<PAGE>2
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from: to:
Commission file number: 0-22965
PINNACLE RESOURCES, INC.
(Exact name of Small Business Issuer in its charter)
WYOMING 84-1414869
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
7345 E. Peakview Avenue, Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Issuer's Telephone number, including area code:
(303) 771-8100
Check mark whether the Issuer (1) has filed all reports required by Section
13 or 15(d) of the Exchange Act 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 the filing requirements for at least the past 90
days. YES: X NO:
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PREVIOUS FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by the court. YES: NO:
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: 4,150,000
Transitional Small Business Disclosure Format. YES: NO: X
<PAGE>3
Pinnacle Resources, Inc.
Index
PART I FINANCIAL INFORMATION
Balance Sheet
December 31 1998 4
Statements of Operations
Six Months
Ended December 31, 1998 and 1997 5
Statements of Cash Flows
Six Months Ended
December 31, 1998 6
Statement of Stockholders' Equity 7
Notes to Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
PART II
Other Information 12
Signatures 13
Financial Data Schedule 14
<PAGE>4
Pinnacle Resources, Inc.
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
ASSETS
Unaudited Audited
December June
31, 1998 30, 1998
<S> <C> <C>
Current assets:
Cash $ 11,8788 $ 18,998
Interest Receivable - Related Entity 25,522 10,425
Note Receivable - Related Entity 115,000 115,000
--------- ----------
Total Current Assets 152,400 115,000
--------- ----------
TOTAL ASSETS $ 152,400 $ 144,423
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Current Portion of Notes Payable $ 100,000 $ 100,000
Accounts payable 13,875 6,600
Accrued Interest 3,925 1,425
--------- ---------
Total Current Liabilities 117,800 108,025
Long-Term portion of Note Payable 0 0
--------- ---------
TOTAL LIABILITIES 117,800 108,025
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value
Authorized 2,000,000 Shares; issued
And Outstanding -0- Shares 0 0
Common stock, .00001 par value,
Authorized 500,000,000 Shares,
Issued and Outstanding 4,150,000 Shares 42 42
Capital Paid in Excess of
Par Value of Common Stock 101,458 101,458
Retained Earnings (Deficit Accumulated During the
Development Stage (66,900) (65,102)
TOTAL SHAREHOLDERS' EQUITY 34,600 36,398
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $152,400 $144,423
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited
financial statements.
<PAGE>5
Pinnacle Resources, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Unaudited Inception
Six Months Ended January 6, 1995
December 31, Through December 31
1998 1997 1998
<S> <C> <C> <C>
Revenue $0 $0 $0
Expenses:
Legal and Accounting 4,972 14,028 21,215
Office 375 0 1,896
Officer Remuneration 4,800 4,800 14,400
Professional Fees 0 38,400 38,400
Rent 1,800 1.800 5,400
Secretarial Services 0 0 3,750
Travel 2,449 0 3,437
------- ------ ------
Total 14,396 59,028 88,498
------- ------ ------
(Loss) before Other income (14,396) (59,028) (88,498)
Other Income (Expense)
Interest Income 15,098 1,000 25,523
Interest (Expense) (2,500) 0 (3,925)
-------- ------- ------
Total 12,598 1,000 21,598
-------- ------- -------
Net (Loss) ($1,798) ($58,028) ($66,900)
======== ======= =======
Basic (Loss) Per Common Share ($0.00) ($0.01) ($0.02)
======== ======= =======
Weighted average shares outstanding 4,215,000 4,150,000 4,150,000
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>6
Pinnacle Resources, Inc.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Unaudited Inception
Six Months Ended January 6
December 31 1995 through
1998 1997 December 31, 1998
<S> <C> <C> <C>
Net (Loss) ($1,798) ($58,028) ($66,900)
Adjustments To Reconcile Net Loss To Net Cash
Used in Operating Activities:
Stock Issued For Services 0 0 1,500
Changes in Operating Assets and Liabilities:
Increase in Interest Receivable (15,097) (1,000) (25,522)
Increase in Accounts Payable 7,275 2,650 13,875
Increase in Accrued Interest Payable 2,500 0 3,925
------ ----- ------
Net Flows From Operations (7,120) (56,378) (73,122)
Cash Flows From Investing Activities:
Advances Made to Related Entity 0 (40,000) (115.000)
Net Cash Flows From Investing 0 (40,000) (115,000)
Cash Flows From Financing Activities:
Stock Issued For Cash 0 100,000 100,000
Monies Received from Loans 0 0 100,000
------- ------- --------
Cash Flows From Financing 0 100,000 200,000
Net (Decrease) in Cash (7,120) 3,622 11,878
Cash At Beginning Of Period 18,998 0 0
------- ------- --------
Cash At End Of Period $11,878 $3,622 $1,878
------- ------- --------
Summary Of Non-Cash Investing And Financing Activities:
Stock Issued for Services $ 0 $ 0 $1,500
==== ==== ======
The accompanying notes are an integral part of these unaudited financial statements.
<PAGE>7
PINNACLE RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
Statement of Shareholders' Equity
</TABLE>
<TABLE>
<CAPTION>
Deficit
Capital Paid Accumulated
Number Of In Excess During The
Common Common of Development
Shares Stock Par Value Stage Total
<S> <C> <C> <C> <C> <C>
Balance At
January 6, 1995 0 $0 $ 0 $0 $ 0
Issuance of Common Stock:
January 1995 for Cash
Advances Made On Behalf
of the Company & Services
at $.01 Per Share 150,000 2 1,498 1,500
Net (Loss) (1,500) (1,500)
------- --- ------- ------ -------
Balance At June 30,
1995, 1996 150,000 $2 $1,498 ($1,500) $0
Issuance Of Common Stock:
June 26, 1997 for Cash
At $.025 Per Share 4,000,000 40 99,960 0 100,000
Net (Loss) 0 0
--------- --- ------ ------ -------
Balance At June 30,
1995, 1996 4,150,000 $42 $101,458 ($1,500) $100,000
========= === ======== ====== ========
Net (Loss) (63,602) (63,602)
--------- --- ------ ------ -------
Balance At June 30, 1998 4,150,000 $42 $101,458 (65,102) 36,398
Net (Loss) (1,798) (1,798)
--------- --- -------- ------ -------
Unaudited Balance At December
31, 1998 4,150,000 $42 $101,458 ($66,900) $34,600
========= === ======== ====== =======
</TABLE>
The Accompanying Notes Are An Integral Part Of These Unaudited
Financial Statements
<PAGE>8
Pinnacle Resources, Inc.
Notes to Unaudited Financial Statements
For the Six Month Period Ended December 31, 1998
Note 1 - Unaudited Financial Information
The unaudited financial information included for the six month period ended
December 31, 1998 and 1997 were taken from the books and records without
audit. However, such information reflects all adjustments (consisting only
of normal recurring adjustments, which are of the opinion of management
necessary to reflect properly the results of interim periods presented).
The results of operations for the six month period ended December 31, 1998
are not necessarily indicative of the results expected for the year ended
June 30, 1999
Note 2 - Note Receivable - Related Entity:
In October 1997, monies were advanced to a related entity in the amount of
$40,000. These funds are accruing interest at a rate of 13% per annum.
The funds were originally due to be repaid on April 22, 1998. This has been
extended until October 22, 1998.
In March 1998, monies were advanced to a related entity in the amount of
$75,000. These funds are accruing interest at a rate of 10% per annum.
The funds are due to be repaid on March 22, 1999.
Note 3 - Notes Payable:
In March 1998, the Company received $100,000 in cash as a loan payable by
March 18, 1999. Interest is accruing at 5% per annum.
Note 4 - Related Party Events:
When the Company organized in January 1995, stock was issued for services
valued at $1,500. This amount was treated as administrative fees.
Commencing July 1, 1997, the shareholders of the Company are providing office
space to the Company for $300 per month. The officers are providing
services valued at $800.00 per month.
Note 5 - Subsequent Event
In January 1999, the Company issued 100,000 shares of its
common stock for $50,000 cash or $.50 per share.
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Trends and Uncertainties. The financial statements have been prepared
assuming that the Company will continue as a going concern. The Company is
in the development stage and had no operations as of its latest fiscal year end
June 30, 1998. The deficiency in working capital as of December 31, 1998
raises substantial doubt about its ability to continue as a going concern. In
the course of its development activities the Company has sustained continuing
losses and expects such losses to continue for the foreseeable future. The
Company's management plans on advancing funds on an as needed basis and in
the longer term to revenues from the operations of which there is no assurance.
The Company's ability to continue as a going concern is dependent on these
additional management advances, and, ultimately, upon achieving profitable
operations.
The Company has expended charges for professional fees. These professional
fees were paid to Victory Minerals, Inc., an affiliated company, for services
provided in connection with the registration process, raising capital and
pursuing proposed business opportunities. These are not expected to be of a
recurring nature.
Until revenues commence, the Company shall raise funds through equity
financing which may or not be successful. The Company has tried to limit
its general and administrative expenses. The Company has little or no
control as to the demand for its services and, as a result, inflation and
changing prices could have a material effect on the future profitability of
the Company.
The Company will focus its financing and capital arrangement activities on
emerging growth companies which plan to raise capital in the public markets
within a reasonable short period of time, i.e., one to two years. Although
the Company will initially target small mining companies due to its contacts
in that industry, management has not identified any particular industry
within which the Company will focus its efforts. Rather, management intends
to identify any number of candidates which may be brought to its attention
through present associations or by word-of-mouth. Initially the Company
intends to arrange sources of funding and finance for its prospective clients
through established sources for such funds by acting as a finder or broker to
the lender and as an arranger or financial consultant to the borrowing party.
In the emerging markets of South Africa and South America, opportunities
exist where small mining companies seek funding from outside sources for
capitalization because it is not available locally.
Management has over 70 years of combined business experience involving a
variety of situations where financing and/or funding has been required in
order to effectuate a mining opportunity. Individually, management
personnel has directly funded, underwritten or brokered financing for a
number of mining prospects over the years, both in the domestic market as
well as South Africa and South America.
Management believes that the Company will be able to successfully seek out
potential candidates who are interested in obtaining loans from the Company
in the immediate future. This belief is based upon the perceived difficulty
of many development and growth stage companies who require additional
financing, but are unable to obtain the same from established sources, such
as banking institutions and venture capitalists. As interest rates begin to
rise, management anticipates that those types of entities earmarked by the
Company as possible clients will continue to seek out the Company as a
lending source, as management views a potential borrower's borrowing base in
a different light than banks. For loans made by regulated commercial
lenders, there is normally a structured review and evaluation of a
prospective borrower's loan application by the lender, including an in-depth
review of such application by a loan committee. The loan committee will
then approve or reject each application as it is submitted. The evaluation
and approval of loans depends on subjective factors and judgments, as well as
objective criteria, such as loan to value ratios and independent appraisals,
when appropriate or available. The Company's loan committee consists of
substantially fewer persons than a commercial lender and uses a less formal
procedure than more traditional lenders. It is possible that any such
subjective factors and judgments may prove to be incorrect with a resulting
loss of part or all of the Company's investment in any particular loan.
However, as part of the consideration provided to the Company for issuance of
its loans, the Company receives its interest and attempts to also obtain
additional consideration in the form of equity or options or warrants in the
borrower. In the event the borrower's business plan proves successful, the
Company may receive substantial returns as a result of this equity
enhancement.
Most venture capitalists take an aggressive equity position far in excess of
that of the Company and in many instances, takes an active role in the
management of their clients. Management believes that this makes venture
capitalists unattractive to those types of entities with whom the Company
does business.
The Company's ability to become a significant lender is impaired primarily by
its own lack of capital with which to make loans. While management would
welcome the opportunity to make more loans for larger amounts, management
finds itself in the same predicament as that of its prospective clients.
That is, the lack of capital with which to fully implement the Company's
business plan. Management hopes that as the Company begins to make
successful loans, its track record will allow the Company to attract
either private investors seeking to invest in the business of the Company on
a private basis, or that the Company will be able to attract an investment
banker willing to underwrite a secondary offering of the Company's securities
to generate additional capital. There are no assurances that the Company
will be able to attract either of the aforesaid entities to increase the
Company's working capital. If the Company is unable to obtain additional
working capital, it is unlikely that the Company will generate any
substantial growth in the near future.
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the
Year 2000. As a result, many companies will be required to undertake major
projects to address the Year 2000 issue. Because the Company has nominal
<PAGE>10
assets, including no personal property such as computers, it is not
anticipated that the Company will incur any negative impact as a result of
this potential problem. However, it is possible that this issue may have an
impact on the Company after the Company successfully consummates a merger or
acquisition.
Capital Resources and Source of Liquidity. The Company currently has no
material commitments for capital expenditures. As of July 1997, the Company
pays $300 rent per month for its current office space. An increase in
lease payments could have negative effect on the cash flow and liquidity of
the Company.
For the six months ended December 31, 1998, the Company had no investing
activities.
For the six months ended December 31, 1997, the Company made advances to a
related entity of $40,000 resulting in cash flows from investing activities.
For the six months ended December 31, 1998, the Company issued stock for cash
of $100,000 resulting in cash flows from financing activities of $100,000.
For the six months ended December 31, 1997, the Company issued stock for cash
of $100,000 and received $100,000 from loans resulting cash flows from financing
activities of $200,000.
On June 26, 1997, the Company sold 4,000,000 at $.025 per Common Share for
an aggregate of $100,000. At June 30, 1997, the Company had working capital
of $100,000 consisting of $100,000 in current assets and $0 in current
liabilities.
The Company received a loan of $100,000 in March, 1998. For the year ended
June 30, 1998, the Company advanced two related parties an aggregate of
$115,000 resulting in net cash flows used in financing activities of
$115,000. Mr. Gamble serves as a Director on the Board of Directors of
Plateau Resources (Pty) Ltd., one of the related parties who received a
$75,00 loan from the Company. There is a narrow probability that third
party funding of Plateau Resources (Pty) Ltd. will be finalized in the short
term and it is highly unlikely that the Company will acquire significant
equity participation nor merge with Plateau Resources (Pty) Ltd. as a failure
in third party funding would most likely lead to an asset sale of Plateau
Resources. At June 30, 1998, the Company had working capital of $36,398
consisting of $144,423 in current assets and $108,025 in liabilities. The
Company has no long-term liabilities.
Results of Operations. The Company expects to earn consulting fees,
commissions, brokerage points and equity participation for having acted as an
arranger and go-between from having effectuated a financing package on behalf
of a client and a funding source. To date, the Company has not yet commenced
operations or received any revenues.
The Company had a net loss for the six months ended December 31, 1998 of
$(14,396). The Company had an increase of $15,097 in interest receivable for
the six months ended December 31, 1998, an increase in accounts payable of
$7,275 and an increase in accrued interest payable of $2,500. As a result,
the Company had net cash flows from operations of $7,120 for the six months
ended December 31, 1998.
The Company incurred legal and accounting costs of $4,972, office expense of
$375, officer remuneration of $4,800, professional fees of $0, rent of $1,800
and travel of $2,449 for the six months ended December 31, 1998.
The Company had a net loss for the six months ended December 31, 1997 of
$(58,028). The Company had an increase of $1,000 in interest receivable for
the six months ended December 31, 1998 and an increase in accounts payable of
$2,650. As a result, the Company had net cash flows from operations of $56,378
for the six months ended December 31, 1998.
The Company incurred legal and accounting costs of $14,028, office expense of
$0, officer remuneration of $4,800, professional fees of $38,400, rent of $1,800
and travel of $0 for the six months ended December 31, 1997.
The Company had a net loss for the year ended June 30, 1998 of $63,602. The
Company had an increase of $10,425 in interest receivable for the year ended
June 39, 1998, an increase in accounts payable of $6,600 and an increase in
interest payable of $1,425. As a result, the Company had net cash flows from
operations of $(66,002) for the year ended June 30, 1998.
The Company spent $72,602 and $0 in administrative costs for the year ended
June 30, 1996 and 1997 respectively. No other costs were incurred
in the year ended June 30, 1998. The Company incurred legal and
accounting costs of $16,243, office expense of $21, professional fees of
$38,400, rent of $3,600, salaries of $9,600, secretarial services of $3,750
and travel expenses of $988 for the year ended June 30, 1998.
Plan of Operation. The Company is not delinquent on any of its obligations
even though the Company has not yet begun to generate revenue. The Company
will identify and subsequently qualify prospective clients. Current
operations require minimal cash infusions. The Company may borrow funds or
obtain equity financing from affiliated persons or entities to continue
operations, if necessary. The Company intends to market its services
utilizing cash made available from the recent private sale of its Common
Shares. The Company is of the opinion that revenues from its services along
with proceeds of the private sale of its securities will be sufficient to pay
its expenses until receipt of revenues at a level to sustain operations.
<PAGE>12
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Not applicable.
(b) Not applicable.
<PAGE>13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pinnacle Resources, Inc.
(Registrant)
Dated: February 15, 1999
By: /s/ Glen R. Gamble
----------------------------
Glen R. Gamble, President
<PAGE>13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> $11,878
<SECURITIES> $0
<RECEIVABLES> $140,522
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $152,400
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $152,400
<CURRENT-LIABILITIES> $117,800
<BONDS> $0
<COMMON> $42
$0
$0
<OTHER-SE> $34,600
<TOTAL-LIABILITY-AND-EQUITY> $152,400
<SALES> $0
<TOTAL-REVENUES> $0
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $(14,396)
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $(2,500)
<INCOME-PRETAX> $(1,798)
<INCOME-TAX> $0
<INCOME-CONTINUING> $(1,798)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(1,798)
<EPS-PRIMARY> $(.00)
<EPS-DILUTED> $(.00)
</TABLE>
