SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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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 JUNE 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 JUNE 30, 1997
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
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Page
Number
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- CONDENSED CONSOLIDATED
BALANCE SHEETS AS OF
JUNE 30, 1997, AND DECEMBER 31, 1996 3 & 4
- CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS THREE MONTHS ENDED
JUNE 30, 1997 AND 1996 5 - 7
- CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
AS OF JUNE 30, 1997 8 - 10
- CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS AS OF JUNE 30, 1997
AND JUNE 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
PART II. OTHER INFORMATION AND SIGNATURES 15
2
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
ASSETS
June 30, December 31,
-------- ------------
1997 1996
-------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 15,319 $ 90,987
Receivables - related parties 18,247 11,744
---------- ----------
Total Current Assets 33,566 102,731
---------- ----------
FIXED ASSETS, at cost, net of accumulated
depreciation of $147,717 and $151,186,
respectively 402,065 371,649
---------- ----------
NET ASSETS/LIABILITIES OF DISCONTINUED
OPERATIONS (Note 12) (57,161) 683,190
---------- ----------
OTHER ASSETS
Construction-in-process 401,803 484,424
Notes receivable - related parties 161,051 140,171
Developer fees receivable 258,000 294,000
Development costs 1,223,436 1,216,036
Investments in limited partnerships 1,224,292 1,224,292
Other assets 3,458 5,201
---------- ----------
Total Other Assets 3,272,040 3,364,124
---------- ----------
TOTAL ASSETS $3,650,510 $4,521,694
---------- ----------
---------- ----------
3
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
-------- ------------
1997 1996
-------- ------------
CURRENT LIABILITIES
Accounts payable $ 267,801 $ 295,881
Other current liabilities 76,558 336,014
Lines of credit 65,630 76,006
Notes payable - current portion 399,446 797,100
Note payable to stockholder 30,409 27,914
----------- -----------
Total Current Liabilities 839,844 1,532,915
----------- -----------
LONG-TERM DEBT
Notes payable - long term 1,892,302 1,829,951
----------- -----------
Total Liabilities 2,732,146 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 (1,324,560) (1,074,064)
----------- -----------
Total Stockholders' Equity 918,364 1,158,828
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,650,510 $ 4,521,694
----------- -----------
----------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
4
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Operations
For 6 Months Ended For 3 Months Ended
------------------------------------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---------- ----------- ----------- ----------
REVENUES
Home building and development sales $1,040,985 $ 422,127 $ 336,697 $ 422,127
Property management and administration
income 3,867 129,793 1,900 63,241
Commissions income 5,447 26,823 633 618
Other income 16,199 6,664 14,072 (8,143)
---------- --------- --------- ---------
Total Revenues 1,066,498 585,407 353,302 477,843
---------- --------- --------- ---------
EXPENSES
Home building and development costs 1,037,907 422,127 339,757 422,127
General and administrative 318,755 342,115 133,888 191,099
Depreciation and amortization 200 4,914 - 2,457
---------- --------- --------- ---------
Total Expenses 1,356,862 769,156 473,645 615,683
---------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS 290,364 183,749 120,343 137,840
---------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income - 1,000 - -
Interest expense (83,256) (38,610) 78,389 (25,094)
Other expense (1,600) - - -
---------- --------- --------- ---------
Total Other Income (Expense) (84,856) (37,610) 78,389 (25,094)
(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (375,220) (221,359) (198,732) (162,934)
INCOME TAXES - - - -
---------- --------- --------- ---------
NET (LOSS) FROM CONTINUING OPERATIONS (375,220) (221,359) (198,732) (162,934)
DISCONTINUED OPERATIONS (Note 12)
Income (Loss) from operations of discontinued
segment (10,953) 272,484 50,634 331,773
Gain on disposal of discontinued segment 135,677 - 135,677 -
---------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated
financial statements.
5
Total Discontinued Operations 124,724 272,484 186,311 331,773
---------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated
financial statements.
6
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,
1997 1996 1997 1996
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (250,496) $ 51,125 $ (12,421) $ 168,839
----------- ----------- ----------- -----------
EARNINGS (LOSS) PER SHARE
Continued operations $ (0.03) $ (0.03) $ (0.02) (0.02)
Discontinued operations 0.01 0.02 0.02 0.04
----------- ----------- ----------- -----------
EARNINGS (LOSS) PER SHARE $ 0.02 $ 0.01 $ - $ 0.02
----------- ----------- ----------- -----------
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
financial 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
financial statements.
8
1995 - $ - 3,256,150 $3,256 $2,326,899 $(1,214,867)
------- ------- --------- ------- ---------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
9
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Stockholders' Equity (Continued)
Additional
Preferred Stock Common Stock 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
June 30, 1997 (250,496)
------- ------- --------- ------- ---------- -----------
Balance June
30, 1997 672,300 $6,723 10,695,295 $10,695 $2,215,474 $(1,324,560)
------- ------- --------- ------- ---------- -----------
------- ------- --------- ------- ---------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
10
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows
June 30, June 30,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(250,496) $ 51,125
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 200 5,392
Discontinued operations 740,352 493,654
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 36,000 940
(Increase) decrease in accounts
receivable - related parties (27,384) (347,145)
(Increase) decrease in other assets (5,657) 271,871
Increase (decrease) in accounts payable (28,080) 38,137
Increase (decrease) in other liabilities (269,832) (26,079)
--------- ---------
Net Cash Used by Operating Activities (195,103) 487,895
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress 82,621 (651,027)
Purchase of property and equipment (30,616) (57,995)
--------- ---------
Net Cash Used by Investing Activities 52,005 (709,022)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders 2,495 (16,857)
Repayment of notes payable (397,654) (116,603)
Proceeds from long-term borrowings 62,351 (5,074)
Proceeds from stock offerings 10,032 96,164
--------- ---------
Net Cash Provided by Financing Activities $(322,776) $ (42,370)
--------- ---------
The accompanying notes are an integral part of these consolidated
financial statements.
11
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows (Continued)
For the 6 Months Ended
June 30, June 30,
1997 1996
--------- --------
NET INCREASE IN CASH $(75,668) $(263,497)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 90,987 267,593
-------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 15,319 $ 4,096
-------- ---------
-------- ---------
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 $ 1,399 $ 36,610
Income taxes paid $ - $ -
The accompanying notes are an integral part of these consolidated
financial statements.
12
PEACOCK FINANCIAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
JUNE 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 JUNE 30, 1997, COMPARED TO THE THREE
MONTHS ENDED JUNE 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 June 30, 1997, decreased by
$124,541 or 26% to $353,302 from $477,843 for the three months ended June 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 June 30, 1997, decreased by
$142,038 or 23% to $473,645 from $615,683 for the three months ended June 30,
1997. This decrease resulted from lower home building development costs. General
and administrative expenses for the three months ended June 30, 1997, decreased
by $57,211 or 30% to $133,888 from $191,099 for the three months June 30, 1997.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1996.
REVENUES. Revenues for the six months ended June 30, 1997, increased by
$481,091 or 82% to $1,066,498 from $585,407 for the six months ended June 30,
1997. This increase resulted from increased home building offset by a decrease
in property management and administration income.
EXPENSES. Total expenses for the six months ended June 30, 1997, increased by
$587,706 or 76% to $1,356,862 from $769,156 for the six months ended June 30,
1997. This increase resulted from higher home building development costs.
General and administrative expenses for the six months ended June 30, 1997,
decreased by $23,360 or 7% to $318,755 from $342,115 for the six months ended
June 30, 1997.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE.
For the six months ended June 30, 1997, the Company funded its operations and
capital requirements partially with its own capital and partially with loans
from related parties. As of June 30, 1997, the Company had cash of $15,319.
14
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
15