UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
AMENDMENT NO.1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
_________
(Commission file number)
PINNACLE BUSINESS MANAGEMENT, INC.
(Name of Small Business Issuer in its charter)
Nevada 91-1871963
(State or other jurisdiction of I.R.S. Employer Identification
Incorporation or Organization
2963 Gulf to Bay Boulevard, Suite 265
Clearwater, FL 33759
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(727) 669-7781
Securities registered under Section 12(b) of the Act:
None
(Title or class)
Securities registered under Section 12(g) of the Act:
None
(Title or class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ ] NO [X]
<PAGE>
As of June 30, 2000 the Registrant had outstanding 147,159,622 shares of common
stock.
Transitional Small Business Disclosure Format. Yes [ ] No[X]
INTRODUCTORY STATEMENT
Pinnacle Business Management, Inc., acquired MAS Acquisition XIX Corp. on March
3, 2000. At the time of the acquisition, MAS Acquisition XIX Corp. was a
reporting company; Pinnacle was not. Pinnacle filed a Form 8-K on March 6,
2000, to disclose the acquisition, using MAS's then current CIK code 0001093989
(the Security and Exchange Commission's corporate identification code).
On March 16, 2000, Pinnacle filed a Form S-8 to register 1,525,000 shares of
common stock paid to certain consultants associated with MRC Legal Services
Corporation, who were involved in the acquisition of MAS. Pinnacle then filed
amendments to its Form 8-K on March 17, 2000 and May 3, 2000 to include
financial statements.
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., as
payment for consulting services. Due to a filing error by the financial printer
effecting the transmission, 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 Acquisition XIX Corp. 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
Gordon & Associates for consulting services on June 8, 2000. EDGAR accepted the
Form S-8.
The Office of Small Business Review Division of the Securities and Exchange
Commission decided that Pinnacle should file a registration statement separate
from MAS and under a separate CIK code. This solution would allow both Pinnacle
and MAS to have separate CIK code numbers and report as separate entities.
Pinnacle has filed a Form 10SB12G with the SEC. It has received comments, and
expects to respond soon.
As soon thereafter as practical, Pinnacle intends to submit all
registration statements formerly filed on Form S-8 under MAS's CIK code. These
submissions will appear under Pinnacle's new CIK code, 0001055037. 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, 0001093989.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
JUNE 30, 2000 AND MARCH 31, 2000 [Restated]
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTANTS' REVIEW REPORT 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>
ACCOUNTANTS' REVIEW REPORT
--------------------------
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.
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.
As discussed in Note 14 to the financial statements, the company's March 31,
2000 professional fees was previously reported as $73,359 and should have been
$210,609.
This discovery was made subsequent to the issuance of the financial statements.
The financial statements have been restated to reflect this correction.
/S/ BAGELL, JOSEPHS & COMPNAY., L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Certified Public Accountants
May 10, 2000, except for Note 14, as to which the date is August 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, par value of $.001; authorized
100,000,000 and 10,000,000 shares in March 31, 2000
and 1999; issued and outstanding none $ - $ -
Common stock; par value of $.001; authorized
200,000,000 and 100,000,000 shares of common stock
and 157,262,589 and 74,429,610 shares of common stock
issued and outstanding 157,262 74,429
Additional paid-in capital 1,384,455 484,030
Deficit (3,632,983) (1,255,633)
------------- ------------
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 210,609 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 540,712 296,231
----------------------------------------------------- ------------ -----------
OPERATING (LOSS) (478,031) (185,300)
----------------------------------------------------- ------------ -----------
OTHER EXPENSES
-----------------------------------------------------
Interest expense ( 70,950) ( 77,032)
Depreciation and Amortization expense ( 7,000) ( 7,005)
Bad debt - -
------------ -----------
TOTAL OTHER EXPENSES ( 77,950) (84,037)
----------------------------------------------------- ------------ -----------
NET LOSS
BEFORE FEDERAL INCOME TAX BENEFIT ( 555,981) (269,337)
----------------------------------------------------- ------------ -----------
PROVISION FOR INCOME TAX BENEFIT - -
------------ -----------
NET LOSS APPLICABLE TO COMMON SHARES $( 555,981) $ (269,337)
------------ -----------
NET LOSS PER BASIC AND DILUTED SHARES $ (0.006) $ (0.008)
------------ -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 86,952,686 32,970,767
----------------------------------------------------- ------------ -----------
See Accompanying Notes and Accountants' Report
Page 4
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
COMMON STOCK ADDITIONAL TOTAL
$.001 PAR VALUE PAID-IN STOCKHOLDERS'
---------------------- CAPITAL DEFICIT DEFICIT
SHARES AMOUNT
------------ -------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1999
----
Balance
January 1, 1999 16,494,202 $ 16,494 $ 541,965 $ (986,296) $ (427,837)
Issuance of
Common Stock at book value,
loan collateral 57,935,408 57,935 (57,935) -
Net Loss - - - (269,337) (269,337)
------------ -------- ----------- ------------- ------------
Balance
March 31,1999 74,429,610 74,429 $484,030 (1,255,633) (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
for legal and consulting
services at $.09 per
share 1,525,000 1,525 135,725 137,250
Issuance of common stock
in lieu of officers'
settlement at book
value 55,000,000 55,000 (55,000)
Issuance of common stock
For MAS Acquisition
XIX Corp. 1,500,000 1,500 (1,500)
Issuance of common stock
Cancelled for non-payment
of options 12,284,903 12,285 (12,285)
Net Loss - - - (555,981) (555,981)
============ ======== =========== ============= ============
Balance
March 31,
2000 157,262,589 $157,262 $1,384,455 $ (3,632,983) $(2,091,266)
============ ======== =========== ============= ============
</TABLE>
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 $ (555,981) $ (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:
(Increase)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 (438,332) 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 137,250 -
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 494,724 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, 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 annual
report on Form 10-K 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. 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 100% 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 reporting period. Actual results would differ from those estimates.
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.
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.
Page 8
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
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 financing 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 loans 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.
Statement of Cash Flow:
--------------------------
For purposes of the consolidated statement 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 Cost:
------------------------------------
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.
Reclassification:
-----------------
Certain items in March, 1999 were reclassified to conform to the March,
2000 presentation.
Page 9
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE 3 - CUSTOMER LOAN RECEIVABLE - NET
----------------------------------
Customer loan receivable, net 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.
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 in part including but not limited to
any escrow disbursements of any funds to the maker, on 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 to a company for $433,000. This loan in 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 stock during the calendar year 2000.
Page 10
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE 5 - PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
MARCH 31,
2000 1999
Furniture and Equipment $ 131,088 $117,651
Improvements 34,917 34,917
-------------------------------
166,005 152,568
Less: Accumulated depreciation (74,654) (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 top $1,500,000 of advances. 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 collaterized
by 7,500,000 shares of the common stock of the company.
Page 11
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 and 1999
Long-term debt consists of the following:
March 31,
2000 1999
------------ ------------
<S> <C> <C>
Note payable lending institution with monthly
interest payable at 14% per annum expiring
February 28,2000 (see Note 11) $ 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
============ ============
</TABLE>
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.
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 shares, respectively, with a par value of
$.001 with rights and privileges to be set by the board of directors. As
of March 31, 2000 and 1999 there were no shares issued or 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 Mailboxes, Etc. account.
Additionally, there are 5 year warranty 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:
March 31,
2000 $60,372
2001 25,101
-------
$85,473
-------
Rent and related expenses under operating leases amounted to $38,482 and
$44,314 for the three months 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 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 to the company exceeded the sum that FAR claims it is owed by the
company. The company has not accrued any interest on this note 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 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 27,500,00 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 notes payable due them from the
Company of $300,360. As of March 31, 1999 the Company 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 investor 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, due to an unfavorable legislative climate, the company plans
to close down its title loan business 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 these obligations.
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 that what is reflected on the balance sheet at this time (see note 9).
However, there can be no assurance that he 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 and a three year
contract with Mailboxes, Etc., the company is anticipating on expanding its
payday advances on a national level.
NOTE 14 - PROFESSIONAL FEES
------------------
The company has restated their professional fees at March 31, 2000 to
include $137,250 for legal and consulting services paid in Pinnacle stock
to MRC Consulting, in connection with the acquisition of MAS Acquisition
XIX Corp. Both Pinnacle and MRC Consulting agreed that the value of the
1,525,000 shares of stock issued to MRC Consulting would be discounted
market value of 9 cents per share at that time.
Page 16
<PAGE>
ACCOUNTANTS' REVIEW REPORT
----------------------------
To the Board of Directors
Pinnacle Business Management, Inc.
We hereby consent to the use of the reviewed financial statements dated
May 10, 2000 for the quarter ending March 31, 2000 and March 31, 1999 to
be used in the quarterly filing 10QSB.
/s/ Bagell, Josephs & Company, L.L.C.
Bagell, Josephs & Company, L.L.C.
Certified Public Accountants
May 10, 2000, except for Note 14, as to which the date is August 10, 2000
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD
JUNE 30, 2000
_________________________________________________________________________
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INFORMATION
BALANCE SHEETS AS OF JUNE 30, 2000 AND 1999
(UNAUDITED)
STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) AND
THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS
ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
------
JUNE 30,
------------------------
2000 1999
----------- -----------
CURRENT ASSETS
----------------
Cash and cash equivalents $ 54,450 $ 3,060
Customer loans receivable, net 243,339 557,224
Loans Receivable - Other 423,000 85,000
Prepaid Expenses 37,500 30,881
----------- -----------
Total Current Assets 758,289 676,165
--------------------------------- ----------- -----------
PROPERTY AND EQUIPMENT 169,731 153,572
Less accumulated depreciation (83,650) (55,467)
--------------------------------- ----------- -----------
Total net property and equipment 86,081 98,105
----------- -----------
OTHER ASSETS
--------------
Unamortized goodwill 235,498 241,722
Deferred tax asset 505,560 505,560
Security deposits 8,958 7,424
Officer loan receivable -0- 49,564
Total Other Assets ----------- -----------
750,016 804,270
----------- -----------
TOTAL ASSESTS $ 1,594,386 $1,578,540
========== ==========
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
----------------------------------------
JUNE 30,
------------------------
2000 1999
----------- -----------
CURRENT LIABILITIES
------------------------------------------
Accounts payable and accrued expenses $ 446,341 $ 122,218
Current portion of long-term debt 1,545,928 1,162,401
----------- ------------
Total current liabilities 1,992,269 1,284,619
--------------------------------------------- ----------- ------------
LONG-TERM LINE OF CREDIT 1,068,000 518,000
NOTES PAYABLE - OFFICERS 280,623 -0-
LONG-TERM DEBT, LESS CURRENT PORTION 1,013,636 450,000
----------- ------------
Total long-term liabilities 2,362,259 968,000
--------------------------------------------- ----------- ------------
TOTAL LIABILITIES 4,354,528 2,252,619
--------------------------------------------- ----------- ------------
COMMITMENTS AND CONTINGENCIES
------------------------------------------
STOCKHOLDERS' DEFICIT
------------------------------------------
Preferred stock, par value of $.001; authorized
100,000,000 and 10,000,000, respectively,
in June 30, 2000 and 1999; issued and
outstanding none $ - $ -
Common stock; par value of $.001; authorized
200,000,000 and 100,000,000 shares of common
stock authorized and 147,159,622 and
84,449,000 shares of common stock issued
and outstanding 147,159 74,429
Additional paid-in capital 1,294,561 1,131,949
Deficit (4,201,862) (1,880,457)
------------- ------------
Total stockholder's deficit (2,760,142) (674,079)
--------------------------------------------- ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,594,386 $ 1,578,540
------------------------------------------- ============= ============
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -----------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATING REVENUE
------------------------------
Revenue $ 69,683 $ 150,706 $ 7,002 $ 39,775
------------ ------------ ------------ ---------
OPERATING EXPENSES
------------------------------
Salaries, employee leasing
and related 354,160 222,998 199,166 123,204
Advertising 17,621 18,808 10,235 10,738
Commissions 28,692 99,050 15,692 82,144
Office and general 30,531 26,743 19,755 13,310
Professional fees 284,015 76,471 73,406 58,622
Repairs and maintenance 2,629 3,680 1,386 768
Rent 72,258 69,371 33,776 25,055
Repossession costs 13,667 14,240 4,933 3,896
Telephone and utilities 55,617 52,334 27,921 19,291
Travel 44,996 35,127 12,596 8,504
Other operating 86,564 84,033 51,172 61,092
------------ ------------ ------------ ---------
Total operating expenses 990,750 702,855 450,038 406,624
------------ ------------ ------------ ---------
OPERATING (LOSS) (921,067) (552,149) (443,036) (366,859)
------------ ------------ ------------ ---------
OTHER EXPENSES
Interest expense (174,948) (172,290) (103,998) (95,258)
Depreciation and Amortization
expense (17,160) (17,222) (10,160) (10,217)
Bad debt (11,658) (152,500) (11,685) (152,500)
------------ ------------ ------------ ---------
Total other expenses (203,793) (342,012) (125,843) (257,975)
NET LOSS
Before Federal Income Tax Benefit (1,124,860) (894,161) (568,879) (624,824)
------------ ------------ ------------ ---------
PROVISION FOR INCOME TAX BENEFIT - -
------------ ------------ ------------ ---------
NET LOSS APPLICABLE TO COMMON
SHARES $(1,124,860) $ (894,161) (568,879) (624,824)
============ ============ ============ =========
NET LOSS PER BASIC AND DILUTED
SHARES $ (.009) $ (.015) $ (.006) $ (.014)
============ ============ ============ =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 17,056,154 58,709,884 102,004,420 45,840,320
============ ============ ============ =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
-------------------------------------------------
Net Loss $ (1,124,860) $ ( 894,161)
------------ -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
----------------------------------------------
Depreciation and amortization 17,160 17,222
Provision for doubtful accounts 11,685 152,500
CHANGES IN ASSETS AND LIABILITIES:
(Increase)Decrease in customer loans
receivable - net 19,950 34,153
(Increase) in loans other - (86,000)
(Increase)in deposits and other prepaids 9,937 (31,309)
Increase in accounts payable and
accrued expenses 127,577 42,435
------------ -----------
Total Adjustments 186,309 129,001
--------------------------------------------------- ------------ -----------
Net Cash Provided by (used in) operating
activities (938,551) (765,160)
--------------------------------------------------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (12,900) (8,733)
------------- -----------
Net cash (used in) investing activities (12,900) (8,733)
--------------------------------------------------- -------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
---------------------------------------------------
Proceeds from issuance of long-term debt and
line of credit 956,349 518,000
Proceeds from issuance of common stock and
paid in capital 37,253 647,319
Principle payments on long-term debt (10,825) (331,886)
Increase (decrease)in officer's loans - net 13,398 (59,464)
-------------- ----------
Net cash provided by financing activities 996,175 773,969
--------------------------------------------------- -------------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 44,724 76
--------------------------------------------------- -------------- ----------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 9,726 2,984
--------------------------------------------------- -------------- ----------
CASH AND CASH EQUIVALENTS-END OF PERIOD 54,450 3,060
--------------------------------------------------- ============== ==========
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------
The consolidated interim financial statements included herein have been
prepared, 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 annual
report on Form 10-K 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. 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>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
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 100% 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.
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 expenditures
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------
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 financing 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 loans 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>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
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.
Statement of Cash Flow:
--------------------------
For purposes of the consolidated statement 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 Cost:
------------------------------------
Costs of advertising and promotional costs are expensed as incurred.
Advertising costs were $17,621 and $18,808 in 2000 and 1999, respectively.
Goodwill:
---------
Goodwill is amortized over 40 years. Amortization charged to expense
was $3,224 and $3,224 in 2000 and 1999, respectively.
NOTE 3 - CUSTOMER LOAN RECEIVABLE - NET
----------------------------------
Customer loan receivable, net of the following:
JUNE 30,
2000 1999
------------ -----------
Customer loans receivable: $ 253,669 $ 768,055
------------ -----------
Less: Allowance for doubtful accounts (10,330) (210,831)
------------ -----------
Customer Loans receivable - Net $ 243,339 $ 557,224
============ ===========
Customer loans receivable include accrued interest amounts. However, the
company, due to an unfavorable legislative climate regarding the title loan
industry, reserved in aggregate $10,330 and $210,831 in bad debt allowance
to account for the write down of accrued interest and loans that are
doubtful in 2000 and 1999 respectively. The inactive loan portfolio has
been outsourced to two collection agencies to expedite the collection
process.
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
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 in part including but not limited to
any escrow disbursements of any funds to the maker, on 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 to a company for $433,000 and $85,000 in 2000 and
1999. This loan in 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 stock during the calendar year 2000. The
anticipated stock terms are one share of stock for each dollar loaned to
the start up company.
NOTE 5 - PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
JUNE 30,
--------- -------------
2000 1999
Furniture and Equipment $134,814 $118,655
Improvements 34,917 34,917
--------- -------------
169,731 153,572
Less: Accumulated depreciation (83,650) (55,467)
--------- -------------
Property and Equipment, Net $86,081 $ 98,105
========= =============
NOTE 6 - LINE OF CREDIT
----------------
In March, 1999, the company obtained a line of credit with a capital
Company to receive up top $1,500,000 of advances. 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 June 30, 2000 and 1999 the company had $1,068,000 and $518,000
outstanding on the line, respectively. The line of credit is collateralized
by 7,500,000 shares of the common stock of the company.
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 7 - LONG-TERM DEBT
---------------
Long-term debt consists of the following: JUNE 30,
2000 1999
---------- -----------
Note payable lending institution with monthly
interest payable at 14% per annum expiring
February 28,2000 (see Note 11) $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. 514,055 524,125
Renegotiated note payable investors with
monthly interest payable at rates varying
between 1.5%-6% per month. This loan
expires in December 2000. 393,597 450,000
Note payable investor with interest only
payable at 12% per annum. This note has
a balloon and expires December 31, 2002. 1,013,636 -0-
---------- -----------
$2,559,564 $1,612,401
Less: Current portion: (1,545,928) (1,162,401)
---------- -----------
Net Long-Term Debt $1,013,636 $ 450,000
========== ===========
The non-current portion of long-term debt
matures as follows:
June 30,
---------
2000 $1,545,928
2001 -0-
2002 1,013,636
----------
$2,559,564
==========
The company is negotiating with certain investors to convert long-term debt
to common stock at various negotiated prices predicated on market value.
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 8 - STOCKHOLDERS DEFICIT
---------------------
The authorized preferred stock of the company in 2000 and 1999 consists
of 100,000,000 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 June 30, 2000 and 1999 there were no shares issued or outstanding.
As of June 30, 2000 and June 30, 1999 there were 200,000,000 and
100,000,000 shares of common stock authorized and 147,159,622 and
84,449,000 shares of common stock issued and outstanding.
Additionally, there are 5 year warranty 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:
June 30,
--------
2000 $60,372
2001 25,101
-------
$85,473
=======
Rent and related expenses under operating leases amounted to $72,258 and
$69,371 for the six months ended June 30, 2000 and 1999 respectively. The
company is operating various locations on a month to month basis.
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 9- COMMITMENTS AND CONTINGENCIES (CONTINUED)
--------------------------------------------
(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 to the company exceeded the sum that FAR claims it is owed by the
company. The company has not accrued any interest on this note 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 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
----------------------------
The officers, as of June 30,2000, had notes payable due them from the
company of $280,623. As of June 30, 1999 the officers owed $49,565
to the company; this was subsequently repaid.
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 11 - GOING CONCERN
--------------
As shown in the accompanying financial statements, the company incurred net
losses for the six months ended June 30, 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 investor 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, due to an unfavorable legislative climate, the company plans
to close down its title loan business 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 these obligations.
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 that what is reflected on the balance sheet at this time (see note 9).
However, there can be no assurance that he 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>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 12 - INCOME TAX BENEFIT
--------------------
There was no income tax benefit recognized at June 30, 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
-------- --------
The company conservatively will not accrue any further income tax benefit
pending the monitoring of the profitability of its future operations.
NOTE 13 - SUBSEQUENT EVENT
-----------------
In August 2000, the Company cancelled the shares (options) outstanding with a
consulting company. Hence, the outstanding shares of common stock have been
reduced at June 30, 2000 to 147,159,622.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's discussion is based on an analysis of the financial statements for
the three months ended June 30, 2000, and the six months ended June 30, 2000.
The figures are then compared to the same period 1999. This discussion should be
read in conjunction with the company's audited financial statements for 1999 and
1998 which are set forth in the company's amended Form 8-K dated March 6, 2000.
The Form 8-K is incorporated into this report by reference.
PAST AND FUTURE FINANCIAL CONDITION
Investors must keep in mind that Pinnacle is a company in transition. Its main
source of revenues historically, Fast Title, has virtually ceased doing
business. As a result, the company has suffered, as its financial statements
indicate.
Management has developed new lines of business, primarily through Fast Paycheck,
and is optimistic that the company will recover. As discussed in the company's
previously filed Form 8-K, filed March 6, 2000, Pinnacle shifted its business
operations dramatically in 1999. Management continues to not only develop the
data processing services and payday deferred deposits to individuals, but to
explore additional opportunities to expand cash flow.
Management expects revenues to increase through the expansion of Fast PayCheck.
Pursuant to a contract with Mailboxes Etc., U.S.A., Inc., ("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. 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
Financial Statements include the financial statements for first quarter ended
March 31, 2000 Restated. The original numbers filed with the first quarter Form
10QSB for Pinnacle did not include as an expense approximately $137,000 paid in
stock to MRC Consulting, Inc., a group of consultants who structured the
acquisition of Mas Acquisition XIX Corp. in March, 2000.
The restated financial statements do include the figure. As a result, other
numbers, which draw on expenses in their calculation, also change. Any
discrepancy in the numbers presented here, and those in the first quarter Form
10QSB filed on behalf of Pinnacle, should be reconcilable once the payment to
MRC Consulting is included.
TOTAL ASSETS. Total assets at year end 1999 were $1,595,330 compared to June 30,
2000 total assets of $1,594,386, less than $1,000 difference. While first
quarter numbers at March 31, 2000 indicated approximately $50,000 more,
$1,645,738, this increase was due to a temporarily higher balance in cash and
cash equivalents.
TOTAL LIABILITIES. Total liabilities include accounts payable, the current
portion of the long term debt and non current portion of the long term debt.
Accounts payable increased from $318,764 at year end December 31, 1999, to
$430,429 at March 31, 2000, with a six month total at June 30, 2000 of $446,341.
The increase of long-term debt has been necessary to effectuate the transition
of business focus from Fast Title to Fast PayCheck. Pinnacle suffered a net loss
before federal income taxes in 1999 of $2,090,706. The company needed the
additional funding to provide liquidity to pay current obligations. It was
successful in obtaining an additional loan of $1,013,636. This number was
reflected by the increase in long term debt from year end 1999 to June 30, 2000.
Long term debt was $417,287 at December 31, 1999; $547,287 at March 31, 2000 and
$1,013,636 at June 30, 2000.
Management hope to address the remaining shortfall through cash flow, and by
arranging the conversion of existing debt into equity, to reduce the company's
interest expense.
REVENUES. Operating revenues have decreased over the first six months of
operation in 2000. At December 31, 1999, operating revenues were $214,538,
compared to $62,681 at March 31, 2000 and $39,683 for the six months at June 30,
2000. Operating revenues are expected to remain low until the Fast Paycheck
business expands and other sources of revenue are discovered.
OPERATING EXPENSES. Operating expenses remain fairly consistant, $960,750 for
the six months ended June 30, 2000. This compares to $1,413,078 for year end
December 31, 1999. Such expenses include the costs of 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.
In addition, the company has a $100,000 note payable with an investor that
expired May 14, 1999.
Additionally, the company has a $538,276 note payable with private financier
that expired February 28, 2000 that is the subject of a lawsuit. There is a
$514,055 note payable with investors that expired on March 1, 2000. The
investors have not yet called the aforementioned loans. There are no agreements
as of yet to the terms of possible reinstatements on the aforementioned loans.
Moreover, the company has approximately $785,000 in debt that will mature
between December 2000 and December 31, 2002. At this time, it is unlikely that
the company will have adequate capital available to repay the debt. If the loans
are called, the company's financial condition will be further negatively
impacted.
The company is also defending various lawsuit claims, 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.
The company's expenses also include the payment in stock to MRC Consulting Group
for consulting services in connection with the acquisition of Mas Acquisition
XIX Corp.
NET LOSS. The company's net loss is $555,981 for the three months ended March
31, 2000 and $1,124,860 for the six months ended June 30, 2000. This compares to
a net loss for year end 1999 of $2,090,706 at December 31, 1999. The net loss
includes the MRC Consulting group payment of $137,000.
CAPITAL EXPENDITURES. The company is engaged in consumer finance and electronic
technology development. As a result, capital expenditures are not substantial
and management does not foresee a substantial difference from quarter to
quarter. The facilities are leased. Property and equipment net costs
consistantly approximate $150,000 per quarter. 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 is approximately $40,000 per
quarter. 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 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. There are no payments received as of
March 31, 2000. The company has made an allowance for doubtful receivable for
the entire loan.
The company also owns a demand loan receivable for $423,000. This loan is
non-interest bearing. The company is performing consulting services to
theborrower in exchange for the demand loan. It is anticipated that this loan
receivable will be converted into equity during the calendar year 2000.
The company has signed a non-binding letter of intent to purchase an ongoing
business entity. The acquisition may be structured using stock for stock,
resulting in the entity becoming a subsidiary of the company. The company could
benefit from the revenues produced by the entity's business. The transaction,
however, is only in the due diligence phase at the present time. Management will
make a decision on the proposal once due diligence is complete. Regardless
whether Management accepts or declines this transaction, it is still exploring
other business opportunities for Pinnacle.
In August 1999, the Company secured a national contract with Comdata. This
contract allows the distribution of the Fast PayCheck debit card at the point of
sale locations. As a result, the Company is in negotiation with its competitors
to allow them to use the debit card system. This may generate revenue on a
broader basis and increase Company value.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Tyler Jay & Company, L.L.C. and First American Reliance, I
-------
The first proceeding regarding Tyler Jay is an adversary proceeding brought by
the trustee in bankruptcy of First American Reliance, Inc.("the Debtor"), 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., and Fast Title Loans, Inc. The
trustee is seeking to recover purported loans from the Debtor to Fast Title
and/or Pinnacle, in a sum of approximately $800,000, including 9% interest, for
amounts loaned and advanced by First American Reliance, IncAn answer to the suit
has been filed and the parties are currently in the discovery process. The
company had asserted a defense and set off alleging moneys due to Pinnacle from
stock subscriptions in 1998, which were never turned over to the company.
Pinnacle accrued a liability for $538,276 in 1998 and $355,755 in 1997,
respectively. Management has agreed to determine the actual amount of the loans
against proceeds of a private placement diverted by the Debtor's principal using
a separate corporation. Management believes that the setoff for funds diverted
during the private placement will equal or exceed the amounts claimed and
documented by checks as transferred to Pinnacle and will also create a setoff in
respect to at least a portion of the sums advanced to Fast Title. Management is
investigating whether the funds advanced by Debtor, in part, included funds
diverted by the Debtor, and, therefore, were not loans at all, but a return of
Pinnacle's property. The company is currently in the process of settlement
negotiations in this case.
In the second proceeding, Pinnacle and Fast Title Loans are defendants in a
pending civil action instituted in 1999, in Erie County, New York, entitled
Tyler Jay & Company, L.L.C. v. Fast Title Loans, Inc. and Pinnacle Business
Management, Inc., Index No. I-1999/5697. Plaintiff asserts a claim for fees
and commissions arising from loans made by the 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 noted above. Tyler
Jay claims that it is owed certain moneys and stock options, which damages are
allegedly in excess of $500,000. Fast Title and Pinnacle have filed a motion to
dismiss the case alleging that the New York courts do not have jurisdiction over
them in this matter. They have also asserted that Tyler Jay is not entitled to
recovery since the agreed-upon services were not provided. Moreover, Fast Title
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. Discovery is in process. Management intends to
vigorously defend this claim.
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Form S-8
The company filed a Form S-8 on March 16, 2000. This filing registered
1,525,000 shares of common stock. The selling shareholders in this offering are
the consultants that negotiated and completed the company's acquisition of MAS.
The consultants received 1,500,000 shares of common stock of the company as
compensation for such services, pursuant to a Consulting Agreement dated March
3, 2000. A law firm affiliated with the consulting group received 25,000
additional shares for preparation of the Form S-8 and the legality opinion. The
Form S-8 is incorporated into this report by reference.
In April and June, 2000, the company filed two Form S-8 registration
statements including reoffer prospectuses for Pinnacle stock. The prospectuses
offered stock and stock from options issued to nominees of Gordon & Associates
Strategic Investments, Inc. as payment for consulting services. The services
provided included the negotiation of a contract with Mail Boxes Etc., USA to
offer Fast Paycheck services in MBE centers throughout the United States.
The MBE contract provided that the consultants would receive 5,050,000 shares of
stock upon execution of the contract. Then as the contract was performed by MBE,
the consultants would receive options to acquire additional stock, up to
35,322,578 additional shares. The number of options granted the consultants
depended on the number of MBE locations actually providing Fast Paycheck
services. These options could be exercised at a price of $.25 per share or
thirty percent of the closing bid price of the stock on the date of exercise.
On April 14, 2000, the company filed the first Form S-8, registering 10,920,024
shares of stock. This included 5,050,000 shares of stock and 5,870,024 shares
that were issued upon the exercise of options received by the nominees. The
filing was made under CIK code 00010903989.
The filing was made on the mistaken belief that the options had been exercised.
The nominees had indicated their intention to exercise the options, and the
shares issued. The shares were not delivered, however, pending payment. On May
29, 2000, the consulting company submitted a note for payment.
On April 29, 2000, the company and the consultants entered into an amendment to
the contract permitting the exercise of all of the options, without regard to
the number of MBE locations contracted to provide Fast Paycheck services. As a
result, the consultants executed the promissory note on May 29, 2000 in the
amount of $1,214,790.04 as payment for stock issued in the exercise of all of
the options. This note was cancelled in the second quarter ended June 30, 2000,
and is not reflected in the financial statements.
On June 7, 2000, the company prepared to file the second Form S-8, registering
the remaining 25,382,495 shares. The financial printer, however, inadvertently
refiled the previous Form S-8. As a result, the Form S-8 which appears as filed
on June 7, 2000 was nothing more than a duplicate of the filing made on April
14, 2000. The second registration statement was filed on June 8, 2000 regarding
the remaining shares. This was also filed under CIK code 00010903989.
Thereafter, the company decided in conjunction with the SEC, that it should file
a Form 10SB registration statement and obtain new codes. It did. The new code
for Pinnacle is 0001055037. The SEC requested that all previous filings be
refiled after the Form 10 became effective. This called into question the status
of the shares issued to the consultants. In addition, the company questioned the
ability of the consulting company to pay the promissory note. At or about the
same time, Pinnacle learned that MBE might be permitting competitors of Fast
Paycheck to use certain MBE locations for sales. These factors raised a question
as to the status of the Gordon contract.
Pinnacle conferred with the individuals who received the stock, and determined
that the stock not issued would not be issued. The stock still held by the
consultants would be retired, and the remaining shares would be obtained by the
company from the market. Once retrieved, all of the MBE contract shares would be
retired.
The shares have been obtained, and the note cancelled. The Forms S-8 are
incorporated herein by reference.
<PAGE>
Employment Agreement
The company entered into an Agreement and Release with Jeff Turino, Chief
Executive Officer of the company, and Michael B. Hall, Director and President of
the company on February 28, 2000. This Agreement and Release was entered into
by the company to release 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. 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. As consideration for the forgiveness of the claims, the company
issued 27,500,000 shares of company common stock to each Turino and Hall.
Pursuant to the Agreement and Release, 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. The Agreement and
Release is incorporated into this report by reference.
Amendment to the Articles of Incorporation
On February 22, 2000, the company amended its Articles of Incorporation.
Prior to this date, the Articles stated that the company was authorized to issue
100,000,000 shares of common stock and 50,000,000 shares of preferred stock.
The amendment authorizes the company to issue 200,000,000 shares of common stock
and 50,000,000 shares of preferred stock. Both the common and preferred stock
have a par value of one-tenth of one cent $(.001) per share, just as it did
before the Amendment.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The company has a $100,000 note payable with an investor that expired May
14, 1999. The company has a $538,276 note payable with investors that expired
February 28, 2000. The company is in the process of renegotiating a new payoff
date for this loan. The company was not able to make payment under the
obligations of this note. The start-up expenses of Fast Paycheck exceeded the
revenues of the company, as indicated by the Company's current financial
statements. There is a $514,055 note payable with investors that expired on
March 1, 2000.
ITEM 5. OTHER INFORMATION.
Acquisition of MAS Acquisition XIX Corp. Consulting Agreement
Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated
March 3, 2000, between the company and MRC Legal Services Corporation, a
California corporation, which is the controlling shareholder of MAS Acquisition
XIX Corp., ("MAS"), an Indiana corporation, 1,500,000 shares of common stock of
The company were exchanged for 8,250,000 shares of MAS. Through this
transaction, the company became the parent corporation of MAS.
The Exchange Agreement was adopted by the unanimous consent of the Board of
Directors of MAS on March 3, 2000. The Exchange Agreement was adopted by the
unanimous consent of the Board of Directors of the company on March 3, 2000. No
approval of the shareholders of the company or MAS is 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. During a simultaneous closing, MRC Legal Services Corporation, the
selling shareholder, effected the completion of stock transfer by transmitting
funds for distribution to cash out minority shareholders. The shareholder then
caused the directors of MAS to effect a reverse stock split of 8,250 shares to
one, resulting in only 1000 shares of MAS Acquisition issued and outstanding. As
a result, Pinnacle became the sole remaining shareholder.
In addition, and as a part of this transaction, Pinnacle issued 1,500,000
shares to certain consultants pursuant to a Consulting Agreement.
The company filed a Form 8-K 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. The Form 8-K
and the amendment are incorporated into this report by reference.
ITEM 6. Exhibits and Reports on Form 8-K
<PAGE>
Exhibit Exhibit Number
______________________________________________________________________________
Articles of Incorporation 3.1
Incorporated by reference from
Form 8-K, dated March 6, 2000
Exhibit 3.1
Bylaws 3.2
Incorporated by reference from
Form 8-K, dated March 6, 2000
Exhibit 3.2
Employment Agreement:
Agreement and Release 10
Incorporated by reference from
Form 8-K, dated March 6, 2000
Exhibit 10.5.3
Consent of accountants 23
Form 8-K, March 6, 2000 99.1
Incorporated by Reference
Form 8-K/A, May 3, 2000 99.2
Incorporated by Reference
Reports on 8-K
A Form 8-K was filed on March 6, 2000, to disclose the acquisition of MAS
Acquisition XIX Corp.
An amendment to the Form 8-K filed on March 16, 2000 included audited
financial statements for MAS Acquisition XIX for the years ending 1998 and
1999.
An amendment to the Form 8-K filed on May 3, 2000 included audited
financial statements for Pinnacle for the years ending 1998 and 1999. A copy of
the Form 8-K and the amendments are incorporated by reference to this report.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PINNACLE BUSINESS MANAGEMENT, INC.
Date: October 2, 2000 By: /s/ Jeffrey G. Turino
------------------------------------------
Jeffrey G. Turino, Chief Executive Officer
/s/ Michael B. Hall
------------------------------------------
Michael B. Hall, President and Director
<PAGE>
