<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 MARCH 31, 1998 COMMISSION FILE NO. 2-91651-D
PEACOCK FINANCIAL
CORPORATION
COLORADO 87-0410039
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
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.
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK 12,967,131 SHARES OUTSTANDING
$0.001 PAR VALUE AS OF MARCH 31, 1998
</TABLE>
<PAGE>
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- CONDENSED CONSOLIDATED
BALANCE SHEETS AS OF
MARCH 31, 1998, AND DECEMBER 31, 1997 3 & 4
- CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS THREE MONTHS ENDED
MARCH 31, 1998 AND 1997 5 & 6
- CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
AS OF MARCH 31, 1998 7 & 8
- CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS AS OF MARCH 31, 1998
AND MARCH 31, 1997 9 & 10
- NOTES TO CONDENSED 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>
March 31, December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 13,142 $ 14,777
----------- -----------
Total Current Assets 13,142 14,777
----------- -----------
FIXED ASSETS, at cost, net of accumulated
depreciation of $147,717 and $151,186,
respectively 358,276 359,215
----------- -----------
OTHER ASSETS
Construction-in-process - 374,397
Notes receivable 10,242,202 230,067
Developer fees receivable 209,243 226,000
Development costs 1,216,036 1,216,036
Investments in limited partnerships 1,224,292 1,224,292
Other assets 11,926 11,926
----------- -----------
Total Other Assets 12,903,699 3,282,718
----------- -----------
TOTAL ASSETS $13,275,117 $ 3,656,710
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 145,675 $ 219,934
Other current liabilities 201,886 189,423
Lines of credit 46,905 50,585
Notes payable - current portion 919,650 1,147,871
Note payable to stockholder 18,486 23,869
----------- -----------
Total Current Liabilities 1,332,602 1,631,682
----------- -----------
LONG-TERM DEBT
Notes payable - long term 522,802 523,217
----------- -----------
Total Liabilities 1,855,404 2,154,899
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: 10,000,000 shares
authorized at $0.01 par value; 672,300
and -0- shares issued and outstanding,
respectively 6,723 6,723
Common stock: 250,000,000 shares authorized
at $0.001 par value; 12,967,131 and
11,763,797 shares issued and outstanding,
respectively 12,967 11,764
Additional paid-in capital 12,521,736 2,335,379
Accumulated deficit (1,121,713) (852,055)
----------- -----------
Total Stockholders' Equity 11,419,713 1,501,811
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,275,117 $ 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>
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES
Home building and development sales $ 233,672 $ 704,288
Property management and administration
income 900 1,967
Commissions income - 4,814
Other income 9,086 2,127
---------- -----------
Total Revenues 243,658 713,196
---------- -----------
EXPENSES
Home building and development costs 324,879 698,150
General and administrative 162,255 184,867
Depreciation and amortization 939 200
---------- -----------
Total Expenses 488,073 883,217
---------- -----------
LOSS FROM CONTINUING OPERATIONS (244,415) (170,021)
---------- -----------
OTHER INCOME (EXPENSE)
Interest income - -
Interest expense (24,444) (4,867)
Other expense (800) (1,600)
---------- -----------
Total Other Income (Expense) (25,244) (6,467)
---------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (269,659) (176,488)
INCOME TAXES - -
---------- -----------
NET LOSS FROM CONTINUING OPERATIONS (269,659) (176,488)
DISCONTINUED OPERATIONS
Loss from operations of discontinued segment - (61,587)
---------- -----------
Total Discontinued Operations - (61,587)
---------- -----------
NET LOSS $ (269,659) $ (238,075)
---------- -----------
---------- -----------
</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>
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
LOSS PER SHARE
Continued operations $ 0.02 $ 0.01
Discontinued operations 0.00 0.01
----------- -----------
LOSS PER SHARE $ 0.02 $ 0.02
----------- -----------
----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,365,464 10,695,295
----------- -----------
----------- -----------
</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,
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 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) -
Net income for the
year ended
December 31, 1997 - - - - - 222,009
------- -------- ---------- --------- ------------ -----------
Balance,
December 31, 1997 672,300 $ 6,723 11,763,797 $ 11,764 $ 2,335,379 $ (852,055)
------- -------- ---------- --------- ------------ -----------
</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>
Common stock
issued for cash - - 1,153,334 1,153 177,200 -
Common stock issued
for services - - 50,000 50 14,950 -
Common stock issued
for note receivable - - - - 10,000,000 -
Accrued dividends - - - - (5,793) -
Net income for the
year ended March
31, 1998 - - - - - (269,659)
------- -------- ---------- --------- ------------ -----------
Balance,
March 31, 1998 672,300 $ 6,723 12,967,131 $ 12,967 $12,521,736 $(1,121,714)
------- -------- ---------- --------- ------------ -----------
------- -------- ---------- --------- ------------ -----------
</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>
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (269,659) $ (238,075)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 939 200
Discontinued operations - 151,185
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 4,623 12,000
(Increase) decrease in accounts
receivable - related parties - 7,772
(Increase) decrease in other assets - (6,278)
Increase (decrease) in accounts payable (74,259) 9,385
Increase (decrease) in other liabilities 8,783 16,921
------------ ----------
Net Cash Used by Operating Activities (329,573) (46,890)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Note receivable (10,000.00) -
Construction in progress 374,397 29,120
Purchase of property and equipment - (30,831)
------------ ----------
Net Cash Used by Investing Activities (9,625,603) (1,711)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders (5,383) 1,878
Repayment of notes payable (228,221) (401,968)
Proceeds from long-term borrowings (415) 360,627
Proceeds from stock offerings 10,187,560
------------ ----------
Net Cash Provided by Financing Activities $ 9,953,541 $ (39,463)
------------ ----------
</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>
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
NET INCREASE IN CASH $ (1,635) $ (88,064)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 14,777 90,987
--------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 13,142 $ 2,923
--------- ---------
--------- ---------
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 $ 11,253 $ 2,173
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
MARCH 31, 1998
1. The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1997, balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and footnotes thereto included in
the Company's report on Form 10-KSB for the year ended December 31, 1997.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for the interim periods presented.
11
<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 MARCH 31, 1998, COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 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 March 31, 1998, decreased by
$469,538 or 66% to $243,658 from $713,196 for the three months ended March 31,
1998. This decrease resulted from decrease in home building.
EXPENSES. Total expenses for the three months ended March 31, 1998, decreased
by $395,144 or 45% to $488,073 from $883,217 for the three months ended March
31, 1998. This decrease resulted from lower general and administrative expenses
and home building development costs. General and administrative expenses for the
three months ended March 31, 1998, decreased by $22,612 or 12% to $162,255 from
$184,867 for the three months March 31, 1998.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE.
For the three months ended March 31, 1998, the Company funded its operations and
capital requirements partially with its own working capital and partially with
proceeds from stock offerings. As of March 31, 1998, the Company had cash of
$13,142.
Net cash used from the operating activities was $329,573 compared to $46,890 for
the three months ended March 31, 1998, and 1997, respectively. The increase was
mainly from operating activities.
Net cash used in financing activities was $9,625,603 compared to ($1,711) for
the three months ended March 31, 1998, and 1997, respectively.
At March 31, 1998, and 1997, the Company had $522,802 and $2,190,578 of
long-term debt respectively.
On March 31, 1998, the Company issued $10,000,000 stock to Hawthorne Group, Ltd.
and in exchange received a $10,000,000 note receivable.
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
May 20, 1998 /s/ Steven R. Peacock
- ------------------------------ -------------------------------------
Date Steven R. Peacock
President and Chief Executive Officer
May 20, 1998 /s/ Bruce Merati
- ------------------------------ -----------------------------------
Date Bruce Merati
Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,142
<SECURITIES> 0
<RECEIVABLES> 12,903,699
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,916,841
<PP&E> 505,993
<DEPRECIATION> (147,717)
<TOTAL-ASSETS> 13,275,117
<CURRENT-LIABILITIES> 1,332,602
<BONDS> 522,802
0
6,723
<COMMON> 12,798
<OTHER-SE> 11,400,192
<TOTAL-LIABILITY-AND-EQUITY> 13,275,117
<SALES> 243,658
<TOTAL-REVENUES> 0
<CGS> 324,879
<TOTAL-COSTS> 162,255
<OTHER-EXPENSES> 1,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,444
<INCOME-PRETAX> (269,659)
<INCOME-TAX> 0
<INCOME-CONTINUING> (269,659)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (269,659)
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
