UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 22, 2000
PINNACLE BUSINESS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-27171 91-1871963
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
2963 Gulf to Bay Boulevard, Suite 265, Clearwater, FL 33759
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(813) 669-7781
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
MAS ACQUISITION XIX CORP.
1710 E. DIVISION ST.
EVANSVILLE, IN 47711
(812) 479-7226
(FORMER NAME, ADDRESS AND TELEPHONE NUMBER)
<PAGE>
The undersigned Registrant hereby amends Item 7 of its Current Report on Form
8-K dated March 6, 2000 to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS:
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . 1
BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997. . . . . . . . 2-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 . . . . . . . . . . . . . . . . . . 4
STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE
YEARS ENDED DECEMBER 31, 1998 AND 1997 . . . . . . . . . . . . 5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED . . . . . . . . . 6
DECEMBER 31, 1998 AND 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 7-15
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Pinnacle Business Management, Inc.
Clearwater, Florida
We have audited the accompanying consolidated balance sheets of Pinnacle
Business Management, Inc. and Subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements for December 31, 1998 and 1997 have been
prepared assuming that the company will continue as a going concern. As
discussed in Notes 8 and 10 to the financial statements, the company has
suffered recurring losses from operations, has a net capital deficiency, and
certain litigation pending that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 8 and 10. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pinnacle Business
Management, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for the years ended December
31, 1998 and 1997, in conformity with generally accepted accounting principles.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
- ----------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
February 28, 2000
Page 1
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
CURRENT ASSETS
- --------------
Cash and cash equivalents $ 2,984 $ 5,521
Customer loans receivable, net 743,877 870,965
---------- ----------
TOTAL CURRENT ASSETS 746,861 876,486
- --------------------------------- ---------- ----------
PROPERTY AND EQUIPMENT 144,839 89,417
Less accumulated depreciation (43,078) (18,515)
- --------------------------------- ---------- ----------
101,761 70,902
OTHER ASSETS
- ------------
Unamortized goodwill 244,944 251,390
Deferred tax asset 505,560 220,734
Security deposits 6,996 6,996
Receivables - other - net - 0 - - 0 -
------- -------
757,500 479,120
------- -------
TOTAL ASSETS $1,606,122 $1,426,508
- --------------------------------- ========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 2
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
DECEMBER 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
- -------------------
Accounts payable and accrued expenses $ 79,783 $ 75,742
Current portion of long-term debt 600,000 550,000
----------- -----------
TOTAL CURRENT LIABILITIES 679,783 625,742
- ------------------------------------------- ----------- -----------
NOTES PAYABLE - OFFICERS' 9,900 100,000
LONG-TERM DEBT, LESS CURRENT PORTION 1,344,276 998,755
----------- -----------
TOTAL LONG-TERM LIABILITIES 1,354,176 1,098,775
- ------------------------------------------- ----------- -----------
TOTAL LIABILITIES 2,033,959 1,724,497
- ------------------------------------------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
- -------------------------------------------
STOCKHOLDERS' DEFICIT
- -------------------------------------------
Preferred stock $ - $ -
Common stock 16,494 13,418
Additional paid-in capital 541,965 121,992
Deficit (986,296) (433,399)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (427,837) (297,989)
- ------------------------------------------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,606,122 1,426,508
- ------------------------------------------- =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 3
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
DECEMBER 31,
-------------------------
1998 1997
----------- ------------
<S> <C> <C>
OPERATING REVENUE
- ---------------------------------------------------------
Revenue $ 633,478 $ 1,459,026
----------- ------------
OPERATING EXPENSES
- ---------------------------------------------------------
Salaries, employee leasing and related 444,352 463,106
Advertising 106,183 81,244
Commissions 35,568 46,282
Office and general 56,746 43,632
Professional fees 55,676 75,452
Repairs and maintenance 5,562 12,892
Rent 110,923 83,792
Repossession costs 53,310 33,563
Telephone and utilities 81,260 71,313
Travel 59,749 62,401
Other operating 91,982 89,695
----------- ------------
TOTAL OPERATING EXPENSES 1,101,311 1,063,372
- --------------------------------------------------------- ----------- ------------
OPERATING INCOME (LOSS) (467,833) 395,654
- --------------------------------------------------------- ----------- ------------
OTHER EXPENSES
- ---------------------------------------------------------
Interest expense (278,050) (552,839)
Depreciation and Amorizitation expense (31,009) (19,842)
Bad debt (60,831) (122,793)
----------- ------------
TOTAL OTHER EXPENSES (369,890) (695,474)
- --------------------------------------------------------- ----------- ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
LIQUIDATION AND DISSOLUTION OF WHOLLY OWNED SUBSIDIARY (837,723) (299,820)
- ---------------------------------------------------------
AND PROVISION FOR INCOME TAX BENEFIT
- ---------------------------------------------------------
EXTRAORDINARY LOSS - (1,933)
- --------------------------------------------------------- ----------- ------------
NET INCOME (LOSS)
BEFORE FEDERAL INCOME TAX BENEFIT (837,723) (301,753)
- ---------------------------------------------------------
PROVISION FOR INCOME TAX BENEFIT (EXPENSE) 284,826 100,934
----------- ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES (552,897) (200,819)
----------- ------------
NET INCOME (LOSS) PER COMMON SHARES (0.04) 0.02
- --------------------------------------------------------- ----------- ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 14,976,794 12,340,182
- --------------------------------------------------------- ----------- ------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 4
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
ADDITIONAL
COMMON STOCK PAID-IN TOTAL
$.001 PAR VALUE CAPITAL STOCKHOLDER'S
---------------
SHARES AMOUNT AMOUNT DEFICIT DEFICIT
--------------- ------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1997-Fast Title
Loans, Inc. 11,104,000 $11,104 $ - 0 - $(232,580) $ (221,476)
Issuance of common stock for stock 1,973,027 1,973 24,960 - 26,933
Conversion of debt for common stock 341,000 341 97,032 - 97,373
Net Loss - - - (200,819) (200,819)
--------------- ------- ----------- ---------- ---------------
Balance December 31, 1997 13,418,027 $13,418 $ 121,992 $(433,399) $ (297,989)
Issuance of common stock 3,076,175 3,076 419,973 - 423,049
Net Loss - - - (552,897) (552,897)
--------------- ------- ----------- ---------- ---------------
Balance December 31, 1998 16,494,202 $16,494 $ 541,965 $(986,296) $ (427,837)
=============== ======= =========== ========== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 5
<PAGE>
<TABLE>
<CAPTION>
PINNACLE BUSINESS MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(552,897) $ (200,819)
---------- ------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation 31,009 19,842
Provision for doubtful accounts 60,831 81,919
Deferred Income Tax Benefit (284,826) (100,934)
CHANGES IN ASSETS AND LIABILITIES:
(Increase) Decrease in customer loans receivable - net 49,257 (965,897)
(Increase) Decrease in loans other - (25,000)
(Increase) Decrease in deposits and other - (13,973)
Increase (Decrease) in accounts payable and accrued expenses 4,041 44,896
---------- ------------
TOTAL ADJUSTMENTS (139,688) (959,147)
- ---------------------------------------------------------------------- ---------- ------------
NET CASH (USED IN) OPERATING ACTIVITIES (692,585) (1,159,966)
- ---------------------------------------------------------------------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ----------------------------------------------------------------------
Capital expenditures (58,422) (53,316)
---------- ------------
NET CASH (USED IN) INVESTING ACTIVITIES (58,422) (53,316)
- ---------------------------------------------------------------------- ---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ----------------------------------------------------------------------
Proceeds from issuance of long-term debt 583,952 1,243,150
Proceeds from issuance of common stock and paid in capital 423,049 25,000
Principle payments on long-term debt (168,431) (50,000)
Reduction of loans payable officers (90,100) -
---------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 748,470 1,218,150
- ---------------------------------------------------------------------- ---------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,537) 4,868
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 5,521 653
- ---------------------------------------------------------------------- ---------- ------------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 2,984 $ 5,521
- ---------------------------------------------------------------------- ========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest Expense 270,250 470,862
NON-CASH ACTIVITY
Conversion of debt to equity - 179,173
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 6
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
--------------------------------------
Pinnacle Business Management, Inc. is an integrated consumer finance and E-
commerce technology developer. The company operates title loan and paycheck
advance locations. Fast Title Loans, Inc. (FTL)is a wholly owned subsidiary
of Pinnacle Business Management, Inc. Fast Title Loans, Inc. is a consumer
loan company that operates title loan offices in central Florida. The title
loan is an immediate short term cash loan, using the free and clear title
of a person's car or truck as collateral. The loan allows the customer to
retain possession and use of their motor vehicle. Fast Paycheck Advance,
Inc. is a wholly owned subsidiary of Pinnacle Business Management, Inc.
that provides short-term paycheck advances to consumers. The accompanying
financial statements reflect the consolidated operations of the above.
On May 9, 1997, Pinnacle Business Management, Inc. (The "Company") was
incorporated as a wholly owned subsidiary of 300365 BC, Ltd., D/B/A Peaker
Resource Company, a company which was incorporated in British Columbia,
Canada on November 13, 1985. 300365 BC, Ltd. had been inactive for years
due to the lack of working capital. On May 15, 1997, the stockholders of
300365 BC, Ltd. exchanged all of the company's outstanding stock of 300365
BC, Ltd. for the stock of Pinnacle Business Management, Inc. This exchange
was made on a share for share basis. There were no tangible assets of
300365 BC, Ltd. The excess of par value of the common stock issued over the
assets acquired upon the acquisition of the parent was $1,933. After the
exchange of stock, the parent became the wholly owned subsidiary and it was
liquidated and the $1,933 was written off as an extraordinary loss upon the
dissolution of 300365 BC, Ltd.
On October 27, 1997, JTBH Corporation, a wholly owned subsidiary of the
"Company", with no assets, merged with Fast Title Loans, Inc. (FTL) a
Florida corporation. On that date Fast Title Loans, Inc. became the wholly
owned subsidiary of Pinnacle Business Management, Inc. The shares of (FTL)
were converted into common stock $.001 per share, of Pinnacle Business
Management, Inc.
The merger of (FTL) the private company into the public shell company
Pinnacle Business Management, Inc. on October 27, 1997 gave rise to the
private company having effective operating control of the combined company
after the transaction. This was a reverse merger and the costs
associatedwith were treated as a recapitilization. In 1998, the company
incorporated Fast Paycheck Advance, Inc. as a wholly owned subsidiary. Also
in 1998, the Company incorporated Summit Property, Inc. This subsidiary has
remained inactive, however.
Page 7
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION:
----------------------------
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES:
-------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT:
-------------------------
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated
useful lives:
YEARS
-----
Improvements 10-40
Furniture and Equipment 5-7
Leasehold Improvements are amortized over their estimated useful lives or
the lives of the related leases, whichever is shorter.
REVENUE RECOGNITION:
---------------------
Substantially most of the revenues are derived from interest charged on
consumer financing, title loans and advance paychecks.
INCOME TAXES:
--------------
The income tax benefit is computed on the pretax loss based on the current
tax law. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates.
Page 8
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------
NATURE OF BUSINESS AND CREDIT RISK:
----------------------------------------
The company operates in mainly one business segment and primarily earns
interest income on consumer title loans and advanced paychecks. Financial
instruments which potentially subject the company to concentrations of
credit risk are primarily customer loans receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
----------------------------------------
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, customer loan receivables, accounts payable and
accrued expenses and other liabilities approximate fair value because of
the immediate or short-term maturity of these financial instruments. The
carrying amount reported for long-term debt approximates fair value
because, in general, the interest on the underlying instruments fluctuates
with market rates.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
------------------------------------------------
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding.
STATEMENTS OF CASH FLOWS:
----------------------------
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.
ADVERTISING AND PROMOTIONAL COSTS
------------------------------------
Costs of advertising and promotional costs are expensed as incurred.
Advertising costs were $106,183 and $81,244 in 1998 and 1997. respectively.
GOODWILL
--------
Goodwill is amortized over 40 years. Amortization charged to expense was
$6,446 and $6,446 in 1998 and 1997 respectively.
Page 9
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 3- CUSTOMER LOANS RECEIVABLE - NET
-------------------------------
Customer loans receivable, net consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1997
------- ------
<S> <C> <C>
Customer loans receivable $804,708 $1,001,656
Less: Allowance for doubtful accounts (60,831) ( 130,691)
-------- -----------
Customer loans receivable - Net $743,877 $ 870,965
======== ===========
</TABLE>
Customer loans receivable include accrued interest amounts.
NOTE 4- RECEIVABLE - OTHER
------------------
Note receivable dated December 29, 1997 to a company for $25,000 together
with interest thereon at the rate of 18% per annum. The principal balance
and accrued interest is due and payable on the earlier of a private
placement being completed in whole or part including but not limited to any
escrow disbursements of any funds to the maker, or March 27, 2000. There
were no payments received in 1997 or 1998. The company has made an
allowance for doubtful receivable for the entire loan.
NOTE 5- PROPERTY AND EQUIPMENT, NET
------------------------------
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Furniture and Equipment $ 109,922 $ 59,256
Improvements 34,917 30,161
---------- ---------
144,839 89,417
Less: Accumulated depreciation (43,078) (18,515)
---------- ---------
Property and Equipment, Net $ 101,761 $ 70,902
========== =========
</TABLE>
Page 10
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6- LONG-TERM DEBT
---------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
Note payable lending institution with monthly
interest payable at 14% per annum expiring
February 28, 2000 (see Note 8). $ 538,276 $ 355,755
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. 606,000 643,000
Renegotiated note payable investors with
monthly interest payable at rates varying
between 1.5%-6% per month. This loan
expires in December, 2000. 450,000 450,000
Note payable investor with monthly interest
payable at 4%, expiring May 17, 1999. 150,000 - 0 -
Notes payable investor with interest payable
at 18% per annum, expiring February and
March, 1999. 100,000 - 0 -
----------- -----------
1,944,276 1,548,755
Less: Current Portion (600,000) (550,000)
----------- -----------
Net Long-Term Debt $1,344,276 $ 998,755
============ ===========
The non-current portion of long-term debt
matures as follows:
1999 600,000
2000 1,344,276
-----------
- $ 1,944,276
==============
</TABLE>
The company has negotiated with certain investors to convert long-term debt
to common stock at various negotiated prices predicated on market value.
Long-term debt is substantially collateralized with motor vehicle titles and the
personal guarantees of the officers and the assets of the company.
Page 11
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 7- STOCKHOLDERS' DEFICIT
---------------------
The authorized capital stock of the company in 1997 consists of
15,000,000 shares of common stock with par value of $.001. As of December
31, 1997, there were 13,418,027 shares outstanding.
The authorized preferred stock of the company in 1998 and 1997
consists of 10,000,000 shares with a par value of $.001 with rights and
privileges to be set by the board of directors. As of December 31, 1998 and
1997, there were no shares issued or outstanding.
In 1998, the corporation authorized an additional 5,000,000 shares of
common stock for a total of 20,000,000 shares authorized with a par value
of $.001. As of December 31, 1998, there were 16,494,202 shares
outstanding.
NOTE 8- 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:
1999 $37,373
2000 36,624
-------
73,997
=======
Rent and related expenses under operating leases amounted to $110,923 and
$83,792 for the years ended December 31, 1998 and 1997 respectively. The
company is operating various locations on a month to month basis.
(B) LITIGATION:
-----------
The company is a defendant involving a claim made in bankruptcy by First
American Reliance, Inc. (FAR) against the company for $800,000, including
9% interest, for amounts loaned and advanced by FAR to the company
Page 12
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 8- COMMITMENTS AND CONTINGENCIES (CONTINUED)
-----------------------------------------
which were not repaid. The company has asserted a defense and set off
alleging that monies due to Pinnacle from stock subscriptions in 1998
delivered to FAR were not turned over to the company. It is further alleged
that the claims of the company exceed the sum that FAR claims it is owed by
the company. The company has not accrued any interest on this note for 1998
because of the offsets of monies due the company alleged in the litigation.
The lawyers have stated that documentation to fully evaluate the claims is
not presently available. However, the company is contesting the case
vigorously. The company has accrued a liability for $538,276 in 1998 and
$355,755 in 1997, 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.
The company is anticipating filing form 10-sb to become fully
reporting by march 8, 2000 pursuant to NASD rule 6530. The filing may not
be accepted as effective by the United States Securities and Exchange
Commission (SEC) by March 8, 2000. If the filing of Form 10-SB is not
filed and accepted by the SEC by that date the Company would be removed
from the OTC exchange. Should this occur, the Company would be required
to file a Form 15c2-11 or exception thereto and be once again listed as
soon as the SEC accepted the filing. The Company and their legal
representatives have indicated that they have a contingency plan in place
should they foresee or encounter any problems. This contingency plan
would entail merging or acquiring another publicly reporting entity
in a timely matter to keep enlisted.
NOTE 9- RELATED PARTY TRANSACTIONS
--------------------------
The officers of the company loaned $100,000 to the business to pay for
certain costs in acquiring the public company. The loan is non-interest
bearing and has no specific payment terms. In 1998, $90,100 was repaid.
The company has issued common stock shares to two related family
partnerships of the President and CEO of the company respectively. At
December 31, 1998 those outstanding shares approximated 9,005,000.
NOTE 10- GOING CONCERN
-------------
As shown in the accompanying financial statements, the company
incurred substantial net losses for the years ended December 31, 1998 and
1997. Additionally, the company has a $100,000 note payable with an
investor that expired May 14, 1999.
Page 13
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 10- GOING CONCERN (CONTINUED)
-------------------------
The investor has not called this loan and it is shown as a current
liability. Moreover, the company has debt that will be coming due between
March 1, 2000 and December 31, 2000 without adequate capital available to
repay the debt. The company is negotiating with the investors to either
extend these obligations or convert the debt to equity. However, if these
loans are called, the company's financial condition will be further
negatively impacted. Finally, the company is defending various lawsuit
claims that, if the outcome is unfavorable, would negatively impact the
company. These factors raise substantial doubt about the company's ability
to continue as a going concern.
Management is working with the certain investors to rework the debt that is
coming due. Additionally, management is vigorously contesting the lawsuits
that have been filed against the company. The company feels that they have
certain offsets against the claims in litigation and does not expect to pay
more than what is reflected on the balance sheet at this time (see note 8).
However, there can be no assurance that the company will be successful in
its efforts to not have the payment of debt accelerated. If the company is
unsuccessful in its efforts, it may be necessary to undertake such other
actions as may be necessary to preserve asset value. The financial
statements do not include any adjustments, other than the current
classification of long-term debt in default, that might result from the
outcome of those uncertainties.
NOTE 11- INCOME TAX BENEFIT
------------------
The benefit for income taxes is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
-------- --------
Deferred income tax benefit
(Federal only) $284,826 $100,934
======== ========
</TABLE>
At December 31, 1998 and 1997, the company had net operating loss carry
forwards for U. S. Federal tax purposes available to offset future taxable
income of approximately $986,296 and $433,399 which expire through 2013.
The company has concluded that, based on expected future results and future
reversals of existing temporary differences, it is more likely than not
that the deferred tax assets will be realized. (See note 12)
Page 14
<PAGE>
PINNACLE BUSINESS MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 11- INCOME TAX BENEFIT (CONTINUED)
---------------------------------
The net deferred tax assets in the accompanying balance sheets
include the following components:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets $505,560 $220,734
Deferred tax valuation allowance -0- -0-
-------- --------
Net deferred tax assets $505,560 $220,734
======== ========
</TABLE>
NOTE 12- SUBSEQUENT EVENTS
------------------
A note for an investor of $100,000 expired in 1999 and is reclassified
as a ________ current obligation.
Due to current local legislative climate regarding the title loan industry,
the company aggressively pursued alternative operations. After considerable
research and development, the company implemented payday advances and a
debit card program in 1999. The result of this is a three year contract
with Mailboxes ETC to facilitate payday advances on a national level. This
contract was executed on September 24, 1999. The contract provides for
rapid expansion without the considerable cost of store locations.
Additionally, in August 1999 the company secured a national contract with
Comdata through their banking affiliates. This contract allows the
distribution of debit cards at the point of sale location. Subsequently,
the company is in negotiation with its competitors to allow them to use the
debit card system. This transforms the competitors into vendors and allows
revenue on a broader basis. Management anticipates putting forth its
efforts to expand the payday advance basis through physical locations and
the Internet on a national basis to increase company value.
February 28, 2000, the Company, Jeff Turino and Bruce Hall entered into an
Agreement and Release concerning claims arising from operation of those
officers' employment agreements with the Company between 1997 and 2000.
Turino and Hall released the Company from certain performance obligations,
including the waiver of back compensation and bonus amounts. In exchange,
each received 27,500,000 shares of restricted common stock of the Company.
Turino and Hall agreed to perform the remainder of the employment agreement
in accordance with its terms. The Company released any claims arising from
the officers' performance of the agreements prior to January 1, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PINNACLE BUSINESS MANAGEMENT INC.
/S/ Jeffrey G. Turino
- -------------------------------------------------------
Jeffrey G. Turino, Chief Executive Officer and Director
/S/ Michael B. Hall
- -------------------------------------------------------
Michael B. Hall, President and Director
Date: March 16, 2000
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors of Pinnacle Business Management, Inc.
We hereby consent to the use in this Form 8-K/A of our report dated
February 28, 2000 relating to the financial statements of
Pinnacle Business Management, Inc.
/S/ BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C.
- ----------------------------------------------------
BAGELL, JOSEPHS, LEVINE, FIRESTONE & CO., L.L.C
Certified Public Accountants
March 16, 2000
