $11,000,000  for  income  tax  purposes,  $1,200,000
expiring in 2009,  $1,800,000  in 2010,  $3,800,000 in 2011 and the
remainder  expiring in 2012.  This net operating loss  carryforward
may  result  in  future   income  tax  benefits  of   approximately
$4,300,000;  however,  because  realization  is  uncertain  at this
time,   a   valuation   reserve   in  the  same   amount  has  been
established.  Deferred  income  taxes  reflect  the net tax effects
of temporary  differences  between the  carrying  amounts of assets
and  liabilities for financial  reporting  purposes and the amounts
used  for  income  tax  purposes.  Significant  components  of  the
Company's  deferred tax  liabilities  and assets as of December 31,
1997 and 1996 are as follows:

                                       1997        1996
                                    ===========  ==========
Deferred tax liabilities            $        -   $       -
                                    ===========  ==========
Deferred tax assets
  Net operating loss carry forwards  4,276,800   2,579,000
  Legal settlement                           -     233,300
                                    -----------  ----------
  Total deferred tax assets          4,276,800   2,812,300
  Valuation allowance for deferred
     tax assets                     (4,276,800) (2,812,300)
                                    ===========  ==========
                                    $        -   $       -
                                    ===========  ==========

The  valuation  allowance  for deferred tax assets was increased by
$1,464,500 and $1,487,800 during 1997 and 1996, respectively.

F-13
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 5 -  REGULATORY REQUIREMENTS

PBS  is  subject  to  the  Securities  and  Exchange   Commission's
Uniform  Net  Capital  Rule  (Rule  15c3-1),   which  requires  the
maintenance  of minimum net  capital.  At December  31,  1997,  PBS
had net capital  and net capital  requirements  of  $1,145,758  and
$100,000,   respectively.   The   Company's   net   capital   ratio
(aggregate  indebtedness  to net capital)  was .09 to 1.  According
to Rule  15c3-1,  PBS's net  capital  ratio  shall not exceed 15 to
1. On a consolidated  basis,  as a result of the  requirement,  net
assets of  $120,000  are  unavailable  for any  purpose  other than
meeting PBS's net capital requirements at December 31, 1997.

NOTE 6 -  NOTES PAYABLE

Notes payable consist of the following:
                                            1997           1996
                                         -----------    -----------
5%   note    payable   to   a   former
stockholder    of   ADAM    Investment
Services,  Inc., unsecured,  requiring
annual    principal    and    interest    $ 240,000     $        -
payments  and  maturing   February  9,
1999.

11%   note   payable   to   a   former
shareholder    of   ADAM    Investment
Services,    Inc.,   unsecured,    due      120,000              -
February    5,   2000,    payable   in
quarterly  payments of  principal  and
interest.

11.5% note payable to  shareholder(s),
unsecured,   due   August   1,   1998,
payable  in  monthly  installments  of        6,158         14,694
$832 including interest.
                                         -----------    -----------
                                          $ 366,158     $   14,694
                                         ===========    ===========

In 1995 a  shareholder  acquired  250,000  shares of the  Company's
common stock in a private  transaction with another  individual and
loaned the Company  $1,200,000.  In  connection  with this loan,  a
warrant to  purchase  300,000  shares of common  stock at $4.00 per
share  (see  Note  3)  was  also   received.   In   addition,   the
shareholder  obtained an option to lend the  Company an  additional
$1,800,000  and  received  warrants  similar  to  those  issued  in
connection   with  the  initial  loan.    This
shareholder   exercised  its  option  and  loaned  the  Company  an
additional  $1,800,000 through several partial exercises through
July 9, 1996, and received  450,000  warrants to purchase
common  shares.  On December  24,  1996,  the  shareholder  and the
Company  entered  into an agreement  whereby (1) the Company  would
remit  $1,976,250  against the  principal  amount of the loan,  (2)
the  shareholder   would  exercise  warrants  to  purchase  255,938
common  shares at $4.00 per share to be used against the  remaining
principal  balance,  and (3) the  shareholder  would  exchange  its
remaining  warrants  for 244,062  shares of common stock and 37,500
warrants to purchase common stock at $8.50 per share.

In November,  1996,  the Company  borrowed  $250,000 from the Company's
President, Executive Vice President, Company employees, a shareholder,
and the Company's investment bankin firm on  a  short-term  basis
carrying  interest  at  12%.  In December,  1996 these  amounts were
repaid  through the proceeds of the private offering (see Note 3).

F-14
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 6 -  NOTES PAYABLE (continued)

On December 14, 1995, the Company  commenced a private  offering of
units.  Each unit  consisted  of a  promissory  note  with  limited
conversion  rights in the principal  amount of $1,000 and a warrant
to purchase  250 shares of common  stock at a price per share equal
to  the  greater  of  $4.00  or the  market  price  on the  initial
closing  date of the  offering.  If the notes  were not paid by the
due  date,  the  notes,  at  the  option  of  the  holder,   became
convertible  into  shares  of the  Company's  common  stock  on the
basis  of  one  share  for  each  $4.00  of  unpaid  principal  and
interest.  On May 7,  1996  a  second  private  offering  of  units
commenced with similar terms and, after  completion,  $1,500,000 of
promissory  notes were  outstanding  from both offerings.  Prior to
the due date of the notes,  the Company  asked its  noteholders  to
apply their  principal  balance against the exercise price of their
warrants  and, in  addition,  they would also  receive  warrants to
purchase  37,500  shares  of the  Company's  stock  at an  exercise
price of $8.50 per  share.  Subsequently,  the  noteholders  agreed
to this arrangement.

As of  December 31, 1997,  maturities  of notes  payable  are as
follows:

       December 31,           Amount
       ------------           ------
          1998               $166,158
          1999                160,000
          2000                40,000
                           -----------

                             $ 366,158
                           ===========



Interest  expense  for the years ended  December  31, 1997 and 1996
was $43,227 and $331,008 respectively.


NOTE 7 -  COMMITMENTS AND CONTINGENCIES

PMC had been under a formal order of private  investigation  by the
Securities and Exchange  Commission  relating to certain aspects of
PMC's  former  practice  of  principal  trading.  PMC  discontinued
this  practice in April,  1994.  In 1995,  the Company  submitted a
settlement  proposal  to  the  Commission,   without  admitting  or
denying  liability,  on  behalf  of PMC  under a plan  pursuant  to
which  PMC should disgorge its net trading  profits  realized  from
principal  trading together with prejudgment  interest in an amount
estimated  to be $465,000.  In 1996,  the  settlement  was accepted
by  the  Commission  with  the  total  amount  payable,   including
accrued  interest,  approximating  $616,000.  At December 31, 1997,
approximately  $9,400  is  included  in  other  liabilities  in the
accompanying financial statements.

F-15
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 7 -  COMMITMENTS AND CONTINGENCIES (continued)

In January,  1997,  LLC,  mentioned in Note 2, borrowed  $1,750,000
from a bank with a due date of December  31,  1997.  The purpose of
the loan was to  finance  payment  of the  deferred  portion of the
purchase  price of 410,961  shares of Common Stock owned by the LLC
that were  purchased  from a former  officer of the  Company at the
time of his  departure.  In  connection  with this  borrowing,  the
Company  agreed  to  collateralize  the loan on  behalf of the LLC.
Accordingly,  $1,890,000 of cash was  restricted  for this purpose.
Subsequently,   the  Company   renegotiated  the  arrangement  with
another bank and accordingly,  as of December 31, 1997,  $1,422,264
included in cash and cash equivalents in the  accompanying  balance
sheet  is  restricted  under  this  arrangement  with  the  Company
guaranteeing  the   uncollateralized   balance.  The  Company  also
agreed to loan the LLC amounts  sufficient  to pay  interest on the
loan so long as the  amount  of  loans  made  and  bank  collateral
provided  would not exceed  $2,000,000.  As of December  31,  1997,
(see Note 2) the  Company  has loaned the LLC  $150,400  designated
to pay the  interest  on the  bank  loan.  The LLC  has  agreed  to
reimburse  the Company for any amounts  paid by the Company  toward
the  loan  or  for  collateral  applied  to  the  loan,   including
interest  at an annual  rate of 9%, and has  granted  the Company a
security  interest in 323,461 shares of the Company's  common stock
held by it.

The  Company  leases  office  space  and  equipment  under  various
operating   and  capital   leases.   Included  in   furniture   and
equipment  is  $562,532  of  equipment   under  capital  leases  at
December 31, 1997 and  accumulated  depreciation  relating to these
leases of $219,198.

Future  minimum lease  payments  under  noncancelable  leases as of
December 31, 1997 are as follows:

                                                      Principal
  Year ending                                            due
  December 31,       Operating        Capital       Capital Lease
--------------       ---------        -------       -------------
     1998            $ 681,334       $ 230,421      $  203,023
     1999              812,782         147,473         136,628
     2000              828,340          46,908          45,335
     2001              568,716            -              -
     2002              574,176            -              -
                     ---------       ---------      ----------
                    $3,465,348         424,802      $  384,986
                    ==========                      ==========
Less amount representing interest       39,816
                                     ---------
Present value of net minimum
   lease payments                    $ 384,987
                                     =========
Total rent  expense  for  facilities  and  equipment  for the years
ended  December  31,  1997 and 1996,  was  $628,551  and  $471,339,
respectively.

F-16
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 7 -  COMMITMENTS AND CONTINGENCIES (continued)

The Company has  historically  incurred net losses and  accordingly
experienced  cash flow  problems.  As a result  of the  acquisition
of ADAM,  the  Company is  obligated  to make a  deferred  purchase
payment on September  24,  1998.  The payment will be equal to 1.0%
of   certain   ADAM   assets   under   management   in   excess  of
$500,000,000,  with the  payment  not to exceed  $2,000,000 plus interest.
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 ADAM payment.  The
Company is currently  investigating  sources of short and long term
capital  to meet  the  ADAM  payment  as well  as  working  capital
needs.  Should additional  capital not be raised,  the Company will
be  required  to  restructure  the  terms of the ADAM  payment,  to
remove the  restriction  from its cash  balances,  restructure  its
operations or a combination of the above.

NOTE 8 -   STOCK OPTIONS AND WARRANTS

The Company has an equity  incentive  stock option  plan.  The Plan
was adopted by the  Company's  Board of  Directors  on November 12,
1997, and approved by shareholders on December 15, 1997.  The  Board
believes  that  approval  of the  Plan is in the
best  interests  of the  Company.  The  purpose  of the  Plan is to
provide  incentives  to  attract,   retain  and  motivate  eligible
persons  whose present and  potential  contributions  are important
to the success of the Company,  by offering them an  opportunity to
participate in the Company's future  performance  through awards of
options and stock bonuses.  Options  totaling  177,386 were granted
in 1998 under the Plan.  Also the Company  has  granted  options to
officers,  employees,  shareholders  and certain other  individuals
and  entities.  These plans and  arrangements  allow these  parties
to purchase  common  stock of the Company  generally  at the market
value of the stock at date of grant.  Options are  generally  for a
five-year term, however, in certain instances the term is longer.

In addition,  common stock  warrants have been issued in connection
with  certain  private  offerings  of stock and debt.  At  December
31,  1997,  warrants to  purchase  common  stock at various  prices
were outstanding which expire as follows:

      Expiration                      Exercise
      Date               Warrants     Price
      --------------     --------     -----
      December, 1998       75,000     $6.48
      June, 2001           50,000      4.00
      November, 2001        6,250      6.50
      December, 2001      137,500      8.50
                         --------
                          268,750
                         ========

F-17
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 8 -  STOCK OPTIONS AND WARRANTS (continued)

The following table describes  certain  information  related to the
Company's  compensatory  stock option activity for the years ending
December 31, 1997 and 1996.
                                               1997               1996
                                        -------------------  -------------------

                                                   Weighted             Weighted
                                                   Average              Average
                                        Number     Exercise    Number   Exercise
                                        of Options Prices    of Options Prices
                                        ---------- ------    ---------- -------
Outstanding, beginning of year            627,625    5.80     254,000     5.68

 Grants during year -
   Exercise price equals
      market price                        209,795    7.07     338,125     5.60
   Exercise price greater than
      market price                              -       -      50,000     6.24
 Exercised during year                     (6,250)   4.30        (250)    5.52
 Forfeited during year                    (56,750)   5.17      (5,500)    4.52
 Expired during year                      (13,125)  10.00      (8,750)   11.16
                                          -------   -----     -------    -----
 Outstanding, end of year                 761,295    6.03     627,625     5.80
                                          =======             =======
 Exercisable                              519,000    5.68     350,125     5.80
                                          =======             =======
The weighted  average grant date fair value of the options  granted
in 1997 and 1996 was as follows:

                                         1997       1996
                                      --------  --------
       Exercise price equals
         market price                 $   3.40  $   2.68

       Exercise price is greater than
         market price                 $      -  $   4.12

During  1996,  the fair value of each  option  grant was  estimated
using the  Black-Scholes  option-pricing  model with the  following
assumptions:  risk-free  interest rate of 5.71% to 6.56%;  dividend
yield  of  -0-%;   expected  lives  of  five  to  six  years;   and
volatility of 37.2% to 44.2%.

F-18
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================

NOTE 8 -  STOCK OPTIONS AND WARRANTS (continued)

A  summary  of the  Company's  outstanding  and  exercisable  stock
options as of December 31, 1997 are as follows:
                                                      Weighted Average
                       Number                             Remaining
    Range of            of          Weighted Average     Contractual
 Exercise Prices      Options        Exercise Price     Life (months)
------------------  ----------   -------------------- -----------------
      $4.00 - $5.50
         Outstanding   251,625            $  4.64             19
         Exercisable   251,625               4.64             21

      $6.00 - $6.50
         Outstanding   417,170               6.24             40
         Exercisable   217,375               6.23             21

      $7.50 - $8.50
         Outstanding    62,500               8.37             49
         Exercisable    50,000               8.50             48

      $10.00
         Outstanding    30,000              10.00             57
         Exercisable         -                  -              -

As  previously  described,  the Company  applies APB 25 and related
Interpretations    in   accounting    for   its   stock    options.
Accordingly,   no  compensation  cost  has  been  recognized.   Had
compensation   cost  for  the   Company's   vested   options   been
determined  based on the fair  value at the grant  dates for awards
consistent  with the  method of SFAS 123,  the  Company's  net loss
and loss per share  would have  resulted in the  pro-forma  amounts
indicated below:

                               1997              1996
                           -----------       -----------
Net loss                   $(3,860,050)      $(5,111,682)
                           ===========       ===========
Net loss per share           $    (.99)      $     (3.63)
                           ===========       ===========

NOTE 9 -   EMPLOYEE BENEFIT PLAN

Salary deferral "401(k)" plan

The  plan  allows  employees,   who  have  completed  one  year  of
employment  and at least  1,000 hours  service,  to defer up to 15%
of their salary.  The Company match  employee  contributions  by an
amount  determined  annually  by  the  board  of  directors.   Only
contributions  up to the first 6% of an  employee's  salary will be
considered for the match.

F-19
<PAGE>
                      PMC INTERNATIONAL, INC.
                         AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 1997 AND 1996
            ==========================================


NOTE 10 -  RISKS AND UNCERTAINTIES

The Company's  revenues are primarily  derived from a percentage of
the  assets  under the  management  of its  distribution  channels.
Assets  under  management  are impacted by both the extent to which
the  Company  attracts  new,  or  loses  existing  clients  and the
appreciation or depreciation of the U.S. and  international  equity
and  fixed  income   markets.   A  downturn  in  general   economic
conditions  could  cause  investors  to cease  using the  products,
including its proprietary  software  products,  and services of the
Company or its distribution channels.

The  Company has  deposits  in banks in excess of the FDIC  insured
amount of  $100,000.  The  amounts  in excess of the  $100,000  are
subject to loss should the banks cease business.

The Company has been  notified of a  threatened  litigation  form a
former employee  alleging  damages of $1,190,000.  Management,  after
review and  discussion  with  counsel,  believes  the  Company  has
meritorious  defenses and intends to  vigorously  defend  itself in
this matter,  but it is not  feasible to predict the final  outcome
at the present time.

NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS  107  requires  disclosure  of the  fair  value  of  financial
instruments,   both  assets  and  liabilities  recognized  and  not
recognized  in the  statement of financial  position,  for which it
is practicable to estimate fair value.

The  following  methods and  assumptions  were used to estimate the
fair value of each class of financial  instruments  for which it is
practicable to estimate that value:

The  carrying  amount  of cash  and cash  equivalents  approximates
fair value because of the short maturity of those instruments.

The  carrying  amount of  receivables,  accounts  payable,  accrued
expenses  and other  liabilities  approximates  fair value  because
the  collection  or payments on those  instruments  are expected in
the short term.

The long term note  receivable  was  discounted  at inception  (see
Note 2) and at  December  31,  1997,  discounting  the  note at the
current  interest  rate at  which  similar  loans  would be made to
borrowers with similar  credit ratings and for the same  maturities
yields a fair value which approximates the carry value.

Based on the  borrowing  rates  currently  available to the Company
for loans with  similar  terms and  maturities,  the carry value of
obligations under capital leases approximate fair value.

The carrying  amount of deferred  revenue  approximates  fair value
because it is expected to be realized within ninety days.

F-20