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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d)
Securities Exchange Act of 1934
for Quarterly Period Ended September 30, 2000
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities And Exchange Act of 1934
for the transaction period from _________ to________
Commission File Number 000-22965
Pinnacle Resources, Inc.
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(Exact name of registrant as specified in its charter)
Wyoming 84-1414869
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
9600 E. Arapahoe Road, Suite 260, Englewood, Colorado 80112
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(Address of principal executive offices, Zip Code)
303-705-8600
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of outstanding shares of the registrant's common stock,
September 30, 2000: Common Stock - 5,860,000
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PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Index to Condensed Consolidated Financial Statements
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements*
Condensed consolidated balance sheet, September 30, 2000 (unaudited). 3
Condensed consolidated statements of operations
for the three months ended September 30, 2000
and 1999, and from January 6, 1995 (inception)
through September 30, 2000 (unaudited) .... ...... 4
Condensed consolidated statements of cash flows
for the three months ended September 30, 2000
and 1999, and from January 6, 1995 (inception)
through September 30, 2000 (unaudited)..... ..... 5
Notes to condensed consolidated financial statements................. 6
* The accompanying condensed consolidated financial statements are
not covered by an Independent Certified Public Accountant's report
<PAGE>
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Condensed Consolidated Balance Sheet
(Unaudited)
September 30, 2000
Assets
Current assets:
Cash........................................... $ 146,789
Receivables, other.................................... 21,060
-------------------
Total current assets 167,849
Equipment, net..................................... . 74,420
Note receivable, net...................................... -
Mining lease, net (Note D)........................... 2,051,935
Goodwill, net.................................. 363,461
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$ 2,657,665
==================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable, trade......................... $ 69,845
Line of credit.................................. 40,000
Note payable.................................. 100,000
Accrued interest payable......................... 13,077
Advances payable to shareholder and officer............. 1,663,278
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Total current liabilities 1,886,200
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Minority interest.......................... 352
Shareholders' equity (Note D):
Preferred stock.......................... -
Common stock............................. 99
Additional paid in capital....................... 2,683,901
Cumulative translation adjustment ........... 91,192
Deficit accumulated during development stage.......... (2,004,079)
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Total shareholders' equity 771,113
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$ 2,657,665
==================
See accompanying notes to condensed consolidated financial statements
<PAGE>
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
January 6, 1995
Three Months Ended (inception)
September 30, through
-------------------- September 30,
2000 1999 2000
-------- ------ -----------------
<S> <C> <C> <C>
Operating expenses:
Prospecting costs................................. $ 10,895 $ - $ 1,029,690
General and administrative.................... 74,730 7,936 363,375
Legal and accounting fees............................ 2,845 3,622 179,796
Travel.............................................. 585 2,748 168,037
Depreciation and amortization...................... 39,055 8,642 135,399
Foreign currency transaction loss....................... - 1,489 42,770
---------- ------- ------------
Total operating expenses 128,110 24,437 1,919,067
---------- ------- ------------
Operating loss (128,110) (24,437) (1,919,067)
Non-operating income (expense):
Write-down of notes receivable.................... - - (86,293)
Interest income..................................... 1,503 1,315 54,474
Other income............................... . 3,860 - 3,860
Interest expense................................. (1,918) (1,250) (57,053)
---------- ------- -----------
Net loss before income taxes (124,665) (24,372) (2,004,079)
Income taxes (Note C).................................... - - -
---------- ------- ----------
Net loss $ (124,665) $(24,372) $(2,004,079)
========== ======== ===========
Basic and diluted loss per common share................ $ (0.02) $ *
========== ========
Basic and diluted weighted average
common shares outstanding............................ .. 6,223,333 5,278,333
========== =========
</TABLE>
* Less than $.01 per share
<PAGE>
PINNACLE RESOURCES, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
January 6, 1995
Three Months Ended (inception)
September 30, through
-------------------- September 30,
2000 1999 2000
-------- ------ -----------------
<S> <C> <C> <C>
Net cash used in operating activities................. $ (49,715) $ (16,244) $ (1,714,445)
---------- ---------- -------------
Cash flows from investing activities:
Cash received for sale of options to purchase
interest in subsidiary................................. - - 42,708
Purchase of equipment.............................. (3,034) - (87,484)
Advances made to related parties as notes receivable........... - - (145,000)
Purchase of subsidiary, cash received...................... - 1,151 1,151
----------- --------- ------------
Net cash used in investing activities................. (3,034) 1,151 (188,625)
----------- --------- ------------
Cash flows from financing activities:
Advances from officer/shareholder..................... 114,672 - 1,531,167
Proceeds from loans and line of credit......... 40,000 - 140,000
Proceeds from sale of common stock........................... - 42,500 287,500
----------- --------- -----------
Net cash provided by financing activities.......... 154,672 42,500 1,958,667
----------- --------- -----------
Cumulative translation adjustment............................. - - 91,192
----------- --------- -----------
Net change in cash 101,923 27,407 146,789
Cash and cash equivalents, beginning 44,866 145 -
----------- --------- -----------
Cash, ending $ 146,789 $ 27,552 $ 146,789
=========== ========= ===========
Supplemental disclosure of cash flow information:
Cash paid for interest............. $ - $ - $ -
=========== ========= ===========
Cash paid for income taxes........................... $ - $ - $ -
=========== ========= ===========
Non-cash investing and financing transactions:
Acquisition of subsidiary in exchange for 1,500,000
shares of common stock............................ $ - $ 375,000 $ 375,000
=========== ========= ===========
Acquisition of subsidiary in exchange for 4,000,000
shares of common stock.............................. $ 2,000,000 $ - $ 2,000,000
=========== ========= ===========
</TABLE>
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Item 2. Management's Discussion and Analysis or Plan 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
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.
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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 1999 the Company issued 1,500,000 common shares 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 September 30, 2000, the Company had a negative working capital of
$(1,718,351) consisting $167,849 in current assets and $1,886,200 in
liabilities. The Company has no long-term liabilities.
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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 three months ended
September 30, 2000 of $124,665. The Company had prospecting costs of
$10,895, general and administrative expenses of $74,730, legal and
accounting fees of $2,845, travel of $585, depreciation and
amortization of $39,055 for the three months ended September 30, 2000.
General and administrative expenses included health insurance of $102,
administration fees of $10,000, advertising of $1,050, automobile
expense of $2,069, bank service charges of $105, contract labor of
$438, office supplies of $830, office expense of $(798), on-line
services of $1,402, operational fees of $135, postage and delivery of
$822, printing and reproduction of $290, professional fees of $31,645,
rent of $4,328, salaries-officer of $9,000, salaries - office of
$1,250, stock transfer fees of $1,471, payroll taxes of $895,
telephone of $6,753, payroll fees of $143 and credit card expenses of
$2,800.
The Company had a net loss for the three months ended September 30,
1999 of $24,372. The Company had general and administrative expenses
of $7,936, legal and accounting fees of $3,622, travel of $2,748,
depreciation and amortization of $8,642 and foreign currency
transaction loss of $1,489 for the three months ended September 30,
2000.
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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. not applicable.
Item 2. Changes in Securities and Use of Proceeds. not applicable.
Item 3. Defaults Upon Senior Securities. not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
not applicable.
Item 5. Other Information. not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Reports on Form 8-K.
(b) Exhibits. * Exhibit 27 - Financial Data Schedule
* A summary of any Exhibit is modified in its entirety by reference to
the actual Exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
PINNACLE RESOURCES, INC
By: /s/ Glen R. Gamble, President and Director
