<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 COMMISSION FILE NO. 2-91651-D
PEACOCK FINANCIAL
CORPORATION
COLORADO 87-0410039
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
248 E. MAIN STREET
SAN JACINTO, CA.
92583
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
(909) 487-8911
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
COMMON STOCK 10,967,296 SHARES OUTSTANDING
$0.001 PAR VALUE AS OF SEPTEMBER 30, 1997
<PAGE>
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- CONDENSED CONSOLIDATED
BALANCE SHEETS AS OF
SEPTEMBER 30, 1997, AND
DECEMBER 31, 1996 3 & 4
- CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996 5 & 6
- CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
AS OF SEPTEMBER 30, 1997 8 - 10
- CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS AS OF SEPTEMBER 30,
1997 AND SEPTEMBER 30, 1996 11 & 12
- NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
ITEM 2. NOTES TO THE FINANCIAL STATEMENTS 13
ITEM 3. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION 14 & 15
PART II. OTHER INFORMATION AND SIGNATURES 16
2
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
------------------ -------------
1997 1996
------------ -----------
CURRENT ASSETS
Cash and cash equivalents $ 3,162 $ 90,987
Receivables - related parties 10,488 11,744
--------- ---------
Total Current Assets 13,650 102,731
--------- ---------
FIXED ASSETS, at cost, net of accumulated
depreciation of $147,717 and $151,186,
respectively 402,347 371,649
--------- ---------
NET ASSETS/LIABILITIES OF DISCONTINUED OPERATIONS
(Note 12) (50,360) 683,190
--------- ---------
OTHER ASSETS
Construction-in-process 408,304 484,424
Notes receivable - related parties 200,348 140,171
Developer fees receivable 242,367 294,000
Development costs 1,224,292 1,216,036
Investments in limited partnerships 1,221,936 1,224,292
Other assets 4,383 5,201
--------- ---------
Total Other Assets 3,301,630 3,364,124
--------- ---------
TOTAL ASSETS $3,667,267 $4,521,694
--------- ---------
--------- ---------
3
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
-------------- ------------
1997 1996
-------------- ------------
CURRENT LIABILITIES
Accounts payable $ 270,914 $ 295,881
Other current liabilities 99,009 336,014
Lines of credit 57,715 76,006
Notes payable - current portion 390,819 797,100
Note payable to stockholder 28,409 27,914
------------ ------------
Total Current Liabilities 846,866 1,532,915
------------ ------------
LONG-TERM DEBT
Notes payable - long term 1,977,576 1,829,951
------------ ------------
Total Liabilities 2,824,442 3,362,866
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: 10,000,000 shares authorized
at $0.01 par value; 672,300 and -0- shares
issued and outstanding, respectively 6,723 6,723
Common stock: 250,000,000 shares authorized at
$0.001 par value; 10,967,296 and 10,695,295
shares issued and outstanding, respectively 10,967 10,695
Additional paid-in capital 2,225,234 2,215,474
Accumulated deficit (1,400,099) (1,074,046)
------------ ------------
Total Stockholders' Equity 842,825 1,158,828
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,667,267 $ 4,521,694
------------ ------------
------------ ------------
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For 9 Months Ended For 3 Months Ended
--------------------------- -------------------------------
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Home building and development sales $ 1,802,591 $ 2,094,402 $ 761,606 $ 1,672,275
Property management and administration
income 3,867 151,848 - 22,055
Commissions income 6,977 67,199 1,530 40,376
Other income 69,632 15,416 53,433 8,752
--------- --------- --------- ---------
Total Revenues 1,883,067 2,328,865 816,569 1,743,458
--------- --------- --------- ---------
EXPENSES
Home building and development costs 1,799,513 2,089,923 761,606 1,667,796
General and administrative 441,554 509,644 122,799 167,529
Depreciation and amortization 200 7,371 - 2,457
--------- --------- --------- ---------
Total Expenses 2,241,267 2,606,938 884,405 1,837,782
--------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (358,200) (278,073) (67,836) (94,324)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income - 1,000 - -
Interest expense (181,979) (61,590) (98,723) (22,980)
Other expense (1,600) - - -
--------- --------- --------- ---------
Total Other Income (Expense) (183,579) (60,590) (98,723) (22,980)
--------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (541,779) (338,663) (166,559) (117,304)
INCOME TAXES - - - -
NET LOSS FROM CONTINUING OPERATIONS (541,779) (338,663) (166,559) (117,304)
--------- --------- --------- ---------
DISCONTINUED OPERATIONS
Income from operations of discontinued
segment 80,068 232,830 91,021 (39,654)
Gain on disposal of discontinued segment 135,676 241,504 - 241,504
--------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
Total Discontinued Operations 215,744 474,334 92,021 201,850
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Operations (Continued)
<TABLE>
<CAPTION>
For 9 Months Ended For 3 Months Ended
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ (326,035) $ 135,671 $ (75,538) $ 84,546
------------ ------------ ------------ ---------
------------ ------------ ------------ ---------
EARNINGS (LOSS) PER SHARE
Continued operations $ (0.05) $ (0.04) $ (0.02) (0.01)
Discontinued operations 0.02 0.06 0.01 0.02
------------ ------------ ------------ ---------
EARNINGS (LOSS) PER SHARE $ .03 $ 0.02 $ (0.01) $ 0.01
------------ ------------ ------------ ---------
------------ ------------ ------------ ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 10,831,295 7,844,581 10,831,295 7,844,581
------------ ------------ ------------ ---------
------------ ------------ ------------ ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
7
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------------- ------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March
31, 1994 - $ - 2,136,304 $ 2,136 $1,910,998 $(345,718)
Stock issued for
services - - 848,696 849 7,638 -
Accrued dividends - - - - (10,200) -
Class B stock issued
for debt - - 184,900 185 369,800 -
Class B stock issued
for cash - - 16,250 16 32,299 -
Stock offering costs
charged to paid-in
capital - - - - (69,080) -
Net loss for the year
ended March 31,
1995 - - - - - (321,864)
---------- ---------- ---------- ---------- ----------- -----------
Balance, March
31, 1995 - - 3,186,150 3,186 2,241,455 (667,582)
Class A stock issued
for services - - 20,000 20 19,980 -
Class B stock issued
for cash - - 50,000 50 99,950 -
Accrued dividends - - - - (34,486) -
Net loss for the period
from April 1, 1995 to
December 31, 1995 - - - - - (547,285)
---------- ---------- ---------- ---------- ----------- -----------
Balance, December 31,
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE>
1995 - $ - 3,256,150 $ 3,256 $ 2,326,899 $(1,214,867)
---------- ---------- ---------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
9
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
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)
Net Loss for the
period ended
September 30, 1997 (326,035)
---------- ---------- ---------- ---------- ----------- -----------
Balance September
30, 1997 672,300 $ 6,723 10,695,295 $ 10,695 $ 2,215,474 $ (1,400,099)
---------- ---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
10
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows
For the 9 Months Ended
September 30, September 30,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(326,035) $135,671
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 200 7,849
Discontinued operations 733,551 396,598
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 51,633 940
(Increase) decrease in accounts
receivable - related parties (58,922) (349,686)
(Increase) decrease in other assets (5,082) 214,377
Increase (decrease) in accounts payable (24,967) 95,524
Increase (decrease) in other liabilities (255,296) (16,259)
--------- --------
Net Cash Used by Operating Activities 115,082 485,014
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress 76,120 (611,037)
Purchase of property and equipment (30,898) (208,120)
--------- --------
Net Cash Used by Investing Activities 45,222 (819,157)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders 495 (16,857)
Repayment of notes payable (406,281) (116,603)
Proceeds from long-term borrowings 147,625 102,887
Proceeds from stock offerings 10,032 102,873
--------- --------
Net Cash Provided by Financing Activities $(248,129) $ 72,300
--------- --------
The accompanying notes are an integral part of these consolidated statements.
11
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows (Continued)
For the 9 Months Ended
September 30, September 30,
1997 1996
------------- -------------
NET INCREASE IN CASH $ (87,825) $(261,843)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 90,987 267,593
--------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 3,162 $ 5,750
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for debt $ - $ -
Common stock issued for services $ - $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid, net of amount capitalized $2,355 $ -
Income taxes paid $ - $ -
The accompanying notes are an integral part of these consolidated statements.
12
<PAGE>
PEACOCK FINANCIAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1996, balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and footnotes thereto included in
the Company's report on Form 10-KSB for the year ended December 31, 1996.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for the interim periods presented.
13
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Form 10-QSB contains forward looking statements within the meaning of
section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward looking statements.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1996.
The Company is engaged in construction and real estate development. The
Company's most recent developments are near the Eastside Reservoir, a $3 billion
project under construction in Central Riverside County which will be the largest
freshwater lake in Southern California.
REVENUES. Revenues for the three months ended September 30, 1997, decreased by
$926,889 or 53% to $816,569 from $1,743,458 for the three months ended September
30, 1997. This decrease resulted from reduction in home building as well as
decrease in property management and administration revenues.
EXPENSES. Total expenses for the three months ended September 30, 1997,
decreased by $953,377 or 52% to $884,405 from $1,837,782 for the three months
ended September 30, 1997. This decrease resulted from lower home building
development costs. General and administrative expenses for the three months
ended September 30, 1997, decreased by $44,730 or 27% to $122,799 from $167,529
for the three months September 30, 1997.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE
NINE MONTHS ENDED JUNE 30, 1996.
REVENUES. Revenues for the nine months ended September 30, 1997, decreased by
$445,798 or 19% to $1,883,067 from $2,328,865 for the nine months ended
September 30, 1997. This decrease resulted from reduction in home building as
well as decrease in property management and administration income.
EXPENSES. Total expenses for the nine months ended September 30, 1997,
decreased by $365,671 or 14% to $2,241,267 from $2,606,938 for the nine months
ended September 30, 1997. This decrease resulted from lower home building
development costs. General and administrative expenses for the nine months ended
September 30, 1997, decreased by $68,090 or 13% to $441,554 from $509,644 for
the nine months ended September 30, 1997.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE.
For the nine months ended September 30, 1997, the Company funded its operations
and capital requirements partially with its own capital and partially with loans
from related parties. As of September 30, 1997, the Company had cash of $3,162.
Net cash generated from the operating activities increased by $115,082 compared
to increase of $485,014 for the nine months ended September 30, 1997 and 1996
respectively. The increase resulted mainly from the discontinued operations.
14
<PAGE>
Net cash from investing activities increased by $45,222 compared to reduction of
$819,157 for the prior year. These are mainly as the result of construction in
progress.
Net cash used in financing activities decreased by $248,129 compared to increase
of $72,300 for the nine months ended September 30, 1997 and 1996, respectively.
At September 30, 1997 and 1996, the Company had $1,977,576 and $1,853,228 of
long-term debt respectively.
The Company is in the process to raise a three-year $10,000,000 loan for real
estate development as well as for working capital.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEACOCK FINANCIAL CORPORATION
- ----------------------- ---------------------------------------
Date Steven R. Peacock
President and Chief Executive Officer
- ----------------------- --------------------------------------- Date
Joy M. Hunt
Secretary/Treasurer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,162
<SECURITIES> 0
<RECEIVABLES> 10,488
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,650
<PP&E> 402,347
<DEPRECIATION> 147,717
<TOTAL-ASSETS> 3,667,267
<CURRENT-LIABILITIES> 846,866
<BONDS> 1,977,576
0
6,723
<COMMON> 10,967
<OTHER-SE> 825,135
<TOTAL-LIABILITY-AND-EQUITY> 3,667,267
<SALES> 1,802,591
<TOTAL-REVENUES> 1,883,067
<CGS> 1,799,513
<TOTAL-COSTS> 2,241,267
<OTHER-EXPENSES> 1,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181,979
<INCOME-PRETAX> (541,779)
<INCOME-TAX> 0
<INCOME-CONTINUING> (541,779)
<DISCONTINUED> 215,744
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (326,035)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
