<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- --------------------------------------------------------------------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999 Commission File No. 2-91651-D
PEACOCK FINANCIAL
CORPORATION
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
COLORADO 87-0410039
- ---------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
2531 SAN JACINTO STREET
San Jacinto, CA 92583
(Address and zip code of principal executive offices)
(909) 652-3885
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
COMMON STOCK 32,185,056 SHARES OUTSTANDING
$0.001 PAR VALUE AS OF SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PEACOCK FINANCIAL CORPORATION
REPORT ON FORM 10Q
QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
* CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999, AND
DECEMBER 31, 1998 3 & 4
* CONSOLIDATED STATEMENTS OF
OPERATIONS THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 5 & 6
* CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
AS OF SEPTEMBER 30, 1999 7 & 8
* CONSOLIDATED STATEMENTS OF
CASH FLOWS AS OF SEPTEMBER 30,
1999 AND SEPTEMBER 30, 1998 9 & 10
* NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 11
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 12, 13 & 14
PART II. OTHER INFORMATION AND SIGNATURES 15
Page 2
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 59,701 -0-
Notes receivable 317,893 19,300
Due from related party (5,348) 2,396
---------- ----------
Total Current Assets 372,246 21,696
FIXED ASSETS, at cost, net of accumulated depreciation
of $83,034 and $80,299, respectively 2,610 366,780
OTHER ASSETS
Notes receivable - related parties 114,000 114,000
Developer fees receivable 58,728 154,077
Development costs 1,216,036 1,216,036
Investments in limited partnerships 1,224,292 1,224,292
Other investments 901,730 200,000
Licensing rights 30,000 30,000
Other assets 48,151 29,201
---------- ----------
Total Other Assets 3,592,937 2,967,606
---------- ----------
TOTAL ASSETS $3,967,793 $3,356,082
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $227,193 $227,743
Bank overdraft -0- 4,509
Other current liabilities 263,746 280,982
Lines of credit 2,677 6,365
Notes payable - current portion 422,322 753,060
Note payable to stockholder 51,198 57,058
---------- ----------
Total Current Liabilities 967,136 1,329,717
LONG-TERM DEBT
Notes payable - long term 730,296 864,501
---------- ----------
Total Liabilities 1,697,432 2,194,218
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; 32,185,056 and 20,750,370
shares issued and outstanding, respectively 32,185 20,750
Capital reserve (3,666) -0-
Additional paid-in capital 4,512,972 3,519,882
Accumulated deficit (2,277,853) (2,385,491)
---------- ----------
Total Stockholders' Equity 2,270,361 1,161,864
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,967,793 $3,356,082
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 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,
1999 1998 1999 1998
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Home building and development sales $ -0- $453,412 $ -0- $139,544
Property management and administration income 2,755 3,300 385 1,200
Investment banking income 600,000 -0- -0- -0-
Other income 20,121 14,283 16,297 4,697
-------- ---------- -------- --------
Total Revenues 622,876 470,995 16,682 145,441
EXPENSES
Home building and development costs -0- 540,602 -0- 139,544
General and administrative 466,953 883,188 144,053 393,930
Depreciation and amortization 2,735 2,817 -0- 939
-------- ---------- -------- --------
Total Expenses 469,688 1,426,607 144,053 534,413
-------- ---------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS 153,188 (955,612) (127,371) (388,972)
OTHER INCOME (EXPENSE)
Interest income 7,556 -0- 7,556 -0-
Interest expense (99,951) (72,443) (29,676) (24,264)
Other expense -0- (2,400) 800 (1,600)
Gain (loss) on investments 45,000 -0- -0- -0-
-------- ----------- --------- ---------
Total Other Income (Expense) (47,395) (74,843) (21,320) (25,864)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 105,793 (1,030,455) (148,691) (414,836)
Income taxes -0- -0- -0- -0-
-------- ----------- --------- ---------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS $105,793 ($1,030,455) ($148,691) ($414,836)
======== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
<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,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 105,793 ($1,030,385) ($148,691) ($414,836)
========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE $ 0.01 $ (0.07) $ (0.01) $ (0.03)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 31,756,963 14,705,959 32,066,796 10,375,373
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 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, 1996 672,300 $6,723 10,695,295 $10,695 $2,215,474 ($1,074,064)
Common stock issued for cash -0- -0- 422,002 422 59,618 -0-
Stock issued for services -0- -0- 646,500 647 83,459 -0-
Accrued dividends -0- -0- -0- -0- (23,172) -0-
Net income (loss) for the
year ended December 31,
1997 -0- -0- -0- -0- -0- 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 -0- -0- 1,609,413 1,609 217,456 -0-
Common stock issued for services -0- -0- 3,108,040 3,108 599,967 -0-
Common stock issued on
conversion of debentures -0- -0- 1,559,834 1,560 104,033 -0-
Common stock issued for
investments and
licensing rights -0- -0- 2,420,000 2,420 257,580 -0-
Common stock issued under
failed financing package -0- -0- 289,286 289 28,639 -0-
Accrued dividends -0- -0- -0- -0- (23,172) -0-
Net income (loss) for the
period ended December 31,
1998 -0- -0- -0- -0- -0- (1,533,436)
------- ----- ---------- ------ --------- ---------
Balance, December 31, 1998 672,300 6,723 20,750,370 20,750 3,519,882 (2,385,491)
------- ----- ---------- ------ --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 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>
Balance, December 31, 1998 672,300 $6,723 20,750,370 $20,750 3,519,882 ($2,385,491)
------- ------ ---------- ------- --------- ----------
Common stock issued for cash -0- -0- 9,349,815 9,350 668,553 -0-
Common stock issued for services -0- -0- 8,571 9 600 -0-
Common stock issued on conversion of debentures -0- -0- 826,300 826 41,315 -0-
Common stock issued for investments and
licensing rights -0- -0- 1,250,000 1,250 300,000 -0-
Peacock International Corp -0- -0- -0- -0- -0- 1,845
Accrued dividends -0- -0- -0- -0- (17,379) -0-
Net income (loss) for the year ended
September 30, 1999 -0- -0- -0- -0- -0- 105,793
Balance September 30, 1999 672,300 $6,723 32,185,056 $32,185 4,512,971 ($2,277,853)
------- ------ ---------- ------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 8
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the 9 Months Ended
September 30, September 30,
------------ -------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $105,793 ($1,030,385)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 2,735 2,817
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable (203,244) 51,022
(Increase) decrease in accounts receivable - related parties 7,744 (23,132)
(Increase) decrease in other assets (720,680) (735)
Increase (decrease) in accounts payable (550) (7,962)
Incresae (decrease) in other liabilities (20,924) 40,287
--------- ---------
Net Cash Used by Operating Activities ($829,126) ($968,088)
========= =========
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress -0- 374,222
Purchase of property and equipment 364,170 (20,884)
--------- ---------
Net Cash Used by Investing Activities $364,170 $353,338
========= =========
CASH FLOWS FROM FINANCING ACTIVITIES
Due to (from) shareholders (5,860) (10,158)
Repayment of notes payable (330,738) (123,346)
Repayment of long-term borrowings (134,205) (12,280)
Stock issued for cash 999,969 753,389
--------- ---------
Net Cash Provided by Financing Activities $529,166 $607,605
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 9
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY
(Formerly Connectivity and Technology, Inc.)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the 9 Months Ended
September 30, September 30,
------------ ------------
1999 1998
------- ------
<S> <C> <C>
NET INCREASE IN CASH $64,210 ($7,145)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD (4,509) 14,777
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $59,701 $7,632
------- ------
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Common stock issued for debentures $51,565 -0-
Common stock issued for debt $8,452 -0-
Common stock issued for services $300,000 $470,275
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid, net of amount capitalized $50,424 $25,999
Income taxes paid -0- -0-
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 10
<PAGE>
PEACOCK FINANCIAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. The interim financial statements area prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1998 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 included in the Company's
report on Form 10-KSB for the year ended December 31, 1998. 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.
Page 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 1993 and section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward looking statements.
MANAGEMENT DISCUSSION
Peacock Financial Corporation (Company) is a diversified company that makes
direct investments in and provides management services to emerging businesses.
The Company intends to continue expanding through the internal development of
its present operations and as well as the acquisition of additional business
ventures. Since filing with the SEC to become a Business Development Corporation
in September of 1998, the Company has formed two new affiliate operating
companies with substantial ownership positions in each, and has made significant
investments in three emerging growth companies.
CURRENT OPERATING COMPANIES CONSIST OF THE FOLLOWING:
- ----------------------------------------------------
Peacock Real Estate Development Corporation (PDC): is a wholly owned subsidiary
with a 23 year operating history of successful real estate development in
California and Oregon. Through a broad corporate background and network of
affiliates, PDC has the capability of designing, building and managing any real
estate project in the continental United States. Current holdings are focused in
the San Jacinto Valley, CA, where the Company controls approximately 450
residential lots, 30 acres of commercially zoned property, and 11 acres zoned
for senior apartments. Most of these assets are in the master planned community
of Rancho San Jacinto, developed by PDC.
Vir-Tek Company (VTC): was formed as a partnership between Mr. Virgil Woolfolk
and Peacock Financial Corporation. Mr. Woolfolk controls 51% of VTC, and the
Company 49%. This partnership was formed to take advantage of recent federal
legislation allocating 3% of all federally funded projects to Disabled Veteran
Business Enterprises (DVBE) under which VTC qualifies. VTC is currently
obtaining the necessary accreditation while pursuing strategic alliances with a
variety of major companies that contract with governmental agencies. These
companies are highly experienced in engineering, environmental assessments and
construction, and have extensive track records in governmental contracting.
DOTCOM Ventures, LLC (DCV): was formed for the purpose of pursuing revenue and
equity opportunities in the Internet and E-commerce industry, while assisting
the Company in the identification and development of Internet related
investments. The Company owns 51% of DCV. DCV has a talented team experienced in
the successful launch of multiple Internet and technology start-up companies.
DCV currently has three contracts with companies to design new websites. DCV
also will assist the Company with website upgrades and marketing materials.
Page 12
<PAGE>
CURRENT EMERGING GROWTH INVESTMENT HOLDINGS CONSIST OF THE FOLLOWING:
- ---------------------------------------------------------------------
Solutions Media, Inc (SMI): and its Spinrecords.Com, is a development stage
company that licenses, develops, and markets musical recordings for direct file
transfer, or "downloading", to consumers over the Internet through the new
innovative technology commonly referred to as MP3. SMI has stated its intention
to file with the SEC for an Initial Public Offering and has retained the firm of
Brobek, Phleger & Harrison as SEC counsel. The Company currently owns 800,000
shares of common stock in SMI and intends on distributing 300,000 shares to its
stockholders prior to the Public Offering.
San Diego Soccer Development Corporation (SDSDC): was founded to develop, own
and run a professional soccer team in San Diego, CA, with the ultimate goal of
becoming a major league soccer franchise. SDSDC operates as the San Diego
"FLASH" soccer club and competes in the A-League in America's Division II
professional league. SDSDC recently filed a Form 10-SB with the SEC. SDSDC stock
is expected to be trading on the OTC-BB exchange before the end of 1999. Recent
press releases include an application with the world Indoor Soccer League to
play the 2000 indoor season under the "FLASH" logo. SDSDC has acquired a 75%
ownership position in the Riverside Soccer Development Corporation, a Division
III soccer club, and will serve as a farm team for the "FLASH". The Company
currently owns 500,000 common shares of SDSDC. The Company's CEO is a member of
the SDSDC Board of Directors.
San Francisco Soccer Development Corporation (SFSDC): was founded for the same
purpose as SDSDC in San Francisco. SFSDC operates as the San Francisco "SEALS"
and competes in the A-League. The Company currently owns 200,000 shares of SFDSC
common stock, with an option to purchase an additional 200,000 shares at fifty
cents ($0.50) per share. The Company expects SFSDC to file a Form 10SB with the
SEC in the year 2000.
IPO/Emerging Growth, LLC: is an investment vehicle formed and managed by Mr.
Michael Brette of Capital Asset Management. Mr. Brette is also a Director of the
Company. IPO/Emerging Growth, LLC was formed to raise capital to acquire
positions in emerging growth companies and to take them public through the
Company in what is known as a "spin-off" process. The Company holds an
investment position in IPO/Emerging Growth, LLC, currently valued at
$100,000.00.
ANALYSIS OF FINANCIAL CONDITION
Management believes that the key to a successful Business Development
Corporation is the ability to produce ongoing revenues and profits from
operating subsidiaries which will allow for an orderly due diligence process
when investing in start-up and emerging growth companies.
The Company has formed three operating subsidiaries which are strategically
positioned to produce both revenues and profits in the near future. These
subsidiaries contain key personnel and have niche opportunities which have
matured to the point of producing cash flow and bottom line profits to the
Company.
The Company's investments are about to mature with Solutions Media, Inc.
expected to file its IPO soon and San Diego Soccer Development Corporation
expected to be trading its stock on the OTC-BB exchange before year end.
Page 13
<PAGE>
It is management's belief that these two investments are substantially
undervalued and that the Solutions Media, Inc. investment could produce a
"windfall" profit to the company.
Results of Operations - Three months ended September 30, 1999, compared to the
three months ended September 30, 1998.
Revenues. Revenues for the three months ended September 30, 1999, decreased by
$128,759 or 89% to $16,682 from $145,441 for the three months ended September
30, 1998. This decrease resulted from reduction in home building.
Expenses. Total expenses for the three months ended September 30, 1999,
decreased by $390,360 or 73% to $144,053 from $534,413 for the three months
ended September 30, 1998. This decrease resulted from lower home building
development costs. General and administrative expenses for the three months
ended September 30, 1999 decreased by $249,877 or 64% to $144,053 from $393,930
for the three months ended September 30, 1998, primarily due to the streamlining
of our operations resulting in lower salaries.
Results of Operations - Nine months ended September 30, 1999, compared to the
nine months ended September 30, 1998
Revenues. Revenues for the nine months ended September 30, 1999, increased by
$151,881 or 25% to $622,876 from $470,995 for the nine months ended September
30, 1998. This increase resulted from fees charged for investment banking
services as well as an increase in administrative income.
Expenses. Total expenses for the nine months ended September 30, 1999,
decreased by $956,918 or 67% to $469,689 from $1,426,607 for the nine months
ended September 30, 1998. This decrease resulted from lower home building
development costs. General and administrative expenses for the nine months ended
September 30, 1999, decreased by $416,234 or 48% to $466,954 from $883,188 for
the nine months ended September 30, 1998, primarily due to the streamlining of
our operations resulting in lower salaries.
Changes in Financial Condition, Liquidity and Capital Resource.
For the nine months ended September 30, 1999, the Company funded its operations
and capital requirements partially with its own capital and partially with
proceeds from stock offerings. As of September 30, 1999, the Company had cash of
$59,701.
Page 14
<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
Registrant
November 12, 1999 /s/ Steven R. Peacock
- ------------------------------- ---------------------------------
Date Steven R. Peacock
President and Chief Executive Officer
November 12, 1999 /s/ Lisa Martinez
- ------------------------------- ---------------------------------
Date Lisa Martinez
Secretary
Page 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 59,701
<SECURITIES> 0
<RECEIVABLES> 3,905,482
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,965,183
<PP&E> 85,644
<DEPRECIATION> 83,034
<TOTAL-ASSETS> 3,967,793
<CURRENT-LIABILITIES> 967,136
<BONDS> 730,296
0
6,723
<COMMON> 32,185
<OTHER-SE> 2,231,453
<TOTAL-LIABILITY-AND-EQUITY> 3,967,793
<SALES> 0
<TOTAL-REVENUES> 622,876
<CGS> 0
<TOTAL-COSTS> 414,398
<OTHER-EXPENSES> 2,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,951
<INCOME-PRETAX> 105,793
<INCOME-TAX> 0
<INCOME-CONTINUING> 105,793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,793
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
