<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: 6/30/00
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.)
9600 E. Arapahoe Road, Suite 260, Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code:
(303) 705-8600
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, 2000, 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, 2000 was 5,860,000 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 maintain its
quotation, granted on July 15, 1999, on the OTC Bulletin Board under
the trading symbol PNRR.
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.
<PAGE>4
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
<PAGE>5
or other forms of securities in order to provide additional yield
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.
At last report, the Company had arranged funding for Plateau Resources
(Pty)Ltd., a South African development-stage corporation in order to
initiate a drilling and exploration program on their undeveloped
properties. For this the Company obtained an option to merge with
Plateau. 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.
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 was awarded Prospecting Rights on
lands that have platinum group metals (PGM) potential. Plateau
required operational capital, which was provided by a third party
investor introduced to the Plateau opportunity by the efforts of Mr.
Gamble for a fee.
On January 22, 2000, the Company secured $6.9 million in funding for
the Plateau Resources drilling and exploration project, now referred
to as the Platreef project. Under the terms of the Loan Facility
Agreement the Platreef project is being financed by Anooraq Resources,
Inc. Anooraq is a Vancouver based company managed by Hunter-
Dickinson, Inc. Anooraq will be able to acquire up to 70 percent of
the shares in Plateau Resources by systematically funding a $6.9
million drilling and exploration program over the next two years.
When Anooraq achieves full funding it will have acquired 70 percent
shareholding in Plateau, at which point the Company will convert its
remaining 30 percent into Anooraq shares on an undiluted basis. Out
of the closing with Anooraq the Company was able to retrieve money
that it had loaned to Plateau and was able to settle all accounts with
financiers and professionals using Pinnacle stock.
In June the Company concluded negotiations to acquire 100% ownership
of Vanadium and Magnetite Exploration and Development (Pty) Ltd.
(V-MED, a South African corporation holding an exclusive 32-year
mineral lease on five contiguous farms near Potgietersrus, South
Africa. These properties are adjacent to, and run parallel to,
Plateau's platinum-palladium properties.
The farms cover 17,188 acres within the Bushveld Complex, a region
that accounts for 50 percent of the world's vanadium supply. They
host a 6-metre thick main layer magnetite, approximately 17
kilometers in strike length, which is believed to be the largest
underdeveloped resource of vanadium in the world. Indicated resource
of the main magnetite layer to a depth of only 80 meters is estimated
to be 100 million tonnes of magnetite containing 1.67 million tonnes
of vanadium pentoxide. Assays from diamond core drilling show that
the "run-of-mine ore" contains an average of 1.24% vanadium pentoxide
and 11.88% titanium dioxide. The outcropping and shallow magnetite
layer constitutes a low cost open pit proposition.
The Company is allocating $300,000 of a Private Placement to fund
the closing of V-MED and first year's operations. The company is
also issuing 4,000,000 shares of restricted stock. Management is of
the opinion that the vanadium and titanium property represent an
excellent business opportunity for the shareholders of the Company.
Other than these two opportunities 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 proposal and
has no contingent loan agreements which are subject to approval.
<PAGE>6
The Company is attempting to raise additional equity or debt capital to
fund additional financing activities in the future. As of the date of
this filing, management has authorized the sale of 650,000 shares of
treasury stock in a 506 Private Placement Offering at the sale price of
$2.00 per share. These shares, if sold, would bear the SEC 144 two-
year sale restriction legend. There is no assurance that the Company,
or any of its brokering assistants, will be successful in completing
the placement of the shares. Management therefore 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.
The loan to Asset Partners was written off and is no longer an account
receivable however management expects to be able to recover the
principal amount plus accrued interest in due time. The loan made to
Plateau Resources was repaid by Hunter-Dickinson Inc. when they closed
with the Company on their proposal to provide drilling and exploration
funding for Plateau Resources. An additional loan to Froghair, LLC is
outstanding together with accumulated interest and this loan should be
retired on time.
Out of the successful sale of shares in the Private Placement a loan is
being contemplated to Alpha Society Plus (Pty) Ltd in order to fund the
purchase of certain mining equipment and start up operations for a
project called the Katenya River Diamond Recovery Project which will be
located on Alpha Society's leases on the Katenya River in Guinea West
Africa. Under the terms of the contingent loan agreement the Company
is scheduled to advance up to $400,000 and receive back 150% of the
first proceeds until $600,000 in net revenues has been realized. After
payout the Company would then receive 20% of the projects net revenues.
If the Company fails to raise the necessary funds to proceed with this
project then it is of no material consequence to the Company other than
an opportunity lost and there are no repercussions for failure to fund.
Other than the Vanadium property and managements hope to be able to
participate in the project with Alpha Plus, 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.
Prior to any affiliation with the Company, Mr. Glen Gamble, now
President of the Company, and Victory Minerals Corp, a major
shareholder of the Company, had arranged start-up financing for a South
African mining company by the name of Plateau Resources (Pty) Ltd. When
Plateau Resources was acquired by the Company all of the financial
contributions and professional contributions were satisfied with the
issuance of Pinnacle stock consequently the Company gained 100%
ownership of Plateau Resources with no further obligations to any third
parties. However, the Company has subsequently entered into a Loan
Facility Agreement with Hunter-Dickinson, Inc through its managed
subsidiary, Anooraq Resources, Ltd wherein Anooraq may gain share
ownership in Plateau Resources by expending funds through managing and
implementing a drilling and exploration program on Plateau's farms.
Since commencement through the date of the writing, Anooraq has loaned
(and spent) Cdn$2 million, and for this Anooraq has been issued 2,154
shares of Plateau Resources. The net effect is that the Company's
4,000 shares which represented 100% now represent 65% of the ownership
of Plateau.
Company management remains most hopeful that the continued efforts of
Anooraq will establish a proven ore reserve containing Platinum Group
Metals (PGM's) eventhough the continued effort will futher dilute the
Company's ownership of Plateau.
When the Company closed on its acquisition of Vanadium and Magnetite
Exploration and Development (Pty) Ltd it took on the responsibility to
pay annually the minimum Mineral Lease fees of approximately US$7,500.
Additionally, the Company plans to investigate certain process for
beneficiating the vanadium and titanium values from the magnetite ore
among other activities which management hopes will attract a joint
venture partner. These activities plus normal supervision have been
cost estimated into an overall annual budget of $300,000. Therefore,
it is a priority of the Company to achieve sufficient funding to meet
this need.
<PAGE>7
Other than the Company's normal office overhead and the commitment to
the vanadium/titanium project, Pinnacle has no other plans,
arrangements or pre-planned financing commitments for which it is
obligated. The Company has aspirations as stated earlier but they are
contingent upon the successful sale and closing of the Private
Placement Offering.
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
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
<PAGE>8
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 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.
<PAGE>9
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. Mr. Gamble,
President draws a $3,000 per month and Terrilynn Gamble, office
manager draws $2,500 per month.
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal.
ITEM 2. PROPERTIES.
In January 2000, the Company moved its offices to 9600 E. Arapahoe
Road, Suite 260, Englewood, Colorado 80112, a space rented and
occupied by Terryl K. Jensen, a director and shareholder in the
Company. The Company pays $1,500 rent per month for its current
office space. The Company's offices consist of approximately 1,500
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, 2000, no
matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies.
<PAGE>10
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,
2000, 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, 2000, was 50. As of September
30, 2000, there are 76 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, 2000. The deficiency in working capital as of June 30, 2000
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
<PAGE>11
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.
Capital Resources and Source of Liquidity. The Company currently has
no material commitments for capital expenditures. The Company pays
$1,500 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 October of this fiscal year the Company issued 1,500,000
Shares of common stock from its treasury for the acquisition of 4,000
shares of Plateau Resources (Pty) Ltd. which made Plateau a 100% wholly
owned subsidiary of the Company.
On October 1, 1999 the Company issued 195,000 shares of common
stock for cash of $97,500, or $.50 per share, resulting in net cash
flows from financing activities of $97,500.
The Company received a loan of $100,000 in March of 1998 and the
Company has renewed that loan until March 2001. A loan of $75,000 was
made to Plateau Resources (Pty) Ltd in May of 1999 was repaid when the
Company closed on a Loan Facility Agreement with Anooraq Resources,
Inc.. Another loan made September of 1998 to Asset Partners, Ltd in the
amount of $40,000 was written off even though the Company expects to
receive back the principal plus accrued interest in the up coming
physical year. There is a narrow probability that third party funding
of Vanadium and Magnetite Exploration and Development (Pty) Ltd [VMED}
will be finalized in the short term and it is highly unlikely that the
Company will find a joint venture partner at any time in the near
future. This acquisition has caused a financial burden of approximately
US$7,500 per year for the Company and if the Company is unsuccessful in
meeting those financial obligations then an asset sale of VMED would
become a necessity.
At June 30, 2000, the Company had a negative working capital of
$(1,599,680) consisting $126,275 in current assets and $1,725,955 in
liabilities. The Company has no long-term liabilities.
<PAGE>12
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.
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,
2000 of $1,725,955. The Company had an increase of $41,319 in
receivables for the year ended June 30, 2000, an increase in accounts
payable and accrued liabilities of $53,580. As a result, the Company
had net cash flows used in operating activities of $(1,559,875)
The Company had prospecting costs of $1,018,795, general and
administrative expenses of $224,391, legal and accounting fees of
$155,061, travel of $142,087, depreciation and amortization of $96,344
and foreign currency transaction loss of $42,770.
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.
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>13
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Page
Independent auditors' reports........................................... F-2
Consolidated balance sheet as of June 30, 2000.......................... F-4
Consolidated statements of operations, for the years ended June 30, 2000
and 1999 and for the period January 6, 1995 (inception) through
June 30, 2000 (Unaudited)............................................. F-5
Consolidated statements of shareholders' equity (deficit) for the period
from January 6, 1995 (inception) through June 30, 2000................ F-6
Consolidated statements of cash flows, for the years ended June 30, 2000
and 1999 and for the period January 6, 1995 (inception) through
June 30, 2000 (Unaudited)............................................. F-7
Notes to consolidated financial statements.............................. F-8
<PAGE>14
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Pinnacle Resources, Inc.
We have audited the accompanying consolidated balance sheet of Pinnacle
Resources, Inc. (a development stage company) and its subsidiaries as of June
30, 2000 and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pinnacle Resources,
Inc. and its subsidiary as of June 30, 2000 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note A to the
consolidated financial statements, the Company has a substantial dependence on
the success of its development stage activities, significant losses since
inception, lack of liquidity and a working capital deficit at June 30, 2000.
These factors raise a substantial doubt about the ability of the Company to
continue as a going concern. Management's plans in regard to these matters are
also described in Note A. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
/s/ Cordovano and Harvey, P.C.
------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
September 30, 2000
F-2
<PAGE>15
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of Pinnacle
Resources, Inc. (a development stage company) and its subsidiaries as of June
30, 1999 (not presented herein) and the related statements of income,
shareholders' equity, and cash flows for the year ended June 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable
assurance about whether the consolidated 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 year
ended 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 (not presented
herein), 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 (not presented herein).
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
/s/ Kish, Leake & Associates, P.C.
------------------------------------
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
September 20, 1999
F-3
<PAGE>16
PINNACLE RESOURCES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
June 30, 2000
ASSETS
CURRENT ASSETS
Cash...................................................... $ 44,865
Receivables, other ....................................... 81,410
------------
TOTAL CURRENT ASSETS 126,275
============
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $9,925........................ 75,777
NOTE RECEIVABLE, net of allowance............................... -
GOODWILL, net of
accumulated amortization of $86,419....................... 389,387
------------
$ 591,439
============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable, trade................................... $ 65,924
Note payable.............................................. 100,000
Accrued interest payable.................................. 11,425
Advances payable to shareholder and officer............... 1,548,606
------------
TOTAL CURRENT LIABILITIES 1,725,955
------------
MINORITY INTEREST............................................... 352
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value, 2,000,000 shares
authorized; -0- shares issued and outstanding........... -
Common stock, $.00001 par value; 500,000,000 shares
authorized; 5,890,000 shares issued and outstanding .... 59
Additional paid in capital................................ 663,941
Cumulative translation adjustment......................... 91,192
Deficit accumulated during development stage.............. (1,890,060)
------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,134,868)
------------
$ 591,439
============
See accompanying notes to the consolidated financial statements
F-4
<PAGE>17
PINNACLE RESOURCES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
January 6, 1995
For the Years Ended June 30, (inception)
---------------------------- through
2000 1999 June 30, 2000
------------- ------------ ---------------
(Unaudited)
<S> <C> <C> <C>
OPERATING EXPENSES
Prospecting costs............................................. $ 1,018,795 $ - $ 1,018,795
General and administrative.................................... 224,391 18,030 299,291
Legal and accounting fees..................................... 155,061 5,647 176,951
Travel........................................................ 142,087 24,377 167,452
Depreciation and amortization................................. 96,344 - 96,344
Foreign currency transaction loss............................. 42,770 - 42,770
------------- ------------ ---------------
TOTAL OPERATING EXPENSES 1,679,448 48,054 1,801,603
------------- ------------ ---------------
OPERATING LOSS (1,679,448) (48,054) (1,801,603)
NON-OPERATING INCOME (EXPENSE)
Write-down of notes receivable................................ (37,517) (48,776) (86,293)
Interest expense.............................................. (48,710) (5,000) (55,135)
Interest income............................................... 16,908 25,638 52,971
------------- ------------ ---------------
NET LOSS BEFORE INCOME TAXES (1,748,767) (76,192) (1,890,060)
INCOME TAXES ...................................................... - - -
------------- ------------ ---------------
NET LOSS $ (1,748,767) $ (76,192) $ (1,890,060)
============= ============ ===============
NET LOSS PER COMMON SHARE:
Basic and diluted............................................. $ (0.31) $ (0.02)
============= ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted............................................. 5,574,167 4,250,000
============= ============
</TABLE>
F-5
<PAGE>18
PINNACLE RESOURCES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
From January 6, 1995 (inception) through June 30, 2000
<TABLE>
<CAPTION>
Cumulative
Translation
Adjustment
Addi- ------------
Preferred Stock Common Stock tional Other Total
--------------- ---------------- Paid-in Accumulated Comprehensive Shareholders'
Shares Amount Shares Amount Capital Deficit Income Equity (Deficit)
------ ------ --------- ------ -------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 6, 1995................... - $ - - $ - $ - $ - $ - $ -
January 1995 issuance of common stock
in exchange for cash advances made on
behalf of the Company and services
at $.01 per share........................ - - 150,000 1 1,499 - - 1,500
Net loss for the year ended June 30, 1995.. - - - - - (1,500) - (1,500)
------ ------ --------- ------ -------- ----------- ------------ ----------------
BALANCE, June 30, 1995 and 1996 - - 150,000 1 1,499 (1,500) - -
June 1997 issuance of common stock
for cash at $.025 per share............. - - 4,000,000 40 99,960 - - 100,000
Net loss for the year ended June 30, 1997.. - - - - - - - -
------ ------ --------- ------ -------- ----------- ------------ ----------------
BALANCE, June 30, 1997 - - 4,150,000 41 101,459 (1,500) - 100,000
Net loss for the year ended June 30, 1998.. - - - - - (63,601) - (63,601)
------ ------ --------- ------ -------- ----------- ------------ ----------------
BALANCE, June 30, 1998 - - 4,150,000 41 101,459 (65,101) - 36,399
January 1999 issuance of common stock
for cash at $.50 per share.............. - - 100,000 1 49,999 - - 50,000
Net loss for the year ended June 30, 1999.. - - - - - (76,192) - (76,192)
------ ------ --------- ------ -------- ----------- ------------ ----------------
BALANCE, June 30, 1999 - - 4,250,000 42 151,458 (141,293) - 10,207
August 30, 1999 issuance of common stock
valued at $.25 per share in exchange for
Plateau Resources, Inc. shares.......... - - 1,500,000 15 374,985 - - 375,000
September 1999 issuance of common stock
for cash at $.50 per share.............. - - 85,000 1 42,499 - - 42,500
October 1999 issuance of common stock
for cash at $.50 per share.............. - - 10,000 - 5,000 - - 5,000
June 2000 issuance of common stock
for cash at $2.00 per share............. - - 45,000 1 89,999 - - 90,000
Comprehensive loss
Net loss for the year ended June 30, 1999 - - - - - (1,748,767) - (1,748,767)
Cumulative translation adjustment........ - - - - - - 91,192 91,192
Comprehensive loss......................... - - - - - - - (1,657,575)
------ ------ --------- ------ -------- ----------- ------------ ----------------
BALANCE, June 30, 2000 - $ - 5,890,000 $ 59 $663,941 $(1,890,060) $ 91,192 $ (1,134,868)
====== ====== ========= ====== ======== ============ ============ ================
</TABLE>
See accompanying notes to the consolidated financial statements
F-6
<PAGE>19
PINNACLE RESOURCES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
January 6, 1995
(inception)
For the Years Ended June 30, through
----------------------------- June 30, 2000
2000 1999 ----------------
------------- ----------- (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................... $ (1,748,767) $ (76,192) $ (1,890,061)
Transactions not requiring cash:
Common stock issued for services............................... - - 1,500
Depreciation and amortization.................................. 96,344 - 96,344
Foreign currency transaction loss.............................. 42,770 - 42,770
Write-down of notes receivable................................. 37,517 48,776 86,293
Changes in current assets and current liabilities:
Increase in receivables;
net of $40,091 from purchase of subsidiary.................. (41,319) (25,637) (77,381)
Increase in accounts payable and accrued liabilities
net of $1,544 effects from purchase subsidiary............... 53,580 14,200 75,805
NET CASH USED IN
OPERATING ACTIVITIES (1,559,875) (38,853) (1,664,730)
INVESTING ACTIVITIES
Cash received for sale of options to purchase interest
in subsidiary.................................................. 42,708 - 42,708.
Purchase of equipment............................................ (84,450) - (84,450)
Advances made to related parties as notes receivable............. - (30,000) (145,000)
Purchase of subsidiary, cash received........................... 1,151 - 1,151.
NET CASH USED IN
INVESTING ACTIVITIES (40,591) (30,000) (185,591)
FINANCING ACTIVITIES
Advances from officer/shareholder................................ 1,416,495 - 1,416,495.
Proceeds from loans.............................................. - - 100,000.
Proceeds from sale of common stock............................... 137,500 50,000 287,500.
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,553,995 50,000 1,803,995
CUMULATIVE TRANSLATION ADJUSTMENT.................................... 91,192 - 91,192.
NET CHANGE IN CASH AND CASH EQUIVALENTS............................. 44,721 (18,853) 44,866.
Cash and cash equivalents, beginning................................. 145 18,998 -....
Cash and cash equivalents, ending.................................... $ 44,866 $ 145 $ 44,866.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................................... $ - $ - $ -....
Cash paid for income taxes........................................... $ - $ - $ -....
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of subsidiary in exchange for 1,500,000 shares of
common stock..................................................... $ 375,000 $ - $ 375,000.
</TABLE>
See accompanying notes to the consolidated financial statements
F-7
<PAGE>20
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Notes to the Financial Statements
Note A: Organization, business, liquidity and summary of significant accounting
policies
================================================================================
Organization
------------
Pinnacle Resources, Inc. (the "Company") was incorporated under the laws of
Wyoming as Claremont House, Corp. on January 6, 1995. On June 26, 1997 the
Company changed its name to Pinnacle Resources, Inc. The Company was formed to
engage in all aspects of the financial services industry or any other lawful
business. The Company has been in the development stage since its inception.
Nature of business
-------------------
Beginning with the acquisition of its subsidiary in September 2000, Plateau
Resources, the Company's principal business has been to obtain mining rights,
mining concessions and to explore such grants towards the mining and marketing
of mineral products produced and all facets thereto.
Basis of presentation
---------------------
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements, the Company is a development stage company
with no significant revenue as of June 30, 2000, and has incurred losses of
$(1,748,767), $(76,192) and $(1,890,060 unaudited) for the years ended June 30,
2000 and 1999 and for the period January 6, 1995 (inception) through June 30,
2000 (unaudited), respectively. The Company has a lack of liquidity and a
working capital deficit at June 30, 2000. These factors among others may
indicate that the Company will be unable to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon the planned principal
activities of its subsidiary to produce sufficient cash flow to meet its
obligations on a timely basis, successful completion of additional financing
and, ultimately to attain profitability. The Company's subsidiary's activities
have been funded primarily by a shareholder. The Company anticipates additional
funding from the shareholder, whereby the shareholders' interest in the
subsidiary increases as funding of the expenditure increases. The Company plans
to continue to finance its operations and satisfy cash requirements with a
combination of debt financing, stock sales and, in the longer term, revenues
from operations.
F-8
<PAGE>21
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Notes to the Financial Statements
Summary of significant accounting policies
------------------------------------------
Development stage company
-------------------------
The Company is in the development stage in accordance with Statement of
Financial Accounting Standard (SFAS) No. 7.
Basis of consolidation
----------------------
The consolidated financial statements include the accounts of Pinnacle
Resources, Inc. and its majority-owned subsidiary Plateau Resources
(Proprietary) Limited ("Plateau"), a South African corporation. All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Cash equivalents
----------------
For the purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents
Notes receivable and allowance for doubtful accounts
----------------------------------------------------
At June 30, 2000 the Company had an outstanding note receivable collateralized
by common stock of another corporation. The principal amount of $30,000 and
accrued interest of approximately $7,516 have been fully allowed for because the
market value of the collateral stock is significantly less than the face value
of the note and the related interest.
Other receivables are taxes (VAT) for which the Company has filed for the refund
and expects reimbursement within ninety days.
Equipment and depreciation
--------------------------
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which is estimated to be three to five years.
Expenditures for repairs and maintenance are charged to expense when incurred.
Expenditures for major renewals and betterments, which extend the useful lives
of existing equipment, are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the consolidated statements of operations.
F-9
<PAGE>22
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Notes to the Financial Statements
Net loss per share
------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share" (SFAS 128). The Company adopted SFAS 128 for the
two-year period ended June 30, 2000. Under SFAS 128, net loss per share-basic
excludes dilution and is determined by dividing loss available to common
shareholders by the weighted average number of common shares outstanding during
the period. Net loss per share-diluted reflects the potential dilution that
could occur if securities and other contracts to issue common stock were
exercised or converted into common stock. As of June 30, 2000, there were no
stock options or warrants to issue common shares outstanding.
Income taxes
------------
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future income taxes.
Fair value of financial instruments
-----------------------------------
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based on available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts receivable,
accounts payable, and other accrued liabilities approximate fair value due to
the short-term maturity of the instruments.
Intangible assets
-----------------
Goodwill at June 30, 2000 was derived from the acquisition of Plateau and is
amortized over sixty months. Amortization expense for the year ended June 30,
2000 was $86,419.
Foreign currency translation
----------------------------
Assets and liabilities of non-U.S. subsidiaries are translated to U.S. Dollars
at end-of-period exchange rates. The effects of this translation for non-U.S.
subsidiaries are reported in other comprehensive income (loss). Remeasurement of
assets and liabilities of non-U.S. subsidiaries that use a currency other than
the U.S. dollar as their functional currency are included in income as
transaction gains and losses. Income statement elements of all non-U.S.
subsidiaries are translated to U.S. Dollars at average-period exchange rates and
are recognized as part of revenues, costs and expenses. The functional currency
of the Company's foreign subsidiary is the local currency, the South African
Rand.
Note B: Related party transactions
===================================
During the year ended June 30, 2000 the Company paid a related entity a total of
$66,647 for general and administrative costs. During the year ended June 30,
2000, a shareholder of Plateau advanced Plateau $1,362,879 which is unsecured
and carries interest at the LIBOR + two percent. The shareholder has
subordinated its loan in favor of the creditors of Plateau until such time as
the assets of Plateau fairly valued, exceed its liabilities.
F-10
<PAGE>23
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Notes to the Financial Statements
Note C: Property and equipment
===============================
Equipment consisted of the following:
Office furniture and fixtures............. 3,077
Computer equipment........................ 24,059
Motor vehicles............................ 58,566
-------------------
85,702
Less accumulated depreciation............. (9,925)
-------------------
$ 75,777
===================
Depreciation expense for the year ended June 30, 2000 totaled $9,925.
Note D: Note payable
=====================
On March 18, 1998 the Company signed a one-year loan agreement for $100,000 at
five percent interest. The loan was collateralized by an individual interest in
the Drenthe, Wirivier, Dortsland platinum concession as arranged by the Company.
On June 22, 2000 the Company renewed the loan at an interest rate of 12 percent
for one year with interest to be settled with common stock of the Company at
$.50 per share. At June 30, 2000 accrued interest on the loan was $11,425.
Note E: Shareholders' Equity
=============================
Plateau Resources Ltd.
----------------------
On August 30, 1999 the Company purchased all of the outstanding common stock of
Plateau in exchange for 1,500,000 shares of the Company's common stock valued at
$375,000. The common stock was valued at $.25 per share based on contemporaneous
transactions. Plateau was acquired from an independent and unaffiliated third
party. Net liabilities of Plateau as of the date of acquisition was $143,514.
The excess of the purchase price over the fair value of the assets, in the
amount of $518,514 has been allocated to Goodwill and is being amortized over a
60-month period. Amortization expense of $86,419 has been recorded in the
accompanying consolidated financial statements for the year ended June 30, 2000.
During the year ended June 30, 2000 the Company entered into an agreement with
an unrelated third party, whereby the third party could purchase up to 65
percent of the Company's interest in Plateau. As of June 30, 2000 the third
party had acquired a 35 percent interest. In exchange for this agreement, the
third party paid the Company $42,708 which the Company accordingly reduced its
investment in Plateau. The minority interest's share of Plateau's net losses
exceed the third party's equity in Plateau by 109,558, therefore the minority
losses have been charged to the Company until such time the third party's equity
exceeds the losses. At June 30, 2000, the third party had advanced Plateau a
total of $1,548,606.
F-11
<PAGE>24
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Notes to the Financial Statements
The Company has recorded the transaction as a purchase in accordance with
Accounting Principles Board Opinion No. 16. The accompanying consolidated
financial statements include the results of operations of Plateau from the date
of acquisition, August 30, 1999 through June 30, 2000.
The following pro forma consolidated statement of operations gives effect to the
acquisition of Plateau as if it occurred at the beginning of the period
presented.
The pro forma consolidated statement of operations are not necessarily
indicative of results of operations had the acquisition occurred at the
beginning of the periods presented, nor the results to be expected in the
future.
<TABLE>
<CAPTION>
Pro Forma
Pinnacle Plateau Adjustments Consolidated
-------------- -------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Operating Expenses $ 1,679,448 $ 1,403,793 $ (14,885) $ 3,068,356
(Loss) from Operations $ (1,679,448) $ (1,403,793) $ 14,885 $ (3,068,356)
Interest Expense $ (48,710) $ - $ (48,710)
Interest Income $ 16,908 $ 10,852 $ (9) $ 27,751
Other, non-operating $ (37,517) $ - $ (37,517)
Net (Loss) $ (1,748,767) $ (1,392,941) $ 14,876 $ (3,126,832)
Net (Loss) per share
Basic and diluted $ (0.31) $ (226.35) $ (0.55)
Basic and diluted shares
outstanding 5,574,167 6,154 5,699,167
</TABLE>
Proforma adjustments include $6,125 of the operating expenses for Plateau for
the two months ended August 31, 1999 and $8,751 amortization expense for the two
months ended August 31, 1999.
Private Stock Offerings
-----------------------
On September 30, 1999 the Company sold 85,000 shares of its restricted common
stock at $.50 per share for total proceeds of $42,500.
In October of 1999 the Company sold 10,000 shares of its restricted common stock
at $.50 per share for total proceeds of $5,000.
During the fourth quarter of 2000, the Company sold 45,000 shares of its
restricted common stock at $2.00 per share for total proceeds of $90,000.
F-12
<PAGE>25
Note F: Income taxes
=====================
A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate at June 30, follows:
2000 1999
------------ -------------
U.S. statutory federal rate................ 34.00% 34.00%
Net operating loss for which no tax benefit
is currently available................... -34.00% -34.00%
------------ -------------
0.00% 0.00%
============ =============
Income taxes from operations for the years ended June 30, 2000 and 1999,
consisted of the following components: (1) current tax benefit ($594,580,
$14,155, respectively) resulting from the net loss before income taxes, and (2)
deferred tax expense ($594,580, $14,155 respectively) resulting from the
valuation allowance recorded against the deferred tax asset (which is
substantially comprised of net operating losses). The change in the valuation
allowance from June 30, 1999 to June 30, 2000 was $580,425. Net operating loss
carryforwards will expire through 2020.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
Note G: Subsequent event
=========================
In September 2000, the Company acquired all of the outstanding common shares of
Vanadium and Magnetite Exploration Development Ltd. (a South African
corporation) ("Vanadium") in exchange for 4,000,000 shares of the Company's
common stock. Vanadium's principal business has been to obtain mining rights,
mining concessions and to explore such grants towards the mining and marketing
of mineral products produced and all facets thereto.
F-13
<PAGE>25
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>26
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
Terryl 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>28
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
<PAGE>29
become "full time," there will be conflicts of interest in allocating
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.
<PAGE>30
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 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.
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Shares
Glen R. Gamble
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
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.
7345 E. Peakview
Englewood, Co 80111 2,000,000 48.19%
Re-Group, Inc.
9600 E. Arapahoe Road
#260
Englewood, CO 80112 266,000 6.41%
<PAGE>31
All Directors & Officers
as a group (3 persons) 3,606,000 86.89%
[FN]
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.
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.
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.
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
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>32
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.
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 this report:
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
<PAGE>33
(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
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 13, 2000 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 10/13/00
- ------------------------------
Glen R. Gamble
President and Director
(chief executive officer)
/s/ Robert A. Hildebrand 10/13/00
- ------------------------------
Date:
Robert A. Hildebrand
Secretary/Treasurer and Director
(Chief Financial Officer)
/s/ Terryl F. Jensen 10/13/00
- ------------------------------
Terryl F. Jensen
Director
