** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB /A**

 

**Amendment 1**

 

**(Mark One)**

**ý****Quarterly report under Section13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly periodended June 30, 2004.**

 

**o****Transition report under Section13 or 15(d) of the Securities Exchange Act of 1934 for the transition periodfrom                      to                      ..**

 

**Commission file number: 000-25523**

 

**PRIMARY BUSINESS SYSTEM INC.**

(Exact name of small business issuer asspecified in its charter)

 

| **NEVADA**                                                      | **86-0857752**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) | (I.R.S. Employer  Identification No.) |

 

**433 Kitty Hawk Drive # 226, Universal City,Texas 73148**

(Address of principal executive office) (ZipCode)

 

**(210) 658-4675**

 (Issuer’s telephone number)

 

Check whether the issuer: (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter 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    ý | No    o |
|-----------------------------------|-----------------------------|

 

The number of outstanding shares of the issuer’s common stock, $0.001par value (the only class of voting stock), as of June 30, 2004 and August 9,2004 was 86,278,297

 
| Transitional Small Business Disclosure Format | Yes    o | No    ý |
|-----------------------------------------------|------------------------------|----------------------------------|

 

 

----

 

This amendment is filed solely to correct atypographical error which appears in the

 Unaudited Consolidated Condensed InterimStatements Of Cash Flow

For The Six Months Ended June 30, 2004 and2003, which incorrectly states net cash provided by (used in) financingactivities as $49,662 and should read ($13,699).

 

Table of Contents

 

Part I

 
| Item 1. | FINANCIAL  STATEMENTS |   |
|---------|-----------------------|--------|

 

----

 
| ITEM 1. |   | FINANCIAL STATEMENTS |   |   |
|---------|--------|----------------------|--------|--------|

 

As used herein, the term “Company”refers to Primary Business Systems Inc., a Nevada corporation, and itssubsidiaries and predecessors unless otherwise indicated. Unauditedconsolidated condensed interim financial statements including a balance sheetfor the Company as of the quarter ended June 30, 2004 and statements ofoperations, and statements of cash flows for the interim period up to the dateof such balance sheet and the comparable period of the preceding year for thestatement of operations are attached hereto as of Pages F-1 through F-9 and areincorporated herein by this reference.

 

BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements arepresented in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and the instructionsfor Form 10-QSB and Item 310 under subpart A of Regulation S-B. Accordingly,they do not include all of the information and footnotes required by accountingprinciples generally accepted in the United States of America for completefinancial statements. The accompanying statements should be read in conjunctionwith the audited financial statements for the years ended December 31, 2003 andDecember 31, 2002. In the opinion of management, all adjustments (consistingonly of normal occurring accruals) considered necessary in order to make thefinancial statements not misleading have been included. Operating results forthe three and six months ended June 30, 2004 are not necessarily indicative ofresults that may be expected for the year ended December 31, 2004. Thefinancial statements are presented on the accrual basis with significantintercompany transactions and balances eliminated.

 

F-1

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Primary Business System, Inc.

 

Financial Statements

 

June 30, 2004

 

----

 

Primary Business Systems Inc.

 & Subsidiaries

 

Index

 

Unaudited Consolidated Condensed Interim Financial Statements

For the Period Ended

June 30, 2004

 
| Balance Sheet                                        | F-3    |
|------------------------------------------------------|--------|
|                                                 |   |
| Statement  of Operations-Three Months and Six Months | F-5    |
|                                                 |   |
| Statement  of Stockholders’ Equity (Deficit)    | F-6    |
|                                                 |   |
| Statement  of Cash Flows-Three Months and Six Months | F-7    |
|                                                 |   |
| Notes  to the Unaudited Financial Statements         | F-9    |

 

F-2

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PRIMARY BUSINESS SYSTEMS, INC.

And SUBSIDIARIES

ConsolidatedBalance Sheet

As of December 31, 2003 (Audited) and June 30, 2004 (Unaudited)

 
| **ASSETS**                            | ** ** | **December 31, 2003** | ** ** | **June 30, 2004** | ** ** |
|---------------------------------------|------------|-----------------------|------------|-------------------|------------|
| Current assets                        |       |                  |       |              |       |
| Cash                                  |       | $                     | 19,845     |              | $          | 34,798 |   |
| Notes receivable                      |       | 46,007                |       | 61,549            |       |
| Client accounts receivable            |       | 70,589                |       | 70,095            |       |
| Prepaid Expenses                      |       | 73,186                |       | 30,790            |       |
| Workers Compensation Prepaid Premiums |       | 96,097                |       | 96,097            |       |
|                                  |       |                  |       |              |       |
| Total Current Assets                  |       | 305,724               |       | 293,329           |       |
|                                  |       |                  |       |              |       |
| Property & Equipment              |       |                  |       |              |       |
| Furniture & Fixtures              |       | 52,244                |       | 52,244            |       |
| Computer equipment                    |       | 84,300                |       | 84,3000           |       |
| Payroll software                      |       | 43,724                |       | 43,724            |       |
|                                  |       |                  |       |              |       |
| Less: accumulated depreciation        |       | 180,269               |       | 180,269           |       |
|                                  |       |                  |       |              |       |
|                                  |       | (119,153              | )          | (133,784          | )          |
| Total Property & Equipment        |       | 61,116                |       | 46,520            |       |
|                                  |       |                  |       |              |       |
| Other assets                          |       |                  |       |              |       |
| Security Deposits                     |       | 1,054                 |       | 1,055             |       |
| Customer list, net of amortization    |       | 11,400                |       | 10,200            |       |
| Prepaid marketing                     |       | 0                     |       | 0                 |       |
| Goodwill                              |       | 557,240               |       | 557,240           |       |
| Total Other Assets                    |       | 569,694               |       | 569,094           |       |
| Total Assets                          |       | $                     | 936,534    |              | $          | 908,344 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

F-3

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PRIMARY BUSINESS SYSTEMS, INC.

& SUBSIDIARIES

 

Consolidated Balance Sheet Continued

As of December 31, 2003 (audited) and June 30, 2004 (unaudited

 

 
| **LIABILITIES**                                                  | ** ** | **December 31,  2003** | ** ** | **June 30, 2004** | ** ** |
|------------------------------------------------------------------|------------|------------------------|------------|-------------------|------------|
| Current liabilities                                              |       |                   |       |              |       |
| Accounts payable                                                 |       | $                      | 214,656    |              | $          | 122,402 |   |
| Checks drawn on uncollected payrolls                             |       | 69,160                 |       | 60,037            |       |
| Deferred revenue on payrolls                                     |       | 0                      |       | 45,934            |       |
| Client Payroll Tax payable                                       |       | 20,024                 |       | 192,626           |       |
| Workers Comp payable                                             |       | 45,139                 |       | 54,647            |       |
| Client payroll amount withheld                                   |       | 16,477                 |       | 1,205             |       |
| Notes Payable                                                    |       | 20,973                 |       | 63,362            |       |
| Line of credit from banks                                        |       | 44,988                 |       | 52,436            |       |
| Total Current Liabilities                                        |       | 431,416                |       | 592,649           |       |
|                                                             |       |                   |       |              |       |
| Other liabilities                                                |       |                   |       |              |       |
| Due to shareholder/officer                                       |       | 628,023                |       | 627,859           |       |
| Total Liabilities                                                |       | 1,059,448              |       | 1,220,508         |       |
| Stockholders’ Equity                                        |       |                   |       |              |       |
| Common stock, - $.001 par value authorized  - 750,000,000 shares |       |                   |       |              |       |
| Issued and outstanding 85,657,747                                |       | 85,750                 |       | 85,750            |       |
| Additional paid-in capital                                       |       | 976,870                |       | 976,870           |       |
| accumulated (deficit)                                            |       | (1,185,534             | )          | (1,347,782        | )          |
| Total Stockholders’ Equity                                  |       | (122,914               | )          | (312,164          | )          |
| Total liabilities and Stockholder’s Equity                  |       | $                      | 936,534    |              | $          | 908,343 |   |

 

The accompanying notes are anintegral part of theses financial statements.

 

F-4

----

 

PRIMARY BUSINESS SYSTEMS, INC.

And SUBSIDIARIES

Unaudited ConsolidatedCondensed Interim Statement of Operations

For the Three Months and Six Months Ended June 30, 2004 and 2003

 
| ** **                                                 | ** ** | **Three Months Ended June 30** | ** ** | **Six Months Ended June 30** | ** ** |
|------------------------------------------------------------|------------|--------------------------------|------------|------------------------------|------------|
| ** **                                                 | ** ** | **2004**                       | ** ** | **2003**                     | ** ** | **2004** | ** ** | **2003** | ** ** |
| Revenues                                                   |       | $                              | 786,631    |                         | $          | 704,233 |   | $ | 1,332,829 |   | $ | 1,338,665 |   |
| Cost of revenues                                           |       | 482,265                        |       | 475,329                      |       | 855,278 |   | 975,963 |   |
| Gross Profit                                               |       | 300,366                        |       | 228,904                      |       | 477,542 |   | 362,702 |   |
| Operating Expenses                                         |       |                           |       |                         |       |   |   |   |   |
| General and Administrative                                 |       | 202,386                        |       | 147,370                      |       | 386,273 |   | 245,932 |   |
| Wages, commissions & salaries                          |       | 153,962                        |       | 140,499                      |       | 280,519 |   | 200,481 |   |
| Consulting services for acquisition                        |       | 0                              |       | (110,000                     | )          |   |   | 75,000 |   |
| Total Operating Expenses                                   |       | 356,348                        |       | 177,869                      |       | 666,792 |   | 521,413 |   |
| (Loss) from Operations                                     |       | (55,982                        | )          | 51,035                       |       | (189,250 | ) | (158,711 | ) |
| Other Income                                               |       | 0                              |       | 498                          |       | 0 |   | 2,934 |   |
| (Loss Before Prevision For Income Tax)                     |       | (55,982                        | )          | 51,533                       |       | (189,250 | ) | (155,777 | ) |
| Provision for Income Taxes                                 |       | —                         |       | —                       |       |   |   |   |   |
| Net (Loss)                                                 |       | $                              | (55,982    | )                            | $          | 51,533 |   | (189,250 | ) | (155,777 | ) |
|                                                       |       |                           |       |                         |       |   |   |   |   |
| Basic & Distributed Net (Loss) Per  Share              |       | 0.00                           |       | 0.00                         |       | 0.00 |   | 0.00 |   |
| Basic and Distributed Weighted Average Shares  Outstanding |       | 86,278,297                     |       | 62,196,587                   |       | 86,278,297 |   | 62,169,587 |   |
|                                                            |            |                                |            |                              |            |  |  |  |  |  |  |  |  |

 

The Accompanying notes are anintegral part of these financial statements.

 

F-5

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PRIMARY BUSINESS SYSTEMS, INC.

& SUBSIDUARIES

 

Unaudited Consolidated Condensed Interim

Statementsof Cash Flow

For the Six Months Ended June 30, 2004 and 2003

 
| ** **                                                                                          | ** ** | **For the Six Months Ending June 30** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                          | ** ** | **2004**                              | ** ** | **2003** | ** ** |
| Net Income                                                                                          |       | $                                     | (189,250   | ) | $ | (155,776 | ) |
| Adjustments to reconcile net income (loss)  to net cash provided by (used by) operating activities: |       |                                  |       |   |   |
|                                                                                                |       |                                  |       |   |   |
| Depreciation and amortization                                                                       |       | 15,795                                |       | 16,908 |   |
| (Increase) decrease in accounts receivable                                                          |       | 494                                   |       | (45,348 | ) |
| (Increase) decrease in prepaid expense                                                              |       | 42,396                                |       | (53,348 | ) |
| (Increase) decrease in other current assets                                                         |       | (15,542                               | )          | (31,382 | ) |
| Increase (decrease) in accounts payable                                                             |       | (92,255                               | )          | 50,259 |   |
| Increase (decrease) in client payroll tax  liability                                                |       | 172,602                               |       | 30,893 |   |
| Deferred revenue on payrolls                                                                        |       | 40,174                                |       | 9,641 |   |
| Increase (decrease) in other assets                                                                 |       |                                  |       | (1,955 | ) |
| Adjustments to consulting expense on return  of stock                                               |       |                                  |       | 75,000 |   |
| Checks Drawn on uncollected payrolls                                                                |       | (9,123                                | )          | 34,336 |   |
| Total Adjustments                                                                                   |       | 154,541                               |       | 85,004 |   |
| Net cash provided by (used in) operating  activities                                                |       | (34,709                               | )          | (70,772 | ) |
| Cash flows from investing activities                                                                |       |                                  |       |   |   |
|                                                                                                |       |                                  |       |   |   |
| Payments for the purchase of property                                                               |       | 0                                     |       | 0 |   |
| Net cash provided by (used in) investing  activities                                                |       | 0                                     |       | 0 |   |
| Cash flows from financing activities                                                                |       |                                  |       |   |   |
| Net borrowing under line of credit                                                                  |       | 7,448                                 |       | (3,886 | ) |
| Net borrowing on notes payable                                                                      |       | 0                                     |       | 61,473 |   |
| Principal payments on short-term debt                                                               |       | (20,973                               | )          | (2,310 | ) |
| Due to shareholders/officers                                                                        |       | (174                                  | )          | (2,995 | ) |
| **Net cash provided by (used in) financing  activities**                                            | ** ** | **(13,699**                           | )          | 52,282 |   |
| Net increase (decrease) in cash and cash  equivalents                                               |       | 14,953                                |       | (18,490 | ) |
|                                                                                                |       |                                  |       |   |   |
| Cash and cash equivalents at beginning of  year                                                     |       | 19,845                                |       | 30,868 |   |
|                                                                                                |       |                                  |       |   |   |
| Cash and Cash equivalents at end of quarter                                                         |       | $                                     | 34,798     |   | $ | 12,378 |   |

 

The accompanying notes are anintegral part of these financial statements

 

F-6

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| ** **                                                                  | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Supplemental information                                                    |       |     |       |     |       |
| Cash Payments for Income Taxes                                              |       | $        | —     |     |       |   |
|                                                                        |       |     |       |     |       |
| Non Cash Items                                                              |       |     |       |     |       |
| Stock for goodwill                                                          |       | $        | 0          |     | $          | 7,240 |   |
| Stock for Consulting Services                                               |       |     |       | 235,000  |       |
| Stock returned for non performance of  services regarding prepaid marketing |       |     |       | (270,000 | )          |
| Stock returned for nonperformance of  consulting services                   |       | $        | 0          |     | $          | (160,000 | ) |

 

The Accompanying notes are anintegral part of these financial statements

 

F-7

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Notesto Unaudited Consolidated Condensed Interim Financial Statements

June 30, 2004

 

NOTE1 – BASIS OF PRESENTATION

 

Thecondensed interim financial statements at June 30, 2004 are unaudited, butinclude all adjustments which the Company considers necessary for a fairpresentation.

 

Theaccompanying unaudited financial statements are for the interim periods and donot include all disclosures normally provided in annual financial statements,and should be read in conjunction with the Company’s Form 10-KSB for the yearended December 31, 2003. The accompanying unaudited interim financialstatements for the current quarter and year to date ended June 30, 2004, arenot necessarily indicative of the results which can be expected for the entireyear. The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

 

NOTE2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

TheCompany has consolidated the financial statements of its wholly ownedsubsidiaries, Primary Business Systems, LLC, Primary HR Services LLC and AHJRInc., dba/Concord Staffing Services in these financial statements. Allsignificant intercompany transactions have been eliminated.

 

Allsignificant accounting policies as previously disclosed with the annualfinancial statements for the years ended December 31, 2003 and 2002 remainunchanged.

 

NOTE3 – CHANGE IN STOCKHOLDERS’ EQUITY

 

Thestatement of changes in stockholders’ equity is reported in these financialstatements and discloses the transactions as they were incurred in the threemonths ended June 30, 2004.

 

During2003 the Company issued a total of 1,126,355 restricted shares for prepaidconsulting services valued at $108,872 to be rendered over a twelve monthperiod. The consulting expense amortized and reported in the current quarter is$27,218 leaving a current asset of prepaid expense at $18,751 as of June 30,2004. The Company was required to prepay payroll costs on direct depositclients during the quarter ended June 30, 2004 of $12,039. The total prepaidexpenses for the quarter ended June 30, 2004 is $30,790.

 

NOTE4 – RELATED PARTY TRANSACTIONS

 

NotesReceivable reported as a current asset of $61,549 is due from ConsumersInsurance Agency, LLC. The primary member of the LLC is Patrick Matthews who isthe majority shareholder in the Company. The notes receivable are made up ofrevolving cash advances to the LLC and expenses paid on behalf of the LLC bythe Company.

 

Theserevolving notes receivable were part of the 2002 acquisition of the presentoperations of the Company and were outstanding prior to the date ofacquisition.

 

F-8

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Item 6.  EXHIBITS

 

The following documents are filed as exhibits.

 
| 31     |   | Certificate under Section 302 of the Sarbanes-Oxley Act of 2002 of  the Chief Executive Officer and Chief Financial Officer.     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                             |
| 32     |   | Certificate under Section 906 of the Sarbanes-Oxley Act of 2002 of  the Chief Executive Officer and the Chief Financial Officer. |

 

SIGNATURES

 

Inaccordance with the requirements of the Exchange Act, the registrant causedthis amended report to be signed on its behalf by the under signed, there untodully authorized, this 15th day of December 2004.

 
| Primary  Business Systems Inc.                   |               |
|--------------------------------------------------|--------------------|
|                                             |               |
| /S/  Patrick D Matthews                          |               |   |
| Patrick  D. Matthews                             |               |
| President,  Chief Executive Officer and Chairman | December  15, 2004 |
| And  Principal Accounting Officer                |               |
|                                                  |                    |  |

 

 

(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY)

 

F-9

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