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Red Cat Holdings, Inc. - Quarter Report: 2002 June (Form 10-Q)

Prepared by R.R. Donnelley Financial -- Form 10-Q date June 30, 2002
Table of Contents

 
Securities and Exchange Commission
Washington, DC 20549
 

 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2002
 
Commission File No. 2-91651-D
 

 
Broadleaf Capital Partners, Inc.
 
Nevada
(State or other jurisdiction
of incorporation or organization)
 
87-0410039
(I.R.S. Employer
Identification Number)
 
2531 San Jacinto Street
San Jacinto, CA 92583
(Address and zip code of principal executive offices)
 
(909) 652-3885
(Registrant’s telephone number, including area code)
 

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes ¨  No
 
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
 
Common Stock
$0.001 par value
 
6,629,535 Shares Outstanding
as of June 30, 2002
 


Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC.
AND SUBSIDIARIES
(Formerly Peacock Financial Corporation)
 
REPORT ON FORM 10-Q
 
QUARTER ENDED JUNE 30, 2002
 
TABLE OF CONTENTS
 
         
Page Number

PART I.
  
FINANCIAL INFORMATION
    
 
ITEM 1.
  
FINANCIAL STATEMENTS (UNAUDITED)
    
           
       
3 & 4
           
       
5 & 6
           
       
7
           
       
8 & 9
           
       
10
           
ITEM 2.
     
12
           
PART II.
     
13 & 14

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Table of Contents
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
June 30, 2002 and December 31, 2001
 
 
    
June 30,
2002

  
December 31, 2001

    
(Unaudited)
    
ASSETS
             
CURRENT ASSETS
             
Cash and cash equivalents
  
$
520
  
$
764
Accounts receivable, net
  
 
—  
  
 
24,855
Notes receivable, net
  
 
5,436
  
 
—  
    

  

Total Current Assets
  
 
5,956
  
 
25,619
    

  

FIXED ASSETS, NET
  
 
81,104
  
 
98,384
    

  

OTHER ASSETS
             
Investments in limited partnerships
  
 
991,985
  
 
1,038,856
Other assets
  
 
890
  
 
1,059
    

  

Total Other Assets
  
 
992,875
  
 
1,039,915
    

  

TOTAL ASSETS
  
$
1,079,935
  
$
1,163,918
    

  

 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS (Continued)
June 30, 2002 and December 31, 2001
 
 
    
June 30,
2002

    
December 31, 2001

 
    
(Unaudited)
        
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                 
CURRENT LIABILITIES
                 
Accounts payable
  
 
444,576
 
  
 
499,195
 
Accounts payable—officers and directors
  
 
—  
 
  
 
225,760
 
Accrued expenses
  
 
192,568
 
  
 
181,789
 
Accrued interest
  
 
223,742
 
  
 
176,638
 
Judgments payable
  
 
1,031,243
 
  
 
2,083,300
 
Notes payable—current portion
  
 
851,910
 
  
 
862,166
 
    


  


Total Current Liabilities
  
 
2,744,039
 
  
 
4,028,848
 
    


  


LONG-TERM DEBT
                 
Notes payable—long term
  
 
500,000
 
  
 
500,000
 
    


  


                   
NET LIABILITIES IN EXCESS OF THE ASSETS OF DISCONTINUED OPERATIONS
  
 
270,712
 
  
 
295,892
 
    


  


Total Liabilities
  
 
3,514,751
 
  
 
4,824,740
 
    


  


COMMITMENTS AND CONTINGENCIES
                 
                   
STOCKHOLDERS’ EQUITY (DEFICIT)
                 
                   
Preferred stock: 10,000,000 shares authorized at $0.01 par value; 515,300 shares issued and outstanding
  
 
5,153
 
  
 
5,153
 
Common stock: 250,000,000 shares authorized at $0.001 par value; 6,629,535 and 2,303,507 shares issued and outstanding, respectively
  
 
6,630
 
  
 
2,304
 
Additional paid-in capital
  
 
12,500,375
 
  
 
12,302,987
 
Subscriptions receivable
  
 
(153,559
)
  
 
(347,337
)
Accumulated deficit
  
 
(14,793,415
)
  
 
(15,623,929
 
    


  


Total Stockholders’ Equity (Deficit)
  
 
(2,434,816
)
  
 
(3,660,822
)
    


  


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
  
$
1,079,935
 
  
$
1,163,918
 
    


  


 
 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
SCHEDULE OF INVESTMENTS
June 30, 2002 and December 31, 2001
 
    
June 30, 2002

 
Company

  
Description of Business

  
Number of Shares Owned (or %)

    
Cost

  
Fair Value

 
    
(Unaudited)
 
Canyon Shadows
  
Real estate
  
10
%
  
$
1,131,961
  
$
991,985
(e)
IPO/Emerging Growth Company, LLC
  
Start-up
  
33
%
  
 
100,000
  
 
-0-
(f)
San Diego Soccer Development
  
Dormant company
  
1,551,001
 
  
 
715,905
  
 
-0-
(f)
Other
       
8,000
 
  
 
15,962
  
 
-0-
(f)
Bio-Friendly Corporation
  
Start-up
  
437,500
 
  
 
180,000
  
 
-0-
(f)
Las Vegas Soccer Development
  
Start-up
  
1,020,000
 
  
 
20,000
  
 
-0-
(f)
                

  


Total
              
$
2,163,828
  
$
991,985
 
                

  


    
December 31, 2001

 
Canyon Shadows
  
Real estate
  
10
%
  
$
1,131,961
  
$
1,038,856
(e)
IPO/Emerging Growth Company, LLC
  
Start-up
  
33
%
  
 
100,000
  
 
-0-
(a)
San Diego Soccer Development
  
Soccer franchise
  
1,551,001
 
  
 
715,905
  
 
-0-
(c)
Other
       
8,000
 
  
 
15,962
  
 
-0-
(f)
Bio-Friendly Corporation
  
Start-up
  
437,500
 
  
 
180,000
  
 
-0-
(d)
Las Vegas Soccer Development
  
Start-up
  
1,020,000
 
  
 
20,000
  
 
-0-
(d)
                

  


Total
              
$
2,163,828
  
$
1,038,856
 
                

  



Note—All of the above investments are considered non-income producing securities.
 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
SCHEDULE OF INVESTMENTS (Continued)
June 30, 2002 and December 31, 2001
 
a)
 
Non-public company, represents ownership in an LLC, fair value is determined in good faith by the Company based on a variety of factors.
b)
 
Public market method of valuation based on trading price of stock at year-end.
c)
 
The fair value of restricted shares is determined in good faith by the Company based on a variety of factors, including recent and historical prices and other recent transactions.
d)
 
No public market for this security exists—cost method of valuation used.
e)
 
The Company’s board of directors has valued this investment at cost, less cash distributions to the Company from Canyon Shadows.
f)
 
At December 31, 2001, the Company’s board of directors determined that the Company is unlikely to recover its investments in these companies, and elected to value the investments at zero. The board maintains the same opinion at June 30, 2002.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
For the Six Months Ended
June 30,

    
For the Three Months Ended June 30,

 
    
2002

    
2001

    
2002

    
2001

 
REVENUES
                                   
Investment banking income
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Development income
  
 
—  
 
  
 
220,713
 
  
 
—  
 
  
 
220,713
 
Interest income
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Realized gain on investments
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Other income
  
 
6,232
 
  
 
720
 
  
 
1,267
 
  
 
720
 
    


  


  


  


Total Revenues
  
 
6,232
 
  
 
221,433
 
  
 
1,267
 
  
 
221,433
 
    


  


  


  


EXPENSES
                                   
General and administrative
  
 
286,219
 
  
 
317,982
 
  
 
124,805
 
  
 
121,143
 
Bad debt expense
  
 
—  
 
  
 
219,198
 
  
 
—  
 
  
 
80,402
 
Depreciation and amortization
  
 
17,280
 
  
 
15,208
 
  
 
8,641
 
  
 
3,758
 
Loss on disposal of assets
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
    


  


  


  


Total Expenses
  
 
303,499
 
  
 
552,388
 
  
 
133,446
 
  
 
205,303
 
    


  


  


  


INCOME (LOSS) FROM OPERATIONS
  
 
(297,267
)
  
 
(330,955
)
  
 
(132,179
)
  
 
16,130
 
    


  


  


  


OTHER INCOME (EXPENSE)
                                   
Interest income
  
 
—  
 
  
 
25,429
 
  
 
—  
 
  
 
12,788
 
Interest expense
  
 
(82,151
)
  
 
(63,947
)
  
 
(15,857
)
  
 
(32,983
)
Gain on forgiveness of debt
  
 
1,184,752
 
  
 
—  
 
  
 
1,136,952
 
  
 
—  
 
Realized gain (loss) on investment
  
 
—  
 
  
 
(86
)
  
 
—  
 
  
 
—  
 
Unrealized gain (loss) on investment
  
 
—  
 
  
 
(392,675
)
  
 
—  
 
  
 
(283,825
)
    


  


  


  


Total Other Income (expense)
  
 
1,102,601
 
  
 
(431,279
)
  
 
1,121,095
 
  
 
(304,020
)
    


  


  


  


NET INCOME (LOSS) FROM CONTINUING OPERATIONS
  
 
805,334
 
  
 
(762,234
)
  
 
988,916
 
  
 
(287,890
)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
  
 
25,180
 
  
 
79,525
 
  
 
(2,409
)
  
 
(102
)
    


  


  


  


NET INCOME (LOSS)
  
 
830,514
 
  
 
(682,709
)
  
 
986,507
 
  
 
(287,992
)
    


  


  


  


OTHER COMPREHENSIVE GAIN
                                   
Gain on treasury stock
  
 
—  
 
  
 
1,072
 
  
 
—  
 
  
 
(440
)
    


  


  


  


NET COMPREHENSIVE INCOME (LOSS)
  
$
830,514
 
  
$
(681,637
)
  
$
986,507
 
  
$
(288,432
)
    


  


  


  


 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    
For the Six Months Ended
June 30,

 
    
2002

    
2001

 
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net income (loss) from continuing operations
  
$
805,334
 
  
$
(762,234
)
Adjustments to reconcile net loss to net cash used by operating activities:
                 
Depreciation and amortization
  
 
17,280
 
  
 
15,208
 
Bad debt expense
  
 
—  
 
  
 
219,198
 
Loss on investment
  
 
—  
 
  
 
392,761
 
Gain on forgiveness of debt
  
 
(1,184,752
)
  
 
—  
 
Discontinued operations:
                 
Net income (loss)
  
 
(4,820
)
  
 
79,525
 
Depreciation and amortization
  
 
—  
 
  
 
12,512
 
Loss on disposal of assets
           
 
—  
 
Gain on forgiveness of debt
  
 
30,000
 
  
 
—  
 
Changes in operating assets and liabilities:
                 
(Increase) decrease in accounts and notes receivable
  
 
24,855
 
  
 
(325,816
)
(Increase) decrease in notes receivable—related party
  
 
(5,437
)
  
 
(18,124
)
(Increase) decrease in other assets
  
 
169
 
  
 
639
 
Increase (decrease) in accounts payable
  
 
(54,619
)
  
 
(44,410
)
Increase (decrease) in other liabilities
  
 
(97,673
)
  
 
(134,315
)
Increase (decrease) in discontinued operation, net liabilities
  
 
(25,180
)
  
 
(74,296
)
    


  


Net Cash Used in Operating Activities
  
 
(494,843
)
  
 
(639,352
)
    


  


CASH FLOWS FROM INVESTING ACTIVITIES
                 
Receipt of cash distributions on investment
  
 
46,871
 
  
 
—  
 
Purchase of property and equipment
  
 
—  
 
  
 
(2,410
)
    


  


Net Cash Used in Investing Activities
  
 
46,871
 
  
 
(2,410
)
    


  


CASH FLOWS FROM FINANCING ACTIVITIES
                 
Proceeds from long-term borrowings
  
 
195,000
 
  
 
384,750
 
Payment on long-term borrowings
  
 
(4,167
)
  
 
—  
 
Receipt of subscription receivable
  
 
210,568
 
  
 
10,000
 
Stock issued for cash
  
 
46,327
 
  
 
244,499
 
    


  


Net Cash Provided by Financing Activities
  
 
447,728
 
  
 
639,249
 
    


  


NET DECREASE IN CASH
  
 
(244
)
  
 
(2,513
)
CASH, BEGINNING OF PERIOD
  
 
764
 
  
 
2,513
 
    


  


CASH, END OF PERIOD
  
$
520
 
  
$
—  
 
    


  


 
 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
June 30, 2002 and 2001
(Unaudited)
 
    
For the Six Months Ended June 30,

    
2002

  
2001

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
             
Interest paid
  
$
—  
  
$
156
Income taxes paid
  
$
—  
  
$
—  
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
             
Common stock issued in conversion of debentures and interest
  
$
143,581
  
$
246,866
 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
 
NOTE 1—BASIS OF FINANCIAL STATEMENT PRESENTATION
 
The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company’s most recent audited financial statements and notes thereto included in its December 31, 2001 Annual Report on Form 10-KSB. Operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002.
 
NOTE 2—GOING CONCERN
 
As reported in the consolidated financial statements, the Company has an accumulated deficit of approximately $14,800,000 as of June 30, 2002. The Company also has certain debts that are in default at June 30, 2002. The Company’s stockholders’ deficit at June 30, 2002 was $2,434,816, and its current liabilities exceeded its current assets by $2,738,083.
 
These factors create uncertainty about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital it could be forced to cease operations.
 
In order to continue as a going concern, develop and generate revenues and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) raising additional capital through sales of common stock, (2) converting promissory notes into common stock and (3) entering into acquisition agreements with profitable entities with significant operations. In addition, management is continually seeking to streamline its operations and expand the business through a variety of industries, including real estate and financial management. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
NOTE 3—MATERIAL EVENTS
 
In March 2002, the shareholders of the Company approved changing the name of the Company to Broadleaf Capital Partners, Inc. and changing the state of domicile from Colorado to Nevada. In addition, the shareholders approved a reverse stock split of 100 to 1.
 
During the period ended June 30, 2002, the Company issued 3,115,903 shares of common stock to convert debt at conversion rates of $0.03 to $0.25 per share in accordance with provisions of convertible debenture agreements During the same period, the Company issued 1,210,124 shares of common stock for cash and subscriptions receivable at prices of $0.03 to $0.20 per share.
 
Subsequent to June 30, 2002, the Company issued 1,533,333 shares of common stock for cash and to convert debt.

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Table of Contents
 
BROADLEAF CAPITAL PARTNERS, INC. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001

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Item 2.     Management Discussion and Analysis of Financial Condition and Results of Operations
 
This Form 10-QSB contains forward looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. The Company’s actual results could differ materially from those set forth in the forward looking statements.
 
MANAGEMENT DISCUSSION
 
Broadleaf Capital Partners, Inc. (Company) is a venture capital fund that makes direct investments in and provides management services to businesses that have at least a one-year operating history, the original founding management, with minimum annual revenues of $1.5 million. The Company intends to expand on its investment strategy and portfolio through the internal development of its present operations and other business opportunities, as well as the acquisition of additional business ventures. The Company has in the past, and may again in the future, raise capital specifically for the purpose of maintaining operations and making an investment that the Company believes is attractive.
 
ANALYSIS OF FINANCIAL CONDITION
 
The second quarter of 2002 marked the continuance of assessing and consolidating the Company’s previous investments and operations.
 
Results of Operations—Three months ended June 30, 2002, compared to the three months ended June 30, 2001.
 
Revenues.    Revenues for the three months ended June 30, 2002 decreased by $220,166 or 99% to $1,267 from $221,433 for the three months ended June 30, 2001. This decrease was due to the return of assets being allocated to the balance sheet rather than the income statement.
 
Expenses.    Expenses for the three months ended June 30, 2002 decreased by $71,857 or 35% to $133,446 from $205,303 for the three months ended June 30, 2001. General and administrative expenses for the three months ended June 30, 2002 increased by $3,662 or 3% to $124,805 from $121,143.
 
Results of Operations—Six months ended June 30, 2002, compared to the six months ended June 30, 2001.
 
Revenues.    Revenues for the six months ended June 30, 2002 decreased by $215,201 or 98% to $6,232 from $221,433 for the six months ended June 30, 2001. This decrease was due to the return of assets being allocated to the balance sheet rather than the income statement.
 
Expenses.    Total expenses for the six months ended June 30, 2002, decreased by $248,889 or 45% to $303,499 from $552,388 for the six months ended June 30, 2001. General and administrative expenses for the six months ended June 30, 2002, decreased by $31,763 or 10% to $286,219 from $317,982 for the six months ended June 30, 2001. This decrease resulted from reduced administrative and operating costs.
 
Changes in Financial Condition, Liquidity and Capital Resource.
 
For the six months ended June 30, 2002, the Company funded its operations and capital requirements partially with its own working capital and partially with proceeds from stock offerings. As of June 30, 2002, the Company had cash of $520.

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Table of Contents
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
BROADLEAF CAPITAL PARTNERS, INC.
/s/    ROBERT A. BRANER        

Robert A. Braner
Interim President
 
Date: August 19, 2002
 
/s/    LISA L. MARTINEZ        

Lisa L. Martinez
Corporate Secretary
 
Date: August 19, 2002

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Statement of Chief Executive Officer Regarding
Facts and Circumstances Relating to Exchange Act Filings
 
I, Robert A. Braner, state and certify as follows:
 
The financial statements filed with the report on Form 10-QSB for the period ended June 30, 2002 fully comply with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 and that the information contained in said periodic report fairly presents, in all material respects, the financial condition and results of operations of Broadleaf Capital Partners, Inc.
 
This Statement is submitted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
/s/    ROBERT A. BRANER

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