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, 1998 Commission File No. 2-91651-D
Peacock Financial Corporation
Colorado 87-0410039
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification
organization) 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.
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 16,164,972 Shares Outstanding
$0.001 par value as of September 30, 1998
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998, AND
DECEMBER 31, 1997 3 & 4
- CONSOLIDATED STATEMENTS OF
OPERATIONS THREE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 5 & 6
- CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
AS OF SEPTEMBER 30, 1998 7 & 8
- CONSOLIDATED STATEMENTS OF
CASH FLOWS AS OF SEPTEMBER 30,
1998 AND SEPTEMBER 30, 1997 9 & 10
- NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 11
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
PART II. OTHER INFORMATION AND SIGNATURES
2
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
1998 1997
------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 7,632 $ 14,777
--------------------- --------------------
Total Current Assets 7,632 14,777
------------------- ------------------
FIXED ASSETS, at cost, net of accumulated
depreciation of $69,797 and $66,980,
respectively 377,282 359,215
------------------- ------------------
OTHER ASSETS
Construction-in-process 175 374,397
Notes receivable - related parties 253,199 230,067
Developer fees receivable 174,978 226,000
Development costs 1,216,036 1,216,036
Investments in limited partnerships 1,224,292 1,224,292
Other assets 12,661 11,926
------------------- ------------------
Total Other Assets 2,881,342 3,287,718
------------------- ------------------
TOTAL ASSETS $ 3,266,256 $ 3,656,710
------------------- ------------------
------------------- ------------------
3
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31
1998 1997
------------- -----------
CURRENT LIABILITIES
Accounts payable $ 211,974 $ 219,934
Other current liabilities 239,524 189,423
Lines of credit 40,771 50,585
Notes payable - current portion 1,024,524 1,147,871
Note payable to stockholder 13,711 23,869
------------------- ------------------
Total Current Liabilities 1,530,504 1,631,682
------------------- ------------------
LONG-TERM DEBT
Notes payable - long term 510,937 532,217
------------------- ------------------
Total Liabilities 2,041,441 2,154,899
------------------- ------------------
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; 16,164,972 and 11,763,797
shares issued and outstanding, respectively 16,165 11,764
Additional paid-in capital 3,084,367 2,335,379
Accumulated deficit (1,882,440) (852,055)
------------------- ----------------
Total Stockholders' Equity 1,224,815 1,501,811
------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,266,256 $ 3,656,710
------------------- ------------------
------------------- ------------------
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 9 Months Ended For 3 Months Ended
------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
REVENUES
Home building and development sales $ 453,412 $ 1,802,591 $ 139,544 $ 761,606
Property management and administration
income 3,300 3,867 1,200 -
Commissions income - 6,977 - 1,530
Other income 14,283 69,632 4,697 53,433
------------------- ---------------- ------------- ------------
Total Revenues 470,995 1,883,067 145,441 816,569
------------------- ---------------- ------------- ------------
EXPENSES
Home building and development costs 540,602 1,799,513 139,544 761,606
General and administrative 883,118 441,554 393,930 122,799
Depreciation and amortization 2,817 200 939 -
------------------- ---------------- ------------- ------------
Total Expenses 1,426,537 2,241,267 534,413 884,405
------------------- ---------------- ------------- ------------
LOSS FROM CONTINUING OPERATIONS (955,542) (358,200) (388,972) 67,836)
------------------- ---------------- ------------- ------------
OTHER INCOME (EXPENSE)
Interest expense (72,443) (181,979) (24,264) (98,723)
Other expense (2,400) (1,600) (1,600) -
------------------- ---------------- ------------- ------------
Total Other Income (Expense) (74,843) (183,579) (25,864) (98,723)
------------------- ---------------- ------------- ------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (1,030,385) (541,779) (414,836) (166,559)
INCOME TAXES - - - -
------------------- ---------------- ------------- ------------
NET LOSS FROM CONTINUING OPERATIONS (1,030,385) (541,779) (414,836) (166,559)
DISCONTINUED OPERATIONS
Income from operations of discontinued
segment - 80,068 - 91,021
Gain on disposal of discontinued segment - 135,676 - -
------------------- ---------------- ------------- ------------
Total Discontinued Operations - 215,744 - 91,021
------------------- ---------------- ------------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
5
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,
1998 1997 1998 1997
---- ---- ---- ----
NET INCOME (LOSS) $ (1,030,385) $ (326,035) $ (414,836) $ (75,538)
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
EARNINGS (LOSS) PER SHARE
Continued operations $ (0.07) $ (0.05) $ (0.03) $ (0.02)
Discontinued operations - 0.02 - 0.01
------------- ------------ ----------- -----------
EARNINGS (LOSS) PER SHARE $ (0.07) $ (0.03) $ (0.03) $ (0.01)
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,705,959 10,831,295 10,375,373 10,831,295
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
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 Stockholders' Equity
Additional
Preferred Stock Common Stock Paid-in
---------------- ------------------------------------- Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
Balance, March
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 -
Stock issued for
services - - 227,500 227 36,773 -
Deferred stock costs
charged to paid-in
capital - - - - (265,810) -
Accrued dividends - - - - (25,422) -
Net income/(loss) 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)
Common stock issued
for cash - - 422,002 422 59,618 -
Common stock issued
for services - - 646,500 647 83,459 -
Accrued dividends - - - - (23,172) -
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 (Continued)
Additional
Preferred Stock Common Stock Paid-in
------------------- ---------------------------------------- Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -----------
Net income/(loss) for the
period ended December
31, 1997 - - - - - 222,009
----------- --------- ----------------- ------------ ------------- ---------------
Balance, December 31,
1997 672,300 $ 6,723 11,763,797 $ 11,764 $ 2,335,379 $ (852,055)
----------- --------- ----------------- ------------ -------------- ---------------
Common stock
issued for cash - - 1,643,819 1,644 296,092 -
Common stock issued
for services - - 2,757,356 2,757 470,275 -
Accrued dividends - - - - (17,379) -
Net income/(loss) for the
year ended September
30, 1998 - - - - - (1,030,385)
----------- --------- ----------------- ----------- -------------- ---------------
Balance September 30, 1998 672,300 $ 6,723 16,164,972 $ 16,165 $ 3,084,367 $ (1,882,440)
----------- --------- ----------------- ----------- -------------- ---------------
----------- --------- ----------------- ----------- -------------- ---------------
The accompanying notes are an integral part of these consolidated financial
statements.
8
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows
For the 9 Months Ended
September 30, September 30,
1998 1997
---------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,030,385) $ (326,035)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 2,817 200
Discontinued operations - 733,551
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 51,022 51,633
(Increase) decrease in accounts
receivable - related parties (23,132) (58,922)
(Increase) decrease in other assets (735) (5,082)
Increase (decrease) in accounts payable (7,962) (24,967)
Increase (decrease) in other liabilities 40,287 (255,296)
---------------- ----------------
Net Cash Used by Operating Activities (968,088) 115,082
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress 374,222 76,120
Purchase of property and equipment (20,884) (30,898 )
---------------- ----------------
Net Cash Used by Investing Activities 353,338 45,222
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders (10,158) 495
Repayment of notes payable (123,346) (406,281)
Proceeds from long-term borrowings (12,280) 147,625
Proceeds from stock offerings 753,389 10,032
---------------- ----------------
Net Cash Provided by Financing Activities $ 607,605 $ (248,129 )
---------------- ----------------
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 Cash Flows (Continued)
For the 9 Months Ended
September 30, September 30,
1998 1997
--------------- -------------
NET INCREASE IN CASH $ (7,145) $ (87,825 )
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 14,777 90,987
---------- --------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 7,632 $ 3,162
---------- --------------
---------- --------------
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for debt $ - $ -
Common stock issued for services $ 470,275 $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid, net of amount capitalized $ 25,999 $ 2,355
Income taxes paid $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
10
PEACOCK FINANCIAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The December 31, 1997,
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, 1997. 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.
11
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, 1998, compared to the
three months ended September 30, 1997.
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, 1998, decreased by
$671,128 or 83% to $145,441 from $816,569 for the three months ended September
30, 1997. This decrease resulted from reduction in home building as well as a
decrease in administration revenues.
Expenses. Total expenses for the three months ended September 30, 1998,
decreased by $349,992 or 40% to $534,413 from $884,405 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, 1998, increased by $271,131 or 69% to $393,930 from $122,799
for the three months September 30, 1997, primarily due to the increase in issue
of common stock for services.
Results of Operations - Nine months ended September 30, 1998, compared to the
nine months ended September 30, 1997.
Revenues. Revenues for the nine months ended September 30, 1998, decreased by
$1,412,072 or 75% to $470,995 from $1,883,067 for the nine months ended
September 30, 1997. This decrease resulted from reduction in home building as
well as a decrease in administration income.
Expenses. Total expenses for the nine months ended September 30, 1998, decreased
by $814,730 or 37% to $1,426,537 from $2,241,267 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, 1998, increased by $441,564 or 50% to $883,118 from $441,554 for the nine
months ended September 30, 1997, primarily due to the increase in issue of
common stock for services.
Changes in Financial Condition, Liquidity and Capital Resource.
For the nine months ended September 30, 1998, the Company funded its operations
and capital requirements partially with its own capital and partially with loans
from related parties. As of September 30, 1998, the Company had cash of $7,632.
12
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
(Registrant)
November 10, 1998 /S/ STEVEN R. PEACOCK
- ----------------- ---------------------
Date Steven R. Peacock
President and Chief Executive Officer
13