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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 22, 1998
PINNACLE MICRO, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 0-21892 33-0238563
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
140 Technology Drive, Suite 500, Irvine, California 92618
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 789-3000
Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
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Pinnacle Micro, Inc. ("Pinnacle" or the "Company") has received
favorable initial response to its out-of-court, voluntary Plan of
Reorganization ("Out-of-Court Plan"), which was submitted to its unsecured
creditors on or about July 28, 1998. As of August 22, 1998, the initial
deadline for receipt of votes from unsecured creditors, approximately 33% of
the unsecured creditors, representing approximately 31% of the total dollar
amounts owed, had voted. The voting results were as follows: approximately
91% of the number of creditors voting on the Out-of-Court Plan voted in favor
of the Plan, representing approximately 50% of the dollar amount of claims
voting on the Plan. Based on discussions between Pinnacle's management and
various unsecured creditors who have not yet voted, Pinnacle expects to
receive additional favorable votes that will add substantially to the total
dollar amount of favorable votes. Accordingly, Pinnacle and the Unsecured
Creditors Committee have extended the final date for receipt of ballots to
September 22, 1998.
While the results of voting on the Out-of-Court Plan are favorable,
Pinnacle has now been notified that three unsecured claimants, one an
ex-employee and two who were previously consultants to the Company, have
filed against Pinnacle an involuntary petition in an attempt to force
Pinnacle into a Chapter 7 bankruptcy. Pinnacle intends to vigorously contest
the involuntary filing on several grounds and, although there can be no
assurance with respect to the outcome, believes that it will prevail with
respect to the involuntary petition. If Pinnacle should be unsuccessful in
contesting the involuntary petition, Pinnacle will exercise its right to
convert the Chapter 7 proceeding into a Chapter 11 proceeding. In such a
Chapter 11 proceeding, Pinnacle would immediately submit its Chapter 11 Plan
and Disclosure Statement to the bankruptcy court. Pinnacle anticipates that
the terms of its Chapter 11 Plan would be materially the same as the terms of
its pre-negotiated Out-of-Court Plan that has received such a favorable
response. Pinnacle has been advised that it could expect to obtain
confirmation of its Chapter 11 Plan approximately 120 days after the filing
of the Chapter 11 Plan, although the ability to obtain confirmation of a
Chapter 11 Plan, and the time required to obtain the same, could be subject
to many factors which would not be in Pinnacle's control.
The current Out-of-Court Plan has the following significant provisions:
1. Pinnacle proposes to pay to unsecured creditors 100% of their valid
claims out of future cash flows available to Pinnacle.
2. No fixed payments would be required to be made to unsecured creditors,
except for a one percent (1%) annual distribution to unsecured
creditors. Accordingly, payment of the full amount owed to unsecured
creditors, and
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the time required to accomplish the same, would be completely
dependent upon Pinnacle's future available cash flow.
3. No interest would accrue or be paid by Pinnacle on the amounts owed.
4. The claims of unsecured creditors would be subordinate to existing
secured debt and any new senior debt as defined by the plan.
The total indebtedness to unsecured creditors is approximately $17 million.
Pinnacle's secured lender has continued to cooperate with Pinnacle since
Pinnacle achieved a voluntary moratorium with its unsecured creditors over one
year ago. Such cooperation may, however, be discontinued by the secured lender
at any time. Pinnacle has been engaged in negotiations to obtain a new
financing agreement with its secured lender and, although no assurance can be
given with respect to the same, Pinnnacle believes that it will be successful in
obtaining a new financing agreement. If such a financing agreement is obtained,
Pinnacle anticipates that, if required, the financing agreement would be
implemented as part of the pre-negotiated Chapter 11 Plan discussed above.
This Report on Form 8-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
The forward-looking statements include the plans and objectives of management
relating to the Out-of Court Plan and the involuntary bankruptcy petition
referred to above. The forward-looking statements contained herein are based
upon current expectations and assumptions that involve various risks and
uncertainties, including risks and uncertainties associated with the effect
of changing economic conditions, trends in the markets for the Company's
products, technical developments, variations in the Company's cash flow,
actions taken by the Company's creditors, and other factors detailed in the
Company's other filings with the Securities and Exchange Commission. As a
result of these risks and uncertainties, actual events in the future may
differ significantly from the events contemplated by the forward-looking
statements contained herein. Therefore, the inclusion of the forward-looking
statements in this Report on Form 8-K should not be regarded as a
representation by the Company or any other person that events or results
contemplated thereby will occur or be achieved.
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SIGNATURE
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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.
August 27, 1998 PINNACLE MICRO, INC.
By: /s/ William F. Blum
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William F. Blum, President and
Chief Executive Officer
