SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 COMMISSION FILE NO. 2-91651-D PEACOCK FINANCIAL CORPORATION COLORADO 87-0410039 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 248 E. MAIN STREET SAN JACINTO, CA. 92583 (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES) (909) 487-8911 (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 10,967,296 SHARES OUTSTANDING $0.001 PAR VALUE AS OF SEPTEMBER 30, 1997 PEACOCK FINANCIAL CORPORATION REPORT ON FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1997 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page Number ------ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) - CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997, AND DECEMBER 31, 1996 3 & 4 - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 5 & 6 - CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AS OF SEPTEMBER 30, 1997 8 - 10 - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AS OF SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996 11 & 12 - NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ITEM 2. NOTES TO THE FINANCIAL STATEMENTS 13 ITEM 3. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 14 & 15 PART II. OTHER INFORMATION AND SIGNATURES 16 2 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Balance Sheets ASSETS September 30, December 31, ------------------ ------------- 1997 1996 ------------ ----------- CURRENT ASSETS Cash and cash equivalents $ 3,162 $ 90,987 Receivables - related parties 10,488 11,744 --------- --------- Total Current Assets 13,650 102,731 --------- --------- FIXED ASSETS, at cost, net of accumulated depreciation of $147,717 and $151,186, respectively 402,347 371,649 --------- --------- NET ASSETS/LIABILITIES OF DISCONTINUED OPERATIONS (Note 12) (50,360) 683,190 --------- --------- OTHER ASSETS Construction-in-process 408,304 484,424 Notes receivable - related parties 200,348 140,171 Developer fees receivable 242,367 294,000 Development costs 1,224,292 1,216,036 Investments in limited partnerships 1,221,936 1,224,292 Other assets 4,383 5,201 --------- --------- Total Other Assets 3,301,630 3,364,124 --------- --------- TOTAL ASSETS $3,667,267 $4,521,694 --------- --------- --------- --------- 3 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31, -------------- ------------ 1997 1996 -------------- ------------ CURRENT LIABILITIES Accounts payable $ 270,914 $ 295,881 Other current liabilities 99,009 336,014 Lines of credit 57,715 76,006 Notes payable - current portion 390,819 797,100 Note payable to stockholder 28,409 27,914 ------------ ------------ Total Current Liabilities 846,866 1,532,915 ------------ ------------ LONG-TERM DEBT Notes payable - long term 1,977,576 1,829,951 ------------ ------------ Total Liabilities 2,824,442 3,362,866 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock: 10,000,000 shares authorized at $0.01 par value; 672,300 and -0- shares issued and outstanding, respectively 6,723 6,723 Common stock: 250,000,000 shares authorized at $0.001 par value; 10,967,296 and 10,695,295 shares issued and outstanding, respectively 10,967 10,695 Additional paid-in capital 2,225,234 2,215,474 Accumulated deficit (1,400,099) (1,074,046) ------------ ------------ Total Stockholders' Equity 842,825 1,158,828 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,667,267 $ 4,521,694 ------------ ------------ ------------ ------------ The accompanying notes are an integral part of these consolidated statements. 4 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Operations
For 9 Months Ended For 3 Months Ended --------------------------- ------------------------------- September 30, September 30, September 30, September 30, 1997 1996 1997 1996 -------------- -------------- ------------- ------------- REVENUES Home building and development sales $ 1,802,591 $ 2,094,402 $ 761,606 $ 1,672,275 Property management and administration income 3,867 151,848 - 22,055 Commissions income 6,977 67,199 1,530 40,376 Other income 69,632 15,416 53,433 8,752 --------- --------- --------- --------- Total Revenues 1,883,067 2,328,865 816,569 1,743,458 --------- --------- --------- --------- EXPENSES Home building and development costs 1,799,513 2,089,923 761,606 1,667,796 General and administrative 441,554 509,644 122,799 167,529 Depreciation and amortization 200 7,371 - 2,457 --------- --------- --------- --------- Total Expenses 2,241,267 2,606,938 884,405 1,837,782 --------- --------- --------- --------- LOSS FROM CONTINUING OPERATIONS (358,200) (278,073) (67,836) (94,324) --------- --------- --------- --------- OTHER INCOME (EXPENSE) Interest income - 1,000 - - Interest expense (181,979) (61,590) (98,723) (22,980) Other expense (1,600) - - - --------- --------- --------- --------- Total Other Income (Expense) (183,579) (60,590) (98,723) (22,980) --------- --------- --------- --------- LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (541,779) (338,663) (166,559) (117,304) INCOME TAXES - - - - NET LOSS FROM CONTINUING OPERATIONS (541,779) (338,663) (166,559) (117,304) --------- --------- --------- --------- DISCONTINUED OPERATIONS Income from operations of discontinued segment 80,068 232,830 91,021 (39,654) Gain on disposal of discontinued segment 135,676 241,504 - 241,504 --------- --------- --------- --------- The accompanying notes are an integral part of these consolidated statements. 5 Total Discontinued Operations 215,744 474,334 92,021 201,850 --------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated statements. 6 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Operations (Continued)
For 9 Months Ended For 3 Months Ended ------------------------------- ------------------------------ September 30, September 30, September 30, September 30, 1997 1996 1997 1996 -------------- -------------- ------------- ------------- NET INCOME (LOSS) $ (326,035) $ 135,671 $ (75,538) $ 84,546 ------------ ------------ ------------ --------- ------------ ------------ ------------ --------- EARNINGS (LOSS) PER SHARE Continued operations $ (0.05) $ (0.04) $ (0.02) (0.01) Discontinued operations 0.02 0.06 0.01 0.02 ------------ ------------ ------------ --------- EARNINGS (LOSS) PER SHARE $ .03 $ 0.02 $ (0.01) $ 0.01 ------------ ------------ ------------ --------- ------------ ------------ ------------ --------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,831,295 7,844,581 10,831,295 7,844,581 ------------ ------------ ------------ --------- ------------ ------------ ------------ ---------
The accompanying notes are an integral part of these consolidated statements. 7 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Stockholders' Equity
Preferred Stock Common Stock Additional ------------------------- ------------------------- Paid-in Accumulated Shares Amount Shares Amount Capital Deficit ---------- ----------- ---------- ----------- ----------- ------------- Balance, March 31, 1994 - $ - 2,136,304 $ 2,136 $1,910,998 $(345,718) Stock issued for services - - 848,696 849 7,638 - Accrued dividends - - - - (10,200) - Class B stock issued for debt - - 184,900 185 369,800 - Class B stock issued for cash - - 16,250 16 32,299 - Stock offering costs charged to paid-in capital - - - - (69,080) - Net loss for the year ended March 31, 1995 - - - - - (321,864) ---------- ---------- ---------- ---------- ----------- ----------- Balance, March 31, 1995 - - 3,186,150 3,186 2,241,455 (667,582) Class A stock issued for services - - 20,000 20 19,980 - Class B stock issued for cash - - 50,000 50 99,950 - Accrued dividends - - - - (34,486) - Net loss for the period from April 1, 1995 to December 31, 1995 - - - - - (547,285) ---------- ---------- ---------- ---------- ----------- ----------- Balance, December 31, The accompanying notes are an integral part of these consolidated statements. 8 1995 - $ - 3,256,150 $ 3,256 $ 2,326,899 $(1,214,867) ---------- ---------- ---------- ---------- ----------- -----------
The accompanying notes are an integral part of these consolidated statements. 9 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Stockholders' Equity (Continued)
Preferred Stock Common Stock Additional ------------------------- ------------------------- Paid-in Accumulated Shares Amount Shares Amount Capital Deficit ---------- ----------- ---------- ----------- ----------- ------------- Balance, December 31, 1995 - $ - 3,256,150 $ 3,256 $ 2,326,899 $(1,214,867) Common stock issued to acquire Connectivity and Technology, Inc. - - 5,183,850 5,184 (5,184) - Conversion of Class B common stock to preferred stock 672,300 6,723 (672,300) (672) (6,051) - Common stock issued for cash - - 2,700,095 2,700 154,269 - Common stock issued for service - - 227,500 227 36,773 - Deferred stock costs charged to paid-in capital - - - - (265,810) - Accrued dividends - - - - (25,422) - Net income for the year ended December 31, 1996 - - - - - 140,803 ---------- ---------- ---------- ---------- ----------- ----------- Balance, December 31, 1996 672,300 6,723 10,695,295 10,695 2,215,474 (1,074,064) Net Loss for the period ended September 30, 1997 (326,035) ---------- ---------- ---------- ---------- ----------- ----------- Balance September 30, 1997 672,300 $ 6,723 10,695,295 $ 10,695 $ 2,215,474 $ (1,400,099) ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
The accompanying notes are an integral part of these consolidated statements. 10 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Cash Flows For the 9 Months Ended September 30, September 30, 1997 1996 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(326,035) $135,671 Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 200 7,849 Discontinued operations 733,551 396,598 Changes in operating assets and liabilities: (Increase) decrease in accounts and notes receivable 51,633 940 (Increase) decrease in accounts receivable - related parties (58,922) (349,686) (Increase) decrease in other assets (5,082) 214,377 Increase (decrease) in accounts payable (24,967) 95,524 Increase (decrease) in other liabilities (255,296) (16,259) --------- -------- Net Cash Used by Operating Activities 115,082 485,014 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Construction in progress 76,120 (611,037) Purchase of property and equipment (30,898) (208,120) --------- -------- Net Cash Used by Investing Activities 45,222 (819,157) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Due to shareholders 495 (16,857) Repayment of notes payable (406,281) (116,603) Proceeds from long-term borrowings 147,625 102,887 Proceeds from stock offerings 10,032 102,873 --------- -------- Net Cash Provided by Financing Activities $(248,129) $ 72,300 --------- -------- The accompanying notes are an integral part of these consolidated statements. 11 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Cash Flows (Continued) For the 9 Months Ended September 30, September 30, 1997 1996 ------------- ------------- NET INCREASE IN CASH $ (87,825) $(261,843) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 90,987 267,593 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,162 $ 5,750 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Common stock issued for debt $ - $ - Common stock issued for services $ - $ - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid, net of amount capitalized $2,355 $ - Income taxes paid $ - $ - The accompanying notes are an integral part of these consolidated statements. 12 PEACOCK FINANCIAL CORPORATION NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 1997 1. The interim financial statements are prepared pursuant to the requirements for reporting on Form 10-QSB. The December 31, 1996, 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, 1996. 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. 13 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. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1996. The Company is engaged in construction and real estate development. The Company's most recent developments are near the Eastside Reservoir, a $3 billion project under construction in Central Riverside County which will be the largest freshwater lake in Southern California. REVENUES. Revenues for the three months ended September 30, 1997, decreased by $926,889 or 53% to $816,569 from $1,743,458 for the three months ended September 30, 1997. This decrease resulted from reduction in home building as well as decrease in property management and administration revenues. EXPENSES. Total expenses for the three months ended September 30, 1997, decreased by $953,377 or 52% to $884,405 from $1,837,782 for the three months ended September 30, 1997. This decrease resulted from lower home building development costs. General and administrative expenses for the three months ended September 30, 1997, decreased by $44,730 or 27% to $122,799 from $167,529 for the three months September 30, 1997. RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1996. REVENUES. Revenues for the nine months ended September 30, 1997, decreased by $445,798 or 19% to $1,883,067 from $2,328,865 for the nine months ended September 30, 1997. This decrease resulted from reduction in home building as well as decrease in property management and administration income. EXPENSES. Total expenses for the nine months ended September 30, 1997, decreased by $365,671 or 14% to $2,241,267 from $2,606,938 for the nine months ended September 30, 1997. This decrease resulted from lower home building development costs. General and administrative expenses for the nine months ended September 30, 1997, decreased by $68,090 or 13% to $441,554 from $509,644 for the nine months ended September 30, 1997. CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE. For the nine months ended September 30, 1997, the Company funded its operations and capital requirements partially with its own capital and partially with loans from related parties. As of September 30, 1997, the Company had cash of $3,162. Net cash generated from the operating activities increased by $115,082 compared to increase of $485,014 for the nine months ended September 30, 1997 and 1996 respectively. The increase resulted mainly from the discontinued operations. 14 Net cash from investing activities increased by $45,222 compared to reduction of $819,157 for the prior year. These are mainly as the result of construction in progress. Net cash used in financing activities decreased by $248,129 compared to increase of $72,300 for the nine months ended September 30, 1997 and 1996, respectively. At September 30, 1997 and 1996, the Company had $1,977,576 and $1,853,228 of long-term debt respectively. The Company is in the process to raise a three-year $10,000,000 loan for real estate development as well as for working capital. 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 - ----------------------- --------------------------------------- Date Steven R. Peacock President and Chief Executive Officer - ----------------------- --------------------------------------- Date Joy M. Hunt Secretary/Treasurer 16