<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 JUNE 30, 1998 COMMISSION FILE NO. 2-91651-D
PEACOCK FINANCIAL
CORPORATION
COLORADO 87-0410039
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
248 E. MAIN STREET
SAN JACINTO, CA 92583
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
(909) 487-8911
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
/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 29,061,507 SHARES OUTSTANDING
$0.001 PAR VALUE AS OF JUNE 30, 1998
<PAGE>
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998, AND
DECEMBER 31, 1997 3 & 4
- CONSOLIDATED STATEMENTS OF
OPERATIONS THREE MONTHS ENDED
JUNE 30, 1998 AND 1997 5 & 6
- CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
AS OF JUNE 30, 1998 7 & 8
- CONSOLIDATED STATEMENTS OF
CASH FLOWS AS OF JUNE 30, 1998
AND JUNE 30, 1997 9 & 10
- NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
ITEM 2. NOTES TO THE FINANCIAL STATEMENTS
ITEM 3. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
PART II. OTHER INFORMATION AND SIGNATURES
</TABLE>
2
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
-------- -----------
1998 1997
-------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ (9,217) $ 14,777
Receivables - related parties - -
----------- ----------
Total Current Assets (9,217) 14,777
----------- ----------
FIXED ASSETS, at cost, net of accumulated
depreciation of $68,858 and $66,980,
respectively 378,221 359,215
----------- ----------
OTHER ASSETS
Construction-in-process 176 374,397
Notes receivable - related parties 10,246,522 230,067
Developer fees receivable 190,610 226,000
Development costs 1,216,036 1,216,036
Investments in limited partnerships 1,224,292 1,224,292
Deferred charges 655 -
Other assets 11,926 11,926
----------- ----------
Total Other Assets 12,890,217 3,282,718
----------- ----------
TOTAL ASSETS $13,259,221 $3,656,710
----------- ----------
----------- ----------
</TABLE>
3
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
-------- -----------
1998 1997
-------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 175,333 $ 219,934
Other current liabilities 219,192 189,423
Lines of credit 43,226 50,585
Notes payable - current portion 965,541 1,147,871
Note payable to stockholder 15,996 23,869
----------- ----------
Total Current Liabilities 1,419,288 1,631,682
----------- ----------
LONG-TERM DEBT
Notes payable - long term 513,953 523,217
Total Liabilities 1,933,241 2,154,899
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: 10,000,000 shares authorized
at $0.01 par value; 672,300 and 672,300 shares
issued and outstanding, respectively 6,723 6,723
Common stock: 250,000,000 shares authorized at
$0.001 par value; 29,061,507 and 11,763,797
shares issued and outstanding, respectively 29,062 11,764
Additional paid-in capital 12,757,799 2,335,379
Accumulated deficit (1,467,604) (852,055)
----------- ----------
Total Stockholders' Equity 11,325,980 1,501,811
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,259,221 $3,656,710
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For 6 Months Ended For 3 Months Ended
June 30, June 30, June 30, June 30,
------------------------ ------------------------
1998 1997 1998 1997
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Home building and development sales $ 313,868 $ 1,040,985 $ 80,196 $ 336,697
Property management and administration
income 2,100 3,867 1,200 1,900
Commissions income - 5,447 - 633
Other income 9,586 16,199 500 14,072
---------- ------------ --------- ----------
Total Revenues 325,554 1,066,498 81,896 353,302
---------- ------------ --------- ----------
EXPENSES
Home building and development costs 401,058 1,037,907 76,179 339,757
General and administrative 489,188 318,755 326,934 133,888
Depreciation and amortization 1,878 200 939 -
---------- ------------ --------- ----------
Total Expenses 892,124 1,356,862 404,052 473,645
---------- ------------ --------- ----------
LOSS FROM CONTINUING OPERATIONS 566,570 290,364 322,156 120,343
---------- ------------ --------- ----------
OTHER INCOME (EXPENSE)
Interest expense (48,179) (83,256) (23,735) 78,389
Other expense (800) (1,600) - -
---------- ------------ --------- ----------
Total Other Income (Expense) (48,979) (84,856) (23,735) 78,389
---------- ------------ --------- ----------
(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (615,549) (375,220) (345,891) (198,732)
INCOME TAXES - - - -
---------- ------------ --------- ----------
NET (LOSS) FROM CONTINUING OPERATIONS (615,549) (375,220) (345,891) (198,732)
DISCONTINUED OPERATIONS (Note 12)
Income (Loss) from operations of discontinued
segment - (10,953) - 50,634
Gain on disposal of discontinued segment - 135,677 - 135,677
---------- ------------ --------- ----------
Total Discontinued Operations - 124,724 - 186,311
---------- ------------ --------- ----------
</TABLE>
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 Statements of Operations (Continued)
<TABLE>
<CAPTION>
For 6 Months Ended For 3 Months Ended
June 30, June 30, June 30, June 30,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ (615,549) $ (250,496) $ (345,891) $ (12,421)
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
EARNINGS (LOSS) PER SHARE
Continued operations (0.03) (.03) (0.01) (.02)
Discontinued operations 0.00 .01 0.00 0.02
----------- ----------- ---------- ----------
EARNINGS (LOSS) PER SHARE (0.03) (.02) (0.01) 0.00
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 20,412,652 10,831,295 27,912,652 10,831,295
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
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 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, 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 -
Class stock issued
for services - - 227,500 227 36,773 -
Deferred stock costs
charged to paid-in
capital - - - - (265,810) -
Accrued dividends - - - - (25,422) -
Net income for the year
ended December 31,
1996 - - - - - (140,803)
------- ------ ---------- ------ --------- ----------
Balance,
December 31, 1996 672,300 6,723 10,695,295 10,695 2,215,474 (1,074,064)
Common stock issued
for cash - - 422,002 422 59,618 -
Common stock issued
for services - - 646,500 647 83,459 -
Accrued dividends - - - - (23,172) -
</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 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>
Net income for the
year ended December
December 31, 1997 - - - - - 222,009
-------- ------ ---------- ------- ----------- -----------
Balance,
December 31, 1997 672,300 $6,723 11,763,797 $11,764 $2,335,379 $(852,055)
-------- ------ ---------- ------- ----------- -----------
Common stock issued
for cash - - 1,323,710 1,324 218,013 -
Common stock issued
for services - - 974,000 974 210,200 -
Common stock issued
for note receivable - - 15,000,000 15,000 10,000,000 -
Accrued dividends - - - - (5,793) -
Net income for the year
ended June
31, 1998 - - - - - (615,549)
-------- ------ ---------- ------- ----------- -----------
Balance June
30, 1998 672,300 $6,723 29,061,507 $29,062 $12,757,799 $(1,467,604)
-------- ------ ---------- ------- ----------- -----------
-------- ------ ---------- ------- ----------- -----------
</TABLE>
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 Cash Flows
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (615,549) (250,496)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 1,878 200
Discontinued operations - 740,352
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 35,390 36,000
(Increase) decrease in accounts
receivable - related parties (10,016,455) (27,384)
(Increase) decrease in other assets (655) (5,657)
Increase (decrease) in accounts payable (44,601) (28,080)
Increase (decrease) in other liabilities 22,410 (269,832)
----------- ---------
Net Cash Used by Operating Activities 10,617,582 (195,103)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress 374,221 82,621
Purchase of property and equipment (20,884) (30,616)
----------- ---------
Net Cash Used by Investing Activities 353,337 52,005
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders (7,873) 2,495
Repayment of notes payable (182,330) (397,654)
Proceeds from long-term borrowings (9,264) 62,351
Proceeds from stock offerings 10,439,718 10,032
----------- ---------
Net Cash Provided by Financing Activities $10,240,251 $(322,776)
----------- ---------
</TABLE>
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 Cash Flows (Continued)
<TABLE>
<CAPTION>
For the 6 Months Ended
June 30, June 30,
1998 1997
---------- -----------
<S> <C> <C>
NET DECREASE IN CASH $ (23,994) $(75,668)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 14,777 90,987
--------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ (9,217) $ 15,319
--------- --------
--------- --------
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for debt $ - $ -
Common stock issued for services $ 210,200 $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid, net of amount capitalized $22,604 $ 1,399
Income taxes paid $- $-
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
10
<PAGE>
PEACOCK FINANCIAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997
1. The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1997, balance sheet data
was derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and footnotes thereto included in
the Company's report on Form 10-KSB for the year ended December 31, 1997.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for the interim periods presented.
11
<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 JUNE 30, 1998, COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1997.
The Company is engaged in construction and real estate development. The
Company's most recent developments are near the Eastside Reservoir, a $3
billion project under construction in Central Riverside County which will be
the largest freshwater lake in Southern California.
REVENUES. Revenues for the three months ended June 30, 1998, decreased by
$271,406 or 77% to $81,896 from $353,302 for the three months ended June 30,
1998. This decrease resulted from a reduction in home building as well as a
decrease in property management income and administration revenues.
EXPENSES. Total expenses for the three months ended June 30, 1998, decreased
by $69,593 or 15% to $404,052 from $473,645 for the three months ended June
30, 1998. This decrease resulted from lower home building costs. General and
administrative expenses for the three months ended June 30, 1998, increased
by $193,046 or 59% to $326,934 from $133,888 for the three months June 30,
1998. This increase was primarily for increase in issue of common stock for
services.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1997.
REVENUES. Revenues for the six months ended June 30, 1998, decreased by
$740,944 or 70% to $325,554 from $1,066,498 for the six months ended June 30,
1998. This decrease resulted from decreased home building as well as a
decrease in property management and administration income.
EXPENSES. Total expenses for the six months ended June 30, 1998, decreased
by $464,737 or 35% to $892,125 from $1,356,862 for the six months ended June
30, 1998. This decrease resulted from lower home building development costs.
General and administrative expenses for the six months ended June 30, 1998,
increased by $170,434 or 35% to $489,188 from $318,755 for the six months
ended June 30, 1998 primariy due to the increase in issue of common stock for
services.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE.
For the six months ended June 30, 1998, the Company funded its operations and
capital requirements partially with its own capital and partially with loans
from related parties. As of June 30, 1998, the Company had an overdraft of
$9,217.
12
<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
August 13, 1998 /s/ Steven R. Peacock
- ---------------------------- --------------------------------------
Date Steven R. Peacock
President and Chief Executive Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> (9,217)
<SECURITIES> 0
<RECEIVABLES> 12,890,217
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,881,000
<PP&E> 447,079
<DEPRECIATION> (68,858)
<TOTAL-ASSETS> 13,259,221
<CURRENT-LIABILITIES> 1,419,288
<BONDS> 513,953
0
6,723
<COMMON> 29,062
<OTHER-SE> 11,290,195
<TOTAL-LIABILITY-AND-EQUITY> 13,259,221
<SALES> 325,554
<TOTAL-REVENUES> 0
<CGS> 401,058
<TOTAL-COSTS> 489,188
<OTHER-EXPENSES> 2,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,179
<INCOME-PRETAX> (615,549)
<INCOME-TAX> 0
<INCOME-CONTINUING> (615,549)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (615,549)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
