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, 2001
_________
(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. Employer
Incorporation or Organization 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:
(727) 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 [X] NO [ ]
PAGE 1
As of March 31, 2001 the Registrant had outstanding 635,707,064 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, 2001 AND 2000
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD
MARCH 31, 2001 AND 2000
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS:
BALANCE SHEETS AS OF MARCH 31, 2001 AND 2000
(UNAUDITED)
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
------
MARCH 31,
2001 2000
------------ -----------
CURRENT ASSETS
Cash and cash equivalents $ 182,845 $ 56,944
Accounts receivable, net of allowance for doubtful accounts 2,385,449 277,477
Mortgage loans receivable 73,000 -
Inventory 1,443,736 -
Other current assets 26,250 464,250
------------ -----------
TOTAL CURRENT ASSETS 4,111,280 798,671
------------ -----------
PROPERTY AND EQUIPMENT 3,640,148 166,005
Less: accumulated depreciation (338,489) (74,654)
------------ -----------
TOTAL NET PROPERTY AND EQUIPMENT 3,301,659 91,351
------------ -----------
OTHER ASSETS
Investments 558,000 135,000
Unamortized goodwill 5,713,566 236,498
Security deposits 7,938 13,658
Loan costs, less amortization 4,900 196,671
------------ -----------
TOTAL OTHER ASSETS 6,284,404 581,827
------------ -----------
TOTAL ASSETS $13,697,343 $1,471,849
============ ===========
See accompanying notes to consolidated condensed financial statements.
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
MARCH 31,
2001 2000
------------ ------------
CURRENT LIABILITIES
Demand note - shareholders $ 1,007,090 $ -
Current portion of mortgage payable 1,165,316 -
Current portion of notes payable 1,077,608 1,390,928
Accounts payable and accrued expenses 981,533 430,429
Deferred revenue 43,256 -
------------ ------------
TOTAL CURRENT LIABILITIES 4,274,803 1,821,357
------------ ------------
LONG-TERM LINE OF CREDIT - 1,068,000
NOTES PAYABLE - OFFICERS - 300,360
LONG-TERM DEBT, LESS CURRENT PORTION 7,839,783 547,287
------------ ------------
TOTAL LONG-TERM LIABILITIES 7,839,783 1,915,647
------------ ------------
TOTAL LIABILITIES 12,114,586 3,737,004
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value of $.001; authorized
50,000,000 and 50,000,000 shares in March 31, 2001
and 2000; issued and outstanding none - -
Common stock, par value of $.001; authorized
700,000,000 and 250,000,000 shares of common stock
and 635,707,064 and 157,262,589 shares of common
stock issued and outstanding 635,707 157,262
Additional paid-in capital 9,402,338 2,328,575
Deficit (8,455,288) (4,750,992)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,582,757 (2,265,155)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $13,697,343 $ 1,471,849
============ ============
See accompanying notes to consolidated condensed financial statements.
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
MARCH 31,
2001 2000
------------------ ------------------
REVENUE
Vehicle sales $ 2,330,034 $ -
Business telephone systems and wireless telephones 146,395 -
Consulting and miscellaneous 461,416 -
Payday advance 10,590 62,681
------------------ ------------------
2,948,435 62,681
COST OF SALES (2,063,147) -
------------------ ------------------
GROSS PROFIT 885,288 62,681
OPERATING EXPENSES
Salaries, employee leasing and related 482,928 154,994
Advertising 56,584 7,386
Commissions and consulting 1,907,673 13,000
Office and general 34,313 10,776
Professional fees 109,811 210,609
Repairs and maintenance 1,185 1,243
Rent 79,487 38,482
Repossession costs - 8,734
Telephone and utilities 56,341 27,696
Travel 21,471 32,400
Other operating 58,401 35,392
------------------ ------------------
TOTAL OPERATING EXPENSES 2,808,194 540,712
------------------ ------------------
(LOSS) FROM OPERATIONS (1,922,906) (478,031)
------------------ ------------------
OTHER INCOME (EXPENSES)
Interest income 58,661 -
Interest expense (152,449) (70,950)
Depreciation and Amortization expense (69,279) (31,583)
Bad debt - -
------------------ ------------------
TOTAL OTHER INCOME (EXPENSE) (163,067) (102,533)
------------------ ------------------
NET LOSS APPLICABLE TO COMMON SHARES $ (2,085,973) $ (580,564)
================== ==================
NET LOSS PER BASIC AND DILUTED SHARES $ (0.006) $ (0.007)
================== ==================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 331,161,325 86,952,686
================== ==================
See accompanying notes to consolidated condensed financial statements.
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(2,085,973) $(580,564)
------------ ----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Depreciation and amortization 69,279 31,583
Stock issued for Consulting Services 1,905,000 137,250
CHANGES IN ASSETS AND LIABILITIES:
(Increase) Decrease in customer and vehicle loans receivable - net (488,620) (2,503)
Decrease in loans other and prepaid expenses 3,750 2,750
(Increase) Decrease in deposits and other 127,903 (1,263)
Decrease in inventory 134,463 -
Increase in accounts payable and accrued expenses 47,941 111,665
Increase in deferred revenue 22,648 -
------------ ----------
TOTAL ADJUSTMENTS 1,822,364 279,482
------------ ----------
NET CASH (USED IN) OPERATING ACTIVITIES (263,609) (301,082)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (25,212) (9,174)
------------ ----------
NET CASH (USED IN) INVESTING ACTIVITIES (25,212) (9,174)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds and payments of long-term debt and line of credit - net 400,550 324,175
Increase in officers' loans - net 9,181 33,299
------------ ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 409,731 357,474
------------ ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 120,910 47,218
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 61,935 9,726
------------ ----------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 182,845 $ 56,944
============ ==========
See accompanying notes to consolidated condensed financial statements.
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest Expense $ 138,949 $ 3,700
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH
FINANCING ACTIVITIES:
Issuance of Common Stock for Consulting Services $ 1,905,000 $ 137,250
============ ============
Issuance of common stock for MAS-Investment $ - $ 135,000
============ ============
Issuance of common stock-officer loan repayment $ 298,817 $ -
============ ============
Issuance of common stock-debt repayment $ 213,106 $ -
============ ============
ACQUISITION OF LO CASTRO AND ASSOCIATES, INC.
AND ARNONI PARTNERSHIP
Purchase price $ 7,942,965
------------
Goodwill 5,749,500
Equity assumed (assets over liabilities) 793,465
Stepup in building value from purchase 1,400,000
------------
$ 7,942,965
============
ASSETS OVER LIABILITIES PURCHASED
ASSETS
Cash $ 59,947
Accounts receivable 1,881,209
Mortgage loans receivable 158,370
Inventory 1,578,199
Other assets 42,533
Property, plant and equipment - net 1,751,142
Loan origination costs - net 5,005
------------
$ 5,476,405
------------
LIABILITIES
Shareholders payable - net $ 998,000
Notes and mortgages payable 2,952,695
Deferred revenue 20,608
Accounts payable 711,637
------------
4,682,940
------------
NET EQUITY PURCHASED $ 793,465
============
See accompanying notes to consolidated condensed financial statements.
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2001 AND 2000
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------
The consolidated condensed unaudited interim financial statements
included herein have been prepared, 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.
Results of operations for the interim periods are not indicative of
annual results.
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.
Pinnacle Business Management, Inc. operates a wholly owned subsidiary
Lo Castro and Associates, Inc. a licensed new vehicle dealership that
sells Daewoo motor vehicles pursuant to a franchise agreement. In
addition, the company sells used cars, communication systems, wireless
telephones, and provides consulting services to other dealers.
The company's other operating wholly owned, subsidiary Fast Paycheck
Advance of Florida, Inc. provides short-term paycheck advances to
customers.
The company in the year 2000 discontinued its only other operating
subsidiary Fast Title Loans, Inc. due to a poor legislative climate.
On March 3, 2000, the Company acquired 100% 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
common stock for 8,250,000 shares of MAS. An investment of $135,000
was recorded.
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 2001 AND 2000
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
-------------------------------------------------------
In the first quarter 2001 the Company spun off an inactive wholly
owned subsidiary, Summit Property Group, Inc. and Pinnacle Business
Management Inc's shareholders received a non cash dividend of 1 share
of Summit Property Group, Inc. for each 100 shares of Pinnacle
Business Management, Inc. Summit Property Group, Inc. subsequently
changed its name to Corbel Holdings, Inc.
The accompanying financial statements reflect the consolidated
operations of the above.
NOTE 2 - BUSINESS ACQUISITION
---------------------
Pinnacle Business Management, Inc. ("the Company") on January 19, 2001
acquired the net assets of Lo Castro and Associates, Inc. a
Pennsylvania "S" corporation ("Lo Castro"). The Company also acquired
the net assets of Arnoni, Lo Castro and Associates, a Pennsylvania
general partnership ("Arnoni"). Lo Castro and Arnoni are related
entities under common ownership.
The Company acquired Lo Castro and Arnoni for 83,300,000 shares of the
Company's common stock plus a promissory note in the amount of
$6,693,465 due in quarterly installments commencing April 1, 2002
through and including January 1, 2007. The purchase price approximated
$7,942,965.
The summarized unaudited pro forma results of operations set forth
below for the three months ended March 31, 2001 and 2000 assume the
acquisition was completed January 1, 2000 and include applicable
expenses.
Three Months Ended
March 31,
(Unaudited)
--------------------------------
2001 2000
------------- -------------
Revenue $ 2,948,435 $1,875,556
Operating expenses (4,871,341) (2,256,516)
------------- -------------
Loss from operations (1,922,906) (380,960)
Other income (expenses) (163,067) (88,073)
------------- -------------
Proforma net income (loss) $ (2,085,973) $ (469,033)
============= =============
Proforma net income (loss) per
Common stock $ (.006) $ (.005)
============ =============
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 2001 AND 2000
NOTE 3 - 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. Diluted earnings
per share (EPS) includes additional dilution from common stock
equivalents, such as stock issuable pursuant to the exercise of stock
options and warrants. Common stock equivalents were not included in
the computation of diluted earnings per share when the company
reported a loss because to do so would have been antidilutive for
periods presented.
The following is a reconciliation of the computation for basic and
diluted EPS:
March 31,
-----------------------------
2001 2000
-------------- -------------
Net Loss $ (2,085,973) $ (580,564)
Weighted average common shares
outstanding (basic) 331,161,325 86,952,686
Weighted-average common stock
equivalents:
Stock options: --- ---
Warrants: --- ---
-------------- -------------
Weighted-average common shares
outstanding (diluted) 331,161,325 86,952,686
============== =============
Options and warrants outstanding to purchase stock were not included
in the computation of diluted EPS because inclusion would have been
antidilutive.
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 2001 AND 2000
NOTE 4 - GOING CONCERN
--------------
As shown in the accompanying financial statements, the Company
incurred net losses for the three months ended March 31, 2001 and
2000.
Additionally, in the year 2001, a mortgagor has made a demand for the
mortgage payable which is secured by the land and the building on
which Lo Castro and Associates, Inc. operates. Furthermore, Lo Castro
was informed by Promistar Bank to seek other alternative financing for
their floor plan liability of new Daewoo vehicles. The company is
seeking the financing to rectify these two demands.
Pinnacle Business Management,Inc.has a $100,000 note payable with an
investor that expired May 14, 1999. The Company has accrued interest
at March 31, 2001 of $100,500 that is due.
Management is negotiating and seeking long-term financing to meet
their obligations stated above. However, the Company's financial
condition will be further negatively impacted if the financing is not
obtained.
These factors raise substantial doubt about the Company's ability to
continue as a going concern.
There is no guarantee whether the Company will be able to generate
enough revenue and/or raise enough capital to support the operations.
If the Company is unsuccessful in its efforts, it may be necessary to
preserve asset value. The financial statements do not include any
adjustments that may result from the outcome of those uncertainties.
NOTE 5 - LITIGATION
----------
The Company is defending a lawsuit commenced by Tyler Jay & Co.,
L.L.C. asserting a claim for fees and commissions arising from loans
made to the Company. The sums demanded exceed $500,000 in the
aggregate. The Company has asserted claims that are still in the
process of being evaluated by their attorneys. It is not possible to
determine whether there will be a loss; or, if there is a loss, the
extent of the loss.
However, the Company favorably settled a lawsuit with First American
Reliance, Inc. (FAR) in December, 2000. The suit above stems from
loans made to the Company by FAR.
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
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, 2001. The figures are then compared
to the same period 2000. This discussion should be read in conjunction with
the company's audited financial statements for 2000 and 1999 which are set forth
in the company's Form 10-KSB filed on April 17, 2001.
PAST AND FUTURE FINANCIAL CONDITION
Pinnacle is a consumer finance servicer that offers advance paycheck services
and other retail financial services at competitive rates in convenient
locations. At present, Pinnacle is a company in transition with diversified
operations.
Pinnacle is a holding company of Fast Paycheck Advance Inc., a Florida
corporation ("Fast Paycheck") and Lo Castro & Associates, Inc., a Pennsylvania
Subchapter S corporation, ("Lo Castro"), acquired on January 19, 2001. In
addition, Pinnacle acquired Arnoni, Lo Castro & Associates, a Pennsylvania
general partnership ("Arnoni"). Lo Castro and Arnoni are related entities under
common control. The company's other wholly owned subsidiary, Fast Title Loans,
Inc., a Florida corporation ("Fast Title") became inactive in September 2000.
In the past, Fast Title, Pinnacle's consumer lending subsidiary, generated all
of the Company's revenues. Fast Title loaned money, secured by motor vehicle
title, to individuals with poor or non-existent credit. It provided fast access
to short-term cash loans, primarily in the state of Florida. The title loan
business, however, became unprofitable when the legislature in Florida lowered
the interest rates on vehicle title loans. In September 2000, Pinnacle
discontinued its Fast Title business and concentrates instead on developing Fast
Paycheck and its growth potential. Fast PayCheck is engaged in consumer lending
and advance paycheck services.
Since Fast Title became inactive in September 2000, management has developed new
lines of business, primarily through Fast Paycheck, and shifted its business
operations dramatically. As a result of discontinuing the title loan business in
Florida, however, the operating revenues decreased and the company's financial
condition was impaired.
The negative impact on operations resulted in a loss of income for the last two
years. The total losses for the company were $3,440,749 in 2000 and $2,646,922
in 1999. The total revenue from the title loan business was -0- in 2000 and
$210,424 in 1999. Revenues from the payday advance were $71,199 in year 2000 and
$4,114 in 1999.
In March 2001, Pinnacle spun-off Summit Property Group, Inc., ("Summit"), a
Nevada corporation and a wholly-owned subsidiary of Pinnacle. This subsidiary
remained inactive and had no assets since its incorporation on December 27,
1997.
Management is optimistic that the company will recover and continues to develop
the data processing services and payday advance services to individuals, as well
as to explore additional business opportunities to expand cash flow.
The company's new operations encompass three areas: (1) the expansions of
revenues through the traditional pay day lending; (2) revenue from processing
payday loans for competitors and (3) continuation and expansion of the Lo Castro
business.
First Component of Operations
- --------------------------------
The first component of operations consists of revenues generated through the pay
day lending from the company's former Fast Title locations in Florida.
In November 1999, the company entered into a contract with Comdata Network, Inc.
d/b/a Comdata Corporation ("Comdata"), a Maryland corporation. Comdata has
developed, offers and operates a funds distribution service, which may be used
by companies and employers to distribute wages, salaries or expense
reimbursement funds to employees or persons entitled to such funds, by means of
Comcheck eCash Card (MasterCard), provided the companies are approved for
Comdata's service.
The Comdata agreement, entered into on November 11, 1999, was for the term of
one year. Pinnacle continues to renew the agreement on month-to-month basis.
Under the agreement, Comdata provided Pinnacle with the ComCheck debit card that
have access to the CIRRUS ATM Network and the MAESTRO POS Debit Network. The
debit cards are issued by First American National Bank, who is a CIRRUS and
MAESTRO member. MAESTRO is a distribution division of the MasterCard system.
Comdata also provided the company's employees with initial training in the funds
distribution by the means of the debit card, as well as with promotional
material.
The debit cards provided by Comdata are used to advance funds to the customers.
Instead of disbursing cash and requiring cash to be on hand in locations
throughout the country, Pinnacle provides a debit card to its customers that is
accepted at 1,000,000 plus locations. The debit card is placed on the MAESTRO
system by Comdata.
Comdata contract expired on November 11, 2000. Before its expiration, Pinnacle
entered into a contract with Lynk Systems, Inc. ("Lynk Systems"), by and through
its CashLynk Master-Client Agreement signed on September 12, 2000. Both Lynk
System and Comdata provide debit cards to the company. Lynk System contract is
for the term of two years. Lynk System provides the same services as Comdata,
but it also provides additional services that customers can utilize with the
debit card, such as ATM services, Fund Transfer Services, Long Distance
Telephone Services, and POS Services that allow the cardholder to purchase goods
and services at any retail or other establishment that displays the network logo
that also appears on the back of the card. POS are Point-of-Service locations.
The debit card issued by Lynk Systems is supported by the Star, Plus, Mac,
Pulse, Interlink and NYCE network. These networks act exactly like the MAESTRO
and CIRRUS networks that support the Comdata debit cards. The major advantage of
the Lynk System is the increased swipe fee revenue from Lynk Systems. A swipe
fee is a fee generated each time the debit card is used in an ATM or at a POS
location. Pinnacle has the option to pick up additional services for its
clients, but has not implemented any such programs. Pinnacle has plans to
implement additional services as they become available from the Lynk System in
the next 12 months.
Second Component of Operations
- ---------------------------------
The second component of operational revenues consists of processing revenues
generated from processing PayDay advance loans for the company's competitors.
Management expects revenues to increase through the expansion of Fast PayCheck.
On September 24, 1999, the company signed an agreement to offer Fast PayCheck
services through Mail Boxes Etc. USA, Inc. ("MBE") stores. MBE is a franchiser
of retail outlets which provide a variety of postal, business and
communication services to businesses and the general public. The contract
allows Fast PayCheck to offer services through participating MBE retail outlets.
MBE has over 3000 locations in the United States. The management estimates
that offering its debit card services in even a fraction of these stores could
greatly expand the business of Fast PayCheck.
Through the MBE agreement, Fast PayCheck may offer its services in any
participating MBE Centers. The decision to open a Fast PayCheck service in an
existing MBE center is made by Pinnacle's management. Under the agreement,
Pinnacle may commence business in any state, in which Pinnacle is licensed to
conduct business, within the three year period. Pinnacle has to negotiate with
each franchisee separately, and the franchisee must agree to offer Fast
PayCheck services in their MBE Center.
The MBE contract carries an option to renew upon terms agreed to by MBE,
Pinnacle and Fast PayCheck. However, MBE, a subsidiary of Office Products of
America, Inc., has recently been sold to United Parcel Service. The
reorganization of MBE's corporate structure does not affect or modify the terms
of MBE's agreement with Pinnacle. The future of the MBE agreement, however, is
uncertain at this time due to the fact that the new management of MBE may not
include Pay Check services in their business model and may not renew the
agreement before its expiration in September 2002. In the event Pinnacle is
unable to renew the MBE contract, it may not be able to meet the projected
target of revenues generated by its debit card services in MBE locations, unless
it secures a similar contract with another competitor or develops new lines of
business.
Currently, Fast PayCheck services are offered in four corporate locations
(former Fast Title stores) in the state of Florida and throughout 125 MBE
locations in the state of Florida. By the end of 2001, Management plans to
expand into every MBE location in states with laws favorable to the provisions
of Fast PayCheck services. Several states have usury laws, for example, that
would prohibit Fast PayCheck practices. Management estimates that as many as
2800 MBE stores are located in favorable states.
The company has been licensed in Florida, Louisiana, Utah, Missouri, North
Carolina, Kentucky, Indiana, Idaho, and California, and has pending applications
for licenses in 20 (twenty) additional states, as set forth in more detail in
the company's Form 10-KSB, filed on April 17, 2001, and incorporated herein by
reference. Management is currently working to open locations in Louisiana and
Utah; the target date, previously announced as December 2000, has not been met
and a revised target for the opening has not been set due to the company's
assimilation of the Lo Castro acquisition into its business plan.
Third Component of Operations
- --------------------------------
The third component of operations is the recently acquired Lo Castro businesss.
Pinnacle intends to continue Lo Castro's diversified operations conducted
through Lo Castro's three divisions, All Pro Auto Mall, All Pro Daewoo, and All
Pro Communications.
All Pro Auto Mall
- --------------------
All Pro Auto Mall sells used passenger cars and light trucks in the Western
Pennsylvania area out of its Auto Mall store in McMurray, Pennsylvania. The Auto
Mall store, located on Route 19 South in Peters Township, has a showroom that
accommodates up to seven vehicles. The Company focuses its marketing efforts on
the sub-prime customer through its Buy-Here-Pay-Here program. In a typical
transaction, the Buy-Here-Pay-Here customer purchases a used vehicle that sells
for less than $9,000. The customer is required to make a down payment, ranging
from $1,500 to $2,500, and finances the balance with the Company. All Pro
charges interest rates ranging from 13% to 21%, depending on the condition and
model year of the vehicle, the degree of credit risk, and the size and term of
the loan.
All Pro Auto Mall also offers a wide range of traditional third party financing
and leasing options for customers not considered sub-prime. Occasionally, the
Auto Mall also offers a limited selection of classic cars, sports cars, exotic
cars, and motorcycles. These vehicles are financed through traditional financing
arrangements with other lending institutions.
All Pro Daewoo
- ----------------
All Pro Daewoo is an authorized dealer of Daewoo Motor America, Inc., and it
sells new and used Daewoo motor vehicles. Daewoo Motor America, Inc. currently
manufactures three Daewoo models for sale in the United States, all of which are
available at All Pro Daewoo. The Daewoo models consist of the sub-compact Lanos,
the mid-size Nubira, and the full-size Leganza. Daewoo motor vehicles are a
high-value, low price-point vehicle with Manufacturer's Suggested Retail Prices
ranging from $9,199 to $19,199, excluding taxes, title, and destination charges.
Daewoo vehicles are sold for cash or financed through traditional third party
sources and are not typically eligible for the Buy-Here-Pay-Here Program.
The All Pro Daewoo dealership has a full service parts department with eleven
service bays and a customer service department. It has the ability to service
any vehicle. It is also a fully licensed Safety Inspection and Emission Station
for the Commonwealth of Pennsylvania, making servicing any vehicle convenient
for the customer.
All Pro Communications
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All Pro Communications is a full service Telecommunications company engaged in
the sales, installation, and service of the following systems:
1. Digital Business Telephone Systems
2. Digital Voice Mail Systems
3. Automated Attendant Systems
4. Nurse Call Systems
5. Emergency Call Systems
6. Closed Circuit Television (CCTV) Surveillance Systems
7. Fire and Security Systems
8. Structured Cabling (voice, data, video, fiber optics)
9. Telephone Entry Systems
On May 24, 2000, All Pro entered into an agreement with NEC America, Inc.
("NECAM"), a New York corporation with a principal place of business located in
Irving, Texas, to sell and distribute telecommunications products and to provide
installation, repair, maintenance, training and related services in the
territory designated in the agreement. The NECAM agreement and Product
Appendices are incorporated by reference to the Company's Form 8-K filed with
the Commission on February 5, 2001.
All Pro, as NECAM's Associate under the agreement with NEC America, Inc., has
installed business telephone systems within the port configurations offered by
NECAM. During the calendar year 2000, All Pro provided installation and service
to the commercial industry, private business, government agencies, health care
facilities and educational institutions throughout the Western Pennsylvania
region.
All Pro Communication is lead by a group of experienced telecommunication
professionals specializing in the sales, design, installation and service of
Business Communication Systems. All Pro employees include communications
consultants, certified technicians, customer service representatives and
administrative personnel. Senior management of All Pro will be comprised of the
same team that has directed the growth of Lo Castro since its incorporation in
1997 and includes Vincent A. Lo Castro, Mark D. Jackson, Frank J. Lo Castro and
Vincent Trocheck. The current management brings to All Pro many years of
combined experience in business management and telecommunications.
All Pro Communications is an authorized agent of AT&T Wireless Services in the
Pittsburgh Metropolitan Statistical Area. As AT&T's agent, All Pro offers a wide
range of products, including the latest digital multi-network and internet-ready
wireless telephones manufactured by Nokia, Ericsson, and Motorola. The Company
also assists the customer in selecting the best calling plan on which to
activate service based on a review of their calling patterns (minutes used per
month, long distance and roaming activity).
As a subsequent event, in May, 2001, All Pro Communications entered into a
three-year Sales Agency Agreement with MCI WorldCom Wireless, Inc. ("MCIW").
Under this Agreement, All Pro Communications is permitted to act as a sales
agent for the solicitation of wireless telephone service in the territory in
which MCIW has legal and regulatory authority.
All three divisions operate out of the same facility, a three story building
located at 3644 Washington Road, McMurray, Pennsylvania, 15317. The property is
owned by Arnoni, Lo Castro & Associates ("Arnoni"), a Pennsylvania general
partnership, which was acquired by Pinnacle in the Lo Castro Acquisition. Prior
to the Lo Castro Acquisition, each of the selling shareholders assigned their
respective interest in Arnoni to Lo Castro & Associates, Inc. The Assignment of
Partnership Agreement has been filed with the Commission as Exhibit 17 to the
company's Form 8-K/A filed on April 4, 2001, and incorporated herein by
reference.
RESULTS OF OPERATIONS
TOTAL ASSETS. Total assets at March 31, 2001 are $13,697,343 compared to
$1,471,849 at March 31, 2000. The increase in the first quarter 2001 primarily
represents the net assets of Lo Castro and Arnoni.
TOTAL LIABILITIES. Total liabilities are $12,114,586 for three months ended
March 31, 2001 compared to $3,737,004 as of March 31, 2000. Total liabilities
include accounts payable and accrued expenses, current portion of mortgage
payable, the current portion of the long term debt, and demand note payable
shareholders. Accounts payable increased to $981,533 at March 31, 2001 compared
to from $430,429 at March 31, 2000.
The long-term debt increased to $7,839,783 at March 31, 2001 compared to
$547,287 at March 31, 2000. The increase of long-term debt reflects a promissory
note in the amount of $6,693,465 payable to Vincent A. and Kim Lo Castro for the
acquisition of the net assets of LoCastro. The note is payable in quarterly
installments commencing April 1, 2002 through and including January 1, 2007.
The company has a $100,000 note payable with an investor that expired May 14,
1999. The company has accrued interest at March 31, 2001 of $100,500 that is
due.
REVENUES. Operating revenues have increased over the first three months of
operation in 2001. At March 31, 2001 operating revenues were $2,948,435
compared to $62,681 at March 31, 2000. Operating revenues are expected to remain
constant or increase as a result of the Lo Castro acquisition and the Fast
PayCheck expansion.
COST OF SALES: Cost of sales at March 31, 2001 is $2,063,147 compared to -0- at
March 31, 2000. Costs of sales are expected to increase in proportion to the
operating revenues.
OPERATING EXPENSES. Operating expenses are $2,808,194 for the three months ended
March 31, 2001 compared to $540,712 for the three months ended March 31, 2000.
The expenses include salaries, advertising, commissions and consulting fees
relating to the Lo Castro acquisition. Management believes that the financial
condition of the company will improve substantially by 2002.
NET LOSS. The company incurred net losses for the three months ended March 31,
2001 and 2000. The company's net loss is $2,085,973 for the three months ended
March 31, 2001 and $580,564 for the three months ended March 31, 2000.
CAPITAL EXPENDITURES. Capital expenditures increased to $25,212 for the three
months ended March 31, 2001 compared to $9,174 for the three months ended March
31, 2000. The increase represents expenditures associated with the Lo Castro
operations. The company's capital expenditures are not substantial and
management does not foresee a substantial difference from quarter to quarter.
Non-cancelable lease commitments run until 2003. The total amount due under the
lease terms for 2001 is $34,212. The company is operating various Fast
PayCheck's locations in Florida on a month to month basis.
The company has a mortgage payable note secured by the land and the building
from which Lo Castro operates. The total amount due under the mortgage note for
2001 is $1,165,316. The mortgagor made a demand for the mortgage. The company is
seeking long-term financing to refinance the loan.
LIQUIDITY
Maintaining sufficient liquidity is a material challenge to management at the
present time. As the financial statements reflect, the company incurred net
losses for the three months ended March 31, 2001 and 2000. In addition, a
mortgagor has made a demand for the mortgage payable which is secured by the
land and the building from which Lo Castro operates. Furthermore, Lo Castro was
informed by Promistar Bank to seek other alternative financing for its floor
plan financing of new Daewoo vehicles. Management is negotiating and seeking
long-term financing to meet their obligations and to carry the expenses of the
company until revenues are increased. If the financing is not obtained, however,
the company's condition will be further negatively impacted.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
First American Reliance, Inc., BK Case No. 98-23906
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The first proceeding 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. This case involves a claim
made in bankruptcy by First American Reliance, Inc. ("FAR") against the company
and Fast Title for $689,207 plus 9% interest thereon from April 3, 1997, for
amounts allegedly loaned and advanced by FAR to the company and Fast Title which
were not repaid. The company and Fast Title have asserted a defense and setoff
alleging that monies of the company from stock subscriptions delivered to FAR
and related entities were not turned over to the company but were wrongfully
converted and, in some cases, used by FAR as loans to the company and Fast
Title. It is further alleged that the claims of the company and Fast Title
exceed the sum that FAR claims it is owed by the company and Fast Title. The
parties in the case recently entered into a Stipulation of Settlement, in which
the company and Fast Title agreed, jointly and severally, to pay the Trustee in
bankruptcy of FAR the sum of $100,000 in the full settlement of the case. An
initial payment of $25,000 was tendered at the time of delivery of the executed
Stipulation to the Trustee, and an additional payment of $25,000 was made in
March 2001. Two additional payments of $25,000 each are payable on or before
April 1, 2001 and May 1,2001. The Stipulation provides that in the event of
failure to pay in full any of these payments within 10 days of its due date, the
remaining balance of all payments along with the additional sum of $25,000 will
be immediately due and payable at the option of the Trustee. Under the
Stipulation, the maximum money judgment the company is subject to is $100,000.
On March 23, 2001 the bankruptcy Judge approved the settlement.
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. This case involves a breach of
contract claim made against the company and Fast Title by Tyler Jay and Company
("Tyler Jay") for their failure to pay certain compensation allegedly owing
Tyler Jay for services that it purportedly performed. Tyler Jay claims that it
is owed certain monies and stock options, which damages are allegedly in excess
of $600,000. The company and Fast Title have asserted that Tyler Jay is not
entitled to recovery since the agreed-upon services were not provided. Moreover,
the company and Fast Title have filed a counterclaim seeking $34,000, the sum
paid to Tyler Jay, on the basis that they were damaged by Tyler Jay's fraudulent
representation and breach of fiduciary duty. The parties in the case are
currently conducting discovery. Management intends to vigorously defend this
claim.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Item 2:
(a) There were no instruments defining rights of the holders of any class of
registered securities that have been modified.
(b) Not applicable
(c) As of March 31, 2001, the company issued 178,707,064 restricted securities.
The shares were contracted for issue by the company in a privately
negotiated agreement and therefore were issued in an exemption from
registration as a private placement under section 4(2) of the Securities
Act of 1933.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The company has a $100,000 note payable with an investor that expired May
14, 1999. The company has accrued interest at March 31, 2001 of $100,500 that
is due.
The company has a mortgage payable note secured by the land and the building
from which Lo Castro operates. In the year 2001, the mortgagor made a demand for
the mortgage. The total amount due under the mortgage note is $1,165,316.
In addition, Lo Castro has been informed by Promistar Bank to seek other
alternative financing for their floor plan liability of new Daewoo vehicles. The
company is seeking long-term financing to rectify these two demand.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to the vote of securities holders.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit Number Exhibit Description
______________________________________________________________________________
2. Stock Purchase Agreement among Pinnacle Business Management, Inc. and
Vincent A. Lo Castro and Kim Lo Castro, and Michael B. Hall and Jeff
Turino, dated as of December 27, 2000, incorporated herein by
reference to the company's Form 8-K, filed with the Commission on
February 5, 2001.
2(i) Stock Pledge Agreement among Pinnacle Business Management, Inc.,
Vincent and Kim Lo Castro, and Mark Jackson as Pledge Agent, dated as
of January 1, 2001, incorporated herein by reference to the company's
Form 8-K, filed with the Commission on February 5, 2001.
2(ii) Secured Promissory Note by Pinnacle Business Management Inc., made on
January 1, 2001, incorporated herein by reference to the company's
Form 8-K, filed with the Commission on February 5, 2001.
2(iii) Shareholder Rights Agreement among Pinnacle Business Management, Inc.
and Kim and Vincent Lo Castro, dated as of January 1, 2001,
incorporated herein by reference to the company's Form 8-K, filed with
the Commission on February 5, 2001.
2(iv) Mortgage, Security Agreement, and Financing Statement between Kim and
Vincent Lo Castro, as Mortgagees, and Arnoni, Lo Castro & Associates,
as Mortgagor, effective as of January 1, 2001, incorporated herein by
reference to the company's Form 8-K, filed with the Commission on
February 5, 2001.
2(v) Closing Agreement between Pinnacle Business Management, Inc. and Kim
and Vincent Lo Castro, dated as of January 18, 2001, incorporated
herein by reference to the company's Form 8-K, filed with the
Commission on February 5, 2001.
3(i) Articles of Incorporation, incorporated herein by reference from Form
10-SB/A, filed with the Commission on December 8, 2000.
3(ii) Certificate of Amendment of Articles of Incorporation filed with the
Secretary of State of the State of Nevada on March 14, 2001.
3(iii) Bylaws, Incorporated by reference from Form 10-SB/A, filed with the
Commission on December 8, 2000.
The company filed with the Commission Form 8-K and Form 8-K/A in the period
ended March 31, 2001.
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 18, 2001
By:
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Jeffrey G. Turino, Chief Executive Officer
By:
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Michael B. Hall, President and Director