UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
PINNACLE BUSINESS MANAGEMENT, INC.
(Name of small business issuer in its charter)
NEVADA 91-1871963
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2963 Gulf to Bay Boulevard, Suite 265
Clearwater, Florida 33759
(727) 669-7781
(Address and telephone number of principal executive offices)
Securities to be registered pursuant to Section 12(g) of the Act
200,000,000 shares of common stock
50,000,000 shares of preferred stock
Copies to:
Lee Walthall
Schroeder Walthall Neville L.L.P.
1100 Louisiana, Suite 4850
Houston, Texas 77002-5222
(713) 654-9100
<PAGE>
INTRODUCTORY STATEMENT
Pinnacle Business Management, Inc., ("Pinnacle" or "the company") acquired
100% of MAS Acquisition XIX Corp. ("MAS") on March 3, 2000. At the time of the
acquisition, MAS was a reporting company; Pinnacle was not. Pinnacle filed a
Form 8-K on March 6, 2000, to disclose the acquisition, using MAS's CIK code
numbers (the Security and Exchange Commission's corporate identification codes).
Pinnacle and MAS filed all reports under MAS's CIK codes. On March 16,
2000, Pinnacle filed a Form S-8 to register 1,525,000 shares of common stock
paid to certain consultants involved in the acquisition of MAS. Pinnacle then
filed an amendment to its Form 8-K on May 3, 2000, to include 1998 and 1999
audited financial statements for the company.
The company filed another Form S-8 on April 14, 2000, to register
10,920,024 shares of stock paid to Gordon & Associates Strategic Investments,
Inc., ("G & A") as payment for consulting services. Due to a filing error,
EDGAR, the Security and Exchange Commission's electronic filing system, recorded
the filing date of the Form S-8 as June 7, 2000, instead of the accurate date of
filing, April 14, 2000. The Securities and Exchange Commission accepted all the
aforementioned filings.
Pinnacle and MAS filed quarterly reports on Form 10-QSB on May 15, 2000.
The Securities and Exchange Commission accepted Pinnacle's filing, but rejected
MAS's Form 10-QSB as a duplicative filing. MAS filed a Form TH and its Form 10-
QSB in paper format. A Form TH is a temporary hardship form used by filers
experiencing technical difficulties with EDGAR.
Pinnacle filed a Form S-8 to register 25,382,495 shares of stock issued to
G & A for consulting services on June 8, 2000. EDGAR accepted the Form S-8.
The Office of Small Business Review of the Securities and Exchange
Commission's Division of Corporate Finance has decided that Pinnacle should file
a registration statement separate from MAS and under a separate CIK code. This
solution will allow both Pinnacle and MAS to have separate CIK code numbers and
report as separate entities.
As soon as practical, Pinnacle will re-file the Form S-8 originally filed
on March 16, 2000 under MAS's CIK code. This submission will appear under
Pinnacle's new CIK code. At that time, the company may withdraw the Pinnacle
filings appearing under the CIK code for MAS. MAS will continue to file its
reports under the CIK code it currently uses.
Pinnacle's board of directors has resolved to acquire and retire
105,000,000 shares of the company's stock. Some of the stock registered in
the Forms S-8 filed on April 14, 2000 and June 8, 2000 are included in this
retirement action. As a result, one or both the Forms S-8 may not be re-filed.
ITEM 1. DESCRIPTION OF BUSINESS
Pinnacle is a holding company with two subsidiaries actively engaged in
consumer lending and deferred deposit services. It is a Nevada corporation
chartered in May 1997.
Originally, Pinnacle was a wholly owned subsidiary of
300365 BC, Ltd. d/b/a Peakers Resources Company, a Canadian corporation (the
"Predecessor"). The Predecessor was organized in 1986 to conduct mining
operations, but never actively engaged in business. On May 15, 1997, the
shareholders of the Predecessor agreed to exchange all the shares of the
Predecessor with the shares of the Company on a share-for-share basis. The
Predecessor became inactive and its business was wound up. United States
residents now own the majority of Pinnacle's shares.
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In 1997, Pinnacle acquired Fast Title Loans, Inc.("Fast Title"). It did so
by forming JTBH Corporation, a wholly owned subsidiary, which merged with Fast
Title on a share for share basis. The merger occurred in 1997, at a cost to the
Company of $122,500. Fast Title was the surviving entity and is now a
wholly owned subsidiary of Pinnacle.
Fast Title is a consumer lender chartered in Florida in April 1996. It
makes relatively short term loans on the basis of a security interest in vehicle
titles.
Summit Property, Inc. ("Summit Property") is a Pinnacle subsidiary
incorporated in Florida in 1997. Summit Property is inactive.
Fast PayCheck Advance of Florida, Inc. ("Fast PayCheck") is also a wholly
owned subsidiary, incorporated in Florida. Fast Paycheck offers deferred
deposit services to individual customers who find it difficult to obtain credit.
In 2000, Pinnacle acquired MAS. This acquisition closed pursuant to a
Stock Exchange Agreement (the "Exchange Agreement") dated March 3, 2000, between
the company, MAS Capital, Inc., the controlling shareholder of MAS, and MRC
Legal Services Corporation, the acquiring shareholder of MAS Capital, Inc.'s,
MAS shares. MRC Legal Services Corporation acted as an intermediary between MAS
Capital, Inc., and Pinnacle for the exchange of stock. Pursuant to the Exchange
Agreement, 1,500,000 shares of common stock of the company were exchanged for
100% (8,250,000 shares) of MAS. Through this transaction, the company became
the parent corporation of MAS.
MAS is an Indiana corporation, and a fully reporting company with the
Securities and Exchange Commission. MAS, a development stage company, does not
have any significant business operations.
The board of directors of MAS adopted the Exchange Agreement by unanimous
consent dated March 3, 2000. No approval of the shareholders of the company of
MAS was required under applicable state corporate law.
Prior to the merger, MAS had 8,519,800 shares of common stock outstanding
of which 8,250,000 were exchanged for 1,500,000 shares of common stock of the
company. The remaining shares were redeemed and retired. By virtue of the
exchange, the company acquired 100% of the issued and outstanding common stock
of MAS. The MRC Legal Services consultants were issued an additional 1,500,000
shares pursuant to a Consulting Agreement.
The company filed a Form 8-K, under the CIK codes for MAS, to disclose the
acquisition of MAS. The Form 8-K is dated March 6, 2000. An amendment to the
Form 8-K was filed on May 3, 2000, which included audited financial statements
for the company. An additional amendment is anticipated to correct the
percentage of the company's stock acquired, and reflect the filing of this Form
10.
Business of the Issuer
Pinnacle is a company in transition. In the past, Fast Title, its consumer
lending subsidiary, has generated all of its revenues. Fast Title lends money
short-term, secured by the borrower's vehicle title. Certain local ordinances
recently enacted create a hostile environment for the title loan business. As a
result, the company plans to discontinue its efforts to expand the Fast Title
business. It plans, instead, to concentrate on the Fast PayCheck business and
its potential for growth.
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Fast PayCheck offers payday deferred deposit services to individuals. The
maximum amount of a deferred deposit is $500. The company has recently signed
an agreement to offer Fast PayCheck services through Mail Boxes Etc. USA, Inc.
stores ("MBE Agreement"). Management is very optimistic about the potential for
growth in this business endeavor. Operations are expected to render a yield to
the company, which should grow conservatively for several years into the future.
Mail Boxes Etc. USA, Inc. ("MBE") has over 3000 locations in the United
States. Locating in even a fraction of these stores could greatly expand the
business of Fast PayCheck.
Illustrated below is an estimate of the percentage of total revenue
contributed to Pinnacle by Fast Title operations compared to Fast PayCheck
operations:
1997 Fast Title = 100% Fast PayCheck = 0%
1998 Fast Title = 99% Fast PayCheck = 1%
1999 Fast Title = 95% Fast PayCheck = 5%
This year, the company has spent approximately $100,000 on new proprietary
software to process its payday deferred deposit operations. This system also
services the title loan business; it accepts and processes all information
necessary for Pinnacle's bookkeeping system.
These costs are incurred at the same time the cash flow from Fast Title is
decreasing. Management believes that any negative impact on revenues will be
temporary. Net income should increase as the new operations begin generating
revenues.
Fast Title
Fast Title loans money on motor vehicle titles. It markets loans to
individuals and businesses with poor or non-existent credit. Fast Title
provides fast access to short-term cash loans. Borrowers pledge the title of
their vehicle as collateral. The company will not accept a vehicle as
collateral unless there are no other outstanding liens on the vehicle. No
credit checks on the individual are required. The individual generally retains
the use of his vehicle during the loan period.
Loan amounts are generally less than 40% of the blue book value of the
collateral. The maximum interest rate is 22% per month, the maximum allowed by
Florida law. The average net yield to the company is 12%. The average loan is
$500.00. The average term of a loan is four months, but the term may extend to
a year. In Florida, the law provides that a creditor may keep any surplus
realized from the repossession and the sale of the vehicle . Fast Title,
however, does not repossess vehicles on a regular basis. It is the policy of
the company to repossess only if there is no activity on the account for 60
days, and only after efforts are made to secure repayment of the loan. In 1999,
Fast Title netted approximately $1,200 from the sales of repossessed vehicles.
Fast Title recently consolidated its eight store front locations, and now
markets its services through six store locations, telephone solicitation and
newspaper and Yellow Pages advertisements. Management plans to keep the six
store locations open but does not intend to open any more stores. Fast Title
holds a consumer-lending license from the State of Florida pursuant to Florida
Statutes Chapter 538. This license requires Pinnacle to register and pay a fee
for each location. Pinnacle is subject to the pawn broker laws of Florida.
<PAGE>
Fast Title Competition
Fast Title's primary competitor is Florida Title Loans, Inc.("Florida
Title"). Florida Title has 300 locations in the Southeast and has a long
operating history. Florida Title has a loan to value ratio of 33% of the
wholesale value of the collateral. Fast Title has a loan to value ratio of up
to 50% of the wholesale value of the collateral. Fast Title therefore competes
with the larger distribution base by attracting a wider market.
Fast Title's second major competitor is Speedy Cash. Speedy Cash has
approximately 200 locations. Speedy Cash is located in the states of Florida,
Georgia, Mississippi, South Carolina and North Carolina. Management believes
that it effectively competes with Speedy Cash. The presence of these competitor
companies is favorable for Fast Title. These companies advertise heavily. This
publicity educates consumers about the title loan method of borrowing cash.
Fast Title to some extent experiences the same seasonal fluctuations that any
consumer lending facility would experience. It may experience a slight increase
in business during the Christmas season, for example. It is not, however,
considered a seasonal business. Any such fluctuations are relatively minor and
are not considered by Management in the overall planning and budgeting for the
company.
Fast PayCheck
Fast PayCheck offers deferred deposit services to individuals with poor or
non-existent credit or who need short-term financing. Fast PayCheck provides
fast access to short-term cash. Customers complete an application. If
accepted, the customer writes a post-dated personal check to Fast PayCheck.
Fast PayCheck then issues the customer a debit card. Pinnacle holds the
personal check until the customer's payday, and then electronically debits the
individual's bank account. The transaction is considered an exchange of a
payment instrument for a payment instrument. As a result, Fast PayCheck is not
considered a paycheck lender, but a money transmitter. No credit checks on the
individual are required.
Fast PayCheck charges the customer a fee of 10% of the check amount and a
$5 transaction fee. The maximum amount of a loan is $500.00. The average loan
is $200. The maximum term of a loan is two weeks. The company receives an
average return of 25% per month on these transactions.
Pinnacle has a contract with Comdata Network, Inc. d/b/a Comdata
Corporation ("Comdata") and Master Card to issue the borrower the pre-credited
private label debit card for the amount of the personal check minus the fees
charged. Distribution of funds to the customer is only made through this debit
card system. This insures maximum security at the store locations by
eliminating the need for each store to carry large amounts of cash. The company
keeps a bank account by agreement with Master Card. This account generally
keeps a balance of up to $50,000. Purchases made by a customer's use of the
debit card are deducted from Pinnacle's Master Card cash account. If Pinnacle
does not keep sufficient cash in the account, Master Card will not honor debit
card purchases.
Pinnacle also has a remarketing agreement with Comdata. This allows
Pinnacle to offer the card to its competitors and receive transactional revenue
from the card usage. At the present time, the company receives little income
from this agreement. Pinnacle also receives recurring revenue through a per
transaction fee associated with the customer's use of the Fast PayCheck debit
card.
<PAGE>
In third quarter 1999, Fast PayCheck and Pinnacle signed a three year
contract with MBE to offer Fast PayCheck services in MBE locations throughout
the United States. MBE is a franchisor of retail outlets ("MBE Centers") which
provide a variety of postal, business and communication services to businesses
and the general public. Through this Agreement, Fast PayCheck may offer its
services in any participating MBE Centers. To participate, an individual
franchisee must agree to offer Fast PayCheck services in their MBE Center. The
MBE Agreement carries an option to renew upon terms agreed to by MBE, Pinnacle
and Fast PayCheck.
Under the terms of the MBE Agreement, customers complete the application
and provide it to MBE personnel. MBE Centers fax the documents to Pinnacle's
call center and distribute a card to the borrower at the MBE location. MBE is
paid $3.50 per transaction. Management intends the call center to receive the
fax application from the MBE centers, qualify the application, enter the
customers information into the computer, re-fax the approval or denial and
activate the debit card for the customer.
Currently, Fast PayCheck offers its services in Fast Title and Florida MBE
Center locations. Pinnacle intends to expand into a multi-state operation in
the year 2000 offering services in MBE Centers. By the end of 2001, Management
plans to expand into every MBE location in states with laws favorable to the
provisions of Fast PayCheck services. Several states have usury laws, for
example, that would prohibit Fast PayCheck practices. Management estimates that
as many as 2800 MBE stores are located in favorable states. At this time,
Pinnacle has applied for the appropriate licenses in Idaho, Missouri, Utah and
Indiana.
Fast PayCheck holds a license from the State of Florida Department of
Banking and Finance pursuant to the provisions of Florida Statutes 560.200
through 560.213.
Fast PayCheck Competition
Fast PayCheck competes with paycheck lenders and check cashers. Its
largest competitor is Ace Check Cashing ("Ace"). Ace has approximately 1,800
locations throughout the United States. However, Ace cashes checks. Fast
PayCheck can offer a customer the use of funds before the paycheck is actually
deposited. Therefore, Ace's competitive effect is minimal.
Several companies offer payday advance loans. These companies are
considered lenders and must comply with consumer lending laws to a greater
extent than Fast PayCheck. These companies have received a great deal of
negative press because they will "roll" the loaned amount into a greater loan
term with the payment of additional fees. Many customers find themselves having
to borrow against their paycheck in this manner every pay period. Fast PayCheck
will not roll any amounts forward. Fast PayCheck will not credit the debit card
unless all prior amounts have been paid through the electronic debit. As a
result, a true comparison of Fast PayCheck and traditional paycheck advance
lenders cannot be made.
<PAGE>
Fast PayCheck's payday advance business has not operated for a full fiscal
year. Presently, Management does not know whether Fast PayCheck's business will
be seasonal in nature. Management anticipates a small increase in business
during the Christmas season as individuals need cash to meet holiday expenses.
Employees
Pinnacle has four full time employees. Fast Title employs 11 people. Of
the Fast Title employees, eight manage the stores and three are administrators
in the corporate office.
Fast PayCheck currently employs 15 people. Currently, ten employees
operate the call center. Management is currently hiring more employees to man
the call center. More people will be added as additional business is added from
the MBE Agreement. At this time, it is not possible to estimate the amount of
business the MBE Agreement will generate or the resulting number of employees
needed by Fast PayCheck.
Both Michael Bruce Hall and Jeff Turino have employment agreements with the
company.
Regulations
GENERAL. The company is, or expects to be, subject to regulation in
several jurisdictions in which it operates, including jurisdictions that
regulate check cashing fees, or require the registration of check cashing
companies or money transmission agents. The company is also subject to
regulation in jurisdictions where it offers title loans. In addition, Pinnacle
is subject to federal and state regulation relating to the reporting and
recording of certain currency transactions.
STATE REGULATIONS. Florida law requires licensing and regulates check
cashing fees. The ceiling on fees is in excess or equal to the fees charged by
the company.
As the company's operations expand, check cashing fee ceilings in
additional jurisdictions could have an adverse effect on the company's business.
Existing fee ceilings could restrict the ability of the company to expand its
operations into certain states.
The company must be licensed as a check casher in all jurisdictions in
which it offers payday deferred deposit services and must comply with the
regulations governing those services. In addition, in some jurisdictions, check
cashing companies or money transmission agents are required to meet minimum
bonding or capital requirements and are subject to record-keeping requirements.
FEDERAL REGULATIONS. The Money Laundering Suppression Act of 1994 added a
section to the Bank Secrecy Act requiring the registration of businesses, like
the company, that engage in check cashing, currency exchange, money
transmission, or the issuance or redemption of money orders, traveler's checks,
and similar instruments. The purpose of the registration is to enable
governmental authorities to better enforce laws prohibiting money laundering and
other illegal activities. The registration requirement was suspended pending
the adoption of regulations implementing the statute, and in May 1997, the
Financial Crimes Enforcement Network of the Treasury Department ("FinCEN")
proposed regulations for comment. In August 1999, FinCEN announced the adoption
of final implementing regulations, effective September 20, 1999. The
regulations require "money services businesses" to register with the Treasury
Department by filing a form to be adopted by FinCEN by December 31, 2001, and to
re-register at least every two years thereafter. The regulations also require
that a money services business maintain a list of names and addresses of, and
other information about, its agents and that the list be made available to any
requesting law enforcement agency (through FinCEN). That agent list must first
be maintained by January 1, 2002, and must be updated at least annually. Though
FinCEN must adopt further regulations and procedures to more fully implement
these requirements, based on the newly adopted regulations, management of the
company does not believe that compliance with these requirements will have any
material impact on the company's operations.
<PAGE>
In November 1999, the Federal Reserve Board proposed new regulations that
would include "payday loans" as credit for purposes of the federal Truth in
Lending Act. The company's lending activities may be subject to the new
regulations, if the company's activities are included in the definition of
payday lending. The proposed regulations require that payday lenders clearly
disclose the interest rate of the loan, calculated on an annual basis, to
consumers applying for credit. The company expects that the effect of the
proposed regulations on the company will be minimal because Florida law already
requires such disclosures, and the company complies. The regulations, if
adopted, would become effective October 1, 2000. Compliance with the proposed
regulations is optional until that date.
To the extent that use of the debit card falls within the Electronic Funds
Transfer Act, Federal Reserve Board Regulation E will apply to Fast PayCheck
transactions. These govern electronic funds transfers ("EFT") between customer
accounts. Primarily, the Act and regulation 1) require EFT merchants to provide
customers with certain disclosures, 2 detail the circumstances under which an
EFT merchant may issue a card, 3) limit a customer's liability for a lost or
stolen card, and 4) require EFT merchants to follow certain dispute resolution
procedures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion is based on an analysis of the audited year end
financial statements for 1998 and 1999 and the unaudited interim financial
statements for the three months ended March 31, 2000.
Past and Future Financial Condition
Pinnacle is a company in transition. As discussed before, Pinnacle shifted
its business operations dramatically in 1999. Before 1999, Pinnacle's major
revenue producing subsidiary was Fast Title. Due to a hostile regulatory
environment, Pinnacle discontinued its efforts to expand Fast Title and the
company's focus shifted to Fast PayCheck.
This transition period has caused a slight decrease in total assets, and
unfortunately, a sharp increase in total liabilities. The increase in total
liabilities is due to an increase in long-term debt. It has been necessary for
the company to incur the long-term debt in order to effectuate the transition of
business focus.
The company's operating revenues have been significantly less than the
total operating expenses for the same period. The company's operating revenues
decreased from $633,478 in 1998 to $214,538 in 1999. For the three months ended
March 31, 2000, the company had operating revenues of $62,681. The company's
operating expenses increased from $1,101,311 in 1998 to $1,413,078 in 1999. For
the three months ended March 31, 2000, the company had operating expenses of
$403,462.
<PAGE>
Management nevertheless expects revenues to increase through the expansion
of Fast PayCheck. Pursuant to a contract with MBE, Fast PayCheck offers
services through participating MBE retail outlets. Any increase will be
affected by the length of time it takes to complete the licensure process in
each state, and the agreement of each of the franchisees to start servicing Fast
PayCheck customers. The number of customers who participate at each location
will also affect any increase.
To meet the expenses of the company over the next twelve months, Management
is pursuing a reduction of company debt. The company is negotiating with
investors to either extend the existing obligations or convert the debt to
equity. Management is also seeking an alliance partner or banking institution
that could offer long-term debt to carry the expense of the company until
revenues are increased.
Results of Operations
TOTAL ASSETS. Total assets decreased $10,792, or .006%, from 1998 to 1999.
Total assets of the company are $1,595,330 for 1999 and $1,606,122 for 1998.
Total assets of the company are $1,645,738 for the three months ended March 31,
2000, $50,408 more than the total assets at the end of 1999.
TOTAL LIABILITIES. Total liabilities increased $1,233,906, or 60%, from
1998 to 1999. Total liabilities of the company are $3,267,865 for 1999 and
$2,033,959 for 1998. Total liabilities are $3,737,004 for the three months
ended March 31, 2000, $469,139 more than the total liabilities for 1999. The
increase between 1998 and 2000 is due to the increase of long-term debt
necessary to effectuate the transition of business focus from Fast Title to Fast
PayCheck. Also, operating expenses continued to increase over the same time
period.
REVENUES. Operating revenues decreased $418,940, or 66%, from 1998 to 1999
due to the cessation of Fast Title business. Operating revenues are $214,538
for 1999 and $633,478 for 1998. Operating revenues are $62,681 for the three
months ended March 31, 2000. However, Management expects revenues to sharply
increase as additional MBE retail centers begin offering Fast PayCheck services.
OPERATING EXPENSES. Operating expenses increased $311,767, or 28%, from
1998 to 1999. Operating expenses are $1,413,078 for 1999 and $1,101,311 for
1998. Operating expenses for the company are approximately $403,462 for the
three months ended March 31, 2000. The amount of expenses is reasonable
considering the expansion and litigation expenses the company has borne. As a
result, Management believes that the financial condition of the company will
improve substantially by 2002.
The company has a $100,000 note payable with an investor that expired May
14, 1999. In addition, the company has a $538,276 note payable with investors
that expired February 28, 2000. This note is the subject of a lawsuit with
First American Reliance, Inc.
There is also a $514,055 note payable with investors that expired on March
1, 2000. This debt is currently in the process of being converted into equity.
The company has approximately $785,000 in debt that will mature between
December 2000 and December 31, 2002.
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At this time, it is unlikely that the company will have adequate capital
available to repay the debts as they mature. If the loans are called, the
company's financial condition will be further negatively impacted.
The company is defending various lawsuits, which, if lost, would negatively
impact the company. Even if the outcome is positive, the cost to the company in
legal fees and employees' time is substantial.
NET LOSS. The company's net loss increased $1,537,809 from 1998 to 1999.
Net loss was $2,090,706 for 1999 and $552,897 for 1998. The net loss was
$418,731 for the three months ended March 31, 2000. The increase in net loss
has been attributed to the increased operating expenses and total liabilities
and decreased operating revenues.
CAPITAL EXPENDITURES. The company is engaged in consumer finance and
electronic technology development. As a result, capital expenditures are not
substantial. The facilities are leased. Property and equipment net costs are
$156,831 for 1999 and $144,839 for 1998. Property and equipment net costs are
$166,005 for the three months ended March 31, 2000. Substantially all of the
value of the company is not in physical assets but in the ongoing operations of
the company. Should the company be liquidated, there are few assets to
distribute to creditors or shareholders.
Non-cancelable lease commitments run until 2002. The total amount due under the
lease terms for 2000 is $60,372. Rent under operating leases amounts to
$138,259 for 1999 and $110,923 for 1998. Rent under operating leases amounts to
$38,482 for the three months ended March 31, 2000. The company is operating
various locations on a month to month basis.
Liquidity
Maintaining sufficient liquidity is a material challenge to Management at
the present time. The company has customer loans receivable of $274,974 for
1999 and $743,877 for 1998. Customer loans receivable are $277,477 for the
three months ended March 31, 2000.
Further, the company owns a note receivable dated December 29, 1997 for
$25,000 with 18% per annum interest. The principal balance and accrued interest
is due and payable on the earlier of 1) a private placement being completed in
whole or part including but not limited to, any escrow disbursements of any
funds to the maker, or 2) March 27, 2000. No payments have been received as of
the date of this filing. The company has made an allowance for doubtful
receivable for the entire loan.
The company also owns a demand loan receivable for $500,000. This loan is
non-interest bearing. The company is performing consulting services to the
borrower in exchange for the demand loan. This loan is in the process of being
converted into equity.
In August 1999, the company secured a national contract with Comdata. This
contract allowed the distribution of the Fast PayCheck debit card at the point
of sale locations. As a result, the company negotiated with its competitors to
allow them to use the debit card system. This may generate revenue on a broader
basis and increase company value.
ITEM 3. DESCRIPTION OF PROPERTY
The company leases certain office space and store front facilities. It has
made no investments in real estate, real estate mortgages, or securities or
interest in persons primarily engaged in real estate activities. There is no
plan to do so in the future.
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents each class of equity securities of beneficial
owners holding 5% or more of Pinnacle and all directors and officers of Pinnacle
as a group, as of June 30, 2000.
Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Ownership
Percent of Class
Common Stock
Michael Bruce Hall
2600 State Street
Dallas, TX 75204
39,502,000 shares held by the Michael Bruce Hall Family Partnership
25.16%
Common Stock
Jeffrey Turino
2963 Gulf to Bay Boulevard, Suite 265
Clearwater, Florida 33759
39,502,000 shares held by the Katherine Burney Family Limited Partnership
25.16%
Common Stock
Officers and Directors as a Group
79,004,000 shares
50.32%
Common Stock
<PAGE>
The stock ownership information presented in the chart includes 55,000,000
shares issued to the officers, Jeff Turino and Bruce Hall, as consideration for
an Agreement and Release signed February 28, 2000 by the company. The Agreement
and Release releases any claims to back compensation, bonus amounts and stock
options arising before January 1, 2000 under the terms of the employment
agreements signed in 1997.
The company's board of directors has entered into an agreement in principle
with Michael Bruce Hall, the company's chief executive officer, and Jeffrey
Turino, the company's president, whereby these officers will exchange 70,000,00
of shares owned individually by them and by their affiliates for options to buy
shares. Their existing shares will be retired. These exchanges will take place
over the next six months. The parties have not yet agreed to the terms of the
options.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name of Officer or Director
Position
Age
Term of Office
Michael Bruce Hall
President
Director
45
Since October 1997
Jeffrey G. Turino
Chief Executive Officer
Director
43
Since October 1997
MICHAEL BRUCE HALL: President since 1997. Mr. Hall has a BSBA from the
University of Richmond.
Mr. Hall started Landmark Custom Homes in the early 1980s and built 200
custom homes in Pinellas and Hillsborough Counties in Florida. In 1983, he
started and still owns Market Place Travel, which is one of the top five
independent producing agencies in Pinellas County. In the late 1980s, he worked
as a financial planner for E.F. Hutton. He returned to the construction and
design field in the early 1990s and worked for Zuma Engineering, Inc., a local
recycling company, as an electrical design specialist until 1997. He served as
the Chairman for the Legislative Committee for the Southern Association of Title
Lenders in 1996.
Mr. Hall oversees and manages all facets of the corporation including, but
not limited to, marketing, collections, customer service and expansion. He also
plans, develops and establishes policies and objectives of Pinnacle. He
approves all financial obligations.
JEFFREY G. TURINO: Chief Executive Officer since 1997. Mr. Turino has a
management degree from the University of Florida. From 1986 to 1997, Mr.
Turino served as corporate secretary for Zuma Engineering, Inc.
Mr. Turino coordinates and implements all policies and procedures directed
by the board of directors.
<PAGE>
Suits Against Directors
In 1986, Michael Hall was a party to an arbitration proceeding convened by
the National Association of Securities Dealers, Inc.("NASD"). The proceeding
was the result of a complaint by a client of Shearson Lehman stemming in part
from Mr. Hall's activities as a broker for such client. The arbitration
resulted in an award for the client in the amount of $250,000.
In 1995, Jeffrey Turino entered into a Stipulation and Consent Agreement
with the Florida Department of Banking and Finance Division of Financial
Investigation. Mr. Turino consented to a finding that, as corporate secretary
of Zuma Engineering, Inc., he failed to prevent corporate agents of Zuma to
offer for sale and sell unregistered securities in the State of Florida. He
agreed to pay a $10,000 fine and to refrain from future violations of Florida's
securities laws.
ITEM 6. EXECUTIVE COMPENSATION
The company issued 27,500,000 shares of common stock each to Jeff
Turino, chief executive officer of the company, and Michael B. Hall, director
and president of the company in the first quarter of 2000. This issuance of
shares was pursuant to an Agreement and Release releasing all claims by
Turino and Hall pursuant to the company's inability to perform under
the Employment Agreements entered into by the company and Turino
and Hall in 1997. These Employment Agreements required the company to pay
certain compensation to Turino and Hall for services rendered. The company
failed to pay Turino and Hall the agreed compensation for performed services.
The original employment agreements each have an initial term ending in 2002
and automatically renew for one-year terms thereafter. Under the terms of the
agreement, each would receive an annual base salary of $104,000 with additional
increases, at least annually, as deemed necessary by the board of directors.
The contracts provide that if the company fails to meet the executive's
compensation, the executive may either defer the compensation and accrue the
salary or take the difference in common stock at the rate of one share for each
dollar not received in the first year. In years two through five, the executive
could take stock at a rate equal to the shares purchased by the dollar
difference of the paid versus unpaid salary at an average price of the last
thirty days in the trading year of the stock.
The employment agreements provide that each executive may take in the form
of stock or cash compensation earned up to $104,000 per year but not paid, and
bonus amounts of $52,000 each in 1998. The officer can defer the acquisition of
earned stock and take the stock at any time in their sole discretion. The
employment agreements also provide two stock option plans, "A" and "B." Option
"A" allows for 500,000 shares of common stock, having an exercise price of $.50
per share, in 1998. Option "B" allows for 500,000 shares of common stock,
having an exercise price of $1.00 per share, from 1999 through 2002.
The following chart presents the compensation that the company actually
paid the officers between 1997 and 1999. It does not include the 27,500,000
shares of stock paid to each officer as consideration for entering into the
Agreement and Release:
Name and Principal Position
Year
Salary
Bonus
Other Annual Compensation
All Other Compensation
Michael Hall
<PAGE>
1999
1998
1997
$ 55,000
$ 65,464
$ 61,728
$-0-
-0-
-0-
Jeffrey Turino
1999
1998
1997
$ 55,000
$ 65,464
$ 61,728
$-0-
-0-
-0-
The Agreement and Release deletes all provisions in the employment
agreements creating stock options and the promise of the company to adopt an
incentive stock option as part of the employment agreement. Turino and Hall
will continue employment under the terms of the Employment Agreements until 2002
as if no breach in either of the officer's Employment Agreements occurred.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1999, Jeff Turino and Bruce Hall signed an agreement with Primex
Capital pledging 7,000,000 shares of Pinnacle stock to secure personal loans.
Messrs. Turino and Hall then loaned the proceeds to Pinnacle in the amount of
$348,000 apiece. The company repaid Messrs. Hall and Turino $439,157 the same
year.
ITEM 8. DESCRIPTION OF SECURITIES
Common and Preferred Stock
The authorized capital stock of the company consists of 200,000,000 shares
of common stock, par value $.001 per share and 100,000,000 shares of preferred
stock, par value $.001 per share. As of the date of this filing, there are
187,157,589 shares of common stock outstanding. None of the preferred shares
have been issued. The common stock is currently traded on the Over The Counter
Bulletin Board. The company's trading symbol is PCBM. There are approximately
150 current shareholders of record. At year end 1999, 85,952,686 shares were
outstanding.
<PAGE>
All shares of common stock have equal voting, liquidation, dividend and
other rights. Shareholders are entitled to one vote for each share of common
stock at any shareholders' meeting. Holders of shares of common stock are
entitled to receive such dividends as may be declared by the board of directors.
In the event of liquidation, shareholders are entitled to participate pro rata
in a distribution. There are no conversion, preemptive, or other subscription
rights or privileges with respect to the common shares. The common stock of the
company does not have cumulative voting rights. The holders of more than fifty
percent (50%) of the shares voting in an election of directors may elect all of
the directors if they choose to do so. In such event, the holders of the
remaining shares aggregating less than fifty percent (50%) would not be able to
elect any directors.
Stock Options
At year end 1999, the following stock options were outstanding:
1. Gordon & Associates Strategic Investments, Inc. A consulting agreement
entered into with Gordon & Associates grants options with the following
attributes:
Expiry Date Exercise Price Number of Shares
Termination of the The lesser of $.25 per share or Up to 35,322,578
Agreement 30% of the average closing bid
for trading.
Pinnacle issued the stock options in lieu of giving cash payment for
consulting services performed by G & A to Pinnacle. G & A assigned the receipt
options to its associates. They exercised options for 35,322,578 shares under
this agreement. The recipients opted to pay 30% of the average closing bid for
trading as consideration for the stock.
Pinnacle filed two Form S-8 registration statements to register the stock
issued to G & A associates, dated April 14, 2000 and June 8, 2000. The company
filed the Form S-8 registrations under the CIK code for MAS. Thereafter, the
Securities and Exchange Commission informed the company that this stock must be
registered under the new CIK code for Pinnacle.
The company did not deliver all the shares issued pursuant to the options
pending total payment. Before settlement of the issue, a dispute arose
concerning certain territory covered by the MBE agreement. As a result, the G&A
associates agreed to return approximately 33,400,000 shares to the company, to
be retired, in release of the company's claims against G&A Consequently,
the company may not re-file both Forms S-8 registering the shares originally
issued to G&A and its associates. G&A executed a promissory note in favor of the
company as consideration for the shares.
2. The company issued 8% Convertible Debentures dated March 19, 1999, in the
amount of $260,000 all of which has been converted and 2,054,480 shares issued.
On March 31, 1999, the company granted an option to buy 33,000 shares at a
purchase price of $.319 per share to the attorney and underwriter for the 8%
Notes.
3. The company's board of directors has entered into an agreement in principle
with Michael Bruce Hall, the company's chief executive officer, and Jeffrey
Turino, the company's president, whereby these officers will exchange 70,000,00
of shares owned individually by them and by their affiliates for options to buy
shares. Their existing shares will be retired. These exchanges will take place
over the next six months. The parties have not yet agreed to the terms of the
options. The retirement of the shares belonging to the G&A associates and
Messrs. Hall and Turino will reduce the number of issued and outstanding
shares by approximately 105,000,000.
<PAGE>
Warrants
The company has entered into an agreement with M.H. Meyerson & Co., Inc.
for the provision of investment banking services. As consideration, the company
has granted five year Warrants to purchase, at a price of $.125 per share, a
total of 5,580,000 shares of the common stock of Pinnacle. These warrants may
be exercised until August 18, 2004. At the present time, none have been
exercised.
Dividends
The company has not declared dividends in the past and does not have the
current capital necessary to declare a dividend in the foreseeable future.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCK MATTERS
Pinnacle is traded on the Over the Counter Bulletin Board, symbol PCBM.
The high and low bid information for the stock during each full quarterly period
for the last two years and for the first quarter of 2000 are as follows:
Quarter
High
Low
1Q 2000
.2467
.1417
4Q 1999
.275
.09
3Q 1999
.60
.095
2Q 1999
.51
.029
1Q 1999
.84375
.0625
4Q 1998
.625
.125
3Q 1998
1.75
.50
2Q 1998
4.00
1.50
1Q 1998
4.00
3.50
<PAGE>
The OTC BB market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
As of the date of this filing there are 150 holders of common stock.
Management believes that most of the stock is held in nominee name, and as a
result, there may be as many as 2,000 individuals who own Pinnacle stock. As of
the date of this filing, there are no holders of preferred stock.
ITEM 2. LEGAL PROCEEDINGS
Tyler Jay & Company, L.L.C. and First American Reliance, Inc.
------------------------------------------------------------=---------
The Trustee in bankruptcy of First American Reliance, Inc. (the "Debtor")
brought an adversary proceeding on June 29, 1999, in the United States
Bankruptcy Court, Western District, New York, BK Case No. 98-23906, AP No. 99-
2186, entitled Douglas J. Lustig, as Trustee v. Pinnacle Business Management,
----------------------------------------------------------------
Inc. ("PBM"), and Fast Title Loans, Inc. ("FTL"). The Plaintiff-Trustee
--- -----------------------------
amended the complaint to assert claims against M.B. Hall and J.C. Turino as
guarantors of the alleged debt. The Trustee is seeking to recover purported
loans from the Debtor to Fast Title Loans, Inc. and/or Pinnacle, in the sum of
approximately $800,000 plus 9% interest, for amounts loaned and advanced by
First American Reliance, Inc. The checks produced by the Trustee reflect checks
to FTL totaling $494,202.37 and checks to PBM of $195,000.00. The rest of the
claim consists of interest, disputed fees and charges. An answer to the
adversary proceeding has been filed and the parties are currently in the
discovery process. The Defendants asserted a defense and setoff alleging monies
due to Pinnacle from stock subscriptions in 1993 sold by American Freedom
Securities, Inc. ("AFS") an affiliate of Debtor. The Defendants claim each of
Debtor, AFS and Samuel Yacono, their principal, were instrumentalities of each
other and were used by Yacono to perpetrate frauds on those doing business with
them and/or affiliated companies. FTL further asserts that the loan agreement
was modified when Debtor was unable to lend funds in the amounts promised to
omit certain charges claimed by Debtor. In addition, Pinnacle asserts that it
did not assume any of the obligations sought to be enforced by the Trustee and
that all checks made payable to it were deposited in FTL accounts.
Management of PBM and FTL have agreed to determine the actual amount of the
Trustee's claim by deducting proceeds of a private placement allegedly diverted
by Yacono and/or AFS. Management believes that this setoff will equal or exceed
the amounts claimed and documented by checks transferred to Pinnacle and will
also create a setoff in respect to at least a portion of the sums advanced to
Fast Title. The Trustee now claims that the stock sold was not Pinnacle's
unissued stock, but that Yacono, who personally owned Pinnacle stock, actually
had AFS sell his personally owned Pinnacle stock, not Pinnacle's unissued stock
pursuant to the private offering documents drafted by AFS's counsel. Defendants
dispute that AFS engaged in such an egregious breach of faith. PBM and FTL are
currently in the process of settlement negotiations in this case.
<PAGE>
In a second proceeding, Pinnacle and FTL are defendants in a pending civil
action instituted in 1999, in Supreme Court, Erie County, New York, entitled
Tyler Jay & Company, L.L.C. ("Tyler Jay") v. Fast Title Loans, Inc. and
------------------------------- -------------------------------
Pinnacle Business Management, Inc., Index No. I-1999/5697. In this suit, Tyler
----------------------------------
Jay asserts a claim for fees and commissions arising from loans made by Debtor
in the previously described adversary proceeding and sums lost by Tyler Jay
allegedly because Tyler Jay was not permitted to conduct the private placement
discussed above. Tyler Jay claims that it is owed certain monies and stock
options, and alleges that these damages exceed $500,000. Pinnacle claims it has
no agreement with Tyler Jay and is not a successor to FTL or otherwise
responsible to Tyler Jay. Both Pinnacle and FTL claim that the option agreement
to purchase stock in FTL asserted by Tyler Jay was not signed by either FTL or
Pinnacle and was not even in existence when the Engagement Letter with Tyler Jay
was signed by FTL. Both Pinnacle and FTL claim that Tyler Jay did not have
required licenses to perform at least some of the services it agreed to perform
for FTL and thus cannot recover. Pinnacle and FTL have also asserted that Tyler
Jay is not entitled to recovery since not all the agreed upon services were
provided. FTL and Pinnacle have filed a counterclaim seeking $34,000, the sum
paid to Tyler Jay, on the basis that Tyler Jay's fraudulent representations and
breach of fiduciary duty damaged them. This suit is currently in the discovery
phase. Management of PBM and FTL intends to vigorously defend this claim.
Pinnacle and its subsidiaries accrued a liability for $538,276 in 1998 and
$355,755 in 1997, respectively, as a result of these claims.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM
REGISTERED SECURITIES
The company offered a private placement under Rule 504 of Regulation D for
635,000 shares of common stock for $1.50 per share on February 2, 1998. This
resulted in net capital contributed to the company of $419,973 to the company.
The underwriter, American Freedom Securities, Inc. was entitled to a commission
of 10% of the gross amount sold. This offering was never completed;
substantially all of the proceeds were never forwarded to the company. The
principal of the underwriter, thought to be liable for the losses, is now
deceased.
Management believes that all shares sold under the offering have been
accounted for, although the missing proceeds may never be available to the
company. Management believes that the offering was fully subscribed.
The company issued 8% Convertible Debentures dated March 19,1999. These
were underwritten by Corporate Capital Management, L.L.C., in the amount of
$260,000 with a maturity of 360 days ("8% Notes"). The Conversion Price was the
lesser of 77.5% of the lowest closing bid price of the common shares for five
trading days ending on the day prior to conversion ("Variable Conversion Price")
or 100% of the lowest closing bid price for the common shares for the five
trading days ending on the day prior to closing ("Fixed Conversion Price"). By
April 15, 1999, all of the 8% Notes were converted and 2,054,480 shares issued.
On March 31, 1999, the company granted an option to buy 33,000 shares at a
purchase price of $.319 per share to the attorney and underwriter for the 8%
Notes.
<PAGE>
On or about February 29, 2000, the company issued 55,000,000 shares of
restricted stock to Jeff Turino and Bruce Hall. The company issued the shares
as consideration for an Agreement and Release in which the officers and the
company released mutual claims against each other arising from operation of the
employment agreements before January 1, 2000. The Agreement and Release also
amended the employment agreements, and the officers agree to perform under the
amended terms until expiration of the agreements.
On March 3, 2000, the company issued 1,500,000 shares of restricted common
stock to MRC Legal Services Corporation ("MRC") as consideration for the
purchase of 98.6% of the shares of MAS.
On March 3, 2000, the company issued 1,500,000 shares of restricted common
stock to the lawyers that negotiated and completed the company's acquisition of
MAS. The number of shares issued were as follows: 828,750 to M. Richard
Cutler, 255,000 to Brian A. Lebrecht, 191,250 to James Stubler, and 150,000 to
Samuel Eisenburg. These shares were the subject of the Form S-8 registration
filed by the Company on March 16, 2000.
During the first quarter of 2000, the company issued 36,302,519 restricted
shares of stock to G & A pursuant to a Stock Option Agreement, dated May 19,
1999. Pinnacle signed the stock option agreement as part of a Consulting
Services Agreement, also dated May 19, 1999, for services performed by G & A to
Pinnacle.
The Stock Option Agreement granted G & A the right to purchase 36,302,519
shares at either $.25 per share or 30% of the average closing bid price of the
last thirty trading days. G & A opted to purchase the aforementioned 36,302,519
shares at 30% of the closing bid price. G & A signed a promissory note to the
company for the purchase price of the options.
G & A therefore acquired a total of 40,372,578 shares of stock as
consideration for its services to the company. Of these, associates of G & A
registered 36,302,519 shares in the two Form S-8 filings by the company on April
14, 2000 and July 8, 2000.
On April 7, 2000, the parties signed an amendment to the Consulting
Services Agreement and Stock Option Agreement, entitled Amendment to Agreement
Between Gordon & Associates Strategic Investments, Inc. & Pinnacle Business
Management, Inc. The amendment required Pinnacle to abate the premiums due on
all shares acquired or to be acquired until all 40,372,578 shares are fully
registered.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There are currently no provisions in either the Articles or the Bylaws of
the company which indemnify the Officers or Directors.
<PAGE>
FINANCIAL STATEMENTS
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 2-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998 4
STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 6
DECEMBER 31, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-16
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
-------------------------------------------------------
Pinnacle Business Management, Inc.
Clearwater, Florida
We have audited the accompanying consolidated balance sheets of Pinnacle
Business Management, Inc. and Subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements for December 31, 1999 and 1998 have been
prepared assuming that the company will continue as a going concern. As
discussed in Notes 9 and 11 to the financial statements, the company has
suffered recurring losses from operations, has a net capital deficiency, and
certain litigation pending that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Notes 9 and 11. The financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pinnacle Business
Management, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998, in conformity with generally accepted accounting principles.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
-----------------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
April 26, 2000
Page 1
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
DECEMBER 31,
------------------------
1999 1998
----------- -----------
CURRENT ASSETS
----------------
Cash and cash equivalents $ 9,726 $ 2,984
Customer loans receivable, net 274,974 743,877
Loans Receivable - Other 422,000 -0-
Prepaid Expenses 45,000 -0-
----------- -----------
751,700 746,861
----------- -----------
PROPERTY AND EQUIPMENT 156,831 144,839
Less accumulated depreciation (69,654) (43,078)
----------- -----------
87,177 101,761
OTHER ASSETS
--------------
Unamortized goodwill 238,498 244,944
Deferred tax asset 505,560 505,560
Security deposits 12,395 6,996
Receivables - other - net -0- -0-
----------- -----------
756,453 757,500
----------- -----------
TOTAL ASSETS 1,595,330 $1,606,122
------------------------------------------- =========== ===========
See Accompanying Notes to Consolidated Financial Statements
Page 2
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
----------------------------------------
DECEMBER 31,
------------------------
1999 1998
----------- -----------
CURRENT LIABILITIES
--------------------
Accounts payable and accrued expenses $ 318,764 $ 79,783
Current portion of long-term debt 1,401,753 600,000
----------- ------------
TOTAL CURRENT LIABILITIES 1,720,517 679,783
----------- ------------
LONG TERM LINE OF CREDIT 863,000 -0-
NOTES PAYABLE - OFFICERS' 267,061 9,900
LONG-TERM DEBT, LESS CURRENT PORTION 417,287 1,344,276
----------- ------------
TOTAL LONG-TERM LIABILITIES 1,547,348 1,354,176
----------- ------------
TOTAL LIABILITIES 3,267,865 2,033,959
----------- ------------
COMMITMENTS AND CONTINGENCIES
-------------------------------
STOCKHOLDERS' DEFICIT
----------------------
Preferred stock -0- -0-
Common stock 86,952 16,494
Additional paid-in capital 1,317,515 541,965
Deficit (3,077,002) (986,296)
------------- ------------
TOTAL STOCKHOLDERS' DEFICIT (1,672,535) (427,837)
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,595,330 $ 1,606,122
------------------------------------------- ============= ============
See Accompanying Notes to Consolidated Financial Statements
Page 3
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
DECEMBER 31,
-------------------------
1999 1998
------------ -----------
OPERATING REVENUE
------------------
Revenue $ 214,538 $ 633,478
------------ -----------
OPERATING EXPENSES
-------------------
Salaries, employee leasing and related 510,627 444,352
Advertising 51,157 106,183
Commissions 146,948 35,568
Office and general 61,322 56,746
Professional fees 166,190 55,676
Repairs and maintenance 10,042 5,562
Rent 138,259 110,923
Repossession costs 34,707 53,310
Telephone and utilities 109,157 81,260
Travel 73,468 59,749
Other operating 111,201 91,982
------------ -----------
TOTAL OPERATING EXPENSES 1,413,078 1,101,311
----------------------------------------------------- ------------ -----------
OPERATING (LOSS) (1,198,540) (467,833)
------------ -----------
OTHER EXPENSES
---------------
Interest expense (516,447) (278,050)
Depreciation and Amortization expense (28,022) (31,009)
Bad debt (347,697) (60,831)
------------ -----------
TOTAL OTHER EXPENSES (892,166) (369,890)
------------ -----------
NET LOSS
BEFORE FEDERAL INCOME TAX BENEFIT (2,090,706) (837,723)
------------ -----------
PROVISION FOR INCOME TAX BENEFIT -0- 284,826
------------ -----------
NET LOSS APPLICABLE TO COMMON SHARES $(2,090,706) $ (552,897)
------------ -----------
NET LOSS PER COMMON SHARES $ (0.04) $ (0.04)
------------ -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 50,964,740 14,976,794
------------ -----------
See Accompanying Notes to Consolidated Financial Statements
Page 4
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
COMMON STOCK
$.001 PAR VALUE ADDITIONAL TOTAL
-------------------- PAID-IN STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
----------- -------- ---------- ------------ ------------
Balance
January 1, 1998
Fast Title
Loans, Inc. 13,418,027 $ 13,418 $ 121,992 $ (433,399) $ (297,989)
Issuance of
common stock 3,076,175 3,076 419,973 - 423,049
Net Loss - - - (552,897) (552,897)
----------- -------- ---------- ------------ ------------
Balance
December 31,
1998 16,494,202 16,494 541,965 (986,296) (427,837)
Issuance of
common stock 70,458,484 70,458 775,550 - 846,008
Net Loss (2,090,706) (2,090,706)
----------- -------- ---------- ------------ ------------
Balance
December 31,
1999 86,952,686 $ 86,952 $1,317,515 $(3,077,002) $(1,672,535)
=========== ======== ========== ============ ============
See Accompanying Notes to Consolidated Financial Statements
Page 5
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
----------------------------------------
Net Loss $(2,090,706) $ (552,897)
------------ -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
-------------------------------------------------
Depreciation and Amortization 28,022 31,009
Provision for doubtful accounts 367,076 60,831
Deferred Income Tax Benefit - (284,826)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in customer loans
receivable - net 101,827 49,257
(Increase) in loans other and
prepaid expenses (467,000) -
(Increase)in deposits and other (399) -
Increase in accounts
payable and accrued expenses 238,981 4,041
------------ -----------
TOTAL ADJUSTMENTS 268,507 (139,688)
------------------- ------------ -----------
NET CASH (USED IN) OPERATING ACTIVITIES (1,822,199) (692,585)
----------------------------------------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Capital expenditures (11,992) (58,422)
------------ -----------
NET CASH (USED IN) INVESTING ACTIVITIES (11,992) (58,422)
----------------------------------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Proceeds from issuance of long-term debt 1,280,287 583,952
Proceeds from issuance of common stock and
paid in capital 846,008 423,049
Principle payments on long-term debt (542,523) (168,431)
Increase (decrease) in officer's loans - net 257,161 (90,100)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,840,933 748,470
-------------------------------------------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,742 (2,537)
--------------- ------------ -----------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 2,984 5,521
--------------------------------------------- ------------ -----------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 9,726 $ 2,984
--------------------------------------- ------------ -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest Expense $ 432,369 270,250
------------ -----------
See Accompanying Notes to Consolidated Financial Statements
Page 6
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------
Pinnacle Business Management, Inc. is an integrated consumer finance and E-
commerce technology developer. The company operates title loan and paycheck
advance locations. Fast Title Loans, Inc. (FTL)is a wholly owned subsidiary
of Pinnacle Business Management, Inc. Fast Title Loans, Inc. is a consumer
loan company that operates title loan offices in central Florida. The title
loan is an immediate short term cash loan, using the free and clear title
of a person's car or truck as collateral. The loan allows the customer to
retain possession and use of their motor vehicle. Fast Paycheck Advance,
Inc. is a wholly owned subsidiary of Pinnacle Business Management, Inc.
that provides short-term paycheck advances to consumers. The accompanying
financial statements reflect the consolidated operations of the above.
On May 9, 1997, Pinnacle Business Management, Inc. (The "Company") was
incorporated as a wholly owned subsidiary of 300365 BC, Ltd., D/B/A Peaker
Resource Company, a company which was incorporated in British Columbia,
Canada on November 13, 1985. 300365 BC, Ltd. had been inactive for years
due to the lack of working capital. On May 15, 1997, the stockholders of
300365 BC, Ltd. exchanged all of the company's outstanding stock of 300365
BC, Ltd. for the stock of Pinnacle Business Management, Inc. This exchange
was made on a share for share basis. There were no tangible assets of
300365 BC, Ltd. The excess of par value of the common stock issued over the
assets acquired upon the acquisition of the parent was $1,933. After the
exchange of stock, the parent became the wholly owned subsidiary and it was
liquidated and the $1,933 was written off as an extraordinary loss upon the
dissolution of 300365 BC, Ltd.
On October 27, 1997, JTBH Corporation, a wholly owned subsidiary of the
"Company", with no assets, merged with Fast Title Loans, Inc. (FTL) a
Florida corporation. On that date Fast Title Loans, Inc. became the wholly
owned subsidiary of Pinnacle Business Management, Inc. The shares of (FTL)
were converted into common stock $.001 per share, of Pinnacle Business
Management, Inc.
The merger of (FTL) the private company into the public shell company
Pinnacle Business Management, Inc. on October 27, 1997 gave rise to the
private company having effective operating control of the combined company
after the transaction. This was a reverse merger and the costs
associated with were treated as a recapitilization. In 1998, the company
incorporated Fast Paycheck Advance, Inc. as a wholly owned subsidiary. Also
in 1998, the Company incorporated Summit Property, Inc. This subsidiary has
remained inactive, however.
Page 7
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------
PRINCIPLES OF CONSOLIDATION:
------------------------------
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES:
-------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT:
-------------------------
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated
useful lives:
YEARS
-----
Improvements 10-40
Furniture and Equipment 5-7
Leasehold Improvements are amortized over their estimated useful lives or
the lives of the related leases, whichever is shorter.
REVENUE RECOGNITION:
---------------------
Substantially most of the revenues are derived from interest charged on
consumer financing, title loans and advance paychecks.
INCOME TAXES:
--------------
The income tax benefit is computed on the pretax loss based on the current
tax law. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates.
Page 8
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------
NATURE OF BUSINESS AND CREDIT RISK:
----------------------------------------
The company operates in mainly one business segment and primarily earns
interest income on consumer title loans and advanced paychecks. Financial
instruments which potentially subject the company to concentrations of
credit risk are primarily customer loans receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
----------------------------------------
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, customer loan receivables, accounts payable and
accrued expenses and other liabilities approximate fair value because of
the immediate or short-term maturity of these financial instruments. The
carrying amount reported for long-term debt approximates fair value
because, in general, the interest on the underlying instruments fluctuates
with market rates.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
------------------------------------------------
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding.
STATEMENTS OF CASH FLOWS:
----------------------------
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.
ADVERTISING AND PROMOTIONAL COSTS
------------------------------------
Costs of advertising and promotional costs are expensed as incurred.
Advertising costs were $51,157 and $106,183 in 1999 and 1998, respectively.
GOODWILL
--------
Goodwill is amortized over 40 years. Amortization charged to expense was
$6,446 and $6,446 in 1999 and 1998 respectively.
Page 9
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 3 - CUSTOMER LOANS RECEIVABLE - NET
-----------------------------------
Customer loans receivable, net consists of the following:
Customer loans receivable, net consists of the following:
December 31,
------------
1999 1998
--------- ----------
Customer loans receivable $ 702,881 $ 804,708
Less: Allowance for doubtful accounts (427,907) (60,831)
---------- ----------
Customer loans receivable - Net 274,974 $ 743,877
========== ==========
Customer loans receivable include accrued interest amounts. However,
the Company, due to an unfavorable legislative climate regarding the title
loan industry, reserved an additional $367,076 in bad debt allowance to
account for the write down of accrued interest and loans that they may
not collect.
NOTE 4- LOANS RECEIVABLE - OTHER
---------------------------
Loans receivable dated December 29, 1997 to a company for $25,000
together with interest thereon at the rate of 18% per annum. The principal
balance and accrued interest is due and payable on the earlier of a
private placement being completed in whole or part including but not
limited to any escrow disbursements of any funds to the maker, or March
27, 2000. There were no payments received in 1999 or 1998. The company
has made an allowance for doubtful receivable for the entire loan. The
company has not accrued any interest on this loan for 1999 or 1998.
Demand loan receivable a company for $422,000. This loan is non-interest
bearing. The company is performing outside consulting for a start up
company. It is anticipated that this loan receivable will be converted
into equity during the year 2000.
NOTE 5- PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
1999 1998
---------- ----------
Furniture and Equipment $ 121,914 $ 109,922
Improvements 34,917 34,917
---------- ----------
156,831 144,839
Less: Accumulated depreciation (69,654) (43,078)
---------- ----------
Property and Equipment, Net $ 87,177 $ 101,761
========== ==========
Page 10
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 6- LINE OF CREDIT
----------------
In March 1999, the Company obtained a line of credit with a capital
company to receive up to $1,500,000 of advances. The interest is
payable at 17% per annum. Principal and interest on advances are due
March 1, 2001, with the company having an option to extend the note an
additional one year. At December 31, 1999, the company had $ 863,000
outstanding on the line. The line of credit is collateralized by
7,500,000 shares of the common stock of the company.
NOTE 7- LONG-TERM DEBT
---------------
Long-term debt consists of the following:
1999 1998
------------ -----------
Note payable lending institution with monthly
interest payable at 14% per annum expiring
February 28, 2000 (see Note 9). $ 538,276 $ 538,276
Note payable investor with monthly interest
payable at 4.5% per month. This note
expired May 14, 1999. 100,000 100,000
Note payable investor with monthly interest
payable at rates varying between 16-36% per
annum, expiring March 1, 2000. 524,880 606,000
Renegotiated note payable investors with
monthly interest payable at rates varying
between 1.5%-6% per month. This loan
expires in December, 2000. 238,597 450,000
Note payable investor with monthly interest
payable at 4%, expiring May 17, 1999. -0- 150,000
Notes payable investor with interest payable
at 18% per annum, expiring February and
March, 1999. -0- 100,000
Note payable investor with interest only
payable at 12% per annum. This note has a
balloon and expires December 31, 2002. 417,287 -0-
------------ -----------
1,819,040 1,944,276
Less: Current Portion (1,401,753) (600,000)
------------ -----------
Net Long-Term Debt 417,287 $1,344,276
============ ===========
Page 11
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 7- LONG-TERM DEBT (Continued)
----------------------------
The non-current portion of long-term debt matures as follows:
2000 $1,401,753
2001 -0-
2002 417,287
----------
1,819,040
==========
The company has negotiated with certain investors to convert long-term debt
to common stock at various negotiated prices predicated on market
value. Long-term debt is substantially collateralized with motor vehicle
titles and the personal guarantees of the officers and the assets
of the company.
NOTE 8- STOCKHOLDERS' DEFICIT
----------------------
The authorized capital stock of the company in 1998 consists of
20,000,000 shares of common stock with par value of $.001. As of December
31, 1998, there were 16,494,202 shares outstanding.
The authorized preferred stock of the company in 1999 and 1998
consists of 50,000,000 and 10,000,000 shares, respectively, with a par
value of $.001 with rights and privileges to be set by the board of
directors. As of December 31, 1999 and 1998, there were no shares issued or
outstanding.
In 1999, the corporation authorized an additional 80,000,000 shares of
common stock with a par value of $.001. As of December 31, 1999, there
were 100,000,000 shares authorized, and 86,952,686 issued and outstanding.
At December 31, 1999 the company had up to 35,322,578 shares (options)
outstanding with a consulting company. Shares may be exercisable at $.25
per share or 30% of the closing bid price, whichever is less. This was for
compensation in arranging the Mail Boxes Etc. account.
Additionally there are 5 year warrants outstanding for investment banking
services rendered to purchase 5,580,000 shares of common stock at $.125
per share. The warrants become due August 18, 2004.
Page 12
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 9- COMMITMENTS AND CONTINGENCIES
-----------------------------
(A) LEASES:
-------
The company operates its facilities under certain operating leases. Future
minimum lease commitments under non-cancelable operating leases are as
follows:
2000 $60,372
2001 25,101
-------
85,473
=======
Rent and related expenses under operating leases amounted to $138,259 and
$110,923 for the years ended December 31, 1999 and 1998 respectively.
The company is operating various locations on a month to month basis.
(B) LITIGATION:
-----------
The company is a defendant involving a claim made in bankruptcy by First
American Reliance, Inc. (FAR) against the company for $800,000, including
9% interest, for amounts loaned and advanced by FAR to the company which
were not repaid. The company has asserted a defense and set off
alleging that monies due to Pinnacle from stock subscriptions in 1998
delivered to FAR were not turned over to the company. It is further alleged
that the claims of the company exceed the sum that FAR claims it is owed by
the company. The company has not accrued any interest on this note for 1999
and 1998 because of the offsets of monies due the company alleged in the
litigation. The lawyers have stated that documentation to fully evaluate
the claims is not presently available. However, the company is contesting
the case vigorously. The company has accrued a liability for $538,276 in
1999 and 1998, respectively.
Secondly, Tyler Jay & Company, L.L.C. commenced an action against the
company asserting a claim for fees and commissions arising from loans made
by FAR described in the previous paragraph. This also includes sums lost by
Tyler Jay allegedly because Tyler Jay was not permitted to complete the
private placement noted above. The sums demanded exceed $500,000 in the
aggregate. Management is vigorously contesting the claim. The company has
asserted claims and defenses that are still in the process of being
evaluated by the attorneys. It is not possible to determine whether there
will be a loss; or, if there is a loss, the extent of the loss.
Page 13
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 10 - RELATED PARTY TRANSACTIONS
----------------------------
The executive officers of the company pledged as collateral 7,000,000
shares of Pinnacle stock to secure personal loans and loaned $696,000 to
the company in 1999. The company in 1999 repaid the officers $439,157.
The officers received under an employment agreement approximately $55,000
and $65,464 each, respectively in 1999 and 1998.
The officers owned 79,102,000 and 9,005,000 common stock shares in 1999
and 1998 respectively.
NOTE 11- GOING CONCERN
--------------
As shown in the accompanying financial statements, the company
incurred substantial net losses for the years ended December 31, 1999 and
1998. Additionally, the company has a $100,000 note payable with an
investor that expired May 14, 1999.
The investor has not called this loan and it is shown as a current
liability. Moreover, the company has debt that will be coming due between
March 1, 2000 and December 31, 2000 without adequate capital available to
repay the debt. The company is negotiating with the investors to either
extend these obligations or convert the debt to equity. However, if these loans
are called, the company's financial condition will be further negatively
impacted. Finally, the company is defending various lawsuit claims that, if
the outcome is unfavorable, would negatively impact the company. These
factors raise substantial doubt about the company's ability to continue as a
going concern.
Additionally, the company, due to an unfavorable legislative climate,
plans to discontinue its title loan business by June 30, 2000; and concentrate
on its payday advance business. There is no guarantee whether the company will
be able to generate enough revenue and or raise capital to support those
operations.
Management is working with the certain investors to rework the debt that is
coming due. Additionally, management is vigorously contesting the lawsuits that
have been filed against the company. The company feels that they have certain
offsets against the claims in litigation and does not expect to pay more than
what is reflected on the balance sheet at this time (see note 9). However,
there can be no assurance that the company will be successful in its efforts to
not have the payment of debt accelerated. If the company is unsuccessful in
its efforts, it may be necessary to undertake such other actions as may be
necessary to preserve asset value. The financial statements do not include
any adjustments, other than the current classification of long-term debt
in default, that might result from the outcome of those uncertainties.
Page 14
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 12- INCOME TAX BENEFIT
--------------------
The benefit for income taxes is as follows:
1999 1998
-------- --------
Deferred income tax benefit
(Federal only) -0- $284,826
======== ========
At December 31, 1999 and 1998, the company had net operating loss carry
forwards for U. S. Federal tax purposes available to offset future taxable
income of approximately $3,081,823 and $986,296 which expire through
2014. The company has concluded that, based on expected future results and
future reversals of existing temporary differences, it is more likely
than not that the deferred tax assets will be realized. However, for 1999
no tax benefit was booked as a conservative measure.
The net deferred tax assets in the accompanying balance sheets
include the following components:
1999 1998
--------- ---------
Deferred tax assets $ 505,560 $ 505,560
Deferred tax valuation allowance -0- -0-
--------- ---------
Net deferred tax assets $ 505,560 $ 505,560
========= =========
NOTE 13- SUBSEQUENT EVENTS
------------------
On February 28,2000, the company, Jeff Turino and Bruce Hall entered into an
agreement and release concerning claims arising from operation of those
officers' employment agreements with the company between 1997 and 2000. Turino
and Hall released the Company from certain performance obligations, including
the waiver of back compensation and bonus amounts. In exchange, each received
27,500,000 shares of restricted common stock of the Company. Turino and Hall
agreed to perform the remainder of the employment agreement in accordance with
its terms. The company released any claims arising from the officer's
performance of the agreements prior to January 1, 2000.
Due to certain local legislative climate, the company is making efforts in 2000
to discontinue operating the title loan business. With the implementation of
payday advance debit card program, a three year contract with Mailboxes Etc.,
and a possible banking alliance, the company is anticipating expanding its
payday advances on a national level.
Page 15
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Additionally, the company secured a national contract with Comdata through
their banking affiliates. This contract allows the distribution of debit
cards at the point of sale location. Subsequently, the company is in
negotiation with its competitors to allow them to use the debit card system.
This transforms the competitors into vendors and allows revenue on a broader
basis. Management anticipates putting forth its efforts to expand the payday
advance basis through physical locations and the Internet on a national basis
to increase company value.
On March 3, 2000 the company entered into a consulting agreement with certain
professionals and completed an acquisition via a stock exchange agreement with
MAS Acquisition XIX Corporation, a publicly held reporting entity. MAS
Acquisition XIX Corporation is inactive at this time. After the stock exchange
Pinnacle owns approximately 97% of MAS Acquisition XIX Corp.
Page 16
<PAGE>
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 hereunto duly authorized.
PINNACLE BUSINESS MANAGEMENT INC.
/S/ Jeffrey G. Turino
-----------------------------------------------------
Jeffrey G. Turino, Chief Executive Officer and Director
/S/ Michael B. Hall
-----------------------------------------------------
Michael B. Hall, President and Director
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of Pinnacle Business Management, Inc.
We hereby consent to the use in this Form 10-SB of our report dated
April 26, 2000 relating to the financial statements of
Pinnacle Business Management, Inc.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
-----------------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
BALANCE SHEETS AS OF MARCH 31, 2000 AND 1999 2-3
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999 4
STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 5
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-16
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
-------------------------------------------------------
Pinnacle Business Management, Inc.
Clearwater, Florida
We have reviewed the accompanying consolidated balance sheets of Pinnacle
Business Management, Inc. and Subsidiaries as of March 31, 2000 and 1999, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the three months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Pinnacle Business
Management, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an opinion.
<PAGE>
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
As discussed in Notes 9 and 11, certain conditions indicate that the company may
be unable to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments to the financial statements
that might be necessary should the company be unable to continue as a going
concern.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
-----------------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
May 10, 2000
Page 1
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
MARCH 31,
------------------------
2000 1999
----------- -----------
CURRENT ASSETS
----------------
Cash and cash equivalents $ 56,944 $ 67,776
Customer loans receivable, net 277,477 546,109
Loans Receivable - Other 423,000 -
Prepaid Expenses 41,250 -
----------- -----------
Total Current Assets 798,671 613,885
----------- -----------
PROPERTY AND EQUIPMENT 166,005 152,568
Less accumulated depreciation (74,654) (48,467)
----------- -----------
Total net property and equipment 91,351 104,101
OTHER ASSETS
-------------
Unamortized goodwill 236,498 243,333
Deferred tax asset 505,560 505,560
Security deposits 13,658 7,424
Officer loan receivable - 35,426
Total Other Assets ----------- -----------
755,716 791,743
----------- -----------
TOTAL ASSETS $1,645,738 $1,509,729
------------- =========== ==========
See Accompanying Notes and Accountants' Report
Page 2
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
----------------------------------------
MARCH 31,
------------------------
2000 1999
----------- -----------
CURRENT LIABILITIES
--------------------
Accounts payable and accrued expenses $ 430,429 $ 152,377
Current portion of long-term debt 1,390,928 1,204,526
-------------- -----------
TOTAL CURRENT LIABILITIES 1,821,357 1,356,903
-------------- -----------
LONG-TERM LINE OF CREDIT 1,068,000 150,000
NOTES PAYABLE - OFFICERS' 300,360 -
LONG-TERM DEBT, LESS CURRENT PORTION 547,287 700,000
-------------- -----------
TOTAL LONG-TERM LIABILITIES 1,915,647 850,000
-------------- -----------
TOTAL LIABILITIES 3,737,004 2,206,903
-------------- -----------
COMMITMENTS AND CONTINGENCIES
-------------------------------
STOCKHOLDERS' DEFICIT
----------------------
Preferred stock $ - $ -
Common stock 157,262 74,429
Additional paid-in capital 1,317,515 541,965
Deficit (3,566,043) (1,313,568)
-------------- -----------
TOTAL STOCKHOLDERS' DEFICIT (2,091,266) (697,174)
-------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,654,738 $ 1,509,729
============= ============
See Accompanying Notes and Accountants' Report
Page 3
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
MARCH 31,
-------------------------
2000 1999
------------ -----------
OPERATING REVENUE
------------------
Revenue $ 62,681 $ 110,931
------------ -----------
OPERATING EXPENSES
-------------------
Salaries, employee leasing and related 154,994 99,794
Advertising 7,386 8,070
Commissions 13,000 16,906
Office and general 10,776 13,433
Professional fees 73,359 17,849
Repairs and maintenance 1,243 2,914
Rent 38,482 44,314
Repossession costs 8,734 10,344
Telephone and utilities 27,696 33,043
Travel 32,400 26,623
Other operating 35,392 22,941
------------ -----------
TOTAL OPERATING EXPENSES 403,462 296,231
----------------------------------------------------- ------------ -----------
OPERATING (LOSS) (340,781) (185,300)
----------------------------------------------------- ------------ -----------
OTHER EXPENSES
-----------------------------------------------------
Interest expense ( 70,950) ( 77,032)
Depreciation and Amorizitation expense ( 7,000) ( 7,005)
Bad debt - -
------------ -----------
TOTAL OTHER EXPENSES ( 77,950) (84,037)
----------------------------------------------------- ------------ -----------
NET LOSS
BEFORE FEDERAL INCOME TAX BENEFIT ( 418,731) (269,337)
----------------------------------------------------- ------------ -----------
PROVISION FOR INCOME TAX BENEFIT - -
------------ -----------
NET LOSS APPLICABLE TO COMMON SHARES $( 418,731) $ (269,337)
------------ -----------
NET LOSS PER COMMON SHARES $ (0.005) $ (0.008)
------------ -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 86,952,686 32,970,767
----------------------------------------------------- ------------ -----------
See Accompanying Notes and Accountants' Report
Page 4
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
COMMON STOCK
$.001 PAR VALUE ADDITIONAL TOTAL
-------------------- PAID-IN STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
---------- -------- ---------- ------------ ------------
1999
----
Balance
January 1, 1999 16,494,206 $ 16,494 $ 541,965 $ (986,246) $ (427,837)
Issuance of
Common Stock 56,935,408 57,935 - (57,935) -
Net Loss - - - (269,337) (269,337)
---------- -------- ---------- ------------ ------------
Balance
March 31,
1999 74,429,610 74,429 $541,965 $(1,313,568) $(697,174)
2000
----
Balance
January 1,
2000 86,952,686 $ 86,952 $1,317,515 $(3,077,002) $(1,672,535)
Issuance of
Common Stock 70,309,903 70,310 - (70,310) -
Net Loss - - - (418,731) (418,731)
=========== ======== ========== ============ ============
Balance
March 31,
2000 157,262,589 $157,262 $1,317,515 $(3,566,043) $(2,091,266)
========== ======== ========== ============ ============
See Accompanying Notes and Accountants' Report
Page 5
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
----------------------------------------------------
Net Loss $ (418,731) $ (269,337)
------------ -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
----------------------------------------------------
Depreciation and Amortization 7,000 7,005
Provision for doubtful accounts - 24,774
Deferred Income Tax Benefit - -
CHANGES IN ASSETS AND LIABILITIES:
Decrease in customer loans
receivable - net (2,503) 172,994
(Increase) in loans other and
prepaid expenses 2,750 -
(Increase)in deposits and other (1,263) (433)
Increase in accounts
payable and accrued expenses 111,665 72,594
------------ -----------
TOTAL ADJUSTMENTS 117,649 276,934
--------------------------------------------------- ------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (301,082) 7,597
--------------------------------------------------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
---------------------------------------------------
Capital expenditures (9,174) (7,729)
------------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (9,174) (7,729)
--------------------------------------------------- -------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
---------------------------------------------------
Proceeds from issuance of long-term debt and
Line of credit 335,000 150,000
Proceeds from issuance of common stock and
paid in capital - -
Principle payments on long-term debt (10,825) (39,750)
Increase (decrease) in officer's loans - net 33,299 (45,326)
-------------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 357,474 64,924
--------------------------------------------------- -------------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 47,218 64,792
--------------------------------------------------- -------------- ----------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 9,726 2,984
--------------------------------------------------- -------------- ----------
CASH AND CASH EQUIVALENTS-END OF PERIOD 56,944 67,776
--------------------------------------------------- -------------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest Expense $ 3,700 $26,000
-------------- ----------
See Accompanying Notes and Accountants' Report
Page 6
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------
The consolidated reviewed interim financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's most
recent current report on Form 8-K, filed March 6, 2000, for the year ended
December 31, 1999.
Pinnacle Business Management, Inc. is an integrated consumer finance and E-
commerce technology developer. The company operates title loan and paycheck
advance locations. Fast Title Loans, Inc.(FTL) is a wholly owned subsidiary
of Pinnacle Business Management, Inc. Fast Title Loans, Inc. is a consumer
loan company that operates title loan offices in central Florida. The title
loan is an immediate short term cash loan, using the free and clear title
of a person's car or truck as collateral. The loan allows the customer to
retain possession and use of their motor vehicle. Fast Paycheck Advance,
Inc. is a wholly owned subsidiary of Pinnacle Business Management, Inc.
that provides short-term paycheck advances to consumers. The accompanying
financial statements reflect the consolidated operations of the above.
On May 9, 1997, Pinnacle Business Management, Inc. (The "Company") was
incorporated as a wholly owned subsidiary of 300365 BC, Ltd., D/B/A Peaker
Resource Company, a company which was incorporated in British Columbia,
Canada on November 13, 1985. 300365 BC, Ltd. had been inactive for years
due to the lack of working capital. On May 15, 1997, the stockholders of
300365 BC, Ltd. exchanged all of the company's outstanding stock of 300365
BC, Ltd. for the stock of Pinnacle Business Management, Inc. This exchange
was made on a share for share basis. There were no tangible assets of
300365 BC, Ltd. The excess of par value of the common stock issued over the
assets acquired upon the acquisition of the parent was $1,933. After the
exchange of stock, the parent became the wholly owned subsidiary and it was
liquidated and the $1,933 was written off as an extraordinary loss upon the
dissolution of 300365 BC, Ltd.
Page 7
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION - (continued)
----------------------------------------------------------------------
On October 27, 1997, JTBH Corporation, a wholly owned subsidiary of the
"Company", with no assets, merged with Fast Title Loans, Inc. (FTL) a
Florida corporation. On that date Fast Title Loans, Inc. became the wholly
owned subsidiary of Pinnacle Business Management, Inc. The shares of (FTL)
were converted into common stock $.001 per share, of Pinnacle Business
Management, Inc.
The merger of (FTL) the private company into the public shell company
Pinnacle Business Management, Inc. on October 27, 1997 gave rise to the
private company having effective operating control of the combined company
after the transaction. This was a reverse merger and the costs
associated with were treated as a recapitilization. In 1998, the company
incorporated Fast Paycheck Advance, Inc. as a wholly owned subsidiary. Also
in 1998, the Company incorporated Summit Property, Inc. This subsidiary has
remained inactive, however.
On March 3, 2000, the Company acquired 96.8% of the issued and outstanding
common stock of MAS Acquisition XIX Corp., an inactive registrant,
reporting company. Pinnacle became the parent corporation of MAS
Acquisition XIX Corp. when it exchanged 1,500,000 shares of its common
stock for 8,250,000 shares of MAS Acquisition XIX Corp.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------
PRINCIPLES OF CONSOLIDATION:
----------------------------
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES:
-------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Page 8
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
PROPERTY AND EQUIPMENT:
-------------------------
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated
useful lives:
YEARS
-----
Improvements 10-40
Furniture and Equipment 5-7
Leasehold Improvements are amortized over their estimated useful lives or
the lives of the related leases, whichever is shorter.
REVENUE RECOGNITION:
---------------------
Substantially most of the revenues are derived from interest charged on
consumer financing, title loans and advance paychecks.
INCOME TAXES:
--------------
The income tax benefit is computed on the pretax loss based on the current
tax law. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates.
NATURE OF BUSINESS AND CREDIT RISK:
----------------------------------------
The company operates in mainly one business segment and primarily earns
interest income on consumer title loans and advanced paychecks. Financial
instruments which potentially subject the company to concentrations of
credit risk are primarily customer loans receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
----------------------------------------
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, customer loan receivables, accounts payable and
accrued expenses and other liabilities approximate fair value because of
the immediate or short-term maturity of these financial instruments. The
carrying amount reported for long-term debt approximates fair value
because, in general, the interest on the underlying instruments fluctuates
with market rates.
Page 9
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------------
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
------------------------------------------------
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding.
STATEMENTS OF CASH FLOWS:
----------------------------
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.
ADVERTISING AND PROMOTIONAL COSTS
------------------------------------
Costs of advertising and promotional costs are expensed as incurred.
Advertising costs were $7,386 and $8,070 in 2000 and 1999, respectively.
GOODWILL
--------
Goodwill is amortized over 40 years. Amortization charged to expense was
$1,612 and $1,612 in 2000 and 1999 respectively.
NOTE 3 - CUSTOMER LOANS RECEIVABLE - NET
-------------------------------------
Customer loans receivable, net consists of the following:
March 31,
------------
2000 1999
--------- ----------
Customer loans receivable $ 705,384 $ 631,717
Less: Allowance for doubtful accounts (427,907) (85,608)
---------- ----------
Customer loans receivable - Net 277,477 $ 546,109
========== ==========
Customer loans receivable include accrued interest amounts. However,
the Company, due to an unfavorable legislative climate regarding the title
loan industry, reserved in aggregate $427,907 in bad debt allowance to
account for the write down of accrued interest and loans that are
doubtful.
Page 10
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 4- LOANS RECEIVABLE - OTHER
---------------------------
Loan receivable dated December 29, 1997 to a company for $25,000
together with interest thereon at the rate of 18% per annum. The principal
balance and accrued interest is due and payable on the earlier of a
private placement being completed in whole or part including but not
limited to any escrow disbursements of any funds to the maker, or March
27, 2000. There were no payments received in 2000 or 1999. The company
has made an allowance for doubtful receivable for the entire loan. The
company has not accrued any interest on this loan for 2000 or 1999.
Demand loan receivable a company for $423,000. This loan is non-interest
bearing. The company is performing outside consulting for a start up
company. It is anticipated that this loan receivable will be converted
into equity during the calendar year 2000.
NOTE 5- PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
2000 1999
---------- -----------
Furniture and Equipment $ 131,088 $ 117,651
Improvements 34,917 34,917
---------- -----------
166,005 152,568
Less: Accumulated depreciation (75,654) ( 48,467)
---------- -----------
Property and Equipment, Net $ 91,351 $ 104,101
========== ===========
NOTE 6- LINE OF CREDIT
----------------
In March 1999, the company obtained a line of credit with a capital
company to receive up to $1,500,000 of advances. The interest is
payable at 17% per annum. Principal and interest on advances are due
March 1, 2001, with the company having an option to extend the note an
additional one year. At March 31, 2000 and 1999, the company had
$1,068,000 and $150,000 outstanding on the line, respectively. The line
of credit is collateralized by 7,500,000 shares of the common stock of the
company.
Page 11
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 and 1999
NOTE 7 - LONG-TERM DEBT
---------------
Long-term debt consists of the following:
2000 1999
------------ ------------
Note payable lending institution with monthly
interest payable at 14% per annum expiring
February 28, 2000 (see Note 9). $ 538,276 $ 538,276
Note payable investor with monthly interest
payable at 4.5% per month. This note
expires May 14, 1999. 100,000 100,000
Note payable investor with monthly interest
payable at rates varying between 16-36% per
annum, expiring March 1, 2000. 514,055 566,250
Renegotiated note payable investors with
monthly interest payable at rates varying
between 1.5%-6% per month. This loan
expires in December, 2000. 238,597 450,000
Note payable investor with monthly interest
payable at 4%, expiring May 17, 1999. -0- 150,000
Notes payable investor with interest payable
at 18% per annum, expiring February and
March, 1999. -0- 100,000
Note payable investor with interest only
payable at 12% per annum. This note has a
balloon and expires December 31, 2002. 547,287 -0-
------------- -----------
$ 1,938,215 $1,904,526
Less: Current Portion ( 1,390,928) (1,204,526)
------------ ------------
Net Long-Term Debt $ 547,287 $ 700,000
============ ============
The non-current portion of long-term debt
matures as follows:
March 31,
-----------
2000 $1,390,928
2001 -0-
2002 547,287
----------
$1,938,215
==========
The company is negotiating with certain investors to convert long-term debt
to common stock at various negotiated prices predicated on market
value. Long-term debt is substantially collateralized with motor vehicle
titles and the personal guarantees of the officers and the assets
of the company.
Page 12
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 8- STOCKHOLDERS' DEFICIT
----------------------
The authorized preferred stock of the company in 2000 and 1999 consists of
100,000,000 and 10,000,000, respectively, with par value of $.001 with
rights and privileges set by the board of directors. As of March 31, 2000
and 1999 there were no shares outstanding.
As of March 31, 2000 and March 31, 1999 there were 200,000,000 and
100,000,000 shares of common stock authorized and 157,262,589 and
74,429,610 shares of common stock issued and outstanding.
At March 31, 2000, the company had up to 35,322,578 shares (options)
outstanding with a consulting company. Shares may be exercisable at $.25
per share or 30% of the closing bid price, whichever is less. This was for
compensation in arranging the Mail Boxes Etc. account.
Additionally there are 5 year warrants outstanding for investment banking
services rendered to purchase 5,580,000 shares of common stock at $.125
per share. The warrants become due August 18, 2004.
NOTE 9- COMMITMENTS AND CONTINGENCIES
-------------------------------
(A) LEASES:
-------
The company operates its facilities under certain operating leases. Future
minimum lease commitments under non-cancelable operating leases are as
follows:
2000 $60,372
2001 25,101
-------
$85,473
=======
Rent and related expenses under operating leases amounted to $38,482 and
$44,314 for the years ended March 31, 2000 and 1999 respectively.
The company is operating various locations on a month to month basis.
Page 13
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
(B) LITIGATION:
-----------
The company is a defendant involving a claim made in bankruptcy by First
American Reliance, Inc. (FAR) against the company for $800,000, including
9% interest, for amounts loaned and advanced by FAR to the company which
were not repaid. The company has asserted a defense and set off
alleging that moneys due to Pinnacle from stock subscriptions in 1998
delivered to FAR were not turned over to the company. It is further alleged
that the claims of the company exceed the sum that FAR claims it is owed by
the company. The company has not accrued any interest on this note for 1999
and 1998 because of the offsets of moneys due the company alleged in the
litigation. The lawyers have stated that documentation to fully evaluate
the claims is not presently available. However, the company is contesting
the case vigorously. The company has accrued a liability for $538,276 in
2000 and 1999, respectively.
Secondly, Tyler Jay & Company, L.L.C. commenced an action against the
company asserting a claim for fees and commissions arising from loans made
by FAR described in the previous paragraph. This also includes sums lost by
Tyler Jay allegedly because Tyler Jay was not permitted to complete the
private placement noted above. The sums demanded exceed $500,000 in the
aggregate. Management is vigorously contesting the claim. The company has
asserted claims and defenses that are still in the process of being
evaluated by the attorneys. It is not possible to determine whether there
will be a loss; or, if there is a loss, the extent of the loss.
NOTE 10 - RELATED PARTY TRANSACTIONS
----------------------------
February 28, 2000, the Company, Jeff Turino, and Bruce Hall entered into an
Agreement and release concerning claims arising from operation of those
Officers' employment agreements with the Company between 1997 and 2000.
Turino and Hall released the Company from certain performance obligations,
including the waiver of back compensation and bonus amounts. In exchange,
each received 27,500,000 shares of restricted common stock of the Company.
Turino and Hall agreed to perform the remainder of the employment agreement
in accordance with its terms. The Company released any claims arising from
the officers' performance of the agreements prior to January 1, 2000.
The officers as of March 31, 2000, had a note payable due them from the
Company of $300,360. As of March 31, 1999 the officers owed $35,426 to the
Company, this was subsequently repaid.
Page 14
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 11 - GOING CONCERN
--------------
As shown in the accompanying financial statements, the company
incurred net losses for the three months ended March 31, 2000 and 1999.
Additionally, the company has a $100,000 note payable with an
investor that expired May 14, 1999.
The investor has not called this loan and it is shown as a current
liability. Moreover, the company has debt that will be coming due between
March 1, 2000 and December 31, 2000 without adequate capital available to
repay the debt. The company is negotiating with the investors to either
extend these obligations or convert the debt to equity. However, if these loans
are called, the company's financial condition will be further negatively
impacted. Finally, the company is defending various lawsuit claims that, if
the outcome is unfavorable, would negatively impact the company. These
factors raise substantial doubt about the company's ability to continue as a
going concern.
Additionally, the company, due to an unfavorable legislative climate,
plans to discontinue its title loan business by June 30, 2000; and concentrate
on its payday advance business. There is no guarantee whether the company will
be able to generate enough revenue and or raise capital to support those
operations.
Management is working with the certain investors to rework the debt that is
coming due. Additionally, management is vigorously contesting the lawsuits that
have been filed against the company. The company feels that they have certain
offsets against the claims in litigation and does not expect to pay more than
what is reflected on the balance sheet at this time (see note 9). However,
there can be no assurance that the company will be successful in its efforts to
not have the payment of debt accelerated. If the company is unsuccessful in
its efforts, it may be necessary to undertake such other actions as may be
necessary to preserve asset value. The financial statements do not
include any adjustments, other than the current classification of
long-term debt in default, that might result from the outcome of those
uncertainties.
Page 15
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 AND 1999
NOTE 12- INCOME TAX BENEFIT
--------------------
There was no income tax benefit recognized at March 31, 2000 or 1999.
The net deferred tax assets in the accompanying balance sheets include the
following components:
2000 1999
-------- ---------
Deferred tax assets $505,560 $505,560
Deferred tax
valuation allowance -0- -0-
--------- ---------
Net deferred
tax assets $505,560 $505,560
========= =========
NOTE 13- SUBSEQUENT EVENTS
------------------
Due to certain local legislative climate, the company is making efforts in 2000
to discontinue operating in the title loan business. With the implementation of
payday advance debit card programs, a three year contract with Mailboxes, Etc.,
and a possible banking alliance, the company is anticipating on expanding its
payday advances on a national level.
EXHIBITS
Number
Exhibits
3.1 Articles of Incorporation and Amendments
3.2 By-laws
10.1 Mail Boxes Etc. USA, Inc. Contract
10.2 Comdata Referral Agreement
10.3 Comdata Payment Services Express Cash Statement of Services
10.4 Mastercard Agreement
10.5 M.H. Meyerson & Co., Inc.
10.6 Hall Employment Agreement
10.7 Turino Employment Agreement
10.8 Agreement and Release
21 Subsidiaries of the Registrant
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Pinnacle Business Management Inc.
July 26, 2000
Date
/s/ Jeffrey G. Turino
------------------------------------------
Jeffrey G. Turino, Chief Executive Officer and Director
/s/ Michael B. Hall
------------------------------------------
Michael B. Hall, President and Director
<PAGE>
