SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------------------
FORM 10-KSB/A
AMENDMENT NO.2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from . . . to . . . .
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
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 AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF DECEMBER 31, 1998, WAS $1,176,012.
THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF DECEMBER 31,
1998, WAS 20,750,370.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
This Amendment No. 2 applies to Item 7 and Item 13 only.
Item 7. Financial Statements.
The financial statements required by this item begin immediately following
Item 13 of this report.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibit Table.
None
(b) Reports on Form 8-K filed during the quarter ended December 31, 1998.
None.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
C O N T E N T S
Independent Auditors' Report 3
Consolidated Balance Sheet 4
Consolidated Statements of Operations 6
Consolidated Statements of Stockholders' Equity 8
Consolidated Statements of Cash Flows 9
Notes to the Consolidated Financial Statements 11
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, 1998 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1998 and 1997. 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 audits to
obtain reasonable assurance about whether the consolidated financial
tatements 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, 1998 and the
results of their operations and their cash flows for the years ended December
31, 1998 and 1997 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 16 to the consolidated financial statements, the Company has suffered
losses from operations for the years ended December 31, 1998 and 1997, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 16.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
March 30, 1999
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
December 31,
1998
------------
CURRENT ASSETS
Cash and cash equivalents $ -
Due from related party (Note 11) 2,396
Notes receivable (Note 7) 19,300
------------
Total Current Assets 21,696
------------
FIXED ASSETS, NET (Notes 2 and 5) 366,780
------------
OTHER ASSETS
Notes receivable - related parties (Note 11) 114,000
Developer fees receivable 154,077
Development costs (Note 3) 1,216,036
Investments in limited partnerships (Note 4) 1,224,292
Other investments (Note 6) 200,000
Licensing rights, net (Note 8) 30,000
Other assets 29,201
------------
Total Other Assets 2,967,606
------------
TOTAL ASSETS $ 3,356,082
------------
------------
The accompanying notes are an integral part of these consolidated financial
statements.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
December 31,
1998
- ------------
<S>
<C>
CURRENT LIABILITIES
Accounts payable$
227,743
Bank overdraft
4,509
Other current liabilities
280,982
Lines of credit (Note 9)
6,365
Notes payable - current portion (Note 10)
753,060
Note payable to stockholder (Note 11)
57,058
- ------------
Total Current Liabilities
1,329,717
- ------------
LONG-TERM DEBT
Notes payable - long term (Note 10)
864,501
- ------------
Total Liabilities
2,194,218
- ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' EQUITY
Preferred stock: 10,000,000 shares authorized at $0.01 par value;
672,300 shares issued and outstanding
6,723
Common stock: 250,000,000 shares authorized at $0.001 par value;
20,750,370 shares issued and outstanding
20,750
Additional paid-in capital
3,519,882
Accumulated deficit
(2,385,491)
- ------------
Total Stockholders' Equity
1,161,864
- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$3,356,082
</TABLE>
- ------------
- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
For the
Year Ended
December 31,
--------------
- --------------
1998
1997
-----------
- -----------
<S> <C>
<C>
REVENUES
Home building and development sales $ 591,006
$ 1,992,736
Property management and administration income 4,270
1,375
Commissions income -
6,977
Other income 14,535
74,298
-----------
- -----------
Total Revenues 609,811
2,075,386
-----------
- -----------
EXPENSES
Home building and development costs 585,490
1,989,958
General and administrative 1,089,130
770,094
Depreciation and amortization 43,319
14,385
-----------
- -----------
Total Expenses 1,717,939
2,774,437
-----------
- -----------
LOSS FROM CONTINUING OPERATIONS (1,108,128)
(699,051)
-----------
- -----------
OTHER INCOME (EXPENSE)
Interest income 5
1
Interest expense (132,912)
(173,431)
Bad debt expense (164,057)
- -
Loss on investments (11,225)
- -
Loss on disposition of assets (117,119)
- -
-----------
- -----------
Total Other Income (Expense) (425,308)
(173,430)
-----------
- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (1,533,436)
(872,481)
Income taxes (Note 2) -
- -
-----------
- -----------
LOSS FROM CONTINUING OPERATIONS (1,533,436)
(872,481)
DISCONTINUED OPERATIONS (Note 15)
Gain (loss) from operations of discontinued segment -
90,956
Gain on disposal of discontinued segment -
1,003,534
-----------
- -----------
Total Discontinued Operations -
1,094,490
-----------
- -----------
NET INCOME (LOSS) (1,533,436)
222,009
OTHER COMPREHENSIVE INCOME -
- -
-----------
- -----------
NET COMPREHENSIVE INCOME (LOSS) $(1,533,436)
$ 222,009
-----------
- -----------
-----------
- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Continued)
<TABLE>
For the
Year Ended
December 31,
--------------
- --------------
1998
1997
-----------
- -----------
<S> <C>
<C>
BASIC EARNINGS (LOSS) PER SHARE
Continued operations $ (0.10)
$ (0.08)
Discontinued operations -
0.10
-----------
- -----------
BASIC EARNINGS (LOSS) PER SHARE $ (0.10)
$ 0.02
-----------
- -----------
-----------
- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 15,053,919
11,253,615
-----------
- -----------
-----------
- -----------
FULLY DILUTED EARNINGS (LOSS) PER SHARE $ (0.08)
$ 0.02
-----------
- -----------
-----------
- -----------
FULLY DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 19,950,219
14,090,915
-----------
- -----------
-----------
- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
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 - - 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)
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.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
For
the Year Ended
December 31,
-------------
- ------------------
1998
1997
-----------
- -----------
<S> <C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,533,436)
$222,009
Adjustments to reconcile net income (loss) to
net cash (used) by operating activities:
Depreciation and amortization 43,319
14,385
Bad debts 164,057
- -
Loss on disposition of assets 117,119
- -
Loss on investments 11,225
- -
Stock issued for services 632,003
84,106
Discontinued operations -
(244,982)
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable 4,633
68,000
(Increase) decrease in accounts
receivable - related parties (2,396)
(78,152)
(Increase) decrease in other assets (17,275)
(6,725)
Increase (decrease) in accounts payable 7,809
(75,947)
Increase (decrease) in bank overdraft 4,509
- -
Increase (decrease) in other liabilities 68,387
(146,591)
-----------
- -----------
Net Cash (Used) by Operating Activities (500,046)
(163,897)
-----------
- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (27,000)
- -
Sale of investments 15,775
- -
Construction in progress -
(104,863)
Sale of property and equipment -
214,890
Purchase of property and equipment (20,884)
(1,951)
-----------
- -----------
Net Cash Provided (Used) by Investing Activities (32,109)
108,076
-----------
- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholders 33,189
(20,902)
Repayment of notes payable (88,029)
(883,312)
Proceeds from long-term borrowings 353,153
823,785
Stock issued for cash 219,065
60,040
-----------
- -----------
Net Cash Provided (Used) by Financing Activities $ 517,378
$ (20,389)
-----------
- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
<TABLE>
For
the Year Ended
December 31,
-------------
- ------------------
1998
1997
-----------
- -----------
<S> <C>
<C>
NET INCREASE (DECREASE) IN CASH $ (14,777)
$ (76,210)
-----------
- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 14,777
90,987
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ -
$ 14,777
-----------
- -----------
-----------
- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 41,230
$ 272,867
Income taxes paid $ -
$ -
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for services $ 632,003
$ 84,106
Common stock issued on conversion of debentures $ 105,593
$ -
Common stock issued for investments $ 200,000
$ -
Common stock issued for licensing rights $ 60,000
$ -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 1 - COMPANY BACKGROUND
The consolidated financial statements include those of Peacock
Financial Corporation (Colorado) (Peacock) and its wholly-owned
subsidiaries, Peacock Financial Corporation (California) (PFC) and
Peacock International Corporation (Bahamas) (PIC). 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.
PFC, a wholly-owned subsidiary, was formed on May 22, 1986. 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 PFC. Pursuant to the
reorganization, the name of the Company was changed to Peacock
Financial Corporation.
The reorganization was accounted for as a recapitalization of PFC
because the shareholders of PFC control the Company after the
acquisition. Therefore, PFC 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 PFC 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.
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.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
e. Basic and Fully Diluted Loss Per Share
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. Convertible debt and
preferred shares have been included in the fully diluted loss per
share.
f. Change in Accounting Principle
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share" during the year ended December
31, 1998.
In accordance with SFAS No. 128, diluted earnings per share must be
calculated when an entity has convertible securities, warrants,
options, and other securities that represent potential common
shares.
The purpose of calculating diluted earnings (loss) per share is to
show
(on a pro forma basis) per share earnings or losses assuming the
exercise or conversion of all securities that are exercisable or
convertible into common stock and that would either dilute or not
affect basis EPS. As permitted by SFAS No. 128, the Company has
retroactively applied the provisions of this new standard by showing
the fully diluted loss per common share for all years presented.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Change in Accounting Principle (Continued)
The Company also adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income" during
the year ended December 31, 1998. 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.
g. Principles of Consolidation
The consolidated financial statements include those of Peacock
Financial Corporation (Colorado) and its wholly-owned
subsidiaries, Peacock Financial Corporation (California) and
Peacock International Corporation (Bahamas). 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.
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, 1998, the Company has net operating loss
carryforwards of approximately $2,380,000 that may be offset
against future taxable income through 2013. 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.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Advertising
The Company follows the policy of charging the costs of advertising
to
expense as incurred.
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, 1998 are recorded at the lower of cost or estimated net
realizable value (see Note 13).
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.
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.
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 13). 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. Additional expenses of $319,292 were
incurred by the Company on behalf of the partnership resulting in
a total investment in Canyon Shadows, L.P. of $1,224,292 at
December 31, 1998.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 5 - FIXED ASSETS
Fixed assets consist of the following at December 31, 1998:
Building $ 381,874
Furniture and fixtures 18,985
Computers and software 46,220
-------------
447,079
Accumulated depreciation (80,299)
-------------
Net fixed assets $ 366,780
-------------
-------------
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). IPO was inactive through December 31, 1998. The investment
has been recorded under the equity method.
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. As part of
the agreement, the Company has the option to purchase an
additional 5% interest. The investment has been recorded under the
cost method and the Company does not exercise any influence or
control over management of SDSDC.
Following is a summary of the investments held as of December 31,
1998:
33% interest in IPO/Emerging Growth Co. $
100,000
5% interest in SDSDC
100,000
--------
- -----
Total $
200,000
--------
- -----
--------
- -----
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 7 - NOTES RECEIVABLE
Notes receivable consist of the following at December 31, 1998:
Note receivable at 10%, unsecured,
principal and interest due March 17, 1999 $
10,000
Note receivable at 6%, unsecured,
principal and interest due August 17, 1999
9,300
-----------
- -
Total Notes Receivable
19,300
Less: Current Portion
(19,300)
-----------
- -
Long-Term Notes Receivable $ -
-----------
- -
-----------
- -
NOTE 8 - LICENSING RIGHTS
Licensing rights consist of the following at December 31, 1998:
Licensing rights $ 60,000
Accumulated amortization
(30,000)
-----------
- -
Net licensing rights $ 30,000
-----------
- -
-----------
- -
During the year ended December 31, 1998, the Company issued
600,000 shares of its outstanding common stock valued at $60,000
pursuant to a license agreement with Linzy Capital, Inc. (Linzy).
Linzy is a private business development company which has invented
and developed an "Option Day Trading System." Pursuant to the
license agreement, the Company was granted a non-exclusive license
to use the option program, and the Company will pay Linzy a
management fee of 10% on the profits generated by the day trading
system. The license agreement became effective on October 2, 1998
and terminates on October 2, 2008.
The licensing rights have been recorded at cost and are amortized
using the straight-line method over a two year life. Amortization
expense for the year ended December 31, 1998 was $30,000.
NOTE 9 - LINE OF CREDIT
The Company has a line of credit with a bank at December 31, 1998.
Borrowings outstanding under this line of credit at December 31,
1998
was $6,365. The credit line bears interest at the bank's index rate
plus 2 percent or 12 percent currently and expires during July,
1999.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 10 - NOTES PAYABLE
Notes payable consist of the following at December 31, 1998:
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, 1998) collateralized by deed
of trust on real property. Lump sum payment
is due May 21, 1999.
205,540
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 3%, collateralized by deed of trust
on real property, due June 24, 2024.
70,000
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.
22,912
Loan payable at 9%, collateralized by deed of
trust on property, accrued interest and principal
due February 15, 1997 (see Note 13(b)).
193,088
Note payable to individual at 10%, collateralized by deed of
trust, payable in monthly interest only payments, principal
due
January 19, 1997 (see Note 13(b)).
125,000
Note payable, non-interest bearing, unsecured,
payable in monthly installments of $1,000.
13,250
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, 1998 through December 31, 2000.
422,400
- ------------
Total Notes Payable
1,617,561
Less: Current Portion
(753,060)
- ------------
Long-Term Notes Payable
$ 864,501
- ------------
- ------------
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 10 - NOTES PAYABLE (Continued)
The aggregate principal maturities of notes payable are as follows:
Years Ending December 31,
Amount
------------------------- ---
- ---
1999 $
753,060
2000
364,501
2001
- -
2002
- -
2003
- -
2004 and thereafter
500,000
-------
- -----
Total $
1,617,561
-------
- -----
-------
- -----
NOTE 11 - 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.
In 1994, the Company paid a legal settlement on behalf of one of
the partnerships of which it is a partner. The payment has been
recorded as a note receivable from the partnership. The note is
non-interest bearing and is due on demand. The amount
outstanding as of December 31, 1998 was $114,000.
Certain stockholders have made loans to the Company. The loans
bear interest at rates from 8 percent to 10 percent per annum.
The balance outstanding at December 31, 1998 is $57,058.
The Company also holds a receivable from an officer of the
Company in the amount of $2,396. The amount is non-interest
bearing and due on demand.
NOTE 12 - 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, 1998 or 1997.
NOTE 13 - 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, 1998, 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.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
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. The Company currently occupies approximately
half of the offices and rents the remaining space to others.
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, is
currently being restructured into long-term financing.
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.
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
subsequent to December 31, 1998 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.
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.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
f. BUILDING PURCHASE
During 1998, the Company entered into an agreement to purchase a
building adjacent to their corporate headquarters. The purchase
price will be $200,000 and closing is set to occur once the
Company has paid an initial down payment of $60,000 at which
time financing for the remaining $140,000 will occur. As of
December 31, 1998, the Company has paid $24,000 towards the down
payment which is included in other assets in the accompanying
financial statements. The Company has agreed to pay rent on the
building of $750 per month until the closing date. The Company
had not closed on the property as of the date of this audit
report.
NOTE 14 - 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.
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 $.05
per warrant.
NOTE 15 - DISCONTINUED OPERATIONS
The Company decided to either sell or dispose of a portion of its
operations during 1997. The operations of these projects are being
netted together as loss on discontinued operations. The resulting
gain for the year ended December 31, 1997 was $90,956. In addition,
the Company recognized a gain on the disposition of the
discontinued
operations of $1,003,534 for the year ended December 31, 1997.
PEACOCK FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 16 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company has incurred significant losses and does not currently
have the means to pay the current maturities of its long term debt
as they become due. These factors create an uncertainty about the
Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
The Company has, however, entered into three separate joint
venture agreements subsequent to December 31, 1998 which
management believes will enable them to develop certain properties
that the Company owns or properties owned by certain investment
partnerships that the Company has an interest in. Management
believes that the real estate market in California has improved
substantially which increases the potential of the Company to
generate revenues sufficient to cover its costs.
The Company has also been able to raise an additional $390,000 in
capital during January and February 1999. One of the Company's
investments, San Diego Soccer Development Corp. is in the process
of going public through a SB-1 filing and if successful, will allow
the Company to be a selling shareholder in the offering which is
expected to raise $450,000 of new capital for the Company.
NOTE 17 - SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the following transactions
occurred:
1) On January 28, 1999, the Company issued 750,000 shares of its
outstanding common stock to acquire a 20% interest in Solutions
Media, Inc. (SMI). SMI provides a variety of professional
services
including web site design and implementation, database and
graphic
design and web based marketing and advertising. SMI's product
development strategy centers on developing and licensing
interactive television interfaces.
2) The Company converted outstanding debentures of $50,000 plus
accrued interest of $1,565 into 1,031,300 shares of common
stock at $0.05 per share.
3) The Company entered into three separate joint venture
agreements that will be utilized to develop certain
properties (See Note 16).
The accompanying notes are an integral part of these consolidated financial
statements.
POWER OF ATTORNEY
The Registrant and each person whose signature appears below hereby
authorizes Steven R. Peacock, the agent for service named in this Report,
with full power to act alone, to file one or more amendments to this
Report, which amendments may make such changes in this Report as such agent
for service deems appropriate, and the Registrant and each such person
hereby appoints such agent for service as attorney-in-fact, with full power
to act alone, to execute in the name and in behalf of the Registrant and
any such person, individually and in each capacity stated below, any such
amendments to this Report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PEACOCK FINANCIAL CORPORATION (Registrant)
By: /s/ Steven R. Peacock
------------------------------------------
Steven R. Peacock
President and Chief Executive Officer
Date: February 9, 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
- ------------------------- February 9, 2000
Steven R. Peacock President, Chief Executive -----------
/s/ Lisa L. Martinez Secretary February 9, 2000
- ------------------------- -----------
