UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
- --------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---------- ACT OF 1934
For the quarterly period ended March 31, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
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Commission File Number: 0-29582
UNITED COMMUNITY HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 75-2300997
- ------------------------ ------------------------
(State of incorporation) (IRS Employer ID Number)
3935 I-55 South, Jackson MS 39212
----------------------------------------
(Address of principal executive offices)
(601) 371-0009
--------------
(Issuer's telephone number)
PACIFIC GREAT CHINA CO., LTD. 16910 Dallas Parkway, Suite 100, Dallas, TX 75248
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
- --------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 NO X
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: July 10, 1999: 8,000,818
---------
Transitional Small Business Disclosure Format (check one): YES NO X
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United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Form 10-QSB for the Quarter ended March 31, 1999
Table of Contents
Page
----
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Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 13
Part II - Other Information
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibits
Exhibit 27 Financial Data Schedule 17
Exhibit 99.1 Audited financial statements of
Rosemont Gardens Funeral Chapel-Cemetery, Inc.
as of and for the years ended December 31, 1998 and 1997 F-1
Exhibit 99.2 Proforma Consolidated Financial Information F-17
</TABLE>
2
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<TABLE>
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Part 1 - Item 1 - Financial Statements
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Balance Sheets
March 31, 1999 and 1998
(Unaudited)
ASSETS 1999 1998
------ ----------- -----------
<S> <C> <C>
Current assets
Cash on hand and in bank $ 2,218 $ 50
Restricted cash 45,751 35,889
Accounts receivable-at need, net of allowance
for doubtful accounts of $12,500 and $-0-, respectively 21,570 --
Other current assets 3,863 3,294
----------- -----------
Total current assets 73,402 39,233
----------- -----------
Property and equipment - at cost 2,855,171 2,606,046
Accumulated depreciation (244,993) (92,207)
----------- -----------
2,610,178 2,513,839
Land 107,580 107,580
----------- -----------
Net property and equipment 2,717,758 2,621,419
----------- -----------
Other assets
Cemetery property - at cost 1,081,015 1,082,615
Prearranged funeral contracts 1,313,502 835,280
Long-term receivables for cemetery property sales 364,963 329,073
Other 17,963 17,962
----------- -----------
Total other assets 2,777,443 2,264,930
----------- -----------
TOTAL ASSETS $ 5,568,603 $ 4,925,582
=========== ===========
</TABLE>
- Continued -
The accompanying notes are an integral part of these financial statements. The
financial information presented herein has been prepared by management without
audit by independent certified public accountants.
3
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United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Balance Sheets - Continued
March 31, 1999 and 1998
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
------------------------------------ ----------- -----------
<S> <C> <C>
Current liabilities
Notes payable $ 400,000 $ 2,250,000
Current maturities of long-term debt 46,203 --
Accounts payable and other accrued liabilities 85,735 45,721
----------- -----------
Total current liabilities 531,938 2,295,721
----------- -----------
Long-term liabilities
Long-term debt, net of current maturities 2,145,529 --
Deferred prearranged funeral contract revenues 1,690,215 1,022,598
Deferred cemetery property sale revenues 331,080 287,598
Shareholder loan -- 577,169
----------- -----------
Total liabilities 4,698,762 4,183,086
----------- -----------
Commitments and contingencies
Shareholders' Equity Common stock - $0.00001 par value
50,000,000 shares authorized. 8,000,818
shares issued and outstanding 80 80
Additional paid-in capital 2,777,070 2,024,425
Accumulated deficit (1,907,309) (1,282,009)
----------- -----------
Total shareholders' equity 869,841 742,496
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,568,603 $ 4,925,582
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements. The
financial information presented herein has been prepared by management without
audit by independent certified public accountants.
4
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<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.) Comprehensive Income
Consolidated Statements of Operations and
Three months ended March 31, 1999 and 1998
(Unaudited)
1999 1998
----------- -----------
<S> <C> <C>
Revenues
Funeral revenues $ 43,391 $ 22,286
Cemetery sales 77,295 13,095
Finance charge and related revenues (4,510) 5,855
----------- -----------
Total revenues 116,176 41,236
----------- -----------
Cost of sales and direct expenses
Cost of cemetery spaces and crypts 9,132 548
Cost of cemetery merchandise and funeral services 18,062 11,099
Sales commissions 13,685 15,485
----------- -----------
Total cost of sales and direct expenses 40,879 27,132
----------- -----------
Gross profit 75,297 14,104
----------- -----------
Operating expenses
General and administrative expenses 65,666 101,479
Interest expense 51,004 67,805
Depreciation and amortization 39,749 32,423
----------- -----------
Total operating expenses 156,419 201,707
----------- -----------
Loss from operations (81,122) (187,603)
Other income (expense) 66 851
----------- -----------
Loss before income taxes (81,056) (186,752)
Income taxes -- --
----------- -----------
Net Loss (81,056) (186,752)
Other comprehensive income -- --
----------- -----------
Comprehensive Loss $ (81,056) $ (186,752)
=========== ===========
Net loss per weighted-average share
of common stock outstanding - Basic $(0.01) $(0.02)
==== ====
Weighted-average number of shares
of common stock outstanding - Basic 8,000,818 8,000,818
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements. The
financial information presented herein has been prepared by management without
audit by independent certified public accountants.
5
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<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Statements of Cash Flows
Three months ended March 31, 1999 and 1998
(Unaudited)
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $ (81,056) $(186,752)
Adjustments to reconcile net loss to net --------- ---------
cash provided by operating activities
Depreciation and amortization 40,423 32,423
Cost of cemetery spaces and crypts 9,123 548
Capitalized construction period interest -- --
Allowance for doubtful accounts -- --
Gain on sale of Trust fund marketable securities -- --
(Increase) Decrease in:
Accounts receivable 24,116 --
Other assets 8,858 (1,161)
Increase (Decrease) in:
Accounts payable and other accrued liabilities (28,443) (8,791)
--------- ---------
Net cash used in operating activities (26,970) (163,733)
--------- ---------
Cash flows from investing activities
Transfers (to)/from trust funds and restricted cash 7,044 (10,998)
Capital expenditures for property, equipment and cemetery property 18,072 (196,305)
Changes in prearranged funeral contract receivables,
net of changes in deferred funeral contract revenues 119,162 6,214
Changes in long-term receivables for cemetery property
sales, net of changes in deferred cemetery property
sale revenues (144,588) 2,501
--------- ---------
Net cash used in investing activities (310) (198,588)
--------- ---------
Cash flows from financing activities
Net activity on bank line of credit 35,000 30,000
Principal (paid) received on long-term note payable (6,829) --
Cash paid for loan fees -- (16,200)
Contributed capital by shareholder -- 55,426
--------- ---------
Net cash provided by financing activities 28,171 69,226
--------- ---------
Increase in cash 891 (293,095)
Cash at beginning of year 1,327 293,145
--------- ---------
Cash at end of year $ 2,218 $ 50
========= =========
Supplemental disclosure of interest and income taxes paid
Interest paid for the period $ 42,236 $ 55,694
========= =========
Income taxes paid for the year $ -- $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements. The
financial information presented herein has been prepared by management without
audit by independent certified public accountants.
6
<PAGE>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation
United Community Holdings, Inc. (Company) was incorporated under the corporate
name of Professionalistics, Inc. on May 31, 1989, under the laws of the State of
Delaware, as a wholly-owned subsidiary of Halter Venture Corporation, a
publicly-owned corporation. The Company changed its name to Pacific Great China
Co., Ltd. on May 8, 1996 as a result of an action by the Company's Board of
Directors in anticipation of a business acquisition or merger transaction.
Subsequently, this anticipated business acquisition or merger transaction was
mutually canceled by both parties.
On December 17, 1998, the Company changed its state of Incorporation from
Delaware to Nevada by means of a merger with and into a Nevada corporation
formed solely for the purpose of effecting the reincorporation. The Articles of
Incorporation and Bylaws of the Nevada corporation are the Articles of
Incorporation and Bylaws of the surviving corporation. Such Articles of
Incorporation did not change the capital structure of the Company. The effect of
this action also changed the Company's name to United Community Holdings, Inc.
On November 19, 1998, the Company's then majority shareholder sold 7,200,000
shares of the 7,750,129 shares held by the then majority shareholder to an
unrelated third party in anticipation of a reverse merger transaction whereby
the Company would merge with and into a privately held operating company during
the first quarter of 1999.
On February 28, 1999, effective as of January 1, 1999, the Company exchanged
1,000 shares of restricted, unregistered common stock with its then current
majority shareholder for 100.0% of the issued and outstanding stock of Rosemont
Gardens Funeral Chapel-Cemetery, Inc. (a Mississippi corporation) (Rosemont). At
closing, Rosemont became a wholly-owned subsidiary of the Company
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (Rosemont) was originally
incorporated on March 4, 1994 under the laws of the State of Mississippi.
Rosemont's operations consist of a funeral home and cemetery operation in
Jackson, Mississippi. Rosemont personnel at the funeral service location provide
all professional services related to funerals, including the use of funeral
facilities and motor vehicles. Funeral related merchandise is sold at the
funeral service location. Rosemont sells prearranged funeral services whereby a
customer contractually agrees to the terms, conditions and price of a funeral to
be performed at an unknown future date at the time the contract is executed.
Rosemont's cemetery provides cemetery interment rights (including mausoleum
crypts and lawn spaces) and certain merchandise including stone and bronze
memorials and burial vaults. These items may be sold on either a pre-need or an
at-need basis. Rosemont personnel at the cemetery site perform interment
services and provide management and maintenance of the cemetery grounds.
The acquisition of Rosemont by the Company was accounted for as a "reverse
acquisition" with the Company being the parent company and Rosemont being a
wholly-owned subsidiary. Due to common control and ownership of the two
corporations, this transaction was accounted for on an "as-if-pooled" basis in
accordance with Interpretation #39 of Accounting Principles Board Opinion #16.
These combined entities are referred to as Company. Accordingly, the combined
financial statements of the Company and Rosemont represent the historical
consolidated financial statements as of the first day of the first period
presented.
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.
7
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United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Consolidated Financial Statements - Continued
Note 1 - Basis of Presentation - Continued
During interim periods, the Company follows the accounting policies set forth
the audited historical financial statements of Rosemont Gardens Funeral
Chapel-Cemetery, Inc., contained elsewhere in this document. Users of financial
information provided for interim periods should refer to the annual financial
information and footnotes contained in the historical financial statements of
Rosemont Gardens Funeral Chapel-Cemetery, Inc.
Note 2 - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, certificates of deposit
and other highly-liquid investments with maturities of three months or less,
when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Accounts receivable
-------------------
In the normal course of business, the Company extends unsecured credit to its
at-need customers which are regionally concentrated in and around Jackson,
Mississippi. Because of the credit risk involved, management has provided an
allowance for doubtful accounts which reflects its opinion of amounts which
will eventually become uncollectible. In the event of complete
non-performance, the maximum exposure to the Company is the recorded amount
of trade accounts receivable shown on the balance sheet at the date of
non-performance.
3. Inventory
---------
Inventory consists of funeral merchandise and cemetery property and
merchandise and are stated at the lower of cost or market, using the
first-in, first-out method.
4. Property, plant and equipment
-----------------------------
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives of the individual assets,
generally four (4) to twenty-five (25) years, using the straight-line method.
Maintenance and repairs are charged to expense whereas renewals and major
replacements are capitalized. Gains and losses from disposition of property
and equipment are recognized as incurred and are included in operations.
For the quarters ended March 31, 1999 and 1998, depreciation expense of
approximately $39,542 and $32,114, respectively, was charged to operations.
8
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United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Consolidated Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
5. Funeral operations
------------------
Funeral revenue is recognized when the funeral service is performed. The
Company's trade receivables, when recorded, will consist principally of
funeral services already performed. An allowance for doubtful accounts will
be provided based on historical experience. In the event of complete
non-performance, the maximum exposure to the Company is the recorded amount
of trade accounts receivable shown on the balance sheet at the date of
non-performance.
The Company sells prearranged funeral services and funeral merchandise that
provide for the delivery of price guaranteed services and merchandise at
prices prevailing when the agreement is signed. Revenues and related costs
associated with sales of prearranged funeral contracts are deferred and later
recognized when the funeral service is actually performed. Prearranged
funeral services and merchandise are generally financed either through trust
funds or escrow accounts, depending on State Regulatory requirements,
established by the Company or through insurance. Principal amounts deposited
in trust funds or escrow accounts are available to the Company as funeral
services are performed and merchandise is delivered. These amounts may be
refundable to the customer in those situations where state law provides for
the return of those amounts under the purchaser's option to cancel the
contract. Certain jurisdictions provide for non-refundable trust funds or
escrow accounts where the Company receives such amounts upon cancellation by
the customer.
The Company recognizes as revenue on a current basis all dividends and
interest earned, and net capital gains realized, by all prearranged funeral
trust funds or escrow accounts, except in those states where earnings revert
to the customer if a prearranged funeral service or funeral merchandise
contract is canceled. Principal and earnings are withdrawn only as funeral
services and merchandise are delivered or contracts are canceled, except in
jurisdictions that permit earnings to be withdrawn currently and in
unregulated jurisdictions where escrow accounts are used.
Commissions and other related direct marketing costs relating to prearranged
funeral services and prearranged funeral merchandise sales are expensed as
paid, subject to a nominal percentage which is withheld and paid at the time
the service is performed. Other indirect costs, including telemarketing and
advertising costs, are expensed in the period when incurred.
Funeral services sold at the time of need are recorded as funeral revenue in
the period performed.
6. Cemetery operations
-------------------
Cemetery revenue is accounted for in accordance with the principles
prescribed for accounting for sales of real estate. Those principles require,
among other things, the receipt of a certain portion (generally 25%) of an
installment sale price prior to recognition of any revenue or cost on a
contract. The Company recognizes income currently from unconstructed
mausoleum crypts sold to the extent the Company has available inventory.
Costs related to the sales of cemetery mausoleum or lawn crypts include
property and other costs related to cemetery development activities which are
charged to operations using the specific identification method. Allowances
for customer cancellations are provided at the date of sale based upon
historical experience. Costs related to merchandise are based on actual costs
incurred or estimates of future costs necessary to purchase the merchandise,
including provisions for inflation when required.
9
<PAGE>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Consolidated Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
6. Cemetery operations - continued
-------------------
Pursuant to applicable state law, all or a portion of the proceeds from each
sale of cemetery merchandise may also be required to be paid into trust funds
until such merchandise is purchased by the Company for the customer. The
Company recognizes realized trust income on these merchandise trusts in
current cemetery revenues as trust earnings accrue to defray inflation costs
recognized related to the unpurchased cemetery merchandise.
Additionally, pursuant to perpetual care contracts and laws, a portion,
generally 15.0%, of the total sales price of cemetery property is deposited
into perpetual care trust funds or escrow accounts. In addition, in those
jurisdictions where trust or escrow arrangements are neither statutorily nor
contractually required, the Company typically on a voluntary basis a portion,
generally 15.0%, of the sale price into escrow accounts. The income from
these funds, which have been established in most jurisdictions in which the
Company operates cemeteries, is used for maintenance of these cemeteries, but
principal, including in some jurisdictions, net realized capital gains, must
generally be held in perpetuity. Accordingly, the trust fund corpus is not
reflected in the financial statements, except for voluntary escrow funds
established by the Company. The Company recognizes and withdraws currently
all dividend and interest income earned and, where permitted, capital gains
realized by perpetual care funds.
A portion of the sales of cemetery property and merchandise is made under
installment contracts bearing interest at 9.75%. Finance charges are
recognized as a component of cemetery revenue under the straight-line method
over the terms of the related installment receivables.
Commissions and other related direct marketing costs relating to cemetery
spaces or mausoleum crypts are expensed as paid, subject to a nominal
percentage which is withheld and paid at the time the related sales contract
service is paid in full. Other indirect costs, including telemarketing and
advertising costs, are expensed in the period when incurred.
7. Organization costs
------------------
Costs related to the formation and organization of Rosemont have been
capitalized and are being amortized over a five year period, using the
straight-line method.
8. Income taxes
------------
The Company filed a separate corporate federal income tax return through
December 31, 1998. Due to the change in control occurring in 1998, the
Company has no net operating loss carryforwards available to offset financial
statement or tax return taxable income in future periods.
Rosemont, with the consent of its former sole shareholder, has elected under
the Internal Revenue Code to be taxed as an "Subchapter S corporation",
through December 31, 1998. In lieu of corporate income taxes, the shareholder
of a "Subchapter S corporation" is taxed directly on the Company's taxable
income. Accordingly, no provision, benefit or liability for income taxes is
included in the accompanying financial statements.
10
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United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Consolidated Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
8. Income taxes - continued
------------
The Company uses the asset and liability method of accounting for income
taxes. At March 31, 1999 and 1998, respectively, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
As of March 31, 1999, the deferred tax asset related to the Company's first
quarter 1999 consolidated net operating loss carryforward is fully reserved.
9. Income (Loss) per share
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 1999 and 1998, the Company
had no warrants and options outstanding which could be deemed to be
dilutive.
Note 3 - Trust Funds and Restricted Cash
Pursuant to State law or Company policy, certain portions of contracts related
to the sales of prearranged funeral services and funeral merchandise and
cemetery spaces, mausoleum crypts and related merchandise are deposited into a
common trust for the period ended March 31, 1999 and in separate trusts for the
period ended March 31, 1998 to provide funds for the fulfillment of the
underlying contracts and/or perpetual care of the cemetery property.
The Company recognizes as revenue on a current basis all dividends and interest
earned, and net capital gains realized, by all prearranged funeral trust funds
or escrow accounts, except in those states where earnings revert to the customer
if a prearranged funeral service or funeral merchandise contract is canceled.
The Company recognizes realized trust income on these merchandise trusts in
current cemetery revenues as trust earnings accrue to defray inflation costs
recognized related to the unpurchased cemetery merchandise. The Company
recognizes and withdraws currently all dividend and interest income earned and,
where permitted, capital gains realized by perpetual care funds.
11
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<TABLE>
<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Consolidated Financial Statements - Continued
Note 3 - Trust Funds and Restricted Cash - Continued
As of March 31, 1999 and 1998, the trust funds and resultant restricted cash
consist of the following components:
1999 1998
--------- --------
<S> <C> <C>
Trust cash $ 13,735 $43,222
Marketable securities, at fair market value 78,250 -
Unrealized gains (losses) on marketable securities 41,029 -
Amounts due to trust funds from future contract collections (87,263) (7,333)
--------- -------
Restricted cash $ 45,751 $35,889
========= =======
Marketable securities are considered available-for-sale. All unrealized gains or
losses are excluded from earnings until such time that such gains or losses are
realized upon the sale of the underlying security. For purposes of computing
realized gains and losses, the specific identification method is used.
As of March 31, 1999 and 1998, the marketable securities held in the trust funds
consist entirely of equity securities and are summarized as follows:
1998 1997
--------- --------
Aggregate fair value $ 78,250 $ -
Gross unrealized holding gains $ - $ -
Gross unrealized holding losses $ 41,029 $ -
Amortized cost basis $ 119,279 $ -
</TABLE>
12
<PAGE>
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
United Community Holdings, Inc. (Company) was incorporated under the corporate
name of Professionalistics, Inc. on May 31, 1989, under the laws of the State of
Delaware, as a wholly-owned subsidiary of Halter Venture Corporation, a
publicly-owned corporation . The Company changed its name to Pacific Great China
Co., Ltd. on May 8, 1996 as a result of an action by the Company's Board of
Directors in anticipation of a business acquisition or merger transaction.
Subsequently, this anticipated business acquisition or merger transaction was
mutually canceled by both parties.
On December 17, 1998, the Company changed its state of Incorporation from
Delaware to Nevada by means of a merger with and into a Nevada corporation
formed solely for the purpose of effecting the reincorporation. The Articles of
Incorporation and Bylaws of the Nevada corporation are the Articles of
Incorporation and Bylaws of the surviving corporation. Such Articles of
Incorporation did not change the capital structure of the Company. The effect of
this action also changed the Company's name to United Community Holdings, Inc.
On November 19, 1998, the Company's then majority shareholder sold 7,200,000
shares of the 7,750,129 shares held by the then majority shareholder to an
unrelated third party in anticipation of a reverse merger transaction whereby
the Company would merge with and into a privately held operating company during
the first quarter of 1999.
On February 28, 1999, effective as of January 1, 1999, the Company exchanged
1,000 shares of restricted, unregistered common stock with its then current
majority shareholder for 100.0% of the issued and outstanding stock of Rosemont
Gardens Funeral Chapel-Cemetery, Inc. (a Mississippi corporation) (Rosemont). At
closing, Rosemont became a wholly-owned subsidiary of the Company
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (Rosemont) was originally
incorporated on March 4, 1994 under the laws of the State of Mississippi.
Rosemont's operations consist of a funeral home and cemetery operation in
Jackson, Mississippi. Rosemont personnel at the funeral service location provide
all professional services related to funerals, including the use of funeral
facilities and motor vehicles. Funeral related merchandise is sold at the
funeral service location. Rosemont sells prearranged funeral services whereby a
customer contractually agrees to the terms, conditions and price of a funeral to
be performed at an unknown future date at the time the contract is executed.
Rosemont's cemetery provides cemetery interment rights (including mausoleum
crypts and lawn spaces) and certain merchandise including stone and bronze
memorials and burial vaults. These items may be sold on either a pre-need or an
at-need basis. Rosemont personnel at the cemetery site perform interment
services and provide management and maintenance of the cemetery grounds.
The acquisition of Rosemont by the Company was accounted for as a "reverse
acquisition" with the Company being the parent company and Rosemont being a
wholly-owned subsidiary. Due to common control and ownership of the two
corporations, this transaction was accounted for on an "as-if-pooled" basis in
accordance with Interpretation #39 of Accounting Principles Board Opinion #16.
These combined entities are referred to as Company. Accordingly, the combined
financial statements of the Company and Rosemont represent the historical
consolidated financial statements as of the first day of the first period
presented.
13
<PAGE>
The operations for the quarter ended March 31, 1999 compared to the quarter
ended March 31, 1998 show a continued maturation of the operations of the
Company's Rosemont subsidiary. Recognized revenues for the 1999 quarter were
approximately $116,000 as compared to approximately $41,000 for the same period
of the preceding year. The Company recognizes revenues upon the provision of
funeral services, sale of funeral, cemetery or related merchandise or upon the
receipt of at least 25% of the initial sales price for cemetery spaces and/or
crypts.
The principal generator of cash to support daily operations is the collection of
contractual receivables for both prearranged funeral services and the sales of
cemetery spaces or crypts. This area continues to experience growth in the
number and dollar amount of contracts placed in effect on a cumulative basis and
the related cash flows therefrom.
The Company continues to monitor its expenditures for general operating
expenses, principally personnel costs and professional fees. The Company had
aggregate general and administrative expenses of approximately $67,000 for the
quarter ended March 31, 1999 as compared to approximately $101,000 for the same
period of 1998. Interest expense decreased by approximately $17,000 due to 1998
debt restructuring and/or repayment which impacted both the amounts outstanding
and the related interest rates. Depreciation and amortization is relatively
constant based on the completion of the Rosemont visitors center and related
placement into service during the first quarter of 1998.
Earnings per share improved from $(0.02) per share for the first quarter of 1998
to approximately $(0.01) per share for the first quarter of 1999.
(3) Liquidity and capital resources
The Company is principally dependent upon cash flows related to the collection
of long-term contract receivables related to prearranged funeral contracts and
sales of cemetery spaces and/or crypts. The Company had negative cash flows from
operations of approximately $(27,000) and $(164,000) for the first quarters of
1999 and 1998, respectively. These deficits were supported through advances on
the Company's bank line of credit (discussed in the accompanying historical
financial statements) or through controlling shareholder advances (for 1998).
The Company has virtually completed the development of its initial cemetery
garden, visitors center and other funeral related buildings. The Company is in
the process of constructing Phase II to its Mausoleum and the second and third
cemetery gardens. These efforts are being funded from cash flows generated
through operations. Management is of the opinion that it has sufficient cemetery
spaces and mausoleum crypts to meet current demands and construct additional
capacity within the parameters of existing cash flows.
The Company has identified no significant capital requirements for the current
annual period. Liquidity requirements mandated by future business expansions or
acquisitions, if any are specifically identified or undertaken, are not readily
determinable at this time as no substantive plans have been formulated by
management.
Additionally, management is of the opinion that there is additional potential
availability of incremental mortgage debt and the opportunity for the sale of
additional common stock through either private placements or secondary
offerings.
14
<PAGE>
(3) Year 2000 Considerations
The Year 2000 (Y2K) date change is believed to affect virtually all computers
and organizations. The Company has undertaken a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems. The Company has no direct
electronic links with any customer or supplier. In addition, the Company has
held discussions with certain of its software suppliers with respect to the Y2K
date change. The Company has completed its detailed review, as a preliminary
assessment and the Company believes, as of the date of this filing, that it will
not be required to modify or replace significant portions of its computer
hardware or software and any such modifications or replacements are, or will be,
readily available. The Company anticipates that it will complete its detailed
review by September 1, 1999 and complete any modifications, upgrades or
replacements during the third quarter of 1999.
The Company is also holding discussions with its significant suppliers,
shippers, customers and other external business partners related to their
readiness for the Y2K date change.
The Company does not expect the costs associated with the Y2K date change
compliance to have a material effect on its financial position or its results of
operations. There can be no assurance until January 1, 2000, however, that all
of the Company's systems, and the systems of its suppliers, shippers, customers
or other external business partners will function adequately.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
On February 28, 1999, effective as of January 1, 1999, the Company exchanged
1,000 shares of restricted, unregistered common stock with its then current
majority shareholder for 100.0% of the issued and outstanding stock of
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (a Mississippi corporation)
(Rosemont). At closing, Rosemont became a wholly-owned subsidiary of United
Community Holdings, Inc.
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Exhibit 99.1 - Audited Financial Statements of Rosemont Gardens Funeral
Chapel-Cemetery, Inc. as of and for the years ended
December 31, 1998 and 1997
Exhibit 99.2 - Pro-forma Financial Statements as of and for the period
ended March 31, 1999 and the
year ended December 31, 1998
Form 8-K filings - None
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED COMMUNITY HOLDINGS, INC.
July 10 , 1999 /s/ James F. Robinson.
-------- -----------------------------------
James F. Robinson
Chairman and President
July 10 , 1999 /s/ Margaret R. Lauro
-------- -----------------------------------
Margaret R. Lauro
Secretary/Treasurer and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0001016130
<NAME> United Community Holdings, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 2218
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> (12500)
<INVENTORY> 0
<CURRENT-ASSETS> 39332
<PP&E> 2962751
<DEPRECIATION> (244993)
<TOTAL-ASSETS> 5568603
<CURRENT-LIABILITIES> 531938
<BONDS> 0
0
0
<COMMON> 80
<OTHER-SE> 869761
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 116176
<TOTAL-REVENUES> 116176
<CGS> 40879
<TOTAL-COSTS> 156419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51044
<INCOME-PRETAX> (81056)
<INCOME-TAX> 0
<INCOME-CONTINUING> (81056)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81056)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
EXHIBIT 99.1
------------
ROSEMONT GARDENS
FUNERAL CHAPEL-CEMETERY,
INC.
Financial Statements
and
Auditor's Report
December 31, 1998 and 1997
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
F-1
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Balance Sheets as of December 31, 1998 and 1997 F-4
Statements of Operations and Comprehensive Income
for the years ended December 31, 1998 and 1997 F-6
Statement of Changes in Shareholder's Equity
for the years ended December 31, 1998 and 1997 F-7
Statements of Cash Flows
for the years ended December 31, 1998 and 1997 F-8
Notes to Financial Statements F-9
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Shareholder
Rosemont Gardens Funeral Chapel-Cemetery, Inc.
We have audited the accompanying balance sheets of Rosemont Gardens Funeral
Chapel-Cemetery, Inc. (a Mississippi corporation) as of December 31, 1998 and
1997 and the related statements of operations and comprehensive income, changes
in shareholder's equity and cash flows for each of the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 Rosemont Gardens
Funeral Chapel-Cemetery, Inc. as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the years then ended in
conformity with generally
accepted accounting principles.
S. W. HATFIELD, CPA
(formerly S. W. HATFIELD + ASSOCIATES)
Dallas, Texas
June 2, 1999
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
------
1998 1997
----------- -----------
<S> <C> <C>
Current assets
Cash on hand and in bank $ 1,327 $ 293,145
Restricted cash 52,795 24,891
Accounts receivable-at need, net of allowance
for doubtful accounts of $12,500 and $-0-, respectively 11,616 --
Other current assets 12,721 2,133
----------- -----------
Total current assets 78,459 320,169
----------- -----------
Property and equipment - at cost
Construction in process -- 2,079,581
Buildings 2,354,061 --
Roads, common cemetery areas and landscaping 326,930 197,799
Vehicles, equipment and office furnishings 192,252 132,360
----------- -----------
2,873,243 2,409,740
Accumulated depreciation (205,451) (60,093)
----------- -----------
2,667,792 2,349,647
Land 107,580 107,580
----------- -----------
Net property and equipment 2,775,372 2,457,227
----------- -----------
Other assets
Cemetery property - at cost 1,086,037 1,083,163
Prearranged funeral contracts 1,263,109 710,455
Long-term receivables for cemetery property sales 365,295 294,222
Other 18,844 2,072
----------- -----------
Total other assets 2,733,285 2,089,912
----------- -----------
TOTAL ASSETS $ 5,587,116 $ 4,867,308
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
BALANCE SHEETS
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Current liabilities
Notes payable $ 365,000 $ 2,220,000
Current maturities of long-term debt 46,203 --
Accounts payable and other accrued liabilities 110,070 54,513
----------- -----------
Total current liabilities 521,273 2,274,513
----------- -----------
Long-term liabilities
Long-term debt, net of current maturities 2,152,358 --
Deferred prearranged funeral contract revenues 1,599,220 891,559
Deferred cemetery property sale revenues 363,370 250,246
Shareholder loan -- 2,459,893
----------- -----------
Total liabilities 4,636,221 5,876,211
----------- -----------
Commitments and contingencies
Shareholder's Equity
Common stock - $1.00 par value. 10,000 shares
authorized; 1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 2,770,632 79,836
Accumulated deficit (1,820,737) (1,089,739)
----------- -----------
Total shareholder's equity 950,895 (1,008,903)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 5,587,116 $ 4,867,308
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Years ended December 31, 1998 and 1997
1998 1997
--------- ---------
<S> <C> <C>
Revenues
Funeral revenues $ 149,057 $ 3,401
Cemetery sales 81,185 66,772
Finance charge and related revenues 20,415 18,732
--------- ---------
Total revenues 250,657 88,905
--------- ---------
Cost of sales and direct expenses
Cost of cemetery spaces and crypts 15,325 16,265
Cost of cemetery merchandise and funeral services 74,046 2,058
Sales commissions 78,343 44,580
--------- ---------
Total cost of sales and direct expenses 167,714 62,903
--------- ---------
Gross profit 82,943 26,002
--------- ---------
Operating expenses
General and administrative expenses 480,777 423,314
Interest expense 235,993 43,580
Depreciation and amortization 129,693 24,449
--------- ---------
Total operating expenses 846,463 491,343
--------- ---------
Loss from operations (763,520) (465,341)
Other income (expense)
Interest and other income 32,522 407
--------- ---------
Loss before income taxes (730,998) (464,934)
Income taxes -- --
--------- ---------
Net Loss (730,998) (464,934)
Other comprehensive income -- --
--------- ---------
Comprehensive Loss $(730,998) $(464,934)
========= =========
Net loss per weighted-average share
of common stock outstanding - Basic $ (731.00) $ (464.93)
========= =========
Weighted-average number of shares
of common stock outstanding - Basic 1,000 1,000
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
Years ended December 31, 1998 and 1997
Additional
Common stock paid-in Accumulated
# shares Amount capital deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 1,000 $ 1,000 $ 79,836 $ (624,805) $ (543,969)
Net loss for the year -- -- -- (464,934) (464,934)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 1,000 1,000 79,836 (1,089,739) (1,008,903)
Shareholder loans contributed to
additional paid-in capital -- -- 2,690,796 -- 2,690,796
Net loss for the year -- -- -- (730,998) (730,998)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1998 1,000 $ 1,000 $ 2,770,632 $(1,820,737) $ 950,895
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998 and 1997
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss for the year $ (730,998) $ (464,934)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 129,693 24,449
Capitalized construction period interest (13,742) (129,724)
Allowance for doubtful accounts 12,500 --
Gain on sale of Trust fund marketable securities (28,927) --
(Increase) Decrease in:
Accounts receivable (24,116) --
Other assets (10,588) (103)
Increase (Decrease) in:
Accounts payable and other accrued liabilities 57,745 19,895
----------- -----------
Net cash used in operating activities (608,433) (550,617)
----------- -----------
Cash flows from investing activities
Transfers (to)/from trust funds and restricted cash 1,023 (7,968)
Capital expenditures for property, equipment and cemetery property (435,730) (1,325,914)
Changes in prearranged funeral contract receivables,
net of changes in deferred funeral contract revenues 155,007 76,060
Changes in long-term receivables for cemetery property
sales, net of changes in deferred cemetery property
sale revenues 42,051 (2,925)
----------- -----------
Net cash used in investing activities (237,649) (1,260,747)
----------- -----------
Cash flows from financing activities
Net activity on bank line of credit 365,000 --
Principal (paid) received on long-term note payable (21,439) 1,350,952
Cash paid for loan fees (20,200) --
Contributed capital by shareholder 230,903 --
Net increase in shareholder loan -- 735,820
----------- -----------
Net cash provided by financing activities 554,264 2,086,772
----------- -----------
Increase in cash (291,818) 275,608
Cash at beginning of year 293,145 17,537
----------- -----------
Cash at end of year $ 1,327 $ 293,145
=========== ===========
Supplemental disclosure of interest
and income taxes paid
Interest paid for the year $ 243,530 $ 161,193
=========== ===========
Income taxes paid for the year $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (Company) was originally
incorporated on March 4, 1994 under the laws of the State of Mississippi. The
Company's operations consist of a funeral home and cemetery operation in
Jackson, Mississippi. Company personnel at the funeral service location provide
all professional services related to funerals, including the use of funeral
facilities and motor vehicles. Funeral related merchandise is sold at the
funeral service location. The Company sells prearranged funeral services whereby
a customer contractually agrees to the terms, conditions and price of a funeral
to be performed at an unknown future date at the time the contract is executed.
The Company's cemetery provides cemetery interment rights (including mausoleum
crypts and lawn spaces) and certain merchandise including stone and bronze
memorials and burial vaults. These items may be sold on either a pre-need or an
at-need basis. Company personnel at the cemetery site perform interment services
and provide management and maintenance of the cemetery grounds.
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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Accounts receivable
-------------------
In the normal course of business, the Company extends unsecured credit to
its at-need customers which are regionally concentrated in and around
Jackson, Mississippi. Because of the credit risk involved, management has
provided an allowance for doubtful accounts which reflects its opinion of
amounts which will eventually become uncollectible. In the event of
complete non-performance, the maximum exposure to the Company is the
recorded amount of trade accounts receivable shown on the balance sheet at
the date of non-performance.
3. Inventory
---------
Inventory consists of funeral merchandise and cemetery property and
merchandise and are stated at the lower of cost or market, using the
first-in, first-out method.
F-9
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
4. Property, plant and equipment
-----------------------------
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives of the individual assets,
generally four (4) to twenty-five (25) years, using the straight-line
method. Construction in process consists of funeral service facilities
under construction and not placed in service as of December 31, 1997. All
facilities were completed and placed in service during the first calendar
quarter of 1998.
Maintenance and repairs are charged to expense whereas renewals and major
replacements are capitalized. Gains and losses from disposition of property
and equipment are recognized as incurred and are included in operations.
For the years ended December 31, 1998 and 1997, depreciation expense of
approximately $128,453 and $23,209, respectively, was charged to
operations.
5. Funeral operations
------------------
Funeral revenue is recognized when the funeral service is performed. The
Company's trade receivables, when recorded, will consist principally of
funeral services already performed. An allowance for doubtful accounts will
be provided based on historical experience. In the event of complete
non-performance, the maximum exposure to the Company is the recorded amount
of trade accounts receivable shown on the balance sheet at the date of
non-performance.
The Company sells prearranged funeral services and funeral merchandise that
provide for the delivery of price guaranteed services and merchandise at
prices prevailing when the agreement is signed. Revenues and related costs
associated with sales of prearranged funeral contracts are deferred and
later recognized when the funeral service is actually performed.
Prearranged funeral services and merchandise are generally financed either
through trust funds or escrow accounts, depending on State Regulatory
requirements, established by the Company or through insurance. Principal
amounts deposited in trust funds or escrow accounts are available to the
Company as funeral services are performed and merchandise is delivered.
These amounts may be refundable to the customer in those situations where
state law provides for the return of those amounts under the purchaser's
option to cancel the contract. Certain jurisdictions provide for
non-refundable trust funds or escrow accounts where the Company receives
such amounts upon cancellation by the customer.
The Company recognizes as revenue on a current basis all dividends and
interest earned, and net capital gains realized, by all prearranged funeral
trust funds or escrow accounts, except in those states where earnings
revert to the customer if a prearranged funeral service or funeral
merchandise contract is canceled. Principal and earnings are withdrawn only
as funeral services and merchandise are delivered or contracts are
canceled, except in jurisdictions that permit earnings to be withdrawn
currently and in unregulated jurisdictions where escrow accounts are used.
F-10
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
5. Funeral operations - continued
------------------
Commissions and other related direct marketing costs relating to
prearranged funeral services and prearranged funeral merchandise sales are
expensed as paid, subject to a nominal percentage which is withheld and
paid at the time the service is performed. Other indirect costs, including
telemarketing and advertising costs, are expensed in the period when
incurred.
Funeral services sold at the time of need are recorded as funeral revenue
in the period performed.
6. Cemetery operations
-------------------
Cemetery revenue is accounted for in accordance with the principles
prescribed for accounting for sales of real estate. Those principles
require, among other things, the receipt of a certain portion (generally
25%) of an installment sale price prior to recognition of any revenue or
cost on a contract. The Company recognizes income currently from
unconstructed mausoleum crypts sold to the extent the Company has available
inventory.
Costs related to the sales of cemetery mausoleum or lawn crypts include
property and other costs related to cemetery development activities which
are charged to operations using the specific identification method.
Allowances for customer cancellations are provided at the date of sale
based upon historical experience. Costs related to merchandise are based on
actual costs incurred or estimates of future costs necessary to purchase
the merchandise, including provisions for inflation when required.
Pursuant to applicable state law, all or a portion of the proceeds from
each sale of cemetery merchandise may also be required to be paid into
trust funds until such merchandise is purchased by the Company for the
customer. The Company recognizes realized trust income on these merchandise
trusts in current cemetery revenues as trust earnings accrue to defray
inflation costs recognized related to the unpurchased cemetery merchandise.
Additionally, pursuant to perpetual care contracts and laws, a portion,
generally 15.0%, of the total sales price of cemetery property is deposited
into perpetual care trust funds or escrow accounts. In addition, in those
jurisdictions where trust or escrow arrangements are neither statutorily
nor contractually required, the Company typically on a voluntary basis a
portion, generally 15.0%, of the sale price into escrow accounts. The
income from these funds, which have been established in most jurisdictions
in which the Company operates cemeteries, is used for maintenance of these
cemeteries, but principal, including in some jurisdictions, net realized
capital gains, must generally be held in perpetuity. Accordingly, the trust
fund corpus is not reflected in the financial statements, except for
voluntary escrow funds established by the Company. The Company recognizes
and withdraws currently all dividend and interest income earned and, where
permitted, capital gains realized by perpetual care funds.
A portion of the sales of cemetery property and merchandise is made under
installment contracts bearing interest at 9.75%. Finance charges are
recognized as a component of cemetery revenue under the straight-line
method over the terms of the related installment receivables.
F-11
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Cemetery operations - continued
-------------------
Commissions and other related direct marketing costs relating to cemetery
spaces or mausoleum crypts are expensed as paid, subject to a nominal
percentage which is withheld and paid at the time the related sales
contract service is paid in full. Other indirect costs, including
telemarketing and advertising costs, are expensed in the period when
incurred.
7. Organization costs
------------------
Costs related to the formation and organization of the Company have been
capitalized and are being amortized over a five year period, using the
straight-line method.
8. Income taxes
------------
The Company, with the consent if its sole shareholder, has elected under
the Internal Revenue Code to be taxed as an "Subchapter S corporation". In
lieu of corporate income taxes, the shareholder of a "Subchapter S
corporation" is taxed directly on the Company's taxable income.
Accordingly, no provision, benefit or liability for income taxes has been
included in the accompanying financial statements.
9. Income (Loss) per share
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 1998 and 1997, the Company
had no warrants and options outstanding which could be deemed to be
dilutive.
10. Accounting standards to be adopted
----------------------------------
Upon the adoption of a formal stock compensation plan, the Company
anticipates using the "fair value based method" of accounting for
compensation based stock options pursuant to Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation".
Under the fair value based method, compensation cost will be measured at
the grant date of the respective option based on the value of the award and
will be recognized as a charge to operations over the service period, which
will usually be the respective vesting period of the granted option(s).
F-12
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - LONG-TERM RECEIVABLES
The Company's long-term receivables related to prearranged funeral contracts and
cemetery sales are expected to mature as follows:
Year ending
December 31, Principal due
------------- -------------
<S> <C> <C>
1999 $ 488,521
2000 407,101
2001 325,680
2002 244,261
2003 81,420
Thereafter 81,421
----------
Total $1,628,404
NOTE D - CEMETERY PROPERTY
Cemetery property consists of the following at December 31, 1998 and 1997,
respectively:
1998 1997
---------- ----------
Developed cemetery gardens, net of
spaces sold with revenue recognition $ 95,155 $ 98,992
Development in progress 26,698 26,698
Mausoleum crypts, net of crypts sold 306,710 299,999
Undeveloped 657,474 657,474
---------- ----------
Total $1,086,037 $1,083,163
========== ==========
NOTE E - NOTES PAYABLE
Notes payable consist of the following:
1998 1997
---------- ----------
$1,820,000 note payable to a bank. Interest at the Bank's
prime interest rate plus .75% (9.75% at December 31, 1997).
Principal payable at maturity. Accrued interest payable
monthly. Final maturity in February 2000. Secured by
land, accounts receivable from prearranged funeral
contracts and cemetery property sales contracts and the
personal guarantee of the Company's shareholder.
Restructured into the $2,220,000 long-term note payable. $ - $1,620,000
F-13
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - NOTES PAYABLE - Continued
1998 1997
---------- ----------
$600,000 term note payable to a corporation. Interest
at 8.0%. Payable in monthly installments of approximately
$12,166, including accrued interest. Final maturity in June
2001. Secured by the Company's interest in prearranged
funeral contracts and the personal guarantee of the
Company's shareholder. Paid in full in June 1998. $ - $ 600,000
$400,000 revolving line of credit payable to a bank. Interest
at 8.50%. Interest payable monthly. Principal and unpaid
interest due at maturity in June 1999. Secured by
land, accounts receivable from prearranged funeral
contracts and cemetery property sales contracts and
the personal guarantee of the Company's shareholder. 365,000 -
---------- ----------
Total notes payable $ 365,000 $2,220,000
========== ==========
NOTE F - LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and 1997:
1998 1997
---------- ----------
$2,220,000 note payable to a bank. Interest at 8.00%.
Payable in monthly installments of approximately
$18,569, including interest. Any unpaid principal
and interest is due at maturity in June 2003. Secured
by land, accounts receivable from prearranged funeral
contracts and cemetery property sales contracts and
the personal guarantee of the Company's shareholder. $2,198,561 -
---------- -----------
Total long-term debt 2,198,561 -
Less current maturities (46,203) -
---------- -----------
Long-term portion $2,152,358 $ -
========== ===========
Future maturities of long-term debt are as follows: Year ending
December 31, Principal due
------------ -------------
1999 $ 46,203
2000 49,587
2001 54,268
2002 58,837
2003 1,989,666
----------
Total $2,152,358
==========
</TABLE>
F-14
<PAGE>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE G - SHAREHOLDER LOAN
The Company's shareholder made unsecured advances to the Company aggregating
approximately $1,841,599 through December 31, 1997. The advances were
non-interest bearing.
The Company's sole shareholder executed a note payable to a bank in the
principal amount of $630,000. In turn, the sole shareholder then loaned the
$630,000 to the Company at terms and conditions identical and equal to the
bank's terms. The note bore interest at 7.75% and all principal and accrued
interest payable was due at maturity in February 2000. The loan to the bank was
secured by marketable securities owned by the Company's shareholder and the loan
to the Company was unsecured.
Effective December 31, 1998, the Company's sole shareholder converted the
advances and note payable, totaling $2,690,796, as additional paid-in capital.
NOTE H - CONSTRUCTION PERIOD INTEREST
Pursuant to Statement of Financial Accounting Standard No. 62, "Capitalization
of Interest Costs", the Company capitalizes interest incurred during the
construction period related to the development of the cemetery property and
funeral facilities. An analysis of interest both capitalized and charged to
operations during the years ended December 31, 1998 and 1997, respectively,
follows:
1998 1997
--------- --------
Interest capitalized $ 13,742 $129,723
Interest charged to operations 235,993 43,580
--------- --------
Total interest incurred $ 249,735 $173,303
========= ========
NOTE I - TRUST FUNDS AND RESTRICTED CASH
Pursuant to State law or Company policy, certain portions of contracts related
to the sales of prearranged funeral services and funeral merchandise and
cemetery spaces, mausoleum crypts and related merchandise are deposited into a
common trust, as of December 31, 1998, and separate trusts for funeral
contracts, cemetery contracts and perpetual care, as of December 31, 1997, to
provide funds for the fulfillment of the underlying contracts and/or perpetual
care of the cemetery property.
The Company recognizes as revenue on a current basis all dividends and interest
earned, and net capital gains realized, by all prearranged funeral trust funds
or escrow accounts, except in those states where earnings revert to the customer
if a prearranged funeral service or funeral merchandise contract is canceled.
The Company recognizes realized trust income on these merchandise trusts in
current cemetery revenues as trust earnings accrue to defray inflation costs
recognized related to the unpurchased cemetery merchandise. The Company
recognizes and withdraws currently all dividend and interest income earned and,
where permitted, capital gains realized by perpetual care funds.
F-15
<PAGE>
<TABLE>
<CAPTION>
ROSEMONT GARDENS FUNERAL CHAPEL-CEMETERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE I - TRUST FUNDS AND RESTRICTED CASH - Continued
As of December 31, 1998 and 1997, the trust funds and resultant restricted cash
consist of the following components:
1998 1997
--------- --------
<S> <C> <C>
Trust cash $ 13,735 $ 40,002
Marketable securities, at fair market value 139,156 48,625
Unrealized gains on marketable securities (19,877) (12,668)
Amounts due to trust funds from future contract collections (80,219) (51,068)
--------- --------
Restricted cash $ 52,795 $24,891
========= ========
Marketable securities are considered available-for-sale. All unrealized gains or
losses are excluded from earnings until such time that such gains or losses are
realized upon the sale of the underlying security. For purposes of computing
realized gains and losses, the specific identification method is used.
As of December 31, 1998 and 1997, the marketable securities held in the trust
funds consist entirely of equity securities and are summarized as follows:
1998 1997
--------- --------
Aggregate fair value $139,156 $48,625
Gross unrealized holding gains $ 24,249 $12,668
Gross unrealized holding losses $ 4,372 $ -
Amortized cost basis $119,279 $35,957
</TABLE>
F-16
EXHIBIT 99.2
------------
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Introduction to Proforma Consolidated Financial Information
(Unaudited)
On February 28, 1999, effective as of January 1, 1999, United Community
Holdings, Inc. (Company) exchanged 1,000 shares of restricted, unregistered
common stock with its then current majority shareholder for 100.0% of the issued
and outstanding stock of Rosemont Gardens Funeral Chapel-Cemetery, Inc. (a
Mississippi corporation) (Rosemont). At closing, Rosemont became a wholly-owned
subsidiary of the Company.
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (Rosemont) was originally
incorporated on March 4, 1994 under the laws of the State of Mississippi.
Rosemont's operations consist of a funeral home and cemetery operation in
Jackson, Mississippi. Rosemont personnel at the funeral service location provide
all professional services related to funerals, including the use of funeral
facilities and motor vehicles. Funeral related merchandise is sold at the
funeral service location. Rosemont sells prearranged funeral services whereby a
customer contractually agrees to the terms, conditions and price of a funeral to
be performed at an unknown future date at the time the contract is executed.
Rosemont's cemetery provides cemetery interment rights (including mausoleum
crypts and lawn spaces) and certain merchandise including stone and bronze
memorials and burial vaults. These items may be sold on either a pre-need or an
at-need basis. Rosemont personnel at the cemetery site perform interment
services and provide management and maintenance of the cemetery grounds.
The acquisition of Rosemont by the Company was accounted for as a "reverse
acquisition" with the Company being the parent company and Rosemont being a
wholly-owned subsidiary. Due to common control and ownership of the two
corporations, this transaction was accounted for on an "as-if-pooled" basis in
accordance with Interpretation #39 of Accounting Principles Board Opinion #16.
These combined entities are referred to as Company. Accordingly, the combined
financial statements of the Company and Rosemont represent the historical
consolidated financial statements as of the first day of the first period
presented.
The Proforma Consolidated Balance Sheet as of December 31, 1998 and March 31,
1998 and the Proforma Consolidated Statements of Operations for the year ended
December 31, 1998 and the three months ended March 31, 1999 present the
consolidated results of continuing consolidated operations of United Community
Holdings, Inc. and its wholly-owned subsidiary, Rosemont Gardens Funeral
Chapel-Cemetery, Inc. (collectively Company).
These proforma statements include all material adjustments necessary to present
proforma historical results of the above described transactions. The proforma
information does not purport to be indicative of the financial position or the
results of operations which would have actually been obtained if the acquisition
transactions had actually been consummated on the dates indicated. In addition,
the proforma financial information does not purport to be indicative of the
financial position or results of operations that may be obtained in the future.
The proforma information has been prepared by United Community Holdings, Inc.
and all calculations have been made by the Company based on assumptions deemed
appropriate in the circumstances by the Company. Certain of these assumptions
are set forth under the Notes to Proforma Consolidated Financial Information.
The proforma financial information should be read in conjunction with the
historical Financial Statements and Notes thereto of United Community Holdings,
Inc. (formerly Pacific Great China Co., Ltd.) and the historical Financial
Statements and Notes thereto of Rosemont Gardens Funeral Chapel-Cemetery, Inc.
F-17
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Proforma Balance Sheet
December 31, 1998
(Unaudited)
United Rosemont
Community Gardens Funeral
Holdings Chapel-Cemetery, Proforma Proforma
ASSETS Inc. Inc. adjustments consolidated
----------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Current assets
Cash on hand and in bank $ -- $ 1,327 $ -- $ 1,327
Restricted cash -- 52,795 -- 52,795
Accounts receivable-at need, net
of allowance for doubtful accounts -- 11,616 -- 11,616
Other current assets -- 12,721 -- 12,721
----------- ----------- ----------- -----------
Total current assets -- 78,459 -- 78,459
----------- ----------- ----------- -----------
Property, equipment and land - at cost -- 2,980,823 -- 2,980,823
Accumulated depreciation -- (205,451) -- (205,451)
----------- ----------- ----------- -----------
Net property and equipment -- 2,775,372 -- 2,775,372
----------- ----------- ----------- -----------
Other assets
Cemetery property - at cost -- 1,086,037 -- 1,086,037
Prearranged funeral contracts -- 1,263,109 -- 1,263,109
Long-term receivables for
cemetery property sales -- 365,295 -- 365,295
Other -- 18,844 -- 18,844
----------- ----------- ----------- -----------
Total other assets -- 2,733,285 -- 2,733,285
----------- ----------- ----------- -----------
Total Assets $ -- $ 5,587,116 $ -- $ 5,587,116
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ -- $ 365,000 $ -- $ 365,000
Current maturities of long-term debt -- 46,203 -- 46,203
Accounts payable and
other accrued liabilities -- 110,070 -- 110,070
----------- ----------- ----------- -----------
Total current liabilities -- 521,273 -- 521,273
----------- ----------- ----------- -----------
Long-term liabilities
Long-term debt, net of current maturities -- 2,152,358 -- 2,152,358
Deferred prearranged
funeral contract revenues -- 1,599,220 -- 1,599,220
Deferred cemetery property sale revenues -- 363,370 -- 363,370
Shareholder loan -- -- -- --
----------- ----------- ----------- -----------
Total Liabilities -- 4,636,221 -- 4,636,221
----------- ----------- ----------- -----------
Commitments and contingencies
Shareholders' Equity
Common stock - $0.00001 par value 80 -- -- 80
Common stock - $1.00 par value -- 1,000 (1,000) --
Additional paid-in capital 5,438 2,770,632 1,000 2,777,070
Accumulated deficit (5,518) (1,820,737) -- (1,826,255)
----------- ----------- ----------- -----------
Total Shareholders' Equity -- 950,895 -- 950,895
----------- ----------- ----------- -----------
Total Liabilities and Shareholders' Equity $ -- $ 5,587,116 $ -- $ 5,587,116
=========== =========== =========== ===========
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Proforma Statement of Operations and Comprehensive Income
Year ended December 31, 1998
(Unaudited)
United Rosemont
Community Gardens Funeral
Holdings Chapel-Cemetery, Proforma Proforma
Inc. Inc. adjustments consolidated
------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues
Funeral revenues $ -- $ 149,057 $ -- $ 149,057
Cemetery sales -- 81,185 -- 81,185
Finance charge and related revenues -- 20,415 -- 20,415
------------- ----------- ---------- -----------
Total revenues -- 250,657 -- 250,657
------------- ----------- ---------- -----------
Cost of sales and direct expenses
Cost of cemetery spaces and crypts -- 15,325 -- 15,325
Cost of cemetery merchandise
and funeral services -- 74,046 -- 74,046
Sales commissions -- 78,343 -- 78,343
------------- ----------- ---------- -----------
Total cost of sales and direct expenses -- 167,714 -- 167,714
------------- ----------- ---------- -----------
Gross profit -- 82,943 -- 82,943
------------- ----------- ---------- -----------
Operating expenses
General and administrative expenses -- 480,777 -- 480,777
Interest expense -- 235,993 -- 235,993
Depreciation and amortization -- 129,693 -- 129,693
------------- ----------- ---------- -----------
Total operating expenses -- 846,463 -- 846,463
------------- ----------- ---------- -----------
Loss from operations -- (763,520) -- (763,520)
Other income (expense) -- 32,522 -- 32,522
------------- ----------- ---------- -----------
Loss before income taxes -- (730,998) -- (730,998)
Income taxes -- -- -- --
------------- ----------- ---------- -----------
Net Loss -- (730,998) -- (730,998)
Other comprehensive income -- -- -- --
------------- ----------- ---------- -----------
Comprehensive Loss $ -- $ (730,998) $ -- $ (730,998)
============= =========== ========== ===========
Proforma net loss per weighted-average
share of common stock outstanding - Basic $ (0.09)
===========
Proforma weighted-average number of
shares of common stock outstanding - Basic 8,000,818
===========
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Proforma Balance Sheet
March 31, 1999
(Unaudited)
United Rosemont
Community Gardens Funeral
Holdings Chapel-Cemetery, Proforma Proforma
ASSETS Inc. Inc. adjustments consolidated
----------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets
Cash on hand and in bank $ -- $ 2,218 $ -- $ 2,218
Restricted cash -- 45,751 -- 45,751
Accounts receivable-at need, net
of allowance for doubtful accounts -- 21,570 -- 21,570
Other current assets -- 3,863 -- 3,863
----------- ----------- ----------- -----------
Total current assets -- 73,402 -- 73,402
----------- ----------- ----------- -----------
Property, equipment and land - at cost -- 2,962,751 -- 2,962,751
Accumulated depreciation -- (244,993) -- (244,993)
----------- ----------- ----------- -----------
Net property and equipment -- 2,717,758 -- 2,717,758
----------- ----------- ----------- -----------
Other assets
Cemetery property - at cost -- 1,081,015 -- 1,081,015
Prearranged funeral contracts -- 1,313,502 -- 1,313,502
Long-term receivables for
cemetery property sales -- 364,963 -- 364,963
Other -- 17,963 -- 17,963
----------- ----------- ----------- -----------
Total other assets -- 2,777,443 -- 2,777,443
----------- ----------- ----------- -----------
Total Assets $ -- $ 5,568,603 $ -- $ 5,568,603
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ -- $ 400,000 $ -- $ 400,000
Current maturities of long-term debt -- 46,203 -- 46,203
Accounts payable and
other accrued liabilities -- 85,735 -- 85,735
----------- ----------- ----------- -----------
Total current liabilities -- 531,938 -- 531,938
----------- ----------- ----------- -----------
Long-term liabilities
Long-term debt, net of current maturities -- 2,145,529 -- 2,145,529
Deferred prearranged
funeral contract revenues -- 1,690,215 -- 1,690,215
Deferred cemetery property sale revenues -- 331,080 -- 331,080
Shareholder loan -- -- -- --
----------- ----------- ----------- -----------
Total Liabilities -- 4,698,762 -- 4,698,762
----------- ----------- ----------- -----------
Commitments and contingencies
Shareholders' Equity
Common stock - $0.00001 par value 80 -- -- 80
Common stock - $1.00 par value -- 1,000 (1,000) --
Additional paid-in capital 5,438 2,770,632 1,000 2,777,070
Accumulated deficit (5,518) (1,901,791) -- (1,907,309)
----------- ----------- ----------- -----------
Total Shareholders' Equity -- 869,841 -- 869,841
----------- ----------- ----------- -----------
Total Liabilities and Shareholders' Equity $ -- $ 5,568,603 $ -- $ 5,568,603
=========== =========== =========== ===========
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Consolidated Proforma Statement of Operations and Comprehensive Income
Three months ended March 31, 1999
(Unaudited)
United Rosemont
Community Gardens Funeral
Holdings Chapel-Cemetery, Proforma Proforma
Inc. Inc. adjustments consolidated
------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues
Funeral revenues $ -- $ 43,391 $ -- $ 43,391
Cemetery sales -- 77,295 -- 77,295
Finance charge and related revenues -- (4,510) -- (4,510)
------------- ----------- ---------- -----------
Total revenues -- 116,176 -- 116,176
------------- ----------- ---------- -----------
Cost of sales and direct expenses
Cost of cemetery spaces and crypts -- 9,132 -- 9,132
Cost of cemetery merchandise
and funeral services -- 18,062 -- 18,062
Sales commissions -- 13,685 -- 13,685
------------- ----------- ---------- -----------
Total cost of sales and direct expenses -- 40,879 -- 40,879
------------- ----------- ---------- -----------
Gross profit -- 75,297 -- 75,297
------------- ----------- ---------- -----------
Operating expenses
General and administrative expenses -- 65,666 -- 65,666
Interest expense -- 51,004 -- 51,004
Depreciation and amortization -- 39,749 -- 39,749
------------- ----------- ---------- -----------
Total operating expenses -- 156,419 -- 156,419
------------- ----------- ---------- -----------
Loss from operations -- (81,122) -- (81,122)
Other income (expense) -- 66 -- 66
------------- ----------- ---------- -----------
Loss before income taxes -- (81,056) -- (81,056)
Income taxes -- -- -- --
------------- ----------- ---------- -----------
Net Loss -- (81,056) -- (81,056)
Other comprehensive income -- -- -- --
------------- ----------- ---------- -----------
Comprehensive Loss $ -- $ (81,056) $ -- $ (81,056)
============= =========== ========== ===========
Proforma net loss per weighted-average
share of common stock outstanding - Basic $ (0.01)
===========
Proforma weighted-average number of
shares of common stock outstanding - Basic 8,000,818
===========
</TABLE>
F-21
<PAGE>
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd.)
Notes to Proforma Consolidated Financial Information
(Unaudited)
The Proforma Consolidated Balance Sheets as of December 31, 1998 and March 31,
1999 and the Proforma Consolidated Statements of Operations for the year ended
December 31, 1998 and the three months ended March 31, 1999 are derived from the
historical Balance Sheets and Statements of Operations of United Community
Holdings, Inc. and Rosemont Gardens Funeral Chapel-Cemetery, Inc. (collectively
Company).
The proforma information reflects the adjustments to record the acquisition of
Rosemont Gardens Funeral Chapel- Cemetery, Inc. This transaction is recorded
pursuant to the requirements of Interpretation 39 of Accounting Principles Board
Opinion #16, whereby the acquisition of Rosemont Gardens Funeral
Chapel-Cemetery, Inc. is treated as a transfer of shares between companies with
common control in a manner similar to a pooling of interests. All assets and
liabilities of Rosemont Gardens Funeral Chapel - Cemetery, Inc. are recognized
at historical cost.
The proforma information does not purport to be indicative of the financial
position or the results of operations which would have actually been obtained if
the acquisition transactions had actually been consummated on the dates
indicated. In addition, the proforma financial information does not purport to
be indicative of the financial position or results of operations that may be
obtained in the future.
The proforma financial information should be read in conjunction with the
historical Financial Statements and Notes thereto of United Community Holdings,
Inc. (formerly Pacific Great China Co., Ltd.) and the historical Financial
Statements and Notes thereto of Rosemont Gardens Funeral Chapel-Cemetery, Inc.
The footnotes depicted on the Proforma Consolidated Financial Information are
described below:
(1) Adjustment to acquire 100% of the issued and outstanding shares of
Rosemont Gardens Funeral Chapel- Cemetery, inc. by United Community
Holdings, Inc. effective January 1, 1999, for the issuance of 1,000 shares
of United Community Holdings, Inc.'s common stock.
F-22
