UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Second Amendment to Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): February 22, 2000
PINNACLE BUSINESS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-27171 91-1871963
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
2963 Gulf to Bay Boulevard, Suite 265, Clearwater, FL 33759
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(813) 669-7781
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
MAS ACQUISITION XIX CORP.
1710 E. DIVISION ST.
EVANSVILLE, IN 47711
(812) 479-7226
(FORMER NAME, ADDRESS AND TELEPHONE NUMBER)
The undersigned Registrant hereby amends Item 7 of its Current Report on Form
8-K dated March 6, 2000 to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 2-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998 4
STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 6
DECEMBER 31, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Pinnacle Business Management, Inc.
Clearwater, Florida
We have audited the accompanying consolidated balance sheets of Pinnacle
Business Management, Inc. and Subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements for December 31, 1999 and 1998 have been
prepared assuming that the company will continue as a going concern. As
discussed in Notes 9 and 11 to the financial statements, the company has
suffered recurring losses from operations, has a net capital deficiency, and
certain litigation pending that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Notes 9 and 11. The financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pinnacle Business
Management, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998, in conformity with generally accepted accounting principles.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
- -----------------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
April 26, 2000
Page 1
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
DECEMBER 31,
------------------------
1999 1998
----------- -----------
CURRENT ASSETS
- ----------------
Cash and cash equivalents $ 9,726 $ 2,984
Customer loans receivable, net 274,974 743,877
Loans Receivable - Other 422,000 -0-
Prepaid Expenses 45,000 -0-
----------- -----------
751,700 746,861
--------------------------------- ----------- -----------
PROPERTY AND EQUIPMENT 156,831 144,839
Less accumulated depreciation (69,654) (43,078)
--------------------------------- ----------- -----------
87,177 101,761
OTHER ASSETS
- --------------
Unamortized goodwill 238,498 244,944
Deferred tax asset 505,560 505,560
Security deposits 12,395 6,996
Receivables - other - net -0- -0-
----------- -----------
756,453 757,500
----------- -----------
TOTAL ASSETS 1,595,330 $1,606,122
- ------------------------------------------- =========== ===========
See Accompanying Notes to Consolidated Financial Statements
Page 2
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
----------------------------------------
DECEMBER 31,
------------------------
1999 1998
----------- -----------
CURRENT LIABILITIES
- ------------------------------------------
Accounts payable and accrued expenses $ 318,764 $ 79,783
Current portion of long-term debt 1,401,753 600,000
----------- ------------
TOTAL CURRENT LIABILITIES 1,720,517 679,783
- --------------------------------------------- ----------- ------------
LONG TERM LINE OF CREDIT 863,000 -0-
NOTES PAYABLE - OFFICERS' 267,061 9,900
LONG-TERM DEBT, LESS CURRENT PORTION 417,287 1,344,276
----------- ------------
TOTAL LONG-TERM LIABILITIES 1,547,348 1,354,176
- --------------------------------------------- ----------- ------------
TOTAL LIABILITIES 3,267,865 2,033,959
- --------------------------------------------- ----------- ------------
COMMITMENTS AND CONTINGENCIES
- ------------------------------------------
STOCKHOLDERS' DEFICIT
- ------------------------------------------
Preferred stock -0- -0-
Common stock 86,952 16,494
Additional paid-in capital 1,317,515 541,965
Deficit (3,077,002) (986,296)
------------- ------------
TOTAL STOCKHOLDERS' DEFICIT (1,672,535) (427,837)
- --------------------------------------------- ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,595,330 $ 1,606,122
- ------------------------------------------- ============= ============
See Accompanying Notes to Consolidated Financial Statements
Page 3
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
DECEMBER 31,
--------------------------
1999 1998
------------ ------------
OPERATING REVENUE
- -----------------------------------------------------
Revenue $ 214,538 $ 633,478
------------ ------------
OPERATING EXPENSES
- -----------------------------------------------------
Salaries, employee leasing and related 510,627 444,352
Advertising 51,157 106,183
Commissions 146,948 35,568
Office and general 61,322 56,746
Professional fees 166,190 55,676
Repairs and maintenance 10,042 5,562
Rent 138,259 110,923
Repossession costs 34,707 53,310
Telephone and utilities 109,157 81,260
Travel 73,468 59,749
Other operating 111,201 91,982
------------ ------------
TOTAL OPERATING EXPENSES 1,413,078 1,101,311
- ----------------------------------------------------- ------------ ------------
OPERATING (LOSS) (1,198,540) (467,833)
- ----------------------------------------------------- ------------ ------------
OTHER EXPENSES
- -----------------------------------------------------
Interest expense (516,447) (278,050)
Depreciation and Amorizitation expense (28,022) (31,009)
Bad debt (347,697) (60,831)
------------ ------------
TOTAL OTHER EXPENSES (892,166) (369,890)
- ----------------------------------------------------- ------------ ------------
NET LOSS
BEFORE FEDERAL INCOME TAX BENEFIT (2,090,706) (837,723)
- ----------------------------------------------------- ------------ ------------
PROVISION FOR INCOME TAX BENEFIT -0- 284,826
------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $(2,090,706) $ (552,897)
------------ ------------
NET LOSS PER COMMON SHARES $ (0.04) $ (0.04)
------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 50,964,740 14,976,794
- ----------------------------------------------------- ------------ ------------
See Accompanying Notes to Consolidated Financial Statements
Page 4
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
COMMON STOCK ADDITIONAL TOTAL
$.001 PAR VALUE PAID-IN STOCKHOLDERS'
-------------------- CAPITAL DEFICIT DEFICIT
SHARES AMOUNT
---------- -------- ---------- ------------ ------------
Balance
January 1, 1998
Fast Title
Loans, Inc. 13,418,027 $ 13,418 $ 121,992 $ (433,399) $ (297,989)
Issuance of
common stock 3,076,175 3,076 419,973 - 423,049
Net Loss - - - (552,897) (552,897)
---------- -------- ---------- ------------ ------------
Balance
December 31,
1998 16,494,202 16,494 541,965 (986,296) (427,837)
Issuance of
common stock 70,458,484 70,458 775,550 - 846,008
Net Loss (2,090,706) (2,090,706)
---------- -------- ---------- ------------ ------------
Balance
December 31,
1999 86,952,686 $ 86,952 $1,317,515 $(3,077,002) $(1,672,535)
========== ======== ========== ============ ============
See Accompanying Notes to Consolidated Financial Statements
Page 5
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
- ----------------------------------------------------
Net Loss $(2,090,706) $ (552,897)
------------ -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
- ----------------------------------------------------
Depreciation and Amoritization 28,022 31,009
Provision for doubtful accounts 367,076 60,831
Deferred Income Tax Benefit - (284,826)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in customer loans
receivable - net 101,827 49,257
(Increase) in loans other and
prepaid expenses (467,000) -
(Increase)in deposits and other (399) -
Increase in accounts
payable and accrued expenses 238,981 4,041
------------ -----------
TOTAL ADJUSTMENTS 268,507 (139,688)
- --------------------------------------------------- ------------ -----------
NET CASH (USED IN) OPERATING ACTIVITIES (1,822,199) (692,585)
- --------------------------------------------------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ---------------------------------------------------
Capital expenditures (11,992) (58,422)
------------ -----------
NET CASH (USED IN) INVESTING ACTIVITIES (11,992) (58,422)
- --------------------------------------------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ---------------------------------------------------
Proceeds from issuance of long-term debt 1,280,287 583,952
Proceeds from issuance of common stock and
paid in capital 846,008 423,049
Principle payments on long-term debt (542,523) (168,431)
Increase (decrease) in officer's loans - net 257,161 (90,100)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,840,933 748,470
- --------------------------------------------------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,742 (2,537)
- --------------------------------------------------- ------------ -----------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 2,984 5,521
- --------------------------------------------------- ------------ -----------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 9,726 $ 2,984
- --------------------------------------------------- ------------ -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest Expense $ 432,369 270,250
------------ -----------
See Accompanying Notes to Consolidated Financial Statements
Page 6
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------
Pinnacle Business Management, Inc. is an integrated consumer finance and E-
commerce technology developer. The company operates title loan and paycheck
advance locations. Fast Title Loans, Inc. (FTL)is a wholly owned subsidiary
of Pinnacle Business Management, Inc. Fast Title Loans, Inc. is a consumer
loan company that operates title loan offices in central Florida. The title
loan is an immediate short term cash loan, using the free and clear title
of a person's car or truck as collateral. The loan allows the customer to
retain possession and use of their motor vehicle. Fast Paycheck Advance,
Inc. is a wholly owned subsidiary of Pinnacle Business Management, Inc.
that provides short-term paycheck advances to consumers. The accompanying
financial statements reflect the consolidated operations of the above.
On May 9, 1997, Pinnacle Business Management, Inc. (The "Company") was
incorporated as a wholly owned subsidiary of 300365 BC, Ltd., D/B/A Peaker
Resource Company, a company which was incorporated in British Columbia,
Canada on November 13, 1985. 300365 BC, Ltd. had been inactive for years
due to the lack of working capital. On May 15, 1997, the stockholders of
300365 BC, Ltd. exchanged all of the company's outstanding stock of 300365
BC, Ltd. for the stock of Pinnacle Business Management, Inc. This exchange
was made on a share for share basis. There were no tangible assets of
300365 BC, Ltd. The excess of par value of the common stock issued over the
assets acquired upon the acquisition of the parent was $1,933. After the
exchange of stock, the parent became the wholly owned subsidiary and it was
liquidated and the $1,933 was written off as an extraordinary loss upon the
dissolution of 300365 BC, Ltd.
On October 27, 1997, JTBH Corporation, a wholly owned subsidiary of the
"Company", with no assets, merged with Fast Title Loans, Inc. (FTL) a
Florida corporation. On that date Fast Title Loans, Inc. became the wholly
owned subsidiary of Pinnacle Business Management, Inc. The shares of (FTL)
were converted into common stock $.001 per share, of Pinnacle Business
Management, Inc.
The merger of (FTL) the private company into the public shell company
Pinnacle Business Management, Inc. on October 27, 1997 gave rise to the
private company having effective operating control of the combined company
after the transaction. This was a reverse merger and the costs
associated with were treated as a recapitilization. In 1998, the company
incorporated Fast Paycheck Advance, Inc. as a wholly owned subsidiary. Also
in 1998, the Company incorporated Summit Property, Inc. This subsidiary has
remained inactive, however.
Page 7
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------
PRINCIPLES OF CONSOLIDATION:
----------------------------
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES:
-------------------
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.
PROPERTY AND EQUIPMENT:
-------------------------
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated
useful lives:
YEARS
-----
Improvements 10-40
Furniture and Equipment 5-7
Leasehold Improvements are amortized over their estimated useful lives or
the lives of the related leases, whichever is shorter.
REVENUE RECOGNITION:
---------------------
Substantially most of the revenues are derived from interest charged on
consumer financing, title loans and advance paychecks.
INCOME TAXES:
--------------
The income tax benefit is computed on the pretax loss based on the current
tax law. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates.
Page 8
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------
NATURE OF BUSINESS AND CREDIT RISK:
----------------------------------------
The company operates in mainly one business segment and primarily earns
interest income on consumer title loans and advanced paychecks. Financial
instruments which potentially subject the company to concentrations of
credit risk are primarily customer loans receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
----------------------------------------
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, customer loan receivables, accounts payable and
accrued expenses and other liabilities approximate fair value because of
the immediate or short-term maturity of these financial instruments. The
carrying amount reported for long-term debt approximates fair value
because, in general, the interest on the underlying instruments fluctuates
with market rates.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
------------------------------------------------
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding.
STATEMENTS OF CASH FLOWS:
----------------------------
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.
ADVERTISING AND PROMOTIONAL COSTS
------------------------------------
Costs of advertising and promotional costs are expensed as incurred.
Advertising costs were $51,157 and $106,183 in 1999 and 1998, respectively.
GOODWILL
--------
Goodwill is amortized over 40 years. Amortization charged to expense was
$6,446 and $6,446 in 1999 and 1998 respectively.
Page 9
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 3 - CUSTOMER LOANS RECEIVABLE - NET
-----------------------------------
Customer loans receivable, net consists of the following:
Customer loans receivable, net consists of the following:
December 31,
------------
1999 1998
--------- ----------
Customer loans receivable $ 702,881 $ 804,708
Less: Allowance for doubtful accounts (427,907) (60,831)
---------- ----------
Customer loans receivable - Net 274,974 $ 743,877
========== ==========
Customer loans receivable include accrued interest amounts. However,
the Company, due to an unfavorable legistlative climate regarding the title
loan industry, reserved an additional $367,076 in bad debt allowance to
account for the write down of accrued interest and loans that they may
not collect.
NOTE 4- LOANS RECEIVABLE - OTHER
---------------------------
Loans receivable dated December 29, 1997 to a company for $25,000
together with interest thereon at the rate of 18% per annum. The principal
balance and accrued interest is due and payable on the earlier of a
private placement being completed in whole or part including but not
limited to any escrow disbursements of any funds to the maker, or March
27, 2000. There were no payments received in 1999 or 1998. The company
has made an allowance for doubtful receivable for the entire loan. The
company has not accrued any interest on this loan for 1999 or 1998.
Demand loan receivable a company for $422,000. This loan is non-interest
bearing. The company is performing outside consulting for a start up
company. It is anticipated that this loan receivable will be converted
into equity during the year 2000.
NOTE 5- PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
1999 1998
---------- ----------
Furniture and Equipment $ 121,914 $ 109,922
Improvements 34,917 34,917
---------- ----------
156,831 144,839
Less: Accumulated depreciation (69,654) (43,078)
---------- ----------
Property and Equipment, Net $ 87,177 $ 101,761
========== ==========
Page 10
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 6- LINE OF CREDIT
----------------
In March 1999, the Company obtained a line of credit with a capital
company to receive up to $1,500,000 of advances. The interest is
payable at 17% per annum. Principal and interest on advances are due
March 1, 2001, with the company having an option to extend the note an
additional one year. At December 31, 1999, the company had $ 863,000
outstanding on the line. The line of credit is collateralized by
7,500,000 shares of the common stock of the company.
NOTE 7 - LONG-TERM DEBT
---------------
Long-term debt consists of the following:
1999 1998
------------ -----------
Note payable lending institution with monthly
interest payable at 14% per annum expiring
February 28, 2000 (see Note 9). $ 538,276 $ 538,276
Note payable investor with monthly interest
payable at 4.5% per month. This note
expired May 14, 1999. 100,000 100,000
Note payable investor with monthly interest
payable at rates varying between 16-36% per
annum, expiring March 1, 2000. 524,880 606,000
Renegotiated note payable investors with
monthly interest payable at rates varying
between 1.5%-6% per month. This loan
expires in December, 2000. 238,597 450,000
Note payable investor with monthly interest
payable at 4%, expiring May 17, 1999. -0- 150,000
Notes payable investor with interest payable
at 18% per annum, expiring February and
March, 1999. -0- 100,000
Note payable investor with interest only
payable at 12% per annum. This note has a
balloon and expires December 31, 2002. 417,287 -0-
------------ -----------
1,819,040 1,944,276
Less: Current Portion (1,401,753) (600,000)
------------ -----------
Net Long-Term Debt 417,287 $1,344,276
============ ===========
Page 11
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 7- LONG-TERM DEBT (Continued)
----------------------------
The non-current portion of long-term debt
matures as follows:
2000 $1,401,753
2001 -0-
2002 417,287
----------
1,819,040
==========
The company has negotiated with certain investors to convert long-term debt
to common stock at various negotiated prices predicated on market
value. Long-term debt is substantially collateralized with motor vehicle
titles and the personal guarantees of the officers and the assets
of the company.
NOTE 8- STOCKHOLDERS' DEFICIT
----------------------
The authorized capital stock of the company in 1998 consists of
20,000,000 shares of common stock with par value of $.001. As of December
31, 1998, there were 16,494,202 shares outstanding.
The authorized preferred stock of the company in 1999 and 1998
consists of 50,000,000 and 10,000,000 shares, respectively, with a par
value of $.001 with rights and privileges to be set by the board of
directors. As of December 31, 1999 and 1998, there were no shares issued or
outstanding.
In 1999, the corporation authorized an additional 80,000,000 shares of
common stock with a par value of $.001. As of December 31, 1999, there
were 100,000,000 shares authorized, and 86,952,686 issued and outstanding.
At December 31, 1999 the company had up to 35,322,578 shares (options)
outstanding with a consulting company. Shares may be exercisable at $.25
per share or 30% of the closing bid price, whichever is less. This was for
compensation in arranging the Mail Boxes Etc. account.
Additionally there are 5 year warrants outstanding for investment banking
services rendered to purchase 5,580,000 shares of common stock at $.125
per share. The warrants become due August 18, 2004.
Page 12
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 9- COMMITMENTS AND CONTINGENCIES
-----------------------------
(A) LEASES:
-------
The company operates its facilities under certain operating leases. Future
minimum lease commitments under non-cancelable operating leases are as
follows:
2000 $60,372
2001 25,101
-------
85,473
=======
Rent and related expenses under operating leases amounted to $138,259 and
$110,923 for the years ended December 31, 1999 and 1998 respectively.
The company is operating various locations on a month to month basis.
(B) LITIGATION:
-----------
The company is a defendant involving a claim made in bankruptcy by First
American Reliance, Inc. (FAR) against the company for $800,000, including
9% interest, for amounts loaned and advanced by FAR to the company which
were not repaid. The company has asserted a defense and set off
alleging that monies due to Pinnacle from stock subscriptions in 1998
delivered to FAR were not turned over to the company. It is further alleged
that the claims of the company exceed the sum that FAR claims it is owed by
the company. The company has not accrued any interest on this note for 1999
and 1998 because of the offsets of monies due the company alleged in the
litigation. The lawyers have stated that documentation to fully evaluate
the claims is not presently available. However, the ompany is contesting
the case vigorously. The company has accrued a liability for $538,276 in
1999 and 1998, respectively.
Secondly, Tyler Jay & Company, L.L.C. commenced an action against the
company asserting a claim for fees and commissions arising from loans made
by FAR described in the previous paragraph. This also includes sums lost by
Tyler Jay allegedly because Tyler Jay was not permitted to complete the
private placement noted above. The sums demanded exceed $500,000 in the
aggregate. Management is vigorously contesting the claim. The company has
asserted claims and defenses that are still in the process of being
evaluated by the attorneys. It is not possible to determine whether there
will be a loss; or, if there is a loss, the extent of the loss.
Page 13
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 10 - RELATED PARTY TRANSACTIONS
----------------------------
The executive officers of the company pledged as collateral 7,000,000
shares of Pinnacle stock to secure personal loans and loaned $696,000 to
the company in 1999. The company in 1999 repaid the officers $439,157.
The officers received under an employment agreement approximately $55,000
and $65,464 each, respectively in 1999 and 1998.
The officers owned 79,102,000 and 9,005,000 common stock shares in 1999
and 1998 respectively.
NOTE 11- GOING CONCERN
-------------
As shown in the accompanying financial statements, the company
incurred substantial net losses for the years ended December 31, 1999 and
1998. Additionally, the company has a $100,000 note payable with an
investor that expired May 14, 1999.
The investor has not called this loan and it is shown as a current
liability. Moreover, the company has debt that will be coming due between
March 1, 2000 and December 31, 2000 without adequate capital available to
repay the debt. The company is negotiating with the investors to either
extend these obligations or convert the debt to equity. However, if these loans
are called, the company's financial condition will be further negatively
impacted. Finally, the company is defending various lawsuit claims that, if
the outcome is unfavorable, would negatively impact the company. These
factors raise substantial doubt about the company's ability to continue as a
going concern.
Additionally, the company, due to an unfavorable legislative climate,
plans to discontinue its title loan business by June 30, 2000; and concentrate
on its payday advance business. There is no guarantee whether the company will
be able to generate enough revenue and or raise capital to support those
operations.
Management is working with the certain investors to rework the debt that is
coming due. Additionally, management is vigorously contesting the lawsuits that
have been filed against the company. The company feels that they have certain
offsets against the claims in litigation and does not expect to pay more than
what is reflected on the balance sheet at this time (see note 9). However,
there can be no assurance that the company will be successful in its efforts to
not have the payment of debt accelerated. If the company is unsuccessful in
its efforts, it may be necessary to undertake such other actions as may be
necessary to preserve asset value. The financial statements do not
include any adjustments, other than the current classification of
long-term debt in default, that might result from the outcome of those
uncertainties.
Page 14
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 12- INCOME TAX BENEFIT
--------------------
The benefit for income taxes is as follows:
1999 1998
-------- --------
Deferred income tax benefit
(Federal only) -0- $284,826
======== ========
At December 31, 1999 and 1998, the company had net operating loss carry
forwards for U. S. Federal tax purposes available to offset future taxable
income of approximately $3,081,823 and $986,296 which expire through
2014. The company has concluded that, based on expected future results and
future reversals of existing temporary differences, it is more likely
than not that the deferred tax assets will be realized. However, for 1999
no tax benefit was booked as a conservative measure.
The net deferred tax assets in the accompanying balance sheets
include the following components:
1999 1998
--------- ---------
Deferred tax assets $ 505,560 $ 505,560
Deferred tax valuation allowance -0- -0-
--------- ---------
Net deferred tax assets $ 505,560 $ 505,560
========= =========
NOTE 13- SUBSEQUENT EVENTS
------------------
On February 28,2000, the company, Jeff Turino and Bruce Hall entered into an
agreement and release concerning claims arising from operation of those
officers' employment agreements with the company between 1997 and 2000. Turino
and Hall released the Company from certain performance obligations, including
the waiver of back compensation and bonus amounts. In exchange, each received
27,500,000 shares of restricted common stock of the Company. Turino and Hall
agreed to perform the remainder of the employment agreement in accordance with
its terms. The company released any claims arising from the officer's
performance of the agreements prior to January 1, 2000.
Due to certain local legislative climate, the company is making efforts in 2000
to discontinue operating the title loan business. With the implementation of
payday advance debit card program, a three year contract with Mailboxes Etc.,
and a possible banking alliance, the company is anticipating expanding its
payday advances on a national level.
Page 15
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Additionally, the company secured a national contract with Comdata through
their banking affiliates. This contract allows the distribution of debit
cards at the point of sale location. Subsequently, the company is in
negotiation with its competitors to allow them to use the debit card system.
This transforms the competitors into vendors and allows revenue on a broader
basis. Management anticipates putting forth its efforts to expand the payday
advance basis through physical locations and the Internet on a national basis
to increase company value.
On March 3, 2000 the company entered into a consulting agreement with certain
professionals and completed an acquisition via a stock exchange agreement with
MAS Acquisition XIX Corporation, a publicly held reporting entity. MAS
Acquisition XIX Corporation is inactive at this time. After the stock exchange
Pinnacle owns approximately 97% of MAS Acquisition XIX Corp.
Page 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PINNACLE BUSINESS MANAGEMENT INC.
/S/ Jeffrey G. Turino
- --------------------------------------------------------------
Jeffrey G. Turino, Chief Executive Officer and Director
/S/ Michael B. Hall
- ----------------------------------------------------------
Michael B. Hall, President and Director
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of Pinnacle Business Management, Inc.
We hereby consent to the use in this Form 8-K/A of our report dated
April 26, 2000 relating to the financial statements of
Pinnacle Business Management, Inc.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
- -----------------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants