<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 2-91651-D
PEACOCK FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 87-0410039
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
248 E. MAIN STREET
SAN JACINTO, CALIFORNIA 92583
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (909) 457-8911
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS)
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 X NO
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF DECEMBER 31, 1996 WAS $1,283,435.
THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF DECEMBER 31,
1996.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1 - BUSINESS
Peacock Financial Corporation (Peacock) is a real estate developer in
Southern California and its primary mission is to take advantage of the
changes happening in the San Jacinto Valley as a result of the $3 billion
construction of the Eastside Reservoir by The Metropolitan Water District of
Southern California.
Peacock is pleased to report a $141K net income and revenues of $3,369K for
the year ending December 31, 1996, versus a loss of $547K and $278K revenue
for the nine months ending December 31, 1995.
The Company currently employs 6 people. The Company uses independent
consultants for a variety of tasks, including engineering, shareholder
relations and financial management. Its principal executive offices are
located at 248 E. Main Street, San Jacinto, California 92583.
ITEM 2 - PROPERTIES
Apart from the Discontinued Operations, the Company's properties are
comprised of $484,424 Home Building Construction in Process, $1,216,036 land
development cost and $1,324,292 investment in limited partnerships.
INVESTMENTS IN LIMITED PARTNERSHIPS
1. Carreon Professional Building - The Company formed a limited partnership
in November 1990 and acquired the property for $2,031,300. During the
year ending 1992, the Company reduced its interest to 1% and has remained
a general partner with a 1% interest, receiving a property management fee.
2. 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 a 1%
interest, receiving a property management fee.
3. 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
$2,500,000 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 the general
partner for which it receives a management fee.
4. St. Michel, LLC - In 1995, the Company formed a limited liability company
to acquire a 63-lot residential subdivision in the San Jacinto Valley. In
March
<PAGE>
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 receives an overhead fee
for the construction and marketing of the homes.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not presently involved in any material litigation nor, to its
knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business which is expected to be covered by the Company's liability insurance.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
Common Stock of the Company is traded in the over-the-counter market, and
quoted on the Electronic Bulletin Board. During the fiscal year ending
December 31, 1996, the Company's common stock traded between $5.00 and $0.12
per share. The Company has not yet adopted any policy regarding payment of
dividends.
Quarter Ended Low High
- ------------- --- ----
March 31, 1996 $3.50 $5.00
June 30, 1996 0.88 3.50
September 30, 1996 0.25 0.88
December 31, 1996 0.12 0.25
At December 31, 1996, there were approximately 295 holders of record of the
Company's stock.
ITEM 6 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index to financial statements included herein.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal year 1996 marked an exciting year for Peacock Financial Corporation,
as its first year as a publicly traded Company. In December 1996, the Company
moved its headquarters to the historically important Virginia Lee Hotel in
downtown San Jacinto, where the Company refurbished and converted the Hotel
into an executive suites office building. This move symbolized Peacock's
mission to play a major role in
<PAGE>
the future of the San Jacinto Valley. Also during the year, the Company
completed the Canyon Shadows Apartments, which involved grant financing from
the City of Riverside, as well as Federal Tax Credits for affordable housing.
As the year progressed, the Company focused more of its attention to
developing and investing in the San Jacinto Valley and, therefore, sold or
went into escrow on three of its projects which were outside the Valley. The
Company believes it will substantially benefit from the development of the
Eastside Reservoir and the future of the San Jacinto Valley. The Company has
been positioning itself and has plans in place to be the biggest developer in
the Valley.
RESULTS OF OPERATIONS:
Revenues totaled $3,369,000 for the fiscal year ending December 31, 1996. For
the nine months ending December 31, 1995, revenues were $278,517. The
increase in Revenues were due to the home building operation.
General and Administrative expenses for the year ended December 31, 1996,
were $972,256, as compared to $505,257 for the nine months ended December 31,
1995. The increase in General and Administrative expenses was related to
Canyon Shadows Apartments.
Depreciation and amortization was $8,190 for the year ended December 31,
1996, as compared to $43,356 for the nine months ended December 31, 1995. The
decrease was due to fixed assets and loan fees reaching full amortization in
1996.
Interest income was $1,802 and interest expense was $170,386 for the year
ended December 31, 1996, as compared to $31,923 interest income and $52,089
in interest expense for the nine months ended December 31, 1995. The decrease
in interest income and increase in interest expense was due to expenditures
incurred on Canyon Shadows Apartments.
Discontinued operation gain of $983,507 for the year ended December 31, 1996,
is as a result of sale or decision to sell the Company's rental operations,
i.e., Magnolia Center commercial building, the Anaheim Vacation Park and the
Canyon Shadows Apartments.
ITEM 8 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As mentioned in Note 11 to the financial statements, in April 1995, the
Company acquired the Canyon Shadows Apartment complex using a $975,000 loan
that converts to a grant from the City of Riverside. In December 1996, after
rehabilitation and meeting the vacancy requirements, the Company sold the
apartment complex to a partnership and received a $905,000 Capital Account in
the partnership. This equity in the partnership is not reflect in the
financial statements. The management
<PAGE>
believes all material conditions of the grant have been met, therefore, the
liability no longer exists. As a result, the shareholder's equity should be
increased by $905,000.
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTION AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
NAME AGE POSITION PERIOD OF SERVICE
Steven R. Peacock 52 President, Since 1986
Chief Executive Officer
and Director
Joy M. Hunt 47 Secretary Since 1996
All directors hold office until the next annual shareholders meeting or until
their death, resignation, retirement or until their successors have been
elected and qualified.
Mr. Steven R. Peacock, 52, is President, Chief Executive Officer, and a
Director of Peacock Financial Corporation. He has broad experience in real
estate development, property management and construction experience.
Ms. Joy M. Hunt, 47, is Secretary of Peacock Financial Corporation. She has
25 years of accounting, business administration and governmental relations
experience.
The Securities Exchange Act of 1934 requires all executive officers and
directors to report any changes in ownership of common stock of the Company
to the Securities and Exchange Commission and the Company. The management
review and representations indicates no reports were required to be filed in
1996.
ITEM 10 - EXECUTIVE COMPENSATION
The following table shows the amount of all compensation earned for services
in all capacities to the Company for the last two fiscal years for the
executive officers at December 31, 1996.
NAME AND POSITION YEAR SALARY OTHER TOTAL
Steven R. Peacock, President & 1996 $96,000 None $96,000
Chief Executive Officer, and Director 1995 84,000 None 84,000
Joy M. Hunt, Secretary 1996 $8,000 None $8,000
<PAGE>
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on December 31, 1996, the Company had 10,695,295
shares outstanding. The beneficial owner of more than five percent of any
class of the Company's voting securities are as follows:
NAME AND
ADDRESS OF
BENEFICIAL NUMBER OF PERCENT
TITLE OF CLASS OWNER SHARES OF CLASS
Common Stock Steven R. Peacock 2,927,324 27.4%
248 E. Main Street
San Jacinto, CA 92583
Common Stock Byron Radaker 2,010,048 18.9%
248 E. Main Street
San Jacinto, CA 92583
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Patricia Peacock, mother of Steven R. Peacock, President, from time to time
advanced funds to the Company. Such loans are unsecured with below market
interest rate and with repayment terms between 1 to 3 years.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
Audited Financial Statements and Notes thereto are filed as part of this
report. On February 8, 1996, the Company filed Form 8-K containing its merger.
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(FORMERLY CONNECTIVITY AND TECHNOLOGY, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<PAGE>
CONTENTS
Independent Auditors' Report ................................................ 3
Consolidated Balance Sheets ................................................. 4
Consolidated Statements of Operations ....................................... 6
Consolidated Statements of Stockholders' Equity ............................. 8
Consolidated Statements of Cash Flows ....................................... 10
Notes to the Consolidated Financial Statements .............................. 12
<PAGE>
INDEPENDENT AUDITORS' REPORT
Peacock Financial Corporation and Subsidiary
(Formerly Connectivity and Technology, Inc.)
Board of Directors
Hemet, California
We have audited the accompanying consolidated balance sheets of Peacock
Financial Corporation and Subsidiary (formerly Connectivity and Technology,
Inc.) as of December 31, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
ended December 31, 1996, for the nine months ended December 31, 1995 and for
the year ended March 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Peacock
Financial Corporation and Subsidiary (formerly Connectivity and Technology
Inc.) as of December 31, 1996 and 1995 and the results of their operations
and their cash flows for the year ended December 31, 1996, the nine months
ended December 31, 1995 and for the year ended March 31, 1995 in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 13 to the consolidated financial statements, the Company has suffered
losses from operations for the years ended December 31, 1996 and 1995, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters also are described in Note 13.
The consolidated financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result from the outcome
of this uncertainty.
Jones, Jensen & Company
July 21, 1997
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
ASSETS
------
December 31,
-------------------------
1996 1995
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 90,987 $ 267,593
Receivables - related parties (Note 7) 11,744 42,109
Notes receivable, net of allowance
for bad debt - 940
---------- ----------
Total Current Assets 102,731 310,642
---------- ----------
FIXED ASSETS, at cost, net of accumulated
depreciation of $151,186 and $144,261, respectively 371,649 33,324
---------- ----------
NET ASSETS OF DISCONTINUED OPERATIONS
(Note 12) 683,190 1,639,164
---------- ----------
OTHER ASSETS
Construction-in-process 484,424 -
Notes receivable - related parties (Note 7) 140,171 65,426
Developer fees receivable 294,000 -
Development costs (Note 3) 1,216,036 1,216,436
Investments in limited partnerships (Note 4) 1,224,292 -
Deferred charges - 44,298
Prepaid salary - 208,358
Other assets 5,201 33,234
---------- ----------
Total Other Assets 3,709,374 1,567,752
---------- ----------
TOTAL ASSETS $4,521,694 $3,550,882
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
--------------------------
1996 1995
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 295,881 $ 149,352
Other current liabilities 336,014 230,758
Lines of credit (Note 5) 76,006 83,073
Notes payable - current portion (Note 6) 797,100 116,603
Note payable to stockholder (Note 7) 27,914 16,857
----------- -----------
Total Current Liabilities 1,532,915 596,643
----------- -----------
LONG-TERM DEBT
Notes payable - long term (Note 6) 1,829,951 1,838,951
----------- -----------
Total Liabilities 3,362,866 2,435,594
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
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 -
Common stock: 250,000,000 shares authorized at
$0.001 par value; 10,695,295 and 3,256,150 shares
issued and outstanding, respectively 10,695 3,256
Additional paid-in capital 2,215,474 2,326,899
Accumulated deficit (1,074,064) (1,214,867)
----------- -----------
Total Stockholders' Equity 1,158,828 1,115,288
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,521,694 $3,550,882
----------- -----------
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
December 31, December 31, March 31,
1996 1995 1995
------------ ------------ -----------
(12 Months) (9 Months) (12 Months)
<S> <C> <C> <C>
REVENUES
Home building and development sales $3,005,211 $- $-
Property management and administration
income 208,023 221,277 276,042
Commissions income 101,363 54,065 -
Other income 54,403 3,175 40,584
------------ ------------ -----------
Total Revenues 3,369,000 278,517 316,626
------------ ------------ -----------
EXPENSES
Home building and development costs 2,990,836 - -
General and administrative 638,745 505,257 444,193
Depreciation and amortization 8,190 43,563 23,595
------------ ------------ -----------
Total Expenses 3,637,771 548,820 467,788
------------ ------------ -----------
LOSS FROM CONTINUING OPERATIONS (268,771) (270,303) (151,162)
------------ ------------ -----------
OTHER INCOME (EXPENSE)
Interest income 1,802 31,923 -
Interest expense (170,386) (52,089) (50,822)
------------ ------------ -----------
Total Other Income (Expense) (168,584) (20,166) (50,822)
------------ ------------ -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (437,355) (290,469) (201,984)
INCOME TAXES - - -
------------ ------------ -----------
NET LOSS FROM CONTINUING OPERATIONS (437,355) (290,469) (201,984)
DISCONTINUED OPERATIONS (Note 12)
Loss from operations of discontinued segment (405,349) (256,816) (119,880)
Gain on disposal of discontinued segment 983,507 - -
------------ ------------ -----------
Total Discontinued Operations 578,158 (256,816) (119,880)
------------ ------------ -----------
NET INCOME (LOSS) $140,803 $(547,285) $(321,864)
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Operations (Continued)
December 31, December 31, March 31,
1996 1995 1995
----------- ----------- -----------
(12 Months) (9 Months) (12 Months)
EARNINGS (LOSS) PER SHARE
Continued operations $(0.06) $(0.09) $(0.09)
Discontinued operations 0.08 (0.08) (0.06)
--------- ---------- -----------
EARNINGS (LOSS) PER SHARE $0.02 $(0.17) $(0.15)
--------- ---------- -----------
--------- ---------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,844,581 3,207,786 2,184,707
--------- ---------- -----------
--------- ---------- -----------
The accompanying notes are an integral part of these consolidated
financial statements
8
<PAGE>
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,
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
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
Preferred Stock Common Stock Additional
---------------------- ------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
-------- ------ ---------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
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)
------- ------ ---------- ------- ---------- -----------
------- ------ ---------- ------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows
<TABLE>
December 31, December 31, March 31,
1996 1995 1995
------------ ------------ -----------
(12 Months) (9 Months) (12 Months)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 140,803 $ (547,285) $(321,864)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 390,387 244,408 312,061
Stock issued for services 37,000 20,000 -
Discontinued operations (542,664) - -
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable (293,060) (3,013) 2,459
(Increase) decrease in accounts
receivable - related parties (44,324) 15,839 (104,578)
(Increase) decrease in other assets (97,380) (36,934) (19,338)
Increase (decrease) in accounts payable 160,406 167,179 19,509
Increase (decrease) in other liabilities 72,850 121,466 38,224
-------- ----------- ---------
Net Cash Used by Operating Activities (175,982) (18,340) (73,527)
-------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress (484,424) - -
Purchase of property and equipment (345,250) (2,346,866) (184,016)
-------- ----------- ---------
Net Cash Used by Investing Activities (829,674) (2,346,866) (184,016)
-------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders 11,057 - -
Repayment of notes payable (93,600) (199,172) (47,884)
Proceeds from long-term borrowings 754,624 2,623,053 300,000
Proceeds from stock offerings 156,969 100,000 32,315
-------- ----------- ---------
Net Cash Provided by Financing Activities $829,050 $ 2,523,881 $ 284,431
-------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
December 31, December 31, March 31,
1996 1995 1995
------------ ------------ -----------
(12 Months) (9 Months) (12 Months)
<S> <C> <C> <C>
NET INCREASE IN CASH $ (176,606) $ 158,675 $ 26,888
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 267,593 108,918 82,030
------------ ------------ -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 90,987 $ 267,593 $ 108,918
------------ ------------ -----------
------------ ------------ -----------
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for debt $ - $ - $ 369,985
Common stock issued for services $ 37,000 $ 20,000 $ 8,487
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid, net of amount capitalized $ 669,259 $ 396,241 $ 545,778
Income taxes paid $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - COMPANY BACKGROUND
The consolidated financial statements include those of Peacock Financial
Corporation (Colorado) (Peacock) and its wholly-owned subsidiary, Peacock
Financial Corporation (California) (PFC). Collectively, they are
referred to herein as "the Company".
Peacock was incorporated under the laws of the State of Colorado on
February 16, 1984 under the name of Oravest International, Inc. It later
changed its name to Camdon Holdings, Inc. and then to American
Temperature Control, Inc., Connectivity and Technology, Inc., and finally
to Peacock Financial Corporation on February 27, 1996. Peacock was
incorporated for the purpose of creating a vehicle to obtain capital to
seek out, investigate and acquire interests in products and businesses
which may have a potential for profit.
PFC, the wholly-owned subsidiary, was formed on May 22, 1986. Its
operations consist of the acquisition and enhancement of income-producing
properties and the development of multi-use property including home
building. Certain properties are owned by limited partnerships managed
by the Company.
On February 27, 1996, the Company completed an Agreement and Plan of
Reorganization whereby Peacock issued 7,767,702 shares of its common
stock and 672,300 shares of its preferred stock in exchange for all of
the outstanding common stock of PFC. Pursuant to the reorganization, the
name of the Company was changed to Peacock Financial Corporation.
The reorganization was accounted for as a recapitalization of PFC because
the shareholders of PFC control the Company after the acquisition.
Therefore, PFC is treated as the acquiring entity. Accordingly, there
was no adjustment to the carrying value of the assets or liabilities of
Peacock. Peacock is the acquiring entity for legal purposes and PFC is
the surviving entity for accounting purposes.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements
follows:
a. ACCOUNTING METHOD
The Company's consolidated financial statements are prepared using the
accrued method of accounting. The Company has elected a December 31 year
end.
b. PARTNERSHIP INVESTMENTS
The Company's general and limited partnership interests are accounted for
using the equity method, which reflects historical cost adjusted for the
proportionate share of partnership earnings or losses. The Company has
not recorded its share of losses in excess of its investment in each
partnership.
13
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
c. FIXED ASSETS
Fixed assets are carried at cost. The cost is depreciated over the
estimated useful lives of 30 years for buildings and improvements and 5
to 6 years for furniture and equipment.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred.
During the period from April 1, 1995 through December 31, 1995, the
Company incurred interest of $122,500 on a construction loan. The
interest has been capitalized as part of the building improvements.
d. INCOME TAXES
The Company provides for income taxes using the liability method under
Statement of Financial Accounting Standards No. 109. Deferred income
taxes arise principally from temporary differences for financial and tax
reporting purposes in depreciation methods.
The Company has not recorded income taxes in 1996 or 1995 due to
operating losses and loss carryovers. The Company has net operating loss
carryovers of approximately $1,800,000 at December 31,1996 which expire
in the years 2007 to 2011.
e. CASH AND CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
f. LOSS PER SHARE
The computations of loss per share of common stock are based on the
weighted average number of shares outstanding at the date of the
consolidated financial statements.
g. DEFERRED CHARGES
The Company had recorded the costs incurred in connection with its stock
offerings as a deferred charge at December 31, 1995. The costs were
charged against additional paid-in capital during 1996 at the completion
of the stock offering.
h. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include those of Peacock Financial
Corporation (Colorado) and its wholly-owned subsidiary, Peacock Financial
Corporation (California). All significant intercompany accounts and
transactions have been eliminated.
14
<PAGE>
15
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
i. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
j. CONCENTRATIONS OF RISK
ACCOUNTS RECEIVABLE
Credit losses, if any, have been provided for in the consolidated
financial statements and are based on the management's expectations. The
Company's accounts receivable are subject to potential concentrations of
credit risk. The Company does not believe that it is subject to any
unusual, or significant risks in the normal course of its business.
k. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
December 31, 1996 presentations.
NOTE 3 - DEVELOPMENT COSTS
Land improvements and related property development costs have been
capitalized and will be amortized to the cost of the houses sold based
upon the total number of homes to be constructed in each project. The
land and land improvements of $1,216,036 and $1,216,436 at December 31,
1996 and 1995, respectively, are recorded at the lower of cost or net
realizable value (see Note 9).
NOTE 4 - INVESTMENTS IN LIMITED PARTNERSHIPS
In November 1990, the Company formed a limited partnership to acquire,
manage and develop certain real property referred to as the Carreon
Professional Building. The partnership acquired the property for
$2,031,300 on November 30, 1990 for $581,300 in cash and a promissory
note of $1,450,000 that bears interest of 12, 12.5 and 13 percent per
year for the first, second and third years, respectively. During the
partnership year ended December 31, 1992, the Company sold its remaining
limited interest in the partnership. The Company remains the general
partner with a 1% interest. The Company receives a property management
fee. The Company accounts for its remaining general partner interest
using the equity method.
16
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 4 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
On June 29, 1992, the Company formed a limited partnership agreement to
acquire two apartment buildings to be repaired, developed, and managed
which are referred to as the Riverside Park Apartments. The partnership
acquired the property for $3,350,000 on July 10, 1992 for $670,000 in
cash and a promissory note of $2,680,000. In July 1992, the partnership
entered into an agreement whereby the City of Riverside loaned the
partnership $650,000 at 10.5 percent interest. The loan will be forgiven
by August 1, 2007. The debt and accrued interest are forgiven at
one-fifteenth of the original balance per year. The agreement requires
the partnership to meet certain restrictive covenants. The Company
remains the general partner with a 1% interest and receives a property
management fee.
In December 1995, the Company formed a limited liability company to
acquire a 63-lot residential subdivision in the San Jacinto Valley. The
Company retains a 50% ownership in the limited liability company and also
receives an overhead fee for the construction and marketing of the homes.
During 1995, the Company received a $975,000 loan that converts to a
grant from the City of Riverside to acquire and rehabilitate a 120-unit
apartment complex (see Note 11). During April 1996, the Company was
awarded $2,400,000 in Federal tax credits. During December 1996, the
Company sold the completed project to a tax credit partnership named
Canyon Shadows, L.P. retaining a 1% interest as general partner and
receiving a $905,000 capital account in the partnership. Additional
expenses of $319,292 were incurred by the Company on behalf of the
partnership resulting in a total investment in Canyon Shadows, L.P. of
$1,224,292 at December 31, 1996.
NOTE 5 - LINES OF CREDIT
The Company has two separate lines of credit with banks at December 31,
1996 in the aggregate maximum amount of $250,000. Borrowings outstanding
under these lines of credit at December 31, 1996 and 1995 were $51,598
and $24,408 and $53,098 and $29,975, respectively. The credit lines bear
interest at the bank's index rate plus 2 percent or 12 percent currently
and expire during June, 1998 and July, 1999, respectively.
NOTE 6 - NOTES PAYABLE
Notes payable consist of the following:
December 31,
-------------------------
1996 1995
----------- ----------
Note payable at 8%, collateralized by deed
of trust on property, payable in monthly
principal and interest installments of
$16,390 with the outstanding balance due
July 1998 $ - $ 2,055,050
Note payable at 12%, collateralized by deed
of trust on buildings, payable in monthly
principal and interest installments of
$28,899 through December 1998. 2,765,435 2,780,500
----------- ----------
17
<PAGE>
Balance Forward $ 2,765,435 $ 4,835,550
----------- ----------
----------- ----------
18
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 6 - NOTES PAYABLE (Continued)
Notes payable consist of the following (continued):
December 31,
---------------------
1996 1995
----------- -----------
Balance Forward, $ 2,765,435 $ 4,835,550
Note payable at variable rate (10.25% at
December 31, 1996) collateralized by deed
of trust on real property. Lump sum payment
is due October 21, 1998. 312,252 332,252
Note payable at 10%, unsecured, due with
accrued interest on or before February
1, 1997. 1,236 6,136
Note payable at 15%, unsecured, principal
originally due on or before November 30, 1996,
interest due monthly (see Note 14). 241,520 241,520
Note payable at 10%, secured by deed of trust,
due March 31, 1996, currently in default. 65,000 65,000
Note payable at 10%, unsecured, with outstanding
balance and interest due June 1996 (subsequently
paid in 1997). 20,930 20,930
Note payable at 7.5%, collateralized by deed of
trust on real property, payable in monthly
installments of $2,100 including interest, due
June 30, 1997 (see Note 14). 290,179 293,480
Note payable at 12%, unsecured, payable in
monthly installments of $354 including interest,
due January 1, 1997. - 3,979
Note payable at 3%, collateralized by deed of
trust on real property, due January 31, 2005
(Note 11). 975,000 975,000
Note payable at 14%, secured by deed of trust
on real property, payable in monthly installments
of $17,500 (interest only), due May 1, 1996. - 1,500,000
Loan payable at 9%, collateralized by deed of
trust on property, accrued interest and principal
due February 15, 1997 (see Note 9(b)). 172,204 -
----------- -----------
Balance Forward, $ 4,843,756 $ 8,273,847
----------- -----------
----------- -----------
19
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 6 - NOTES PAYABLE (Continued)
Notes payable consist of the following (continued):
December 31,
--------------------------
1996 1995
----------- -----------
Balance Forward, $ 4,843,756 $ 8,273,847
Note payable to individual at 10%,
collateralized by deed of trust, payable in
monthly interest only payments, principal
due January 19, 1997 (see Note 9(b)). 125,000 -
Note payable at 7%, collateralized by deed of
trust, due August, 1997. 25,000 -
Note payable, non-interest bearing, unsecured,
payable in monthly installments of $1,000. 18,000 -
Construction note payable at 10.50% with a
maximum balance of $750,000, principal and
interest due July 1997. 359,595 -
Debentures at 10%, unsecured, originally due
July, 1996 (see Note 14). 11,000 -
Other equipment loans 10,135 17,257
----------- -----------
Total Notes Payable 5,392,486 8,291,104
Less: Current Portion (797,100) (116,603)
Less: Discontinued Operations (Note 12) (2,765,435) (6,335,550)
----------- -----------
Long-Term Notes Payable $ 1,829,951 $ 1,838,951
----------- -----------
----------- -----------
The aggregate principal maturities of notes payable are as follows
(including discontinued operations):
Years Ending December 31,
-------------------------
1997 $ 811,439
1998 873,875
1999 19,858
2000 22,376
2001 2,689,938
Thereafter 975,000
-----------
Total $ 5,392,486
-----------
-----------
20
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company is a partner in several limited partnerships (Note 4). The
Company occasionally pays for operating expenses of the partnerships and
is reimbursed as funds become available to the partnerships. These
advances are non-interest bearing and are reimbursed on a regular basis.
In 1994, the Company paid a legal settlement on behalf of one of the
partnerships of which it is a partner. The payment has been recorded as
a note receivable from the partnership. The note is non-interest bearing
and is due on demand.
Two stockholders have made loans to the Company. The loans bear interest
at 10 percent per annum and matured in March 1996. The balance
outstanding at December 31, 1996 and 1995 is $27,914 and $16,857,
respectively.
NOTE 8 - PROFIT SHARING PLAN
In 1989, the Company adopted a profit sharing plan covering all eligible
employees. Contributions are made at the discretion of the Board of
Directors. There were no contributions to the plan for the year ended
December 31, 1996 or for the period from April 1, 1995 through December
31, 1995.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
a. GENERAL PARTNER OBLIGATIONS
The Company serves as general partner in several real estate development
partnerships. The Company may be held liable for certain liabilities of
these partnerships in its capacity as general partner. At December 31,
1996, the partnerships had no liabilities with recourse against the
Company.
b. RENTS AND LEASES
During 1996, the Company acquired an historic 15-room hotel in downtown
San Jacinto and converted it into an executive suites office building.
The Company currently occupies approximately half of the offices and
rents the remaining space to others. Financing, which consisted of a
seller carry-back loan of $125,000 for the acquisition and a City of San
Jacinto Redevelopment loan of $172,204 for the rehabilitation, is
currently being restructured into long-term financing.
c. WRAP AROUND MORTGAGE
The Company has sold a property subject to a mortgage. The mortgage has
not been fully assumed by the buyer. If the buyer defaults on the
mortgage, the Company may be liable for the balance owing. At December
31, 1996, the balance was $129,875.
21
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
d. VISTA RAMONA DEVELOPMENT COSTS
The Company has incurred costs associated with the development of a
residential housing project. The costs incurred have been for
engineering and planning for the project. The project encompasses 489
acres of land containing approximately 1,800 residential building lots.
The Company controls 277 acres of the project through a joint venture.
The remaining 212 acres are controlled by a separate joint venture which
has filed for chapter 11 bankruptcy. The Company has reached an
agreement with the lienholder of the land to acquire the lienholder's
interest in the note and trust deed which encumber the 212 acres for
$1,500,000 cash. The Company must make payment in full on or before
April 4, 1996 to complete the agreement. If the 212 acres are not
brought under the control of the Company, there is some uncertainty as to
the recoverability of all development costs. The Company believes that
regardless of the outcome of the attempt to gain control of the 212
acres, that more likely than not the entire amount of the development
costs will be recovered from the remaining joint venture.
NOTE 10 - PREFERRED STOCK
The Company's preferred stock has the right to quarterly dividends to be
paid at the annual rate of 6%. The quarterly dividend is to be paid to
all shareholders of record, as of the last day of each quarter until such
time as the Company causes such shares to be converted to common shares
and "registered" (free trading) with the S.E.C. and the appropriate State
regulatory agency.
Each preferred share shall be converted into one share of the common
stock of the Company, such conversion to occur automatically and
registered concurrently with any public offering of the common shares of
the Company.
Each share of preferred stock comes with a warrant. Each warrant
entitles the holder to purchase one share of the common stock at a price
of $2.20 per share, from the date of purchase until 180 days following
the completion of the Company's initial public offering of common stock,
or commencement of public trading therein. During the exercise period of
the warrants, the Company, at its option, may call the warrants for
redemption on a 30-day prior written notice to warrant holders of record
at a redemption price of $.05 per warrant.
NOTE 11 - APARTMENT COMPLEX ACQUISITION
In April 1995, the Company acquired a 120 unit apartment complex using a
$975,000 loan that converts to a grant from the City of Riverside,
California. The loan is non-recourse and is secured by a second trust
deed on the property. If the Company meets certain requirements
pertaining to the complex, which have been stipulated by the city, the
loan will be forgiven in its entirety per the following schedule:
May, 2002 10%
May, 2003 20%
May, 2004 30%
May, 2005 40%
If the Company fails to meet the requirements, the entire unpaid
principle balance, together with accrued
22
<PAGE>
interest, will become due at the discretion of the City of Riverside and
foreclosure proceedings may be initiated on the property.
23
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 12 - DISCONTINUED OPERATIONS
The Company has decided to either sell or dispose of a portion of its
operations during 1997. As a result, the assets and liabilities of those
operations are being netted together as discontinued operations resulting
in a balance of net assets at December 31, 1996 and 1995 of $683,190 and
$1,639,164, respectively. The breakout of the amounts at December 31,
1996 and 1995 is summarized as follows:
December 31,
---------------------------
1996 1995
----------- ------------
Assets of Discontinued Operations $ 3,598,533 $ 8,243,154
Liabilities of Discontinued Operations (2,915,343) (6,603,990)
----------- ------------
Net Assets of Discontinued Operations $ 683,190 $ 1,639,164
----------- ------------
----------- ------------
In addition, the operations of these projects are being netted together
as loss on discontinued operations. The resulting loss for the year
ended December 31, 1996 and the period ended December 31, 1995 was
$405,349 and $256,816, respectively. In addition, the Company recognized
a gain on the disposition of the discontinued operations of $983,507 for
the year ended December 31, 1996.
NOTE 13 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has incurred
significant losses and does not currently have the means to pay the
current maturities of its long term debt as they become due. These
factors create an uncertainty about the Company's ability to continue as
a going concern. The Company is currently, however, in the final stages
of obtaining a $5,000,000 financing package from a bank. The Company
expects to receive a portion of those funds shortly and the remaining
balance before the end of 1997. The financing package could eventually
go as high as $10,000,000. As part of the arrangement, the Company will
ultimately sell approximately 50% of the Company through a 504 stock
issuance. Receiving the $5,000,000 could ultimately effect the
realization of assets and liquidation of liabilities in the normal course
of business. The consolidated financial statements do not include any
adjustments that might be necessary if the Company is unable to continue
as a going concern.
If the $5,000,000 is obtained, the Company's management believes that the
Company will soon be able to generate revenues sufficient to cover its
operating costs. Management also has plans to raise capital through the
issuance of stock.
24
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1996 and 1995
NOTE 14 - SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the following events occurred:
1. Three of the Company's notes payable were converted into one
long-term note during 1997. Total outstanding principal on the
three notes at December 31, 1996 was $542,699 ($241,520, $290,179
and $11,000). The new note is in the form of a credit line that
bears interest at 6% per annum and matures on January 1, 2007.
2. As mentioned in Note 13, the Company is in the process of obtaining
a $5,000,000 financing package from a bank. The Company has not
received any of the funds as of the date of this audit report.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By:
-------------------------------------
Steven R. Peacock
President and Chief Executive Officer
Dated:
-----------------------
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
- --------- ----- ----
- ------------------------ President, Chief Executive Officer
Steven R. Peacock and Director
- ------------------------ Secretary
Joy M. Hunt
<PAGE>
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
CANYON SHADOWS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
This First Amended and Restated Agreement of Limited Partnership (the
"Agreement") is made as of July 15, 1996 by and between Peacock Financial
Corp., a California corporation ("Peacock"), as managing general partner,
Blindness Support Services, Inc., a California nonprofit corporation, as
general partner ("Blindness" and together with Peacock, the "General
Partners"), National Corporate Tax Credit Fund IV, a California limited
partnership, as investor limited partner ("Investor LP"), National Corporate
Tax Credit, Inc. IV, a California corporation, as administrative limited
partner ("Administrative LP" and together with the Investor LP, the "Limited
Partners"), Steven R. Peacock (the "Withdrawing Limited Partner"), and with
reference to the following recitals of fact:
WHEREAS, Peacock is the owner of that certain real property and
improvements thereon located as 8405 Arlington Boulevard, Riverside,
California 92507 (the "Property"); and
WHEREAS, Peacock, as general partner, and the Withdrawing Limited
Partner, as limited partner, entered into that certain Agreement of Limited
Partnership of Canyon Shadows, L.P. (the "Partnership") dated as of July 15,
1996 (the "Initial Agreement"); and
WHEREAS, Peacock, as general partner, the Withdrawing Limited Partner,
the Investor LP and the Administrative LP, as limited partners, entered into
that certain Amendment to the Agreement of Limited Partnership of Canyon
Shadows, L.P. dated as of July 15, 1996 (the "First Amendment" and together
with the Initial Agreement, the "Original Agreement"), wherein the Investor
LP and the Administrative LP were admitted to the Partnership as limited
partners; and
WHEREAS, the Investor LP and the Administrative LP, through clerical
error, were referred to in the First Amendment with the roman numeral VI in
their names rather than the correct roman numeral IV; and
WHEREAS, the parties hereto wish to admit Blindness as a general partner
and to continue the Partnership; and
WHEREAS, the parties hereto wish to amend and restate the Original
Agreement to reflect their respective rights and obligations with respect to
the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
1. WITHDRAWAL OF WITHDRAWING LIMITED PARTNER. The Withdrawing Limited
Partner hereby withdraws as a limited partner of the Partnership. Execution
of this Agreement
<PAGE>
shall constitute acknowledgment by the Withdrawing Limited Partner that it
has received from the Partnership the full amount set forth in its capital
account.
2. ADMISSION OF BLINDNESS AS A GENERAL PARTNER. Blindness is hereby
admitted to the Partnership as a general partner thereof, and whenever the
term General Partner or General Partners is used in the Agreement it shall be
deemed to mean Peacock and/or Blindness. Blindness hereby agrees to assume
all obligations of a general partner pursuant to the Original Agreement, as
amended hereby.
3. CONTINUATION OF LIMITED PARTNERSHIP. The General Partners and the
Limited Partners hereby continue the limited partnership pursuant to the
California Revised Limited Partnership Act. The parties hereto do hereby
amend and restate the Original Agreement by substituting this Agreement in
its entirety for the Original Agreement. As of the date hereof, the Original
Agreement shall be of no further force or effect , and all rights and
obligations of the Partners shall be governed by this Agreement. All
references to "Partner" or "Partners" in this Agreement shall include the
General Partners and the Limited Partners.
4. NAME AND PRINCIPAL OFFICE. The name of the Partnership is Canyon
Shadows, L.P., a California limited partnership, whose principal office and
place of business is located at 1600 East Florida Avenue, Suite 306, Hemet,
California 92544, or such other location within the State of California as
may hereafter be determined by the General Partners.
5. PURPOSE. The business and purpose of the Partnership shall be to
acquire, own, manage and operate the Property as an affordable housing
project, and to enter into such agreements and make such presentations before
governmental authorities as are necessary for, and to carry out the
management and operation of the Property as an affordable housing project.
6. CERTIFICATES. The Partnership has caused a Certificate of Limited
Partnership (Form LP-1) to be filed in the Office of the Secretary of State
of the State of California on July 15, 1996 as File No. 9619700018. In
addition, the Partnership shall cause an Amendment to Certificate of Limited
Partnership (Form LP-2) to be filed in the Office of the Secretary of State
of the State of California to reflect the admission of Blindness as a general
partner.
7. DESIGNATION OF AGENT FOR SERVICE OF PROCESS. The agent for service
of process for the Partnership shall be Steven R. Peacock, whose address is
1600 East Florida Avenue, Suite 306, Hemet, California 92544.
8. TERM OF PARTNERSHIP. The Partnership shall commence on July 15,
1996 and shall terminate on December 31, 2051.
2
<PAGE>
9. PERCENTAGE INTERESTS. Each Partner shall have the following
percentage interests in the Partnership (each, a "Percentage Interest"):
Peacock shall have a .5% Percentage Interest in the Partnership, as managing
general partner; Blindness shall have a .5% Percentage Interest in the
Partnership, as a general partner; Investor LP shall have a 98.9% Percentage
Interest in the Partnership, as a limited partner; and Administrative LP
shall have a .1% Percentage Interest in the Partnership, as a limited partner.
10. LIMITATION OF LIABILITY. Except as otherwise provided by law, the
Limited Partners shall not be liable to the Partnership for any cash or
property in excess of their capital contributions.
11. TAXABLE GAIN, TAX LOSS AND DISTRIBUTIONS. All taxable gains and tax
losses, distributions and tax credits shall be allocated as follows: .5% to
Peacock, .5% to Blindness, 98.9% to Investor LP and .1% to Administrative LP.
12. CAPITAL ACCOUNTS. A capital account shall be maintained for each
Partner in accordance with Treasury Regulations section 1.704-1(b)(2)(iv).
Each Partner shall have the following initial capital account to reflect each
Partner's initial capital contribution to the Partnership (each, a "Capital
Account"): the Capital Account of Peacock shall be $975,000; the Capital
Account of Blindness shall be $10; the Capital Account of the Investor LP
shall be $99; and the Capital Account of the Administrative LP shall be $1.
13. MANAGEMENT OF PARTNERSHIP.
a. MANAGING GENERAL PARTNER. Subject to subparagraph (b) below,
Peacock shall act as the managing general partner (the "Managing General
Partner") of the Partnership and, in such capacity, shall have control over
the day-to-day operations of the Partnership and shall have all rights,
powers and authority conferred by law as necessary, advisable or consistent
in connection therewith. Without limiting the generality of the foregoing,
but subject to paragraph 12.b below, the Managing General Partner shall have
the right, power and authority to execute any documents relating to the
financing, rehabilitation, construction, operation and sale of all or any
portion of the Property without the prior approval of the other Partners.
b. CONSENT OF THE GENERAL PARTNER. Notwithstanding anything to
the contrary contained herein, including, without limitation, Section 12(a)
hereof, in addition to those acts and decisions set forth elsewhere in this
Agreement, the Partnership shall not take any act, expend any sum, or incur
any obligation with respect to the following matters unless and until the
same has been approved in writing by all of the General Partners and the
Administrative LP:
3
<PAGE>
(1) Acquisition of any asset unrelated to the ownership and
operation of the Property by the Partnership;
(2) Sale, exchange, assignment, financing, refinancing or
mortgaging of all or a substantial part of any Partnership asset (other than
credit extended to the Partnership by usual trade creditors in the ordinary
course of Partnership business);
(3) Lending any funds or extending credit, or causing the
Partnership to become a guarantor or surety for any purpose;
(4) The release, assignment or transfer of any Partnership
claim, security interest, or all or any part of any other asset of the
Partnership;
(5) Confessing a judgment against the Partnership;
(6) Requesting that the General Partners and/or the Limited
Partner make any additional capital contribution to the Partnership;
(7) The filing of bankruptcy by the Partnership;
(8) The execution or delivery of any assignment of all or
substantially all of the Partnership's assets for the benefit of the
Partnership's creditors;
(9) The use by any Partner, or any individual or entity
affiliated with a Partner, of any real or personal property owned by the
Partnership for a purpose other than in furtherance of the Partnership's
business;
(10) The adoption of annual operating budgets, or any other
periodic operating budgets for the Partnership;
(11) Borrowing any sums, or obtaining any credit on behalf of
the Partnership;
(12) The execution of any contract, instrument or agreement
obligating the Partnership, or potentially obligating the Partnership, or
exposing the Partnership to liability, in an amount greater than $1,000,
except as contemplated within the Property's operating budget; and
(13) The amendment of any material contract to which the
Partnership is a party.
4
<PAGE>
14. TRANSFER OR PLEDGE. A Partner's interest in the Partnership shall
not be assigned, pledged, sold or otherwise transferred, in whole or in part,
without the prior written consent of the Managing General Partner.
15. ADDITIONAL OR SUBSTITUTED PARTNERS. Upon the prior written consent
of the General Partners, additional general or limited partners or substitute
general or limited partners may be admitted to the Partnership upon such
terms and conditions as the General Partners deem necessary.
16. INDEMNIFICATION. The Partnership does hereby indemnify, defend and
agree to hold the General Partners wholly harmless from and against any loss,
expense or damage suffered by a General Partner by reason of anything which
the General Partner may do or refrain from doing hereafter for or on behalf
of the Partnership and in furtherance of its interest; provided, however,
that the Partnership shall not be required to indemnify a General Partner
from any loss, expense or damage which a General Partner may suffer as a
result of its failure to perform its duties hereunder in good faith with due
diligence or in taking any action beyond the authority of the General Partner.
17. DISSOLUTION AND WINDING UP. Upon the expiration of the
Partnership's term or the written notice to the Partnership by the General
Partners or the Limited Partners, the Partnership shall be dissolved and the
business wound up.
18. GOVERNING LAW. The validity and enforceability of this Agreement
shall be governed by and construed in accordance with the laws of the State
of California in every respect and unless expressly or by necessary
implication contravened by any provisions hereof, the provisions of the
California Revised Limited Partnership Act shall prevail.
19. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which shall constitute one
and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"GENERAL PARTNERS"
PEACOCK FINANCIAL CORP., a California
corporation
By:
---------------------------------
5
<PAGE>
Steven R. Peacock, President
[Signatures Continued on Next Page]
6
<PAGE>
BLINDNESS SUPPORT SERVICES, INC.,
a California nonprofit corporation
By:
--------------------------------
Peter Benevidez, Executive Director
"LIMITED PARTNERS"
NATIONAL CORPORATE TAX CREDIT
FUND IV, a California limited partnership
By: National Partnership Investments
Corp., a California corporation,
General Partner
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
NATIONAL CORPORATE TAX CREDIT,
INC. IV, a California corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
"WITHDRAWING LIMITED PARTNER"
------------------------------------
Steven R. Peacock
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 90,987
<SECURITIES> 0
<RECEIVABLES> 11,744
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 102,731
<PP&E> 522,835
<DEPRECIATION> 151,186
<TOTAL-ASSETS> 4,521,694
<CURRENT-LIABILITIES> 1,532,915
<BONDS> 0
0
6,723
<COMMON> 10,695
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,521,694
<SALES> 3,005,211
<TOTAL-REVENUES> 3,369,000
<CGS> 2,990,836
<TOTAL-COSTS> 2,999,026
<OTHER-EXPENSES> 638,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,386
<INCOME-PRETAX> 140,803
<INCOME-TAX> 0
<INCOME-CONTINUING> (437,355)
<DISCONTINUED> 578,158
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,803
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
