UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
0-27171
(Commission file number)
PINNACLE BUSINESS MANAGEMENT, INC.
(Name of Small Business Issuer in its charter)
Nevada 91-1871963
(State or other jurisdiction of (I.R.S.
Incorporation or Organization Employer
Identification
Number)
2963 Gulf to Bay Boulevard, Suite 265
Clearwater, FL 33759
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(813) 669-7781
Securities registered under Section 12(b) of the Act:
None
(Title or class)
Securities registered under Section 12(g) of the Act:
None
(Title or class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ] NO [X]
PAGE 1
As of March 31, 2000, the Registrant has outstanding 157,262,589 shares of
common stock.
Transitional Small Business Disclosure Format. Yes [ ] No[X]
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
PAGE 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
BALANCE SHEETS AS OF MARCH 31, 2000 AND 1999 2-3
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999 4
STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 5
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Pinnacle Business Management, Inc.
Clearwater, Florida
We have reviewed the accompanying consolidated balance sheets of Pinnacle
Business Management, Inc. and Subsidiaries as of March 31, 2000 and 1999, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the three months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Pinnacle Business
Management, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
As discussed in Notes 9 and 11, certain conditions indicate that the company may
be unable to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments to the financial statements
that might be necessary should the company be unable to continue as a going
concern.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
- - -----------------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
May 10, 2000
Page 1
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
MARCH 31,
------------------------
2000 1999
----------- -----------
CURRENT ASSETS
- - ----------------
Cash and cash equivalents $ 56,944 $ 67,776
Customer loans receivable, net 277,477 546,109
Loans Receivable - Other 423,000 -
Prepaid Expenses 41,250 -
----------- -----------
Total Current Assets 798,671 613,885
--------------------------------- ----------- -----------
PROPERTY AND EQUIPMENT 166,005 152,568
Less accumulated depreciation (74,654) (48,467)
--------------------------------- ----------- -----------
Total net property and equipment 91,351 104,101
OTHER ASSETS
- - --------------
Unamortized goodwill 236,498 243,333
Deferred tax asset 505,560 505,560
Security deposits 13,658 7,424
Officer loan receivable - 35,426
Total Other Assets ----------- -----------
755,716 791,743
----------- -----------
TOTAL ASSETS $1,645,738 $1,509,729
- - ------------------------------------------- =========== ===========
See Accompanying Notes and Accountants' Report
Page 2
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
----------------------------------------
MARCH 31,
------------------------
2000 1999
----------- -----------
CURRENT LIABILITIES
- - ------------------------------------------
Accounts payable and accrued expenses $ 430,429 $ 152,377
Current portion of long-term debt 1,390,928 1,204,526
----------- ------------
TOTAL CURRENT LIABILITIES 1,821,357 1,356,903
- - --------------------------------------------- ----------- ------------
LONG-TERM LINE OF CREDIT 1,068,000 150,000
NOTES PAYABLE - OFFICERS' 300,360 -
LONG-TERM DEBT, LESS CURRENT PORTION 547,287 700,000
----------- ------------
TOTAL LONG-TERM LIABILITIES 1,915,647 850,000
- - --------------------------------------------- ----------- ------------
TOTAL LIABILITIES 3,737,004 2,206,903
- - --------------------------------------------- ----------- ------------
COMMITMENTS AND CONTINGENCIES
- - ------------------------------------------
STOCKHOLDERS' DEFICIT
- - ------------------------------------------
Preferred stock $ - $ -
Common stock 157,262 74,429
Additional paid-in capital 1,317,515 541,965
Deficit (3,566,043) (1,313,568)
------------- ------------
TOTAL STOCKHOLDERS' DEFICIT (2,091,266) (697,174)
- - --------------------------------------------- ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,654,738 $ 1,509,729
- - ------------------------------------------- ============= ============
See Accompanying Notes and Accountants' Report
Page 3
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
MARCH 31,
-------------------------
2000 1999
------------ -----------
OPERATING REVENUE
- - -----------------------------------------------------
Revenue $ 62,681 $ 110,931
------------ -----------
OPERATING EXPENSES
- - -----------------------------------------------------
Salaries, employee leasing and related 154,994 99,794
Advertising 7,386 8,070
Commissions 13,000 16,906
Office and general 10,776 13,433
Professional fees 73,359 17,849
Repairs and maintenance 1,243 2,914
Rent 38,482 44,314
Repossession costs 8,734 10,344
Telephone and utilities 27,696 33,043
Travel 32,400 26,623
Other operating 35,392 22,941
------------ -----------
TOTAL OPERATING EXPENSES 403,462 296,231
- - ----------------------------------------------------- ------------ -----------
OPERATING (LOSS) (340,781) (185,300)
- - ----------------------------------------------------- ------------ -----------
OTHER EXPENSES
- - -----------------------------------------------------
Interest expense ( 70,950) ( 77,032)
Depreciation and Amorizitation expense ( 7,000) ( 7,005)
Bad debt - -
------------ -----------
TOTAL OTHER EXPENSES ( 77,950) (84,037)
- - ----------------------------------------------------- ------------ -----------
NET LOSS
BEFORE FEDERAL INCOME TAX BENEFIT ( 418,731) (269,337)
- - ----------------------------------------------------- ------------ -----------
PROVISION FOR INCOME TAX BENEFIT - -
------------ -----------
NET LOSS APPLICABLE TO COMMON SHARES $( 418,731) $ (269,337)
------------ -----------
NET LOSS PER COMMON SHARES $ (0.005) $ (0.008)
------------ -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 86,952,686 32,970,767
- - ----------------------------------------------------- ------------ -----------
See Accompanying Notes and Accountants' Report
Page 4
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
COMMON STOCK ADDITIONAL TOTAL
$.001 PAR VALUE PAID-IN STOCKHOLDERS'
-------------------- CAPITAL DEFICIT DEFICIT
SHARES AMOUNT
---------- -------- ---------- ------------ ------------
1999
- - ----
Balance
January 1, 1999 16,494,206 $ 16,494 $ 541,965 $ (986,246) $ (427,837)
Issuance of
Common Stock 56,935,408 57,935 - (57,935) -
Net Loss - - - (269,337) (269,337)
---------- -------- ---------- ------------ ------------
Balance
March 31,
1999 74,429,610 74,429 $541,965 $(1,313,568) $(697,174)
2000
- - ----
Balance
January 1,
2000 86,952,686 $ 86,952 $1,317,515 $(3,077,002) $(1,672,535)
Issuance of
Common Stock 70,309,903 70,310 - (70,310) -
Net Loss - - - (418,731) (418,731)
=========== ======== ========== ============ ============
Balance
March 31,
2000 157,262,589 $157,262 $1,317,515 $(3,566,043) $(2,091,266)
========== ======== ========== ============ ============
See Accompanying Notes and Accountants' Report
Page 5
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
- - ----------------------------------------------------
Net Loss $ (418,731) $ (269,337)
------------ -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
- - ----------------------------------------------------
Depreciation and Amortization 7,000 7,005
Provision for doubtful accounts - 24,774
Deferred Income Tax Benefit - -
CHANGES IN ASSETS AND LIABILITIES:
Decrease in customer loans
receivable - net (2,503) 172,994
(Increase) in loans other and
prepaid expenses 2,750 -
(Increase)in deposits and other (1,263) (433)
Increase in accounts
payable and accrued expenses 111,665 72,594
------------ -----------
TOTAL ADJUSTMENTS 117,649 276,934
- - --------------------------------------------------- ------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (301,082) 7,597
- - --------------------------------------------------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- - ---------------------------------------------------
Capital expenditures (9,174) (7,729)
------------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (9,174) (7,729)
- - --------------------------------------------------- -------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
- - ---------------------------------------------------
Proceeds from issuance of long-term debt and
Line of credit 335,000 150,000
Proceeds from issuance of common stock and
paid in capital - -
Principle payments on long-term debt (10,825) (39,750)
Increase (decrease) in officer's loans - net 33,299 (45,326)
-------------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 357,474 64,924
- - --------------------------------------------------- -------------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 47,218 64,792
- - --------------------------------------------------- -------------- ----------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 9,726 2,984
- - --------------------------------------------------- -------------- ----------
CASH AND CASH EQUIVALENTS-END OF PERIOD 56,944 67,776
- - --------------------------------------------------- -------------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest Expense $ 3,700 $26,000
-------------- ----------
See Accompanying Notes and Accountants' Report
Page 6
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------
The consolidated reviewed interim financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's most
recent current report on Form 8-K, filed March 6, 2000, for the year ended
December 31, 1999.
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.
Page 7
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION - (continued)
______________________________________________________________
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.
On March 3, 2000, the Company acquired 96.8% of the issued and outstanding
common stock of MAS Acquisition XIX Corp., an inactive registrant,
reporting company. Pinnacle became the parent corporation of MAS
Acquisition XIX Corp. when it exchanged 1,500,000 shares of its common
stock for 8,250,000 shares of MAS Acquisition XIX Corp.
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.
Page 8
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
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.
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.
Page 9
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
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 $7,386 and $8,070 in 2000 and 1999, respectively.
GOODWILL
--------
Goodwill is amortized over 40 years. Amortization charged to expense was
$1,612 and $1,612 in 2000 and 1999 respectively.
NOTE 3 - CUSTOMER LOANS RECEIVABLE - NET
-----------------------------------
Customer loans receivable, net consists of the following:
March 31,
------------
2000 1999
--------- ----------
Customer loans receivable $ 705,384 $ 631,717
Less: Allowance for doubtful accounts (427,907) (85,608)
---------- ----------
Customer loans receivable - Net 277,477 $ 546,109
========== ==========
Customer loans receivable include accrued interest amounts. However,
the Company, due to an unfavorable legislative climate regarding the title
loan industry, reserved in aggregate $427,907 in bad debt allowance to
account for the write down of accrued interest and loans that are
doubtful.
Page 10
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 4- LOANS RECEIVABLE - OTHER
---------------------------
Loan 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 2000 or 1999. The company
has made an allowance for doubtful receivable for the entire loan. The
company has not accrued any interest on this loan for 2000 or 1999.
Demand loan receivable a company for $423,000. 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 calendar year 2000.
NOTE 5- PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
2000 1999
---------- ----------
Furniture and Equipment $ 131,088 $ 117,651
Improvements 34,917 34,917
---------- ----------
166,005 152,568
Less: Accumulated depreciation (75,654) ( 48,467)
---------- -----------
Property and Equipment, Net $ 91,351 $ 104,101
========== ==========
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 March 31, 2000 and 1999, the company had
$1,068,000 and $150,000 outstanding on the line, respectively. The line
of credit is collateralized by 7,500,000 shares of the common stock of the
company.
Page 11
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 and 1999
NOTE 7 - LONG-TERM DEBT
---------------
Long-term debt consists of the following:
2000 1999
------------ ------------
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
expires 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. 514,055 566,250
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. 547,287 -0-
------------- -----------
$ 1,938,215 $1,904,526
Less: Current Portion ( 1,390,928) (1,204,526)
------------ ------------
Net Long-Term Debt $ 547,287 $ 700,000
============ ============
The non-current portion of long-term debt
matures as follows:
March 31,
___________
2000 $1,390,928
2001 -0-
2002 547,287
----------
$1,938,215
==========
The company is negotiating 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.
Page 12
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 8- STOCKHOLDERS' DEFICIT
----------------------
The authorized preferred stock of the company in 2000 and 1999 consists of
100,000,000 and 10,000,000, respectively, with par value of $.001 with
rights and privileges set by the board of directors. As of March 31, 2000
and 1999 there were no shares outstanding.
As of March 31, 2000 and March 31, 1999 there were 200,000,000 and
100,000,000 shares of common stock authorized and 157,262,589 and
74,429,610 shares of common stock issued and outstanding.
At March 31, 2000, 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.
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 $38,482 and
$44,314 for the years ended March 31, 2000 and 1999 respectively.
The company is operating various locations on a month to month basis.
Page 13
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
(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 moneys 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 moneys due the company alleged in the
litigation. The lawyers have stated that documentation to fully evaluate
the claims is not presently available. However, the company is contesting
the case vigorously. The company has accrued a liability for $538,276 in
2000 and 1999, 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.
NOTE 10 - RELATED PARTY TRANSACTIONS ----------------------------
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 officers' performance of the agreements prior to January 1, 2000.
The officers as of March 31, 2000, had a note payable due them from the
Company of $300,360. As of March 31, 1999 the officers owed $35,426 to the
Company, this was subsequently repaid.
Page 14
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 11 - GOING CONCERN
_____________
As shown in the accompanying financial statements, the company
incurred net losses for the three months ended March 31, 2000 and 1999.
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 15
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 12- INCOME TAX BENEFIT
--------------------
There was no income tax benefit recognized at March 31, 2000 or 1999.
The net deferred tax assets in the accompanying balance sheets include the
following components:
2000 1999
-------- ---------
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
------------------
Due to certain local legislative climate, the company is making efforts in 2000
to discontinue operating in the title loan business. With the implementation of
payday advance debit card programs, a three year contract with Mailboxes, Etc.,
and a possible banking alliance, the company is anticipating on expanding its
payday advances on a national level.
Page 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's discussion is based on an analysis of the financial statements
for the three months ended March 31, 1999, and the three months ended March 31,
2000. This discussion should be read in conjunction with the company's audited
financial statements for 1999 and 1998 which are set forth in the company's
amended Form 8-K dated March 6, 2000. The Form 8-K is incorporated into this
report by reference.
PAST AND FUTURE FINANCIAL CONDITION
Pinnacle is a company in transition. As discussed in the company's
previously filed Form 8-K, filed March 6, 2000, Pinnacle shifted its business
operations dramatically in 1999. Before 1999, Pinnacle's major revenue
producing subsidiary was Fast Title Loans, Inc., ("Fast Title"), which offered
consumer lending services. Due to a hostile regulatory environment, Pinnacle
discontinued its efforts to expand Fast Title. Pinnacle's focus shifted to
another subsidiary, Fast PayCheck Advance of Florida, Inc., ("Fast PayCheck").
Fast PayCheck offers payday deferred deposits to individuals.
This transition period has caused a slight decrease in total assets, and
unfortunately, a sharp increase in total liabilities. The increase in total
liabilities is due to an increase in long-term debt. It was necessary for the
company to incur the long-term debt in order to effectuate the transition of
business focus.
The company's operating revenues are significantly less than the total
operating expenses. For the three months ending March 31, 2000, the company had
operating revenues of $62,681 compared to operating expenses of $403,462 for the
same period.
However, Management expects revenues to increase through the expansion of
Fast PayCheck. Pursuant to a contract with Mailboxes Etc., U.S.A., Inc.,
("MBE"), Fast PayCheck offers services through participating MBE retail outlets.
Any increase will be affected by the length of time it takes to complete the
licensure process in each state, and the agreement of each of the franchisees to
start servicing Fast PayCheck customers. The number of customers who
participate at each location will also affect any increase.
Furthermore, to meet the expenses of the company over the next twelve
months, Management is pursuing a reduction of company debt. The company is
negotiating with investors to either extend the existing obligations or convert
the debt to equity. Further, Management is seeking an alliance partner or
banking institution that could offer long-term debt to carry the expense of the
company until revenues are increased.
RESULTS OF OPERATIONS
TOTAL ASSETS. Total assets increased $136,009, or 9%, for the three month
period ended March 31, 2000, compared to the corresponding prior year period.
Total assets of the company are $1,645,738 for the three months ended March 31,
2000, compared to $1,509,729 for the three months ended March 31, 1999.
TOTAL LIABILITIES. Total liabilities increased $1,530,101, or 69%, for
the three months ended March 31, 2000, compared to the corresponding prior year
period. Total liabilities of the company are $3,737,004 for the three months
ended March 31, 2000, compared to $2,206,903 for the three months ended March
31, 1999. This is due to the increase of long-term debt necessary to effectuate
the transition of business focus from Fast Title to Fast PayCheck. Also,
operating expenses continue to increase over the same time period.
REVENUES. Operating revenues decreased $48,250, or 43%, for the three
month period ended March 31, 2000, compared to the corresponding prior year
period. Operating revenues are $62,681 for the three months ended March 31,
2000, compared to $110,931 for the three months ended March 31, 1999. However,
Management expects revenues to sharply increase as additional Mailboxes ETC.
retail centers begin offering Fast PayCheck services.
OPERATING EXPENSES. Operating expenses increased $107,231, or 36%, for the
three month period ended March 31, 2000, compared to the corresponding prior
year period. Operating expenses for the company are approximately $403,462 for
the three months ended March 31, 2000 and $296,231 for the three months ended
March 31, 1999. The amount of expenses is reasonable considering the expansion
and litigation expenses the company has borne. As a result, Management believes
that the financial condition of the company will improve substantially by 2002.
In addition, the company has a $100,000 note payable with an investor that
expired May 14, 1999. This note is the subject of the lawsuit with Tyler Jay &
Company, L.L.C.
Also, the company has a $538,276 note payable with investors that expired
February 28, 2000. There is a $514,055 note payable with investors that expired
on March 1, 2000. The investors have not yet called the aforementioned loans.
There are no agreements as of yet to the terms of possible reinstatements on the
aforementioned loans. Moreover, the company has approximately $785,000 in debt
that will mature between December 2000 and December 31, 2002. At this time, it
is unlikely that the company will have adequate capital available to repay the
debt. If the loans are called, the company's financial condition will be
further negatively impacted. The company is also defending various lawsuit
claims, which, if lost, would negatively impact the company. Even if the
outcome is positive, the cost to the company in legal fees and employees' time
is substantial.
NET LOSS. The company's net loss increased $149,394, or 55%, for the
three month period ended March 31, 2000, compared to the corresponding prior
year period. The net loss is $418,731 for the three months ended March 31,
2000, compared to $269,337 for the three months ended March 31, 1999. The
increase in net loss is attributable to the increased operating expenses and
total liabilities and decreased operating revenues.
CAPTIAL EXPENDITURES. The company is engaged in consumer finance
and electronic technology development. As a result, capital expenditures
are not substantial. The facilities are leased. Property and equipment
net costs are $166,005 for the three months ended March 31, 2000 and $152,568
for the three months ended March 31, 1999. Substantially all
of the value of the company is not in physical assets but in the ongoing
operations of the company. Should the company be liquidated, there are few
assets to distribute to creditors or shareholders.
Non-cancelable lease commitments run until 2002. The total amount due under
the lease terms for 2000 is $60,372. Rent and related expenses under
operating leases amount to $38,482 for the three months ended March 31, 2000,
and $44,314 for the three months ended March 31, 1999. The company is
operating various locations on a month to month basis.
LIQUIDITY
Maintaining sufficient liquidity is a material challenge to Management at
the present time. The company has customer loans receivable of $277,477 for the
three months ended March 31, 2000 and $546,109 for the three months ended March
31, 1999.
Further, the company owns a note receivable dated December 29, 1997 for
$25,000 with 18% per annum interest. The principal balance and accrued interest
is due and payable on the earlier of 1) a private placement being completed in
whole or part including but not limited to, any escrow disbursements of any
funds to the maker, or 2) March 27, 2000. There are no payments received as of
March 31, 2000. The company has made an allowance for doubtful receivable for
the entire loan.
The company also owns a demand loan receivable for $423,000. This loan is
non-interest bearing. The company is performing consulting services to the
borrower in exchange for the demand loan. It is anticipated that this loan
receivable will be converted into equity during the calendar year 2000.
In August 1999, the Company secured a national contract with Comdata. This
contract allows the distribution of the Fast PayCheck debit card at the point of
sale locations. As a result, the Company is in negotiation with its competitors
to allow them to use the debit card system. This may generate revenue on a
broader basis and increase Company value.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Tyler Jay & Company, L.L.C. and First American Reliance, Inc.
- - ----------------------------------------------------------------------
The first proceeding regarding Tyler Jay is an adversary proceeding brought by
the trustee in bankruptcy of First American Reliance, Inc.("the Debtor"), on
June 29, 1999, in the United States Bankruptcy Court, Western District,
New York, BK Case No. 98-23906, AP No. 99-2186, entitled Douglas J.
Lustig, as Trustee v. Pinnacle Business Management, Inc., and Fast Title Loans,
Inc. The trustee is seeking to recover purported loans from the Debtor to Fast
Title and/or Pinnacle, in a sum of approximately $800,000, including 9%
interest, for amounts loaned and advanced by First American Reliance,
IncAn answer to the suit has been filed and the parties are currently in the
discovery process. The company had asserted a defense and set off alleging
moneys due to Pinnacle from stock subscriptions in 1998, which were never
turned over to the company. Pinnacle accrued a liability for $538,276 in 1998
and $355,755 in 1997, respectively. Management has agreed to determine the
actual amount of the loans against proceeds of a private placement diverted by
the Debtor's principal using a separate corporation. Management believes that
the setoff for funds diverted during the private placement will equal or exceed
the amounts claimed and documented by checks as transferred to Pinnacle and
will also create a setoff in respect to at least a portion of the sums advanced
to Fast Title. Management is investigating whether the funds advanced by
Debtor, in part, included funds diverted by the Debtor, and, therefore, were not
loans at all, but a return of Pinnacle's property. The company is currently in
the process of settlement negotiations in this case.
In the second proceeding, Pinnacle and Fast Title Loans are defendants in a
pending civil action instituted in 1999, in Erie County, New York, entitled
Tyler Jay & Company, L.L.C. v. Fast Title Loans, Inc. and Pinnacle Business
Management, Inc., Index No. I-1999/5697. Plaintiff asserts a claim for fees
and commissions arising from loans made by the Debtor in the previously
described adversary proceeding and sums lost by Tyler Jay allegedly because
Tyler Jay was not permitted to conduct the private placement noted above. Tyler
Jay claims that it is owed certain moneys and stock options, which damages are
allegedly in excess of $500,000. Fast Title and Pinnacle have filed a motion to
dismiss the case alleging that the New York courts do not have jurisdiction over
them in this matter. They have also asserted that Tyler Jay is not entitled to
recovery since the agreed-upon services were not provided. Moreover, Fast Title
and Pinnacle have filed a counterclaim seeking $34,000, the sum paid to Tyler
Jay, on the basis that Tyler Jay's fraudulent representations and breach of
fiduciary duty damaged them. Discovery is in process. Management intends to
vigorously defend this claim.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Form S-8
The company filed a Form S-8 on March 16, 2000. This filing registered
1,525,000 shares of common stock. The selling shareholders in this offering are
the consultants that negotiated and completed the company's acquisition of MAS.
The consultants received 1,500,000 shares of common stock of the company as
compensation for such services, pursuant to a Consulting Agreement dated March
3, 2000. The Form S-8 is incorporated into this report by reference.
Employment Agreement
The company entered into an Agreement and Release with Jeff Turino, Chief
Executive Officer of the company, and Michael B. Hall, Director and President of
the company on February 28, 2000. This Agreement and Release was entered into
by the company to release all claims by Turino and Hall pursuant to the
company's inability to perform under the Employment Agreements entered into by
the company and Turino and Hall. These Employment Agreements required the
company to pay certain compensation to Turino and Hall for services rendered.
The company failed to pay Turino and Hall the agreed compensation for performed
services. As consideration for the forgiveness of the claims, the company
issued 27,500,000 shares of company common stock to each Turino and Hall.
Pursuant to the Agreement and Release, Turino and Hall will continue employment
under the terms of the Employment Agreements until 2002 as if no breach in
either of the officer's Employment Agreements occurred. The Agreement and
Release is incorporated into this report by reference.
Amendment to the Articles of Incorporation
On February 22, 2000, the company amended its Articles of Incorporation.
Prior to this date, the Articles stated that the company was authorized to issue
100,000,000 shares of common stock and 50,000,000 shares of preferred stock.
The amendment authorizes the company to issue 200,000,000 shares of common stock
and 50,000,000 shares of preferred stock. Both the common and preferred stock
have a par value of one-tenth of one cent $(.001) per share, just as it did
before the Amendment.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The company has a $100,000 note payable with an investor that expired May
14, 1999. This note is the subject of the lawsuit with Tyler Jay & Company,
L.L.C. The company has a $538,276 note payable with investors that expired
February 28, 2000. The company is in the process of renegotiating a new payoff
date for this loan. The company was not able to make payment under the
obligations of this note. The start-up expenses of Fast Paycheck exceeded the
revenues of the company, as indicated by the Company's current financial
statements. There is a $514,055 note payable with investors that expired on
March 1, 2000. The company satisfied this loan obligation by converting the
debt to equity in the second quiarter of 2000.
ITEM 5. OTHER INFORMATION.
Acquisition of MAS Acquisition XIX Corp. Consulting Agreement
Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated
March 3, 2000, between the company and MRC Legal Services Corporation, a
California corporation, which is the controlling shareholder of MAS Acquisition
XIX Corp., ("MAS"), an Indiana corporation, 1,500,000 shares of common stock of
the company were exchanged for 96.8% (8,250,000 shares) of MAS. Through this
transaction, the company became the parent corporation of MAS.
The Exchange Agreement was adopted by the unanimous consent of the Board of
Directors of MAS on March 3, 2000. The Exchange Agreement was adopted by the
unanimous consent of the Board of Directors of the company on March 3, 2000. No
approval of the shareholders of the company or MAS is required under applicable
state corporate law.
Prior to the merger, MAS had 8,519,800 shares of common stock outstanding
of which 8,250,000 were exchanged for 1,500,000 shares of common stock of the
company. By virtue of the exchange, the company acquired 96.8% of the issued
and outstanding common stock of MAS. Certain consultants were issued an
additional 1,500,000 shares pursuant to a Consulting Agreement.
The company filed a Form 8-K to disclose the acquisition of MAS. The Form
8-K is dated March 6, 2000. An amendment to the Form 8-K was filed on May 3,
2000, which included audited financial statements for the company. The Form 8-K
and the amendment are incorporated into this report by reference.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit Exhibit Number
______________________________________________________________________________
Articles of Incorporation 3.1
Incorporated by reference from
Form 8-K, dated March 6, 2000
Exhibit 3.1
Bylaws 3.2
Incorporated by reference from
Form 8-K, dated March 6, 2000
Exhibit 3.2
Employment Agreement:
Agreement and Release 10
Incorporated by reference from
Form 8-K, dated March 6, 2000
Exhibit 10.5.3
Consent of accountants 23
Financial Data Schedule 27
Form 8-K, March 6, 2000 99.1
Incorporated by Reference
Form 8-K/A, May 3, 2000 99.2
Incorporated by Reference
Reports on 8-K
A Form 8-K was filed on March 6, 2000, to disclose the acquisition of MAS
Acquisition XIX Corp. An amendment to the Form 8-K was filed on May 3, 2000,
which included audited financial statements for Pinnacle for the years ending
1998 and 1999. A copy of the Form 8-K and the amendment are incorporated by
reference to this report.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PINNACLE BUSINESS MANAGEMENT, INC.
Date: May 15, 2000 By: /s/ Jeffrey G. Turino
------------------------------------------
Jeffrey G. Turino, Chief Executive Officer
/s/ Michael B. Hall
------------------------------------------
Michael B. Hall, President and Director