<PAGE>
Securities and Exchange Commission
Washington, DC 20549
__________________
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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)
2531 SAN JACINTO AVENUE 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. YES X NO___.
---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OR 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 NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF DECEMBER 31,
1999, WAS 37,810,508.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
<PAGE>
ITEM 1 - BUSINESS
- -----------------
February 1984, is a publicly traded diversified investment holding 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 other business opportunities, as well
as the acquisition of additional business ventures or increased Peacock
Financial Corporation, a Colorado corporation (the Company), incorporated in
ownership positions in its existing holdings.
The Company participates in the formation of, and invests in, emerging or early-
stage companies in various fields of business by arranging for and contributing
capital and providing management assistance. Potential ventures are evaluated
based on the ability of the business to become viable and reach a significant
milestone with the Company's initial investment as well as possessing a
potential to generate significant revenues through strong intellectual property
rights and experienced management. The Company continually seeks and evaluates
investment opportunities that have the potential of earning significant returns
in either new business ventures or by increasing its equity position in existing
holdings. The Company has in the past, and may again in the future, raise
capital specifically for the purpose of permitting it to make an investment that
the company believes is attractive. The Company has significant economic
interests in nine enterprises and takes an active role in each company's growth
and advancement.
The Company's current enterprise portfolio includes the following:
. Peacock Real Estate Development Corporation (PDC)
. Vir-Tek Corporation (Vir-Tek)
. DOTCOM Ventures, LLC. (DOTCOM)
. Solutions Media, Inc. (Solutions Media)
. Desert Winds Entertainment, Corp. (Desert Winds)
. iNetPartners, Inc. (iNetPartners)
. San Diego Soccer Development Corporation (SDSDC)
. Las Vegas Soccer Development Corporation (LVSDC)
. San Francisco Soccer Development Corporation (SFSDC)
The Company generally invests in startup ventures with no operating histories,
unproven technologies and products and, in some cases, the need for
identification and implementation of experienced management. Because of the
uncertainties and risks associated with such startup ventures, investors in the
Company should expect losses, which could be significant, associated with any
possible failed venture. In addition, markets for venture capital in the
2
<PAGE>
United States are increasingly competitive. As a result, the Company faces
potential losses of business opportunities and possible deterioration of the
terms of available financing and equity investments in start-up ventures.
Furthermore, the Company may lack financial resources to fully fund additional
ventures in which it could participate and may be dependent upon external
financing to provide sufficient capital, depending on the number and scope of
the ventures that could be financed. The venture capital business is marked by a
high degree of risk, including risks associated with identifying and developing
new business opportunities, difficulties selecting ventures with acceptable
likelihood of success and future profitability, the high risk of loss associated
with investments in startups and the competitive nature of the venture capital
business. Identifying and developing each new business opportunity requires the
Company to dedicate significant amounts of financial resources, management
attention, and personnel, with no assurance that these expenditures will be
recouped. Similarly, the selection of companies and the determination of whether
a company offers a viable business plan, an acceptable likelihood of success,
and future profitability involves inherent risk and uncertainty.
ITEM TWO: INVESTMENTS
Real Estate Development
. Peacock Real Estate Development Corporation
-------------------------------------------
Peacock Real Estate Development Corporation, a wholly owned subsidiary, is a
master developer with expertise for land assembly, planning, infrastructure
design and construction (PDC). PDC is also proficient in property management
of residential, commercial, and industrial developments, taking a high level
approach to real estate, utilizing over 60 years of experience and network of
resources to identify, assess, and manage real estate related investments.
PDC is positioned to capitalize on the East Side Reservoir project in San
Jacinto, as a result of its land holdings in the San Jacinto Valley. The
project is estimated to bring 2 million visitors annually to the Valley and
create 3,700 new jobs. PDC currently owns or controls approximately 500
residential lots, 20 acres of commercially zoned property, and 11 acres of
property zoned for senior apartments. PDC is also involved in the development
of professional indoor and outdoor soccer stadiums in conjunction with The
Stadium Game.
1. 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
<PAGE>
2. 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 $2,200,000 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 a general
partner for which it receives a management fee and 80% of the project
cash flow.
3. St. Michel Development
In 1995, the Company formed a limited liability company to acquire a
63-lot residential subdivision in the San Jacinto Valley. In March
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 has recently signed a
joint venture agreement to build homes on these existing lots.
4. Rancho San Jacinto Development
In 1987, the Company formed a limited partnership to acquire and
develop approximately 500 acres in San Jacinto, California. The
partnership currently owns approximately 285 residential lots, 30
acres of commercially zoned property and 11 acres zoned for high
density senior apartments all within the master planned community of
Rancho San Jacinto. The company retains a 15% ownership position and
has recently entered into certain joint venture agreements to build
out these properties.
. Vir-Tek
-------
Vir-Tek is a minority disabled veteran engineering and contracting firm,
formed to take advantage of recently passed federal legislation (H.R. 1568)
requiring 3% participation on all programs and projects funded by federal
dollars. Vir-Tek provides environmental management, facility and operations
management, mapping and information management, engineering services, project
management, and waste management. The company emphasizes teamwork in
combination with innovation to design balanced solutions to complex
environmental, industrial, and engineering problems. Vir-Tek has served
commercial, industrial, and residential construction developers as well as
concerns of city, county, and federal agencies.
In addition to receiving contracts in large Civil Engineering projects, Vir-
Tek is currently in the bidding process with contracts valued in excess of $11
million with government agencies.
4
<PAGE>
Internet/Technology
. DOTCOM Ventures, LLC
--------------------
DOTCOM Ventures, LLC, a wholly owned subsidiary, specializes in the
identification, assessment, and oversight of Peacock Financial's Internet
investments. DOTCOM is a virtual incubator that provides valuable knowledge
in product and brand development, marketing, and technology for start-up and
emerging growth Internet and technology companies helping to ensure that
Peacock's investments are positioned and guided to success.
1. Solutions Media
Solutions Media, Inc. (SMI), an Internet and convergence technology
firm headquartered in San Diego and an equity holder of
SpinRecords.com, researches and develops viable interactive
applications for the consumer market. Peacock Financial is a major
(800,000) shareholder of SMI. An initial public offering (IPO) is
expected in 2000.
2. Desert Winds Entertainment Corporation
Desert Winds Entertainment is a traditional entertainment production
company that has unique content geared toward the Gen X and Gen Y
markets. In December, Peacock Financial entered into an agreement with
Desert Winds Entertainment (OTCBB:DESW) to form a digital
entertainment division called Desert Digital Network (DESTV.NET) as a
first step into the area of digital broadcasting. Peacock invested
$75,000 in convertible debt at $.20 a share. Peacock has since
converted this note into 379,868 free trading shares.
3. iNetPartners, Inc.
Peacock Financial holds a 51 percent interest in iNetPartners, Inc.,
which focuses on the development of Internet e-commerce applications
for both the new and used automotive markets and is currently
developing iNetmotors.com, a regionally based automobile e-commerce
Web site to provide Internet automobile shoppers easy access to dealer
inventories with detailed pictures and prices online within the
shoppers' immediate area. More than 80 percent of pre-owned and new
vehicles are purchased within 20 to 35 miles of where the buyer lives
or works, and 90 percent of all buyers want to inspect and test-drive
the vehicle before purchase.
5
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Professional Sports
. Peacock Sports, Inc.
-------------------
Peacock Sports, Inc. (PSI), a wholly owned subsidiary, was formed to hold and
manage investments in professional sports. Current holdings include
investments in A-League professional soccer. Soccer is positioned to grow
rapidly in the United States over the next few years and A-League
professional soccer presents the ideal, ground-floor opportunity to
capitalize on this emerging market.
1. San Diego Soccer Development Corporation
The San Diego Soccer Development Corporation (SDSDC) owns the San
Diego FLASH A-League professional soccer team, which is the only
publicly traded soccer franchise in the United States. The FLASH won
the Pacific Division Championship in 1998, its first year in
competition, and repeated as champion again in 1999. In November,
SDSDC acquired a 75% interest in the Riverside County Soccer
Development Corporation (the ELITE), a D-3 League professional
franchise, which is one level below the A-League. The ELITE is the
farm team for San Diego FLASH while providing quality professional
soccer for Riverside County.
2. San Francisco Soccer Development Corporation
In March, Peacock Financial acquired an initial five percent equity
position in the San Francisco Soccer Development Corporation (SFSDC)
with a contract to ultimately own up to ten percent of the A-League
soccer franchise. Peacock Financial negotiated for an additional ten
(10) percent of the SFSDC as an investment banking fee should Peacock
Financial Corporation take the corporation public through a spin-off.
3. Las Vegas Soccer Development Corporation
Peacock Financial is a 25% equity founding shareholder in the Las
Vegas Soccer Development Corporation (LVSDC) (the STRIKERS), which was
established to acquire an A-League soccer sports franchise for the Las
Vegas market. As a founding shareholder, Peacock Financial's position
represents 1,020,000 shares and the Company will play a major role in
raising initial capital.
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.
6
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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,
1999, the Company's common stock traded between $1.18 and $.05 per share. The
Company has not yet adopted any policy regarding payment of dividends.
Quarter Ended Low High
- -------------------- ----- -----
March 31, 1999 $0.05 $0.18
June 30, 1999 0.11 0.29
September 30, 1999 0.11 0.28
December 31, 1999 0.28 1.18
At December 31, 1999, there were approximately 2,719 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 1999 was the Company's first full year in operation as a Business
Development Corporation under the Investment Act of 1940. As such, the Company
continued to restructure and strengthen its internal operations as an emerging
growth venture capital fund with three specific areas of investment in
Internet/Technology, Professional Sports and Real Estate Development.
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 or emerging growth companies.
7
<PAGE>
The Company has subsequently formed three operating subsidiaries which are
strategically positioned to produce both revenues and profits. These
subsidiaries contain key management personnel and have niche opportunities which
have matured to the point of producing cash flow and bottom line profits to the
Company.
Certain of the Company's investments are expected to mature in the year 2000
which should produce substantial returns and increase shareholder net worth.
The Company will continue to actively seek emerging growth opportunities that
meet its stated investment criteria and will continue its capital raising
efforts to fund these carefully selected investment opportunities.
The Company's auditors have removed the "Going Concern" statement in their 1999
audited financial statement which is a significant event and a statement of
objective confidence regarding the Company's current structure and capital
position.
Results of Operations
- ---------------------
Revenues totaled $704,556 for the fiscal year ending December 31, 1999. For the
year ending December 31, 1998, revenues were $609,811. The increase resulted
from fees charged for investment banking services as well as an increase in
property management and administration income.
General and administrative expenses for the year ended December 31, 1999 were
$918,374, as compared to $1,089,130 for the year ended December 31, 1998. The
decrease was primarily due to streamlining our operations resulting in lower
salaries.
Depreciation and amortization expenses was $33,979 for the year ended December
31, 1999 as compared to $43,319 for the year ended December 31, 1998. The
decrease was due to fixed assets reaching full amortization in 1999.
Interest expense was $126,932 for the year ended December 31, 1999 as compared
to $132,912 for the year ended December 31, 1998. The decrease was primarily
due to the paydown of existing loans.
ITEM 8 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None
8
<PAGE>
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTION and CONTROL PERSONS,
- ----------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- -------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position Period of Service
<S> <C> <C> <C>
Steven R. Peacock 54 President, Chief Since 1986
Executive Officer,
and Director
James S. Upton 52 Executive Vice Since 1997
President
Lisa Martinez 41 Corporate Secretary Since 1998
Dr. Rachamim Siromachoff 55 Director Since 1999
</TABLE>
All directors hold office until the next annual shareholders meeting or until
their death, resignation, and retirement or until their successors have been
elected and qualified.
Mr. Steven R. Peacock, 54, is President and founder of Peacock Financial
Corporation. He has over 22 years of real estate development, insurance and
business management experience. His vision, creative mind, persistence, and
direction have positioned the company not only to take advantage of the upturn
in the real estate marketplace, but to increase shareholder value through
internet/technology, professional sports and real estate.
Mr. James S. Upton, 52, Executive Vice President of Peacock Financial
Corporation, brings 27 years of real estate development and business experience
to the team. He specializes in the management and administration of all of
Peacock's investments. He is experienced in market analysis, analyzing economic
feasibility, analyzing pro-formas and cost budgets, and directing scheduling,
marketing, and sales.
Ms. Lisa Martinez, 41, is Corporate Secretary and the Accounting & Finance
Manager of Peacock Financial Corporation. She has over 19 years of accounting
experience and has the managerial duties to handle the multitude of public and
privates business entities for Peacock through effective and organizational
administrative skills.
Dr. Rachamim Siromachoff, 54, Director, has a degree in mechanical engineering
from the Ort School of Engineering. He has pursued a successful career in
obstetrics and gynecology and was appointed as a Research Fellow at the UCLA
Medical School studying in-vitro fertilization. In real estate, he has been
involved in the acquisition and resale of large properties throughout the U.S.,
purchased through the RTC and other distressed sellers.
9
<PAGE>
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.
ITEM 10 - EXECUTIVE COMPENSATION
- --------------------------------
The following table shows the amount of compensation earned for services in all
capacities to the Company for the last fiscal year for the executive officers at
December 31, 1999.
<TABLE>
<CAPTION>
Names and Position Year Salary Other Total
<S> <C> <C> <C> <C>
Steven R. Peacock, President and
Chief Executive Officer and Director 1999 $125,000 None $125,000
James S. Upton, Executive Vice
President 1999 $ 67,200 None $ 67,200
Lisa L. Martinez, Corporate Secretary 1999 $ 28,800 None $ 28,800
</TABLE>
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
At the close of business on December 31, 1999, the Company had 37,810,508 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
Title of Class Owner Shares Percent of Class
Common Stock Steven R. Peacock 2,630,174 7.0%
2531 San Jacinto Avenue
San Jacinto, Ca. 92583
Common Stock Byron Radaker 2,010,048 5.4%
2531 San Jacinto Avenue
San Jacinto, Ca. 92583
10
<PAGE>
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Patricia Peacock, Mother of Steven R. Peacock, President, has advanced the
Company working capital. The balance outstanding as of December 31, 1999 was
$740,000.
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.
11
<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: /s/ Steven R. Peacock
--------------------------------------
Steven R. Peacock
President and Chief Executive Officer
Date: April 20, 2000
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
- --------- ----- ----
/s/ Steven R. Peacock
- ---------------------
Steven R. Peacock President, Chief Executive 4/20/00
/s/ Lisa L. Martinez Secretary 4/20/00
- ---------------------
12
<PAGE>
PEACOCK FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
F-1
<PAGE>
C O N T E N T S
Independent Auditors' Report ............................................. F-3
Consolidated Balance Sheet................................................ F-4
Consolidated Statements of Operations .................................... F-6
Consolidated Statements of Stockholders' Equity .......................... F-7
Consolidated Statements of Cash Flows .................................... F-9
Notes to the Consolidated Financial Statements ........................... F-11
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Peacock Financial Corporation and Subsidiaries
Board of Directors
San Jacinto, California
We have audited the accompanying consolidated balance sheet of Peacock Financial
Corporation and Subsidiaries as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1999 and 1998. 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 Subsidiaries as of December 31, 1999 and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
in conformity with generally accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
April 7, 2000
F-3
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
December 31,
1999
------------
CURRENT ASSETS
Cash and cash equivalents ................................. $ 190,581
Due from related party (Note 10) .......................... 37,696
Developer fees receivable ................................. 46,828
Interest receivable ....................................... 8,102
Notes receivable - related parties (Note 8) ............... 91,007
Notes receivable (Note 7) ................................. 102,800
------------
Total Current Assets .................................... 477,014
------------
FIXED ASSETS, NET (Notes 2 and 5) ............................ 5,962
------------
OTHER ASSETS
Development costs (Note 3) ................................ 1,216,036
Investments in limited partnerships (Note 4) .............. 1,131,945
Other investments (Note 6) ................................ 742,233
Other assets .............................................. 6,151
------------
Total Other Assets ...................................... 3,096,365
------------
TOTAL ASSETS ............................................ $3,579,341
============
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
CURRENT LIABILITIES
Accounts payable ................................................ $ 159,272
Other current liabilities ....................................... 174,668
Notes payable - current portion (Note 9) ........................ 623,204
Notes payable - related parties (Note 10) ....................... 25,398
-----------
Total Current Liabilities ..................................... 982,542
-----------
LONG-TERM DEBT
Notes payable - long term (Note 9) .............................. 500,000
-----------
Total Liabilities ............................................. 1,482,542
-----------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY
Preferred stock: 10,000,000 shares authorized at $0.01 par value;
670,300 shares issued and outstanding .......................... 6,703
Common stock: 250,000,000 shares authorized at $0.001 par value;
37,810,508 shares issued and outstanding ....................... 37,810
Additional paid-in capital ...................................... 5,457,569
Subscriptions receivable ........................................ (327,055)
Accumulated deficit ............................................. (3,078,228)
-----------
Total Stockholders' Equity .................................... 2,096,799
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 3,579,341
===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Year Ended
December 31,
----------------------------
1999 1998
------------ ------------
REVENUES
Home building and development sales ......... $ -- $ 591,006
Investment banking income ................... 605,000 --
Property management and administration income 7,070 4,270
Other income ................................ 92,486 14,535
------------ ------------
Total Revenues ............................ 704,556 609,811
------------ ------------
EXPENSES
Home building and development costs ......... -- 585,490
General and administrative .................. 918,374 1,089,130
Bad debt expense ............................ 196,791 164,057
Depreciation and amortization ............... 33,979 43,319
------------ ------------
Total Expenses ............................ 1,149,144 1,881,996
------------ ------------
LOSS FROM OPERATIONS ........................... (444,588) (1,272,185)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income ............................. 8,371 5
Interest expense ............................ (126,932) (132,912)
Loss on investments ......................... (92,223) (11,225)
Loss on disposition of assets ............... (37,365) (117,119)
------------ ------------
Total Other Income (Expense) .............. (248,149) (261,251)
------------ ------------
LOSS FROM CONTINUING OPERATIONS ................ (692,737) (1,533,436)
Income taxes (Note 2) .......................... -- --
------------ ------------
NET LOSS ....................................... (692,737) (1,533,436)
------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS)
Dividends ................................... (188,786) (23,172)
------------ ------------
NET COMPREHENSIVE LOSS ......................... $ (881,523) $ (1,556,608)
============ ============
BASIC LOSS PER SHARE ........................... $ (0.02) $ (0.10)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ............................ 30,503,871 15,053,919
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock
--------------------------- --------------------------
Subscriptions Accumulated Paid-in
Shares Amount Shares Amount Capital Receivable Deficit
------------- ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 . 672,300 $ 6,723 11,763,797 $ 11,764 $ 2,335,379 $ -- $ (852,055)
Common stock issued
for cash .......... -- -- 1,609,413 1,609 217,456 -- --
Common stock issued
for services ...... -- -- 3,108,040 3,108 599,967 -- --
Common stock issued
on conversion
of debentures ..... -- -- 1,559,834 1,560 104,033 -- --
Common stock issued
for investments and
licensing rights .. -- -- 2,420,000 2,420 257,580 -- --
Common stock issued
under failed
financing package . -- -- 289,286 289 28,639 -- --
Accrued dividends ... -- -- -- -- (23,172) -- --
Net loss for the
year ended
December 31, 1998 . -- -- -- -- -- -- (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.
F-7
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock
--------------------------- ------------------------
Subscriptions Accumulated Paid-in
Shares Amount Shares Amount Capital Receivable Deficit
------------- ----------- ---------- ----------- ------------ ------------ -----------
<S> <C> <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 ............... -- -- 14,008,007 14,008 1,787,118 (443,500) --
Common stock issued
for services ........... -- -- 759,571 760 161,040 -- --
Common stock issued on
conversion of debentures -- -- 1,070,560 1,070 58,346 -- --
Common stock issued
for investments ........ -- -- 1,250,000 1,250 123,750 -- --
Common stock issued in
conversion of
preferred stock ........ (2,000) (20) 2,000 2 1,998 -- --
Common stock canceled ... -- -- (30,000) (30) (5,779) -- --
Cash received on
subscriptions receivable -- -- -- -- -- 116,445 --
Accrued dividends ....... -- -- -- -- (23,172) -- --
Dividends paid .......... -- -- -- -- (165,614) -- --
Net loss for the year
ended December 31, 1999 -- -- -- -- -- -- (692,737)
------------- ----------- ---------- ----------- ------------ ------------ -----------
Balance,
December 31, 1999 ...... 670,300 $ 6,703 37,810,508 $ 37,810 $ 5,457,569 $ (327,055) $(3,078,228)
============= =========== ========== =========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Year Ended
December 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ............................................. $ (692,737) $(1,533,436)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Depreciation and amortization ...................... 33,979 43,319
Bad debts .......................................... 196,791 164,057
Loss on disposition of assets ...................... 37,365 117,119
Loss on investments ................................ 92,223 11,225
Stock issued for services .......................... 161,800 632,003
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable 99,147 4,633
(Increase) decrease in accounts
receivable - related parties ...................... (61,091) (2,396)
(Increase) decrease in other assets ................ (18,950) (17,275)
Increase (decrease) in accounts payable ............ (68,471) 7,809
Increase (decrease) in bank overdraft .............. (4,509) 4,509
Increase (decrease) in other liabilities ........... (57,995) 68,387
----------- -----------
Net Cash (Used) by Operating Activities .......... (282,448) (500,046)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments .............................. (662,348) (27,000)
Sale of investments .................................. -- 15,775
Notes receivable - advances .......................... (324,007) --
Notes receivable - received .......................... 92,500 --
Purchase of property and equipment ................... (7,084) (20,884)
----------- -----------
Net Cash (Used) by Investing Activities .......... (900,939) (32,109)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders ................................... (31,660) 33,189
Repayment of notes payable ............................ (62,634) (88,029)
Proceeds from long-term borrowings .................... -- 353,153
Repurchase of stock ................................... (5,809) --
Stock issued for cash ................................. 1,474,071 219,065
----------- -----------
Net Cash Provided by Financing Activities .......... $ 1,373,968 $ 517,378
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the Year Ended
December 31,
---------------------
1999 1998
--------- ---------
NET INCREASE (DECREASE) IN CASH .................. $ 190,581 $ (14,777)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR ............................... -- 14,777
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR .................................. $ 190,581 $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid ................................ $ 269,728 $ 41,230
Income taxes paid ............................ $ -- $ --
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for services .............. $ 161,800 $ 632,003
Common stock issued on conversion of debentures $ 59,416 $ 105,593
Common stock issued for investments ........... $ 125,000 $ 200,000
Common stock issued for licensing rights ...... $ -- $ 60,000
Dividends paid through investment stock ....... $ 165,614 $ --
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - COMPANY BACKGROUND
The consolidated financial statements include those of Peacock
Financial Corporation (Colorado) (Peacock), its wholly-owned
subsidiaries, Peacock Real Estate Development Corporation
(California) (PREDC) and Peacock International Corporation
(Bahamas) (PIC), a 51% owned subsidiary, iNetPartners, Inc. (iNet)
and a 50% owned subsidiary, DotCom Ventures, LLC (DotCom).
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.
PREDC, a wholly-owned subsidiary, was originally formed on July
29, 1993. On October 22, 1999, the name was changed from Peacock
Financial Corporation (California) to Peacock Real Estate
Development Corporation. 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.
PIC, a wholly-owned subsidiary, was formed on December 8, 1997. It
has had no operations to date, but was formed to invest and trade
in securities on an international basis.
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 PREDC. Pursuant to the
reorganization, the name of the Company was changed to Peacock
Financial Corporation.
The reorganization was accounted for as a recapitalization of
PREDC because the shareholders of PREDC control the Company after
the acquisition. Therefore, PREDC 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 PREDC is the surviving entity for
accounting purposes.
On September 15, 1998, the Company filed with the Securities and
Exchange Commission to become a Business Development Corporation
as defined under the Investment Act of 1940. Simultaneously, the
Company registered an offering circular with the SEC for
13,000,000 shares of common stock under Regulation E of the
Investment Act to raise capital and to make investments in real
estate and in eligible portfolio companies. The Company
participates in the formation of, and invests in, emerging or
early-stage companies in various fields of business by arranging
for and contributing capital and providing management assistance.
F-11
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - COMPANY BACKGROUND (Continued)
Peacock acquired a 50% ownership in DotCom on July 23, 1999 and
contributed a total of $112,203 as its initial investment through
December 31, 1999. DotCom was organized for the purposes of
conducting an internet production company and to consult start-up
and emerging growth companies with their internet strategies.
DotCom has had limited operations through December 31, 1999.
Subsequent to December 31, 1999, the Company acquired the
remaining 50% ownership and DotCom became a wholly-owned
subsidiary of the Company.
Peacock holds a 51% interest in iNet as of December 31, 1999. iNet
was organized under the laws of the State of California on
December 15, 1999. iNet focuses on the development of Internet
e-commerce applications for both the new and used automotive
markets and is currently developing iNetmotors.com, a regionally
based automobile e-commerce website to provide Internet automobile
shoppers easy access to dealer inventories.
NOTE 2 - SUMMARY OF SIGNIFICANT 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 accrual method of accounting. The Company has elected a
December 31 year end.
b. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
c. 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.
d. Fixed Assets
Fixed assets are recorded at cost. Major additions and improvement
are capitalized. The cost and related accumulated depreciation of
equipment retired or sold are removed from the accounts and any
differences between the undepreciated amount and the proceeds from
the sale are recorded as gain or loss on sale of assets.
Depreciation is computed using the straight-line method over the
estimated useful life of the assets as follows:
Description Estimated Useful Life
----------- ---------------------
Furniture and fixtures 5 to 7 years
Computers and software 5 years
Buildings 40 years
F-12
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Basic Loss Per Share
1999 1998
------------ ------------
Loss (numerator) $ (692,737) $ (1,533,436)
Shares (denominator) 30,503,871 15,053,919
Per share amount $ (0.02) $ (0.10)
The computations of basic loss per share of common stock are based
on the weighted average number of common shares outstanding during
the period of the consolidated financial statements. Common stock
equivalents, consisting of convertible debt and preferred shares,
have not been included in the calculation as their effect is
antidilutive for the periods presented.
f. Change in Accounting Principle
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income" during the year
ended December 31, 1999. SFAS No. 130 established standards for
reporting and display of comprehensive income (loss) and its
components (revenues, expenses, gains and losses) in a full set of
general purpose financial statements. This statement requires that
an enterprise classify items of other comprehensive income by
their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a
balance sheet. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The Company has retroactively
applied the provisions of this new standard by showing the other
comprehensive income (loss) for all years presented.
The Financial Accounting Standards Board has issued other new
standards. The adoption of these standards did not have a material
impact on the Company's consolidated financial statements.
g. Principles of Consolidation
The consolidated financial statements include those of Peacock
Financial Corporation (Colorado), its wholly-owned subsidiaries,
Peacock Real Estate Development Corporation (California) (PREDC)
and Peacock International Corporation (Bahamas) (PIC), a 51% owned
subsidary, iNetPartners, Inc. (iNet) and a 50%-owned subsidiary,
DotCom Ventures, LLC (DotCom). All significant intercompany
accounts and transactions have been eliminated.
h. 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.
F-13
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. Concentrations of Risk
Credit losses, if any, have been provided for in the consolidated
financial statements and are based on 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.
j. Provision for Taxes
At December 31, 1999, the Company has net operating loss
carryforwards of approximately $3,070,000 that may be offset
against future taxable income through 2019. No tax benefit has
been reported in the consolidated financial statements because the
Company believes there is a 50% or greater chance the net
operating loss carrryforwards will not be used. Accordingly, the
potential tax benefits of the net operating loss carryforwards are
offset by a valuation allowance of the same amount.
k. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
l. Revenue Recognition
The Company receives shares in certain companies for providing
capital and investment services. The Company records investment
banking income based on the fair value of the shares received.
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 at December
31, 1999 are recorded at the lower of cost or estimated net
realizable value (see Note 12).
NOTE 4 - INVESTMENTS IN LIMITED PARTNERSHIPS
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.
F-14
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 4 - INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)
In December 1995, the Company formed a limited liability company
to acquire a 63-lot residential subdivision in the San Jacinto
Valley. In March 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 also receives an overhead fee for the construction and
marketing of the homes. The Company has also recently signed a
joint venture agreement to build homes on these existing lots.
During 1995, the Company received a $975,000 loan that converted
to a grant from the City of Riverside to acquire and rehabilitate
a 120-unit apartment complex (see Note 12). 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. During 1999, a $70,000 note held by
the Company was transferred to Canyon Shadows, L.P., which was
recorded as a capital distribution to the Company (see Note 12).
Additional costs of $411,639 were incurred by the Company on
behalf of the partnership resulting in a total investment in
Canyon Shadows, L.P. of $1,131,945 at December 31, 1999.
NOTE 5 - FIXED ASSETS
Fixed assets consist of the following at December 31, 1999:
Furniture and fixtures $ 18,985
Computers and software 46,713
-----------
65,698
Accumulated depreciation (59,736)
------------
Net fixed assets $ 5.962
============
Depreciation expense for the years ended December 31, 1999 and
1998 was $3,979 and $13,319, respectively.
NOTE 6 - OTHER INVESTMENTS
During the year ended December 31, 1998, the Company became a
Business Development Corporation whereby the Company can raise
capital under a simplified and cost effective informational filing
with the Securities and Exchange Commission for the purpose of
investing in small businesses and government securities. The
Company intends to provide capital for these companies and to
later take these companies public through a spin-off process.
On October 19, 1998, the Company issued 1,000,000 shares of its
outstanding common stock valued at $100,000 to acquire an
approximate 33% interest in IPO/Emerging Growth Company, LLC.
(IPO). The investment has been recorded under the equity method.
The Company's share of the 1999 loss recorded under the equity
method was $16,513 bringing the equity investment at December 31,
1999 to $83,487.
F-15
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 6 - OTHER INVESTMENTS (Continued)
On October 23, 1998, the Company issued 820,000 shares of its
outstanding common stock valued at $100,000 to acquire an
approximate 5% interest in San Diego Soccer Development Corp.
(SDSDC), owner of the San Diego FLASH pro soccer team. On March
11, 1999, the Company issued an additional 500,000 shares of its
outstanding common stock valued at $50,000 to acquire 200,000
additional shares of SDSDC. In addition, the Company received an
additional 400,000 shares of SDSDC during 1999, valued at
$200,000, as an investment fee for providing capital to SDSDC. As
part of the investment agreement, the Company distributed a total
of 294,999 shares of its SDSDC stock to the Company's shareholders
as a dividend valued at $165,614. At December 31, 1999, the
Company owned a total of 505,001 shares of SDSDC recorded at the
Company's cost of $184,386.
On January 3, 2000, SDSDC became a publicly traded company. Once
the Company's shares in SDSDC become free-trading shares on the
open market, the shares will be recorded as "trading securities"
pursuant to SFAS 115, and recorded at their fair market value. The
investment has been recorded under the cost method since the
Company does not exercise any influence or control over management
of SDSDC.
On February 2, 1999, the Company issued 750,000 shares of its
outstanding common stock valued at $75,000 to acquire
approximately 20% (2,000,000 shares) of the outstanding shares of
Solutions Media, Inc. (Solutions). On June 15, 1999, the Company
entered into a separate agreement whereby the 750,000 shares of
the Company were returned for cancellation in exchange for the
return of the 2,000,000 shares of Solutions. As part of the
agreement, the Company received 800,000 shares of Solutions as an
investment fee valued at $400,000. The investment has been
recorded under the cost method as the Company does not exercise
any influence or control over management of Solutions. The 800,000
shares of Solutions represents an approximate ownership of 2% at
December 31, 1999. Solutions provides a variety of professional
services including web site design and implementation, database
and graphic design and web based marketing and advertising.
Solution's product development strategy centers on developing and
licensing interactive television interfaces.
On March 11, 1999, the Company issued 500,000 shares of its
outstanding common stock valued at $50,000 to acquire 200,000
shares of San Francisco Soccer Development Corporation (SFSDC),
which represents an approximate ownership of 5% at December 31,
1999. The investment has been recorded under the cost method. The
Company has negotiated for an additional 10% ownership as an
investment banking fee should the Company be able to take SFSDC
public through a spin-off.
During 1999, the Company purchased 1,020,000 shares of Las Vegas
Soccer Development Corporation (LVSDC) for $20,000 cash, which
represents an approximate ownership of 25% at December 31, 1999.
The investment has been recorded under the equity method.
As previously mentioned, once the shares that the Company owns in
each of the companies become free-trading shares on the open
market, the investments will be recorded as "trading securities"
pursuant to SFAS 115, and recorded at the fair market value of the
shares owned.
F-16
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 6 - OTHER INVESTMENTS (Continued)
Following is a summary of the investments held as of December 31, 1999:
33% interest in IPO/Emerging Growth Co. $ 83,487
5% interest in SDSDC 184,386
2% interest in Solutions 400,000
5% interest in SFSDC 50,000
25% interest in LVSDC 20,000
Other 4,360
------------
Total $ 742,233
============
NOTE 7 - NOTES RECEIVABLE
Notes receivable consist of the following at December 31, 1999:
Note receivable at 10%, unsecured,
principal and interest due December 12, 2000. $ 18,500
Note receivable at 10%, unsecured,
principal and interest due July 1, 2000. 10,000
Note receivable at 10%, unsecured, principal
and interest due June 30, 2000, converted to
379,868 shares of Desert Winds Entertainment
subsequent to December 31, 1999. 65,000
Note receivable at 6%, unsecured,
principal and interest due August 17, 1999. 9,300
-----------
Total Notes Receivable 102,800
Less: Current Portion (102,800)
-----------
Long-Term Notes Receivable $ --
===========
NOTE 8 - NOTES RECEIVABLE - RELATED PARTIES
Notes receivable - related parties consist of the following at
December 31, 1999:
<TABLE>
<S> <C>
Note receivable at 8%, due from San Diego Soccer
Development Corporation, unsecured, principal and
interest due on demand $ 50,000
Note receivable at 9.0%, due from Solutions Media, Inc.,
unsecured, principal and interest due April 1, 2000. 28,900
Note receivable from employee, secured by 100,000 shares
of the Company's stock, due October 1, 2000. 12,107
------------
Total Notes Receivable - Related Parties 91,007
Less: Current Portion (91,007)
------------
Long-Term Notes Receivable - Related Parties $ --
============
</TABLE>
F-17
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the consolidated Financial Statements
December 31, 1999
NOTE 9 - NOTES PAYABLE
<TABLE>
<S> <C>
Notes payable consist of the following at December 31, 1999:
Note payable at 5%, secured by an assignment of
partnership cash, interest payable quarterly, principal
due January 1, 2007, convertible to common stock. $ 500,000
Note payable at variable rate (18.0% at December 31, 1999)
collateralized by deed of trust on real property. Lump sum
payment was due May 21, 1999, currently
in default. 171,925
Note payable at 10%, unsecured, due with accrued
interest on or before February 1, 1997, currently in default. 371
Note payable at 10%, secured by deed of trust, due
March 31, 1996, currently in default. 65,000
Note payable at 7%, secured by deed of trust on real property,
payable in monthly installments of $1,621
including interest, due March 1, 2000. 2,908
Note payable, non-interest bearing, unsecured, payable in
monthly installments of $1,000, currently in default. 13,000
Debentures at 10%, unsecured, convertible into common shares at
rates of $0.05 to $0.10 per share at the option
of the holder, due December 31, 2000. 370,000
-----------
Total Notes Payable 1,123,204
Less: Current Portion (623,204)
-----------
Long-Term Notes Payable $ 500,000
===========
</TABLE>
The aggregate principal maturities of notes payable are as follows:
Years Ending December 31, Amount
------------------------- -------------
2000 $ 623,204
2001 --
2002 --
2003 --
2004 --
2005 and thereafter 500,000
-------------
Total $ 1,123,204
=============
F-18
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 10 - 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.
Certain stockholders have made loans to the Company. The loans
bear interest at rates from 10 percent to 11 percent per annum.
The balance outstanding at December 31, 1999 is $25,398.
The Company also is owed certain amounts from an officer of the
Company and certain other related entities in the amount of
$37,696. The amounts are non-interest bearing and due on demand.
NOTE 11 - 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 years ended December 31, 1999 or 1998.
NOTE 12 - 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, 1999, the partnerships had
certain liabilities with recourse against the Company although
management does not feel that the potential liabilities will have
a material impact on 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. Financing, which consisted of a seller
carry-back loan of $125,000 for the acquisition and a City of San
Jacinto Redevelopment loan of $193,088 for the rehabilitation was
foreclosed on during 1999, resulting in a gain on the disposition
of the corresponding assets and liabilities associated with the
hotel of $4,635 for the year ended December 31, 1999.
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.
F-19
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 12 - 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. 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. The Company
entered into a joint venture agreement during 1999 that is
intended to develop the Vista Ramona project. Pursuant to the
joint venture agreement and conditional upon the Company being
able to meet certain requirements and conditions, the joint
venture partner will invest up to $5,000,000 to develop the
project.
e. Housing Grant
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. Management has complied with all of the requirements
and believes that the repayment of $905,000 (the grant portion)
of the $975,000 is highly remote. Accordingly, $905,000 of the
amount has been recorded as income to the Company for the year
ended December 31, 1997.
The remaining $70,000 plus accrued interest of $9,625 on the loan
was transferred to Canyon Shadows, L.P. (see Note 4) during 1999,
reducing the loss on investment in Canyon Shadows by $79,625 for
the year ended December 31, 1999.
If the Company fails to meet the requirements, however, the
entire unpaid principal balance, together with accrued interest,
will become due at the discretion of the City of Riverside and
foreclosure proceedings may be initiated on the property.
NOTE 13 - 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 is convertible 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.
F-20
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 13 - PREFERRED STOCK (Continued)
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 $0.05
per warrant.
NOTE 14 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the following transactions
occurred:
1. On January 5, 2000, the Company acquired the remaining 50%
ownership in DotCom Ventures, LLC by granting options to acquire a
total of 500,000 shares of restricted common stock at $0.10 per
share (see Note 1). DotCom Ventures, LLC. became the holding
company for the Company's investments in Solutions Media, Inc.,
iNet Partners, Inc., Desert Winds Entertainment Corp., 1st Miracle
Group, Inc. and Filmstew.com, Inc.
2. On January 9, 2000, San Diego Soccer Development Corporation of
which the Company held an approximate 5% ownership at December 31,
1999, began trading on the OTC (over-the-counter) exchange.
3. On January 28, 2000, a note receivable due from Desert Winds
Entertainment Corporation in the principal amount of $65,000 plus
interest was converted at approximately $0.20 per share into
379,868 free-trading shares of Desert Winds Entertainment
Corporation (see Note 7).
4. On February 14, 2000, the Company entered into an agreement to loan
$300,000 to a Canadian-based movie production company called 1st
Miracle Group, Inc. and submitted a proposal to provide technical
assistance through the Company's wholly-owned subsidiary, DotCom
Ventures, LLC.
5. On March 21, 2000, the Company received 1,000,000 restricted shares
of SDSDC as an investment fee recorded at $500,000 or $0.50 per
share.
6. In January 2000, the Company incorporated a new wholly-owned
subsidiary, Peacock Sports, Inc. (PSI) to hold and manage
investments in professional sports. PSI now holds major interests
in three "A" league professional soccer teams including the Orange
County Waves, the Bay Area Seals and the San Diego Flash.
7. In January 2000, the Company acquired an 85% ownership interest for
$50,000 cash in Orange County Soccer Development Corporation
(OCSDC). The investment will be recorded as a purchase. OCSDC owns
the "A" league soccer franchise for Orange County, California,
known as the Orange County Waves.
F-21
<PAGE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 14 - SUBSEQUENT EVENTS (Continued)
8. In February 2000, the Company acquired an 85% ownership
interest for $100,000 cash in Bay Area Soccer Development
Corporation (BASDC). The investment will be recorded as a
purchase. BASDC owns the "A" league soccer franchise of San
Francisco, California known as the Bay Area Seals.
9. The Company has issued shares of its outstanding common stock
at an average price of $0.39 per share for approximately
$2,142,000 cash.
F-22
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