<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file No. 0-30066
-------------
PINNACLE GLOBAL GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0583569
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
600 TRAVIS, SUITE 2900
HOUSTON, TEXAS 77002
(Address of principal executive office)
(713) 993-4610
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
5599 SAN FELIPE, SUITE 555
HOUSTON, TX 77056
(FORMER ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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 __X__ NO _____
The number of shares of Common Stock, par value $0.01 per share,
outstanding as of November 10, 2000, was 15,298,388.
================================================================================
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Item 1. Financial Statements............................................................... 2
Condensed Consolidated Balance Sheet as of September 30, 2000 and
December 31, 1999 (unaudited).................................................... 2
Condensed Consolidated Statement of Operations for the Three and Nine Months
Ended September 30, 2000 and 1999 (unaudited) ................................... 3
Condensed Consolidated Statement of Shareholders' Equity for the Nine
Months Ended September 30, 2000 (unaudited)...................................... 4
Condensed Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (unaudited).................................... 5
Notes to Condensed Consolidated Financial Statements (unaudited)................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... 14
Item 3. Quantitative and Qualitative Disclosures About Market Risks........................ 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................. 17
Item 6. Exhibits and Reports on Form 8-K................................................... 19
PART III. SIGNATURES............................................................................ 20
</TABLE>
1
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
RECLASSIFIED
----------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 25,528 $ 10,495
Receivables from brokers-dealers and clearing organizations 1,533 162,423
Deposits with clearing brokers 3,491 8,463
Securities owned 9,209 85,002
Securities available for sale 3,908 4,050
Intangible assets 42,326 13,081
Furniture and equipment 2,441 670
Other assets 7,259 2,104
Net assets of discontinued operations - 11,618
----------------- ----------------
Total assets $ 95,695 $ 297,906
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 8,511 $ 2,132
Payable to clearing brokers-dealers 28 117,922
Securities sold, not yet purchased 99 120,275
----------------- ----------------
Total liabilities 8,638 240,329
----------------- ----------------
Commitments and Contingencies
Minority interests 332 -
Shareholders' equity:
Preferred stock, $0.10 par value; 10,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, $0.01 par value; 100,000,000 shares authorized;
15,250,512 and 7,125,292 shares issued at September 30,
2000 and December 31, 1999, respectively 152 71
Additional paid-in capital 98,875 58,929
Receivables for shares issued (558) (1,312)
Retained earnings(deficit) (8,353) (88)
Accumulated other comprehensive loss (207) (23)
Treasury stock at cost, 802,124 shares at September 30, 2000 (3,184) -
----------------- ----------------
Total shareholders' equity 86,725 57,577
----------------- ----------------
Total liabilities and shareholders' equity $ 95,695 $ 297,906
================= ================
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
2
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
RECLASSIFIED RECLASSIFIED
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 5,591 $ 1,068 $ 12,371 $ 2,620
Principal transactions 607 - 1,869 -
Investment banking 3,973 264 10,690 1,338
Fiduciary, custodial and advisory fees 1,424 780 3,900 1,539
Interest and dividends 615 234 1,657 821
Other income 670 18 1,649 74
--------------- --------------- --------------- --------------
Total revenues 12,880 2,364 32,136 6,392
--------------- --------------- --------------- --------------
Expenses:
Employee compensation and benefits 7,408 1,593 17,545 4,113
Floor brokerage, exchange and clearance fees 714 129 1,858 344
Communications and data processing 802 106 1,893 259
Occupancy 774 198 1,815 462
Amortization of intangible assets 457 150 1,116 378
Other general and administrative 1,541 234 3,773 1,317
--------------- --------------- --------------- --------------
Total expenses 11,696 2,410 28,000 6,873
--------------- --------------- --------------- --------------
Income(loss) from continuing operations before
income taxes and minority interests 1,184 (46) 4,136 (481)
Provision(benefit) for income taxes 601 48 2,033 (40)
Minority interests in loss of consolidated
companies 51 - 205 -
--------------- --------------- --------------- --------------
Income(loss) from continuing operations 634 (94) 2,308 (441)
Income(loss) from discontinued operations,
net of tax - (12) (10,573) 977
--------------- --------------- --------------- --------------
Net income(loss) $ 634 $ (106) $ (8,265) $ 536
=============== =============== =============== ==============
Net income(loss) per share:
Basic:
From continuing operations $ 0.04 $ (0.01) $ 0.17 $ (0.07)
From discontinued operations - - (0.78) 0.15
--------------- --------------- --------------- --------------
Basic net income(loss) per share $ 0.04 $ (0.01) $ (0.61) $ 0.08
=============== =============== =============== ==============
Diluted:
From continuing operations $ 0.04 $ (0.01) $ 0.17 $ (0.07)
From discontinued operations - - (0.78) 0.15
--------------- --------------- --------------- --------------
Diluted net income(loss) per share $ 0.04 $ (0.01) $ (0.61) $ 0.08
=============== =============== =============== ==============
Weighted average shares outstanding
Basic 14,595,367 7,125,253 13,505,849 6,729,420
=============== =============== =============== ==============
Diluted 14,659,097 7,125,253 13,505,849 6,729,420
=============== =============== =============== ==============
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
3
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL RECEIVABLES
--------------------------------------- PAID-IN FOR SHARES
SHARES AMOUNT SHARES AMOUNT CAPITAL ISSUED
--------- --------- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 7,125 $ 71 - $ - $ 58,929 $ (1,312)
Issuance of common stock in
acquisitions 8,125 81 - - 39,946 -
Acquisition of treasury stock - - (802) (3,184) - 650
Collections of receivables
for shares issued - - 104
Comprehensive loss:
Net loss - - - - - -
Net change in unrealized
appreciation (depreciation)
of securities available for sale - - - - - -
Total comprehensive loss - - - - - -
--------- --------- -------- ---------- ----------- --------------
Balance, September 30, 2000 15,250 $ 152 (802) $ (3,184) $ 98,875 $ (558)
========= ========= ======== ========== =========== ==============
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
EARNINGS(DEFICIT) LOSS TOTAL
------------------ ---------------- -----------
<S> <C> <C> <C>
Balance, December 31, 1999 $ (88) $ (23) $57,577
Issuance of common stock in
acquisitions - - 40,027
Acquisition of treasury stock - - (2,534)
Collections of receivables
for shares issued 104
Comprehensive loss:
Net loss (8,265) - (8,265)
Net change in unrealized
appreciation (depreciation)
of securities available for sale - (184) (184)
-----------
Total comprehensive loss - - (8,449)
------------------ ---------------- -----------
Balance, September 30, 2000 $ (8,353) $ (207) $86,725
================== ================ ===========
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
4
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
-------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (8,265) $ 535
Adjustments to reconcile net income(loss) to net cash -
provided by(used in) operating activities:
Gain on sale of securities available for sale (655) (55)
Depreciation 493 85
Loss on disposal of assets - 2
Net amortization of premiums and discounts on securities
available for sale 62 44
Amortization of intangible assets 1,116 378
Minority interests in consolidated companies (205) -
Changes in operating assets and liabilities:
(Increase)decrease in receivables from brokers-dealers
and clearing organizations 161,410 (25,005)
(Increase)decrease in securities owned 83,398 (16,636)
(Increase)decrease in deposits with clearing brokers 5,396 (8,315)
Increase(decrease) in securities sold, not yet purchased (120,238) 22,433
(Increase)decrease in other assets (2,124) 2,611
(Increase)decrease in net assets of discontinued operations 8,519 (4,379)
Increase(decrease) in payable to clearing brokers-dealers (118,079) 21,499
Increase(decrease) in accounts payable and accrued liabilities (4,386) 408
-------------- ----------------
Net cash provided by(used in) operating activities 6,442 (6,395)
-------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (614) (492)
Acquisition of businesses (5,731) (287)
Proceeds from sale of discontinued operations 3,099 -
Purchase of securities available for sale (4,820) (12,824)
Proceeds from sales and maturities of securities available for sale 5,338 11,723
-------------- ----------------
Net cash used in investing activities (2,728) (1,880)
-------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (2,301) -
Collections of receivables for shares issued 104 -
-------------- ----------------
Net cash used in financing activities (2,197) -
CASH OF BUSINESSES ACQUIRED 13,516 4,359
-------------- ----------------
Net increase(decrease) in cash and cash equivalents 15,033 (3,916)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,495 13,293
-------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,528 $ 9,377
============== ================
Noncash investing and financing activities:
Common stock issued for acquisitions $ 40,027 $ 29,640
Retirement of treasury stock - 4,188
Notes received for shares issued - 1,312
Shares received in exchange for notes (650) -
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements.
5
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
NATURE OF OPERATIONS
Through its operating subsidiaries, the Company provides a broad range
of financial services, including institutional and retail brokerage,
investment banking, merchant banking, trust related services and investment
management. The Company serves a diverse group of institutional, corporate
and individual clients.
In January 1999, the shareholders of TEI, Inc. ("TEI") exchanged all
common shares of TEI for 3,562,753 common shares of the Company. The Company
simultaneously completed the acquisition of three financial services firms:
Harris Webb & Garrison, Inc. ("HWG"), Pinnacle Management & Trust Company
("PMT") and Spires Financial, L.P. ("Spires"), by exchanging 3,562,500 of its
common shares for all of the ownership interests of the three financial
services firms. TEI is now a wholly owned subsidiary of the Company.
In January 2000, the Company merged HWG with Sanders Morris Mundy Inc.
("SMM") by exchanging 7,125,220 shares of the Company's common stock for all
of the ownership interests of SMM. SMM survived the merger, became a wholly
owned subsidiary of the Company and was renamed Sanders Morris Harris Inc.
("SMH"). SMM is a twelve year old investment banking and brokerage firm based
in Houston, Texas, with branch offices in New York City, Denver and Chicago.
In June 2000, the Company acquired Blackford Securities Corporation
("Blackford"), for 1,000,000 shares of the Company's common stock and $5.5
million in cash. Blackford, based in Garden City, New York, specializes in
providing prime brokerage services to investment partnerships and execution
services to institutions. As a result of these acquisitions, current period
results are not comparable to the prior period.
In June 2000, the Company discontinued the operations of Spires, a
regional brokerage service firm whose activities primarily include the
trading of mortgage-backed securities. Accordingly, the operations of Spires
for all prior periods since its acquisition in January 1999 have been
reclassified as discontinued operations.
CONSOLIDATION
The unaudited condensed consolidated financial statements of the Company
include the accounts of its wholly owned subsidiaries. All material
intercompany transactions and balances have been eliminated in consolidation.
In management's opinion, the unaudited condensed consolidated financial
statements include all adjustments necessary for a fair presentation of
financial position at September 30, 2000, results of operations for the three
and nine months ended September 30, 2000 and 1999, and cash flows for the
nine months ended September 30, 2000 and 1999. All such adjustments are of a
normal recurring nature. Interim results are not necessarily indicative of
results for a full year.
These financial statements and notes should be read in conjunction with
the Company's annual report on Form 10-K for the year ended December 31,
1999. The balance sheet as of December 31, 1999 has been reclassified from
amounts previously reported in the Company's annual report on Form 10K to
reflect the discontinuance of Spires. The statement of operations for the
three and nine months ended September 30, 1999, and the statement of cash
flows for the nine months ended September 30, 1999, have also been
reclassified to reflect the discontinuance of Spires.
6
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS No. 133"). SFAS No. 133 as
amended established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective beginning
January 1, 2001. The adoption of SFAS No. 133 is not expected to be material.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB No. 101). SAB No. 101, as amended, is required to be implemented in the
fourth quarter of 2000 and is not expected to be material.
2. ACQUISITIONS
On January 29, 1999, the Company acquired HWG, PMT, and Spires. The
former owners of HWG, PMT, and Spires received 3,562,500 shares of the
Company's common stock, which represented 49.98% of the outstanding common
stock. The acquisitions were accounted for as purchases and, accordingly, the
financial information of HWG, PMT, and Spires is included in the Company's
consolidated financial statements from the date of acquisition. The purchase
price of approximately $31 million exceeded the fair value of identifiable
net assets acquired by approximately $22 million, which has been recorded as
goodwill and is being amortized on a straight-line basis over 25 years.
During the second quarter of 2000 the Company charged off approximately $8.2
million of goodwill related to the discontinuance of operations of Spires.
On January 31, 2000, HWG merged with SMM. SMM survived the merger,
became a wholly owned subsidiary of the Company and was renamed Sanders
Morris Harris Inc. ("SMH"). The former owners of SMM received 7,125,220
shares of the Company's common stock in the merger, which represented
approximately 50% of the Company's outstanding common stock. The merger was
accounted for as a purchase and, accordingly, the financial information of
SMM has been included in the Company's consolidated financial statements from
February 1, 2000. The purchase price of approximately $37 million exceeded
the fair value of identifiable net assets acquired by approximately $23
million, which has been recorded as goodwill and is being amortized on a
straight-line basis over 25 years. The purchase price has been allocated to
the individual assets acquired and liabilities assumed based upon preliminary
estimates of fair value. The actual allocation may be different from
preliminary allocation due to refinements in the estimates of the fair values
of the net assets acquired; however, such differences are not expected to be
material.
On June 30, 2000, SMH acquired Blackford. The former owners of Blackford
received 1,000,000 shares of the Company's common stock and $5.5 million in
cash. The acquisition was accounted for as a purchase and, accordingly, the
financial information of Blackford has been included in the Company's
consolidated financial statements from June 30, 2000. The purchase price of
approximately $9.3 million exceeded the fair value of identifiable net assets
acquired by approximately $7.1 million, which has been recorded as goodwill
and is being amortized on a straight-line basis over 20 years. The purchase
price has been allocated to the individual assets acquired and liabilities
assumed based upon preliminary estimates of fair value. The actual allocation
may be different from preliminary allocation due to refinements in the
estimates of the fair values of the net assets acquired; however, such
differences are not expected to be material.
7
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following summarized unaudited pro forma financial information
assumes the above transactions occurred on January 1, 1999 and further
assumes the discontinuance of Spires on January 1, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1999 2000 1999
------------- --------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues $ 9,798 $ 42,791 $ 41,410
Income(loss) from continuing operations $ (222) $ 3,731 $ 2,787
Basic and diluted earnings(loss) per share
from continuing operations $ (0.01) $ 0.25 $ 0.18
</TABLE>
These unaudited pro forma amounts are derived from the historical
financial information of the acquired businesses and reflect adjustments for
amortization of intangible assets and for income taxes. The unaudited pro
forma financial information does not necessarily represent results that would
have occurred if the acquisitions had taken place on the basis assumed above,
nor are they indicative of the results of future combined operations.
3. SECURITIES OWNED AND SECURITIES SOLD, NOT YET PURCHASED
Securities owned and securities sold, not yet purchased were as follows:
<TABLE>
<CAPTION>
SOLD, NOT YET
OWNED PURCHASED
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
September 30, 2000:
Marketable:
Obligations of U.S. government $ 605 $ -
Corporate stocks 1,118 99
-------------- -----------------
1,723 99
Not readily marketable:
Partnerships, equities, options and warrants 7,486 -
-------------- -----------------
$ 9,209 $ 99
============== =================
</TABLE>
Securities not readily marketable include investment securities (a) for
which there is no market on a securities exchange or no independent publicly
quoted market, (b) that cannot be publicly offered or sold unless
registration has been effected under the Securities Act of 1933, or (c) that
cannot be offered or sold because of other arrangements, restrictions, or
conditions applicable to the securities or to the Company. Securities not
readily marketable also include investments in limited partnerships,
equities, options and warrants. The investments in limited partnerships,
which are accounted for using the equity method, consist of Environmental
Opportunities Fund, L.P., Environmental Opportunities Fund II, L.P.,
Environmental Opportunities Fund II (Institutional), L.P., Corporate
Opportunities Fund, L.P., Corporate Opportunities Fund (Institutional), L.P.,
Sanders Opportunity Fund, L.P., and Sanders Opportunity Fund (Institutional),
L.P.
8
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES
The differences between the effective tax rate reflected in the income tax
provision(benefit) for continuing operations and the statutory federal rate were
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------- ---------- ---------- -----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax computed using the statutory rate $ 403 $ (16) $ 1,406 $ (164)
Nondeductible amortization of goodwill 155 51 379 129
State income taxes and other 43 13 248 (5)
----------- ---------- ---------- -----------
Total $ 601 $ 48 $ 2,033 $ (40)
=========== ========== ========== ===========
</TABLE>
5. DISCONTINUED OPERATIONS
Energy Recovery Resources, Inc.'s ("ERRI") operations were discontinued
as of December 31, 1998 and the assets and liabilities of ERRI were disposed
of on July 13, 2000. The Company remains liable for certain post-closing
balance sheet adjustments related to minimum working capital and net asset
value thresholds established in the sale agreement and certain environmental
claims with a maximum exposure of $2.2 million. The Company recorded a
provision for loss on disposition of ERRI of $600,000 during the second
quarter of 2000. It is reasonably possible that the Company will need to
record additional loss provisions on the disposition of ERRI in future
periods based on potential post-closing claims.
Engineered Systems, Inc.'s ("ESI") operations were discontinued as of
December 31, 1995 and assets of ESI were disposed of on December 23, 1997.
The purchaser agreed to complete customer contracts in process at the time of
the sale. However, the Company remains liable for costs incurred by the
purchaser in excess of amounts recoverable from customers. The Company
recorded an additional loss of $100,000 during the second quarter of 2000 as
a result of those continuing liabilities. In March 2000, the Company paid the
purchaser $420,000, and in July 2000 the Company paid the purchaser an
additional $1.4 million to satisfy a portion of those liabilities. The
Company currently estimates that it will not incur any additional losses with
respect to contracts to be completed by the purchaser; however, the Company
has experienced significant changes in these estimates in the past and it is
reasonably possible that such changes could occur in future periods.
Spires' operations were discontinued in June 2000 due to changes in the
mortgage-backed securities market resulting from interest rate increases and
departures of certain key employees. Spires incurred net losses of $9.8
million for the three months ended June 30, 2000, including goodwill
impairment of $8.2 million and lease obligations of $505,000. Certain assets
and liabilities of Spires, consisting of proprietary software, databases, and
property are held for sale as of September 30, 2000. Other operating net
assets of Spires not held for sale are expected to be realized in 2000.
9
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into underwriting
commitments. Transactions relating to underwriting commitments that were open
at September 30, 2000, were subsequently settled, and had no material effect
on the consolidated financial statements as of that date.
The Company and its subsidiaries have obligations under operating leases
that expire by 2007 with initial noncancelable terms in excess of one year.
Aggregate annual rentals for office space and computer and office equipment
are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
2001 $ 1,869
2002 1,810
2003 1,067
2004 524
2005 321
Thereafter 427
-----------
$ 6,018
===========
</TABLE>
The Company is involved in litigation and routine claims from time to
time. Certain of the Company's litigation and claims are covered by insurance
with a maximum deductible of $50,000. During the third quarter of 2000, the
Company paid $62,500 to a brokerage customer to settle a claim that alleged
wrongdoing in execution of a trade.
As discussed in Note 5 to the condensed consolidated financial
statements, the Company has contingent liabilities and potential loss
exposures related to discontinued operations. The Company may also be exposed
to certain liabilities and claims associated with the discontinued liquid
waste business. In connection with the sale of ERRI, the Company remains
contingently liable for certain environmental claims with a maximum exposure
of $2.2 million. A portion of these potential environmental claims is covered
by insurance with a maximum deductible of $50,000 per occurrence. The Company
believes such potential claims will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
10
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. EARNINGS PER COMMON SHARE
Basic and diluted per-share computations for the periods indicated were
as follows:
Stock options outstanding of 202,649 and 50,000 at September 30, 2000 and
1999, respectively, have not been included in diluted earnings per common share
because their inclusion would have been antidilutive for the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
2000 1999
-------------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Computation of basic earnings per common share for the three months ended
September 30:
Net income(loss) applicable to common stock $ 634 $ (106)
==================== ================
Weighted average number of common shares outstanding 14,595 7,125
Common shares issuable under stock option plan - -
Less shares assumed repurchased with proceeds - -
-------------------- ----------------
Weighted average common shares outstanding 14,595 7,125
==================== ================
Basic earnings(loss) per common share $ 0.04 $ (0.01)
==================== ================
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
2000 1999
-------------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Computation of diluted earnings per common share for the three months ended
September 30:
Net income (loss) applicable to common stock $ 634 $ (106)
==================== ================
Weighted average number of common shares outstanding 14,595 7,125
Common shares issuable under stock option plan 798 -
Less shares assumed repurchased with proceeds (734) -
-------------------- ----------------
Weighted average common shares outstanding 14,659 7,125
==================== ================
Diluted earnings(loss) per common share $ 0.04 $ (0.01)
==================== ================
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
-------------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Computation of basic and diluted earnings per common share for the nine months
ended September 30:
Net income(loss) applicable to common stock $ (8,265) $ 536
==================== ================
Weighted average number of common shares outstanding 13,506 6,729
Common shares issuable under stock option plan - -
Less shares assumed repurchased with proceeds - -
-------------------- ----------------
Weighted average common shares outstanding 13,506 6,729
==================== ================
Basic and diluted earnings(loss) per common share $ (0.61) $ 0.08
==================== ================
</TABLE>
11
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. BUSINESS SEGMENT INFORMATION
The Company's continuing businesses operate in two reportable business
segments. SMH is an investment banking and brokerage services firm whose
activities primarily include securities underwriting, and retail and
brokerage services. SMH is the successor segment to HWG. PMT is a state
chartered trust company providing a variety of trust services including
investment management, estate settlement, and retirement planning. The Spires
segment was discontinued during the second quarter of 2000. The following
summarizes certain financial information of SMH and PMT for the three and
nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
AS OF OR FOR THE AS OF OR FOR THE
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
SMH PMT SMH PMT
-------- ------ -------- ------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues $ 11,796 $ 906 $ 1,455 $ 808
Income before income taxes 1,736 307 187 284
Total assets 31,804 5,854 3,919 4,547
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
SMH PMT SMH PMT
-------- ------ -------- ------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues $ 28,513 $ 2,591 $ 4,165 $ 1,669
Income before income taxes 4,934 991 511 594
</TABLE>
The following table reconciles income before income taxes of the
reportable segments to the consolidated income from continuing operations
before income taxes reported in the consolidated statement of operations for
the three and nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Income before income taxes of reportable segments:
SMH $ 1,736 $ 187 $ 4,934 $ 511
PMT 307 284 991 594
------------ ------------ ------------ ------------
2,043 471 5,925 1,105
Amortization of intangible assets (457) (150) (1,116) (378)
Corporate revenues and expenses, net (402) (367) (673) (1,208)
------------ ------------ ------------ ------------
Income(loss) from continuing operations
before income taxes $ 1,184 $ (46) $ 4,136 $ (481)
============ ============ ============ ============
</TABLE>
12
<PAGE>
PINNACLE GLOBAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. STOCK OPTIONS
In February 2000, the Board granted 482,000 options to employees of SMH
who were employees of SMM prior to the merger with HWG. The options vest
over three years and have an exercise price of $4.44 per share which
represented the closing price of the Company's common stock on the date of
the grant.
In September 2000, the Company exchanged recourse notes receivable from
employees for the Company's common shares that were pledged to secure the
notes. These shares are now held as treasury shares. Each employee was
issued options in an amount equal to the pledged shares that were
repurchased. A total of 152,649 options were granted which are fully vested
and have an exercise price of $5.13, which was the closing price of the
Company's common stock on the date of the grant.
10. COMPREHENSIVE INCOME(LOSS)
Comprehensive income(loss) consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
---------- --------- ---------- ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income(loss) $ 634 $(106) $ (8,265) $ 536
Net change in unrealized appreciation/
(depreciation) on securities available
for sale, net of tax (234) (76) (184) (174)
---------- --------- ---------- ---------
Total comprehensive income(loss) $ 400 $(182) $ (8,449) $ 362
========== ========= ========== =========
</TABLE>
11. SUBSEQUENT EVENTS
On October 2, 2000, the Company acquired Cummer/Moyers ("CM"), a Fort
Worth based investment manager specializing in fixed income securities. The
former owners of CM received a total of 850,000 of Pinnacle Global Group
common shares and may later earn up to an additional 150,000 common shares if
the acquired operations meet or exceed specified performance levels. The
shares were issued in a transaction exempt from registration pursuant to
Section 4(2) of the Securities Act. As part of the acquisition, each of the
former shareholders of CM agreed not to sell or transfer the common shares
received in the acquisition until after October 2, 2001. The Company also
granted "piggyback" registration rights to the former CM shareholders to
include these common shares in our future registered offerings that are filed
after the one-year lockup period expires. The value of the consideration paid
was approximately $5 million.
13
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and their related notes thereto.
GENERAL
We provide diversified financial services through our subsidiaries,
including institutional and retail brokerage, investment banking, merchant
banking, trust related services and investment management. All of these
activities are highly competitive and are sensitive to many factors outside
our control, including those factors listed under "Factors Affecting
Forward-Looking Statements."
We closely monitor our operating environment to enable us to respond
promptly to market cycles. In addition, we seek to lessen earnings volatility
by controlling expenses, increasing fee-based business and developing new
revenue sources. Nonetheless, operating results of any individual period
should not be considered representative of future performance.
On January 29, 1999, we completed the combination of Harris Webb &
Garrison, Inc. ("HWG"), Pinnacle Management & Trust Company ("PMT") and
Spires Financial, L.P. ("Spires"). In the combination, 3,562,500 of our
common shares were issued to the former owners of the financial services
firms. The combination was accounted for as separate purchases of each of the
three financial services firms. The following discussion of our results of
operations includes the operations of HWG, PMT and Spires from the date of
combination, January 29, 1999.
On January 31, 2000, we completed the merger of HWG with Sanders Morris
Mundy Inc. ("SMM"). SMM survived the merger, was renamed Sanders Morris
Harris Inc. ("SMH") and became our wholly owned subsidiary. In the merger, we
issued 7,125,220 of our common shares to the former shareholders of SMM. The
following discussion of our results of operations during the period ended
September 30, 2000 includes the operations of SMH from the date of the
merger, January 31, 2000.
On June 30, 2000, we completed the merger of Blackford Securities
Corporation ("Blackford") into SMH. In the merger, we issued 1 million of our
common shares and paid $5.5 million in cash to the former shareholders of
Blackford. The following discussion of our results of operations during the
period ended September 30, 2000 includes the operations of Blackford from the
date of acquisition, June 30, 2000.
In June 2000, we discontinued the operations of Spires, a regional
brokerage service firm whose activities primarily include the trading of
mortgage-backed securities. Accordingly, the operations of Spires for all
prior periods since its acquisition in January 1999 have been reclassified to
discontinued operations.
On October 2, 2000, we acquired all of the outstanding capital stock of
Cummer/Moyers ("CM"), a Fort Worth based investment manager specializing in
fixed-income securities, in exchange for a total of 850,000 of our common
shares and up to an additional 150,000 common shares if the acquired
operations meet or exceed specified performance levels. The following
discussion of our results of operations does not include any operations of
CM. Accordingly, the following discussion of our operating results will not
be comparable to our operating results for future periods.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Our financial results for the three months ended September 30, 2000
include the results of operations of PMT, SMH and Blackford for the entire
period. During the comparable period in 1999, our financial statements do not
include any of the operating results of SMM or Blackford, which were combined
with our operations in January 2000 and June 2000, respectively. In addition,
all operations of Spires for the three months ended September 30, 1999 were
reclassified as discontinued operations. Therefore, the results of operations
for the three months ended September 30, 2000 are not comparable to the
results for the same period in 1999.
14
<PAGE>
Total revenues rose to $12.9 million in 2000 from $2.4 million in 1999
primarily due to an increase in the number of sales and marketing
professionals due to the mergers with SMM and Blackford. Total expenses for
the period increased to $11.7 million from $2.4 million in the previous year
principally from compensation and benefits paid to employees who joined the
Company as a result of the SMM and Blackford mergers. Income from continuing
operations for the three months ended September 30, 2000 increased to
$634,000 in 2000 from a loss of $94,000 in 1999. Basic and diluted
income(loss) per share from continuing operations was $0.04 for the three
months ended September 30, 2000 compared to ($0.01) for the same period in
1999.
Commissions revenue increased to $5.6 million in 2000 from $1.1 million
in 1999 due primarily to additional retail and institutional brokerage
operations associated with the mergers with SMM and Blackford. Principal
transactions revenue totaled $607,000 in 2000 primarily attributable to an
increase in the value of not readily marketable investments. No principal
transactions revenues were recorded during 1999. Investment banking revenue
from advisory services and private security offerings rose to $4.0 million in
2000 from $264,000 in 1999 mainly due to increased transaction fees earned at
SMH. Fiduciary, custodial and advisory fees revenue increased to $1.4 million
in 2000 compared to $780,000 in 1999 resulting principally from an increase
in the number of fee based accounts and an increase in the market value of
assets under management at PMT as well as advisory fees received from SMH's
investments in limited partnerships. Interest and dividend income rose to
$615,000 in 2000 from $234,000 in the same period last year and was derived
primarily from interest earned on investments at SMH.
In the three months ended September 30, 2000, employee compensation and
benefits, which includes commissions paid to retail and institutional brokers
and investment bankers at SMH, increased to $7.4 million from $1.6 million in
the same period last year primarily due to the increased number of employees
following the mergers with SMM and Blackford. Floor brokerage, exchange and
clearance fees increased to $714,000 in 2000 from $129,000 in 1999, mainly
due to the additional brokerage operations at SMH. Communication and data
processing costs, primarily related to costs at SMH and upgrades in
technology and services, including quotes and market data services, increased
to $802,000 in 2000 from $106,000 in the same period last year. Occupancy
costs increased to $774,000 in 2000 from $198,000 in 1999 primarily from the
additional rent expense for office leases at SMH. Intangible asset
amortization increased to $457,000 from $150,000 as a result of additional
goodwill recorded in the SMM and Blackford mergers. Other general and
administrative expenses increased to $1.5 million from $234,000 mainly due to
the mergers with SMM and Blackford.
The effective tax rate from continuing operations was 51% for the three
months ended September 30, 2000. Our effective tax rate exceeds the federal
statutory income tax rate primarily as a result of nondeductible goodwill
amortization and state income taxes.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999
Our financial results for the nine months ended September 30, 2000
include the results of operations of TEI, HWG, and PMT for the entire period.
The results for SMM and Blackford are included from the dates of merger,
January 31, 2000 and June 30, 2000, respectively. During the comparable
period in 1999, our financial statements reflect the operating results from
TEI, and the results from HWG and PMT from January 29, 1999 to September 30,
1999. The operations of Spires for all periods since its January 1999
acquisition date have been reclassified as discontinued. Therefore, the
results of operations for the nine months ended September 30, 2000 are not
comparable to the results for the same period in 1999.
Total revenues increased to $32.1 million in 2000 from $6.4 million in
1999 principally due to the mergers with SMM in January 2000 and Blackford in
June 2000. Total expenses for the period were $28 million, compared to $6.9
million in the prior year due to the compensation and benefits paid to
employees who joined the Company as a result of the SMM and Blackford
mergers. Income from continuing operations increased to $2.3 million in 2000
from a loss of $441,000 during the first nine months of 1999. Basic and
diluted income (loss) per share from continuing operations was $0.17 per
share in 2000, compared to ($0.07) per share for 1999.
Commissions revenue increased to $12.4 million in 2000 from $2.6 million
in 1999. Principal transaction revenue totaled $1.9 million in 2000.
Investment banking revenue rose to $10.7 million in 2000 from $1.3
15
<PAGE>
million in 1999. Interest and dividend revenue climbed to $1.7 million in
2000 from $821,000 in 1999. Other income totaled $1.6 million in 2000. The
increases in revenues from commissions, principal transactions, investment
banking, interest and dividends, and other income are primarily due to the
January 2000 merger with SMM. Fiduciary, custodial and advisory fees rose to
$3.9 million in 2000 from $1.5 million in 1999 primarily due to an increase
in the number of fee-based accounts and an increase in the market value of
assets under management at PMT as well as SMH's management and advisory fees
earned from its investments in limited partnerships.
Employee compensation and benefits totaled $17.5 million in 2000,
compared to $4.1 million in 1999. Floor brokerage, exchange and clearance
fees rose to $1.9 million in 2000 from $344,000 in 1999. Communications and
data processing expenses increased to $1.9 million in the current year from
$259,000 in 1999. Occupancy costs totaled $1.8 million in 2000, compared to
$462,000 in the previous year. Amortization of intangible assets increased to
$1.1 million in the current year from $378,000 in the prior year. Other
general and administrative expenses rose to $3.8 million during the first
nine months of 2000 from $1.3 million in the same period last year. The
increase in expenses from 1999 to 2000 is related to the SMM merger that
closed in January 2000 and the Blackford acquisition that closed in June 2000.
The effective tax rate from continuing operations was 49% for the nine
months ended September 30, 2000. Our effective tax rate exceeds the federal
statutory income tax rate primarily as a result of nondeductible goodwill
amortization and state income taxes.
Losses from discontinued operations, net of tax, were $10.6 million in
the first nine months of 2000, compared to income of $1 million in 1999. The
loss from discontinued operations in 2000 consists of $600,000 related to the
July 2000 sale of Energy Recovery Resources, Inc. ("ERRI"); $100,000
associated with additional costs incurred to complete customer contracts
related to the 1997 sale of Engineered Systems, Inc. ("ESI"); and $9.8
million related to Spires that included an $8.2 million charge for impairment
of goodwill and a $505,000 charge for abandoned leases. Operating income at
Spires was $1.0 million during the prior year period.
LIQUIDITY AND CAPITAL RESOURCES
We intend to satisfy a large portion of our funding needs with our own
capital resources, consisting largely of internally generated earnings and
liquid assets we held before the January 1999 combination. Cash, cash
equivalents and liquid assets, consisting of receivables from brokers-dealers
and clearing organizations, deposits with clearing brokers, securities owned,
and securities available for sale represented about 46% of our total assets
at September 30, 2000. At September 30, 2000, we had approximately $25.5
million in cash and cash equivalents.
The decrease in net assets of discontinued operations is primarily due
to losses of Spires that were recorded during the second quarter and the sale
of ERRI during the third quarter of 2000.
At September 30, 2000, SMH, our registered broker-dealer subsidiary, was
in compliance with the net capital requirements of the Securities and
Exchange Commission's Uniform Net Capital Rules and had capital in excess of
the required minimum. PMT was in compliance with the Texas Department of
Banking net capital requirement and had capital in excess of the required
minimum.
The Company is involved in litigation and routine claims from time to
time. Certain of the Company's litigation and claims are covered by insurance
with a maximum deductible of $50,000. During the third quarter of 2000, the
Company paid $62,500 to a brokerage customer to settle a claim that alleged
wrongdoing in execution of a trade.
Management believes that cash generated from operations, existing cash
balances and available borrowing capacity will be sufficient to meet our
anticipated cash requirements for 2000.
16
<PAGE>
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities and Exchange Act of 1934, as
amended, (the "Acts"). These forward-looking statements may relate to such
matters as anticipated financial performance, future revenues or earnings,
business prospects, projected ventures, new products, anticipated market
performance and similar matters. The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward-looking statements. To comply with
the terms of the safe harbor, the Company cautions readers that a variety of
factors could cause the Company's actual results to differ materially from
the anticipated results or other expectations expressed in the Company's
forward-looking statements. These risks and uncertainties, many of which are
beyond the Company's control, include, but are not limited to (1) trading
volume in the securities markets; (2) volatility of the securities markets
and interest rates; (3) changes in regulatory requirements which could affect
the demand for the Company's services or the cost of doing business; (4)
general economic conditions, both domestic and foreign, especially in the
regions where the Company does business; (5) changes in the rate of inflation
and related impact on securities markets; (6) competition from existing
financial institutions and other new participants in the securities markets;
(7) legal developments affecting the litigation experience of the securities
industry; (8) successful implementation of technology solutions and (9)
demand for the Company's services. The Company does not undertake any
obligation to publicly update or revise any forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
MARKET RISKS
The following discussion relates to our market risk sensitive
instruments as of September 30, 2000, and thus, includes such instruments
held by PMT and SMH. Our portfolio of market risk sensitive instruments is
expected to change for future periods as a result of our October 2000
acquisition of CM, a Fort Worth based investment manager specializing in fixed
income securities.
PMT
At September 30, 2000, PMT had equity securities under management with a
fair value of $619 million. PMT's fee income for the period ended September
30, 2000 would have been reduced by approximately $33,000 assuming a
hypothetical 10% decrease in the value of its equity securities under
management. PMT's fee income could also be reduced from changes in interest
rates to the extent that such changes reduce the carrying value of securities
under management.
SMH
SMH's trading equity securities are marked to market on a daily basis.
At September 30, 2000, SMH's trading equity securities were recorded at a
fair value of $1.1 million. These trading equity securities are subject to
equity price risk. This risk would amount to $110,000 based on a potential
loss in fair value from a hypothetical 10% decrease in the market value of
such equity securities. The actual equity price risk related to the trading
equity securities may differ substantially.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to various legal proceedings which are of an ordinary or
routine nature incidental to our operations. We believe we have adequately
reserved for such litigation matters and that they will not have a material
adverse effect on our financial condition, results of operations, or cash
flows.
17
<PAGE>
We are involved in litigation and routine claims from time to time.
Certain of our litigation and claims are covered by insurance with a maximum
deductible of $50,000. During the third quarter of 2000, the Company paid
$62,500 to a brokerage customer to settle a claim that alleged wrongdoing in
execution of a trade.
We may be exposed to certain liabilities and claims associated with our
discontinued liquid waste business. In connection with the sale of ERRI, we
remain contingently liable for certain environmental claims with a maximum
exposure of $2.2 million. A portion of such potential claims is covered by
insurance with a maximum deductible of $50,000 per occurrence. We believe
such potential claims will not have a material adverse effect on our
financial condition, results of operations, or cash flows.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Articles of Incorporation of the Company, as amended (Filed as Appendix
F to the Proxy Statement/Prospectus of the Company dated December 31,
1998 (Reg. No. 333-65417) and incorporated herein by reference).
3.2 Amended and Restated Bylaws of the Company (Filed as an exhibit to the
Company's Form 10-K for the year ending December 31, 1998. (File No.
333-65417) and incorporated herein by reference).
10.4 Merger Agreement dated June 30, 2000, among Pinnacle Global Group,
Inc., Sanders Morris Harris Inc., Blackford Securities Corporation,
Arnold J. Barton, Richard D. Grimes, Jack D. Seibald, Allison Weiss,
Deborah Weiss, Neil Lauro, and John Conlon (incorporated by reference
to Exhibit 2.1 to the Company's Form 8-K dated June 30, 2000.)
10.5 Registration Rights Agreement dated June 30, 2000, among Pinnacle
Global Group, Inc., Arnold J. Barton, Richard D. Grimes, Jack D.
Seibald, Allison Weiss, Neil Lauro, and John Conlon (incorporated by
reference to Exhibit 10.2 to the Company's Form 8-K dated June 30,
2000.)
10.6 Asset Purchase Agreement dated July 13, 2000, among Energy Recovery
Resources, Inc., TEI, Inc., Pinnacle Global Group, Inc. and U.S. Filter
Recovery Services (Mid-Atlantic), Inc. (incorporated by reference to
Exhibit 2.1 to the Company's Form 8-K dated July 13, 2000.)
*27.1 Financial Data Schedule.
</TABLE>
* Filed herewith.
(b) Reports on Form 8-K.
The Company filed the following Reports on Form 8-K during the period
covered by this Quarterly Report:
- Form 8-K dated July 13, 2000 reporting the disposition of
ERRI.
- Form 8-K dated July 14, 2000 reporting the acquisition of
Blackford.
- Form 8-K/A dated September 12, 2000 amending the financial
statements and proforma financial information portion of the
Form 8-K dated July 14, 2000 reporting the acquisition of
Blackford.
19
<PAGE>
PART III
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PINNACLE GLOBAL GROUP, INC.
By /s/ ROBERT E. GARRISON II
------------------------------------
Robert E. Garrison II
President & Chief Executive Officer
By /s/ Rick Berry
------------------------------------
Rick Berry
Controller and
Principal Financial Officer
DATE: NOVEMBER 14, 2000
20
