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 September 30, 2001 Commission File No. 2-91651-D
Peacock Financial
Corporation
Colorado 87-0410039
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
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.
[_] 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 153,691,482 Shares Outstanding
$0.001 par value as of September 30, 2001
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
- ------------------
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
. CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 2001, AND DECEMBER 31, 2000 3 & 4
. SCHEDULE OF INVESTMENTS 5 & 6
. CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE NINE MONTHS
AND THREE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000 7
. CONSOLIDATED STATEMENTS
OF CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2001 8 & 9
. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 10 - 12
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
PART II. OTHER INFORMATION AND
SIGNATURES
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Assets and Liabilities
ASSETS
------
September 30, December 31,
2001 2000
------------------ ----------------
(Unaudited)
Investments, at fair value, cost of $1,015,905 and
$1,030,475 at September 30, 2001 and
December 31, 2000, respectively $ - $ 392,897
Cash and cash equivalents 1,881 2,513
Due from related party - 79,765
Prepaid expenses - 2,704
Other receivables 54,592 27,000
Notes receivable 131,994 114,944
Fixed assets 107,024 191,530
Investments in limited partnerships 1,131,961 1,131,961
Other assets 5,545 4,892
-------------- ---------------
Total Assets $ 1,432,997 $ 1,948,206
============== ===============
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Assets and Liabilities (Continued)
LIABILITIES AND NET ASSETS
--------------------------
September 30, December 31,
2001 2000
----------------- -------------
(Unaudited)
LIABILITIES
Accounts payable $ 421,843 $ 473,496
Accrued expenses 268,988 238,176
Judgments payable 160,000 350,000
Notes payable 1,420,269 1,371,518
Net liabilities in excess of the assets of discontinued
operations 245,009 305,055
-------------- --------------
Total Liabilities 2,516,109 2,738,245
-------------- --------------
NET ASSETS
Preferred stock: 10,000,000 shares authorized at $0.01
par value, 535,300 and 545,300 shares issued and
outstanding, respectively 5,353 5,453
Common stock: 250,000,000 shares authorized at $0.001
par value, 153,691,482 and 76,931,751 shares issued
and outstanding, respectively 153,692 76,932
Additional paid-in capital 12,041,392 11,390,655
Subscriptions receivable (204,501) (286,056)
Treasury stock - (8,180)
Accumulated deficit (12,065,043) (11,347,735)
Unrealized net loss on investments (1,014,005) (621,108)
-------------- --------------
Total Net Assets (1,083,112) (790,039)
-------------- --------------
Total Liabilities and Net Assets $ 1,432,997 $ 1,948,206
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Schedule of Investments
September 30, 2001
(Unaudited)
Number of
Description of Shares Owned Fair
Company Business (or %) Cost Value
- ----------------------------- ---------------------- ------------------ ------------------ ------------------
IPO/Emerging Growth
Company, LLC Start-up 33% $ 100,000 $ -0- (a)
San Diego Soccer
Development Dormant company 1,551,001 715,905 -0- (b)
Bio-Friendly
Corporation Start-up 437,500 180,000 -0- (b)
Las Vegas Soccer
Development Start-up 1,020,000 20,000 -0- (b)
----------------- -----------
Total $ 1,015,905 $ -0-
================= ===========
(1) Non-public company, represents ownership in an LLC, fair value is
determined in good faith by the Company based on a variety
of factors.
(2) Non-operating companies with no determinable value.
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Schedule of Investments
December 31, 2000
Number of
Description of Shares Owned Fair
Company Business (or %) Cost Value
- ----------------------------- ---------------------- ------------------ ------------------ ------------------
IPO/Emerging Growth
Company, LLC Start-up 33% $ 100,000 $ 83,487 (a)
San Diego Soccer
Development Soccer franchise 1,551,001 715,905 108,850 (c)
8,000 14,570 560 (b)
Bio-Friendly
Corporation Start-up 437,500 180,000 180,000 (d)
Las Vegas Soccer
Development Start-up 1,020,000 20,000 20,000 (d)
------------------ -------------
Total $ 1,030,475 $ 392,897
================== =============
(3) Non-public company, represents ownership in an LLC, fair value is
determined in good faith by the Company based on a variety
of factors.
(4) Public market method of valuation based on trading price of stock at
year-end.
(5) The fair value of restricted shares is determined in good faith by the
Company based on a variety of factors, including recent and historical
prices and other recent transactions.
(6) No public market for this security exists - cost method of valuation
used.
The accompanying notes are an integral part of these consolidated
financial statements.
-6-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2001 2000 2001 2000
---------------- --------------- --------------- ----------------
REVENUES
Investment banking income $ - $ 525,000 $ - $ -
Development income 68,250 - 28,858 -
Interest income 25,429 10,335 - 2,710
Realized gain on investments - 68,459 - 19,849
Other income 4,664 72,504 3,944 15,800
---------------- --------------- --------------- ----------------
Total Revenues 98,343 676,298 32,802 38,359
---------------- --------------- --------------- ----------------
EXPENSES
General and administrative 412,694 1,332,122 276,169 621,171
Bad debt expense 333,717 - 114,519 -
Depreciation and amortization 31,540 28,827 16,332 14,249
Interest expense 82,910 65,241 18,963 11,617
Loss on disposal of assets 8,114 - 8,114 -
---------------- --------------- --------------- ----------------
Total Expenses 868,975 1,426,190 434,097 647,037
---------------- --------------- --------------- ----------------
LOSS FROM CONTINUING
OPERATIONS (770,632) (749,892) (401,295) (608,678)
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS 61,504 (2,381,136) (18,021) (978,653)
NET UNREALIZED LOSS ON
INVESTMENTS (392,897) - - -
---------------- --------------- --------------- ----------------
CHANGE IN NET ASSETS $ (1,102,025) $ (3,131,028) $ (419,316) $ (1,587,331)
================ =============== =============== ================
CHANGE IN NET ASSETS PER SHARE $ (0.01) $ (0.06) $ (0.00) $ (0.03)
================ =============== =============== ================
The accompany notes are an integral part of these consolidated
financial statements.
-7-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
--------------------------------------
2001 2000
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Change in net assets $ (1,102,025) $ (3,131,028)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 38,770 28,827
Bad debt expense 333,717 -
Loss on disposal of assets 8,114 -
Gain on investment - (68,459)
Unrealized loss on investments 392,897 -
Stock issued for services - 216,000
Change in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable (67,858) (1,132,651)
(Increase) decrease in related party receivable - (85,427)
(Increase) decrease in prepaid expenses 2,704 -
(Increase) decrease in other assets (653) (270,951)
Increase (decrease) in accounts payable and accrued
expenses (20,841) 518,915
Increase (decrease) in judgments payable (190,000) -
Increase (decrease) in discontinued operation reserve (60,046) -
------------------ ------------------
Net Cash Used in Operating Activities (665,221) (3,924,774)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,410) (257,268)
Purchase of investments - (720,846)
------------------ ------------------
Net Cash Used in Investing Activities (2,410) (978,114)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders - 99,602
Cash received on debentures and notes 412,500 519,500
Cash received on subscriptions receivable 10,000 51,000
Proceeds from stock offerings 244,499 4,468,297
Repayment of notes payable - (313,022)
Repurchase of stock - (93,951)
------------------ ------------------
Net Cash Provided by Financing Activities $ 666,999 $ 4,731,426
------------------ ------------------
The accomoany notes are an integral part of these consolidated
financial statements.
-8-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended
September 30,
--------------------------------------
2001 2000
------------------ ------------------
NET INCREASE (DECREASE) IN CASH $ (632) $ (171,462)
CASH, BEGINNING OF PERIOD 2,513 190,581
------------------ ------------------
CASH, END OF PERIOD $ 1,881 $ 19,119
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid $ 156 $ 28,885
Income taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES
Common stock issued in conversion of
debentures and interest $ 451,169 $ 26,497
Common stock issued for services $ - $ 168,000
Common stock issued for investments $ - $ 150,000
The accompanying notes are an integral part of these consolidated financial
statements
-9-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
September 31, 2001 and December 31, 2000
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with such
rules and regulations. The information furnished in the interim
condensed financial statements include normal recurring
adjustments and reflects all adjustments, which, in the opinion of
management, are necessary for a fair presentation of such
financial statements. Although management believes the disclosures
and information presented are adequate to make the information not
misleading, it is suggested that these interim condensed financial
statements be read in conjunction with the Company's most recent
audited financial statements and notes thereto included in its
December 31, 2000 Annual Report on Form 10-KSB. Operating results
for the nine months ended September 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2001.
NOTE 2 - GOING CONCERN
As reported in the consolidated financial statements, the Company
has an accumulated deficit (including unrealized losses) of
approximately $11,968,000 at December 31, 2000. In addition, the
Company is party to certain lawsuits that could have a material
impact on the Company's operations. The Company also has certain
debts that are in default. The Company's net assets (deficit) at
December 31, 2000 was $790,039.
These factors create uncertainty about the Company's ability to
continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital it
could be forced to cease operations.
In order to continue as a going concern, develop and generate
revenues and achieve a profitable level of operations, the Company
will need, among other things, additional capital resources.
Management's plans to obtain such resources for the Company
include (1) raising additional capital through sales of common
stock, (2) converting promissory notes into common stock and (3)
enter into acquisition agreement with profitable entities with
substantial operations. In addition, management is continually
seeking to improve the operations and grow the business through a
variety of venues. However, management cannot provide any
assurances that the Company will be successful in accomplishing
any of its plans.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans
described in the preceding
-10-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
September 31, 2001 and December 31, 2000
paragraph and eventually secure other sources of financing and
attain profitable operations. The accompanying consolidated
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
NOTE 3 - INVESTMENTS AND INVESTMENT VALUATION
On September 15, 1998, the Company filed with the Securities and
Exchange Commission to become a Business Development Corporation
as defined under the Investment Act of 1940 in order to invest in
real estate and eligible portfolio companies. This resulted in the
Company becoming a specialized type of investment company.
The investment valuation method adopted in 1982 provides for the
Company's Board of Directors to be responsible for the valuation
of the Company's investments (and all other assets). In the
development of the Company's valuation methods, factors that
affect the value of investees' securities, such as significant
escrow provisions, trading volume and significant business changes
are taken into account. These investments are carried at fair
value using the following four basic methods of evaluation:
a. Cost - The cost method is based on the original cost to the
Company, adjusted for amortization of original issue discounts
and accrued interest for certain capitalized expenditures of
the corporation. Such method is to be applied in the early
stages of an investee's development until significant positive
or adverse events subsequent to the date of the original
investment require a change to another method.
b. Private market - The private market method uses actual or
proposed third party transactions in the investee's securities
as a basis for valuation, utilizing actual firm offers as well
as historical transactions, provided that any offer used is
seriously considered and well documented by the investee.
c. Public market - The public market method is the preferred
method of valuation when there is an established public market
for the investee's securities. In determining whether the
public market method is sufficiently established for valuation
purposes, the corporation is directed to examine the trading
volume, the number of shareholders and the number of market
makers in the investee's securities, along with the trend in
trading volume as compared to the Company's proportionate
share of the investee's securities. If the security is
restricted, the value is discounted at an appropriate rate.
d. Appraisal - The appraisal method is used to value an
investment position after analysis of the best available
outside information where there is no established public or
private market method which have restrictions as to their
resale as denoted in the schedule of investments are also
considered to be restricted securities.
-11-
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
September 31, 2001 and December 31, 2000
All portfolio securities valued by the cost, private market and
appraisal methods are considered to be restricted as to their
disposition. In addition, certain securities valued by the public
market method which have restrictions as to their resale as
denoted in the schedule of investments are also considered to be
restricted securities.
NOTE 4 - OTHER SIGNIFICANT TRANSACTIONS AND EVENTS
The Company has been advised by the Securities and Exchange
Commission (the "Commission") that the Commission has entered into
a formal investigation of the Company. The Company believes that
the investigation concerns valuation issues, stock issuances,
disclosure requirements and format requirements that are required
by the Commission under the Investment Company Act of 1940 as they
relate to the Company's election to become a Business Development
Corporation. The Company is voluntarily cooperating with the
investigation and certain officers have given their depositions.
As of the date hereof, the investigation remains open. The
potential liability or outcome of the investigation cannot
currently be determined.
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.
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.
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.
-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.
ANALYSIS OF FINANCIAL CONDITION
The third quarter of 2001 marked the continuance of assessing and consolidating
the Company's previous investments and operations.
Results of Operations - Three months ended September 30, 2001, compared to the
three months ended September 30, 2000.
Revenues. Revenues for the three months ended September 30, 2001, decreased by
$5,557 or 14% to $32,802 from $38,359 for the three months ended September 30,
2000. This decrease was primarily due to a decrease in gain on investments.
Expenses. Total expenses for the three months ended September 30, 2001,
decreased by $212,940 or 33% to $434,097 from $647,037 for the three months
ended September 30, 2000. General and administrative expenses for the three
months ended September 30, 2001, decreased by $345,002 or 56% to $276,169 from
$621,171 for the three months ended September 30, 2000. This decrease resulted
from reduced administrative and operating costs.
Results of Operations - Nine months ended September 30, 2001, compared to the
nine months ended September 30, 2000.
Revenues. There were revenues of $98,343 reported for the first nine months
ended September 30, 2001, as compared to $676,298 for the nine months ended
September 30, 2000. The decrease was primarily due to a decrease in fees charged
for investment banking services.
Expenses. Total expenses for the nine months ended September 30, 2001, decreased
by $557,215 or 39% to $868,975 from $1,426,190 for the nine months ended
September 30, 2000. General and administrative expenses for the nine months
ended September 30, 2001, decreased by $919,428 or 69% to $412,694 from
$1,332,122 for the nine months ended September 30, 2000. This decrease resulted
from reduced administrative and operating costs. Bad debt expense of $333,717
was primarily due to the write-off of an un-collectable receivable.
Changes in Financial Condition, Liquidity and Capital Resource.
For the nine months ended September 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 September 30, 2001, the Company had
cash of $1,881.
-13-
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
November 19, 2001 /s/ Robert A. Braner
- ------------------ --------------------
Date Robert A. Braner
Interim President
November 19, 2001 /s/ Donald E. Johnson
- ------------------ ---------------------
Date Donald E. Johnson
Chief Financial Officer
-14-