<PAGE>2
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: 6/30/99
OR
[ ] 15,TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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)
Registrant's Telephone number, including area code:
(303) 771-8100
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.00001 par
value
Check whether the Company (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during
the preceding 12 months (or such shorter period that the Company
was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days. Yes [x]__ No
[ ]_____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Company's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[x]
The Company's revenues for its most recent fiscal year was $0.
As of June 30, 1999, the market value of the Company's voting $.0000
par value common stock held by non-affiliates of the Company was $0.
The number of shares outstanding of Company's only class of common
stock, as of June 30, 1998 was 4,250,000 shares of its $.00001 par
value common stock.
Check whether the Issuer has 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 a court.
Yes [x] No [ ]
No documents are incorporated into the text by reference.
Transitional Small Business Disclosure Format (check one)
Yes No x
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PART I
ITEM 1. BUSINESS General
A. Business Development. Pinnacle Resources, Inc. (the "Company")
is a development stage company, incorporated pursuant to the laws of
the State of Wyoming on January 6, 1995 under the name of Claremont
House, Corp. On June 26, 1997, the Articles of Incorporation were
amended to change the name of the Company to Pinnacle Resources, Inc.
and to authorize 2,000,000 Preferred Shares with a par value of $.01
per Preferred Share. Additionally, the Company effectuated a 1 for
3.3333 reverse stock split reducing the number of outstanding Common
Shares from 500,000 to 150,000.
The Company has had limited operations since its inception in 1995 due
to its lack of working capital. The Company was originally
established with the idea of providing "Assisted Living Facilities" to
at risk (frail) senior citizens. Management never commenced
operations regarding this venture due to a lack of funding. In June
1997, the Company issued 4,000,000 (post split) Common Shares for cash
at $.025 per Common Share for an aggregate of $100,000 to thirteen
individuals who were then non-affiliates. The new owners of Claremont
House, Corp. did not acquire the Company in order to use Claremont
House, Corp. or its predecessors, as the object of a merger or
acquisition. Claremont House, Corp. was acquired, and its name changed
to Pinnacle Resources, Inc., in order to more clearly identify its new
mandated business purpose, which is to evaluate, structure, and
complete a merger with, or acquisition of, another unrelated privately-
owned corporation. In the course of its activities, the Company plans
to arrange (or provide) funding for companies that it evaluates and
will try to structure merger or acquisition opportunities so that
conditions are advantageous to the Company. Victory Minerals Corp., a
holding company controlled by Glen Gamble, purchased 2,000,000 of those
Common Shares. Currently, the Company is engaged in the business of
providing financial services to emerging growth companies in the United
States, as well as development stage companies located in selected
developing countries, primarily in Africa and South America.
Since inception, the Company has not had any material financial
activities.
The Company filed a Form 10-SB on a voluntary basis to provide full
disclosure to its shareholders and to meet one of the requirements of a
NASDAQ listing. Until the Company, if ever, meets all of the
requirements of a NASDAQ listing, the Company intends to seek quotation
on the OTC Bulletin Board, which is managed by the NASD. The Company
does not know approximately when it shall seek said quotation on the
OTC Bulletin Board.
The Company will voluntarily file periodic reports in the event that
its obligation to file such reports is suspended under the Exchange
Act.
Many states limit the resales of securities of shell companies. As a
result, such restrictions may be placed upon the Company's shareholders
even though the Company now has a stated business purpose. The
Company has not yet applied for secondary trading in any specified
states and does not know specifically of any such restrictions.
B. Business of Company. The Company will engage in the business of
financial services, making small commercial loans to, and equity
investments in, emerging growth companies which are unable to obtain
financing from traditional sources. The Company intends to be in the
financial services business and may also furnish financial consulting
services and advice as an incidental part of any other agreement or
arrangement.
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 reasonably 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. However, the Company will direct
its activities in seeking and evaluating suitable candidates for
financing both in the United States and on companies operating in
selected stable, developing countries, principally in Africa and South
America.
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In addition to domestic financing experience, management's historical
exposure has been in Southern Africa and South America. Even though
the Company intends to review and evaluate a variety of funding
opportunities, the bulk of the management's funding and financing
experience has been concentrated in the mineral and mining industry;
therefore management's experience would be limited in the financing of
projects outside the mining industry. In Africa and South America,
management assisted in funding a variety of mining opportunities. For
example, a gold operating company in Bolivia; a domestic brokerage firm
for placing two active diamond properties in South Africa; a gold
claims leasing project in Zimbabwe; and a leasing/title program for a
vanadium ore property and a platinum ore property both located in South
Africa. Based on this exposure, management is of the opinion that the
need for outside sources of funding by mining companies in these
markets has potential. The Company is attracted to these areas
because they represent some of the most highly mineralized areas in the
world. Additionally, the Company's management has some prior
expertise and working knowledge in these markets. The Company expects
to encounter normal timing difficulties with third world governmental
regulations and bureaucracy that could slow down and encumber the
Company's planned business activities.
In the third world countries it is not uncommon during the application
and approval process relating to surface and mineral titles; drilling
and exploration permits; mineral and mining leases; easements and
rights-of-way; water or power access and usage; environmental and
restoration plans; etc., to be exceedingly slow compared to United
States standards. Based on management observation and past experience,
these third world countries often have only one person qualified to
process any particular application; and sometimes they have no one
qualified to evaluate an application and the department has to seek an
outside consultant's report prior to processing an application. In
geographic areas where prospecting and mining activity is abundant,
regulatory departments can be understaffed, resulting in delays in the
application process.
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.
The Company's operating strategies will be to provide financing
solutions to privately-held corporations and other companies which, in
all likelihood, do not meet the overall credit standards typically
required by commercial banks in today's restrictive credit environment.
Management believes that commercial banks are reluctant to make loans
to small and newly organized companies and, in the instances in which
such loans are made, they are heavily collaterized by homes and other
personal assets in virtually every case. Commercial bankers typically
do not lend to companies with limited assets, or which have been in
business for less than three or four years. Most, if not all, of the
companies which will be candidates for loans and/or equity investments
by the Company or for other sources of capital known to management,
will not have an operating history which will support bank loans.
These companies, primarily privately-held corporations to be targeted
by the Company, may have negative working capital positions, negative
cash flow, recurring losses or other negative characteristics relating
to their past performance which would result, in all probability, in a
bank's refusal to lend funds. The Company may consider as candidates
for financing, corporations and entities which are affiliated with the
Company, or in which the Company or executive officers, directors
and/or controlling shareholders have an equity interest.
While the Company may require, as a condition to making a loan to any
particular candidate, adequate collateral as security, the Company will
rely upon the expertise and experience of its management on a case-by-
case basis in making the determination regarding the issue of
collateral. Management will not employ any specific formula for
collateral coverage and may make unsecured signature loans under
circumstances deemed acceptable by management. Banks, on the other
hand, traditionally require collateral coverage of approximately 133%
for accounts receivable, 300% for inventory and 200% of liquidation
value for real estate, equipment and other tangible assets. The
Company intends to charge interest rates on loans in a range from 5% to
18% and to obtain equity participation in the form of warrants or
options to purchase shares of the common stock of the entity financed
or other forms of securities in order to provide additional yield
<PAGE>5
enhancement. Where the Company receives such warrants, options or
other securities, the Company may distribute such securities to its
shareholders as a stock dividend, subject to compliance with applicable
state and federal securities laws. In addition to or in lieu of the
aforementioned types of securities, the Company may seek to obtain an
interest in revenues, a carried working interest or other carried
interest in an operating, producing mine or oil, gas or mineral
property owned by a mining or energy-related company financed by the
Company or its other capital sources. Depending upon the nature of
the legal interest or right obtained, the Company could become subject
to liability in addition to that of a shareholder or holder of a debt
instrument.
The Company was asked by the management of Plateau Resources (Pty)
Ltd., a South African development-stage corporation, to arrange funding
in order to initiate a drilling and exploration program on their
undeveloped properties. If the Company is successful in achieving
funding for Plateau Resources, then Company management expects to
obtain an option for equity participation in Plateau Resources and
perhaps an option to merge Plateau Resources in as a wholly owned
subsidiary of the Company. The Company is of the opinion that equity
participation in Plateau could be advantageous to the Company if
Plateau successfully encounters a commercially feasible-mineable PGM
ore reserve. If any option is earned then the Company may, or may not,
exercise such option depending upon the outcome of Plateau's
exploration program. Any anticipated option to merge is undefined and
is presently not contemplated.
Plateau Resources (formerly Bougleigh 126 (Pty) Ltd} was organized in
February 1995 and its business activities to date have been confined to
South Africa. Plateau has been awarded Prospecting Rights on lands
that have platinum group metals (PGM's) potential. To date, no
drilling or exploration has been conducted on these lands by either Mr.
Gamble or Plateau.
Plateau required operational capital which was provided by a third
party investor introduced to the Plateau opportunity independently by
the efforts of Mr. Gamble for a fee. Plateau is currently seeking
drilling and exploration funds in the amount of US$1.5 million in order
to initiate a core drilling program over the next eighteen months. If
the funding is completed, this exploration program will either prove or
disprove the commercial feasibility of the anticipated PGM reserves of
platinum, palladium, ruthenium as well as base metals of copper and
nickel. The Company made a $75,000 loan to Plateau to use as a deposit
for the drilling company. Management anticipates these funds will be
returned out of funding for Plateau's drilling and exploration program
which the Company intends to arrange from private third party sources.
The Company is of the opinion that the equity participation in Plateau
is advantageous to the Company if Plateau successfully encounters a
commercially feasible-mineable PGM ore reserve.
Other than this one opportunity, the Company is not currently
evaluating any development-stage companies with a view to making a loan
or stock purchase or arranging funding or any loan proposals and has no
contingent loan agreements which are subject to approval.
Subject to market conditions, the Company may attempt to raise
additional equity or debt capital to fund additional financing
activities in the future. As of the date of this filing, management
has no specific plans in this regard. Management acknowledges that
the Company may have insufficient capital with which to implement its
business plans on the scale desired. Accordingly, the Company may be
capable of making only an extremely limited number of loans to, and/or
equity investments in, companies to which traditional sources of
capital are unavailable.
With the exception of loans to Asset Partners and Plateau Resources,
the Company has not performed any financial services for any emerging
growth clients or consummated or arranged any loans, equity investments
or other financing transactions. Further, no loans, stock purchases or
other non-traditional financing transactions are pending or under
consideration. The Company has no existing agreement or arrangement
for the performance of financial services.
Prior to any affiliation with the Company, Mr. Glen Gamble, now
President of the Company, and Victory Minerals Corp. (now a major
shareholder of the Company) had arranged start-up financing for a South
<PAGE>6
African mining company by the name of Plateau Resources (Pty) Ltd. Mr.
Gamble serves as a Director on the Board of Directors of Plateau
Resources (Pty) Ltd. This entity was awarded mineral rights on certain
undeveloped properties in May 1997 and is now seeking funding from the
Company in order to continue its operations. Therefore, Plateau
Resources (Pty) Ltd. has become the Company's first prospect. Neither
the Company nor Mr. Gamble (before assuming his position as President)
had any pre-arrangement or prior commitment to Plateau
Resources.
Consequently, this opportunity with Plateau Resources came about
because non-related third-party financial commitments from within the
Canadian mining industry failed to materialize.
The Company has no pre-arranged financing with any other prospects. The
Company has not made any prior commitments, or any understandings, with
any third parties, or any of its affiliated entities, such as Victory
Minerals or Re-Group, Inc. for financing or participation.
Additionally, the Company does not have any plans, arrangements,
commitments or understandings to pay any finders' fees to any person or
entity.
The Company does not have any plans, arrangements, commitments or
understandings to obtain an interest in an operating producing mine or
oil, gas or mineral property owned by a mining or energy-related
company.
Operating Strategy.
Management of the Company will evaluate the future potential, credit
worthiness and, if required, collateral of prospective candidates for
funding by the Company or other sources, including corporate and
individual lenders and investors, known to management. The fact that
a corporation or other entity is affiliated with the Company or an
equity interest in a prospective borrower is owned by one or more of
the executive officers, directors and/or controlling shareholders of
the Company, will not disqualify such entity from consideration as a
potential borrower or recipient of investment capital. In order to
minimize conflicts of interest, the Company has adopted a policy that
any contracts or other transactions with entities with whom management
is affiliated, or in which they have a financial interest, will be
approved by a majority of the disinterested members of the Board of
Directors and will be fair and reasonable, but that no such
transactions by the Company shall be affected or invalidated
solelybecause of such relationship or interest of directors or
officers. For purposes herein, the term "disinterested directors" are
those directors who have no direct, pecuniary interest in a proposed
transaction. If the Company's Board of Directors is unavailable to
approve a financing transaction with an affiliated or related party,
the Company will require that the transaction be approved by a majority
of the Company's shareholders, at a special meeting of shareholders
called for such purpose.
Prior to funding any loans or equity investments, management of the
Company will conduct a comprehensive credit investigation of the
potential financing candidate. The investigation will generally
include, but not necessarily be limited to, the following: (I) a review
of the prospective candidate's financial statements and operating and
prior credit history; (ii) an analysis of the prospect's projected cash
flow; (iii) a survey of the performance of other companies engaged in
the candidate's business; (iv) an analysis of the value of the
collateral, if any, proposed to secure a loan; and (v) the source of
repayment for the loan. In addition, management intends, as part of
its credit procedures, to conduct a complete due diligence review of
the prospective candidate's business at its offices, during which
management proposes to review the prospect's record keeping systems and
procedures, the historical and projected financial condition of the
borrower/recipient of investment capital and its industry and any
collateral offered to secure a loan. Management may, in its
discretion, conduct a formal, independent appraisal of any collateral
offered to assure that the collateral can be liquidated without a loss
in the event of a downturn in the economy, which appraisal may include
an assessment of auction liquidation and/or fair market value.
Management intends to make the decision whether to arrange or fund a
loan or purchase common stock of a financing candidate only after
<PAGE>7
completing the number and type of credit procedures described above and
as deemed necessary or appropriate, in the discretion of management, in
order to determine the candidate's business potential and credit
worthiness.
In instances deemed appropriate by management, the Company may require
security in the form of inventory, accounts receivable, manufacturing
and other operating equipment, other tangible assets and/or real estate
used in the financing candidate's business. With respect to asset-
based loans which the Company may fund, management will have no fixed
policy as to the percentage of collateral coverage required. However,
in almost every such case, management envisions that the percentage of
collateral coverage required by it will be in excess of 100% of the
amount of the loan. Additionally, management may require that any one
or more of the officers, directors and principal shareholders of the
borrower personally guarantee the indebtedness and, depending upon the
prospective borrower's financial strength and the nature and value of
any collateral, require, in addition, that the personal guarantees be
collateralized separately.
Management of the Company will closely monitor the borrower's
performance after funding a loan or equity investment and, with respect
to a secured loan, intends to monitor the adequacy of the collateral at
least on a monthly basis. If the primary collateral is accounts
receivable, management may require direct verification and a monthly
aging of the receivables. The Company's management intends to
conduct aspects of its monitoring process, inducing, if necessary, a
reappraisal of any collateral, periodically at the borrower's place of
business. Regardless of whether the financing provided by the Company
takes the form of a loan, stock purchase or a combination thereof,
management will maintain close contact with management of the financing
recipient to ensure that the financial condition and overall
performance of the borrower are acceptable and that any collateral
remains adequate. In the event of default in the payment of principal
or interest on a loan, management may notify the borrower's customers
to make payments directly to the Company via a lock box established for
the borrower. In a case where the Company arranges financing for, but
does not itself fund, a development-stage company, management will also
endeavor to monitor the borrower's performance if an equity interest in
the form of common stock, warrants, options or any other type of
security is received as part of the finder's or consulting fee.
Management has not adopted any policy regarding the maximum size of any
loans or stock purchases which it may make with respect to a single
company. Further, management has not determined any maximum
percentage of its loan or stock portfolio which may be committed to
loans or investments in excess of a specified amount. Management, in
its sole discretion, will determine guidelines for levels of
concentration as to the diversity of companies which it funds and types
of assets required as collateral for loans, in order to attempt to
minimize credit losses. However, management intends to employ a
policy of maintaining a diversity of companies financed and types of
collateral accepted as security for loans in order to minimize undue
exposure.
Competition. The Company is, and will remain for the foreseeable
future, an insignificant participant among those firms which are also
engaged in the business of the Company. There are many established
entities and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the
Company. Management will rely upon their own ability to generate
potential lending candidates, either through their own personal
industries in which management has had prior experience. In view of
the Company's extremely limited resources, it should be expected that
the Company will continue to be at a significant competitive
disadvantage compared to the Company's competitors.
Federal and/or State Regulation. The Company is not subject to any
federal or state regulations regarding its services.
Business Development Company. As the Company obtains equity interests
in companies who desire to become public, the Company may become
subject to the provisions of the Investment Company Act of 1940 or the
Investment Advisers Act of 1940. It is possible that the Company may
choose to elect to be treated as a Business Development Company ("BDC")
pursuant to Section 54 of the Investment Company Act of 1940 (the "1940
Act"). On October 21, 1980, the 1940 Act was amended by a series of
amendments, which added sections 59 through 65. These sections
<PAGE>8
comprise the Small Business Investment Incentive development company is
defined as a domestic closed-end company which is operated for the
purpose of making certain types of investments and which makes
available significant managerial assistance to the companies in which
it invests. Generally, a company which elects to be treated as a
business development company, or intends within 90 days to so elect, is
exempt from certain provisions of sections 1 through 53 of the 1940
Act.
To take advantage of these special regulatory provisions, a BDC must
comply with sections 59 through 65 of the 1940 Act, which require,
among other things, that:
a. a majority of the BDC's directors must not be "interested
persons" as defined in section 2(a)(19) of the 1940 Act;
b. A BDC is restricted in the kind of investments it can make,
i.e., at least seventy percent of the BDC's assets (excluding assets
necessary to maintain the business, such as office furniture) must
consist of securities of small, developing business or financially
troubled businesses and such liquid assets as cash or cash items,
Government securities or short-term, high quality debt securities;
c. A BDC must annually furnish to its shareholders a statement, in
such form and manner as the Securities and Exchange Commission may
prescribe, about the risks involved in investing in a BDC due to the
nature of its portfolio, and;
d. A BDC must have a class of equity securities registered under
the 1934 Act or have filed a registration statement under that section
and must comply with the periodic reporting requirements under the 1934
Act, including annual reports, quarterly reports and reports of certain
material changes, rather than with those in section 30 of the 1940 Act.
Employees. The Company presently has two employees, none of whom are
paid any salary.
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal.
ITEM 2. PROPERTIES.
In May 1997, the Company moved its offices to 7345 E. Peakview Avenue,
Englewood, Colorado 80111, a building rented and occupied by a
shareholder in the Company. As of July 1997, the Company pays $300
rent per month for its current office space. The Company's offices
consist of approximately 500 square feet of executive office space and
secretarial area. Management believes that this space will meet the
Company's needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings nor is the Company
aware of any disputes, which may result in legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended June 30, 1999, no
matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies.
<PAGE>9
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information. The Company has applied for the trading of
its common shares in the over-the-counter market. As of June 30,
1999, there is no market for the Company's Common Shares.
The approximate number of holders of record of the Company's $.00001
par value common stock, as of June 30, 1999, was 25. As of September
30, 1999, there are holders of record.
Dividends. Holders of the Company's common stock are entitled to
receive such dividends as may be declared by its Board of Directors.
No dividends on the Company's common stock have ever been paid, and the
Company does not anticipate that dividends will be paid on its common
stock in the foreseeable future.
ITEM 6. 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 has no operations as of June
30, 1999. The deficiency in working capital as of June 30, 1999
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.
.
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
<PAGE>10
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 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. 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.
During the year ended June 30, 1999, the Company made advances to
related parties as notes receivable of $30,000 resulting in net cash
flow used in investing activities of $30,000.
On January 15, 1999 the Company issued 100,000 shares of common stock
for cash of $50,000 or $.50 per share resulting in net cash flows from
financing activities of $50,000.
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.
<PAGE>11
At June 30, 1999, the Company had working capital of $(89,794)
consisting of $32,431 in current assets and $122,225 in liabilities.
The Company has no long-term liabilities.
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 year ended June 30, 1999
of $76,192. The Company had an increase of $25,637 in interest
receivable for the year ended June 39, 1999, an increase in accounts
payable of $9,200 and an increase in interest payable of $5,000. As a
result, the Company had net cash flows from operations of $(38,853) for
the year ended June 30, 1999.
General and administrative expenses for the year ended June 30, 1999
were $48,054. These included accounting and legal expenses of $5,647,
office expense of $507, professional fees of $3,000, rent of $3,600,
salaries of $9,600, stock transfer fees of $404, telephone of $919 and
travel of $24,377.
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.
General and administrative expenses for the year ended June 30, 1998
were $72,602. These included accounting and legal expenses of $16,243,
office expense of $21, professional fees of $38,400, rent of $3,600,
salaries of $9,600, secretarial services of $3,650, and travel of $988.
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
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PINNACLE RESOURCES, INC.
Audited Financial Statements
For the Year Ended June 30, 1999 and 1998
and the Period January 6, 1995 (Inception)
through June 30, 1999
Independent Auditors' Report
We have audited the accompanying balance sheet of Pinnacle Resources,
Inc. (a Developmental Stage Company), as of June 30, 1999 and the
related statements of income, shareholders' equity, and cash flows for
the fiscal years ended June 30, 1999 and 1998 and period January 6,
1995 (Inception) through June 30, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Pinnacle
Resources, Inc. at June 30, 1999 and the results of its operations and
its cash flows for the fiscal years ended June 30, 1999 and 1998 and
the period January 6, 1995 (Inception) through June 30, 1999 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1,
the Company is in the development stage and has no operations as of
June 30, 1999. The deficiency in working capital as of June 30, 1999
raises substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are described in
Note 7. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
September 20, 1999
<PAGE>13
Pinnacle Resources, Inc.
(A Development Stage Company)
Balance Sheet
June 30, 1999
ASSETS
Current Assets:
Cash $145
Note Receivable and Accrued Interest $32,286
Related Party Notes Receivable and Related Interest
($ 48,776 less Allowance for Uncollectible Amounts
of$48,776) $ 0
--------
Total Current Assets 32,431
Long-term Portion Related Party Note Receivable
and Accrued Interest 100,000
--------
Total Assets $132,431
========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Current Portion Of Notes Payable $100,000
Accounts Payable 15,800
Accrued Interest Payable 6,425
---------
Total Current Liabilities 122,225
Long-term Liabilities 0
--------
Total Liabilities 122,225
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 Par Value
Authorized 2,000,000 Shares; Issued
And Outstanding -0- Shares 0
Common Stock, $.00001 Par Value
Authorized 500,000,000Shares; Issued
And Outstanding 4,250,000 Shares 43
Additional Paid In Capital On Common Stock 151,457
Deficit Accumulated During The Development Stage (141,294)
--------
TOTAL SHAREHOLDERS' EQUITY 10,206
--------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $132,431
========
The Accompanying Notes Are
An Integral Part Of These Financial Statements.
<PAGE>14
Pinnacle Resources, Inc.
(A Development Stage Company)
Statement Of Operations
<TABLE>
<CAPTION>
January 6,
1995
Fiscal Year Fiscal Year (Inception)
Ended Ended Through
June June June
30, 1999 30, 1998 30, 1999
--------- ----------- -----------
<S> <C> <C> <C>
Revenue $0 $0 $0
-- -- --
Expenses:
Accounting and Legal 5,647 16,243 21,890
Office 507 21 2,028
Professional Fees 3,000 38,400 41,400
Rent 3,600 3,600 7,200
Salaries 9,600 9,600 19,200
Secretarial Services 0 3,750 3,750
Stock Transfer Fees 404 0 404
Telephone 919 0 919
Travel 24,377 988 25,365
------ ----- ------
Total 48,054 72,602 122,156
------ ------ -------
Net (Loss) Before Other
Income (Expense) (48,054) (72,602) (122,156)
------ ------- -------
Other Income (Expense)
Write Down of Notes and
Related Accrued Interest (48,776) 0 (48,776)
Interest Income 25,638 10,425 36,063
Interest Expense (5,000) (1,425) (6,425)
------- ------ -------
Total Other Income (Expense) (28,138) 9,000 (19,138)
------- ------- -------
Net (Loss) ($76,192) ($63,602)
======= ======= ======
Basic (Loss) Per Common Share ($0.01) ($0.02)
====== ======
Weighted Average Common
Shares Outstanding 4,250,000 4,150,000
========= =========
</TABLE>
The Accompanying Notes Are
An Integral Part Of These Financial Statement
<PAGE>15
Pinnacle Resources, Inc.
(A Development Stage Company)
Statement Of Cash Flows
<TABLE>
<CAPTION>
January 6,
1995
Fiscal Year Fiscal Year (Inception)
Ended Ended Through
June June June
30, 1999 30, 1998 30, 1999
<S> <C> <C> <C>
Net (Loss) Accumulated
During The Development Stage ($76,192) ($63,602) ($141,294)
Issuance Of Common Stock For
Services 0 0 1,500
------ ------- -------
(Increase)in Interest Receivable (25,637) (10,425) (36,062)
Increase in Note Receivable Allowance 48,776 0 48,776
Increase in Accounts Payable 9,200 6,600 15,800
Increase in Interest Payable 5,000 1,425 6,425
Cash Flows from Operations (38,853) (66,002) (104,855)
------- ------- -------
Cash Flows From Investing
Activities:
Advances Made to Related Parties
as Notes Receivable (30,000) (115,000) (145,000)
-------- -------- --------
Net Cash Flows From Investing
Activities (30,000) (115,000) (145,000)
-------- -------- --------
Cash Flows From Financing
Activities:
Cash Received from Loans 0 100,000 100,000
Issuance of Common Stock 50,000 0 150,000
------- -------- --------
Cash Flows from Financing 50,000 100,000 250,000
------- -------- --------
Net Increase In Cash (18,853) (81,002) 145
Cash At Beginning Of Period 18,998 100,000 0
------- -------- -------
Cash At End Of Period $145 $18,998 $145
======= ======== =======
Non - Cash Activities:
Stock Issued For Cash
Advances & Services $0 $0 $1,500
======= ======== ======
</TABLE>
The Accompanying Notes Are
An Integral Part Of These Financial Statemen
<PAGE>16
Pinnacle Resources, Inc.
(A Development Stage Company)
Statement Of Shareholders' Equity
<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, 1997 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
Issuance Of Common Stock:
January 15, 1999 for Cash At $ .50
Per Share 100,000 1 49,999 0 50,000
Net (Loss) (76,192) (76,192)
--------- --- -------- --------- ------
Balance At 4,250,000 $43 $151,457 ($141,294) $10,206
========= === ======= ========= =======
</TABLE>
The Accompanying Notes Are An Integral Part Of These Financials
<PAGE>17
Pinnacle Resources, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended June 30, 1999 and 1998
Note 1 - Organization and Summary of Significant Accounting Policies
Organization:
On January 6,1995 Pinnacle Resources, Inc. (fka Claremont House,
Corp.), (the Company) was incorporated under the laws of Wyoming to
engage in all aspects of the financial services industry or any other
lawful business.
Development Stage:
The company entered the Development stage in accordance with SFAS No. 7
on January 6, 1995. Its purpose is to evaluate, structure and complete
a merger with, or acquisition of a privately owned corporation.
Currently it is concentrating in the mining of metals in South Africa.
Statement of Cash Flows:
For the purpose of the statement of cash flows, the company considers
demand deposits and highly liquid-debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Cash paid for interest in fiscal year ended June 30, 1999 and 1998 was
$-0-. Cash paid for income taxes in fiscal year ended June 30, 1999 and
1998 was $-0-.
Basic (Loss) per Common Share:
Basic (Loss) per common share is computed by dividing the net loss for
the period by the number of shares outstanding at June 30, 1999 and
June 30, 1998.
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. Actual results could
differ from those estimates.
Note 2 - Capital Stock and Capital in Excess of Par Value
The Company initially authorized 500,000,000 shares of $.00001 par
value common stock. In January 1995, the company issued 500,000 shares
of common stock for services and cash advances paid on behalf of the
Company valued at $1,500 or $.03 per share. On June 26, 1997, the Board
of Directors authorized a 1 for 3.33 reverse split. On June 26, 1997,
the Company amended its Articles of Incorporation and authorized
2,000,000 of $.01 par value preferred stock.
On June 26, 1997 the Company issued 4,000,000 after split shares of
common stock for cash of $100,000 or $.025 per share.
On January 15, 1999 the Company issued 100,000 shares of common stock
for cash of $50,000 or $.50 per share.
Note 3 - Notes Receivable - Related Parties
Due to the history of the Notes Receivable from Asset Partners LLC, the
Company's management felt that there was some doubt to the
collectability of the principle and related accrued interest.
Notes Receivable consisted of the following:
Note Accrued
Amount Interest
------ --------
Asset Partners LLC
Dated: October 22, 1997
Interest at 13%,
Collateralized by 15,000 shares of US
Assurance Group, Inc. Common stock,
Originally due October 22, 1998,
renewed through November 22, 1999 $ 40,000 $ 8,776
Less Allowance for Uncollectible Amount (40,000) (8,776)
<PAGE>18
Pinnacle Resources, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended June 30, 1999 and 1998
Note 3 - Notes Receivable - Related Parties (Continued)
Plateau Resources International LTD
Dated: March 22, 1998
Interest at 33.34%
Collateralized by Drilling Application
Deposit on file with the Mineral Energy
Department, Environmental Division,
Pretoris, R.S.A., cash proceeds from funding
as provided by the All Africa Platinum (Pty) Ltd
agreement, and a 2 r% interest in the DWD project,
Originally due March 22, 1999,
renewed through September 22, 1999 75,000 25,000
------ ------
Total Notes Receivable From
Related Parties $135,000 $27,286
Less: Current Portion (30,000) (2,286)
------- ------
Long-term Portion of Notes
Receivable Related Parties $100,000 $25,000
======== =======
Note 4 - Notes Receivable
Frog Hair L.P.
Dated: January 21, 1999
Interest at 17.49%,
Collateralized by 5,000 shares of US
Assurance Group, Inc. common stock,
Due January 21, 2000 30,000 2,286
------- ------
Total $30,000 $2,286
======= ======
Note 5 - Note Payable
Current Portion Note Payable consisted of the following:
Note Accrued
Amount Interest
Mel Keller
Dated: March 18, 1998
Interest at 5%,
Collateralized by an undivided interest in
the Drenthe, Wirivier, Dortsland platinum
concession as arranged by the Company on
of the lender.
Due March 18, 1999 $100,000 $ 6,425
======== =======
Note 6 - Related Party Events
The Company maintains a mailing address at an officer's place of
business. This address is located at 7345 East Peakview, Greenwood
Village, CO 80111. Commencing July 1, 1997 the Company will pay certain
officers $300 per month for facility rental and $800 per month for
services.
The president of the Company is also an officer and director of a major
shareholder of the Company's common stock.
The Company has made loans to entity's related to the Company's
shareholders.
Note 7 - Income Taxes
The Company follows Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes" (SFAS #109), which requires, among
other things, an asset and liability approach to calculating deferred
income taxes. As of June 30, 1999, the Company has a deferred tax asset
of $28,259 primarily from its net operating loss which has been fully
reserved through a valuation allowance.
The net change in the valuation allowance for the year ended June 30,
1999 is $5,483.
<PAGE>19
Note 7 - Income Taxes (Continued)
The net change in the valuation allowance for the year ended June 30,
1999 is $15,238.
The types of temporary differences between the tax basis of assets and
their financial reporting amounts that give rise to a significant
portion of the deferred tax asset are as follows:
Temporary Tax
Difference Effect
----------- -------
Net operating loss carry forward $ 141,294 $28,259
========= =======
The Company's NOL carryforward of approximately $141,294 at June 30,
1999, which management expects will be fully utilized, will expire in
various amounts between 2017 and 2019.
Note 8 - Basis of Presentation
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, revenues from the
operations of a merger candidate, if found. The Company's ability to
continue as a going concern is dependent on these additional management
advances, and, ultimately, upon achieving profitable operations through
a merger candidate.
Note 9 - Subsequent Event / Acquisition
On August 30, 1999 the Company entered into an agreement with Plateau
Resources, Ltd, a South African corporation to acquire all of the
outstanding shares of Plateau Resources, International, Ltd., a Cayman
Island, BWI corporation in exchange for 1,500,000 shares of the
Company's common stock.
Plateau Resources, Ltd. owes the Company $75,000 plus interest of
$25,000 or a total of $100,000 which is currently in default. This
amount is to be paid before closing or 500,000 shares less of the
Company's common stock will be issued. The receivable has been written
down to $0.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have not been any changes in or disagreements with accountants on
accounting and financial disclosure.
<PAGE>20
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Board of Directors. The following persons listed below have been
retained to provide services as director until the qualification and
election of his successor. All holders of Common Stock will have the
right to vote for
Directors of the Company. The Board of Directors has primary
responsibility for adopting and reviewing implementation of the
business plan of the Company, supervising the development business
plan, review of the officers' performance of specific business
functions. The Board is responsible for monitoring management, and
from time to time, to revise the strategic and operational plans of the
Company. A director shall be elected by the shareholders to serve until
the next annual meeting of shareholders, or until his or her death, or
resignation and his or her successor is elected. Presently, Directors
receive no compensation or fees for their services rendered in such
capacity.
The Executive Officers and Directors are:
Name Position Term(s) of Office
Glen R. Gamble, age 53 President, Director From June 26, 1997
Chief Executive Officer to present
Robert A. Hildebrand,
age 71 Vice President, Director From Inception
Secretary/Treasurer to present
Chief Financial Officer
President From Inception
to June 26, 1997
Terry K. Jensen, age 58 Director From June 26, 1997
to present
Prior to the change in control and name change, Anthony Griffin was a
Director of the Company and served as Secretary of the Company until
June 26, 1997. Marshall Griffin was a Director of the Company from
inception to June 26, 1997.
Resumes:
Glen R. Gamble. Mr. Gamble has served as an officer and director of
variety of companies engaged in the fields of mining, oil and gas,
cattle, real estate and resource financing. Currently, Mr. Gamble is
the Manager of Viatica Fund, LLC; a Director of Natural Buttes Gas
Corp.; Manager of Desert Flower Mining, LLC; and President and Chairman
of Victory Minerals Corp. and the Company. Offshore, Mr. Gamble also
serves as a Director on the Board of Directors of Plateau Resources
(Pty) Ltd., a South African corporation. Mr. Gamble assisted the
management in setting up an offshore parent holding company in the
Cayman Islands. Additionally, Mr. Gamble recently facilitated Plateau
Resources (Pty) Ltd. in obtaining mineral rights on South African
properties. He helped to fund, via private sources, Plateau's start-up
and operating capital to date. Similarly, Mr. Gamble served on the
Board of Vanmag Exploration and Development (Pty) Ltd., also a South
African corporation. He also assisted this company in obtaining mineral
rights on a major vanadium deposit, and facilitated in setting up its
parent offshore company in the Cayman Islands. Mr. Gamble resigned
from the Vanmag Board of Directors when the Cayman parent company sold
the South African entity. Currently he is a Director with Zebediela
Platinum (Pty) Ltd., another South African corporation which is
awaiting approval of its applications on farms having platinum
potential.
In mid-1979, Mr. Gamble effected a sale and financing package on a
ranch in Russell, Kansas on which were several producing oil and gas
wells. This opportunity led to the creation of a new entity, Petro-
Package Brokerage Co., which Mr. Gamble owns. For the next few years
Mr. Gamble specialized in packaging, financing and selling producing
oil and gas properties. Additionally, he managed several oil
properties for investors and drilled over 20 wells in Central Kansas.
He moved the Petro-Package operation to Denver in 1985 and created a
new Wyoming company called Victory Minerals Corp. which is the flagship
company for Mr. Gamble's mineral interest both in the United States and
in Africa.
<PAGE>21
Mr. Gamble graduated from Lakewood High School in 1962, performed three
years of military service in the U.S. Army from which he was Honorably
Discharged in May 1966. Mr. Gamble attended the University of Colorado
and graduated with a Bachelor of Science degree in Accounting and
Finance in 1970.
Robert A. Hildebrand. Since 1991, Mr. Hildebrand has been Vice
President of Environmental Assurance corporation, a company offering
financial solutions to owners of contaminated real estate. Mr.
Hildebrand served as the President and a director of Resource Finance
Group, Ltd., a public Colorado corporation engaged in the business of
acquiring revenue interest in producing mines in selected developing
countries in exchange for mining and processing equipment and training
provided by Resource Finance Group, Ltd., from August 1991 until that
company merged, in April 1993, with Onyx Systems, Ltd. From June 1987
through October 1991, Mr. Hildebrand served as a director and an
officer, holding various positions including President, of General
Mining Company ("General Mining"), a small, inactive public mining
company. General Mining was active, from 1987 through early 1991, in
exploring for surface sulfur deposits in Bolivia, which did not result
in viable operations. In November 1996 Mr. Hildebrand served as a
consultant to Mr. Glen Gamble and Victory Minerals S.A. (Pty) Ltd. to
assist Plateau Resources (Pty) Ltd. and Vanmag Exploration (Pty) Ltd.
with its applications to be awarded mineral rights and surface rights
on certain farms having platinum/palladium and vanadium potential,
respectively. On January 10, 1994, Mr. Hildebrand filed a voluntary
petition pursuant to Chapter 7 of the United States Bankruptcy Code,
case #94-10209SBB. On May 19, 1994, he was released from all
dischargable debt. He has accepted a directorship with Zebediela
Platinum (Pty) Ltd., another South African corporation which has
pending applications in on farms with platinum potential.
Mr. Hildebrand attended the U.S. Naval Academy from 1947 through 1949
and received his Geological Engineering Degree from the Colorado School
of Mines in 1954. He has been a registered Colorado Professional
Engineer since 1958.
Terryl K. Jensen. Mr. Jensen has been with Horton Cavey Company
since 1969 and is currently President of Horton Cavey Realty Company
and has twenty-eight years of experience in real estate as a broker,
manager and owner. He has held his real estate broker license since
1972. His experience includes the sale of land and investment real
estate, syndication of investment property, development of commercial
and residential projects and management of the Company.
Mr. Jensen has participated in the development and marketing of twelve
residential projects of over 800 lots; the development of a small
office park, two apartment buildings and one office building. He was
executive vice president of a company that developed 5,200 acres in
Kentucky into a large equestrian community. In addition, he has
participated in the forming, marketing and management of over thirty
investment partnership projects, which included apartments, land, land
development, mobile home parks and residential subdivisions.
Mr. Jensen served as a Director of Paragon Mortgage Corporation, a
mortgage company from June 1994 to September 1994.
Mr. Jensen received a Bachelor of Science degree with a major in
Business from Dakota State University in 1964; and he is a licensed
real estate broker in the State of Colorado. Mr. Jensen is a member
of the Denver Board of Realtors Commercial Division, Colorado
Association of Real Estate Boards, National Association of Real Estate
Boards, Home Builders Association of Metropolitan Denver, Colorado
Association of Home Builders and the National Association of Home
Builders.
Conflicts of Interest. The Corporation will be subject to various
conflicts of interest between the Corporation and its Affiliates.
Since the executive officers and directors will control the daily
operations of the Corporation and its Affiliates, there may be
occasions when the interests of the Corporation's Affiliates may be
inconsistent with the interests of the Corporation.
Allocation of Management Time. The Corporation will rely on its
officers to manage the Corporation's business operations. Currently
the officers are devoting a minimal amount of their time for the
operation of the Corporation. The Corporation may obtain additional
officers, as necessary. As such, and until all of their positions
become "full time," there will be conflicts of interest in allocating
<PAGE>22
management time, services and functions between the Corporation and its
Affiliates. These individuals may engage for their own account, or
for the account of others in other business ventures for which the
Corporation shall not be entitled to any interest.
The Corporation may, at some time in the future, compete with others
for the management services of the current and future officers of the
Corporation. As a result, these individuals may be placed in a
position where their decision to favor other operations in which they
are associated over those of the Corporation will result in a conflict
of interest. It should also be noted that it may be expedient for
them to favor one operation over another since their participation in
such operations will vary. In allocating their time, they will
recognize their fiduciary obligations to the Corporation, the
prevailing industry standards and the financial situation of the
Corporation.
Conflicts of Interest Policy. The Corporation has adopted a policy
that any transactions with directors, officers or entities of which
they are also officers or directors or in which they have a financial
interest, will only be on terms consistent with industry standards and
approved by a majority of the disinterested directors of the
Corporation's Board of Directors. No such transactions by the
Corporation shall be either void or voidable solely because of such
relationship or interest of directors or officers or solely because
such directors are present at the meeting of the Board of Directors of
the Corporation or a committee thereof which approves such
transactions, or solely because their votes are counted for such
purpose if: (i) the fact of such common directorship or financial
interest is disclosed or known by the Board of Directors or committee
and noted in the minutes, and the Board or committee authorizes,
approves or ratifies the contract or transaction in good faith by a
vote for that purpose without counting the vote or votes of such
interested directors; or (ii) the fact of such common directorship or
financial interest is disclosed to or known by the shareholders
entitled to vote and they approve or ratify the contract or transaction
in good faith by a majority vote or written consent of shareholders
holding a majority of the Common Shares entitled to vote (the votes of
the common or interested directors or officers shall be counted in any
such vote of shareholders), or (iii) the contract or transaction is
fair and reasonable to the Corporation based on the material similarity
of terms to recent consulting agreements not involving interested
parties, or in all other agreements by competitive bids, at the time it
is authorized or approved. In addition, interested directors may be
counted in determining the presence of a quorum at a meeting of the
Board of Directors of the Corporation or a committee thereof which
approves such transactions.
Non-Qualified and Incentive Stock Option Plans. The Corporation does
not currently have any stock option plans, however, the Corporation
does intend to pursue the adoption of a non-qualified stock option plan
in the fourth quarter of 1999.
ITEM 10. EXECUTIVE COMPENSATION
Commencing July 1, 1997, the officers of the Company receive $800 per
month (aggregate) for services. As operations increase, the Company
intends to enter into employment agreements with its officers. Upon
funding, either through revenues from operations, a private placement
or initial public offering, should the amount justify the salary
demands, the key management of the Company would be compensated
according to their duties. No specific details have been determined.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company maintains a mailing address at Victory Mineral
Corporation's place of business located at 7345 E. Peakview, Greenwood
Village, CO 80111.
Glen Gamble, president of the Company, is also an officer and director
of Victory Minerals Corporation, a majority shareholder of the
Company's common stock.
Mr. Gamble is also a director on the Board of Directors of Plateau
Resources (Pty) Ltd., a South African corporation. He has acted as a
consultant and facilitator to assist Plateau Resources International
Ltd., a Cayman Island Corporation which serves as a parent holding
company for the South African entity. Plateau Resources (Pty) Ltd. has
<PAGE>23
asked Mr. Gamble to obtain funding, either from outside sources or from
the Company itself in order to commence drilling and exploration
activities on its undeveloped properties in South
Africa.
In March 1998, monies ($75,000) were advanced to Plateau Resources
(Pty) Ltd. These funds are accruing interest at a rate of 10% per
annum. The funds are due to be repaid on March 22, 1999.
In October 1997, monies ($40,000) were advanced to Asset Partners LLC.
whose managing partner is a minority shareholder of the Company
(holding 3,000 Common Shares or .07% of the Company's outstanding
Common Shares). These funds are accruing interest at a rate of 13% per
annum. The funds were originally due to be repaid on April 22, 1998.
The note has been extended until October 22, 1998.
Mel Keller, a 20.24% shareholder of the Company loaned $100,000 to the
Company on March 18, 1998 for the duration of one year. The loan
included interest at the rate of Five Percent (5%) per Annum. The
funds are to be used to advance the permitting process on platinum ore
properties of Plateau Resources (Pty) Ltd located in the Republic of
South Africa. This loan is unsecured by Company but shall instead be
secured by an undivided five percent (5%) interest in the Drenthe,
Witrivier, Dortsland Platinum concession as arranged by Company on
behalf of Mr. Keller and due in writing from Plateau Resources (PTY)
Ltd sixty (60) days from receipt of such funds. The loan was made to
the Company instead of directly to Plateau Resources (Pty) Ltd. because
Mr. Keller insisted his funds be placed in a domestic entity as opposed
to a foreign company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following tabulates holdings of shares of the Company by each
person or entity who, subject to the above, as of June 30, 1998, holds
of record or is known by Management to own beneficially more than 5.0%
of the Common Shares and, in addition, by all directors and officers of
the Company individually and as a group. Each named beneficial owner
has sole voting and investment power with respect to the shares set
forth opposite his name.
<PAGE>23
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Shares
Glen R. Gamble<F1><F2>
12892 Sierra Circle
Parker, CO 80134 2,200,000 53.01%
Terryl K. Jensen
9600 E. Arapahoe Road
#260
Englewood, CO 80112 50,000 1.2%
Robert A. Hildebrand
7345 E. Peakview
Englewood, CO 80111 50,000 1.2%
Beverly Jo Gamble<F1><F2>
12892 Sierra Circle
Parker, CO 80134 200,000 4.82%
Mel Keller
R.R. 1 Box
Blairsburg, IA 840,000 20.24%
Victory Minerals Corp.<F1><F3>
7345 E. Peakview
Englewood, Co 80111 2,000,000 48.19%
Re-Group, Inc.<F4>
9600 E. Arapahoe Road
#260
Englewood, CO 80112 266,000 6.41%
All Directors & Officers
as a group (3 persons) 3,606,000 86.89%
[FN]
<F1>Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, beneficial ownership of a security consists of sole or
shared voting power (including the power to vote or direct the voting)
and/or sole or shared investment power (including the power to dispose
or direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable community property laws.
<F2>Beverly Jo Gamble is married to Glen R. Gamble, an officer and
director of the Company. As a result, Glen R. Gamble would be deemed
to be a beneficial owner of the Common Shares owned of record by
Beverly Jo Gamble. Nevertheless, Glen R. Gamble disclaims any
beneficial ownership of the Common Shares owned of record by his wife.
<F3>Victory Minerals Corp. is a corporation controlled by Glen R.
Gamble, an officer and director of the Company. As a result, Glen R.
Gamble would be deemed to be a beneficial owner of the 2,000,000 Common
Shares owned of record by Victory Minerals Corp.
<F4>Daniel J. Boone and S. Diane Boone are principals of Re-Group, Inc.
The balance of the Company's outstanding Common Shares are held by 17
persons, not including those persons who hold their shares in street
name.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company maintains a mailing address at Victory Mineral
Corporation's place of business located at 7345 E. Peakview, Greenwood
Village, CO 80111.
Glen Gamble, president of the Company, is also an officer and director
of Victory Minerals Corporation, a majority shareholder of the
Company's common stock.
Mr. Gamble is also a director on the Board of Directors of Plateau
Resources (Pty) Ltd., a South African corporation. He has acted as a
consultant and facilitator to assist Plateau Resources International
Ltd., a Cayman Island Corporation which serves as a parent holding
<PAGE>25
company for the South African entity. Plateau Resources (Pty) Ltd. has
asked Mr. Gamble to obtain funding, either from outside sources or from
the Company itself in order to commence drilling and exploration
activities on its undeveloped properties in South Africa.
In March 1998, monies ($75,000) were advanced to Plateau Resources
(Pty) Ltd. These funds are accruing interest at a rate of 33.34% per
annum. The funds are due to be repaid on March 22, 1999.
In October 1997, monies ($40,000) were advanced to Asset Partners LLC.
whose managing partner is a minority shareholder of the Company
(holding 3,000 Common Shares or .07% of the Company's outstanding
Common Shares). These funds are accruing interest at a rate of 13% per
annum. The funds were originally due to be repaid on April 22, 1998.
The note has been extended until October 22, 1998.
Mel Keller, a 20.24% shareholder of the Company loaned $100,000 to the
Company on March 18, 1998 for the duration of one year. The loan
included interest at the rate of Five Percent (5%) per Annum. The
funds are to be used to advance the permitting process on platinum ore
properties of Plateau Resources (Pty) Ltd located in the Republic of
South Africa. This loan is unsecured by Company but shall instead be
secured by an undivided five percent (5%) interest in the Drenthe,
Witrivier, Dortsland Platinum concession as arranged by Company on
behalf of Mr. Keller and due in writing from Plateau Resources (PTY)
Ltd sixty (60) days from receipt of such funds. The loan was made to
the Company instead of directly to Plateau Resources (Pty) Ltd. because
Mr. Keller insisted his funds be placed in a domestic entity as opposed
to a foreign company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company maintains a mailing address at Victory Mineral
Corporation's place of business located at 7345 E. Peakview, Greenwood
Village, CO 80111.
Glen Gamble, president of the Company, is also an officer and director
of Victory Minerals Corporation, a majority shareholder of the
Company's common stock.
Mr. Gamble is also a director on the Board of Directors of Plateau
Resources (Pty) Ltd., a South African corporation. He has acted as a
consultant and facilitator to assist Plateau Resources International
Ltd., a Cayman Island Corporation which serves as a parent holding
company for the South African entity. Plateau Resources (Pty) Ltd. has
asked Mr. Gamble to obtain funding, either from outside sources or from
the Company itself in order to commence drilling and exploration
activities on its undeveloped properties in South Africa.
In March 1998, monies ($75,000) were advanced to Plateau Resources
(Pty) Ltd. These funds are accruing interest at a rate of 33.34% per
annum. The funds are due to be repaid on March 22, 1999.
In October 1997, monies ($40,000) were advanced to Asset Partners LLC.
whose managing partner is a minority shareholder of the Company
(holding 3,000 Common Shares or .07% of the Company's outstanding
Common Shares). These funds are accruing interest at a rate of 13% per
annum. The funds were originally due to be repaid on April 22, 1998.
The note has been extended until October 22, 1998.
Mel Keller, a 20.24% shareholder of the Company loaned $100,000 to the
Company on March 18, 1998 for the duration of one year. The loan
included interest at the rate of Five Percent (5%) per Annum. The
funds are to be used to advance the permitting process on platinum ore
properties of Plateau Resources (Pty) Ltd located in the Republic of
South Africa. This loan is unsecured by Company but shall instead be
secured by an undivided five percent (5%) interest in the Drenthe,
Witrivier, Dortsland Platinum concession as arranged by Company on
behalf of Mr. Keller and due in writing from Plateau Resources (PTY)
Ltd sixty (60) days from receipt of such funds. The loan was made to
the Company instead of directly to Plateau Resources (Pty) Ltd. because
Mr. Keller insisted his funds be placed in a domestic entity as opposed
to a foreign company.
<PAGE>26
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed as part
of thisreport:
Report of Independent Public Auditors
Balance Sheet
Statement of Operations
Statement of Stockholder's Equity
statement of Cash Flows
Notes to Financial Statements
Schedules Omitted: All schedules other than those shown have been
omitted because they are not applicable, not required, or the required
information is shown in the financial statements or notes
thereto.
(b) List of Exhibits
The following of exhibits are filed with this report:
(3.1) Articles of Incorporation incorporated by referenced to Form
10SB filed August 7, 1997, File No. 0-22965
(3.2) Amendment to Articles of Incorporation incorporated by
referenced to Form 10SB filed August 7, 1997, File No. 0-22965
(3.3) Bylaws incorporated by reference to Form 10SB filed August 7,
1997, File No. 0-22965
(3.4) Amendment to Bylaws dated July 1, 1997 incorporated by
reference to Form 10SB filed October, 1997.
(4.1) Specimen Common Stock Certificate incorporated by reference to
Form 10SB filed August 7, 1997, File No. 0-22965
(10.1) Loan Agreement between the Company and Asset Partners, LLC
dated October 22, 1997 incorporated by reference to Amendment 3 to Form
10SB.
(10.2) Loan Agreement between the Company and Plateau Resources (PTY)
Ltd. dated March 22, 1998 incorporated by reference to Amendment 3 to
Form 10SB.
(10.3) Loan Agreement between the Company and Mel Keller dated March
18, 1998 incorporated by reference to Amendment 3 to Form 10SB.
(B) REPORTS ON FORM 8-K
None
<PAGE>27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.
Date: October 12, 1999 Pinnacle Resources, Inc.
/s/ Glen R. Gamble
------------------------------------
By: Glen R. Gamble, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated.
/s/ Glen R. Gamble 10/12/99
- ------------------------------
Glen R. Gamble
President and Director
(chief executive officer)
/s/ Robert A. Hildebrand 10/12/99
- ------------------------------
Date:
Robert A. Hildebrand
Secretary/Treasurer and Director
(Chief Financial Officer)
/s/ Terry F. Jensen 10/12/99
- ------------------------------
Terry F. Jensen
Director
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