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 March 31, 2000 Commission File No. 2-91651-D PEACOCK FINANCIAL CORPORATION COLORADO 87-0410039 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
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 43,476,527 Shares Outstanding $0.001 Par Value as of March 31, 2000 PEACOCK FINANCIAL CORPORATION REPORT ON FORM 10-Q QUARTER ENDED MARCH 31, 2000 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page Number ------ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) . CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000, AND DECEMBER 31, 1999 3 & 4 . CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 5 & 6 . CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AS OF MARCH 31, 2000 7 - 9 . CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AS OF MARCH 31, 2000 AND MARCH 31, 1999 10 & 11 . NOTES TO CONDENSED CONSOLIDATED 12 FINANCIAL STATEMENTS ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 13 - 16 PART II. OTHER INFORMATION AND SIGNATURES 17 2 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets ASSETS ------ March 31, December 31, --------------------------------- 2000 1999 ------------ ------------ (Unaudited) CURRENT ASSETS Cash and cash equivalents 259,568 190,581 Due from related party 30,938 37,696 Developer fees receivable 26,928 46,828 Interest receivable 5,040 8,102 Credit line receivable 324,788 - Notes receivable - related parties 166,272 91,007 Notes receivable 466,088 102,800 ------------ ------------ Total Current Assets 1,279,622 477,014 ------------ ------------ FIXED ASSETS 104,173 5,962 ------------ ------------ OTHER ASSETS Development costs 1,216,036 1,216,036 Investments in limited partnerships 1,131,945 1,131,945 Other investments 1,584,422 742,233 Other assets 287,555 6,151 ------------ ------------ Total Other Assets 4,219,958 3,096,365 ------------ ------------ TOTAL ASSETS $ 5,603,753 $ 3,579,341 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 3 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
March 31, December 31, -------------------------- 2000 1999 ----------- ----------- (Unaudited) CURRENT LIABILITIES Accounts payable $ 288,192 $ 159,272 Other current liabilities 23,264 174,668 Notes payable - current portion 390,111 623,204 Notes payable - related parties 12,198 25,398 ----------- ----------- Total Current Liabilities 713,765 982,542 ----------- ----------- LONG-TERM DEBT Notes payable - long term 500,000 500,000 ----------- ----------- Total Liabilities 1,213,765 1,482,542 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock: 10,000,000 shares authorized at $0.01 par value; 666,300 and 670,300 shares issued and outstanding, respectively 6,663 6,703 Common stock: 250,000,000 shares authorized at $0.001 par value; 43,476,527 and 37,810,508 shares issued and outstanding, respectively 43,477 37,810 Additional paid-in capital 7,610,113 5,457,569 Subscriptions receivable (143,056) (327,055) Treasury stock (1,610) -- Accumulated deficit (3,125,599) (3,078,228) ----------- ----------- Total Stockholders' Equity 4,489,988 2,096,799 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,603,753 $ 3,579,341 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) March 31, March 31, 2000 1999 --------- --------- REVENUES Property management and administration income $ 1,315 $ 593 Investment banking income 500,000 200,000 Gain on investment 166,216 -- Other income 7,328 9,086 --------- --------- Total Revenues 674,859 200,593 --------- --------- EXPENSES General and administrative 698,470 165,775 Depreciation and amortization 7,674 2,561 --------- --------- Total Expenses 706,144 168,336 --------- --------- INCOME/(LOSS) FROM CONTINUING OPERATIONS (31,285) 32,257 --------- --------- OTHER INCOME/(EXPENSES) Interest income 2,244 70,000 Interest expense (17,530) (37,027) --------- --------- Total Other Expenses (15,286) 32,173 --------- --------- INCOME/(LOSS) BEFORE INCOME TAXES (46,571) 64,430 INCOME TAXES (800) -- --------- --------- NET INCOME (LOSS) $ (47,371) $ 64,430 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 5 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Continued) (Unaudited) March 31, March 31, 2000 1999 --------- --------- EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.01 ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 40,721,916 25,896,706 The accompanying notes are an integral part of these consolidated financial statements. 6 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Unaudited)
Preferred Stock Common Stock Additional ---------------------- ---------------------- Paid-in Subscriptions Accumulated Shares Amount Shares Amount Capital Receivable Deficit ---------- -------- ---------- --------- ---------- ------------- ----------- Balance, December 31, 1997 672,300 $ 6,723 11,763,797 $11,764 2,335,379 $( 852,055) Common stock issued for cash 1,609,413 1,609 217,456 Common stock issued for services 3,108,040 3,108 599,967 Common stock issued on conversation of debentures 1,559,834 1,560 104,033 Common stock issued for investments and licensing rights 2,420,000 2,420 257,580 Common stock issued under failed financing package 289,286 289 28,639 Accrued dividends (23,172) Net income (loss) for the year ended December 31, 1998 (1,533,436) ---------- -------- ---------- --------- ---------- ------------- ----------- Balance, December 31, 1998 672,300 $ 6,723 20,750,370 $20,750 $3,519,882 $(2,385,491) ---------- -------- ---------- --------- ---------- -----------
The accompanying notes are an integral part of these consolidated financial statements. 7 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Continued) (Unaudited)
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 and licensing rights 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) ---------- --------- ---------- --------- ----------- ------------- -----------
The accompanying notes are an integral part of these consolidated financial statements. 8 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Continued) (Unaudited)
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 5,457,378 $ 5,458 2,136,389 Common stock issued for interest 1,737 2 1,735 Common stock issued in conversion of preferred stock (4,000) (40) 4,000 4 36 Common stock issued for 202,904 203 20,087 debt Cash received on subscriptions receivable 184,000 Accrued dividends (5,703) Net income (loss) for the period ended March 31, 2000 (47,371) -------- --------- ---------- --------- ---------- ----------- ----------- Balance, March 31, 2000 666,300 $6,663 43,476,527 $ 43,477 $7,610,113 $ (143,055) $(3,125,599) ======== ========= ========== ========= ========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 9 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) March 31, March 31, 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (47,371) $ 64,430 Adjustments to reconcile net income (loss) to net cash (used) by operating activities: Depreciation and amortization 7,674 2,561 Gain on investment (166,216) -- Changes in operating assets and liabilities: (Increase) decrease in accounts and notes receivable (665,114) 19,899 (Increase) decrease in accounts receivable - related parties (68,507) (Increase) decrease in other assets (281,404) (12,950) Increase (decrease) in accounts payable 128,920 (6,600) Increase (decrease) in other liabilities (151,404) (7,817) ----------- ----------- Net Cash Used by Operating Activities (1,243,422) (329,573) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (675,973) Note receivable -- (116,300) Construction in progress -- 1,902 Purchase of property and equipment (105,885) 1,941 ----------- ----------- Net Cash Used by Investing Activities (781,858 (112,457) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Due to shareholders (13,200) (33,352) Repayment of notes payable (233,093 (42,650) Proceeds from long-term borrowings -- (76,645) Repurchase of stock (1,610) -- Proceeds from stock offerings 2,342,170 802,373 ----------- ----------- Net Cash Provided by Financing Activities $ 2,094,267 $ 649,726 ----------- ----------- The accompanying notes are an integral part of these consolidated financial statements. 10 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued) (Unaudited) March 31, March 31, 2000 1999 --------- --------- NET INCREASE IN CASH $ 68,987 $ 96,076 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 190,581 (4,509) --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 259,568 $ 91,567 ========= ========= SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Common stock issued on conversion of debentures $ 20,087 $ 51,565 Common stock issued for services $ -- $ 600 Common stock issued for investments $ -- $ 300,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid, net of amount capitalized $ 12,612 $ 13,953 Income taxes paid $ -- $ -- The accompanying notes are an integral part of these consolidated financial statements. 11 PEACOCK FINANCIAL CORPORATION NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2000 1. The interim financial statements are prepared pursuant to the requirements for reporting on Form 10-QSB. The December 31, 1999 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, 1999. 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. 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 emerging businesses. The Company manages its investments through three wholly owned subsidiaries and intends on expanding its investment portfolio. The Company has in the past, and may again in the future, raise capital specifically for the purpose of making an investment that the Company believes is attractive. The Company's three wholly owned subsidiaries are Peacock Real Estate Development Corporation, DOTCOM Ventures, LLC. and Peacock Sports, Inc. Each of these subsidiaries manages a portfolio of investments as follows: Peacock Real Estate Development Corporation - ------------------------------------------- 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 1% interest, receiving a property management fee. 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 a general partner for which it receives a management fee and 80% of the project cash flow. 3. St. Michel Development - 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 and has recently signed a joint venture agreement to build homes on these existing lots. 4. Rancho San Jacinto Development - In 1987, the Company formed a limited partnership to acquire and develop approximately 500 acres in San Jacinto, California. The partnership currently owns approximately 285 residential lots, 30 acres of commercially zoned property and 11 acres zoned for high density senior apartments all within the master planned community of Rancho San Jacinto. The Company retains a 15% ownership position and has recently entered into certain joint venture agreements to build out these properties. 13 5. 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 combination with innovation to design balanced solutions to complex environmental, industrial, and engineering problems. Vir-Tek has served commercial, industrial, and residential construction developers as well as concerns of city, county, and federal agencies. In addition to receiving contracts in large Civil Engineering projects, Vir-Tek is currently in the bidding process with contracts valued in excess of $25 million with government agencies. DOTCOM Ventures, LLC - -------------------- 1. Solutions Media, Inc. - is an Internet and convergence technology firm headquartered in San Diego and an equity holder of SpinRecords.com. SMI researches and develops viable interactive applications for the consumer market. Peacock Financial is a major (800,000) shareholder of SMI. An initial public offering (IPO) is expected in 2000. 2. Desert Winds Entertainment Corporation - is a traditional entertainment production company that has unique content geared toward the Gen X and Gen Y markets. In December, Peacock Financial entered into an agreement with Desert Winds Entertainment (OTCBB:DESW) to form a digital entertainment division called Desert Digital Network (DESTV.NET) as a first step into the area of digital broadcasting. Peacock invested $75,000 in convertible debt as $.20 a share. Peacock has since converted this note into 379,868 free trading shares. 3. 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 is currently developing iNetmotors.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 shoppers' immediate area. More than 80 percent of pre-owned and new vehicles are purchased within 20 to 35 miles of where the buyer lives or works, and 90 percent of all buyers want to inspect and test-drive the vehicle before purchase. 4. 1st Miracle Group, Inc. - The Company invested $300,000 in convertible debt financing and subsequently converted its investment into free trading shares at $.01 per share. 1st Miracle Group, Inc. (OTCBB:MVEE) is a Canadian based movie production company with 5 films currently in distribution and several new films in production. The Company also expects to enter into a consulting contract with 1st Miracle Group to expand its internet capabilities. 14 Peacock Sports, Inc. - -------------------- 1. San Diego Soccer Development Corporation - The Company currently owns approximately 1,500,000 shares of SDSDC, the only publicly traded soccer franchise in the United States. Besides SDSDC's ownership of the San Diego Flash, an A-League franchise, and the Riverside Elite, a D-3 League franchise, the long term strategy will be to acquire Peacock's other two A- League franchises in Orange County and the Bay Area, to become a soccer holding company with multiple franchises including a professional farm system, a soccer academy and soccer specific stadiums. 2. Orange County Soccer Development Corporation - The Company owns 85% of OCSDC, the A-League soccer franchise known as the Orange County Waves. The Company is currently working to structure a term sheet to sell the franchise to San Diego Soccer Development Corporation for cash and stock. 3. Bay Area Soccer Development Corporation - The Company owns 85% of BASDC, the A-League soccer franchise known as the Bay Area Seals. The Company is currently working to structure at term sheet to sell the franchise to San Diego Soccer Development Corporation for cash and stock. 4. Las Vegas Soccer Development Corporation - Peacock Financial is a 25% equity founding shareholder in the LVSDC (the Strikers), which was established to acquire an A-League soccer sports franchise for the Las Vegas market. As a founding shareholder, Peacock Financial's position represents 1,020,000 shares and the Company will play a major role in raising initial capital. ANALYSIS OF FINANCIAL CONDITION The first quarter of 2000 marks the emergence of the Company as a true venture capital fund, registered with the SEC as a Business Development Corporation. The Company's auditors removed the "Going Concern" statement in their 1999 audited financial statement which is a statement of objective confidence regarding the Company's current structure and capital position. Management believes that the key to a successful "Fund" is the ability to produce ongoing revenues and profits from operating subsidiaries which will allow for an orderly due diligence process when investing in start up or emerging growth companies. The Company has subsequently formed three operating subsidiaries which are strategically positioned to produce both revenue and profits. These subsidiaries contain key management personnel and have niche opportunities which have matured to the point of producing cash flow and bottom line profits to the Company. Certain of the Company's investments are expected to mature in the year 2000 which should produce substantial returns and increase shareholder net worth. The Company will continue to actively seek emerging growth opportunities that meet its stated investment criteria and will continue its capital raising efforts to fund these carefully selected investment opportunities. 15 RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999. The Company is a registered Business Development Corporation under the Investment Act of 1940. As such, the Company acts as a holding company for the purpose of raising capital and investing in real estate and into emerging growth companies that meet certain investment criteria which includes the possibility of taking the targeted company public at a later stage. In the first quarter, the Company raised over $2.1 million in capital, which was used for working capital, debt reduction and investments. Its primary investments were in the purchase of the Bay Area Seals and the Orange County Waves. Additionally, the Company provided a convertible debenture loan to 1st Miracle Group, Inc. and an operating credit line loan to San Diego Soccer Development Corporation. The Company expects to raise additional capital for its real estate operations in the San Jacinto Valley, (California) where a $3 billion recreational reservoir is nearing completion and to continue to seek out investment opportunities in high tech emerging growth companies. REVENUES. Revenues for the three months ended March 31, 2000, increased by $474,266 or 71% to $674,859 from $200,593 for the three months ended March 31, 1999. This increase resulted from fees charged for investment banking services as well as an increased gain from the sale of investments. EXPENSES. Total expenses for the three months ended March 31, 2000, increased by $537,808 or 77% to $706,144 from $168,336 for the three months ended March 31, 1999. General and administrative expenses for the three months ended March 31, 2000, increased by $532,695 or 77% to $698,470 from $165,775 for the three months March 31, 1999. These increases resulted from the administrative and operating costs associated with consolidating the financial statements of the portfolio companies in which the Company has a majority or greater interest. CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE. For the three months ended March 31, 2000, the Company funded its operations and capital requirements partially with its own working capital and partially with proceeds from stock offerings. As of March 31, 2000, the Company had cash of $259,568. 16 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 May 15, 2000 /s/ Steven R. Peacock ------------ ----------------------- Steven R. Peacock President May 15, 2000 /s/ Lisa L. Martinez - ------------ ---------------------- Lisa L. Martinez Corporate Secretary 17