SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------------------ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 Commission File No. 2-91651-D Peacock Financial Corporation Colorado 87-0410039 (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) 2531 San Jacinto Street San Jacinto, CA 92583 (Address and zip code of principal executive offices) (909) 652-3885 (Registrant's telephone number, including area code) 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. [X] YES [_] NO Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock 118,993,091 Shares Outstanding $0.001 par value as of June 30, 2001 PEACOCK FINANCIAL CORPORATION REPORT ON FORM 10-Q QUARTER ENDED JUNE 30, 2001 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page Number ------ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) . CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2001, AND DECEMBER 31, 2000 3 & 4 . CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 & 2000 5 & 6 . CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AS OF JUNE 30, 2001 7 - 9 . CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 10 & 11 . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 13 - 15 PART II. OTHER INFORMATION AND SIGNATURES 16 2 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets ASSETS ------ June 30, December 31, --------------------------- 2001 2000 ----- ---- CURRENT ASSETS (Unaudited) Cash and cash equivalent - 2,513 Due from related party 6,871 79,765 Prepaid expenses 2,704 Credit line receivable 119,722 - Other receivables 233,094 27,000 Notes receivable - related parties 29,862 29,987 Notes receivable 84,957 84,957 ---------- ---------- Total Current Assets 474,506 226,926 ---------- ---------- FIXED ASSETS 154,999 191,530 ---------- ---------- OTHER ASSETS Investments in limited partnerships 1,131,961 1,131,961 Other investments 1,528 394,289 Other assets 5,565 3,500 ---------- ---------- Total Other Assets 1,139,054 1,529,750 ---------- ---------- TOTAL ASSETS $1,768,559 $1,948,206 ========== ========== 3 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
June 30, December 31, --------------------------- 2001 2000 ---- ---- CURRENT LIABILITIES Accounts payable $ 429,086 $ 473,496 Bank overdraft 1,430 - Other current liabilities 247,888 238,176 Notes payable - current portion 1,018,986 848,343 Judgments payable 188,000 350,000 ------------ ------------ Total Current Liabilities 1,885,390 1,910,015 ------------ ------------ LONG-TERM DEBT Notes payable - long term 500,000 523,175 ------------ ------------ NET LIABILITIES IN EXCESS OF THE ASSETS OF DISCONTINUED OPERATIONS 230,759 305,055 ------------ ------------ Total Liabilities 2,616,149 2,738,245 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock: 10,000,000 shares authorized at $0.01 par value; 545,300 and 545,300 shares issued and outstanding, respectively 5,453 5,453 Common stock: 250,000,000 shares authorized at $0.001 par value; 118,993,091 and 76,931,751 shares issued and outstanding, respectively 118,993 76,932 Additional paid-in capital 11,888,197 11,390,655 Subscriptions receivable (200,501) (286,056) Treasury stock (9,252) (8,180) Accumulated deficit (12,650,480) (11,968,843) ------------ ------------ Total Stockholders' Equity (847,590) (790,039) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,768,559 $ 1,948,206 ============ ============
4 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
For 6 Months Ended For 3 Months Ended ----------------------- --------------------- June 30, June 30, June 30, June 30, 2001 2000 2001 2000 --------- ---------- --------- --------- REVENUES Property management and administration income $ - $ 1,525 $ - $ 210 Investment banking income - 779,961 279,961 Development income 220,713 - 220,713 - Gain on investment 38,750 - 38,750 Other income 720 164,779 720 157,571 --------- ---------- -------- --------- Total Revenues 221,433 985,015 221,433 476,492 --------- ---------- -------- --------- EXPENSES General and administrative 317,982 1,221,458 121,143 857,052 Bad debt 219,198 - 80,402 - Depreciation and amortization 15,208 14,578 3,758 6,904 --------- ---------- -------- --------- Total Expenses 552,388 1,236,036 205,303 863,956 --------- ---------- -------- --------- INCOME/(LOSS) FROM CONTINUING OPERATIONS (330,955) (251,021) 16,130 (387,464) --------- ---------- -------- --------- OTHER INCOME/(EXPENSES) Interest income 25,429 7,625 12,788 5,381 Interest expense (63,947) (39,515) (32,983) (21,985) Realized gain (loss) on investments (86) - - (166,216) Unrealized gain (loss) on investments (392,675) (283,825) - --------- ---------- -------- --------- Total Income (Expenses) (431,279) (31,890) (304,020) (182,820) --------- ---------- -------- --------- INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (762,234) (282,911) (287,890) (570,284) INCOME TAXES (1,600) (800) --------- ---------- -------- --------- NET INCOME (LOSS) FROM CONTINUING OPERATIONS (762,234) (284,511) (287,890) (571,084) NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS 79,525 (1,025,406) (102) (691,342) --------- ---------- -------- --------- NET INCOME (LOSS) (682,709) (1,309,917) (287,992) (1,262,426) --------- ---------- -------- ----------
5 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Operations (Continued)
For 6 Months Ended For 3 Months Ended ------------------------- ------------------------- June 30, June 30, June 30, June 30, 2001 2000 2001 2000 -------- -------- -------- -------- OTHER COMPREHENSIVE GAIN (LOSS) Gain (loss) on treasury stock 1,072 - (440) - NET COMPREHENSIVE INCOME (LOSS) $ (681,637) $(1,309,917) $ (288,432) $(1,262,546) ============ =========== ============ =========== BASIC INCOME (LOSS) PER SHARE Continuing operations $ (0.01) $ (0.01) $ (0.02) $ (0.01) Discontinued operations 0.00 (0.02) (0.00) (0.01) BASIC INCOME (LOSS) PER SHARE $ (0.01) $ (0.03) $ (0.02) $ (0.02) ------------ ----------- ----------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 111,692,037 48,150,404 104,546,945 46,830,296 =========== =========== =========== ===========
6 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity
Preferred Stock Common Stock Additional ---------------- ----------------------- Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ------- ------- ---------- --------- ---------- ------------- ----------- Balance, December 31, 1998 672,300 $ 6,723 20,750,370 $ 20,750 $3,519,882 $ ($2,385,491) Common stock issued for cash 14,008,007 14,008 1,787,118 (443,500) Common stock issued for services 759,571 760 161,040 Common stock issued on conversion of debentures 1,070,560 1,070 58,346 Common stock issued for investments 1,250,000 1,250 123,750 Common stock issued in conversion of preferred stock (2,000) (20) 2,000 2 1,998 Common stock canceled (30,000) (30) (5,779) Cash received on subscriptions receivable 116,445 Accrued dividends (23,172) Dividends paid (165,614) Net income (loss) for the year ended December 31, 1999 (692,737) ----------------------------------------------------------------------------------------- Balance, December 31, 1999 670,300 $ 6,703 37,810,508 $ 37,810 $5,457,569 ($327,055) $(3,078,228) -----------------------------------------------------------------------------------------
7 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Continued)
Preferred Stock Common Stock Additional ------------------------- ------------------------ Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ------------ ----------- ---------- ----------- ----------- ------------- ----------- Balance, December 31, 1999 670,300 $ 6,703 37,810,508 $ 37,810 $ 5,457,569 ($327,055) $(3,078,228) Common stock issued for cash 22,330,821 22,331 4,595,865 (158,001) Common stock issued for interest 6,207 6 6,202 Common stock issued in conversion of preferred stock (125,000) (1,250) 125,000 125 1,125 Common stock issued for services 1,282,000 1,282 247,118 Common stock issued for debt 14,577,215 14,578 604,713 Cash received on subscriptions receivable 199,000 Common stock issued for investments 800,000 800 169,200 Unrealized loss on Treasury stock (69,222) Realized loss on Treasury stock (205,065) Accrued dividends (22,812) Stock offering costs (202,325) Net income (loss) for the period ended December 31, 2000 (8,616,328) ---------- -------- ---------- --------- ----------- ------------ ------------ Balance, December 31, 2000 545,300 $ 5,453 76,931,751 $ 76,932 $11,390,655 $ (286,056) $(11,968,843) ========== ======== ========== ========= =========== ============ ============
8 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Continued)
Preferred Stock Common Stock Additional ---------------------- ---------------------- Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ---------- ---------- ----------- ---------- ----------- ------------- ------------ Balance December 31, 2000 545,300 $ 5,453 76,931,751 $ 76,932 $11,390,655 $ (286,056) $(11,968,843) Common stock issued for cash (unaudited) 29,281,674 29,282 263,455 (52,500) Common stock issued for debt (unaudited) 12,114,416 12,114 228,765 Common stock issued for interest (unaudited) 665,250 665 5,322 Cash received on subscriptions receivable (unaudited) 10,000 Write-off of subscription receivable (unaudited) 128,056 Unrealized gain on Treasury stock (unaudited) 1,070 Net income (loss) for the period ended June 30, 2001 (unaudited) (682,707) ---------- ---------- ----------- ---------- ----------- ------------- ------------ Balance, June 30, 2001 (unaudited) 545,300 $ 5,453 118,993,091 118,993 $11,888,197 $ (200,500) $(12,650,480) ========== ========== =========== ========== =========== ============= ============
9 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows
For the 6 Months Ended ------------------------- June 30 June 30 2001 2000 --------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Continued Operations: Net income (loss) $(762,234) $ (284,511) Adjustments to reconcile net income (loss) from continuing operations to net cash (used) by operating activities; Depreciation and amortization 15,208 14,578 Bad debt expense 219,198 - Loss on investments 392,761 (38,750) Discontinued Operations: Net income (loss) 79,525 (1,025,406) Depreciation and amortization 12,512 - Loss on disposition of assets - - Changes in Operating Assets and Liabilities: (Increase) decrease in accounts and notes receivable (325,816) (833,702) (Increase) decrease in accounts receivable - related parties (18,124) (169,740) (Increase) decrease in other assets 639 (272,371) Increase (decrease) in accounts payable (44,410) 226,253 Increase (decrease) in other liabilities (134,315) (52,617) Increase (decrease) in discontinued operation reserve (74,296) - --------- ----------- Net Cash Used by Operating Activities (639,352) (2,436,266) --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (701,790) Purchase of property and equipment (2,410) (243,563) --------- ----------- Net Cash Used by Investing Activities (2,410) (945,353) --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Due to shareholders - (25,398) Cash received on debentures 384,750 - Repayment of notes payable - (260,741) Repurchase of stock - (307,090) Cash rec'd on subscriptions receivable 10,000 - Proceeds from stock offerings 244,499 4,066,146 --------- ----------- Net Cash Provided by Financing Activities $ 639,249 $ 3,472,917 --------- -----------
10 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued)
For the 6 Months Ended ----------------------- June 30 June 30 2001 2000 --------- ---------- NET INCREASE (DECREASE) IN CASH $(2,513) $ 91,298 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,513 190,581 ---------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $281,879 ========== ======== SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Common stock issued on conversion of debentures & interest $ 246,866 $ 26,497 Common stock issued for investments $ - $150,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid, net of amount capitalized $ 156 $ 18,893 Income taxes paid $ - $ -
11 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 and DECEMBER 31, 2000 1. The interim financial statements are prepared pursuant to the requirements for reporting on Form 10-QSB. The December 31, 2000 balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. The interim financial statements and notes thereto should be read in conjunction with the financial statements and footnotes thereto included in the Company's report on Form 10-KSB for the year ended December 31, 2000. In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. 2. The Company has formed new subsidiary corporations in the State of Nevada, under the names of: Broadleaf Capital Partners, Inc., Broadleaf Asset Management, Inc., Broadleaf Financial Services, Inc. and Brand Asset Management, Inc. The Company has also changed the name of Broadleaf Asset Management, Inc. to Broadleaf Aerospace Systems, Inc. 3. A Certificate of Assumed or Trade Name was filed in the State of Colorado to assume the name change to Broadleaf Capital Partners, Inc. and the Company is currently operating under said name. 4. The Company has completed its internal due diligence and is awaiting final closure pending an independent audit and contingencies, to acquire Genesis Aviation/Aerospace Modworks, Inc., a twelve-year old Aviation services company reporting $3.2 million in annual revenues for its operating year 2000. 5. A Joint Venture was entered into between Peacock Financial Corporation and Jugular, Inc., a stated leader in extreme sports products with worldwide registered trademarks, to form two new entities; Jugular Japan and Jugular Europe. These Joint Ventures, along with an Exclusive Japanese Distribution agreement with X-Gear, Inc., is intended to provide a strong venture to pursue licensing and marketing opportunities for Jugular's trademarks throughout Japan and Europe. 12 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-QSB contains 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. The Company's actual results could differ materially from those set forth in the forward looking statements. MANAGEMENT DISCUSSION Peacock Financial Corporation (Company) is a venture capital fund that makes direct investments in and provides management services to businesses that have at least a one-year operating history, the original founding management, with minimum annual revenues of $1.5 million. The Company intends to expand on its investment strategy and portfolio through the internal development of its present operations and other business opportunities, as well as the acquisition of additional business ventures. The Company has in the past, and may again in the future, raise capital specifically for the purpose of maintaining operations and making an investment that the Company believes is attractive. The Company's current portfolio of investments includes the following: 1. Riverside Park Apartments - The Company formed a limited partnership in June 1992 and acquired two apartment buildings for $3,350,000 to be repaired, developed and managed. During the year ending 1992, the Company reduced its interest to 1% and has remained a general partner with a 1% interest, receiving a property management fee. Management is currently assessing its general partnership position and the Company has received no revenues to-date for the operating year 2000. 2. Canyon Shadows Apartments - The Company acquired a 120-unit apartment complex in April 1995 for $875,000. The Company received a $975,000 loan that converts to a grant from the City of Riverside for the purpose of acquisition and rehabilitation, and in 1996, the Company was awarded $2,200,000 in Federal Tax Credits for the project. In December 1996, the project was sold to a tax credit partnership in which the Company retains a $905,000 capital account, as well as a 1% interest as the general partner, for which it receives a management fee and 80% of the project cash flow. 3. St. Michel, LLC - In 1995, the Company formed a limited liability company to acquire a 63-lot residential subdivision in the San Jacinto Valley, In March 1996, the limited liability company acquired an additional 110-lot subdivision also in the San Jacinto Valley. The Company retains a 50% ownership in the limited liability company. A joint venture to build out these homes was just completed and the Company has booked the distribution of its profits in the second quarter of 2001. 4. Vir-Tek Company - The Company currently owns 49% of Vir-Tek, a minority disabled veteran engineering and contracting firm, formed to take advantage of recently passed federal legislation (H.R. 1568) requiring 3% participation on all programs and projects funded by federal dollars. Vir- Tek provides environmental management, facility and operations management, mapping and information management, engineering services, project management, and waste management. The Company emphasizes teamwork in industrial, and engineering problems. Vir-Tek has served commercial, industrial, and residential construction developers as well as concerns of city, county, and federal agencies. Company management is assessing the validity of its ownership position. 13 5. iNetPartners, Inc. - Peacock Financial holds a 51 percent interest in iNetPartners, Inc., which focuses on the development of Internet e-commerce applications for both the net and used automotive markets and developed iNet4Cars.com, a regionally based automobile e-commerce Website to provide Internet automobile shoppers easy access to dealer inventories with detailed pictures and prices online within the shopper's immediate area. Inet4Cars ceased operations in operating year 2000. It is management's intention to re-launch the website in the future under more favorable e- commerce market conditions. 6. Bio-Friendly Corporation - In May 2000, the Company signed a contract to purchase 625,000 shares of common stock at 40 cents a share of Bio-Friendly Corporation, a fuel technology company, that has a combustion catalyst which Bio-Friendly states, dramatically reduces the emissions produced by any system which burns fuel of any kind, while greatly reducing the amount of fuel consumed. Company management is currently assessing the validity of the contract and Bio-Friendly Corporation. 7. San Diego Soccer Development Corporation (SDSDC) - The Company currently owns approximately 1,555,001 shares of SDSDC. SDSDC recently ceased operations; Company management is currently assessing its position in SDSDC. ANALYSIS OF FINANCIAL CONDITION The second quarter of 2001 marked the continuance of assessing and consolidating the Company's previous investments and operations. The Company, with new management, launched its strategy in seeking business opportunities that can succeed in bringing profits to the bottom line. Management believes that the key to a successful fund is the ability to produce ongoing revenues and profits from operating subsidiaries that will allow for an orderly due diligence process when investing in established companies that have an ongoing revenue stream and operating history. Results of Operations - Three months ended June 30, 2001, compared to the three months ended June 30, 2000. Revenues. Revenues for the three months ended June 30, 2001, decreased by $255,059 or 54% to $221,433 from $476,492 for the three months ended June 30, 2000. This decrease resulted from a decrease in fees charged for investment banking services. Expenses. Total expenses for the three months ended June 30, 2001, decreased by $658,653 or 77% to $205,303 from $863,956 for the three months ended June 30, 2000. General and administrative expenses for the three months ended June 30, 2001, decreased by $735,909 or 86% to $121,143 from $857,052 for the three months ended June 30, 2000. This decrease resulted from reduced administrative and operating costs. 14 Results of Operations - Six months ended June 30, 2001, compared to the six months ended June 30, 2000. Revenues. There were revenues of $221,433 reported for the first six months ended June 30, 2001, as compared to $985,015 for the six months ended June 30, 2000. The decrease was primarily due to a decrease in fees charged for investment banking services. Expenses. Total expenses for the six months ended June 30, 2001, decreased by $683,648 or 56% to $552,388 from $1,236,036 for the six months ended June 30, 2000. General and administrative expenses for the six months ended June 30, 2001, decreased by $903,476 or 74% to $317,982 from $1,221,458 for the six months ended June 30, 2000. This decrease resulted from reduced administrative and operating costs. Bad debt expense of $219,198 was primarily due to the write-off of an un-collectable receivable. Changes in Financial Condition, Liquidity and Capital Resource. For the six months ended June 30, 2001, the Company funded its operations and capital requirements partially with its own working capital and partially with proceeds from stock offerings. As of June 30, 2001, the Company had an overdraft of $1,430. 15 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. PEACOCK FINANCIAL CORPORATION August 14, 2001 /s/ Robert A. Braner - ---------------- -------------------- Date Robert A. Braner Interim President August 14, 2001 /s/ Lisa L. Martinez - ---------------- -------------------- Date Lisa L. Martinez Corporate Secretary 16